Talisman Energy Inc, Canada's fifth-largest independent petroleum producer, reported a surprise loss, hurt by lower gas prices in North America and higher royalty payments on production.

The company, which was approached by Spain's Repsol SA last week for talks over a potential deal, said higher operating costs in the United Kingdom and Norway also weighed on netbacks.

Netbacks is revenue a company gets from the sale of hydrocarbons, minus costs of getting the fuel to the market.

Total netbacks fell to $27.18 per barrel of oil equivalent (boe) in the second quarter ended June 30 from $28.44 per boe in the first quarter.

The company reported a net loss of $237 million, or 23 cents per share, compared with a net profit of $97 million, or 9 cents per share, a year earlier.

The loss included a $171 million charge related mainly to hedging losses, Talisman said.

Excluding items, the loss was 1 cent per share, while analysts on average had expected an operating profit of 4 cents per share, according to Thomson Reuters I/B/E/S.

Total production increased 4 percent to 375,000 barrels of oil equivalent per day.

Total revenue rose 4.4 percent to $1.24 billion, but total expenses jumped 47.4 percent to $1.4 billion.

Talisman, which is trying to restructure debt and firm up its flagging stock price, confirmed last week that "it has been approached by Repsol with regards to various transactions" but offered no further details.

The Calgary, Alberta-based company's stock has declined about 5 percent on the Toronto Stock Exchange through Monday's close of C$11.72.

Reporting by Scott Haggett and Sneha Banerjee