Hal Kvisle, president and CEO of Talisman Energy, speaks at the Global Business Forum in Banff, Alta., Thursday, Sept. 20, 2012.Jeff McIntosh/The Canadian Press
Hal Kvisle, Talisman Energy Inc.'s director-turned-chief executive officer, has made it clear from his first day as the company's boss he wants the energy giant to cut costs and keep its operations confined to Southeast Asia, Canada, the United States and Colombia.
Shareholders get that. What they don't get, Mr. Kvisle said in an interview, is how the rest of company fits into this plan.
Plenty of pieces are on the auction block, including land rich in natural gas in the British Columbia's Montney region, as the CEO strives to shrink the company. International properties investors found questionable are also up for grabs.
But there are a few oddities that neither fit neatly into Mr. Kvisle's blueprints nor are for sale. He calls these "special situations."
Talisman's assets in Kurdistan serve as a perfect example of properties that do not fit into Mr. Kvisle's tidy vision. Yet, Kurdistan is in, at least for now. Talisman will drill two wells there in the next six to eight months prove – or disprove – whether it is sitting on several hundreds of million barrels of recoverable oil.
"If they prove it, this will be by a wide margin the largest oil discovery that I've ever been involved in," he said. "So I'm certainly not inclined to move really quick to divest it."
Algeria also falls into the "special situations" category. It is one of Talisman's most profitable properties and its partner, Pertamina, Indonesia's state-owned oil and gas firm, is one of the company's most important partners in Asia. "Holding it is low-cost. We don't operate. Takes very little effort on our part. And it is a high quality, high profitability asset.
"We're not going to go out there and try to find a whole bunch more special situations," Mr. Kvisle said. "But to the extent that we already have a good asset that I call a special situation, we're going to make the most money we can out of it."
Mr. Kvisle took over Talisman in September, after a two-year retirement. He previously ran power and pipeline giant TransCanada Corp., dragging it through a restructuring process.
"I'm a bit of an obsessive value-maximizer," he said. He is leery about holding a fire sale, but recognizes the company needs to shine up its balance sheet and narrow its focus.
Mr. Kvisle wants Talisman to hedge most of its production in order to protect the company from volatile prices. Be warned, investors: he is willing to miss out on a rally in exchange for stabilization. "Certainty," Mr. Kvisle said, "is worth something."
Encana Corp., the North American natural gas company, placed astute hedges ahead collapsing natural gas prices, Mr. Kvisle said. These bets helped it ward off some of the pain tied to the battered market. Mr. Kvisle admires how Encana predicted the extent to which shale gas and technology would affect the market, and wants Talisman to learn from its Calgary-based competitor.
He wants to forward sell 75 per cent of next year's production, 50 per cent two years out, and 25 per cent for three years, rolling it forward each month.
"When the world falls out of bed and the gas price collapses, we have six months where we can think about it. And maybe in six months it bounces back," Mr. Kvisle said.
(Carrie Tait is a Globe and Mail Energy Reporter.)
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