FOR: TALISMAN ENERGY INC.
TSX, NYSE SYMBOL: TLM
November 1, 2007
Talisman Energy Reports $1.1 Billion in Cash Flow for the Quarter
Cash Flow Per Share Up 7%
CALGARY, ALBERTA--(Marketwire - Nov. 1, 2007) - Talisman Energy Inc. (TSX:TLM) (NYSE:TLM) reported its
operating and financial results for the third quarter of 2007.
/T/
Third Third Nine
Quarter Quarter Months
2007 2006 2007
-----------------------------
Cash Flow (1) ($ million) 1,133 1,136 3,314
-----------------------------
Cash Flow per share (1) 1.11 1.04 3.20
-----------------------------
Net Income ($ million) 352 524 1,422
-----------------------------
Earnings from Continuing Operations (1)
($ million) 246 350 832
-----------------------------
Production (000 boe/d) 441 460 454
-----------------------------
/T/
"This quarter should be the low point for Talisman's underlying production going forward," said John Manzoni,
President and Chief Executive Officer. "With a heavy capital program through this year, we have suffered from a
number of delays, which are also impacting the fourth quarter somewhat. We will now begin to see the benefits
of projects coming on line in the third and fourth quarters, including higher production volumes and lower unit
costs. Fourth quarter volumes are expected to increase, particularly in the North Sea, with a full quarter of
production from the Blane and Duart fields and commissioning of the Wood and Tweedsmuir Phase B facilities.
This will be partly offset by the sale of the Brae properties.
"Our diversified portfolio helped shield us from the impact of lower North America gas prices in the quarter.
With less than one-third of our portfolio linked to North American natural gas prices, cash flow was a robust
$1.1 billion, unchanged from the prior year.
(1)The terms "cash flow", "cash flow per share" and "earnings from continuing operations" are non-GAAP
measures. A reconciliation from cash provided by operating activities to cash flow and from net income to
earnings from continuing operations is provided immediately following the unaudited Consolidated Statements of
Cash Flows in this news release.
"We are looking carefully at our spending plans in North America next year while we work through the
implications of the new Alberta royalty regime, particularly given the uncertain outlook for North American
natural gas prices. With royalty rates sensitive to depth, volumes and price on a well by well basis, it will
take some time to determine the impact of these changes.
"I have been visiting Talisman's operating areas and am very impressed with the quality of the assets, the
knowledge of our employees and their passion for the business. I look forward to working with the team to
deliver the projects which will assure growth in the short term, and achieve the longer term growth potential
which lies within the portfolio."
Management's Discussion and Analysis and complete financial statements and notes for the third quarter are
available on Talisman's website (www.talisman-energy.com).
Third Quarter Summary
- Cash flow was robust at $1.1 billion, unchanged from the prior year despite asset sales and lower natural gas
prices. Cash flow per share was up 7%.
- Net income was down 33% from a year ago with lower production volumes, reduced net backs, higher dry hole
costs and other non-cash charges.
- Production averaged 441,000 boe/d, down 4% due to asset sales, while production per share was up 3%.
- During the quarter, Talisman repaid $385 million in long-term debt. Debt to cash provided by operating
activities was 1.05:1 at September 30.
- Talisman set a new production record in the Alberta Foothills of 218 mmcf/d in September.
- In the North Sea, the Blane and Duart fields commenced production during the quarter. The Wood field is
expected to start production in the next few days and Tweedsmuir Phase B is expected to startup later this
month.
- In Indonesia, the West Java pipeline was completed in October.
/T/
Financial Results
Three Months Ended Nine Months Ended
Sept 30 Sept 30
---------------------------------------
2007 2006 2007 2006
---------------------------------------
Cash flow(1) ($ million) 1,133 1,136 3,314 3,622
---------------------------------------
Cash flow per share (1) 1.11 1.04 3.20 3.30
---------------------------------------
Net income ($ million) 352 524 1,422 1,407
---------------------------------------
Net income per share 0.35 0.48 1.37 1.28
---------------------------------------
Earnings from Continuing
Operations (1) ($ million) 246 350 832 1,181
---------------------------------------
Earnings from Continuing Operations
(per share) (1) 0.24 0.32 0.80 1.08
---------------------------------------
Average shares outstanding (million) 1,019 1,095 1,037 1,097
---------------------------------------
(1) The terms "cash flow" and "earnings from continuing operations" are
non-GAAP measures.
/T/
Talisman's diversity of assets has helped shield it from a significant drop in North American natural gas
prices. Cash flow was virtually unchanged from a year earlier at $1.1 billion and down 4% from the second
quarter. Asset sales, continuing cost pressures and the stronger Canadian dollar, which has offset gains in
world oil prices, have also put downward pressure on cash flow. Cash flow per share in the quarter was up 7%
reflecting share repurchases. Year to date, the Company has generated $3.3 billion in cash flow.
Talisman expects cash flow of approximately $4.3 to $4.5 billion for the year based on fourth quarter
production guidance of 460,000 to 470,000 boe/d. These volumes are contingent on production rates achieved at
Tweedsmuir during the quarter and timing of the Brae asset sale. The estimate also assumes prices of US$78/bbl
WTI, US$6.90/mmbtu NYMEX and a US$/C$ exchange rate of $1.00 in the fourth quarter.
Net income was down 33% compared to the third quarter of 2006. This was due in part to lower production
volumes, the result of non-core asset sales, as well as lower netbacks. The Company also recorded higher dry
hole costs in the quarter, in addition to higher other non-cash charges.
Talisman continues to generate solid financial results with a 12 month return on capital employed of 19%.
Earnings from continuing operations were down 30%. This measure takes into account asset sales and adjusts for
significant one time events and other non-operational impacts on earnings. Net income from discontinued
operations, for the quarter, was roughly comparable to a year ago.
Dry hole costs were $149 million during the quarter, an increase of $112 million from the prior year.
The Company has repurchased approximately 46 million shares year to date at a cost of $950 million. On October
15, the Company declared a semi annual dividend of $0.0875 per share.
During the quarter, Talisman repaid $385 million in long-term debt. Long-term debt (net of cash) was $4.2
billion at September 30, down from $4.8 billion at the end of the second quarter, which includes the impact of
foreign exchange movements. For the 12 months ended September 30, the ratio of debt to cash provided by
operating activities was 1.05:1.
Exploration and development spending for the first nine months of 2007 was $3.3 billion, up 2% from a year
earlier.
/T/
Three Months Ended Nine Months Ended
Sept 30 Sept 30
---------------------------------------
2007 2006 2007 2006
---------------------------------------
Oil and liquids (bbls/d) 230,616 236,344 242,541 262,687
---------------------------------------
Natural gas (mmcf/d) 1,260 1,342 1,266 1,334
---------------------------------------
Total mboe/d 441 460 454 485
---------------------------------------
Production per share (boe) 0.0398 0.0387 0.119 0.121
---------------------------------------
/T/
Total production in the third quarter averaged 441,000 boe/d, down 4% from the prior year and 2% from the
second quarter, the result of ongoing asset sales. However, production per share was up 3%, compared to the
third quarter of 2006. Third quarter volumes also reflect significant shutdowns for planned maintenance.
Production volumes from continuing operations averaged 416,000 boe/d during the quarter, an overall increase of
1% and up 13% in the North Sea. This number compares production from assets which are part of the ongoing
operations of the Company.
During the quarter, Talisman commissioned the BRE gas processing facilities on Block PM-3 CAA in Southeast Asia
and commenced production from the Blane and Duart fields in the North Sea. The Wood field is expected to
commence production in early November and additional volumes from Tweedsmuir Phase B are also expected in
November. Talisman expects to complete the sale of its interests in the Brae area of the North Sea, which will
result in the loss of 16,000 boe/d later in the fourth quarter. Brae volumes are excluded from continuing
operations.
/T/
Netbacks
$/boe Nine Nine
Months Months
3Q 2007 3Q 2006 2007 2006
---------------------------------------
Sales 57.76 56.90 57.90 58.93
---------------------------------------
Hedging gain 0.85 0.42 0.82 0.32
---------------------------------------
Royalty 9.61 9.52 9.78 10.11
---------------------------------------
Transportation 1.49 1.34 1.40 1.28
---------------------------------------
Opex 12.44 9.90 12.06 9.84
---------------------------------------
Netback 35.07 36.56 35.48 38.02
---------------------------------------
Oil & liquids netback ($/bbl) 44.88 45.10 42.42 44.86
---------------------------------------
Natural gas netback ($/mcf) 4.05 4.60 4.58 5.01
---------------------------------------
/T/
Netbacks during the quarter were down 4% from the previous year.
WTI oil prices averaged US$75.38/bbl during the quarter, an increase of 7% over the prior year; however, this
gain was offset by the 8% increase in the value of the Canadian dollar relative to the US dollar. NYMEX natural
gas prices averaged US$6.13/mmbtu, down 6% as a result of continuing high inventory levels. AECO prices were
14% below the same period last year and 30% below second quarter levels.
Average royalty rates were relatively unchanged from a year ago. Unit operating and transportation costs were
up 26% compared to a year ago. The acquisition of the Auk and Fulmar fields in the North Sea late last year
accounted for one-third of the total increase in Talisman's operating costs. Unit operating costs at Auk and
Fulmar are expected to come down significantly with field redevelopment. As North Sea production volumes
increase in the fourth quarter, the Company expects unit operating costs to fall significantly.
North America
In North America, Talisman's natural gas production averaged 867 mmcf/d, down 6% (51 mmcf/d), compared to the
third quarter of last year. Sales of non-core assets reduced volumes in the quarter by 40 mmcf/d. Talisman
drilled 34 gross gas wells during the quarter, approximately half the number drilled last year.
New production records were set in the Alberta Foothills, reaching 218 mmcf/d in September. Production in the
quarter averaged 195 mmcf/d, 17% above 2006, due in part to commissioning the Ram River facility in June.
The Company also saw production increases over the same period in 2006 at Monkman (5%) and Bigstone/Wild River
(8%). In the Outer Foothills play area, development is progressing as planned and drilling results are
encouraging. An Outer Foothills well tested at 18 mmcf/d from two zones. The well is expected onstream later in
November at a rate of 10 mmcf/d, constrained by facilities.
Midstream Operations transported and processed 598 mmcf/d during the quarter. The expansion of the Cutbank
Complex is expected in the fourth quarter and should result in an additional 75 mmcf/d of processing capacity.
The Company is evaluating changes to the Alberta royalty regime before setting its 2008 capital plans for North
America.
North Sea
Talisman's UK production averaged 110,925 boe/d in the quarter, up 2% from the same period in 2006. New field
startups and successful development drilling more than offset net asset sales and planned maintenance
shutdowns.
Production from the first phase of the Tweedsmuir development project started in the second quarter. Tweedsmuir
production was constrained to an average of approximately 8,000 boe/d (Talisman share) during the third quarter
due to existing plant limitations on the Piper platform. Tweedsmuir Phase B startup, with increasing production
volumes, is expected in November.
The Blane field development came onstream September 12, reaching a gross rate of approximately 17,000 boe/d by
month end. The Duart field development came onstream September 20, six weeks ahead of schedule, and is
producing at a gross rate of over 7,000 boe/d.
The Wood and Gas Export Project (WaGE) development is expected to startup in early November and reach a peak
gross rate of 10,000 boe/d.
Successful development wells were drilled at Arbroath, Tartan North and Affleck. In addition, the second and
third Through Tubing Rotary Drilling wells were successfully completed at Claymore. This is a relatively new
drilling technology that significantly reduces the cost of infill drilling.
A successful exploration well has been drilled at Cayley in the Montrose Arbroath area. The well was tested at
a constrained rate of 29.7 mmcf/d of gas and 2,846 bbls/d of condensate. A downdip sidetrack is currently
drilling to determine the extent of the discovery.
At the Beatrice Wind Farm Demonstrator Project, the second five megawatt turbine was installed and has started
up.
Production in Scandinavia averaged 30,985 boe/d during the quarter, up 2% over the third quarter of 2006. The
production increase was due to first production from the Blane field and successful development drilling at
Brage. At the end of the quarter, development drilling was progressing at Brage and Veslefrikk. The Company
participated in a successful exploration well on the Ragnarok prospect and appraisal drilling is underway.
Work is continuing on the Rev field development with first production expected in mid-2008 and the Yme
development with first production expected in mid-2009.
Southeast Asia
Production in Southeast Asia averaged 94,724 boe/d, 2% lower than the third quarter last year.
Gas sales in Malaysia/Vietnam averaged 61 mmcf/d (net to Talisman) in the third quarter, increasing to 73
mmcf/d at the end of September with the commissioning of the Bunga Raya-E gas processing facility and the
completion of two new gas wells.
Development of the Northern Fields is progressing with first gas expected at the end of second quarter of 2008.
First oil has slipped a quarter from fourth quarter 2008 to the first quarter of 2009 as a result of
significant delays experienced in the supply of materials in the current over-heated market. The Northern
Fields development drilling program is expected to commence in late November 2007.
In Vietnam, the five-well development drilling program in the Song Doc Field in Block 46/02 is currently
underway. First oil is scheduled for mid-2008.
The first of the three exploration wells in Block 15-02/01, Hai Su Den-1X, spudded in September and is
progressing. Development of the Hai Su Trang (HST) field in Block 15-02/01 is progressing with the Reserves
Assessment Report expected to be submitted to the government later in the fourth quarter 2007.
In Indonesia, production during the quarter was 10% higher than the same period last year as a result of higher
gas nominations from the Corridor PSC Block. The PGN pipeline to West Java is now completed and commenced
taking gas from Corridor on October 18.
Other International
In other areas, production averaged 18,076 bbls/d, a decrease of 8% from the same period a year ago. Production
in Algeria decreased over 2006, due to an extended shutdown of the Greater MLN facility for the tie-in of the
expanded gas injection facilities. Greater MLN is back onstream with full injection and increased production is
expected by mid-November.
In Trinidad and Tobago, production averaged 7,065 bbls/d. A successful exploration well was drilled during the
quarter in a new fault block and pre-development activities continue for the Angostura Phase 2 gas development
project.
In Peru, a 3-D seismic program was completed on Block 64 and is progressing on Block 101.
/T/
Talisman Energy Inc.
Highlights
(unaudited)
Three months ended Nine months ended
September 30 September 30
2007 2006 2007 2006
----------------------------------------------------------------------------
Financial
(millions of C$ unless otherwise
stated)
Cash flow (1) 1,133 1,136 3,314 3,622
Net income 352 524 1,422 1,407
Exploration and development expenditures 1,079 1,051 3,320 3,262
Per common share (C$)
Cash flow (1) 1.11 1.04 3.20 3.30
Net income 0.35 0.48 1.37 1.28
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Production
(daily average)
Oil and liquids (bbls/d)
North America 41,394 48,716 44,446 50,789
United Kingdom 96,249 86,975 101,200 102,970
Scandinavia 29,166 28,174 30,326 32,405
Southeast Asia 45,731 49,085 46,400 51,456
Other 18,076 19,715 20,169 21,837
Synthetic oil - 3,679 - 3,230
----------------------------------------------------------------------------
Total oil and liquids 230,616 236,344 242,541 262,687
----------------------------------------------------------------------------
Natural gas (mmcf/d)
North America 867 918 883 899
United Kingdom 88 129 90 128
Scandinavia 11 12 13 14
Southeast Asia 294 283 280 293
----------------------------------------------------------------------------
Total natural gas 1,260 1,342 1,266 1,334
----------------------------------------------------------------------------
Total mboe/d (2) 441 460 454 485
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Prices (3)
Oil and liquids ($/bbl)
North America 62.66 63.29 57.45 58.54
United Kingdom 77.89 74.87 72.49 73.69
Scandinavia 80.60 76.11 73.92 75.37
Southeast Asia 78.68 79.01 78.99 77.15
Other 81.03 72.46 76.08 73.21
----------------------------------------------------------------------------
Crude oil and natural gas liquids 75.91 73.27 71.46 71.58
Synthetic oil - 70.47 - 69.18
----------------------------------------------------------------------------
Total oil and liquids 75.91 73.22 71.46 71.55
----------------------------------------------------------------------------
Natural gas ($/mcf)
North America 5.80 6.30 7.04 7.19
United Kingdom 6.22 7.53 6.87 8.80
Scandinavia 4.93 6.53 4.63 5.04
Southeast Asia 7.90 7.37 7.29 7.35
----------------------------------------------------------------------------
Total natural gas 6.30 6.65 7.06 7.36
----------------------------------------------------------------------------
Total ($/boe)(includes synthetic)(2) 57.76 57.01 57.90 58.99
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Cash flow and cash flow per share are non-GAAP measures.
(2) Barrels of oil equivalent (boe) is calculated at a conversion rate of
six thousand cubic feet (mcf) of natural gas for one barrel of oil.
(3) Prices are before hedging.
Includes the results from continuing and discontinued operations.
Talisman Energy Inc.
Consolidated Balance Sheets
(unaudited)
September 30 December 31
(millions of C$) 2007 2006
----------------------------------------------------------------------------
Assets
Current
Cash and cash equivalents 174 103
Accounts receivable 977 1,116
Inventories 132 185
Prepaid expenses 16 25
Assets of discontinued operations 247 786
----------------------------------------------------------------------------
1,546 2,215
----------------------------------------------------------------------------
Accrued employee pension benefit asset 45 50
Other assets 329 284
Goodwill 1,441 1,522
Property, plant and equipment 17,215 17,390
----------------------------------------------------------------------------
19,030 19,246
----------------------------------------------------------------------------
Total assets 20,576 21,461
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Liabilities
Current
Bank indebtedness 27 39
Accounts payable and accrued liabilities 2,000 2,472
Income and other taxes payable 275 412
Liabilities of discontinued operations 188 257
----------------------------------------------------------------------------
2,490 3,180
----------------------------------------------------------------------------
Deferred credits 31 59
Asset retirement obligations 1,734 1,848
Other long-term obligations 127 157
Long-term debt 4,384 4,560
Future income taxes 4,332 4,350
----------------------------------------------------------------------------
10,608 10,974
----------------------------------------------------------------------------
Contingencies and commitments
Shareholders' equity
Common shares 2,436 2,533
Contributed surplus 64 67
Cumulative foreign currency translation (2,414) (1,204)
Retained earnings 5,084 4,584
Accumulated other comprehensive income 2,308 1,327
----------------------------------------------------------------------------
7,478 7,307
----------------------------------------------------------------------------
Total liabilities and shareholders' equity 20,576 21,461
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Talisman Energy Inc.
Consolidated Statements of Income
(unaudited)
Three months ended Nine months ended
(millions of C$ except per September 30 September 30
share amounts) 2007 2006 2007 2006
----------------------------------------------------------------------------
Revenue
Gross sales 2,333 2,127 6,809 6,918
Hedging gains (34) (18) (101) (43)
----------------------------------------------------------------------------
Gross sales, net of hedging 2,367 2,145 6,910 6,961
Less royalties 418 347 1,148 1,184
----------------------------------------------------------------------------
Net sales 1,949 1,798 5,762 5,777
Other 38 24 112 79
----------------------------------------------------------------------------
Total revenue 1,987 1,822 5,874 5,856
----------------------------------------------------------------------------
Expenses
Operating 490 384 1,443 1,199
Transportation 52 51 161 154
General and administrative 53 48 166 163
Depreciation, depletion and amortization 584 459 1,743 1,427
Dry hole 149 37 362 120
Exploration 97 90 226 207
Interest on long-term debt 54 37 151 123
Stock-based compensation (47) (47) 38 (47)
(Gain)/Loss on held-for-trading financial
instruments 10 - (16) -
Other 7 (3) (15) 68
----------------------------------------------------------------------------
Total expenses 1,449 1,056 4,259 3,414
----------------------------------------------------------------------------
Income from continuing operations before
taxes 538 766 1,615 2,442
----------------------------------------------------------------------------
Taxes
Current income tax 238 209 524 730
Future income tax 20 84 168 448
Petroleum revenue tax 56 82 197 231
----------------------------------------------------------------------------
314 375 889 1,409
----------------------------------------------------------------------------
Net income from continuing operations 224 391 726 1,033
----------------------------------------------------------------------------
Net income from discontinued operations 128 133 696 374
----------------------------------------------------------------------------
Net income 352 524 1,422 1,407
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Per common share (C$)
Net income from continuing operations 0.22 0.36 0.70 0.94
Diluted net income from continuing
operations 0.22 0.35 0.68 0.92
Net income from discontinued operations 0.13 0.12 0.67 0.34
Diluted net income from discontinued
operations 0.12 0.12 0.66 0.33
Net income 0.35 0.48 1.37 1.28
Diluted net income 0.34 0.47 1.34 1.25
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Average number of common shares
outstanding (millions) 1,019 1,095 1,037 1,097
Diluted number of common shares
outstanding (millions) 1,040 1,122 1,061 1,127
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Talisman Energy Inc.
Consolidated Statements of Cash Flows
(unaudited)
Three months ended Nine months ended
September 30 September 30
(millions of C$) 2007 2006 2007 2006
----------------------------------------------------------------------------
Operating
Net income from continuing operations 224 391 726 1,033
Items not involving cash 751 512 2,201 1,845
Exploration 97 90 226 207
----------------------------------------------------------------------------
1,072 993 3,153 3,085
Changes in non-cash working capital (15) (144) (108) (216)
----------------------------------------------------------------------------
Cash provided by continuing operations 1,057 849 3,045 2,869
Cash provided by discontinued operations 61 143 161 537
----------------------------------------------------------------------------
Cash provided by operating activities 1,118 992 3,206 3,406
----------------------------------------------------------------------------
Investing
Corporate acquisitions - - - (66)
Capital expenditures
Exploration, development and corporate (1,088) (1,033) (3,326) (3,200)
Acquisitions (38) (5) (42) (6)
Proceeds of resource property
dispositions 21 - 37 2
Investments 243 - 243 -
Changes in non-cash working capital 45 29 (272) 40
Discontinued operations 215 107 944 274
----------------------------------------------------------------------------
Cash used in investing activities (602) (902) (2,416) (2,956)
----------------------------------------------------------------------------
Financing
Long-term debt repaid (681) (102) (1,716) (3,550)
Long-term debt issued 296 137 2,072 3,387
Common shares purchased (25) (104) (946) (157)
Common share dividends - - (91) (82)
Deferred credits and other (13) (20) (19) (54)
Changes in non-cash working capital (2) - (2) -
----------------------------------------------------------------------------
Cash used in financing activities (425) (89) (702) (456)
----------------------------------------------------------------------------
Effect of translation on foreign
currency cash and cash equivalents (2) 1 (5) 10
----------------------------------------------------------------------------
Net increase in cash and cash
equivalents 89 2 83 4
Cash and cash equivalents, net,
beginning of period 58 132 64 130
----------------------------------------------------------------------------
Cash and cash equivalents, net, end of
period 147 134 147 134
----------------------------------------------------------------------------
----------------------------------------------------------------------------
/T/
Cash Flow
Below is a reconciliation of cash provided by operating activities calculated in accordance with generally
accepted accounting principles (GAAP) to cash flow (which is a non-GAAP measure of financial performance).
Please refer to the section in this press release entitled Advisory - Non-GAAP Measures for further explanation
and details.
/T/
($ million) Three months ended Nine months ended
---------------------------------------
September 30, 2007 2006 2007 2006
----------------------------------------------------------------------------
Cash provided by operating activities 1,118 992 3,206 3,406
Changes in non-cash working capital 15 144 108 216
----------------------------------------------------------------------------
Cash flow 1,133 1,136 3,314 3,622
----------------------------------------------------------------------------
/T/
Earnings from Continuing Operations
Earnings from operations adjusts for significant one-time events as well as other non-operational impacts on
earnings, such as the mark-to-market effect of changes in share prices on stock based compensation expense and
changes to tax rates. This calculation does not reflect differing accounting policies and conventions between
companies. All amounts are reported on an after-tax basis.
/T/
($ million, except per share amounts)
Three months ended Nine months ended
September 30, 2007 2006 2007 2006
----------------------------------------------------------------------------
Net income 352 524 1,422 1,407
----------------------------------------------------------------------------
Operating income from discontinued
operations 35 64 124 227
Gain on disposition of discontinued
operations 93 69 572 147
----------------------------------------------------------------------------
Net income from discontinued operations 128 133 696 374
----------------------------------------------------------------------------
Net income from continuing operations 224 391 726 1,033
Unrealized loss on held-for-trading
instruments 12 - 13 -
Realized (gain)/loss on COSL units 4 - (19) -
Stock-based compensation (1) (32) (33) 27 (33)
Future tax effects of unrealized foreign
exchange gains /(losses) on foreign
denominated debt (2) 38 (8) 111 24
Future tax rate reductions and other(2) - - (26) 157
----------------------------------------------------------------------------
Earnings from continuing operations(3) 246 350 832 1,181
----------------------------------------------------------------------------
Per share(3) 0.24 0.32 0.80 1.08
----------------------------------------------------------------------------
1. Stock-based compensation expense relates to the mark-to-market value of
the Company's outstanding stock options and cash units at September 30.
The Company's stock-based compensation expense is based on the
difference between the Company's share price and its stock options or
cash units exercise price.
2. Tax adjustments reflect Canadian tax rate decreases in the second quarter
of 2007 and 2006 and a 10% supplemental tax increase in the UK in the
first quarter of 2006, as well as future taxes relating in part to
unrealized foreign exchange gains and losses associated with the impact
of fluctuations in the Canadian dollar on foreign denominated debt.
3. This is a non-GAAP measure.
/T/
Talisman Energy Inc. is an independent upstream oil and gas company headquartered in Calgary, Alberta, Canada.
Talisman has operations in Canada and its subsidiaries operate in the North Sea, Southeast Asia, Australia,
North Africa, the United States and Trinidad and Tobago. Talisman's subsidiaries are also active in a number of
other international areas. Talisman is committed to conducting its business in an ethically, socially and
environmentally responsible manner. The Company is a participant in the United Nations Global Compact and
included in the Dow Jones Sustainability (North America) Index. Talisman's shares are listed on the Toronto
Stock Exchange in Canada and the New York Stock Exchange in the United States under the symbol TLM.
Forward-looking Statements
This news release contains statements that constitute forward-looking statements and forward-looking
information (collectively, "forward looking statements") within the meaning of applicable securities
legislation. These forward-looking statements include, among others, statements regarding: future production,
future cash flow, anticipated asset dispositions, estimated timing of production, expected royalty rates and
taxes, the Company's outlook for major projects, business strategy and plans, and other expectations, beliefs,
plans, goals, objectives, assumptions, information and statements about possible future events, conditions,
results of operations or performance. Often, but not always, forward-looking statements use words or phrases
such as: "expects", "does not expect" or "is expected", "anticipates" or "does not anticipate", "plans" or
"planned", "estimates" or "estimated", "projects" or "projected", "forecasts" or "forecasted", "believes",
"intends", "likely", "possible", "probable", "scheduled", "positioned", "goal", "objective" or state that
certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved.
Various assumptions were used in drawing the conclusions or making the forecasts and projections contained in
the forward-looking statements throughout this news release. Statements which discuss future business plans for
drilling, exploration and development assume that the extraction of crude oil, natural gas and natural gas
liquids remains economic. For the purposes of preparing this document, Talisman assumed a US$78/bbl West Texas
Intermediate oil price, a US$6.90/mmbtu New York Mercantile Exchange natural gas price, a US$/C$ exchange rate
of $1.00 and a C$/British Pounds Sterling rate of $2.02 for the fourth quarter.
Statements regarding estimated future production and production growth, as well as estimated financial results
that are derived from or depend upon future production estimates (such as cash provided by operating
activities) incorporate the anticipated completion of the UK Brae asset sale. The completion of the UK Brae
asset sale is contingent upon various factors including finalisation of the execution deeds with third-party co-
venturers.
Undue reliance should not be placed on forward-looking statements. Forward-looking statements are based on
current expectations, estimates and projections that involve a number of risks and uncertainties which could
cause actual results to differ materially from those anticipated by the Company and described in the forward-
looking statements. These risks and uncertainties include:
- the risks of the oil and gas industry, such as operational risks in exploring for, developing and producing
crude oil and natural gas, and market demand, including unpredictable facilities outages;
- risks and uncertainties involving geology of oil and gas deposits;
- uncertainty of reserves estimates, reserves life and underlying reservoir risk;
- uncertainty of estimates and projections relating to production, costs and expenses;
- potential delays or changes in plans with respect to exploration or development projects or capital
expenditures;
- fluctuations in oil and gas prices, foreign currency exchange rates and interest rates;
- the outcome and effects of completed acquisitions, as well as any future acquisitions and dispositions;
- health, safety and environmental risks;
- uncertainties as to the availability and cost of financing and changes in capital markets;
- uncertainties related to the litigation process, such as possible discovery of new evidence of acceptance of
novel legal theories and difficulties in predicting the decisions of judges and juries;
- risks in conducting foreign operations (for example, political and fiscal instability or the possibility of
civil unrest or military action);
- competitive actions of other companies, including increased competition from other oil and gas companies or
companies providing alternative sources of energy;
- changes in general economic and business conditions;
- the effect of acts of, or actions against, international terrorism;
- the possibility that government policies or laws may change or governmental approvals may be delayed or
withheld;
- results of the Company's risk mitigation strategies, including insurance and any hedging programs; and
- the Company's ability to implement its business strategy.
Readers are cautioned that the foregoing list of risks and uncertainties is not exhaustive. Additional
information on these and other factors which could affect the Company's operations or financial results are
included: (1) under the heading "Risk Factors" in the Company's Annual Information Form; and (2) under the
heading "Management's Discussion and Analysis - Risk Factors" and elsewhere in the Company's 2006 Annual
Financial Report. Additional information may also be found 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, except as required by law.
Advisories
Oil and Gas Information
Throughout this news release, the Company makes reference to production volumes. Where not otherwise indicated,
such production volumes are stated on a gross basis, which means they are stated prior to the deduction of
royalties and similar payments. In the US, net production volumes are reported after the deduction of these
amounts.
Use of BOE
Throughout this news release, the calculation of barrels of oil equivalent (boe) is calculated at a conversion
rate of six thousand cubic feet (mcf) of natural gas for one barrel of oil and is based on an energy
equivalence conversion method. BOEs may be misleading, particularly if used in isolation. A boe conversion
ratio of 6 mcf:1 bbl is based on an approximate energy equivalence conversion method primarily applicable at
the burner tip and does not represent a value equivalence at the wellhead.
Non-GAAP Measures
This news release includes references to financial measures commonly used in the oil and gas industry such as
cash flow, cash flow per share, earnings from continuing operations and earnings from continuing operations per
share. These terms are not defined by Generally Accepted Accounting Principles (GAAP) in either Canada or the
US. Consequently, these are referred to as non-GAAP measures. Talisman's reported results of cash flow, cash
flow per share and earnings from continuing operations may not be comparable to similarly titled measures by
other companies.
Cash flow, as commonly used in the oil and gas industry, represents net income before exploration costs, DD&A,
future taxes and other non-cash expenses. Cash flow is used by the Company to assess operating results between
years and between peer companies with different accounting policies. Cash flow should not be considered an
alternative to, or more meaningful than, cash provided by operating, investing and financing activities or net
income as determined in accordance with Canadian GAAP as an indicator of the Company's performance or
liquidity. Cash flow per share is cash flow divided by the average number of common shares outstanding during
the period.
Earnings from continuing operations is calculated by adjusting the Company's net income from continuing
operations per the financial statements, for certain items of a non-operational nature, on an after-tax basis.
This term is not defined by GAAP in either Canada or the US. The Company uses this information to evaluate
performance of core operational activities on a comparable basis between periods.
Additional information related to the Company can be found on SEDAR at www.sedar.com.
-30-
FOR FURTHER INFORMATION PLEASE CONTACT:
Talisman Energy Inc.
David Mann
Senior Manager, Corporate & Investor Communications
(403) 237-1196
(403) 237-1210 (FAX)
Email: tlm@talisman-energy.com
OR
Talisman Energy Inc.
Christopher J. LeGallais
Senior Manager, Investor Relations
(403) 237-1957
(403) 237-1210 (FAX)
Email: tlm@talisman-energy.com
Website: www.talisman-energy.com
-0-
Talisman Energy Inc.
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