News from Reuters
Talisman Profit Falls Despite Surging Oil
14:09 EST Tuesday, November 02, 2004
By Jeffrey Jones
CALGARY, Alberta (Reuters) - Talisman Energy Inc.'s profit dropped nearly 5 percent in the third quarter despite surging crude prices as one-time items masked the impact of production gains, Canada's No. 3 oil explorer by market value said on Tuesday.
Talisman, with operations in North America, the North Sea and Southeast Asia, would have produced 38 percent more income in the third quarter if not for the impact of stock-based compensation and the stronger Canadian dollar, it said.
In addition, the company passed up on C$103 million ($84 million) of net earnings due to hedges at below-market prices.
Several of its rivals, including Husky Energy , EnCana Corp. and Suncor Energy , also reported losses from forward oil sales as prices soared to near $50 a barrel in the third quarter.
"Operationally, the quarter came in as expected," chief executive Jim Buckee told analysts. "We have delivered 13 percent production growth over last year and our major development projects in the North Sea, Malaysia and Trinidad are proceeding on schedule and on budget."
Talisman earned C$122 million, or 31 Canadian cents a share, compared with year-earlier C$128 million, or 31 Canadian cents a share. Without unusual items, profit would have been C$74 million more, Talisman said.
Cash flow, a glimpse into an oil company's ability to fund development, was C$706 million, or C$1.81 a share, up 10 percent from C$640 million, or C$1.64 a share.
Production rose 13 percent to average 429,000 barrels of oil equivalent a day.
Talisman shares were down 83 Canadian cents, or 2.5 percent, at C$32.05 on the Toronto Stock Exchange on Tuesday afternoon.
The company expects average output to be in the middle of its target range of 420,000-450,000 barrels of oil equivalent a day this year, and jump by 5-10 percent a share annually over the next three years.
In the quarter, oil prices surged 45 percent from the year before to nearly $44 a barrel due to worries over export disruptions in countries such as Russia and Nigeria and the prospect of tight winter supplies in the United States.
Talisman sold oil for an average C$53.30 a barrel, but hedging, or forward sales at predetermined prices, cut C$7.15 from that. Talisman also had higher operating costs and royalties.
About a fifth of the company's oil and production is hedged through the end of this year, Buckee said.
"However, we currently have only about 6,000 barrels a day and very minor gas hedges in place for 2005," he said.
In the North Sea, where Talisman pumps half of its oil, the company passed up on buying EnCana's assets, sold last week to Canadian rival Nexen Inc. for $2.1 billion, he said.
Talisman was not swayed by the huge Buzzard oil find off the Scottish coast, which is expected to produce up to 200,000 barrels a day starting in late 2006, Buckee said.
The package also included stakes in the producing Scott and Telford fields.
"We were interested in a little piece of it, not the larger thing. I'd say that they paid pretty full value for that, and possibly more-than," Buckee said.
($1=$1.22 Canadian)
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