Canadian energy explorer Talisman Energy Inc. (TLM) offered a glimpse of its 2010 production and capital spending plans. Talisman said that it will boost its capital expenditures by about 10% in 2010, as it focuses on promising shale gas programs. However, despite hiking the capital budget, Talisman expects the overall production rate to be flat from 2009 at around 425,000 barrels of oil equivalent per day.
The Calgary-based firm has pegged its 2010 capital budget at about C$5.2 billion ($5 billion). About C$1.9 billion will be spent on North America, of which C$1.6 billion (or 84%) has been allocated towards shale gas properties (primarily in Pennsylvania Marcellus and Montney).
Talisman plans to expend C$1 billion in the Marcellus Shale play in western Pennsylvania, where it expects to increase production from 65 million cubic feet per day (MMcf/d) at the end of 2009 to 250 – 300 MMcf/d this year and gradually expand from six rigs working in the region to ten.
Another C$550 million have been budgeted for the nascent Montney formation in northeastern British Columbia and northwestern Alberta. Talisman expects to increase its rig count from three to nine, and drill between 35 and 40 horizontal wells in that area. It hopes year-end 2010 volumes from the Montney development to be 40 – 60 MMcf/d.
The company also informed that it plans to spend C$1.8 million in the U.K. North Sea (including C$300 million of non-cash capital spending), about C$1.1 billion in Southeast Asia, and C$700 million for international exploration projects.
At the same time, Talisman disclosed that it is examining the divestiture of certain gas-weighted assets (currently producing 40,000 barrels of oil equivalent per day) as part of a strategic shift. During the last two years, the company has been selling non-core oil and gas properties around the world, thereby freeing up capital to concentrate on its longer-term prospects in Canada, the U.S., the North Sea and Southeast Asia.
Talisman Energy is a globally diversified upstream oil and gas company, which is engaged in the business of exploration, development, production and marketing of crude oil, natural gas and natural gas liquids. 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 currently has a Zacks Rank #4 (Sell), meaning that the stock is expected to underperform relative to the overall market during the next 1-3 months. Therefore, the company should most likely be sold or avoided over this time period. The Zacks #4 Rank is the second-lowest rating given by Zacks and applied to 15% of all the stocks ranked by it.
Talisman is expected to report earnings of 13 cents per share during the fourth quarter (with an upside potential of 3 cents or 23.1%), down from 41 cents a year ago. The Zacks Consensus Estimate for the about-to-be-reported quarter has remained unchanged over the past month. One out of 3 analysts has pulled back on projections during that time.
Talisman announced third-quarter earnings of 4 cents per share on Nov 3, 2009, which lagged analysts’ projections by 69%. It was the company’s second consecutive earnings miss and reflected a 95% year-over-year decrease. Revenues slumped to $1.6 billion from $3.3 billion last year.
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