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‘Prudent’ view of Alaska Talisman’s new CEO writes off NPR-A costs; seismic to identify anchor fields Gary Park For Petroleum News
A new CEO, a new course of direction — that’s the message delivered by Talisman Energy’s recently installed boss John Manzoni when it comes to the National Petroleum Reserve-Alaska.
Speaking to analysts Feb. 28, he delivered a carefully measured prognosis for a region that his predecessor Jim Buckee had eagerly touted a year ago, suggesting two wildcats were pointing to “several hundred million” barrels, with Amaguq No. 2 in the region of a “billion” barrels.
By mid-May last year, Talisman said three wells drilled by subsidiary FEX L.P. encountered more than 225 feet of net hydrocarbon-bearing sandstones, with formations in the two suspended wells estimated at 300 million-400 million barrels net to FEX. The balance is held by a Petro-Canada subsidiary.
As the first sign of a new approach, Manzoni wasted no time after becoming CEO in September putting out word that Talisman’s widely scattered global operation would start meeting output targets.
“By not delivering our guidance numbers over the last three quarters we’re losing credibility,” he said, in unusually blunt terms after facing a 33 percent drop in the third-quarter 2007 profits.
He said the production setbacks did not stem from problems with Talisman’s oil and gas reservoirs, but were a function of “limited project engineering capabilities, particularly in-house.”
Strategic review promised for May In addition, he has promised to complete a strategic review of the company in May, with the focus on growth opportunities in the core areas of the North Sea, Asia and North America.
Manzoni said he does not want to stifle Talisman’s “opportunistic” style, but “we will make clear choices on where to invest … there are a number of areas in our portfolio which, although they are good for business, don’t hold the strategic growth potential we are looking for in the future.”
Asked why he would still think about drilling in Alaska, given his pessimistic view of the exploration potential, Manzoni said that as the new CEO he has the prerogative to take a different point of view.
Underscoring that style, Talisman wrote off C$322 million in dry hole costs for all operations in the fourth quarter of last year, pushing the total for the year to a startling C$684 million, including the exploration activity in Alaska. Manzoni said he views that as taking a “prudent view of the past exploration well costs” in NPR-A.
“We are still shooting seismic this year and we will see what that tells us,” he said.
“That was always the plan. We were never going to drill this year. We were always going to shoot seismic to see if we could identify bigger anchor fields on the land that we own. And that remains the objective.”
Manzoni said the write-off “does not change our stance on the activity we will pursue this year,” with the winter seismic following up “on the play concept derived from last year’s drilling program and we will determine the next step based on that seismic activity.”
Accelerated unconventional gas exploration planned To drive home the changes in course at Talisman, the company disclosed an acceleration of its North American unconventional gas exploration this year, which North American Executive Vice President Ron Eckhardt said stems partly from technological advances that have improved the economics of that gas over recent years.
He said 23 wells will be drilled in the emerging Montney play which straddles the British Columbia-Alberta border, two in the Arsella shales of New York state and a “number” of wells in Saskatchewan’s Bakken oil play.
The company has large unconventional positions in the Outer Foothills of Western Canada, where it is already a front-runner; Montney; Bakken and the shales of New York and Pennsylvania; and the Devonian shales of Quebec.
Manzoni said longer-term plans for the Outer Foothills will soon be announced.
Eckhardt said Talisman will be looking to augment its unconventional gas teams, with special emphasis on the shale areas where its experience is limited.
It also plans two wells this year in the Western United States and, if results point to longer-term potential, it will be able to build on the subsurface skills it has demonstrated on the deep plays of the Canadian Foothills, Manzoni said.
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