UPDATE 3-Canada's Talisman Energy forecasts lower output, spending in 2013

Wed Mar 6, 2013 3:54pm EST

* Cuts 2013 spending by 25 percent
    * Raising $2 bln to $3 bln through sales, joint ventures
    * Focusing on liquids-rich shale fields in North America
    * Looks to sell properties in Alberta, British Columbia
    * Share buybacks depend on successful asset sale program
    * Shares rise 0.4 percent


    By Scott Haggett
    CALGARY, Alberta, March 6 (Reuters) - Talisman Energy Inc
 said on Wednesday it will cut spending this year by a
fourth, lower production and sell some of its Canadian shale-gas
properties, as Canada's No.6 independent oil producer looks to
reduce debt and boost its shares.
    The company said it would focus its global operations on its
activities in North America, Colombia and Asia, which account
for 90 percent of its output, and sell or find joint-venture
partners for $2 billion to $3 billion of its assets over the
next 18 months.
    It also confirmed it would cut 2013 spending by 25 percent
to $3 billion and lowered its production forecast to between
375,000 and 395,000 barrels of oil equivalent per day, from
426,000 boepd in 2012.
    Talisman, like other natural gas producers, is struggling to
cope with weak natural gas prices as surplus production from
prolific shale-gas fields floods the North American market. To
cope, it is reducing overhead and expenses, including its move
last month to cut 7 percent of its head office staff, and
focusing on producing more-profitable oil and natural-gas
liquids. 
    "One of our objectives over the past six months has been to
refocus and stabilize the company," Hal Kvisle, Talisman's chief
executive, told reporters. "We've reduced debt (and) we've
brought the capital program down to a level where we can
actually afford to fund it."  
    Talisman said it would look to sell its lands in the North
Duvernay shale-gas region of Alberta and parts of its holdings
in the Montney field, which straddles Alberta and northeastern
British Columbia.
    Both regions have attracted interest from international oil
companies in the past year. Exxon Mobil Corp paid C$2.6
billion ($2.52 billion) last month to Celtic Exploration Ltd for
its holdings in the two fields and in December, PetroChina
 agreed to pay $2.2 billion to enter into a joint
venture on some of Encana Corp's Duvernay holdings. 
    Kvisle said Talisman had more property in both fields than
it could afford to develop and would prefer to sell the stakes
outright, but would consider a joint venture on the right terms.
    "Sometimes these joint ventures can bring you almost as much
cash upfront (as a sale) plus a carry, plus an enduring interest
in the asset and that's obviously of great interest to us," he
said. 
    "We're open-minded. We would accept any number of variations
of a joint venture and any number of ways of exiting
completely." 
    The company said it expects to have $2.5 billion in cash
flow in 2013 and will fund the rest of its capital plan through
the asset sales. 
    "The intent is to monetize holdings with minimal cash flow
but high net asset value," Robert Morris, an analyst with Citi
Research, said in a note. "Beyond filling the capital funding
gap this year, management plans to use proceeds to reduce debt,
perhaps accelerate spending in key areas and/or repurchase
stock." 
    Kvisle said Talisman had been pressured to launch a share
repurchase program after it sold a half stake in its North Sea
assets to Sinopec Corp last year for $1.5 billion. However, he
said the company chose to use the proceeds from that sale to pay
down debt. 
    He said if the company met its asset sale target, some of
those funds could be used for share buybacks.
    "In terms of share buybacks, the board has never been
opposed to that," Kvisle said. "I expect with a good divestment
program we would be doing that."   
    It expects to spend about $650 million this year on its
liquids-rich shale at Eagle Ford, Texas, where it partners with 
Norway's Statoil ASA. Talisman said it would focus on
improving drilling performance there.
    Most of the company's steps had been expected, after Kvisle,
a Talisman board member and former TransCanada Corp 
chief executive, restructured its operations after stepping in
to replace former head John Manzoni in September. 
    Shares of Talisman were up 6 Canadian cents at C$12.59 by
late afternoon on the Toronto Stock Exchange.
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