Sudan fears overshadow Talisman's rich results
(Adds analyst comments paras 2-3, stock reaction para 9)
By Jeffrey Jones
CALGARY, Nov 4 (Reuters) - Talisman Energy Inc. (Toronto:TLM.TO - news), Canada's biggest international oil producer, said on Thursday that big jumps in oil and gas prices and higher production drove its third-quarter financial results to new highs.
Investor fears over controversy surrounding Calgary-based Talisman's operations in civil war-torn Sudan overshadowed the record results in the stock market, however, with the company's share price dropping more than 3 percent on the day.
``I would concur,' said Brian Prokop, an analyst with Calgary-based Peters & Co. Ltd., who recently joined the brokerage after working as an executive with Talisman. ``The numbers are outstanding, without a doubt. They certainly were slightly above our estimates.'
Third-quarter earnings were C$60.2 million or 45 Canadian cents a share, up dramatically from a year-earlier loss of C$32.8 million or 30 Canadian cents a share.
Cash flow, a key measure of an oil company's ability to fund future development, soared 123 percent to a record quarterly high of C$280.8 million from C$126.1 million in the third-quarter of 1998. Cash flow per share doubled to C$2.30 from C$1.15. Revenues totaled C$498.2 million, up 52 percent from C$326.8 million the year before.
Talisman is known for its extensive operations in Canada, the North Sea, Indonesia and in Sudan, where it has a 25-percent stake in a huge oil project that started producing in September.
It has been under fire from some human rights and church groups, which contend revenues from the project would be used by Sudan's Islamic government to fund a 16-year civil war against rebels in the mostly Christian and animist south.
Canadian Foreign Minister Lloyd Axworthy said last week Talisman could be hit with sanctions if it was found to have a role in exacerbating the conflict. Days before, Talisman was criticized by U.S. Secretary of State Madeleine Albright.
Talisman's stock has slid nearly 12 percent since Axworthy made his comments. It closed down C$1.20 to C$38.35 on the Toronto Stock Exchange on Thursday,
The warning was part of a series of Canadian government initiatives aimed at increasing its knowledge of the murky situation in the African nation, and contributing to the peace process. Talisman has said it supported the diplomatic moves.
``I remain convinced that our investment will benefit all the people of Sudan,' Talisman Chief Executive Jim Buckee said in a statement a day after meeting in Ottawa with Axworthy.
Meanwhile, Talisman's Canadian and North Sea units were expanded in the quarter with its C$1.2-billion takeover of Rigel Energy, which bolstered holdings in both regions, and deals to acquire several North Sea holdings from Elf Aquitaine and U.S.-based Atlantic Richfield Co. (NYSE:ARC - news)
``Current production volumes are over 370,000 barrels of oil equivalent a day including Rigel, and we now expect 1999 cash flow to comfortably exceed C$1 billion,' Buckee said. Talisman's cash flow was C$631 million last year.
Like its oil-producing peers, Talisman reaped benefits of a March deal among major producing nations to cut output, a move that has led to oil prices doubling since the start of 1999.
Canadian producers have also enjoyed a jump in natural gas prices, fueled by new pipeline capacity to rich U.S. markets and fears of tight supply during this winter heating season.
The company's average oil sales price was C$28.67 a barrel in the third quarter, up 67 percent from last year. Gas averaged C$2.56 per thousand cubic feet, up 20 percent.
Oil output rose 2 percent to 149,261 barrels a day, while gas output rose 23 percent to 844 million cubic feet a day.
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