CALGARY - Talisman Energy (TSX:T.TLM
, Stock Forum
) posted an unexpected US$1-billion net loss in the fourth quarter, reflecting the reduced value of its North Sea operations, which have been a long-running headache for it.
The asset and goodwill impairments totalled US$826 million during the quarter, mostly related to its European offshore activities
That included a charge in its U.K. North Sea joint venture with China's Sinopec, “as a result of negative reserves revisions influenced by poor reservoir and asset performance, increased decomissioning cost estimates and higher development and operating cost estimates.”
It also took charges in Norway resulting from increased costs and negative reserves and a non-taxable impairment as its U.K. and Norway assets lost value.
John Stephenson, a portfolio manager at First Asset Investment Management, said earlier this week that the market was expecting the North Sea writedowns. He said it would be best for Talisman to get the ugly news out of the way and move on.
“It's all been a disaster for them and that's the problem for the stock,” Stephenson said.
“Any kind of action on the North Sea, even if it's ugly, is better than just a continued slow drip, drip, drip of problems.”
Talisman shares rose 3.5 per cent to $12.09 in early afternoon trading on the Toronto Stock Exchange.
Its fourth-quarter net loss, reported in U.S. currency, amounted to 98 cents per share. A year earlier, Talisman posted a fourth-quarter net profit of $376 million, or 37 cents per share.
The Calgary-based oil and gas producer also reported a loss from operations of $116 million, or 11 cents a share, widening from an operating loss of $107 million, or 10 cents a share, in the fourth quarter of 2013.
Analysts had expected Talisman to break even on an operating basis and have a small net profit equal to four cents per share, according to estimates compiled by Thomson Reuters.
On another key measure for energy companies, Talisman reported $580 million, or 56 cents per share, of cash flow in the fourth quarter, down from $675 million, or 66 cents per share a year earlier.
Talisman also said Wednesday it plans to sell an additional $2 billion of assets over the next 12 to 18 months on top of the $2.2-billion in sales that it has already announced, such as a $1.5-billion sale of B.C. shale lands to Malaysia's Petronas (OTO:PNAGF
, Stock Forum) and the $595-million sale of stake in a Colombian oil pipeline.
Talisman said it expects to produce the equivalent of 350,000 to 365,000 barrels per day on average in 2014 - up from 345,000 barrels from continuing operations last year.
It's also planning a capital budget of $3.2 billion, about the same as last year but down 20 per cent from 2012. About 70 per cent of this year's budget will be in its core Americas and Asia-Pacific regions.
“In 2014, we expect more improvements in performance, with continued growth in high-margin liquids production generating increased cash flow,” CEO Hal Kvisle said in a release.
“Our objective is to create sustainable value for our shareholders, and we will continue to position the company to achieve this by generating near-term steady cash flow from our best assets in our two core regions.
“Our goal as we move into 2014 and beyond is to deliver annual cash flow per share growth and maintain a strong balance sheet.”
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