Unplugged and ready to turn corner
Upstream, this week's issue
The new "unplugged from Sudan" Talisman Energy has turned the corner on a depressed stock price and is back focusing on production growth targets, writes Dann Rogers.
"Sudan is disposed of and the money's in the bank," said chief executive Jim Buckee. "That's behind us and gone."
Buckee added that growth for the rest of this year from western Canada, offshore Malaysia/Vietnam, the North Sea and Algeria will make up for the 86,000 barrels of oil equivalent per day in lost production in the second quarter from the Sudan asset sale and North Sea maintenance.
"Talisman has been in the penalty box since October, not because of Sudan, but because they missed production forecast targets due to poor North Sea performance," said analyst Brian Prokop of brokerage Peters & Co. "Then, they waited too long to tell investors about it. Now they are rebuilding credibility, but it is a credibility of forecasting growth and profitability, not one of corporate ethics."
In a conference call with analysts, Buckee said the company expects to meet its target of 395,000 to 415,000 boepd in 2003, up from 365,000 in the second quarter.
Earnings were more than double the same period last year because of the one-time sale proceeds, a change in Canadian corporate tax rates and currency gains as the Canadian dollar appreciated against its US counterpart.
Analyst Christopher Theal of Tristone Capital said the most encouraging news in Talisman's results was the lower operating costs in all of its core areas. "It demonstrates that they are getting back on track. You can clearly see where the growth is going to come from, not only in the next six months, but into 2005," he said.
Capital spending will rise 10% this year to C$2.25 billion ($1.6 billion), with most of the increase going to natural gas drilling in the deeper basin areas of the Rocky Mountain Foothills of western Canada, which should result in an output boost by 2004.
North Sea output fell to 117,500 boepd due to maintenance, but additional production from the Blake Flank and development drilling should lift the flow to 150,000 boepd by the fourth quarter.
Talisman's first entry into the Norwegian sector should net 7000 boepd, with plans to raise that to 20,000 boepd by 2006. In Trinidad, development of the Greater Angostura field is under way with first oil production expected in 2005.
For analyst Prokop, the second quarter was clean for Talisman in that it had no Sudan statistics, as well as marking a transition period from what the company was, to what it will become.
"We haven't seen an influx of institutional investors yet and it is still incredibly cheap relative to its US peers. Barring commodity price increases, Talisman's stock will probably stay around this level until the street sees another quarter of solid growth," he said.
Several analysts said that if Talisman's share price does not rise suitably in the next quarter, it will be takeover prey for the likes of EnCana or Anadarko Petroleum. |
