Talisman Sees 3Q Profit Increase on Oil Prices
Talisman reported its operating and financial results for the third quarter of 2011. The company is reporting under International Financial Reporting Standards (IFRS), and all values in this release are in US$ unless otherwise stated.
- Cash flow was $902 million, up 29% from a year ago.
- Net income was $521 million, up 48% over 2010.
- Earnings from operations increased 38%, to $165 million.
- Production was 400,000 boe/d. Production from ongoing operations is up 10% year to date.
- North America shale volumes have doubled year over year.
- Talisman achieved record gas volumes in Southeast Asia, with prices averaging $9.40/mcf.
- The Kitan project offshore Timor-Leste/Australia started up in October, adding 40,000 bbls/d (10,000 bbls/d net).
"Results for the third quarter are in line with our recent operational update and we continue to build volumes through the fourth quarter," said John A. Manzoni, President and Chief Executive Officer.
"With growing shale production, the Kitan field startup and a number of platform turnarounds completed in Southeast Asia and the North Sea, production is now expected to increase into the fourth quarter, averaging 425,000 boe/d for 2011. This will equate to growth from ongoing operations of 9% year over year. Apart from some short-term operational issues during the quarter, there were a number of notable successes.
"In North America we continue to ramp up shale activity and are now operating 30 rigs. Our shale volumes have doubled over the past year, and we expect to average 490 mmcfe/d of shale production for 2011.
"Southeast Asia production continues to be very strong, meeting our delivery targets and setting new gas sales records, enabling us to capture strong regional natural gas prices.
"The UK Claymore platform restarted in mid-October, however, North Sea volumes were down during the quarter as a result of turnarounds and safety upgrades.
"We continue to see encouraging signs in our Colombia program. In the foothills region, Equion has drilled two successful development wells, and we are drilling an appraisal well on our Huron discovery. We are also drilling a number of heavy oil wells to follow up on our successful stratigraphic program.
"We have spudded our deepwater exploration well in Indonesia, and have started drilling our first international shale well, in Poland.
"This was a strong financial quarter, with cash flow up 29% and earnings from operations up 38% year over year.
"We will release our 2012 guidance in January, which we expect will reflect increased capital allocation to liquids-rich opportunities and increased focus of our portfolio, including plans for additional non-core asset sales."
Cash flow was $902 million for the quarter, compared to $700 million a year ago, primarily due to higher oil prices.
Net income increased to $521 million from $352 million a year ago, also due to higher prices as well as a recovery on share-based payments. This was partially offset by higher deferred taxes, in large measure due to exchange rate movements.
Earnings from operations were up 38% to $165 million, compared to $120 million a year ago.
Production from ongoing operations was up 3% over the same period last year and 10% year-to-date, with strong growth in North American shale volumes, record gas sales in Southeast Asia and the addition of producing assets in Colombia.
Over 50% of Talisman's production is liquids or natural gas tied to liquids pricing.
In North America, the company continues to focus on the development of high-quality shale plays in the Eagle Ford, Marcellus and Montney, as well as liquids-rich opportunities within the Canadian conventional portfolio. Capital spending was $629 million during the quarter, of which 80% was related to shale activities.
Shale production doubled year over year and will account for more than half of North American production volumes at year end. In the fourth quarter, Talisman is ramping up shale activity, currently operating 30 rigs, leading to expected shale production of approximately 490 mmcfe/d for 2011, up 125% from 2010.
In the Marcellus, the company brought 34 net wells onstream during the third quarter, and will continue to operate with 11 rigs for the remainder of the year. Talisman expects Marcellus production to average approximately 400 mmcf/d in 2011, which is at the upper end of the target range set at the beginning of the year.
In the Montney, the company has 11 rigs actively drilling in the Farrell Creek area and is on track to meet its full-year production guidance of 50-60 mmcfe/d from this region. During the quarter, the Farrell Creek facility was expanded to handle 180 mmcf/d of throughput.
In the liquids-rich Eagle Ford shale, Talisman will increase to 10 drilling rigs in the fourth quarter and has two full-time frac crews operating. Well results are in line with expectations and production is expected to average approximately 30 mmcfe/d in 2011.
In the Duvernay shale, the company is currently drilling its first horizontal pilot well.
Southeast Asia is a self-funding growth area for Talisman. Natural gas sales during the quarter averaged 522 mmcf/d, a record for Talisman, with prices averaging $9.40/mcf.
In Malaysia, gas sales averaged 121 mmcf/d, 10% higher than the same period last year, reflecting optimization initiatives at PM3 and strong regional gas demand. Talisman plans to drill up to four development wells in the fourth quarter.
In Indonesia, volumes were higher than in the previous quarter after planned shutdowns were completed in Corridor and Tangguh. The early compression project was commissioned in the Dayung field, increasing gas production 15% to 50 mmcf/d (net sales gas).
Also in Indonesia, production continued to ramp up at the recently commissioned Jambi Merang project, averaging 5,200 boe/d in the quarter.
In the Joint Petroleum Development Area (Timor-Leste/Australia), the offshore Kitan project was commissioned in early October and is currently producing 40,000 bbls/d (10,000 bbls/d net).
The North Sea continues to generate surplus cash flow for reinvestment elsewhere, with a high percentage of liquids production and high netbacks. Capital spend was $298 million during the quarter.
Production in the third quarter was lower due to maintenance activities, mandated safety upgrades and natural field declines. In the UK, the Buchan, Ross/Blake and Claymore fields are now back online, as is Rev in Norway. As announced previously, the Tartan platform has been shut down to undertake safety-related upgrades. Tartan is expected to be shut down through the fourth quarter.
North Sea production is expected to average approximately 100,000 boe/d during the fourth quarter. Next year, the company plans to bring on a fourth development well at Auk North and drill infill wells at Tweedsmuir and Rev to mitigate natural declines.
In Norway, two wells were drilled and well interventions were successfully completed at Gyda. Offshore commissioning continued at Yme and first production is expected by the end of the second quarter of 2012.
Talisman has a number of important international exploration wells currently drilling or planned for the fourth quarter.
International exploration spending of $185 million was focused on exploration and appraisal wells in Colombia, Papua New Guinea, the North Sea, and on seismic programs in Southeast Asia and Latin America.
In Colombia, production averaged 14,000 boe/d during the quarter. The Equion-operated Piedemonte development is progressing. Two recent development wells were successful and drilling is continuing, with two rigs currently in the field.
In the nearby Niscota block, the Huron 2 appraisal well is expected to finish drilling mid-year 2012. The Huron 3 appraisal well is expected to spud in the second quarter of next year.
In the heavy oil region of Colombia, following the success of stratigraphic wells in block CPE-6, the regulator has approved an application to convert a portion of the block to an Exploration and Production Contract. Further drilling in the block will commence in the fourth quarter. The company expects to flow test wells in 2012.
Also in the heavy oil region, in the Ecopetrol-operated block CPO-9, the Akacias-1 well continues to produce approximately 1,600 bbls/d (gross) on long-term test. Talisman started drilling the first of several appraisal wells on the Akacias structure in October.
In Peru, Talisman plans to spud the Situche Norte-4X exploration well in the fourth quarter. In Indonesia, Talisman spudded the Lempuk-1 deepwater well in the Sageri PSC in October. In the Kurdistan region of northern Iraq, the Topkhana-1 exploration well is currently drilling, with completion expected in November. In Poland, the first of three initial shale wells spudded in September.
In Papua New Guinea, the most recent well, Siphon-1, found gas in a non-commercial reservoir. Drilling continues with the addition of a second rig in October, and Talisman remains confident in its target to successfully aggregate 2-4 tcf of gas in this region.
Operates 8 Offshore Rigs
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