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Repsol's Talisman takeover not affecting Sabah
Published on: Monday, August 17, 2015

Kota Kinabalu: Talisman Malaysia, operating Sabah's Kinabalu Field crude oil platform off here is not affected by Repsol's takeover of Talisman Energy."There is no change of (company) name for now," said Talisman Malaysia vice president Duncan Smart who is also Sabah Assets Manager when asked by Daily Express.

Talisman Malaysia will intensify its development of the Kinabalu Field with the fabrication of a new additional platform to increase the productivity of its output, with further development exploration approved.

"Despite the decline in prices, we can justify our investments (off Sabah)," said Smart.

Spanish oil and gas firm Repsol bought over Talisman Energy for USD8.3 billion earlier this year in the global oil and gas shakeup following a slump in oil and gas prices is said to be a harbinger of things to come in the industry, according to some experts and analysts.

Repsol also acquired Talisman's assumed debt of USD4.7 billion. JPMorgan Chase acted as financial adviser to Repsol, meanwhile, Goldman Sachs, Nomura acted as financial advisers to Talisman.

Many oil and gas companies borrowed heavily to fund expansion while oil prices were at USD100 per barrel or higher, and are under financial strain as their cash flows are squeezed.

Shell reportedly has shed a few thousand jobs outside of Malaysia, but Talisman Malaysia according to Smart is not embarking on any retrenchment exercise.

Talisman's main assets are in Canada and the US but it also has a presence in Southeast Asia (Indonesia, Malaysia and Vietnam), Colombia and Norway.

When asked if there were any changes in the top management levels of its former Calgary, Canada headquarters, Duncan replied in the affirmative saying that some had quit or retired with the control centre now shifted to Madrid, Spain under Repsol.

"But I won't shift my (soccer) support to Real Madrid," he jested. There is also no change in the management personnel in Talisman Malaysia, now under Repsol Group.

Repsol said the Talisman deal would boost its oil and gas output by 76 per cent and transform it into "one of the world's most significant players".

The incorporation of Talisman increases the output of the Repsol Group by 76 per cent to 680,000 barrels of oil equivalent per day, and boosts reserves by 55 per cent to 2,353 billion barrels of oil equivalent. The group now is present in more than 50 countries with over 27,000 employees.

Josu Jon Imaz, Repsol chief executive, said that the deal was "a good agreement at the right time". The Talisman deal is the result of an exhaustive analysis of more than 100 companies and assets worldwide. In every area, Talisman has always been the best option, because of the excellent quality of its complementary global assets, including its talent.

"With Repsol's ability to support growth of these assets there is much value to be realised - it is a win-win situation and will transform Repsol."

Talisman's appeal to Repsol is clear: two-thirds of Talisman's production comes from North America, the UK and Norway. Repsol goes from having almost all of its production in emerging economies – with all the political risk that entails – to having more than a third of its production in developed ones.

Chuck Williamson, Chairman of Talisman Energy said, "The deal underscores Repsol's belief in the strong set of assets Talisman has worked hard to develop. Repsol is a world-class operator with a solid track record and the resources to continue the development of these assets within their international portfolio."

Antonio Brufau, Chairman of Repsol said, "This is a transformative and exciting deal which will make us one of the world's most significant players and which will allow us to grow as a company and reinforce Repsol as a solid and competitive integrated player."

The Federal Government of Malaysia depends on petroleum income tax for its operating budget and right now it is in need of greater oil and gas output, with Talisman Malaysia is expected to contribute more to this direction.

According to estimates of the Federal Government's 2015 revenue, the petroleum income tax is calculated based on crude oil price (Tapis) of USD 110 per barrel in 2014 and USD 105 per barrel in 2015.

The crude oil price has fallen significantly of late and every USD 1 per barrel drop in crude oil prices costs the government about RM650 million in revenue.

A decline of crude oil price to USD 85 per barrel will result in a reduction of revenue of RM13 billion (4 per cent); if the crude oil price is reduced to USD 75 per barrel, it would mean a loss of RM19.5 billion (7 per cent); and if the oil price is at USD 65 per barrel, the loss would be RM 26 billion (9.4 per cent).

Petroleum income tax alone constitutes some 21 per cent of the federal government's direct tax revenue excluding other forms of revenue contributed by Petronas.



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