ALBERTA

Talisman CEO hearing investor concerns, but says no quick-fix in current market

11/06/2013 07:09 EST | Updated 01/23/2014 06:58 EST
CALGARY - Investors are piping up about what they see as a too-slow turnaround at Talisman Energy Inc., its chief executive said Wednesday.

Hal Kvisle, speaking during the company's third-quarter conference call, listed a number of the criticisms he's heard from shareholders in recent months.

Kvisle said he understands many of those concerns, but stressed that a quick fix is not feasible in today's market.

"In an industry where commodity prices can change quickly but reshaping a company takes time, we're conscious of the tension between the short-term and long-term value," Kvisle said.

"We understand our challenges the way our shareholders see them. We're working hard to improve and restructure the business in the short term while we build a stronger long-term future for the company."

Billionaire and prominent activist investor Carl Icahn disclosed a month ago that he's now in control of six per cent of Talisman's stock. Kvisle said he's had some "preliminary" discussions with Icahn, but it's not clear yet what changes Icahn is after.

Kvisle took the reins of Talisman more than a year ago and has since set out a new strategy that has honed its focus on the Americas and Southeast Asia.

Up to $3 billion in assets are on the sale block — including offshore properties in Norway and a stake in a Colombian oil pipeline — but no sales have come to fruition yet.

Investors are antsy to see deals get done, but the market is "challenging and slow moving" at the moment, Kvisle said.

Talisman is optimistic it can announce "one or two" deals by the end of this year and reach its $2-billion to $3-billion target toward the middle of next year.

The company had aimed for an outright sale of its North Duvernay natural gas holdings in Alberta, but is now setting its sights on a joint venture instead.

A number of Asian and European firms expressed interest but balked at developing the shale gas resource on their own without the type of technical expertise a Canadian partner like Talisman could provide.

Kvisle said Talisman "absolutely" could have sold the Duvernay lands — but not at an attractive price.

The CEO said he also frequently hears proposals from shareholders to split the company in two or spin off some of its operations to better reflect value.

Talisman has taken that idea seriously, enlisting the help of outside advisers to evaluate it. But in the end, the company determined that a corporate split was a no-go in today's environment.

"While we do see the benefit of two highly focused companies, splitting the company is only valid if the two companies that arise from the split are strong and viable stand-alone entities," said Kvisle.

"A split, or a variation like a spinout of one part of our business, would be challenging to execute today, given a number of constraints associated with our debt, our credit ratings, North Sea obligations and other tax, legal and other cost considerations."

Talisman is committed to keeping its investment grade credit rating and wouldn't undertake any changes that would jeopardize that, he said.

Shareholders have questioned the decision by Talisman to keep its presence in the North Sea, which has been a particularly challenging part of its business. But statutory and contractual obligations restrict Talisman's ability to simply dispose of those assets, though it has been aiming to pare down its exposure to the region, Kvisle said.

Kvisle, who retired as CEO of pipeline giant TransCanada Corp. (TSX:TRP) in 2010, said Wednesday that he doesn't intend to stay on as CEO past the end of 2014.

Talisman, which reports in U.S. dollars, reported a wider loss from operations in the third quarter.

The loss was $45 million compared with $36 million a year earlier. In both quarters, the loss was equal to four cents per share.

Analysts polled by Thomson Reuters were, on average, expecting Talisman to post a loss of two cents per share.

Talisman shares were down 2.4 per cent at $12.51 in afternoon trading Wednesday on the Toronto Stock Exchange.

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