Jim Buckee, the embattled CEO of the not-so- talisman-like Talisman Energy, said it was “time to turn the page.”
But, for Talisman, turning the page on its controversial Sudan chapter with the sale of its Sudan assets may be much, much easier said than done.
Talisman may be free of its Sudan assets, but will it ever be free of Sudan and the stigma attached to the company?
Somehow, I doubt it.
Never mind the human-rights and political activists who, rightly or wrongly, have dragged the Talisman name in the mud over the past four years.
Investors with long memories will always associate Talisman’s name with Sudan and the headline-grabbing investment that turned into a mammoth public-relations disaster.
Buckee, the British physicist, will always be remembered as the CEO who stubbornly fought off those critics who alleged that Talisman’s participation in a consortium of companies in the Sudan oil field inadvertently helped the Sudan regime wage a civil war by providing it with revenue that could be used to buy weapons.
Buckee’s combative stance and outspokenness over the Sudan investment seemed only to kindle the fires of protest and play into the hands of protesters.
Talisman’s Sudan hangover includes a U.S. lawsuit over its operations in the African country. Those allegations have been rejected by the company that has always argued it was a force for good in Sudan, citing its investment in that country by funding schools, building hospitals and developing water supplies.
When the news broke last week that Talisman (TLM-TSX) had finally swung a deal to unload its 25-per-cent stake in the Greater Nile Petroleum Operating Company to India’s state-owned Oil and Natural Gas Corp. for $1.2 billion, some analysts were projecting a huge celebratory champagne pop for the stock on its first day of trading after the news.
Investors welcomed the deal with all the fizz of a bottle of flat Baby Duck, giving the stock a modest one-day boost of 98 cents or 1.74 per cent, fuelling speculation that the company’s valuations made it a prime takeover target.
Although the deal was anticipated for months, the initial response by investors was disappointing, particularly to those over-zealous analysts who had touted the so-called ‘Sudan Discount’ as high as 25 to 30 per cent despite the fact Sudan accounted for only about 12 per cent of Talisman’s output.
The lukewarm response indicated that many investors have simply grown weary of the long-running soap opera that Talisman became over its involvement in a country notorious for widespread human-rights abuses.
“I’m thrilled that they’ve sold it,” said Peter Linder, energy strategist for the DeltaOne Energy Fund, which owns Talisman shares. “It had to go, but it had to go a long time ago. I think it was difficult to consummate the deal, politically and economically. Jim Buckee is a very, very strong president, but he’s also a very stubborn president.
“Frankly, I was disappointed initially when they went into Sudan (in 1998),” added Linder, who formerly followed the stock while an analyst with Research Capital.
“I think it was a wrong business decision solely because the perception was negative. With a public company, perception is reality.
“Fortunately, I think they got full value for (the Sudan assets), and I think we’ll still see the stock go over $60 (recently at $57.15) in the next couple of months. And I would not be surprised if they used the cash from the deal to make a Canadian acquisition.”
Buckee said after the deal was announced that Talisman is “ultimately in the business of creating value to shareholders.”
If Talisman really had the best interest of shareholders at heart, why did the company not sell sooner, before the slow boil of Sudan turned into a bubbling cauldron?
STREET TALK: Is this a new bull or another bear-trap rally? That’s become the hot debate in the market.
Dan Sullivan of The Chartist investment letter suspects the bull may soon leave the chute, but isn’t yet laying money on those odds.
“I think we might need another leg to flush out all the excesses of the previous bull market,” says Sullivan, whose letter has realized an annual return of 12.7 per cent since 1980.
“Basically, my feeling is that this new rally could be the real thing - but I don’t see any reason to rush in at this point.
“If we are going to get into a new bull market, it will last 18 months or more. Right now, I’m 100-per-cent cash and have been since February. Our stocks tripped out stop-losses then, and we saw no reason to go back in.”
October, historically the market’s spookiest month based on previous crashes, belonged to the bulls with the TSX Composite index up 1.1 per cent, the Dow Jones up 10.6 per cent, the S&P 500 up nine per cent and the Nasdaq up 13.5 per cent.
SAGE WORDS: “Experience in the stock market is a matter of accepting what there is to know and not demanding what is not yet, or not ever, knowable”
– Justin Mamis, author of The Nature of Risk.
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VRM-TSX $10.3
Up $2.36 (+29.7%) on 4,688,800 shares (for week ending Nov. 1)
Vermilion CEO Jeff Boyce used to sport a rising fastball that had batters in the fastball wars quaking in their spikes. But that was nothing compared to the high, hard chin ascent of Vermilion stock on its latest spike on massive volume. Investors were licking their lips in anticipation of a reorganization of the Calgary energy company into an income trust. Fund manager Peter Linder, whose DeltaOne Energy Fund owns Vermilion stock, said, based on his prediction that an income trust was in the cards, the stock could still trade higher, in the $11-$13 range.
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COLD ALBERTA STOCK: McCoy Bros.
MCB-TSX 31 Cents
Down 9 cents (-22.5%) on 1,000 shares (for week ending Nov. 1)
Twenty months ago, this was the real McCoy, trading as high as $2.40. Since then, it's been all downhill for the Edmonton-based provider of truck services and oilfield
equipment that showed a loss of $43,742 in its latest quarter. Even the recent appointment of new CEO Jim Rackievich has failed to breathe life into the stock.
