April 29, 2009 / 10:21 AM / in 9 years

REFILE-UPDATE 3-Talisman profit slips lower, but tops forecasts

(Refiles to fix typo in paragraph 2)

* Gets boost from stronger output, lower costs

* First-quarter EPS flat at 45 Canadian cents

* Cash flow rises 6 percent to C$1.31 billion

* Shares jump 6 percent (Adds CEO comments)

By Jeffrey Jones

CALGARY, Alberta, April 29 (Reuters) - Talisman Energy Inc TLM.TO said on Wednesday its first-quarter profit fell 2 percent as oil and gas prices skidded, but the results beat expectations thanks to a hefty jump in production and lower operating costs.

One of several big Canadian oil companies to outperform quarterly forecasts during the industry downturn, Talisman also boosted its twice-yearly dividend by 12.5 percent to 11.25 Canadian cents a share.

Shares in Canada’s No. 3 independent oil explorer jumped 6 percent to C$15.26 on the Toronto Stock Exchange. That was on top of an 11 percent gain in the past month.

Chief Executive John Manzoni, who has been shifting the company’s focus to longer-term prospects since taking the helm in September 2007, told reporters that production exceeded his expectations in nearly all operating areas, including such key ones as the North Sea, Southeast Asia and North America.

Production averaged 450,000 barrels of oil equivalent a day, up 7 percent from last year.

Talisman has also put its costs under review as oil has fallen to around $50 a barrel from last year’s record high above $147, he said.

Some moves include cutting its contractor workforce in the North Sea and freezing employee salary levels company-wide.

In the quarter, net income slid to C$455 million, or 45 Canadian cents a share, from year-earlier C$466 million, or 45 Canadian cents a share. The results included a gain of C$519 million from the sale of non-core assets.

Earnings from continuing operations, excluding one-time items, fell 29 percent to C$303 million, or 30 Canadian cents a share, from C$429 million, or 42 Canadian cents.

Analysts on average had expected earnings of 18 Canadian cents a share, according to Reuters Estimates.

Cash flow, an indicator of a company’s ability to pay for new projects and drilling, rose 6 percent to C$1.31 billion, or C$1.29 a share, from C$1.23 billion, or C$1.21, in the year-prior quarter.

Dundee Capital Markets analyst Menno Hulshof pointed out that the company under Manzoni has turned around its record of missing targets.

“The ‘Manzoni’ factor is really starting to show through,” Hulshof said in a research note. “Since Mr. Manzoni came on as the new CEO, roughly 18 months ago, he has made it clear that one of the primary priorities looking forward is making its numbers.”

Manzoni is in the process of selling off assets around the world so Talisman can concentrate on long-term opportunities such as unconventional natural gas in Canada and the United States and oil discoveries in Southeast Asia.

He said on Wednesday the company has jettisoned more than C$2 billion of assets.

Talisman has sold its Trinidad operations for C$380 million to China’s CNOOC Ltd (0883.HK), and said on Monday that Pembina Pipeline Income Fund PIF_u.TO is buying its West Central Alberta gas gathering and processing facilities for C$300 million.

Hulshof pointed out that EnCana Corp (ECA.TO) and Nexen Inc NXY.TO also beat profit expectations for the quarter, even with oil prices down 55 percent and natural gas prices off 49 percent.

$1=$1.20 Canadian Reporting by Jeffrey Jones and Isheeta Sanghi; editing by Rob Wilson

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