Thursday, July 28, 2011
Talisman Energy Inc.
Talisman reported its operating and financial results for the second quarter of 2011. The company is reporting under International Financial Reporting Standards (IFRS) and all values in this release are in US$ unless otherwise stated.
- Cash flow was $897 million for the quarter, up 14% compared to $790 million a year ago and $811 million in the first quarter.
- Net income was $698 million versus $572 million in 2010 and a net loss of $326 million in the previous quarter.
- Earnings from operations were $168 million, up 14% from the same period last year and up from $157 million in the prior quarter.
- Production for the quarter averaged 420,000 boe/d, compared to 411,000 boe/d in 2010. Production from ongoing operations was up 13%, compared to 372,000 boe/d a year ago.
- Net debt at June 30, 2011 was $3 billion versus $2.5 billion at March 31, 2011.
- The company closed a second transaction with Sasol, selling a 50% interest in its Cypress A Montney shale properties for C$1.05 billion, including certain future development costs.
- Talisman acquired additional acreage in the Alberta Duvernay shale play, bringing its land position to 360,000 net acres.
- The company continues to deliver strong natural gas volumes in Southeast Asia, with price realizations of $9.78/mcf.
- Talisman plans to drill a number of important exploration wells in the second half of this year.
"Talisman achieved a strong financial performance this quarter" said John A. Manzoni, President & CEO. "We continue to grow and strengthen our shale portfolio in North America, and are looking forward to results from a number of significant exploration wells in the second half of the year.
"Total volumes in the quarter were 2% above the comparable number for 2010, although down from the first quarter, largely due to annual maintenance turnarounds. Excluding volumes from assets which have been sold, underlying growth in production is 13% year over year.
"We continue to see strong growth in North American shale volumes, which averaged approximately 470 mmcfe per day in the quarter, an increase of 178% over the same period last year and up 4% over the previous quarter. Our success in the Marcellus is continuing, with production averaging over 400 mmcf per day during the quarter.
"In the liquids-rich Eagle Ford shale play, we now have six rigs running and are planning to build to 10 by year-end. In the Montney shale, we are operating 10 rigs and closed the second transaction with Sasol during the quarter, for approximately C$1 billion, including certain future development costs.
"We are continuing to build our North American shale portfolio, with a sizeable land acquisition during the quarter, in what we hope will emerge as another successful liquids-rich play. Talisman now holds approximately 360,000 net acres in the Alberta Duvernay shale play, acquired at an average cost of about $2,000 per acre. We will begin drilling into the play in the second half of the year, with two rigs.
"In Southeast Asia, volumes continue to be strong, although down from a year ago, reflecting a one-time upward adjustment in the second quarter of last year and annual maintenance turnarounds. Natural gas prices in the region averaged about $9.80 per mcf during the quarter, reflecting strong regional demand and linkage to oil prices.
"North Sea volumes were down relative to both the previous year and the prior quarter, with annual maintenance turnarounds and natural production declines. Ongoing planned turnarounds will result in slightly lower North Sea production in the third quarter, with a return to higher volumes in the fourth quarter when work is completed. Work on future development projects continues and we have seen encouraging early test results at the Grosbeak discovery in Norway.
"The Yme project in Norway took a significant step forward with offshore installation completed at the end of the quarter; however there is still a significant amount of remaining work to commission the topsides. The amount of rework which is required on the platform has turned out to be substantial, and I believe we are now close to defining the full scope. In light of what we have found we are now moving our expectation for first production to the second quarter of 2012.
"In addition, we have seen a slight delay in the final stages of commissioning the non-operated Kitan project, and our Eagle Ford ramp-up was delayed by about three months.
"This combination of factors has led us to revise our current view of production for this year, including Colombia, to between 430,000 and 440,000 boe per day. Excluding Colombia, this represents only slight absolute growth over last year, although it represents between 7 - 10% organic growth from ongoing operations in 2010. It is, nonetheless, below our minimum expectation of 5% absolute growth for the year and I am very disappointed to miss our own target for the first time since I joined the company.
"The factors which have led to this reduction are specific and identifiable, and we remain confident in the underlying quality of the portfolio. Our growth target of 5 - 10% annually in the medium term remains firmly in place.
"There are continuing signs of success in the early testing phase of our international exploration portfolio, which has been largely focused on Colombia and Papua New Guinea to date. In the second half of the year, we plan to drill significant wells in Indonesia, Peru, Poland and the Kurdistan region of northern Iraq.
"Cash flow was $897 million during the quarter, up 14% year over year, reflecting higher oil prices. Similarly, earnings from operations, which adjust for non-operational impacts, were also up 14% to $168 million.
"Net income was $698 million compared to $572 million a year earlier and a loss of $326 million in the first quarter. This reflects the impact of changing commodity prices on the mark-to-market value of held-for-trading financial instruments and changes in the non-cash value of share based payments.
"We continue to expect that our cash exploration and development capital spending will be between $4 to $4.5 billion. In addition, we have spent $510 million on land purchases in the quarter.
"I am confident in the structure of our portfolio to deliver long-term, profitable growth of 5 - 10%. The project set-backs we have experienced are localized, but nevertheless, reinforce the need to continue the improvements we have begun across our business to address project execution and delivery. We can look forward to getting these issues behind us, and to drilling a number of important exploration wells through the second half. The underlying financial performance was strong this quarter, and we will continue to focus on effectively delivering against our strategy, with our strong portfolio of assets."
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