New boss moves quickly to put stamp on Talisman
02/11/07
By Jeffrey Jones
CALGARY, Alberta (Reuters) - Talisman Energy Inc's new chief moved quickly to put his stamp on the Canadian oil producer on Friday, vowing to start meeting output targets after a series of misses hurt the firm's credibility.
In his first conference call with analysts as Talisman CEO, John Manzoni said he had begun a review of the company's worldwide assets and plans to detail his intentions for them over the next few months.
Manzoni, a former BP Plc executive, took the helm at Canada's No. 3 independent explorer in September, replacing outspoken founding CEO Jim Buckee. Talisman has operations in North America, the North Sea, Southeast Asia and Trinidad.
"By not delivering our guidance numbers over the last three quarters we're losing credibility," Manzoni said during the call to discuss a 33 percent drop in third-quarter profit.
"Although this isn't necessarily unique to Talisman ... I'm quite determined that going forward we will improve our track record in this area. We must achieve the targets we set."
Production disappointments do not stem from problems with Talisman's oil and gas reservoirs, but are a function of "general pressures on the supply chain and limited project engineering capabilities, particularly in-house," he said.
In the third quarter, Talisman produced 441,000 barrels of oil equivalent a day, down 4 percent from a year earlier.
Companies throughout the industry have struggled with inflation in labor and materials costs and delays.
To cut its exposure to those risks, the company aims to rely less on contractors for major projects and more on its own staff, which should accelerate start-ups, he said.
Talisman's stock price has lagged many of its competitors, leading some analysts to suggest the company might be worth more if it was split up along geographic lines.
However, Manzoni spoke of long-term potential with the firm having completed C$1.6 billion ($1.7 billion) of asset sales over the past two years. Proceeds were used to buy back stock.
Now, he prefers to use excess cash to invest in high-potential assets, he said.
"That must be our No. 1 aim, and .... we've initiated a process which really looks at all of our options for that so we can identify how much we want to spend and the priority with which we want to spend it," he said.
Talisman shares were up 35 Canadian cents at C$20.40 on the Toronto Stock Exchange on Friday, representing a gain of 2.5 percent this year. That lagged a 10 percent climb in the TSX energy group.
Salman Partners analyst Kyle Preston said it appears Manzoni is still being a bit cautious eight weeks into his tenure, while communicating his desire to be more predictable with production goals.
"Given that Jim Buckee was such a long-standing head there, I think any change was going to look drastic relative to what he was doing," said Preston, who maintained a "buy" rating on the stock with a 12-month target price of C$25.
Manzoni said he had not changed Talisman's goal of boosting output by 5 percent to 10 percent a share annually.
He made one change: taking Talisman's Canadian gas pipeline and processing business off the auction block, blaming uncertainty caused by an increase in Alberta's royalty rates.
"We plan to reassess the potential of this business as part of a longer-term review of growth options," he said.
The company has not fully gauged the impact of the royalty changes, but executives said the most pronounced effects will be on deep gas drilling along the Rocky Mountain foothills.
Still, they said that any spending cuts that result from the royalty changes will likely come in under C$500 million, the amount Talisman had earlier warned it might have to reduce spending by.
($1=$0.93 Canadian)
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