Talisman Energy Inc., the Canadian oil and natural gas company being targeted by activist investor Carl Icahn, reported a narrower third-quarter loss as costs fell.
The net loss was $54 million, or 5 cents a share, from $731 million, or 71 cents, a year earlier, Calgary-based Talisman said in a statement today. Excluding hedging costs and tax adjustments, the per-share loss was more than the 1-cent average of 14 analysts’ estimates compiled by Bloomberg. Last year’s results included $1.04 billion in expenses from Norway projects and costs associated with exiting Peru.
Chief Executive Officer Hal Kvisle is seeking to sell $2 billion to $3 billion in assets to reduce debt and focus on the Americas and Southeast Asia. Billionaire investor Icahn reported a 7 percent stake in Talisman last month and said he may seek talks with management on “strategic alternatives” and board seats.
While Talisman’s production and operating cash flow beat estimates, “the market remains focused on divestitures,” Randy Ollenberger, an analyst at BMO Capital Markets in Calgary, wrote in a research note today.
While the market to sell assets is difficult, Talisman expects to do one or two significant deals in the near future and plans to meet its mid-2014 sales target, Kvisle said on a conference call today. The company has also met with shareholders in the past two months and heard suggestions including splitting the company in two, he said. While there may be value in a corporate split, challenges involving debt mean that option doesn’t make sense for Talisman, Kvisle said.
Sale of a stake in the Ocensa pipeline in Colombia is in the “final phase,” the company said in the statement. Talisman, Petrominerales Ltd. and two other partners in the pipeline are selling a combined 27 percent interest.
Talisman’s output declined 11 percent to the equivalent of 371,000 barrels of oil a day in the third quarter, from 415,000 barrels a year earlier. Capital spending is down 17 percent year-to-date and operating expenses for the quarter dropped 31 percent to the equivalent of $11.49 a barrel. Sales fell 25 percent to $1.23 billion, from $1.65 billion a year earlier.
The lower production comes after Talisman sold assets and North Sea volumes declined. U.K. operations are being impeded by scheduled maintenance and reliability issues, including work to fix corrosion at the Claymore offshore platform, the company said.
“Talisman continues to battle reliability issues in the North Sea, which adds an element of uncertainty to our estimates,” Chris Feltin and Brian Bagnell of Macquarie Capital Markets Canada Ltd. wrote in an Oct. 10 note. Talisman was the worst-performing stock in the quarter among a group of large Canadian energy companies tracked by Macquarie.
Talisman reduced its full-year output target from the North Sea by the equivalent of about 9,000 barrels of oil a day in July. In December, the company sold 49 percent of its U.K. business to China Petrochemical Corp.
Talisman declined 2.7 percent to C$12.48 at the close in Toronto. The stock, which has gained 11 percent this year, has seven buy, 16 hold and one sell recommendation from analysts.