Canada's Talisman Energy forecasts lower output, spending in 2013
CALGARY, Alberta (Reuters) - Talisman Energy Inc (TLM.TO) 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 (XOM.N) 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 (0857.HK) agreed to pay $2.2 billion to enter into a joint venture on some of Encana Corp's (ECA.TO) 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 (STL.OL). 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 (TRP.TO) 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.
(Additional reporting by Maneesha Tiwari in Bangalore; Editing by Sofina Mirza-Reid and Dale Hudson)
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