January 10, 2012 / 11:43 AM / 6 years ago

UPDATE 3-Talisman Energy cuts 2012 capex, to focus on liquids

* To reduce 2012 capex by $500 million

* Production from ongoing operation rises 9 pct in 2011

* Sees production to grow 5 pct in 2012

* Expects liquids production in North America to rise

* To sell $1 bln-$2 bln non-core assets in the North Sea (Adds analyst comments, updates share movement)

By Arnav Sharma

Jan 10 (Reuters) - Canada’s Talisman Energy plans to reduce its capital spending by more than a tenth this year, as the oil and gas producer pulls back on investments in natural gas assets to focus on liquids-rich shales such as the Eagle Ford in Texas.

A steep drop in U.S. natural gas prices has forced many companies to invest in fields with a higher percentage of liquid content.

Shares of Talisman rose 5 percent in early morning trade on Tuesday on the Toronto Stock Exchange. They later pared some gains to trade up 4 percent at C$12.85.

Talisman, Canada’s third-largest independent oil explorer, expects to spend slightly over $4 billion in 2012.

“There’s a downward pressure on the company’s free cash flows, and it realizes that. Hence, they want to focus on other places, whether it’s natural gas liquids, or even light oil if they can get their hands on it, to improve their netbacks,” Accountability Research analyst Imran Pervaiz told Reuters.

The company said production from ongoing operations rose 9 percent to average about 425,000 barrels of oil equivalent per day (boepd) in 2011.

Talisman expects production to grow 5 percent in 2012.

The company plans to shift focus to the liquids-rich parts of North America, and expects its liquids production in the continent to rise to over 60,000 barrels per day (bbl/d) by 2015 from about 25,000 bbl/d in 2012.

The company expects to spend $1.8 billion in North America this year, about $400 million lower than 2011 as it cuts down on dry gas production.

However, over 40 percent of the capital program will focus on liquids-rich opportunities, it said in a statement.

Spending in the Eagle Ford play will increase to $500 million in 2012 from $350 million last year.

The company expects to spend about $1.2 billion in the North Sea in 2012, and sees production to average between 95,000 boepd to 110,000 boepd.

Talisman is looking to sell between $1 billion to $2 billion of non-core assets in the North Sea this year.

Talisman Chief Executive John Manzoni had earlier said North Sea operational problems have overshadowed positive results in other parts of the company’s portfolio.

“The area (North Sea) is experiencing some physical and government issues, especially concerning the recent tax hikes. However, they are still good assets, but it really comes down to how economic they are,” Pervaiz added. (Reporting by Arnav Das Sharma in Bangalore; Editing by Don Sebastian)

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