Talisman Energy Inc. (TLM): Vietnam meetings highlight S-E Asia growth, exploration upside
Goldman Sachs
Stock rating: Neutral Coverage view: Attractive Price: US$18.49 September 20, 2007 Canada
What's changed
Senior management of Talisman Energy recently held investor meetings in Ho Chi Minh City, Vietnam that focused on the company's exploration and development opportunities in Southeast Asia. The company released no specific new well results from the promising Block 15-2 offshore Vietnam or elsewhere, but did outline a strong inventory of drilling prospects extending at least through 2009. In the near-term (including a well that spud this week), Talisman will continue exploring Block 15-2, with results from a three well program expected by 1Q 2008. Sanctioning of development could occur later in 2008. In 2009, we expect Talisman to continue exploration offshore Vietnam, while also beginning to drill other high-impact opportunities offshore Indonesia such as the Pasangkayu and Sageri deepwater oil prospects.
Implications
We believe Talisman presented a strong investment case for Southeast Asia, and for its own competitive advantages in the region. We were impressed with the vigor and depth of Talisman's regional personnel, many of whom participated in the meetings. Importantly, the company has clearly established strong relationships with pertinent NOCs, and has a strong existing acreage inventory at a time when bidding for new blocks is becoming much more competitive. We already give Talisman credit for strong growth in the region (11% estimated 2008-2012 production CAGR), but continued exploration success could drive upside to our forecasts.
Valuation
We see 30% upside to our $24 12-month DCF-based target price, and we continue to rate Talisman Neutral. Upside to our target price could result from strong results from Talisman's Southeast Asia exploration program.
Key risks
Commodity price volatility, drilling results, and gov't pronouncements. |
