Independent oil and gas exploration and production (E&P)
Talisman Energy Inc
) 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.
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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
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
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.
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.
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%.
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.
) with Zacks Rank #1 (Strong Buy) as well as
Canadian Oil Sands
Dejour Energy Inc.
) with Zacks Rank #2 (Buy).