Spanish energy company Repsol SA's talks to buy Canadian producer Talisman Energy Inc are in difficulty, three sources familiar with the matter said, with Talisman's North Sea assets the stumbling block.

A Madrid-based source with knowledge of Repsol's strategy said talks to buy Talisman had stalled, while two further sources familiar with the matter said Repsol was no longer looking at a bid for the Canadian company in its entirety.

Calgary-based Talisman, Canada's fifth-largest independent petroleum producer with a market capitalisation of nearly C$11 billion ($10.2 billion), said in July it had been approached by Repsol with regards to various transactions.

Talisman's North Sea assets were putting off Repsol, one of the sources said. These projects, in Britain and Norway, have consistently missed production targets and weighed down its stock. Most are held in a joint venture with China's Sinopec , making it difficult to exit the region quickly.

A Repsol spokesman declined to comment on Wednesday. No one from Talisman was immediately available to comment. Talisman shares closed on Tuesday down 1.4 percent while Repsol's shares were little changed in Wednesday trade.

Talisman operates in some of the world's most desirable petroleum areas, including the Eagle Ford and Marcellus shales in the United States and Western Canada's burgeoning Duvernay and Montney shale regions.

The Canadian company, which also has oil production in Colombia and southeast Asia, has long been considered a takeover target as low natural gas prices and problems with the North Sea operations lowered profits and its share price.

Repsol, meanwhile, is cash-rich since settling a two-year dispute with Argentina earlier this year over the seizure of YPF - its business in the Latin American country.

The Spanish company has been looking to boost exploration and production to ensure future growth and fill a gap leftover from the loss of YPF, focusing on assets that offer instant cash flow and with a view to diversifying away from high-risk areas like Libya and into developed countries.
Source: Reuters

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