Talisman Energy Inc. (TLM) Message Board

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

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From: Dennis Roth	1/16/2008 8:16:21 AM
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Talisman Energy Inc. (TLM): Production guidance negative, Vietnam exploration positive - Goldman Sachs - 01/15/08 What's changed Management announced: (1) a 2008 capex budget of C$4.4 billion, in line with our expectations; (2) gross production guidance of 435-460 MBOE/d, well below our adjusted 497 MBOE/d; and (3) exploration success at the Hai Su Den well in Vietnam that tested 13,450 bpd. Implications The >13,000 bpd test rate from the Hai Su Den exploration well seems to cement Vietnam as a key growth area for the company early in the next decade. However, the more cautious pace and the seeming potential for at least modest reserve revisions at Tweedsmuir (North Sea) the key growth field for this year is negative, especially considering that management did not indicate it could be well into 2008 if at all to reach 40,000 bpd when asked about the rampup on the 3Q 2007 conference call. Because this is new CEO John Manzoni's first guidance announcement, we believe there was likely a greater impetus to be conservative and highlight negatives in order to put the company in a better position to beat expectations going forward. We believe this should temper the extent of a potential negative stock reaction. Valuation We have revised our estimates to account for lower production. Talisman trades at 4.6x 2008 EV/debt-adjusted cash flow which still represents the lowest multiple among large-cap E&Ps. We see 22% upside to our US$23 12-month discounted cash flow based target price versus 18% upside for peers. We rate Talisman Neutral relative to an Attractive coverage view. Among large-cap oil-levered E&Ps, our favorites are Apache and Suncor Energy (both Buy rated). Key risks Commodity price volatility, drilling results, cost pressures and government pronouncements are key risks.

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