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Talisman Energy, Inc. (TLM)

Q3 2009 Earnings Call

November 3, 2009 12:30 pm ET


John Manzoni – President, Chief Executive Officer & Non-Independent Director

L. Scott Thomson – Chief Financial Officer & Executive Vice President Finance

Nick Walker – Senior Vice President

Robert R. Rooney – Executive Vice President Legal & General Counsel

Philip D. Dolan – Vice President Finance

Paul Smith – Executive Vice President

Richard Herbert – Executive Vice President Exploration

A. Paul Blakeley – Executive Vice President – International Operations (East)


Andrew Fairbanks – Bank of America Merrill Lynch

Brian Singer – Goldman Sachs

Greg Pardy – RBC Capital Markets

[Chris Steel] – Macquarie Securities

Peter Ogden – National Bank Financial

Brian Dutton – Credit Suisse

Mark Polak – Scotia Capital Markets

Barbara Betanski – UBS Global Asset Management

Rafi Khouri – Raymond James

William Lee – CIBC World Markets

[Carrie Tight] – The National Post

[Mark Freezon – Verson Partners]



Welcome to the Talisman Energy, Inc. third quarter results conference call. At this time all participants are in a listen only mode. Following the presentation we will conduct a question and answer session. Instructions will be provided at that time for the queue up for questions. (Operator Instructions) This call contains forward-looking statements. Certain material factors and assumptions were applied in making the forecast and projections to be discussed on this call and actual results could differ materially from those anticipated by Talisman and described in the forward-looking information.

Please refer to the cautionary advisories in the November 3, 2009 news release and Talisman’s most recent annual information form which contains additional information about the applicable risks factors and assumptions. I’d like to remind everyone that this conference call is being recorded on Tuesday, November 3 at 11 am Mountain time. I’ll now turn the conference over to Mr. John Manzoni.

John Manzoni

Welcome and thank you for joining our third quarter conference call. With me today in Calgary is Scott Thomson, Paul Smith, Nick Walker, Bob Rooney and Phil Dolan and joining today by telephone are Paul Blakeley and Richard Herbert. After Scott and I have made some comments about the results and the outlook we’ll be very happy to answer your questions.

Let me begin my giving an overview of the results and pick up some points I think might be helpful for you. The results of this quarter reflect a lower pricing environment from a year ago and a relatively lower production level which represents a low point during the year but doesn’t materially change our outlook for the full year.

Our realized prices during the quarter were up from the prior quarter by just under $2.50 a barrel equivalent at $50.29 a barrel. But, our net backs were down about $0.25 to $27.16 a barrel. The reason the net backs were down was higher royalties arising from higher production in Asia where the royalties are a little bit higher and a very slight increase in unit operating costs which is due to the lower production rates rather than the absolute level of costs.

Cash from operations during the quarter was $838 million compared to $900 million last quarter which reflects the reduction in net backs and the lower production levels in this quarter. Reported net income for the quarter was $30 million and earnings from continuing operations which strips out certain non-operating items was $155 million for the quarter up from $125 million last quarter.

Free cash flow for the quarter was -$183 million reflecting our normal capital expenditure program and the small acquisitions we made in Papua New Guinea which amounted to about $220 million. This compares to the nearly $1.4 billion in flow last quarter which reflected of course our disposition program during Q2. Although capital spending year-to-date has been broadly in line with our guidance, as Scott will explain in a moment we will spend more than $3.6 billion capital this year by the time the year is complete.

We continue to retain cash on the balance sheet although this is now reducing slightly from last quarter and currently sits at about $2 billion. Scott will give you some indication on how we see that moving for the rest of the year.

Turning to our operations, I’m pleased by our continuing performance in safety. Year-to-date we have a loss time injury frequency 48% below last year despite substantial changes in our business which can sometimes distract people from this very important priority. Production for the quarter was 401,000 barrels a day. This is down from the second quarter mainly in the UK which produces 74,000 barrels a day in 3Q. The UK production was impacted by plant shut down activity which effectively took about 14,000 barrels a day out of service during the quarter.

There were also some operational issues which are now fixed but which impacted our UK production by about 6,000 barrels a day for the quarter. The other operational issue of note during 3Q was here in Canada where our Sukunka gas plant was down for a while which reduced production by about 3,000 barrels a day equivalent for the quarter. That’s now fixed and back up in operation.

Looking forward for the year, I’ve said on previous calls that I expected to be at about 430,000 barrels a day for the year with down side limited to 5%. The reason I’ve maintained the down side is because we’ve been selling assets through the year and the final outcome of that was uncertain. We now have a clearer picture of how much disposal activity we’re likely to complete this year and we expect to complete about 8,000 barrels a day annualized over and above the Netherlands and Trinidad disposals which were in our plans from the start.

Read the rest of this transcript for free on seekingalpha.com