Talisman Energy release first quarter results
Talisman Energy Inc. (TSX:TLM) (NYSE:TLM) reported its operating and unaudited financial results for the first quarter of 2014. All values are in US$ unless otherwise stated.
“Talisman is a more focused company with stronger performance compared to one year ago,” said Hal Kvisle, President and CEO. “We continue to deliver against our objectives. On a year-over-year basis, production from ongoing operations is up 6% and North American liquids volumes are up 45%. We are progressing non-core asset sales and have applied proceeds from previously announced dispositions to maintain a strong balance sheet.
“We grew cash flow(1)19% compared to the same period last year as a result of our solid operating performance, increased liquids volumes and stronger natural gas prices. We are steadily improving capital efficiency and reducing costs, and are on track to meet our guidance for 2014.”
First Quarter Highlights
Cash flow was $616 million, up 19% year-over-year and 6% from the previous quarter.
Production from ongoing operations was 360,000 boe/d, up 6% compared to the first quarter of 2013.
Liquids production is up 10% year-over-year to 142,000 boe/d, with North American liquids up 45% to 42,000 boe/d over the same period.
Completed the sale of 75% of the company’s Montney assets for C$1.5 billion, with proceeds used to reduce net debt1 by approximately $1 billion.
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(1)The terms “cash flow” and “net debt” are non-GAAP measures. Please see the advisories and reconciliations elsewhere in this release.
In 2013, Talisman reset its strategy and made significant progress against its four key priorities. In 2014, Talisman’s objective is to position the company to deliver sustainable shareholder value by growing cash flow from its best assets in its two core regions: the Americas and Asia-Pacific. To achieve this, Talisman expects to:
Hold capital spending(2) flat compared to 2013;
Grow near-term, high-margin production;
Improve operating performance to improve cash margins;
Dispose of long-dated, non-core capital-intensive assets; and,
Maintain a strong balance sheet.
First Quarter Summary
The company continued to make progress in the first quarter, growing liquids volumes, increasing operating margins and lowering net debt. Supported by stronger natural gas prices in North America, cash flow was up to $616 million. Capital spending during the quarter was $768 million.
Talisman’s North America portfolio delivered steady year-over-year liquids growth, driven by strong growth in the Eagle Ford and Greater Edson areas. Despite slightly lower natural gas production compared to the first quarter last year (due to natural declines and the decision to direct capital towards liquids opportunities), higher natural gas prices have resulted in an approximately $120 million increase in natural gas revenues. As a result of the company’s strong competitive position in the North American gas sector, Talisman retains the option to ramp up production in the Marcellus to capitalize on rising longer term natural gas prices.
In Colombia, Talisman and its partners have completed substantial activity on Block CP0-9 and Block CPE-6 over the past 12 months. Production for the quarter was up 18% over the same period last year to 20,000 boe/d. In Block CP0-9, eight of 10 wells have been placed on long-term test, with peak production of 10,500 bbls/d (gross, with Talisman at 45%) of 8° API oil. In Block CPE-6, appraisal drilling and testing will continue through the year to determine future development plans.
Talisman’s Southeast Asia business continues to provide high margin production and free cash flow. Production was flat compared to the previous quarter, while year-over-year liquids volumes grew around 7%, offset by year-over-year gas declines and fluctuations in demand impacting Corridor and PM-3 CAA output.
In Indonesia, Talisman received government approval to obtain a 90% working interest in the Sakakemang PSC, located between our existing high-margin Corridor and Jambi Merang PSCs. In Malaysia, two successful development wells were completed at Kinabalu, contributing an additional 1,200 boe/d compared to the previous quarter.
In the North Sea, production averaged 35,000 boe/d, up 21% over the previous quarter, due to the restart of Claymore, increased up time at Piper and Tweedsmuir and new production coming onstream from the Varg gas export project. North Sea cash flow grew compared the previous quarter on increased production and lower operating costs.
(2)The term “capital spending” is a non-GAAP measure. Please see the advisories and reconciliations elsewhere in this release.