Talisman Energy Inc. (TSX: TLM) (NYSE: TLM) announced its capital
spending plans for 2011. The company expects 5-10% production
growth this year. Cash spending on exploration and development is
expected to be relatively unchanged at around US$4 billion,
maintaining capital discipline in an uncertain commodity price
environment. Through reshaping the portfolio in 2010, maintaining a
balance between natural gas and liquids opportunities, and high
grading to a more profitable asset base, Talisman has entered a new
phase of sustainable value-creating growth. Highlights include:
-- Expected production growth of 5-10% against approximately 415,000 boe/d
in 2010. In addition, the BP Colombia acquisition will add 12,000-15,000
boe/d of incremental production. Approximately half of this production
growth will be liquids.
-- Cash exploration and development spending of approximately US$4 billion,
approximately the same as 2010. In addition, US$370 million of non-cash
capital items is expected.
-- Talisman expects continued improvement in its reserve replacement costs
in both 2010 and 2011, as an important driver in increasing the
profitability of the company. The company expects to further reduce
reserve replacement costs by 25-30% in 2010 relative to 2009.
Replacement costs related to proved developed production are expected to
be 45-50% lower in 2010.
-- North American spending of approximately US$1.7 billion, with a 35%
reduction in spending on dry gas. The company plans to increase activity
in the liquids rich Eagle Ford shale, conventional oil properties and
the Farrell Creek shale play.
-- Southeast Asia spending of US$700-800 million. Development projects
include start-up at Jambi Merang, drilling and optimization at Corridor
in Indonesia, infill drilling in Malaysia and the Kitan field, offshore
Australia.
-- Cash capital spending is expected to be circa US$1.2 billion in the
North Sea, with approximately two-thirds of this spending in the UK. In
the UK, the company expects growing volumes from the recently completed
Auk North project and further progress on the Auk South development. In
Norway, first production from the Yme field is expected mid-year.
-- The international capital spending numbers include approximately US$700
million committed to exploration, with significant wells in the North
Sea, first shale wells in Poland, active drilling in Papua New Guinea
and key wells in Colombia, Indonesia and the Kurdistan region of
northern Iraq.
Commencing in 2011, Talisman will be reporting in US dollars to
reflect the fact that the majority of company transactions occur in
US dollars, and this is the functional currency of the company.
Talisman's 2010 year-end results, which the company plans to issue
on February 16, 2011, will be reported in Canadian dollars.
"2010 was an important transition year for Talisman," said John
A. Manzoni, President and CEO. "Talisman's 2011 plan is expected to
deliver strong production growth and improving profitability, based
on a continuing track record of project execution, capital
discipline, and improving replacement costs. We have repositioned
the portfolio and our company is now set to deliver sustainable,
profitable growth.
"We have set our plans for this year with a cautious view of
both North American natural gas prices and global oil prices. We
see continuing weakness in gas prices this year, planning against a
base of US$ 4 NYMEX. Oil prices have remained very robust, in-line
with the growing global recovery, and our planning assumption of
approximately US$75 WTI for 2011 may be conservative.
"We expect to grow production this year between 5-10%, not
including an additional 12,000-15,000 boe/d which will be added
once the BP Colombia acquisition closes. Approximately half of our
total volume growth in 2011 will be liquids, balanced between North
America, the North Sea and Colombia.
"This growth projection is consistent with the promise of 5-10%
medium-term growth, which we made at our investor open house in
May, although the base 2010 number of approximately 415,000 boe/d
is significantly higher than we were projecting at that time.
Overall growth in 2011 will be broad-based, deriving from our shale
properties, including the liquids rich Eagle Ford shale, and a
number of project start ups in the North Sea.
"Capital discipline continues to be a priority, and we will be
very mindful of North American gas prices as we move through the
year. Cash exploration and development spending will be broadly
similar to 2010 levels, at approximately US$4 billion.
"In North America, our emphasis will shift to liquids, and we
will reduce gas directed spending by 35%. Our reduced gas directed
drilling remains profitable at US$4 prices, and our land retention
commitments are relatively minor.
"We will slow the Marcellus program, with plans to move from 12
rigs at year end to nine, over the course of this year. However,
upon completion of the recently announced deal with Sasol, we
expect to increase drilling activity at Farrell Creek, where our
partner is carrying the majority of the capital costs.
"With the Eagle Ford acquisition complete, we plan to build to
eight rigs by year end, with net Talisman production expected to
average 55-65 mmcfe/d, just under half of which will be liquids. We
will also direct investment in our conventional portfolio toward
expanded oil development programs at Shaunavon and Chauvin.
"In Southeast Asia, spending will increase this year, largely
due to a ramp up in activity in Papua New Guinea. First production
from Jambi Merang in Indonesia is expected by mid year and we will
continue with development projects in the Corridor block. We are
also developing the Kitan field offshore Australia and are hoping
to sanction the HSD development offshore Vietnam.
"Volumes are projected to increase slightly in the North Sea
this year with start up of the Burghley and Auk North projects in
the UK in the fourth quarter of 2010 and successful infill drilling
in Norway.
"The major project this year will be the Yme field
commissioning, which is expected in the middle of the year,
depending on weather windows for safe installation. Because of the
high initial production volumes, a delay beyond July would begin to
impact our production outlook. We will also have a large infill
drilling program in Norway again this year and will progress
appraisal of the Grosbeak discovery and development planning for
the Grevling discovery.
"We have an exciting exploration program this year, focused
predominantly on large prospects in Latin America, Southeast Asia,
the North Sea and the Kurdistan region of northern Iraq. We will
also drill our first shale wells in Poland.
"We also expect to achieve the 25-30% reduction in reserve
replacement costs we promised for 2010, on top of a greater than
45% reduction in 2009. We should look for further improvement of
proved developed producing replacement costs in 2011, as an
important driver in increasing the profitability of the
company.
"Overall, we have repositioned the portfolio for sustainable,
profitable growth in the future. We have a balanced portfolio, with
the flexibility to adjust spending towards liquids opportunities
while gas prices remain low, and an exciting set of exploration
opportunities."
North America
In North America, the company plans to spend approximately
US$1.7 billion in 2011, with emphasis shifting to liquids rich
opportunities, primarily in the Eagle Ford shale and conventional
oil plays. Spending on dry gas will be 35% lower than 2010.
In the Pennsylvania Marcellus play, Talisman has budgeted
approximately US$800 million, including infrastructure capital.
Talisman plans to reduce the number of rigs in the play from 12 at
the end of 2010 to nine rigs over the course of 2011. The plan is
to drill approximately 100 net wells in the Marcellus in 2011. The
company expects production to average 350-400 mmcf/d, up from
approximately 180 mmcf/d in 2010. Marcellus production was 315
mmcf/d at year end.
In the Montney shale, Talisman will continue to progress the
development of the Farrell Creek area with plans to drill
approximately 35 net wells in 2011. The company has reached an
agreement to create a strategic partnership with Sasol to jointly
develop this play. As part of the agreement, Talisman will act as
operator for the partnership, having a 50% working interest while
being carried for about US$800 million in capital spending. The
company will expand from four rigs to an eight-rig program in 2011,
with Talisman spending approximately US$100 million. Production
(net to Talisman) is expected to average 50-60 mmcf/d net in 2011.
The transaction with Sasol is expected to close in the first half
of 2011, subject to regulatory approvals.
Following the successful entry into the liquids-rich Eagle Ford
through two acquisitions in 2010, the company is expecting to drill
approximately 35 net wells. Talisman expects to ramp up to eight
operated rigs (from four currently) by year end, and has budgeted
approximately US$300 million. Net annual production from this play
is estimated at 55-65 mmcfe/d. Approximately half of this
production is expected to be liquids.
In the conventional portfolio, the focus will also be on liquids
opportunities. Expected spending will be around US$380 million,
with nearly 70% of the capital focused on expanded oil development
programs in the Chauvin and Shaunavon properties, as well as
continuation of the pilot programs in the Cardium oil and wet gas
windows.
Shale production in North America is expected to average 455-525
mmcfe/d (approximately 75,000-85,000 boe/d), with an additional
90,000 boe/d of conventional production.
Southeast Asia
Talisman plans to spend between US$700-800 million in Southeast
Asia in 2011, with exploration spending accounting for one-third of
the total.
Major activities include an infill drilling program at PM-3 CAA
in Malaysia/Vietnam and plans to sanction the HST/HSD development
concept in Block 15-02 offshore Vietnam. Talisman also expects to
spend US$200-$250 million in Papua New Guinea.
In Indonesia, Talisman expects first production from Jambi
Merang by mid-year and will continue infill drilling in the OK
Block. Drilling and optimization activities, which were initiated
in 2010, will continue in 2011 in the Corridor Block in Indonesia,
where discussions are underway to examine unitization in a small
part of the Block.
The company is also developing the Kitan discovery offshore
Australia.
Production in Southeast Asia will remain flat relative to 2010
at approximately 120,000 boe/d, due to the timing of project
delivery.
North Sea
In the North Sea, cash capital spending is budgeted at
approximately US$1.2 billion in 2011, with approximately two-thirds
of this spending in the UK and one-third in Norway. Of the total,
approximately US$150 million is being directed towards exploration.
The plan also includes US$370 million of non-cash capital
(capitalized leases) in Norway.
Major activities in the UK include ramping up production from
the Auk North project, which came on stream at the end of 2010. At
Claymore, Talisman will recommence infill drilling, with first
production expected in 2011. Engineering for the Auk South
redevelopment project is being completed, and the company has
commenced fabrication of the new facilities, with first production
expected in 2012. Plans for redevelopment of the Montrose/Arbroath
area are being progressed, which extend the life of the existing
field and incorporate development of the Cayley, Godwin and Shaw
discoveries.
In Norway, activities will focus on commissioning the Yme
redevelopment project, with first oil expected early in the second
half of 2011. The topsides are complete and waiting in Stavanger
for a weather window to allow installation. There is also a large
infill program ongoing in Norway, including wells on Gyda, Brage,
Veslefrikk and Varg. The Grosbeak discovery will be appraised and,
in addition, the development plan for Grevling is being
progressed.
Production from the region is expected to average between
130,000-135,000 boe/d in 2011.
International Exploration
The international exploration budget for 2011 is US$700 million,
some of which is included in the regional capital, with
three-quarters allocated to build new core areas and one-quarter to
support existing core areas. The goal of the program is to add
600-700 million boe of prospective resource additions over a five
year period at a finding cost of less than $5/boe.
In Southeast Asia, Talisman plans to drill Lempuk-1, a deepwater
well in South Makassar in Indonesia and continue with its seismic
acquisition in the area. 3D seismic data will also be acquired over
the two offshore Sabah exploration blocks in Malaysia and in
Vietnam's Nam Con Son Basin. In Papua New Guinea, the company plans
to drill six exploration and appraisal wells in our foreland
blocks. 2D seismic acquisition will continue as well.
In the North Sea, Talisman continues to explore in Norway and
the UK. In Norway, Talisman plans to drill the Gnatcatcher
exploration well and Grosbeak appraisal well, acquired in 2010 as
part of an asset acquisition. In the UK, the company will complete
drilling of the TR1 appraisal well in Block 30/13 in the Fulmar
area.
In Latin America, Talisman's focus is in Colombia and Peru. In
Colombia, Talisman is focusing activity on the heavy oil trend in
the southern Llanos Basin and on the foothills trend, site of the
2009 Huron discovery. In the foothills trend, the Huron-2 appraisal
well on the Niscota Block will be drilled in 2011. In the heavy oil
trend, the company is currently developing drilling and seismic
plans to follow-up on the Akacias-1 discovery drilled in 2010 in
Block 9. Talisman is also completing a six-well stratigraphic
program on Block 6. In Block 8, Talisman will acquire seismic data
in preparation for stratigraphic well drilling later in the year.
In Peru, the company is continuing seismic acquisition over the
Situche area in Block 64 and plans to spud the Situche Norte
exploration well in 2011.
In the Kurdistan region of northern Iraq, Talisman will drill
the first exploration well in Block K39, Topkhana, followed by a
redrill of the Kurdamir well to test for deeper potential.
In Poland, Talisman will continue with the 2D seismic program
commenced in late 2010, and in mid-2011, the company plans to
commence the first two wells of a three-well vertical exploration
drilling program.
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.
ADVISORIES
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 and plans;
-- expected production and production growth;
-- planned capital spending;
-- expected reduction of reserve replacement costs;
-- planned development, number of rigs, drilling and production in North
America;
-- planned development projects and drilling in the North Sea;
-- expected timing of first production at Burghley, Claymore, Auk South and
Yme;
-- planned development projects, drilling and appraisal in Norway;
-- redevelopment plans relating to the Montrose/Arbroath platform;
-- planned development projects, drilling, sanctioning, infill and seismic
acquisition in Southeast Asia;
-- planned development projects relating to the Kitan field offshore
Australia;
-- expected timing of first production at Jambi Merang, planned drilling in
OK Block and planned drilling and optimization activities and potential
unitization in a small part of Corridor;
-- goal of international exploration program;
-- planned development, drilling and appraisal in Papua New Guinea;
-- planned drilling, seismic acquisition and appraisal in Colombia and
Peru;
-- planned drilling in the Kurdistan region of northern Iraq;
-- planned 2D seismic program and drilling in Poland; and
-- other expectations, beliefs, plans, goals, objectives, assumptions,
information and statements about possible future events, conditions,
results of operations or performance.
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 2011 capital expenditure plans assuming: (1)
Talisman's production in 2011 will be approximately 5-10% greater
than 2010, excluding the BP Colombia acquisition; (2) a WTI oil
price of approximately US$75/bbl; and (3) a NYMEX natural gas price
of approximately US$4/mmbtu. Information regarding business plans
generally assumes that the extraction of crude oil, natural gas and
natural gas liquids remains economic. Closing of any transactions
will be subject to receipt of all necessary regulatory approvals
and completion of definitive agreements.
Undue reliance should not be placed on forward-looking
information. Forward-looking information is based on current
expectations, estimates and projections that involve a number of
risks, which could cause actual results to vary and in some
instances to differ materially from those anticipated by Talisman
and described in the forward-looking information contained in this
news release. The material risk factors include, but are not
limited to:
-- the risks of the oil and gas industry, such as operational risks in
exploring for, developing and producing crude oil and natural gas,
market demand and unpredictable facilities outages;
-- risks and uncertainties involving geology of oil and gas deposits;
-- the uncertainty of reserves and resources estimates, reserves life and
underlying reservoir risk;
-- the uncertainty of estimates and projections relating to production,
costs and expenses;
-- the impact of the economy and credit crisis on the ability of the
counterparties to the Company's commodity price derivative contracts to
meet their obligations under the contracts;
-- potential delays or changes in plans with respect to exploration or
development projects or capital expenditures;
-- fluctuations in oil and gas prices, foreign currency exchange rates and
interest rates;
-- the outcome and effects of any future acquisitions and dispositions;
-- health, safety and environmental risks;
-- uncertainties as to the availability and cost of financing and changes
in capital markets;
-- risks in conducting foreign operations (for example, political and
fiscal instability or the possibility of civil unrest or military
action);
-- changes in general economic and business conditions;
-- the possibility that government policies or laws may change or
governmental approvals may be delayed or withheld; and
-- results of the Company's risk mitigation strategies, including insurance
and any hedging activities.
The foregoing list of risk factors is not exhaustive. Additional
information on these and other factors, which could affect the
Company's operations or financial results are included in the
Company's most recent Annual Information Form. In addition,
information is available in the Company's other reports on file
with Canadian securities regulatory authorities and the United
States Securities and Exchange Commission (SEC). Forward-looking
information is based on the estimates and opinions of the Company's
management at the time the information is presented. The Company
assumes no obligation to update forward-looking information should
circumstances or management's estimates or opinions change, except
as required by law.
Gross Production
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. US readers may
refer to the table headed "Continuity of Proved Net Reserves" in
Talisman's most recent Annual Information Form for a statement of
Talisman's net production volumes by reporting segment that are
comparable to those made by US companies subject to SEC reporting
and disclosure requirements.
Boe Conversion
Throughout this news release, 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 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 do not represent a value
equivalency at the wellhead.
US Dollars
Dollar amounts are presented in US dollars unless otherwise
indicated.
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
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