TLM

Weak North American natural gas prices and volatile economic conditions compelled Talisman Energy (TLM) to trim its 2012 capital spending program by 11% from the 2011 level.

For the current year, Talisman intends to expend slightly more than $4 billion, representing a decrease of over $500 million from 2011. Of the total amount, approximately $1.8 billion (about $400 million lower than last year) has been allocated for North American operations, while $600 million to $700 million will be invested in Southeast Asia.

North Sea will likely incur capital spending of $1.2 billion and the budget for international exploration activities is nearly $600 million, of which one quarter will be spent in Latin America.

Talisman’s expenditure planning supports its medium-term growth target of 5 – 10%. The company expects to witness production growth of up to 5% in 2012, as against an increase of 9% in 2011. Reflecting a diversified portfolio, Talisman has focused its resources to high-return yielding ventures and expects to see liquids production grow at a double rate than natural gas, in the next few years.

North America is expected to generate volumes from its shale portfolio in the range of 630 million cubic feet equivalent per day (mmcfe/d) to 660 mmcfe/d in 2012. Canadian energy explorer Talisman expects to boost liquids production from approximately 25,000 barrels per day (bbl/d) in 2012 to over 60,000 bbl/d by 2015.

Aided by contribution from the Kitan and Jambi Merang projects, Southeast Asia production is expected to increase in 2012 from the prior-year level of 120,000 barrels of equivalent per day (boe/d). Talisman expects to witness average compound annual production growth of 8% from the region over the next few years. The company projected output of 95,000 – 110,000 boe/d in the North Sea.

As a part of strategic repositioning, Talisman is divesting properties that does not fall in line with its long-term growth strategy. In this regard, management aims to shed some of its North Sea assets and concentrate heavily on drilling activities. The company has set a target of $1 billion to $2 billion worth asset divesture in 2012.

Talisman, which operates in the industry along with Canadian Natural Resources Ltd. (CNQ) and EnCana Corp. (ECA), currently, has a Zacks #3 Rank, which is equivalent to a Hold rating for a period of one to three months.

 
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