Friday, October 15, 2010

Talisman Energy Inc: Eagle Ford Shale update

By Andrea:

Talisman Energy Inc.(TLM) recently announced that it has reached an agreement to acquire additional properties in the Eagle Ford shale play in south Texas. Talisman and Statoil have agreed on a joint-venture to acquire 97,000 net acres of high-quality, liquids rich Eagle Ford shale properties from Enduring Resources for a total consideration of US$1.325 billion.

"This transaction is an excellent fit with Talisman's strategy," said John A. Manzoni, President and CEO. "Talisman now has material positions in three world-class shale plays in North America. This acquisition is in the liquids rich window of the Eagle Ford and complements our existing acreage. We are very pleased to be working with Statoil, a respected global company with whom we have an excellent working relationship."

The Transaction

Talisman and Statoil have agreed to create a 50/50 joint-venture across the Eagle Ford shale play, with Talisman as the initial operator. The net cost to Talisman of this new acreage will be approximately US$485 million, after Statoil purchases a 50% working interest in Talisman's existing 37,000 net acres in the Eagle Ford. Upon completion of these transactions, Talisman will hold approximately 70,000 net acres, predominantly in the liquids rich heart of the play.

Talisman and Statoil have agreed that Statoil will operate approximately 50% of the joint assets within three years. The transaction is expected to close by year end.

The Assets

The acquisition includes 97,000 net acres of land (50/50 joint-venture between Talisman and Statoil) in the liquids rich window of the Eagle Ford shale. The purchase price equates to about US$10,900 per acre, taking into consideration Enduring's existing production of 5,500 boe/d, as well as gas processing infrastructure that comes with the acquisition. In addition, the companies have an option to jointly acquire up to an additional 22,000 net acres.

Approximately 55,000 net acres are held by existing production. There are currently three horizontal rigs operating on the leases, which is more than sufficient to hold this land. The land position consists of large contiguous blocks across the Eagle Ford, with a thick, high-porosity shale section, and high expected ultimate recovery factors (EURs). EURs are expected to average at least 660,000 boe per well.

There is currently 5,500 boe/d of production, including six Eagle Ford wells which are on-stream. An additional eight wells have been drilled; three wells are drilling, with nine additional wells planned by year-end. Initial production rates on the two most recent wells have averaged 3,700 boe/d (including 1,000 bbl/d of liquids) and 2,300 boe/d (including 425 bbl/d of liquids). There are numerous egress options available to support future production growth.

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