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ATTACK ON THE U.S.

Saturday, Feb. 4, 2006

Attacks put heat on Talisman

By LILY NGUYEN
Thursday, September 13, 2001

Calgary - The terrorist attacks on U.S. targets on Tuesday have turned the heat back up on Talisman Energy Inc. and its controversial oil play in Sudan, the North African country with a radical Islamic government that has been accused in the past of providing a safe haven for terrorists.

Some analysts, who expect investors to flock to oil and gas stocks once North American markets reopen, said Calgary-based Talisman could well prove the odd man out in a rally of the sector.

Brian Prokop an analyst at Peters & Co. in Calgary predicted Talisman shares could dip to the low $50-range once trading resumes.

He pointed out that Talisman was one of only two major petroleum producers whose shares lost value - they were down $1.15 to $60.50 on the Toronto Stock Exchange during the brief period the exchange was open Tuesday.

The other company to lose ground was Anderson Exploration Ltd., down $2.27 to $37.50. Mr. Prokop attributed its slide to a "deal risk," referring to investor fears that plans to sell itself to U.S.-based Devon Energy Corp. could be jeopardized in the wake of the U.S. attacks.

As for Talisman, Mr. Prokop attributed downward pressure to fears that U.S. retaliation could somehow threaten the company's oil production in Sudan. He said recent attacks may also harden U.S. attitudes to Islamic radical regimes, increasing the likelihood that U.S. capital market sanctions, which could deprive Talisman of its New York Stock Exchange listing, may be enacted.

"You know that feelings in the U.S. are running at the level of outrage, and they are looking for some type of scapegoat, something to act on," Mr. Prokop said.

Before the attacks, the U.S. House of Representatives had passed the so-called Sudan Peace Act with the capital market sanctions, but the Senate had stripped the sanctions from its version of the bill and President George W. Bush was said to be opposed to them.

Talisman chief executive officer Jim Buckee has repeatedly said the company will pull out of Sudan rather than lose its listing on the NYSE.

Dave Mann, a Talisman spokesman, said he couldn't speculate about the fallout for Talisman, especially because it's not known who is behind the attacks.

"We'll have to wait and see when the markets open," he said. "Let's let the U.S. authorities do their job."

The chief suspect behind the attacks - although little evidence has emerged - is exiled Saudi extremist Osama bin Laden, who is based in Afghanistan.

Mr. Bush vowed Tuesday night to avenge the New York and Washington attacks, saying he would "make no distinction between the terrorists who committed these acts and those who harbour them."

Mr. bin Laden lived in Sudan in 1998. He is accused by the United States of having masterminded attacks on two U.S. embassies in East Africa. A Sudanese factory was bombed by U.S. cruise missiles in retaliation for those links. However, the country has since expelled him.

Steve Calderwood, an analyst at Salman Partners in Calgary, disagreed with Mr. Prokop's assessment, saying Talisman shares could benefit because the United States is distracted from the issues surrounding Sudan.

"Holders of Talisman stock may be pleasantly surprised to see the U.S. attention is diverted well away from Sudan towards Afghanistan," he said. He acknowledged, however, that Talisman shares could temporarily suffer because people may still link Sudan to terrorism in their minds.

"The emotions are running high right now," he said. "It's really quite bad luck for Talisman."

Mr. Prokop said he expected Talisman stock to bounce back once it falls to "screaming buy" levels, based on solid fundamentals and gushing revenue and profit.



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