MADRID: Spanish oil major Repsol is close to buying Canada's fifth-largest independent petroleum producer, Talisman Energy, a source with knowledge of the matter said on Monday.
The source, speaking on condition of anonymity, said the board of Repsol had approved making an offer for the Canadian company, and Talisman's board was now meeting to review it.
Spanish daily El Pais said the bid could be worth around 10 billion euros ($12.44 billion), including debt worth $4.3 billion.
That would represent a more than 50 percent premium on Talisman's market value of $5.33 billion.
Talisman confirmed on Monday that it was engaged in discussions with Repsol regarding a potential corporate transaction. Repsol declined to comment.
A drop in oil prices has lowered valuations for producers like Talisman, spurring interest from Repsol which has been on the search for oil and gas targets in North America or other countries with stable regulation.
By acquiring the Calgary-based firm, Repsol will also reduce heavy exposure to conflict-ridden regions like Libya, boost its exploration and production arm and fill a funding gap after the seizure of its Argentine business.
Previous merger talks between the two companies broke down last summer because of Talisman's underperforming North Sea operations, much of which are in a joint venture with China's Sinopec.
While much of Talisman's operations in the Western Hemisphere remained profitable while oil prices were high, its North Sea operations have weighed on results as maintenance work on aging platforms made production targets unreliable while decommissioning obligations mount.
The company said earlier this year that it could take a charge against its operations in the region, which would be recorded in the fourth quarter if needed.
Talisman values the operations at $637 million but warned "the magnitude of potential impairments could result in a material reduction in the carrying value of the company's investment".
Talisman's weak share price and profitable operations outside of the North Sea have attracted investors eager to see the company fix its problems.
Activist investor Carl Icahn took a 7 percent stake in the company in 2013 but has refrained from making public statements about whether he would like to see the company sold or broken up.
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