CALGARY, ALBERTA
-- (MARKET WIRE)
-- 08/01/12
Talisman Energy Inc. (TSX:TLM) (NYSE:TLM) reported its operating and financial results for the second quarter of 2012. All values in this release are in US$ unless otherwise stated.
-- Cash flow(1) was $803 million, down 10% over the same period last year
despite a 50% reduction in NYMEX natural gas prices.
-- Net income for the quarter was $196 million, down from $698 million in
the same quarter last year, up 31% to $487 million for the six months
ended June 30, 2012.
-- Total production was 435,000 boe/d, an increase of 4% over the same
period in 2011, due to increased oil and gas volumes in Southeast Asia
and from North American shale.
-- Talisman agreed to sell a 49% equity stake in its UK North Sea assets to
Sinopec for $1.5 billion, $500 million of which the company plans to use
for share repurchases. Announced asset sales total $2.5 billion.
-- Eagle Ford production averaged 13,800 boe/d, up from 2,700 boe/d a year
ago.
-- In Colombia, the Piedemonte development was approved and a three-rig
drilling program is underway.
-- Talisman was formally awarded a new production sharing contract (PSC) at
Kinabalu in Malaysia.
-- The company has moved from paying common share dividends on a semi-
annual to a quarterly basis.
(1) The term "cash flow" is a non-GAAP measure. Please see the
advisories and reconciliations elsewhere in this news release.
"In addition to repositioning our business in the UK North Sea, we delivered a strong operational quarter," said John A. Manzoni, President and Chief Executive Officer. "With our recent UK North Sea transaction, we continue to focus and strengthen our portfolio while maintaining a strong balance sheet to weather current low natural gas prices in North America. The new joint venture will spend more on a gross basis to improve operating efficiency and extend the life of these fields. The deal will reduce Talisman's decommissioning liability in the UK, decrease future capital commitments and brings forward significant cash. We plan to use approximately $500 million of the proceeds to repurchase Talisman shares.
"Production during the quarter was 435,000 boe/d, up 4% year over year, driven by growth in Southeast Asia and North American shale. Shale volumes are up 50% from last year. We continue to deliver strong results in the liquids-rich Eagle Ford, which accounts for the bulk of our North American spending. Marcellus gas volumes continue to be strong despite significantly reduced drilling activity in the current gas price environment.
"Our Southeast Asia business delivered excellent results, with production growth of 12% compared to last year and natural gas prices averaging $9.48 per mcf for the quarter. We have received approval from PETRONAS to take over a producing asset, the Kinabalu block, in Malaysia. This is a new type of production contract to encourage further development of mature fields.
"In our exploration portfolio, we have completed drilling the Kurdamir-2 well. We have logged hydrocarbons in the Oligocene and Cretaceous zones and are currently preparing to test. In Colombia, we have sanctioned our Piedemonte development, where we have three rigs drilling. Elsewhere in Colombia, we are drilling in the foothills and progressing to test our heavy oil blocks. Our drilling program in PNG continues to be successful, and we have received government approval for our partnership with Mitsubishi.
"In summary, we have delivered a strong quarter operationally, with production up 4%. We have more than delivered on the divestments we promised earlier this year, ensuring we maintain a strong balance sheet, and we will continue to focus the portfolio. We plan to use some of the UK joint venture proceeds to buy back Talisman stock, which we believe to be good value at current prices."
Financial Results
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Three Months Six Months
June 30 Ended Ended
----------------------------------------------------------------------------
2012 2011 2012 2011
----------------------------------------------------------------------------
Cash flow(2) ($ million) 803 897 1,654 1,708
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Cash flow per share(2) 0.78 0.88 1.61 1.67
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Net income ($ million) 196 698 487 372
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Net income per share 0.19 0.68 0.48 0.36
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Earnings from operations(2) ($ million) 71 168 238 325
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Earnings from operations per share(2) 0.07 0.16 0.23 0.32
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Average shares outstanding - basic
(million) 1,026 1,025 1,025 1,024
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(2) The terms "cash flow," "cash flow per share" "earnings from operations" and "earnings from operations per share" are non-GAAP measures. Please see the advisories and reconciliations elsewhere in this news release.
Cash flow(3) was $803 million compared to $897 million in the same period last year, due mainly to weaker commodity prices and higher operating expenses, partially offset by lower cash taxes and a lower realized loss on held-for-trading financial instruments.
Net income was down as a result of weaker commodity prices, a smaller recovery on share-based payments, higher operating expenses, higher DD&A, and asset impairments, partially offset by a larger gain on asset disposals, lower exploration costs and lower income taxes. Earnings from operations were also down as a result of weaker commodity prices, higher operating costs and DD&A, partially offset by lower exploration costs, lower deferred taxes and a lower realized loss on held-for-trading financial instruments.
Exploration and development spending(3) in the quarter was $1 billion. Net debt(3) at the end of the second quarter was $4.1 billion, relatively unchanged from $4 billion at the end of the first quarter.
(3) The terms "cash flow," "exploration and development spending" and "net debt" are non-GAAP measures. Please see the advisories and reconciliations elsewhere in this news release.
Netbacks
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Three Months Six Months
June 30 Ended Ended
----------------------------------------------------------------------------
2012 2011 2012 2011
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Total company sales price ($/boe) 54.72 68.47 60.09 67.08
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Total company netback ($/boe) 26.20 39.48 31.65 40.05
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Oil and liquids netback ($/bbl) 47.83 61.97 58.69 63.39
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Natural gas netback ($/mcf) 2.25 3.90 2.43 3.74
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The company's average netback was $26.20/boe, 34% lower than the same period last year due to lower commodity prices and higher unit operating expenses. In Southeast Asia, natural gas prices averaged $9.48/mcf, and netbacks remained relatively unchanged from the first quarter at $5.80/mcf.
WTI oil prices averaged $93.53 and Brent oil prices averaged $108.33, down 9% and 8% respectively from the second quarter of last year. NYMEX natural gas prices averaged $2.26, a 48% decrease from a year ago.
Production
----------------------------------------------------------------------------
June 30 Three Months Ended Six Months Ended
----------------------------------------------------------------------------
2012 2011 2012 2011
----------------------------------------------------------------------------
Oil and liquids (mbbls/d)
----------------------------------------------------------------------------
North America 28 23 28 22
------------------------------------
North Sea 70 96 79 109
------------------------------------
Southeast Asia 41 33 43 33
------------------------------------
Other 22 23 24 22
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Total oil and liquids (mbbls/d) 161 175 174 186
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Natural gas (mmcf/d)
----------------------------------------------------------------------------
North America 1,039 875 1,032 880
------------------------------------
North Sea 32 56 38 69
------------------------------------
Southeast Asia 528 500 538 497
------------------------------------
Other 43 39 40 32
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Total natural gas (mmcf/d) 1,642 1,470 1,648 1,478
----------------------------------------------------------------------------
Total (mboe/d) 435 420 448 432
----------------------------------------------------------------------------
Less: Assets sold - North America
(mboe/d) 6 8 7 8
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Production from ongoing operations
(mboe/d) 429 412 441 424
----------------------------------------------------------------------------
Total production and production from ongoing operations increased by 4% over the previous year due principally to increased shale volumes in North America and growth in Southeast Asia, partially offset by lower North Sea production.
North America
Production
----------------------------------------------------------------------------
Three Months Six Months
June 30 Ended Ended
----------------------------------------------------------------------------
2012 2011 2012 2011
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Shale (mmcfe/d)
----------------------------------------------------------------------------
Marcellus 545 406 537 379
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Montney/pilots 76 47 73 61
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Eagle Ford 83 16 79 19
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Total shale (mmcfe/d) 704 469 689 459
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Conventional total, excluding assets
sold (mboe/d) 78 83 78 84
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Assets sold (mboe/d) 6 8 7 8
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total NAO production (mboe/d) 201 169 200 168
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We are well positioned in some of the top-tier shale plays in North America. We are shifting our focus to the liquids-rich parts of our portfolio and expect to grow our liquids production from approximately 25,000 bbls/d in 2012 to over 60,000 bbls/d by 2015.
In North America, production averaged 201,000 boe/d for the second quarter, up 19% from a year ago. Oil and liquids volumes increased by 22%, with natural gas production up 19%. Volumes listed as "assets sold" include 2,350 bbls/d of liquids.
Capital expenditure totalled $399 million, of which 90% was related to shale activity. The majority of this was spent on progressing development of the liquids-rich Eagle Ford program, where overall production averaged 13,800 boe/d (83 mmcfe/d). Liquids production averaged 7,000 bbls/d compared to 1,000 bbl/d in the same quarter in 2011.
As signalled at the beginning of the year, Talisman is actively reducing capital spending in the Marcellus due to low natural gas prices. Gas production averaged 545 mmcf/d, an increase of 34% over the same quarter last year. It is expected to decrease over the coming months as a result of the ramp down in activity. Operating costs for the quarter included $11 million for the recently introduced Pennsylvania impact fee, which included $7 million for prior year costs.
In the Montney and other pilots, production was up slightly over the previous quarter, averaging 76 mmcfe/d. During the quarter, Talisman made the decision not to proceed with the next phase of Sasol Canada's GTL (gas-to-liquids) project. This does not impact the company's upstream joint venture agreement with Sasol.
In the liquids-rich Duvernay, the company drilled the third well of its 2012 six-well pilot program. Talisman plans to drill the next three wells in the southern portion of our holdings in the second half of the year.
Southeast Asia
Production
----------------------------------------------------------------------------
June 30 Three Months Ended Six Months Ended
----------------------------------------------------------------------------
2012 2011 2012 2011
----------------------------------------------------------------------------
Malaysia liquids (mbbls/d) 16 17 17 17
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Malaysia gas (mmcf/d) 121 118 124 116
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Malaysia total (mboe/d) 37 37 38 37
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Indonesia liquids (mbbls/d) 10 11 11 11
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Indonesia gas (mmcf/d) 407 382 414 381
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Indonesia total (mboe/d) 78 74 80 74
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Vietnam (mboe/d) 2 2 2 2
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Australia (mboe/d) 13 3 13 3
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Total (mboe/d) 130 116 133 116
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Southeast Asia is expected to grow at an average of approximately 8% per year through the medium term. The majority of Talisman's gas sales contracts here are linked to oil price benchmarks. This region is one of the fastest growing natural gas markets in the world.
Liquids production averaged 41,000 bbls/d in the quarter, an increase of 24% over the same quarter last year. This is primarily due to the ramp up at Jambi Merang and the addition of Kitan in October 2011. Natural gas sales for the second quarter averaged 528 mmcf/d, with prices averaging $9.48/mcf.
In Malaysia, production averaged 37,000 boe/d in the quarter. Talisman has drilled six wells of an eight-well program in PM-3 CAA Northern Fields, with five wells now on production. All wells are meeting or exceeding expectations. During the quarter, PETRONAS formally awarded Talisman a 60% working interest in a new production sharing contract for continuing production, further development and improved oil recovery from Kinabalu, which lies within the Sabah region offshore Malaysia. Talisman assumes operatorship in December of this year.
In Indonesia, production was 5% higher than the same period last year (12% higher when normalized to account for Suban unitization) due principally to increased volumes at Jambi Merang and Tangguh. The Corridor PSC is maintaining production at record levels of over 1 bcf/d gross sales gas.
In Vietnam, production has remained steady at an average of 2,000 bbls/d. The Hai Su Trang and Hai Su Den development is progressing on schedule and on budget, with first production planned for the second half of 2013.
In Papua New Guinea, the Stanley condensate recovery scheme was sanctioned by Talisman in June. This liquids project is expected to start production in late 2014.
North Sea
Production (mboe/d)
----------------------------------------------------------------------------
June 30 Three Months Ended Six Months Ended
----------------------------------------------------------------------------
2012 2011 2012 2011
----------------------------------------------------------------------------
UK 52 73 57 83
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Norway 23 33 28 38
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Total (mboe/d) 75 106 85 121
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The North Sea is an important part of the company's portfolio. We will continue to maximize value from our UK assets through the recent joint venture agreement with Sinopec.
In July, Talisman announced a joint venture agreement where Sinopec will acquire a 49% equity interest in Talisman's UK North Sea business for $1.5 billion. The joint venture will invest to improve ongoing operating performance, as well as infill drilling and major projects, thereby extending field life and deferring decommissioning. The joint venture will proportionately reduce Talisman's share of capital spending, production and abandonment liabilities for its UK business. The transaction is expected to close by year-end.
During the quarter, production in the North Sea decreased by 29% relative to the same period in 2011. In the UK, the decrease related to planned turnarounds, shut-ins to repair a gas export pipeline, and mechanical issues at several sites. The decrease in Norway was due principally to reduced rates at Brage and Gyda, and shutdown work at Brage and Rev.
Production is expected to increase toward the end of the year with the contribution from infill wells, completion of planned maintenance and the resolution of mechanical issues. During the quarter, the first of several planned infill wells at Clyde was drilled and an infill well at Rev commenced drilling. Following the Rev well, the rig will move to Varg to drill two infill wells on the field.
Colombia
In Colombia, the development of Equion's Piedemonte complex is proceeding with the recent sanctioning of a major facilities expansion and a three-rig drilling program underway. In the foothills region, the Huron-2 appraisal well continues to drill. An environmental permit has been issued for block CPO-9, and we are moving to progress testing.
International Exploration
Talisman is focusing its exploration spending in areas that have high impact and a greater potential for large discoveries. This next phase of our exploration program includes near-term oil growth and large Asian gas opportunities. We continue to evaluate new plays as part of our unconventional and deepwater strategy.
In the Kurdistan Region of northern Iraq, the Kurdamir-2 exploration well has reached its target total depth of 4,000 metres, and drillstem testing in the Cretaceous pay zone identified on logs is being initiated. Depending on results, an extended well test in either the Cretaceous or Oligocene zone will be considered. After completing operations on Kurdamir-2, Talisman intends to enter the next exploration period of the Kurdamir licence and drill a follow-up appraisal well, Kurdamir-3.
In Papua New Guinea, the Weimang-1 exploration well found gas in line with pre-drill expectations. Talisman will now move onto the Puk Puk-2 appraisal well and is confident that its gas aggregation strategy in the Western Province remains on track.
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 September 28, 2012 to shareholders of record at the close of business on August 17, 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 October 1, 2012 to shareholders of record at the close of business on August 17, 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; production guidance; expected shift to liquids and expected liquids production in North America; expected production decline in the Marcellus; expected drilling in the Duvernay; expected production growth in Southeast Asia; expected operatorship at Kinabalu; expected drilling in Malaysia, the Kurdistan Region of northern Iraq and PNG; expected first production at HST/HSD and Stanley; planned investment, drilling, projects, extended field life and deferred decommissioning through the joint venture with Sinopec; expected closing of the Sinopec transaction; planned drilling at Varg; expected testing in Colombia; planned share repurchase; 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.
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 Six Months Ended
----------------------------------------------------------------------------
June 30, June 30, June 30, June 30,
2012 2011 2012 2011
----------------------------------------------------------------------------
Cash provided by operating
activities 809 896 1,789 1,779
Changes in non-cash working capital (58) (94) (212) (221)
Add: Exploration expenditure 91 136 147 248
Add: Pennsylvania impact fee(1) 7 - 25 -
Less: Finance costs (cash) (46) (41) (95) (98)
----------------------------------------------------------------------------
Cash flow 803 897 1,654 1,708
----------------------------------------------------------------------------
Cash flow per share 0.78 0.88 1.61 1.67
----------------------------------------------------------------------------
Diluted cash flow per share 0.78 0.86 1.60 1.63
----------------------------------------------------------------------------
1. Pennsylvania impact fee amount represents the one-time impact of the
retrospective application of the legislation to wells drilled pre-2012.
Q2 2012 amount represents revision to prior period estimate of the
expected retrospective fee.
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 August 1, 2012. A reconciliation of cash provided by operating activities to cash flow is provided above.
Earnings from Operations
US$ million, except per share amounts
Three Months Ended Six Months Ended
----------------------------------------------------------------------------
June 30, June 30, June 30, June 30,
2012 2011 2012 2011
----------------------------------------------------------------------------
Net income 196 698 487 372
----------------------------------------------------------------------------
Gain on disposals (tax adjusted) (188) (89) (565) (157)
Unrealized (gain) loss on financial
instruments(tax adjusted)(1) (37) (181) - 82
Share-based payments (tax
adjusted)(2) (30) (179) (76) (71)
Foreign exchange on debt (tax
adjusted) (3) - 12 8
Impairment (tax adjusted) 73 - 375 39
Pennsylvania impact fee (tax
adjusted)(3) 5 - 16 -
Deferred tax adjustments(4) 55 (81) (11) 52
----------------------------------------------------------------------------
Earnings from operations 71 168 238 325
----------------------------------------------------------------------------
Earnings from operations per share 0.07 0.16 0.23 0.32
----------------------------------------------------------------------------
Diluted earnings from operations per
share 0.07 0.16 0.23 0.31
----------------------------------------------------------------------------
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 June 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.
Q2 2012 amount represents revision to prior period estimate of the
expected retrospective fee.
4. Deferred tax adjustments largely comprise tax on foreign exchange on tax
pools.
Earnings from 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 operations per share are earnings from operations divided by the average number of common shares outstanding during the period. Diluted earnings from operations per share are earnings 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 August 1, 2012. A reconciliation of net income to earnings from operations is provided above.
Exploration and Development Spending
US$ million
Three Months Ended Six Months Ended
----------------------------------------------------------------------------
June 30, June 30, June 30, June 30,
2012 2011 2012 2011
----------------------------------------------------------------------------
Exploration, development and other
936 997 1,947 1,907
Exploration expensed 91 136 147 248
----------------------------------------------------------------------------
Exploration and development spending 1,027 1,133 2,094 2,155
----------------------------------------------------------------------------
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
Three Months Ended
----------------------------------------------------------------------------
June 30, 2012 March 31, 2012
----------------------------------------------------------------------------
Long-term debt 4,746 4,741
Bank indebtedness 14 -
Cash and cash equivalents (683) (732)
----------------------------------------------------------------------------
Net debt 4,077 4,009
----------------------------------------------------------------------------
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 ended June 30 Six months ended June 30
2012 2011 2012 2011
----------------------------------------------------------------------------
Financial
(millions of US$
unless otherwise
stated)
Cash flow (1) 803 897 1,654 1,708
Net income 196 698 487 372
Exploration and
development
spending(1) 1,027 1,133 2,094 2,155
Per common share
(US$)
Cash flow (1) 0.78 0.88 1.61 1.67
Net income 0.19 0.68 0.48 0.36
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Production
(Daily Average -
Gross)
Oil and liquids
(bbls/d)
North America 27,589 22,730 27,764 21,911
North Sea 69,657 96,186 79,205 109,200
Southeast Asia 41,460 32,832 43,154 32,845
Other 22,027 22,983 23,703 21,578
----------------------------------------------------------------------------
Total oil and
liquids 160,733 174,731 173,826 185,534
----------------------------------------------------------------------------
Natural gas (mmcf/d)
North America 1,039 875 1,032 880
North Sea 32 56 38 69
Southeast Asia 528 500 538 497
Other 43 39 40 32
----------------------------------------------------------------------------
Total natural gas 1,642 1,470 1,648 1,478
----------------------------------------------------------------------------
Total mboe/d (2) 435 420 448 432
----------------------------------------------------------------------------
Prices
Oil and liquids
(US$/bbl)
North America 67.55 79.33 72.41 74.29
North Sea 104.03 117.04 113.27 110.28
Southeast Asia 106.52 118.74 115.08 118.01
Other 115.13 112.67 120.38 113.46
----------------------------------------------------------------------------
Total oil and
liquids 99.93 111.88 108.16 107.77
----------------------------------------------------------------------------
Natural gas
(US$/mcf)
North America 2.14 4.22 2.31 4.14
North Sea 9.99 8.82 9.94 8.66
Southeast Asia 9.48 9.78 9.67 9.26
Other 3.95 3.04 4.53 4.03
----------------------------------------------------------------------------
Total natural gas 4.70 6.25 4.94 6.07
----------------------------------------------------------------------------
Total (US$/boe) (2) 54.72 68.47 60.09 67.08
----------------------------------------------------------------------------
(1) Cash flow, exploration 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)
(millions of US$) June 30, 2012 December 31, 2011
----------------------------------------------------------------------------
Assets
Current
Cash and cash equivalents 683 474
Accounts receivable 1,357 1,550
Risk management 23 42
Inventories 151 164
Prepaid expenses 46 24
Assets held for sale 31 -
----------------------------------------------------------------------------
2,291 2,254
----------------------------------------------------------------------------
Other assets 110 101
Investments 374 395
Risk management 26 24
Goodwill 1,310 1,317
Property, plant and equipment 15,516 15,909
Exploration and evaluation assets 3,596 3,954
Deferred tax assets 843 272
----------------------------------------------------------------------------
21,775 21,972
----------------------------------------------------------------------------
Total assets 24,066 24,226
----------------------------------------------------------------------------
Liabilities
Current
Bank indebtedness 14 60
Accounts payable and accrued
liabilities 2,458 2,622
Income and other taxes payable 360 371
Current portion of long-term debt 324 410
Liabilities associated with assets
held for sale 31 -
----------------------------------------------------------------------------
3,187 3,463
----------------------------------------------------------------------------
Decommissioning liabilities 2,929 2,982
Other long-term obligations 348 346
Long-term debt 4,422 4,485
Deferred tax liabilities 2,826 2,932
----------------------------------------------------------------------------
10,525 10,745
----------------------------------------------------------------------------
Shareholders' equity
Common shares 1,642 1,561
Preferred shares 191 191
Contributed surplus 102 186
Retained earnings 7,631 7,292
Accumulated other comprehensive
income 788 788
----------------------------------------------------------------------------
10,354 10,018
----------------------------------------------------------------------------
Total liabilities and shareholders'
equity 24,066 24,226
----------------------------------------------------------------------------
Talisman Energy Inc.
Condensed Consolidated Statements of Income
(unaudited)
Three months ended Six months ended
June 30 June 30
(millions of US$) 2012 2011 2012 2011
----------------------------------------------------------------------------
Revenue
Sales 1,850 2,216 3,939 4,188
Other income 19 18 45 46
----------------------------------------------------------------------------
Total revenue and other income 1,869 2,234 3,984 4,234
----------------------------------------------------------------------------
Expenses
Operating 642 555 1,219 1,007
Transportation 58 52 117 108
General and administrative 131 108 252 206
Depreciation, depletion and
amortization 572 479 1,175 948
Impairment 73 - 1,126 102
Dry hole 65 36 125 140
Exploration 91 136 147 248
Finance costs 68 60 139 136
Share-based payments recovery (31) (176) (72) (60)
(Gain) loss on held-for-
trading financial
instruments (35) (68) 12 251
Gain on asset disposals (254) (122) (759) (214)
Other, net (43) 23 34 81
----------------------------------------------------------------------------
Total expenses 1,337 1,083 3,515 2,953
----------------------------------------------------------------------------
Income before taxes 532 1,151 469 1,281
----------------------------------------------------------------------------
Taxes
Current income tax 218 436 651 879
Deferred income tax
(recovery) 118 17 (669) 30
----------------------------------------------------------------------------
336 453 (18) 909
----------------------------------------------------------------------------
Net income 196 698 487 372
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Per common share (US$):
Net income 0.19 0.68 0.48 0.36
Diluted net income 0.14 0.50 0.38 0.26
----------------------------------------------------------------------------
Weighted average number of
common shares outstanding
(millions)
Basic 1,026 1,025 1,025 1,024
Diluted 1,033 1,044 1,032 1,047
----------------------------------------------------------------------------
Talisman Energy Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)
Three months ended June 30 Six months ended June 30
(millions of US$) 2012 2011 2012 2011
----------------------------------------------------------------------------
Operating activities
Net income 196 698 487 372
Add: Finance costs
(cash and non-cash) 68 60 139 136
Items not involving
cash 487 44 951 1,050
----------------------------------------------------------------------------
751 802 1,577 1,558
Changes in non-cash
working capital 58 94 212 221
----------------------------------------------------------------------------
Cash provided by
operating activities 809 896 1,789 1,779
----------------------------------------------------------------------------
Investing activities
Capital expenditures
Exploration,
development and
other (936) (997) (1,947) (1,907)
Corporate
acquisitions, net
of cash acquired - 19 - (156)
Property
acquisitions - (542) (2) (573)
Proceeds of resource
property
dispositions 437 290 939 539
Acquisition deposit - - - 18
Investments (1) - (4) 54
Changes in non-cash
working capital (212) 53 (142) (87)
----------------------------------------------------------------------------
Cash used in
investing activities (712) (1,177) (1,156) (2,112)
----------------------------------------------------------------------------
Financing activities
Long-term debt repaid (562) (2) (991) (310)
Long-term debt issued 583 - 841 -
Common shares issued 1 35 3 114
Common shares
purchased (9) (24) (13) (42)
Finance costs (cash) (46) (41) (95) (98)
Deferred credits and
other 16 (17) 9 (20)
Common share dividend (138) (138) (138) (138)
Preferred share
dividend (2) - (5) -
Changes in non-cash
working capital 2 - 9 (1)
----------------------------------------------------------------------------
Cash used in
financing activities (155) (187) (380) (495)
----------------------------------------------------------------------------
Effect of translation
on foreign currency
cash and cash
equivalents (5) 7 2 33
----------------------------------------------------------------------------
Net increase
(decrease) in cash
and cash equivalents (63) (461) 255 (795)
Cash and cash
equivalents net of
bank indebtedness,
beginning of period 732 1,319 414 1,653
----------------------------------------------------------------------------
Cash and cash
equivalents net of
bank indebtedness,
end of period 669 858 669 858
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cash and cash
equivalents 683 860 683 860
Bank indebtedness (14) (2) (14) (2)
----------------------------------------------------------------------------
Cash and cash
equivalents net of
bank indebtedness,
end of period 669 858 669 858
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Talisman Energy Inc.
Segmented Information
(unaudited)
North America (1)
----------------------------------------------------
Three months ended Six months ended
June 30 June 30
----------------------------------------------------
(millions of US$) 2012 2011 2012 2011
----------------------------------------------------------------------------
Revenue
Sales 330 448 693 852
Other income 18 13 39 36
----------------------------------------------------------------------------
Total revenue and other
income 348 461 732 888
----------------------------------------------------------------------------
Segmented expenses
Operating 164 100 313 211
Transportation 25 14 48 30
DD&A 276 203 549 404
Impairment - - 75 -
Dry hole 10 1 21 3
Exploration 22 15 23 44
Other 5 (1) 34 6
----------------------------------------------------------------------------
Total segmented expenses 502 332 1,063 698
----------------------------------------------------------------------------
Segmented income (loss)
before taxes (154) 129 (331) 190
----------------------------------------------------------------------------
Non-segmented expenses
General and
administrative
Finance costs
Share-based payments
recovery
Currency translation
(Gain) loss on held-for-
trading financial
instruments
Gain on asset disposals
----------------------------------------------------------------------------
Total non-segmented
expenses
----------------------------------------------------------------------------
Income before taxes
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Capital expenditure
Exploration 29 55 62 138
Development 370 378 931 729
----------------------------------------------------------------------------
Exploration and
development 399 433 993 867
----------------------------------------------------------------------------
Acquisitions
Proceeds on dispositions
Other non-segmented
----------------------------------------------------------------------------
Net capital expenditures
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Property, plant and
equipment 7,109 6,740
Exploration and
evaluation assets 2,200 2,370
Goodwill 133 140
Other 1,149 987
Assets held for sale - -
----------------------------------------------------------------------------
Segmented assets 10,591 10,237
Non-segmented assets
----------------------------------------------------------------------------
Total assets (5)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Decommissioning
liabilities (5) 330 394
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Talisman Energy Inc.
Segmented Information
(unaudited)
North Sea (2)
----------------------------------------------------
Three months ended Six months ended
June 30 June 30
----------------------------------------------------
(millions of US$) 2012 2011 2012 2011
----------------------------------------------------------------------------
Revenue
Sales 770 1,167 1,715 2,255
Other income 1 5 4 10
----------------------------------------------------------------------------
Total revenue and other
income 771 1,172 1,719 2,265
----------------------------------------------------------------------------
Segmented expenses
Operating 349 357 661 617
Transportation 18 23 38 46
DD&A 156 181 330 367
Impairment - - 978 102
Dry hole 18 2 17 77
Exploration 8 7 22 18
Other 11 5 21 14
----------------------------------------------------------------------------
Total segmented expenses 560 575 2,067 1,241
----------------------------------------------------------------------------
Segmented income (loss)
before taxes 211 597 (348) 1024
----------------------------------------------------------------------------
Non-segmented expenses
General and
administrative
Finance costs
Share-based payments
recovery
Currency translation
(Gain) loss on held-for-
trading financial
instruments
Gain on asset disposals
----------------------------------------------------------------------------
Total non-segmented
expenses
----------------------------------------------------------------------------
Income before taxes
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Capital expenditure
Exploration 57 54 57 105
Development 263 307 492 552
----------------------------------------------------------------------------
Exploration and
development 320 361 549 657
----------------------------------------------------------------------------
Acquisitions
Proceeds on dispositions
Other non-segmented
----------------------------------------------------------------------------
Net capital expenditures
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Property, plant and
equipment 5,141 5,809
Exploration and
evaluation assets 368 538
Goodwill 866 866
Other 943 645
Assets held for sale 31 -
----------------------------------------------------------------------------
Segmented assets 7,349 7,858
Non-segmented assets
----------------------------------------------------------------------------
Total assets (5)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Decommissioning
liabilities (5) 2,393 2,390
----------------------------------------------------------------------------
----------------------------------------------------------------------------
1. North America 2012 2011 2012 2011
------------------------------------------------------------------
Canada 206 300 435 590
US 142 161 297 298
------------------------------------------------------------------
Total revenue and other
income 348 461 732 888
------------------------------------------------------------------
Canada 3,727 3,937
US 3,382 2,803
------------------------------------------------------------------
Property, plant and
equipment (5) 7,109 6,740
------------------------------------------------------------------
Canada 1,163 1,207
US 1,037 1,163
------------------------------------------------------------------
Exploration and evaluation
assets (5) 2,200 2,370
------------------------------------------------------------------
2. North Sea 2012 2011 2012 2011
------------------------------------------------------------------
UK 516 866 1,179 1,602
Norway 255 306 540 663
------------------------------------------------------------------
Total revenue and other
income 771 1,172 1,719 2,265
------------------------------------------------------------------
UK 4,145 3,927
Norway 996 1,882
------------------------------------------------------------------
Property, plant and
equipment (5) 5,141 5,809
------------------------------------------------------------------
UK 38 210
Norway 330 328
------------------------------------------------------------------
Exploration and evaluation
assets (5) 368 538
------------------------------------------------------------------
5. Current year represents balances at June 30.
Prior year represents balances at December
Talisman Energy Inc.
Segmented Information
(unaudited)
Southeast Asia (3)
--------------------------------------------------------
Three months ended Six months ended
June 30 June 30
--------------------------------------------------------
(millions of US$) 2012 2011 2012 2011
----------------------------------------------------------------------------
Revenue
Sales 581 442 1,195 828
Other income - - - -
----------------------------------------------------------------------------
Total revenue and
other income 581 442 1,195 828
----------------------------------------------------------------------------
Segmented expenses
Operating 109 75 207 147
Transportation 13 13 27 28
DD&A 105 63 223 125
Impairment - - - -
Dry hole 31 33 34 57
Exploration 20 83 38 135
Other (14) 1 (13) 4
----------------------------------------------------------------------------
Total segmented
expenses 264 268 516 496
----------------------------------------------------------------------------
Segmented income
(loss) before taxes 317 174 679 332
----------------------------------------------------------------------------
Non-segmented
expenses
General and
administrative
Finance costs
Share-based payments
recovery
Currency translation
(Gain) loss on held-
for-trading
financial
instruments
Gain on asset
disposals
----------------------------------------------------------------------------
Total non-segmented
expenses
----------------------------------------------------------------------------
Income before taxes
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Capital expenditure
Exploration 27 79 40 128
Development 68 22 138 93
----------------------------------------------------------------------------
Exploration and
development 95 101 178 221
----------------------------------------------------------------------------
Acquisitions
Proceeds on
dispositions
Other non-segmented
----------------------------------------------------------------------------
Net capital
expenditures
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Property, plant and
equipment 2,429 2,501
Exploration and
evaluation assets 486 498
Goodwill 149 149
Other 632 560
Assets held for sale - -
----------------------------------------------------------------------------
Segmented assets 3,696 3,708
Non-segmented assets
----------------------------------------------------------------------------
Total assets (5)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Decommissioning
liabilities (5) 211 208
----------------------------------------------------------------------------
Talisman Energy Inc.
Segmented Information
(unaudited)
Other (4)
--------------------------------------------------------
Three months ended Six months ended
June 30 June 30
--------------------------------------------------------
(millions of US$) 2012 2011 2012 2011
----------------------------------------------------------------------------
Revenue
Sales 169 159 336 253
Other income - - 2 -
----------------------------------------------------------------------------
Total revenue and
other income 169 159 338 253
----------------------------------------------------------------------------
Segmented expenses
Operating 20 23 38 32
Transportation 2 2 4 4
DD&A 35 32 73 52
Impairment 73 - 73 -
Dry hole 6 - 53 3
Exploration 41 31 64 51
Other (8) 12 (2) 12
----------------------------------------------------------------------------
Total segmented
expenses 169 100 303 154
----------------------------------------------------------------------------
Segmented income
(loss) before taxes - 59 35 99
----------------------------------------------------------------------------
Non-segmented
expenses
General and
administrative
Finance costs
Share-based payments
recovery
Currency translation
(Gain) loss on held-
for-trading
financial
instruments
Gain on asset
disposals
----------------------------------------------------------------------------
Total non-segmented
expenses
----------------------------------------------------------------------------
Income before taxes
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Capital expenditure
Exploration 68 25 124 41
Development 25 45 40 73
----------------------------------------------------------------------------
Exploration and
development 93 70 164 114
----------------------------------------------------------------------------
Acquisitions
Proceeds on
dispositions
Other non-segmented
----------------------------------------------------------------------------
Net capital
expenditures
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Property, plant and
equipment 837 859
Exploration and
evaluation assets 542 548
Goodwill 162 162
Other 840 788
Assets held for sale - -
----------------------------------------------------------------------------
Segmented assets 2,381 2,357
Non-segmented assets
----------------------------------------------------------------------------
Total assets (5)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Decommissioning
liabilities (5) 44 43
----------------------------------------------------------------------------
Talisman Energy Inc.
Segmented Information
(unaudited)
Total
-------------------------------------------------------
Three months ended Six months ended
June 30 June 30
--------------------------------------------------------
(millions of US$) 2012 2011 2012 2011
----------------------------------------------------------------------------
Revenue
Sales 1,850 2,216 3,939 4,188
Other income 19 18 45 46
----------------------------------------------------------------------------
Total revenue and
other income 1,869 2,234 3,984 4,234
----------------------------------------------------------------------------
Segmented expenses
Operating 642 555 1,219 1,007
Transportation 58 52 117 108
DD&A 572 479 1,175 948
Impairment 73 - 1,126 102
Dry hole 65 36 125 140
Exploration 91 136 147 248
Other (6) 17 40 36
----------------------------------------------------------------------------
Total segmented
expenses 1,495 1,275 3,949 2,589
----------------------------------------------------------------------------
Segmented income
(loss) before taxes 374 959 35 1,645
----------------------------------------------------------------------------
Non-segmented
expenses
General and
administrative 131 108 252 206
Finance costs 68 60 139 136
Share-based payments
recovery (31) (176) (72) (60)
Currency translation (37) 6 (6) 45
(Gain) loss on held-
for-trading
financial
instruments (35) (68) 12 251
Gain on asset
disposals (254) (122) (759) (214)
----------------------------------------------------------------------------
Total non-segmented
expenses (158) (192) (434) 364
----------------------------------------------------------------------------
Income before taxes 532 1,151 469 1,281
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Capital expenditure
Exploration 181 213 283 412
Development 726 752 1,601 1,447
----------------------------------------------------------------------------
Exploration and
development 907 965 1,884 1,859
----------------------------------------------------------------------------
Acquisitions - 564 2 1,357
Proceeds on
dispositions (437) (290) (939) (539)
Other non-segmented 37 28 68 44
----------------------------------------------------------------------------
Net capital
expenditures 507 1,267 1,015 2,721
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Property, plant and
equipment 15,516 15,909
Exploration and
evaluation assets 3,596 3,954
Goodwill 1,310 1,317
Other 3,564 2,980
Assets held for sale 31 -
----------------------------------------------------------------------------
Segmented assets 24,017 24,160
Non-segmented assets 49 66
----------------------------------------------------------------------------
Total assets (5) 24,066 24,226
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Decommissioning
liabilities (5) 2,978 3,035
----------------------------------------------------------------------------
3. Southeast Asia 2012 2011 2012 2011
------------------------------------------------------------------
Indonesia 293 284 609 533
Malaysia 165 113 323 228
Vietnam 12 16 38 36
Australia 111 29 225 31
------------------------------------------------------------------
Total revenue and other
income 581 442 1,195 828
------------------------------------------------------------------
Indonesia 1,024 1,023
Malaysia 837 883
Vietnam 338 297
Papua New Guinea 45 47
Australia 185 251
------------------------------------------------------------------
Property, plant and
equipment (5) 2,429 2,501
------------------------------------------------------------------
Indonesia 10 12
Malaysia 35 41
Vietnam 13 5
Papua New Guinea 428 440
------------------------------------------------------------------
Exploration and evaluation
assets (5) 486 498
------------------------------------------------------------------
4. Other 2012 2011 2012 2011
------------------------------------------------------------------
Algeria 58 90 112 134
Colombia 111 69 226 119
------------------------------------------------------------------
Total revenue and other
income 169 159 338 253
------------------------------------------------------------------
Algeria 281 284
Colombia 556 575
------------------------------------------------------------------
Property, plant and
equipment (5) 837 859
------------------------------------------------------------------
Colombia 114 75
Kurdistan 250 303
Peru 120 133
Other 58 37
------------------------------------------------------------------
Exploration and evaluation
assets (5) 542 548
------------------------------------------------------------------
(5) Current year represents balances at June 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
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