Talisman Reports Profit on Asset Sales, Cost ReductionsRebecca Penty
Talisman Energy Inc., the Canadian oil and natural gas producer with operations on six continents, reported a fourth-quarter profit for the first time in four years after selling assets and cutting costs.
Net income was $376 million, or 37 cents a share, compared with a loss of $117 million, or 11 cents, a year earlier, the Calgary-based company said in a statement today. Excluding gains from asset sales, the revaluation of a Colombia pipeline investment and other one-time items, Talisman had a 10-cent loss, compared with the 7-cent average profit of 17 analysts’ estimates compiled by Bloomberg.
Hal Kvisle, who took over as chief executive officer in September, has announced plans to reduce spending, cut debt and exit certain regions, including Peru, to refocus the company on near-term cash flow. Talisman sold a 49 percent stake in its U.K. unit to China Petrochemical Corp. for $1.5 billion last year and the company continues to look at selling assets globally.
“There are no assets within Talisman that are absolutely off limits. We’ll be willing to discuss joint ventures or divestments on a wide range of assets,” Kvisle said on a conference call today. Talisman will invest in fewer projects and will focus on ones “that will come onstream and generate positive cash flows quickly,” including those in Vietnam, Malaysia, Indonesia and Colombia.
Talisman, aiming for flat output in 2013, will have negative cash flow this year and will close the gap with divestitures, Kvisle said. Sales processes are underway for assets, he said, declining to comment further until a March 6 investor day, when he plans to provide an update.
The stock gained 2.1 percent to C$12.82 at the close in Toronto.
Sales fell 23 percent to $1.58 billion from $2.06 billion a year earlier. Spending on exploration and development declined 26 percent to $1.02 billion.
Talisman will reduce its capital budget 25 percent to $3 billion this year from 2012, said Kvisle, who has pledged to cut spending to match cash flow and “live within our means.” Cash flow for 2012 was $3 billion, a 12 percent drop from the prior year on lower gas prices and a decline in North Sea production.
Talisman is “following up on its promise” by balancing spending with cash flow, Pawel Rajszel, an analyst at Veritas Investment Research in Toronto, said in a phone interview today.
Fourth-quarter output fell to the equivalent of 392,000 barrels of oil a day from 442,000 barrels a year earlier. The company also reduced its reported reserves as it deferred action on the Auk South and Yme projects in the North Sea and cut spending in the Marcellus shale-gas formation in the U.S.
The company, which had its last profitable fourth quarter in 2008, has seven buy and 19 hold recommendations from analysts.