(By Balachander) RBC Capital Markets downgraded its rating on shares of Talisman Energy Inc. (NYSE:TLM) (TSX:TLM) to "Sector Perform" from "Outperform", reflective of its revised one-year potential return outlook and a lack of near-term catalysts.
The brokerage is of the view that the Calgary-based upstream oil and gas company continues to offer an attractive value proposition for patient investors with a time frame of at least one year.
"At the same time, closing the gap in its market valuation will necessitate improving operating momentum, which should come together as we move through 2013," RBC analyst Greg Pardy wrote. "To be sure, 2012 has become another transition year for Talisman, in part due to the collapse in Henry Hub natural gas prices and unfortunate delays with its Norwegian growth plans."
Pardy reduced price target on the stock to $14.00 from $17.00.
Talisman's major catalysts revolve around its initiatives to right-size its UK North Sea portfolio and accelerate growth in Colombia once government approvals are in place to flow test its wells on Blocks CP-6 and CP-9, the analyst said, adding that these events are significant but could take some time to unfold.
The company's production is around 45 percent crude oil weighted (two-thirds accounting for crude linked natural gas production) and flows predominantly from the North Sea (U.K. and Norway), Southeast Asia (Indonesia, Malaysia, Vietnam and Australia), North Africa (Algeria), Western Canada and the United States (Pennsylvania).
On Wednesday, U.S. listed shares of TLM retreated 1.77 percent to trade at $11.09. Over the past year, the stock has been trading in the range of $9.46 to $20.83.