* 2013 capital spending cut to $3 billion
* Proceeds from North Sea sale to be used to cut debt
* CEO says no suitors have surfaced
* 3rd qtr net loss $731 mln; loss of $36 mln excluding items
* Shares sink 5 percent in Toronto
By Jeffrey Jones
CALGARY, Alberta, Oct 30 Talisman Energy Inc's
new chief executive on Tuesday announced a push into a
new period of austerity for the Canadian oil producer, with a 25
percent cut in capital spending, plans to exit unprofitable
regions and a promise to chop costs in the name of shoring up a
lagging share price.
The announcement of the new strategy, delivered as Talisman
reported a $731 million quarterly net loss after a series of
writedowns, prompted a selloff in Talisman's shares as investors
weighed the impact of a $1 billion cut in capital spending next
year that will deliver one of its biggest hits to high-risk
The shares closed down 5 percent to C$11.50 on the Toronto
Stock Exchange. They are down 11 percent this year.
Chief Executive Hal Kvisle detailed several moves aimed at
putting Talisman on more solid financial footing, including
using proceeds from a $1.5 billion North Sea joint venture deal
with China's Sinopec to pay down debt rather than
buy back shares, as previously planned.
Talisman will concentrate its main efforts on boosting cash
flow from lower-risk operations in the Americas, Southeast Asia
and the North Sea.
It is writing off its stalled shale gas operations in
Quebec, resulting in an $82 million charge, and reducing the
book value of its troubled Yme oil project in the Norwegian
North Sea by a further $125 million after tax.
"In some ways you could characterize it as battening down
the hatches, getting a lot of things sorted out and getting
Talisman going in a more predictable direction," Kvisle said in
"There is austerity, but I don't think that going from $4.5
billion in capital (in 2011) to $3 billion in capital should be
seen as austerity. In some ways I would characterize it as
coming back to reality. That's about the amount of money a
company like Talisman should be investing."
The stakes could hardly be higher for Canada's sixth-largest
independent oil company, which was built on big acquisitions and
promises of unlocking major reserves around the world using cash
generated in the North Sea and North America.
The shares have suffered, however, due a series operational
problems and delays in bringing the 40,000 barrel a day Yme
project to fruition amid warnings about the platform's
stability. The stock has also been pressured by depressed
natural gas markets.
Kvisle, a former CEO at TransCanada Corp, replaced
John Manzoni as head of Talisman in September to seek ways to
boost the stock as speculation swirled that Talisman could be
the next Canadian target of an acquisitive Asian state oil
company after Nexen Inc agreed to be bought by China's
Kvisle said Tuesday the company was not in talks with any
would-be buyers and he had not been approached about a deal.
"But those things can always come at you, and it's the
responsibility of the board to deal with them appropriately when
they do," he said. "But I am convinced more than ever that
Talisman has very, very valuable upside in its asset base from
assets not seeing a lot of cash flow today. We can do a lot to
improve cash flow out of existing assets and do a lot to bring
some near-term opportunities on stream."
That means reducing a focus on expensive long-term
exploration, such as operations in Peru, a location that
Talisman has said it will exit. In total, Talisman will spend
about $350 million on high-risk exploration in 2013, down by
about half from 2012 levels.
It will also cut costs across the board, which could mean a
reduction in its work force of 3,700, Kvisle said. The bigger
thrust will be on reducing finding and development, operating
and overhead costs, he said.
The $3 billion budget is being billed as enough to maintain
production at current levels, though one analyst cautioned of
"The company has historically struggled to organically grow
production," said Michael Dunn, an analyst at FirstEnergy
Capital Corp. "That will likely continue to be a concern over
the next six to 12 months."
CHARGES PROMPT DEEP LOSS
In the third-quarter, Talisman lost a net $731 million, or
71 cents a share, compared with a year-earlier profit of $521
million, or 51 cents a share.
The result included $443 million in after-tax impairment
charges, which included the exit from Peru and writedowns in
Quebec and Norway.
Excluding unusual items, the company lost $36 million, or 4
cents a share.
Cash flow, a glimpse into a company's ability to fund
development, decreased 23 percent to $693 million, or 68 cents a
share, from $902 million, or 88 cents a share.
Production rose 4 percent to 415,000 barrels of oil
equivalent a day, and the company said it was still on track to
meet its annual production targets.