* Q1 shr loss $0.32 vs EPS $0.36 last year
* Earning from operations C$0.15/shr
* Shares tumble 7 percent (Adds CEO comments, details. In U.S. dollars unless noted)
By Jeffrey Jones
CALGARY, Alberta, May 4 (Reuters) - Talisman Energy Inc TLM.TO sank into the red in the first quarter despite surging oil prices, hurt by a combination of hedging losses, delays in crude loadings and a jump in British taxes, Canada’s No. 3 independent oil and gas producer said on Wednesday.
Talisman also said it was forced to push back the start-up of a big Norwegian oil field by about six months to year-end, the latest of several delays for the development.
The company’s shares tumbled C$1.59, or 7 percent, to C$20.84 on the Toronto Stock Exchange. They had climbed 29 percent in the past year.
The stock skidded on the financial results, which lagged Street estimates by a wide margin, and a growing negative sentiment for the sector as crude prices have dropped in recent days, FirstEnergy Capital Corp analyst Michael Dunn said.
“There’s a general theme and Talisman appears to be the victim of that today,” Dunn said.
U.S. oil prices averaged $94.60 in the first quarter, up 20 percent from the year before due largely to unrest in the Middle East and North Africa. Brent crude ended the period at $117. However, Talisman’s below-market price hedges chopped an unrealized $319 million from earnings.
Talisman Chief Executive John Manzoni said he believes oil should be selling for $80-$95 a barrel, based on the fundamentals, down from the current price of more than $109.
“One aspect of this quarter’s results is that the hedges we put in place at the end of last year did not contemplate those events and thus the income for the quarter is subject to marked-to-market results,” Manzoni told analysts.
Hedges limited realized prices to $92-$98 a barrel for 70,000 barrels a day. The impact will end after this quarter, executives said.
Meanwhile, the British government’s hike in taxes, to 62 percent from 50 percent, cut net income by about $250 million and created some asset impairments. The move may force a rethink of some of the company’s activities, Manzoni said.
“The U.K. tax change also, of course, has an influence on future projects. We are in the process of reviewing our development plans carefully right now, and I believe we may reconsider some of them, but I don’t want to rush into that,” he said. “We’ll consider them carefully and I plan to discuss them with the U.K. government before taking any action.”
Talisman, which has retooled North American operations to concentrate on shale gas drilling, reported a loss of $326 million, or 32 cents a share, down from a profit of $371 million, or 36 cents a share, a year earlier.
Earnings from operations, which exclude one-time items, were $157 million, or 15 cents a share, up slightly from $155 million, or 15 cents a share, in the year-before quarter. That was just half the average estimate among analysts surveyed by Thomson Reuters I/B/E/S.
Cash flow, an indication of the company’s ability to fund development, rose almost 1 percent to $811 million, or 79 cents a share, from $805 million, or 79 cents a share.
In recent months Talisman has done a series of deals to take on partners for its shale gas holdings in Canada and the United States. It has signed two partnership agreements with South Africa’s Sasol (SOLJ.J) worth a total of more than $2 billion, to develop assets in British Columbia.
It also struck a $1.3 billion deal with Statoil STL.OL of Norway last October to develop its Eagle Ford lands in Texas.
Talisman’s overall production in the quarter averaged 444,000 barrels of oil equivalent a day, up 6 percent from the previous quarter and 2 percent from last year.
Talisman now expects its Yme field off the coast of Norway to start up at the end of this year, rather than July. The project, designed to produce at a peak 40,000 barrels a day, has been hit by a series of delays in getting the platform out to the site.
“This project continues to cause problems and I’m frustrated by the quality of the work undertaken by our contractor, which is requiring considerable rework in the yard,” Manzoni said.
The company has yet to lower its production targets for the year as a result, but he said the numbers will be at the bottom end of its forecast range.
$1=$0.95 Canadian Additional reporting by Aftab Ahmed; editing by Peter Galloway