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| Share Name | Share Symbol | Market | Type |
|---|---|---|---|
| NYSE:TLM | NYSE | Common Stock |
| Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 7.99 | 0 | 01:00:00 |
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FOR: TALISMAN ENERGY INC.
NYSE, TSX SYMBOL: TLM
July 30, 2003
Talisman Generates a Record $1.45 Billion in Cash Flow in the First Half of
2003 Company Expects Greater Than 10% Production Growth by Year End
CALGARY, ALBERTA--Talisman Energy Inc. today reported record high cash flow
and earnings for the first six months of 2003.
Cash flow to June 30 was $1.45 billion ($11.17/share) compared to $1.23
billion ($9.15/share) a year ago. Cash flow during the second quarter was
$600 million ($4.65/share) compared to $652 million ($4.84/share) a year
earlier. On a comparable basis (excluding Talisman's production from Sudan)
cash flow per share was up 10% from $4.24 a year ago.
Earnings were $774 million ($5.90/share) compared to $191 million
($1.33/share) during the first six months of 2002. Quarterly earnings were
$201 million ($1.52/share) versus $90 million ($0.62/share) during the second
quarter of 2002.
Production averaged 365,000 boe/d during the quarter, in line with the
Company's guidance. Unit operating costs averaged $6.98/boe, down 3% from the
first quarter. Capital spending was $503 million during the quarter and
Talisman's net debt at the end of June was $1.8 billion. On a net basis, debt
to debt-plus-equity was 27%, down from 40% at year end.
"This quarter was operationally on plan, helped by strong commodity prices
and I am looking forward to an exciting second half," said Dr. Jim Buckee,
President and Chief Executive Officer. "We expect greater than 10% production
growth by year end; we have a number of high impact exploration wells
drilling, or about to drill; and Talisman has one of the strongest balance
sheets in the sector.
"Our major development project in Malaysia/Vietnam is over 90% complete and
on schedule for oil production in September. Algerian oil production is
increasing and expected to average over 15,000 bbls/d in the fourth quarter.
Blake Flank production will start in the North Sea in September as planned.
Gas sales from the Corridor Block to Singapore are expected to start in
August and we have signed a number of significant agreements to progress
additional Corridor sales.
"In North America, Talisman's natural gas production is up 5%. The Balvenie
well off the east coast is drilling, we have two wells in Appalachia about to
test and have farmed in to highly prospective acreage in Alaska.
"Talisman expects that cash flow per share will be in the $20-21 range this
year based on forecasts of US$27/bbl WTI oil prices, US$5/mcf NYMEX gas
prices and a US$0.73 Canadian dollar exchange rate in the second half of the
year. We are on track to meet our production guidance for the year.
"We have completed a number of small acquisitions and increased our
exploration and development budget by about $200 million in Canada and
Appalachia, which will boost production in 2004. Total exploration and
development spending for the year is expected to be about $2.25 billion.
"We have also repurchased an additional 1.2 million shares in recent weeks,
reflecting Talisman's strong financial position and a continuing belief that
Talisman is an attractive investment at current price levels.
"In summary, Talisman is positioned for significant production growth over
the next six months. We have a large opportunity inventory and are expanding
our drilling programs in North America. Our strong balance sheet protects us
against a drop in prices and will enable us to bolt on new opportunities.
Talisman's strategy continues to add value and we have a unique and
attractive opportunity set for the future."
Talisman Second Quarter Summary
-------------------------------
- High drilling success continued at 92% in North America with completion of
56 oil and 43 gas wells during the quarter.
- A Talisman subsidiary has entered into an agreement to farm-in to 10
townships of highly prospective exploration acreage in Alaska.
- The Balvenie exploration well off the east coast of Nova Scotia spudded on
July 7, 2003.
- A second well has reached total depth in Appalachia. Clean up of the first
well is under way and both wells will be testing soon.
- Talisman has acquired an entry position in Norway with the announced
acquisition of a 61% operated interest in the Gyda field for $123 million.
- First production from the Blake Flank is expected in September as planned.
The first well has been completed and tested at over 5,000 bbls/d from one of
two prospective zones.
- A new oil discovery adjacent to the Tartan field is currently testing at
approximately 5,000 bbls/d, constrained by a half inch choke.
- Construction of the PM-3 CAA development in Malaysia/Vietnam is over 90%
complete and the central processing facilities have been installed offshore.
Oil sales are scheduled to start in September and gas sales in October.
Production volumes in Malaysia are expected to grow from 6,000 boe/d
currently to over 40,000 boe/d early next year.
- Natural gas sales from the Corridor Block to Singapore are expected to
start in August as scheduled.
- A new gas sales agreement has been signed to sell gas from Corridor to
Island Power in Singapore. Gas sales heads of agreements have been reached
for significant volumes from Corridor to West Java.
- The MLN field in Algeria started oil production in late June and Algerian
production is expected to reach over 15,000 bbls/d in the fourth quarter.
- Development of the Greater Angostura field is under way in Trinidad.
Facilities installation will start in the fourth quarter of 2003 with first
oil production expected early in 2005.
- An exploration well, Howler, is currently drilling in Trinidad.
- Talisman's first exploration well in Colombia is expected to spud next
month.
Management's Discussion and Analysis (MD&A)
This discussion and analysis should be read in conjunction with the Interim
Consolidated Financial Statements. The calculation of barrels of oil
equivalent (boe) is based on a conversion rate of six thousand cubic feet
(mcf) of natural gas for one barrel of oil equivalent. All comparative
percentages are between the quarters ended June 30, 2003 and 2002, unless
stated otherwise. All amounts are in Canadian dollars unless otherwise
indicated. Readers are also referred to the product netbacks by reporting
segment included in this interim report upon which much of the following
discussion is based.
Included in the MD&A are references to terms commonly used in the oil and gas
industry such as cash flow and cash flow per share. These terms are not
defined by Generally Accepted Accounting Principles in either Canada or the
US. Consequently these are referred to as non-GAAP measures. Cash flow, as
discussed below, appears as a separate caption on the Company's cash flow
statement and is reconciled to both net income and cash flow from operations.
Three months Six months
ended ended
---------------------------------------------------------------------
June 30, 2003 2002 2003 2002
---------------------------------------------------------------------
Financial (millions of C$
unless otherwise stated)
Cash flow (1&3) 600 652 1,445 1,229
Net income (1) 201 90 774 191
Exploration and development
expenditures 492 386 947 948
Per common share (dollars)
Cash flow (1&3) - Basic 4.65 4.84 11.17 9.15
- Diluted 4.59 4.76 11.03 9.00
Net income (2) - Basic 1.52 0.62 5.90 1.33
- Diluted 1.50 0.61 5.82 1.31
---------------------------------------------------------------------
---------------------------------------------------------------------
Production (daily
average production)
Oil and liquids (bbls/d) 188,682 275,157 217,864 276,556
Natural gas (mmcf/d) 1,061 1,051 1,078 1,047
---------------------------------------------------------------------
Total mboe/d (6mcf=1boe) 365,473 450,354 397,613 451,137
---------------------------------------------------------------------
(1) Amounts are reported prior to preferred security charges of $9
million ($5 million, net of tax) for the three months ended June
30, 2003 (2002 - $10 million; $6 million, net of tax).
(2) Per common share amounts for net income and diluted net income
are reported after preferred security charges.
(3) Cash flow is a non-GAAP measure and represents net income before
exploration costs, DD&A, future taxes and other non-cash
expenses.
The Company's quarterly cash flow was $600 million, down slightly from the
quarter a year ago due to sale of the Sudan operations during the first
quarter of 2003 and lower North Sea liquids volumes due to scheduled
maintenance. North American natural gas prices were $2.33/mcf higher during
the quarter compared to a year ago, whereas commodity prices are down from
the first quarter.
Net income per share increased during the quarter to $1.52, up from $0.62 in
2002. Net income per share for the first six months was $5.90/share, up from
$1.33/share in 2002. The Company's net income for the first half of 2003 was
impacted by three significant special items that increased net income by
$2.74/share. The second quarter impact of these items was an increase to net
income of $0.46/share. None of these items impacted the Company's reported
cash flow.
During the first quarter of 2003, the gain on sale of the Sudan operations
increased net income by $296 million ($2.28/share). Beginning in the second
quarter of 2003, the Company changed its accounting for stock options which
resulted in an expense of $105 million ($74 million, net of tax) or
$0.57/share. Also during the second quarter, the Company recorded a $133
million ($1.03/share) future tax recovery primarily due to a reduction in the
Canadian federal and provincial tax rates, which was partially offset by a
future tax expense associated with unrealized foreign exchange gains on the
Company's foreign denominated debt. The 2002 second quarter comparative net
income was reduced by a one-time non-cash future tax expense of $116 million
($0.86/share), primarily due to a new supplemental tax in the UK.
Pro forma Sudan operations and gain on sale
The following table has been provided to assist readers in understanding the
Company's results after taking into account the sale of the Sudan operations.
Pro forma is before the gain on sale of the Sudan operations in 2003 and
excludes Sudan results of operations for the period January 1 to March 12,
2003 (sale closing date) and from the 2002 comparatives.
Three months Six months
ended ended
-----------------------------------
June 30, 2003 2002 2003 2002
---------------------------------------------------------------------
Financial (millions of C$
unless otherwise stated)
Cash flow 600 571 1,369 1,076
Net income 201 42 433 93
Exploration and development
expenditures 492 365 945 902
Per common share (dollars)
Cash flow - Basic 4.65 4.24 10.58 8.02
- Diluted 4.59 4.16 10.45 7.88
Net income - Basic 1.52 0.27 3.26 0.60
- Diluted 1.50 0.26 3.22 0.59
---------------------------------------------------------------------
---------------------------------------------------------------------
Production (daily average
production)
Oil and liquids (bbls/d) 188,682 214,553 191,569 216,944
Natural gas (mmcf/d) 1,061 1,051 1,078 1,047
---------------------------------------------------------------------
Total mboe/d (6mcf=1boe) 365,473 389,750 371,318 391,525
---------------------------------------------------------------------
---------------------------------------------------------------------
On a pro forma basis after removing the Sudan operating results from the 2002
comparatives, cash flow per share increased 10% due to the higher North
American natural gas revenues and fewer outstanding common shares. Pro forma
net income for the quarter increased 378% compared to a year ago.
Company Netbacks
Three months ended Six months ended
June 30, 2003 2002 2001 2003 2002 2001
---------------------------------------------------------------------
Oil and liquids ($/bbl)
Sales price 34.87 36.46 38.66 40.51 33.87 37.57
Hedging expense (income) 0.65 0.11 0.12 2.06 (0.32) 0.13
Royalties 3.83 6.32 8.34 6.49 5.92 7.44
Operating costs 9.87 7.17 7.45 9.58 7.27 7.19
---------------------------------------------------------------------
20.52 22.86 22.75 22.38 21.00 22.81
---------------------------------------------------------------------
---------------------------------------------------------------------
Natural gas ($/mcf)
Sales price 6.09 4.02 5.74 6.80 3.78 6.99
Hedging expense (income) 0.10 (0.16) 0.13 0.18 (0.25) 0.28
Royalties 1.28 0.65 1.37 1.34 0.64 1.69
Operating costs 0.65 0.62 0.62 0.69 0.61 0.60
---------------------------------------------------------------------
4.06 2.91 3.62 4.59 2.78 4.42
---------------------------------------------------------------------
---------------------------------------------------------------------
Total $/boe (6mcf=1boe)
Sales price 35.68 31.63 36.88 40.62 29.53 39.41
Hedging expense (income) 0.63 (0.31) 0.41 1.60 (0.77) 0.79
Royalties 5.71 5.36 8.30 7.20 5.11 8.57
Operating costs 6.98 5.81 5.85 7.11 5.87 5.69
---------------------------------------------------------------------
22.36 20.77 22.32 24.71 19.32 24.36
---------------------------------------------------------------------
---------------------------------------------------------------------
Netbacks do not include synthetic oil and pipeline operations.
Additional netback information by major product type and region is
included elsewhere in this interim report.
The Company's average netback for the quarter was $22.36/boe, up 8% from 2002
with higher North American natural gas prices reduced by increased hedging
losses and higher royalties on natural gas sales. Oil royalties during the
quarter were reduced due to a royalty recovery in the North Sea. Unit
operating costs increased due to expected maintenance in the North Sea.
Revenue
The Company's gross sales were $1.2 billion for the quarter, down slightly
from 2002 due to the sale of the Sudan operations. On a pro forma basis,
after removing the Sudan operations, gross sales for the quarter were up 5%
as the drop in oil and liquids revenue was more than offset by higher natural
gas revenues in North America.
Production
(daily average
production) Three months ended Six months ended
----------------------------------------------
June 30, 2003 2002 2001 2003 2002 2001
---------------------------------------------------------------------
Oil and liquids (bbls/d)
North America 59,743 63,050 66,624 60,601 63,328 66,456
North Sea 102,274 129,002 85,751 105,498 130,850 95,533
Southeast Asia 22,899 22,501 18,502 22,134 22,766 18,628
Algeria 3,766 - - 3,336 - -
Sudan - 60,604 53,208 26,295 59,612 51,654
---------------------------------------------------------------------
188,682 275,157 224,085 217,864 276,556 232,271
---------------------------------------------------------------------
---------------------------------------------------------------------
Natural gas (mmcf/d)
North America 865 822 792 866 822 791
North Sea 91 136 99 114 128 103
Southeast Asia 105 93 89 98 97 93
---------------------------------------------------------------------
1,061 1,051 980 1,078 1,047 987
---------------------------------------------------------------------
---------------------------------------------------------------------
Total boe/d
(6mcf equals 1boe) 365,473 450,354 387,486 397,613 451,137 396,739
---------------------------------------------------------------------
---------------------------------------------------------------------
The Company's average oil and liquids production for 2003 as compared to 2002
decreased with the sale of the Sudan operations and major North Sea planned
maintenance. North American liquids production was lower as the Company
continues to focus on natural gas opportunities. Southeast Asia liquids
production remained steady during the quarter. Algerian production at Ourhoud
commenced at the end of 2002 and increased through the first half of 2003.
Production from the Greater MLN project started at quarter end with the
completion of the initial commissioning of the oil processing and storage
facilities. The Company's oil and liquids production is expected to increase
significantly during the second half of 2003 with higher North Sea volumes,
start up of the PM-3 CAA development project in Malaysia/Vietnam and
increased production from the Greater MLN project.
North American natural gas production for the quarter ended June 30 increased
to 865 mmcf/d, up 5% over the same period last year. The increase is
primarily due to the addition of the US natural gas properties acquired at
the end of 2002 and during the first quarter of 2003, which contributed 67
mmcf/d during the second quarter. Production was reduced due to delayed
development and turnarounds. North Sea natural gas production was affected by
reduced access to export pipeline capacity at Brae. Southeast Asia production
averaged 105 mmcf/d due to higher sales at Corridor. The Company's natural
gas production is expected to increase during the second half of 2003 with
reduced turnarounds and the tie in of new wells in North America, the start
up of the PM-3 CAA development later in the year and access to additional
export pipeline capacity at Brae becoming available in the fourth quarter.
Prices
Three months ended Six months ended
--------------------------------------------
June 30, 2003 2002 2001 2003 2002 2001
---------------------------------------------------------------------
Oil and liquids ($/bbl)
North America 32.92 32.76 33.70 37.87 29.80 34.42
North Sea 35.29 37.71 40.48 40.85 35.77 39.66
Southeast Asia 37.81 38.77 42.81 42.26 35.78 40.51
Algeria 35.05 - - 37.33 - -
Sudan - 36.64 40.22 43.89 33.08 36.51
---------------------------------------------------------------------
34.87 36.46 38.66 40.51 33.87 37.57
---------------------------------------------------------------------
---------------------------------------------------------------------
Natural gas ($/mcf)
North America 6.41 4.08 5.99 7.22 3.68 7.51
North Sea 4.16 3.05 3.92 4.61 3.97 4.66
Southeast Asia 5.05 4.92 5.60 5.53 4.42 5.15
---------------------------------------------------------------------
6.09 4.02 5.74 6.80 3.78 6.99
---------------------------------------------------------------------
---------------------------------------------------------------------
Total $/boe (6mcf equals
1boe) 35.68 31.63 36.88 40.62 29.53 39.41
---------------------------------------------------------------------
---------------------------------------------------------------------
Hedging loss (income)-
excluded from the above
prices
Oil and liquids ($/bbl) 0.65 0.11 0.12 2.06 (0.32) 0.13
Natural gas ($/mcf) 0.10 (0.16) 0.13 0.18 (0.25) 0.28
Total $/boe (6mcf
equals 1boe) 0.63 (0.31) 0.41 1.60 (0.77) 0.79
---------------------------------------------------------------------
---------------------------------------------------------------------
Benchmark prices
WTI (US$/bbl) 28.91 26.25 27.96 31.39 23.95 28.34
Brent (US$/bbl) 26.03 25.04 27.33 28.77 23.10 26.59
NYMEX (US$/mmbtu) 5.48 3.37 4.78 6.05 2.88 6.03
AECO (C$/gj) 6.63 4.19 6.70 7.07 3.68 8.52
---------------------------------------------------------------------
---------------------------------------------------------------------
Excludes synthetic oil.
World oil prices are above the level of a year ago but are down from the
first quarter of 2003. North American natural gas prices, which remained high
during the second quarter with inventory levels continuing to be at
historically low levels, have also fallen from the first quarter of the year.
Talisman's Canadian dollar average reported price for oil and liquids fell
during the quarter primarily due to the strengthening of the Canadian dollar
vis-a-vis the US dollar, which also had a mitigating impact on Talisman's
reported average natural gas price. Talisman's average natural gas price for
the quarter increased in part due to the inclusion of natural gas sales from
the recently acquired Appalachia properties, which averaged $8.66/mcf during
the quarter.
The Company's commodity hedging activities resulted in a $0.63/boe loss for
the quarter compared to a gain of $0.31/boe in 2002, due principally to
higher North American natural gas prices. The Company's net hedging loss for
the quarter was $21 million compared to a gain of $13 million in 2002. A
summary of the Company's outstanding commodity based sales contracts may be
found in note 5 of the Interim Financial Statements.
Royalties
June 30, Three months ended Six months ended
-----------------------------------------
Average royalty rates (%) 2003 2002 2001 2003 2002 2001
---------------------------------------------------------------------
North America 23 18 26 22 20 26
North Sea (2) 5 5 - 5 5
Southeast Asia 28 25 20 28 26 20
Algeria 51 - - 51 - -
Sudan - 38 45 46 38 42
---------------------------------------------------------------------
16 17 23 18 17 22
---------------------------------------------------------------------
---------------------------------------------------------------------
Excludes synthetic oil
The Company's royalty expense for the second quarter was $190 million, which
equates to a royalty rate of 16%, down from 17% in 2002. Higher natural gas
prices in Canada increased the royalty rate for North America. North Sea
royalties decreased as a result of the UK abolishing government royalties
effective January 2003. During the period, agreement was reached in respect
of the majority of outstanding royalty issues in respect of prior years
resulting in a negative royalty rate during the current period. Talisman
expects to resolve additional outstanding government royalty claims by year
end, which may result in further royalty adjustments. Talisman's Algerian
royalty rate is expected to average 51% during the initial years of
production. Without Sudan, the Company's quarterly average royalty rate would
have been 13% and 18% for 2002 and 2001, respectively.
Operating Expense
June 30, Three months ended Six months ended
-----------------------------------------
Unit operating costs ($/boe) 2003 2002 2001 2003 2002 2001
---------------------------------------------------------------------
North America 4.69 4.14 4.39 4.87 4.28 4.26
North Sea 11.53 8.53 9.76 11.89 8.90 9.20
Southeast Asia 5.38 5.71 5.55 5.90 5.43 5.11
Algeria 4.07 - - 5.01 - -
Sudan - 4.55 3.93 3.73 3.74 3.82
---------------------------------------------------------------------
6.98 5.81 5.85 7.11 5.87 5.69
---------------------------------------------------------------------
---------------------------------------------------------------------
Excludes synthetic oil
Operating expense decreased slightly to $249 million for the quarter due to
the sale of the Sudan operations offset by higher operating expense in North
America and the North Sea. Unit operating costs averaged $6.98/boe, down from
$7.22/boe in the first quarter with lower costs in North America and the
stronger Canadian dollar. Unit operating costs as compared to a year ago are
up due primarily to higher North Sea maintenance while North American unit
operating costs increased due to higher power and processing fees.
Capital expenditures ($ millions)
Three months ended Six months ended
-----------------------------------------
June 30, 2003 2002 2001 2003 2002 2001
---------------------------------------------------------------------
North America 236 143 186 872 430 496
North Sea 142 116 203 220 264 332
Southeast Asia 74 56 18 154 106 34
Algeria 10 24 15 25 41 29
Sudan - 21 28 2 46 51
Other 40 35 8 58 71 13
---------------------------------------------------------------------
502 395 458 1,331 958 955
---------------------------------------------------------------------
---------------------------------------------------------------------
Capital expenditures include exploration and development expenditures
and net asset acquisitions but exclude corporate acquisitions and
administrative capital.
Total planned exploration and development spending for 2003 is now expected
to be $2.25 billion. During the first six months of 2003, $947 million was
spent on exploration and development and $384 million was spent on net
acquisitions, mostly related to the US property acquisitions during the first
quarter. In the first six months of 2003, the category "other" in the above
table includes $40 million spent for exploration and development in Trinidad.
Not included in the above capital expenditures for the quarter is the amount
related to the agreement to purchase a 61% operated interest in the Norwegian
offshore Gyda field, associated facilities and adjacent acreage for $123
million effective January 1, 2003. Gyda, in addition to providing highly
prospective field development opportunities, is expected to add 7,000 boe/d
of production. All significant conditions of the agreement have been met and
the acquisition is expected to close in September.
Depreciation, Depletion and Amortization
Three months ended Six months ended
June 30, -----------------------------------------
DD&A ($/boe) 2003 2002 2001 2003 2002 2001
---------------------------------------------------------------------
North America 9.23 8.14 7.89 9.14 8.27 7.49
North Sea 12.33 12.42 12.01 12.63 12.13 11.55
Southeast Asia 6.52 6.11 6.38 6.19 6.11 6.46
Algeria 7.01 - - 7.39 - -
Sudan - 4.14 4.13 3.98 4.23 3.99
---------------------------------------------------------------------
9.90 8.88 8.33 9.59 8.85 8.10
---------------------------------------------------------------------
---------------------------------------------------------------------
The 2003 second quarter depreciation, depletion and amortization (DD&A)
expense was $329 million, down from $364 million in 2002 as an increase in
unit DD&A rates partly offset the impact of lower production volumes. The
DD&A rates in North America increased due to the inclusion of costs
associated with the US property acquisitions.
Other ($ millions except where noted)
Three months ended Six months ended
-----------------------------------------
June 30, 2003 2002 2001 2003 2002 2001
---------------------------------------------------------------------
G&A ($/boe) 1.07 0.87 0.75 1.03 0.81 0.75
Interest costs capitalized 7 4 7 14 11 12
Dry hole expense 42 25 41 114 52 55
Other expense (income) 41 23 (60) 34 74 2
Interest expense 32 46 30 72 84 59
Other revenue 14 18 18 37 39 43
---------------------------------------------------------------------
Dry hole expense was $42 million, of which $37 million was incurred in North
America. Other expense (income) of $41 million in the second quarter of 2003
includes a property impairment in the North Sea of $27 million due to
disappointing development drilling at Ivanhoe/Rob Roy. Interest expense fell
during the quarter due to the lower average debt level. Other revenue
included $12 million of pipeline and processing revenue.
Stock-Based Compensation
As approved by Talisman's shareholders, the Company's stock option plans have
been amended to provide employees and directors who hold stock options the
choice upon exercise to purchase a share of the Company at the stated
exercise price or to receive a cash payment in exchange for surrendering the
option. The cash payment is equal to the appreciated value of the stock
option as determined based on the difference between the option's exercise
price and the Company's share price at the time of exercise. These amendments
are expected to result in reduced shareholder dilution from both existing
options and in the future, as it is anticipated that holders of the stock
options will elect to take a cash payment. Such cash payments made by the
Company to stock option holders will be deductible by the Company for
corporate income tax purposes. As a result of the amendments, the Company's
second quarter results include a $105 million ($74 million, net of tax) or
$0.57/share stock-based compensation expense relating to the appreciated
value of the Company's outstanding stock options. Additional stock-based
compensation expense or recoveries in future periods is dependent on the
movement of the Company's share price and the number of outstanding options.
See notes 1 and 3 of the June 30 Interim Financial Statements for additional
information on stock based compensation.
Taxes ($ millions)
Three months ended Six months ended
-----------------------------------------
June 30 2003 2002 2001 2003 2002 2001
---------------------------------------------------------------------
Income before tax 118 323 428 906 513 955
Less PRT 17 35 36 50 76 80
---------------------------------------------------------------------
101 288 392 856 437 875
---------------------------------------------------------------------
Income tax expense (recovery)
Current income tax 43 73 69 135 124 194
Future income tax (143) 125 34 (53) 122 109
---------------------------------------------------------------------
(100) 198 103 82 246 303
---------------------------------------------------------------------
Effective tax rate (99%) 69% 26% 10% 56% 35%
---------------------------------------------------------------------
---------------------------------------------------------------------
The current tax expense for the quarter was reduced due to lower North Sea
revenues. During the second quarter of 2003, the Company recorded a non-cash
future tax recovery of $160 million ($1.24/share) due to a reduction in the
Canadian federal and provincial tax rates. In addition, the second quarter
included a $27 million ($0.21/share) future tax expense relating to the
potential Canadian future tax liability associated with the impact of a
stronger Canadian dollar on the foreign denominated debt. In 2002, the future
tax expense for the second quarter increased due to the introduction of a 10%
supplemental tax in the UK ($128 million), which was partially offset by a
reduction in the Alberta provincial tax rate ($12 million). Adjusting for the
impact of the above items in 2003 and 2002, the effective tax rate for the
second quarter of 2003 and 2002 would have been 33% and 28%, respectively.
This adjusted effective tax rate increased during the quarter due to the
change in the sourcing of the Company's pre-tax income between tax
jurisdictions.
Long-term debt and liquidity
Long-term debt decreased to $2.3 billion, down from $3.0 billion at year end
due to a portion of the Sudan net proceeds being used to repay amounts
outstanding under the Company's bank credit facilities. In addition, with 72%
of the Company's debt effectively denominated in US dollars, the
strengthening of the Canadian dollar during the first half of 2003 decreased
the reported debt amount by $272 million as compared to year end. The
majority of the change in reported debt due to currency movements does not
impact the Company's net income but instead impacts the cumulative foreign
currency translation account which is included in shareholders' equity.
Allowing for $488 million of cash and short-term investments, total net
corporate debt at quarter end, excluding the preferred securities, was $1.8
billion. On a net debt basis, debt-to-debt plus equity was 27%, down from 40%
at year end.
During the quarter, the Company purchased 68,500 common shares under its
normal course issuer bid for $4 million ($56.58/share). Subsequent to the end
of the quarter, 1,200,900 common shares were repurchased for $73 million
($60.99/share). Year to date, the Company has purchased 3,335,600 common
shares for $194 million ($58.23/share). In March 2003, the Company renewed
the normal course issuer bid to permit the purchase of up to 6,456,669 of its
common shares, representing 5% of the total number of common shares
outstanding at the time of the renewal.
Sale of Sudan operations
On March 12, 2003, Talisman completed the sale of its indirectly held
subsidiary which owned an interest in the Greater Nile Oil Project in Sudan
to ONGC Videsh Limited ("OVL"), a subsidiary of India's national oil company.
The aggregate amount realized by Talisman from the transaction (including
interest and cash received by Talisman between September 1, 2002 and closing)
was $1.13 billion (US$771 million), subject to post-closing adjustments. See
note 7 of the Interim Financial Statements.
Exploration and Operations Review
---------------------------------
North America
During the second quarter, Talisman participated in 108 wells (gross). A
total of 43 gas and 56 oil wells were drilled, resulting in an average
success rate of 92%.
Gas production in North America during the second quarter averaged 865
mmcf/d, an increase of 5% over the same period last year, primarily due to
the recent acquisition of US properties in Appalachia. Liquids production
averaged 59,743 bbls/d, a decrease of 5% over the same period last year.
Natural gas continues to be the focus of the Company's exploration and
development activities in North America, supplemented by low risk oil
projects.
In the Alberta Foothills, natural gas production averaged 124 mmcf/d,
essentially unchanged from the last few quarters. Production in this area is
limited by available infrastructure and Talisman estimates that it has 15-20
mmcf/d of shut in production. The Erith Pipeline and dehydration projects
should be commissioned in the fourth quarter to alleviate this bottleneck.
The pipeline will add 75 mmcf/d of raw gas capacity from the Foothills Area
to Talisman's Edson gas plant. The Company expects to utilize approximately
two-thirds of this new capacity. Talisman continued its active program in the
area with five operated and two non-operated drilling rigs. During the
quarter, six of the 23 wells (gross) planned for this year were drilled with
a 100% success rate.
In the Turner Valley field, Talisman's successful oil and up hole gas
drilling programs continued with four new wells drilled with a 100% success
rate. Of particular note is the new 12-9 well (100% TLM), which tested at a
rate of 4 mmcf/d. The well has been tied in and is on production.
In the Monkman area, natural gas production averaged 87 mmcf/d, an increase
of 11% over the same period last year and 5% over the last quarter. Two
recently drilled Triassic gas wells have contributed to the production growth
in the Monkman area. TEC et al Perry (Bullmoose)b-2-E (44% TLM) tested at 18
mmcf/d and is expected to be on stream in late August 2003. There are
currently two rigs active in the area.
In Chauvin, nine wells were drilled in the second quarter with a 100% success
rate. Chauvin's production averaged 17,865 boe/d, an increase of 3% over the
same period last year, establishing a new production record.
Production from Appalachia averaged 67 mmcf/d during the quarter, an increase
of 12% over last quarter. Fortuna Ganung Hz #1 (100% TLM) has been completed
and cleanup is under way. A second well has reached total depth and both
wells will be tested soon. Prices averaged $8.66/mcf during the quarter. Two
rigs are operating in the area and seven to nine wells are planned for the
rest of the year.
Edson area production increased 3% over last quarter. West Whitecourt again
achieved record production averaging 10,200 boe/d, an increase of 7% over the
same period last year and 2% over last quarter, as a result of a successful
winter drilling program. In Bigstone/Wild River, five wells were drilled in
the quarter with 100% success. Production at Bigstone/Wild River averaged
16,204 boe/d, an increase of 7% over last quarter, mainly due to the
successful drilling program. Talisman is currently operating three drilling
rigs in this area and plans to increase the rig activity level to five rigs
this fall. In Deep Basin, two gas wells were drilled in the second quarter
with a 100% success rate. Average production was 9,503 boe/d, an increase of
3% over the same period last year.
The EUB has issued GB2003-16, which recommended gas producing from the
Wabiskaw-McMurray formation in designated areas be shut-in while a detailed
review is conducted. This proposed policy has minimal impact on Talisman, as
less than 1.5 mmcf/d of production falls within the newly prescribed area.
Talisman will continue to monitor the situation, but expects no further
impact on our operations or development plans in the area.
North American Frontiers
South east of Nova Scotia, on offshore Block EL 2379, we are participating in
the high-risk, high-potential exploration well Balvenie-B79. The well spudded
on July 7 and is scheduled to reach total depth by the end of August.
Talisman's subsidiary, Fortuna Exploration LLC, entered into an agreement
with Total E&P USA, Inc. to explore 10 townships in the National Petroleum
Reserve Area of Alaska. Fortuna will earn 30% in the lands. Several large
prospects have been identified and geological and geophysical work is
progressing in preparation for a 2004 exploration well.
North Sea
North Sea production during the second quarter averaged 117,500 boe/d, down
11%, as expected, from the first quarter of 2003, mainly due to major planned
shutdowns for maintenance and modifications at Ross/Blake and at
Claymore/Tartan. With the major planned shutdowns now complete, additional
production from the Blake Flank and the ongoing development well drilling
program, production is anticipated to increase to about 140,000-150,000 boe/d
in the fourth quarter.
The Blake Flank pilot development is still on schedule to deliver first
production of about 11,500 bbls/d in September (TLM 54%). Reservoir quality
in the first two development wells is better than expected and the first well
has been completed and tested at over 5,000 bbls/d from one of two
prospective zones.
Talisman has a very active drilling program in the North Sea with wells
currently drilling in the Clyde, Ross, Blake and Claymore fields. The second
Hannay well was successful, although production was delayed due to a subsea
mechanical fault and is expected to start up in early August. The water
injector well at Halley, drilled during the first and second quarters, proved
to have poor injectivity and is expected to be sidetracked later this year.
An exploration well adjacent to the Tartan field in Block 15/16a (TLM 100%)
is currently testing at approximately 5,000 bbls/d, constrained by a half
inch choke.
Talisman's first entry into the Norwegian North Sea with the acquisition of
the operated Gyda field was announced in May. The transaction is proceeding
as planned and the Company expects completion and assumption of operatorship
before the end of the third quarter. Upon completion of the transaction,
initial net production is expected to be 7,000 boe/d with plans to increase
this to 20,000 boe/d by 2006.
Indonesia
The successful fracture stimulation program at Tanjung continued into the
second quarter with production rates maintained at 6,500 bbls/d (net TLM).
Sales of Corridor gas to Singapore Power are due to commence in August 2003,
on schedule.
Negotiations are progressing well for additional Corridor gas sales. In July,
a gas sales agreement was concluded for gas sales from Corridor to Island
Power in Singapore at an initial rate of approximately 20 mmcf/d (net TLM)
likely starting in 2006. A gas sales heads of agreement was signed in July
for Corridor to supply gross volumes of 2.4 tcf of gas to PT PLN (Indonesia's
state owned electric power generator). Gas deliveries are expected to start
in 2006 and reach 300 mmcf/d in 2008 and a plateau rate of 400 mmcf/d (TLM
36%).
Malaysia/Vietnam
The PM-3 CAA project requires the fabrication of four wellhead riser
platforms, a central processing platform, compression platform and floating
storage and offloading vessel. Construction activity is over 90% complete and
on schedule for oil start up in September and gas sales in October 2003.
To the end of June, the four wellhead riser platforms and the jacket for the
processing platform had been installed, with all other project activities
nearing completion. In July, the processing topsides were shipped out to the
field and installed as scheduled. Development drilling is progressing in
tandem with construction activity and is progressing as planned. To date,
eleven development wells have been completed with the batch drilling of
further wells under way. Well results are generally exceeding expectations
and there is already sufficient deliverability capacity to meet initial gas
sales volumes.
In the northern part of Block PM-3 CAA, the Pakma/Orkid appraisal program was
successful. The East Bunga Orkid-2 appraisal well was drilled with two
sidetracks, encountering 27 different gas zones with a maximum of 191 meters
of net pay. Two of the 27 zones were tested and flowed at rates 18.2 mmcf/d
and 17.2 mmcf/d. The North Bunga Pakma-2 appraisal well was drilled with one
sidetrack, encountering 15 different gas zones with a maximum of 72 meters of
net pay. One of the 15 zones was tested and flowed at 20 mmcf/d. These wells
have increased proved and probable reserves in the Bunga Orkid/Pakma complex.
Development planning for the South Angsi discovery is under way, towards a
production start in mid-2005.
Trinidad
Development of the Greater Angostura field located in offshore Block 2c is
progressing as planned (TLM 25%), with the installation of facilities due to
commence in the fourth quarter of 2003. First oil from the project is
expected in early 2005. On Block 2c, the Howler-1 exploration well is
drilling. Acquisition of the onshore 3D seismic program on the Eastern Block
has been suspended during rainy weather with 67% of the CEC-1 area shot.
Algeria
Oil production from the Menzel Lejmat North (MLN) field in Algeria commenced
in late June 2003. Initial gross production of approximately 14,000 bbls/d of
oil is expected to increase to around 33,000 bbls/d in late 2003 (TLM 35%).
Production from the Ourhoud field (TLM 2%) commenced in late 2002 with first
oil sales in 2003. Talisman's overall share of Algeria production is expected
to average 15,000 bbls/d (net TLM) in the fourth quarter.
The Company is continuing to evaluate its MLSE gas discoveries in the
southern portion of Block 405a.
Colombia
Drilling on the Acevedo and the Huila Norte Blocks is expected to start in
late August or early September.
Talisman Energy Inc. is a large, independent oil and gas producer, with
operations in Canada and, through its subsidiaries, the North Sea, Indonesia,
Malaysia, Vietnam, Algeria and the United States. Talisman's subsidiaries
also conduct business in Trinidad, Colombia and Qatar. Talisman has adopted
the International Code of Ethics for Canadian Business and is committed to
maintaining high standards of excellence in corporate citizenship and social
responsibility wherever its business is conducted. Talisman's shares are
listed on Toronto Stock Exchange in Canada and the New York Stock Exchange in
the United States under the symbol TLM.
Forward Looking Statements: This press release contains "forward-looking
statements" within the meaning of the US Private Securities Litigation Reform
Act of 1995, including estimates of future production and cash flows,
business plans for drilling, exploration, production, construction, oil or
gas sales or deliveries, and acquisitions, the estimated amounts and timing
of capital expenditures, and other expectations, beliefs, plans, objectives,
assumptions or statements about future events or performance (often, but not
always, using words such as "expects", "expected", "anticipated", "intended",
"planned", "on schedule to", "due to", "should be", "scheduled", "likely" or
stating that certain actions, events or results "may", or "will" be taken,
occur or be achieved). Forward-looking statements are based on current
expectations, estimates and projections that involve a number of risks and
uncertainties that could cause actual results to differ materially from those
reflected in the statements. These risks include, but are not limited to: the
risks of the oil and gas industry (for example, operational risks in
exploring for, developing and producing crude oil and natural gas; risks and
uncertainties involving geology of oil and gas deposits; the uncertainty of
reserve estimates; the uncertainty of estimates and projections relating to
future production, costs and expenses and the success of exploration and
development projects; potential delays or changes in plans with respect to
exploration or development projects or capital expenditures; and health,
safety and environmental risks); uncertainties as to the availability and
cost of financing; risks in conducting foreign operations (for example,
political and fiscal instability or the possibility of civil unrest or
military action in countries such as Indonesia, Algeria or Colombia);
fluctuations in oil and gas prices and foreign currency exchange rates; and
the possibility that government policies may change or governmental approvals
may be delayed or withheld. Additional information on these and other factors
that could affect the Company's operations or financial results are included
in the Company's other reports on file with Canadian securities regulatory
authorities and the United States Securities and Exchange Commission.
Forward-looking statements are based on the estimates and opinions of the
Company's management at the time the statements are made. The Company assumes
no obligation to update forward-looking statements should circumstances or
management's estimates or opinions change.
Non-GAAP Measures: Included in this news release are references to terms
commonly used in the oil and gas industry, such as cash flow and cash flow
per share. These terms are not defined by Generally Accepted Accounting
Principles in either Canada or the US. Consequently, these are referred to as
non-GAAP measures. Cash flow, as discussed in this news release, appears as a
separate caption on the Company's cash flow statement and is reconciled to
both net income and cash flow from operations.
Talisman Energy Inc.
Highlights
Three months ended Six months ended
June 30 June 30
2003 2002 2003 2002
--------------------------------------------------------------------
Financial
(millions of Canadian dollars
unless otherwise stated)
Cash flow 600 652 1,445 1,229
Net income 201 90 774 191
Exploration and development
expenditures 492 386 947 948
Per common share (dollars)
Cash flow (1) 4.65 4.84 11.17 9.15
Net income (2) 1.52 0.62 5.90 1.33
--------------------------------------------------------------------
--------------------------------------------------------------------
Production
(daily average)
Oil and liquids (bbls/d)
North America 57,302 60,381 58,087 60,524
North Sea 102,274 129,002 105,498 130,850
Southeast Asia 22,899 22,501 22,134 22,766
Algeria 3,766 - 3,336 -
Sudan - 60,604 26,295 59,612
Synthetic oil 2,441 2,669 2,514 2,804
--------------------------------------------------------------------
Total oil and liquids 188,682 275,157 217,864 276,556
--------------------------------------------------------------------
Natural gas (mmcf/d)
North America 865 822 866 822
North Sea 91 136 114 128
Southeast Asia 105 93 98 97
--------------------------------------------------------------------
Total natural gas 1,061 1,051 1,078 1,047
--------------------------------------------------------------------
Total mboe/d 365 450 398 451
--------------------------------------------------------------------
--------------------------------------------------------------------
Prices (3)
Oil and liquids ($/bbl)
North America 32.92 32.76 37.87 29.80
North Sea 35.29 37.71 40.85 35.77
Southeast Asia 37.81 38.77 42.26 35.78
Algeria 35.05 - 37.33 -
Sudan - 36.64 43.89 33.08
--------------------------------------------------------------------
Crude oil and natural gas liquids 34.87 36.46 40.51 33.87
Synthetic oil 46.24 42.84 46.71 37.25
--------------------------------------------------------------------
Total oil and liquids 35.02 36.53 40.58 33.90
--------------------------------------------------------------------
Natural gas ($/mcf)
North America 6.41 4.08 7.22 3.68
North Sea 4.16 3.05 4.61 3.97
Southeast Asia 5.05 4.92 5.53 4.42
--------------------------------------------------------------------
Total natural gas 6.09 4.02 6.80 3.78
--------------------------------------------------------------------
Total ($/boe) (includes synthetic) 35.75 31.70 40.66 29.58
--------------------------------------------------------------------
--------------------------------------------------------------------
(1) Cash flow per common share is calculated before deducting
preferred security charges.
(2) Net income per common share is calculated after deducting
preferred security charges.
(3) Prices are before hedging.
Talisman Energy Inc.
Consolidated Balance Sheets
June 30 December 31
(millions of Canadian dollars) 2003 2002
--------------------------------------------------------------------
Assets
Current
Cash and short-term investments 488 27
Accounts receivable 690 719
Inventories 116 147
Prepaid expenses 16 24
--------------------------------------------------------------------
1,310 917
--------------------------------------------------------------------
Accrued employee pension benefit asset 66 67
Other assets 78 99
Goodwill 444 469
Property, plant and equipment 9,168 10,042
--------------------------------------------------------------------
9,756 10,677
--------------------------------------------------------------------
Total assets 11,066 11,594
--------------------------------------------------------------------
--------------------------------------------------------------------
Liabilities
Current
Accounts payable and accrued liabilities 890 803
Income and other taxes payable 219 186
--------------------------------------------------------------------
1,109 989
--------------------------------------------------------------------
Deferred credits 53 57
Provision for future site restoration 766 813
Long-term debt 2,280 2,997
Future income taxes 2,020 2,236
--------------------------------------------------------------------
5,119 6,103
--------------------------------------------------------------------
Shareholders' equity
Preferred securities 431 431
Common shares 2,747 2,785
Contributed surplus 73 75
Cumulative foreign currency translation (134) 140
Retained earnings 1,721 1,071
--------------------------------------------------------------------
4,838 4,502
--------------------------------------------------------------------
Total liabilities and shareholders' equity 11,066 11,594
--------------------------------------------------------------------
--------------------------------------------------------------------
See accompanying notes.
Interim statements are not independently audited.
Talisman Energy Inc.
Consolidated Statements of Income
Three months ended Six months ended
(millions of Canadian dollars June 30 June 30
except per share amounts) 2003 2002 2003 2002
--------------------------------------------------------------------
Revenue
Gross sales 1,169 1,312 2,812 2,475
Less royalties 190 219 516 414
--------------------------------------------------------------------
Net sales 979 1,093 2,296 2,061
Other 14 18 37 39
--------------------------------------------------------------------
Total revenue 993 1,111 2,333 2,100
--------------------------------------------------------------------
Expenses
Operating 249 254 543 510
General and administrative 35 35 74 66
Depreciation, depletion and
amortization 329 364 690 723
Dry hole 42 25 114 52
Exploration 42 41 91 78
Interest on long-term debt 32 46 72 84
Stock-based compensation 105 - 105 -
Other 41 23 34 74
--------------------------------------------------------------------
Total expenses 875 788 1,723 1,587
--------------------------------------------------------------------
Gain on sale of Sudan operations - - 296 -
--------------------------------------------------------------------
Income before taxes 118 323 906 513
--------------------------------------------------------------------
Taxes
Current income tax 43 73 135 124
Future income tax (recovery) (143) 125 (53) 122
Petroleum revenue tax 17 35 50 76
--------------------------------------------------------------------
(83) 233 132 322
--------------------------------------------------------------------
Net income 201 90 774 191
Preferred security charges,
net of tax 5 6 11 12
--------------------------------------------------------------------
Net income available to common
shareholders 196 84 763 179
--------------------------------------------------------------------
--------------------------------------------------------------------
Per common share (dollars)
Net income 1.52 0.62 5.90 1.33
Diluted net income 1.50 0.61 5.82 1.31
--------------------------------------------------------------------
--------------------------------------------------------------------
Average number of common
shares outstanding (millions)
Basic 129 135 129 134
Diluted 131 137 131 137
--------------------------------------------------------------------
--------------------------------------------------------------------
Consolidated Statements of Retained Earnings
Three months ended Six months ended
June 30 June 30
(millions of Canadian dollars) 2003 2002 2003 2002
--------------------------------------------------------------------
Retained earnings, beginning
of period 1,566 882 1,071 787
Net income 201 90 774 191
Common share dividends (39) (40) (39) (40)
Purchase of common shares (2) - (74) -
Preferred security charges,
net of tax (5) (6) (11) (12)
--------------------------------------------------------------------
Retained earnings, end of period 1,721 926 1,721 926
--------------------------------------------------------------------
--------------------------------------------------------------------
See accompanying notes.
Talisman Energy Inc.
Consolidated Statements of Cash Flows
Three months ended Six months ended
June 30 June 30
(millions of Canadian dollars) 2003 2002 2003 2002
--------------------------------------------------------------------
Operating
Net income 201 90 774 191
Items not involving current
cash flow 357 521 580 960
Exploration 42 41 91 78
--------------------------------------------------------------------
Cash flow 600 652 1,445 1,229
Deferred gain on unwound hedges (2) (13) (5) (25)
Changes in non-cash working
capital 78 28 2 10
--------------------------------------------------------------------
Cash provided by operating
activities 676 667 1,442 1,214
--------------------------------------------------------------------
Investing
Proceeds on sale of Sudan
operations - - 1,012 -
Capital expenditures
Exploration, development and
corporate (505) (392) (966) (960)
Acquisitions (14) (15) (398) (20)
Proceeds of resource property
dispositions 4 8 14 12
Investments (2) - (3) -
Changes in non-cash working capital 23 (132) (15) (79)
--------------------------------------------------------------------
Cash used in investing activities (494) (531) (356) (1,047)
--------------------------------------------------------------------
Financing
Long-term debt repaid (180) (647) (737) (1,163)
Long-term debt issued - 571 292 1,055
Common shares issued (purchased) 2 14 (114) 34
Common share dividends (39) (40) (39) (40)
Preferred security charges (9) (10) (19) (21)
Deferred credits and other - (4) 18 (13)
--------------------------------------------------------------------
Cash used in financing activities (226) (116) (599) (148)
--------------------------------------------------------------------
Effect of translation on
foreign currency cash (26) - (26) -
--------------------------------------------------------------------
Net (decrease) increase in cash (70) 20 461 19
Cash and short-term investments,
beginning of period 558 16 27 17
--------------------------------------------------------------------
Cash and short-term investments,
end of period 488 36 488 36
--------------------------------------------------------------------
--------------------------------------------------------------------
See accompanying notes.
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(tabular amounts in millions of Canadian dollars ("$") except as
noted)
The Interim Consolidated Financial Statements of Talisman Energy Inc.
("Talisman" or the "Company") have been prepared by management in accordance
with accounting principles generally accepted in Canada. Certain information
and disclosures normally required to be included in notes to annual
consolidated financial statements have been condensed or omitted. The Interim
Consolidated Financial Statements should be read in conjunction with the
Consolidated Financial Statements and the notes thereto in Talisman's Annual
Report for the year ended December 31, 2002.
1. Significant Accounting Policies
The Interim Consolidated Financial Statements have been prepared following
the same accounting policies and methods of computation as the Consolidated
Financial Statements for the year ended December 31, 2002 except for the
following:
Talisman's stock option plans, as approved by the Company's shareholders,
have been amended effective July 1, 2003 to provide employees and directors
who hold stock options the choice upon exercise to receive a cash payment in
exchange for surrendering the option. The cash payment is equal to the
appreciated value of the stock option as determined based on the difference
between the option's exercise price and the Company's share price at the time
of exercise. As a result of the amendments to the stock option plans, the
Company has recorded $105 million ($74 million after tax) of compensation
expense and a corresponding liability based on the appreciated value of the
outstanding stock options as determined using the June 30, 2003 closing share
price.
In addition to the Company's stock option plans, Talisman has issued 382,080
cash units during the quarter to certain of its overseas employees. Cash
units are similar to stock options except that the holder does not have a
right to purchase the underlying share of the Company.
Future stock based compensation expense or recoveries will be dependent on
changes in the Company's share price and the number of options and cash units
outstanding.
2. Share Capital
Talisman's authorized share capital consists of an unlimited number of common
shares without nominal or par value and first and second preferred shares. No
preferred shares have been issued.
Continuity of common shares (year to date)
2003
--------------------------------------------------------------------
Shares Amount
--------------------------------------------------------------------
Balance at January 1, 131,039,435 $2,785
Issued upon exercise of stock options 257,913 8
Purchased (2,134,700) (46)
--------------------------------------------------------------------
Balance at June 30, 129,162,648 2,747
--------------------------------------------------------------------
--------------------------------------------------------------------
Pursuant to a normal course issuer bid renewed in March 2003, Talisman may
repurchase up to 6,456,669 common shares representing 5% of the outstanding
common shares of the Company at the time the normal course issuer bid was
renewed. During the first six months of 2003 the Company repurchased
2,134,700 common shares for $121 million, including 68,500 common shares for
$4 million in the quarter ended June 30, 2003. Subsequent to June 30, 2003,
the Company repurchased an additional 1,200,900 of common shares for $73
million.
3. Stock Options
Continuity of stock options (year to date)
2003
--------------------------------------------------------------------
Number Average
Of Exercise
Options Price
--------------------------------------------------------------------
Outstanding at January 1, 2003 7,384,054 46.53
Granted during the period 2,299,499 59.36
Exercised 257,913 33.33
Expired/forfeited 109,836 58.62
--------------------------------------------------------------------
Outstanding at June 30, 2003 9,315,804 49.92
--------------------------------------------------------------------
--------------------------------------------------------------------
Exercisable at June 30, 2003 3,900,957 35.90
--------------------------------------------------------------------
--------------------------------------------------------------------
As indicated in note 1, the Company began recording compensation expense in
the second quarter of 2003 for stock options and cash units outstanding.
Prior to the second quarter, no amount of compensation expense had been
recognized in the financial statements for stock options granted to employees
and directors. The following table provides pro forma measures of net income
and net income per common share had stock options been recognized as
compensation expense prior to 2003 based on the estimated fair value of the
options on the grant date. Had the stock option plans not been amended during
the second quarter of 2003, the pro forma net income would have been
approximately $55 million ($0.42/share) higher than the net income as
reported for the six months ended June 30, 2003.
June 30, 2002(1) Three months Six months
Ended ended
--------------------------------------------------------------------
As Pro As Pro
Reported Forma(2) Reported Forma(2)
--------------------------------------------------------------------
Net income
($millions) 90 82 191 176
Per common
share ($/share)
Basic 0.62 0.56 1.33 1.22
Diluted 0.61 0.55 1.31 1.20
--------------------------------------------------------------------
--------------------------------------------------------------------
(1) Pro forma amounts have not been provided for 2003 due to the
recording of compensation expense as disclosed in note 1.
(2) Pro forma net income and net income per common share had stock
options been recognized as compensation expense based on the
estimated fair value of the options on the grant date.
Stock options granted during the six months ended June 30, 2003 had an
estimated weighted-average fair value of $22.91 per option (2002 - $26.19 per
share). The estimated fair value of stock options issued was determined using
the Black-Scholes model using substantially the same assumptions disclosed in
note 8 of the December 31, 2002 Consolidated Financial Statements. All
options issued by the Company permit the holder to purchase one common share
of the Company at the stated exercise price or, effective July 1, 2003, to
receive a cash payment equal to the appreciated value of the stock option.
4. Long-Term Debt
June 30, December 31,
2003 2002
--------------------------------------------------------------------
Bank Credit Facilities
(Canadian $ denominated) $ - $ 265
Debenture and Notes (unsecured)
US$ denominated (US$850 million) 1,152 1,342
Canadian $ denominated 634 814
Pounds Sterling denominated
(Pounds Sterling 250 million)(1) 494 576
--------------------------------------------------------------------
2,280 2,997
Less current portion - -
--------------------------------------------------------------------
--------------------------------------------------------------------
$ 2,280 $ 2,997
--------------------------------------------------------------------
--------------------------------------------------------------------
(1) Swapped into US dollars. See note 6 of the December 31, 2003
Consolidated Financial Statements.
5. Commodity Based Sales Contracts
The following tables are an update of the commodity price derivative
contracts and fixed price sales contracts outstanding:
a) Commodity price derivative contracts
Natural gas
--------------------------------------------------------------------
Fixed price Remainder Three-way Remainder
Swaps 2003 2004 collars 2003
--------------------------------------------------------------------
(AECO gas index) (AECO gas index)
Volumes (mcf/d) 27,500 - Volumes (mcf/d) 9,200
Price ($/mcf) 6.35 - Ceiling price ($/mcf) 3.39
(NYMEX gas index) Floor price ($/mcf) 3.11
Volumes (mcf/d) 58,000 48,500 Sold put price ($/mcf) 2.56
Price (US$/mcf) 5.13 4.58
---------------------------- -----------------------------
Two-way Remainder Two-way Remainder
collars 2003 collars 2003
---------------------------- -----------------------------
(AECO gas index) (Sumas gas index)
Volumes (mcf/d) 18,500 Volumes (mcf/d) 6,500
Ceiling price ($/mcf) 7.26 Ceiling price (US$/mcf) 4.96
Floor price ($/mcf) 6.23 Floor price (US$/mcf) 3.92
Crude oil contracts
--------------------------------------------------------------------
Fixed price Remainder Two-way Remainder
swaps 2003 collars 2003 2004
--------------------------------------------------------------------
(Brent oil index) (Brent oil index)
Volumes (bbls/d) 12,000 Volumes (bbls/d) 12,000 10,000
Price (US$/bbl) 22.79 Ceiling price (US$/bbl) 25.71 25.02
Floor price (US$/bbl) 22.23 22.34
(WTI oil index) (WTI oil index)
Volumes (bbls/d) 30,000 Volumes (bbls/d) 23,000 -
Price (US$/bbl) 25.34 Ceiling price (US$/bbl) 28.48 -
Floor price (US$/bbl) 23.05 -
--------------------------------------------------------------------
b) Physical contracts (North America)
Remainder
Fixed price sales 2003 2004 2005-2007
--------------------------------------------------------------------
Volumes (mcf/d) 59,200 33,200 11,100
Weighted average price ($/mcf) 3.65 3.37 3.30
--------------------------------------------------------------------
--------------------------------------------------------------------
In addition to the fixed price contracts, the Company has entered
into contracts with a pricing structure similar to the three-way
commodity collars disclosed in note 9 of the Company's December 31,
2002 Consolidated Financial Statements.
Remainder
NIT index 2003 2004
--------------------------------------------------------------------
Volumes (mcf/d) 15,300 15,300
Ceiling ($/mcf) 3.56 3.49
Floor ($/mcf) 3.37 3.32
Sold put strike ($/mcf) 2.76 2.67
--------------------------------------------------------------------
--------------------------------------------------------------------
6. Selected Cash Flow Information
Three months ended Six months ended
June 30 June 30
2003 2002 2003 2002
--------------------------------------------------------------------
Net income 201 90 774 191
--------------------------------------------------------------------
Items not involving current
cash flow
Depreciation, depletion and
amortization 329 364 690 723
Property impairments 28 4 28 49
Dry hole 42 25 114 52
Net loss (gain) on asset
disposals (5) 2 (9) 1
Gain on sale of Sudan
operations - - (296) -
Stock-based compensation 105 - 105 -
Future taxes and deferred
PRT (139) 129 (53) 138
Other (3) (3) 1 (3)
--------------------------------------------------------------------
357 521 580 960
--------------------------------------------------------------------
Exploration 42 41 91 78
--------------------------------------------------------------------
Cash flow 600 652 1,445 1,229
--------------------------------------------------------------------
7. Sale of Sudan Operations
On March 12, 2003, the Company completed the sale of its 25%
indirectly held interest in the Greater Nile Oil Project in Sudan.
Total gross proceeds were $1.13 billion (US$771 million), including
interest and cash received by Talisman between September 1, 2002 and
closing on March 12, 2003. The gain on sale is as follows:
Gross proceeds on sale of Sudan operations (US$771 million) $ 1,135
Less interim adjustments (123)
--------------------------------------------------------------------
1,012
--------------------------------------------------------------------
Property, plant and equipment 687
Working capital and other assets 72
Future income tax liability (59)
--------------------------------------------------------------------
Net carrying value at March 12, 2003 700
Estimated closing costs 16
--------------------------------------------------------------------
Gain on disposal $ 296
--------------------------------------------------------------------
The interim adjustments are subject to finalization and may change.
8. Segmented Information
North America (1) North Sea (2)
Three Six Three Six
months months months months
ended ended ended ended
June 30 June 30 June 30 June 30
(millions of
Canadian dollars) 2003 2002 2003 2002 2003 2002 2003 2002
--------------------------------------------------------------------
Revenue
Gross sales 671 510 1,489 941 362 480 837 947
Royalties 157 89 338 170 (8) 22 (4) 49
--------------------------------------------------------------------
Net sales 514 421 1,151 771 370 458 841 898
Other 7 8 20 18 7 10 17 21
--------------------------------------------------------------------
Total revenue 521 429 1,171 789 377 468 858 919
--------------------------------------------------------------------
Segmented expenses
Operating 94 82 193 166 134 128 288 266
DD&A 172 148 340 300 131 172 284 334
Dry hole 37 5 62 21 4 - 51 -
Exploration 15 13 38 31 8 7 11 11
Other (7) (1) (20) (4) 28 5 29 55
--------------------------------------------------------------------
Total segmented
expenses 311 247 613 514 305 312 663 666
--------------------------------------------------------------------
Segmented income
before taxes 210 182 558 275 72 156 195 253
--------------------------------------------------------------------
Non-segmented
expenses
General and
administrative
Interest on
long-term debt
Gain on sale of
Sudan operations
Stock based
compensation
Currency
translation
--------------------------------------------------------------------
Total non-segmented
expenses
--------------------------------------------------------------------
Income before taxes
--------------------------------------------------------------------
--------------------------------------------------------------------
Capital expenditures
Exploration 98 55 233 162 19 26 34 53
Development 135 92 258 270 117 79 183 201
--------------------------------------------------------------------
Exploration and
development 233 147 491 432 136 105 217 254
Property
acquisitions
Proceeds on
dispositions
Other
non-segmented
--------------------------------------------------------------------
Net capital
expenditures (4)
--------------------------------------------------------------------
--------------------------------------------------------------------
Property, plant
and equipment 5,367 4,955 2,474 2,921
Goodwill 291 291 40 46
Other 858 350 299 387
--------------------------------------------------------------------
Segmented assets 6,516 5,596 2,813 3,354
Non-segmented
assets
--------------------------------------------------------------------
Total assets (5)
--------------------------------------------------------------------
--------------------------------------------------------------------
Southeast Asia (3) Algeria
Three Six Three Six
months months months months
ended ended ended ended
(millions of June 30 June 30 June 30 June 30
Canadian dollars) 2003 2002 2003 2002 2003 2002 2003 2002
--------------------------------------------------------------------
Revenue
Gross sales 124 121 256 227 12 - 21 -
Royalties 35 31 74 58 6 - 11 -
--------------------------------------------------------------------
Net sales 89 90 182 169 6 - 10 -
Other - - - - - - - -
--------------------------------------------------------------------
Total revenue 89 90 182 169 6 - 10 -
--------------------------------------------------------------------
Segmented expenses
Operating 20 19 41 38 1 - 3 -
DD&A 24 21 43 43 2 - 4 -
Dry hole 1 4 1 4 - - - -
Exploration 3 4 7 6 - - - -
Other 3 4 4 4 - 1 - 1
--------------------------------------------------------------------
Total segmented
expenses 51 52 96 95 3 1 7 1
--------------------------------------------------------------------
Segmented income
before taxes 38 38 86 74 3 (1) 3 (1)
--------------------------------------------------------------------
Non-segmented
expenses
General and
administrative
Interest on
long-term debt
Gain on sale of
Sudan operations
Stock based
compensation
Currency
translation
--------------------------------------------------------------------
Total
non-segmented
expenses
--------------------------------------------------------------------
Income before
taxes
--------------------------------------------------------------------
--------------------------------------------------------------------
Capital
expenditures
Exploration 18 10 33 14 6 (1) 3 -
Development 56 45 121 91 4 24 22 41
--------------------------------------------------------------------
Exploration and
development 74 55 154 105 10 23 25 41
Property
acquisitions
Proceeds on
dispositions
Other
non-segmented
--------------------------------------------------------------------
Net capital
expenditures (4)
--------------------------------------------------------------------
--------------------------------------------------------------------
Property, plant
and equipment 1,033 1,093 219 244
Goodwill 113 132 - -
Other 201 205 12 6
--------------------------------------------------------------------
Segmented assets 1,347 1,430 231 250
Non-segmented
assets
--------------------------------------------------------------------
Total assets (5)
--------------------------------------------------------------------
--------------------------------------------------------------------
Sudan Other
Three Six Three Six
months months months months
ended ended ended ended
(millions of June 30 June 30 June 30 June 30
Canadian dollars) 2003 2002 2003 2002 2003 2002 2003 2002
--------------------------------------------------------------------
Revenue
Gross sales - 201 209 360 - - - -
Royalties - 77 97 137 - - - -
--------------------------------------------------------------------
Net sales - 124 112 223 - - - -
Other - - (1) - - - 1 -
--------------------------------------------------------------------
Total revenue - 124 111 223 - - 1 -
--------------------------------------------------------------------
Segmented
expenses
Operating - 25 18 40 - - - -
DD&A - 23 19 46 - - - -
Dry hole - 7 - 7 - 9 - 20
Exploration - 2 5 4 16 15 30 26
Other - - - - 3 (1) 3 -
--------------------------------------------------------------------
Total segmented
expenses - 57 42 97 19 23 33 46
--------------------------------------------------------------------
Segmented income
before taxes - 67 69 126 (19) (23) (32) (46)
--------------------------------------------------------------------
Non-segmented
expenses
General and
administrative
Interest on
long-term debt
Gain on sale of
Sudan operations
Stock based
compensation
Currency
translation
--------------------------------------------------------------------
Total
non-segmented
expenses
--------------------------------------------------------------------
Income before taxes
--------------------------------------------------------------------
--------------------------------------------------------------------
Capital
expenditures
Exploration - 9 7 14 24 31 38 65
Development - 12 (5) 32 15 4 20 5
--------------------------------------------------------------------
Exploration and
development - 21 2 46 39 35 58 70
Property
acquisitions
Proceeds on
dispositions
Other
non-segmented
--------------------------------------------------------------------
Net capital
expenditures (4)
--------------------------------------------------------------------
--------------------------------------------------------------------
Property, plant
and equipment - 772 75 57
Goodwill - - - -
Other - 56 18 12
--------------------------------------------------------------------
Segmented assets - 828 93 69
Non-segmented
assets
--------------------------------------------------------------------
Total assets (5)
--------------------------------------------------------------------
--------------------------------------------------------------------
Total
Three months Six months
ended ended
June 30 June 30
(millions of Canadian dollars) 2003 2002 2003 2002
--------------------------------------------------------------------
Revenue
Gross sales 1,169 1,312 2,812 2,475
Royalties 190 219 516 414
--------------------------------------------------------------------
Net sales 979 1,093 2,296 2,061
Other 14 18 37 39
--------------------------------------------------------------------
Total revenue 993 1,111 2,333 2,100
--------------------------------------------------------------------
Segmented expenses
Operating 249 254 543 510
DD&A 329 364 690 723
Dry hole 42 25 114 52
Exploration 42 41 91 78
Other 27 8 16 56
--------------------------------------------------------------------
Total segmented expenses 689 692 1,454 1,419
--------------------------------------------------------------------
Segmented income before taxes 304 419 879 681
--------------------------------------------------------------------
Non-segmented expenses
General and administrative 35 35 74 66
Interest on long-term debt 32 46 72 84
Gain on sale of Sudan
operations - - (296) -
Stock based compensation 105 - 105 -
Currency translation 14 15 18 18
--------------------------------------------------------------------
Total non-segmented expenses 186 96 (27) 168
--------------------------------------------------------------------
Income before taxes 118 323 906 513
--------------------------------------------------------------------
--------------------------------------------------------------------
Capital expenditures
Exploration 165 130 348 308
Development 327 256 599 640
--------------------------------------------------------------------
Exploration and development 492 386 947 948
Property acquisitions 14 15 398 20
Proceeds on dispositions (4) (8) (14) (12)
Other non-segmented 13 6 19 12
--------------------------------------------------------------------
Net capital expenditures (4) 515 399 1,350 968
--------------------------------------------------------------------
--------------------------------------------------------------------
Property, plant and equipment 9,168 10,042
Goodwill 444 469
Other 1,388 1,016
--------------------------------------------------------------------
Segmented assets 11,000 11,527
Non-segmented assets 66 67
--------------------------------------------------------------------
Total assets (5) 11,066 11,594
--------------------------------------------------------------------
--------------------------------------------------------------------
Three months Six months
ended ended
June 30 June 30
(1) North America 2003 2002 2003 2002
--------------------------------------------------------------------
Canada 475 429 1,072 789
US 46 - 99 -
--------------------------------------------------------------------
Total revenue 521 429 1,171 789
--------------------------------------------------------------------
--------------------------------------------------------------------
Canada 4,948 4,848
US 419 107
--------------------------------------------------------------------
Property, plant and equipment (5) 5,367 4,955
--------------------------------------------------------------------
--------------------------------------------------------------------
Three months Six months
ended ended
June 30 June 30
(2) North Sea 2003 2002 2003 2002
--------------------------------------------------------------------
United Kingdom 370 460 841 902
Netherlands 7 8 17 17
--------------------------------------------------------------------
Total revenue 377 468 858 919
--------------------------------------------------------------------
--------------------------------------------------------------------
United Kingdom 2,435 2,875
Netherlands 39 46
--------------------------------------------------------------------
Property, plant and equipment 2,474 2,921
--------------------------------------------------------------------
--------------------------------------------------------------------
Three months Six months
ended ended
June 30 June 30
(3) Southeast Asia 2003 2002 2003 2002
--------------------------------------------------------------------
Indonesia 74 77 149 144
Malaysia 14 12 26 23
Vietnam 1 1 7 2
--------------------------------------------------------------------
Total revenue 89 90 182 169
--------------------------------------------------------------------
--------------------------------------------------------------------
Indonesia 420 515
Malaysia 602 565
Vietnam 11 13
--------------------------------------------------------------------
Property, plant and equipment 1,033 1,093
--------------------------------------------------------------------
--------------------------------------------------------------------
(4) Excluding corporate acquisitions.
(5) Current year represents balances as at June 30, prior year
represents balances as at December 31.
9. Contingencies
Talisman is being sued by the Presbyterian Church of Sudan and others under
the Alien Tort Claims Act in the United States District Court for the
Southern District of New York. Talisman's motion to dismiss the lawsuit was
denied by the Court in March 2003. In June 2003, Talisman's motion for
reconsideration or certification for appeal of the Court's denial of the
motion to dismiss the lawsuit was also denied. In July 2003, Talisman filed a
motion to dismiss the lawsuit for lack of personal jurisdiction of the Court
over Talisman. No decision on this motion is expected until 2004. Talisman is
continuing to vigorously defend itself against this lawsuit.
Talisman Energy Inc.
Product Netbacks
Three months ended Six months ended
June 30 June 30
(C$ - production before royalties) 2003 2002 2003 2002
---------------------------------------------------------------------
North Oil and liquids ($/bbl)
America Sales price 32.92 32.76 37.87 29.80
Hedging (gain) 1.26 0.11 2.83 (0.33)
Royalties 6.50 6.35 7.90 6.12
Operating costs 5.89 4.64 6.08 5.06
----------------------------------------------------------
19.27 21.66 21.06 18.95
----------------------------------------------------------
Natural gas ($/mcf)
Sales price 6.41 4.08 7.22 3.68
Hedging (gain) 0.12 (0.21) 0.22 (0.32)
Royalties 1.54 0.73 1.61 0.70
Operating costs 0.70 0.65 0.73 0.65
----------------------------------------------------------
4.05 2.91 4.66 2.65
---------------------------------------------------------------------
North Sea Oil and liquids ($/bbl)
Sales price 35.29 37.71 40.85 35.77
Hedging (gain) 0.14 0.11 1.98 (0.32)
Royalties (0.89) 1.41 (0.39) 1.50
Operating costs 12.91 9.51 13.49 9.89
----------------------------------------------------------
23.13 26.68 25.77 24.70
----------------------------------------------------------
Natural gas ($/mcf)
Sales price 4.16 3.05 4.61 3.97
Hedging (gain) - - - -
Royalties 0.04 0.41 0.16 0.59
Operating costs 0.38 0.49 0.50 0.47
----------------------------------------------------------
3.74 2.15 3.95 2.91
---------------------------------------------------------------------
Southeast Oil and liquids ($/bbl)
Asia(1) Sales price 37.81 38.77 42.26 35.78
Hedging (gain) 1.26 0.11 2.72 (0.33)
Royalties 15.86 13.76 17.23 13.04
Operating costs 7.22 7.61 7.78 7.38
----------------------------------------------------------
13.47 17.29 14.53 15.69
----------------------------------------------------------
Natural gas ($/mcf)
Sales price 5.05 4.92 5.53 4.42
Hedging (gain) - - - -
Royalties 0.27 0.25 0.30 0.23
Operating costs 0.49 0.49 0.56 0.45
----------------------------------------------------------
4.29 4.18 4.67 3.74
---------------------------------------------------------------------
Algeria Oil ($/bbl)
Sales price 35.05 - 37.33 -
Hedging (gain) 1.26 - 2.62 -
Royalties 18.04 - 18.96 -
Operating costs 4.07 - 5.01 -
----------------------------------------------------------
11.68 - 10.74 -
---------------------------------------------------------------------
Sudan Oil ($/bbl)
Sales price - 36.64 43.89 33.08
Hedging (gain) - 0.11 - (0.31)
Royalties - 13.96 20.34 12.67
Operating costs - 4.55 3.73 3.74
----------------------------------------------------------
- 18.02 19.82 16.98
---------------------------------------------------------------------
Total Oil and liquids ($/bbl)
Company Sales price 34.87 36.46 40.51 33.87
Hedging (gain) 0.65 0.11 2.06 (0.32)
Royalties 3.83 6.32 6.49 5.92
Operating costs 9.87 7.17 9.58 7.27
----------------------------------------------------------
20.52 22.86 22.38 21.00
----------------------------------------------------------
Natural gas ($/mcf)
Sales price 6.09 4.02 6.80 3.78
Hedging (gain) 0.10 (0.16) 0.18 (0.25)
Royalties 1.28 0.65 1.34 0.64
Operating costs 0.65 0.62 0.69 0.61
----------------------------------------------------------
4.06 2.91 4.59 2.78
---------------------------------------------------------------------
(1) Includes operations in Indonesia and Malaysia/Vietnam.
Netbacks do not include synthetic oil or pipeline operations.
Talisman Energy Inc.
Additional Information for US Readers
Production net of royalties
Three months ended Six months ended
June 30 June 30
2003 2002 2003 2002
-------------------------------------------------- ----------------
Oil and liquids (bbls/d)
North America 45,982 48,677 45,969 48,088
North Sea 104,862 124,183 106,506 125,352
Southeast Asia (1) 13,291 14,514 13,110 14,466
Algeria 1,828 - 1,642 -
Sudan - 37,511 14,111 36,777
Synthetic oil (Canada) 2,296 2,521 2,376 2,664
-------------------------------------------------- ----------------
Total oil and liquids 168,259 227,406 183,714 227,347
-------------------------------------------------- ----------------
Natural gas (mmcf/d)
North America 657 675 674 666
North Sea 90 118 110 109
Southeast Asia (1) 99 88 92 93
-------------------------------------------------- ----------------
Total natural gas 846 881 876 868
-------------------------------------------------- ----------------
Total mboe/d 309 375 330 372
-------------------------------------------------- ----------------
(1) Includes operations in Indonesia and Malaysia/Vietnam.
Talisman Energy Inc.
Additional Information for US Readers
Product Netbacks
Three months ended Six months ended
June 30 June 30
(US$ - production net of royalties) 2003 2002 2003 2002
---------------------------------------------------------------------
North Oil and liquids (US$/bbl)
America Sales price 23.54 21.08 26.04 18.93
Hedging (gain) 1.13 0.09 2.46 (0.26)
Operating costs 5.25 3.71 5.29 4.04
-----------------------------------------------------------
17.16 17.28 18.29 15.15
-----------------------------------------------------------
Natural gas (US$/mcf)
Sales price 4.58 2.63 4.97 2.34
Hedging (gain) 0.12 (0.16) 0.20 (0.25)
Operating costs 0.66 0.51 0.65 0.51
-----------------------------------------------------------
3.80 2.28 4.12 2.08
---------------------------------------------------------------------
North Sea Oil and liquids (US$/bbl)
Sales price 25.24 24.26 28.09 22.72
Hedging (gain) 0.10 0.07 1.35 (0.21)
Operating costs 9.00 6.35 9.19 6.56
-----------------------------------------------------------
16.14 17.84 17.55 16.37
-----------------------------------------------------------
Natural gas (US$/mcf)
Sales price 2.97 1.96 3.17 2.52
Hedging (gain) - - - -
Operating costs 0.28 0.37 0.36 0.35
-----------------------------------------------------------
2.69 1.59 2.81 2.17
---------------------------------------------------------------------
Southeast Oil and liquids (US$/bbl)
Asia(1) Sales price 27.04 24.94 29.06 22.73
Hedging (gain) 1.55 0.11 3.15 (0.33)
Operating costs 8.90 7.59 9.03 7.38
-----------------------------------------------------------
16.59 17.24 16.88 15.68
-----------------------------------------------------------
Natural gas (US$/mcf)
Sales price 3.61 3.17 3.80 2.81
Hedging (gain) - - - -
Operating costs 0.37 0.33 0.41 0.30
-----------------------------------------------------------
3.24 2.84 3.39 2.51
---------------------------------------------------------------------
Algeria Oil (US$/bbl)
Sales price 25.06 - 25.67 -
Hedging (gain) 1.86 - 3.66 -
Operating costs 6.00 - 7.00 -
-----------------------------------------------------------
17.20 - 15.01 -
---------------------------------------------------------------------
Sudan Oil (US$/bbl)
Sales price - 23.57 30.18 21.01
Hedging (gain) - 0.11 - (0.32)
Operating costs - 4.73 4.78 3.85
-----------------------------------------------------------
- 18.73 25.40 17.48
---------------------------------------------------------------------
Total Oil and liquids (US$/bbl)
Company Sales price 24.91 23.50 27.79 21.63
Hedging (gain) 0.52 0.09 1.68 (0.25)
Operating costs 7.92 5.59 7.83 5.63
-----------------------------------------------------------
16.47 17.82 18.28 16.25
-----------------------------------------------------------
Natural gas (US$/mcf)
Sales price 4.30 2.59 4.62 2.41
Hedging (gain) 0.09 (0.12) 0.15 (0.19)
Operating costs 0.59 0.47 0.58 0.47
-----------------------------------------------------------
3.62 2.24 3.89 2.13
---------------------------------------------------------------------
(1) Includes operations in Indonesia and Malaysia/Vietnam.
Netbacks do not include synthetic oil or pipeline operations.
Talisman Energy Inc.
Consolidated Financial
Ratios June 30, 2003
The following financial ratios are provided in connection with the Company's
continuous offering of medium term notes pursuant to the short form
prospectus dated March 27, 2002 and a prospectus supplement dated March 28,
2002, and are based on the corporation's consolidated financial statements
that are prepared in accordance with accounting principles generally accepted
in Canada.
The asset coverage ratios are calculated as at June 30, 2003.
The interest coverage ratios are for the 12 month period then ended.
Preferred Preferred
Securities Securities
as equity (5) as debt (6)
---------------------------------------------------------------------
Interest coverage (times)
Income (1) 9.71 7.71
Cash flow (2) 21.04 16.70
Asset coverage (times)
Before deduction of future income taxes
and deferred credits (3) 4.37 3.71
After deduction of future income taxes
and deferred credits (4) 3.12 2.65
---------------------------------------------------------------------
(1) Net income plus income taxes and interest expense; divided by the sum of
interest expense and capitalized interest.
(2) Cash flow plus current income taxes and interest expense; divided by the
sum of interest expense and capitalized interest.
(3) Total assets minus current liabilities; divided by long-term debt.
(4) Total assets minus current liabilities and long-term liabilities
excluding long-term debt; divided by long-term debt.
(5) The Company's preferred securities are classified as equity and the
related charges have been excluded from interest expense.
(6) Reflects adjusted ratios, had the preferred securities been treated as
debt and the related charges been included in interest expense.
-30-
FOR FURTHER INFORMATION PLEASE CONTACT:
Talisman Energy Inc.
David Mann, Senior Manager,
Investor Relations & Corporate Communications
(403) 237-1196
(403) 237-1210 (fax)
Email: tlm@talisman-energy.com
Website: www.talisman-energy.com
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