Talisman Reports Unexpected Loss as North Sea Production Slides

Talisman Energy Inc. (TLM), the Canadian energy company that was targeted by billionaire investor Carl Icahn, reported an unexpected fourth-quarter loss as it pumped less oil and gas from the North Sea and recorded impairments.

The net loss was $1.01 billion, compared with net income of $376 million a year earlier, the Calgary-based company said today in a statement. Excluding one-time items, the per-share loss of 11 cents missed the break-even point that was the average of 14 analysts’ estimates compiled by Bloomberg.

Talisman’s output is falling as it lowers spending and sells assets to reduce debt amid operational troubles in the North Sea. Chief Executive Officer Hal Kvisle has said he plans to sell as much as $3 billion in assets by mid-2014. Icahn, the second-largest shareholder in Talisman with a 7.3 percent stake, agreed in December not to conduct a proxy fight at the company’s next annual meeting in exchange for two board seats.

“During the fourth quarter, the company experienced more downtime and operational issues in the North Sea, with some of these issues over the past year potentially increasing future capital and abandonment costs going forward,” Jeff Martin, a Calgary-based analyst at Peters & Co. who rates Talisman the equivalent of a hold, wrote in a Jan. 24 note.

Fourth-quarter production fell to 387,000 barrels of oil equivalent a day from 392,000 barrels a day a year earlier, according to the statement. Asset and goodwill impairments totaled $826 million after tax in the period.

Spending Plans

Talisman’s 2014 capital spending will be about $3.2 billion, unchanged from 2013 and down about 20 percent from 2012.

The company said in November that unplanned maintenance in the North Sea would probably result in lower cash flows and may require the company to cut the value of the assets. In December 2012, Talisman sold a 49 percent stake in its U.K. assets, including North Sea production, to China Petrochemical Corp.

The company forecast 2014 output from ongoing operations of 350,000 barrels to 365,000 barrels of oil equivalent a day, compared with 345,000 barrels a day last year.

The stock is undervalued and investors should use “any weakness on 2014 guidance as a buying opportunity,” Phil Skolnick, an analyst at Canaccord Genuity Corp. in New York, wrote in a note last month. “The market is giving no credit to any potential fixes associated with Carl Icahn.”

Talisman reported results before the start of regular trading on North American markets. The stock, which has dropped 5.4 percent this year, was unchanged at C$11.68 in Toronto yesterday. The shares have seven buy and 15 hold recommendations from analysts.

To contact the reporter on this story: Rebecca Penty in Calgary at rpenty@bloomberg.net

To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net

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