Talisman Energy Generates Record Cash Flow

Talisman Energy reported its operating and financial results for the second quarter of 2004.

Production averaged 437,000 boe/d during the quarter, a 20% increase over the second quarter of 2003 and up slightly compared to the first quarter. Year to date, production has averaged 437,000 boe/d, an 18% increase over the same period last year, excluding Sudan.

Cash flow was $767 million ($2.00/share), up 28% from $600 million ($1.55/share) last year and essentially unchanged from the first quarter. Cash flow for the first six months of 2004 was a record $1,546 million ($4.02/share), an increase of 7% compared to 2003. This increase reflects both higher production levels and commodity prices.

Net income for the quarter was $197 million ($0.50/share), compared to $202 million ($0.51/share) a year ago. On a comparable basis, net income in the second quarter was up 186% versus $69 million ($0.17/share) a year ago excluding a one-time gain on income taxes recorded in the second quarter of 2003. Year to date, net income was $420 million ($1.07/share), compared with $776 million ($1.97/share) in 2003. Excluding the gain on the sale of and income from the Sudan properties, as well as one time income tax effects, the comparable net income numbers for the first half of 2004 and 2003 are $371 million and $303 million respectively.

Exploration and development spending was $509 million during the quarter and $1.1 billion year to date.

Talisman's realized prices averaged $42.78/boe in the quarter, compared to $36.56/boe a year ago. The Company's average unit operating costs were $7.10/boe during the quarter, an increase of 7% over the previous quarter, due in part to the impact of a weaker Canadian dollar.

"Operationally and financially, this was another very solid quarter," said Dr. Jim Buckee, President and Chief Executive Officer. "Production is up 20% compared to last year, as we maintained production levels in a quarter which typically sees some declines due to maintenance and turnarounds. Year to date, production per share is up 12% compared to a year ago and I am very comfortable with our earlier guidance of 5-10% production per share growth for 2004.

"All of the major projects which will contribute to continuing growth in 2005 are on, or ahead of schedule. These include the Tartan North field development in the North Sea, the Greater Angostura development in Trinidad and Tobago and the South Angsi field in Malaysia. Our international exploration program is also gearing up for an exciting second half of the year, with key exploration wells either planned or drilling in the North Sea, Malaysia, Vietnam, Colombia and Canada.

"I am pleased with our very successful drilling programs in North America. Gas production averaged 885 mmcf/d during the second quarter, an increase of 1.5% over the first quarter and 2.3% over last year. Virtually all of this growth is through the drill bit and we see the opportunity to do more. Fortuna Energy Inc. has doubled its land base in the northeastern United States and production is currently averaging 112 mmcf/d.

"Our North Sea production is up 21% over the second quarter of last year. We have had early drilling success in Norway, a small exploration discovery near Clyde, added new exploration acreage, increased our working interest in the Flotta Catchment area and are progressing towards development of the Tweedsmuir field (formerly J1/J5).

"Production in Malaysia/Vietnam continued to increase, averaging 41,000 boe/d in the quarter.

"Guidance for the year is unchanged at 420,000-450,000 boe/d. However, we now expect cash flow per share to be in the $7.50-$8.00 range, reflecting higher commodity prices. This assumes US$37.25/bbl WTI oil prices, US$6.20/mcf NYMEX gas prices and a C$/US$ exchange rate of $0.76 in the second half of the year.

"Over the past year we have stepped up our drilling activity and are getting to a point where virtually all of Talisman's growth is the result of internally generated opportunities. Following a comprehensive review, we see the potential to do significantly more drilling both in North America and internationally. As a result, we are planning a significant increase to our 2004 capital spending program, details of which will be announced shortly."

Talisman Second Quarter Summary

  • Talisman's common shares were split three for one on May 19, 2004 on the TSX. There are now 384 million common shares issued and outstanding.
  • The Company increased its annual dividend by 12.5% to $0.30/share per annum.
  • Talisman redeemed the remaining US$150 million Junior Subordinated Debentures (TLM PrB).
  • Gas production in North America averaged a record 885 mmcf/d.
  • Drilling success averaged 90% in North America with the completion of 22 oil and 64 gas wells during the quarter.
  • Fortuna Energy Inc., a wholly owned Talisman subsidiary, achieved production rates in excess of 100 mmcf/d in the northeastern United States. Fortuna also acquired an additional 475,000 acres of land for US$65 million.
  • Talisman Energy (UK) Limited acquired additional interests in the Flotta Catchment Area of the North Sea, increasing its interests in the Claymore field to 72.4% and Piper and associated fields to 80%.
  • The North Tartan development project in the North Sea is well ahead of schedule.
  • A successful exploration well near Clyde is on production at 1,700 bbls/d.
  • The South Tweedsmuir appraisal well at J5 in the Buchan area was successful.
  • The first Gyda sidetrack well in Norway tested at initial rates in excess of 5,000 bbls/d.
  • In Malaysia, the South Angsi development project is on schedule for production start in mid-2005.
  • In Indonesia, proved and probable natural gas reserves at Corridor have been revised upwards from 5.8 tcf to 8.0 tcf (TLM 36%) based on new production and pressure information.
  • The Angostura development in Trinidad is on schedule for an early 2005 production start.
  • Fortuna Exploration LLC successfully bid to acquire 22 leases covering 238,733 gross acres in the northwest section of the National Petroleum Reserve in Alaska.