Talisman Energy Inc., which has been in discussions with Spain’s Repsol SA over potential deals, is “frustrated” with its slow pace of restructuring and says that’s hurting the company’s ability to cut costs.
Hal Kvisle, Talisman’s chief executive, engineered the company’s restructuring plan after taking over the corner office in September, 2012.
His strategy to clean up the balance sheet and focus on North America, Colombia, and the Asia-Pacific region hangs on Talisman’s ability to sell assets. But the slow speed of this transformation has left the company and investors weary.
“On the pace of dispositions, we’d grade ourselves as a little bit frustrated,” Mr. Kvisle said during the company’s second-quarter conference call. “We’ve been through two or three years of a relatively difficult marketplace. We’re determined not to give assets away for 60 cents on the dollar.”
The prolonged sales process is responsible for a “big part” of Talisman’s inability to cut overhead costs quickly, Mr. Kvisle said.
The company has assets spanning the globe.
Some of its North Sea assets, for example, have proved difficult to sell because they are unreliable and come with spending commitments to its Chinese partner.
Mr. Kvisle told analysts he would not answer any questions regarding deal discussions with Repsol. Talisman did not take questions from reporters on the call.
Maarten Bloemen, a portfolio manager and research analyst at Franklin Templeton Investments – Talisman’s largest shareholder with 13.97 per cent of the stock, according to Bloomberg – said he was disappointed the company could not be more forthcoming with information about a potential transaction, but added he understood the limitations Mr. Kvisle is under.
“I think what they are doing [with asset sales] is reasonable,” Mr. Bloemen said.
“It’s frustrating – don’t get me wrong – as a shareholder too, that things aren’t faster, but I would be remiss not to say I would rather have them, at this discipline, getting the best for us than desperately giving up and selling this and not realizing the value, and leaving all the value to Repsol.”
Mr. Kvisle, however, discussed other potential deals. Talisman is seeing “much more interest” compared with last year from companies interested in striking a joint venture deal on its Duvernay assets, he said.
Companies from around the world have expressed interest in this project and Talisman expects to receive proposals in the third quarter, according to chief financial officer Paul Smith.
Deliberations over the company’s midstream assets, such as its natural gas pipeline and processing facilities in the Marcellus play, located in New York and Pennsylvania, are also progressing, Mr. Smith said. “We expect to be in a position to make a decision in” the third quarter, he said.
The company is “reviewing” when it would be appropriate to put its assets in Kurdistan on the block, given hostilities in Iraq, he added.
Talisman reiterated its plan to sell $2-billion (U.S.) of “long dated, non-core, capital intensive assets” over the next 12 to 18 months. Mr. Kvisle wants to leave his spot some time in 2014, meaning he will not complete the company’s restructuring.
Talisman lost $237-million (U.S.) or 23 cents a share in the second quarter, down from a profit of $97-million or 9 cents a year earlier.
The company’s operating earnings were also in the red, ringing in at a loss of $9-million, compared with a loss of $27-million in the same quarter in 2013.
The company attributed its losses to a $171-million charge related to hedging and a “non-cash mark-to-market loss” of $125-million tied to commodity derivatives.
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