Talisman Targets $3 Billion in Asset Sales in Next 18 MonthsRebecca Penty
Talisman Energy Inc., the Canadian energy company with operations on six continents, is seeking as much as $3 billion from asset sales or joint ventures in the next 12 to 18 months as it plans to reduce debt and cut spending on natural gas production.
Talisman is “actively marketing its North Duvernay shale and parts of the Montney” in Alberta and British Columbia, the Calgary-based company said in a statement today. It’s also seeking a buyer for $1 billion to $1.5 billion in international assets, “the bulk” of them in the North Sea, Chief Executive Officer Hal Kvisle said at a meeting with analysts today.
Proceeds may be used to reduce debt, fund short-term development or repurchase shares, the company said. Talisman is cutting spending and exiting certain regions as it seeks to streamline operations and boost production of liquids after North American gas prices fell to a 10-year low last year.
“Over the past six months, we have stabilized the company,” Kvisle, who took over as CEO in September, said in the statement. “We are quickly moving to strengthen and focus our company by imposing strict capital discipline, increasing the cash margins on the barrels we produce, and unlocking value through asset sales or strategic joint ventures.”
Talisman rose 0.9 percent to C$12.65 at the close in Toronto. The stock has eight buy and 19 hold recommendations from analysts.
The company’s 2013 capital budget will be $3 billion, 25 percent less than last year, with 90 percent of the spending going to liquids and international gas projects. Cash flow is expected to be about $2.5 billion this year and annual output is targeted at the equivalent of 375,000 to 395,000 barrels of oil a day.
“As we look forward for the next three to five years, our plan calls for flat production today,” Kvisle said on the webcast. Talisman will focus development on the Americas and the Asia-Pacific, he said.
The company holds 350,000 acres in the Duvernay, where it’s testing for liquids production, and 200,000 in the Montney, an area of interest for companies exploring liquefied natural gas exports from Canada’s Pacific Coast, Kvisle said. Talisman has seen “significant interest” from discussions regarding the Montney, he said on a call with reporters.
The company last year agreed to sell China Petrochemical Corp. a 49 percent stake in its U.K. North Sea business for $1.5 billion. Talisman also operates fields near Norway in the North Sea, which in 2011 averaged output equivalent to 34,600 barrels of oil a day.
Talisman may seek to change its partnership with the Chinese state-owned company known as Sinopec to reduce its interest in the U.K. and may sell its Norwegian business or seek a partner, including Sinopec, Kvisle said.
Talisman is showing it will live within its means, focus its global operations on key areas and sell less important assets, said Ryan Bushell, who helps oversee C$2 billion ($1.9 billion) at Leon Frazer and Associates Inc. in Toronto, including Talisman shares.
“I was satisfied that the company was demonstrating the sharper focus Hal talked about last year when he stepped in as CEO,” Bushell said in phone interview today.
The company is seeking at least three new directors by 2014, and is nominating TD Bank Group Chairman Brian Levitt to the board, Talisman Chairman Chuck Williamson said in a letter to shareholders today.
The Globe and Mail newspaper reported Feb. 7 that a shareholder asked the company for board changes. The company has heard from “three to four” activist investors, Kvisle said in a phone interview on Feb. 13. He refused to identify the investors.
The makeup of the board will change to add more directors with experience in the oil and gas industry, as Kvisle is currently the only one, he told reporters. “We’ve had discussions with institutional shareholders around that.”