CALGARY — Talisman Energy Inc. expects to produce more oil and gas this year than previously anticipated as it ratchets up output from its vast shale holdings in North America.
The Calgary-based international energy company (TSX:TLM) is now calling for 2010 production to average 415,000 oil-equivalent barrels per day on an oil-equivalent basis, compared to its previous guidance of 400,000 boe/d.
“I believe this quarter reflects the start of a new phase for Talisman,” CEO John Manzoni said as his company reported a four-fold increase in third-quarter profits.
“We are now delivering strong underlying production growth, we have increased production guidance for 2010, and I am very confident we can maintain this momentum of increasing profitability and production into next year.”
Stronger commodity prices helped push Talisman’s quarterly net income to $121 million, or 12 cents per share, from last year’s $30 million, or three cents per share.
Analysts polled by Thomson Reuters were on average expecting earnings of 13 cents per share.
Revenue was $1.7 billion, up from $1.4 billion during the third quarter of 2009.
Production during the quarter, excluding the effect of asset sales, rose 12 per cent from year-ago levels.
Talisman shares rose 68 cents, or more than 3.7 per cent, to $19.12 in afternoon trading Tuesday on the Toronto Stock Exchange.
One of Talisman’s main focal points is exploiting natural gas from shale rock formations throughout North America.
That region was a “major growth driver” for Talisman, mainly in the promising Marcellus formation, which underlies parts of Pennsylvania, New York, Ohio and West Virginia, CIBC World Markets analyst Andrew Potter said in a research note.
“We expect this production growth momentum to be sustained as the company continues to ramp up shale gas production,” he wrote.
In the Marcellus, Talisman has land in both Pennsylvania and New York. However, virtually all of its activity so far has been in Pennsylvania, where communities have generally been more receptive to development than in New York.
Pennsylvania’s outgoing Democratic governor, Edward Rendell, last week ordered a halt to new natural gas developments on state forest lands. The move came as heated negotiations over a new drilling tax broke down in the state senate.
A temporary drilling moratorium is already in place in neighbouring New York, prompted by concerns drilling could endanger the watershed that provides drinking water to New York City.
Last month, Talisman bulked up its presence in a liquids-rich part of the Eagle Ford shale in Texas. Liquids are considered much more valuable than ordinary dry natural gas, which has been fetching low prices recently.
Talisman brought in Norway’s Statoil as a joint-venture partner in the Eagle Ford.
In addition to the Marcellus and Eagle Ford, Talisman has shale holdings in northeastern British Columbia and Quebec.
Talisman is actively looking for a partner to help it develop properties in the Montney formation in northeastern B.C., Manzoni said.
“We believe the overall value of the asset will be higher if we develop it with a partner, since we have so much contingent resource in the area,” he said.
“We’re very pleased with the level of interest in the process and we’ll progress the conversations over the next few months.”
Another key operating area for Talisman is in the North Sea. Completing the company’s Yme project off the coast of Norway has not been an easy task, Manzoni said on a conference call with analysts.
“Because we’ve been late, we’re now at the mercy of the weather,”he said.
Talisman needs five solid days of calm weather to install some of the equipment, and three months of commissioning work after that before oil can flow.
“We could be waiting a long time for those five clear days,” Manzoni said.
“Given that time line, Yme will certainly not be on stream this year.”
Talisman’s other key operating areas include Southeast Asia, the Middle East and South America.
During the quarter, Talisman announced the joint acquisition of BP Exploration Company (Colombia) Ltd., and entered into agreements to acquire interests in licences in Norway.