Talisman Disappoints as Prices Fall - Analyst Blog
February 14 2013 - 9:41AM
Zacks
Independent oil and gas exploration and production (E&P)
company, Talisman Energy Inc. (TLM) reported weak
fourth-quarter 2012 results due to lower price realizations. The
company announced loss per share from continuing operations
(excluding non-operating items) of 10 cents against the Zacks
Consensus Estimate of earnings of 9 cents. In the year-ago quarter,
Talisman had earned 11 cents per share.
Quarterly total revenue of $1,606.0 million deceased 22.9% from
$2,082.0 million in the fourth quarter of 2011. The revenue also
missed the Zacks Consensus Estimate of $1,742.0 million due to
decreased production.
Volume Analysis
The quarter’s total production of 392 thousand barrels of oil
equivalent per day (MBOE/d), was down 11.3% from the year-ago
level, due to lower North Sea oil production and a decrease in
North American gas output. Higher activity in Southeast Asia,
Colombia and the Eagle Ford shale was however encouraging.
Oil & liquids production was down 20.50% at 142,764 barrels per
day (Bbl/d). Volumes were down due to lower production in the North
Sea, partially offset by Southeast Asia and North America output
increase.
Talisman’s natural gas volumes were down 4.70% at 1,498 million
cubic feet per day (MMcf/d), mainly attributable to the decrease in
North America.
Realized Prices
During the quarter, Talisman’s realized commodity prices dropped
8.80% from the year-ago quarter to $56.56 per barrel of oil
equivalent (BOE) mainly on account of lower North American and
Southeast Asia realizations.
Overall, natural gas prices declined 4.30% year over year to $5.28
per Mcf, while oil and liquids realizations averaged $100.05 per
barrel, down 3.90% from the year-ago level.
Cash Flow and Capital Expenditure
Cash flow from continuing operations totaled $675.0 million, down
18.10% year over year. Talisman spent $311.0 million on exploration
and development activities.
Balance Sheet
As of Dec 31, 2012, Talisman had cash and cash equivalents of
approximately $721.0 million and long-term debt of $4,442.0 million
(including current portion) with a debt-to-capitalization ratio of
31.0%.
Zacks Rating
The company currently retains a Zacks Rank #4 (Sell), implying that
it is expected to underperform the broader U.S. equity market over
the next one to three months.
As is the case with other independent exploration and production
companies, Talisman Energy’s results are directly exposed to oil
and gas prices, which are inherently volatile and subject to
complex market forces. Realized prices could differ significantly
from our estimates, thereby affecting the company’s revenues,
earnings and cash flows.
Additionally, Talisman’s extensive natural gas exposure raises its
sensitivity to gas price fluctuations, compared to its more
diversified independent peers with higher oil production. The
company, which derives more than half of its reserves/production
from natural gas, is likely to see its sales and income suffer on
the back of weak gas prices.
However, there are other E&P companies that are expected to
perform well in the coming one to three months. These include
ARC Resources Ltd. (AETUF) with Zacks Rank #1
(Strong Buy) as well as Canadian Oil Sands (COSWF)
and Dejour Energy Inc. (DEJ) with Zacks Rank #2
(Buy).
(AETUF): ETF Research Reports
(COSWF): ETF Research Reports
DEJOUR ENERGY (DEJ): Free Stock Analysis Report
TALISMAN ENERGY (TLM): Free Stock Analysis Report
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