Talisman hunts for shale gas in Poland

Canada's Talisman Energy Inc. has broadened its shale gas focus to Poland, with plans to drill its first three wells in the undeveloped European play in the middle of next year.

Poland's rocks are similar to those found in North America's Montney and Marcellus plays, Richard Herbert, Talisman's executive vice-president of exploration, said Tuesday. "[Poland's plays] are much, much thicker, so there's a big upside in the Polish shales if they are in fact gas-bearing," Mr. Herbert said on a conferencecall to discuss Talisman's second-quarter results for the period ended June 30. The Calgary-based company will begin seismic activity in the fourth quarter.

"It is an area that has had quite a land rush - a lot of companies have moved in there," Mr. Herbert said.

Talisman is a 60% partner in three blocks in Poland's north, near the Baltic Sea. Exxon Mobil Corp. and Chevron Corp. are also poking around the basin, and Talisman said there is very little unlicensed land left.

Poland's shale and tight gas reserves may be as much as three trillion cubic meters, according to estimates by Advanced Resources International, a U.S. energy research firm.

Location may be just as attractive as quantity for Talisman.

"It is very important just because it is another shale play," said Phil Skolnick, an analyst at Canaccord Genuity Inc. "It kind of balances that North American price gas risk, because you're going into a European market. The geology looks the same, so you don't have a learning curve."

For Poland and its neighbours, however, quantity is crucial. The play could eat away at Russia's Gazprom dominance in the region. Only one preliminary "modern" well has been drilled in the new basin, Talisman noted.

Meanwhile, John Manzoni, Talisman's chief executive, said the company is unlikely to spend all of the $4.6-billion it budgeted in May, but has yet to put out new guidance. The spending change will not affect the company's plans, and could shave $100-million to $200-million off its most recent estimate. It started the year expecting to spend about $4.9-billion, but foreign exchange favoured the company.

Talisman made $603-million in the second quarter, compared with $63-million in the same timeframe last year when it was hit by mark-to-market losses on derivatives. Cash flow rang in at $812-million in the quarter, down from $897-million.

The company, which focuses on North American shale gas, oil in the North Sea, and projects in Southeast Asia, produced an average of 411,000 barrels of oil equivalent per day in the second quarter, down from 424,000 in the same quarter last year.

The drop linked to its campaign to ditch assets outside of its main areas. Talisman sold $1.5-billion worth of assets by mid-July, although some of the proceeds from the deals will not show up until the third quarter.

Source:  Financial Post/Bloomberg