Talisman Energy Inc. (TLM) Message Board

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Gold/Mining/Energy : Talisman Energy Inc. (TLM)

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From: Dennis Roth	5/11/2007 7:49:46 AM
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Execution strong, risk/reward similar to other E&Ps May 11, 2007 Goldman Sachs' Rating/Coverage View is Neutral/Neutral What's changed Talisman reported 1Q 2007 operating and financial results that were slightly weaker than our expectations. Adjusted EPS was US$0.22 versus our estimate of $0.26. Production was 388 MBOE/d versus our 392 MBOE/d, while unit costs were $33.89 per BOE versus our estimate of $29.95 per BOE. Management also provided an operational and exploration update that we viewed as net neutral. The company reported mixed exploration results from Alaska, where two of three wells encountered encouraging signs of commercial oil but will need to be further evaluated next winter. Implications We believe Talisman continues to execute well in its traditional conventional strategy. Following last year’s competitive organic reserve replacement (137%) and F&D costs ($18.50 per BOE), the 2007 drilling program appears generally off to a good start as well, highlighted by exploration success offshore Vietnam and the timely startup of the important Tweedsmuir development in the North Sea. That said, with drilling in Alaska now complete for the year and the shares having performed well recently, we see Talisman’s risk/reward as similar to other E&Ps at this time without many visible catalysts for the remainder of the year. Valuation Talisman trades at 4.4X 2008E EV/DACF, generally in line with 4.2X – 4.7X range of conventional diversified E&Ps. We see 6% downside for Talisman shares to our $18 12-month target price, based on a net asset value analysis. This is comparable to the 4% downside we see for E&Ps. We continue to rate Talisman Neutral, relative to a Neutral coverage view. Key risks Commodity price volatility and results from Talisman’s development and exploration drilling are the key risks to our target price.

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