Talisman Energy Inc.
Tuesday’s close: $12.56, up 23 cents
52-week trading range: $9.71 to $14.70 a share
Annual dividend: 0.271 cents a share for a yield of 2.2 per cent
Analysts’ ratings: There were seven buys, 19 holds and no sells, according to Bloomberg data. Target prices ranged from $11.50 a share from GMP Securities analyst Ryan Savage to $17 a share from Matthew Portillo from Tudor Pickering & Co.
Recent history: Shares of the Calgary-based oil and gas producer have risen 4.6 per cent (including reinvested dividends) over the past year, but many shareholders are frustrated over the stock’s longer-term record. Talisman has taken a severe haircut from a high of $24.90 a share in 2008 as the global company has struggled to grow cash flow, and missed production targets. A focus on North American shale gas plays hurt the company as the commodity prices took a big dive. To generate needed cash, Talisman managed to sell 49 per cent of its North Sea oil business last July to China’s top refiner Sinopec Corp. The arrival of activist hedge fund manager West Face Capital on Talisman’s shareholder list last summer, however, may have helped trigger a management shakeup. Talisman replaced its former chief executive officer John Manzoni last September with Hal Kvisle, a former TransCanada Corp. executive. The company will be in the spotlight on Wednesday when it reports fourth-quarter results before the market opens.
Manager insight: The Talisman story is not unlike that of Nexen Energy Inc., another Calgary energy company whose stock lagged its peers and came under pressure from shareholders before it became a takeover target by China’s CNOCC Ltd. There is speculation that Talisman could also be target by a large energy company or a state-owned energy player.
“It’s similar to Nexen in that the majority of the assets are outside of Canada, spread out [widely], and have underperformed,” says Jim Huang, president of T.I.P. Wealth Management Inc., and owner of Talisman shares since last fall. “But Talisman doesn’t have oil sand assets, which makes it easier to get political approval [in Canada].” The removal of Nexen’s CEO paved the way for the $15.1-billion (U.S.) takeover deal last summer by CNOCC, but it was a winding road to finally get approval from Ottawa. The transaction got the nod from U.S. regulators on Tuesday.
Mr. Huang is betting that the value in Talisman will be unlocked either as a takeover candidate, or through the sale of assets. Talisman shares could be worth $16 to $20 (Canadian) a share, he suggested. “The timing could be uncertain, but the direction is going the right way.”
Talisman’s new CEO has been saying the “right things” in terms of selling certain assets, reducing some of the higher-risk exploration activity, and possibly seeking joint-venture partners, he said. “But the sense that we are getting is that he is taking a slow approach. So that is where the activists come in.” When Talisman reports its financial results on Wednesday, “the quarterly numbers are not that critical,” he said. “It is more what management says about its plan to reshape the company that matters.”