Financial & Operating Performance
Talisman generated $2.9 billion in cash flow in 2004 Cash flow totaled $2.9 billion in 2004 ($7.65/share) versus $2.7 billion ($7.07/share) a year earlier. Gross sales were $6.9 billion, up $1.3 billion compared to 2003 on higher volumes and prices. Higher sales revenues were partially offset by higher royalties, operating costs, hedging losses and current taxes. Cash flow is a non-GAAP measure. Please refer to the advisories on the inside back cover. Net income for 2004 was $663 million ($1.77/share), compared to $1,012 million ($2.56/share) in 2003. Talisman also calculates net income in accordance with US GAAP. On this basis, earnings were $694 million in 2004 ($1.81/share) compared to $922 million ($2.39/share) in 2003. Earnings from operations up 15% Talisman’s earnings from operations in 2004 were $773 million ($2.02/share) compared to $673 million ($1.74/share) the previous year. Earnings from operations are calculated to help investors understand the Company’s core operating performance on a consistent, comparable basis. For example, the sale of Talisman’s assets in Sudan and adjustments to tax rates had a significant positive impact on 2003 earnings. Earnings from operations in 2004 were up, due largely to higher volumes and prices. Offsetting this was higher depreciation, depletion and amortization expense, as well as higher dry hole and exploration costs. Earnings from operations is a non-GAAP measure. A reconciliation to net income has been provided on the inside back cover. Liquidity and capital resources Talisman’s long-term debt at year end was $2.5 billion, down from a total of $2.6 billion (comprised of long-term debt of $2.2 billion and preferred securities of $431 million) at the end of 2003. During 2004, the Company generated $3.1 billion of cash from operating activities and spent $2.5 billion on exploration and development while spending $242 million on acquisitions. Talisman also refinanced its preferred securities, paid dividends of $114 million and repurchased almost nine million common shares for $286 million. At year end, the Company had drawn $328 million of its available $1,335 million bank lines of credit. Additional financial information can be found in Talisman’s 2004 Annual Report Financial Review, available on our website or by contacting the Company. Talisman sets production per share record Production averaged 438,000 boe/d in 2004, an increase of
10%, setting a new record of 0.42 boe per share. The majority
of the increase came from a full year of production at the PM-3
CAA project in Malaysia/Vietnam.
Talisman increased its natural gas production by 16%. Production in North America increased 2% with drilling success in the Foothills, west central Alberta and the Northeastern US. Production in Southeast Asia more than doubled. Gas sales in Indonesia averaged 141 mmcf/d (up 26%), reflecting new volumes to Singapore. Gas production from PM-3 CAA in Malaysia/Vietnam, averaged 119 mmcf/d, compared to 5 mmcf/d in 2003. Talisman replaced 179% of production, a key indicator of future growth Talisman replaced 179% of production from all sources in 2004 (proved reserves only) and 166% through drilling, including revisions. The Company added 265 mmboe of proved reserves through drilling and development (including net revisions) and 21 mmboe of proved reserves through net acquisitions. Major contributors to the growth in reserves were 479 bcf of natural gas discoveries, additions and extensions in North America, 85 mmbbls of oil in the North Sea and 695 bcf of natural gas additions in Indonesia, primarily associated with the signing of a major new gas sales contract in August 2004. As a result, Talisman increased its total proved reserves by 9%, to almost 1.5 billion boe. At year end, Talisman had a reserve life index of 9.3 years for proved reserves and 14 years based on proved and probable reserves. Talisman’s net proved reserves increased by 11% to 1.2 billion boe. Approximately 42% of Talisman’s proved reserves are high quality oil and liquids and 58% are natural gas. Proved reserves in North America account for 42% of the total, the North Sea 22% and Southeast Asia 30%. At year end, the Company had 820 mmboe of gross probable reserves, which comprise a large part of Talisman’s development inventory. Capital spending during 2004 totaled $2,375 million for exploration and development, excluding Syncrude and midstream expenditures, and $242 million for net acquisitions. Over the past three years, Talisman has added a total of 623 mmboe of proved reserves (including net acquisitions, but excluding the sale of Sudan assets) while spending $7,461 million on exploration, development and net acquisitions. Approximately 90% of Talisman’s proved reserves have been independently evaluated over the past three years.
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