Canadian energy explorer Talisman Energy Inc. (TLM) reported marginally better-than-expected third quarter results, helped by in-line production volumes. Earnings per share from continuing operations, excluding one-time items came in at 15 Canadian cents (14 cents), a penny above the Zacks Consensus Estimate. However, on a year-over-year basis, Talisman’s adjusted earnings per share slumped approximately 77%, while revenues declined 42.3% to C$1.5 billion, hurt by lower prices of oil and natural gas.
Volume Analysis
Production during the quarter was down approximately 9.5% from the year-ago level to 401 thousand barrels of oil equivalent per day (MBOE/d), reflecting asset sales in Western Canada and maintenance downtime.
Oil & liquids production during the quarter was down 16.9% to 192.3 thousand barrels per day (MBbl/d), or 48% of total volumes. Volumes in North America, the U.K., Scandinavia , and other international regions were down 23.4%, 31.2%, 4.4%, and 30.5% to 31.4 MBbl/d, 71.3 MBbl/d, 30.1 MBbl/d, and 14.4 MBbl/d respectively. Oil & liquids production from Southeast Asia was, however, up 30.4% to 45.1 MBbl/d.
Talisman’s third quarter natural gas volumes were modestly down, approximately 1.2% to 1.3 billion cubic feet per day (Bcf/d). Production was down approximately 8.1% to 790 million cubic feet per day (MMcf/d) in North America and 62.2% in the U.K. to 14 MMcf/d. But volumes were up 111.1% in Scandinavia and 16.4% in Southeast Asia to 38 MMcf/d and 411 MMcf/d, respectively.
Realized Prices
During the quarter, the company’s realized commodity prices were down 42.9% from the year-ago quarter to C$50.29 per barrels of oil equivalent (BOE), reflecting significantly weaker oil and natural gas prices across the board.
Overall natural gas prices decreased approximately 50.3% year over year to C$5.01 per Mcf. In North America, unit realization declined 55.9% to C$4.05 per Mcf. Natural gas prices were down 67.8% in the U.K. and 44.1% in Southeast Asia to C$3.24 per Mcf and C$6.92 per Mcf, respectively, while Scandinavia experienced a 37.4% decline in realized prices to C4.83 per Mcf. 
Oil & liquids realizations averaged C$72.24 per barrel, down 36.2% from the year-ago level. Prices realized in North America, U.K., Scandinavia, and Southeast Asian regions were C$60.17 per barrel (down 42.2% year over year), C$74.59 per barrel (down 35.2%), C$76.53 per barrel (down 31.9%) and C$74.30 per barrel (down approximately 36.8%), respectively.
Acreage Addition
Talisman added 90,000 acres of properties in Pennsylvania’s Marcellus shale region, while boosting land holdings in the Montney region of British Columbia by 80,000 acres.
Cash Flows & Capital Expenditure
Cash flows from continuing operations during the quarter totaled C$828 million, down 46.6% from the year-earlier quarter, while the company spent C$871 million on exploration and development activities.
Balance Sheet
At the end of the quarter, Talisman had cash and cash equivalents of approximately C$2.0 billion and long-term debt of $3.9 billion, representing a debt-to-capitalization ratio of 33.5%.
Management hiked its 2009 capital budget by 25% to C$4.5 billion, primarily to increase drilling on its shale properties and acquire new exploration lands. Talisman is targeting average production of 423,000 – 426,000 BOE/d for the year, slightly down from its previous 430,000 BOE/d forecast, as it expects to sell some non-core oil and gas assets. The company further informed that it plans to reorganize its North American operations into separate conventional and unconventional (focusing exclusively on shale gas) assets.
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