| November 2, 2010 |
| Talisman Energy Reports Underlying Production Up 12%
Adds Liquids Opportunities in Colombia, Norway and the Eagle Ford Shale |
CALGARY, ALBERTA--(Marketwire - Nov. 2, 2010) - Talisman Energy Inc. (TSX:TLM) (NYSE:TLM) reported its operating and financial results for the third quarter of 2010.
- Cash flow (1) during the quarter was $727 million, a decrease from $838 million a year ago, which included significant cash gains on financial instruments. Year-to-date, cash flow was $2.4 billion.
- Net income was $121 million, a four-fold increase from $30 million a year earlier, primarily due to increased commodity prices.
- Earnings from continuing operations (1) were $22 million, compared to $95 million in the third quarter of 2009, largely due to the impact of foreign exchange rate movements on working capital balances.
- Production from continuing operations averaged 389,000 boe/d, 12% above last year. Production averaged 404,000 boe/d, 1% over the third quarter of 2009.
- Net debt (1) at quarter end was $1.6 billion, down from $2.1 billion at December 31, 2009.
- Production from the Pennsylvania Marcellus shale play averaged 222 mmcf/d during the quarter and was approximately 270 mmcf/d at the beginning of November.
- The company entered into an agreement to acquire a material land position in the liquids rich window of the Eagle Ford shale play.
- Talisman announced the joint acquisition of BP Exploration Company (Colombia) Limited, which will add over 12,000 boe/d of production, as well as exploration and development upside.
- The company entered into agreements to acquire interests in licences in Norway, which include a number of oil discoveries.
- Production from the Burghley field started on schedule, with an initial gross rate of 15,000 bbls/d.
- Talisman declared a semi-annual dividend of 12.5 cents per share, payable on December 31, 2010 to shareholders of record at the close of business on December 10, 2010.
(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.
"Talisman had a very active third quarter in terms of acquisitions, each of which strengthen our portfolio in line with the strategy," said John A. Manzoni, President & CEO. "We have almost doubled our land position in the Eagle Ford shale and, at the same time, increased the liquids proportion of our total acreage. We are now very well positioned in the high quality, liquids rich transition window of the play.
"The acquisition in Colombia will add existing production, with exploration and development upside in an area contiguous with our existing acreage in the Niscota Block. It also provides access to a very strategic pipeline, which will help underpin our exploration program. Recent exploration drilling results have been very encouraging with two stratigraphic tests on Block 6 showing oil and the third nearing completion. We are also encouraged by an exploration well on Block 9, which is about to test.
"In Norway, we completed two relatively small deals, acquiring an interest in the Beta and Grosbeak discoveries, which will level our long-term production profile and provide exploration upside. Our disposition program is progressing in line with our stated goals. Our non-core asset sales in North America have been heavily weighted towards natural gas and should generate in excess of $2 billion in proceeds this year.
"We have achieved the majority of the portfolio transition we laid out around a year ago and expect to see production growth from this point. Excluding the effect of asset sales, production this quarter is up 12% year over year, and 4% compared to the second quarter. In light of expected additional volume increases in the fourth quarter, and timing of asset sales, we now expect production for 2010 to average around 415,000 boe/d, above our previous guidance of just over 400,000 boe/d.
"We continue to deliver very strong results from our North American shale portfolio. Shale now accounts for 36% of our North American natural gas volumes, up from 6% a year ago. Natural gas production from continuing operations in North America was up 24% compared to the third quarter of 2009.
"This is largely driven by the Pennsylvania Marcellus, where Talisman's production averaged 222 mmcf/d during the quarter, up from 38 mmcf/d a year ago. With production currently averaging approximately 270 mmcf/d, we are very confident that we will exit 2010 at the upper end of the 250-300 mmcf/d target range we have projected all year.
"We are increasingly excited by our Montney shale acreage, drilling seven development and two pilot wells in the quarter. With excellent results in the Farrell Creek area, Talisman is evaluating a strategic partnership to help fund development of this very large shale resource. In Quebec, we drilled one well and completed two others during the quarter and now plan to complete the remaining two wells in the first half of 2011.
"North Sea volumes were up 11% year over year, with strong infill drilling results and improved uptime in Norway. First oil from the UK Burghley field was delivered in late October, and the Auk North development is on schedule, with first oil targeted for early 2011. In Norway, the Yme topsides are ready for installation, and we are now waiting for a clear weather window to complete tow-out and installation. Once on location, installation will take approximately three months, which we expect to complete in the first half of next year.
"In Southeast Asia, Talisman continues to deliver strong production volumes, with growing sales from the Corridor project in Indonesia and successful infill drilling at the PM-3 CAA field offshore Malaysia/Vietnam. The Jambi Merang project in Indonesia is on schedule for mid-2011, with two out of three development wells drilled.
"Cash flow is down from a year ago; however, this is due to significant cash proceeds, which were realized from hedges in 2009. Excluding the impact of these hedges, cash flow would have been 11% higher than the same quarter last year, as higher production volumes and netbacks more than offset higher cash taxes and royalties.
"Net income during the quarter was up four-fold versus a year ago, largely due to higher commodity prices. Earnings from continuing operations were $22 million during the quarter, with a negative impact of approximately $70 million compared to the third quarter of last year, due to the impact of foreign currency movements on working capital balances.
"We are well positioned during this period of low natural gas prices in North America. Our balance sheet is strong, with approximately $2 billion of cash at the end of the quarter, although this will come down as we close some acquisitions and due to the natural phasing of capital spending. And, of course we still have undrawn bank lines of $2.8 billion. We have options in terms of capital allocation into next year and will finalize these plans over the coming months.
"I believe this quarter reflects the start of a new phase for Talisman. We are now delivering strong underlying production growth, we have increased production guidance for 2010, and I am very confident we can maintain this momentum of increasing profitability and production into next year."
Financial Highlights
Three months ended Nine months ended
September 30, 2010 2009 2010 2009
---------------------------------------
Cash flow ($ million) 727 838 2,376 3,042
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Cash flow per share (2) 0.71 0.83 2.33 3.00
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---------------------------------------
Net income ($ million) 121 30 952 548
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Net income per share 0.12 0.03 0.94 0.54
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---------------------------------------
Earnings from continuing
operations ($ million) 22 95 263 560
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Earnings from continuing
operations per share (2) 0.02 0.09 0.26 0.55
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---------------------------------------
Average shares outstanding (million) 1,017 1,015 1,018 1,015
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(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.
Cash flow during the quarter was $727 million compared to $838 million a year earlier with higher netbacks partially offset by higher taxes and royalties. The year over year comparison is affected by significant cash gains on held-for-trading financial instruments in 2009. Year-to-date, Talisman has generated $2.4 billion in cash flow, down from $3 billion in 2009.
Net income for the quarter was $121 million compared to $30 million a year earlier as a result of increased netbacks. Earnings from continuing operations, which exclude non-operational items, were $22 million during the quarter, versus $95 million a year earlier. The decline was primarily due to unfavourable foreign exchange variances and cash gains on financial instruments in 2009.
Dry hole expense was $44 million during the quarter, a $33 million decrease compared to the same period of 2009. Depreciation, Depletion and Amortization (DD&A) expense was $568 million, up 7% from the same period in 2009 as a result of increased production. General and administrative costs increased $39 million, mainly as a result of one-time set up costs for new offices in the US and Papua New Guinea/Australia.
Exploration and development spending was $1,056 million during the quarter, bringing the total to $2.7 billion for the year. Talisman's net long-term debt at September 30 was $1.6 billion, down from $2.1 billion at year-end. The reduction was primarily due to proceeds from asset dispositions that closed during the first three quarters of 2010.
Production
Three months ended Nine months ended
September 30, 2010 2009 2010 2009
---------------------------------------
Oil and liquids (bbls/d) 175,721 192,293 188,062 212,949
---------------------------------------
Natural gas (mmcf/d) 1,369 1,253 1,371 1,271
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Total (mboe/d) 404 401 416 425
---------------------------------------
---------------------------------------
Continuing operations (mboe/d) 389 348 383 362
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Production from continuing operations averaged 389,000 boe/d, a 12% increase over the previous year. This was due principally to increased oil and liquids volumes in Scandinavia and increased gas volumes in North America, Scandinavia and Southeast Asia, partially offset by decreased oil and liquids volumes in the UK and Southeast Asia. Total production was relatively flat, the result of asset sales.
Netbacks
Three months ended Nine months ended
September 30, 2010 2009 2010 2009
---------------------------------------
Sales 53.17 50.29 54.38 47.36
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Royalties 8.35 8.16 8.52 6.74
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Transportation 1.47 1.41 1.51 1.37
---------------------------------------
Operating expenses 12.36 13.56 12.81 12.93
---------------------------------------
Netback ($/boe) 30.99 27.16 31.54 26.32
---------------------------------------
---------------------------------------
Oil and liquids netback ($/bbl) 43.88 38.20 43.93 35.17
---------------------------------------
Natural gas netback ($/mcf) 3.50 2.82 3.56 2.90
---------------------------------------
WTI oil prices averaged US$76.20/bbl during the quarter, down from US$78.04/bbl in the second quarter, but up from US$68.30/bbl a year ago. Talisman's average natural gas price increased 13% relative to a year ago, with a stronger Canadian dollar offsetting some of the year over year gains in NYMEX prices.
Unit operating expenses decreased 9% over the same period last year, due to the UK and Norway. Total operating costs were lower in the UK, helped by a weakening of the UK Pound Sterling relative to the C$, partially offset by lower liquids production during the quarter. Unit operating expenses in Scandinavia decreased 35% over the same period last year as a result of increased production.
Royalty expense was $310 million, up 26% from $246 million in 2009, due to increased commodity prices and higher production. Royalty rates averaged 16%, compared to 15% a year ago.
Netbacks in the third quarter averaged $30.99, a 14% increase from a year earlier. Talisman's realized price of $53.17 was 6% higher than 2009, due principally to higher oil and liquids prices, partially offset by the strengthening of the C$ relative to the US$.
North America
In North America, production from continuing operations was 786 mmcfe/d (131,000 boe/d), an increase of 19% year-over-year, with natural gas volumes from continuing operations increasing by 24% to 663 mmcf/d. Production from shale averaged 243 mmcf/d during the quarter, up from 39 mmcf/d a year earlier. Shale now accounts for 36% of Talisman's North American natural gas production, up from 6% at the end of the third quarter of 2009.
Total production averaged 875 mmcfe/d (145,800 boe/d) for the third quarter, down 9% from a year ago as a result of non-core asset sales. Capital spending in North America was $517 million, including $471 million related to shale activities.
In the Pennsylvania Marcellus area, production averaged 222 mmcf/d during the quarter, up from 38 mmcf/d during the third quarter of 2009 (up 55% from the previous quarter) and was approximately 270 mmcf/d at the beginning of November. Talisman is confident it will exit the year at the upper end of its 250-300 mmcf/d target. The company drilled 116 gross (109.9 net) Marcellus shale wells during the first three quarters of 2010. Talisman brought 42 gross (41 net) new wells on stream during the quarter for a total of 79 gross (75.5 net) wells since the beginning of the year.
In the Montney shale, the company drilled seven horizontal development wells and brought two new wells on stream at Farrell Creek. Talisman continued its pilot program in the Greater Cypress area, drilling two wells and completing four horizontal wells during the quarter. Talisman exited the quarter with production of 18 mmcf/d in the Montney and remains on track to reach the 40-60 mmcf/d range by year end.
In early October, Talisman announced the creation of a 50/50 joint-venture with Statoil, with Talisman as the initial operator, to acquire 97,000 net acres of high-quality, Eagle Ford shale properties in the liquids rich transition window. The net cost to Talisman of this new acreage will be approximately US$485 million, after Statoil purchases a 50% working interest in Talisman's existing 37,000 net acres in the Eagle Ford. Upon completion of these transactions, expected by year end, Talisman will hold approximately 70,000 net acres. In addition, the joint-venture has options to acquire up to an additional 22,000 acres of land. Talisman expects to have four rigs running in the area by the end of the year.
In the Quebec Utica Shale Talisman drilled one gross well (0.8 net) and completed two wells during the quarter. The remaining two wells will be completed during the first half of 2011.
Production from Talisman's conventional areas was 509 mmcf/d natural gas and 21,000 bbls/d of liquids. The company drilled a total of 37 gross conventional wells (34 net) in the third quarter. In the Cardium play in Alberta, Talisman spudded its first operated pilot well in October, with two more operated pilot wells planned this year.
Talisman continues to progress the sale of conventional, non-core assets in North America. In the third quarter, the company completed sales for a total consideration of $348 million. In the first nine months Talisman has completed transactions for a total of $1.7 billion and expects to complete the sale of in excess of $2 billion of non-core North American assets during 2010.
UK
Production in the UK averaged 71,700 boe/d in the third quarter of 2010, an 11% increase from the previous quarter and flat compared to the same period last year. Increased quarterly production was mainly due to planned shutdowns at Buchan, MonArb and Ross/Blake having less of an impact compared to those in the second quarter at Tweedsmuir and Piper. A Tartan area shutdown is expected to take place during the fourth quarter.
The company spent approximately $154 million on development in the UK during the quarter, primarily directed towards the Auk North project. Auk North is on schedule with first oil targeted for early 2011, with a well spud during the quarter still drilling. Auk South is steadily progressing with construction started on the living quarters during the quarter and first oil is expected in 2012. First oil at the Burghley project was achieved on schedule in late October, with initial gross production of 15,000 bbls/d. Talisman has a 37% working interest in Burghley.
Norway
Production in Norway averaged 50,300 boe/d in the quarter, a 38% increase over the same period in 2009 and flat compared to the previous quarter. The increase over last year predominantly reflects increased operating efficiency at the host platform for the Rev field and successful infill wells at Varg.
Successful infill wells were completed at both Brage and Veslefrikk during the quarter, both of which were spud in the previous quarter.
The Yme topsides were completed and are currently in Stavanger undergoing preparations for the offshore tow and installation, which are weather dependent. Once the topsides are on location, commissioning will take approximately three months. The final pre-startup Yme well was drilled successfully at the end of the quarter, with final well operations taking place in the fourth quarter.
Talisman entered into agreements to acquire a 35% working interest in the PL378 Grosbeak discovery and a 20% interest in the PL375 Beta discovery. These acquisitions also bring exploration upside. Drilling in the area is currently underway with a well at the Beta discovery, and further wells in the licenses are expected to start drilling at the end of this year and during 2011.
The company spent $128 million on development in Norway during the quarter, with approximately two-thirds of the spend on the Yme redevelopment and the development well, with most of the remainder on development drilling.
Southeast Asia
Talisman recorded strong production in the region, with an average of 123,000 boe/d during the quarter, 8% higher than the same period last year and 2% lower than last quarter.
Indonesia achieved another production record. In this quarter, production reached 79,000 boe/d, 2% over last quarter and 19% over the same period last year. The gain is largely due to testing the Suban facilities beyond nameplate production capacity in Corridor, and both LNG trains reaching their design capacity in Tangguh.
In the Ogan Komering JOB block, five of 37 infill wells have been drilled with three wells completed and onstream. The Jambi Merang project remains on schedule for a mid-2011 startup with two of the three new wells drilled. Three gas sales agreements were finalized and are scheduled for signing in the fourth quarter of 2010.
In Malaysia, production averaged 38,000 boe/d, down 9% against the second quarter, and a 5% increase relative to last year. Second quarter production included the one time redetermination of the South Angsi field where Talisman's unit equity increased from 15% to approximately 29%. Without the redetermination, third quarter production would have exceeded the second quarter by 10%. Gas production in the last month of the third quarter reached record highs for 2010, exceeding an average of 300 mmcf/d (gross sales gas).
Northern Fields produced an average of 55,000 gross boe/d (23,000 net boe/d) in the third quarter. Talisman has now drilled eight Northern Fields development wells and one appraisal well in 2010. In an effort to meet high gas demand, a parallel export compressor was installed in August resulting in a production gain of 40 mmcf/d sales gas at minimal cost.
The Southern Fields Incremental Oil Recovery (IOR) phase 1 drilling program is now completed and these wells produced up to 10,000 boe/d gross (3,700 bbls/d net) during the third quarter.
In Vietnam, production averaged 2,000 bbls/d for the third quarter. Drilling of three infill wells in Song Doc began in the third quarter and is expected to be completed in early 2011. Development concepts for HST/HSD fields are being evaluated.
In Australia, production averaged 3,000 bbls/d, down from a year ago due to natural declines and a planned shutdown during the quarter. The first well in the three well Kitan project was drilled during this quarter.
Other Operating Areas
In August, Talisman and Ecopetrol announced the joint acquisition of BP Exploration Company (Colombia) Limited. This acquisition adds 330,000 net acres in close proximity to Talisman's existing holdings in the Niscota Block in the under explored Foothills trend. These assets are of high quality, with both exploration and development upside.
In Algeria, production averaged 13,300 boe/d, down 4% compared to the same period a year ago.
International Exploration
International exploration spending during the third quarter was $162 million. The company continues active drilling in the North Sea, Latin America and Southeast Asia, and there are also a number of seismic programs on going in the next quarter.
In Indonesia, the company is participating in two deep water wells in the North Makassar Basin. The first well, Bravo-1, is currently drilling.
In Papua New Guinea, Talisman will commence a drilling program in the Papuan foreland in the fourth quarter. Seismic acquisition is currently underway.
In Colombia, Talisman had a successful well in the CPE-6 stratigraphic drilling program within the Llanos Basin. The Guairuro-2 well was drilled to a depth of 3,300 feet and encountered a net oil pay zone of 31.5 feet. This well further reinforces the potential of this region and the third well is nearing completion. Talisman, along with its partner and operator, Ecopetrol, also spudded the Akacias-1 well in CPO-9 in the southwest Llanos Basin and preliminary indications are encouraging.
In Kurdistan, the operator has now successfully dealt with the well control issues on the Kurdamir 1 well and is proceeding to test a lower zone in the Oligocene. There are plans to drill the Topkhana 1 exploration well in Block K39 using a different rig.
In Poland, seismic acquisition is planned to commence in fourth quarter.
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.
Advisory - 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, including expected capital expenditures;
- planned drilling, development, exploration, seismic and testing;
- planned and expected production and exit targets;
- expected landholdings and development upon completion of Eagle Ford acquisitions;
- timing of sales of non-core asset dispositions;
- expected timing of first oil at Auk North and Auk South;
- estimated installation of topsides and drilling at Yme;
- estimated timing of Jambi Merang project;
- estimated timing of completion of drilling at Song Doc;
- commencement of drilling program in Papua New Guinea;
- commencement of seismic acquisition in Poland; and
- other expectations, beliefs, plans, goals, objectives, assumptions, information and statements about possible future events, conditions, results of operations or performance.
The forward-looking information contained herein is based on Talisman's 2010 capital program. Talisman set its 2010 capital expenditure plans assuming: (1) Talisman's production in 2010 will be just over 400,000 boe/d, most of the North American asset sales having closed by mid-year; (2) a US$60/bbl WTI oil price for 2010; and (3) a US$3.50/mmbtu NYMEX natural gas price for 2010. The disposition metrics disclosed assume closing of all dispositions as announced; the final completion of such dispositions is contingent on various factors including the ability of the Company to negotiate acceptable terms of sale and receipt of any required approvals for such transactions. Closing of any acquisitions will be subject to customary conditions, including receipt of all necessary regulatory approvals. Forward-looking information for periods past 2010 assumes escalating commodity prices.
Undue reliance should not be placed on forward-looking information. Forward-looking information is based on current expectations, estimates and projections that involve a number of risks which could cause actual results to vary and in some instances to differ materially from those anticipated by Talisman and described in the forward-looking information contained in this news release. The material risk factors include, but are not limited to:
- the risks of the oil and gas industry, such as operational risks in exploring for, developing and producing crude oil and natural gas, market demand and unpredictable facilities outages;
- risks and uncertainties involving geology of oil and gas deposits;
- uncertainty related to securing sufficient egress and markets to meet shale gas production;
- the uncertainty of reserves and resources estimates, reserves life and underlying reservoir risk;
- the uncertainty of estimates and projections relating to production, costs and expenses;
- the impact of the economy on the ability of the counterparties to our 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 government approvals may be delayed or withheld; and
- results of the Company's risk mitigation strategies, including insurance and 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 and Annual Report. 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.
Advisory - Oil and Gas Information
Talisman makes reference to production volumes throughout this news release. Where not otherwise indicated, 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.
Advisory - Use of 'boe'
Throughout this news release, the calculation of barrels of oil equivalent (boe) is 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. Boe 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 equivalence at the wellhead.
Additional information related to the Company, including its Annual Information Form, can be found on SEDAR at www.sedar.com.
Advisory - Canadian Dollars and GAAP
Dollar amounts are presented in Canadian dollars unless otherwise indicated. Unless otherwise indicated, financial information is presented in accordance with Canadian generally accepted accounting principles that may differ from generally accepted accounting principles in the US. Talisman's Consolidated Financial Statements as at and for the year ended December 31, 2009, contains information concerning differences between Canadian and US generally accepted accounting principles.
Advisory - 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, cash flow per share, earnings from continuing operations, earnings from continuing operations per share 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 cash flow, cash flow per share, earnings from continuing operations, earnings from continuing operations per share and net debt may not be comparable to similarly titled measures 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 that use 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.
($ million, except per
share amounts) Three months ended Nine months ended
---------------------------------------
September 30, 2010 2009 (1) 2010 2009 (1)
----------------------------------------------------------------------------
Cash provided by operating activities 822 747 2,853 2,977
Changes in non-cash working capital (95) 91 (477) 65
----------------------------------------------------------------------------
Cash flow (2) 727 838 2,376 3,042
Less: Cash provided by discontinued
Operations (1) (21) (78) (184) (325)
----------------------------------------------------------------------------
Cash flow from continuing operations
(1) (2) 706 760 2,192 2,717
----------------------------------------------------------------------------
Cash flow per share (1) (2) 0.71 0.83 2.33 3.00
----------------------------------------------------------------------------
Cash flow from continuing operations
per share (1) (2) 0.69 0.75 2.15 2.68
----------------------------------------------------------------------------
(1) Comparatives restated for operations classified as discontinued since
September 30, 2009.
(2) This is a non-GAAP measure.
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.
($ million, except per share amounts)
Three months ended Nine months ended
September 30, 2010 2009 (5) 2010 2009 (5)
----------------------------------------------------------------------------
Income (loss) from continuing
operations 68 25 721 (477)
Unrealized (gains) losses on
financial instruments (1)
(tax adjusted) (86) 33 (331) 884
Stock-based compensation (2)
(tax adjusted) 42 71 (35) 174
Foreign exchange on net debt and
future income taxes 14 (72) (9) (42)
Future tax (recovery) of unrealized
Foreign exchange losses on net
foreign denominated debt (3) (16) 38 (83) 21
----------------------------------------------------------------------------
Earnings from continuing operations (4) 22 95 263 560
----------------------------------------------------------------------------
Per share (4) 0.02 0.09 0.26 0.55
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(1) Unrealized losses on financial instruments relate to the change in the
period of the mark-to-market value of the Company's outstanding
held-for-trading financial instruments.
(2) Stock-based compensation expense relates principally to the
mark-to-market value of the Company's outstanding stock options and
cash units at September 30. 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.
(3) Tax adjustments reflect future taxes relating to unrealized foreign
exchange gains and losses associated with the impact of fluctuations in
the Canadian dollar on net foreign denominated debt.
(4) This is a non-GAAP measure. Refer to the section in the news release
entitled 'Non-GAAP Financial Measures' for further explanation and
details.
(5) Comparatives restated for operations classified as discontinued
subsequent to September 30, 2009, and for foreign exchange on net
debt and future income tax in order to be presented on the same basis
as 2010.
This calculation does not reflect differing accounting policies and conventions between companies. All amounts are reported on an after-tax basis.
Net debt is calculated by adjusting the Company's long-term debt per the financial statements for bank indebtedness and cash and cash equivalents. The Company uses this information to assess its true debt position since cash could potentially be used to pay down long-term debt.
($ million)
September 30 December 31
2010 2009
----------------------------------------------------------------------------
Long-term debt 3,705 3,780
Bank indebtedness 6 36
Cash and cash equivalents (2,078) (1,690)
----------------------------------------------------------------------------
Net Debt 1,633 2,126
----------------------------------------------------------------------------
Say on Pay
Talisman will include a non-binding advisory vote on executive compensation at its annual meeting in 2011. This vote will give Talisman shareholders the opportunity to provide feedback to the Board of Directors on the company's approach to executive compensation. Talisman is offering this "say on pay" vote voluntarily, consistent with its ongoing commitment to strong corporate governance, as well as the requirements for US domestic issuers in the recently adopted US Dodd-Frank Act. The Board of Directors recognizes the importance of sound compensation practices and disclosure in the company's governance framework. This advisory vote is intended to continue the ongoing constructive engagement and dialogue that Talisman's management and Board of Directors enjoys with the company's shareholders.
Talisman Energy Inc.
Highlights
(unaudited)
Three months ended Nine months ended
September 30 September 30
2010 2009 2010 2009
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Financial
(millions of C$ unless otherwise stated)
Cash flow (1) 727 838 2,376 3,042
Net income 121 30 952 548
Capital expenditures 1,085 901 2,799 2,743
Per common share (C$)
Cash flow (1) 0.71 0.83 2.33 3.00
Net income 0.12 0.03 0.94 0.54
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Production
(daily average)
Oil and liquids (bbls/d)
North America 20,875 31,372 23,928 36,283
UK 69,152 71,300 71,153 87,859
Scandinavia 35,042 30,067 39,233 32,018
Southeast Asia 37,340 45,145 40,099 40,222
Other 13,312 14,409 13,649 16,567
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Total oil and liquids 175,721 192,293 188,062 212,949
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Natural gas (mmcf/d)
North America 750 790 778 808
UK 16 14 17 21
Scandinavia 91 38 85 44
Southeast Asia 512 411 491 398
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Total natural gas 1,369 1,253 1,371 1,271
----------------------------------------------------------------------------
Total mboe/d (2) 404 401 416 425
----------------------------------------------------------------------------
Prices (3)
Oil and liquids (C$/bbl)
North America 61.40 60.17 64.68 52.46
UK 79.87 74.59 79.73 65.22
Scandinavia 81.63 76.53 81.28 66.53
Southeast Asia 78.37 74.30 79.79 66.52
Other 85.00 71.45 80.18 66.15
----------------------------------------------------------------------------
Total oil and liquids 78.09 72.24 78.19 63.56
----------------------------------------------------------------------------
Natural gas (C$/mcf)
North America 4.73 4.05 5.10 4.65
UK 4.95 3.24 4.56 4.80
Scandinavia 7.40 4.83 6.44 6.54
Southeast Asia 6.73 6.92 6.82 6.12
----------------------------------------------------------------------------
Total natural gas 5.66 5.01 5.80 5.18
----------------------------------------------------------------------------
Total (C$/boe) (2) 53.17 50.29 54.38 47.36
----------------------------------------------------------------------------
(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 and production from continuing and discontinued
operations.
Talisman Energy Inc.
Consolidated Balance Sheets
(unaudited)
September 30 December 31
(millions of C$) 2010 2009
----------------------------------------------------------------------------
(restated)
Assets
Current
Cash and cash equivalents 2,078 1,690
Accounts receivable 1,145 1,253
Inventories 138 144
Prepaid expenses 18 9
Assets of discontinued operations 9 58
----------------------------------------------------------------------------
3,388 3,154
----------------------------------------------------------------------------
Other assets 1,038 290
Goodwill 1,186 1,176
Property, plant and equipment 17,544 16,431
Assets of discontinued operations 513 2,567
----------------------------------------------------------------------------
20,281 20,464
----------------------------------------------------------------------------
Total assets 23,669 23,618
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Liabilities
Current
Bank indebtedness 6 36
Accounts payable and accrued liabilities 2,070 2,124
Income and other taxes payable 422 357
Current portion of long-term debt 355 10
Future income taxes 11 68
Liabilities of discontinued operations 3 9
----------------------------------------------------------------------------
2,867 2,604
----------------------------------------------------------------------------
Deferred credits 56 59
Asset retirement obligations 2,129 2,109
Other long-term obligations 160 168
Long-term debt 3,350 3,770
Future income taxes 3,728 3,646
Liabilities of discontinued operations 6 151
----------------------------------------------------------------------------
9,429 9,903
----------------------------------------------------------------------------
Shareholders' equity
Common shares, no par value
Authorized: unlimited
Issued and outstanding:
September 2010 - 1,016,753,202 (December 2009
- 1,014,876,564) 2,405 2,374
Contributed surplus 119 153
Retained earnings 9,999 9,174
Accumulated other comprehensive loss (1,150) (590)
----------------------------------------------------------------------------
11,373 11,111
----------------------------------------------------------------------------
Total liabilities and shareholders' equity 23,669 23,618
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Prior period balances have been restated to reflect the financial position
of discontinued operations
Talisman Energy Inc.
Consolidated Statements of Income
(unaudited)
Three months ended Nine months ended
September 30 September 30
(millions of C$) 2010 2009 2010 2009
----------------------------------------------------------------------------
(restated) (restated)
Revenue
Gross sales 1,995 1,647 5,882 4,955
Less royalties 310 246 926 706
----------------------------------------------------------------------------
Net sales 1,685 1,401 4,956 4,249
Other 26 29 82 89
----------------------------------------------------------------------------
Total revenue 1,711 1,430 5,038 4,338
----------------------------------------------------------------------------
Expenses
Operating 459 455 1,393 1,394
Transportation 55 52 172 158
General and administrative 118 79 286 246
Depreciation, depletion and
amortization 568 529 1,618 1,762
Dry hole 44 77 78 335
Exploration 74 75 241 202
Interest on long-term debt 37 54 119 144
Stock-based compensation (recovery) 63 98 (23) 249
(Gain) loss on held-for-trading
financial instruments (54) (98) (227) 270
Other, net 89 (77) 135 25
----------------------------------------------------------------------------
Total expenses 1,453 1,244 3,792 4,785
----------------------------------------------------------------------------
Income (loss) from continuing
operations before taxes 258 186 1,246 (447)
Taxes
Current income tax 235 161 631 477
Future income tax recovery (70) (21) (186) (507)
Petroleum revenue tax 25 21 80 60
----------------------------------------------------------------------------
190 161 525 30
----------------------------------------------------------------------------
Income (loss) from continuing
operations 68 25 721 (477)
----------------------------------------------------------------------------
Income from discontinued operations 53 5 231 1,025
----------------------------------------------------------------------------
Net income 121 30 952 548
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Per common share (C$):
Income (loss) from continuing
operations 0.07 0.02 0.71 (0.47)
Diluted income (loss) from continuing
operations 0.07 0.02 0.70 (0.47)
Income from discontinued operations 0.05 0.01 0.23 1.01
Diluted income from discontinued
operations 0.05 0.01 0.22 1.01
Net income 0.12 0.03 0.94 0.54
Diluted net income 0.12 0.03 0.92 0.54
----------------------------------------------------------------------------
Average number of common shares
outstanding (millions) 1,017 1,015 1,018 1,015
Diluted number of common shares
outstanding (millions) 1,035 1,035 1,036 1,015
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Prior period balances have been restated to reflect the results of
discontinued operations
Talisman Energy Inc.
Consolidated Statements of Cash Flows
(unaudited)
Three months ended Nine months ended
September 30 September 30
(millions of C$) 2010 2009 2010 2009
----------------------------------------------------------------------------
(restated) (restated)
Operating
Income (loss) from continuing operations 68 25 721 (477)
Items not involving cash 564 660 1,230 2,992
Exploration 74 75 241 202
----------------------------------------------------------------------------
706 760 2,192 2,717
Changes in non-cash working capital 95 (91) 477 (65)
----------------------------------------------------------------------------
Cash provided by continuing operations 801 669 2,669 2,652
Cash provided by discontinued operations 21 78 184 325
----------------------------------------------------------------------------
Cash provided by operating activities 822 747 2,853 2,977
----------------------------------------------------------------------------
Investing
Capital expenditures
Exploration, development and other (1,084) (851) (2,784) (2,336)
Corporate acquisitions - - (189) -
Property acquisitions (66) (221) (451) (278)
Proceeds of resource property
dispositions 5 44 120 104
Acquisition deposit (638) - (638) -
Changes in non-cash working capital 182 197 98 (157)
Discontinued operations, net of
capital expenditures 347 (32) 1,586 1,542
----------------------------------------------------------------------------
Cash used in investing activities (1,254) (863) (2,258) (1,125)
----------------------------------------------------------------------------
Financing
Long-term debt repaid - (174) (11) (970)
Long-term debt issued - - - 1,249
Common shares issued 3 - 13 1
Common shares purchased (24) - (50) (1)
Common share dividends - - (127) (115)
Deferred credits and other (2) 7 (12) 14
Changes in non-cash working capital (2) (1) (2) 1
----------------------------------------------------------------------------
Cash provided by (used in) financing
activities (25) (168) (189) 179
----------------------------------------------------------------------------
Effect of translation on foreign
currency cash and cash equivalents - (73) (2) (93)
----------------------------------------------------------------------------
Net increase (decrease) in cash and
cash equivalents (457) (357) 404 1,938
Cash and cash equivalents net of bank
indebtedness, beginning of period 2,529 2,305 1,668 10
----------------------------------------------------------------------------
Cash and cash equivalents net of bank
indebtedness, end of period 2,072 1,948 2,072 1,948
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cash and cash equivalents 2,078 2,007 2,078 2,007
Cash and cash equivalents reclassified
to discontinued operations - 10 - 10
Bank indebtedness (6) (69) (6) (69)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cash and cash equivalents net of bank
indebtedness, end of period 2,072 1,948 2,072 1,948
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Prior period balances have been restated to reflect the cash flows of
discontinued operations
Segmented Information
North America (1) UK
----------------------------- ---------------------------
Three months Nine months Three months Nine months
ended ended ended ended
September 30 September 30 September 30 September 30
(millions of C$) 2010 2009 2010 2009 2010 2009 2010 2009
----------------------------------------------------------------------------
Revenue
Gross sales 408 321 1,223 1,016 526 484 1,590 1,606
Royalties 57 36 140 115 1 1 5 4
----------------------------------------------------------------------------
Net sales 351 285 1,083 901 525 483 1,585 1,602
Other 19 22 66 69 7 6 15 17
----------------------------------------------------------------------------
Total revenue 370 307 1,149 970 532 489 1,600 1,619
----------------------------------------------------------------------------
Segmented expenses
Operating 100 92 309 310 203 226 638 655
Transportation 13 18 46 44 7 10 25 33
DD&A 199 188 562 564 142 165 420 618
Dry hole 3 29 (14) 120 24 - 63 30
Exploration 1 30 35 65 4 6 13 13
Other (6) (15) (5) (25) 1 11 1 6
----------------------------------------------------------------------------
Total segmented
expenses 310 342 933 1,078 381 418 1,160 1,355
----------------------------------------------------------------------------
Segmented income (loss)
before taxes 60 (35) 216 (108) 151 71 440 264
----------------------------------------------------------------------------
Non-segmented expenses
General and administrative
Interest on long-term debt
Stock-based compensation
(recovery)
Currency translation
(Gain) loss on
held-for-trading
financial instruments
----------------------------------------------------------------------------
Total non-segmented
expenses
----------------------------------------------------------------------------
Income (loss) from
continuing operations
before taxes
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Capital expenditures
Exploration 70 253 221 439 34 40 74 130
Development 447 83 959 139 154 135 397 425
Midstream - (2) 1 28 - - - -
----------------------------------------------------------------------------
Exploration and
development 517 334 1,181 606 188 175 471 555
Property acquisitions
Proceeds on dispositions
Other non-segmented
----------------------------------------------------------------------------
Net capital expenditures
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Property, plant and
equipment 6,920 6,155 4,390 4,549
Goodwill 146 149 276 289
Other 2,710 1,240 275 386
Discontinued operations 522 2,585 - -
----------------------------------------------------------------------------
Segmented assets 10,298 10,129 4,941 5,224
Non-segmented assets
----------------------------------------------------------------------------
Total assets (4)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Scandinavia
-----------------------------
Three months Nine months
ended ended
September 30 September 30
(millions of C$) 2010 2009 2010 2009
----------------------------------------------------------------------------
Revenue
Gross sales 363 224 1,014 678
Royalties - - - -
----------------------------------------------------------------------------
Net sales 363 224 1,014 678
Other - - - 2
----------------------------------------------------------------------------
Total revenue 363 224 1,014 680
----------------------------------------------------------------------------
Segmented expenses
Operating 77 79 227 215
Transportation 17 11 49 36
DD&A 133 77 375 266
Dry hole - (2) 5 61
Exploration 6 4 21 16
Other 4 1 68 5
----------------------------------------------------------------------------
Total segmented expenses 237 170 745 599
----------------------------------------------------------------------------
Segmented income (loss) before taxes 126 54 269 81
----------------------------------------------------------------------------
Non-segmented expenses
General and administrative
Interest on long-term debt
Stock-based compensation (recovery)
Currency translation
(Gain) loss on held-for-trading financial
instruments
----------------------------------------------------------------------------
Total non-segmented expenses
----------------------------------------------------------------------------
Income (loss) from continuing
operations before taxes
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Capital expenditures
Exploration 23 11 76 139
Development 128 136 408 384
Midstream - - - -
----------------------------------------------------------------------------
Exploration and development 151 147 484 523
Property acquisitions
Proceeds on dispositions
Other non-segmented
----------------------------------------------------------------------------
Net capital expenditures
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Property, plant and equipment 2,251 2,040
Goodwill 618 628
Other 451 226
Discontinued operations - -
----------------------------------------------------------------------------
Segmented assets 3,320 2,894
Non-segmented assets
----------------------------------------------------------------------------
Total assets (4)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) North America 2010 2009 2010 2009
----------------------------------------------------------------------------
Canada 274 279 925 882
US 96 28 224 88
----------------------------------------------------------------------------
Total revenue 370 307 1,149 970
----------------------------------------------------------------------------
Canada 4,901 4,993
US 2,019 1,162
----------------------------------------------------------------------------
Property, plant and equipment (4) 6,920 6,155
----------------------------------------------------------------------------
----------------------------------------------------------------------------
4 Current year represents balances as at September 30, prior year represents
balances as at December 31.
Southeast Asia (2) Other (3)
---------------------------- ---------------------------
Three months Nine months Three months Nine months
ended ended ended ended
September 30 September 30 September 30 September 30
(millions of C$) 2010 2009 2010 2009 2010 2009 2010 2009
----------------------------------------------------------------------------
Revenue
Gross sales 600 555 1,773 1,375 98 63 282 280
Royalties 203 189 632 466 49 20 149 121
----------------------------------------------------------------------------
Net sales 397 366 1,141 909 49 43 133 159
Other - - 1 - - 1 - 1
----------------------------------------------------------------------------
Total revenue 397 366 1,142 909 49 44 133 160
----------------------------------------------------------------------------
Segmented expenses
Operating 72 54 199 185 7 4 20 29
Transportation 16 11 46 39 2 2 6 6
DD&A 87 93 240 285 7 6 21 29
Dry hole 11 40 4 90 6 10 20 34
Exploration 20 16 65 44 43 19 107 64
Other 10 3 29 3 1 (2) 1 10
----------------------------------------------------------------------------
Total segmented
expenses 216 217 583 646 66 39 175 172
----------------------------------------------------------------------------
Segmented income
(loss) before taxes 181 149 559 263 (17) 5 (42) (12)
----------------------------------------------------------------------------
Non-segmented expenses
General and
administrative
Interest on long-term
debt
Stock-based
compensation
(recovery)
Currency translation
(Gain) loss on
held-for-trading
financial
instruments
----------------------------------------------------------------------------
Total non-segmented
expenses
----------------------------------------------------------------------------
Income (loss) from
continuing operations
before taxes
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Capital expenditures
Exploration 58 54 135 179 47 39 156 156
Development 69 78 222 364 26 12 76 24
Midstream - - - - - - - -
----------------------------------------------------------------------------
Exploration and
development 127 132 357 543 73 51 232 180
Property acquisitions
Proceeds on
dispositions
Other non-segmented
----------------------------------------------------------------------------
Net capital
expenditures
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Property, plant and
equipment 3,065 2,864 918 823
Goodwill 146 110 - -
Other 572 427 206 156
Discontinued
operations - - - 40
----------------------------------------------------------------------------
Segmented assets 3,783 3,401 1,124 1,019
Non-segmented assets
----------------------------------------------------------------------------
Total assets (4)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total
----------------------------
(millions of C$) 2010 2009 2010 2009
----------------------------------------------------------------------------
Revenue
Gross sales 1,995 1,647 5,882 4,955
Royalties 310 246 926 706
----------------------------------------------------------------------------
Net sales 1,685 1,401 4,956 4,249
Other 26 29 82 89
----------------------------------------------------------------------------
Total revenue 1,711 1,430 5,038 4,338
----------------------------------------------------------------------------
Segmented expenses
Operating 459 455 1,393 1,394
Transportation 55 52 172 158
DD&A 568 529 1,618 1,762
Dry hole 44 77 78 335
Exploration 74 75 241 202
Other 10 (2) 94 (1)
----------------------------------------------------------------------------
Total segmented expenses 1,210 1,186 3,596 3,850
----------------------------------------------------------------------------
Segmented income (loss) before taxes 501 244 1,442 488
----------------------------------------------------------------------------
Non-segmented expenses
General and administrative 118 79 286 246
Interest on long-term debt 37 54 119 144
Stock-based compensation (recovery) 63 98 (23) 249
Currency translation 79 (75) 41 26
(Gain) loss on held-for-trading financial
instruments (54) (98) (227) 270
----------------------------------------------------------------------------
Total non-segmented expenses 243 58 196 935
----------------------------------------------------------------------------
Income (loss) from continuing
operations before taxes 258 186 1,246 (447)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Capital expenditures
Exploration 232 397 662 1,043
Development 824 444 2,062 1,336
Midstream - (2) 1 28
----------------------------------------------------------------------------
Exploration and development 1,056 839 2,725 2,407
Property acquisitions 64 227 655 322
Proceeds on dispositions (50) (44) (201) (143)
Other non-segmented 19 11 48 34
----------------------------------------------------------------------------
Net capital expenditures 1,089 1,033 3,227 2,620
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Property, plant and equipment 17,544 16,431
Goodwill 1,186 1,176
Other 4,214 2,435
Discontinued operations 522 2,625
----------------------------------------------------------------------------
Segmented assets 23,466 22,667
Non-segmented assets 203 951
----------------------------------------------------------------------------
Total assets (4) 23,669 23,618
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(2) Southeast Asia 2010 2009 2010 2009
----------------------------------------------------------------------------
Indonesia 220 187 662 491
Malaysia 130 115 370 266
Vietnam 11 25 42 78
Australia 36 39 68 74
----------------------------------------------------------------------------
Total revenue 397 366 1,142 909
----------------------------------------------------------------------------
Indonesia 1,089 906
Malaysia 1,125 1,171
Vietnam 273 241
Papua New Guinea 369 337
Australia 209 209
----------------------------------------------------------------------------
Property, plant and equipment (4) 3,065 2,864
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(3) Other 2010 2009 2010 2009
----------------------------------------------------------------------------
Algeria 49 44 133 160
----------------------------------------------------------------------------
Total revenue 49 44 133 160
----------------------------------------------------------------------------
Algeria 246 193
Kurdistan 532 512
Other 140 118
----------------------------------------------------------------------------
Property, plant and equipment (4) 918 823
----------------------------------------------------------------------------
----------------------------------------------------------------------------
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