Canadian oil company Talisman Energy (NYSE: TLM) has done nothing but disappoint investors for the last few years. But with the company's turnaround plan in full swing, the company's shares could prove to be a lucrative investment for patient investors. For example, Talisman's first quarter results highlight how much progress the company has made just in the past year.

Making progress
One of the regions where Talisman has made the most progress is North America. Compared to year-ago figures, Talisman's North American liquids production was up 45% during the first quarter, and Talisman's cash flow from the region covered capital spending for the first time.

What's more, Talisman's overall first quarter cash flow jumped 19% year on year, despite asset sales and a 65% slump in North Sea income.

On the production side of things, excluding the discontinued Montney and Monkman assets, production averaged 360,000 barrels of oil equivalent a day, up slightly on the previous quarter and up 6% year over year.

Unfortunately, the majority of this production was gas, although the company did improve its liquids production during the quarter. Overall liquids production averaged 142,000 barrels a day, up 4% quarter on quarter. The company issued full year production guidance of 350,000 to 365,000 barrels of oil equivalent per day.

All in all during the first quarter Talisman generated cash flow of $616 million, or $0.60 per share, a 6% increase over the fourth quarter and up 19% year over year. The company reported net income of $491 million for the quarter compared to the $1 billion loss reported in the previous quarter.

More importantly, Talisman slashed debt during the first three months of this year. Net debt was $3.8 billion at the end of March, equivalent to a net debt to cash flow ratio of approximately 1.6x, compared to 2.1x in the previous quarter. The company's long-term target is debt to cash flow of 1.5x to 2x.

Moreover, Talisman is continuing to divest assets in order to unlock value. The company completed the sale of its Montney position during the period for C$1.5 billion using the proceeds to pay down $1 billion of debt. A further $2 billion of asset sales are planned over the next 12 to 18 months.

According to some sources however, Talisman is considering the sale of its joint venture in Texas's oil-rich Eagle Ford basin, which could fetch more than $4 billion. The company's partner in this venture is Statoil.

The North Sea problem
On the topic of sales, Talisman's CEO recently stated that the company is not actively pursuing a sale of the whole company, but is open to offers, although in the words of Talisman's CEO, the North Sea situation isn't helping.

The North Sea situation relates to Talisman's commitments within the North Sea where the company is having to invest heavily but is only reporting falling returns -- as mentioned above cash flow for the region collapsed by 65% during the first quarter.

Around 50% of Talisman's capital spent in the North Sea region is going toward the MonArb redevelopment project, which is slated to commence production during 2016; the other half of Talisman's capital spending is being invested to improve reliability and sustain production from existing operations.

Talisman's objective is to reduce its exposure and ultimately exit the North Sea. However, until then, the company is having to improve operating performance, spending despite falling income from the region.

Talisman is not alone when it comes to falling returns from production in the North Sea region. I have written about the issue of rising costs and falling production within the North Sea before and Chevron's (CVX -1.74%) Rosebank project is a great example of the troubles operators are facing within the region. 

Rosebank has been under consideration for a decade, and the project has been offered numerous tax breaks from the UK government in the hopes that the project would become viable. The project was expected to cost Chevron $10 billion to bring into full production, and it was thought that up to 240 million barrels of oil could be recovered from the field. 

However, according to Chevron, "Rosebank has always been a challenging project. At present, the cost of doing business continues to rise...[Rosebank] does not currently offer an economic value proposition that justifies proceeding with an investment of this magnitude."

Using a rough estimate, 240 million barrels of oil is worth around $24 billion at $100 Brent; if Chevron believes that this project is no longer viable then the company must believe that it will now cost above $100 per barrel to extract this oil. 

Strange deal
While Talisman is making solid progress turning its business around the company has also recently signed a strange deal.

The company revealed within its first quarter results that it had just renewed a $3 billion revolving credit facility for five years, at lower rates than its previous facility, giving the company borrowing capacity of up to $7.6 billion -- Talisman clearly doesn't need this much room, and with disposals still on the cards could the company be weighing up acquisitions?

Foolish summary
Overall, Talisman's solid set of first quarter results show that the company's turnaround is progressing well. What's more, the company has returned to a position where it is cash flow positive, and this should enable the company to reduce debt and fund growth going forward.