Talisman Energy Inc. said it expects to sell more properties in order to buffer its finances as the oil producer showed an operating loss in the fourth quarter.
Hal Kvisle, the company's new chief executive officer, is renovating the underperforming energy company, and on Wednesday said he will rely on money from asset deals in order to bolster Talisman's cash position. Further, the company cut its 2013 budget to $3-billion (U.S), a 25-per-cent drop, in an attempt to live within its means.
Talisman, like many of its competitors, faces two key problems at home: North American natural gas prices are still in the tank, and so-called natural gas liquids – commodities such as propane and butane which companies hoped would alleviate their natural gas problems – are now facing a glut. Further, Talisman has brought on its own challenges: it has far-flung operations as well as an excess of land it can't afford to develop.
"We do expect to be [free] cash-flow negative during the year because we have significant obligations to drill to retain land in high-quality situations – Eagle Ford [shale play, and] other places like that in North America," Mr. Kvisle said during the company's fourth-quarter conference call. "We do intend to close that gap in cash flow through divestments. Divestments are going to continue to be an important part of our work here at Talisman in 2013."
Talisman's operations posted a loss of $107-million or 10 cents a share in the fourth quarter, compared to a gain of $114-million or 11 cents a share in the same frame last year. However, the Calgary-based company's profit rang in at $376-million or 37 cents a share, compared to a loss of $117-million or 11 cents per share in the fourth quarter of 2011.
The company's swing into the black came largely from $862-million in asset sales.
Mr. Kvisle took over from John Manzoni in September and immediately canned the company's growth aspirations. The new CEO, who previously ran pipeline powerhouse TransCanada Corp., outlined four priorities for Talisman: spend only within its cash flow; invest in a smaller number of "high-value" projects which will quickly create cash flow, while reducing its international exploration budget; build its "competitive" position in its core regions, which means developing its best assets and while selling others; and run its operations better.
Talisman's quarterly results disappointed analysts.
"We view [the fourth-quarter] results as a slight negative as financial results missed expectations and reserve additions were very weak," CIBC World Markets Inc. analyst Andrew Potter wrote in a note to clients. "However, we believe the market is more focused on potential for the break-up or sale of [Talisman] as opposed to short-term results and expect only a mild negative reaction to [Wednesday's] results."
Talisman is already running sale processes, Mr. Kvisle said, pledging to reveal more details at the company's investor day on March 6. With respect to selling the entire company, he said "we're not doing anything in that direction."
Mr. Kvisle in an interview highlighted the north Duverney field as a prime joint-venture candidate. Further, Talisman's position in the Montney is large enough to bring in another partner, he said. Its operations in Kurdistan could also fit the bill. The Marcellus, however, is not on the list of potential joint ventures, Mr. Kvisle said.