ASIA-PACIFIC OVERVIEW October 2013
TALISMAN OVERVIEW
Asia-Pacific • Growing free cash flow, near-term exploration potential • $600 million free cash flow in 2012 • Algeria – Pertamina relationship • Ongoing rationalization within Asia-Pacific
Americas • Resource plays provide long-term growth • 38 tcfe contingent resource • Colombia – exploration, development and rationalization underway
Other areas – considering all options • UK – Sinopec deal lowers exposure • Norway – sales process underway • Kurdistan – Kurdamir and Topkhana appraisal ongoing
• 2013 production guidance – 375 mboe/d – Liquids ~132 mbl/d – International gas ~580 mmcf/d – North American gas ~870 mmcf/d
• 1,700 mmboe 2P reserves* – 45% liquids or liquids-linked
• In addition: – 6,700 mmboe contingent resource* – 3,100 mmboe unrisked prospective resource*
*All reserves and resources converted at 6 mcf:1 boe
TWO CORE REGIONS: AMERICAS AND ASIA-PACIFIC ~90% of production
~85% of 2P reserves
~90% of COGEH 2P value
~95% of contingent resource
~85% of unrisked prospective resource
2013 production ~375 mboe/d
2012 2P reserves 1.7 billion boe RLI ~ 12 years
2012 COGEH 2P value ~ $14 billion
2012 contingent resource 6.7 billion boe
2012 unrisked prospective resource 3.1 billion boe
Committed to long-term growth and value creation in core regions Continuing to high-grade within core regions
October 2013
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Page 1
2013 PRIORITIES TO DRIVE VALUE CREATION Live within our means • Set capital spending budgets that can be funded by operating cash flows • Less reliance on asset sales to fund capital program in future years • Maintain strong balance sheet Focus our capital program • Projects with faster cycle times delivering sustainable cash flow over longer term • Renewal through production optimization, exploitation, bolt-on acquisitions and exploration Improve operational performance • Improve cash margins on every barrel and mcf we produce • Better execution of capital projects Unlock NAV of portfolio • Rationalize North American portfolio • Consider all options in North Sea: develop, JV or divest • Recognize value from long-dated exploration options
ASIA: ONE PILLAR OF OUR TWO CORE AREA MODEL • Talisman has a strong, competitive advantage in each of its two core regions • Valuable set of assets and infrastructure, key relationships, great people and a proven track record of accomplishment • The value of Asia-Pacific business enhanced as part of larger Talisman – Right size – World-wide scope – Demonstrated ability to execute
• Focused and valuable balance to quality North American portfolio – Solid growth potential – High value/margin products – Proven business model •
October 2013
Cash flow growth with free cash flow generation
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Page 2
OUR FOUR PRIORITIES TO CREATE VALUE… At work in Asia-Pacific •
Living within our means – Delivering year-on-year growth in production (8% p.a. from 2008) – Generated cash flow of $1.2B and free cash flow of more than $600M in 2012 – Cash flow projected to grow in 2013
• Focusing our capital program – Strong regional energy demand growth supporting premium pricing – Stable and attractive fiscal regimes – Multiple value accretive investment options within existing portfolio
• Consistently improving operational performance – Top quartile safety performance – Consistent and reliable project execution, i.e.; HST/HSD delivered ahead of schedule and under budget – PM3-CAA production efficiency averaged 97% in 2012
•
Continue unlocking net asset value (NAV)
Continue to high-grade current portfolio to focus on the best assets (ONWJ sold in Q2)
Capitalizing on tuck-in acquisitions that deliver near-term cash flow/value
Robust business development opportunities
•
Red Emperor discovery acquired from Premier
TALISMAN’S HISTORY IN ASIA-PACIFIC Asia-Pacific part of Talisman’s history Some of the major events that shaped our business
150
Corridor PM-3 CAA Talisman Kitan Jambi Merang
18% compound annual growth
120 December, 1992 At midnight, Talisman Energy comes Into being.
February, 1997 Full construction commences on Corridor gas project
90
Production (mboe/d)
60
May, 1993 Entry into Indonesia through Encor Inc. acquisition
1994 Acquired interests in OK Block, Corridor, and Jambi in Sumatra through Bow Valley acquisition
30
August, 2001 Acquired block PM-3 CAA and a gas discovery in PNG from Lundin
November, 2003 Offshore Vietnam gas discovery in Block 46-Cai Nuoc, adjacent to the Talisman-operated PM-3 CAA.
1999 Major gas discoveries at Suban (Suban-3 27mmcf/d of low CO2 gas) and Durian Mabok-2 (Suban, 58mmcf/d
1998 Corridor Gas Project commissioned in October, on budget averaging 53mmcf/d in Q4
April, 2011 Jambi Merang first gas
2H 2010 Joint Timor Leste/Australia authorities approves Kitan field development
October, 2005 Acquired interests in Indonesia, in Australia through Paladin acquisition, including Southeast Sumatra, ONWJ, Laminaria, Corallina and Kitan
September, 2003 PM-3 CAA project completed on schedule and budget, producing over 19 mboe/d in Q4
January, 1999 Discovery in Corridor proves long-term potential to increase gas sales.
2006 Suban Phase 2 completed, including two trains, additional pipelines and infrastructure
2009 Executed PNG gas aggregation strategy including acquisitions and farm-ins to various licenses
2010 Acquired 25% interest in onshore Jambi Merang PSC
December, 2012 Awarded US$1 billion production-sharing contract to develop and recover oil from the Kinabalu fields (offshore Malaysia) by PETRONAS.
October 2011 First oil from Kitan in Australia.
2013 First oil from HST/HSD ahead of schedule and under budget .
0 1992
October 2013
93
94
95
96
97
98
99
00
: NYSE : TLM | TSX : TLM
01
2002 03
04
05
06
07
08
09
www.talisman-energy.com
10
11
12
2013
Page 3
ASIA-PACIFIC – BALANCED PORTFOLIO DELIVERING NEAR-TERM VALUE AND SUSTAINABLE GROWTH Capital summary
HST/HSD on production
PM3 CAA and Malay Basin Blocks 45 and 46/07
2012
2013
Development
362
505
Exploration/Appraisal
151
145
Total
513
650
($ million)
Red Emperor and Nam Con Son Development & Exploration
Kinabalu and Sabah Basin Development & Exploration
Papua New Guinea Gas aggregation and early liquids
Corridor and South Sumatra Jambi Merang & OK Block
Tangguh Progressing train three sanction
TLM block Core area Kitan Upcoming appraisal well
Other
* Dollar ($) values shown are capital investment for 2013
ASIA-PACIFIC – GROWING PRODUCTION AND CASH FLOW Steady production growth
Sources and uses of cash
mboe/d
$ million Liquid
200
2,000
Oil-linked gas
Cash flow
Fixed price gas
Exploration capex Development capex
~8% p.a 150
1,500
• Corridor developments
100
1,000
• PM-3 CAA • Jambi Merang • HST/HSD • Kinabalu • PNG early liquids
50
500
0
0
2008 2009 2010 2011 2012 2013
2016
* Excludes Algeria
October 2013
2008 2009 2010 2011 2012 2013
2016
* Excludes Algeria
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Page 4
RAPIDLY GROWING ASIAN ECONOMIES DRIVING INCREASED ENERGY DEMAND Southeast Asia GDP 2012 vs. 2020
Southeast Asia gas supply demand balance*
$ billion
bcf/d
800
2012
6% p.a.
15
2020
Confirmed domestic supply Demand Supply demand gap
600 10
9 bcf/d
400 4% p.a.
4% p.a. 5
6% p.a.
200
0
0 Vietnam
Singapore
Malaysia
Indonesia
Source: IHS Global Insight
2010
2015
2020
* Includes Singapore, Malaysia, Vietnam and Indonesia
• Population growth, urbanization and rising living standards driving economic development in region • Low GDP per capita in Southeast Asia (~10% of developed economies), indicates significant headroom for economic growth
2025 Source: Wood Mackenzie
• Gas supply gap of 9 bcf/d in 2025 • Domestic gas supply is peaking and cannot keep pace with demand growth • LNG imports are increasingly required to meet Southeast Asia market demand
• GDP growth has shown strong resilience even in global economic downturn
SIGNIFICANT NEW LNG IS NEEDED TO MEET THE ASIA SUPPLY CHALLENGE • Sustained growth in both traditional and new markets underpins LNG demand growth of 5% p.a. to 2025
Asia-Pacific LNG demand and supply bcf/d 50
LNG Demand Committed LNG (Europe)
• Estimates of 40 - 60 mtpa (5-8 bcf/d) of credible U.S. exports by 2025 satisfies only a portion of Asia LNG demand gap
Committed LNG (North America) Committed LNG (Other)
40
Committed LNG (Middle East) Committed LNG (Asia-Pacific) +18 bcf/d
30
• Significant volumes of additional conventional LNG supply is therefore required Asia-Pacific 2025 LNG supply gap by country Percentage (%)
20
16%
JKT* China
10
9%
Indonesia Thailand
50%
7%
Others Singapore
7%
0
2010
2015
2020
2025
Source: Wood Mackenzie, BG Group
October 2013
5% Source: Wood Mackenzie
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Malaysia
6%
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*Japan, South Korea, Taiwan
Page 5
NEW LNG SUPPLY COSTS OFFER SIGNIFICANT HEADROOM FOR DOMESTIC GAS PRICES IN ASIA LNG break-even costs (gas price to generate a 12% project IRR) $/mmbtu-real terms 2013 20
Long-term LNG contract price equivalent from $80-120/bbl Brent crude in real 2013 terms 15
13.5
10
8.5
9.6
8.5
12.1
11.5
12.7
10.2
4.1
5
North America Hub price based model
0 2000-2010*
Ichthys
Exxon PNG LNG
Prelude FLNG Wheatstone
Gladstone
Sabine Pass
Integrated upstream and liquefaction costs**
Upstream
Liquefaction
Shipping to region
Pipeline
Cost range
W. Canada
Mozambique Area 4
LNG price range
• Roughly $46 billion (nominal) of cost increase announced across 7 projects since 2010 (average 20%) per annum • Applying a weighted average of latest cost estimates yields $3,000/tonne of greenfield capacity, representing a four fold increase and making legacy LNG contract pricing unsustainable • Project economics for new LNG supply will therefore establish a headroom price for domestic gas in range of $10-12/mmbtu or higher Sources: Talisman internal analysis, Wood Mackenzie, PFC Energy. *Weighted average break-even costs of 10 LNG projects started up in 2000-2010 period **Assumes 10% discount rate. North America costs based on Talisman internal price/cost views.
PROJECT COST INFLATION A GROWING CHALLENGE LNG Project Unit Costs (Liquefaction Only – Nominal)
•
Per unit cost average doubles those of the previous decade
•
Projects taking approximately one year longer on average to complete from sanction to first LNG as compared to last decade
•
Recent cost increases are partially biased by the influence of Australia-specific issues but also realized more broadly across all greenfield projects
$/tonne 2,700 2,600
Australia
2,500
Non-Australia
2,400
Pluto
Cost Estimate at Sanction
2,300
Gorgon
2,200 2,100 2,000
Angola
Ichthys
1,900 1,800
Snohvit
1,700 1,600
Wheatstone
1,500
DS LNG
1,400
PNG LNG
1,300
GLNG
1,200 1,100
QCLNG
1,000 900 800 700 600 500 400 300 200
APLNG
Peru Darwin Atlantic LNG 1 MLNG Tiga Damietta OLNG
100
Yemen
Qatargas-4 EG LNG Sakhalin 2 Tangguh
Year of First LNG Sales
0
2000
October 2013
2005
2010
: NYSE : TLM | TSX : TLM
2015
Source: Woodmac LNG Tool, company public cost announcements
www.talisman-energy.com
Page 6
KEY ASSETS UNDERPINNING ASIA-PACIFIC BUSINESS 2013 Cash Flow
2013 Production Profile
($ Millions)
(mboepd)
Corridor & South Sumatra
Corridor & South Sumatra
PM3 & Malay Basin
PM3 & Malay Basin
Vietnam - HST/HSD
Vietnam - HST/HSD
Kinabalu & Sabah Basin Other NonOp
Kinabalu & Sabah Basin 1
1
Other NonOp 0
0 10 20 30 40 50 60 70 80
100 200 300 400 500 600
1H 2013 Netbacks ($/boe)
• Asia-Pacific business anchored in two core assets
Indonesia
Corridor provides material stable cash flow and production
Malaysia
PM3 - top quartile operating performance delivers material cash flow and production
Vietnam* Australia $0
$20
$40
$60
80
Kinabalu set to become third core asset in Asia Pacific for Talisman
*Includes carry cost recovery
1. OTHER NON OP = KITAN & LAM/COR IN AUSTRALIA, AND TANGGUH IN INDONESIA
INDONESIA – KEY OPERATIONS AND ACTIVITIES TLM block Oil field Gas field Development
ANDAMAN III JAMBI MERANG (JM) JOB
Exploration
• Corridor and South Sumatra
Ongoing asset development through plant expansions, drilling and facility optimization projects TANGGUH
SOUTH EAST SUMATRA (SES)
OGAN KOMERING (OK) JOB
October 2013
• Growing Indonesian gas market drives robust economics World class natural gas asset producing 1 bcf/d gross and expected to generate more than $400 million of cash flow for Talisman in 2013
SOUTH SUMATRA
CORRIDOR
Indonesia Highlights
• Tangguh Offshore gas production delivered into LNG plant (3.1% working interest) producing 160 mboe/d gross Accessing price upside through delivery substitution and potential renegotiations Third train development progressing towards sanction
: NYSE : TLM | TSX : TLM
2013 Capital (US$mm)
~190
2013 Production (mboe/d)
75-77
2013 Cash Flow (US$mm)
~500
www.talisman-energy.com
Page 7
SOUTH SUMATRA – PREMIUM MARKETS, MATERIAL FREE CASH FLOW GENERATION Core focus
TLM block Oil field
Jambi Merang
Gas field
Corridor
•
Well-established relationships with NOC and government, generating new opportunities
•
Material long-term cash generation from Corridor and Jambi Merang
•
Low F&D, low opex, realizing high netbacks
•
Premium pricing in both domestic and export markets
Near-term Ogan Komering
•
Reinvestment delivering near-term incremental production and cash flow
•
Domestic gas prices continue to rise
The future Southeast Sumatra
•
Expansion potential from existing assets, such as Suban Train 5, Jambi Merang Phase II
•
Near infrastructure development
•
New licences and exploration opportunities
CORRIDOR – WORLD CLASS ASSET Gas sales pipeline to Chevron Duri Sumpal plant 2012: 155 mmcf/d* 2013: 310 mmcf/d*
COPI gas pipeline 3rd party pipeline
Production outlook(1) mmcfe/d
Gas sales pipeline to Singapore
500
Base
Development
400
Gelam plant 85 mmcf/d*
300
Dayung plant 300 mmcf/d*
• • • •
200
Grissik plant 2012: 310 mmcf/d* 2013: 460 mmcf/d*
100
Sumpal LTRO Suban Dayung
0 2013
Suban plant 780 mmcf/d**
Rawa station 2012: 0 mmcf/d* 2013: 45 mmcf/d*
0 * Gross raw non-cumulative facility capacity
2016
Sources and uses of cash(1) 25
50
75
Km 100
$ million
750
Development capex
Cash flow
**Gross sales non-cumulative facility capacity
1H 2013 field price realization and netback chart
500
$/mcf
3.51
0.81
250
11.30 6.68 0
Realized price
Royalties
Opex/trans.
2013
Netback (1)
October 2013
: NYSE : TLM | TSX : TLM
2014
2015
2016
Talisman internal estimate
www.talisman-energy.com
Page 8
CORRIDOR – LONG LIFE, PREMIUM PRICES, OPERATIONAL EXCELLENCE • Premium natural gas pricing: 55% of gas production is realizing liquidslinked pricing Average $10.65 / mscf (2Q 2013) Ongoing gas sales agreement price renegotiation potential
• Several facility upgrades are nearing completion Letang, Tengah and Rawa fields (LTRO) reactivated and currently producing 30 mmscf/d
Suban gas plant, Corridor PSC
Sumpal Expansion – new dehydration train will double capacity to 310MMscf/d (194 MMscf/d sales) Increase processing capacity of the Central Grissik Plant from 310 MMscf/d to 460 MMscf/d and install compression at Dayung Further potential expansion at Suban to be appraised in 2014 drilling program, will deliver significant reserve upside Grissik Gas Plant
JAMBI MERANG TLM block Other block Oil pipeline Gas pipeline Prospect
Palau Gading gas plant, Jambi Merang JOB
Phase 1 •
Principle customers are Chevron (at $10/mmbtu) and PLN (at $5.4/mmbtu)
•
2D & 3D seismic programs ongoing and further exploration wells scheduled
Jabung PSC
Phase 2 Expansion Jambi Merang PSC
•
Project sanction expected early 2014
•
Pre-sanction phase
• Corridor PSC
October 2013
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FEED underway
Confirming additional reserves
Facilities expansion project anticipated to deliver:
Additional 60 mmscf/d of sales gas
Up to 2 mboe/d of additional condensate
LPG production of up to 8 mboe/d
Robust regional gas market delivers sound economics
www.talisman-energy.com
Page 9
TANGGUH LNG TLM block Muturi block Muturi Area 5
LNG plant
Berau A Wiriagar Muturi Area 4
• Offshore gas production feeding liquefaction plant, Talisman holds 3.1% equity interest • On stream in 2009 with 325 cargoes delivered by 2Q 2013 • Two LNG Trains with maximum capacity of 7.6 Mtpa • Proven reserves of ~14 TCF, 80% already contracted
Berau B
• Potential price upside associated with cargo diversions and future sales contracts • Main market is East Asia with anchor buyers in China, South Korea, Japan and US Expansion project • Addition of third LNG train to increase total capacity to more than 11 Mtpa • 40% of cargoes from the new train will be allocated to domestic markets Tangguah LNG plant
MALAYSIA – KEY OPERATIONS AND ACTIVITIES TLM block
Malaysia Highlights
Oil field
MALAY BASIN Exploration (PM-3 CAA, VN 46/2 & 7, VN 45)
Gas field Development
Malay Basin •
Exploration
Enhance core production area through step-out exploration of stratigraphic oil & gas targets
PM-3 CAA
Malaysia
Peninsular Malaysia
SABAH Exploration
• •
Sabah
•
KINABALU Development
PM-3 CAA Development Sarawak
Multi-facility offshore oil and gas production Delivering gas to peninsular Malaysia and mainland Vietnam Significant reserves upside through further drilling and facilities investment
Sabah •
4-well program in 2013 / 2014
Kinabalu • •
October 2013
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Assumed operatorship in late 2012, currently focused on delivering steady operations 4 well program in 2013/14, followed by full scale redevelopment
2013 Capital (US$ mm)
~240
2013 Production (mboe/d)
~41
2013 Cash Flow (US$ mm)
300-350
www.talisman-energy.com
Page 10
PM-3 CAA AND MALAY BASIN – OPERATIONS EXCELLENCE WITH EXCITING UPSIDE Core focus Remove 51 and PM 325 and PM 302 TLM block Oil field
•
Long life production and cash flow
•
Gaining recognition as an operator of choice through technical excellence
•
Leveraging regional knowledge and infrastructure to exploit new opportunities
Gas field Block 45
Near-term Block 46/07
Vietnam
•
Maintain production levels through infill drilling and well interventions
•
Continuous operations improvement
•
Stratigraphic play derisked through development drilling in PM-3 CAA
•
Secure PM-3 license extension
Malaysia PM3CAA
0
30
60
The future
Km 120
90
•
Step out exploitation of proven stratigraphic oil and gas play within PM-3 CAA
•
Exploration of Blocks 45 and 46/07
•
Further new business opportunities around PM-3 infrastructure
•
Additional development may utilize nearby Talisman infrastructure
•
3.7 billion boe yet to find in Malay Basin
PM-3 CAA – HIGH QUALITY OPERATING BUSINESS TLM block
Block 46-02
Production outlook
Oil field
mboe/d
Gas field
50
Vietnam
Base
Development
40 30
FSO Block 46 Cai Nuoc
Northern Fields Complex
PM-3 CAA
Southern Fields Complex
20 10
FSO
Gas Export to Vietnam
Malaysia
0 2013
Gas Export to Malaysia 0
6
12
18
Km 24
Cashflow
Development capex Exploration capex
400 300
•
Drilled 3 of 6 wells during 2013 in a multi-year program
•
Netbacks, exceeding $30/boe in 2012
•
PSC environment delivers cost effective investment opportunities
•
Infill exploration targets and near-term facilities enhancements
•
Delivering year-on-year free cash flow
0 2013
October 2013
2014
2015
2016
: NYSE : TLM | TSX : TLM
2016
Top quartile uptime performance (97% production efficiency in 2012)
200 100
2015
•
Sources and uses of cash $ million
2014
www.talisman-energy.com
Page 11
MALAYSIA/VIETNAM PM-3 CAA – FACTS AND FIGURES • PM3 is Talisman’s largest operated asset worldwide • Current gross production 100,000 boe/d (60% gas, 40% oil) • A complex of 12 fields produced through 11 installations and 2 FSOs • 300 reservoirs • 140 development wells drilled 2002- 2012 • Cumulative production 154 mmbls oil/615 bcf gas at end of 2012 • 2P reserves 345 mmboe at Jan 2013 • Track record of monetizing near field discoveries in less than 2 years
1720m/ 5650ft Gross Hydrocarbon Column
KINABALU AND SABAH BASIN TLM block
Core focus
Oil field Gas field SSGP pipeline Proposed plant
• Material acreage position in a prolific and proven hydrocarbon province anchored by the Kinabalu PSC • Accessing low-cost discovered oil and associated gas reserves with upside potential • Extensive infrastructure enhances exploration monetization optionality • Gas monetization available via SSGP to Bintulu
SB309
Near-term • Production growth through infill drilling and facility upgrades at Kinabalu
SB310 Kinabalu
The future GIS confirming Malaysia where pipeline starts 0
20
October 2013
40
60
Km 80
: NYSE : TLM | TSX : TLM
• Significant exploration upside through shallow oil prospects near infrastructure and large deeper gas potential across SB 309/310
www.talisman-energy.com
Page 12
KINABALU – IMMEDIATE PRODUCTION, SIGNIFICANT GROWTH Production outlook mboe/d
30
20
10
0
2013
Kinabalu platform
2014
2015
2016
Sources and uses of cash $ million
• Progressive PSC terms granted for production, investment and improved oil recovery • Significant near-term production and cash flow growth • Ongoing facilities optimization and upgrades
300 250
Cash flow Development capex
200 150 100 50 0
• Commenced 4 well infill program 2013/2014
2013
2014
2015
2016
SABAH EXPLORATION • Exploration program underway TLM block
– Grafit-1 first exploration well in SB310 – gas discovery with development potential as part of gas aggregation strategy
Oil field Gas field Gas pipeline
– Similar geological profile with established Kinabalu porosities and permeability
Oil pipeline Proposed plant
• Material exploration upside from identified oil prospects and large scale gas potential across the blocks • Awarded in 2009, comprised of Blocks SB309 and SB310 • Identified significant unrisked resource in diverse plays to be delineated through ongoing exploration drilling program • Planning to utilize existing infrastructure as potential export route via Kinabalu
October 2013
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Page 13
VIETNAM – KEY OPERATIONS AND ACTIVITIES TLM block (Vietnam) TLM block (Malaysia) Oil field Gas field Development Exploration Vietnam
Blocks 15-2/01 – TGT
Vietnam 2013 Activities Block 15-2/01 – HST/HSD • On production ahead of schedule and under budget Nam Con Son • Bolt-on acquisition in Block 07/03 supports short-term liquids potential underpinning long-term growth options
Blocks 133 & 134
Block 45 & 46-07 • Drilled 3 exploration wells, one discovery • Technical work ongoing • Focus on gas aggregation and building on our expertise
Blocks 15-2/01 – HST/HSD
Blocks 45 & 46-07 Blocks 05-2/10
Blocks 07/03 Blocks 135 & 136/03
2013 Capital (US$mm)
Block 46/02 Song Doc
~140
2013 Production (mboe/d)
~9
2013 Cash flow (US$mm)
180-220
HST/HSD – ON STREAM AHEAD OF SCHEDULE AND UNDER BUDGET TLM block Multiphase production Gas lift Water injection Gas export Oil field
HSD
HST
HST/HSD production* – quick ramp up after early first oil mboe/d
15 12 9 6
FPSO
3 0 May
TGT
June
July
*Talisman share including carried cost recovery
Gas to Bach Ho Field
Sources and uses of cash
Vietnam 15-2/01
0
4
8
Km 12 16
$ million Cash flow
300
Development capex •
HST/HSD project in Vietnam delivered first oil May 2013 ahead of schedule and under budget
•
Delivering near-term peak production of ~12 mboe/d with rapid investment payback of 19 months Maximizes use of existing export and processing infrastructure Significant potential upside at HSD, assessing through early production history
• •
October 2013
: NYSE : TLM | TSX : TLM
200
100
0
2013
2014
www.talisman-energy.com
2015
2016
Page 14
RED EMPEROR AND THE NAM CON SON Block 135 & Block 136/03
TLM block Oil field
• Significant near field inventory of low risk prospects
Gas field
• Two well program in 2014, complementing Block 07/03 activity
Pipeline Oil discovery
• Leverage significant project efficiencies with proximity to potential Red Emperor development
133 5.2/10
• Potential for gas aggregation in addition to planned oil project
134
Block 133 & 134 Ongoing Exploration • Continue de-risking material portfolio of prospects
135
• De-risk prospects in Block 05-2/10 with adjacent Block 133 & 134 drilling
Red Emperor
07/03
136
RE2-N
Proposed 2014 Drilling
CRD-4X
Red Emperor
RE2
Block 07/03 Acquisition
RE1 RE3 RE4 REA
• Exploration and development synergies with adjoining blocks • Discovered oil resource with upside potential, appraisal drilling underway
RE5
• Early commercialization and potential infrastructure hub for the area Block 07/03
Block136
PNG – CAPITALISING ON PROLIFIC RESOURCE POTENTIAL IN A LOW F&D COST ENVIRONMENT TLM block Discoveries Proposed 2013/2014 wells* Currently drilling
Tingu-1 Ketu
Stanley Elevala
Ubuntu
Kupio
Core area focus •
Dominant position in prolific hydrocarbon basin with up to 20 tcf undiscovered petroleum initially in place (unrisked)
•
Secured strategic partners, Mitsubishi and Santos, bringing funding and LNG expertise
•
Early liquids project provides near-term cash flow and material value upside
•
Onshore shallow drilling supports low F&D, and high margins into the Asian LNG market
Weimang
Puk Puk Kimu Langia
Near-term
Douglas
•
High-grading land position to maintain quality and focus
•
Executing early liquids projects at Stanley and Elevala/Ketu
The future •
Aggregating material gas resource
•
Developing gas monetization optionality
* Further wells subject to JV approval
October 2013
: NYSE : TLM | TSX : TLM
www.talisman-energy.com
Page 15
PNG – LIQUIDS AND LOCAL GAS SALES YIELDING EARLY CASH AND MATERIAL VALUE Resources – early liquids and local gas sales
Resources – gas aggregation to LNG
mmboe, gross (TLM average working interest ~42%)
tcf, gross (TLM average working interest ~43%)
200
10
Liquids - upside
Unrisked prospective liquids
Liquids
Risked prospective liquids
Gas - local sales
150
Unrisked prospective gas Risked prospective gas
8
Gas - LNG
6 100 4 50
2
0
0
Discovered - Stanley, Elevala/Ketu
2013-2015
Discovered
• 2012 finding cost of $1.80/bbl • Potential for $0.5 billion net in project NPV and generating cash flow of up to $100 million net per annum
2013-2015
• Joint venture carry (by both Mitsubishi Corporation and Santos) and early condensate recovery scheme providing funding over mid-term • Gas aggregation project on track
ASIA-PACIFIC – GROWING PRODUCTION AND CASH FLOW Steady production growth*
Sources and uses of cash*
mboe/d
$ million Liquid
200
2,000
Oil-linked gas
Cash flow
Fixed price gas
Exploration capex Development capex
~8% p.a 150
1,500
• Corridor developments
100
1,000
• PM-3 CAA • Jambi Merang • HST/HSD • Kinabalu • PNG early liquids
50
500
0
0
2008 2009 2010 2011 2012 2013
2016
* Excludes Algeria
October 2013
2008 2009 2010 2011 2012 2013
2016
* Excludes Algeria
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OUR FOUR PRIORITIES TO CREATE VALUE… At work in Asia-Pacific •
Living within our means – Delivering year-on-year growth in production (8% p.a. from 2008) – Generated cash flow of $1.2B and free cash flow of more than $600M in 2012 – Cash flow projected to grow in 2013
• Focusing our capital program – Strong regional energy demand growth supporting premium pricing – Stable and attractive fiscal regimes – Multiple value accretive investment options within existing portfolio
• Consistently improving operational performance – Top quartile safety performance – Consistent and reliable project execution, i.e.; HST/HSD delivered ahead of schedule and under budget – PM3-CAA production efficiency averaged 97% in 2012
•
Continue unlocking net asset value (NAV)
Continue to high-grade current portfolio to focus on the best assets (ONWJ sold in Q2)
Capitalizing on tuck-in acquisitions that deliver near-term cash flow/value
Robust business development opportunities
•
October 2013
Red Emperor discovery acquired from Premier
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Advisories Forward-Looking Information This presentation contains information that constitutes “forward-looking information” or “forward-looking statements” (collectively “forward-looking information”) within the meaning of applicable securities legislation. This forward-looking information includes, among others, statements regarding: business strategy, priorities and plans; expected production, regionally and by asset; expected cash flow, regionally and by asset; expected capital spending; expected netbacks; expected free cash flow; expected drilling; expected Southeast Asia GDP growth, gas supply-demand balance and LNG demand and supply; expected upgrades at Corridor; expectation of Phase 2 at Jambi Merang; expected expansion at Tangguh; expected exploration and development activities in Talisman’s Asia-Pacific region; expected extension of the PM-3 license and related development activities; expected exploration upside in the Sabah basin; potential or planned gas aggregation and targeted liquids and local gas sales in PNG; targeted gas monetization options in PNG; potential project NPV and cash flow in PNG; and other expectations, beliefs, plans, goals, objectives, assumptions, information and statements about possible future events, conditions, results of operations or performance. The company priorities disclosed in this presentation are objectives only and their achievement cannot be guaranteed. The factors or assumptions on which the forward-looking information is based include: assumptions inherent in current guidance; projected capital investment levels; the flexibility of capital spending plans and the associated sources of funding; the successful and timely implementation of capital projects; the continuation of tax, royalty and regulatory regimes; ability to obtain regulatory and partner approval; commodity price and cost assumptions; and other risks and uncertainties described in the filings made by the Company with securities regulatory authorities. The Company believes the material factors, expectations and assumptions reflected in the forward-looking information are reasonable but no assurance can be given that these factors, expectations and assumptions will prove to be correct. Forward-looking information for periods past 2013 assumes escalating commodity prices. Closing of any transactions will be subject to receipt of all necessary regulatory approvals and completion of definitive agreements. Undue reliance should not be placed on forward-looking information. Forward-looking information is based on current expectations, estimates and projections that involve a number of risks which could cause actual results to vary and in some instances to differ materially from those anticipated by Talisman and described in the forward-looking information contained in this presentation. The material risk factors include, but are not limited to: the risks of the oil and gas industry, such as operational risks in exploring for, developing and producing crude oil and natural gas; risks and uncertainties involving geology of oil and gas deposits; risks associated with project management, project delays and/or cost overruns; uncertainty related to securing sufficient egress and access to markets; the uncertainty of reserves and resources estimates, reserves life and underlying reservoir risk; the uncertainty of estimates and projections relating to production, costs and expenses, including decommissioning liabilities; risks related to strategic and capital allocation decisions, including potential delays or changes in plans with respect to exploration or development projects or capital expenditures; fluctuations in oil and gas prices, foreign currency exchange rates, interest rates and tax or royalty rates; the outcome and effects of any future acquisitions and dispositions; health, safety, security and environmental risks, including risks related to the possibility of major accidents; environmental regulatory and compliance risks, including with respect to greenhouse gases and hydraulic fracturing; uncertainties as to the availability and cost of credit and other financing and changes in capital markets; risks in conducting foreign operations (for example, civil, political and fiscal instability and corruption); risks related to the attraction, retention and development of personnel; changes in general economic and business conditions; the possibility that government
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policies, regulations or laws may change or governmental approvals may be delayed or withheld; and results of the Company's risk mitigation strategies, including insurance and any hedging activities. The foregoing list of risk factors is not exhaustive. Additional information on these and other factors which could affect the Company’s operations or financial results or strategy are included in Talisman’s most recent Annual Information Form. In addition, information is available in the Company’s other reports on file with Canadian securities regulatory authorities and the United States Securities and Exchange Commission. Forward-looking information is based on the estimates and opinions of the Company’s management at the time the information is presented. The Company assumes no obligation to update forward-looking information should circumstances or management’s estimates or opinions change, except as required by law. Oil and Gas Information Reserves National Instrument 51-101 ("NI 51-101") of the Canadian Securities Administrators imposes oil and gas disclosure standards for Canadian public companies engaged in oil and gas activities. Talisman has obtained an exemption from Canadian securities regulatory authorities to permit it to provide certain disclosures in accordance with the US disclosure standards, in addition to the disclosure mandated by NI 51-101, in order to provide for comparability of oil and gas disclosure with that provided by US and other international issuers. Accordingly, in addition to the reserves data and certain other oil and gas information included in this presentation which is provided in accordance with NI 51-101, there is data and information provided in accordance with US disclosure standards. A separate exemption granted to Talisman also permits it to disclose internally evaluated reserves data. Any reserves and resources data contained in this presentation reflects Talisman’s estimates of its reserves and resources. While Talisman annually obtains an independent audit of a portion of its proved and probable reserves, no independent qualified reserves evaluator or auditor was involved in the preparation of the reserves and resources data disclosed in this presentation.In this presentation, the estimates of reserves and future net revenue for individual properties may not reflect the same confidence level as estimates of reserves and future net revenue for all properties, due to the effects of aggregation.
Production and Reserves Volumes Unless otherwise stated, production volumes and reserves estimates are stated on a Company interest basis prior to the deduction of royalties and similar payments. In the US, net production volumes and reserve estimates are reported after the deduction of these amounts. US readers may refer to the table headed “Continuity of Net Proved Reserves” in Talisman’s most recent Annual Information Form for a statement of Talisman’s net production volumes and reserves. The use of the word “gross” in this presentation means a 100% interest prior to the deduction of royalties and similar payments. Resources, In-place Estimates and EURs In this presentation, Talisman also discloses contingent resources, prospective resources, PIIP and EUR as at February 28, 2013. Where not otherwise indicated, in this presentation, the contingent resources provided are 2C and the prospective resources are unrisked best estimates. Contingent resources are defined as those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations using established technology or technology under development, but which are not currently considered to be commercially recoverable due to one or more contingencies. The
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contingencies that prevent the resources from being classified as reserves are: lack of gas sales contract; additional testing; production and performance appraisal activities; development time frame too far in the future; demonstration of economic viability; facilities and egress; access to equipment and services; hydraulic fracturing technology; commodity prices and regulatory approvals. There is no certainty that it will be commercially viable to produce any portion of the resources. In addition to these contingencies and uncertainties the development of commerciality of resources is also subject to a number of risk factors, as discussed more fully above. Prospective resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from undiscovered accumulations by application of future development projects. Prospective resources have both an associated chance of discovery and a chance of development. There is no certainty that any portion of the resources will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the resources. Unrisked prospective resources are not risked for change of development or chance of discovery. If a discovery is made, there is no certainty that it will be developed or, if it is developed, there is no certainty as to the timing of such development. In this presentation risked prospective resources have been risked for chance of discovery but have not been risked for chance of development. If a discovery is made, there is no certainty that it will be developed or, if it is developed, there is no certainty as to the timing of such development. Estimated ultimate recovery (EUR) is a term commonly used in the oil and gas industry. EUR is an estimate, on a given date, of the quantity of oil and gas that is potentially recoverable, plus those quantities already produced. There is no certainty that it will be commercially viable to produce any portion of the EUR amount that is contained herein. PIIP is defined as petroleum initially in place and is that quantity of petroleum that is estimated to exist originally in naturally occurring accumulations. It is the total quantity of petroleum that is estimated, as of a given date, to be contained in known accumulations, prior to production. PIIP estimates may contain all resource classifications, both discovered and undiscovered. There is no certainty that any portion of the resources will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the resources. Non-Core Assets In this presentation, all references to “core” and “non-core” assets and properties align with the company’s current public disclosure regarding its assets and properties. BOE Conversion Throughout this presentation, barrels of oil equivalent (boe) are calculated at a conversion rate of six thousand cubic feet (mcf) of natural gas for one barrel of oil (bbl). This presentation also includes references to mcf equivalents (mcfes) which are calculated at a conversion rate of one barrel of oil to six thousand cubic feet of gas. Boes and Mcfes may be misleading, particularly if used in isolation. A boe conversion ratio of 6mcf:1bbl and an mcfe conversion ratio of 1bbl:6mcf are based on an energy equivalence conversion method primarily applicable at the burner tip and do not represent a value equivalency at the well head. Netbacks Talisman also discloses netbacks in this presentation. Netbacks per boe are calculated by deducting from the sales price associated royalties, operating and transportation costs. US Dollars and IFRS Dollar amounts are presented in US dollars, except where otherwise indicated. Financial information prior to January 1, 2011 was prepared in accordance with Canadian generally accepted accounting principles (CGAAP) then applicable to publically accountable enterprises. The financial information for 2011, 2012
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and 2013 is presented in accordance with International Financial Reporting Standards (IFRS). Both IFRS and CGAAP may differ from generally accepted accounting principles in the US. Forecasted Cash Flow and Forecasted Free Cash Flow: This presentation also contains discussions of anticipated cash flow and anticipated free cash flow both on an aggregate and per share basis. The material assumptions used in determining estimates of cash flow are: the anticipated production volumes; estimates of realized sales prices, which are in turn driven by benchmark prices, quality differentials and the impact of exchange rates; estimated royalty rates; estimated operating expenses; estimated transportation expenses; estimated general and administrative expenses; estimated interest expense, including the level of capitalized interest; and the anticipated amount of cash income tax and petroleum revenue tax. The amount of is inherently difficult to predict. Anticipated production volumes are, in turn, based on the midpoint of the estimated production range and do not reflect the impact of any potential asset dispositions or acquisitions. The completion of any contemplated asset acquisitions or dispositions is contingent on various factors including favourable market conditions, the ability of the Company to negotiate acceptable terms of sale and receipt of any required approvals for such acquisitions or dispositions. In addition to the assumptions that underpin forecasted cash flow, forecasted free cash flow also includes assumptions around capital investments and financing activities. Non-GAAP Financial Measures Included in this presentation are references to financial measures used in the oil and gas industry such as free cash flow, cash flow and capital expenditure. These terms are not defined by IFRS. Consequently, these are referred to as non-GAAP measures. Talisman’s reported results of such measures may not be comparable to similarly titled measures reported by other companies. Free Cash Flow is used by management to assess the amount of funds available for reinvestment or to reduce debt levels or return to shareholders. Free cash flow is the net of cash provided by operating, investing and financing activities before the repayment or issuance of long-term debt. Cash Flow represents net income before exploration costs, DD&A, impairment, deferred taxes and other non-cash expenses. Cash flow is used by the Company to assess operating results between years and between peer companies using different accounting policies. Cash flow should not be considered an alternative to, or more meaningful than, cash provided by operating, investing and financing activities or net income as determined in accordance with IFRS as an indicator of the Company’s performance or liquidity. Capital expenditure (or “capex” or “cash capital spend”) is calculated by adjusting the capital expenditure per the financial statements for exploration costs that were expensed as incurred. Exploration capex is the combined total of exploration expenditures capitalized as part of the exploration and evaluations assets in the Consolidated Balance Sheet plus the exploration expenses on a before-tax basis from the Consolidated Statement of Income.Development capex is the costs incurred in the development and producing phase and recorded as part of property, plant and equipment in the Consolidated Financial statements.
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Notes ____________________________________________ ____________________________________________ ____________________________________________ ____________________________________________ ____________________________________________ ____________________________________________ ____________________________________________ ____________________________________________ ____________________________________________ ____________________________________________ ____________________________________________ ____________________________________________ ____________________________________________ ____________________________________________ ____________________________________________ ____________________________________________ ____________________________________________ ____________________________________________ ____________________________________________ ____________________________________________ ____________________________________________ ____________________________________________ ____________________________________________ ____________________________________________ ____________________________________________ ____________________________________________
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INVESTOR RELATIONS CONTACTS: Paul Smith Executive Vice President, Finance and Chief Financial Officer (403) 237.1434
ANALYST & INVESTOR RELATIONS INQUIRIES: Lyle McLeod Vice President, Investor Relations (403) 237.1020
GENERAL & MEDIA INQUIRIES: David Mann Vice President, Corporate & Investor Communications (403) 237.1196
TALISMAN ENERGY INC. Suite 2000, 888 - 3rd Street S.W. Calgary, AB T2P 5C5 Phone: (403) 237.1234 Fax: (403) 237.1902 Email:
[email protected] Website: www.talisman-energy.com
