CALGARY, ALBERTA--(Marketwired - Feb 12, 2014) - Talisman Energy Inc. ( TLM.TO ) ( TLM ) reported its operating and unaudited financial results for 2013. All values are in US$ unless otherwise stated.
"We continue to build a strong foundation in our Americas and Asia-Pacific core businesses to deliver sustainable shareholder value and cash flow(1) growth," said Hal Kvisle, President and CEO. "In 2013, we set four priorities and built significant momentum behind each one. We reduced capital spending(1) by 20%, improved our operating efficiency and reduced costs, including an underlying 20% year-on-year reduction in net G&A. In addition, we announced over $2 billion in assets sales in 2013.
"In our Americas and Asia-Pacific businesses, we grew higher margin production and cash flow. Overall, we produced 373,000 boe/d and generated $2.2 billion of cash flow in 2013, including $580 million in the fourth quarter, building momentum throughout the year. In 2014, we will continue to focus on creating value in our two core areas by directing capital towards our highest quality opportunities and improving margins through better execution."
Year-end and Fourth Quarter Highlights :
- Fourth quarter production was 387,000 boe/d, up from 371,000 boe/d in the third quarter.
- In 2013, production averaged 373,000 boe/d and cash flow was approximately $2.2 billion, growing by 12% from the first to fourth quarters. Fourth quarter cash flow was $580 million, up from $573 million in the third quarter.
- Capital spending was $3.2 billion in 2013, down 20% from 2012. Fourth quarter capital spending was $744 million, down from $849 million in the third quarter.
To view the graph associated with this release, please visit the following link: http://media3.marketwire.com/docs/211tlm_graph.jpg
(1) The terms "cash flow" and "capital spending" are non-GAAP measures. Please see the advisories and reconciliations elsewhere in this release.
Progress Against Priorities
Living within our means
Talisman reduced capital spending in 2013 by 20% to $3.2 billion, compared to $4 billion in 2012, reflecting a concentrated effort to reduce high risk, low return expenditures resulting in a 25% reduction in exploration spending. Talisman remains committed to capital discipline and will continue to focus on the Americas and Asia-Pacific. The company has ongoing material legacy capital obligations in non-core assets such as the North Sea until the company is able to dilute or exit its interests in those assets.
Focusing our capital program
In 2013, the company focused its capital program on oil and liquids opportunities that generate higher, more predictable returns, delivering 6% liquids production growth from the first quarter to the fourth quarter. Fourth quarter production was 387,000 boe/d, up from 371,000 boe/d in the third quarter. The company produced 358,000 boe/d in its Americas and Asia-Pacific core areas in the fourth quarter. In 2013, the company exited Poland, received government approval to transfer its interests in Sierra Leone and is in the process of exiting Peru.
Improving operational efficiency and reducing costs
Talisman continued to improve operational efficiency. In North America, year-over-year drilling and completion costs were down 16% in the Eagle Ford, 13% in the Duvernay and 9% in the Marcellus. Drilling cycle times were down 17% in the Montney and 25% in both the Eagle Ford and Marcellus. In Vietnam, Talisman achieved first oil production at its HST/HSD project ahead of schedule and under budget. The company made staffing reductions in its corporate centre and North American operations, resulting in an underlying 20% reduction (excluding certain one-off costs) in net G&A.
Unlocking value from our portfolio (2)
Talisman announced over $2 billion in asset sales in 2013 including the sale of 75% of its Montney assets in Canada for C$1.5 billion, and its equity interest in the Ocensa pipeline in Colombia for $595 million. In the fourth quarter, Talisman also entered into an agreement to sell its Southeast Sumatra asset in Indonesia. Following year-end 2013, the company entered into an agreement to sell its sour gas Foothills Monkman asset.
(2) See advisories for a discussion of this term.
The financial information contained in this release is unaudited. The company expects to file its audited Consolidated Financial Statements for the year ended December 31, 2013, along with the related Management Discussion and Analysis, Annual Information Form and Annual Report on Form 40-F on March 3, 2014. For operational purposes, Talisman has two core operating areas: the Americas (North America and Colombia) and Asia-Pacific (Southeast Asia and Algeria). For the purposes of financial reporting, Talisman's 2013 activities were conducted in four geographic segments: North America, Southeast Asia, North Sea and Other. See the advisories elsewhere in this release for more information or visit Talisman's website at www.talisman-energy.com .
|December 31||Q4 13||Q3 13||Q4 12||2013||2012|
|Cash flow ($ million)||580||573||675||2,196||3,022|
|Cash flow per share(3)||0.56||0.56||0.66||2.13||2.95|
|Earnings (loss) from operations 3 ($ million)||(116||)||(45||)||(107||)||(248||)||95|
|Earnings (loss) from operations per share 3||(0.11||)||(0.04||)||(0.10||)||(0.24||)||0.09|
|Net income (loss) ($ million)||(1,005||)||(54||)||376||(1,175||)||132|
|Net income (loss) per share||(0.98||)||(0.05||)||0.37||(1.15||)||0.12|
|Average shares outstanding - basic (million)||1,031||1,031||1,025||1,030||1,025|
Table includes the company's proportionate results from Talisman Sinopec Energy UK Limited (TSEUK) and Equión Energía Limited (Equión). Table reflects 100% interest of UK business until December 2012.
Steady cash flow growth throughout 2013
Cash flow for the fourth quarter was $580 million, compared to $573 million in the previous quarter, due to increased gas production at PM-3 in Malaysia, successful Marcellus gas development, increased HST/HSD oil production volumes, increased production and higher realized gas prices in Greater Edson and lower cash taxes. This was partially offset by lower netbacks resulting from lower sales into the premium Singapore market and the widening of Western Canada Select differentials in Canada, as well as unexpected operational issues in the UK that resulted in the Piper and Claymore facilities being shut in for most of the quarter, incurring higher operating costs to address the issues. Cash flow for 2013 was $2.2 billion. Talisman delivered quarterly cash flow growth during the course of 2013 as the company focused on increasing liquids volumes production in the Americas and Asia-Pacific, reducing G&A spending and benefiting from lower cash taxes.
In the fourth quarter, the company recorded a loss from operations (which exclude non-operational items) of $116 million, compared to a loss of $45 million in the third quarter. Higher liquids volumes in North America, Norway and Vietnam, higher gas volumes from Marcellus and Malaysia, lower hedging settlements, lower current taxes and lower exploration expense were more than offset by lower netbacks in Southeast Asia and Canada and lower volumes from the UK.
(3) The terms "cash flow per share", "earnings (loss) from operations" and "earnings (loss) from operations per share" are non-GAAP measures. Please see advisories and reconciliations elsewhere in this news release.
The company recorded a net loss of approximately $1.2 billion in 2013 compared to net income of $132 million in 2012. This was due to lower production from the North Sea primarily as a result of the sale of 49% of Talisman's UK business, higher royalties and lower capitalized interest costs, partially offset by lower impairments, higher liquids production in the Eagle Ford and Vietnam, lower operating expenses, lower G&A spending, lower DD&A expense and lower dry hole expense. In addition, 2012 net income reflected a non-taxable gain of $860 million made on the sale of 49% of Talisman's UK business for $1.5 billion and a $365 million gain on the revaluation of the Ocensa pipeline. The company recorded a net loss of approximately $1 billion in the fourth quarter, compared to a loss of $54 million in the third quarter, primarily due to impairments.
DD&A expense in 2013 was $1.9 billion, compared to $2.4 billion in 2012, due primarily to the application of equity accounting to the TSEUK joint venture from December 17, 2012 onward and lower production in Canada, the Marcellus and Kitan. This was partially offset by higher production and unit rates in the Eagle Ford and new production at HST/HSD in Vietnam and Kinabalu in Malaysia. DD&A was $555 million in the fourth quarter, up from $482 million in the third quarter, primarily due to increased production in Indonesia, Malaysia, Vietnam and Norway.
Asset and goodwill impairments, including the company's share of joint venture results, were $1.6 billion pre-tax ($826 million after tax) in the fourth quarter. The company recorded a $651 million pre-tax ($277 million after tax) impairment in the TSEUK joint venture as a result of negative reserves revisions influenced by poor reservoir and asset performance, increased decommissioning cost estimates, and higher development and operating cost estimates.
The company recorded a net impairment expense of $358 million pre-tax ($79 million post-tax) in Norway. The impairments are a result of increased decommissioning costs on Gyda and Rev and negative reserves revisions at Varg.
The company recorded a non-taxable impairment of $185 million related to North Sea goodwill as a result of its view of the reduced value of the UK and Norway assets.
During 2013, the company recorded an impairment expense of $332 million pre-tax ($252 million post-tax) in North America. The majority of this impairment was recorded in conventional dry gas properties in Canada as a result of the company lowering its long-term gas price assumptions by 25% over last year as well as increased cost assumptions in certain conventional gas assets.
The company recorded $55 million pre-tax ($27 million post-tax) impairments in Kitan following negative reserves revisions driven by poor well performance.
Current taxes were $166 million in the fourth quarter and $623 million for the year, down from the third quarter and 2012 due to lower revenues in the North Sea and the sale of a 49% equity interest in Talisman's UK business in 2012.
The company's deferred tax recovery in 2013 was $770 million compared to a deferred tax recovery of $1.2 billion in 2012. This was principally due to lower impairments in the North Sea and the sale of Talisman's equity investment in the Ocensa pipeline.
Capital spending for the year was $3.2 billion, down 20% from 2012, reflecting the company's efforts to live within its means and shift capital towards oil and liquids opportunities. Exploration and development spending in the fourth quarter was $744 million, down from $849 million in the third quarter.
Net debt(4) at year-end was approximately $4.8 billion compared to approximately $3.7 billion at year-end 2012. The company will use proceeds from announced dispositions to continue to pay down debt.
(4)The term "net debt" is a non-GAAP measure. Please see advisories and reconciliations elsewhere in this release.
Commodity Pricing and Netbacks
|December 31||Q4 13||Q3 13||Q4 12||2013||2012|
|WTI benchmark ($/bbl)||97.45||105.83||88.18||97.97||94.22|
|Brent benchmark ($/bbl)||109.27||110.36||110.02||108.66||111.61|
|NYMEX benchmark ($/mmbtu)||3.62||3.60||3.36||3.67||2.80|
|Oil and liquids netback ($/bbl)|
|Total oil and liquids ($/bbl)||37.99||43.17||40.09||38.96||51.96|
|Natural gas netback ($/mcf)|
|Total natural gas ($/mcf)||2.72||2.72||2.69||2.88||2.52|
|Total company netback ($/boe)||23.93||25.98||24.82||24.93||29.13|
North Sea results include Norway and the company's proportionate results from TSEUK; Other results include Colombia and the company's proportionate results from Equión and Algeria. The company's realized sales price includes the impact of physical commodity contracts, but does not include the impact of the financial commodity price derivatives.
In 2013, Brent and WTI prices were largely flat compared to 2012; however, NYMEX natural gas prices were up 31% over the previous year. On a quarterly basis, Brent prices stayed flat over the previous quarter and WTI prices decreased 8% from the third quarter. NYMEX natural gas prices were flat from last quarter. Western Canada Select differentials widened between the third and fourth quarters of 2013, resulting in a marked reduction in North American liquids netbacks in the quarter.
In 2013, the company's average gross netback was $24.93/boe, down from $29.13/boe in 2012 due to lower realized prices, higher royalties and transportation costs, partially offset by lower operating costs. Talisman's gross oil and liquids netback was $38.96/boe, down 25% from 2012 due to decreased realized prices compared to 2012, higher royalties and transportation costs, partially offset by lower operating costs. Talisman's gross natural gas netback was $2.88/mcf in 2013, up from $2.52/mcf in 2012 due to higher realized prices partially offset by higher royalties and operating costs. The company's fourth quarter gross netback was $23.93/boe compared to $25.98/boe in the third quarter.
In North America, the company's 2013 average gross netback was $14.83/boe, up from $10.87/boe in 2012, due primarily to growing liquids production in the Eagle Ford and higher North American gas prices. The company's fourth quarter gross netback in North America was $15.48/boe, down from $16.07/boe in the third quarter.
In Southeast Asia, the company's 2013 netback was $33.51/boe, down from $36.58/boe in 2012 due in part to a change in production mix following the startup of production at HST/HSD, offset by higher royalties at PM-3 in Malaysia and higher operating cost per barrel at Kitan in Australia. The company's fourth quarter gross netback in Southeast Asia was $35.30/boe, up from $34.20/boe in the third quarter.
Table includes Talisman's share of production from subsidiaries and equity-accounted entities. Talisman's UK North Sea equity interest was reduced to 51% in December 2012.
|December 31||Q4 13||Q3 13||Q4 12||2013||2012|
|Oil and liquids (mbbls/d)|
|Other (including Colombia and Algeria)||22||21||21||21||22|
|Total oil and liquids (mbbls/d)||137||134||143||132||162|
|Natural gas (mmcf/d)|
|Other (including Colombia and Algeria)||45||44||43||43||42|
|Total natural gas (mmcf/d)||1,505||1,423||1,498||1,451||1,582|
|Assets sold or held for sale (mboe/d)|
|North America 1||25||22||26||24||31|
|North Sea 2||-||-||17||-||25|
|Southeast Asia 3||3||3||6||4||6|
|Total Assets sold or held for sale (mboe/d)||28||25||49||28||62|
|Production from ongoing operations (mboe/d)||359||346||343||345||364|
|1||Includes Montney (held for sale as at December 31, 2013), Monkman (entered into an agreement to sell post year-end 2013), West Whitecourt and Shaunavon (sold in 2012).|
|2||Includes UK (49% of interest in UK business sold December 2012).|
|3||Includes Northwest Java (sold in May 2013) and Southeast Sumatra (sales agreement reached in December 2013).|
In 2013, production was 373,000 boe/d. Fourth quarter production was 387,000 boe/d, up from 371,000 boe/d in the third quarter due in part to increased development activity in the Marcellus, completion of planned maintenance at PM-3 in Malaysia and completion of project tie-in work at Corridor in Indonesia. These increases were partially offset by planned and unplanned outages in the North Sea. Total oil and liquids production was 137,000 bbls/d in the fourth quarter compared to 134,000 bbls/d in the third quarter. Dispositions agreed in 2013 and early 2014 reduce annual production from ongoing operations to 345,000 boe/d.
Replaced 110% of production on proved (1P) basis
In 2013, the company recorded positive additions and revisions of approximately 166 million boe of 1P reserves and approximately 144 million boe proved plus probable (2P) reserves in its Americas core area against production of approximately 73 million boe. The reserve additions are primarily a result of successful development programs and improving well performance. In its Americas and Asia-Pacific core areas, the company replaced over 110% of production with 2P reserves increases on a company gross share basis.
The company recorded negative additions and revisions of approximately 21 million boe of 1P reserves in 2013 associated with the company's non-core North Sea (UK and Norway) business. A key factor in these negative reserve changes was Talisman's decision to limit capital investments in non-core regions.
At year-end 2013, Talisman's 1P reserves totaled 1.1 billion boe, which equates to a reserve life index of 8.1 years. Talisman's 2P reserves totaled 1.6 billion boe at year-end 2013, down 4% primarily due to production and revisions. The company's 1P reserves replacement ratio was 110%.
Acquisitions and divestures increased 1P reserves by 3.5 million boe and 2P reserves by 8.4 million boe and are included in the totals above, but not in the table below.
Talisman will release complete year-end reserves disclosure as part of its Annual Information Form on March 3, 2014.
|Production||1P Additions & Revisions||2P Additions & Revisions|
|million boe||million boe||million boe|