Canadian Manufacturing

Talisman Energy posts operating loss; plans to sell Norway assets

Formal sale process underway, with strong interest in assets expressed early on, CEO Hal Kvisle said



CALGARY—Talisman Energy’s offshore operations in Norway are on the sale block, the oil and gas company said as it posted an operating loss that missed analyst expectations.

CEO Hal Kvisle said the Norway assets, which aren’t part of Talisman’s core business, take up a “disproportionate” share of spending and are better off in someone else’s hands.

A formal sale process is underway and Kvisle said interest in the Norway assets has been strong so far.

He said he expects “a relatively short process to get into advanced negotiations with the preferred buyer” and that a deal should be announced some time later this year.

“But then there will be an extended period to get that kind of a transaction closed, just from a regulatory perspective and the complexities of selling a whole operating entity in a jurisdiction other than our home jurisdiction. These things take time,” he said.

In March, Talisman announced a deal with its contractor, SBM Offshore, to cancel its problematic Yme project in Norway, and dismantle the above-surface part of the offshore platform.

Elsewhere in the Scandinavian country, Talisman operates the Blane, Gyda, Varg and Rev fields, with interests ranging from 18 to 70 per cent.

Talisman aims to shed up to $3-billion in assets by the middle of next year as it focuses its portfolio on two key operating areas: the Americas and Southeast Asia.

It’s part of a new strategy introduced by Kvisle shortly after he became CEO last September.

A sale process is also underway for Talisman’s 12 per cent interest in the OCENSA pipeline in Colombia, a country where the company intends to keep producing oil.

As well, Talisman would like to pare down its shale natural gas position in British Columbia and Alberta, potentially by partnering up with other firms to develop its Montney and North Duvernay lands.

The same day it announced the plans to sell, Talisman posted a $27-million loss from operations, or three cents per share, in the quarter—down from a year earlier profit of $71-million or seven cents per share.

Analysts polled by Thomson Reuters had recently lowered their estimates for Talisman to less than a cent per share of adjusted earnings.

The Calgary-based company’s net income—which include one-time items, such as hedging gains and losses—was $97-million in the second quarter, or nine cents per share, compared with $196-million, or 19 cents per share a year earlier.

Investors have been eager to see a turnaround at Talisman since Kvisle became CEO.

The former TransCanada boss took the top job after the abrupt departure of John Manzoni.

Higher-risk exploration areas, such as Peru and Poland, have been chucked from Talisman’s portfolio in favour of stable, predictable production.

However, it’s hanging onto its interest in a potentially huge oilfield in the Iraqi region of Kurdistan for now, with an eye to selling it or finding a joint-venture partner down the road.

Kvisle recently returned from Kurdistan and was impressed with what he saw.

“I come back with my impressions of a very well-run drilling operation in difficult circumstances,” he said.

“Everything in Kurdistan takes longer, much longer than it takes here in North America and that’s just reflective of the logistics and the supply situation of drilling in some fairly remote regions.”

The company says production in the quarter averaged 361,000 barrels of oil equivalent, down from 435,000 barrels in the corresponding quarter of 2012.

While performance in Asia-Pacific and the Americas was strong, the North Sea continued to be problematic, causing the company to scale down its full-year production targets from that region by 9,000 barrels per day.

Company wide, Talisman expects its 2013 production to come in at the low end of its targeted 375,000 to 395,000 barrel per day range.

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