Talisman Energy Inc.
TSX : TLM
NYSE : TLM

Talisman Energy Inc.

August 01, 2012 05:00 ET

Talisman Energy Second Quarter Results

Strong Operating Performance

$2.5 Billion in Announced Asset Sales

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

  • Cash flow1 was $803 million, down 10% over the same period last year despite a 50% reduction in NYMEX natural gas prices.
  • Net income for the quarter was $196 million, down from $698 million in the same quarter last year, up 31% to $487 million for the six months ended June 30, 2012.
  • Total production was 435,000 boe/d, an increase of 4% over the same period in 2011, due to increased oil and gas volumes in Southeast Asia and from North American shale.
  • Talisman agreed to sell a 49% equity stake in its UK North Sea assets to Sinopec for $1.5 billion, $500 million of which the company plans to use for share repurchases. Announced asset sales total $2.5 billion.
  • Eagle Ford production averaged 13,800 boe/d, up from 2,700 boe/d a year ago.
  • In Colombia, the Piedemonte development was approved and a three-rig drilling program is underway.
  • Talisman was formally awarded a new production sharing contract (PSC) at Kinabalu in Malaysia.
  • The company has moved from paying common share dividends on a semi-annual to a quarterly basis.

    1 The term "cash flow" is a non-GAAP measure. Please see the advisories and reconciliations elsewhere in this news release.

"In addition to repositioning our business in the UK North Sea, we delivered a strong operational quarter," said John A. Manzoni, President and Chief Executive Officer. "With our recent UK North Sea transaction, we continue to focus and strengthen our portfolio while maintaining a strong balance sheet to weather current low natural gas prices in North America. The new joint venture will spend more on a gross basis to improve operating efficiency and extend the life of these fields. The deal will reduce Talisman's decommissioning liability in the UK, decrease future capital commitments and brings forward significant cash. We plan to use approximately $500 million of the proceeds to repurchase Talisman shares.

"Production during the quarter was 435,000 boe/d, up 4% year over year, driven by growth in Southeast Asia and North American shale. Shale volumes are up 50% from last year. We continue to deliver strong results in the liquids-rich Eagle Ford, which accounts for the bulk of our North American spending. Marcellus gas volumes continue to be strong despite significantly reduced drilling activity in the current gas price environment.

"Our Southeast Asia business delivered excellent results, with production growth of 12% compared to last year and natural gas prices averaging $9.48 per mcf for the quarter. We have received approval from PETRONAS to take over a producing asset, the Kinabalu block, in Malaysia. This is a new type of production contract to encourage further development of mature fields.

"In our exploration portfolio, we have completed drilling the Kurdamir-2 well. We have logged hydrocarbons in the Oligocene and Cretaceous zones and are currently preparing to test. In Colombia, we have sanctioned our Piedemonte development, where we have three rigs drilling. Elsewhere in Colombia, we are drilling in the foothills and progressing to test our heavy oil blocks. Our drilling program in PNG continues to be successful, and we have received government approval for our partnership with Mitsubishi.

"In summary, we have delivered a strong quarter operationally, with production up 4%. We have more than delivered on the divestments we promised earlier this year, ensuring we maintain a strong balance sheet, and we will continue to focus the portfolio. We plan to use some of the UK joint venture proceeds to buy back Talisman stock, which we believe to be good value at current prices."

Financial Results

June 30 Three Months
Ended
Six Months
Ended
2012 2011 2012 2011
Cash flow(2) ($ million) 803 897 1,654 1,708
Cash flow per share2 0.78 0.88 1.61 1.67
Net income ($ million) 196 698 487 372
Net income per share 0.19 0.68 0.48 0.36
Earnings from operations2 ($ million) 71 168 238 325
Earnings from operations per share2 0.07 0.16 0.23 0.32
Average shares outstanding - basic (million) 1,026 1,025 1,025 1,024

2 The terms "cash flow," "cash flow per share" "earnings from operations" and "earnings from operations per share" are non-GAAP measures. Please see the advisories and reconciliations elsewhere in this news release.

Cash flow3 was $803 million compared to $897 million in the same period last year, due mainly to weaker commodity prices and higher operating expenses, partially offset by lower cash taxes and a lower realized loss on held-for-trading financial instruments.

Net income was down as a result of weaker commodity prices, a smaller recovery on share-based payments, higher operating expenses, higher DD&A, and asset impairments, partially offset by a larger gain on asset disposals, lower exploration costs and lower income taxes. Earnings from operations were also down as a result of weaker commodity prices, higher operating costs and DD&A, partially offset by lower exploration costs, lower deferred taxes and a lower realized loss on held-for-trading financial instruments.

Exploration and development spending3 in the quarter was $1 billion. Net debt3 at the end of the second quarter was $4.1 billion, relatively unchanged from $4 billion at the end of the first quarter.

3 The terms "cash flow," "exploration and development spending" and "net debt" are non-GAAP measures. Please see the advisories and reconciliations elsewhere in this news release.

Netbacks

June 30 Three Months
Ended
Six Months
Ended
2012 2011 2012 2011
Total company sales price ($/boe) 54.72 68.47 60.09 67.08
Total company netback ($/boe) 26.20 39.48 31.65 40.05
Oil and liquids netback ($/bbl) 47.83 61.97 58.69 63.39
Natural gas netback ($/mcf) 2.25 3.90 2.43 3.74

The company's average netback was $26.20/boe, 34% lower than the same period last year due to lower commodity prices and higher unit operating expenses. In Southeast Asia, natural gas prices averaged $9.48/mcf, and netbacks remained relatively unchanged from the first quarter at $5.80/mcf.

WTI oil prices averaged $93.53 and Brent oil prices averaged $108.33, down 9% and 8% respectively from the second quarter of last year. NYMEX natural gas prices averaged $2.26, a 48% decrease from a year ago.

Production

June 30 Three Months Ended Six Months Ended
2012 2011 2012 2011
Oil and liquids (mbbls/d)
North America 28 23 28 22
North Sea 70 96 79 109
Southeast Asia 41 33 43 33
Other 22 23 24 22
Total oil and liquids (mbbls/d) 161 175 174 186
Natural gas (mmcf/d)
North America 1,039 875 1,032 880
North Sea 32 56 38 69
Southeast Asia 528 500 538 497
Other 43 39 40 32
Total natural gas (mmcf/d) 1,642 1,470 1,648 1,478
Total (mboe/d) 435 420 448 432
Less: Assets sold - North America (mboe/d) 6 8 7 8
Production from ongoing operations (mboe/d) 429 412 441 424

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

North America

Production

June 30 Three Months
Ended
Six Months
Ended
2012 2011 2012 2011
Shale (mmcfe/d)
Marcellus 545 406 537 379
Montney/pilots 76 47 73 61
Eagle Ford 83 16 79 19
Total shale (mmcfe/d) 704 469 689 459
Conventional total, excluding assets sold (mboe/d) 78 83 78 84
Assets sold (mboe/d) 6 8 7 8
Total NAO production (mboe/d) 201 169 200 168

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 201,000 boe/d for the second quarter, up 19% from a year ago. Oil and liquids volumes increased by 22%, with natural gas production up 19%. Volumes listed as "assets sold" include 2,350 bbls/d of liquids.

Capital expenditure totalled $399 million, of which 90% was related to shale activity. The majority of this was spent on progressing development of the liquids-rich Eagle Ford program, where overall production averaged 13,800 boe/d (83 mmcfe/d). Liquids production averaged 7,000 bbls/d compared to 1,000 bbl/d in the same quarter in 2011.

As signalled at the beginning of the year, Talisman is actively reducing capital spending in the Marcellus due to low natural gas prices. Gas production averaged 545 mmcf/d, an increase of 34% over the same quarter last year. It is expected to decrease over the coming months as a result of the ramp down in activity. Operating costs for the quarter included $11 million for the recently introduced Pennsylvania impact fee, which included $7 million for prior year costs.

In the Montney and other pilots, production was up slightly over the previous quarter, averaging 76 mmcfe/d. During the quarter, Talisman made the decision not to proceed with the next phase of Sasol Canada's GTL (gas-to-liquids) project. This does not impact the company's upstream joint venture agreement with Sasol.

In the liquids-rich Duvernay, the company drilled the third well of its 2012 six-well pilot program. Talisman plans to drill the next three wells in the southern portion of our holdings in the second half of the year.

Southeast Asia

Production

June 30 Three Months Ended Six Months Ended
2012 2011 2012 2011
Malaysia liquids (mbbls/d) 16 17 17 17
Malaysia gas (mmcf/d) 121 118 124 116
Malaysia total (mboe/d) 37 37 38 37
Indonesia liquids (mbbls/d) 10 11 11 11
Indonesia gas (mmcf/d) 407 382 414 381
Indonesia total (mboe/d) 78 74 80 74
Vietnam (mboe/d) 2 2 2 2
Australia (mboe/d) 13 3 13 3
Total (mboe/d) 130 116 133 116

Southeast Asia is expected to grow at an average of approximately 8% per year through the medium term. The majority of Talisman's gas sales contracts here are linked to oil price benchmarks. This region is one of the fastest growing natural gas markets in the world.

Liquids production averaged 41,000 bbls/d in the quarter, an increase of 24% over the same quarter last year. This is primarily due to the ramp up at Jambi Merang and the addition of Kitan in October 2011. Natural gas sales for the second quarter averaged 528 mmcf/d, with prices averaging $9.48/mcf.

In Malaysia, production averaged 37,000 boe/d in the quarter. Talisman has drilled six wells of an eight-well program in PM-3 CAA Northern Fields, with five wells now on production. All wells are meeting or exceeding expectations. During the quarter, PETRONAS formally awarded Talisman a 60% working interest in a new production sharing contract for continuing production, further development and improved oil recovery from Kinabalu, which lies within the Sabah region offshore Malaysia. Talisman assumes operatorship in December of this year.

In Indonesia, production was 5% higher than the same period last year (12% higher when normalized to account for Suban unitization) due principally to increased volumes at Jambi Merang and Tangguh. The Corridor PSC is maintaining production at record levels of over 1 bcf/d gross sales gas.

In Vietnam, production has remained steady at an average of 2,000 bbls/d. The Hai Su Trang and Hai Su Den development is progressing on schedule and on budget, with first production planned for the second half of 2013.

In Papua New Guinea, the Stanley condensate recovery scheme was sanctioned by Talisman in June. This liquids project is expected to start production in late 2014.

North Sea

Production (mboe/d)

June 30 Three Months Ended Six Months Ended
2012 2011 2012 2011
UK 52 73 57 83
Norway 23 33 28 38
Total (mboe/d) 75 106 85 121

The North Sea is an important part of the company's portfolio. We will continue to maximize value from our UK assets through the recent joint venture agreement with Sinopec.

In July, Talisman announced a joint venture agreement where Sinopec will acquire a 49% equity interest in Talisman's UK North Sea business for $1.5 billion. The joint venture will invest to improve ongoing operating performance, as well as infill drilling and major projects, thereby extending field life and deferring decommissioning. The joint venture will proportionately reduce Talisman's share of capital spending, production and abandonment liabilities for its UK business. The transaction is expected to close by year-end.

During the quarter, production in the North Sea decreased by 29% relative to the same period in 2011. In the UK, the decrease related to planned turnarounds, shut-ins to repair a gas export pipeline, and mechanical issues at several sites. The decrease in Norway was due principally to reduced rates at Brage and Gyda, and shutdown work at Brage and Rev.

Production is expected to increase toward the end of the year with the contribution from infill wells, completion of planned maintenance and the resolution of mechanical issues. During the quarter, the first of several planned infill wells at Clyde was drilled and an infill well at Rev commenced drilling. Following the Rev well, the rig will move to Varg to drill two infill wells on the field.

Colombia

In Colombia, the development of Equion's Piedemonte complex is proceeding with the recent sanctioning of a major facilities expansion and a three-rig drilling program underway. In the foothills region, the Huron-2 appraisal well continues to drill. An environmental permit has been issued for block CPO-9, and we are moving to progress testing.

International Exploration

Talisman is focusing its exploration spending in areas that have high impact and a greater potential for large discoveries. This next phase of our exploration program includes near-term oil growth and large Asian gas opportunities. We continue to evaluate new plays as part of our unconventional and deepwater strategy.

In the Kurdistan Region of northern Iraq, the Kurdamir-2 exploration well has reached its target total depth of 4,000 metres, and drillstem testing in the Cretaceous pay zone identified on logs is being initiated. Depending on results, an extended well test in either the Cretaceous or Oligocene zone will be considered. After completing operations on Kurdamir-2, Talisman intends to enter the next exploration period of the Kurdamir licence and drill a follow-up appraisal well, Kurdamir-3.

In Papua New Guinea, the Weimang-1 exploration well found gas in line with pre-drill expectations. Talisman will now move onto the Puk Puk-2 appraisal well and is confident that its gas aggregation strategy in the Western Province remains on track.

Common Share and Preferred Share Dividend Declaration

The company has declared a quarterly dividend on the company's common shares of US$0.0675 per share. The dividend will be paid on September 28, 2012 to shareholders of record at the close of business on August 17, 2012.

The company has also declared a quarterly dividend of C$0.2625 on its Cumulative Redeemable Rate Reset First Preferred Shares, Series 1. The dividend will be paid on October 1, 2012 to shareholders of record at the close of business on August 17, 2012.

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; production guidance; expected shift to liquids and expected liquids production in North America; expected production decline in the Marcellus; expected drilling in the Duvernay; expected production growth in Southeast Asia; expected operatorship at Kinabalu; expected drilling in Malaysia, the Kurdistan Region of northern Iraq and PNG; expected first production at HST/HSD and Stanley; planned investment, drilling, projects, extended field life and deferred decommissioning through the joint venture with Sinopec; expected closing of the Sinopec transaction; planned drilling at Varg; expected testing in Colombia; planned share repurchase; 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, exploration and development spending 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 Six Months Ended
June 30, 2012 June 30, 2011 June 30, 2012 June 30, 2011
Cash provided by operating activities 809 896 1,789 1,779
Changes in non-cash working capital (58 ) (94 ) (212 ) (221 )
Add: Exploration expenditure 91 136 147 248
Add: Pennsylvania impact fee1 7 - 25 -
Less: Finance costs (cash) (46 ) (41 ) (95 ) (98 )
Cash flow 803 897 1,654 1,708
Cash flow per share 0.78 0.88 1.61 1.67
Diluted cash flow per share 0.78 0.86 1.60 1.63
  1. Pennsylvania impact fee amount represents the one-time impact of the retrospective application of the legislation to wells drilled pre-2012. Q2 2012 amount represents revision to prior period estimate of the expected retrospective fee.

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 August 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 Six Months Ended
June 30, 2012 June 30, 2011 June 30, 2012 June 30, 2011
Net income 196 698 487 372
Gain on disposals (tax adjusted) (188 ) (89 ) (565 ) (157 )
Unrealized (gain) loss on financial instruments(tax adjusted)1 (37 ) (181 ) - 82
Share-based payments (tax adjusted)2 (30 ) (179 ) (76 ) (71 )
Foreign exchange on debt (tax adjusted) (3 ) - 12 8
Impairment (tax adjusted) 73 - 375 39
Pennsylvania impact fee (tax adjusted)3 5 - 16 -
Deferred tax adjustments4 55 (81 ) (11 ) 52
Earnings from operations 71 168 238 325
Earnings from operations per share 0.07 0.16 0.23 0.32
Diluted earnings from operations per share 0.07 0.16 0.23 0.31
  1. Unrealized (gain) 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 June 30. 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. Q2 2012 amount represents revision to prior period estimate of the expected retrospective fee.
  4. Deferred tax adjustments largely comprise tax on foreign exchange on tax pools.

Earnings from operations are calculated by adjusting the company's net income 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 August 1, 2012. A reconciliation of net income to earnings from operations is provided above.

Exploration and Development Spending

US$ million

Three Months Ended Six Months Ended
June 30, 2012 June 30, 2011 June 30, 2012 June 30, 2011
Exploration, development and other 936
997

1,947

1,907
Exploration expensed 91 136 147 248
Exploration and development spending 1,027 1,133 2,094 2,155

Exploration and development spending 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
June 30, 2012 March 31, 2012
Long-term debt 4,746 4,741
Bank indebtedness 14 -
Cash and cash equivalents (683 ) (732 )
Net debt 4,077 4,009

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 June 30Six months ended June 30
2012201120122011
Financial
(millions of US$ unless otherwise stated)
Cash flow (1)8038971,6541,708
Net income196698487372
Exploration and development spending(1)1,0271,1332,0942,155
Per common share (US$)
Cash flow (1)0.780.881.611.67
Net income0.190.680.480.36
Production
(Daily Average - Gross)
Oil and liquids (bbls/d)
North America27,58922,73027,76421,911
North Sea69,65796,18679,205109,200
Southeast Asia41,46032,83243,15432,845
Other22,02722,98323,70321,578
Total oil and liquids160,733174,731173,826185,534
Natural gas (mmcf/d)
North America1,0398751,032880
North Sea32563869
Southeast Asia528500538497
Other43394032
Total natural gas1,6421,4701,6481,478
Total mboe/d (2)435420448432
Prices
Oil and liquids (US$/bbl)
North America67.5579.3372.4174.29
North Sea104.03117.04113.27110.28
Southeast Asia106.52118.74115.08118.01
Other115.13112.67120.38113.46
Total oil and liquids99.93111.88108.16107.77
Natural gas (US$/mcf)
North America2.144.222.314.14
North Sea9.998.829.948.66
Southeast Asia9.489.789.679.26
Other3.953.044.534.03
Total natural gas4.706.254.946.07
Total (US$/boe) (2)54.7268.4760.0967.08
(1) Cash flow, exploration and development spending 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)
(millions of US$)June 30, 2012December 31, 2011
Assets
Current
Cash and cash equivalents683474
Accounts receivable1,3571,550
Risk management2342
Inventories151164
Prepaid expenses4624
Assets held for sale31-
2,2912,254
Other assets110101
Investments374395
Risk management2624
Goodwill1,3101,317
Property, plant and equipment15,51615,909
Exploration and evaluation assets3,5963,954
Deferred tax assets843272
21,77521,972
Total assets24,06624,226
Liabilities
Current
Bank indebtedness1460
Accounts payable and accrued liabilities2,4582,622
Income and other taxes payable360371
Current portion of long-term debt324410
Liabilities associated with assets held for sale31-
3,1873,463
Decommissioning liabilities2,9292,982
Other long-term obligations348346
Long-term debt4,4224,485
Deferred tax liabilities2,8262,932
10,52510,745
Shareholders' equity
Common shares1,6421,561
Preferred shares191191
Contributed surplus102186
Retained earnings7,6317,292
Accumulated other comprehensive income788788
10,35410,018
Total liabilities and shareholders' equity24,06624,226
Talisman Energy Inc.
Condensed Consolidated Statements of Income
(unaudited)
Three months ended
June 30
Six months ended
June 30
(millions of US$)2012 2011 2012 2011
Revenue
Sales1,850 2,216 3,939 4,188
Other income19 18 45 46
Total revenue and other income1,869 2,234 3,984 4,234
Expenses
Operating642 555 1,219 1,007
Transportation58 52 117 108
General and administrative131 108 252 206
Depreciation, depletion and amortization572 479 1,175 948
Impairment73 - 1,126 102
Dry hole65 36 125 140
Exploration91 136 147 248
Finance costs68 60 139 136
Share-based payments recovery(31)(176) (72)(60)
(Gain) loss on held-for-trading financial instruments(35)(68) 12 251
Gain on asset disposals(254)(122) (759)(214)
Other, net(43)23 34 81
Total expenses1,337 1,083 3,515 2,953
Income before taxes532 1,151 469 1,281
Taxes
Current income tax218 436 651 879
Deferred income tax (recovery)118 17 (669)30
336 453 (18)909
Net income196 698 487 372
Per common share (US$):
Net income0.19 0.68 0.48 0.36
Diluted net income0.14 0.50 0.38 0.26
Weighted average number of common shares outstanding (millions)
Basic1,026 1,025 1,025 1,024
Diluted1,033 1,044 1,032 1,047
Talisman Energy Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)
Three months ended June 30 Six months ended June 30
(millions of US$)2012 2011 2012 2011
Operating activities
Net income196 698 487 372
Add: Finance costs (cash and non-cash)68 60 139 136
Items not involving cash487 44 951 1,050
751 802 1,577 1,558
Changes in non-cash working capital58 94 212 221
Cash provided by operating activities809 896 1,789 1,779
Investing activities
Capital expenditures
Exploration, development and other(936)(997)(1,947)(1,907)
Corporate acquisitions, net of cash acquired- 19 - (156)
Property acquisitions- (542)(2)(573)
Proceeds of resource property dispositions437 290 939 539
Acquisition deposit- - - 18
Investments(1)- (4)54
Changes in non-cash working capital(212)53 (142)(87)
Cash used in investing activities(712)(1,177)(1,156)(2,112)
Financing activities
Long-term debt repaid(562)(2)(991)(310)
Long-term debt issued583 - 841 -
Common shares issued1 35 3 114
Common shares purchased(9)(24)(13)(42)
Finance costs (cash)(46)(41)(95)(98)
Deferred credits and other16 (17)9 (20)
Common share dividend(138)(138)(138)(138)
Preferred share dividend(2)- (5)-
Changes in non-cash working capital2 - 9 (1)
Cash used in financing activities(155)(187)(380)(495)
Effect of translation on foreign currency cash and cash equivalents(5)7 2 33
Net increase (decrease) in cash and cash equivalents(63)(461)255 (795)
Cash and cash equivalents net of bank indebtedness, beginning of period732 1,319 414 1,653
Cash and cash equivalents net of bank indebtedness, end of period669 858 669 858
Cash and cash equivalents683 860 683 860
Bank indebtedness(14)(2)(14)(2)
Cash and cash equivalents net of bank indebtedness, end of period669 858 669 858
Talisman Energy Inc.
Segmented Information
(unaudited)
North America (1)North Sea (2)
Three months ended
June 30
Six months ended
June 30
Three months ended
June 30
Six months ended
June 30
(millions of US$)20122011201220112012201120122011
Revenue
Sales3304486938527701,1671,7152,255
Other income1813393615410
Total revenue and other income3484617328887711,1721,7192,265
Segmented expenses
Operating164100313211349357661617
Transportation2514483018233846
DD&A276203549404156181330367
Impairment--75---978102
Dry hole1012131821777
Exploration22152344872218
Other5(1)3461152114
Total segmented expenses5023321,0636985605752,0671,241
Segmented income (loss) before taxes(154)129(331)190211597(348)1024
Non-segmented expenses
General and administrative
Finance costs
Share-based payments recovery
Currency translation
(Gain) loss on held-for-trading financial instruments
Gain on asset disposals
Total non-segmented expenses
Income before taxes
Capital expenditure
Exploration295562138575457105
Development370378931729263307492552
Exploration and development399433993867320361549657
Acquisitions
Proceeds on dispositions
Other non-segmented
Net capital expenditures
Property, plant and equipment 7,1096,740 5,1415,809
Exploration and evaluation assets 2,2002,370 368538
Goodwill 133140 866866
Other 1,149987 943645
Assets held for sale -- 31-
Segmented assets 10,59110,237 7,3497,858
Non-segmented assets
Total assets (5)
Decommissioning liabilities (5) 330394 2,3932,390
1. North America2012201120122011
Canada206300435590
US142161297298
Total revenue and other income348461732888
Canada 3,7273,937
US 3,3822,803
Property, plant and equipment (5) 7,1096,740
Canada 1,1631,207
US 1,0371,163
Exploration and evaluation assets (5) 2,2002,370
2. North Sea2012201120122011
UK5168661,1791,602
Norway255306540663
Total revenue and other income7711,1721,7192,265
UK 4,1453,927
Norway 9961,882
Property, plant and equipment (5) 5,1415,809
UK 38210
Norway 330328
Exploration and evaluation assets (5) 368538
5. Current year represents balances at June 30.
Prior year represents balances at December
Talisman Energy Inc.
Segmented Information
(unaudited)
Southeast Asia (3)Other (4)Total
Three months ended
June 30
Six months ended
June 30
Three months ended
June 30
Six months ended
June 30
Three months ended
June 30
Six months ended
June 30
(millions of US$)2012 20112012 20112012 20112012 20112012 2011 2012 2011
Revenue
Sales581 4421,195 828169 159336 2531,850 2,216 3,939 4,188
Other income- -- -- -2 -19 18 45 46
Total revenue and other income581 4421,195 828169 159338 2531,869 2,234 3,984 4,234
Segmented expenses
Operating109 75207 14720 2338 32642 555 1,219 1,007
Transportation13 1327 282 24 458 52 117 108
DD&A105 63223 12535 3273 52572 479 1,175 948
Impairment- -- -73 -73 -73 - 1,126 102
Dry hole31 3334 576 -53 365 36 125 140
Exploration20 8338 13541 3164 5191 136 147 248
Other(14)1(13)4(8)12(2)12(6)17 40 36
Total segmented expenses264 268516 496169 100303 1541,495 1,275 3,949 2,589
Segmented income (loss) before taxes317 174679 332- 5935 99374 959 35 1,645
Non-segmented expenses
General and administrative 131 108 252 206
Finance costs 68 60 139 136
Share-based payments recovery (31)(176)(72)(60)
Currency translation (37)6 (6)45
(Gain) loss on held-for-trading financial instruments (35)(68)12 251
Gain on asset disposals (254)(122)(759)(214)
Total non-segmented expenses (158)(192)(434)364
Income before taxes 532 1,151 469 1,281
Capital expenditure
Exploration27 7940 12868 25124 41181 213 283 412
Development68 22138 9325 4540 73726 752 1,601 1,447
Exploration and development95 101178 22193 70164 114907 965 1,884 1,859
Acquisitions - 564 2 1,357
Proceeds on dispositions (437)(290)(939)(539)
Other non-segmented 37 28 68 44
Net capital expenditures 507 1,267 1,015 2,721
Property, plant and equipment 2,429 2,501 837 859 15,516 15,909
Exploration and evaluation assets 486 498 542 548 3,596 3,954
Goodwill 149 149 162 162 1,310 1,317
Other 632 560 840 788 3,564 2,980
Assets held for sale - - - - 31 -
Segmented assets 3,696 3,708 2,381 2,357 24,017 24,160
Non-segmented assets 49 66
Total assets (5) 24,066 24,226
Decommissioning liabilities (5) 211 208 44 43 2,978 3,035
3. Southeast Asia2012201120122011
Indonesia293284609533
Malaysia165113323228
Vietnam12163836
Australia1112922531
Total revenue and other income5814421,195828
Indonesia 1,0241,023
Malaysia 837883
Vietnam 338297
Papua New Guinea 4547
Australia 185251
Property, plant and equipment (5) 2,4292,501
Indonesia 1012
Malaysia 3541
Vietnam 135
Papua New Guinea 428440
Exploration and evaluation assets (5) 486498
4. Other2012201120122011
Algeria5890112134
Colombia11169226119
Total revenue and other income169159338253
Algeria 281284
Colombia 556575
Property, plant and equipment (5) 837859
Colombia 11475
Kurdistan 250303
Peru 120133
Other 5837
Exploration and evaluation assets (5) 542548
(5) Current year represents balances at June 30.
Prior year represents balances at December 31.

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