Talisman Energy Inc. (TSX:TLM) (NYSE:TLM) has announced guidance
for this year. The objective of our 2013 capital and operating plan
is to increase total shareholder returns by unlocking net asset
value and growing cash flow per share. Operationally, the plan
focuses on Talisman's two core areas (the Americas and
Asia-Pacific), increasing the contribution from liquids volumes,
maintaining a strong balance sheet, and driving operational
excellence. All values in this release are in US$ unless otherwise
stated.
2013 Guidance Summary
Executing a focused and disciplined capital spending
program:
-- $3 billion capital budget - a 25% reduction from 2012.
-- 90% of capital directed at liquids and international gas.
-- The majority of capital will be spent in our two core regions.
Replacing low-margin North American natural gas with higher
margin barrels:
-- 375,000-395,000 boe/day production target for 2013.
-- Liquids weighting expected to increase from 35 to 40%.
-- Liquids momentum carries into 2014.
-- High netback international gas expected to account for 25% of
production.
-- Cash flow expected to be approximately $2.5 billion. (i)
-- 2012 asset sales account for the majority of the reduction from last
year.
-- Six core properties account for 60% of cash flow.
(i)assumes $90/bbl WTI oil, $105/bbl Brent oil, $3.60/mmbtu
NYMEX natural gas
Taking steps to unlock net asset value:
-- $2-3 billion of dispositions or joint ventures planned for the next 12-
18 months.
-- $1-1.5 billion in North America.
-- Actively marketing North Duvernay shale and parts of the Montney.
-- $1-1.5 billion of international assets.
-- Options for proceeds include debt reduction and increasing cash flow per
share through short-term development spending or share repurchases.
"We are quickly moving to strengthen and focus our company by
imposing strict capital discipline, increasing the cash margins on
the barrels we produce, and unlocking value through asset sales or
strategic joint ventures," said Hal Kvisle, President and CEO. "Our
focused capital program targets high-margin, near-term
opportunities in our two core areas. We will be less reliant on
asset sales to fund core capital programs in 2013. As a result,
once we execute these planned sales or joint ventures, we will have
the option of using proceeds to pay down debt, or increase cash
flow per share through short-term development spending or share
repurchases.
"Over the past six months, we have stabilized the company. We've
reduced debt by about $750 million over the course of 2012. We will
maintain a strong balance sheet going forward, with a target
debt-to-cash flow ratio of 1.5 times. We are increasingly
protecting our capital program through hedging.
"We are now a much more focused company. Talisman has two core
areas, Asia-Pacific and the Americas (North America and Colombia),
which account for approximately 90% of our production and 85% of
our 2P reserves. We will continue to strengthen and high-grade our
assets within this core. For other areas, we are examining all
options, including harvesting cash flow, ongoing development, joint
venture opportunities, or sale.
"We are unlocking the net asset value (NAV) in our portfolio. We
expect to sell (or joint venture) $2-3 billion of non-core assets
over the next 12-18 months to unlock NAV not currently reflected in
our share price. We are actively marketing our stake in both the
North Duvernay shale play and parts of our Montney position.
"We are building oil and liquids momentum in 2013, which will
continue into next year. Talisman has a large inventory of liquids
and high netback international gas opportunities within our
existing portfolio. In 2013, approximately 90% of our capital
program is directed at these cash flow-generating opportunities. We
plan to grow five key liquids projects - currently producing 10,000
bbls/day - to approximately 65,000 bbls/day in 2014.
"Operational excellence and capital efficiency are top
priorities. We will improve all aspects of our cost structure, with
the objective of increasing cash margins on every barrel we
produce. A major focus will be to continue to improve drilling
performance in the Eagle Ford. Significant progress has been made
over the past two years and we will continue to lower costs and
reduce drilling times. We are also taking steps to reduce our run
rate for net general and administrative (G&A) costs by $100-150
million by the end of 2013.
"This plan is the result of an in-depth review of our strategy
and business by our Board of Directors and management. I believe we
now have a focused and deliberate path forward that will both
unlock, and create sustainable growth in, shareholder value. We
have started to reposition Talisman for future cash-flow-per-share
growth on the foundation of a stronger balance sheet, better
capital discipline, a more focused portfolio, and operational
excellence."
In October 2012, Talisman set four strategic priorities - which
are described below - along with actions and outcomes.
Priority 1 -- live within our means. We will set capital
spending budgets that can be largely funded by operating cash
flows. We will maintain balance sheet strength so that we are able
to respond to quality investment opportunities within our core
regions.
We are reducing our capital budget from $4 billion in 2012 to $3
billion in 2013 - a reduction of 25%.
Priority 2 -- focus our capital program. We will invest in
projects (focused in our two core regions) that come onstream more
quickly, and deliver sustainable cash flow over the longer term. We
will reduce upfront capital invested in high-risk exploration.
The 2013 capital program will focus on near-term, higher netback
opportunities. Exploration spending has been cut in half, and is
directed primarily at proving up substantial oil potential in
Colombia, Kurdistan and Asia-Pacific. Long-dated exploration
spending in 2013 is expected to account for only about 5% of
Talisman's total capital spend.
Priority 3 -- improve operational performance and reduce cost
structure. We will do things better, faster, safer, and at lower
cost. Our aim is to enhance project execution and to improve
margins on every barrel we produce.
Talisman is reviewing all aspects of our cost structure. In
2013, we are taking actions to reduce G&A costs, and will
continue to improve drilling performance in the Eagle Ford.
Priority 4 -- unlocking net asset value of the portfolio.
Talisman's asset base includes large positions in several
long-dated plays that generate little to no cash flow. We will
surface value for shareholders. We will continue to high-grade our
portfolio and consider divestments and joint ventures where
underlying asset values are not reflected in our share price.
Our target is to unlock $2-3 billion in value through asset
sales or joint ventures over the next 12-18 months.
2013 Guidance
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Production range Capital
Region Play (mboe/d) ($ million)
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Americas Marcellus 68-70 approx. 150
---------------------------------------------------------------
Eagle Ford approx. 30 approx. 650
---------------------------------------------------------------
Edson/Duvernay/Montney 62-64 approx. 270
---------------------------------------------------------------
Other 10-12 approx. 30
---------------------------------------------------------------
Colombia approx. 20 approx. 250
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Asia-Pacific Indonesia 74-79 approx. 190
---------------------------------------------------------------
Malaysia 40-43 approx. 240
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Vietnam approx. 8 approx. 140
---------------------------------------------------------------
Australia/PNG approx. 8 approx. 80
---------------------------------------------------------------
Algeria approx. 14 approx. 25
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Other North Sea 41-46 approx. 800
---------------------------------------------------------------
Kurdistan - approx. 70
---------------------------------------------------------------
Other & Corp. - approx. 100
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375-395 approx. $3,000
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The Americas - large resource base and liquids-rich
opportunities
North America
Talisman is well positioned in five leading plays in North
America, with over 35 tcfe (approximately 6 billion boe) of
contingent resource in an area of 1.3 million net acres. We have
material positions in three liquids-rich plays and upside exposure
in two of the best dry gas plays in North America.
A significant portion of this resource base is located in our
Canadian heritage region, which stretches from Fort St. John in
northeastern British Columbia to Edson in west-central Alberta.
Here, we have a large, contiguous land base, providing extensive
running room. This land is supported by company-operated midstream
infrastructure.
Talisman has established itself as a top-tier operator in the
Marcellus shale play, with 5 tcf of contingent resource and an
estimated 1,600 prospective drilling locations. The play is
currently self-funded and provides material upside with an increase
in North American natural gas prices.
In the current low natural gas price environment, we have
sharpened our focus in North America in 2013, reducing spending on
dry gas plays. Our short-term priority is to continue to develop
the liquids-rich Eagle Ford shale play, where production growth
combined with capital and operating efficiency improvements will
deliver considerable cash flow from this high-cash margin play.
In addition, our 2013 priorities for North America include
drilling to hold strategic land positions in some of our dry gas
plays. We will also seek to monetize assets with minimal cash flow
and high net asset values, specifically the Montney and North
Duvernay plays.
We plan to spend approximately $1.1 billion in our core North
American business in 2013 - a decrease of roughly 30% from the
previous year. Approximately 80% of capital is being allocated to
three liquids-rich plays, with a significant reduction in spending
on dry gas plays. This activity set positions Talisman to double
its North American liquids production over the next few years.
In the Eagle Ford, we will continue to focus on liquids-rich
parts of the acreage, and we are increasing pad drilling in 2013.
We have built a secure egress position and we entered the year with
50 uncompleted wells, which we plan to complete and tie-in.
In the liquids-rich Duvernay shale, we hold approximately
350,000 net acres. We recently completed a well reporting one of
the highest liquids ratios in the play and we plan continued
appraisal drilling in 2013.
At Wild River, we are growing NGL volumes through development of
this multi-zone play, with a new Deep Cut liquids extraction
facility that should be operational by the end of this year.
In the Montney, the majority of the capital program is funded by
our joint venture partner. Here, we will continue to assess and
appraise the property and continue to develop the liquids-rich
eastern part of the play. We will also invest capital at Edson to
maintain mineral rights and assess liquids-rich opportunities.
In the Marcellus shale, we will selectively spend capital to
hold strategic core acreage positions.
Colombia
In the three years since the Equion joint venture, we have
drilled some exciting exploration wells, completed a successful
stratigraphic program - which indicates large heavy oil potential
-and secured interest in a key pipeline to access markets. With
these activities, we have moved into the development phase.
We have three key areas in Colombia: the Equion joint venture
(with the Piedemonte complex), the heavy oil region (Block CPO-9
and CPE-6), and the Ocensa pipeline. Part of Talisman's Niscota
license (adjacent to Piedemonte) and operatorship is being
transferred to Equion. We plan to spend approximately $250 million
on exploration and development activities in Colombia in 2013.
The majority of production comes from Piedemonte within our
Equion joint venture. In 2012, daily production from Colombia
averaged 17,000 boe/day of high netback liquids and natural gas. In
2013, we will continue to progress toward Piedemonte Phase II
facilities expansion. Exploration activities in the Niscota Block
continue with imminent flow testing of the Huron-2 well and ongoing
drilling of the Huron-3 well.
In the heavy oil region, we have secured the Exploration
Environmental License for CPO-9, allowing us to move forward with a
seven-well Akacias appraisal program with the intention of flowing
wells on extended well tests in 2013. An exploration well in the
Lorito prospect is also planned. In CPE-6, 3D seismic is ongoing.
Upon license approval, we will drill and flow test three wells
prior to proceeding toward development activity. While we have made
progress on securing permits, permitting delays continue to affect
the pace of development.
Talisman now has ownership in 12.15% of the Ocensa pipeline and
approximately 55,000 bbls/day of capacity, plus an additional
13,900 bbls/day through Equion. Ocensa is now a profit centre for
the company, generating dividends from our ownership position and
marketing/capacity fees from oil transport capacity that is in
short supply in the Llanos Basin. As Talisman's production from
Blocks CPO-9, CPE-6, and the Niscota Block ramp up, we will have
access to the export facilities on the Caribbean coast.
Monetization of all or part of our Ocensa pipeline equity is also
an option.
Asia-Pacific - high netback self-funded growth
Asia-Pacific is characterized by rapid economic growth
supporting strong energy demand. Talisman's portfolio in the region
is anchored by projects at Corridor (South Sumatra, Indonesia) and
PM-3 CAA (Malay Basin, offshore Malaysia/Vietnam), which are
connected to high netback natural gas markets through existing
pipeline infrastructure. We have been operating in the region for
20 years and have demonstrated our operating capability with a
strong track record of consistent, safe delivery. We have
established close working relationships with host governments and
national oil companies to take full advantage of the region's
investment opportunities. The company is on track to deliver
average production growth of approximately 8% per annum over the
medium term, and the region is expected to contribute over $400
million annually in free cash flow to Talisman.
Total capital spending in the region is expected to be
approximately $650 million, with five projects accounting for 85%
of the total.
The focus of the Malay Basin is long-life production and cash
flow. The PM-3 CAA fields are characterized by multiple stacked
reservoirs, which offer significant opportunities for increased
recoveries. In the near term, we will maintain production through
infill drilling, well interventions, and continuous operations
improvements. We are currently in discussion with key stakeholders
with respect to an extension of the current PM-3 CAA license, with
the blocks expiring in 2017 and 2018. In addition, we are looking
for near-field exploration opportunities.
Talisman's acreage in the Sabah Basin provides access to
low-cost discovered oil and gas reserves, with extensive
infrastructure in place. In late 2012, we took over operatorship of
the Kinabalu field and will seek to enhance production through
workovers, development drilling, and enhanced oil recovery
techniques. We hold two large exploration licenses next to Kinabalu
where new 3D seismic has identified potential hydrocarbons, and two
exploration wells will be drilled in 2013.
In Indonesia, the South Sumatra area includes key assets such as
Corridor and Jambi Merang. At Corridor, the company has a very
large natural gas reserve base. Here, we continue to invest in
development opportunities, including proving up additional reserves
to potentially allow sanction of another production train at the
Suban field. At Jambi Merang, we will invest to maintain a high
level of operating efficiency and consider expanding into the next
development phase.
In Vietnam, Talisman is completing the HST/HSD field
development, which is expected to come onstream in the second half
of 2013 with net production expected at approximately 10,000
boe/day.
In PNG, we are continuing our gas aggregation strategy across
our large land position, with potential of up to 20 tcf of
undiscovered petroleum initially in place (unrisked). Our principal
partner, Mitsubishi, brings funding and LNG expertise. In the near
term, we will high-grade our land position to maintain quality and
focus, while we execute the Stanley condensate recovery scheme with
the goal of bringing on first production in late 2014 at the
earliest.
Other Operating Areas
The North Sea
The North Sea is an oil-based portfolio in a strong Brent oil
price environment. With 20 years of operating experience in the
basin, Talisman has focused on operating late-life, mature fields.
In recent years, we have not invested adequate capital in the UK,
which has contributed to asset reliability challenges as well as
reduced production capability.
Recognizing the need for additional capital and looking to
reduce our exposure to inherent production volatility, Talisman
sold a 49% working interest in our UK assets to Sinopec for $1.5
billion in late 2012.
This transaction enables increased investment by the joint
venture in the UK North Sea, while allowing Talisman to reduce net
spending. In 2013, investments will be made to improve operational
efficiency in the UK and to execute economic redevelopment and life
extension projects.
Redevelopment of the Montrose area - including facilities
upgrades, development drilling, and the tie-back of undeveloped
fields - accounts for approximately one-half of our UK North Sea
spending this year. Investment will also be directed to infill
drilling, water injection, platform, and subsea upgrades. We will
also re-examine the possibility of developing the Auk South
field.
In Norway, spending will be focused at Brage and Varg, including
development drilling, field extensions, near-field exploration, and
the Varg gas export project. In 2012, the Yme project experienced
significant delays, quality issues and cost overruns. Given the
uncertainty of the timing of first oil, Talisman removed Yme from
its forward production projections and recorded impairment
losses.
Talisman's overall capital spending in the region is expected to
be about one-third less in 2013, after accounting for the joint
venture. Our strategy across the North Sea is to optimize value
through near-term opportunities, while driving safe, efficient, and
reliable operations.
Kurdistan Region of Iraq
Talisman operates two blocks in the Kurdistan Region of Iraq:
Kurdamir and Topkhana. Kurdistan is a world-class exploration
opportunity in an under-explored basin. In 2012, we made a
significant oil discovery in Kurdamir. Talisman's net 2C contingent
resources in Kurdamir/Topkhana today are 114 mmbbls of liquids and
1.5 tcf of natural gas. Further appraisal drilling is targeted at
proving the significant oil upside that exists. We currently
estimate 329 mmbbls and 1.2 tcf of net unrisked prospective
resource.
One of our key priorities this year is to recognize value in our
portfolio. To do so, we will continue exploration and appraisal
drilling to establish the extent of the resource base in Kurdistan.
In 2013, we will drill two wells: Kurdamir-3 to evaluate the extent
of the oil column, and a second well at Topkhana. Once these
drilling programs are completed, we will consider all options to
unlock value in this asset.
Talisman Energy Inc. is a global upstream oil and gas company,
headquartered in Canada. Talisman has two core operating areas: the
Americas (North America and Colombia) and Asia-Pacific. 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 expenditures, company-wide
and regionally; expected production, company-wide; regionally and
by product; expected divestitures and/or JVs and targeted timing
and targeted value of disposals; potential share repurchase and
other potential reinvestment alternatives; targeted debt to cash
flow ratio; expected G&A reductions; expected cash flow -
company-wide, regionally and by product-type; expected free cash
flow; expected benefits of the JV with Sinopec in the UK; expected
improvement in drilling performance in the Eagle Ford and expected
associated benefits; planned drilling and rigs and drilling
strategy in North America; expected completion of the Deep Cut
facility; expected seismic, drilling, testing and other activity in
Colombia; expected benefits of the ownership share in the Ocensa
pipeline; expected exploration and development activities in
Talisman's Asia-Pacific region; possible exploration upside in the
Sabah basin; potential sanction of production train at the Suban
field; expected completion of and production at HST/HSD; targeted
first production at Stanley; planned focus and strategy in the UK;
planned drilling, extensions and exploration in Norway; planned
upgrades, drilling and tie-back in the UK; planned drilling in
Kurdistan; and other expectations, beliefs, plans, goals,
objectives, assumptions, information and statements about possible
future events, conditions, results of operations or performance.
The company priorities disclosed in this news release are
objectives only and their achievement cannot be guaranteed.
Indicative capital estimates for 2013, which are provided in this
news release, are subject to change.
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 2013 assumes
escalating commodity prices. 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; risks and uncertainties involving geology of
oil and gas deposits; risks associated with project management,
project delays and/or cost overruns; uncertainty related to
securing sufficient egress and access to markets; 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, including
decommissioning liabilities; risks related to strategic and capital
allocation decisions, including 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, interest rates and tax or royalty rates;
the outcome and effects of any future acquisitions and
dispositions; health, safety, security and environmental risks,
including risks related to the possibility of major accidents;
environmental regulatory and compliance risks, including with
respect to greenhouse gases and hydraulic fracturing; uncertainties
as to the availability and cost of credit and other financing and
changes in capital markets; risks in conducting foreign operations
(for example, civil, political and fiscal instability and
corruption); risks related to the attraction, retention and
development of personnel; changes in general economic and business
conditions; the possibility that government policies, regulations
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 or strategy are included
in Talisman'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. Forward-looking
information is based on the estimates and opinions of the Company's
management at the time the information is presented. The Company
assumes no obligation to update forward-looking information should
circumstances or management's estimates or opinions change, except
as required by law.
Oil and Gas Information
Reserves
National Instrument 51-101 ("NI 51-101") of the Canadian
Securities Administrators imposes oil and gas disclosure standards
for Canadian public companies engaged in oil and gas activities.
Talisman has obtained an exemption from Canadian securities
regulatory authorities to permit it to provide certain disclosures
in accordance with the US disclosure standards, in addition to the
disclosure mandated by NI 51-101, in order to provide for
comparability of oil and gas disclosure with that provided by US
and other international issuers. Accordingly, in addition to the
reserves data and certain other oil and gas information included in
this news release which is provided in accordance with NI 51-101,
there is data and information provided in accordance with US
disclosure standards.
A separate exemption granted to Talisman also permits it to
disclose internally evaluated reserves data. Any reserves and
resources data contained in this news release reflects Talisman's
estimates of its reserves and resources. While Talisman annually
obtains an independent audit of a portion of its proved and
probable reserves, no independent qualified reserves evaluator or
auditor was involved in the preparation of the reserves and
resources data disclosed in this news release.
Production and Reserves Volumes
Unless otherwise stated, production volumes and reserves
estimates are stated on a Company interest basis prior to the
deduction of royalties and similar payments. In the US, net
production volumes and reserve estimates are reported after the
deduction of these amounts. US readers may refer to the table
headed "Continuity of Net Proved Reserves" in Talisman's most
recent Annual Information Form for a statement of Talisman's net
production volumes and reserves. The use of the word "gross" in
this news release means a 100% interest prior to the deduction of
royalties and similar payments.
Resources
In this news release, Talisman also discloses contingent
resources, prospective resources and PIIP as at February 28, 2013.
Where not otherwise indicated, in this news release, the contingent
resources provided are 2C and the prospective resources provided
are unrisked best estimates.
Contingent resources are defined as those quantities of
petroleum estimated, as of a given date, to be potentially
recoverable from known accumulations using established technology
or technology under development, but which are not currently
considered to be commercially recoverable due to one or more
contingencies. The contingencies that prevent the resources from
being classified as reserves are: lack of gas sales contract;
additional testing; production and performance appraisal
activities; development time frame too far in the future;
demonstration of economic viability; facilities and egress; access
to equipment and services; hydraulic fracturing technology;
commodity prices and regulatory approvals. There is no certainty
that it will be commercially viable to produce any portion of the
resources. In addition to these contingencies and uncertainties the
development of commerciality of resources is also subject to a
number of risk factors, as discussed more fully above.
Prospective resources are those quantities of petroleum
estimated, as of a given date, to be potentially recoverable from
undiscovered accumulations by application of future development
projects. Prospective resources have both an associated chance of
discovery and a chance of development. There is no certainty that
any portion of the resources will be discovered. If discovered,
there is no certainty that it will be commercially viable to
produce any portion of the resources. Unrisked prospective
resources are not risked for change of development or chance of
discovery. If a discovery is made, there is no certainty that it
will be developed or, if it is developed, there is no certainty as
to the timing of such development. In this news release risked
prospective resources have been risked for chance of discovery but
have not been risked for chance of development. If a discovery is
made, there is no certainty that it will be developed or, if it is
developed, there is no certainty as to the timing of such
development.
PIIP is defined as petroleum initially in place and is that
quantity of petroleum that is estimated to exist originally in
naturally occurring accumulations. It is the total quantity of
petroleum that is estimated, as of a given date, to be contained in
known accumulations, prior to production. PIIP estimates may
contain all resource classifications, both discovered and
undiscovered. There is no certainty that any portion of the
resources will be discovered. If discovered, there is no certainty
that it will be commercially viable to produce any portion of the
resources.
Non-Core Assets
In this news release, all references to "core" and "non-core"
assets and properties align with the company's current public
disclosure regarding its assets and properties.
BOE Conversion
Throughout this news release, barrels of oil equivalent (boe)
are 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 references to mcf equivalents (mcfes) which are
calculated at a conversion rate of one barrel of oil to six
thousand cubic feet of gas. Boes and Mcfes may be misleading,
particularly if used in isolation. A boe conversion ratio of
6mcf:1bbl and an mcfe conversion ratio of 1bbl:6mcf are based on an
energy equivalence conversion method primarily applicable at the
burner tip and do not represent a value equivalency at the well
head.
Netbacks
Talisman also discloses netbacks in this news release. Netbacks
per boe are calculated by deducting from the sales price associated
royalties, operating and transportation costs.
IFRS
The financial information for 2012 and 2013 is presented in
accordance with International Financial Reporting Standards (IFRS).
IFRS may differ from generally accepted accounting principles in
the US.
Non-GAAP Financial Measures
Included in this news release are references to financial
measures used in the oil and gas industry such as free cash flow,
cash flow and capital expenditure. These terms are not defined by
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.
Free Cash Flow is used by management to assess the amount of
funds available for reinvestment or to reduce debt levels or return
to shareholders. Free cash flow is the net of cash provided by
operating, investing and financing activities before the repayment
or issuance of long-term debt.
Cash Flow represents net income before exploration costs,
DD&A, impairment, 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.
The company's 2013 cash provided by operating activities is
expected to be $1.8 billion.
Capital (or "capital spend" or "exploration and development
spending") is calculated by adjusting the capital expenditure per
the financial statements for exploration costs that were expensed
as incurred, including the capital spend of the jointly controlled
entities of the company.
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Year Ended
-------------------------------------------------------------------
(US$ millions) December 31, 2012
-------------------------------------------------------------------
-------------------------------------------------------------------
Exploration, development and other 3,658
-------------------------------------------------------------------
Exploration expensed 346
-------------------------------------------------------------------
Capital 4,004
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The company's 2013 estimated capital expenditure, pursuant to
IFRS, is expected to be $2 billion.
Forecasted Cash Flow and Forecasted Free Cash Flow:
This news release also contains discussions of anticipated cash
flow and anticipated free cash flow both on an aggregate and per
share basis. The material assumptions used in determining estimates
of cash flow are: the anticipated production volumes; estimates of
realized sales prices, which are in turn driven by benchmark
prices, quality differentials and the impact of exchange rates;
estimated royalty rates; estimated operating expenses; estimated
transportation expenses; estimated general and administrative
expenses; estimated interest expense, including the level of
capitalized interest; and the anticipated amount of cash income tax
and petroleum revenue tax. The amount of is inherently difficult to
predict.
Anticipated production volumes are, in turn, based on the
midpoint of the estimated production range and do not reflect the
impact of any potential asset dispositions or acquisitions. The
completion of any contemplated asset acquisitions or dispositions
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
acquisitions or dispositions.
In addition to the assumptions that underpin forecasted cash
flow, forecasted free cash flow also includes assumptions around
capital investments and financing activities.
Contacts: Talisman Energy Inc. - Media and General Inquiries
Phoebe Buckland Manager, External Communications
403-237-1657tlm@talisman-energy.com Talisman Energy Inc. -
Shareholder and Investor Inquiries Lyle McLeod Vice-President,
Investor Relations 403-767-5732tlm@talisman-energy.com
www.talisman-energy.com
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