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In barely 20 years since its spinoff from BP PLC, Talisman Energy Inc. grew into one of Canada’s senior players through a unique mix of corporate raids, shrewd exploration, a global mindset and controversy-be-damned attitude.
From the geologically challenging Alberta foothills to the conflict-ravaged desert of Sudan, to the jungles of Peru to shale deposits in Quebec, Talisman pushed hard if it felt the “rocks” were good — as its founder and former CEO Jim Buckee used to say.
But investors have become increasingly disenchanted, resulting in a low stock price and persistent rumours of a sale that intensified since the announcement in July of rival Nexen Inc.’s sale to CNOOC Ltd. for $15.1-billion. Talisman signaled Monday it’s changing course rather than putting itself on the block.
President and CEO John Manzoni, the BP senior executive hired five years ago to continue in Mr. Buckee’s footsteps, stepped down, and Talisman is now under the steady hand of Hal Kvisle, the former TransCanada Corp. president and CEO and a Talisman board member who came out of retirement to pave the way for a new, more shareholder-focused strategy.
In an interview, Mr. Kvisle said market expectations have changed and the pursuit of costly growth is no longer what they want.
“The board has become increasingly concerned that we have been investing very large amounts of capital in some really exciting projects, but some times due to technical difficulties, some times due to execution, and some times due to commodity prices, the benefits to shareholders … hasn’t always been there,” Mr. Kvisle said.
“And so we just decided that it’s time for Talisman to shift to a more disciplined approach to extracting value from our assets, a more disciplined more capital investments and … to a greater degree on profitability.”
Mr. Kvisle said investors expect energy companies to deliver bigger and more immediate shareholder returns, including potentially higher dividends.
“I think there is probably an appropriate expectation from shareholders that companies are going to do more for them now, and probably in the form of dividend payouts, and the companies are going to be more careful about the allocation of capital to long term things,” he said.
Decisions about higher dividends are made by the board, but “you know that I like dividend-paying companies and that is something that has some appeal to me.”
Mr. Kvisle, 59, is well-positioned to deliver. The long-time oil executive and part-time rancher led pipeline giant TransCanada from 2001 to 2010 through a big expansion, while also steadily increasing its dividend. TransCanada shares rose 138% under his leadership. In 2008, he was named Canada’s Outstanding CEO of The Year.
For the rest of this column, please go to the National Post website: http://business.financialpost.com/2012/09/10/talisman-shifts-focus-to-profitability-as-new-ceo-takes-reins/