August 1, 2012 / 11:59 AM / 6 years ago

Talisman profit falls on weak natgas prices, higher costs

(Reuters) - Talisman Energy Inc TLM.TO, the No.5 Canadian independent oil producer, reported a 72 percent fall in second-quarter profit on low natural gas prices and higher operating costs.

Net income fell to $196 million, or 19 cents per share, from $698 million, or 68 cents per share, a year earlier. Cash flow, an indicator of a company’s ability to fund development, fell 10 percent to $803 million, or 78 cents per share.

North American natural gas prices, which are at decade lows, fell 46 percent in the quarter.

Talisman, citing its intention to focus on higher-margin oil and natural gas liquids, said in June it would opt out of a proposed multibillion-dollar gas-to-liquids project in British Columbia with South Africa’s Sasol Ltd (SOLJ.J).

The company has also been scaling down its exposure to the North Sea, where production fell 29 percent to 75,000 barrels of oil equivalent per day boe/d) in the quarter. Talisman said last week it would sell a 49 percent interest in its North Sea assets to Sinopec Corp (600028.SS) for $1.5 billion.

Talisman has been increasing activity in such areas as the liquids-rich Eagle Ford area of Texas and has also shifted capital to areas offering more valuable liquids-rich gas output as North American markets remain over-supplied.

The next phase of its exploration program includes oil growth and large Asian gas opportunities, the company said on Wednesday.

Talisman said it still expected its liquids production to rise to over 60,000 barrels per day (bbl/d) by 2015 from about 25,000 in 2012.

Talisman has been mentioned as a possible next target in the aftermath of CNOOC Ltd’s (0883.HK) $15.1 billion friendly bid for Nexen Inc NXY.TO, which like Talisman has a large Canadian asset base but even more extensive international holdings.

The company has said it is not operating under the assumption that it will be taken over, and that it is seeking to boost value for shareholders by increasing returns from its own assets.

Production in the quarter averaged 435,000 boe/d, up 4 percent due to increased oil and gas volumes in Southeast Asia and from North American shale.

Shares of Talisman, which has a market value of C$13.25 billion, closed at C$12.40 on Tuesday on the Toronto Stock Exchange. The stock has fallen 8 percent since the start of 2012.

Reporting by Bhaswati Mukhopadhyay and Sakthi Prasad in Bangalore and Jeffrey Jones in Calgary; Editing by David Cowell and Ted Kerr

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