Talisman Energy (NYSE: TLM) has disappointed investors over the last few years. The Canadian oil and gas producer's share price is down more than 50% since late 2011. But noted investor Carl Icahn thinks the company is undervalued.

The famed financier might know best. His activism in undervalued Chesapeake Energy (CHKA.Q) apparently helped shares gain nearly 100% over the last two years. With a more than 7% stake and two seats on the board of directors, can Mr. Icahn help deliver similar performance at Talisman?

Starting its turnaround
Talisman Energy has been making an effort to turn itself around, and the early signs have been positive. The energy producer reported fairly strong performance recently. Quarterly oil and gas production grew 6% compared to a year ago, with cash flow increasing 19%. The gains were due to improved liquids deliveries, stronger natural gas pricing, and greater cost controls.

While Talisman has a worldwide asset base, growing its North American production is now the company's focus. Two major fields, the well-known Eagle Ford shale in the U.S. and the burgeoning Greater Edson in Canada, helped North American production grow 9% year over year in the latest quarter. The Eagle Ford produced an impressive 57% more, and liquids production nearly doubled in the Greater Edson.

Talisman also has substantial holdings abroad; though these regions are admirable producers, the company is not averse to selling non-core properties. A sale of Canadian assets earlier this year generated around $1.4 billion. But asset dispositions are just part of Talisman's turnaround strategy. Growing free cash flow by keeping capital spending in check and improving the cash margin are also part of the plan.

The company's "cash flow first" program appears heavily influenced by noted activist investor and 7.4% company holder, Carl Icahn. In fact, Talisman's turnaround strategy appears very similar to that employed by another Icahn holding.

An activist's plan in process
Chesapeake Energy, the second-largest producer of natural gas in the U.S., is a recent example where Mr. Icahn's activism influence apparently delivered shareholder value. In the summer of 2012, Icahn acquired a 7.6% stake in Chesapeake and quickly gained sympathetic board of director membership.

Chesapeake's recent results suggest the new voices on the board have been helpful. Quarterly adjusted income per share increased 97% year over year; operating cash flow, which the company defines as cash flow provided by operating activities before changes in assets and liabilities, jumped 37% from a year earlier. Oil and gas production also gained, with average deliveries adjusted for asset sales growing 11%.

The company has moved away from natural gas drilling and is now focused on more lucrative oil and natural gas liquids production. On an adjusted basis, the latest quarterly oil production increased 20% year over year, while natural gas deliveries grew a lesser 4%. Chesapeake's Eagle Ford shale properties are key oil assets. Eagle Ford production  jumped 26% in the quarter with additional gains expected for the remainder of the year.

Chesapeake appears committed to a "cash flow first" strategy, which includes aggressively disposing of unwanted properties. Property sales have garnered nearly $900 million so far this year after generating about $4.4 billion in 2013. The company is also keeping a close eye on costs. Capital expenditures were reduced by about half in the latest quarter, while average production and the administrative expense per barrel were also slashed.

Chesapeake's apparently Icahn-influenced strategy of more focused operations, non-core asset sales, and cost controls seems to be working. The company's share price has just about doubled since the activist investor's involvement in mid-2012.

Management as activist?
While there seems to be evidence that activist investing can bring out shareholder value, can an energy company's management achieve similar results by following the activist playbook?

Apache Corp (APA 0.98%), a worldwide oil and gas explorer, is looking to try. This energy producer hopes to deliver better performance by also intensifying its focus on North America liquids production and selling non-core assets.

The company's efforts have not delivered yet, however. Recent quarterly results appeared sluggish. Adjusted earnings per share fell around 11% year over year; net cash from continuing operations, before changes in operating assets and liabilities, dropped roughly 4%. While a 13% drop in oil and gas production was disappointing, the decline was mainly due to property divestitures. Otherwise, higher product delivery out of core areas was encouraging.

Apache has been aggressively developing its onshore North American properties, and this has seemed to pay off. Record-setting performance from its Permian fields last quarter helped boost the company's North American liquids production 21% from a year earlier. The gains are helping Apache divest substantial assets without too much short-term financial damage.

After disposing of nearly $8 billion worth of properties over the past year, Apache sold much of its deepwater Gulf of Mexico exposure recently. This deal not only delivered a quick $1.4 billion but also helps the energy producer deliver on an activist-like "cash flow first" strategy; it allows the company to undertake shallower water-drilling opportunities, which generate quicker payback's and require less funding.

Can Apache management deliver better performance by successfully implementing an activist strategy? They have made a good start, but whether the company's focus on cash generation can be sustained is unclear. If the company can succeed, however, investors might benefit noticeably.

Bottom line
Activist investors like Carl Icahn have shown they can deliver shareholder value. Can the gains achieved in shares of Chesapeake Energy, with some apparent Icahn influence, be replicated in shares of Talisman Energy? Can Apache increase its worth through a management-instigated, activist-style transformation? Investors may want to monitor these turnaround situations closely. Evidence suggests that activism in the oil and gas sector frequently pays off.