Talisman (NYSE: TLM) Unloading Shale Assets

Brian Hicks

Written By Brian Hicks

Posted March 13, 2013

Calgary-based oil company Talisman Energy Inc. (NYSE: TLM) is looking to concentrate its efforts on maximizing its global revenue by doing two things: boosting sales and cutting costs.

Currently, Talisman holds 200,000 acres of oil rich land in the Montney Shale—one of Canada’s largest shale gas fields located in British Columbia and Alberta.

The area is attractive to big oil producers like Exxon (NYSE: XOM), Royal Dutch Shell Plc (NYSE: RDS.A) and Chevron Corp. (NYSE: CVX) because it is positioned perfectly to export directly to the Asian market. The gas can be refined right there on the Pacific Coast where there is easy access to shipping terminals.

But Talisman has announced its intention to sell that acreage. The company estimates the acreage is worth up to $1.5 billion, as Bloomberg reports.

If you couple a good sale of Talisman’s holdings in the Montney with its latest decision on Tuesday to sever ties between its subsidiary, Talisman Norge AS, and business partner SBM Offshore (AMS: SBMO) at an upfront settlement of $470 million, as One News Page reports, Talisman would be set to reap nearly $2 billion.

This strategy aims to cut costs and boost Talisman profit in 2013.

Bloomberg reports:

Talisman earned $376 million, or 37 cents a share, during the fourth quarter, its first profit during the last three-month period of the year in four years, after selling assets and cutting costs, the company said on Feb. 13.

In the past 12 months, Bloomberg reports that Talisman overall has declined 6.4 percent with eight buys, 19 holds, and no sells.

But this week, following yesterday’s announcement with SBM, stock rose nearly 1 percent to $12.24.

The joint venture with SBM was a mounting liability, and it has been a disaster since Talisman first started development in 2008; costs have far exceeded expectations, and constant delays have prevented production from the once-promising field.

Tuesday’s settlement of what was called the YME MOPUstor project of Norway’s Yme oil field will allow all parties to take a step back and re-evaluate for the future.

Talisman’s Europe-Atlantic executive VP Paul Warwick told One News Page:

“This arrangement should allow the partners to move forward to examine options for the Yme field, without incurring significant additional costs related to the existing topsides. Recent analysis has concluded that a new topsides solution is needed in order to develop the Yme field.”

As for the recent offering of Talisman’s Montney holdings, it seems quite peculiar to some that both Talisman and Canadian Natural Resource Ltd. (NYSE: CNQ) would both be offering up their rights to the Montney Shale region simultaneously.

Canadian Natural, the second largest gas producer in Canada behind Encana Corp. (NYSE: ECA), may sell even more than Talisman, as it has roughly 250,000 acres up for grabs, according to Bloomberg.

It has experts wondering just who is talking behind closed doors and pondering the prospects of a big move in the near future.

Last year, acreage in the Montney was at a premium. Exxon Mobil and Petrolium Nasional Bhd. (Petronas) shelled out billions for land in the Montney.

A lot of experts are also saying that most of the prime real estate was bought up last year—all that remains is the leftovers. Still, some argue that demand remains high. Instead of large reserves, focus may be drawn to smaller packages that can be tacked onto larger pieces later on.

There is also a lot of speculation about the probability and appeal of liquefied natural gas (LNG) operations in the region, which become more and more inviting as LNG cuts down on transportation costs.

Top oil executives refuse to speculate on prices, and there is no clear indication of what will become of the Montney Shale. Still, with the amount of land on the table, and with Chevron, Exxon, and Shell all hovering, it will be interesting to see who pounces first and how much they’re willing to bite off.


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