Canadian energy explorer, Talisman Energy Inc. (TLM), reported weak fourth-quarter 2013 results due to decreased production, along with lower liquids price realizations. The company announced a loss per share from continuing operations (excluding non-operating items) of 11 cents against the Zacks Consensus Estimate of earnings of 5 cents per share. Moreover, the company reported wider loss on a year-over-year basis.
Quarterly total revenue of $929.0 million deceased 44.1% from $1,663.0 million in the fourth quarter of 2012. Revenues also missed the Zacks Consensus Estimate of $1,443.0 million.
Talisman Energy’s disappointing fourth-quarter 2013 results is reflected in the company’s share price to some extent. Talisman Energy announced its fourth quarter result on Feb 12, 2014, before the opening bell. The company opened that day at $10.45 per share, representing a fall of 1.5% as compared to previous day’s closing price. However, the company managed to close at $10.85 per share.
Full-year 2013 adjusted loss from continuing operations came in at 24 cents a share, wider than the Zacks Consensus Estimate of a 10-cent loss. The figure also deteriorated from year-ago adjusted profit of 9 cents per share. Total revenue of $4,486.0 million decreased 37.4% from $7,166.0 million recorded in 2012.
Volume Analysis
The quarter’s total production of 387 thousand barrels of oil equivalent per day (MBOE/d) was down 1.3% from the prior-year level.
Total liquids production was down 4.4% year over year to 136,427 barrels per day (Bbl/d). Volumes were affected by significantly lower production in the North Sea.
Talisman Energy’s natural gas volumes were however up by a marginal 0.5% year over year to 1,505 million cubic feet per day (MMcf/d), mainly on increased production in North America and Southeast Asia.
Realized Prices
During the quarter, Talisman Energy’s realized commodity prices dropped 3.3% from the year-ago quarter to $54.71 per barrel of oil equivalent (BOE). The decline mainly resulted from reduced liquids realizations in North America.
Overall, natural gas prices increased nominally by 0.9% year over year to $5.33 per Mcf, however, liquids realizations averaged $96.50 per barrel, down 3.6% from the prior-year level.
Cash Flow and Capital Expenditure
Cash flow from continuing operations totaled $580.0 million, down 14.1% year over year. Talisman Energy spent $744.0 million on exploration and development activities.
Guidance
Talisman Energy will likely invest roughly $3.2 billion in 2014. The figure is in line with capital spending in 2013 and 20% lower than the 2012 figure. The company is willing to spend more than 70% of the projected 2014 capital expenditure toward Americas and Asia-Pacific.
Talisman Energy believes that liquid production in the Americas and Asia-Pacific region will improve 14–19% in 2014 from the 2013 level. Moreover, the two core areas are anticipated to produce more than 90% of the total output in 2014.
The company has divested more than $2.2 billion of non-core assets and is planning to dispose properties worth more than $2.0 billion in the next 12-18 months.
Balance Sheet
As of Dec 31, 2013, Talisman Energy had cash and cash equivalents of approximately $364.0 million and long-term debt of $5,239.0 million (including current portion), with a debt-to-capitalization ratio of 38.0%.
Zacks Rating
Talisman Energy, an independent oil and gas exploration and production (E&P) firm, currently carries a Zacks Rank #5 (Strong Sell), which implies that it is expected to significantly underperform the broader U.S. equity market over the next one to three months.
Meanwhile, one can look at better-ranked players in the oil and gas E&P sector like Canadian Natural Resources Limited (CNQ), Bellatrix Exploration Ltd. (BXE) and Crescent Point Energy Corp. (CPG). Canadian Natural Resources sports a Zacks Rank #1 (Strong Buy), while Bellatrix Exploration and Crescent Point Energy hold a Zacks Rank #2 (Buy).
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