TLM on Annual Meeting DayTalisman outlines it's future growth strategy...Roving Talisman casts its eye homeward
NORVAL SCOTT
Wednesday, April 30, 2008
CALGARY — Talisman Energy Inc., which for years staked its future on former chief executive officer Jim Buckee's vision of global deep-well exploration, is making a dramatic about-turn: It's embracing Canada's unconventional natural gas resources.
John Manzoni, who took over as CEO in September, said Wednesday Talisman will now focus on growth in only a select few areas, one of which is producing gas from tight rock formations in North America.
Under Mr. Buckee, its only previous CEO, the company developed an idiosyncratic reputation for seeking worldwide growth through exploration, instead of tackling the easy-to-find, yet hard-to-develop resources lying in the company's own Alberta backyard.
While Talisman will continue to be a worldwide explorer, Mr. Manzoni's new strategy effectively ditches the company's scattergun approach. His more conservative plan would seek to deliver more reliable, sustainable production over a longer period, adopting the ways of many oil patch majors.
“What has been successful over the last decade may not be so successful going forward,” said Mr. Manzoni at the company's annual meeting in Calgary. “In the last year or two our business model has become challenged – we are now at a scale where's it's more difficult to grow at the same pace with the same strategies. We have had to run faster and faster just to stand still.”
The annual meeting, which followed the release of the company's first-quarter financial results, was Mr. Manzoni's first public appearance as CEO.
Under Mr. Buckee, who retired last year, Talisman grew from a 1992 spinoff from BP PLC to become one of Canada's largest oil and gas companies, expanding rapidly in regions like the North Sea and – controversially – Sudan. All the while, it avoided unconventional resources like Alberta's oil sands or shale gas, which Mr. Buckee said were uneconomic to develop.
While Talisman had some big finds, it found reliable production growth difficult to come by, while its share price lagged those of rivals like EnCana Corp. and Canadian Natural Resources Ltd. that had made such reserves a focus. Investors began to suggest the firm should be broken up to maximize value.
Under the strategy unveiled Wednesday, Talisman will now seek to “lengthen its stride” by demonstrating that it can sustainably grow over the long term, Mr. Manzoni said. The firm will divest assets in non-strategic areas and will no longer look to expand in the North Sea – previously a core growth area. Instead, it will look to develop Southeast Asia and Norway more rapidly, while it may also look to South America and North Africa for future growth.
The firm will also seek to develop shallow but wide unconventional natural gas deposits trapped in shale, sand and silt, an area it hasn't previously targeted. The advantage of that strategy is that Talisman – an established conventional gas producer – already holds a vast North American land base of 2.5 million acres whose unconventional reserves haven't even been evaluated, let alone tapped.
That acreage includes holdings in some of North America's hottest unconventional fields, such as Bakken in Saskatchewan and Montney in British Columbia. Talisman is also the largest landholder in Quebec, whose gas production potential, which could be unlocked with new extraction techniques, has been the subject of fevered speculation in recent months.
“Those are the big names, and we've got them,” Mr. Manzoni told reporters after the annual meeting. The company now plans to run pilot projects in those areas to determine the size of reserves before coming up with a more detailed development plan, he said.
While Talisman is now looking at its unconventional resources and will consider making acquisitions, it still has no plans to get into the oil sands, Mr. Manzoni said.
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