After markets closed on Monday night, activist investor Carl Icahn disclosed that he had accumulated a stake of nearly 6% in Canadian independent oil and gas exploration and production company Talisman Energy Inc. (NYSE: TLM). The total value of Icahn’s investment is around $300 million.
Talisman’s current enterprise value is about $18.4 billion and includes about $5.2 billion in debt. To make some serious money on his investment, Icahn will have to convince Talisman to rationalize its assets. The company has leases in North America, the North Sea, North Africa, the Middle East and South Asia. If that looks like a lack of focus to you, imagine what it looks like to Icahn.
While it is unlikely that he can force Talisman to sell the entire company, it is certainly possible that he could speed up a sell-off of assets that are not contributing to the company’s performance. A good place to start might be Talisman’s leases in Iraq’s Kurdistan region, where the company holds two nearly adjacent leases that could end up being linked into a single reservoir worth as much as $2.5 billion. Developing the Iraqi leases could drag on for years, given the disagreement between Kurdistan and the central government. This is exactly the type of asset that Icahn could argue should be sold.
Shares of Talisman are up about 8.6% in premarket trading Tuesday morning at $13.85, above the high end of the stock’s 52-week range of $10.34 to $13.43. The Thomson Reuters consensus price target on the stock is around $13.80.