Talisman Energy and Ecopetrol to acquire BP’s Colombian subsidiary

Talisman Energy Inc (TSX:TLM, NYSE:TLM) and Ecopetrol SA have agreed to acquire BP (LON:BP) subsidiary BP Exploration Co (Colombia) Lt for US$1.9 billion in cash.

Under the terms of the transaction, Talisman will acquire a 49 percent interest in BPXC for US$858 million, while Ecopetrol will take the remaining 51 percent interest. The transaction is expected to close by the end of 2010, subject to Colombian and US regulatory approval and other customary conditions.

"This is an exciting opportunity and an excellent fit with Talisman's strategy of long-term profitable growth," said John A Manzoni, president and CEO. "These are tremendous assets that our team knows well. They are attractively priced, with excellent running room and we are partnering with the pre-eminent oil and gas company in Colombia.
Talisman and Ecopetrol are currently partners in several blocks in Colombia and Peru.

Completion of this transaction will accelerate Talisman’s objective of building a material core area in Latin America, with target production of at least 50,000 barrels of oil equivalent per day.  The acquisition provides over 12,000 boe/d of production net to Talisman, plus immediate cash flow which will fund the expected short-term exploration and development opportunities the company see on this acreage.

The assets lie in close proximity to the Niscota Block, where Talisman has announced a significant discovery with the Huron well.

The transaction includes BPXC's interests in the Tauramena (31 percent), Rio Chitamena (31 percent), Recetor (50 percent) and Piedemonte (50 percent) association contracts. BPXC also holds a 40.56 percent interest in the RC4 and RC5 exploration blocks offshore Cartagena.

The deal also includes BPXC's interests in the Cusiana gas processing facility and interests in four pipelines, totaling some 1,600 kilometres of crude and 400 kilometres of gas pipelines, including a 24.8 percent interest in the OCENSA crude oil pipeline.

Producing fields on the licenses include the Cusiana oil and gas field and the Pauto and Florena fields. Short-term activity is expected on the under-developed Pauto gas condensate field, and the Florena oil field on the Piedemonte block. BPXC's interest in the Pauto field may extend onto Talisman's Niscota block.  Ecopetrol has an existing interest in these two blocks and has completed the majority of development planning.

The transaction adds immediate production and cash flow to Talisman's Latin American asset base. Current BPXC production is approximately 25,000 boe/d, of which 65 percent is liquids production. Liquids production is exported or sold to domestic refineries and the natural gas production is sold domestically.

Talisman estimates 2P reserves for BPXC, before royalties, of 123 mmboe, with proved reserves of 95 mmboe. Net of royalties, these numbers are 98 mmboe (2P reserves) and 75 mmboe (proved reserves).