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Gold/Mining/Energy : Talisman Energy Inc. (TLM) -- Ignore unavailable to you. Want to Upgrade?

To: Dennis Roth who wrote (45)	5/9/2008 12:31:45 PM
From: Dennis Roth	Read Replies (3) \| Respond to of 82

Talisman Energy Inc. (TLM): Strategic review comments in line with expectations; still Neutral - Goldman Sachs - May 02, 2008 What's changed Talisman reported in line 1Q 2008 operating and financial results and CEO John Manzoni provided a broad update to shareholders on the general conclusions of the company’s strategic review. Implications Though full detail will not be provided until May 21, the initial comments on the strategic review were generally in line with our expectations. Mr. Manzoni indicated an intention to scale back capital spending in the UK North Sea while intensifying the company’s focus on exploratory drilling in emerging North America resource plays and high potential international regions, especially Southeast Asia. After hearing Mr. Manzoni’s presentation, we continue to believe that Talisman is taking incremental steps in the right direction, but ones that ultimately will not spark a re-rating of the shares in the near term. Indeed, it now appears to us that the extent of asset sales is likely to be smaller than the $2.7 billion of pre-tax proceeds we had assumed. In addition, Talisman seems committed to remaining in more regions than we had expected, including North Africa and Latin America, and bolster exploration acreage globally. This could complicate attempts to sharpen focus on key regions and simplify Talisman’s “story” for investors. Valuation Talisman trades at 3.6X 2009E EV/DACF, a discount to the 5.2X large-cap E&P average. While this valuation should provide some support for the shares, we continue to believe that the analyst meeting will not immediately lead to a re-rating towards the group average. We maintain our $25 12 month DCF based target price and Neutral rating, relative to an Attractive coverage view. Key risks Commodity volatility, cost pressures, drilling results, and government pronouncements are the key risks to our target price.