CALGARY, Alberta (Reuters) - Talisman Energy Inc TLM.TO said it had no immediate plans to split itself in two despite pressure from activist shareholders looking to boost returns from the restructuring Canadian oil company.
Talisman, which reported a narrower third-quarter loss on Wednesday, said it had examined the idea of separating its operations in the Americas and Asia, an idea touted by some investors for years, but concluded the time is not right for the move.
“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” Hal Kvisle, the company’s chief executive, said on a conference call. “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 credit ratings, North Sea obligations, and other tax, legal, and cost considerations.”
Talisman, a chronic underperformer now restructuring its operations in order to lower costs and boost its share price, has been in the spotlight since early October, when activist investor Carl Icahn revealed he’d taken a 6 percent stake in the company.
Kvisle said the company has met with Icahn and other activist shareholders over the past year and is sticking with its plan to restructure operations by focusing on the Americas and Asia, selling its Norwegian North Sea assets and limiting the amount it spends on its UK North Sea properties.
“We’re intrigued that people see Talisman as an interesting situation in that way, but we do caution people that this is not an instantaneous 90-day turnaround,” he said. “This is a pretty capital-intensive industry and it takes some time to move the corporation and move the needle, and we’re just discussing those things with them.”
Talisman also said it has revisited plans to sell its properties in the northern portion of the Duvernay shale field in central Alberta after a search for a buyer came up short.
“We saw a number of big players in that north Duvernay area that we expected might want to acquire our position 100 percent,” Kvisle said. “Most of the foreign players, a lot of them are Asians, but also some Europeans, they are very interested in the Duvernay, but they don’t have the capability to operate there, and they recognize they don’t, so we’ve had quite a bit of discussions around the north Duvernay, which is not what we were looking for at the time. We were looking for an outright sale.”
Talisman had planned to use proceeds from the sale to fund development of its holdings in the southern portion of the field. However it now wants to find a joint-venture partner willing to take a stake in all its Duvernay properties and help fund high drilling costs in the promising region.
Talisman reported a smaller quarterly net loss compared with the year-earlier quarter, when it took a $1.04 billion impairment charge.
The company’s net loss narrowed to $54 million, or 5 cents per share, in the third quarter from a loss of $731 million, or 71 cents per share, a year earlier.
Lower North American gas prices and hedging losses weighed on the results, but the impact was partially offset by increased output and higher prices of natural gas liquids and oil.
Full-year liquids production in North America is expected to come in at the top end of its outlook at 35,000 barrels per day.
Talisman shares were down 32 Canadian cents to C$12.50 by early afternoon on the Toronto Stock Exchange.
Reporting by Scott Haggett in Calgary and Swetha Gopinath in Bangalore; Editing by Kirti Pandey and Phil Berlowitz