Talisman, boosted by Repsol talk, may be worth more in pieces

By Scott Haggett and Euan Rocha

CALGARY/TORONTO, July 24 (Reuters) - Canadian oil and gas producer Talisman Energy (Toronto: TLM.TO - news) , approached by Spain's Repsol for talks over a potential deal, may find that its appeal lies more in its individual assets than as a candidate for a complete takeover.

Talisman, which has a market capitalization of nearly $11 billion ($10.2 billion), has long been considered a takeover target as its stock slumped on weak natural gas prices.

Its far-flung global operations include attractive assets stretching from Texas to Vietnam. But it also owns assets in the North Sea that have consistently missed production targets.

Bankers, former investors and analysts say the Calgary firm will not lack for suitors for its individual assets. But taking on the entire company, which has been in midst of restructuring that has seen it cut debt and trim operations, may be a tough ask, partly because its assets are disparate.

"Everyone is looking at tuck-in assets like conventional oil and conventional gas and deepwater oil that they can add to their portfolio and keep the growth curve going," said an energy banker familiar with Talisman who asked not to be identified.

"I think that a sale of the company is not going to happen, because I don't think the final price per share would be fair for them, or particularly attractive."

The banker said a more likely scenario was a bidding war for Talisman's more lucrative assets, such as those in Southeast Asia which are seen as its crown jewels. These include oil and gas assets in Indonesia, Malaysia and Vietnam expected to generate a large part of its 2014 cash flow.

"The assets that people want are the assets that everybody wants," he said.

Talisman could not be immediately reached for comment.

One of Canada's largest independent oil firms, Talisman operates in some of the world's most desirable petroleum areas, including the Eagleford shales in Texas, the Marcellus shale region in the U.S. Northeast and western Canada's burgeoning Duvernay and Montney shales.

It also has oil assets in Iraq's Kurdistan region. But its North Sea assets, much of which are held in a joint venture with China's Sinopec have weighed on earnings.

REPSOL SEEN UNLIKELY TO OFFER BIG PREMIUM

Talisman shares rose 13 percent on Wednesday after it confirmed that it had been approached by the cash-rich Repsol "with regards to various transactions," but the stock is well off its all-time highs of over C$25 a share in 2008.

The stock closed at C$11.76 on Thursday on the Toronto Stock Exchange. Analysts don't expect Repsol to offer Talisman investors much of a premium above current prices, even in the unlikely event it does ultimately bid for the whole company.

Repsol has been searching for acquisitions to boost its exploration and production business and said on Thursday it will return cash to shareholders if it fails to identify a company or assets that meet its acquisition goals.

The Spanish firm said it is considering increasing its exposure to Organization for Economic Co-operation and Development countries.

"The way I look at it, Repsol is potentially trying to go after a wounded duckling and potentially pick away certain parts of it," said John Goldsmith, deputy head of equities at Montrusco Bolton, a firm that has significant investments in the energy sector and which sold its position in Talisman in early 2011.

Talisman shares have dropped by nearly half since 2010 in Toronto while the exchange's energy index has risen by nearly 40 percent.

That weakness attracted U.S. billionaire and activist investor Carl Icahn and convinced management to consider a sale of the company if a buyer could be found.

To be sure, there have been potential buyers looking at the acquiring the entire company. French utility GDF Suez was said to have made an offer for Talisman last year only to be rejected by the company's board.

"I'd say some of their assets could go in a heartbeat but Talisman also knows that, and Talisman wants to extract maximum value for the whole thing, so that's where the dance now goes on," said the energy banker. (Editing by Amran Abocar and Cynthia Osterman)