Talisman Posts Mixed 1Q - Analyst Blog
May 02 2012 - 8:30AM
Zacks
Canadian energy explorer
Talisman Energy Inc. (TLM) came out with soft
first quarter 2012 results, reflecting disappointing North Sea
volumes and unfavorable natural gas fundamentals, partially offset
by higher oil prices.
Alberta-based Talisman announced
earnings per share from continuing operations (excluding
non-operating items) of 16 cents, which missed the Zacks Consensus
Estimate of 20 cents. Compared with the year-ago period, Talisman’s
earnings per share improved 6.7% from 15 cents.
Quarterly total revenue of $2,115.0
million improved 5.6% from $2,000.0 million in the first quarter of
2011 and was 0.8% above our projection.
Volume
Analysis
Total production during the quarter
was up 4.1% from the year-ago level at 462, 000 barrels of oil
equivalent per day (MBOE/d), supported by higher activity at Eagle
Ford shale and efficient operations at facilities in Indonesia.
Oil & liquids production during
the quarter was down 4.9% at 186,920 barrels per day (Bbl/d).
Volumes were down in the North Sea region, but were partially
compensated by improved oil & liquids production from North
America and Southeast Asia areas.
Talisman’s natural gas volumes in
the quarter were up approximately 11.3% at 1,652 million cubic feet
per day (MMcf/d), mainly attributable to increases in North America
and Southeast Asia.
Realized
Prices
During the quarter, Talisman’s
realized commodity prices dropped 1.0% from the year-ago quarter to
$65.14 per barrel of oil equivalent (BOE), mainly on account of the
weak natural gas price scenario in North America.
Overall, natural gas prices
declined 11.9% year over year to $5.19 per Mcf, while oil &
liquids realizations averaged $115.24 per barrel, up 10.7% from the
year-ago level.
Cash Flows and Capital
Expenditure
Cash flows from continuing
operations during the quarter totaled $851 million, 5.0% above that
of the first quarter of 2011. Talisman spent $1,011.0 million on
exploration and development activities.
Balance Sheet
As of March 31, 2012, Talisman had
cash and cash equivalents of approximately $732.0 million and
long-term debt of $4,741.0 million (including current portion),
with a debt-to-capitalization ratio of 31.5%.
Outlook
Talisman expects to witness
production growth in the lower range of 0–5% for 2012, with a
targeted exploration and development spending of about $3.6
billion.
Our
Recommendation
We maintain our long-term Neutral
recommendation on the stock. Talisman, which operates in the
industry along with Canadian Natural Resources
Ltd. (CNQ) and Encana Corp. (ECA),
currently, has a Zacks #3 Rank, which is equivalent to a Hold
rating for a period of one to three months.
We like Talisman Energy for its
solid base business in Western Canada and in the U.K. North Sea,
while offering exposure to some of the most prospective
unconventional plays in North America and high-impact exploration
prospects worldwide.
Taking a cautious view of gas
prices, Talisman’s 2012 capital program specifically focuses on the
promising North American liquids-rich areas, which is a major shift
from dry natural gas development. Moreover, the company’s overseas
operations remain vulnerable to various geo-political risks.
CDN NTRL RSRCS (CNQ): Free Stock Analysis Report
ENCANA CORP (ECA): Free Stock Analysis Report
TALISMAN ENERGY (TLM): Free Stock Analysis Report
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