Talisman, which has a market capitalization of nearly C$11 billion ($10.2 billion), did not provide details saying only it had been contacted by the Spanish firm "with regards to various transactions."

The company, which operates in North America, southeast Asia, the North Sea, Colombia and elsewhere, has long been considered a takeover target as its stock slumped on weak natural gas prices.

David Meats, an equity analyst with Morningstar, said that Talisman's mix of operating assets, low-risk development stage projects and exploration plays would be attractive to a buyer like Repsol.

The Spanish company is cash-rich since settling a two-year dispute with Argentina earlier this year over the seizure of the company's business there.

"It's a mix of assets that are cash flow positive now, funding the development of low-risk and quite stable resource plays in North America," said Meats. "The cherry on top is the really the exploration prospects like Kurdistan (in Iraq), which have huge potential for upside."

Talisman may be more attractive for its parts than the company as a whole.

It operates in some of the world's most desirable petroleum areas, including the Eagleford shales in Texas, the Marcellus shale region in the U.S. Northeast, Western Canada's burgeoning Duvernay and Montney shales. It also has oil assets in Vietnam and Indonesia.

But its North Sea assets, much of which are held in a joint venture with China's Sinopec, have consistently missed production targets and weighed on its stock.

The stock rose C$1.40, or 13 percent, to close at C$11.97 on the Toronto Stock Exchange, though it remains below its 3-month high of C$12.07 on May 7.

Repsol confirmed on Wednesday it was considering possible acquisitions to boost its upstream business but said it had not made a firm decision on the matter.

"As the company has said in recent months, it is studying different deals in exploration and production ... including possible deals with Talisman," Repsol said in a regulatory filing in Spain.

The Spanish company is to report second-quarter results on Thursday in Madrid, followed by a conference call that could provide details on a deal.

Banking and industry sources told Reuters in January that GDF Suez PA approached the Calgary-based company with an offer late last year, but the two sides were unable to reach an agreement on terms. The French utility later denied any takeover plans and insisted on its strong organic growth prospects.

Talisman has been cutting debt and trimming operations in an effort to boost its share price to assuage disgruntled shareholders and activist investors such as Carl Icahn.

The stock surged last October when Icahn took his original 6 percent stake, hitting a 2013 high of C$13.83. But it had dropped to a 52-week low at C$10.48 on Tuesday.

COMPANY OR ASSETS?

Aside from the $6.3 billion raised from exiting its business in Argentina, Repsol has also said it could sell its 30 percent stake in Spanish utility Gas Natural SDG SA, worth about $9 billion, to spend on acquisitions.

That could put the Spanish company in a position to afford Talisman, but analysts were mixed on whether it would be looking to buy the Canadian firm outright or just take certain assets.

"What everyone wants to know right now is whether or not there was corporate bid for the whole company," said Michael Dunn, an analyst with FirstEnergy Capital. "The press release leaves open that possibility without confirming it."

A takeover would diversify Repsol's geographical mix. But analysts noted Talisman's output is still dominated by gas, and that would breach Repsol's criteria of favoring oil-rich companies in deals.

If Talisman is acquired, it would be the largest deal in Canada's energy sector since 2013, when CNOOC Ltd acquired Nexen Inc.