CALGARY (CP) -- Talisman Energy [TSX:TLM; NYSE:TLM] expects international production to grow by 40% by 2009, largely on the strength of development projects already underway.
Talisman's 2007 guidance issued Tuesday came a month after the Calgary company lowered production forecasts and said it would defer C$1 billion in exploration projects to reduce its exposure to soaring labour and equipment costs.
Those constraints on a C$4.8-billion capital spending budget have slowed the rampup of some projects, such as its Tweedsmuir oilfield off Scotland, which is slated to come onstream in the first quarter of 2007.
But with completion of an asset sales program and ongoing development projects, Talisman says it will increase ''production per share'' by 15% or more in 2008. Much of the international growth is expected from existing projects.
''It's not based on a wish or a dream, it's locked in,'' said Phil Skolnick of Genuity Capital Markets. ''They have a lot of little projects out there that add up to the growth.''
That growth is expected to continue into 2009, with incremental production per share increasing by about 10%.
Talisman expects production to average 485,000 barrels of oil equivalent per day in 2007, the same volume as in 2006. Talisman said it will spend C$2.4 billion, or 50%, of its total budget on drilling, with over 600 wells planned, and C$1.8 billion on plant and equipment.
''Our exploration portfolio has been significantly enhanced and upgraded over the past year and, in my opinion, is now more prospective than at any time in Talisman's history,'' said CEO Jim Buckee.
About 80% of its total C$4.8 billion in capital spending will be in North America and the North Sea. Talisman's other holdings stretch from Southeast Asia and Australia to North Africa and Trinidad.
Despite the deferrals, it will continue to move ahead on projects that have big potential, including drilling in Alaska and Qatar.
''There's still some big-ticket exploration activity that could certainly have an impact on the company,'' said Randy Ollenberger of BMO Capital Markets.
Talisman is counting on its large inventory of low-risk drilling opportunities to bolster growth in natural gas volumes.
''We added significant amounts of acreage in Western Canada, building a strategic land position in the Outer Foothills and drilled high-deliverability gas wells in both Canada and Appalachia,'' said Buckee.
It will also continue to use the proceeds from asset sales to buy back shares. Cash flow for 2007 is projected at C$5 billion.
In another development Tuesday, Sterling Resources Ltd. [TSXV:SLG] said it has completed an arrangement with a Talisman unit in Romania to acquire its 80% stake in the offshore Pelican and Midia blocks in the Black Sea.
Sterling held a non-operated 20% interest and will now have a 100% working interest and will operate the projects.
On TSX trading Tuesday, Talisman shares closed down 32 cents to C$19.79.
(c) The Canadian Press 2006
