Go to the Globe and Mail homepage

Jump to main navigationJump to main content

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, president and CEO of Talisman Energy, speaks at the Global Business Forum in Banff, Alta., Thursday, Sept. 20, 2012. (Jeff McIntosh/THE CANADIAN PRESS)

Talisman plans job cuts as pain persists Add to ...

Layoffs are looming for Talisman Energy Inc. as the underperforming company chops costs amid a broader push to boost profitability.

Talisman plans to slash its general and administrative (G&A) costs by “at least 20 per cent over all,” Helen Wesley, the company’s executive vice-president of corporate services, told the CIBC Whistler Institutional Investor Conference Thursday. “And that’s a combination of both people and indirect costs.”

Talisman currently spends $1.3-billion (U.S.) a year on general and administrative costs. It’s unclear what percentage of its work force, which stood at 3,700 employees at the end of 2011, will be let go.

Talisman spokeswoman Phoebe Buckland said cuts will include “people, offices, travel, IT. It’s the overhead as well as the people cost.”

The coming job cuts reflect widespread difficulties facing the Canadian energy patch. Oil companies, faced with high costs, jammed export pipelines and heavily-discounted crude prices, have begun to scale back growth plans.

Natural gas companies, which have grappled with years of low prices, have been forced to sell off pieces of their property, mostly through joint ventures with foreign energy companies.

But as gas prices refuse to rise, more painful change is under way, and Talisman is now in the midst of deep corporate surgery designed to improve its performance top.

Talisman’s Ms. Wesley said the company will act in “a couple of weeks,” backing away from countries such as Peru to help achieve the savings. “Because we’ve had such a distributed focus over the last few years, I think the company will function differently as a result of being more streamlined in terms of the portfolio,” she said.

Tony Meggs, executive vice-president of special projects, will leave at the end of this month as long-time Calgary corporate leader Hal Kvisle, who took over as chief executive officer in 2012, works to remake the struggling company.

“A good part of the head count [reduction] probably relates to the fact that they’re really scaling back on their exploration programs,” said Randy Ollenberger, an analyst with BMO Nesbitt Burns. It’s a change in corporate strategy that is unique to Talisman, which means it doesn’t necessarily portend layoffs elsewhere, he said. Encana Corp., for example, has also struggled with low gas prices – but its new interim CEO, Clayton Woitas, has vowed to maintain a course that has not, in the recent past, involved cutting jobs.

Talisman’s shares have gone nowhere for years amid lacklustre results. After touching nearly $25 (Canadian) in early 2011, the stock now sits at just above $12. The company posted a $731-million (U.S.) loss in the third quarter, largely as a result of writedowns, and trimmed its 2013 capital budget to $3-billion, 25 per cent below 2012 levels.

The company on Thursday acknowledged that of its three corporate pillars – the Americas, the North Sea and Southeast Asia – only the latter is generating free cash flow today.

“Our goal is to make sure that all three of these regions are generating free cash,” Richard Herbert, executive vice-president of exploration, said on Thursday.

In North America in particular, Talisman is looking to back out of a number of operational areas. It is currently involved in five so-called “resource plays.” It wants “to focus on three and a half of those,” Mr. Herbert said.

“Through a combination of divestment or joint ventures, and we’re looking at all of the options that are possible, we’re going to reduce our footprint in North America.”

The company’s challenging financial circumstances have largely ruled out more dramatic moves, Mr. Herbert said. Last year, Talisman “took a look to see what options did we have, ranging from assets sales or joint ventures, all the way through to splitting up the company,” he said. But it’s tough to hive off businesses that aren’t especially profitable.

And selling the entire company, Mr. Herbert said, is “not something that we’re putting any focus on right now.”

Report Typo/Error

Follow us on Twitter: @GlobeBusiness

Next story




Most popular videos »

More from The Globe and Mail

Most popular