Talisman Energy Inc. (TLM) Q1 2010 Earnings Call May 5, 2010 10:30 am ET Executives John Manzoni - President & CEO Scott Thomson - EVP, Finance & CFO Paul Blakeley - EVP, International Operations (East) Analysts Greg Pardy – RBC Capital Markets Brian Dutton - Credit Suisse Chris Theal – Macquarie Securities Presentation Operator
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Helen is looking after our corporate services and this is her first quarterly call with Talisman. So, getting straight down to business, it’s clear that the markets now recognized that there is plenty of gas around and that's obviously impacting current gas prices here in North America.Over the course of the last year we positioned ourselves both in terms of balance sheet capacity and in terms of portfolio to navigate through a period of low or volatile gas prices. And it doesn't change our strategic intent or direction. We can and we will be flexible in how we allocate capital in this period so that we can maintain our direction and at the same time maximize value. I’ll talk more about this a little later. We continue to make great progress on our strategic transition during the last quarter. We have reached preliminary agreement to sell some non-core conventional gas assets in North America. And we expect those transactions to close in the next few months, which of course strengthens the balance sheet further. We have recently used some of that strength to make an entry into another top tier shale play acquiring a moderate entry position of just under 40,000 acres, much of which is in the heart of the liquids rich transition window in the Eagle Ford. We have been evaluating the Eagle Ford for sometime and we are confident that it’s emerging as a top tier play. This addition to our portfolio fits the characteristics, which we have in all of our sales, which are that they are all we believe top tier plays in other words the best rocks. And they all have manageable land (inaudible) profiles which allows us to manage the pace of our capital expenditure profile against the backdrop of a challenging gas price.
We also found into some shale acreage in Northern Poland during the quarter, where we will shoot seismic this year and drill next year. We look at this as an option in our exploration portfolio. And since we are one of the few international companies with shale experience we think that fits well.And finally, we close the Jambi Merang acquisition in Indonesia during this quarter. So over the quarter, we have taken a number of steps which continue our portfolio transition. As we stand today, we have a very strong balance sheet, we have flexibility in our capital programs and we are poised to deliver underlying growth from the second half of this year. Looking at the results for the quarter, they show underlying improvement in both cash flow and earnings from continuing operations and contain the early indications that we are reaching an inflection point in production. The increase in production from shale gas offsets the decline from conventional portfolio in our North American business for the first time this quarter. The main items to point out regarding the financials of the impact to hedges which are changing as they roll forward and depreciation charges in dry hole costs which impact our reported income. The net income for the quarter was $228 million, up from the fourth quarter last year, where we reported a loss of $111 million, but down from the first quarter a year ago. The year ago number was dominated by gains on disposals. Prices in net banks have increased both from the last quarter and the first quarter last year, driven mainly by oil prices although gas netbacks also increased a little. The strengthening Canadian dollar offset some of that gain on our revenues, particularly against this time last year. Two factors to highlight in our income number, the first being the exploration dry hole costs. These are very low this quarter $6 million. Our international exploration write-offs are always lumpy, since they depend on the timing and of course the success of our exploration program. Read the rest of this transcript for free on seekingalpha.com