UPDATE 2-Talisman denies talks with CNOOC on tie-up
(Adds closing stock quote. In U.S. dollars unless noted)
CALGARY, Alberta, Sept 8 (Reuters) - Talisman Energy Inc (TLM.TO) denied a newspaper report on Monday that said the Canadian oil firm had approached China's CNOOC Ltd (0883.HK) about combining assets in a new company worth as much as $10 billion.
Quoting unnamed sources, the South China Morning Post said a deal could result in Talisman and CNOOC amalgamating southeast Asian oil and gas assets and launching an initial public offering in Hong Kong.
But Talisman spokesman Dave Mann said: "We've had no discussions with CNOOC."
Under Chief Executive John Manzoni, who took the helm at Talisman a year ago, the company has targeted the sale of as much as C$3 billion ($2.8 billion) worth of assets around the world to refocus operations on long-term, predictable growth in hopes of lifting a lagging share price.
Investors had complained about the company's failure to meet production targets over several quarters.
It has identified its assets in Indonesia, Malaysia and Vietnam as among those on which it will concentrate capital and manpower.
It also plans to invest heavily in North American unconventional natural gas and oil prospects.
"The strategy is solid -- to focus the company, grow the company," Mann said.
Talisman stock rose early on the Toronto Stock Exchange, but ended down 20 Canadian cents at C$16.85 after it denied the report. The stock is down 8 percent this year, compared with a nearly 1 percent drop in the overall TSX energy group.
"The markets have been in lousy shape for a number of reasons. It's tough to leap out and encourage anybody to leap out and buy oil and gas stocks in the current environment," Mann said.
The newspaper said CNOOC could benefit from such an arrangement by giving it a vehicle to make foreign acquisitions.
An analyst questioned the rationale of such a deal for Calgary-based Talisman, especially since investors have been expecting it to complete its reorganization before embarking on a major deal.
"They don't have any growth constraints as far as I'm aware down there (in Southeast Asia)," FirstEnergy Capital Corp analyst Martin Molyneaux said.
One possible draw could be the opportunity to take advantage of higher multiples to earnings and cash flow on Asian stock exchanges, he said.
It was not the first time the newspaper has paired the two companies. In May, it reported CNOOC was in talks to buy Talisman, which also plans to invest heavily in its North American unconventional natural gas and oil prospects.
But a senior Talisman executive said the following month that his firm had not been in discussions with CNOOC.
CNOOC has run into heavy local opposition to its efforts to make foreign acquisitions. In 2005, U.S. politicians scuttled its bid for California-based Unocal Corp, citing national security concerns.
($1=$1.07 Canadian) (Reporting by Jeffrey Jones; Editing by Peter Galloway)
