Talisman Energy Inc.’s turnaround is being held back by spending commitments and under-performance in the North Sea, said Chief Executive Officer Hal Kvisle.
Talisman, the Canadian energy producer that was targeted by billionaire investor Carl Icahn, is lagging behind peers because of its exposure to aging infrastructure in the U.K. and the potentially uneconomic Yme project in Norway, Kvisle said at its annual meeting today. Talisman may need to abandon its Yme development after spending more than $1 billion, he said.
“I don’t think many of the other companies going through a repositioning face quite the detractive inertia that we see in the North Sea,” Kvisle told reporters. The company is hindered by its inability to exit quickly from the region, he said.
Kvisle, a Talisman director, stepped in as CEO in September 2012 after the ouster of John Manzoni. He devised a plan to boost shareholder returns by reducing debt, focusing on two core regions and turning away from early-stage exploration. He also targeted more natural gas liquids output in North America after a decline in gas prices. His plan to improve Talisman’s operations and change the company’s direction is about 85 percent complete, he said.
In 2012, Talisman committed to spending $2.5 billion over five years in the U.K. North Sea as part of an agreement that saw China Petrochemical Corp. acquire a 49 percent stake in the assets. The spending commitment is “a major burden for our company,” Kvisle said.
Shares of the Calgary-based company have fallen 2.7 percent this year, compared with a 34 percent gain at Encana Corp. and a 15 percent rise at Penn West Petroleum Ltd. The two Canadian companies are also seeking to boost investor returns by shedding assets and focusing on more profitable properties under CEOs appointed in 2013.
Two directors who were appointed to Talisman’s board last year after activist investor Icahn took a stake are working constructively with the company, he said.
Kvisle plans to leave the company by the end of 2014. The board is currently searching for a new CEO to replace him.