Talisman Energy reports tenfold increase in second-quarter profits

CALGARY — Talisman Energy Inc. reported a nearly tenfold surge in second-quarter profits from a year earlier and said its 2010 capital spending may end up being lower than expected.

CALGARY — Talisman Energy Inc. reported a nearly tenfold surge in second-quarter profits from a year earlier and said its 2010 capital spending may end up being lower than expected.

“I’d characterize our second quarter as a strong quarter, in which we’ve done exactly what we said we would do, with the portfolio now increasingly set for sustainable, profitable growth,” chief executive John Manzoni told analysts on a conference call Tuesday.

Talisman said its 2010 capital spending is expected to come in at $4.6 billion, down from its November estimate of $5.2 billion, due to exchange rate fluctuations. And there could be further drops ahead, Manzoni said.

“I think our annual spend may turn out closer to $4.4 to $4.5 billion, although this absolutely doesn’t represent any strategic shift or change,” he said.

“But we’ll need to keep an eye on it over the next quarter and we’ll adjust guidance properly for you as it becomes clearer in the second half.”

The company earned $603 million during the three months ended June 30, compared with $63 million in the year-ago period when Talisman (TSX:TLM) booked hedging losses. The profit amounted to 59 cents per share, compared with six cents per share during the second quarter of 2009.

Revenue was just under $1.6 billion, compared with $1.5 billion a year earlier.

Talisman said its cash flow during the quarter was $812 million, or 80 cents per share, down from $897 million, or 88 cents per share, in 2009. That came in slightly above UBS’s estimate of 77 cents per share.

“The variance from our estimates appears to be due to a combination of lower-than-expected production volumes, slightly better than forecast realized pricing in the Southeast Asia and lower than expected dry hole expenses in the North Sea,” analysts Matt Donohue and George Toriola wrote in a note to clients.

The company had closed the sale of $1.5 billion of non-core assets in North America as of mid-July — $1.3 billion of that during the second quarter. Talisman said it is on track for $1.9 billion in sales this year.

Talisman has been shifting its focus toward unconventional natural gas plays in Canada and the United States.

In particular, The Calgary-based firm has amassed substantial land positions in the Horn River and Montney plays in the northeastern British Columbia as well as the Marcellus play in the northeastern United States. It also has less developed holdings in Quebec shale.

Aside from North American shale gas, Talisman’s core areas include Southeast Asia and the North Sea. It is also active in the Middle East and South America and is poised to enter Europe’s nascent shale gas industry.

Talisman shares rose more than 2.3 per cent, or 40 cents, to $17.49 on the Toronto Stock Exchange on Tuesday.

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