talisman takeover offer for paladin res uk, page-2

Here's the Bloomberg news item:

Talisman Agrees to $2.2 Billion Takeover of Paladin (Update2)

Oct. 20 (Bloomberg) -- Talisman Energy Inc., a Canadian oil and gas producer, agreed to buy Paladin Resources Plc of the U.K. for 1.22 billion pounds ($2.2 billion) to increase its North Sea reserves by about a third as energy prices surge.

The cash price of 355 pence a share is 29 percent more than yesterday's close for Paladin, which is based in Edinburgh. Calgary-based Talisman has already agreed with investors holding about 22 percent of Paladin to sell their holdings, according to a statement today on the Regulatory News Service.

Talisman Chief Executive Jim Buckee, a former head of Norwegian production and U.K. reservoir engineer for BP Plc, has spent at least five years acquiring aging fields from bigger oil companies and reviving their output. Crude oil prices have jumped 49 percent in the past year in London, bringing new life to marginal North Sea supplies.

Talisman ``has been very good buying slightly older fields and squeezing additional value out of them,'' said Richard Slape, an analyst with Seymour Pierce Ltd. in London, which has a ``buy'' recommendation on Paladin shares. ``There's still a lot of money to be made'' in British waters, he said.

Oil and gas takeovers have accelerated this year as new fields become more difficult to find. The value of oil and gas acquisitions this year has more than doubled to $138 billion from $65 billion in the year-earlier period, according to data compiled by Bloomberg.

While Royal Dutch Shell and BP seek new opportunities from Kazakhstan to Angola, Talisman is focusing on the North Sea and Canada. Talisman estimates at least 10.5 billion barrels, worth $617 billion at today's prices, more than currently expected could be squeezed from the North Sea with sufficient investment, Paul Blakeley, a Talisman vice president, said last month.

Paladin's Growth

Paladin shares jumped as much as 77 pence, or 28 percent, to a record 352 pence. They were at 350.5 pence at 10:33 a.m. local time in London. Cairn Energy Plc, another U.K. oil company, rose as much as 9.3 percent to 1740 pence, while Tullow Oil Plc gained as much as 11 percent to 243.75 pence.

Paladin has focused on its North Sea fields while developing properties from Australia to Tunisia. Paladin expects oil production to rise to 60,000 barrels a day by the end of 2006, 31 percent more than the average in the first half of this year. The North Sea last year represented 89 percent of Paladin's crude oil production and 70 percent of its natural gas.

Paladin may produce more than 70,000 barrels a day in 2009, Talisman forecasts. That would represent a 10-fold surge in Paladin's output in just nine years.

The company in 2004 had proven oil and gas reserves of 139.9 million barrels. The acquisition price of $2.2 billion indicates a per-barrel price of $15.73 for each barrel of proven reserves, within the range of other deals this year.

`Enhance Production'

Occidental Petroleum Corp.'s takeover of Vintage Petroleum Inc. valued its oil and gas fields at $8.80 a barrel, according to UBS AG. That compared with the $10.15 a barrel that Chevron Corp. agreed to pay for Unocal Corp. and the $10.66 that China National Petroleum Corp. plans to spend for PetroKazakhstan Inc. Norsk Hydro ASA is spending $18.99 a barrel for reserves of Spinnaker Exploration Co. of the U.S.

Talisman estimates Paladin's proven and probable reserves at 190 million barrels, according to today's statement.

``This is an attractive opportunity for Talisman,'' Buckee said in a statement. ``These assets materially enhance Talisman's production growth profile and offer significant cash generation potential.''

Buckeee helped found the company in 1992, bringing with him experience from BP, where he had managed BP's North Sea exploration planning. Talisman plans to boost production by between 5 percent and 10 percent a year, and last year replaced 179 percent of its proven reserves with new finds.

North Sea Bet

Talisman was the biggest acquirer of U.K. oil and gas fields last year, when Shell was the biggest seller, in line with Buckee's strategy of developing mature basins.

Current investment in the U.K. North Sea may yield the equivalent of about 13.5 billion barrels of oil, Blakeley said last month at the Offshore Europe conference in Aberdeen, Scotland. The other 10.5 billion may come on top of that, he said.

Talisman and Paladin have already joined in some North Sea projects, including the Blane oil field straddling the U.K.- Norwegian border that those governments approved for development in July.

Talisman is being advised by Goldman Sachs Group Inc. and Paladin by Merrill Lynch & Co. and JPMorgan Cazenove.