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Talisman Reports $1.37B Loss After Writedowns, Inches Toward Takeover by Repsol

Talisman Energy Inc. reported a loss of nearly $1.4 billion during the fourth quarter of 2014, after writing down the value of its assets in the Eagle Ford Shale and elsewhere in the wake of the decline in crude oil prices.

Despite the loss, the Calgary-based company continued to close in on a proposed takeover by Spain's Repsol SA, and expects the deal to close before the end of June.

Talisman said its after-tax impairments in 4Q2014 totaled about $1.37 billion. Nearly half of the loss came from writing down the value of its Eagle Ford assets by $614 million because of a decline in oil prices.

There were international losses, too. Talisman wrote off a $234 million investment in the Kurdistan region of Iraq and a $133 million investment in Colombia's Equion Energia Ltd., where Talisman holds a 49% equity interest. In the North Sea, the company wrote off a goodwill balance of $287 million, while its joint venture with China's Sinopec, Talisman Sinopec Energy UK Ltd., recorded an after-tax loss of $633 million net.

Talisman's net loss was $1.59 billion (minus $1.54/share) for 4Q2014, versus a net loss a year earlier of $1.01 billion (minus 98 cents). For the year, Talisman lost $911 million (minus 89 cents/share, compared with losses in 2013 of $1.18 billion (minus $1.15).

Repsol in December said it would buy Talisman (see Daily GPIDec. 16, 2014). Under the terms of the deal, Repsol would acquire each of the outstanding common shares for $8.00 in cash. The boards of directors of both companies have unanimously approved the deal, but it still must win approval from more than two-thirds of shareholders. Talisman said it expects to complete the deal before the end of June. Canadian regulators must approve the deal as well.

"Talisman's assets and people will have an important place in the combined enterprise as we will roughly double Repsol's upstream business," CEO Hal Kvisle said. "Repsol is dedicated to maintaining a strong commitment to Canada and the local and regional economies in which Talisman operates globally."

During 4Q2014, Talisman produced an average 365,000 boe/d, up 3.4% from 3Q2014 (353,000 boe/d). Total production for the fourth quarter included 140,000 b/d of liquids (up 3.7% from 3Q2014, 135,000 b/d) and 1.35 Bcf/d of natural gas (up 2.8% from 3Q2014, 1.31 Bcf/d). Average production from ongoing operations hit 364,000 boe/d in the fourth quarter, up 3.5% from 353,000 boe/d in the third quarter.

Talisman's production from North American sources increased 4.8%, from 165,000 boe/d in 3Q2014 to 173,000 boe/d in 4Q2014. The Marcellus and Eagle Ford were the most productive plays for the company during the fourth quarter in terms of gas and liquids, producing 472 MMcf/d and 24,000 b/d, respectively.

The company attributed the increase in quarterly production to reduced facility downtime and new wells brought online.

For the year, production averaged 369,000 boe/d, a 1.1% decrease from the 373,000 boe/d produced in 2013.  But average production from ongoing operations increased 5.6% during the same time frame, to 357,000 boe/d from 338,000 boe/d. Liquids production rose 6.8% between 2013 and 2014 (to 141,000 b/d from 132,000 b/d) but natural gas production fell 5.5% (to 1.37 Bcf/d from 1.45 Bcf/d).

Talisman said it spent $3 billion on capital expenditures in 2014, which was $156 million lower than 2013. It was also below the company's original full-year guidance of $3.2 billion.

Cash flow for the fourth quarter was $508 million, a comparable figure to the third quarter ($507 million), which the company attributed to benefits from $150 million in hedging settlements. Cash flow for the full-year 2014 was about $2.2 billion, nearly matching 2013. Talisman recorded a loss from operations of $143 million during 4Q2014, compared to earnings of $48 million in 3Q2014.

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