Talisman Energy Reports Third Quarter Results New CEO Signals Lower Capital Spending in 2013On Track to Meet 2012 Production Guidance
New CEO Signals Lower Capital Spending in 2013
On Track to Meet 2012 Production Guidance
CALGARY, ALBERTA -- (Marketwire) -- 10/30/12 -- Talisman Energy Inc. (TSX: TLM) (NYSE: TLM) reported its operating and financial results for the third quarter of 2012. All values in this release are unaudited and in US$ unless otherwise stated.
"Our third quarter results reflect the strengths and challenges of our portfolio. Underlying production increased 6% as a result of strong performance in Southeast Asia, Colombia and the Eagle Ford, and we expect to achieve our full-year production target," said Hal Kvisle, President and Chief Executive Officer. "However, the financial benefit of these production gains is being offset by low natural gas prices in North America and lower production in the North Sea.
"We are working toward a disciplined capital plan for 2013 in the range of $3 billion, smaller and more focused than we've seen in recent years. Our objective is to fund our most promising and profitable investment opportunities, focusing on near-term cash generation while keeping our balance sheet in good shape. We will provide more details in January after we complete our annual planning process."
2012 Third Quarter Overview
-- Hal Kvisle appointed President and Chief Executive Officer on September
10, 2012.
-- Production from ongoing operations increased 6% over last year to
415,000 boe/d, driven by gas volumes in North America and liquids growth
in Southeast Asia, Colombia and the Eagle Ford. Full-year production
guidance remains unchanged.
-- Year-to-date cash flow(1) is $2.3 billion, down 10% from last year, as
low North American natural gas prices and lower North Sea production
were partially offset by higher production in Southeast Asia.
-- The net loss of $731 million in the quarter is largely the result of
$443 million in after-tax impairment charges, reflecting the impact of
the company's planned exit from Peru, ongoing uncertainty with the Yme
development in Norway, the prohibitions on shale operations in Quebec,
and declining reservoir performance at Rev in Norway.
-- In Malaysia, Talisman is on track to assume operatorship of the new
Kinabalu PSC in late December 2012. In Vietnam the HST/HSD development
remains on schedule and on budget, with first oil projected for the
second half of 2013.
-- The company continues to make progress toward closing the $1.5 billion
UK joint venture agreement with Sinopec by year-end.
-- Talisman has decided to exit Peru in order to focus on near-term
opportunities in its three core regions.
-- The company declared a quarterly dividend of US$0.0675 per common share.
(1) The term "cash flow" is a non-GAAP measure. Please see advisories and reconciliations elsewhere in this news release.
Corporate Update
With the appointment of Hal Kvisle as CEO in September, Talisman is focusing on total shareholder returns and near-term profitability, in particular, generating reliable cash flow per share growth.
To achieve this, Talisman has set four key priorities:
-- We will live within our means. We will set capital spending budgets that
can be funded by operating cash flows. We will pay down debt, strengthen
our balance sheet and build financial capacity to act opportunistically
when attractive acquisition or development opportunities come our way.
-- We will focus our capital program on projects that come onstream more
quickly and deliver sustainable cash flow over the longer term. We will
reduce up front capital on high-risk exploration in multiple regions
around the world. We will continue to explore, but in regions we know
well and in a lower risk part of the exploration spectrum.
-- We intend to build and strengthen our three core regions - the Americas,
Southeast Asia and the North Sea - and we will shed non-core assets and
focus on our best properties in all three regions.
-- We will improve operational performance and reduce all aspects of our
cost structure. We will do things better, faster and at lower cost,
maintaining our focus on safe and responsible operating practices.
Financial Results
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September 30 Three Months Ended Nine Months Ended
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2012 2011 2012 2011
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Cash flow(2) ($ million) 693 902 2,347 2,610
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Cash flow per share(2) 0.68 0.88 2.29 2.55
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Earnings (loss) from operations(2)
($ million) (36) 165 202 490
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Earnings (loss) from operations per
share(2) (0.04) 0.16 0.20 0.48
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Net income (loss) ($ million) (731) 521 (244) 893
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Net income (loss) per share (0.71) 0.51 (0.24) 0.87
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Average shares outstanding - basic
(million) 1,026 1,024 1,025 1,024
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Cash flow(2) is down 10% year to date as low North American gas prices and lower North Sea production were partially offset by higher volumes in Southeast Asia. Cash flow(2) is also lower relative to the second quarter as a result of an increase in oil inventories, which fluctuate quarter on quarter, as well as foreign exchange movements.
Year-to-date earnings from operations(2) were also down due to lower netbacks and higher DD&A charges. Earnings from operations(2) were down from the second quarter primarily as a result of increased oil inventories and changes in foreign exchange rates.
Net income was down relative to the corresponding period in 2011 largely as a result of asset impairments. This included one-time costs associated with events during the quarter, including the company's planned exit from Peru, ongoing uncertainty at Yme in Norway, the prohibitions on shale operations in Quebec, and declining reservoir performance at the Rev field in Norway. The after-tax impairment charge for the quarter was $443 million.
Exploration and development spending(2) in the quarter was $893 million, down 13% from the previous quarter. Year-to-date exploration and development spending(2) is $3 billion, and is expected to be approximately $4 billion in 2012.
Net debt(2) at the end of the third quarter was $4.5 billion. The company will use the proceeds from the UK Sinopec joint venture to maintain a strong balance sheet rather than repurchasing shares.
(2) The terms "cash flow," "cash flow per share" "earnings (loss) from operations," "earnings (loss) from operations per share," "exploration and development spending" and "net debt" are non-GAAP measures. Please see the advisories and reconciliations elsewhere in this news release.
Netbacks
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September 30 Three Months Ended Nine Months Ended
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2012 2011 2012 2011
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Realized Asian gas price ($/mcf) 8.88 9.40 9.41 9.31
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Realized North American gas price
($/mcf) 2.67 4.08 2.43 4.12
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Total company sales price ($/boe) 57.19 65.38 59.17 66.54
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Total company netback ($/boe) 27.87 35.13 30.46 38.48
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Oil and liquids netback ($/bbl) 48.05 56.43 55.32 61.26
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Natural gas netback ($/mcf) 2.55 3.47 2.47 3.65
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WTI benchmark ($/bbl) 92.22 89.76 96.23 95.48
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Brent benchmark ($/bbl) 109.61 113.46 112.14 111.93
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NYMEX benchmark ($/mmbtu) 2.81 4.19 2.62 4.23
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The company's realized net natural gas price in Southeast Asia has averaged approximately $9/mcf over the past two years in sharp contrast to North America. Talisman's realized net price of $57.19/boe was 13% lower than the same period in 2011 due to lower oil and liquids prices, as well as lower natural gas prices in North America.The company's average gross netback was $27.87/boe, 21% lower than 2011.
WTI oil prices averaged $92.22/bbl and Brent oil prices averaged $109.61/bbl during the quarter, essentially flat over the previous quarter. NYMEX natural gas prices increased 24% over the second quarter to $2.81 and continue to rise, having reached $3.60 in recent weeks.
Production
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September 30 Three Months Ended Nine Months Ended
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2012 2011 2012 2011
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Oil and liquids (mbbls/d)
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North America 26 23 27 22
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Southeast Asia 39 34 42 33
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North Sea 71 81 77 100
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Other 23 23 23 22
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Total oil and liquids (mbbls/d) 159 161 169 177
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Natural gas (mmcf/d)
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North America 953 865 1,005 875
----------------------------------------
Southeast Asia 509 522 529 505
----------------------------------------
North Sea 28 13 34 50
----------------------------------------
Other 43 35 41 33
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Total natural gas (mmcf/d) 1,533 1,435 1,609 1,463
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Total (mboe/d) 415 400 437 421
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Less: Assets sold - North America
(mboe/d) - 8 5 8
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Production from ongoing operations
(mboe/d) 415 392 432 413
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Total production increased by 4% over the previous year, driven by increased gas volumes in North America (up 15,000 boe/d) and liquids growth in Southeast Asia and North America (up 8,000 boe/d). Production from ongoing operations increased by 6%. Volumes were lower relative to the second quarter due principally to planned maintenance activity in the North Sea and Southeast Asia.
Production guidance for the year remains unchanged.
North America
Production
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September 30 Three Months Ended Nine Months Ended
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2012 2011 2012 2011
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Shale (mmcfe/d)
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Marcellus 507 407 527 388
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Montney/pilots 78 44 74 56
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Eagle Ford 90 32 83 23
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Total shale (mmcfe/d) 675 483 684 467
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Conventional total, excluding assets
sold (mboe/d) 72 79 76 82
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Assets sold (mboe/d) - 8 5 8
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Total NAO gas production (mmcf/d) 953 865 1,005 875
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Total NAO liquids production
(mbbls/d) 26 23 27 22
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Total NAO production (mboe/d) 185 167 195 168
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Talisman's North American business delivered a strong quarter, with production averaging 185,000 boe/d, up 11% from a year ago. Oil and liquids volumes increased by 13%, while natural gas production increased 10% from the same period last year. Production was down over the previous quarter due to asset sales, including 6,000 boe/d from West Whitecourt and Shaunavon, and natural declines in our conventional portfolio.
Capital expenditure totaled $258 million, of which 86% was related to shale activity. Operating costs were down 29% over the previous quarter due to dispositions, the completion of prior-period Pennsylvania impact fee assessments in the second quarter, and adjustments made in the third quarter to prior period cost estimates.
In the Eagle Ford, the company continues to set new production records, averaging 15,000 boe/d (90 mmcfe/d) for the quarter. Liquids production averaged 8,800 bbls/d, up 21% from the second quarter due to the higher liquids content from the wells that came onstream. The company remains on target to reach full-year production of between 14,000 - 17,000 boe/d. Transition toward shared operatorship with Statoil is progressing, as per Talisman's contractual obligations. Talisman will start to transfer operatorship of the eastern part of the play in 2013. The existing joint venture agreement remains in force, with each company continuing to hold a 50% share of the entire play area.
In a depressed natural gas price environment, Talisman is maintaining its strategic, low-cost position in the Marcellus with limited capital spending. Reservoir performance continues to exceed expectations, with lower-than-predicted decline rates. At current minimal activity levels, production is expected to continue to decrease over the coming months.
The Montney and other pilots are delivering as planned, with production up slightly over the previous quarter, averaging 78 mmcfe/d.
In the liquids-rich Duvernay, the company has drilled and completed four wells and has test results from three.
Given the prohibitions on shale drilling in Quebec, the company has no current plans to develop its assets in the province. As a result, Talisman has fully impaired its investment, amounting to $82 million after tax.
Southeast Asia
Production
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September 30 Three Months Ended Nine Months Ended
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2012 2011 2012 2011
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Malaysia liquids (mbbls/d) 14 18 16 18
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Malaysia gas (mmcf/d) 108 121 119 118
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Malaysia total (mboe/d) 32 38 36 37
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Indonesia liquids (mbbls/d) 11 12 11 11
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Indonesia gas (mmcf/d) 401 401 410 387
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Indonesia total (mboe/d) 78 79 79 76
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Vietnam (mboe/d) 2 2 2 2
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Australia (mboe/d) 12 2 13 2
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Total (mboe/d) 124 121 130 117
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In Southeast Asia, third quarter production was in line with expectations at 124,000 boe/d, up 2% over the same quarter last year and down 5% from the previous quarter due to a planned turnaround at PM-3 CAA. Liquids production increased 15% over the same quarter in 2011, averaging 39,000 bbls/d. This was primarily due to the ramp up at Jambi Merang and a full quarter of production from Kitan compared to last year. Natural gas production for the quarter averaged more than 500 mmcf/d, with prices averaging $8.88/mcf.
In Malaysia, production averaged 32,000 boe/d, down 14% over last quarter due to planned maintenance activities. The Kinabalu transition plan is progressing well, and Talisman is on target to assume operatorship in December of this year.
In Indonesia, underlying production increased by 5% over the same period last year due to the ramp up at Jambi Merang and increased volumes from Corridor, offset by the Suban unitization that occurred in December 2011.
In Vietnam, production has remained steady at an average of 2,000 bbls/d. The HST/HSD development is progressing on schedule and on budget, with two jackets now installed and the drilling rig on location. Pipeline tie-ins and development drilling are in progress. First production is planned for the second half of 2013.
The Kitan field in Australia/Timor Leste continues to exceed expectations, producing an average of 9,200 boe/d in the third quarter.
North Sea
Production (mboe/d)
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September 30 Three Months Ended Nine Months Ended
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2012 2011 2012 2011
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UK 55 57 56 74
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Norway 21 26 26 34
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Total (mboe/d) 76 83 82 108
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Production in the North Sea decreased by 8% relative to the same period last year. UK production was relatively flat while Norway was impacted by natural declines in Brage and Varg.
Talisman is working toward closing its joint venture agreement with Sinopec by year-end. Sinopec has agreed to acquire a 49% equity interest in Talisman's UK North Sea business for $1.5 billion. The joint venture will lead to further investment in the UK North Sea, which will improve operating performance, fund infill drilling and major projects, thereby extending field life and deferring decommissioning.
During the quarter, the UK government announced a brownfield allowance for the Montrose Area Redevelopment project. Talisman received necessary approvals to commence development in October. The project involves integration of established fields and infrastructure with two undeveloped fields, Cayley and Shaw. The project will develop tie-backs to extend field life and provide additional infill drilling opportunities. Project costs will be approximately $750 million net to Talisman (post-Sinopec closing) and production is expected to start in 2016.
Infill wells at Rev and Clyde were drilled and completed. The rig has moved to Varg to drill two wells on the field.
Recent reservoir performance issues at Rev have led to an adjustment of reserves. The company has taken an after-tax impairment of $55 million.
During the third quarter, the decision was made to de-man the Yme platform for safety related reasons and it has not been re-manned. Management has conducted further analysis of the platform which indicated additional project uncertainty and resulted in an additional impairment of $497 million pre-tax ($125 million after-tax). This represents an impairment of the remaining book value of the property, plant and equipment of Yme, leaving a deferred tax asset of $521 million relating to the investment in the project. Management continues to work with all stakeholders to evaluate project options.
Colombia
In the foothills region, Equion brought two new Piedemonte wells onstream, with combined production of nearly 9,000 bbls/d gross condensate. Talisman anticipates that the development project to add additional gas compression and pipeline facilities at Piedemonte will move ahead following agreement with local labour groups.
Also in the foothills region, the Huron-2 appraisal well in the Niscota block has now drilled through the first reservoir target, and log data is encouraging. The company expects to drill to a planned total depth of 18,500 feet to evaluate a second potential reservoir zone before testing the well.
Talisman, like the rest of the industry, continues to experience delays in acquiring the necessary regulatory requirements to bring its CPO-9 and CPE-6 discoveries online. With permits in place, the company plans to resume drilling on Block CPO-9 by the end of the year.
Exploration
In the Kurdistan Region of northern Iraq, the company will focus on further testing of the Oligocene reservoir in the Kurdamir-2 exploration well, where light oil flowed in March 2012. Talisman completed testing of the Cretaceous and Eocene reservoirs and found oil. While the company was encouraged to find hydrocarbons within these zones, commercial flow rates were not achieved. Talisman has accelerated plans to drill a follow-up exploration well, Kurdamir-3, in early 2013 to evaluate the downdip extent of the oil pay in the Oligocene reservoir. The company also expects to commence a 3D-seismic program across the Kurdamir and Topkhana structures in late 2012.
In Sierra Leone, Talisman spudded its first deepwater exploration well on the West African Transform Margin, where the company has a 30% working interest.
Following disappointing exploration results, Talisman has decided to exit Peru in order to focus on near-term opportunities in its core areas.
Common Share and Preferred Share Dividend Declaration
The company has declared a quarterly dividend on the company's common shares of US$0.0675 per share. The dividend will be paid on December 31, 2012 to shareholders of record at the close of business on November 19, 2012.
The company has also declared a quarterly dividend of C$0.2625 on its Cumulative Redeemable Rate Reset First Preferred Shares, Series 1. The dividend will be paid on December 31, 2012 to shareholders of record at the close of business on November 19, 2012.
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.
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 2012 and 2013 capital spending; expected 2012 production, company-wide and regionally; planned company priorities, including setting capital spending budgets to be funded by operating cash flows, paying down debt, focussing the capital program on near-term projects with sustainable cash flow, reducing spending on high-risk exploration, strengthening core areas, disposing of non-core assets, improving operational performance and reducing the company's cost structure; expected timing of transferring of operatorship of the eastern Eagle Ford to Statoil; expected transfer of operatorship to Talisman at Kinabalu; expected drilling and first production at HST/HSD; planned closing of the Sinopec joint venture; and expected investment in the UK North Sea for improved performance, infill drilling and major projects, and related expected extension in field life and deferred decommissioning; planned cost, tie-backs, drilling, production and timing of the Montrose Area redevelopment; expected advancement of the development project at Piedemonte following agreement with local labour groups; planned drilling depth at the Huron-2 appraisal well; planned drilling and 3D-seismic program in Kurdistan; and other business strategy, plans and priorities.
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 2012 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 the company's 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 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, are included in the company'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 (SEC). 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.
Unless the context indicates otherwise, references in this news release to "Talisman" or the "company" include, for reporting purposes only, the direct or indirect subsidiaries of Talisman Energy Inc. and the partnership interests held by Talisman Energy Inc. and its subsidiaries. Such use of "Talisman" or the "company" to refer to these other legal entities and partnership interests does not constitute waiver by Talisman Energy Inc. or such entities or partnerships of their separate legal status, for any purpose.
The completion of any contemplated disposition or acquisition 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 disposition. Completion of the Sinopec joint venture transaction is subject to specified conditions precedent, including regulatory approvals and government approvals from the United Kingdom, the European Union, and the People's Republic of China.
Oil and Gas Information
Throughout this news release, Talisman makes reference to production volumes. Unless otherwise stated, 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.
Barrel of oil equivalent (boe) throughout this news release is 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 reference to mcf equivalents (mcfes) which are calculated at a conversion rate of one barrel of oil to 6,000 cubic feet of gas. Boes and mcfes may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf:1 bbl and an mcfe conversion ratio of 1 bbl: 6 mcf are based on an energy equivalence conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
Talisman also discloses its company netbacks in this news release. Netbacks per boe are calculated by deducting from sales price associated royalties, operating and transportation costs.
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, earnings from operations, exploration and development spending and net debt. These terms are not defined by International Financial Reporting Standards (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.
Cash Flow
US$ million, except per share amounts
Three Months Ended Nine Months Ended
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Sept 30, Sept 30, Sept 30, Sept 30,
2012 2011 2012 2011
----------------------------------------------------------------------------
Cash provided by operating
activities 381 522 2,170 2,301
Changes in non-cash working capital 282 346 70 125
Add: Exploration expenditure 81 87 228 335
Add: Pennsylvania impact fee(1) - - 25 -
Less: Finance costs (cash) (51) (53) (146) (151)
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Cash flow 693 902 2,347 2,610
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Cash flow per share 0.68 0.88 2.29 2.55
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Diluted cash flow per share 0.68 0.87 2.27 2.51
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(1) Pennsylvania impact fee amount represents the one-time impact of the
retrospective application of the legislation to wells drilled pre-2012.
Cash flow, as commonly used in the oil and gas industry, represents net income before exploration costs, DD&A, 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. Cash flow per share is cash flow divided by the average number of common shares outstanding during the period. Diluted cash flow per share is cash flow divided by the diluted number of common shares outstanding during the period, as reported in the interim condensed consolidated financial statements filed on October 30, 2012. A reconciliation of cash provided by operating activities to cash flow is provided above.
Earnings (Loss) from Operations
US$ million, except per share amounts
Three Months Ended Nine Months Ended
----------------------------------------------------------------------------
Sept 30, Sept 30, Sept 30, Sept 30,
2012 2011 2012 2011
----------------------------------------------------------------------------
Net income (loss) (731) 521 (244) 893
----------------------------------------------------------------------------
(Gain) loss on disposals (tax
adjusted) - 5 (565) (152)
Unrealized (gain) loss on financial
instruments(tax adjusted)(1) 95 (184) 95 (102)
Share-based payments (tax
adjusted)(2) 52 (267) (24) (338)
Foreign exchange on debt (tax
adjusted) 10 (8) 22 -
Impairment (tax adjusted) 443 - 818 39
Pennsylvania impact fee (tax
adjusted)(3) - - 16 -
Deferred tax adjustments(4) 95 98 84 150
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Earnings (loss) from operations (36) 165 202 490
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Earnings (loss) from operations per
share (0.04) 0.16 0.20 0.48
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Diluted earnings (loss) from
operations per share (0.04) 0.16 0.20 0.47
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(1) Unrealized (gain) loss on financial instruments relates to the change in
the period of the mark-to-market value of the company's held-for-trading
financial instruments.
(2) Share-based payments relate principally to the mark-to-market value of
the company's outstanding stock options and cash units at September 30.
The company uses the Black-Scholes option pricing model to estimate the
fair value of its share-based payment plans.
(3) Pennsylvania impact fee amount represents the one-time impact of the
retrospective application of the legislation to wells drilled pre-2012.
(4) Deferred tax adjustments largely comprise tax on foreign exchange on tax
pools. Year-to-date 2011 also includes a deferred tax expense of $225
million in respect of a UK tax rate change occurring in that period.
Third quarter 2012 includes a deferred tax expense of $137 million in
respect of a UK tax change related to decommissioning.
Earnings (loss) from operations are calculated by adjusting the company's net income (loss) per the financial statements for certain items of a non-operational nature, on an after tax basis. The company uses this information to evaluate performance of core operational activities on a comparable basis between periods. Earnings (loss) from operations per share are earnings (loss) from operations divided by the average number of common shares outstanding during the period. Diluted earnings (loss) from operations per share are earnings (loss) from operations divided by the diluted number of common shares outstanding during the period, as reported in the interim condensed consolidated financial statements filed on October 30, 2012. A reconciliation of net income (loss) to earnings (loss) from operations is provided above.
Exploration and Development Spending
US$ million
Three Months Ended Nine Months Ended
----------------------------------------------------------------------------
Sept 30, June 30, Sept 30, Sept 30,
2012 2012 2012 2011
----------------------------------------------------------------------------
Exploration, development and other 812 936 2,759 3,016
Exploration expensed 81 91 228 335
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Exploration and development spending 893 1,027 2,987 3,351
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Exploration and development spending is calculated by adjusting the capital expenditure per the financial statements for exploration costs that were expensed as incurred.
Net Debt
US$ million
As at
------------------------------------------------------------------
Sept 30, 2012
------------------------------------------------------------------
Long-term debt 5,012
Bank indebtedness -
------------------------------------------------------------------
Cash and cash equivalents (496)
------------------------------------------------------------------
Net debt 4,516
------------------------------------------------------------------
Net debt is calculated by adjusting the company's long-term debt per the financial statements for bank indebtedness, cash and cash equivalents. The company uses this information to assess its true debt position and eliminate the impact of timing differences.
Talisman Energy Inc.
Highlights
(unaudited)
Three months Nine months
ended ended
September 30 September 30
2012 2011 2012 2011
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Financial
(millions of US$ unless otherwise stated)
Cash flow (1) 693 902 2,347 2,610
Net income (loss) (731) 521 (244) 893
Exploration and development spending (1) 893 1,196 2,987 3,351
Per common share (US$)
Cash flow (1) 0.68 0.88 2.29 2.55
Net income (loss) (0.71) 0.51 (0.24) 0.87
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Production
(Daily Average - Gross)
Oil and liquids (bbls/d)
North America 25,836 23,107 27,117 22,314
North Sea 71,440 81,114 76,598 99,735
Southeast Asia 38,759 33,574 41,678 33,091
Other 23,013 22,785 23,471 21,984
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Total oil and liquids 159,048 160,580 168,864 177,124
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Natural gas (mmcf/d)
North America 953 865 1,005 875
North Sea 28 13 34 50
Southeast Asia 509 522 529 505
Other 43 35 41 33
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Total natural gas 1,533 1,435 1,609 1,463
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Total mboe/d (2) 415 400 437 421
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Prices
Oil and liquids (US$/bbl)
North America 65.38 72.93 70.16 73.81
North Sea 110.53 114.15 112.42 111.35
Southeast Asia 109.58 117.82 113.36 117.95
Other 103.08 112.06 114.68 112.97
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Total oil and liquids 101.89 108.69 106.18 108.05
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Natural gas (US$/mcf)
North America 2.67 4.08 2.43 4.12
North Sea 8.99 7.36 9.68 8.55
Southeast Asia 8.88 9.40 9.41 9.31
Other 4.23 4.54 4.43 4.22
----------------------------------------------------------------------------
Total natural gas 4.89 6.05 4.93 6.06
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total (US$/boe) (2) 57.19 65.38 59.17 66.54
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Cash flow, exloration and development spending 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.
Talisman Energy Inc.
Condensed Consolidated Balance Sheets
(unaudited)
September 30, December 31,
(millions of US$) 2012 2011
----------------------------------------------------------------------------
Assets
Current
Cash and cash equivalents 496 474
Accounts receivable 1,528 1,550
Risk management 15 42
Inventories 174 164
Prepaid expenses 34 24
----------------------------------------------------------------------------
2,247 2,254
----------------------------------------------------------------------------
Other assets 111 101
Investments 375 395
Risk management 26 24
Goodwill 1,310 1,317
Property, plant and equipment 15,050 15,909
Exploration and evaluation assets 3,493 3,954
Deferred tax assets 1,415 272
----------------------------------------------------------------------------
21,780 21,972
----------------------------------------------------------------------------
Total assets 24,027 24,226
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Liabilities
Current
Bank indebtedness - 60
Accounts payable and accrued liabilities 2,672 2,622
Risk management 80 -
Income and other taxes payable 287 371
Current portion of long-term debt 579 410
----------------------------------------------------------------------------
3,618 3,463
----------------------------------------------------------------------------
Decommissioning liabilities 3,173 2,982
Other long-term obligations 386 346
Risk management 15 -
Long-term debt 4,433 4,485
Deferred tax liabilities 2,836 2,932
----------------------------------------------------------------------------
10,843 10,745
----------------------------------------------------------------------------
Shareholders' equity
Common shares 1,638 1,561
Preferred shares 191 191
Contributed surplus 123 186
Retained earnings 6,826 7,292
Accumulated other comprehensive income 788 788
----------------------------------------------------------------------------
9,566 10,018
----------------------------------------------------------------------------
Total liabilities and shareholders' equity 24,027 24,226
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Talisman Energy Inc.
Condensed Consolidated Statements of Income (Loss)
(unaudited)
Three months ended Nine months ended
September 30 September 30
(millions of US$) 2012 2011 2012 2011
----------------------------------------------------------------------------
Revenue
Sales 1,708 1,944 5,647 6,132
Other income 14 12 59 58
----------------------------------------------------------------------------
Total revenue and other
income 1,722 1,956 5,706 6,190
----------------------------------------------------------------------------
Expenses
Operating 604 553 1,823 1,560
Transportation 61 51 178 159
General and administrative 130 97 382 303
Depreciation, depletion and
amortization 570 455 1,745 1,403
Impairment 1,037 - 2,163 102
Dry hole 66 33 191 173
Exploration 81 87 228 335
Finance costs 74 73 213 209
Share-based payments
expense (recovery) 61 (285) (11) (345)
(Gain) loss on held-for-
trading financial
instruments 116 (120) 128 131
(Gain) loss on asset
disposals - 8 (759) (206)
Other, net 62 (38) 96 43
----------------------------------------------------------------------------
Total expenses 2,862 914 6,377 3,867
----------------------------------------------------------------------------
Income (loss) before taxes (1,140) 1,042 (671) 2,323
----------------------------------------------------------------------------
Taxes
Current income tax 152 272 803 1,151
Deferred income tax
(recovery) (561) 249 (1,230) 279
----------------------------------------------------------------------------
(409) 521 (427) 1,430
----------------------------------------------------------------------------
Net income (loss) (731) 521 (244) 893
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Per common share (US$):
Net income (loss) (0.71) 0.51 (0.24) 0.87
Diluted net income (loss) (0.71) 0.24 (0.30) 0.49
----------------------------------------------------------------------------
Weighted average number of
common shares outstanding
(millions)
Basic 1,026 1,024 1,025 1,024
Diluted 1,026 1,033 1,034 1,040
----------------------------------------------------------------------------
Talisman Energy Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)
Three months ended Nine months ended
September 30 September 30
(millions of US$) 2012 2011 2012 2011
----------------------------------------------------------------------------
Operating activities
Net income (loss) (731) 521 (244) 893
Add: Finance costs (cash and non-
cash) 74 73 213 209
Dividends from equity investments - 9 - 9
Items not involving cash 1,320 265 2,271 1,315
----------------------------------------------------------------------------
663 868 2,240 2,426
Changes in non-cash working capital (282) (346) (70) (125)
----------------------------------------------------------------------------
Cash provided by operating
activities 381 522 2,170 2,301
----------------------------------------------------------------------------
Investing activities
Capital expenditures
Exploration, development and other (812) (1,109) (2,759) (3,016)
Corporate acquisitions, net of cash
acquired - - - (156)
Property acquisitions (57) (158) (59) (731)
Proceeds of resource property
dispositions 1 (5) 940 534
Repayment of note receivable - 40 - 40
Acquisition deposit - - - 18
Investments (7) - (11) 54
Changes in non-cash working capital 160 80 18 (7)
----------------------------------------------------------------------------
Cash used in investing activities (715) (1,152) (1,871) (3,264)
----------------------------------------------------------------------------
Financing activities
Long-term debt repaid - - (991) (310)
Long-term debt issued 255 232 1,096 232
Common shares issued 6 (5) 9 109
Common shares purchased (11) (48) (24) (90)
Finance costs (cash) (51) (53) (146) (151)
Deferred credits and other 6 12 15 (8)
Common share dividends (69) - (207) (138)
Preferred share dividends (2) - (7) -
Changes in non-cash working capital 19 33 28 32
----------------------------------------------------------------------------
Cash provided by (used in) financing
activities 153 171 (227) (324)
----------------------------------------------------------------------------
Effect of translation on foreign
currency cash and cash equivalents 8 (7) 10 26
----------------------------------------------------------------------------
Net increase (decrease) in cash and
cash equivalents (173) (466) 82 (1,261)
Cash and cash equivalents net of
bank indebtedness, beginning of
period 669 858 414 1,653
----------------------------------------------------------------------------
Cash and cash equivalents net of
bank indebtedness, end of period 496 392 496 392
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cash and cash equivalents 496 421 496 421
Bank indebtedness - (29) - (29)
----------------------------------------------------------------------------
Cash and cash equivalents net of
bank indebtedness, end of period 496 392 496 392
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Talisman Energy Inc.
Segmented Information
(unaudited)
North America (1)
------------------------------------------------
Three months ended Nine months ended
September 30 September 30
------------------------------------------------
(millions of US$) 2012 2011 2012 2011
----------------------------------------------------------------------------
Revenue
Sales 343 424 1,036 1,276
Other income 12 9 51 45
----------------------------------------------------------------------------
Total revenue and other
income 355 433 1,087 1,321
----------------------------------------------------------------------------
Segmented expenses
Operating 116 123 429 334
Transportation 28 19 76 49
DD&A 279 205 828 609
Impairment 109 - 184 -
Dry hole 1 1 22 4
Exploration 1 9 24 53
Other 9 1 43 7
----------------------------------------------------------------------------
Total segmented expenses 543 358 1,606 1,056
----------------------------------------------------------------------------
Segmented income (loss)
before taxes (188) 75 (519) 265
----------------------------------------------------------------------------
Non-segmented expenses
General and administrative
Finance costs
Share-based payments expense
(recovery)
Currency translation
(Gain) loss on held-for-
trading financial
instruments
(Gain) loss on asset
disposals
----------------------------------------------------------------------------
Total non-segmented expenses
----------------------------------------------------------------------------
Income (loss) before taxes
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Capital expenditure
Exploration 42 30 104 168
Development 216 595 1,147 1,324
----------------------------------------------------------------------------
Exploration and development 258 625 1,251 1,492
----------------------------------------------------------------------------
Acquisitions
Proceeds on dispositions
Other non-segmented
----------------------------------------------------------------------------
Net capital expenditures
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Property, plant and
equipment 7,128 6,740
Exploration and evaluation
assets 2,103 2,370
Goodwill 133 140
Other 1,100 987
----------------------------------------------------------------------------
Segmented assets 10,464 10,237
Non-segmented assets
----------------------------------------------------------------------------
Total assets (5)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Decommissioning liabilities
(5) 355 394
----------------------------------------------------------------------------
Talisman Energy Inc.
Segmented Information
(unaudited)
North Sea (2)
------------------------------------------------
Three months ended Nine months ended
September 30 September 30
------------------------------------------------
(millions of US$) 2012 2011 2012 2011
----------------------------------------------------------------------------
Revenue
Sales 714 853 2,429 3,108
Other income 1 2 5 12
----------------------------------------------------------------------------
Total revenue and other
income 715 855 2,434 3,120
----------------------------------------------------------------------------
Segmented expenses
Operating 365 299 1,026 916
Transportation 17 16 55 62
DD&A 153 135 483 502
Impairment 747 - 1,725 102
Dry hole 4 (2) 21 75
Exploration 10 10 32 28
Other 19 8 40 22
----------------------------------------------------------------------------
Total segmented expenses 1,315 466 3,382 1,707
----------------------------------------------------------------------------
Segmented income (loss)
before taxes (600) 389 (948) 1,413
----------------------------------------------------------------------------
Non-segmented expenses
General and administrative
Finance costs
Share-based payments expense
(recovery)
Currency translation
(Gain) loss on held-for-
trading financial
instruments
(Gain) loss on asset
disposals
----------------------------------------------------------------------------
Total non-segmented expenses
----------------------------------------------------------------------------
Income (loss) before taxes
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Capital expenditure
Exploration 7 - 64 105
Development 294 288 786 840
----------------------------------------------------------------------------
Exploration and development 301 288 850 945
----------------------------------------------------------------------------
Acquisitions
Proceeds on dispositions
Other non-segmented
----------------------------------------------------------------------------
Net capital expenditures
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Property, plant and
equipment 4,668 5,809
Exploration and evaluation
assets 416 538
Goodwill 866 866
Other 1,621 645
----------------------------------------------------------------------------
Segmented assets 7,571 7,858
Non-segmented assets
----------------------------------------------------------------------------
Total assets (5)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Decommissioning liabilities
(5) 2,579 2,390
----------------------------------------------------------------------------
1. North America 2012 2011 2012 2011
----------------------------------------------------------------------------
Canada 194 269 629 859
US 161 164 458 462
----------------------------------------------------------------------------
Total revenue and other
income 355 433 1,087 1,321
----------------------------------------------------------------------------
Canada 3,675 3,937
US 3,453 2,803
----------------------------------------------------------------------------
Property, plant and
equipment (5) 7,128 6,740
----------------------------------------------------------------------------
Canada 1,084 1,207
US 1,019 1,163
----------------------------------------------------------------------------
Exploration and evaluation
assets (5) 2,103 2,370
----------------------------------------------------------------------------
2. North Sea 2012 2011 2012 2011
----------------------------------------------------------------------------
UK 515 577 1,694 2,179
Norway 200 278 740 941
----------------------------------------------------------------------------
Total revenue and other
income 715 855 2,434 3,120
----------------------------------------------------------------------------
UK 4,321 3,927
Norway 347 1,882
----------------------------------------------------------------------------
Property, plant and
equipment (5) 4,668 5,809
----------------------------------------------------------------------------
UK 34 210
Norway 382 328
----------------------------------------------------------------------------
Exploration and evaluation
assets (5) 416 538
----------------------------------------------------------------------------
5. Current year represents balances at September 30.
Prior year represents balances at December 31.
Talisman Energy Inc.
Segmented Information
(unaudited)
Southeast Asia (3)
----------------------------------------
Three months
ended Nine months ended
September 30 September 30
----------------------------------------
(millions of US$) 2012 2011 2012 2011
----------------------------------------------------------------------------
Revenue
Sales 501 526 1,696 1,354
Other income - 1 - 1
----------------------------------------------------------------------------
Total revenue and other income 501 527 1,696 1,355
----------------------------------------------------------------------------
Segmented expenses
Operating 99 113 306 260
Transportation 15 14 42 42
DD&A 103 87 326 212
Impairment - - - -
Dry hole 32 35 66 92
Exploration 32 37 70 172
Other 3 1 (10) 5
----------------------------------------------------------------------------
Total segmented expenses 284 287 800 783
----------------------------------------------------------------------------
Segmented income (loss) before taxes 217 240 896 572
----------------------------------------------------------------------------
Non-segmented expenses
General and administrative
Finance costs
Share-based payments expense
(recovery)
Currency translation
(Gain) loss on held-for-trading
financial instruments
(Gain) loss on asset disposals
----------------------------------------------------------------------------
Total non-segmented expenses
----------------------------------------------------------------------------
Income (loss) before taxes
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Capital expenditure
Exploration 24 61 64 189
Development 105 24 243 117
----------------------------------------------------------------------------
Exploration and development 129 85 307 306
----------------------------------------------------------------------------
Acquisitions
Proceeds on dispositions
Other non-segmented
----------------------------------------------------------------------------
Net capital expenditures
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Property, plant and equipment 2,429 2,501
Exploration and evaluation assets 485 498
Goodwill 149 149
Other 597 560
----------------------------------------------------------------------------
Segmented assets 3,660 3,708
Non-segmented assets
----------------------------------------------------------------------------
Total assets (5)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Decommissioning liabilities (5) 213 208
----------------------------------------------------------------------------
Talisman Energy Inc.
Segmented Information
(unaudited)
Other (4)
----------------------------------------
Three months Nine months
ended ended
September 30 September 30
----------------------------------------
(millions of US$) 2012 2011 2012 2011
----------------------------------------------------------------------------
Revenue
Sales 150 141 486 394
Other income 1 - 3 -
----------------------------------------------------------------------------
Total revenue and other income 151 141 489 394
----------------------------------------------------------------------------
Segmented expenses
Operating 24 18 62 50
Transportation 1 2 5 6
DD&A 35 28 108 80
Impairment 181 - 254 -
Dry hole 29 (1) 82 2
Exploration 38 31 102 82
Other 4 8 2 20
----------------------------------------------------------------------------
Total segmented expenses 312 86 615 240
----------------------------------------------------------------------------
Segmented income (loss) before taxes (161) 55 (126) 154
----------------------------------------------------------------------------
Non-segmented expenses
General and administrative
Finance costs
Share-based payments expense
(recovery)
Currency translation
(Gain) loss on held-for-trading
financial instruments
(Gain) loss on asset disposals
----------------------------------------------------------------------------
Total non-segmented expenses
----------------------------------------------------------------------------
Income (loss) before taxes
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Capital expenditure
Exploration 74 41 198 82
Development 27 42 67 115
----------------------------------------------------------------------------
Exploration and development 101 83 265 197
----------------------------------------------------------------------------
Acquisitions
Proceeds on dispositions
Other non-segmented
----------------------------------------------------------------------------
Net capital expenditures
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Property, plant and equipment 825 859
Exploration and evaluation assets 489 548
Goodwill 162 162
Other 815 788
----------------------------------------------------------------------------
Segmented assets 2,291 2,357
Non-segmented assets
----------------------------------------------------------------------------
Total assets (5)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Decommissioning liabilities (5) 74 43
----------------------------------------------------------------------------
Talisman Energy Inc.
Segmented Information
(unaudited)
Total
---------------------------------------
Three months Nine months
ended ended
September 30 September 30
----------------------------------------
(millions of US$) 2012 2011 2012 2011
----------------------------------------------------------------------------
Revenue
Sales 1,708 1,944 5,647 6,132
Other income 14 12 59 58
----------------------------------------------------------------------------
Total revenue and other income 1,722 1,956 5,706 6,190
----------------------------------------------------------------------------
Segmented expenses
Operating 604 553 1,823 1,560
Transportation 61 51 178 159
DD&A 570 455 1,745 1,403
Impairment 1,037 - 2,163 102
Dry hole 66 33 191 173
Exploration 81 87 228 335
Other 35 18 75 54
----------------------------------------------------------------------------
Total segmented expenses 2,454 1,197 6,403 3,786
----------------------------------------------------------------------------
Segmented income (loss) before taxes (732) 759 (697) 2,404
----------------------------------------------------------------------------
Non-segmented expenses
General and administrative 130 97 382 303
Finance costs 74 73 213 209
Share-based payments expense
(recovery) 61 (285) (11) (345)
Currency translation 27 (56) 21 (11)
(Gain) loss on held-for-trading 116 (120) 128 131
financial instruments
(Gain) loss on asset disposals - 8 (759) (206)
----------------------------------------------------------------------------
Total non-segmented expenses 408 (283) (26) 81
----------------------------------------------------------------------------
Income (loss) before taxes (1,140) 1,042 (671) 2,323
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Capital expenditure
Exploration 147 132 430 544
Development 642 949 2,243 2,396
----------------------------------------------------------------------------
Exploration and development 789 1,081 2,673 2,940
----------------------------------------------------------------------------
Acquisitions 57 159 59 1,516
Proceeds on dispositions (1) (35) (940) (574)
Other non-segmented 21 33 89 77
----------------------------------------------------------------------------
Net capital expenditures 866 1,238 1,881 3,959
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Property, plant and equipment 15,050 15,909
Exploration and evaluation assets 3,493 3,954
Goodwill 1,310 1,317
Other 4,133 2,980
----------------------------------------------------------------------------
Segmented assets 23,986 24,160
Non-segmented assets 41 66
----------------------------------------------------------------------------
Total assets (5) 24,027 24,226
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Decommissioning liabilities (5) 3,221 3,035
----------------------------------------------------------------------------
3. Southeast Asia 2012 2011 2012 2011
----------------------------------------------------------------------------
Indonesia 283 300 891 834
Malaysia 99 158 422 386
Vietnam 21 14 59 50
Australia 98 55 324 85
----------------------------------------------------------------------------
Total revenue and other income 501 527 1,696 1,355
----------------------------------------------------------------------------
Indonesia 1,026 1,023
Malaysia 813 883
Vietnam 388 297
Papua New Guinea 44 47
Australia 158 251
----------------------------------------------------------------------------
Property, plant and equipment (5) 2,429 2,501
----------------------------------------------------------------------------
Indonesia 12 12
Malaysia 35 41
Vietnam 9 5
Papua New Guinea 429 440
----------------------------------------------------------------------------
Exploration and evaluation assets
(5) 485 498
----------------------------------------------------------------------------
4. Other 2012 2011 2012 2011
----------------------------------------------------------------------------
Algeria 65 61 177 195
Colombia 86 80 312 199
----------------------------------------------------------------------------
Total revenue and other income 151 141 489 394
----------------------------------------------------------------------------
Algeria 272 284
Colombia 553 575
----------------------------------------------------------------------------
Property, plant and equipment (5) 825 859
----------------------------------------------------------------------------
Colombia 110 75
Kurdistan 307 303
Peru 4 133
Other 68 37
----------------------------------------------------------------------------
Exploration and evaluation assets
(5) 489 548
----------------------------------------------------------------------------
5. Current year represents balances at September 30.
Prior year represents balances at December 31.
Contacts:
Talisman Energy Inc. - Media and General Inquiries
Phoebe Buckland
External Communications
403-237-1657
403-237-1210 (FAX)
tlm@talisman-energy.com
Talisman Energy Inc. - Shareholder and Investor Inquiries
Lyle McLeod, Vice-President
Investor Relations
403-237-1020
403-237-1902 (FAX)
tlm@talisman-energy.com
www.talisman-energy.com
