Talisman Energy (TLM)

Many of Talisman's most attractive prospects located in adverse conditions:

• Alaska prospects: only a short time-window each year to do exploratory work
• North Sea: management gave an example of a pipe-laying barge that was on-site for 170 days, spending 120 of those days idle due to weather
• Indonesia: the West Java gas operations has been delayed half a year due to flooding, among other factors^[1]

This entails some exploration risk. Actual production may not match estimates. Drilled holes may not be economical. Reserves may be overstated. Etc. Furthermore, there is an increasing environmental risk. As resource exploitation becomes more challenging, the environmental costs may induce community backlash and governmental regulations.

Plus, years of underinvestment has led to shortages across the personnel spectrum from crew hands to engineers. Talisman has substantial offshore projects which are experiencing challenging logistics. Rigs and other field services are in high demand and show little sign of let-up.

1. ↑ Talisman Energy Report:Risks

Talisman remains a deeply unpopular company in Canada after investing heavily in oil exploration in the Sudan, bankrolling local mujahadeen to protect its oil interests. Only after intense pressure from Canadian investors did Talisman fully divest from its Sudanese holdings, selling them to an Indian company in 2003.

CEO James Buckee, the guiding hand behind Talisman's phenomenal growth in the last fifteen years, will be retiring in September 2007. With no change of top-level management from 1992-2007, during a period where the company grew from a small spin-off division into a major multinational company, the performance of Talisman under incoming CEO John Manzoni remains uncertain and unproven.

Although Talisman enjoys a relatively high stock price, growth over the last year has remained flat despite skyrocketing oil prices and geopolitical tension in competitors' markets.