TLM.TSE Talisman Energy Message Board

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Gold/Mining/Energy : TLM.TSE Talisman Energy

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To: Tomas who wrote (1677)	2/16/2004 10:15:08 PM
From: Tomas	Read Replies (1) of 1713

We recommend an overweight position in Talisman Lehman Brothers Equity Research, February 10 By Thomas Driscoll and Philip Skolnick It is not clear to us why Talisman continues to trade at such a large discount to US E&Ps, but perhaps it could be because investors were not as excited by the sale of its controversial Sudan asset base in early 2003 as many had hoped. It could also be due to its lack of any meaningful exposure in the US. However, the company recently gained a foothold in the Appalachian region of the United States through two separate asset transactions in late 2002 and 2003. Based on positive results to-date from five wells, it appears that this could eventually become a new core area for the company. This could possibly increase investor interest in the stock. We recommend an overweight position in Talisman: Talisman exposes shareholders to an attractive production growth profile and valuation. We estimate that Talisman will grow its production per share on a net of royalties basis at 11% this year and 7% next year. These compare to our respective 2004 and 2005 production per share growth estimates (net of royalties) of 5% and 4% for Canadian Natural Resources and 1% and 8% for Nexen Inc. Shares of Talisman trade at 5.1x our estimate of its 2005 PICF, which is a 20% discount to our large-cap US E&P coverage universe group average enterprise value to 2005 estimated PICF multiple of 6.4x. Given its attractive production profile and large trading discount, we reiterate our 1- Overweight rating and C$86 price target on its shares. Our price target assumes shares should trade at 6.0x times our 2005 PICF estimate, which is based on our US$23/Bbl WTI oil and US$4.25/MMBtu Henry Hub natural gas price estimates. Our C$86 price target provides roughly 17% upside potential, which compares to our large cap North American E&P coverage universe average estimated upside potential of 11%.

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