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Analyst Blog

On Jul 29, Canadian energy explorer, Talisman Energy Inc. (TLM - Analyst Report), reported second-quarter 2014 adjusted loss of approximately 1 cent per share, which missed the Zacks Consensus Estimate of earnings of 5 cents per share owing to lower natural gas volumes. A decrease in North American natural gas prices also resulted in the miss.  

Following the announcement, the stock has fallen nearly 5% to date. On Jul 31, Talisman Energy shares closed at $10.45.

However, the quarterly loss narrowed from the year-ago quarter level of a loss of 3 cents. Higher liquid production and realizations led to the year-over-year improvement.

Total quarterly revenue of $1,242 million failed to meet the Zacks Consensus Estimate of $1,392 million. However, the top line increased 4.4% from the second quarter 2013 level of $1,190 million.

Volume Analysis
 
Total production for April–June was 375 thousand barrels of oil equivalent per day (MBOE/d), up about 4% from the prior-year level. A substantial rise in North American liquid volumes led to the improvement.
 
Total liquids production was up about 16% year over year to 145,560 barrels per day (Bbl/d) due to higher output from the company’s core regions.
 
Talisman Energy’s natural gas volumes were, however, down 2.4% year over year to 1,380 million cubic feet per day (MMcf/d), mainly on account of lower production from North America and Southeast Asia.

Realized Prices
 
During the reported quarter, Talisman Energy’s realized commodity prices increased 7.2% from the year-ago quarter to $59.49 per barrel of oil equivalent (BOE).
 
Overall liquids realizations averaged $95.66 per barrel, up 4.6% from the prior-year level, while natural gas prices increased marginally to $6.10 per Mcf from the year-ago quarter level of $6.06 per Mcf.

Cash Flow and Capital Expenditure
 
Cash flow from continuing operations totaled $567 million, up nearly 8% year over year. Capital expenditure for the quarter totaled $724 million for Talisman Energy, on track with its 2014 full-year guidance of $3.2 billion.

Balance Sheet
 
As of Jun 30, 2014, Talisman Energy had cash and cash equivalents of approximately $356 million and long-term debt of $4,690 million (including current portion), with a debt-to-capitalization ratio of 35.1%.

Zacks Rank  

Talisman Energy, an independent oil and gas exploration and production (E&P) firm,  currently carries a Zacks Rank #3 (Hold), which implies that it is expected to perform in line with the broader U.S. equity market over the next one to three months.

Stocks to Consider
 
Investors interested in the oil and gas E&P sector could consider stocks like Baytex Energy Corp. (BTE - Snapshot Report), Gastar Exploration Inc. (GST - Snapshot Report) and Enerplus Corporation (ERF - Snapshot Report). All of these have a Zacks Rank #2 (Buy).

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