Talisman Energy Says Cash Flow Up 40%
Talisman Energy Inc. (TSX: TLM.TO; NYSE: TLM) reported its first quarter operating and financial results.
Cash flow was $1,344 million, an increase of 40% compared to $960 million a year earlier. Cash flow was $1,468 million in the fourth quarter of 2005. Cash flow per share was $3.67, an increase of 42% compared to $2.59 in the first quarter of 2005.
Earnings from operations increased 47%, totaling $556 million ($1.52/share) versus $377 million ($1.02/share) a year earlier and $621 million ($1.70/share) in the fourth quarter of 2005. Earnings from operations are calculated to better illustrate Talisman's performance on an internally consistent basis. It adjusts for non-operational impacts on earnings such as the mark-to-market effect of changes in share prices on stock based compensation expense and changes to tax rates.
Net income was $197 million ($0.54/share) compared to $258 million ($0.70/share) a year ago and $533 million ($1.45/share) in the previous quarter. Net income during the quarter included a $325 million provision for future taxes (non-cash) in the UK, as a result of the previously announced tax increase on petroleum profits.
Production averaged 523,000 boe/d, an increase of 14% over the first quarter of 2005. Production in the fourth quarter averaged 516,000 boe/d. Oil and liquids production averaged 299,977 bbls/d, an increase of 27% compared to a year ago. Natural gas production averaged 1,338 mmcf/d in the quarter, up slightly from last year.
"Activity levels are high across all areas for Talisman," said Dr. Jim Buckee, President and Chief Executive Officer. "We continue to generate new opportunities for growth, move forward on a number of large projects and drill big wells in North America. The recently announced Monkman well is a great example of the large upside associated with our deep conventional natural gas strategy in North America.
"To reflect this we've increased our exploration and development spending to $4.8 billion, up from $4.4 billion. We are seeing some cost pressures, but all of our investments are generating attractive returns and we have the manpower and rigs to carry out our programs. The Talisman Board has also approved a 32% increase in the semi-annual dividend to $0.225 as an expression of confidence in Talisman's future. The dividend will be subdivided on a three-for-one basis with the shares.
"We continue to develop new play areas and concepts and are increasing our spending on land and drilling in Western Canada. North America gas volumes are down slightly in the quarter, but we have over 110 mmcf/d of unconnected or temporarily shut-in gas. The Lynx and Palliser pipeline projects will be completed early in the third quarter, bringing significant new volumes to market by the end of the year.
"In the North Sea, we are progressing 10 subsea developments, which will lead to substantial production volumes between the first quarter of 2007 and mid-2008. The largest of these, Tweedsmuir, is 58% complete and is expected to be onstream by the end of the first quarter of 2007. The Wood and Enoch field tie-backs are also expected to be completed within this time frame and the Blane field tie-back is expected to be completed in the second quarter of 2007.
"We are on schedule with our Corridor gas plant expansion, with first natural gas sales to West Java expected to commence in the first quarter of 2007. In Malaysia/Vietnam, the Northern Fields development is underway, which will add incremental volumes in 2008.
"Production in 2006 is expected to average between 515,000-535,000 boe/d. We have reduced the upper end of our guidance by approximately 2% to reflect a reduction in gas takes in Malaysia and lower than expected volumes from the Varg field in Norway, which we plan to remedy later this year. These volumes do not reflect planned asset sales. Cash flow is expected to be in the $5.2-5.5 billion range. Although natural gas prices are coming in lower than expected, oil prices have been significantly higher than planned. The cash flow range reflects, at the $5.2 billion level, a US$65/bbl WTI price and a US$/C$ exchange rate of US$0.86 over the remainder of 2006, whereas the $5.5 billion estimate is based on a US$75/bbl WTI price and US$0.90 exchange rate."
Talisman First Quarter Summary
- A major new discovery was announced in the Monkman area. The Brazion d-93-D well commenced production in April at rates of up to 33 mmcf/d.
- Talisman participated in 212 wells in North America with a 99% success rate. The Company drilled five successful wells in the Alberta Foothills and nine wells are currently drilling.
- The Lynx and Palliser pipelines were 65% complete at the end of the quarter and will likely be commissioned early in the third quarter.
- Talisman participated in six successful UK development wells.
- Development of the Tweedsmuir field is 58% complete. First production is expected towards the end of the first quarter of 2007.
- A successful appraisal well was drilled in the Rev field (Varg South) in Norway, testing at 42 mmcf/d.
- Talisman's subsidiary entered into negotiations to acquire interests in the Fulmar and Auk fields in the Central North Sea.
- Talisman was awarded 1,800 square kilometres (40% interest) in Norwegian license PL387.
- In Indonesia, work continued on the Corridor gas plant expansion in anticipation of first sales to West Java in the first quarter of 2007.
- A successful offshore development well was drilled in Trinidad with production rates of over 5,000 bbls/d (gross).
- The Aklaq-2 well in Alaska was suspended in anticipation of future testing. Talisman acquired 25 leases covering approximately 120,000 acres in the Alaska Beaufort Sea area lease sale.
- Talisman increased the semi-annual dividend on its common
shares by 32%, to $0.225 per share.
Operates 8 Offshore Rigs
- Strong Upstream Performance from European Majors (Jul 28)
- PETRONAS, PetroVietnam Extend PM3CAA PSC in Malaysia-Vietnam Waters to 2027 (May 10)
- Repsol Significantly Scales Back Upstream Investment (Oct 15)