Talisman Energy Inc. (TSX: TLM) (NYSE: TLM) reported its operating
and financial results for the first quarter of 2009.
- Cash flow (1) during the quarter was $1.3 billion, an increase
of 6% from a year ago. Cash flow from continuing operations (1) was
also $1.3 billion, up 14% from the same period a year ago.
- Net income was $455 million, down 2% from a year earlier,
because gains on asset sales were offset by lower realized prices,
higher depletion, depreciation and amortization (DD&A) and dry
hole costs.
- Earnings from continuing operations (1) were $303 million,
compared to $429 million a year ago.
- Production averaged 450,000 boe/d, 7% above the first quarter
of 2008, despite the sale of non-core assets over the past year.
Production from continuing operations averaged 436,000 boe/d, 11%
above the same quarter last year.
- Net debt (1) at quarter end was $3.6 billion, down from $3.9
billion at December 31, 2008.
- Netbacks were down 46% from a year earlier, averaging
$24.48/boe.
- During the quarter, Talisman announced first gas production
from the Rev Field in Norway and first oil production from the
Northern Fields project in Southeast Asia.
- Talisman's unconventional natural gas strategy in North
America is on track with 22 gross wells drilled during the quarter
in the Marcellus and Montney.
- Talisman announced an agreement to sell non-strategic assets
in Saskatchewan for $720 million.
- Talisman entered into an agreement for the sale of its
Trinidad assets for approximately $380 million.
- The Company announced the appointment of Paul Smith as
Executive Vice-President, International Operations (West) and
Richard Herbert as Executive Vice-President, Exploration.
(1) The terms "cash flow", "cash flow from continuing operations",
"earnings from continuing operations" and "net debt" are non-GAAP
measures. Please see the advisories and reconciliations elsewhere in
this news release.
"Talisman's financial and operating performance in the quarter
was strong," said John A. Manzoni, President and CEO. "We continue
to strengthen the Company's balance sheet, which gives us financial
flexibility; we are driving down costs and improving efficiency; we
are bringing development projects on stream; and, delivering on
strategy implementation.
"It was a great quarter from an operations standpoint.
Production from continuing operations was up 11% year over year. UK
production increased by 28%, due in part to improvements in
operating efficiency. Production in Scandinavia rose 26%, with
contributions from the Rev Field and development drilling success.
Production in Southeast Asia was 13% higher with increased sales
from Corridor.
"The first quarter exceeded our internal projections for
production and gives us a strong start to delivering our production
target for the year. We are still early in the year and the
guidance we provided in January of 430,000 boe/d, with downside of
no greater than 5%, remains valid. As usual, production in the
second and third quarters will be lower due to maintenance
shutdowns.
"Cash generation was also strong during the quarter, up 6% to
$1.3 billion, despite low commodity prices. The strong cash flow
results in large part from the hedging program put in place during
the last 12 months. We have hedges in place over the remainder of
the year, although we expect lower cash contributions from these.
Cash flow also benefited from higher production volumes and lower
taxes.
"With higher cash flow and proceeds from non-core asset sales,
we have improved upon our already strong financial position.
Talisman's long-term debt is now at $3.6 billion (net of cash)
versus $3.9 billion at year end and we have paid off our bank
lines.
"Net income was down 2% compared to a year ago, totaling $455
million, largely due to lower realized prices, higher DD&A and
dry hole costs, partly offset by gains on non-core asset sales.
Excluding unusual items, earnings from continuing operations were
$303 million, compared to $429 million a year earlier.
"Unit operating costs are down 6% versus a year ago. In the UK,
unit costs are down 27%, due to production gains and improved
efficiency, exchange rate movements and the disposal of some higher
cost properties. In North America, underlying costs are also
reducing, although the quarter included some one-off costs, which
mask this reduction. We have a number of internal cost initiatives
underway across all our businesses and we expect further
reductions.
"The strategy is proving robust to lower commodity prices. We
are making good progress on non-core asset sales. Including the
Saskatchewan and Trinidad sales, we will generate proceeds of
approximately $2.2 billion from non-core assets with associated
volumes of about 25,000 boe/d.
"First oil from the Northern Fields oil development was achieved
on schedule during the quarter. We announced first natural gas
volumes in July of last year and expect to commission the dry gas
facilities by mid-year. In Norway, we announced first production
from the Rev Field in January. First production from Affleck in the
UK is expected in the third quarter and we continue to progress
projects at Auk, Burghley and Yme in the North Sea and Block
15-2/01, and the Corridor expansion in Southeast Asia.
"We spent approximately $250 million on unconventional gas plays
in North America during the quarter. In the Marcellus Shale, we
drilled four wells during the quarter, with each well performing
better than the previous one. Improved drilling efficiency should
now enable us to complete the 2009 program with a maximum of three
rigs instead of five.
"We drilled 11 gross wells in the Montney Core where Talisman is
achieving top tier performance on drilling and completion costs. We
are encouraged by the results of ongoing pilot work in the Montney
Shale and have drilled our fourth unconventional pilot well in
Quebec.
"In international exploration, we drilled a successful sidetrack
on Block 15-2/01 in Vietnam. Talisman has made a discovery with the
Godwin well in the Central Graben in the UK. We are also encouraged
by a new discovery in Norway, which is preparing to test. Early
indications are promising in Colombia; however, we still have a
couple of months before the well is completed and we are drilling a
well on Block 64 in Peru. Results from our first well in the
Kurdistan region of northern Iraq were also encouraging, but
inconclusive due to operational difficulties in completing the
well. And we have also added new blocks in Peru and offshore
Vietnam.
"In summary, it was a strong quarter, both operationally and
financially. The Company is in excellent financial shape and we are
making good progress on our strategy for profitable long-term
growth."
Financial Results
March 31 Three Months Ended
2009 2008
Cash flow ($ million) 1,309 1,232
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Cash flow per share (1) 1.29 1.21
---------------------
Cash flow from continuing operations ($ million) 1,295 1,136
---------------------
---------------------
Net income ($ million) 455 466
---------------------
Net income per share 0.45 0.46
---------------------
---------------------
Earnings from continuing operations ($ million) 303 429
---------------------
Earnings from continuing operations per share (2) 0.30 0.42
---------------------
---------------------
Average shares outstanding (million) 1,015 1,019
(2) The terms "cash flow per share" and "earnings from continuing
operations per share" are non-GAAP measures. Please see the advisories
and reconciliations elsewhere in this news release.
Cash flow increased 6% year over year to $1.3 billion, as higher
production volumes and cash received on commodity hedges ($436
million after tax) offset a 46% drop in netbacks.
Net income was 2% below last year. Income for the quarter
included a $519 million after tax gain on the sale of non-core
assets.
Total DD&A expense was $733 million, an increase of $226
million compared to the first quarter of 2008. The increase is
primarily from downward reserve revisions as a result of low oil
prices, increased production and capital expenditures.
Dry hole expense was $246 million in the quarter compared to $65
million a year ago. This includes $59 million for exploration wells
in the North Sea and $46 million in Vietnam. Dry hole expense
totalled $128 million in North America, where writeoffs occurred
due to changes in natural gas price forecasts and a number of
unsuccessful deep wells drilled last year.
Total tax expense fell by $400 million compared to the first
quarter of 2008 with lower netbacks, higher operating, dry hole and
DD&A expenses.
Earnings from continuing operations were $303 million compared
to $429 million a year earlier. Earnings from continuing operations
adjust for significant one-time events and non-operational items
such as the mark-to-market effect of changes in share prices on
stock-based compensation expense and mark-to-market changes of
commodity derivatives.
Talisman continued to strengthen its balance sheet. Net debt at
March 31 was $3.6 billion down from $3.9 billion at December 31,
2008.
The Company spent $1,099 million on exploration and development
during the quarter (including $106 million of non-cash costs). This
includes $390 million in North America (primarily unconventional
natural gas) and $361 million in the North Sea, including the Rev
and Yme projects, as well as development drilling at Auk North,
Claymore, Clyde, Gyda and Brage. Spending in Southeast Asia was
$277 million, including capitalization of the Floating Storage
Offloading (FSO) vessel as part of the Northern Fields startup.
Production
March 31 Three Months Ended
2009 2008
-----------------------
Oil and liquids (bbls/d) 234,876 216,625
-----------------------
Natural gas (mmcf/d) 1,291 1,216
-----------------------
Total (mboe/d) 450 419
-----------------------
-----------------------
Continuing operations (mboe/d) 436 393
-----------------------
Production from continuing operations averaged 436,000 boe/d, an
increase of 11% over last year. UK oil and liquids production
increased 25%, in part due to steps taken to improve operating
efficiency. Production in Scandinavia increased 26% with the
startup of the Rev Field and new wells on production at Brage and
better base production at Varg. Natural gas production in Southeast
Asia increased 22%, with a 25% increase in Indonesia as sales to
West Java continue to grow.
Netbacks
March 31 Three Months Ended
$/boe 2009 2008
-----------------------
Sales 44.17 73.01
-----------------------
Hedging gain (loss) - (0.26)
-----------------------
Royalties 5.93 12.87
-----------------------
Transportation 1.40 1.14
-----------------------
Operating expenses 12.36 13.08
-----------------------
Netback 24.48 45.66
-----------------------
-----------------------
Oil & liquids netback ($/bbl) 29.68 58.76
-----------------------
Natural gas netback ($/mcf) 3.14 5.28
-----------------------
Netbacks in the first quarter averaged $24.48/boe, down 46% from
a year ago and 6% below the previous quarter. WTI oil prices
averaged US$43/bbl, down 56% from the first quarter of 2008. NYMEX
natural gas prices averaged US$4.86/mmbtu, a decrease of 36%.
Royalty expenses fell $62 million compared to last year, but
rates increased slightly due to increased sales in Algeria, which
has a relatively high royalty rate. Royalty rates in North America
and Southeast Asia were lower.
Unit operating costs were down 6% compared to the first quarter
of 2008. The biggest drop was in the UK, where unit costs were down
27%, due in part to production efficiencies, with the remainder
coming from the sale of higher cost properties and foreign exchange
rates. In Norway, unit operating costs are down 24%, largely due to
higher volumes and the startup of the Rev Field. North American
unit costs have increased due to one-time charges associated with
the Company's agreement with Hallwood Partners, higher property
taxes and increased processing fees associated with additional
volumes through third party infrastructure. In Southeast Asia,
costs were up with increased maintenance expenses in
Malaysia/Vietnam.
The Company may choose to designate derivative instruments as
hedges for accounting purposes. To date, the Company has elected
not to designate any commodity price derivative contracts entered
into since January 1, 2007 as hedges.
North America
In North America, production averaged 179,000 boe/d for the
first quarter, down 2% from a year ago. Production from continuing
operations was relatively unchanged from the same period in 2008.
Oil and liquids volumes were down 3%, due largely to natural
declines. Natural gas volumes increased 1% with increases in
unconventional areas (Appalachia, Outer Foothills, Montney), as
well as in Monkman and the Northern Alberta Foothills, which more
than offset declines in other conventional areas.
Capital spending included $250 million in unconventional areas
for development and piloting activities, plus $140 million on other
properties. This other spending was comprised mainly of carry-in
capital from the 2008 capital program, with some excellent results.
A well in Monkman, BC tested at 40 mmcf/d raw gas and a Greater
Ojay, BC well tested at 23 mmcf/d raw gas.
Talisman participated in 61 gross (32.4 net) wells in the
quarter, with 53 gross wells in unconventional plays.
In the Marcellus Shale, the Company continues to focus on
Pennsylvania. Talisman drilled four gross wells (four net) in the
quarter and has now moved to pad drilling. Two rigs are currently
operating and the Company now expects it will be able to complete
its 36 well program for the year with a maximum of three rigs
instead of five as originally planned.
Each well is performing better than the previous well. The
latest producing well in the program achieved rates of 4.5 mmcfe/d
over an initial 30-day period, with the most recent pad well on
target to cost US$4.3 million (C$ 5.2 million) to drill and
complete. These costs are down more than 25% from the 2008 average
and drilling cycle times have been reduced by 50% compared to the
first wells in the program.
In the Montney Core, Talisman drilled 11 gross (9.9 net) wells
in the quarter out of a planned 35 well program. The most recent
five horizontal wells have averaged initial 30-day production rates
of over 3 mmcfe/d. Talisman has made significant strides in
reducing costs in the Montney. A recent well was drilled and
completed at a cost of $3.8 million, which is top tier performance
and a 50% reduction from the Company's average 2008 drilling costs
in the area. Talisman is also achieving best in class completion
costs in the area.
Talisman continues to progress piloting in the Montney Shale,
with seven gross (four net) wells drilled in the quarter. Results
are encouraging and the Company recently completed its first
horizontal shale well. Talisman is evaluating egress options for
the area and plans to build gathering and processing facilities
later this year.
In Quebec, the Company is currently drilling the fourth well in
the earning phase of a four-well program. Completion and testing of
the last two wells is expected to take place later this year. The
program is focused on gathering test and core data to evaluate the
potential for commercial gas production.
During the quarter, Talisman announced the sale of its southeast
Saskatchewan and Daniels County, Montana assets for approximately
$720 million. The sale is expected to close in June 2009.
UK
Production from continuing operations in the UK averaged 108,000
boe/d over the quarter, up 28% from the same period in 2008,
primarily due to increased production at Tweedsmuir, which was
ramping up in the first quarter last year, and a full quarter's
production from the Montrose-Arbroath complex, which was shutdown
in the first quarter of 2008.
UK development expenditures during the quarter were $131
million, which included drilling in the Auk North, Claymore and
Clyde fields.
During the quarter, the Company continued to progress
development at Auk North, with three wells being batch drilled. The
non-operated Affleck development is due onstream at the start of
the third quarter. Engineering work at the Auk South redevelopment
is advancing.
The Tweedsmuir water injection plant came onstream on March 11
and the plant was tested at its capacity of 30,000 bbls/d of
water.
Scandinavia
Production from continuing operations averaged 43,000 boe/d, up
26% from the same period in 2008. The production increase over 2008
was due to commencement of production from the Rev Field and new
wells brought onstream at Brage and better base production at
Varg.
The Company spent $115 million on development, which included
the Rev and Yme projects and development drilling in the Yme, Gyda,
Veslefrikk and Brage fields.
The Rev Field came on production on January 24. The field is
expected to produce at a plateau rate of 100 mmcf/d of natural gas
and 6,000 bbls/d of condensate and natural gas liquids from two
subsea wells. A third producing well is expected to be brought
onstream later in 2009.
During the quarter, Talisman reached an agreement to sell a 10%
equity interest in the Yme Field. Construction at the Yme field
redevelopment project continues and first oil is now scheduled for
around the middle of 2010.
The Company also reached an agreement to sell a 40% interest in
PL301 in Norway.
Southeast Asia
In Southeast Asia, production averaged 101,000 boe/d, 13% higher
than the same period last year. Indonesian production averaged
63,000 boe/d, 19% higher than the same period last year, primarily
due to increased gas takes in Corridor. Production from Malaysia
averaged 27,000 boe/d, 22% lower than the previous period, mainly
due to a planned shutdown at PM-3 CAA to complete final tie-ins
prior to the startup of oil production from the Northern Fields and
natural declines in PM 305/314.
In Indonesia, Corridor produced 296 mmcf/d during the quarter,
an increase of 63 mmcf/d over the same period last year, mainly due
to increased West Java gas sales.
First gas was introduced into the Tangguh Train 1 facility on
January 27, marking the startup of the Liquefied Natural Gas (LNG)
processing facilities, with first commercial shipments scheduled
for the second quarter.
In PM-3 CAA in Malaysia/Vietnam, the FSO vessel was installed in
early March 2009 at the Northern Fields development. First oil
production began on March 25 at 6,000 bbls/d (gross) from the
initial two oil wells and production is expected to reach
40,000-50,000 boe/d (gross sales) by early 2010. Commissioning of
dry gas facilities is scheduled for mid-2009.
Gas production from Northern Fields averaged 92 mmcf/d (gross
sales gas) during the quarter. To date, 20 wells (five oil, 13 gas
and two injectors) have been drilled and completed in Northern
Fields with a 100% success rate. The Company plans to drill up to
16 development wells in the Northern Fields in 2009, with an
additional 13 planned for 2010.
In the Southern Fields in PM-3 CAA, the first of the six-well
Bunga Kekwa infill program spudded in March and was completed in
mid-April, while at PM-305, an infill well drilled in the first
quarter came onstream and is currently producing 1,300 bbls/d
(gross).
Production in Vietnam averaged 8,000 bbls/d as Song Doc came
onstream in November 2008. In Block 15-2/01, pre-engineering work
is underway with project sanction of the Hai Su Trang development
and the Hai Su Den Early Production Scheme expected later in the
year.
Production in Australia was 3,200 bbls/d, 60% higher than the
same period last year, primarily due to installation of the new
flowline at Corallina and reinstatement of the Lam-2 well, which
were completed in mid-March. A field development plan for the Kitan
discovery is being prepared and is scheduled to be submitted in
May.
Other Areas
In North Africa, production from continuing operations averaged
15,000 boe/d, down 8% from the same period in 2008, mainly due to
OPEC production restrictions and natural declines. In Algeria, new
production and injection wells were tied in as part of the Greater
MLN Phase 2 project. The Phase 2 expanded gas injection facilities
are being commissioned. The El Merk project in Algeria was
sanctioned during the quarter. The Company participated in two
wells, with a third well drilling over the quarter end.
Talisman entered into an agreement for the sale of its Trinidad
and Tobago assets for approximately $380 million.
International Exploration
International exploration spending in the first quarter was
approximately $247 million.
Southeast Asia
In September 2008, Talisman entered into a farm-in agreement in
Blocks 133 and 134 offshore Vietnam with a 38% working interest.
The amended licence was approved by the Government of Vietnam in
February 2009 and represents the Company's first step into the Nam
Con Son Basin. The Company continues the appraisal of the Hai Su
Den discovery in Block 15-2/01 in the Cuu Long Basin, with further
wells planned later in the year.
Kurdistan Region of Northern Iraq
In the Kurdistan region of northern Iraq, the Sarqala-1 well has
been suspended. A rig move is underway to the Kurdamir location. In
addition, seismic processing of Block K39 data is ongoing.
South America
The Situche Central-3X appraisal well on Block 64 in Peru spud
in late December 2008 and is currently drilling. Talisman was
awarded an interest in Block 158 in April.
In Colombia, the Huron-1 well exploration on the Niscota Block
continued drilling through the quarter. The Company expects
drilling to be completed in the second quarter. In the El Caucho
Blocks, a 3D seismic program is underway in El Sancy. Planning is
underway to drill an exploration well in the El Eden Block late in
2009. Talisman was successful in acquiring interests in Block 09 in
late January.
North Sea
In the UK North Sea, Talisman made a modest oil discovery at
Godwin in Block 22/17 and the highly productive reservoir tested at
7,500 bbls/d. The Company is reviewing options to develop the
Godwin discovery via the Montrose-Arbroath facilities. The rig has
completed operations at Godwin and has spud the Shaw exploration
well on Block 22/22a.
Talisman is encouraged by a recent discovery in Norway and is
preparing to test. Subsequent to the quarter end, the Canon well
was plugged and abandoned.
Talisman Energy Inc. is a global, diversified, upstream oil and
gas company, headquartered in Canada. Talisman's three main
operating areas are North America, the North Sea and Southeast
Asia. The Company also has a portfolio of international exploration
opportunities. Talisman is committed to conducting business safely,
in a socially and environmentally responsible manner, and is
included in the Dow Jones Sustainability (North America) Index.
Talisman is listed on the Toronto and New York Stock Exchanges
under the symbol TLM. Please visit our website at
www.talisman-energy.com.
Forward-Looking Information
This news release contains information that constitutes
"forward-looking information" or "forward-looking statements"
(collectively "forward-looking information") within the meaning of
applicable securities legislation. This forward-looking information
includes, among others, statements regarding:
- planned maintenance shutdowns and expected reductions in
production volumes;
- expected reduction in cash contributions from hedges;
- expected cost reductions;
- expected timing of facilities commissioning at Northern
Fields;
- planned drilling at Northern Fields, Cuu Long, Niscota Block
and EI Eden Block;
- expected first production from Affleck in the UK;
- expected completion of the 2009 Marcellus Shale drilling
program;
- plans to build gathering and processing facilities in the
Montney Shale;
- expected completion and testing of wells in Quebec;
- expected timing of closing of dispositions in southeast
Saskatchewan, Daniels County, Montana and Trinidad and Tobago;
- expected production rates at the Rev Field and at Northern
Fields;
- expected timing of first oil at the Yme Field;
- expected timing of the first commercial shipment from
Tangguh;
- expected timing of project sanctioning in Vietnam;
- expected submission of a field development plan for the Kitan
discovery; and
- other expectations, beliefs, plans, goals, objectives,
assumptions, information and statements about possible future
events, conditions, results of operations or performance.
With the exception of the timing of closing dispositions in
southeast Saskatchewan, Daniels County, Montana and Trinidad and
Tobago, each of the forward-looking information listed above are
based on Talisman's 2009 capital program announced on January 13,
2009. The material assumptions supporting the 2009 capital program
are: (1) 2009 annual production of approximately 430,000 boe/d; (2)
a US $40/bbl WTI oil price for 2009 and (3) a US $5/mmbtu NYMEX
natural gas price for 2009. 2009 production estimates are subject
to the timing of development activities and include the anticipated
completion of planned dispositions. The completion of any planned
disposition is contingent on various factors including market
conditions, the ability of the Company to negotiate acceptable
terms of sale and receipt of any required approvals of such
dispositions.
Undue reliance should not be placed on forward-looking
information. Forward-looking information is based on current
expectations, estimates and projections that involve a number of
risks, which could cause actual results to vary and in some
instances to differ materially from those anticipated by Talisman
and described in the forward-looking information contained in this
news release. The material risk factors include, but are not
limited to:
- the risks of the oil and gas industry, such as operational
risks in exploring for, developing and producing crude oil and
natural gas, market demand and unpredictable facilities
outages;
- risks and uncertainties involving geology of oil and gas
deposits;
- the uncertainty of reserves and resources estimates, reserves
life and underlying reservoir risk;
- the uncertainty of estimates and projections relating to
production, costs and expenses;
- the impact of the economy and credit crisis on the ability of
the counterparties to the Company's commodity price derivative
contracts to meet their obligations under the contracts;
- potential delays or changes in plans with respect to
exploration or development projects or capital expenditures;
- fluctuations in oil and gas prices, foreign currency exchange
rates and interest rates;
- the outcome and effects of any future acquisitions and
dispositions;
- health, safety and environmental risks;
- uncertainties as to the availability and cost of financing and
changes in capital markets;
- risks in conducting foreign operations (for example, political
and fiscal instability or the possibility of civil unrest or
military action);
- changes in general economic and business conditions;
- the possibility that government policies or laws may change or
governmental approvals may be delayed or withheld; and
- results of the Company's risk mitigation strategies, including
insurance and any hedging activities.
The foregoing list of risk factors is not exhaustive. Additional
information on these and other factors which could affect the
Company's operations or financial results are included in the
Company's most recent Annual Information Form. In addition,
information is available in the Company's other reports on file
with Canadian securities regulatory authorities and the United
States Securities and Exchange Commission (SEC).
Forward-looking information is based on the estimates and
opinions of the Company's management at the time the information is
presented. The Company assumes no obligation to update
forward-looking information should circumstances or management's
estimates or opinions change, except as required by law.
Oil and Gas Information
Throughout this news release, the calculation of barrels of oil
equivalent (boe) is at a conversion rate of six thousand cubic feet
(mcf) of natural gas for one barrel of oil (bbl) and the
calculation of mcfe is at a conversion rate of one bbl for six mcf
of natural gas. Boes and mcfes may be misleading, particularly if
used in isolation. A boe conversion ratio of 6 mcf:1 bbl and a mcfe
conversion ratio of 1 bbl:6 mcfe are based on an energy equivalence
conversion method primarily applicable at the burner tip and do not
represent a value equivalence at the wellhead.
Talisman makes reference to production volumes throughout this
news release. Where not otherwise indicated, such production
volumes are stated on a gross basis, which means they are stated
prior to the deduction of royalties and similar payments. In the
US, net production volumes are reported after the deduction of
these amounts.
Canadian Dollars and GAAP
Dollar amounts are presented in Canadian dollars unless
otherwise indicated. Unless otherwise indicated, financial
information is presented in accordance with Canadian generally
accepted accounting principles that may differ from generally
accepted accounting principles in the US. Talisman's Consolidated
Financial Statements as at and for the year ended December 31,
2008, which were filed with Canadian and US securities authorities
on March 5, 2009, contain information concerning differences
between Canadian and US generally accepted accounting
principles.
Non-GAAP Financial Measures
Included in this news release are references to financial
measures commonly used in the oil and gas industry, such as cash
flow, cash flow per share, cash flow from continuing operations,
earnings from continuing operations, earnings from continuing
operations per share and net debt. These terms are not defined by
GAAP in either Canada or the US. Consequently, these are referred
to as non-GAAP measures. Talisman's reported cash flow, cash flow
per share, cash flow from continuing operations, earnings from
continuing operations, earnings from continuing operations per
share and net debt may not be comparable to similarly titled
measures by other companies.
Cash flow, as commonly used in the oil and gas industry,
represents net income before exploration costs, DD&A, future
taxes and other non-cash expenses. Cash flow is used by the Company
to assess operating results between years and between peer
companies that use different accounting policies. Cash flow should
not be considered an alternative to, or more meaningful than, cash
provided by operating, investing and financing activities or net
income as determined in accordance with Canadian GAAP as an
indicator of the Company's performance or liquidity. Cash flow per
share is cash flow divided by the average number of common shares
outstanding during the period. A reconciliation of cash provided by
operating activities to cash flow follows.
($ million) Three months ended
---------------------
March 31, 2009 2008
----------------------------------------------------------------------------
Cash provided by operating activities 1,086 1,312
Changes in non-cash working capital 223 (80)
----------------------------------------------------------------------------
Cash flow 1,309 1,232
Cash provided by discontinued operations (1) (14) (96)
----------------------------------------------------------------------------
Cash flow from continuing operations 1,295 1,136
----------------------------------------------------------------------------
Cash flow per share 1.29 1.21
----------------------------------------------------------------------------
Cash flow from continuing operations 1.28 1.11
----------------------------------------------------------------------------
(1) Comparative restated for operations classified as discontinued
subsequent to March 31, 2008.
Earnings from continuing operations are calculated by adjusting
the Company's net income per the financial statements, for certain
items of a non-operational nature, on an after-tax basis. The
Company uses this information to evaluate performance of core
operational activities on a comparable basis between periods.
Earnings from continuing operations per share are earnings from
continuing operations divided by the average number of common
shares outstanding during the period. A reconciliation of net
income to earnings from continuing operations follows.
($ million, except per share amounts)
Three months ended
March 31, 2009 2008
----------------------------------------------------------------------------
Net income 455 466
----------------------------------------------------------------------------
Operating income from discontinued operations 20 56
Gain (loss) on disposition of discontinued operations 519 (2)
----------------------------------------------------------------------------
Net income from discontinued operations (1) 539 54
----------------------------------------------------------------------------
Net income (loss) from continuing operations (84) 412
Mark-to-market changes in commodity derivatives (2)
(tax adjusted) 387 51
Stock-based compensation expense (recovery) (3)
(tax adjusted) 23 (7)
Future tax recovery of unrealized foreign exchange
gains (losses) on foreign denominated debt (4) (23) (27)
----------------------------------------------------------------------------
Earnings from continuing operations (5) 303 429
----------------------------------------------------------------------------
Per share (5) 0.30 0.42
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(1) Comparatives restated for operations classified as discontinued
subsequent to March 31, 2008.
(2) Changes in mark-to-market commodity derivatives relate to the change in
the period of the mark-to-market value of the Company's outstanding
commodity derivatives that are classified as held-for-trading financial
instruments.
(3) Stock-based compensation expense relates principally to the
mark-to-market value of the Company's outstanding stock options and cash
units at March 31. The Company's stock-based compensation expense is
based principally on the difference between the Company's share price
and its stock options or cash units exercise price.
(4) Tax adjustments reflect future taxes relating to unrealized foreign
exchange gains and losses associated with the impact of fluctuations
in the Canadian dollar on foreign denominated debt.
(5) This is a non-GAAP measure.
This calculation does not reflect differing accounting policies
and conventions between companies. All amounts are reported on an
after-tax basis.
Net debt is calculated by adjusting the Company's long-term debt
per the financial statements for bank indebtedness, and cash and
cash equivalents. The Company uses this information to assess its
true debt position since cash could potentially be used to pay down
long-term debt.
($ million) Three months ended
---------------------
March 31, 2009 2008
----------------------------------------------------------------------------
Long-term debt 3,717 3,961
Bank indebtedness 22 81
Cash and cash equivalents (181) (93)
----------------------------------------------------------------------------
Net Debt 3,558 3,949
----------------------------------------------------------------------------
Talisman Energy Inc. Highlights (unaudited)
Three months ended
March 31
2009 2008
----------------------------------------------------------------------------
Financial
(millions of C$ unless otherwise stated)
Cash flow (1) 1,309 1,232
Net income 455 466
Exploration and development expenditures 1,099 1,013
Per common share (C$)
Cash flow (1) 1.29 1.21
Net income 0.45 0.46
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Production
(daily average)
Oil and liquids (bbls/d)
North America 40,758 40,089
UK 102,688 84,013
Scandinavia 34,874 33,335
Southeast Asia 37,341 37,226
Other 19,215 21,962
----------------------------------------------------------------------------
Total oil and liquids 234,876 216,625
----------------------------------------------------------------------------
Natural gas (mmcf/d)
North America 829 850
UK 30 35
Scandinavia 50 19
Southeast Asia 382 312
----------------------------------------------------------------------------
Total natural gas 1,291 1,216
----------------------------------------------------------------------------
Total mboe/d (2) 450 419
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Prices (3)
Oil and liquids (C$/bbl)
North America 42.65 80.79
UK 56.36 97.33
Scandinavia 56.50 99.30
Southeast Asia 52.69 99.66
Other 59.04 102.48
----------------------------------------------------------------------------
Total oil and liquids 53.64 95.49
----------------------------------------------------------------------------
Natural gas (C$/mcf)
North America 5.51 7.86
UK 5.93 8.52
Scandinavia 9.88 5.78
Southeast Asia 5.35 9.07
----------------------------------------------------------------------------
Total natural gas 5.64 8.16
----------------------------------------------------------------------------
Total (C$/boe) (2) 44.17 73.01
----------------------------------------------------------------------------
----------------------------------------------------------------------------
1 Cash flow and cash flow per share are non-GAAP measures.
2 Barrels of oil equivalent (boe) is calculated at a conversion rate of six
thousand cubic feet (mcf) of natural gas for one barrel of oil.
3 Prices are before hedging.
Includes the results from continuing and discontinued operations.
Talisman Energy Inc.
Consolidated Balance Sheets (unaudited)
March 31 December 31
(millions of C$) 2009 2008
----------------------------------------------------------------------------
(restated)
Assets
Current
Cash and cash equivalents 181 93
Accounts receivable 2,075 2,434
Inventories 148 181
Prepaid expenses 32 16
Assets of discontinued operations 30 204
----------------------------------------------------------------------------
2,466 2,928
----------------------------------------------------------------------------
Other assets 259 235
Goodwill 1,308 1,264
Property, plant and equipment 19,386 19,005
Assets of discontinued operations 888 843
----------------------------------------------------------------------------
21,841 21,347
----------------------------------------------------------------------------
Total assets 24,307 24,275
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Liabilities
Current
Bank indebtedness 22 81
Accounts payable and accrued liabilities 1,797 1,916
Income and other taxes payable 278 468
Future income taxes 201 300
Liabilities of discontinued operations 14 53
----------------------------------------------------------------------------
2,312 2,818
----------------------------------------------------------------------------
Deferred credits 56 51
Asset retirement obligations 2,055 1,998
Other long-term obligations 313 173
Long-term debt 3,717 3,961
Future income taxes 3,982 4,032
Liabilities of discontinued operations 81 92
----------------------------------------------------------------------------
10,204 10,307
----------------------------------------------------------------------------
Shareholders' equity
Common shares, no par value
Authorized: unlimited Issued and outstanding:
2009 - 1,015 million (December 2008 - 1,015 million) 2,373 2,372
Contributed surplus 96 84
Retained earnings 9,421 8,966
Accumulated other comprehensive loss (99) (272)
----------------------------------------------------------------------------
11,791 11,150
----------------------------------------------------------------------------
Total liabilities and shareholders' equity 24,307 24,275
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Prior period balances have been restated to reflect the financial position
of discontinued operations.
Talisman Energy Inc.
Consolidated Statements of Income
(unaudited)
Three months ended
(millions of C$) March 31
2009 2008
----------------------------------------------------------------------------
(restated)
Revenue
Gross sales 1,840 2,345
Hedging loss - (10)
----------------------------------------------------------------------------
Gross sales, net of hedging 1,840 2,335
Less royalties 298 360
----------------------------------------------------------------------------
Net sales 1,542 1,975
Other 34 25
----------------------------------------------------------------------------
Total revenue 1,576 2,000
----------------------------------------------------------------------------
Expenses
Operating 521 429
Transportation 57 43
General and administrative 81 64
Depreciation, depletion and amortization 733 507
Dry hole 246 65
Exploration 68 56
Interest on long-term debt 45 44
Stock-based compensation (recovery) 33 (10)
(Gain) loss on held-for-trading financial
instruments (73) 68
Other, net 11 (16)
----------------------------------------------------------------------------
Total expenses 1,722 1,250
----------------------------------------------------------------------------
Income (loss) from continuing operations
before taxes (146) 750
----------------------------------------------------------------------------
Taxes
Current income tax 128 235
Future income tax (recovery) (204) 56
Petroleum revenue tax 14 47
----------------------------------------------------------------------------
(62) 338
----------------------------------------------------------------------------
Net income (loss) from continuing
operations (84) 412
----------------------------------------------------------------------------
Net income from discontinued operations 539 54
----------------------------------------------------------------------------
Net income 455 466
----------------------------------------------------------------------------
Per common share (C$):
Net income (loss) from continuing operations (0.08) 0.40
Diluted net income (loss) from continuing operations (0.08) 0.40
Net income from discontinued operations 0.53 0.06
Diluted net income from discontinued operations 0.53 0.05
Net income 0.45 0.46
Diluted net income 0.45 0.45
----------------------------------------------------------------------------
Average number of common shares outstanding (millions) 1,015 1,019
Diluted number of common shares outstanding (millions) 1,015 1,036
----------------------------------------------------------------------------
Prior period balances have been restated to reflect the results of
discontinued operations.
Talisman Energy Inc.
Consolidated Statements of Cash Flows
(unaudited)
Three months ended
March 31
(millions of C$) 2009 2008
----------------------------------------------------------------------------
(restated)
Operating
Net income (loss) from continuing operations (84) 412
Items not involving cash 1,311 668
Exploration 68 56
----------------------------------------------------------------------------
1,295 1,136
Changes in non-cash working capital (223) 80
----------------------------------------------------------------------------
Cash provided by continuing operations 1,072 1,216
Cash provided by discontinued operations 14 96
----------------------------------------------------------------------------
Cash provided by operating activities 1,086 1,312
----------------------------------------------------------------------------
Investing
Capital expenditures
Exploration, development and other (941) (967)
Property acquisitions (28) (97)
Proceeds of resource property dispositions 33 -
Changes in non-cash working capital (257) 99
Discontinued operations, net of capital expenditures 584 (56)
----------------------------------------------------------------------------
Cash used in investing activities (609) (1,021)
----------------------------------------------------------------------------
Financing
Long-term debt repaid (690) (1,167)
Long-term debt issued 370 538
Deferred credits and other 4 9
Common shares issued 1 -
Changes in non-cash working capital 1 1
----------------------------------------------------------------------------
Cash used in financing activities (314) (619)
----------------------------------------------------------------------------
Effect of translation on foreign currency cash and cash
equivalents (16) 9
----------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 147 (319)
Cash and cash equivalents, net of bank indebtedness,
beginning of period 12 521
----------------------------------------------------------------------------
Cash and cash equivalents net of bank indebtedness, end
of period 159 202
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cash and cash equivalents 181 217
Bank indebtedness 22 15
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cash and cash equivalents net of bank indebtedness, end
of period 159 202
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Prior period balances have been restated to reflect the cash flows of
discontinued operations.
Segmented Information
Three months ended March 31
North America (1) UK
--------------------------------------
(millions of Canadian dollars) 2009 2008 2009 2008
----------------------------------------------------------------------------
Revenue
Gross sales 540 845 529 798
Hedging - - - (10)
Royalties 84 153 1 4
----------------------------------------------------------------------------
Net sales 456 692 528 784
Other 26 18 7 5
----------------------------------------------------------------------------
Total revenue 482 710 535 789
----------------------------------------------------------------------------
Segmented expenses
Operating 150 124 211 216
Transportation 12 16 13 8
DD&A 271 252 235 144
Dry hole 128 20 31 21
Exploration 23 26 2 2
Other 4 (3) 4 7
----------------------------------------------------------------------------
Total segmented expenses 588 435 496 398
----------------------------------------------------------------------------
Segmented income before taxes (106) 275 39 391
----------------------------------------------------------------------------
Non-segmented expenses
General and administrative
Interest
Stock-based compensation
Currency translation
(Gain)/Loss on held-for-trading
financial instruments
----------------------------------------------------------------------------
Total non-segmented expenses
----------------------------------------------------------------------------
Income from continuing
operations before taxes
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Capital expenditures
Exploration 205 175 46 50
Development 105 225 131 124
Midstream 35 6 - -
----------------------------------------------------------------------------
Exploration and development 345 406 177 174
Property acquisitions
Proceeds on dispositions
Other non-segmented
----------------------------------------------------------------------------
Net capital expenditures (4)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Property, plant and equipment 8,697 8,703 4,693 4,738
Goodwill 223 223 308 306
Other 816 840 316 253
Discontinued operations 550 534 - 165
----------------------------------------------------------------------------
Segmented assets 10,286 10,300 5,317 5,462
Non-segmented assets
----------------------------------------------------------------------------
Total assets (5)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Scandinavia Southeast Asia (2)
--------------------------------------
(millions of Canadian dollars) 2009 2008 2009 2008
----------------------------------------------------------------------------
Revenue
Gross sales 242 203 390 511
Hedging - - - -
Royalties - - 145 203
----------------------------------------------------------------------------
Net sales 242 203 245 308
Other 1 2 - -
----------------------------------------------------------------------------
Total revenue 243 205 245 308
----------------------------------------------------------------------------
Segmented expenses
Operating 74 56 68 33
Transportation 12 9 17 8
DD&A 103 63 109 48
Dry hole 28 24 51 (1)
Exploration 6 7 15 7
Other 1 - (2) 2
----------------------------------------------------------------------------
Total segmented expenses 224 159 258 97
----------------------------------------------------------------------------
Segmented income before taxes 19 46 (13) 211
----------------------------------------------------------------------------
Non-segmented expenses
General and administrative
Interest
Stock-based compensation
Currency translation
(Gain)/Loss on held-for-trading
financial instruments
----------------------------------------------------------------------------
Total non-segmented expenses
----------------------------------------------------------------------------
Income from continuing
operations before taxes
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Capital expenditures
Exploration 59 37 81 85
Development 115 140 196 86
Midstream - - - -
----------------------------------------------------------------------------
Exploration and development 174 177 277 171
Property acquisitions
Proceeds on dispositions
Other non-segmented
----------------------------------------------------------------------------
Net capital expenditures (4)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Property, plant and equipment 1,919 1,745 3,189 2,984
Goodwill 640 602 133 129
Other 133 154 370 304
Discontinued operations 104 93 - -
----------------------------------------------------------------------------
Segmented assets 2,796 2,594 3,692 3,417
Non-segmented assets
----------------------------------------------------------------------------
Total assets (5)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Other (3) Total
----------------------------------------
(millions of Canadian dollars) 2009 2008 2009 2008
----------------------------------------------------------------------------
Revenue
Gross sales 139 (12) 1,840 2,345
Hedging - - - (10)
Royalties 68 - 298 360
----------------------------------------------------------------------------
Net sales 71 (12) 1,542 1,975
Other - - 34 25
----------------------------------------------------------------------------
Total revenue 71 (12) 1,576 2,000
----------------------------------------------------------------------------
Segmented expenses
Operating 18 - 521 429
Transportation 3 2 57 43
DD&A 15 - 733 507
Dry hole 8 1 246 65
Exploration 22 14 68 56
Other 7 (5) 14 1
----------------------------------------------------------------------------
Total segmented expenses 73 12 1,639 1,101
----------------------------------------------------------------------------
Segmented income before taxes (2) (24) (63) 899
----------------------------------------------------------------------------
Non-segmented expenses
General and administrative 81 64
Interest 45 44
Stock-based compensation 33 (10)
Currency translation (3) (17)
(Gain)/Loss on held-for-trading
financial instruments (73) 68
----------------------------------------------------------------------------
Total non-segmented expenses 83 149
----------------------------------------------------------------------------
Income from continuing
operations before taxes (146) 750
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Capital expenditures
Exploration 61 18 452 365
Development 3 11 550 586
Midstream - - 35 6
----------------------------------------------------------------------------
Exploration and development 64 29 1,037 957
Property acquisitions 66 111
Proceeds on dispositions (33) -
Other non-segmented 10 9
----------------------------------------------------------------------------
Net capital expenditures (4) 1,080 1,077
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Property, plant and equipment 888 835 19,386 19,005
Goodwill 4 4 1,308 1,264
Other 165 138 1,800 1,689
Discontinued operations 264 255 918 1,047
----------------------------------------------------------------------------
Segmented assets 1,321 1,232 23,412 23,005
Non-segmented assets 895 1,270
----------------------------------------------------------------------------
Total assets (5) 24,307 24,275
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) North America 2009 2008
----------------------------------------------------------------------------
Canada 447 663
US 35 47
----------------------------------------------------------------------------
Total revenue 482 710
----------------------------------------------------------------------------
Canada 7,880 7,902
US 817 801
----------------------------------------------------------------------------
Property, plant and equipment (5) 8,697 8,703
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(2) Southeast Asia 2009 2008
----------------------------------------------------------------------------
Indonesia 138 202
Malaysia 60 96
Vietnam 36 11
Australia 11 (1)
----------------------------------------------------------------------------
Total revenue 245 308
----------------------------------------------------------------------------
Indonesia 1,060 990
Malaysia 1,374 1,277
Vietnam 491 470
Australia 264 247
----------------------------------------------------------------------------
Property, plant and equipment (5) 3,189 2,984
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(3) Other 2009 2008
----------------------------------------------------------------------------
Algeria 68 -
Tunisia 3 (12)
----------------------------------------------------------------------------
Total revenue 71 (12)
----------------------------------------------------------------------------
Algeria 215 221
Tunisia 24 21
Other 649 593
----------------------------------------------------------------------------
Property, plant and equipment (5) 888 835
----------------------------------------------------------------------------
----------------------------------------------------------------------------
4 Excluding corporate acquisitions.
5 Current year represents balances as at March 31, prior year represents
balances as at December 31.
Contacts: Talisman Energy Inc. - Media and General Inquiries
David Mann, Vice-President, Corporate & Investor Communications
(403) 237-1196 (403) 237-1210 (FAX) Email: tlm@talisman-energy.com
Website: www.talisman-energy.com Talisman Energy Inc. - Shareholder
and Investor Inquiries Christopher J. LeGallais, Vice-President,
Investor Relations (403) 237-1957 (403) 237-1210 (FAX) Email:
tlm@talisman-energy.com Website: www.talisman-energy.com
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