Moody's Investors Service has cut Talisman Energy Inc.'s credit-rating outlook, saying it is not clear when the oil producer's sweeping restructuring will be completed and debt levels will fall.
The rating agency warned that Talisman, which now counts activist investor Carl Icahn among its shareholders, could face a downgrade if proceeds from asset sales are not used to reduce debt. About $4.4-billion of securities are at stake.
Moody's changed its outlook to "negative" from "stable." It affirmed Talisman's Baa2 long-term debt and prime-2 commercial paper ratings.
The company has up to $3-billion (U.S.) of assets on the auction block, including fields in the North Sea, a stake in a Colombian pipeline and a portion of its British Columbia shale properties, as it seeks to refocus efforts on high-return operations in the Americas and Southeast Asia.
"Talisman's negative rating outlook reflects the uncertain outcome of the portfolio transformation taking place under the company's strategic re-positioning," Terry Marshall, senior vice-president at Moody's, said in a statement. "The company's capital productivity is weak and it is uncertain when a clear, profitable and sustainable organic growth profile will be evident."
On Monday, Mr. Icahn revealed via Twitter that he had amassed nearly 6 per cent of Talisman stock, and he may talk to the management about "strategic alternatives, board seats, etc."
Moody's cautioned that any move to redirect asset-sale proceeds from debt reduction to "shareholder returns" could lead to a downgrade.
The agency said Talisman is not expected to face any cash crunch at least through 2014. Its projects about $1.2-billion of negative free cash flow next year, which will be funded from asset sales. It noted the company had $27-million in cash and about $2.5-billion available under its unsecured credit lines as of June 30.