Talisman Energy Inc. (TSX: TLM) (NYSE: TLM) reported its operating
and financial results for the first quarter of 2010.
- Cash flow (1) during the quarter was $837 million compared to
$1.3 billion a year ago and $921 million in the previous quarter.
Excluding the effect of financial instruments, cash flow was 23%
higher than the first quarter of 2009, which included significant
gains on derivatives.
- Net income was $228 million compared to $455 million in the
first quarter of 2009 and a loss of $111 million in the fourth
quarter of 2009.
- Earnings from continuing operations1 were $122 million
compared to $320 million a year earlier and $65 million in the
previous quarter.
- Production averaged 435,000 boe/d compared to 450,000 boe/d in
the prior year. Production from continuing operations was 405,000
boe/d compared to 401,000 boe/d in the same period of the prior
year and 389,000 boe/d in the previous quarter.
- Net debt (1) at March 31 was $1.8 billion, down from $2.1
billion at year end 2009.
- Talisman is progressing the sale of non-core, gas-weighted
assets in North America.
- Production from the Pennsylvania Marcellus shale play reached
150 mmcf/d at the end of April.
- Talisman reached agreement to acquire 37,000 net acres in the
Eagle Ford shale play in south Texas.
- The company tested a successful horizontal Utica shale well in
Quebec.
- Talisman set a new production record in Southeast Asia of
118,000 boe/d.
- Talisman has acquired interests in three large shale gas
blocks in Poland.
"We continue to make excellent progress on our strategic
transition," said John A. Manzoni, President and Chief Executive
Officer. "During the quarter, we announced a number of agreements
to sell additional non-core properties in North America. The
metrics for these predominantly gas-weighted assets were very good.
The agreements are at different stages of completion and we expect
the sales process to be completed by mid-year. These sales give us
additional financial flexibility and help continue to strengthen
the focus on our low-cost North American shale gas programs.
"We have made an entry into the Eagle Ford shale play in south
Texas, with agreements to purchase 37,000 net acres in the liquids
transition window of the play. These are top tier properties, which
are de-risked, with 2,000 boe/d of current production, and ready
for commercial development.
"We have farmed into three Baltic shale gas concessions in
Poland. We will complete seismic acquisition this year in
preparation for drilling in 2011. We see this as creating an option
in our international exploration portfolio, leveraging our position
as an international company with shale gas expertise.
"North American natural gas prices have come down significantly
in the past few months as the market looks at continuing oversupply
into the shoulder months. This situation may persist for some time;
however, we are well positioned to weather a period of prolonged
weakness in gas prices, with a strong balance sheet and capital
programs that we can adjust to maximize value, without compromising
our strategic transition. Talisman's land retention commitments are
low in our shale plays, which allow us to dictate the pace of
spending and drilling.
"We benefit from a diverse portfolio, which is more than 50%
weighted to oil globally. Talisman's net debt was $1.8 billion at
the end of the quarter, down from $2.1 billion at year-end. We
expect to end the year with a significant cash balance, which will
provide us with flexibility heading into 2011.
"Turning to the quarter, cash flow was $837 million compared to
$1.3 billion in the first quarter of 2009. Last year, cash flow was
enhanced by the proceeds from financial instruments, which totaled
about $600 million in the first quarter of 2009. Excluding the
impact of derivatives, cash flow was up 23% compared to a year ago
and 5% above the prior quarter. We have seen progressively higher
oil prices more than offset a stronger Canadian dollar and
increased taxes.
"Net income in the first quarter was $228 million versus a loss
of $111 million in the fourth quarter, but down from the first
quarter of last year, which saw significant accounting gains from
asset sales. Earnings from continuing operations, which strip out
non-operational items, were $122 million, almost double the fourth
quarter number, but also down from a year ago, which, as mentioned,
saw strong realized gains on financial instruments.
"Capital investment for the year is projected to be around $4.6
billion. This is below our initial guidance of $4.9 billion, due to
exchange rate impacts. Although our projected activity levels will
remain constant at this stage in the year, we will keep our
investment plans into the gas business under review as the year
progresses.
"Operationally, production from continuing operations averaged
405,000 boe/d, up slightly from a year ago and 4% higher than the
fourth quarter, with strong growth in Southeast Asia and Norway.
Notably, this is the first quarter since we began our transition
into shale gas that increases in shale volumes have offset
conventional natural gas declines in North America. The absolute
pace of shale growth will depend on how much capital we choose to
invest, but the pattern is now set.
"Our underlying production guidance is unchanged for the year.
In January, I noted that excluding potential North American asset
sales, we would hold production broadly flat, at about 425,000
boe/d this year. Subsequent to the end of the quarter, we announced
sales of non-core assets with current production of 42,500 boe/d of
production. Assuming that most of these transactions close by mid
year, Talisman's annual production is now expected to average just
over 400,000 boe/d.
"In Pennsylvania, our Marcellus shale program is on target for
exit volumes of 250-300 mmcf/d by year end. We brought 22 wells
on-stream and, at the end of April, we have an inventory of 41
wells, which have been drilled and are waiting on completion.
Production averaged 85 mmcf/d for the quarter, reaching 150 mmcf/d
at the end of April.
"In the Montney Shale, we continued the development program at
Farrell Creek, drilling three horizontal development wells, with
production of 22 mmcf/d in March. We also drilled three pilot wells
in the Greater Cypress area. In Quebec, we tested our first
horizontal well at St. Edouard, with 30-day initial production
rates of 5 mmcf/d. Two additional horizontal wells were also
drilled in the quarter, which will likely be tested in the second
half of the year.
"UK production was down in the quarter with a well intervention
at Tweedsmuir; repairs were successfully completed in early April.
Talisman is continuing to progress the Burghley, Auk North and Auk
South projects.
"Volumes were up significantly in Norway as a result of
successful infill programs in the Varg and Brage fields and
improved Rev uptime. Two successful wells were drilled in the Yme
field and the topsides are expected to leave the construction yard
in the second quarter.
"Southeast Asia set new production records again during the
quarter with increased contract takes from Corridor and higher PM-3
CAA volumes, where infill drilling is underway. Talisman completed
its first development well at Jambi Merang, with first production
expected in mid-2011 and the company has received regulatory
approval for the Kitan field development in Australia.
"Drilling in our international exploration program is largely
weighted towards the second half of the year. However, we completed
testing of the Situche discovery in Peru and in the Kurdistan
region of northern Iraq, drilling towards the deeper target in the
Kurdamir well continued during the quarter.
"In summary, we are making good progress in our strategic
transition and expect to see underlying growth from the second half
of this year. Our balance sheet is strong and our capital programs
flexible to allow us to maximize value from our investments in a
volatile commodity price environment, while maintaining our
strategic direction and progress."
Financial Results
March 31 Three Months Ended
2010 2009
------------------------
Cash flow ($ million) 837 1,309
------------------------
Cash flow per share(1) 0.82 1.29
------------------------
------------------------
Net income ($ million) 228 455
------------------------
Net income per share 0.22 0.45
------------------------
------------------------
Earnings from continuing operations ($ million) 122 320
------------------------
Earnings from continuing operations per share (2) 0.12 0.32
------------------------
------------------------
Average shares outstanding (million) 1,017 1,015
Cash flow averaged $837 million for the quarter compared to $1.3
billion a year ago and $921 million in the previous quarter.
Excluding the cash impact of held-for-trading financial
instruments, cash flow was up 23% over the first quarter of 2009
and 5% above the previous quarter. The underlying increase in cash
flow compared to a year ago is due primarily to higher oil prices,
offset partly by a stronger Canadian dollar and higher taxes.
Net income was $228 million, down from $455 million in the same
quarter a year ago, but up from a loss of $111 million in the
previous quarter. Earnings from continuing operations were $122
million, almost double the fourth quarter results, but down from
the same period a year ago.
The company's depreciation, depletion and amortization
(DD&A) expense averaged $582 million during the quarter, down
13% from a year ago, due to reserve additions in the North Sea at
the end of 2009, growing shale gas volumes and exchange rate
movements. Dry hole expense was $6 million compared to $216 million
in 2009. Current income taxes were $235 million compared to $142
million in the first quarter of last year and $253 million in the
previous quarter.
Exploration and development spending during the quarter totalled
$735 million, with 38% in North America, 37% for development in the
North Sea, 17% for international exploration and 8% for development
in Southeast Asia and other areas.
Net debt at the end of March was $1.8 billion, compared to $2.1
billion at year end.
Production
March 31 Three Months Ended
2010 2009
-------------------------
Oil and liquids (bbls/d) 207,000 235,000
-------------------------
Natural gas (mmcf/d) 1,368 1,291
-------------------------
Total (mboe/d) 435 450
-------------------------
-------------------------
Continuing operations (mboe/d) 405 401
-------------------------
Production from continuing operations averaged 405,000 boe/d
during the quarter, an increase of 1% compared to the previous year
and 4% higher than the previous quarter. Total production averaged
435,000 boe/d.
Natural gas volumes increased 6%, driven by Southeast Asia
(higher Corridor contract takes, PM-3 CAA) offsetting slightly
lower year over year volumes in North America. Natural gas volumes
in North America were unchanged from the previous quarter as gains
in shale gas production offset conventional declines.
Oil volumes were down, reflecting a well intervention in the UK
and natural declines in North America. This was partially offset by
a 26% increase in liquids production in Norway, with successful
development drilling at Varg and Brage and a full quarter of
production from the Rev Field.
Netbacks
March 31 Three Months Ended
$/boe 2010 2009
-----------------------
Sales 57.02 44.17
-----------------------
Royalties 8.48 5.93
-----------------------
Transportation 1.56 1.40
-----------------------
Operating expenses 13.22 12.36
-----------------------
Netback 33.76 24.48
-----------------------
-----------------------
Oil & liquids netback ($/bbl) 45.86 29.68
-----------------------
Natural gas netback ($/mcf) 3.80 3.14
-----------------------
Netbacks in the first quarter averaged $33.76/boe, up 38% from a
year ago and 6% above the previous quarter. WTI oil prices averaged
US$78.70/bbl, up 83% from the first quarter of 2009. NYMEX natural
gas prices averaged US$5.26/mmbtu, an increase of 8%. Gains in US
dollar-based oil prices were partially offset by a stronger
Canadian dollar, which has appreciated 17% over the past year.
Talisman's royalty rates averaged 14% during the quarter
compared to 16% a year ago, with lower royalty rates in Southeast
Asia. Unit operating costs were up 7% year over year, with
decreases in all regions except the UK, where unit costs increased
due to lower production.
North America
In North America, production averaged 157,000 mboe/d for the
first quarter, down 13% from a year ago. Production from continuing
operations was 128,000 mboe/d, down 5% from the same period in
2009. Natural gas volumes decreased 4% year over year, but were
unchanged compared to the fourth quarter as growing volumes from
shale development offset declines in conventional areas. Capital
spending included $247 million in shale areas for development and
piloting activities, plus $30 million on other properties.
In the Pennsylvania Marcellus area, the company drilled 35 gross
wells (30.5 net) in the quarter, 26 operated and nine non-operated.
Seven horizontal rigs were employed in the operated program for
most of the quarter. At the end of the quarter, eight rigs were
drilling. Twenty-one operated wells and one non-operated well were
brought on production and, at the end of April, the company had 41
gross (34 net) wells rig released, which are awaiting
completion.
Talisman exited the quarter with production of 97 mmcf/d from 49
wells. Average production for the quarter was 85 mmcf/d, reaching
150 mmcf/d at the end of April. Average 30-day initial production
rates for wells brought onstream during the quarter were
approximately 5 mmcf/d.
In the Montney Shale, Talisman drilled a total of six gross (5.2
net) wells, with three gross (three net) horizontal development
wells in the Farrell Creek area, which are expected to be completed
in the second half of this year. Talisman exited the quarter with
production of 22 mmcf/d. Four operated rigs were drilling in the
Farrell Creek area at the end of March.
Talisman is carrying out a pilot program in the Greater Cypress
area of the Montney Shale and completed three gross (two net) wells
during the quarter.
Talisman is continuing its pilot program in the Quebec Utica
Shale and drilled two horizontal wells during the first quarter.
These wells will likely be tested in the second half of 2010. The
company had encouraging test results from the Saint Edouard
horizontal well, which was drilled in 2009, with a 30-day initial
production rate of over 5 mmcf/d.
Talisman has entered into agreements to acquire 37,000 net
operated acres in the liquids transition window of the Eagle Ford
shale play for US$360 million where the company expects to drill
seven wells in 2010. The acquisition comes with approximately 2,000
boe/d of production and a contiguous acreage position. The assets
have been largely de-risked through six assessment wells and are
ready to go into development. The company expects to commence a
single rig drilling program in June of this year.
Production from Talisman's conventional areas was 676 mmcf/d
natural gas and 26,000 bbls/d of liquids. In total, 25 gross (19
net) wells were drilled in the first quarter.
UK
Production in the UK averaged 86,000 boe/d in the first quarter
of 2010, a 20% decrease from the first quarter of 2009 and a 7%
increase from the previous quarter. Against the same period in
2009, the majority of the decrease in production was due to the
shut-in of a Tweedsmuir producer well to allow well intervention
work. The intervention was successfully completed in early April
and the well is now back on stream.
The company spent approximately $110 million on development in
the UK during the quarter, with approximately three quarters
directed at the Auk North, Auk South and Burghley projects.
In the Central North Sea, the Auk North development is on
schedule with first oil targeted in 2011. Auk South is steadily
progressing with first oil expected in 2012. Work on the Burghley
development is proceeding with first oil planned for the fourth
quarter of 2010.
Norway
Production in Norway averaged 60,000 boe/d in the first quarter
of 2010, a 38% increase over the same period in 2009 and an 8%
increase from the previous quarter with good performance from
recent development wells in the Varg and Brage fields. The year
over year increase also reflects higher volumes from Rev, which was
still being commissioned in early 2009.
At Varg, a successful infill well was drilled in the fourth
quarter of 2009 and a further well was completed in January 2010.
Infill wells at Brage also continued to produce at better than
expected rates.
The Yme project continues to progress to first production in the
second half of 2010, with the topsides due to leave the
construction yard during the second quarter. Two successful wells
have been drilled and drilling operations are expected to be
completed by the end of the second quarter.
The company spent $163 million on development in Norway during
the quarter, with approximately half of the spend on development
drilling and one-third directed at the Yme redevelopment.
Southeast Asia
The company spent $42 million on development activities in
Southeast Asia during the quarter. Talisman continued to set new
production records in the region, with an average of 118,000 boe/d
during the quarter, 17% higher than the first quarter of 2009 and
5% above the previous quarter.
In Malaysia, production averaged 35,000 boe/d, an increase of 9%
over the previous period and 31% higher than the first quarter of
2009 when PM-3 CAA was shutdown to commission the Northern Fields
oil development.
During the quarter, drilling continued on the Southern Fields
improved oil recovery program. Seven of 11 planned wells have been
drilled to date with the two most recent wells producing 2,500
bbls/d. Three development wells were also drilled and completed in
the Northern Fields, with two wells on production.
In Indonesia, production averaged 76,200 boe/d, an increase of
21% over a year ago and 8% higher than the previous quarter. Sales
from Corridor were up 16% with increased contract takes. Talisman's
share of production from the Tangguh LNG facility averaged
approximately 3,000 boe/d, with Trains 1 and 2 running at around
75% capacity.
Talisman acquired a 25% interest in the Jambi Merang Joint
Operating Body (JOB) property in January. Plans are to drill three
new wells and complete five existing wells by year end, with first
production expected in mid-2011.
In Vietnam, production averaged 2,800 boe/d. A three-well infill
program has been sanctioned for Song Doc, with drilling expected to
start in the third quarter. On Block 15-2/01, the company is
reviewing development options for the HST field and the HSD
discovery.
In Australia, production averaged 4,200 boe/d. Regulatory
approval of the Kitan field development was received in late April
and first production is expected in the second half of 2011.
International Exploration
International exploration spending during the first quarter was
$123 million. The capital program was largely directed at
exploration and appraisal drilling in the North Sea, Latin America,
Southeast Asia and the Kurdistan region of northern Iraq. A number
of seismic acquisitions were also ongoing during the quarter.
In Colombia, the company drilled a well in the El Eden Block of
the Colombian Foreland Trend. The company also completed a
farm-down of its interests in Block CPO-9 during the quarter.
In Peru, the testing of the Lower Vivian reservoir in the
Situche Central 3X well in Block 64 was completed during the
quarter. The well flowed at 5,200 bbls of oil per day of 37 degree
API crude. The rig will now move to Block 101 to drill the
Runtasapa exploration well.
In Malaysia, the Sliver-2 appraisal well was drilled during the
quarter, confirming the extent of the pool. A one-year license
extension has been granted and commercialization options are being
evaluated.
In Norway, the company has recently spudded an appraisal to the
2009 Grevling discovery. In the UK, the company is drilling the TP2
well in the Tweedsmuir area.
In the Kurdistan region of northern Iraq, the Kurdamir-1 well,
where significant amounts of gas condensate have been discovered,
encountered high-formation pressures in a deeper section of the
well. A sidetrack has commenced to evaluate oil and gas shows in
the deeper Tertiary and Cretaceous section.
In February, Talisman entered into a farm-in agreement to
acquire a 60% interest in two Baltic shale gas concessions in
Poland. Subsequent to quarter end, Talisman was awarded a third
concession that was pending governmental approval. This is
Talisman's first international shale play and allows the company to
leverage its North American shale gas expertise in a highly
prospective area. In 2010, Talisman expects to complete a seismic
acquisition to prepare for a drilling program of up to six wells in
2011 and 2012.
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, plans and priorities;
- expected onstream dates of North Sea developments;
- expected timing of closing of non-core asset sales;
- expected exit volumes in the Marcellus Shale play;
- planned drilling in the Eagle Ford Shale play;
- expected first oil and completion of drilling operations in
the Yme Field and schedule regarding the Yme platform;
- expected first oil from Auk North, Auk South and Burghley;
- planned drilling and expected first production from Jambi
Merang;
- planned drilling in the Song Doc field; and
- expected completion of seismic acquisition; and
- planned drilling in Poland.
The following material assumptions were used in drawing the
conclusions or making the forecasts and projections contained in
the forward-looking information contained in this news release.
Talisman has set its 2010 capital expenditure plans assuming: (1)
Talisman's production in 2010 will be approximately 400,000 boe/d,
assuming that most of the North American asset sales close by
mid-year; (2) a US$60/bbl WTI oil price, and (3) a US$3.50/mmbtu
NYMEX natural gas price. Information regarding business plans
generally assumes that the extraction of crude oil, natural gas and
natural gas liquids remains economic.
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.
The completion of any contemplated disposition is contingent on
various factors including favorable 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. 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.
Barrels 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 and is based on an energy
equivalence conversion method. Boes may be misleading, particularly
if used in isolation. A boe conversion ratio of 6 mcf:1 bbl is
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.
Canadian Dollars and GAAP
Canadian Dollars and GAAP Dollar amounts are presented in
Canadian dollars, except where otherwise indicated. Unless
otherwise indicated, the financial information is set out in
accordance with Canadian GAAP which may differ from US GAAP. See
the notes to Talisman's Annual Consolidated Financial Statements
for the significant differences between Canadian and US GAAP.
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 continuing operations 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
results of cash flow, earnings from continuing operations and net
debt may not be comparable to similarly titled measures reported 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 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 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.
Cash Flow
$ million, except per share amounts
Three months ended
-------------------------
March 31, 2010 2009
----------------------------------------------------------------------------
Cash provided by operating activities 1,129 1,086
Changes in non-cash working capital (292) 223
----------------------------------------------------------------------------
Cash flow 837 1,309
Cash provided by discontinued operations(1) (71) (89)
----------------------------------------------------------------------------
Cash flow from continuing operations 766 1,220
----------------------------------------------------------------------------
Cash flow per share 0.82 1.29
----------------------------------------------------------------------------
Cash flow from continuing operations per share 0.75 1.20
----------------------------------------------------------------------------
1. Comparatives restated for operations classified as discontinued since
March 31, 2009.
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.
Earnings from Continuing Operations
$ million, except per share amounts
Three months ended
-------------------------
March 31, 2010 2009
----------------------------------------------------------------------------
Net income 228 455
----------------------------------------------------------------------------
Operating income from discontinued operations 19 3
Gain (loss) on disposition of discontinued operations (39) 519
----------------------------------------------------------------------------
Income (loss) from discontinued operations(1) (20) 522
----------------------------------------------------------------------------
Income (loss) from continuing operations 248 (67)
Mark-to-market changes in commodity derivatives(2)
(tax adjusted) (126) 387
Stock-based compensation expense (recovery)(3) (tax
adjusted) (65) 23
Foreign exchange on net debt and future income taxes 24 -
Future tax recovery of unrealized foreign exchange
gains (losses) on foreign denominated debt(4) 40 (23)
----------------------------------------------------------------------------
Earnings from continuing operations 122 320
----------------------------------------------------------------------------
Per share(5) 0.12 0.32
----------------------------------------------------------------------------
1. Comparatives restated for operations classified as discontinued
subsequent to March 31, 2009.
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.
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.
Net Debt
$ million
March 31, December 31,
2010 2009
----------------------------------------------------------------------------
Long-term debt 3,654 3,780
Bank indebtedness 15 36
Cash and cash equivalents (1,874) (1,690)
----------------------------------------------------------------------------
Net debt 1,795 2,126
----------------------------------------------------------------------------
Talisman Energy Inc.
Highlights
(unaudited)
Three months ended
March 31
2010 2009
----------------------------------------------------------------------------
Financial
(millions of C$ unless otherwise stated)
Cash flow(1) 837 1,309
Net income 228 455
Capital expenditures 750 711
Per common share (C$)
Cash flow(1) 0.82 1.29
Net income 0.22 0.45
----------------------------------------------------------------------------
Production
(daily average)
Oil and liquids (bbls/d)
North America 25,799 40,758
UK 83,065 102,688
Scandinavia 44,302 34,874
Southeast Asia 39,560 37,341
Other 14,176 19,215
----------------------------------------------------------------------------
Total oil and liquids 206,902 234,876
----------------------------------------------------------------------------
Natural gas (mmcf/d)
North America 787 829
UK 17 30
Scandinavia 91 50
Southeast Asia 473 382
----------------------------------------------------------------------------
Total natural gas 1,368 1,291
----------------------------------------------------------------------------
Total mboe/d(2) 435 450
----------------------------------------------------------------------------
Prices(3)
Oil and liquids (C$/bbl)
North America 69.68 42.65
UK 79.50 56.36
Scandinavia 82.05 56.50
Southeast Asia 79.30 52.69
Other 78.31 59.04
----------------------------------------------------------------------------
Total oil and liquids 78.70 53.64
----------------------------------------------------------------------------
Natural gas (C$/mcf)
North America 5.83 5.51
UK 5.16 5.93
Scandinavia 5.94 9.88
Southeast Asia 6.98 5.35
----------------------------------------------------------------------------
Total natural gas 6.23 5.64
----------------------------------------------------------------------------
Total (C$/boe)(2) 57.02 44.17
----------------------------------------------------------------------------
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 of continuing and discontinued operations.
Talisman Energy Inc.
Consolidated Balance Sheets
(unaudited)
March 31 December 31
(millions of C$) 2010 2009
----------------------------------------------------------------------------
(restated)
Assets
Current
Cash and cash equivalents 1,874 1,690
Accounts receivable 1,148 1,265
Inventories 129 144
Prepaid expenses 37 9
Assets of discontinued operations 34 46
----------------------------------------------------------------------------
3,222 3,154
----------------------------------------------------------------------------
Other assets 364 290
Goodwill 1,177 1,194
Property, plant and equipment 16,538 17,137
Assets of discontinued operations 1,474 1,843
----------------------------------------------------------------------------
19,553 20,464
----------------------------------------------------------------------------
Total assets 22,775 23,618
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Liabilities
Current
Bank indebtedness 15 36
Accounts payable and accrued liabilities 1,977 2,126
Income and other taxes payable 403 357
Current portion of long-term debt 363 10
Future income taxes 41 68
Liabilities of discontinued operations 7 7
----------------------------------------------------------------------------
2,806 2,604
----------------------------------------------------------------------------
Deferred credits 57 59
Asset retirement obligations 2,004 2,116
Other long-term obligations 144 168
Long-term debt 3,291 3,770
Future income taxes 3,489 3,646
Liabilities of discontinued operations 136 144
----------------------------------------------------------------------------
9,121 9,903
----------------------------------------------------------------------------
Shareholders' equity
Common shares, no par value
Authorized: unlimited
Issued and outstanding:
March 31, 2010 - 1,018,986,947 (December 31, 2009
- 1,014,876,564) 2,443 2,374
Contributed surplus 95 153
Retained earnings 9,402 9,174
Accumulated other comprehensive loss (1,092) (590)
----------------------------------------------------------------------------
10,848 11,111
----------------------------------------------------------------------------
Total liabilities and shareholders' equity 22,775 23,618
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Prior period balances have been restated to reflect the financial position
of discontinued operations.
Talisman Energy Inc.
Consolidated Statements of Income and Loss
(unaudited)
Three months ended
March 31
(millions of C$) 2010 2009
----------------------------------------------------------------------------
(restated)
Revenue
Gross sales 2,085 1,728
Less royalties 301 276
----------------------------------------------------------------------------
Net sales 1,784 1,452
Other 29 34
----------------------------------------------------------------------------
Total revenue 1,813 1,486
----------------------------------------------------------------------------
Expenses
Operating 498 492
Transportation 61 56
General and administrative 82 81
Depreciation, depletion and amortization 582 668
Dry hole 6 216
Exploration 96 68
Interest on long-term debt 41 45
Stock-based compensation (recovery) (72) 33
Gain on held-for-trading financial instruments (97) (73)
Other, net 113 16
----------------------------------------------------------------------------
Total expenses 1,310 1,602
----------------------------------------------------------------------------
Income (loss) from continuing operations before taxes 503 (116)
----------------------------------------------------------------------------
Taxes
Current income tax 235 142
Future income tax (recovery) (7) (205)
Petroleum revenue tax 27 14
----------------------------------------------------------------------------
255 (49)
----------------------------------------------------------------------------
Income (loss) from continuing operations 248 (67)
----------------------------------------------------------------------------
Income (loss) from discontinued operations (20) 522
----------------------------------------------------------------------------
Net income 228 455
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Per common share (C$):
Income (loss) from continuing operations 0.24 (0.07)
Diluted income (loss) from continuing operations 0.24 (0.07)
Income (loss) from discontinued operations (0.02) 0.52
Diluted income (loss) from discontinued operations (0.02) 0.52
Net income 0.22 0.45
Diluted net income 0.22 0.45
----------------------------------------------------------------------------
Average number of common shares outstanding (millions) 1,017 1,015
Diluted number of common shares outstanding (millions) 1,035 1,015
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Prior period balances have been restated to reflect the results of
discontinued operations.
Talisman Energy Inc.
Consolidated Statements of Cash Flows
(unaudited)
Three months ended
March 31
(millions of C$) 2010 2009
----------------------------------------------------------------------------
(restated)
Operating
Income (loss) from continuing operations 248 (67)
Items not involving cash 422 1,219
Exploration 96 68
----------------------------------------------------------------------------
766 1,220
Changes in non-cash working capital 292 (223)
----------------------------------------------------------------------------
Cash provided by continuing operations 1,058 997
Cash provided by discontinued operations 71 89
----------------------------------------------------------------------------
Cash provided by operating activities 1,129 1,086
----------------------------------------------------------------------------
Investing
Capital expenditures
Exploration, development and other (750) (711)
Corporate acquisitions (189) -
Property acquisitions (25) (28)
Proceeds of resource property dispositions 107 33
Changes in non-cash working capital (56) (254)
Discontinued operations, net of capital expenditures 17 351
----------------------------------------------------------------------------
Cash used in investing activities (896) (609)
----------------------------------------------------------------------------
Financing
Long-term debt repaid - (690)
Long-term debt issued - 370
Common shares issued 5 1
Deferred credits and other (7) 4
Changes in non-cash working capital (2) 1
----------------------------------------------------------------------------
Cash used in financing activities (4) (314)
----------------------------------------------------------------------------
Effect of translation on foreign currency cash and
cash equivalents (38) (16)
----------------------------------------------------------------------------
Net increase in cash and cash equivalents 191 147
Cash and cash equivalents net of bank indebtedness,
beginning of period 1,668 12
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cash and cash equivalents net of bank indebtedness,
end of period 1,859 159
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cash and cash equivalents 1,874 181
Bank indebtedness (15) (22)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cash and cash equivalents net of bank indebtedness,
end of period 1,859 159
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Prior period balances have been restated to reflect the cash flows of
discontinued operations.
Segmented information
North America(1) UK Scandinavia
------------------------------------------------
(millions of C$) 2010 2009 2010 2009 2010 2009
----------------------------------------------------------------------------
Revenue
----------------------------------------------------------------------------
Gross sales 474 429 606 529 372 242
Royalties 67 61 2 1 - -
----------------------------------------------------------------------------
Net sales 407 368 604 528 372 242
Other 23 26 5 7 1 1
----------------------------------------------------------------------------
Total revenue 430 394 609 535 373 243
----------------------------------------------------------------------------
Segmented expenses
----------------------------------------------------------------------------
Operating 111 121 233 211 86 74
Transportation 19 12 10 13 16 12
DD&A 195 206 161 236 145 103
Dry hole 1 100 - 31 (1) 28
Exploration 32 22 5 2 11 6
Other (19) 4 (2) 4 66 1
----------------------------------------------------------------------------
Total segmented expenses 339 465 407 497 323 224
----------------------------------------------------------------------------
Segmented income (loss) before
taxes 91 (71) 202 38 50 19
----------------------------------------------------------------------------
Non-segmented expenses
General and administrative
Interest on long-term debt
Stock-based compensation
(recovery)
Currency translation
Gain on held-for-trading
financial instruments
----------------------------------------------------------------------------
Total non-segmented expenses
----------------------------------------------------------------------------
Income (loss) from continuing
operations before taxes
----------------------------------------------------------------------------
Capital expenditure
Exploration 122 81 6 46 13 59
Development 156 (4) 110 131 163 115
Midstream (1) 35 - - - -
----------------------------------------------------------------------------
Exploration and development 277 112 116 177 176 174
----------------------------------------------------------------------------
Property acquisitions
Proceeds on dispositions
Other non-segmented
----------------------------------------------------------------------------
Net capital expenditures(4)
----------------------------------------------------------------------------
Property, plant and equipment 6,665 6,861 4,120 4,549 1,951 2,040
Goodwill 164 167 263 289 608 628
Other 2,242 1,252 307 386 207 226
Discontinued operations 1,508 1,850 - - - -
----------------------------------------------------------------------------
Segmented assets 10,579 10,130 4,690 5,224 2,766 2,894
Non-segmented assets
----------------------------------------------------------------------------
Total assets
----------------------------------------------------------------------------
Southeast Asia(2) Other(3) Total
----------------------------------------------
(millions of C$) 2010 2009 2010 2009 2010 2009
----------------------------------------------------------------------------
Revenue
----------------------------------------------------------------------------
Gross sales 568 390 65 138 2,085 1,728
Royalties 194 145 38 69 301 276
----------------------------------------------------------------------------
Net sales 374 245 27 69 1,784 1,452
Other - - - - 29 34
----------------------------------------------------------------------------
Total revenue 374 245 27 69 1,813 1,486
----------------------------------------------------------------------------
Segmented expenses
----------------------------------------------------------------------------
Operating 63 68 5 18 498 492
Transportation 14 17 2 2 61 56
DD&A 76 109 5 14 582 668
Dry hole (8) 51 14 6 6 216
Exploration 24 15 24 23 96 68
Other 10 (2) 7 12 62 19
----------------------------------------------------------------------------
Total segmented expenses 179 258 57 75 1,305 1,519
----------------------------------------------------------------------------
Segmented income (loss) before
taxes 195 (13) (30) (6) 508 (33)
----------------------------------------------------------------------------
Non-segmented expenses
General and administrative 82 81
Interest on long-term debt 41 45
Stock-based compensation
(recovery) (72) 33
Currency translation 51 (3)
Gain on held-for-trading
financial instruments (97) (73)
----------------------------------------------------------------------------
Total non-segmented expenses 5 83
----------------------------------------------------------------------------
Income (loss) from continuing
operations before taxes 503 (116)
----------------------------------------------------------------------------
Capital expenditure
Exploration 45 81 59 63 245 330
Development 42 196 20 1 491 439
Midstream - - - - (1) 35
----------------------------------------------------------------------------
Exploration and development 87 277 79 64 735 804
----------------------------------------------------------------------------
Property acquisitions 222 66
Proceeds on dispositions (143) (71)
Other non-segmented 10 10
----------------------------------------------------------------------------
Net capital expenditures(4) 824 809
----------------------------------------------------------------------------
Property, plant and equipment 2,960 2,864 842 823 16,538 17,137
Goodwill 142 110 - - 1,177 1,194
Other 501 427 106 156 3,363 2,447
Discontinued operations - - - 39 1,508 1,889
----------------------------------------------------------------------------
Segmented assets 3,603 3,401 948 1,018 22,586 22,667
Non-segmented assets 189 951
----------------------------------------------------------------------------
Total assets 22,775 23,618
----------------------------------------------------------------------------
1. North America 2010 2009
----------------------------------------------------------------------------
Canada 374 359
US 56 35
----------------------------------------------------------------------------
Total revenue 430 394
----------------------------------------------------------------------------
Canada 5,465 5,699
US 1,200 1,162
----------------------------------------------------------------------------
Property, plant and equipment 6,665 6,861
----------------------------------------------------------------------------
2. Southeast Asia 2010 2009
----------------------------------------------------------------------------
Indonesia 215 138
Malaysia 119 67
Vietnam 16 29
Australia 24 11
----------------------------------------------------------------------------
Total revenue 374 245
----------------------------------------------------------------------------
Indonesia 1,052 1,243
Malaysia 1,122 1,171
Vietnam 263 241
Papua New Guinea 328 -
Australia 195 209
----------------------------------------------------------------------------
Property, plant and equipment 2,960 2,864
----------------------------------------------------------------------------
3. Other
----------------------------------------------------------------------------
Algeria 27 69
----------------------------------------------------------------------------
Total revenue 27 69
----------------------------------------------------------------------------
Algeria 201 193
Other 641 630
----------------------------------------------------------------------------
Property, plant and equipment 842 823
----------------------------------------------------------------------------
4 Excluding corporate acquisitions
1 The terms "cash flow", "earnings from continuing operations" and "net
debt" are non-GAAP measures. Please see the advisories and reconciliations
elsewhere in this news release.
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.
Contacts: Talisman Energy Inc. - Media and General Inquiries:
David Mann, Vice-President, Corporate & Investor Communications
(403) 237-1196 (403) 237-1210 (FAX) tlm@talisman-energy.com
Talisman Energy Inc. - Shareholder and Investor Inquiries:
Christopher J. LeGallais, Vice-President, Investor Relations (403)
237-1957 (403) 237-1210 (FAX) tlm@talisman-energy.com
www.talisman-energy.com
Grafico Azioni Talisman (NYSE:TLM)
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Grafico Azioni Talisman (NYSE:TLM)
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