Talisman takes knife to costs

Gary Park

For Petroleum News

Talisman Energy has sent jitters through the Canadian oil patch by putting out word it will cut at least 20 percent of its general and administrative costs by eliminating jobs and divesting non-core assets.

“What we’re doing is rationalizing the size of the G&A through looking at how we optimize efficiencies, both in the corporate center and in the regions,” Executive Vice President Helen Wesley told an institutional investor conference in Whistler, British Columbia.

The downsizing, which targets C$1.3 billion of annual G&A costs, was initiated four months ago when Hal Kvisle, former chief executive officer at TransCanada, replaced John Manzoni in the top job and set to work overhauling the far-flung operations of the Calgary-based independent.

Richard Herbert, executive vice president of exploration, said that could include the sale of assets in Poland and Peru and reducing the company’s footprint in North America, while concentrating on three core regions — Southeast Asia, which generates Talisman’s only free cash flow today, the North Sea and North America’s unconventional resources.

Wesley said the objective is to reduce the company’s widely spread focus and concentrate on being more “streamlined in terms of the portfolio.”

Cautious on asset sales

Herbert said Talisman has weighed a full range of options from asset sales to joint ventures and splitting up the company, conceding that “we wouldn’t have been able to set up a North American business independently with the current debt that we’ve got.”

But he said that selling Talisman is “not something that we’re putting any focus on right now,” although there are no plans to increase oil and natural gas production this year.

Herbert said Talisman has now completed three wells and is drilling two more in Iraq’s Kurdistan region and estimates finding and development costs are “probably among the lowest left in the world.”

He said the company has found an oil column that is almost 150 meters thick and is now faced with a decision on whether to “bring in partners or monetize it entirely (after) growing value by appraising what is clearly a very exciting play.”

Taqa North also shrinking

It confirmed Jan. 28 that 50 of its 950 employees will be laid off as part of a reorganization to streamline operations by reducing costs and increasing efficiency.

“In a tight natural gas market you really need to be top quartile, top decile in your ability to operate and your ability to execute your capital and drilling plans and we weren’t there,” said Taqa President Ed LaFehr.

He said that since Taqa entered Canada four years ago by acquiring three companies for C$7.5 billion it has run the assets through three geographical divisions.

It now plans to change to a “functional” single stream model, he said.

Taqa averaged North American oil and natural gas production of 84,500 barrels of oil equivalent per day in the first three quarters of 2012, exiting the year at 91,000 boe per day after acquiring NuVista Energy to add 5,000 boe per day.

LaFehr said 80 percent of the 2013 capital budget is earmarked for oil and liquids-rich gas plays as Taqa targets an increase in its 30 percent liquids production weighting.

—Gary Park