Nexen's Buyout Could Bode Well For Talisman Energy

| About: Talisman Energy (TLM)

As predicted back in February, CNOOC (CEO) made an aggressive bid today for Canadian oil and gas producer Nexen (NXY) for a 60% premium. This definitely is a nice silver lining for me in what looks to be an otherwise dismal start to the trading week. I also think it bodes well for another one of my other Canadian holdings, Talisman Energy (TLM), which had its own good news today as well.

"Talisman Energy Inc., an upstream oil and gas company, engages in the exploration, development, production, transportation, and marketing of crude oil, natural gas, and natural gas liquids. It primarily operates in North America, the North Sea, and southeast Asia." (Business description from Yahoo Finance).

Six reasons Talisman has further upside from $11 a share:

  1. The company announced today that it has sold a 49% stake in its UK North Sea business for $1.5B to Sinopec (SHI), a very solid price for these assets.
  2. The stock yields 2.5% and has grown its dividend at an annual pace of 11% over the past five years.
  3. The stock is selling near the bottom of its five year valuation range based on P/B, P/S and P/CF.
  4. Analysts have the company growing revenues at 10% in FY2013 and the stock has a minuscule five year projected PEG ratio (.35).
  5. The mean price target of the 15 analysts that cover the stock is just north of $15 a share. Credit Suisse has an "outperform" rating and a $16 price target on the stock.
  6. The stock has spent the last nine months in a bottoming process and looks to be ready to break out (See Chart)

Disclosure: I am long NXY, TLM.