Talisman Energy IncTLM

Talisman's new strategy is focused on improving returns on capital through more selective investment and cutting costs. Higher returns (versus merely growing production) are much more likely to improve the firm's languishing share price.

Talisman has a large, undeveloped acreage position in Southeast Asia, where high GDP growth and increasing electricity requirements should sustain demand for natural gas and liquid natural gas and maintain premium pricing.

Talisman's financing strategy relies on internally generated cash flows and asset divestitures to fund exploration and development. Low debt levels provide the firm flexibility in how it chooses to expand production. Read more 

Talisman's stable production strategy can be viewed as a gamble that international oil and gas prices will remain at current levels, as it works improve cash flow through cost cuts. The company is clearly emulating the strategies of much larger oil companies, but doesn't have the legacy low-cost production or downstream assets to help support cash flow should oil prices fall.

Production delays and unplanned maintenance have historically plagued Talisman. Management has made efforts to counteract this trend, but building a performance-driven culture without sacrificing safety could take years.

Flattening forward price curves in oil and gas markets could diminish the company's ability to effectively hedge future production and leave future cash flows susceptible to increased variability. Read more