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Extracting further value from Talisman 'about as complicated as it gets': analyst

Talisman Energy Inc. has struck a deal to scrap the platform at its troubled Yme oil project in the Norwegian North Sea.

Talisman Energy Inc.

A TD Securities Inc. analyst doubts activist investors will make a public push for more aggressive asset sales or spinoffs at Talisman Energy Inc., despite speculation of such a move pushing up the stock.

With Talisman shares climbing, TD's Menno Hulshof said a corporate split would be a complicated move for any activist shareholder, especially as the company's management, led by Chief Executive Hal Kvisle, has already showed willingness to make major changes.

Mr. Hulshof spent much of last week with Talisman finance chief Paul Smith and other top executives in a series of meetings with investors on the East Coast. Much of the talk focused on the company's Asia-Pacifc assets, which Mr. Kvisle has identified as key for the company's future.

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In a note to clients, the analyst said cutting through the complexity of Talisman's assets to boost value is more than most activist investors are willing to take on.

Speculation that an investor is pushing for major changes has lifted the company's shares in recent sessions. The stock was up 3 per cent at $12.93 late in the session on Monday. It has climbed 9 per cent so far this month.

"It is about as complicated as it gets in the [exploration and production] world given the diversity of the portfolio and the number of steps that need to be undertaken," Mr. Hulshof wrote. "In the absence of a corporate sale, plenty of heavy lifting will need to be done to extract value."

In addition, Talisman has put as much as $3-billion worth of assets on the block since Mr. Kvisle took over as CEO last year, including interests in the North Sea, a Colombian oil pipeline and Northeast British Columbia natural gas properties. The divestitures are planned as the company shifts its development focus to assets in the Americas and Southeast Asia and exploration in regions including Kurdistan. The company has also brought in new directors.

"To suggest it isn't doing enough just doesn't fly, in our opinion." Mr. Hulshof wrote.

Asset sales have been slow because of the weak overall market for energy properties, he said.

The main thrust of last week's meetings was to help major investors understand the value of the Asia-Pacific assets, which executives do not believe is properly recognized by the market, he said.

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(Jeffrey Jones is a Globe and Mail Business Reporter.)

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