Diversified upstream oil and gas company Talisman Energy Inc. (TLM.TO, TLM) reported Tuesday a sharp fall in third-quarter profit, reflecting significantly lower oil and gas prices as well as prior year hedging gains. Separately, Talisman said it added 170,000 net acres in Pennsylvania Marcellus and the Montney shales through a combination of acquisitions and swaps for C$570 million.
The Calgary, Canada-based company's net income for the quarter plunged to C$30 million or C$0.03 per share from C$1.42 billion or C$1.38 per share in the previous year. The company noted that the prior year results have been restated to reflect the results of discontinued operations.
Net income from continuing operations was C$13 million or C$0.01 per share, compared to a net income of C$1.34 billion or C$1.30 per share in the same quarter last year. Excluding certain non-operational items, earnings from continuing operations were C$155 million, compared to C$654 million in the prior year quarter.
Prior-year quarter included gains on held-for-trading financial instruments of C$567 million and stock-based recovery of C$297 million.
Total revenue for the quarter significantly dropped to C$1.54 billion from C$2.66 billion in the year earlier. Region-wise, North America reported revenues of C$413 million, up from C$888 million a year ago. Total revenue from the U.K. fell to C$489 million from C$967 million in the prior year. Scandinavia revenues decreased to C$224 million from C$348 million in the year earlier. Southeast Asia posted revenues of C$366 million, lower than C$438 million in the preceding year.
John Manzoni, president and chief executive officer said, "As part of our program to accelerate the transition into unconventional gas we are restructuring our North American organization into separate Conventional and Shale divisions, recognizing the different strategic objectives and different business models for each."
Total expenses for the quarter surged to C$1.37 billion from C$519 million last year.
Production for the quarter was 401 mboe/d, down 9%, from 443 mboe/d in the same quarter last year. Production of oil and liquids declined to 192,293 bbls/d from 231,420 bbls/d a year earlier. Natural gas production was 1,253 mmcf/d, compared to 1,268 mmcf/d in the prior year.
For the quarter, production in North America averaged about 163,000 boe/d, down 11% from the prior-year period. Production from continuing operations in the UK averaged nearly 74,000 boe/d during the quarter, down 33% from last year. Production from continuing operations in Scandinavia averaged by 36,000 boe/d during the quarter, up 6% over the previous year. Production in Southeast Asia increased 22% from last year and averaged averaged 114,000 boe/d. According to the company, production is expected to increase in the fourth quarter.
Looking ahead, the company now expects overall production for the year to average between 423,000 - 426,000 boe/d.
Netbacks were down 52% from a year earlier, averaging $27.16/boe, with both oil and natural gas prices significantly lower due to the global economic slowdown, the company noted.
Cash flow during the quarter dropped to C$838 million from C$1.67 billion a year ago, mainly due to a significant fall in oil and gas prices.
Talisman expects total cash capital spending for the full year to be about C$4.5 billion, up from the original plan of C$3.6 billion, as a result of land acquisition and accelerated drilling programs in North America, and successful sidetracks and testing in several exploration wells.
For the nine-month period, the company's net income significantly declined to C$548 million or C$0.54 per share from C$2.32 billion or C$2.23 per share in the previous year. Net loss from continuing operations was C$515 million or C$0.51 per share, compared to a net income of C$1.98 billion or C$1.91 per share in the same period last year. Total revenue for the period fell to C$4.68 billion from C$7.62 billion in the preceding year.
In addition, Talisman declared a semi-annual dividend of 11.25 cents per share, to shareholders of record on December 11, 2009, payable on December 31.
"In summary, we are continuing to make good progress in our strategy implementation and have now secured sufficient running room in our unconventional acreage for Talisman to grow sustainably into the future. We are making good progress on building our Southeast Asian portfolio and the international exploration strategy is also showing early signs of success," added Manzoni.
Separately, Talisman announced that it has substantially increased its landholdings in two of the top unconventional natural gas plays in North America and is increasing its development programs.
The company said it doubled Tier 1 unconventional acreage in the Pennsylvania Marcellus and the Montney shales over the past few months and added 170,000 net acres through a combination of acquisitions and swaps for C$570 million. According to the company, it now holds about 350,000 net acres of Tier 1 land in these two areas, with the potential for 4,800 net drilling locations.
TLM.TO closed Monday's regular trading at C$18.33, while TLM ended at $16.96 on the NYSE.
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