QUOTE AND NEWS
Reuters  Nov 4  Comment 
(New throughout, adds details, comment, updates share price; U.S. dollars unless noted)
Reuters  Nov 4  Comment 
Talisman Energy Inc, the Canadian oil producer whose shares have fallen more than half in the past year, said on Tuesday it expects to meet its goal of selling $2 billion...
Benzinga  Nov 4  Comment 
Talisman Energy (NYSE: TLM) shares fell 11.64% to touch a new 52-week low of $5.39 after the company reported Q3 results. Sprint (NYSE: S) shares reached a new 52-week low of $5.045 after the company posted a wider-than expected second-quarter...
Wall Street Journal  Nov 4  Comment 
Talisman Energy said Tuesday it plans to sell off more assets this year to meet a $2 billion divestiture goal by mid-2015.
SeekingAlpha  Oct 9  Comment 
By Asean Century: Gannett (NYSE:GCI) looks to be another challenging investment for billionaire Carl Icahn. I just profiled another activist position of his, Talisman Energy (NYSE:TLM), earlier in the week for SA readers. Why am I focused on these...
SeekingAlpha  Oct 7  Comment 
By Asean Century: Over the years, Canadian oil and gas company Talisman Energy (NYSE:TLM) has assembled assets spanning six continents. This type of geographic expansion is usually reserved for supermajors and not a company with a market cap of...
TheStreet.com  Oct 6  Comment 
Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link. aTheStreet Ratings quantitative algorithm...
TheStreet.com  Sep 29  Comment 
NEW YORK (TheStreet) -- Shares of Talisman Energy Inc. are lower by 2.36% to $8.70 in mid-afternoon trading on Monday, following a ratings downgrade to "hold" from "buy" at TD Securities. The firm said it reduced its rating on the oil and gas...
Canada.com  Sep 29  Comment 
"Although we have argue that the Talisman portfolio is considerably undervalued on both a NAV and sum-of-the-parts basis, we are less confident of a significant near term unlocking of value."




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Talisman Energy (NYSE:TLM) is primarily an Oil and gas exploration and production company with some natural gas midstream operations in Canada. Their operations can be segmented into 3 sections: North America (primarily Canadian natural gas), North Sea (mostly oil) and Southeast Asia (mostly oil with some nat. gas). They also have non-operating interests in African energy plays.

This is a relatively more exciting company in the oil space. Almost all of the growth visibility is mired in nasty oil sands, politically hostile territories, deep beneath the ocean or in the hands of national oil companies who put politics ahead of profits. Throw in an escalating cost environment and the outlook for oil companies is highly uncertain, even as the outlook for the commodity couldn't be stronger.

Company Overview

Like many growing resource companies, TLM's capital expenditure is uneven, swinging from heavy outlays one year to big free cash flow (FCF) another year. At some point, the company has to be able to convert its assets into cash for the owners.

Business Segments

In 2009, TLM earned a total of $6.2 billion in total revenues. This was a decline from its 2008 total revenues of $8.1 billion. As a result, this had an adverse effect on TLM's net income. Between 2008 and 2009, TLM's net income declined from a net profit of $2.75 billion in 2008 to a net loss of $675 million in 2009.

Trends and Forces

Divesting Non core assets

Looking at their capital structure, the company is in the process of divesting non-core assets. They're in the midst of a share buyback program and plan on using sales proceeds to pay down some of the debt and for buybacks. The company pays a small dividend (1% yield on 8% payout ratio) but has increased it near 20% annually over the last few years. The trend of divesting non core assets should help the company improve their overall profitability as it allows TLM to focus on areas where they have the most expertise.

Diverse Portfolio

TLM has a widely diverse portfolio. For instance, they have a big natural gas component in Canada, which is expected perform well as oil sands production ramps up. They also have light oil crude assets in the North Sea and Southeast Asia are in high-demand with good price realizations. Furthermore, Talisman has divested their oil sands assets and now has no bitumen reserves in its portfolio. The diversity of TLM's products as well as its geographic diversity makes TLM's risk lower than it otherwise would be.

Competitors

EnCana – refocused on Canadian oil sands projects and North American natural gas

  • Huge gas wells drilled in the Deep Bossier region of TX
  • Partnering with ConocoPhillips in the oil sands play
  • Oil sands subject to significant cost overruns
  • Rockies exposure not ideal

Devon Energy - attractively valued but paying more for revenues; more balanced gas/oil portfolio Barnett Shale- holdings should provide stable reserves replacement for years

  • good net margins
  • More exposure to oil in Gulf of Mexico
  • Growth primarily through acquisitions ($5.5 billion in goodwill)
  • Riskier exploration plays (10,000 feet deepwater Jack project, Brazilian offshore, etc).
  • Jackfish oil sands project in Alberta subject to oil sands difficulties (higher costs, nat. gas and water shortages, etc)

References

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