CALGARY – Talisman Energy Inc. said Wednesday it has no intention of ditching its potentially “giant” oil discovery in the Iraqi region of Kurdistan as it pares other high-risk exploration projects from its portfolio.

Some observers have pressed Talisman (TSX:TLM) to shed Kurdistan, but CEO Hal Kvisle said the company will take its time to explore its options, one of which could be bringing on new partners to help develop the resource.

“This is a tremendously exciting discovery and I’m really looking forward to the results of the two wells that we’ve got planned for the rest of this year,” said Kvisle, who has held the CEO role for five months.

Talisman and Calgary-based junior WesternZagros Resources Ltd. (TSXV:WZR) each own 40 per cent of the Kurdamir block, with the Kurdistan Regional Government holding the rest.

In November, Talisman announced it had found a “significant accumulation of light oil” in its Kurdamir-2 well and that more tests were planned.

Talisman also holds 60 per cent in the adjacent Topkhana block. The KRG owns the other 40 per cent.

There could be anywhere between a few hundred million and several billion barrels of crude recoverable.

“The range is really that wide,” said Kvisle. “Until we do more drilling and get a better sense for what exactly is in the rocks on the different parts of these big structures, we really don’t know.”

Talisman’s experience in dealing with regulators in the semi-autonomous region have been good, but operating there does have its challenges, Kvisle said.

“The terrain that we work in is rugged and the regions are remote and if you suddenly decide you need a particular piece of equipment, it’s usually not available the way it would be in Alberta.”

Moving and setting up a drilling rig in Alberta takes a few days, whereas in Kurdistan it might take weeks. Figuring out the best way to get oil out of the country via pipeline is also a challenge.

In addition to safety concerns inherent to the oil and gas business, there are additional risks in Kurdistan “which involve guns and things like that,” said Kvisle.

“We have to be very careful,” he said. “We’ve got people running that operation that understand this kind of stuff really well and I think we’re able to run a safe operation, notwithstanding the part of the world that we’re in.”

While global exploration spending has traditionally made up 20 per cent of Talisman’s capital spending, it’s at just over 10 per cent now.

The company is pulling out of Poland and Peru and is reducing its exposure to the U.K. North Sea. Its position in Colombia is a “good keeper,” Kvisle said, and offshore Norway still has a lot of value despite major headaches getting its Yme project there on stream.

Active sales processes are underway to whittle down Talisman’s North American unconventional natural gas business, but there are no details yet on where those assets are or who the buyer might be.

Earlier Wednesday, Talisman said it recorded net income of US$367 million, or 37 cents per share, during the last three months of 2012, the first full quarter under Kvisle’s leadership.

That’s a reversal of the $117 million, or 11 cents per share, it lost in the same quarter of 2011.

The improvement was mainly due to $862 million in gains from asset sales. During the quarter, Talisman completed a $1.5-billion joint-venture with Sinopec that gives the Chinese company a 49 per cent stake in its North Sea operations.

Without those one-time items, Talisman would have posted a $107-million loss from operations, or 10 cents per share, compared with a $114-million profit from operations or 11 cents per share in the year-earlier period.

Revenue was down substantially as well, dropping to $1.6 billion in the quarter from $2.1 billion a year earlier.

Analysts had been looking for US$1.9 billion in revenue and an operating profit of $148 million, or 10 cents per share, according to estimates compiled by Thomson Reuters.

Talisman shares closed up two per cent to $12.82 on the Toronto Stock Exchange.

Lanny Pendill, an analyst at Edward Jones, said he was surprised by the stock jump.

“I guess people are pleased that the (joint venture) with Sinopec was finally completed, because the quarter was a lousy quarter as a whole,” he said.

An 11 per cent drop in production does not bode well for a company looking to get its operations back on track, he said. Higher operating costs and depreciation charges were also unpleasant surprises.

The closing of the Sinopec joint venture was one bright spot.

“If you think about it, the North Sea has kind of been the company’s problem child. It’s what’s caused most of the production volatility,” said Pendill.

Lessening Talisman’s exposure to this region is a good thing, while at the same time Sinopec’s investment may help improve reliability and stabilize production rates.

“You’ve basically taken the weakest part of their business and put it in a position to where, hopefully, it can get healthier and at least quit being the Achilles heel,” said Pendill.

Kvisle, the retired CEO of pipeline giant TransCanada Corp., took the helm of the troubled international oil and gas producer in September.

A month later, company announced four strategic priorities: reducing investment to live within cash flow, investing in a smaller number of high-value projects, building a competitive position in all core regions and improving operations.

Talisman has set a 2013 capital budget of about $3 billion, a 25 per cent drop from 2012.

At an investor conference last month, Talisman said it was aiming to cut general and administrative costs by 20 per cent over the year. Some jobs will be cut throughout the year as Talisman exits or reduces its presence in certain regions and retiring employees are not replaced.

The company will also take a hard look at travel, real estate and other costs.