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Talisman Energy reports US$213-million quarterly loss, shares drop

CALGARY – The CEO of Talisman Energy Inc. says investors can expect a turnaround at the underperforming international oil and gas explorer later this year — provided that commodity prices co-operate.

“If the North American gas price goes back in the tank, then that’s going to delay us. If there is upheaval in the world that one way or another causes the oil price to go down, that’s going to be a problem,” Hal Kvisle told reporters Wednesday following the company’s annual meeting.

“I think if things unfold with relatively stable commodity prices and a different focus to our capital program, during the year 2013, we should see things turn.”

Kvisle was named to the top job in September following his predecessor John Manzoni’s abrupt departure.

“The plan has never been that you could do that in three or four months,” he said.

“It takes some time to do this. I look at first quarter 2013 as the first quarter of the new era.”

Kvisle said he’ll know Talisman has turned the corner once cash flow and capital investment are in balance “so that we’re not forever in a process of selling properties in order to pay for a capital program, which has been a challenge in recent years.”

Talisman shares were down nearly four per cent to $11.60 in afternoon trading on the Toronto Stock Exchange after the company reported a US$213-million net loss for the first three months of the year.

They dropped as low as 7.6 per cent earlier in the day.

“I think the market takes a while to digest information and short-term information tends to have the most immediate reaction,” said Kvisle.

“As the company progresses from what we used to be to what we’re going to be in the future, we’re going to go through a few tough quarters. This was a quarter where we were hit by a variety of different things, did not meet our own expectations, but we see it as the start of the new era.”

In October, the company unveiled a new strategy focused on two regions: the Americas and Asia Pacific. The company has ditched some of its riskier exploration activities in favour of profitable, but flat, production.

It aims to shed between $2 billion and $3 billion in assets over the next 12 to 18 months.

One of the items on the chopping block is Talisman’s interest in the Ocensa pipeline in Colombia — an asset TransCanada Corp. sold when Kvisle was CEO of the pipeline giant.

Kvisle said he expects to find a buyer for the Ocensa stake within six months.

He added that finding a buyer for non-core assets in Norway shouldn’t be too much trouble, but that it may be more difficult for dry gas properties in Western Canada to get a good price, given how much land is on the market right now.

Talisman recently completed the sale of a 49 per cent interest in its U.K. North Sea business — no longer considered a core area for Talisman — to Chinese firm Sinopec for $1.5 billion.

Nearly 90 per cent of Talisman’s assets are now in its core areas.

Talisman’s first-quarter net loss amounted to 21 cents per share. Analysts polled by Thomson Reuters were on average expecting a profit of three cents per share.

Revenue dropped to $1.1 billion from $2 billion.

Production averaged 372,000 barrels of oil equivalent per day, down five per cent from the previous quarter and 19 per cent year over year.

Lower production volumes in the quarter were the result of the Sinopec deal.

Talisman has also exited Peru and Poland and has scrapped a particularly troublesome offshore project in the Norwegian sector of the North Sea.

The company is, however, excited by some properties it has in the Iraq’s Kurdistan region and will look to prove them up before exploring any sale or joint venture deal.

“This is the biggest structure that I’ve worked on in my career,” Kvisle said.

Although there may be a big prize in the Kurdistan properties — a potential one billion barrels of oil in the ground — Talisman is not in a position to pony up as much as $25 billion to develop one oil field on its own, Kvisle said.

“So therein lies the opportunity to bring in some partners,” he said.

“But we would not want to have partnership discussions with people until we’ve drilled the next couple of wells, because if we’ve really discovered something big, the discussions would be different than when it’s highly speculative.”