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Talisman CEO expected to shed light on Repsol talks

Talisman Energy Inc. President and Chief Executive Officer, Hal Kvisle is photographed on Thursday, April 11, 2013. Mr. Kvisle may reveal details on the Spanish company’s interest during a discussion of second-quarter results Tuesday.

Chris Bolin/The Globe and Mail

Talisman Energy Inc. chief executive Hal Kvisle is known for his candour.

Investors are looking to Mr. Kvisle for some straight talk on Tuesday as they seek details of Talisman's deal talks with Spain's Repsol SA when the Calgary-based oil producer discusses its second-quarter results.

Talisman, which has been restructuring for nearly two years, was pushed last week into disclosing the meetings with Repsol, a revelation that lifted its shares to levels not seen since early May. Missing in all the excitement were any details regarding what was being discussed. Talisman has said only it was discussing "various transactions."

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Possible scenarios include Repsol acquiring the whole company, currently valued at nearly $12.2-billion, then trying to sell off assets it does not want to operate, such as the profitable interests in Southeast Asia or the troublesome North Sea fields. Repsol may also just be looking to pick off specific assets, including Talisman's North American resource plays in the Duvernay region of Alberta, Eagle Ford of South Texas and the Marcellus in the U.S. Northeast.

The latter, a huge shale-gas-producing region, could be linked to Repsol's Canaport liquefied natural gas facility in New Brunswick – a joint venture with Irving Oil Ltd. – if the company moves ahead with plans for a multibillion-dollar transformation into an export facility, one industry source said.

Indeed, the discussions may also come to naught, as has likely been the case with other recently rumoured deals involving Talisman.

Talisman's recent struggles are well known. Mr. Kvisle has sold billions of dollars worth of assets to simplify operations and make them more profitable, but he said the North Sea business, and spending commitments with its 49-per-cent partner, Sinopec Corp., have turned away potential buyers. The partners have wrestled with operational problems in the North Sea as well, a factor analysts say has prevented Talisman from participating in this year's resurgence in Canadian energy stocks.

"I don't know what official offers they've had, but potential suitors would probably know that it's a company at a fork in the road, and it might be more willing to listen to bids than other companies," FirstEnergy Capital Corp. analyst Michael Dunn said.

It is not yet known what role Carl Icahn, the activist investor who owns more than 7 per cent of Talisman's stock, is playing in any efforts to sell assets or the company as a whole.

In Repsol's second-quarter conference call last week, executives offered no details about its aims with Talisman, other than to say it does not have in-house expertise operating Canadian or U.S. shale plays.

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Thomas Adolff, a London-based analyst with Credit Suisse who follows Repsol, said signs seem to point to an asset deal rather than a full acquisition of Talisman. A takeout would be "financially challenging" for the Spanish oil company despite a recent injection of $6.3-billion from compensation for the nationalization of its assets in Argentina and the sale of its stake in Argentine oil company YPF.

"Repsol clearly is hunting for assets, or else it would be more committed to the share buyback plan," Mr. Adolff wrote in a research report. "We are, however, not sure how the assets that Talisman is marketing fit into Repsol's portfolio. It may just be window shopping here, as oil companies do as a normal industry practice."

Talisman likely won't have new concrete details about the talks on Tuesday, company spokesman Simon Scott said.

"I don't think you should anticipate any more colour around that, but you can expect Hal to be his normal, very candid self around our second quarter and how the business is moving forward," Mr. Scott said.

Mr. Kvisle, former CEO at TransCanada Corp., emerged from retirement in late 2012 to take the helm at Talisman, which investors had criticized for investments in too many disparate operations around the world. By March, 2014, he had made good on a pledge to sell more than $2-billion (U.S.) of assets, and in May said the company could jettison another $2-billion of properties within 18 months.

He has said he plans to step down by the end of this year, and observers have said that could help open the door to a major deal. The company has not named a successor.

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About the Author
Mergers and Acquisitions Reporter

Jeffrey Jones is a veteran journalist specializing in mergers, acquisitions and private equity for The Globe and Mail’s Report on Business. Before joining The Globe and Mail in 2013, he was a senior reporter for Reuters, writing news, features and analysis on energy deals, pipelines, politics and general topics. More


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