RE:Talisman in Talks to Pare Stake in Kurdistan Assets Oil Proj
BANFF, Alberta—Canada's Talisman Energy Inc. TLM.T-1.23% is in talks to sell a stake in its operations in a potential oil-producing region of Kurdistan in northern Iraq amid a scarcity of bids for other assets it has earmarked for sale, Chief Executive Hal Kvisle said.
The Calgary, Alberta, company, which has been hit hard by a slump in North American natural-gas prices, is looking to pare its stake in two exploration-stage Kurdistan oil projects, Mr. Kvisle said in an interview.
"We're in active discussions with several parties about reducing our interests there," Mr. Kvisle said, though he declined to identify the parties. "We probably have more financial exposure to that than we want."
Talisman and another Canadian oil entergy company, WesternZagros Ltd., each own 40% of one block, with the Kurdistan regional government owning the other 20%. Talisman owns 60% of the other block, with the regional government owning the balance.
"We're into what appears to be a fairly significant oil discovery in Kurdistan, [but] on the larger half of that structure we're paying 100% of the costs for a 60% interest," he said.
As of last month, Talisman valued its assets in Kurdistan between about $750 million and $1.25 billion, according to company estimates.
Mr. Kvisle, who previously headed pipeline operator TransCanada Corp., took the helm at Talisman a year ago in an attempt to reverse its declining fortunes. The company, which depends on natural gas for the bulk of its earnings and has posted a string of disappointing financial results, earned $97 million in the latest quarter, half the year-earlier level. Its stock has languished after falling sharply in 2011, and recently traded at $11 in New York.
Talisman is on track to cut costs by 20% this year. "In these cyclical commodity businesses, when you're at the bottom it's no fun, but you've got to focus on cost control and just ride it out," he said.
While Mr. Kvisle said he is confident Talisman will survive its current travails, he didn't dismiss the possibility of selling its cash-rich southeast Asian operations—or even the entire company. "This board does not rule out anything. We are not actively seeking a buyer for the company, but if people were to express interest we would not reject it out of hand."
Under Mr. Kvisle, Talisman has announced plans to raise cash by selling up to $3 billion in assets from four non-core areas: a pipeline in Colombia, its rapidly maturing North Sea oil business, and portions of two enormous gas reserves in northern British Columbia and eastern Alberta.
But a slowdown in deal-making due to flagging demand for Western Canadian energy assets, especially from once-active Chinese buyers, has led the company to accelerate long-term plans to divest part of leases covering 119,000 acres in Kurdistan.
"For about 24 months in a row, every month the transaction market has gotten more difficult than it was the month before," Mr. Kvisle said.
He said potential buyers from China have pulled back as Beijing reassess its strategic priorities and after Canada signaled investment by foreign state-owned enterprises would face heightened scrutiny, and that such investments in Canada's oil sands would only be approved under exceptional circumstances.
Talisman will likely hold off on plans to immediately sell more of its gas-related assets in promising unconventional natural gas-fields such as western Canada's Duvernay and Montney formations, Mr. Kvisle said.
He expects natural-gas prices to rise to $5-$6 per million British thermal unit, up from $3.65 per million BTUs currently, as a result of higher industrial and power generation demand in North America, as well as the planned start of Canadian exports of liquefied natural gas to Asian markets by 2020.
"It's going to be a rising tide that lifts all boats, so we could do well by waiting to sell into that market," he said.
Write to Chester Dawson at chester.dawson@wsj.com