Cash-rich Talisman eyes Haynesville Shale play


NATHAN VANDERKLIPPE
The Globe and Mail
May. 21, 2009

Flush with cash from a 12-month selling binge, Talisman Energy Inc. TLM-T is looking to expand its reach to fast-developing U.S. natural gas areas by buying from struggling companies in Louisiana's Haynesville Shale play.

"There is a particular opportunity set in North American shale gas as a result of overleverage by some players. And we will be, and are, looking at those opportunities," Talisman president and chief executive officer John Manzoni said yesterday in an interview.

"The key is to be in the best rocks," he said, adding that while he favours the Haynesville Shale, expansion in Southeast Asia is also possible.

Calgary-based Talisman is also spending to develop its existing portfolio, although it trimmed its 2009 capital budget by 30 per cent. In the past year, the company sold $2.5-billion in assets, including some in Saskatchewan and Trinidad. It currently has $3-billion in liquidity, but expects that to grow "significantly" in the second quarter, as payments come in from some of those sales.

When Mr. Manzoni took the top spot at Talisman in September, 2007, one of his main objectives was to rein in some of the company's far-flung international ventures and focus on several key areas. One was unconventional gas plays, and Talisman currently has a foothold in the Marcellus in Pennsylvania, the Utica in Quebec and the Montney in northern British Columbia.

Entering the Haynesville Shale would mark a new step in Mr. Manzoni's strategy.

A number of energy companies have grabbed vast amounts of Haynesville ground in the past 18 months, including Royal Dutch Shell, EnCana Corp., Devon Energy Corp. and Chesapeake Energy.

RBC Dominion Securities analyst Leo Mariani said the only Haynesville player that might be described as overextended is GMX Resources Inc., a $294-million (U.S.) gas explorer that launched a five-million-share equity offering last week.

A number of companies may be open to selling Haynesville assets or opening joint ventures, BMO Nesbitt Burns analyst Jim Byrne said. Other companies active in the area include XTO Energy Inc., Comstock Resources Inc. and Exco Resources Inc.

"Our thesis is that you're going to start to see quite a bit of the acreage start to come onto the market as guys are getting stretched on credit lines," Mr. Byrne said.

The recession and low gas prices have driven down land in the Haynesville from a peak of about $30,000 an acre to about $4,000, Mr. Byrne said. In many places, it is now cheaper to buy gas than find it.

Still, shales are a hugely promising resource that have radically reshaped the continent's natural gas map, boosting production in the United States by 23 per cent in the past five years. EnCana CEO Randy Eresman plans to promote shale gas a "green fuel" to Group of Eight leaders in Rome this weekend. And Enbridge announced yesterday that it intends to move forward on its $1.2-billion LaCrosse pipeline.

The Haynesville Shale is expected to be the most prolific on the continent: BMO has estimated it contains 69 trillion cubic feet in recoverable gas, enough to supply the U.S. for three years. It is also expected to be the cheapest to recover, and should be profitable with natural gas prices at $5.14 per 1,000 cubic feet.