Talisman Energy - Possible Upside
This report reflects the research and analysis I've performed on this company. It is provided for informational purposes only and does not constitute personalized financial advice nor an endorsement or solicitation to purchase stock in this or any other company. Please do your own due diligence or hire a financial advisor before making any investment decisions.- Talisman Energy research report written 08/23/2007
- Risk Detail
- Possible Upside
- Competitor Review
- Valuation and Assessment
- Management & Performance Targets
- Possible upside
- Nice mix of assets.
- Big natural gas component up in Canada which should perform well as oil sands production ramps up.
- Light oil crude assets in the North Sea and Southeast Asia are in high-demand with good price realizations.
- Talisman has divested their oil sands assets and now has no bitumen reserves in its portfolio.
- Diverse portfolio gives company some flexibility in pursuing opportunities. While some of the overseas operations are inflexible (Asia), the company can adjust its operating strategy based on cost conditions and other factors.
- For instance, the company has cut back on its Canadian operations due to high field service costs and focused on its overseas prospects.
- Cheap on an oil-in-the-ground basis. You can buy Talisman at a rate of $13 per barrel of proved reserve (on an enterprise value basis).
- Compare that to Devon's $16.30 per barrel or
- Canadian Natural Resource @ $11 per barrel but with huge bitumen, less desirable heavy-oil component.
- Misc.
- Strong growth profile with 116% production-replacement rate in 2006 and a good, high-visibility pipeline to keep this trend going. Most of the major integrated oils are struggling just to stay even on reserves replacement.
- Company estimates its marketing and midstream operations at a worth of CA$1 - 1.5B and plans to monetize about half this value in a spin-off, possibly within the year.
- Despite its growth profile, the company is a consistent free-cash-flow generator, averaging over CA$700M fcf over the last 7 years.
- Good historical operational results: 30-40% historical profit margins, 17-20% return on tangible invested capital, 19% ROE.
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