Talisman Energy Inc.
TSX : TLM
NYSE : TLM

Talisman Energy Inc.

May 01, 2012 05:00 ET

Talisman Energy First Quarter Results

Cash Flow Up 5% to $851 Million

Production Up 4% to 462,000 BOE/D

$1 Billion in Non-Core Asset Sales

CALGARY, ALBERTA--(Marketwire - May 1, 2012) - Talisman Energy Inc. (TSX:TLM) (NYSE:TLM) reported its operating and financial results for the first quarter of 2012. All values in this release are in US$ unless otherwise stated.

  • Cash flow1 was $851 million, up 5% over the first quarter of last year and 3% higher than the prior quarter.
  • Net income was $291 million, compared to a net loss of $326 million in the first quarter of 2011 and a net loss of $117 million in the fourth quarter.
  • Earnings from operations1 were $167 million, compared to $157 million a year earlier and $114 million in the previous quarter.
  • Production was up 4%, with record sales in Southeast Asia and higher volumes in Colombia and shale. Liquids volumes in Southeast Asia and North America are up 35% year over year.
  • $1 billion of non-core asset sales have been agreed in North America; net debt1 was down to $4 billion from $4.5 billion at year-end.
  • Capital spending will be further cut to approximately $3.6 billion in 2012.
  • In Papua New Guinea, Mitsubishi Corporation (MC) was brought in as a strategic partner; natural gas resource aggregation continues with success at Elevala-2 and Ketu-2.
  • Discovery of light oil was confirmed in the Kurdamir-2 well.
1 The terms "cash flow," "earnings from operations" and "net debt" are non-GAAP measures. Please see the advisories and reconciliations elsewhere in this news release.

"The first quarter was very strong operationally, and we have made significant progress towards meeting key objectives set out in our January guidance," said John A. Manzoni, President and Chief Executive Officer.

"On a macro level, although oil prices are a bit stronger, North American gas prices are weaker than we anticipated coming into the year. As a result, we are taking additional steps to reduce capital spending in dry gas plays in North America. We are now projecting total capital expenditure on exploration and development activities to be around $3.6 billion for the year. For the remainder of the year, we anticipate spending only about $200 million on dry gas activities in North America, primarily to maintain land and options for the future.

"We have reached agreements to sell approximately $1 billion in non-core assets in North America, which further strengthens our balance sheet. We are continuing to look at other options to focus our portfolio, including potential dilution of redevelopment projects in the North Sea, and high grading our exploration portfolio.

"Production averaged 462,000 boe/d, up 4% from both a year ago and the fourth quarter of last year, driven by growth in both North American shale and Southeast Asia. Planned maintenance turnarounds will result in lower volumes in the second and third quarters, and lower capital spending will impact North American natural gas volumes over the rest of this year.

"Underlying production growth for the year is now projected to be at the bottom of our production growth guidance range of 0 - 5%, due to the further reduction of capital in our dry gas assets. The actual outcome will depend on the asset disposals we make through the year.

"Our shift towards liquids-rich opportunities in North America continued during the quarter. We are currently running 12 rigs in the Eagle Ford shale, up from 10 at year-end. In Southeast Asia we set a new production record. Natural gas sales in the region averaged 548 mmcf/d, up 11% year over year, with realized prices averaging $9.85/mcf.

"In the UK, the Tartan field was brought back onstream in March after several months of safety-related work. The Claymore field, which was also subject to an extended turnaround for safety-related work, was brought back onstream in October of last year, and produced around 10,000 bbls/d over the first quarter.

"In Norway, we have been progressing independent technical studies as part of our assurance processes as operator of the Yme field. These studies indicate that a substantial amount of work is still required to complete the facility to meet Norwegian specifications.

"Given this uncertain timing, we are removing Yme from our forward production projections and have taken the prudent step of writing down a portion of the carrying value of the project (a writedown of $248 million after tax), which we believe represents a sensible view of the range of potential outcomes. We are committed to successful startup of the field and will continue to work with our partners and the contractor to achieve this. At the same time, we are considering all options to complete the Yme development.

"In Colombia, Talisman, like others, is experiencing delays in the regulatory permitting process. We are working with the government and our partners and are expecting to see a ramp up of activity in the latter part of the year.

"We are excited about the results of the Kurdamir-2 well in the Kurdistan Region of northern Iraq. The well tested light oil, condensate and natural gas from a portion of an upper zone. We are currently drilling deeper zones and plan to further test the well this summer.

"In Papua New Guinea (PNG), we are very pleased to have Mitsubishi Corporation (MC) as a strategic partner going forward. In addition to funding $280 million of the future program, they bring global and regional gas market expertise. Drilling results in PNG continue to be encouraging, and our gas aggregation plans are on track.

"In summary, we will continue the course set out in January: reducing spending, directing more capital to liquids plays and continuing to focus and high grade our portfolio. Our balance sheet is strong, and we are encouraged by continuing exploration success in Colombia, PNG and Kurdistan."

Financial Results
March 31 Three Months Ended
2012 2011
Cash flow(2) ($ million) 851 811
Cash flow per share2 0.83 0.79
Net income (loss) ($ million) 291 (326 )
Net income (loss) per share 0.28 (0.32 )
Earnings from operations2 ($ million) 167 157
Earnings from operations per share2 0.16 0.15
Average shares outstanding - basic (million) 1,023 1,022

Cash flow was $851 million compared to $811 million in the same period last year, due mainly to higher volumes, oil prices and Southeast Asian natural gas prices, offset by lower North American gas prices, higher royalties and higher operating costs.

Net income was up, reflecting the increase in cash flow plus gains on asset sales, lower dry hole expense and lower exploration expense, a smaller loss on derivatives, a share-based payments recovery and lower taxes, offset by a partial writedown of the Yme project and higher DD&A.

Earnings from operations, which reflect the underlying operations of the company, increased by 6% over the same period last year. Capital expenditure, including exploration expensed2 in the quarter, was $1.1 billion. Net debt2 at the end of the first quarter was $4 billion, down from $4.5 billion at the end of 2011.

(2) The terms "cash flow," "cash flow per share," "earnings from operations," "earnings from operations per share," "capital expenditure, including exploration expensed" and "net debt" are non-GAAP measures. Please see the advisories and reconciliations elsewhere in this news release.

Netbacks
March 31 Three Months Ended
2012 2011
Total company netback ($/boe) $36.79 $40.58
Oil and liquids netback ($/bbl) $68.02 $64.66
Natural gas netback ($/mcf) $2.61 $3.58

Talisman's realized sales price of $65.14/boe was relatively unchanged compared to the same period in 2011, since higher global oil and liquids and Southeast Asian natural gas prices were offset by lower gas prices in North America.

The company's average netback was $36.79/boe, 9% lower than 2011 due to higher royalties and unit operating expenses. Natural gas netbacks in Southeast Asia increased 12% to $5.83/mcf.

WTI oil prices averaged $102.93, up 9% from the first quarter of last year. NYMEX natural gas prices averaged $2.77, a 33% decrease from a year ago due to continued natural gas oversupply in North America.

Production
March 31 Three Months Ended
2012 2011
Oil and liquids (mbbls/d)
North America 28 21
North Sea 89 123
Southeast Asia 45 33
Other 25 20
Total oil and liquids (mbbls/d) 187 197
Natural gas (mmcf/d)
North America 1,024 885
North Sea 43 82
Southeast Asia 548 493
Other 37 24
Total natural gas (mmcf/d) 1,652 1,484
Total (mboe/d) 462 444
Assets held for sale - North America (mboe/d) 7 8
Production from ongoing operations (mboe/d) 455 436

Total production and production from ongoing operations increased by 4% over the previous year, due principally to increased oil and gas volumes in Colombia and Southeast Asia and shale volumes in North America, partially offset by lower North Sea production.

North America
Production
March 31 Three Months Ended
2012 2011
Shale (mmcfe/d)
Marcellus 529 351
Montney/other 70 76
Eagle Ford 76 23
Total shale (mmcfe/d) 675 450
Conventional total (mboe/d) 79 86
Assets held for sale (mboe/d) 7 8
Total NAO production (mboe/d) 198 169

We are well positioned in some of the top-tier shale plays in North America. We are shifting our focus to the liquids-rich parts of our portfolio and expect to grow our liquids production from approximately 25,000 bbls/d in 2012 to over 60,000 bbls/d by 2015.

In North America, production averaged 198,000 boe/d for the first quarter, up 17% from a year ago. Liquids volumes averaged 28,000 boe/d, an increase of 33%.

Talisman sold non-core, non-producing coal properties in Northeast British Columbia for $500 million in cash, and has secured buyers for two non-core conventional oil and gas properties, with additional proceeds of approximately $500 million. These deals are expected to close in the second quarter.

We continue to ramp up our development program in the liquids-rich Eagle Ford, with 12 rigs active at quarter end. During the quarter, Talisman signed a number of deals with midstream companies to secure significant, long-term egress.

In the liquids-rich Duvernay, we drilled the second well of a six-well pilot program.

In the Pennsylvania Marcellus, gas production was 529 mmcf/d, up 51% over the prior year with 36 wells coming onstream this quarter. We have reduced the number of rigs from 10 at the end of December to one in April, reflecting the company's shift away from dry gas to higher-value liquids projects. In February, Pennsylvania introduced a retroactive impact fee. This increased our operating costs in the quarter by $21 million, $18 million of which reflected a non-recurring, one-time impact for wells that were drilled pre-2012.

In the Montney, we have reduced the number of rigs from 11 at the end of 2011 to four currently, with plans to further reduce this to three.

Southeast Asia
Production
March 31 Three Months Ended
2012 2011
Malaysia liquids (mbbls/d) 18 17
Malaysia gas (mmcf/d) 128 113
Malaysia total (mboe/d) 39 36
Indonesia liquids (mbbls/d) 12 11
Indonesia gas (mmcf/d) 421 379
Indonesia total (mboe/d) 82 74
Vietnam (mboe/d) 2 2
Australia (mboe/d) 13 3
Total (mboe/d) 136 115

Southeast Asia is a cash-positive growth area, where the majority of our gas sales contracts are linked to oil price benchmarks. It is expected to grow at an average of approximately 8% per year through the medium term. The region is one of the fastest growing natural gas markets in the world.

Liquids production averaged 45,000 bbls/d in the quarter, an increase of 36% over last year. Natural gas sales averaged 548 mmcf/d, a new record, with prices averaging $9.85/mcf.

In Malaysia, the company achieved record gas sales of 128 mmcf/d, 13% higher than the same period last year, reflecting continued optimization initiatives at PM-3 CAA and strong regional gas demand. Talisman plans to drill up to six development wells on the block this year.

In Indonesia, production was higher than the same period last year principally due to Jambi Merang volumes and improved operational efficiency at the Tangguh LNG plant. Facility optimizations were completed at the Suban gas plant in the Corridor PSC, increasing gross throughput by approximately 45 mmcf/d. Overall, the Corridor PSC is now producing at record levels of over 1 bcf/d gross sales gas.

In Vietnam, production averaged 2,000 bbls/d. The Hai Su Trang and Hai Su Den (HST/HSD) development, which was sanctioned in December 2011, is progressing on schedule and on budget, with first production planned for the second half of 2013.

Production from Australia/Timor-Leste JPDA averaged 13,000 bbls/d, an increase of 30% over the previous period, due primarily to current production from Kitan, which continues to exceed our expectations.

North Sea
Production (mboe/d)
March 31 Three Months Ended
2012 2011
UK 63 92
Norway 33 44
Total (mboe/d) 96 136

The North Sea is an important cash generator for the company. We continue to maximize value from these assets by improving operational efficiency. At the same time, we will seek to reduce our exposure in this region.

In the UK, production recommenced at the Tartan platform at the end of March. Claymore has also been up and running since the fourth quarter of 2011. A new well was brought onstream at Auk North, and the Fulmar coil tubing campaign was successfully completed.

Production decreased 4% compared to the fourth quarter of 2011 and was down 29% year over year as a result of a pump failure at Auk North, technical issues with compressors at Claymore and the Ross/Blake facility, and the shutdown at Tartan. In addition, we are seeing both natural declines and water breakthrough at Rev and Tweedsmuir. We continue to work to improve facilities reliability and take remedial actions to offset some of the water breakthrough issues. Planned maintenance activities will result in lower volumes in the second and third quarters.

In Norway, Talisman remains committed to the safe development of the Yme field but we are concerned with the continued delays in the delivery of the facility. Recent technical studies indicate that a substantial amount of work is still required to complete the facility. We are removing the field from our forward production projections pending the development of a work plan to complete the facility to Norwegian specifications.

As such Talisman has taken the prudent step of writing down a portion of the carrying value of the project. Talisman continues to work closely with the Yme partners and the contractor to fully understand the remaining scope of work. At the same time, we are considering all options to complete the Yme development.

Yme is a turnkey, lump sum lease arrangement, which means that the platform belongs to the contractor and is their project to deliver. Upon delivery, Talisman will lease the facility and begin production.

International Exploration

We have created an exploration portfolio focused on material prospects including near-term oil growth and large Asian gas opportunities. We are looking to expand our portfolio in areas that have significant resource potential and low finding costs. We will continue to high grade our assets by seeking new organic options and rationalizing others at an earlier stage in the cycle.

During the quarter, Talisman confirmed the presence of light oil at Kurdamir-2 in the Kurdistan Region of northern Iraq. An open hole drillstem test flowed at unstimulated rates of 7.3 mmcf/d of natural gas and 950 bbls/d of oil and condensate, with no indications of water and no observed decline. A total of 140 metres of gross reservoir (88 metres net) was identified through wireline logging. The well is drilling ahead toward underlying Eocene and Cretaceous targets, with additional testing of the Oligocene planned after the well has finished drilling.

In Papua New Guinea, the company farmed out interests in nine licences in the Western Province to Mitsubishi Corporation (MC), at a value of approximately $280 million. Following government approval of MC's entry, Talisman's and MC's respective equity positions will average approximately 40% and 20%. The natural gas aggregation project continues in the Western Province, with successful results from the Elevala-2 and Ketu-2 wells. Offshore Vietnam, Talisman has just spud its first exploration well in the Nam Con Son basin.

In Colombia, an additional stratigraphic well, Akacias Es-1, has been drilled on Block CP0-9, and preliminary results are very encouraging. In the Niscota block, the Huron-2 appraisal well is expected to finish drilling mid-year.

In the first quarter, production from Colombia averaged 17,000 boe/d with excellent performance from new wells and facilities debottlenecking.

In Peru, the Situche Norte-4X well reached its target depth. It failed to encounter a commercially viable reservoir and has been plugged and abandoned.

Talisman Energy Inc. is a global, diversified, upstream oil and gas company, headquartered in Canada. 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 is committed to conducting business safely, in a socially and environmentally responsible manner, and is included in the Dow Jones Sustainability (North America) Index. Talisman is listed on the Toronto and New York Stock Exchanges under the symbol TLM. Please visit our website at www.talisman-energy.com.

Forward-Looking Information

This news release contains information that constitutes "forward-looking information" or "forward-looking statements" (collectively "forward-looking information") within the meaning of applicable securities legislation. This forward-looking information includes, among others, statements regarding: business strategy, priorities and plans; expected capital spending and allocation; potential reductions of exposure in the North Sea and the high grading of the exploration portfolio; expected production; expected delays, remaining work, effects on timing and consideration of options at Yme; potential further testing of the Kurdamir-2 well; expected increase in liquids productions; expected timing of the closing of the two non-core conventional oil and gas property sales; expected rigs in the Montney; planned drilling in Malaysia; expected first production at HST/HSD; planned maintenance and corresponding declines in production in the North Sea; expected completion of the drilling of the Huron-2 appraisal well; and other business strategy, plans and priorities.

The factors or assumptions on which the forward-looking information is based include: assumptions inherent in current guidance; projected capital investment levels; the flexibility of capital spending plans and the associated sources of funding; the successful and timely implementation of capital projects; the continuation of tax, royalty and regulatory regimes; ability to obtain regulatory and partner approval; commodity price and cost assumptions; and other risks and uncertainties described in the filings made by the company with securities regulatory authorities. The company believes the material factors, expectations and assumptions reflected in the forward-looking information are reasonable, but no assurance can be given that these factors, expectations and assumptions will prove to be correct. Forward-looking information for periods past 2012 assumes escalating commodity prices.

Undue reliance should not be placed on forward-looking information. Forward-looking information is based on current expectations, estimates and projections that involve a number of risks which could cause actual results to vary and in some instances to differ materially from those anticipated by Talisman and described in the forward-looking information contained in this news release. The material risk factors include, but are not limited to: the risks of the oil and gas industry, such as operational risks in exploring for, developing and producing crude oil and natural gas, market demand and unpredictable facilities outages; risks and uncertainties involving geology of oil and gas deposits; uncertainty related to securing sufficient egress and markets to meet shale gas production; the uncertainty of reserves and resources estimates, reserves life and underlying reservoir risk; the uncertainty of estimates and projections relating to production, costs and expenses; the impact of the economy on the ability of the counterparties to the company's commodity price derivative contracts to meet their obligations under the contracts; potential delays or changes in plans with respect to exploration or development projects or capital expenditures; fluctuations in oil and gas prices, foreign currency exchange rates and interest rates; the outcome and effects of any future acquisitions and dispositions; health, safety and environmental risks; uncertainties as to the availability and cost of financing and changes in capital markets; risks in conducting foreign operations (for example, political and fiscal instability or the possibility of civil unrest or military action); changes in general economic and business conditions; the possibility that government policies or laws may change or governmental approvals may be delayed or withheld; and results of the company's risk mitigation strategies, including insurance and any hedging activities.

The foregoing list of risk factors is not exhaustive. Additional information on these and other factors, which could affect the company's operations or financial results, are included in the company's most recent Annual Information Form. In addition, information is available in the company's other reports on file with Canadian securities regulatory authorities and the United States Securities and Exchange Commission (SEC). Forward-looking information is based on the estimates and opinions of the company's management at the time the information is presented. The company assumes no obligation to update forward-looking information should circumstances or management's estimates or opinions change, except as required by law.

Unless the context indicates otherwise, references in this news release to "Talisman" or the "company" include, for reporting purposes only, the direct or indirect subsidiaries of Talisman Energy Inc. and the partnership interests held by Talisman Energy Inc. and its subsidiaries. Such use of "Talisman" or the "company" to refer to these other legal entities and partnership interests does not constitute waiver by Talisman Energy Inc. or such entities or partnerships of their separate legal status, for any purpose.

The completion of any contemplated disposition or acquisition is contingent on various factors, including favourable market conditions, the ability of the company to negotiate acceptable terms of sale and receipt of any required approvals for such disposition.

Oil and Gas Information

Throughout this news release, Talisman makes reference to production volumes. Unless otherwise stated, such production volumes are stated on a gross basis, which means they are stated prior to the deduction of royalties and similar payments. In the US, net production volumes are reported after the deduction of these amounts.

Barrel of oil equivalent (boe) throughout this news release is calculated at a conversion rate of six thousand cubic feet (mcf) of natural gas for one barrel of oil (bbl). This news release also includes reference to mcf equivalents (mcfes) which are calculated at a conversion rate of one barrel of oil to 6,000 cubic feet of gas. Boes and mcfes may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf:1 bbl and an mcfe conversion ratio of 1 bbl: 6 mcf are based on an energy equivalence conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Talisman also discloses its company netbacks in this news release. Netbacks per boe are calculated by deducting from sales price associated royalties, operating and transportation costs.

Non-GAAP Financial Measures

Included in this news release are references to financial measures commonly used in the oil and gas industry such as cash flow, earnings from operations, capital expenditure including exploration expensed and net debt. These terms are not defined by International Financial Reporting Standards (IFRS). Consequently, these are referred to as non-GAAP measures. Talisman's reported results of such measures may not be comparable to similarly titled measures reported by other companies.

Cash Flow
US$million, except per share amounts
Three Months Ended
March 31, 2012 March 31, 2011
Cash provided by operating activities 980 883
Changes in non-cash working capital (154 ) (127 )
Add: Exploration expenditure 56 112
Add: Pennsylvania impact fee1 18 -
Less: Finance costs (cash) (49 ) (57 )
Cash flow 851 811
Cash flow per share 0.83 0.79
Diluted cash flow per share 0.83 0.79
  1. Pennsylvania impact fee amount represents the one-time impact of the retrospective application of the legislation to wells drilled pre-2012.

Cash flow, as commonly used in the oil and gas industry, represents net income before exploration costs, DD&A, deferred taxes and other non-cash expenses. Cash flow is used by the company to assess operating results between years and between peer companies using different accounting policies. Cash flow should not be considered an alternative to, or more meaningful than, cash provided by operating, investing and financing activities or net income as determined in accordance with IFRS as an indicator of the company's performance or liquidity. Cash flow per share is cash flow divided by the average number of common shares outstanding during the period. Diluted cash flow per share is cash flow divided by the diluted number of common shares outstanding during the period, as reported in the interim condensed consolidated financial statements filed on May 1, 2012. A reconciliation of cash provided by operating activities to cash flow is provided above.

Earnings from Operations
US$million, except per share amounts
Three Months Ended
March 31, 2012 March 31, 2011
Net income (loss) 291 (326 )
Gain on disposal (tax adjusted) (377 ) (68 )
Unrealized loss on financial instruments (tax adjusted)1 37 263
Share-based payments (tax adjusted)2 (46 ) 108
Foreign exchange on debt (tax adjusted) 15 8
Impairment (tax adjusted) 302 39
Pennsylvania impact fee (tax adjusted)3 11 -
Deferred tax adjustments4 (66 ) 133
Earnings from operations 167 157
Earnings from operations per share 0.16 0.15
Diluted earnings from operations per share 0.16 0.15
  1. Unrealized loss on financial instruments relates to the change in the period of the mark-to-market value of the company's held-for-trading financial instruments.
  2. Share-based payments relate principally to the mark-to-market value of the company's outstanding stock options and cash units at March 31. The company uses the Black-Scholes option pricing model to estimate the fair value of its share-based payment plans.
  3. Pennsylvania impact fee amount represents the one-time impact of the retrospective application of the legislation to wells drilled pre-2012.
  4. Deferred tax adjustments largely comprise tax on foreign exchange on tax pools. The three-month period ended March 31, 2011 also includes a deferred tax expense of $225 million in respect of a UK tax rate change occurring in that period.

Earnings from operations are calculated by adjusting the company's net income (loss) per the financial statements for certain items of a non-operational nature, on an after tax basis. The company uses this information to evaluate performance of core operational activities on a comparable basis between periods. Earnings from operations per share are earnings from operations divided by the average number of common shares outstanding during the period. Diluted earnings from operations per share are earnings from operations divided by the diluted number of common shares outstanding during the period, as reported in the interim condensed consolidated financial statements filed on May 1, 2012. A reconciliation of net income (loss) to earnings from operations is provided above.

Capital Expenditure Including Exploration Expensed
US$million
Three Months Ended
March 31, 2012 March 31, 2011
Exploration, development and other 1,011 910
Exploration expensed 56 112
Capital expenditure including exploration expensed 1,067 1,022
Capital expenditure including exploration expensed is calculated by adjusting the capital expenditure per the financial statements for exploration costs that were expensed as incurred.
Net Debt
US$million
Three Months Ended
March 31, 2012 March 31, 2011
Long-term debt 4,741 4,895
Bank indebtedness - 60
Cash and cash equivalents (732 ) (474 )
Net debt 4,009 4,481
Net debt is calculated by adjusting the company's long-term debt per the financial statements for bank indebtedness, cash and cash equivalents. The company uses this information to assess its true debt position and eliminate the impact of timing differences.
Talisman Energy Inc.
Highlights
(unaudited)
Three months ended
March 31
20122011
Financial
(millions of US$ unless otherwise stated)
Cash flow (1)851811
Net income (loss)291(326)
Capital expenditure including exploration expensed (1)1,0671,022
Per common share (US$)
Cash flow (1)0.830.79
Net income (loss)0.28(0.32)
Production
(Daily Average - Gross)
Oil and liquids (bbls/d)
North America27,94021,083
North Sea88,753122,358
Southeast Asia44,84832,858
Other25,37920,157
Total oil and liquids186,920196,456
Natural gas (mmcf/d)
North America1,024885
North Sea4382
Southeast Asia548493
Other3724
Total natural gas1,6521,484
Total mboe/d (2)462444
Prices
Oil and liquids (US$/bbl)
North America77.2068.78
North Sea120.53104.91
Southeast Asia122.99117.27
Other124.93114.37
Total oil and liquids115.24104.07
Natural gas (US$/mcf)
North America2.494.06
North Sea9.918.56
Southeast Asia9.858.74
Other5.215.64
Total natural gas5.195.89
Total (US$/boe) (2)65.1465.75
1.Cash flow, capital expenditure including exploration expensed and cash flow per share are non-GAAP measures.
2.Barrels of oil equivalent (boe) is calculated at a conversion rate of six thousand cubic feet (mcf) of natural gas for one barrel of oil.
Talisman Energy Inc.
Condensed Consolidated Balance Sheets
(unaudited)
March 31,December 31,
(millions of US$)20122011
Assets
Current
Cash and cash equivalents732474
Accounts receivable1,5691,550
Risk management1342
Inventories173164
Prepaid expenses2024
Assets held for sale252-
2,7592,254
Other assets112101
Investments393395
Risk management2724
Goodwill1,3081,317
Property, plant and equipment15,01315,909
Exploration and evaluation assets3,8523,954
Deferred tax assets864272
21,56921,972
Total assets24,32824,226
Liabilities
Current
Bank indebtedness-60
Accounts payable and accrued liabilities2,8312,622
Risk management20-
Income and other taxes payable381371
Current portion of long-term debt892410
Liabilities associated with assets held for sale116-
4,2403,463
Decommissioning liabilities2,9172,982
Other long-term obligations341346
Long-term debt3,8494,485
Deferred tax liabilities2,6832,932
9,79010,745
Shareholders' equity
Common shares1,6501,561
Preferred shares191191
Contributed surplus87186
Retained earnings7,5827,292
Accumulated other comprehensive income788788
10,29810,018
Total liabilities and shareholders' equity24,32824,226
Talisman Energy Inc.
Condensed Consolidated Statements of Income (Loss)
(unaudited)
Three months ended March 31
(millions of US$)2012 2011
Revenue
Sales2,089 1,972
Other income26 28
Total revenue and other income2,115 2,000
Expenses
Operating577 452
Transportation59 56
General and administrative121 98
Depreciation, depletion and amortization603 469
Impairment1,053 102
Dry hole60 104
Exploration56 112
Finance costs71 76
Share-based payments expense (recovery)(41)116
Loss on held-for-trading financial instruments47 319
Gain on asset disposals(505)(92)
Other, net77 58
Total expenses2,178 1,870
Income (loss) before taxes(63)130
Income taxes
Current income tax433 443
Deferred income tax (recovery)(787)13
(354)456
Net income (loss)291 (326)
Per common share (US$):
Net income (loss)0.28 (0.32)
Diluted net income (loss)0.25 (0.32)
Weighted average number of common shares outstanding (millions)
Basic1,023 1,022
Diluted1,028 1,022
Talisman Energy Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)
Three months ended March 31
(millions of US$)2012 2011
Operating activities
Net income (loss)291 (326)
Add: Finance costs (cash and non-cash)71 76
Items not involving cash464 1,006
826 756
Changes in non-cash working capital154 127
Cash provided by operating activities980 883
Investing activities
Capital expenditures
Exploration, development and other(1,011)(910)
Corporate acquisitions, net of cash acquired- (175)
Property acquisitions(2)(31)
Proceeds of resource property dispositions502 249
Acquisition deposit- 18
Investments(3)54
Changes in non-cash working capital70 (140)
Cash used in investing activities(444)(935)
Financing activities
Long-term debt repaid(429)(308)
Long-term debt issued258 -
Common shares issued2 79
Common shares purchased(4)(18)
Finance costs (cash)(49)(57)
Deferred credits and other(7)(3)
Preferred share dividend(3)-
Changes in non-cash working capital7 (1)
Cash used in financing activities(225)(308)
Effect of translation on foreign currency cash and cash equivalents7 26
Net increase (decrease) in cash and cash equivalents318 (334)
Cash and cash equivalents net of bank indebtedness, beginning of period414 1,653
Cash and cash equivalents net of bank indebtedness, end of period732 1,319
Cash and cash equivalents732 1,327
Bank indebtedness- (8)
Cash and cash equivalents net of bank indebtedness, end of period732 1,319
Talisman Energy Inc.
Segmented Information
(unaudited)
North America1 North Sea2 Southeast Asia3 Other4 Total
Three months ended Three months ended Three months ended Three months ended Three months ended
March 31 March 31 March 31 March 31 March 31
(millions of US$)2012 2011 2012 2011 20122011 20122011 2012 2011
Revenue
Sales363 404 945 1,088 614386 16794 2,089 1,972
Other income21 23 3 5 -- 2- 26 28
Total revenue and other income384 427 948 1,093 614386 16994 2,115 2,000
Segmented expenses
Operating149 111 312 260 9872 189 577 452
Transportation23 16 20 23 1415 22 59 56
DD&A273 201 174 186 11862 3820 603 469
Impairment75 - 978 102 -- -- 1,053 102
Dry hole11 2 (1)75 324 473 60 104
Exploration1 29 14 11 1852 2320 56 112
Other29 7 10 9 13 6- 46 19
Total segmented expenses561 366 1,507 666 252228 13454 2,454 1,314
Segmented income (loss) before taxes(177)61 (559)427 362158 3540 (339)686
Non-segmented expenses
General and administrative 121 98
Finance costs 71 76
Share-based payments (recovery) (41)116
Currency translation 31 39
Loss on held-for-trading
financial instruments
47 319
Gain on asset disposals (505)(92)
Total non-segmented expenses (276)556
Income (loss) before taxes (63)130
Capital expenditure
Exploration33 83 - 51 1349 5616 102 199
Development561 351 229 245 7071 1528 875 695
Exploration and development594 434 229 296 83120 7144 977 894
Acquisitions 2 793
Proceeds on dispositions (502)(249)
Other non-segmented 31 16
Net capital expenditures 508 1,454
Property, plant and equipment6,884 6,740 4,821 5,809 2,4662,501 842859 15,013 15,909
Exploration and evaluation assets2,265 2,370 537 538 497498 553548 3,852 3,954
Goodwill131 140 866 866 149149 162162 1,308 1,317
Other1,127 987 1,379 645 568560 789788 3,863 2,980
Assets held for sale237 - 15 - -- -- 252 -
Segmented assets10,644 10,237 7,618 7,858 3,6803,708 2,3462,357 24,288 24,160
Non-segmented assets 40 66
Total assets5 24,328 24,226
Decommissioning liabilities5333 394 2,379 2,390 210208 4443 2,966 3,035
1. North America20122011
Canada229290
US155137
Total revenue and other income384427
Canada3,7483,937
US3,1362,803
Property, plant and equipment6,8846,740
Canada1,1701,207
US1,0951,163
Exploration and evaluation assets2,2652,370
2. North Sea20122011
UK663736
Norway285357
Total revenue and other income9481,093
UK3,8963,927
Norway9251,882
Property, plant and equipment4,8215,809
UK209210
Norway328328
Exploration and evaluation assets537538
3. Southeast Asia20122011
Indonesia288224
Malaysia170123
Vietnam4137
Australia1152
Total revenue and other income614386
Indonesia1,0281,023
Malaysia864883
Vietnam313297
Papua New Guinea4647
Australia215251
Property, plant and equipment2,4662,501
Indonesia1212
Malaysia3341
Vietnam155
Papua New Guinea437440
Exploration and evaluation assets497498
4. Other20122011
Algeria5444
Colombia11550
Total revenue and other income16994
Algeria274284
Colombia568575
Property, plant and equipment842859
Colombia9275
Kurdistan306303
Peru108133
Other4737
Exploration and evaluation assets553548
5. Current year represents balances at March 31.
Prior year represents balances at December 31.

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