Talisman Energy Inc. (TSX:TLM) (NYSE:TLM) reported its operating
and financial results for the first quarter of 2012. All values in
this release are in US$ unless otherwise stated.
-- Cash flow(1) was $851 million, up 5% over the first quarter of last year
and 3% higher than the prior quarter.
-- Net income was $291 million, compared to a net loss of $326 million in
the first quarter of 2011 and a net loss of $117 million in the fourth
quarter.
-- Earnings from operations(1) were $167 million, compared to $157 million
a year earlier and $114 million in the previous quarter.
-- Production was up 4%, with record sales in Southeast Asia and higher
volumes in Colombia and shale. Liquids volumes in Southeast Asia and
North America are up 35% year over year.
-- $1 billion of non-core asset sales have been agreed in North America;
net debt(1) was down to $4 billion from $4.5 billion at year-end.
-- Capital spending will be further cut to approximately $3.6 billion in
2012.
-- In Papua New Guinea, Mitsubishi Corporation (MC) was brought in as a
strategic partner; natural gas resource aggregation continues with
success at Elevala-2 and Ketu-2.
-- Discovery of light oil was confirmed in the Kurdamir-2 well.
(1) The terms "cash flow," "earnings from operations" and "net debt" are
non-GAAP measures. Please see the advisories and reconciliations
elsewhere in this news release.
"The first quarter was very strong operationally, and we have
made significant progress towards meeting key objectives set out in
our January guidance," said John A. Manzoni, President and Chief
Executive Officer.
"On a macro level, although oil prices are a bit stronger, North
American gas prices are weaker than we anticipated coming into the
year. As a result, we are taking additional steps to reduce capital
spending in dry gas plays in North America. We are now projecting
total capital expenditure on exploration and development activities
to be around $3.6 billion for the year. For the remainder of the
year, we anticipate spending only about $200 million on dry gas
activities in North America, primarily to maintain land and options
for the future.
"We have reached agreements to sell approximately $1 billion in
non-core assets in North America, which further strengthens our
balance sheet. We are continuing to look at other options to focus
our portfolio, including potential dilution of redevelopment
projects in the North Sea, and high grading our exploration
portfolio.
"Production averaged 462,000 boe/d, up 4% from both a year ago
and the fourth quarter of last year, driven by growth in both North
American shale and Southeast Asia. Planned maintenance turnarounds
will result in lower volumes in the second and third quarters, and
lower capital spending will impact North American natural gas
volumes over the rest of this year.
"Underlying production growth for the year is now projected to
be at the bottom of our production growth guidance range of 0 - 5%,
due to the further reduction of capital in our dry gas assets. The
actual outcome will depend on the asset disposals we make through
the year.
"Our shift towards liquids-rich opportunities in North America
continued during the quarter. We are currently running 12 rigs in
the Eagle Ford shale, up from 10 at year-end. In Southeast Asia we
set a new production record. Natural gas sales in the region
averaged 548 mmcf/d, up 11% year over year, with realized prices
averaging $9.85/mcf.
"In the UK, the Tartan field was brought back onstream in March
after several months of safety-related work. The Claymore field,
which was also subject to an extended turnaround for safety-related
work, was brought back onstream in October of last year, and
produced around 10,000 bbls/d over the first quarter.
"In Norway, we have been progressing independent technical
studies as part of our assurance processes as operator of the Yme
field. These studies indicate that a substantial amount of work is
still required to complete the facility to meet Norwegian
specifications.
"Given this uncertain timing, we are removing Yme from our
forward production projections and have taken the prudent step of
writing down a portion of the carrying value of the project (a
writedown of $248 million after tax), which we believe represents a
sensible view of the range of potential outcomes. We are committed
to successful startup of the field and will continue to work with
our partners and the contractor to achieve this. At the same time,
we are considering all options to complete the Yme development.
"In Colombia, Talisman, like others, is experiencing delays in
the regulatory permitting process. We are working with the
government and our partners and are expecting to see a ramp up of
activity in the latter part of the year.
"We are excited about the results of the Kurdamir-2 well in the
Kurdistan Region of northern Iraq. The well tested light oil,
condensate and natural gas from a portion of an upper zone. We are
currently drilling deeper zones and plan to further test the well
this summer.
"In Papua New Guinea (PNG), we are very pleased to have
Mitsubishi Corporation (MC) as a strategic partner going forward.
In addition to funding $280 million of the future program, they
bring global and regional gas market expertise. Drilling results in
PNG continue to be encouraging, and our gas aggregation plans are
on track.
"In summary, we will continue the course set out in January:
reducing spending, directing more capital to liquids plays and
continuing to focus and high grade our portfolio. Our balance sheet
is strong, and we are encouraged by continuing exploration success
in Colombia, PNG and Kurdistan."
Financial Results
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March 31 Three Months Ended
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2012 2011
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Cash flow(2) ($ million) 851 811
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Cash flow per share(2) 0.83 0.79
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Net income (loss) ($ million) 291 (326)
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Net income (loss) per share 0.28 (0.32)
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Earnings from operations(2) ($ million) 167 157
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Earnings from operations per share(2) 0.16 0.15
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Average shares outstanding - basic (million) 1,023 1,022
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Cash flow was $851 million compared to $811 million in the same
period last year, due mainly to higher volumes, oil prices and
Southeast Asian natural gas prices, offset by lower North American
gas prices, higher royalties and higher operating costs.
Net income was up, reflecting the increase in cash flow plus
gains on asset sales, lower dry hole expense and lower exploration
expense, a smaller loss on derivatives, a share-based payments
recovery and lower taxes, offset by a partial writedown of the Yme
project and higher DD&A.
Earnings from operations, which reflect the underlying
operations of the company, increased by 6% over the same period
last year. Capital expenditure, including exploration expensed(2)
in the quarter, was $1.1 billion. Net debt(2) at the end of the
first quarter was $4 billion, down from $4.5 billion at the end of
2011.
(2) The terms "cash flow," "cash flow per share," "earnings from
operations," "earnings from operations per share," "capital
expenditure, including exploration expensed" and "net debt" are
non-GAAP measures. Please see the advisories and reconciliations
elsewhere in this news release.
Netbacks
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March 31 Three Months Ended
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2012 2011
----------------------------------------------------------------------------
Total company netback ($/boe) $36.79 $40.58
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Oil and liquids netback ($/bbl) $68.02 $64.66
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Natural gas netback ($/mcf) $2.61 $3.58
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Talisman's realized sales price of $65.14/boe was relatively
unchanged compared to the same period in 2011, since higher global
oil and liquids and Southeast Asian natural gas prices were offset
by lower gas prices in North America.
The company's average netback was $36.79/boe, 9% lower than 2011
due to higher royalties and unit operating expenses. Natural gas
netbacks in Southeast Asia increased 12% to $5.83/mcf.
WTI oil prices averaged $102.93, up 9% from the first quarter of
last year. NYMEX natural gas prices averaged $2.77, a 33% decrease
from a year ago due to continued natural gas oversupply in North
America.
Production
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March 31 Three Months Ended
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2012 2011
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Oil and liquids (mbbls/d)
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North America 28 21
------------------------------
North Sea 89 123
------------------------------
Southeast Asia 45 33
------------------------------
Other 25 20
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Total oil and liquids (mbbls/d) 187 197
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Natural gas (mmcf/d)
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North America 1,024 885
------------------------------
North Sea 43 82
------------------------------
Southeast Asia 548 493
------------------------------
Other 37 24
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Total natural gas (mmcf/d) 1,652 1,484
----------------------------------------------------------------------------
Total (mboe/d) 462 444
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Assets held for sale - North America (mboe/d) 7 8
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Production from ongoing operations (mboe/d) 455 436
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Total production and production from ongoing operations
increased by 4% over the previous year, due principally to
increased oil and gas volumes in Colombia and Southeast Asia and
shale volumes in North America, partially offset by lower North Sea
production.
North America
Production
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March 31 Three Months Ended
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2012 2011
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Shale (mmcfe/d)
----------------------------------------------------------------------------
Marcellus 529 351
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Montney/other 70 76
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Eagle Ford 76 23
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Total shale (mmcfe/d) 675 450
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Conventional total (mboe/d) 79 86
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Assets held for sale (mboe/d) 7 8
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Total NAO production (mboe/d) 198 169
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We are well positioned in some of the top-tier shale plays in
North America. We are shifting our focus to the liquids-rich parts
of our portfolio and expect to grow our liquids production from
approximately 25,000 bbls/d in 2012 to over 60,000 bbls/d by
2015.
In North America, production averaged 198,000 boe/d for the
first quarter, up 17% from a year ago. Liquids volumes averaged
28,000 boe/d, an increase of 33%.
Talisman sold non-core, non-producing coal properties in
Northeast British Columbia for $500 million in cash, and has
secured buyers for two non-core conventional oil and gas
properties, with additional proceeds of approximately $500 million.
These deals are expected to close in the second quarter.
We continue to ramp up our development program in the
liquids-rich Eagle Ford, with 12 rigs active at quarter end. During
the quarter, Talisman signed a number of deals with midstream
companies to secure significant, long-term egress.
In the liquids-rich Duvernay, we drilled the second well of a
six-well pilot program.
In the Pennsylvania Marcellus, gas production was 529 mmcf/d, up
51% over the prior year with 36 wells coming onstream this quarter.
We have reduced the number of rigs from 10 at the end of December
to one in April, reflecting the company's shift away from dry gas
to higher-value liquids projects. In February, Pennsylvania
introduced a retroactive impact fee. This increased our operating
costs in the quarter by $21 million, $18 million of which reflected
a non-recurring, one-time impact for wells that were drilled
pre-2012.
In the Montney, we have reduced the number of rigs from 11 at
the end of 2011 to four currently, with plans to further reduce
this to three.
Southeast Asia
Production
----------------------------------------------------------------------------
March 31 Three Months Ended
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2012 2011
----------------------------------------------------------------------------
Malaysia liquids (mbbls/d) 18 17
----------------------------------------------------------------------------
Malaysia gas (mmcf/d) 128 113
----------------------------------------------------------------------------
Malaysia total (mboe/d) 39 36
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Indonesia liquids (mbbls/d) 12 11
----------------------------------------------------------------------------
Indonesia gas (mmcf/d) 421 379
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Indonesia total (mboe/d) 82 74
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Vietnam (mboe/d) 2 2
----------------------------------------------------------------------------
Australia (mboe/d) 13 3
----------------------------------------------------------------------------
Total (mboe/d) 136 115
----------------------------------------------------------------------------
Southeast Asia is a cash-positive growth area, where the
majority of our gas sales contracts are linked to oil price
benchmarks. It is expected to grow at an average of approximately
8% per year through the medium term. The region is one of the
fastest growing natural gas markets in the world.
Liquids production averaged 45,000 bbls/d in the quarter, an
increase of 36% over last year. Natural gas sales averaged 548
mmcf/d, a new record, with prices averaging $9.85/mcf.
In Malaysia, the company achieved record gas sales of 128
mmcf/d, 13% higher than the same period last year, reflecting
continued optimization initiatives at PM-3 CAA and strong regional
gas demand. Talisman plans to drill up to six development wells on
the block this year.
In Indonesia, production was higher than the same period last
year principally due to Jambi Merang volumes and improved
operational efficiency at the Tangguh LNG plant. Facility
optimizations were completed at the Suban gas plant in the Corridor
PSC, increasing gross throughput by approximately 45 mmcf/d.
Overall, the Corridor PSC is now producing at record levels of over
1 bcf/d gross sales gas.
In Vietnam, production averaged 2,000 bbls/d. The Hai Su Trang
and Hai Su Den (HST/HSD) development, which was sanctioned in
December 2011, is progressing on schedule and on budget, with first
production planned for the second half of 2013.
Production from Australia/Timor-Leste JPDA averaged 13,000
bbls/d, an increase of 30% over the previous period, due primarily
to current production from Kitan, which continues to exceed our
expectations.
North Sea
Production (mboe/d)
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March 31 Three Months Ended
----------------------------------------------------------------------------
2012 2011
----------------------------------------------------------------------------
UK 63 92
----------------------------------------------------------------------------
Norway 33 44
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Total (mboe/d) 96 136
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The North Sea is an important cash generator for the company. We
continue to maximize value from these assets by improving
operational efficiency. At the same time, we will seek to reduce
our exposure in this region.
In the UK, production recommenced at the Tartan platform at the
end of March. Claymore has also been up and running since the
fourth quarter of 2011. A new well was brought onstream at Auk
North, and the Fulmar coil tubing campaign was successfully
completed.
Production decreased 4% compared to the fourth quarter of 2011
and was down 29% year over year as a result of a pump failure at
Auk North, technical issues with compressors at Claymore and the
Ross/Blake facility, and the shutdown at Tartan. In addition, we
are seeing both natural declines and water breakthrough at Rev and
Tweedsmuir. We continue to work to improve facilities reliability
and take remedial actions to offset some of the water breakthrough
issues. Planned maintenance activities will result in lower volumes
in the second and third quarters.
In Norway, Talisman remains committed to the safe development of
the Yme field but we are concerned with the continued delays in the
delivery of the facility. Recent technical studies indicate that a
substantial amount of work is still required to complete the
facility. We are removing the field from our forward production
projections pending the development of a work plan to complete the
facility to Norwegian specifications.
As such Talisman has taken the prudent step of writing down a
portion of the carrying value of the project. Talisman continues to
work closely with the Yme partners and the contractor to fully
understand the remaining scope of work. At the same time, we are
considering all options to complete the Yme development.
Yme is a turnkey, lump sum lease arrangement, which means that
the platform belongs to the contractor and is their project to
deliver. Upon delivery, Talisman will lease the facility and begin
production.
International Exploration
We have created an exploration portfolio focused on material
prospects including near-term oil growth and large Asian gas
opportunities. We are looking to expand our portfolio in areas that
have significant resource potential and low finding costs. We will
continue to high grade our assets by seeking new organic options
and rationalizing others at an earlier stage in the cycle.
During the quarter, Talisman confirmed the presence of light oil
at Kurdamir-2 in the Kurdistan Region of northern Iraq. An open
hole drillstem test flowed at unstimulated rates of 7.3 mmcf/d of
natural gas and 950 bbls/d of oil and condensate, with no
indications of water and no observed decline. A total of 140 metres
of gross reservoir (88 metres net) was identified through wireline
logging. The well is drilling ahead toward underlying Eocene and
Cretaceous targets, with additional testing of the Oligocene
planned after the well has finished drilling.
In Papua New Guinea, the company farmed out interests in nine
licences in the Western Province to Mitsubishi Corporation (MC), at
a value of approximately $280 million. Following government
approval of MC's entry, Talisman's and MC's respective equity
positions will average approximately 40% and 20%. The natural gas
aggregation project continues in the Western Province, with
successful results from the Elevala-2 and Ketu-2 wells. Offshore
Vietnam, Talisman has just spud its first exploration well in the
Nam Con Son basin.
In Colombia, an additional stratigraphic well, Akacias Es-1, has
been drilled on Block CP0-9, and preliminary results are very
encouraging. In the Niscota block, the Huron-2 appraisal well is
expected to finish drilling mid-year.
In the first quarter, production from Colombia averaged 17,000
boe/d with excellent performance from new wells and facilities
debottlenecking.
In Peru, the Situche Norte-4X well reached its target depth. It
failed to encounter a commercially viable reservoir and has been
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: business strategy,
priorities and plans; expected capital spending and allocation;
potential reductions of exposure in the North Sea and the high
grading of the exploration portfolio; expected production; expected
delays, remaining work, effects on timing and consideration of
options at Yme; potential further testing of the Kurdamir-2 well;
expected increase in liquids productions; expected timing of the
closing of the two non-core conventional oil and gas property
sales; expected rigs in the Montney; planned drilling in Malaysia;
expected first production at HST/HSD; planned maintenance and
corresponding declines in production in the North Sea; expected
completion of the drilling of the Huron-2 appraisal well; and other
business strategy, plans and priorities.
The factors or assumptions on which the forward-looking
information is based include: assumptions inherent in current
guidance; projected capital investment levels; the flexibility of
capital spending plans and the associated sources of funding; the
successful and timely implementation of capital projects; the
continuation of tax, royalty and regulatory regimes; ability to
obtain regulatory and partner approval; commodity price and cost
assumptions; and other risks and uncertainties described in the
filings made by the company with securities regulatory authorities.
The company believes the material factors, expectations and
assumptions reflected in the forward-looking information are
reasonable, but no assurance can be given that these factors,
expectations and assumptions will prove to be correct.
Forward-looking information for periods past 2012 assumes
escalating commodity prices.
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; uncertainty related to securing sufficient egress and
markets to meet shale gas production; 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 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.
Unless the context indicates otherwise, references in this news
release to "Talisman" or the "company" include, for reporting
purposes only, the direct or indirect subsidiaries of Talisman
Energy Inc. and the partnership interests held by Talisman Energy
Inc. and its subsidiaries. Such use of "Talisman" or the "company"
to refer to these other legal entities and partnership interests
does not constitute waiver by Talisman Energy Inc. or such entities
or partnerships of their separate legal status, for any
purpose.
The completion of any contemplated disposition or acquisition is
contingent on various factors, including favourable market
conditions, the ability of the company to negotiate acceptable
terms of sale and receipt of any required approvals for such
disposition.
Oil and Gas Information
Throughout this news release, Talisman makes reference to
production volumes. Unless otherwise stated, 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.
Barrel of oil equivalent (boe) throughout this news release is
calculated at a conversion rate of six thousand cubic feet (mcf) of
natural gas for one barrel of oil (bbl). This news release also
includes reference to mcf equivalents (mcfes) which are calculated
at a conversion rate of one barrel of oil to 6,000 cubic feet of
gas. Boes and mcfes may be misleading, particularly if used in
isolation. A boe conversion ratio of 6 mcf:1 bbl and an mcfe
conversion ratio of 1 bbl: 6 mcf are based on an energy equivalence
conversion method primarily applicable at the burner tip and does
not represent a value equivalency at the wellhead.
Talisman also discloses its company netbacks in this news
release. Netbacks per boe are calculated by deducting from sales
price associated royalties, operating and transportation costs.
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, earnings from operations, capital expenditure including
exploration expensed and net debt. These terms are not defined by
International Financial Reporting Standards (IFRS). Consequently,
these are referred to as non-GAAP measures. Talisman's reported
results of such measures may not be comparable to similarly titled
measures reported by other companies.
Cash Flow
US$million, except per share amounts
Three Months Ended
----------------------------------------------------------------------------
March 31, 2012 March 31, 2011
----------------------------------------------------------------------------
Cash provided by operating activities 980 883
Changes in non-cash working capital (154) (127)
Add: Exploration expenditure 56 112
Add: Pennsylvania impact fee(1) 18 -
Less: Finance costs (cash) (49) (57)
----------------------------------------------------------------------------
Cash flow 851 811
----------------------------------------------------------------------------
Cash flow per share 0.83 0.79
----------------------------------------------------------------------------
Diluted cash flow per share 0.83 0.79
----------------------------------------------------------------------------
1. Pennsylvania impact fee amount represents the one-time impact of the
retrospective application of the legislation to wells drilled pre-2012.
Cash flow, as commonly used in the oil and gas industry,
represents net income before exploration costs, DD&A, deferred
taxes and other non-cash expenses. Cash flow is used by the company
to assess operating results between years and between peer
companies using 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 IFRS 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. Diluted cash flow per share is cash flow divided
by the diluted number of common shares outstanding during the
period, as reported in the interim condensed consolidated financial
statements filed on May 1, 2012. A reconciliation of cash provided
by operating activities to cash flow is provided above.
Earnings from Operations
US$million, except per share amounts
Three Months Ended
----------------------------------------------------------------------------
March 31, 2012 March 31, 2011
----------------------------------------------------------------------------
Net income (loss) 291 (326)
----------------------------------------------------------------------------
Gain on disposal (tax adjusted) (377) (68)
Unrealized loss on financial instruments (tax
adjusted)(1) 37 263
Share-based payments (tax adjusted)(2) (46) 108
Foreign exchange on debt (tax adjusted) 15 8
Impairment (tax adjusted) 302 39
Pennsylvania impact fee (tax adjusted)(3) 11 -
Deferred tax adjustments(4) (66) 133
----------------------------------------------------------------------------
Earnings from operations 167 157
----------------------------------------------------------------------------
Earnings from operations per share 0.16 0.15
----------------------------------------------------------------------------
Diluted earnings from operations per share 0.16 0.15
----------------------------------------------------------------------------
1. Unrealized loss on financial instruments relates to the change in the
period of the mark-to-market value of the company's held-for-trading
financial instruments.
2. Share-based payments relate principally to the mark-to-market value of
the company's outstanding stock options and cash units at March 31. The
company uses the Black-Scholes option pricing model to estimate the fair
value of its share-based payment plans.
3. Pennsylvania impact fee amount represents the one-time impact of the
retrospective application of the legislation to wells drilled pre-2012.
4. Deferred tax adjustments largely comprise tax on foreign exchange on tax
pools. The three-month period ended March 31, 2011 also includes a
deferred tax expense of $225 million in respect of a UK tax rate change
occurring in that period.
Earnings from operations are calculated by adjusting the
company's net income (loss) per the financial statements for
certain items of a non-operational nature, on an after tax basis.
The company uses this information to evaluate performance of core
operational activities on a comparable basis between periods.
Earnings from operations per share are earnings from operations
divided by the average number of common shares outstanding during
the period. Diluted earnings from operations per share are earnings
from operations divided by the diluted number of common shares
outstanding during the period, as reported in the interim condensed
consolidated financial statements filed on May 1, 2012. A
reconciliation of net income (loss) to earnings from operations is
provided above.
Capital Expenditure Including Exploration Expensed
US$million
Three Months Ended
----------------------------------------------------------------------------
March 31, 2012 March 31, 2011
----------------------------------------------------------------------------
Exploration, development and other 1,011 910
Exploration expensed 56 112
----------------------------------------------------------------------------
Capital expenditure including exploration
expensed 1,067 1,022
----------------------------------------------------------------------------
Capital expenditure including exploration expensed is calculated by
adjusting the capital expenditure per the financial statements for
exploration costs that were expensed as incurred.
Net Debt
US$million
Three Months Ended
----------------------------------------------------------------------------
March 31, 2012 March 31, 2011
----------------------------------------------------------------------------
Long-term debt 4,741 4,895
Bank indebtedness - 60
Cash and cash equivalents (732) (474)
----------------------------------------------------------------------------
Net debt 4,009 4,481
----------------------------------------------------------------------------
Net debt is calculated by adjusting the company's long-term debt per the
financial statements for bank indebtedness, cash and cash equivalents. The
company uses this information to assess its true debt position and eliminate
the impact of timing differences.
Talisman Energy Inc.
Highlights
(unaudited)
Three months ended
March 31
2012 2011
----------------------------------------------------------------------------
Financial
(millions of US$ unless otherwise stated)
Cash flow (1) 851 811
Net income (loss) 291 (326)
Capital expenditure including exploration
expensed (1) 1,067 1,022
Per common share (US$)
Cash flow (1) 0.83 0.79
Net income (loss) 0.28 (0.32)
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Production
(Daily Average - Gross)
Oil and liquids (bbls/d)
North America 27,940 21,083
North Sea 88,753 122,358
Southeast Asia 44,848 32,858
Other 25,379 20,157
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Total oil and liquids 186,920 196,456
----------------------------------------------------------------------------
Natural gas (mmcf/d)
North America 1,024 885
North Sea 43 82
Southeast Asia 548 493
Other 37 24
----------------------------------------------------------------------------
Total natural gas 1,652 1,484
----------------------------------------------------------------------------
Total mboe/d (2) 462 444
----------------------------------------------------------------------------
Prices
Oil and liquids (US$/bbl)
North America 77.20 68.78
North Sea 120.53 104.91
Southeast Asia 122.99 117.27
Other 124.93 114.37
----------------------------------------------------------------------------
Total oil and liquids 115.24 104.07
----------------------------------------------------------------------------
Natural gas (US$/mcf)
North America 2.49 4.06
North Sea 9.91 8.56
Southeast Asia 9.85 8.74
Other 5.21 5.64
----------------------------------------------------------------------------
Total natural gas 5.19 5.89
----------------------------------------------------------------------------
Total (US$/boe) (2) 65.14 65.75
----------------------------------------------------------------------------
1. Cash flow, capital expenditure including exploration expensed 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.
Talisman Energy Inc.
Condensed Consolidated Balance Sheets
(unaudited)
March 31, December 31,
(millions of US$) 2012 2011
----------------------------------------------------------------------------
Assets
Current
Cash and cash equivalents 732 474
Accounts receivable 1,569 1,550
Risk management 13 42
Inventories 173 164
Prepaid expenses 20 24
Assets held for sale 252 -
----------------------------------------------------------------------------
2,759 2,254
----------------------------------------------------------------------------
Other assets 112 101
Investments 393 395
Risk management 27 24
Goodwill 1,308 1,317
Property, plant and equipment 15,013 15,909
Exploration and evaluation assets 3,852 3,954
Deferred tax assets 864 272
----------------------------------------------------------------------------
21,569 21,972
----------------------------------------------------------------------------
Total assets 24,328 24,226
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Liabilities
Current
Bank indebtedness - 60
Accounts payable and accrued liabilities 2,831 2,622
Risk management 20 -
Income and other taxes payable 381 371
Current portion of long-term debt 892 410
Liabilities associated with assets held for
sale 116 -
----------------------------------------------------------------------------
4,240 3,463
----------------------------------------------------------------------------
Decommissioning liabilities 2,917 2,982
Other long-term obligations 341 346
Long-term debt 3,849 4,485
Deferred tax liabilities 2,683 2,932
----------------------------------------------------------------------------
9,790 10,745
----------------------------------------------------------------------------
Shareholders' equity
Common shares 1,650 1,561
Preferred shares 191 191
Contributed surplus 87 186
Retained earnings 7,582 7,292
Accumulated other comprehensive income 788 788
----------------------------------------------------------------------------
10,298 10,018
----------------------------------------------------------------------------
Total liabilities and shareholders' equity 24,328 24,226
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Talisman Energy Inc.
Condensed Consolidated Statements of Income (Loss)
(unaudited)
Three months ended March 31
(millions of US$) 2012 2011
----------------------------------------------------------------------------
Revenue
Sales 2,089 1,972
Other income 26 28
----------------------------------------------------------------------------
Total revenue and other income 2,115 2,000
----------------------------------------------------------------------------
Expenses
Operating 577 452
Transportation 59 56
General and administrative 121 98
Depreciation, depletion and amortization 603 469
Impairment 1,053 102
Dry hole 60 104
Exploration 56 112
Finance costs 71 76
Share-based payments expense (recovery) (41) 116
Loss on held-for-trading financial
instruments 47 319
Gain on asset disposals (505) (92)
Other, net 77 58
----------------------------------------------------------------------------
Total expenses 2,178 1,870
----------------------------------------------------------------------------
Income (loss) before taxes (63) 130
----------------------------------------------------------------------------
Income taxes
Current income tax 433 443
Deferred income tax (recovery) (787) 13
----------------------------------------------------------------------------
(354) 456
----------------------------------------------------------------------------
Net income (loss) 291 (326)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Per common share (US$):
Net income (loss) 0.28 (0.32)
Diluted net income (loss) 0.25 (0.32)
----------------------------------------------------------------------------
Weighted average number of common shares
outstanding (millions)
Basic 1,023 1,022
Diluted 1,028 1,022
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Talisman Energy Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)
Three months ended March 31
(millions of US$) 2012 2011
----------------------------------------------------------------------------
Operating activities
Net income (loss) 291 (326)
Add: Finance costs (cash and non-cash) 71 76
Items not involving cash 464 1,006
----------------------------------------------------------------------------
826 756
Changes in non-cash working capital 154 127
----------------------------------------------------------------------------
Cash provided by operating activities 980 883
----------------------------------------------------------------------------
Investing activities
Capital expenditures
Exploration, development and other (1,011) (910)
Corporate acquisitions, net of cash acquired - (175)
Property acquisitions (2) (31)
Proceeds of resource property dispositions 502 249
Acquisition deposit - 18
Investments (3) 54
Changes in non-cash working capital 70 (140)
----------------------------------------------------------------------------
Cash used in investing activities (444) (935)
----------------------------------------------------------------------------
Financing activities
Long-term debt repaid (429) (308)
Long-term debt issued 258 -
Common shares issued 2 79
Common shares purchased (4) (18)
Finance costs (cash) (49) (57)
Deferred credits and other (7) (3)
Preferred share dividend (3) -
Changes in non-cash working capital 7 (1)
----------------------------------------------------------------------------
Cash used in financing activities (225) (308)
----------------------------------------------------------------------------
Effect of translation on foreign currency cash
and cash equivalents 7 26
----------------------------------------------------------------------------
Net increase (decrease) in cash and cash
equivalents 318 (334)
Cash and cash equivalents net of bank
indebtedness, beginning of period 414 1,653
----------------------------------------------------------------------------
Cash and cash equivalents net of bank
indebtedness, end of period 732 1,319
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cash and cash equivalents 732 1,327
Bank indebtedness - (8)
----------------------------------------------------------------------------
Cash and cash equivalents net of bank
indebtedness, end of period 732 1,319
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Talisman Energy Inc.
Segmented Information
(unaudited)
Southeast
North America(1) North Sea(2) Asia(3)
--------------------------------------------------
Three months Three months Three months
ended ended ended
March 31 March 31 March 31
--------------------------------------------------
(millions of US$) 2012 2011 2012 2011 2012 2011
----------------------------------------------------------------------------
Revenue
Sales 363 404 945 1,088 614 386
Other income 21 23 3 5 - -
----------------------------------------------------------------------------
Total revenue and other
income 384 427 948 1,093 614 386
----------------------------------------------------------------------------
Segmented expenses
Operating 149 111 312 260 98 72
Transportation 23 16 20 23 14 15
DD&A 273 201 174 186 118 62
Impairment 75 - 978 102 - -
Dry hole 11 2 (1) 75 3 24
Exploration 1 29 14 11 18 52
Other 29 7 10 9 1 3
----------------------------------------------------------------------------
Total segmented expenses 561 366 1,507 666 252 228
----------------------------------------------------------------------------
Segmented income (loss)
before taxes (177) 61 (559) 427 362 158
----------------------------------------------------------------------------
Non-segmented expenses
General and administrative
Finance costs
Share-based payments
(recovery)
Currency translation
Loss on held-for-trading
financial instruments
Gain on asset disposals
----------------------------------------------------------------------------
Total non-segmented
expenses
----------------------------------------------------------------------------
Income (loss) before taxes
----------------------------------------------------------------------------
Capital expenditure
Exploration 33 83 - 51 13 49
Development 561 351 229 245 70 71
----------------------------------------------------------------------------
Exploration and
development 594 434 229 296 83 120
----------------------------------------------------------------------------
Acquisitions
Proceeds on dispositions
Other non-segmented
----------------------------------------------------------------------------
Net capital expenditures
----------------------------------------------------------------------------
Property, plant and
equipment 6,884 6,740 4,821 5,809 2,466 2,501
Exploration and evaluation
assets 2,265 2,370 537 538 497 498
Goodwill 131 140 866 866 149 149
Other 1,127 987 1,379 645 568 560
Assets held for sale 237 - 15 - - -
----------------------------------------------------------------------------
Segmented assets 10,644 10,237 7,618 7,858 3,680 3,708
Non-segmented assets
----------------------------------------------------------------------------
Total assets(5)
----------------------------------------------------------------------------
Decommissioning
liabilities(5) 333 394 2,379 2,390 210 208
----------------------------------------------------------------------------
Other(4) Total
--------------------------------------------------
Three months Three months
ended ended
March 31 March 31
--------------------------------------------------
(millions of US$) 2012 2011 2012 2011
----------------------------------------------------------------------------
Revenue
Sales 167 94 2,089 1,972
Other income 2 - 26 28
----------------------------------------------------------------------------
Total revenue and other
income 169 94 2,115 2,000
----------------------------------------------------------------------------
Segmented expenses
Operating 18 9 577 452
Transportation 2 2 59 56
DD&A 38 20 603 469
Impairment - - 1,053 102
Dry hole 47 3 60 104
Exploration 23 20 56 112
Other 6 - 46 19
----------------------------------------------------------------------------
Total segmented expenses 134 54 2,454 1,314
----------------------------------------------------------------------------
Segmented income (loss)
before taxes 35 40 (339) 686
----------------------------------------------------------------------------
Non-segmented expenses
General and administrative 121 98
Finance costs 71 76
Share-based payments
(recovery) (41) 116
Currency translation 31 39
Loss on held-for-trading
financial instruments 47 319
Gain on asset disposals (505) (92)
----------------------------------------------------------------------------
Total non-segmented
expenses (276) 556
----------------------------------------------------------------------------
Income (loss) before taxes (63) 130
----------------------------------------------------------------------------
Capital expenditure
Exploration 56 16 102 199
Development 15 28 875 695
----------------------------------------------------------------------------
Exploration and
development 71 44 977 894
----------------------------------------------------------------------------
Acquisitions 2 793
Proceeds on dispositions (502) (249)
Other non-segmented 31 16
----------------------------------------------------------------------------
Net capital expenditures 508 1,454
----------------------------------------------------------------------------
Property, plant and
equipment 842 859 15,013 15,909
Exploration and evaluation
assets 553 548 3,852 3,954
Goodwill 162 162 1,308 1,317
Other 789 788 3,863 2,980
Assets held for sale - - 252 -
----------------------------------------------------------------------------
Segmented assets 2,346 2,357 24,288 24,160
Non-segmented assets 40 66
----------------------------------------------------------------------------
Total assets(5) 24,328 24,226
----------------------------------------------------------------------------
Decommissioning
liabilities(5) 44 43 2,966 3,035
----------------------------------------------------------------------------
1. North America 2012 2011
----------------------------------------------------------------------------
Canada 229 290
US 155 137
----------------------------------------------------------------------------
Total revenue and other income 384 427
----------------------------------------------------------------------------
Canada 3,748 3,937
US 3,136 2,803
----------------------------------------------------------------------------
Property, plant and equipment 6,884 6,740
----------------------------------------------------------------------------
Canada 1,170 1,207
US 1,095 1,163
----------------------------------------------------------------------------
Exploration and evaluation assets 2,265 2,370
----------------------------------------------------------------------------
2. North Sea 2012 2011
----------------------------------------------------------------------------
UK 663 736
Norway 285 357
----------------------------------------------------------------------------
Total revenue and other income 948 1,093
----------------------------------------------------------------------------
UK 3,896 3,927
Norway 925 1,882
----------------------------------------------------------------------------
Property, plant and equipment 4,821 5,809
----------------------------------------------------------------------------
UK 209 210
Norway 328 328
----------------------------------------------------------------------------
Exploration and evaluation assets 537 538
----------------------------------------------------------------------------
3. Southeast Asia 2012 2011
----------------------------------------------------------------------------
Indonesia 288 224
Malaysia 170 123
Vietnam 41 37
Australia 115 2
----------------------------------------------------------------------------
Total revenue and other income 614 386
----------------------------------------------------------------------------
Indonesia 1,028 1,023
Malaysia 864 883
Vietnam 313 297
Papua New Guinea 46 47
Australia 215 251
----------------------------------------------------------------------------
Property, plant and equipment 2,466 2,501
----------------------------------------------------------------------------
Indonesia 12 12
Malaysia 33 41
Vietnam 15 5
Papua New Guinea 437 440
----------------------------------------------------------------------------
Exploration and evaluation assets 497 498
----------------------------------------------------------------------------
4. Other 2012 2011
----------------------------------------------------------------------------
Algeria 54 44
Colombia 115 50
----------------------------------------------------------------------------
Total revenue and other income 169 94
----------------------------------------------------------------------------
Algeria 274 284
Colombia 568 575
----------------------------------------------------------------------------
Property, plant and equipment 842 859
----------------------------------------------------------------------------
Colombia 92 75
Kurdistan 306 303
Peru 108 133
Other 47 37
----------------------------------------------------------------------------
Exploration and evaluation assets 553 548
----------------------------------------------------------------------------
5. Current year represents balances at March 31.
Prior year represents balances at December 31.
Contacts: Talisman Energy Inc. - Media and General Inquiries
Dave Mann, Vice-President Corporate & Investor Communications
403-237-1196 403-237-1210 (FAX)tlm@talisman-energy.com Talisman
Energy Inc. - Shareholder and Investor Inquiries Lyle McLeod, Vice
President Investor Relations 403-237-1020 403-237-1902
(FAX)tlm@talisman-energy.com www.talisman-energy.com
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