Icahn ignites Talisman stock, but longer-term doubts linger

Reuters
File photograph of Investor Carl Icahn speaking at the Wall Street Journal Deals & Deal Makers conference at the New York Stock Exchange
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Investor Carl Icahn speaks at the Wall Street Journal Deals & Deal Makers conference at the New York …

By Euan Rocha and Scott Haggett

TORONTO/CALGARY (Reuters) - Talisman Energy Inc shares rallied in trading before the bell on Tuesday on news that Carl Icahn has built a stake in the company, but doubts remain about whether the billionaire investor will be able to force dramatic changes.

Investors and analysts see Icahn's involvement in Talisman breathing life into the stock in the short-term, but many are wary, as the company has been working through a restructuring process under new management for over a year now and the results so far have been mixed at best.

"As a long-suffering shareholder, we are happy to see some price realization right now, but we are wary as the stock has already moved quite a bit in the last couple of weeks given the speculation around activist involvement," said Ryan Bushell a portfolio manager at Leon Frazer, which owns about 1.55 million Talisman shares, according to Thomson Reuters data.

"For the long term, whether this will result in taking the company where it needs to go - that for me is still very much in question," said Bushell.

Icahn disclosed late on Monday that he owns a 6 percent stake in Talisman. The company's shares were up 6.5 percent at $13.58 in trading before the bell in New York on Tuesday.

The shares have risen 2 percent over the past 12 months, but much of the rise has come since the start of October, when rumors began to swirl that an activist investor was buying the stock.

Icahn, 77, said in a filing with the U.S. Securities and Exchange Commission that he intended to talk with Talisman's management to discuss strategic alternatives for the company, including asset sales or restructuring. He may also seek a board seat, according to the filing.

But many analysts noted that Talisman has already been working on a restructuring and asset sales process for months.

"Although the presence of Icahn's beneficial interest may excite some investors, we remain cautious on the story going forward, particularly given that management is currently in the midst of a portfolio restructuring initiative," JPMorgan analyst Katherine Minyard said in a note to clients.

"Moreover, we believe that any positive investor sentiment may be tempered over the long run as long as Talisman retains a somewhat scattered and unfocused portfolio."

Hal Kvisle, who took over as Talisman chief executive in September 2012 following the abrupt departure of John Manzoni, is refocusing the company's sprawling global footprint to concentrate operations in North and South America and Southeast Asia. He is also restructuring production away from low-value natural gas.

The company is looking to raise as much as $3 billion from asset sales this year. Talisman is looking to sell lands in the North Duvernay shale-gas region of Alberta and parts of its holdings in the Montney field, which straddles Alberta and northeastern British Columbia.

It is also looking to sell its 12.15 percent stake in the Ocensa pipeline, which carries 650,000 barrel of oil per day from Colombia's interior to an oil port on the country's Atlantic coast. Sources have also told Reuters the company is exploring the sale of its shale assets in the Eagle Ford basin in south Texas. The company completed the sale of a 49 percent stake in its North Sea operations to Sinopec for $1.5 billion in December.

BMO analyst Randy Ollenberger said he sees Icahn's involvement as a potential catalyst for Talisman's stock price.

"However, the sale of all or part of the company will clearly take time and there are no guarantees the company is able to achieve prices that will meet the market's expectations," Ollenberger said in a note to clients.

(Reporting by Euan Rocha and Scott Haggett; Editing by John Wallace)

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