In a statement, Talisman said it "acknowledges that it has been approached by Repsol with regards to various transactions."
But the company added, "There is no assurance that any transaction will be agreed."
Repsol is said to be looking to spend cash it received as compensation for the loss of assets in South America, while Talisman has been wanting to sell assets in order to pay down its debts.
Talisman shares rose more than 10% in morning trading in Toronto and New York, to almost $11.
The company is valued at CA$12 billion.
Copyright Agence France-Presse, 2014