Talisman Sees Output Rising to Pre-Sudan Sale Level
CALGARY, Alberta (Reuters) - Talisman Energy Inc. (TLM.TO) expects oil and gas projects starting up soon to make up for output lost in the C$1.1 billion ($758 million) sale of its Sudanese assets, its chief executive said on Wednesday.
New fields in southeast Asia and North America will help Canada's second-largest oil explorer and producer boost production by year-end to levels it had projected for a 2003 average before it announced the sale last October, chief executive Jim Buckee said.
"We have substantial new production volumes coming on stream in the next six to eight months," Buckee told analysts. "Talisman should exit the year at close to pre-Sudan sale production rates, or circa 440,000 to 445,000 (barrels of oil equivalent) per day."
He said the company is also scouting for new assets in its main operating areas, especially North America, where natural gas prices have soared past two-year highs.
Talisman reported a quadrupling of fourth quarter profit on Tuesday due to sky-high oil and gas prices and said it expected the sale of its controversial interest in war-torn Sudan to India's state oil firm, representing about 60,000 barrels a day, to close by the end of March after months of delay.
It has already spent a chunk of the expected proceeds buying back stock to help it boost oil and gas production by 5 percent per share this year and 10 percent next year. So far, Talisman has bought back 5.8 million shares for C$340 million.
Gord Currie, analyst with Canaccord Capital Corp, said the emphasis on stock repurchases to help increase per-share output is a recent shift for Talisman.
"It's not what companies generally like to do, and it's not what I would have said Talisman wanted to do in past," he said. "Usually these companies like to reinvest their cash flow in exploration and development, and Talisman was pretty aggressive about spending their cash as it came in the door."
Talisman stock was hit last fall after delays in some projects forced it to cut its 2003 output forecast to a level about flat with 2002. Soon after, it announced the Sudan deal.
The shares rose 40 Canadian cents to C$59.50 in Toronto on Wednesday, or about 7 percent lower than the price before the company warned about flat output in early October.
Among new projects, a key oil and gas development in Malaysian and Vietnamese waters is expected to start up this autumn, with output averaging 40,000 barrels a day in 2004.
Oil production from the North Sea's Blake field, where Talisman has a 53.6 percent interest, is slated to increase by 11,500 barrels a day by the third quarter in an expansion.
North American gas production is expected to increase up to 7 percent from the January level of 860 million cubic feet a day, the company said.
Meanwhile, high oil and gas prices and low debt will allow Talisman to jump back into the acquisition market, Buckee said. It recently bolstered gas production through a series of asset deals in New York state.
"We're looking at more North American gas assets and we also believe (major oil companies) will continue their cleaning-out process, so we believe there will be a number of attractive assets coming forward, and we will be looking at those assets," he said.
Talisman is also expanding exploration efforts in Trinidad, Colombia, Qatar and Vietnam.
Currie said Talisman, with no Sudanese assets, low debt and its shares trading at multiples below those of rivals, could soon be on the radar of potential acquisitors.
But with a stock market value of about C$8 billion, Talisman would be a big bite for the bulk of North American exploration and production firms, and most majors have already left some of its key areas, like traditional fields in western Canada, he said.
($1=$1.47 Canadian).
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