On December 17, 2012, Talisman sold a 49% equity interest in its main UK operating subsidiary, Talisman Energy (UK) Limited, now renamed Talisman Sinopec Energy UK Limited (‘‘TSEUK’’), which owns substantially all of Talisman’s UK assets, to Addax Petroleum UK Limited, a wholly owned subsidiary of Sinopec. The deal structure is a corporate joint venture (‘‘JV’’) whereby Sinopec purchased 49% of TSEUK’s outstanding shares for $1.5 billion, with adjustments for working capital and an economic effective date of January 1, 2012. Together with Sinopec, the JV will allow for more investment in the UK assets than Talisman would have invested alone, with the goal of improving reliability and efficiency while increasing the reserves and remaining life of the assets. The sale and resulting JV will reduce Talisman’s share of capital spending, operating costs, production and abandonment liabilities. Under the terms of the JV, Talisman and Sinopec have agreed to spend approximately $1.9 billion (net Talisman share) of capital expenditure over the 2013 to 2016 period. Seven hundred million of that spend is expected to be spent on the Montrose Area Development (‘‘MAR’’) project. The following details for 2012 account for the 100% interest prior to December 17, 2012 JV closure and the 51% interest thereafter, and forward-looking statements reflect post-JV operations unless otherwise stated.
TSEUK’s principal UK operating areas include Claymore, Piper (including Tweedsmuir), Tartan, Ross/Blake, Buchan/Hannay, Enoch/Blane, Quad 16, Montrose/Arbroath, Fulmar, Auk, and Clyde. These principal operating areas encompass a total of 42 fields. TSEUK’s working interests range from 5% to 100%, as well as in a number of production facilities and pipelines, including a 80% interest in the Flotta Terminal. Thirty-two fields are operated (with TSEUK’s interests ranging from 25% to
100%) and 10 are non-operated (with TSEUK’s interests ranging from 5% to 53%). In 2012, the UK contributed 52 mboe/d, or 12%, of the Company’s worldwide production. The primary focus in the UK is oil, with oil and liquids contributing to 98% of TSEUK’s UK production. At year-end 2012, TSEUK operated approximately 97% of its UK production.
During 2012, TSEUK drilled and completed a production well at Clyde Northern Terrace. The MAR project, with first oil planned for 2016, was sanctioned in 2012 and granted Brownfield Allowance with approval to proceed by UK government authorities in October 2012. The Auk South development has been deferred and placed back into the pre-sanction stage, with a re-evaluation of development options expected in 2013. In 2013, TSEUK plans to continue upgrades at Claymore, Fulmar and Piper platforms to increase operating capability, and plans to replace the Arkwright riser to enable Arkwright and Brechin to be brought back on stream. TSEUK plans to complete the Tweedsmuir TP3 well and drill development wells at Clyde and Godwin in 2013.
UK – Exploration
In 2012, TSEUK farmed down and participated in two appraisal wells, Kildrummy Block 15/12b and Talbot Block 30/13a. The results of Kildrummy have confirmed that oil accumulation is non-commercial. Talbot was still drilling over year-end. Additionally, TSEUK was successful in acquiring new acreage in the recent UK licensing round, which will support existing and potential operations.
In 2013, TSEUK plans to drill an exploration well, Seagull North, in Block 22/24e.