Markets

Analyst Actions: Credit Suisse Cuts Talisman Target Price on Weaker Gas Price Outlook; Revises Estimates

Brent Price Forecast Unchanged But NYMEX Weakness Could Persist Near-term. "Credit Suisse has updated its commodity price view to reflect downward adjustment to NYMEX natural gas prices and a narrower differential between WTI and Brent. The Brent oil price forecast itself is unchanged. For NYMEX gas, Credit Suisse expects weakness to persist near-term as production takes time to fall in response to falling rig counts (mitigating factors include wells behind pipe, liquids drilling and efficiency gains). The long term view of the NYMEX gas price is unchanged at $5.50. The Brent forecast continues to reflect a 3.4% global GDP growth rate for 2012 with downside demand risk balanced by real supply risk across MENA and other significant producers (e.g., Venezuela, Russia, Nigeria)."

Initial Look at Q411. "We currently forecast production of 426,225 boe/d in Q411 and 422,350 boe/d for 2011, in line with company guidance of 425,000 boe/d. Our Q411 Operating EPS/CFPS forecasts of C$0.21/C$0.94 compares with current Bloomberg consensus of C$0.22/C$0.88."

Revising Talisman Estimates After New Oil Price Forecasts. "Incorporating the price changes noted above and other operational updates we have made the following changes to full year estimates for Talisman. Our 2011 EPS/CFPS go from $0.65/$3.44 to $0.68/$3.46, 2012 goes from $1.21/$4.30 to $1.00/$3.93 and 2013 goes from $1.96/$5.37 to $1.76/C$5.01."

Reducing Target Price to $23 on Weaker Gas Price Outlook. "Talisman is trading at 3.4x 2012E EBIDAX. During the past five years, Talisman has traded, on average, at 5.5x the current year's EBIDAX and as high as 6.8x. We apply 5.25x 2013E EBIDAX of C$5,414 million to derive our revised $23.00 target price (was $24.00)"

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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