FORM 6-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
Date: July 30, 2015
TALISMAN ENERGY INC.
Commission File No. 1-6665
[Translation of registrant's name into English]
2000, 888 - 3rd Street S.W.,
Calgary, Alberta, Canada, T2P 5C5
[Address of principal executive offices]
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.
Form 20-F ¨ Form 40-F þ
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ¨
Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):_ ¨____
Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.
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Title
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INTERIM CONDENSED CONSOLIDATED FINANCIALS
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99.2 |
INTERIM MANAGEMENT’S DISCUSSION AND ANALYSIS
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99.3 |
CONSOLIDATED FINANCIAL RATIO
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99.4 |
CEO CERTIFICATION OF INTERIM FILINGS |
99.5 |
CFO CERTIFICATION OF INTERIM FILINGS |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
TALISMAN ENERGY INC.
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[Registrant]
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Date: July 30, 2015
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By: /s/ Daryn V. MacEachern
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Daryn V. MacEachern
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Assistant Corporate Secretary
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Exhibit 99.1
TALISMAN ENERGY INC.
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED JUNE 30, 2015
(Unaudited)
Condensed Consolidated Balance Sheets
(Unaudited)
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June 30,
|
|
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December 31,
|
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(millions of US$)
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
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Assets
|
|
|
|
|
|
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Current
|
|
|
|
|
|
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Cash and cash equivalents (note 23)
|
|
|
168 |
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|
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262 |
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Accounts receivable
|
|
|
526 |
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|
|
893 |
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Risk management (note 17)
|
|
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- |
|
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|
850 |
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Income and other taxes receivable
|
|
|
82 |
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80 |
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Restricted cash (note 9)
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- |
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|
149 |
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Inventories
|
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132 |
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133 |
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Prepaid expenses
|
|
|
22 |
|
|
|
34 |
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Assets held for sale (notes 4 and 9)
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|
1,530 |
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|
- |
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|
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2,460 |
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|
2,401 |
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Other assets (note 8)
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|
175 |
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180 |
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Investments (note 6)
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613 |
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|
604 |
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Risk management (note 17)
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- |
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421 |
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Goodwill (note 7)
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279 |
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|
279 |
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Property, plant and equipment (note 10)
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8,654 |
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9,064 |
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Exploration and evaluation assets (note 10)
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2,488 |
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2,544 |
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Deferred tax assets
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|
563 |
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1,837 |
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12,772 |
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14,929 |
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Total assets
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15,232 |
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17,330 |
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Liabilities
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Current
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Bank indebtedness
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|
5 |
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9 |
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Accounts payable and accrued liabilities
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1,031 |
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1,577 |
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Current portion of Yme removal obligation (note 9)
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- |
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186 |
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Obligation to fund equity investee (note 6)
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145 |
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186 |
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Risk management (note 17)
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- |
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2 |
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Income and other taxes payable
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75 |
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93 |
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Loans from related parties (note 14)
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831 |
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- |
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Loans from joint ventures (note 6)
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74 |
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15 |
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Current portion of long-term debt (note 14)
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156 |
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1,109 |
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Liabilities associated with assets held for sale (notes 4 and 9)
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1,483 |
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- |
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3,800 |
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3,177 |
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Decommissioning liabilities (note 12)
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967 |
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1,885 |
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Other long-term obligations (note 15)
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222 |
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273 |
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Long-term debt (note 14)
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3,807 |
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3,955 |
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Deferred tax liabilities
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|
857 |
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|
635 |
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5,853 |
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6,748 |
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Contingencies and commitments (note 18)
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|
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Shareholder's equity
|
|
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|
|
|
|
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Common shares (note 16)
|
|
|
1,992 |
|
|
|
1,738 |
|
Preferred shares (note 16)
|
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|
- |
|
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|
191 |
|
Contributed surplus
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|
|
86 |
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|
|
176 |
|
Retained earnings
|
|
|
2,690 |
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4,489 |
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Accumulated other comprehensive income
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|
|
811 |
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|
811 |
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5,579 |
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7,405 |
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Total liabilities and shareholder's equity
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15,232 |
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17,330 |
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See accompanying notes.
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Condensed Consolidated Statements of Income (Loss)
(Unaudited)
|
|
Three months ended
|
|
Six months ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
(millions of US$)
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
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(restated)
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(restated)
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Revenue
|
|
|
|
|
|
|
|
|
|
|
|
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Sales
|
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|
617 |
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1,141 |
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|
1,221 |
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|
2,264 |
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Other income (note 19)
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|
41 |
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|
30 |
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|
|
81 |
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|
|
77 |
|
Loss from joint ventures, after tax (note 6)
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|
(107 |
) |
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(37 |
) |
|
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(314 |
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(31 |
) |
Total revenue and other income
|
|
|
551 |
|
|
|
1,134 |
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|
988 |
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2,310 |
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Expenses
|
|
|
|
|
|
|
|
|
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|
|
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|
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Operating
|
|
|
193 |
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|
|
280 |
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|
444 |
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|
543 |
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Transportation
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|
40 |
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|
|
39 |
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|
90 |
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|
|
81 |
|
General and administrative
|
|
|
83 |
|
|
|
103 |
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|
|
167 |
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|
|
205 |
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Depreciation, depletion and amortization
|
|
|
379 |
|
|
|
430 |
|
|
|
790 |
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|
822 |
|
Impairment, net of reversals (note 11)
|
|
|
- |
|
|
|
(32 |
) |
|
|
48 |
|
|
|
(32 |
) |
Dry hole
|
|
|
- |
|
|
|
11 |
|
|
|
13 |
|
|
|
28 |
|
Exploration
|
|
|
98 |
|
|
|
44 |
|
|
|
122 |
|
|
|
83 |
|
Finance costs (note 13)
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|
|
79 |
|
|
|
83 |
|
|
|
163 |
|
|
|
166 |
|
Share-based payments expense (recovery) (note 16)
|
|
|
(19 |
) |
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|
23 |
|
|
|
(24 |
) |
|
|
(9 |
) |
(Gain) loss on held-for-trading financial instruments (note 17)
|
|
|
131 |
|
|
|
171 |
|
|
|
(62 |
) |
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|
231 |
|
(Gain) loss on disposals (note 5)
|
|
|
4 |
|
|
|
5 |
|
|
|
9 |
|
|
|
(554 |
) |
Other, net (note 20)
|
|
|
130 |
|
|
|
37 |
|
|
|
146 |
|
|
|
44 |
|
Total expenses
|
|
|
1,118 |
|
|
|
1,194 |
|
|
|
1,906 |
|
|
|
1,608 |
|
Income (loss) from continuing operations before taxes
|
|
|
(567 |
) |
|
|
(60 |
) |
|
|
(918 |
) |
|
|
702 |
|
Income taxes (note 21)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current income tax
|
|
|
65 |
|
|
|
134 |
|
|
|
135 |
|
|
|
265 |
|
Deferred income tax
|
|
|
256 |
|
|
|
13 |
|
|
|
232 |
|
|
|
63 |
|
|
|
|
321 |
|
|
|
147 |
|
|
|
367 |
|
|
|
328 |
|
Net loss from continuing operations
|
|
|
(888 |
) |
|
|
(207 |
) |
|
|
(1,285 |
) |
|
|
374 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss from discontinued operations (note 4)
|
|
|
(364 |
) |
|
|
(30 |
) |
|
|
(406 |
) |
|
|
(120 |
) |
Net income (loss)
|
|
|
(1,252 |
) |
|
|
(237 |
) |
|
|
(1,691 |
) |
|
|
254 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per common share (US$):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) from continuing operations
|
|
|
(0.85 |
) |
|
|
(0.20 |
) |
|
|
(1.24 |
) |
|
|
0.36 |
|
Net loss from discontinued operations
|
|
|
(0.35 |
) |
|
|
(0.03 |
) |
|
|
(0.39 |
) |
|
|
(0.12 |
) |
Net income (loss)
|
|
|
(1.20 |
) |
|
|
(0.23 |
) |
|
|
(1.63 |
) |
|
|
0.24 |
|
Diluted net income (loss) from continuing operations
|
|
|
(0.89 |
) |
|
|
(0.21 |
) |
|
|
(1.28 |
) |
|
|
0.31 |
|
Diluted net loss from discontinued operations
|
|
|
(0.35 |
) |
|
|
(0.03 |
) |
|
|
(0.39 |
) |
|
|
(0.12 |
) |
Diluted net income (loss)
|
|
|
(1.24 |
) |
|
|
(0.24 |
) |
|
|
(1.67 |
) |
|
|
0.19 |
|
Weighted average number of common shares outstanding (millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
1,041 |
|
|
|
1,034 |
|
|
|
1,037 |
|
|
|
1,033 |
|
Diluted
|
|
|
1,041 |
|
|
|
1,034 |
|
|
|
1,037 |
|
|
|
1,039 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Six months ended
|
|
|
June 30,
|
|
|
June 30,
|
|
(millions of US$)
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
(1,252 |
) |
|
|
(237 |
) |
|
|
(1,691 |
) |
|
|
254 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actuarial gains (losses) relating to pension and other post-employment benefits1
|
|
|
9 |
|
|
|
(3 |
) |
|
|
11 |
|
|
|
(3 |
) |
Other comprehensive income (loss) not being reclassified to net income or loss in subsequent periods
|
|
|
9 |
|
|
|
(3 |
) |
|
|
11 |
|
|
|
(3 |
) |
Comprehensive income (loss)
|
|
|
(1,243 |
) |
|
|
(240 |
) |
|
|
(1,680 |
) |
|
|
251 |
|
1. For the three and six months ended June 30, 2015, amount is net of tax of $nil and $nil respectively (2014 - $1 million and $1 million respectively).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidated Statements of Changes in Shareholder’s Equity
(Unaudited)
|
|
Three months ended
|
|
|
Six months ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
(millions of US$)
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares (note 16)
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period
|
|
|
1,794 |
|
|
|
1,759 |
|
|
|
1,738 |
|
|
|
1,723 |
|
Issued on exercise of stock options
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
5 |
|
Converted from preferred shares
|
|
|
195 |
|
|
|
- |
|
|
|
195 |
|
|
|
- |
|
Shares purchased and held in trust for long-term PSU plan
|
|
|
- |
|
|
|
- |
|
|
|
(30 |
) |
|
|
- |
|
Shares previously held in trust sold on open market
|
|
|
3 |
|
|
|
- |
|
|
|
3 |
|
|
|
- |
|
Shares released from trust for long-term PSU plan
|
|
|
- |
|
|
|
- |
|
|
|
86 |
|
|
|
31 |
|
Balance at end of period
|
|
|
1,992 |
|
|
|
1,759 |
|
|
|
1,992 |
|
|
|
1,759 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred shares (note 16)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period
|
|
|
191 |
|
|
|
191 |
|
|
|
191 |
|
|
|
191 |
|
Converted to common shares
|
|
|
(191 |
) |
|
|
- |
|
|
|
(191 |
) |
|
|
- |
|
Balance at end of period
|
|
|
- |
|
|
|
191 |
|
|
|
- |
|
|
|
191 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributed surplus
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period
|
|
|
95 |
|
|
|
114 |
|
|
|
176 |
|
|
|
135 |
|
Preferred shares conversion difference
|
|
|
(4 |
) |
|
|
- |
|
|
|
(4 |
) |
|
|
- |
|
Settlement of long-term PSU plan grant
|
|
|
(18 |
) |
|
|
- |
|
|
|
(104 |
) |
|
|
(31 |
) |
Share-based payments
|
|
|
13 |
|
|
|
10 |
|
|
|
18 |
|
|
|
20 |
|
Balance at end of period
|
|
|
86 |
|
|
|
124 |
|
|
|
86 |
|
|
|
124 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period
|
|
|
4,050 |
|
|
|
6,114 |
|
|
|
4,489 |
|
|
|
5,695 |
|
Net income (loss)
|
|
|
(1,252 |
) |
|
|
(237 |
) |
|
|
(1,691 |
) |
|
|
254 |
|
Actuarial gains (losses) transferred to retained earnings
|
|
|
9 |
|
|
|
(3 |
) |
|
|
11 |
|
|
|
(3 |
) |
Common share dividends (note 16)
|
|
|
(117 |
) |
|
|
(70 |
) |
|
|
(117 |
) |
|
|
(140 |
) |
Preferred share dividends (note 16)
|
|
|
- |
|
|
|
(2 |
) |
|
|
(2 |
) |
|
|
(4 |
) |
Balance at end of period
|
|
|
2,690 |
|
|
|
5,802 |
|
|
|
2,690 |
|
|
|
5,802 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period
|
|
|
811 |
|
|
|
811 |
|
|
|
811 |
|
|
|
811 |
|
Other comprehensive income (loss)
|
|
|
9 |
|
|
|
(3 |
) |
|
|
11 |
|
|
|
(3 |
) |
Transfer of accumulated foreign currency loss to net income
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Actuarial losses (gains) transferred to retained earnings
|
|
|
(9 |
) |
|
|
3 |
|
|
|
(11 |
) |
|
|
3 |
|
Balance at end of period
|
|
|
811 |
|
|
|
811 |
|
|
|
811 |
|
|
|
811 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
|
Three months ended
|
|
|
Six months ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
(millions of US$)
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
(restated)
|
|
|
|
|
|
(restated)
|
|
Operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) from continuing operations
|
|
|
(888 |
) |
|
|
(207 |
) |
|
|
(1,285 |
) |
|
|
374 |
|
Add: Finance costs (cash and non-cash) (note 13)
|
|
|
79 |
|
|
|
83 |
|
|
|
163 |
|
|
|
166 |
|
Items not involving cash (note 22)
|
|
|
1,732 |
|
|
|
637 |
|
|
|
2,699 |
|
|
|
513 |
|
|
|
|
923 |
|
|
|
513 |
|
|
|
1,577 |
|
|
|
1,053 |
|
Changes in non-cash working capital
|
|
|
113 |
|
|
|
(212 |
) |
|
|
23 |
|
|
|
(255 |
) |
Cash provided by operating activities from continuing operations
|
|
|
1,036 |
|
|
|
301 |
|
|
|
1,600 |
|
|
|
798 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration, development and other
|
|
|
(224 |
) |
|
|
(433 |
) |
|
|
(496 |
) |
|
|
(928 |
) |
Property acquisitions
|
|
|
(8 |
) |
|
|
- |
|
|
|
(8 |
) |
|
|
- |
|
Proceeds of resource property dispositions (note 5)
|
|
|
- |
|
|
|
52 |
|
|
|
- |
|
|
|
1,392 |
|
Loan to joint venture, net of repayments (note 6)
|
|
|
- |
|
|
|
(178 |
) |
|
|
- |
|
|
|
(350 |
) |
Investment in joint ventures (note 6)
|
|
|
(199 |
) |
|
|
- |
|
|
|
(362 |
) |
|
|
- |
|
Changes in non-cash working capital
|
|
|
(39 |
) |
|
|
(51 |
) |
|
|
(228 |
) |
|
|
(5 |
) |
Cash provided by (used in) investing activities from continuing operations
|
|
|
(470 |
) |
|
|
(610 |
) |
|
|
(1,094 |
) |
|
|
109 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt repaid (note 14)
|
|
|
(1,209 |
) |
|
|
(2 |
) |
|
|
(1,558 |
) |
|
|
(879 |
) |
Long-term debt issued (note 14)
|
|
|
- |
|
|
|
315 |
|
|
|
452 |
|
|
|
315 |
|
Loans from (repayments to) joint ventures (note 6)
|
|
|
39 |
|
|
|
- |
|
|
|
59 |
|
|
|
18 |
|
Loans from related parties (note 14)
|
|
|
831 |
|
|
|
- |
|
|
|
831 |
|
|
|
- |
|
Common shares issued (note 16)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
4 |
|
Common shares purchased (note 16)
|
|
|
- |
|
|
|
- |
|
|
|
(30 |
) |
|
|
- |
|
Common shares held in trust sold (note 16)
|
|
|
3 |
|
|
|
- |
|
|
|
3 |
|
|
|
- |
|
Finance costs (cash)
|
|
|
(72 |
) |
|
|
(76 |
) |
|
|
(150 |
) |
|
|
(152 |
) |
Common share dividends (note 16)
|
|
|
(117 |
) |
|
|
(70 |
) |
|
|
(117 |
) |
|
|
(140 |
) |
Preferred share dividends (note 16)
|
|
|
- |
|
|
|
(2 |
) |
|
|
(2 |
) |
|
|
(4 |
) |
Deferred credits and other
|
|
|
(23 |
) |
|
|
(6 |
) |
|
|
(30 |
) |
|
|
1 |
|
Changes in non-cash working capital
|
|
|
(9 |
) |
|
|
(3 |
) |
|
|
10 |
|
|
|
13 |
|
Cash provided by (used in) financing activities from continuing operations
|
|
|
(557 |
) |
|
|
156 |
|
|
|
(532 |
) |
|
|
(824 |
) |
Effect of translation on foreign currency cash and cash equivalents
|
|
|
2 |
|
|
|
2 |
|
|
|
1 |
|
|
|
6 |
|
Cash provided by (used in) operating activities from discontinued operations (note 4)
|
|
|
(16 |
) |
|
|
64 |
|
|
|
(24 |
) |
|
|
37 |
|
Cash used in investing activities from discontinued operations (note 4)
|
|
|
(9 |
) |
|
|
(76 |
) |
|
|
(37 |
) |
|
|
(125 |
) |
Net increase (decrease) in cash and cash equivalents
|
|
|
(14 |
) |
|
|
(163 |
) |
|
|
(86 |
) |
|
|
1 |
|
Cash and cash equivalents net of bank indebtedness, beginning of period
|
|
|
181 |
|
|
|
515 |
|
|
|
253 |
|
|
|
351 |
|
Cash and cash equivalents net of bank indebtedness, end of period
|
|
|
167 |
|
|
|
352 |
|
|
|
167 |
|
|
|
352 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
168 |
|
|
|
356 |
|
|
|
168 |
|
|
|
356 |
|
Bank indebtedness
|
|
|
(5 |
) |
|
|
(4 |
) |
|
|
(5 |
) |
|
|
(4 |
) |
Cash and cash equivalents from discontinued operations (note 4)
|
|
|
4 |
|
|
|
- |
|
|
|
4 |
|
|
|
- |
|
Cash and cash equivalents net of bank indebtedness, end of period
|
|
|
167 |
|
|
|
352 |
|
|
|
167 |
|
|
|
352 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to the Interim Condensed Consolidated Financial Statements
(Unaudited)
(tabular amounts in millions of US dollars, except as noted)
1. CORPORATE INFORMATION
Talisman Energy Inc. ("Talisman" or "the Company") is a company incorporated pursuant to the laws of Canada and domiciled in Alberta, Canada. Talisman’s common shares are wholly owned by a subsidiary of Repsol S.A (“Repsol”). Talisman continues to be a reporting issuer in each of the jurisdictions of Canada. Its registered office is located at Suite 2000, 888 – 3rd Street SW, Calgary, Alberta, Canada, T2P 5C5.
The Company is in the business of exploration, development, production and marketing of crude oil, natural gas and natural gas liquids (NGLs).
The interim condensed Consolidated Financial Statements as at and for the three and six month periods ended June 30, 2015 were approved by the Audit Committee on July 27, 2015.
Repsol Acquisition of Talisman
On May 8, 2015, the acquisition of Talisman by Repsol, by the way of an arrangement under the Canada Business Corporations Act, was completed. Repsol acquired all of the Company’s outstanding common and preferred shares. Upon the completion of the arrangement, the common shares were delisted from the Toronto Stock Exchange and the New York Stock Exchange, and the preferred shares were delisted from the Toronto Stock Exchange and converted into common shares on a 1:1 basis (note 16).
2. BASIS OF PREPARATION
These interim condensed Consolidated Financial Statements have been prepared in accordance with International Accounting Standard (IAS) 34, Interim Financial Reporting as issued by the International Accounting Standards Board (IASB). Certain information and disclosures required to be included in notes to annual Consolidated Financial Statements prepared in accordance with International Financial Reporting Standards (IFRS) and interpretations of the International Financial Reporting Interpretations Committee (IFRIC), as issued by the IASB, have been condensed or omitted.
The interim condensed Consolidated Financial Statements should be read in conjunction with the audited annual Consolidated Financial Statements of Talisman as at and for the year ended December 31, 2014 and the notes thereto.
These interim condensed Consolidated Financial Statements were prepared on a going concern basis, under the historical cost convention, except for certain financial assets and liabilities measured at fair value through the condensed Consolidated Statement of Income (Loss).
3. SIGNIFICANT ACCOUNTING POLICIES
a) Accounting Policies Used
The interim condensed Consolidated Financial Statements have been prepared following the same accounting policies and methods of computation as the audited annual Consolidated Financial Statements as at and for the year ended December 31, 2014, except for adoption of the following new standards and interpretations effective as of January 1, 2015:
Employee Benefits
|
·
|
IAS 19 Employee Benefits - Amendments to IAS 19. The amended standard clarified the requirements that relate to how contributions from employees or third parties that are linked to service should be attributed to periods of service. In addition, it permits a practical expedient if the amount of the contributions is independent of the number of years of service, in that contributions can be, but are not required to be recognized as a reduction in the service cost in the period in which the related service is rendered. The amendment is effective for annual periods beginning on or after July 1, 2014. Application of the amended standard does not have an impact on the Company’s financial statements as it reflects current accounting policy of the Company.
|
Operating Segments
|
·
|
IFRS 8 Operating Segments - Amendments to IFRS 8. The amended standard requires (i) disclosure of judgments made by management in aggregating segments, and (ii) a reconciliation of segmented assets to the Company’s assets when segment assets are reported. The amendment is effective for annual periods beginning on or after July 1, 2014. The amendment does not have an impact on the Company’s financial position or performance.
|
Share-based Payments
|
·
|
IFRS 2 Share-Based Payments - Amendments to IFRS 2. The standard amends the definitions of “vesting condition” and “market condition” and adds definitions for “performance condition” and “service condition”. The amendment is effective for annual periods beginning on or after July 1, 2014. The amendment does not have an impact on the Company as it reflects current accounting policy of the Company.
|
Fair Value Measurement
|
·
|
IFRS 13 Fair Value Measurement - Amendments to IFRS 13. The amended standard clarifies that short-term receivables and payables with no stated interest rates can be measured at invoice amounts if the effect of discounting is immaterial. It also clarifies that the portfolio exception can be applied not only to financial assets and liabilities, but also to other contracts within scope of IAS 39 and IFRS 9. The amendment is effective for annual periods beginning on or after July 1, 2014. The application does not have a significant impact on the Company’s financial statements.
|
Related Parties
|
·
|
IAS 24 Related Parties - Amendments to IAS 24. The amended standard (i) revises the definition of related party to include an entity that provides key management personnel services to the reporting entity or its parent, and (ii) clarifies related disclosure requirements. The amendment does not have an impact on the Company’s financial statements, as there is no entity performing key management services for the Company.
|
b) Accounting Pronouncements Not Yet Adopted
The Company continues to assess the impact of adopting the pronouncements from the IASB as described below:
Financial Instruments
|
·
|
IFRS 9 Financial Instruments. IFRS 9 (July 2014) replaces earlier versions of IFRS 9 that had not yet been adopted by the Company and supersedes IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 introduces new models for classification and measurement of financial instruments, hedge accounting and impairment of financial assets and is mandatorily effective for periods beginning on or after January 1, 2018. The Company continues to review the standard as it is updated and monitor its impact on the Company’s financial statements.
|
Revenue from Contracts with Customers
|
·
|
IFRS 15 Revenue from Contracts with Customers. IFRS 15 specifies that revenue should be recognized when an entity transfers control of goods or services at the amount the entity expects to be entitled to as well as requiring entities to provide users of financial statements with more informative, relevant disclosures. The standard supersedes IAS 18 Revenue, IAS 11 Construction Contracts, and a number of revenue-related interpretations. IFRS 15 will be effective for annual periods beginning on or after January 1, 2017. In an exposure draft in May 2015, the effective date of IFRS 15 was proposed to be deferred to January 1, 2018. Application of the standard is mandatory and early adoption is permitted. The Company has not yet determined the impact of the standard on the Company’s financial statements.
|
4. DISCONTINUED OPERATIONS
During the three month period ended June 30, 2015, Talisman and Repsol entered into a purchase and sale agreement whereby Repsol will acquire substantially all of the assets and liabilities of Talisman’s Norwegian operations (the “Disposal Group”) for proceeds of $47 million including working capital. The transaction is expected to close prior to September 30, 2015.
The assets and liabilities included in the Disposal Group have been reclassified as current assets or liabilities held for sale on the condensed Consolidated Balance Sheets. Operating results related to the Disposal Group have been included in net loss from discontinued operations in the condensed Consolidated Statements of Income. Comparative period balances of the condensed Consolidated Statements of Income and Cash Flows have been restated. The Disposal Group was remeasured to its recoverable amount of $47 million at June 30, 2015 and as a result, a loss of $472 million pre-tax ($292 million after-tax) was recorded in Norway. A $112 million foreign exchange gain relating to the Disposal Group has been recognized in accumulated other comprehensive income in Shareholder’s Equity at June 30, 2015 and will be recognized in earnings upon disposition.
Assets and liabilities associated with the Disposal Group as at June 30, 2015 are as follows:
|
|
June 30,
2015
|
|
Assets
|
|
|
|
Cash
|
|
|
4 |
|
Restricted cash (note 9)
|
|
|
91 |
|
Accounts receivable
|
|
|
55 |
|
Income and other taxes receivable
|
|
|
4 |
|
Inventories
|
|
|
28 |
|
Prepaid expenses
|
|
|
5 |
|
Deferred tax assets
|
|
|
1,337 |
|
Other assets
|
|
|
6 |
|
Assets held for sale
|
|
|
1,530 |
|
Liabilities
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
|
117 |
|
Yme removal obligation (note 9)
|
|
|
128 |
|
Decommissioning liabilities (note 12)
|
|
|
1,215 |
|
Other long term obligations
|
|
|
23 |
|
Liabilities associated with assets held for sale
|
|
|
1,483 |
|
Net loss from discontinued operations reported on the condensed Consolidated Statements of Income (Loss) is composed of the following:
|
|
|
|
Three months ended June 30
|
|
2015
|
|
|
2014
|
|
Revenue
|
|
|
83 |
|
|
|
108 |
|
Expenses
|
|
|
(289 |
) |
|
|
(211 |
) |
|
|
|
(206 |
) |
|
|
(103 |
) |
Loss on remeasurement of discontinued operations
|
|
|
(472 |
) |
|
|
- |
|
Loss from discontinued operations before taxes
|
|
|
(678 |
) |
|
|
(103 |
) |
Income taxes
|
|
|
|
|
|
|
|
|
Current income tax recovery
|
|
|
(6 |
) |
|
|
(5 |
) |
Deferred income tax recovery
|
|
|
(308 |
) |
|
|
(68 |
) |
Net loss from discontinued operations
|
|
|
(364 |
) |
|
|
(30 |
) |
|
|
|
|
Six months ended June 30
|
|
2015
|
|
|
2014
|
|
Revenue
|
|
|
144 |
|
|
|
273 |
|
Expenses
|
|
|
(401 |
) |
|
|
(547 |
) |
|
|
|
(257 |
) |
|
|
(274 |
) |
Loss on remeasurement of discontinued operations
|
|
|
(472 |
) |
|
|
- |
|
Loss from discontinued operations before taxes
|
|
|
(729 |
) |
|
|
(274 |
) |
Income taxes
|
|
|
|
|
|
|
|
|
Current income tax recovery
|
|
|
(7 |
) |
|
|
(5 |
) |
Deferred income tax recovery
|
|
|
(316 |
) |
|
|
(149 |
) |
Net loss from discontinued operations
|
|
|
(406 |
) |
|
|
(120 |
) |
During the three month period ended June 30, 2015, the Company recorded an impairment of $118 million in Norway E&E assets to fully impair costs associated with a license after a dry exploration well confirmed the license to be uneconomic. In addition, the Company recorded an impairment of $30 million in Norway, due to an increase in the decommissioning obligation and asset caused by a 1.5% decrease in the credit-adjusted discount rate used to measure decommissioning liabilities.
During the six month period ended June 30, 2014, the Company recorded an impairment of $60 million in Norway, due to an increase in the decommissioning obligation and asset caused by a 1% decrease in the credit-adjusted discount rate used to measure decommissioning liabilities. The Company also recorded $130 million of impairment expense in Norway as a result of the Company’s decision to withdraw from an exploration license following technical evaluation, representing the full book value of the license.
The cash flows from discontinued operations, including changes in related non-cash working capital items, are as follows:
|
|
Three months ended June 30
|
|
|
Six months ended June 30
|
|
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
Operating
|
|
|
(16 |
) |
|
|
64 |
|
|
|
(24 |
) |
|
|
37 |
|
Investing
|
|
|
(9 |
) |
|
|
(76 |
) |
|
|
(37 |
) |
|
|
(125 |
) |
Cash flows from discontinued operations
|
|
|
(25 |
) |
|
|
(12 |
) |
|
|
(61 |
) |
|
|
(88 |
) |
5. DISPOSALS
North America Dispositions
In April 2014, Talisman sold non-core assets in western Canada for net proceeds of $42 million after $2 million in working capital adjustments, resulting in a pre-tax loss on disposal of $3 million ($4 million after-tax).
In March 2014, Talisman completed the sale of its Montney acreage in northeast British Columbia for proceeds of $1.3 billion, resulting in a pre-tax gain of $564 million ($493 million after tax).
6. INVESTMENTS
|
|
June 30,
2015
|
|
|
December 31,
2014
|
|
Investments in Joint Ventures
|
|
|
|
|
|
|
Equity investment in Equion Energía Limited (Equion)
|
|
|
530 |
|
|
|
523 |
|
|
|
|
530 |
|
|
|
523 |
|
Available-for-sale investments
|
|
|
|
|
|
|
|
|
Transasia Pipeline Company Pvt. Ltd.
|
|
|
34 |
|
|
|
34 |
|
Other
|
|
|
49 |
|
|
|
47 |
|
|
|
|
83 |
|
|
|
81 |
|
Total
|
|
|
613 |
|
|
|
604 |
|
|
|
June 30,
2015
|
|
|
December 31,
2014
|
|
Obligation to Fund Equity Investee
|
|
|
|
|
|
|
Equity investment in Talisman Sinopec Energy (UK) Limited (TSEUK)
|
|
|
(659 |
) |
|
|
(700 |
) |
Loan to TSEUK
|
|
|
514 |
|
|
|
514 |
|
|
|
|
(145 |
) |
|
|
(186 |
) |
Investments in Joint Ventures
Movement in the investment in TSEUK joint venture during the period is as follows:
|
|
Six months ended June 30, 2015
|
|
|
Year ended
December 31, 2014
|
|
Balance, beginning of period
|
|
|
(186 |
) |
|
|
206 |
|
Investment in TSEUK
|
|
|
362 |
|
|
|
961 |
|
Loan to TSEUK, net of repayments and settlements1
|
|
|
- |
|
|
|
(298 |
) |
Share of net loss and comprehensive loss
|
|
|
(321 |
) |
|
|
(1,055 |
) |
Balance, end of period
|
|
|
(145 |
) |
|
|
(186 |
) |
|
Amount shown net of subscription of common shares which settled a portion of the shareholder loan in June 2014.
|
Talisman has a 51% interest in the ownership and voting rights of TSEUK whose principal place of operations is the United Kingdom (UK) and is incorporated in England and Wales. Talisman is one of two shareholders in this corporate joint venture engaging in the exploration for, and development and production of crude oil and natural gas. The corporate joint venture is governed by a shareholders’ agreement, which requires that unanimous consent be obtained from the shareholders for all significant operating and financing decisions.
Movement in the investment in Equion joint venture during the period is as follows:
|
|
Six months ended June 30, 2015
|
|
|
Year ended
December 31, 2014
|
|
Balance, beginning of period
|
|
|
523 |
|
|
|
920 |
|
Share of net income and comprehensive income
|
|
|
7 |
|
|
|
15 |
|
Dividend declared by Equion1
|
|
|
- |
|
|
|
(279 |
) |
Impairment
|
|
|
- |
|
|
|
(133 |
) |
Balance, end of period
|
|
|
530 |
|
|
|
523 |
|
1.
|
The dividend declared was settled through a reduction in the loan payable to Equion.
|
Talisman has a 49% interest in the ownership and voting rights of Equion whose principal place of operations is Colombia. Talisman is one of two shareholders in this strategic corporate joint venture engaged in the exploration for, and development and production of crude oil and natural gas. The corporate joint venture is governed by a heads of agreement amongst the shareholders, which requires that unanimous consent be obtained from the shareholders for all significant operating and financing decisions.
The following tables summarize the financial information of the joint ventures. The tables also reconcile financial information to the carrying amount of the Company's interests in joint ventures, which are accounted for using the equity method.
Summarized Balance Sheets
|
|
June 30, 2015
|
|
|
December 31, 2014
|
|
|
|
TSEUK1
|
|
|
Equion1
|
|
|
Total
|
|
|
TSEUK1
|
|
|
Equion1
|
|
|
Total
|
|
Cash and cash equivalents
|
|
|
23 |
|
|
|
79 |
|
|
|
102 |
|
|
|
37 |
|
|
|
141 |
|
|
|
178 |
|
Current assets
|
|
|
538 |
|
|
|
254 |
|
|
|
792 |
|
|
|
517 |
|
|
|
314 |
|
|
|
831 |
|
Loans receivable from shareholders
|
|
|
- |
|
|
|
150 |
|
|
|
150 |
|
|
|
- |
|
|
|
29 |
|
|
|
29 |
|
Non-current assets
|
|
|
5,050 |
|
|
|
1,117 |
|
|
|
6,167 |
|
|
|
4,812 |
|
|
|
1,246 |
|
|
|
6,058 |
|
Total assets
|
|
|
5,611 |
|
|
|
1,600 |
|
|
|
7,211 |
|
|
|
5,366 |
|
|
|
1,730 |
|
|
|
7,096 |
|
Current liabilities
|
|
|
931 |
|
|
|
272 |
|
|
|
1,203 |
|
|
|
1,073 |
|
|
|
392 |
|
|
|
1,465 |
|
Loans payable to shareholders
|
|
|
1,009 |
|
|
|
- |
|
|
|
1,009 |
|
|
|
1,009 |
|
|
|
- |
|
|
|
1,009 |
|
Non-current liabilities
|
|
|
5,114 |
|
|
|
306 |
|
|
|
5,420 |
|
|
|
4,807 |
|
|
|
329 |
|
|
|
5,136 |
|
Total liabilities
|
|
|
7,054 |
|
|
|
578 |
|
|
|
7,632 |
|
|
|
6,889 |
|
|
|
721 |
|
|
|
7,610 |
|
Net assets (liabilities)
|
|
|
(1,443 |
) |
|
|
1,022 |
|
|
|
(421 |
) |
|
|
(1,523 |
) |
|
|
1,009 |
|
|
|
(514 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Talisman’s interest
|
|
|
51 |
% |
|
|
49 |
% |
|
|
|
|
|
|
51 |
% |
|
|
49 |
% |
|
|
|
|
Talisman’s share of net assets (liabilities)
|
|
|
(736 |
) |
|
|
501 |
|
|
|
(235 |
) |
|
|
(777 |
) |
|
|
494 |
|
|
|
(283 |
) |
Goodwill
|
|
|
77 |
|
|
|
162 |
|
|
|
239 |
|
|
|
77 |
|
|
|
162 |
|
|
|
239 |
|
|
|
|
(659 |
) |
|
|
663 |
|
|
|
4 |
|
|
|
(700 |
) |
|
|
656 |
|
|
|
(44 |
) |
Loan to TSEUK
|
|
|
514 |
|
|
|
- |
|
|
|
514 |
|
|
|
514 |
|
|
|
- |
|
|
|
514 |
|
Accumulated impairment on investment
|
|
|
- |
|
|
|
(133 |
) |
|
|
(133 |
) |
|
|
- |
|
|
|
(133 |
) |
|
|
(133 |
) |
Talisman’s investment (obligation to fund)
|
|
|
(145 |
) |
|
|
530 |
|
|
|
385 |
|
|
|
(186 |
) |
|
|
523 |
|
|
|
337 |
|
1.
|
Balances represent respective entity’s 100% share.
|
Summarized Statements of Income (Loss)
|
|
Three months ended
June 30, 2015
|
|
|
Three months ended
June 30, 2014
|
|
|
|
TSEUK1
|
|
|
Equion1
|
|
|
Total
|
|
|
TSEUK1
|
|
|
Equion1
|
|
|
Total
|
|
Revenue
|
|
|
217 |
|
|
|
129 |
|
|
|
346 |
|
|
|
403 |
|
|
|
158 |
|
|
|
561 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
|
|
|
216 |
|
|
|
21 |
|
|
|
237 |
|
|
|
372 |
|
|
|
24 |
|
|
|
396 |
|
Transportation
|
|
|
5 |
|
|
|
9 |
|
|
|
14 |
|
|
|
8 |
|
|
|
10 |
|
|
|
18 |
|
General and administrative
|
|
|
21 |
|
|
|
- |
|
|
|
21 |
|
|
|
8 |
|
|
|
- |
|
|
|
8 |
|
Depreciation, depletion and amortization
|
|
|
112 |
|
|
|
84 |
|
|
|
196 |
|
|
|
96 |
|
|
|
68 |
|
|
|
164 |
|
Exploration expense
|
|
|
1 |
|
|
|
- |
|
|
|
1 |
|
|
|
2 |
|
|
|
- |
|
|
|
2 |
|
Finance costs
|
|
|
39 |
|
|
|
- |
|
|
|
39 |
|
|
|
35 |
|
|
|
- |
|
|
|
35 |
|
Impairment
|
|
|
260 |
|
|
|
- |
|
|
|
260 |
|
|
|
198 |
|
|
|
- |
|
|
|
198 |
|
Other
|
|
|
(12 |
) |
|
|
(8 |
) |
|
|
(20 |
) |
|
|
15 |
|
|
|
(15 |
) |
|
|
- |
|
Income (loss) before tax
|
|
|
(425 |
) |
|
|
23 |
|
|
|
(402 |
) |
|
|
(331 |
) |
|
|
71 |
|
|
|
(260 |
) |
Current income tax expense (recovery)
|
|
|
(22 |
) |
|
|
20 |
|
|
|
(2 |
) |
|
|
1 |
|
|
|
37 |
|
|
|
38 |
|
Deferred income tax recovery
|
|
|
(178 |
) |
|
|
(13 |
) |
|
|
(191 |
) |
|
|
(214 |
) |
|
|
(12 |
) |
|
|
(226 |
) |
Net income (loss) and comprehensive income (loss)
|
|
|
(225 |
) |
|
|
16 |
|
|
|
(209 |
) |
|
|
(118 |
) |
|
|
46 |
|
|
|
(72 |
) |
Talisman’s interest
|
|
|
51 |
% |
|
|
49 |
% |
|
|
|
|
|
|
51 |
% |
|
|
49 |
% |
|
|
|
|
Talisman’s share of income (loss) after tax
|
|
|
(115 |
) |
|
|
8 |
|
|
|
(107 |
) |
|
|
(60 |
) |
|
|
23 |
|
|
|
(37 |
) |
Cash dividends received by Talisman
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
1.
|
Balances represent respective entity’s 100% share.
|
Summarized Statements of Income (Loss)
|
|
Six months ended
June 30, 2015
|
|
|
Six months ended
June 30, 2014
|
|
|
|
TSEUK1
|
|
|
Equion1
|
|
|
Total
|
|
|
TSEUK1
|
|
|
Equion1
|
|
|
Total
|
|
Revenue
|
|
|
390 |
|
|
|
230 |
|
|
|
620 |
|
|
|
706 |
|
|
|
321 |
|
|
|
1,027 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
|
|
|
477 |
|
|
|
39 |
|
|
|
516 |
|
|
|
656 |
|
|
|
45 |
|
|
|
701 |
|
Transportation
|
|
|
11 |
|
|
|
16 |
|
|
|
27 |
|
|
|
11 |
|
|
|
20 |
|
|
|
31 |
|
General and administrative
|
|
|
41 |
|
|
|
- |
|
|
|
41 |
|
|
|
15 |
|
|
|
- |
|
|
|
15 |
|
Restructuring costs
|
|
|
5 |
|
|
|
- |
|
|
|
5 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Depreciation, depletion and amortization
|
|
|
284 |
|
|
|
151 |
|
|
|
435 |
|
|
|
176 |
|
|
|
132 |
|
|
|
308 |
|
Exploration expense
|
|
|
2 |
|
|
|
- |
|
|
|
2 |
|
|
|
5 |
|
|
|
- |
|
|
|
5 |
|
Finance costs
|
|
|
78 |
|
|
|
1 |
|
|
|
79 |
|
|
|
67 |
|
|
|
1 |
|
|
|
68 |
|
Impairment
|
|
|
260 |
|
|
|
- |
|
|
|
260 |
|
|
|
198 |
|
|
|
- |
|
|
|
198 |
|
Other
|
|
|
47 |
|
|
|
3 |
|
|
|
50 |
|
|
|
27 |
|
|
|
(26 |
) |
|
|
1 |
|
Income (loss) before tax
|
|
|
(815 |
) |
|
|
20 |
|
|
|
(795 |
) |
|
|
(449 |
) |
|
|
149 |
|
|
|
(300 |
) |
Current income tax expense (recovery)
|
|
|
(52 |
) |
|
|
16 |
|
|
|
(36 |
) |
|
|
(26 |
) |
|
|
75 |
|
|
|
49 |
|
Deferred income tax recovery
|
|
|
(134 |
) |
|
|
(10 |
) |
|
|
(144 |
) |
|
|
(272 |
) |
|
|
(19 |
) |
|
|
(291 |
) |
Net income (loss) and comprehensive income (loss)
|
|
|
(629 |
) |
|
|
14 |
|
|
|
(615 |
) |
|
|
(151 |
) |
|
|
93 |
|
|
|
(58 |
) |
Talisman’s interest
|
|
|
51 |
% |
|
|
49 |
% |
|
|
|
|
|
|
51 |
% |
|
|
49 |
% |
|
|
|
|
Talisman’s share of income (loss) after tax
|
|
|
(321 |
) |
|
|
7 |
|
|
|
(314 |
) |
|
|
(77 |
) |
|
|
46 |
|
|
|
(31 |
) |
Cash dividends received by Talisman
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
1.
|
Balances represent respective entity’s 100% share.
|
Summarized Statements of Cash Flows
|
|
Three months ended
June 30, 2015
|
|
|
Three months ended
June 30, 2014
|
|
|
|
TSEUK1
|
|
|
Equion1
|
|
|
Total
|
|
|
TSEUK1
|
|
|
Equion1
|
|
|
Total
|
|
Operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
(225 |
) |
|
|
16 |
|
|
|
(209 |
) |
|
|
(118 |
) |
|
|
46 |
|
|
|
(72 |
) |
Add: Finance costs (cash and non-cash)
|
|
|
39 |
|
|
|
- |
|
|
|
39 |
|
|
|
35 |
|
|
|
- |
|
|
|
35 |
|
Items not involving cash
|
|
|
176 |
|
|
|
65 |
|
|
|
241 |
|
|
|
89 |
|
|
|
44 |
|
|
|
133 |
|
Changes in non-cash working capital
|
|
|
(164 |
) |
|
|
(111 |
) |
|
|
(275 |
) |
|
|
59 |
|
|
|
9 |
|
|
|
68 |
|
Cash provided by (used in) operating activities
|
|
|
(174 |
) |
|
|
(30 |
) |
|
|
(204 |
) |
|
|
65 |
|
|
|
99 |
|
|
|
164 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(198 |
) |
|
|
(21 |
) |
|
|
(219 |
) |
|
|
(332 |
) |
|
|
(55 |
) |
|
|
(387 |
) |
Proceeds of disposition
|
|
|
- |
|
|
|
7 |
|
|
|
7 |
|
|
|
- |
|
|
|
14 |
|
|
|
14 |
|
Loans to shareholders
|
|
|
- |
|
|
|
(80 |
) |
|
|
(80 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
Other
|
|
|
(31 |
) |
|
|
(8 |
) |
|
|
(39 |
) |
|
|
16 |
|
|
|
(12 |
) |
|
|
4 |
|
Cash used in investing activities
|
|
|
(229 |
) |
|
|
(102 |
) |
|
|
(331 |
) |
|
|
(316 |
) |
|
|
(53 |
) |
|
|
(369 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares issued
|
|
|
390 |
|
|
|
- |
|
|
|
390 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Loans from shareholders, net of repayments
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
349 |
|
|
|
- |
|
|
|
349 |
|
Finance costs (cash)
|
|
|
(10 |
) |
|
|
- |
|
|
|
(10 |
) |
|
|
(17 |
) |
|
|
1 |
|
|
|
(16 |
) |
Other
|
|
|
9 |
|
|
|
- |
|
|
|
9 |
|
|
|
20 |
|
|
|
- |
|
|
|
20 |
|
Cash provided by financing activities
|
|
|
389 |
|
|
|
- |
|
|
|
389 |
|
|
|
352 |
|
|
|
1 |
|
|
|
353 |
|
1.
|
Balances represent respective entity’s 100% share.
|
Summarized Statements of Cash Flows
|
|
Six months ended
June 30, 2015
|
|
|
Six months ended
June 30, 2015
|
|
|
|
TSEUK1
|
|
|
Equion1
|
|
|
Total
|
|
|
TSEUK1
|
|
|
Equion1
|
|
|
Total
|
|
Operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
(629 |
) |
|
|
14 |
|
|
|
(615 |
) |
|
|
(151 |
) |
|
|
93 |
|
|
|
(58 |
) |
Add: Finance costs (cash and non-cash)
|
|
|
78 |
|
|
|
1 |
|
|
|
79 |
|
|
|
67 |
|
|
|
1 |
|
|
|
68 |
|
Items not involving cash
|
|
|
437 |
|
|
|
145 |
|
|
|
582 |
|
|
|
122 |
|
|
|
101 |
|
|
|
223 |
|
Changes in non-cash working capital
|
|
|
(134 |
) |
|
|
(10 |
) |
|
|
(144 |
) |
|
|
(89 |
) |
|
|
(27 |
) |
|
|
(116 |
) |
Cash provided by (used in) operating activities
|
|
|
(248 |
) |
|
|
150 |
|
|
|
(98 |
) |
|
|
(51 |
) |
|
|
168 |
|
|
|
117 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(411 |
) |
|
|
(42 |
) |
|
|
(453 |
) |
|
|
(653 |
) |
|
|
(69 |
) |
|
|
(722 |
) |
Proceeds of dispositions
|
|
|
- |
|
|
|
7 |
|
|
|
7 |
|
|
|
- |
|
|
|
14 |
|
|
|
14 |
|
Loans to shareholders
|
|
|
- |
|
|
|
(121 |
) |
|
|
(121 |
) |
|
|
- |
|
|
|
(37 |
) |
|
|
(37 |
) |
Other
|
|
|
(64 |
) |
|
|
(56 |
) |
|
|
(120 |
) |
|
|
106 |
|
|
|
(15 |
) |
|
|
91 |
|
Cash used in investing activities
|
|
|
(475 |
) |
|
|
(212 |
) |
|
|
(687 |
) |
|
|
(547 |
) |
|
|
(107 |
) |
|
|
(654 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares issued
|
|
|
710 |
|
|
|
- |
|
|
|
710 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Loans from shareholders, net of repayments
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
686 |
|
|
|
- |
|
|
|
686 |
|
Finance costs (cash)
|
|
|
(19 |
) |
|
|
- |
|
|
|
(19 |
) |
|
|
(30 |
) |
|
|
- |
|
|
|
(30 |
) |
Other
|
|
|
18 |
|
|
|
- |
|
|
|
18 |
|
|
|
(8 |
) |
|
|
- |
|
|
|
(8 |
) |
Cash provided by financing activities
|
|
|
709 |
|
|
|
- |
|
|
|
709 |
|
|
|
648 |
|
|
|
- |
|
|
|
648 |
|
1.
|
Balances represent respective entity’s 100% share.
|
The summarized financial information presented is the amounts included in the financial statements of the joint venture entities adjusted for fair value adjustments made at the time of acquisition of the joint venture, as appropriate. The fair value adjustments related to the Company's jointly controlled equity interest in Equion principally relate to property, plant and equipment, provisions and the related indemnification asset and goodwill. In addition, the financial statements of TSEUK have been adjusted with respect to asset impairments, decommissioning liabilities and provisions.
TSEUK Joint Venture
As at June 30, 2015, the investment balance in the TSEUK joint venture was negative $145 million. The obligation to fund TSEUK, in proportion of its shareholding, arises from the Company’s past practice of funding TSEUK’s cash flow deficiencies, and the expectation that cash flow deficiencies will continue to be funded through 2015. In addition, the Company, in proportion of its shareholding, has provided certain guarantees to fund TSEUK’s decommissioning obligation if TSEUK is unable to (note 17), and the shareholders of TSEUK have provided equity funding facilities to TSEUK which include funding decommissioning liabilities. As such, the Company has recognized a negative investment value from the application of equity accounting. The Company’s obligation to fund TSEUK will increase to the extent future losses are generated within TSEUK. In addition, future contributions to the TSEUK joint venture could be impaired to the extent recoverability is not probable.
In June 2014, the shareholders of TSEUK provided an equity funding facility totaling $1.2 billion to TSEUK, of which Talisman was committed to $612 million, for the purpose of funding capital, decommissioning and operating expenditures of TSEUK. In March 2015, the maximum available amount was increased to $1.5 billion. This facility expired on June 30, 2015. During the period from July 1, 2014 to December 31, 2014, the shareholders of TSEUK agreed to subscribe for common shares of TSEUK in the amount of $625 million under this facility, of which Talisman’s share was $319 million. During the six month period ended June 30, 2015, the shareholders of TSEUK agreed to subscribe for common shares of TSEUK in the amount of $710 million under this facility, of which Talisman’s share was $362 million.
In June 2015, the shareholders of TSEUK provided a new equity funding facility of $1.7 billion, of which Talisman is committed to $867 million, for the purpose of funding capital, decommissioning and operating expenditures of TSEUK. This facility is effective from July 1, 2015 and expires on December 31, 2016.
The shareholders of TSEUK have provided an unsecured loan facility totaling $2.4 billion to TSEUK, of which Talisman is committed to $1.2 billion, for the purpose of funding capital expenditures of TSEUK. In January 2015, an agreement was reached by the shareholders of TSEUK, in which the quarterly principal and interest payments of the facility were deferred until July 31, 2015. As at June 30, 2015, $1.0 billion has been drawn under this facility, of which Talisman’s share is $514 million (December 31, 2014 - $514 million).
Loans under this facility bear interest at the UK interest rate swap rate plus 2.5%, and are repayable quarterly in equal installments based upon a five year repayment period calculated from the date each loan is advanced. All outstanding loans mature December 31, 2017, although the maturity date may be extended from time to time upon agreement between the shareholders and TSEUK. Prior to the maturity date, TSEUK may repay, in full or in part, the balance outstanding on any loan under this facility. Remaining borrowing capacity under this facility:
|
|
Six months ended
June 30, 2015
|
|
|
Year ended
December 31, 2014
|
|
Borrowing capacity, beginning of period
|
|
|
742 |
|
|
|
1,525 |
|
Advances
|
|
|
- |
|
|
|
(783 |
) |
Borrowing capacity, end of period
|
|
|
742 |
|
|
|
742 |
|
Talisman’s share
|
|
|
378 |
|
|
|
378 |
|
In June 2014, the shareholders of TSEUK agreed to subscribe for common shares of TSEUK in the amount of $1.26 billion, of which Talisman’s share was $643 million, which settled shareholder loans of $1.24 billion and accrued interest of $18 million, of which Talisman’s share was $634 million and $9 million, respectively.
In July 2015, the shareholders of TSEUK agreed to subscribe for common shares of TSEUK in the amount of $1.06 billion, of which Talisman’s share was $541 million, which settled remaining shareholder loans of $1.01 billion and accrued interest of $52 million, of which Talisman’s share was $514 million and $27 million, respectively.
TSEUK is required to provide demand letters of credit as security in relation to certain decommissioning obligations in the UK pursuant to contractual arrangements under Decommissioning Security Agreements (DSAs). Refer to “Liquidity Risk” in note 17.
During the three months ended March 31, 2015, the UK government announced that effective January 1, 2015 the rate of supplementary charge on ring fence profits decreased from 32% to 20%. Consequently, there is now a combined UK corporation tax and supplementary charge rate of 50% (down from 62%) for oil and gas companies with fields not subject to Petroleum Revenue Tax (PRT). The UK government also announced that the PRT rate will decrease from 50% to 35%, effective for years ending after December 31, 2015. As a result of this legislative change, TSEUK recorded a recovery of deferred PRT of $98 million ($50 million net to Talisman).
During the three months ended June 30, 2015, an impairment expense of $260 million, of which Talisman’s share was $133 million, was recorded in TSEUK as a result of Talisman’s adoption of Repsol’s credit-adjusted discount rate in measuring decommissioning obligations.
Equion Joint Venture
During the year ended December 31, 2014, Equion declared dividends payable to the shareholders in the amount of $570 million, of which Talisman’s share was $279 million. The Company has recorded a reduction in the equity investment in Equion. The dividends were settled through reduction of the loan due to Equion as described below.
The loan due to Equion of $74 million (December 31, 2014 - $15 million) is unsecured, due upon demand and bears interest at LIBOR plus 0.30%.
There have been no significant changes in expected future commitments of TSEUK and Equion, and the timing of those payments, since December 31, 2014.
7. GOODWILL
Continuity of goodwill
|
|
Six months ended June 30, 2015
|
|
|
Year ended December 31, 2014
|
|
Balance, beginning of period
|
|
|
279 |
|
|
|
575 |
|
Disposals
|
|
|
- |
|
|
|
(9 |
) |
Impairments
|
|
|
- |
|
|
|
(287 |
) |
Balance, end of period
|
|
|
279 |
|
|
|
279 |
|
Goodwill has no tax basis.
8. OTHER ASSETS
|
|
June 30,
2015
|
|
|
December 31,
2014
|
|
Accrued pension asset
|
|
|
5 |
|
|
|
4 |
|
Decommissioning sinking fund
|
|
|
71 |
|
|
|
71 |
|
Transportation rights1
|
|
|
88 |
|
|
|
92 |
|
Other
|
|
|
11 |
|
|
|
13 |
|
Total
|
|
|
175 |
|
|
|
180 |
|
|
Net of $20 million accumulated depreciation (December 31, 2014 - $16 million).
|
9. YME REMOVAL OBLIGATION
In March 2013, Talisman, acting on behalf of its partners in the Yme field in Norway, entered into an agreement with the platform contractor. This agreement terminated all existing Yme contracts and outstanding disputes between the Yme partners and the platform contractor, set out the provisions regarding the removal of the existing above-surface Yme structure, the delivery of the existing above-surface Yme structure to the platform contractor (which Talisman, acting on behalf of the Yme partners, will complete as the “Talisman Works”) and provided for a payment of $470 million from the platform contractor to the Yme partners to fund the cost of the Talisman Works. The Yme partners agreed to deposit $409 million into an escrow account, which can only be withdrawn for purposes of settling costs and liabilities associated with the Talisman Works.
Balances of restricted cash and Yme removal obligation as at June 30, 2015 were reclassified to assets and liabilities held for sale as a result of Talisman’s expected sale of substantially all of its operating assets and liabilities of the Norwegian operations to Repsol. As at June 30, 2015, Talisman’s share of the liability associated with the Talisman Works in the amount of $128 million (December 31, 2014 - $186 million) has been recorded as the Yme removal obligation. Talisman’s share of the cash held in the escrow account in the amount of $91 million (December 31, 2014 - $149 million) has been recorded as restricted cash. During the three and six months ended June 30, 2015, $20 million and $58 million (2014 - $13 million and $29 million) respectively in eligible expenditures were incurred on the Talisman Works which reduced the Yme removal obligation and the restricted cash balance by an equal amount.
10. OIL AND GAS ASSETS
The cost and accumulated DD&A of the Company’s PP&E (including corporate assets) and E&E assets are as follows:
|
|
PP&E
|
|
|
E&E assets
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
Cost
|
|
|
|
|
|
|
|
|
|
At December 31, 2013
|
|
|
23,039 |
|
|
|
5,393 |
|
|
|
28,432 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions
|
|
|
1,743 |
|
|
|
409 |
|
|
|
2,152 |
|
Disposals and derecognition
|
|
|
(1,981 |
) |
|
|
(23 |
) |
|
|
(2,004 |
) |
Transfers from E&E assets to PP&E
|
|
|
285 |
|
|
|
(285 |
) |
|
|
- |
|
Change in decommissioning liabilities
|
|
|
130 |
|
|
|
114 |
|
|
|
244 |
|
Expensed to dry hole
|
|
|
- |
|
|
|
(140 |
) |
|
|
(140 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2014
|
|
|
23,216 |
|
|
|
5,468 |
|
|
|
28,684 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions
|
|
|
- |
|
|
|
8 |
|
|
|
8 |
|
Additions
|
|
|
467 |
|
|
|
93 |
|
|
|
560 |
|
Disposals and derecognition
|
|
|
(7 |
) |
|
|
- |
|
|
|
(7 |
) |
Transfers from E&E assets to PP&E
|
|
|
11 |
|
|
|
(11 |
) |
|
|
- |
|
Change in decommissioning liabilities
|
|
|
300 |
|
|
|
4 |
|
|
|
304 |
|
Expensed to dry hole
|
|
|
- |
|
|
|
(19 |
) |
|
|
(19 |
) |
Transfers to assets held for sale (note 4)
|
|
|
(3,827 |
) |
|
|
(2,124 |
) |
|
|
(5,951 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 30, 2015
|
|
|
20,160 |
|
|
|
3,419 |
|
|
|
23,579 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated DD&A
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2013
|
|
|
13,287 |
|
|
|
2,228 |
|
|
|
15,515 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charge for the period
|
|
|
1,936 |
|
|
|
10 |
|
|
|
1,946 |
|
Disposals and derecognition
|
|
|
(1,733 |
) |
|
|
- |
|
|
|
(1,733 |
) |
Transfers from E&E assets to PP&E
|
|
|
10 |
|
|
|
(10 |
) |
|
|
- |
|
Impairment losses, net of reversals
|
|
|
672 |
|
|
|
676 |
|
|
|
1,348 |
|
Transfers from PP&E to E&E assets
|
|
|
(20 |
) |
|
|
20 |
|
|
|
- |
|
|
|
|
|
|
|
|
. |
|
|
|
|
|
At December 31, 2014
|
|
|
14,152 |
|
|
|
2,924 |
|
|
|
17,076 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charge for the period
|
|
|
887 |
|
|
|
- |
|
|
|
887 |
|
Disposals and derecognition
|
|
|
(6 |
) |
|
|
- |
|
|
|
(6 |
) |
Impairment, net of reversals (note 11)
|
|
|
70 |
|
|
|
131 |
|
|
|
201 |
|
Transfers to assets held for sale (note 4)
|
|
|
(3,597 |
) |
|
|
(2,124 |
) |
|
|
(5,721 |
) |
|
|
|
|
|
|
|
. |
|
|
|
|
|
At June 30, 2015
|
|
|
11,506 |
|
|
|
931 |
|
|
|
12,437 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value
|
|
|
|
|
|
|
|
|
|
|
|
|
At June 30, 2015
|
|
|
8,654 |
|
|
|
2,488 |
|
|
|
11,142 |
|
At December 31, 2014
|
|
|
9,064 |
|
|
|
2,544 |
|
|
|
11,608 |
|
At December 31, 2013
|
|
|
9,752 |
|
|
|
3,165 |
|
|
|
12,917 |
|
11. IMPAIRMENT, NET OF REVERSALS
|
|
Three months ended June 30
|
|
|
Six months ended June 30
|
|
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
Impairment losses
|
|
|
|
|
|
|
|
|
|
|
|
|
E&E assets
|
|
|
- |
|
|
|
- |
|
|
|
2 |
|
|
|
- |
|
PP&E
|
|
|
- |
|
|
|
- |
|
|
|
46 |
|
|
|
- |
|
|
|
|
- |
|
|
|
- |
|
|
|
48 |
|
|
|
- |
|
Impairment reversals
|
|
|
|
|
|
|
|
|
|
|
|
|
E&E assets
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
PP&E
|
|
|
- |
|
|
|
(32 |
) |
|
|
- |
|
|
|
(32 |
) |
|
|
|
- |
|
|
|
(32 |
) |
|
|
- |
|
|
|
(32 |
) |
Net Impairment (reversal)
|
|
|
- |
|
|
|
(32 |
) |
|
|
48 |
|
|
|
(32 |
) |
In conjunction with the acquisition of the Company by Repsol, Repsol has completed a preliminary allocation of the purchase price for purposes of its accounting subsequent to the acquisition date. As part of the purchase price allocation, Repsol estimated fair values of the Company’s assets and liabilities. Based on this preliminary assessment, certain of the Company’s assets could be impaired or subject to impairment reversals in future periods. Management has not recorded these potential impairments or reversals in the June 30, 2015 financial statements as the estimates are considered preliminary and subject to further review. The magnitude of any impairments or reversals to be recorded in future periods will be determined as the purchase price allocation is finalized. This is expected to occur later in 2015.
During the three month period ended June 30, 2014, the Company recorded an impairment reversal of $32 million in North America, due to the estimated recoverable amount of assets held for sale exceeding their carrying amounts.
12. DECOMMISSIONING LIABILITIES
Continuity of decommissioning liabilities
|
|
Six months ended June 30, 2015
|
|
|
Year ended
December 31, 2014
|
|
Balance, beginning of period
|
|
|
1,928 |
|
|
|
1,769 |
|
Liabilities incurred during the period
|
|
|
10 |
|
|
|
75 |
|
Liabilities settled during the period
|
|
|
(40 |
) |
|
|
(59 |
) |
Accretion expense
|
|
|
28 |
|
|
|
51 |
|
Revisions in estimated cash flows
|
|
|
(20 |
) |
|
|
109 |
|
Change in discount rate
|
|
|
314 |
|
|
|
60 |
|
Disposals
|
|
|
- |
|
|
|
(77 |
) |
Reclassified as liabilities associated with assets held for sale (note 4)
|
|
|
(1,215 |
) |
|
|
- |
|
Balance, end of period
|
|
|
1,005 |
|
|
|
1,928 |
|
Expected to be settled within one year
|
|
|
38 |
|
|
|
43 |
|
Expected to be settled in more than one year
|
|
|
967 |
|
|
|
1,885 |
|
|
|
|
1,005 |
|
|
|
1,928 |
|
As a result of Repsol’s acquisition of Talisman in May 2015, Talisman has adopted Repsol’s credit-adjusted rate to discount its decommissioning liabilities as at June 30, 2015. The provision has been discounted using a weighted average credit-adjusted rate of 2.0% at June 30, 2015 (December 31, 2014 – 3.5%), which excludes the impact of inflation. As a result, Talisman’s decommissioning liabilities including discontinued operations increased by $314 million.
13. FINANCE COSTS
|
|
Three months ended June 30
|
Six months ended June 30
|
|
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
Interest on long-term debt
|
|
|
64 |
|
|
|
69 |
|
|
|
130 |
|
|
|
137 |
|
Miscellaneous interest expense and other fees
|
|
|
8 |
|
|
|
7 |
|
|
|
20 |
|
|
|
15 |
|
Accretion expense
|
|
|
7 |
|
|
|
7 |
|
|
|
13 |
|
|
|
14 |
|
|
|
|
79 |
|
|
|
83 |
|
|
|
163 |
|
|
|
166 |
|
14. LONG-TERM DEBT
|
|
June 30,
2015
|
|
|
December 31,
2014
|
|
Bankers’ Acceptances
|
|
|
- |
|
|
|
475 |
|
Commercial Paper
|
|
|
- |
|
|
|
103 |
|
Tangguh Project Financing
|
|
|
40 |
|
|
|
43 |
|
Short-term LIBOR Loan
|
|
|
- |
|
|
|
150 |
|
Loans from Related Parties
|
|
|
831 |
|
|
|
- |
|
Debentures and Notes (Unsecured)
|
|
|
|
|
|
|
|
|
US$ denominated
|
|
|
3,531 |
|
|
|
3,905 |
|
UK£ denominated (UK£ million)
|
|
|
392 |
|
|
|
388 |
|
Gross debt
|
|
|
4,794 |
|
|
|
5,064 |
|
Less: current portion
|
|
|
(156 |
) |
|
|
(1,109 |
) |
Less: Loans from Related Parties
|
|
|
(831 |
) |
|
|
- |
|
Long-term debt
|
|
|
3,807 |
|
|
|
3,955 |
|
During the six month period ended June 30, 2015, Talisman repaid debt of $1,558 million, including $150 million of short-term LIBOR loan, $775 million of bankers’ acceptances, $255 million of commercial paper, $375 million of 5.125% notes and $3 million of Tangguh project financing. The Company also issued debt of $452 million, including $300 million of bankers’ acceptances and $152 million of commercial paper. The current liability of $156 million consists of $150 million in 8.5% notes, and $6 million in Tangguh project financing.
Bank Credit Facilities and Commercial Paper
At June 30, 2015, Talisman had unsecured credit facilities totaling $3.2 billion, consisting of facilities of $3 billion (Facility No. 1), maturing March 19, 2019 and $200 million (Facility No. 2), maturing October 21, 2019.
Borrowings under Facility No. 1 are available in the form of prime loans, C$ or US$ bankers’ acceptances, US$ base rate loans, LIBOR-based loans and letters of credit. In addition, drawings to a total of $1.0 billion are available in the form of letters of credit. Borrowings under Facility No. 2 are available in the form of prime loans, C$ or US$ bankers’ acceptances, US$ base rate loans, LIBOR-based loans and letters of credit.
At June 30, 2015, there were no drawings in the form of bankers’ acceptances or commercial paper. There was $85 million in letters of credit support outstanding at June 30, 2015. The authorized amount under the Company’s commercial paper program is $1.0 billion, but the amount available under this program is limited to the availability of backup funds under the Company’s Facility No. 1.
At June 30, 2015, available borrowing capacity under the bank credit facilities was $3.1 billion.
Related Party Facilities
During the three months period ended June 30, 2015, Talisman has entered into the following revolving facilities with Repsol entities:
On May 8, 2015, TE Holdings SARL., a subsidiary of Talisman, entered into a $500 million revolving facility with Repsol Tesoreria Y Gestion Financiera, S.A. The facility matures on May 8, 2016 and bears an interest rate of LIBOR+0.80%. As at June 30, 2015, $197 million has been drawn under this facility. Interest expense related to the facility recognized by Talisman during the period was less than $1 million.
On May 8, 2015, Talisman also entered into a $1.0 billion revolving facility with Repsol Energy Resources Canada, Inc. The facility matures on May 8, 2018 and bears an interest rate of LIBOR+1.20%. As at June 30, 2015, $634 million has been drawn under this facility. Interest expense related to the facility recognized by Talisman during the period was $1 million.
Debt Covenants
Talisman is in compliance with all of its debt covenants. The Company’s principal financial covenant under its primary bank credit facility is a debt-to-cash flow ratio of less than 3.5:1, calculated quarterly on a trailing 12-month basis as of the last day of each fiscal quarter. Considering the current commodity price environment, Talisman may require support from Repsol to ensure continued compliance with its liquidity and covenant requirements.
15. OTHER LONG-TERM OBLIGATIONS
|
|
June 30,
2015
|
|
|
December 31,
2014
|
|
Accrued pension and other post-employment benefits liabilities
|
|
|
102 |
|
|
|
135 |
|
Deferred credits
|
|
|
17 |
|
|
|
41 |
|
Long-term portion of discounted obligations under finance leases
|
|
|
36 |
|
|
|
41 |
|
Long-term portion of share-based payments liability (note 16)
|
|
|
- |
|
|
|
1 |
|
Other
|
|
|
67 |
|
|
|
55 |
|
|
|
|
222 |
|
|
|
273 |
|
The fair value of financial liabilities included above approximates the carrying amount.
16. SHARE CAPITAL AND SHARE-BASED PAYMENTS
Authorized
Talisman's authorized share capital consists of an unlimited number of common shares without nominal or par value and an unlimited number of first and second preferred shares.
Common Shares Issued
Continuity of common shares
|
|
Six months ended
June 30, 2015
|
|
|
Year ended
December 31, 2014
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
Balance, beginning of period
|
|
|
1,031,525,988 |
|
|
|
1,738 |
|
|
|
1,031,356,870 |
|
|
|
1,723 |
|
Issued on exercise of stock options
|
|
|
- |
|
|
|
- |
|
|
|
478,244 |
|
|
|
5 |
|
Converted from preferred shares
|
|
|
8,000,000 |
|
|
|
195 |
|
|
|
- |
|
|
|
- |
|
Shares previously held in trust sold on the open market
|
|
|
323,584 |
|
|
|
3 |
|
|
|
- |
|
|
|
- |
|
Shares purchased and held in trust for long-term PSU plan
|
|
|
(3,793,939 |
) |
|
|
(30 |
) |
|
|
(2,265,898 |
) |
|
|
(21 |
) |
Shares released from trust for long-term PSU plan
|
|
|
8,110,394 |
|
|
|
86 |
|
|
|
1,956,772 |
|
|
|
31 |
|
Balance, end of period
|
|
|
1,044,166,027 |
|
|
|
1,992 |
|
|
|
1,031,525,988 |
|
|
|
1,738 |
|
On May 8, 2015, Repsol’s acquisition of Talisman was completed, whereby Repsol acquired all outstanding common and preferred shares of Talisman. The outstanding preferred shares were subsequently converted into common shares on a 1:1 basis.
Subsequent to June 30, 2015, there were no activities relating to the Company’s common shares.
During the three and six month periods ended June 30, 2015, the Company declared common share dividends of $0.1125 per common share for an aggregate dividend of $117 million.
Preferred Shares Issued
Continuity of preferred shares
|
|
Six months ended
June 30, 2015
|
|
|
Year ended
December 31, 2014
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
Cumulative Redeemable Rate Reset First Preferred Shares, 4.2% Series 1:
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of period
|
|
|
8,000,000 |
|
|
|
191 |
|
|
|
8,000,000 |
|
|
|
191 |
|
Converted into common shares
|
|
|
(8,000,000 |
) |
|
|
(191 |
) |
|
|
- |
|
|
|
- |
|
Balance, end of period
|
|
|
- |
|
|
|
- |
|
|
|
8,000,000 |
|
|
|
191 |
|
During the three month period ended June 30, 2015, no preferred share dividends were declared. During the six month period ended June 30, 2015, Talisman declared preferred share dividends of C$0.2625 per share for an aggregate dividend of $2 million.
Subsequent to the acquisition of Talisman by Repsol on May 8, 2015, all Series 1 preferred shares were converted on a 1:1 basis into common shares.
Share-Based Payments
Subsequent to the acquisition of Talisman by Repsol on May 8, 2015, all share-based payment units were settled and paid by May 29, 2015.
As at June 30, 2015, there were no short-term or long-term obligations on the Company’s balance sheets, relating to stock options, cash units, DSUs and RSUs, as all such outstanding units were settled and paid in the three month period ended June 30, 2015.
During the three month period ended June 30, 2015, the Company recorded a share-based payments recovery of $19 million (2014 - $23 million expense) in respect of the following plans: stock options - $37 million recovery, cash units - $1 million recovery, PSUs - $12 million expense, RSUs - $8 million expense, and DSUs - $1 million recovery. The share-based payments expense includes cash payments of $32 million (2014 - $14 million) to employees in settlement of fully accrued share-based payments liabilities for RSUs settled in the period. An additional cash payment of $86 million was made to employees in cash settlement of all stock options, cash units, RSUs, and PSUs outstanding on completion of Repsol’s acquisition of Talisman. In general and administrative expense in the condensed Consolidated Statement of Income (Loss), the Company recognized no DSU expense relating to the director and executive deferrals. General and administrative expense included payments of $8 million for settlement of DSUs as a result of Repsol’s acquisition of Talisman.
During the six month period ended June 30, 2015, the Company recorded share-based payments recovery of $24 million (2014 - $9 million recovery) in respect of the following plans: stock options $38 million recovery, cash units - $3 million recovery, PSUs - $7 million expense, RSUs - $10 million expense, and DSUs - $nil. The share-based payments expense includes cash payments of $32 million (2014 - $16 million) to employees in settlement of fully accrued share-based payments liabilities for RSUs settled in the period. An additional cash payment of $86 million was made to employees in cash settlement of all stock options, cash units, RSUs, and PSUs outstanding on completion of Repsol’s acquisition of Talisman. In general and administrative expense in the condensed Consolidated Statement of Income (Loss), the Company recognized no DSU recovery relating to the directors and executive deferrals. General and administrative expense included payments of $8 million for settlement of DSUs as a result of Repsol’s acquisition of Talisman.
At June 30, 2015, there were no outstanding share-based payment arrangements.
17. FINANCIAL INSTRUMENTS
Talisman’s financial assets and liabilities at June 30, 2015 consisted of cash and cash equivalents, accounts receivable, available-for-sale investments, bank indebtedness, accounts payable and accrued liabilities, loans from joint ventures, loans from related parties, long-term debt (including the current portion) and risk management assets and liabilities arising from the use of derivative financial instruments.
Fair Value of Financial Assets and Liabilities
The fair values of cash and cash equivalents, accounts receivable, bank indebtedness, accounts payable and accrued liabilities, and loans from joint ventures approximate their carrying values due to the short-term maturity of those instruments.
Borrowings under bank credit facilities are short-term in nature and are market rate-based, thus, carrying value approximates fair value. The fair value of public debentures and notes is based on market quotations, which reflect the discounted present value of the principal and interest payments using the effective yield for instruments having the same term and risk characteristics. The fair values of private notes are based on estimations provided by third parties. The fair value of Talisman’s floating rate debt is determined by discounting future estimated coupon payments at the current market interest rate. The fair value of Talisman’s long-term debt (including the current portion) at June 30, 2015 was $4.9 billion (December 31, 2014 - $5.3 billion), while the carrying value was $4.8 billion (December 31, 2014 - $5.1 billion). The Company uses Level 2 inputs as described below to estimate the fair value of the outstanding long-term debt as at June 30, 2015.
The fair values of all other financial assets and liabilities approximate their carrying values.
Risk management assets and liabilities are recorded at their estimated fair values. To estimate fair value, the Company uses quoted market prices when available, or models that utilize observable market data. In addition to market information, the Company incorporates transaction-specific details that market participants would utilize in a fair value measurement, including the impact of non-performance risk. The Company’s non-performance risk is determined based on third party quotes for the Company’s debt instruments with maturity dates that are similar, or in close approximation, to the maturity dates of the corresponding financial instrument. The Company characterizes inputs used in determining fair value using a hierarchy that prioritizes inputs depending on the degree to which they are observable.
The three levels of the fair value hierarchy are as follows:
|
·
|
Level 1 – inputs represent quoted prices in active markets for identical assets or liabilities (for example, exchange-traded commodity derivatives). Active markets are those in which transactions occur in sufficient frequency and volume to provide pricing information on an ongoing basis;
|
|
·
|
Level 2 – inputs other than quoted prices included within level 1 that are observable, either directly or indirectly, as of the reporting date. Level 2 valuations are based on inputs, including quoted forward prices for commodities, market interest rates and volatility factors, which can be observed or corroborated in the marketplace. The Company obtains information from sources such as the New York Mercantile Exchange (NYMEX) and independent price publications; and
|
|
·
|
Level 3 – inputs that are less observable, unavailable or where the observable data does not support the majority of the instrument’s fair value, such as the Company’s internally developed assumptions about market participant assumptions used in pricing an asset or liability, for example, an estimate of future cash flows used in the Company’s internally developed present value of future cash flows model that underlies the fair value measurement.
|
In forming estimates, the Company utilizes the most observable inputs available for valuation purposes. If a fair value measurement reflects inputs of different levels within the hierarchy, the measurement is categorized based upon the lowest level of input that is significant to the fair value measurement. The valuation of over-the-counter financial swaps and collars is based on similar transactions observable in active markets or industry standard models that rely primarily on market observable inputs. Substantially all of the assumptions for industry standard models are observable in active markets throughout the full term of the instrument. These are categorized as Level 2.
Fair values for derivative instruments are determined based on the estimated cash payment or receipt necessary to settle the contract. Fair values for commodity price derivatives are based on discounted cash flow analysis using current market rates and prices and option pricing models using forward pricing curves and implied volatility, as appropriate, which are compared to quotes received from financial institutions for reasonability. Fair values for interest rate instruments are based on discounted cash flow analysis using current market rates and prices.
Risk Management Assets, Liabilities, Gains and Losses
During the three and six month periods ended June 30, 2015, the Company received proceeds of $817 million and $1.3 billion, respectively, for settlement of its oil and gas derivative contracts, which included proceeds related to the liquidation of outstanding instruments. As at June 30, 2015, there was less than $1 million of risk management liability associated with the Company’s outstanding fixed price power swaps, which were measured using Level 2 inputs.
During the three month period ended June 30, 2015, the Company recorded a loss on held-for-trading financial instruments of $131 million (2014 - $171 million loss) and a gain of $62 million for the six month period ended June 30, 2015 (2014 - $231 million loss).
Currency Risk
Talisman operates internationally and is therefore exposed to foreign exchange risk. Talisman’s primary exposure is from fluctuations in the US$ relative to the C$, UK£, and NOK.
Talisman manages its foreign exchange exposure in a number of ways. By denominating most of its borrowings in US$, the Company is able to reduce some of its economic exposure to currency fluctuations. Talisman also manages its translation exposure by generally matching internal borrowings with its subsidiaries’ functional currencies. The Company purchases foreign currencies, mostly at spot value, to meet its current foreign currency obligations as they come due.
In respect of financial instruments existing at June 30, 2015, a 1% strengthening of the US$ against the other currencies noted above, with all other variables assumed constant, would have resulted in a decrease of $3 million in net loss and a $3 million impact on comprehensive loss during the three month period ended June 30, 2015. A similar weakening of the US$ would have had the opposite impact.
Interest Rate Risk
Talisman is exposed to interest rate risk principally by virtue of its borrowings including loans from joint ventures. Borrowing at floating rates exposes Talisman to short-term movements in interest rates. Borrowing at fixed rates exposes Talisman to reset risk (i.e. at debt maturity). Risk management activities aim to manage the mix of fixed-to-floating debt to best manage the trade-off between longer term interest rate reset risk and shorter term volatility in interest rates.
In order to mitigate its exposure to interest rate changes, Talisman enters into interest rate swaps from time to time to manage the ratio of fixed rate debt to floating rate debt. The Company had fixed-to-floating interest rate swap contracts with a total notional amount of $300 million outstanding at the beginning of the three month period ended June 30, 2015. These contracts expired on May 15, 2015. The Company did not enter any new interest rate swap contracts during the rest of the quarter.
Credit Risk
A significant proportion of Talisman’s accounts receivable balance is with customers in the oil and gas industry and is subject to normal industry credit risks. At June 30, 2015, approximately 84% of the Company's trade accounts receivable was aged less than 90 days and the largest single counterparty exposure, accounting for 7% of the total, was with a highly rated counterparty. Concentration of counterparty credit risk is managed by having a broad domestic and international customer base primarily of highly rated counterparties.
Liquidity Risk
Talisman is exposed to liquidity risk, which is the risk that the Company may be unable to generate or obtain sufficient cash to meet its commitments as they come due. Talisman mitigates this risk through its management of cash, debt, committed credit capacity and its capital program.
Talisman manages its liquidity requirements by use of both short-term and long-term cash forecasts, and by maintaining appropriate undrawn capacity under committed bank and related party credit facilities. The Company has in place committed bank facilities totaling $3.2 billion, all of which are committed through 2019. At June 30, 2015, there were no drawings in the form of bankers’ acceptance or commercial paper, and there was $85 million in letters of credit support outstanding. Available borrowing capacity under committed bank facilities was $3.1 billion at June 30, 2015. In addition, the Company also has in place related party facilities from Repsol subsidiaries totaling $1.5 billion, $500 million of which is committed through 2016 with the remainder committed through 2018. At June 30, 2015, $831 million were drawn under these facilities.
In addition, the Company utilizes letters of credit pursuant to letter of credit facilities, most of which are uncommitted. At June 30, 2015, demand letters of credit guaranteed by the Company totaling $1.3 billion were issued, of which $1.2 billion were issued from uncommitted facilities. Of that total, $1.0 billion is provided as security for the costs of decommissioning obligations in the UK, as described below. The remaining outstanding letters of credit relate primarily to a retirement compensation arrangement, guarantees of minimum work commitments and decommissioning obligations in other areas.
TSEUK is required to provide letters of credit as security in relation to certain decommissioning obligations in the UK pursuant to contractual arrangements under Decommissioning Security Agreements (DSAs). At the commencement of the joint venture, Addax Petroleum UK Limited (Addax) assumed 49% of the decommissioning obligations of TSEUK. Addax’s parent company, China Petrochemical Corporation (Sinopec), has provided an unconditional and irrevocable guarantee for this 49% of the UK decommissioning obligations.
The UK government passed legislation in 2013 which provides for a contractual instrument, known as a Decommissioning Relief Deed, for the government to guarantee tax relief on decommissioning costs at 50%, allowing security under DSAs to be posted on an after-tax basis and reducing the value of letters of credit required to be posted by 50%. TSEUK has entered into a Decommissioning Relief Deed with the UK Government and continues to negotiate with counterparties to amend all DSAs accordingly. Tax relief guaranteed by the UK government is limited to corporate tax paid since 2002. Under the limitation, TSEUK’s tax relief is capped at $2.2 billion, representing corporate income taxes paid and recoverable since 2002.
At June 30, 2015, TSEUK has $2.6 billion of demand shared facilities in place under which letters of credit of $1.9 billion have been issued. The Company guarantees 51% of all letters of credit issued under these shared facilities.
The Company has also granted guarantees to various beneficiaries in respect of decommissioning obligations of TSEUK.
At June 30, 2015, Talisman’s share of TSEUK’s total recorded decommissioning liabilities was $2.6 billion. Decommissioning estimates are subject to a significant amount of management judgment given the long dated nature of the assets and the timing of remediation upon cessation of production. The Company reviews its assessment of decommissioning liabilities annually, or where a triggering event causes a review, taking into account new information and industry experience.
Any changes to decommissioning estimates influence the value of letters of credit required to be provided pursuant to DSAs. In addition, the extent to which shared facility capacity is available, and the cost of that capacity, is influenced by the Company’s investment-grade credit rating.
As at June 30, 2015, the investment balance in the TSEUK joint venture was negative $145 million. The obligation to fund TSEUK, in proportion of its shareholding, arises from the Company’s past practice of funding TSEUK’s cash flow deficiencies, and the expectation that cash flow deficiencies will continue to be funded through 2015. In addition, the Company, in proportion of its shareholding, has provided certain guarantees to fund TSEUK’s decommissioning obligation if TSEUK is unable to, and the shareholders of TSEUK have provided equity funding facilities to TSEUK which include funding decommissioning liabilities. As such, the Company has recognized a negative investment value from the application of equity accounting. The Company’s obligation to fund TSEUK will increase to the extent future losses are generated within TSEUK. In addition, future contributions to the TSEUK joint venture could be impaired to the extent recoverability is not probable.
Except for commodity price derivative contracts that mature as noted below, long-term debt that matures as outlined in note 14 and other long-term obligations detailed in note 15, all of the Company’s financial liabilities are due within one year.
Commodity Price Risk
Talisman is exposed to commodity price risk since its revenues are dependent on the price of crude oil, natural gas and NGLs. Talisman may enter into derivative instruments from time to time to mitigate commodity price risk volatility under guidelines approved by the Board of Directors. The Company may hedge a portion of its future production to protect cash flows to allow it to meet its strategic objectives.
During the six month period ended June 30, 2015, the Company liquidated all its contracts related to commodity price risk management. Subsequent to June 30, 2015, the Company has not entered into any new commodity price risk management derivative contracts.
At June 30, 2015, the Company had power commodity price derivative contracts outstanding with fair value of less than $1 million.
18. CONTINGENCIES AND COMMITMENTS
Provisions and Contingencies
From time to time, Talisman is the subject of litigation arising out of the Company’s operations. Damages claimed under such litigation may be material or may be indeterminate and the outcome of such litigation may materially impact the Company’s financial condition or results of operations. While Talisman assesses the merits of each lawsuit and defends itself accordingly, the Company may be required to incur significant expenses or devote significant resources to defend itself against such litigation. These claims are not currently expected to have a material impact on the Company’s financial position. A summary of specific legal proceedings and contingencies is as follows:
Galley Pipeline
In August 2012, a portion of the Galley pipeline, in which TSEUK has a 67.41% interest, suffered an upheaval buckle.
In September 2012, TSEUK, in which Talisman holds a 51% interest, claimed for the suffered losses as a consequence of the incidence to Oleum Insurance Company (''Oleum''), a wholly-owned Talisman subsidiary. TSEUK delivered a proof of loss seeking recovery under the insuring agreement of $315 million.
In November 2014, TSEUK delivered extensive documentation purporting to substantiate its claim. The information delivered to date does not support a determination of coverage and Oleum is seeking additional information from TSEUK to facilitate final coverage determination.
Addax Arbitration
On July 13, 2015, Addax Petroleum UK Limited and Sinopec International Petroleum Exploration and Production Corporation, filed a Notice of Arbitration against Talisman Energy Inc. and Talisman Colombia Holdco Limited in connection with the purchase of 49% shares of Talisman Energy (UK) Limited (now known as TSEUK). In the Company’s opinion, the claims included in the Notice of Arbitration are without merit.
Government and Legal Proceedings with Tax Implications
Specific tax claims which Talisman and its subsidiaries are parties to at June 30, 2015 are as follows:
Canada
The Canadian tax authorities, Canada Revenue Agency, ("CRA") regularly inspect the tax matters of the Talisman Group companies based in Canada. In 2015, verification and investigation activities related to the years 2006-2010 have been made.
As part of these proceedings, the CRA has questioned certain restructuring transactions, although this line of questioning has not resulted in court proceedings to date.
Indonesia
Indonesian Corporate Tax Authorities have been questioning various aspects of the taxation of permanent establishments that Talisman Group has in the country. These proceedings are pending a court hearing.
Malaysia
Talisman Malaysia Ltd. and Talisman Malaysia (PM3) Ltd., the Talisman Group's operating subsidiaries in Malaysia, have received notifications from the Inland Revenue Board (IRB) in respect of the years 2007, 2008 and 2011 questioning, primarily, the deductibility of certain costs. These proceedings are pending a court hearing.
Norway
As part of the process of verifying the tax affairs of Talisman Energy Norge AS, the Talisman Group's subsidiary in Norway, the Norwegian tax authorities have questioned the deductibility of certain items. These proceedings are pending a court hearing.
Timor-Leste
The authorities of Timor-Leste, questioned the deduction by TLM Resources (JPDA 06-105) Pty Limited, the Talisman Group's subsidiary in East Timor, of certain expenses for income tax purposes. This line of questioning is at a very preliminary stage of debate with the authorities.
Commitments
There have been no additional significant changes in the Company’s expected future commitments, and the timing of those payments, since December 31, 2014.
19. OTHER INCOME
|
|
Three months ended June 30
|
|
|
Six months ended June 30
|
|
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
Pipeline and customer treating tariffs
|
|
|
11 |
|
|
|
16 |
|
|
|
26 |
|
|
|
33 |
|
Investment income
|
|
|
4 |
|
|
|
2 |
|
|
|
6 |
|
|
|
10 |
|
Interest on loan to TSEUK (note 6)
|
|
|
5 |
|
|
|
11 |
|
|
|
10 |
|
|
|
19 |
|
Marketing and other income
|
|
|
21 |
|
|
|
1 |
|
|
|
39 |
|
|
|
15 |
|
|
|
|
41 |
|
|
|
30 |
|
|
|
81 |
|
|
|
77 |
|
20. OTHER EXPENSES, NET
|
|
Three months ended June 30
|
|
|
Six months ended June 30
|
|
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
Foreign exchange loss
|
|
|
27 |
|
|
|
10 |
|
|
|
5 |
|
|
|
5 |
|
Restructuring
|
|
|
23 |
|
|
|
14 |
|
|
|
35 |
|
|
|
17 |
|
Transaction costs1
|
|
|
39 |
|
|
|
- |
|
|
|
41 |
|
|
|
- |
|
Other miscellaneous
|
|
|
41 |
|
|
|
13 |
|
|
|
65 |
|
|
|
22 |
|
|
|
|
130 |
|
|
|
37 |
|
|
|
146 |
|
|
|
44 |
|
1.
|
Costs incurred in relation to the acquisition of Talisman by Repsol.
|
21. INCOME TAXES
Current Income Tax Expense
|
|
Three months ended June 30
|
|
|
Six months ended June 30
|
|
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
North America
|
|
|
3 |
|
|
|
5 |
|
|
|
(5 |
) |
|
|
4 |
|
Southeast Asia
|
|
|
62 |
|
|
|
108 |
|
|
|
129 |
|
|
|
224 |
|
North Sea
|
|
|
1 |
|
|
|
(1 |
) |
|
|
1 |
|
|
|
(1 |
) |
Other
|
|
|
(1 |
) |
|
|
22 |
|
|
|
10 |
|
|
|
38 |
|
Total
|
|
|
65 |
|
|
|
134 |
|
|
|
135 |
|
|
|
265 |
|
Deferred Income Tax (Recovery) Expense
|
|
Three months ended June 30
|
|
|
Six months ended June 30
|
|
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
North America
|
|
|
206 |
|
|
|
(8 |
) |
|
|
177 |
|
|
|
44 |
|
Southeast Asia
|
|
|
42 |
|
|
|
22 |
|
|
|
15 |
|
|
|
13 |
|
North Sea
|
|
|
(12 |
) |
|
|
6 |
|
|
|
24 |
|
|
|
3 |
|
Other
|
|
|
20 |
|
|
|
(7 |
) |
|
|
16 |
|
|
|
3 |
|
Total
|
|
|
256 |
|
|
|
13 |
|
|
|
232 |
|
|
|
63 |
|
During the three month period ended June 30, 2015, the deferred tax expense (recovery) was impacted by a $37 million charge related to a substantively enacted Alberta corporate tax rate increase of 2%. In addition, as a result of the acquisition by Repsol, the Company recorded additional tax expense totaling $275 million related to the derecognition of certain tax assets.
22. SUPPLEMENTAL CASH FLOW
Items Not Involving Cash
|
|
Three months ended June 30
|
|
|
Six months ended Jun 30
|
|
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
Depreciation, depletion and amortization
|
|
|
379 |
|
|
|
430 |
|
|
|
790 |
|
|
|
822 |
|
Impairment, net of reversals
|
|
|
- |
|
|
|
(32 |
) |
|
|
48 |
|
|
|
(32 |
) |
Dry hole
|
|
|
- |
|
|
|
11 |
|
|
|
13 |
|
|
|
28 |
|
Share-based payments expense (recovery)
|
|
|
(2 |
) |
|
|
23 |
|
|
|
- |
|
|
|
(8 |
) |
(Gain) loss on disposals
|
|
|
4 |
|
|
|
5 |
|
|
|
9 |
|
|
|
(554 |
) |
Unrealized loss on held-for-trading financial instruments
|
|
|
955 |
|
|
|
125 |
|
|
|
1,268 |
|
|
|
128 |
|
Deferred income tax
|
|
|
256 |
|
|
|
13 |
|
|
|
232 |
|
|
|
63 |
|
Foreign exchange
|
|
|
29 |
|
|
|
8 |
|
|
|
13 |
|
|
|
6 |
|
Loss from joint ventures and associates, after tax
|
|
|
107 |
|
|
|
37 |
|
|
|
314 |
|
|
|
31 |
|
Other
|
|
|
4 |
|
|
|
17 |
|
|
|
12 |
|
|
|
29 |
|
|
|
|
1,732 |
|
|
|
637 |
|
|
|
2,699 |
|
|
|
513 |
|
Other Cash Flow Information
|
|
Three months ended June 30
|
|
|
Six months ended June 30
|
|
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
Cash interest paid
|
|
|
76 |
|
|
|
72 |
|
|
|
130 |
|
|
|
125 |
|
Cash interest received
|
|
|
1 |
|
|
|
1 |
|
|
|
1 |
|
|
|
24 |
|
Cash income taxes paid
|
|
|
75 |
|
|
|
150 |
|
|
|
147 |
|
|
|
331 |
|
23. CASH AND CASH EQUIVALENTS
Of the cash and cash equivalents balance of $168 million (December 31, 2014 - $262 million), the entire balance (December 31, 2014 - $262 million) has been invested in bank deposits. There were no investments in highly rated marketable securities with original maturities of less than three months as at June 30, 2015.
24. RELATED PARTY DISCLOSURES
Interest in subsidiaries
The interim condensed Consolidated Financial Statements include the financial statements of Talisman Energy Inc. and its directly or indirectly owned subsidiaries. Transactions between subsidiaries are eliminated on consolidation. The following table lists the material operating subsidiaries owned directly or indirectly by Talisman as at June 30, 2015:
Name of Subsidiary
|
Jurisdiction of Incorporation
|
Percentage of Voting
Securities Owned
|
Talisman Energy Canada¹
|
Alberta
|
100%
|
Talisman Energy USA Inc.
|
Delaware
|
100%
|
Talisman Alberta Shale Partnership
|
Alberta
|
100%
|
Talisman Energy Norge AS
|
Norway
|
100%
|
Talisman (Corridor) Ltd.
|
Barbados
|
100%
|
Talisman (Vietnam 15-2/01) Ltd.
|
Alberta
|
100%
|
Talisman Malaysia Limited
|
Barbados
|
100%
|
Talisman Malaysia (PM3) Limited
|
Barbados
|
100%
|
Talisman (Algeria) B.V.
|
The Netherlands
|
100%
|
1.
|
Talisman Energy Canada is an Alberta general partnership which currently carries on substantially all of Talisman’s conventional Canadian oil and gas operations.
|
Related party transactions with Repsol and Joint Ventures
In June 2015, Talisman (Algeria) B.V. (“TABV”) entered into a Sale and Purchase Agreement with Repsol Trading S.A., a subsidiary of Repsol, under which TABV will sell to Repsol approximately 615,000 barrels of Saharan Blend Crude Oil for an estimated $38 million. The sale price per barrel is based on June Dated Brent price of US$61.69/barrel minus the agreed differential of US$0.28/barrel. As at June 30, 2015, the amount included in accounts receivable balance as a result of this sale was $38 million.
Other transactions between Talisman and subsidiaries of Talisman’s parent, Repsol, since May 8, 2015, are disclosed in note 4 and note 14. Related party transactions with joint ventures are disclosed as part of note 6 and note 19.
25. SEGMENTED INFORMATION
Talisman's activities are conducted in four geographic segments: North America, the North Sea, Southeast Asia and Other. The North America segment includes operations and exploration in Canada and the US. The Southeast Asia segment includes operations and exploration activities in Indonesia, Malaysia, Vietnam, Papua New Guinea and in Australia/Timor-Leste. The North Sea segment includes operations and exploration activities in the UK. The Company also has non-operated production in Algeria, operations and exploration activities in Colombia, and exploration activities in the Kurdistan Region of Iraq. Furthermore, the Company is in the process of exiting Peru. For ease of reference, all of the activities in Algeria, Colombia, Peru and the Kurdistan Region of Iraq are referred to collectively as the Other geographic segment. All activities relate to the exploration, development, production and transportation of oil, liquids and natural gas.
|
|
North America (1)
|
|
|
Southeast Asia (2)
|
|
|
|
Three months ended
June 30
|
|
|
Six months ended
June 30
|
|
|
Three months ended
June 30
|
|
|
Six months ended
June 30
|
|
(millions of US$)
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
|
258 |
|
|
|
486 |
|
|
|
502 |
|
|
|
1,018 |
|
|
|
298 |
|
|
|
556 |
|
|
|
622 |
|
|
|
1,097 |
|
Other income
|
|
|
23 |
|
|
|
7 |
|
|
|
45 |
|
|
|
27 |
|
|
|
- |
|
|
|
- |
|
|
|
1 |
|
|
|
1 |
|
Income (loss) from joint ventures, after tax
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Total revenue and other income
|
|
|
281 |
|
|
|
493 |
|
|
|
547 |
|
|
|
1,045 |
|
|
|
298 |
|
|
|
556 |
|
|
|
623 |
|
|
|
1,098 |
|
Segmented expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
|
|
|
114 |
|
|
|
134 |
|
|
|
241 |
|
|
|
268 |
|
|
|
60 |
|
|
|
130 |
|
|
|
169 |
|
|
|
252 |
|
Transportation
|
|
|
23 |
|
|
|
18 |
|
|
|
51 |
|
|
|
39 |
|
|
|
13 |
|
|
|
12 |
|
|
|
28 |
|
|
|
27 |
|
DD&A
|
|
|
252 |
|
|
|
296 |
|
|
|
509 |
|
|
|
562 |
|
|
|
112 |
|
|
|
114 |
|
|
|
250 |
|
|
|
230 |
|
Impairment, net of reversals
|
|
|
- |
|
|
|
(32 |
) |
|
|
- |
|
|
|
(32 |
) |
|
|
- |
|
|
|
- |
|
|
|
48 |
|
|
|
- |
|
Dry hole
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
11 |
|
|
|
(1 |
) |
|
|
28 |
|
Exploration
|
|
|
45 |
|
|
|
3 |
|
|
|
47 |
|
|
|
9 |
|
|
|
18 |
|
|
|
22 |
|
|
|
36 |
|
|
|
39 |
|
Other
|
|
|
80 |
|
|
|
22 |
|
|
|
109 |
|
|
|
31 |
|
|
|
21 |
|
|
|
1 |
|
|
|
23 |
|
|
|
2 |
|
Total segmented expenses
|
|
|
514 |
|
|
|
441 |
|
|
|
957 |
|
|
|
877 |
|
|
|
224 |
|
|
|
290 |
|
|
|
553 |
|
|
|
578 |
|
Segmented income (loss) from continuing operations before taxes
|
|
|
(233 |
) |
|
|
52 |
|
|
|
(410 |
) |
|
|
168 |
|
|
|
74 |
|
|
|
266 |
|
|
|
70 |
|
|
|
520 |
|
Non-segmented expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based payments expense (recovery)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Gain) loss on held-for-trading
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
financial instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Gain) loss on asset disposals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-segmented expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before taxes from continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditure
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration
|
|
|
13 |
|
|
|
31 |
|
|
|
39 |
|
|
|
45 |
|
|
|
40 |
|
|
|
31 |
|
|
|
45 |
|
|
|
60 |
|
Development
|
|
|
120 |
|
|
|
242 |
|
|
|
292 |
|
|
|
556 |
|
|
|
25 |
|
|
|
68 |
|
|
|
63 |
|
|
|
146 |
|
Exploration and development
|
|
|
133 |
|
|
|
273 |
|
|
|
331 |
|
|
|
601 |
|
|
|
65 |
|
|
|
99 |
|
|
|
108 |
|
|
|
206 |
|
Acquisitions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds on dispositions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other non-segmented
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net capital expenditures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment
|
|
|
|
|
|
|
|
|
|
|
6,429 |
|
|
|
6,321 |
|
|
|
|
|
|
|
|
|
|
|
1,972 |
|
|
|
2,223 |
|
Exploration and evaluation assets
|
|
|
|
|
|
|
|
1,371 |
|
|
|
1,345 |
|
|
|
|
|
|
|
|
|
|
|
719 |
|
|
|
667 |
|
Goodwill
|
|
|
|
|
|
|
|
|
|
|
110 |
|
|
|
110 |
|
|
|
|
|
|
|
|
|
|
|
169 |
|
|
|
169 |
|
Investments in joint ventures and associates
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
Other
|
|
|
|
|
|
|
|
|
|
|
410 |
|
|
|
555 |
|
|
|
|
|
|
|
|
|
|
|
613 |
|
|
|
740 |
|
Assets held for sale
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
Segmented assets
|
|
|
|
|
|
|
|
|
|
|
8,320 |
|
|
|
8,331 |
|
|
|
|
|
|
|
|
|
|
|
3,473 |
|
|
|
3,799 |
|
Non-segmented assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets (5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Decommissioning liabilities (5)
|
|
|
|
|
|
|
|
|
|
|
663 |
|
|
|
381 |
|
|
|
|
|
|
|
|
|
|
|
313 |
|
|
|
334 |
|
|
|
Three months ended
June 30
|
|
|
Six months ended
June 30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1. North America
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canada
|
|
|
118 |
|
|
|
197 |
|
|
|
232 |
|
|
|
458 |
|
US
|
|
|
163 |
|
|
|
296 |
|
|
|
315 |
|
|
|
587 |
|
Total revenue and other income
|
|
|
281 |
|
|
|
493 |
|
|
|
547 |
|
|
|
1,045 |
|
Canada
|
|
|
|
|
|
|
|
|
|
|
2,593 |
|
|
|
2,507 |
|
US
|
|
|
|
|
|
|
|
|
|
|
3,836 |
|
|
|
3,814 |
|
Property, plant and equipment (5)
|
|
|
|
|
|
|
|
|
|
|
6,429 |
|
|
|
6,321 |
|
Canada
|
|
|
|
|
|
|
|
|
|
|
910 |
|
|
|
871 |
|
US
|
|
|
|
|
|
|
|
|
|
|
461 |
|
|
|
474 |
|
Exploration and evaluation assets (5)
|
|
|
|
|
|
|
|
1,371 |
|
|
|
1,345 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30
|
|
|
Six months ended June 30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2. Southeast Asia
|
|
|
2015 |
|
|
|
2014 |
|
|
|
2015 |
|
|
|
2014 |
|
Indonesia
|
|
|
170 |
|
|
|
265 |
|
|
|
345 |
|
|
|
528 |
|
Malaysia
|
|
|
80 |
|
|
|
132 |
|
|
|
168 |
|
|
|
286 |
|
Vietnam
|
|
|
39 |
|
|
|
114 |
|
|
|
78 |
|
|
|
216 |
|
Australia
|
|
|
9 |
|
|
|
45 |
|
|
|
32 |
|
|
|
68 |
|
Total revenue and other income
|
|
|
298 |
|
|
|
556 |
|
|
|
623 |
|
|
|
1,098 |
|
Indonesia
|
|
|
|
|
|
|
|
|
|
|
905 |
|
|
|
941 |
|
Malaysia
|
|
|
|
|
|
|
|
|
|
|
626 |
|
|
|
698 |
|
Vietnam
|
|
|
|
|
|
|
|
|
|
|
245 |
|
|
|
308 |
|
Papua New Guinea
|
|
|
|
|
|
|
|
|
|
|
132 |
|
|
|
143 |
|
Australia
|
|
|
|
|
|
|
|
|
|
|
64 |
|
|
|
133 |
|
Property, plant and equipment (5)
|
|
|
|
|
|
|
|
|
|
|
1,972 |
|
|
|
2,223 |
|
Indonesia
|
|
|
|
|
|
|
|
|
|
|
45 |
|
|
|
37 |
|
Malaysia
|
|
|
|
|
|
|
|
|
|
|
87 |
|
|
|
41 |
|
Vietnam
|
|
|
|
|
|
|
|
|
|
|
192 |
|
|
|
191 |
|
Papua New Guinea
|
|
|
|
|
|
|
|
|
|
|
395 |
|
|
|
398 |
|
Exploration and evaluation assets (5)
|
|
|
|
|
|
|
|
719 |
|
|
|
667 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5. Current year represents balances at June 30. Prior year represents balances at December 31.
|
|
|
|
North Sea (3)
|
|
|
Other (4)
|
|
|
Total
|
|
|
|
Three months ended
June 30
|
|
|
Six months ended
June 30
|
|
|
Three months ended
June 30
|
|
|
Six months ended
June 30
|
|
|
Three months ended
June 30
|
|
|
Six months ended
June 30
|
|
(millions of US$)
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
61 |
|
|
|
99 |
|
|
|
97 |
|
|
|
149 |
|
|
|
617 |
|
|
|
1,141 |
|
|
|
1,221 |
|
|
|
2,264 |
|
Other income
|
|
|
5 |
|
|
|
11 |
|
|
|
10 |
|
|
|
19 |
|
|
|
13 |
|
|
|
12 |
|
|
|
25 |
|
|
|
30 |
|
|
|
41 |
|
|
|
30 |
|
|
|
81 |
|
|
|
77 |
|
Income (loss) from joint ventures, after tax
|
|
|
(115 |
) |
|
|
(60 |
) |
|
|
(321 |
) |
|
|
(77 |
) |
|
|
8 |
|
|
|
23 |
|
|
|
7 |
|
|
|
46 |
|
|
|
(107 |
) |
|
|
(37 |
) |
|
|
(314 |
) |
|
|
(31 |
) |
Total revenue and other income
|
|
|
(110 |
) |
|
|
(49 |
) |
|
|
(311 |
) |
|
|
(58 |
) |
|
|
82 |
|
|
|
134 |
|
|
|
129 |
|
|
|
225 |
|
|
|
551 |
|
|
|
1,134 |
|
|
|
988 |
|
|
|
2,310 |
|
Segmented expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
19 |
|
|
|
16 |
|
|
|
34 |
|
|
|
23 |
|
|
|
193 |
|
|
|
280 |
|
|
|
444 |
|
|
|
543 |
|
Transportation
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
4 |
|
|
|
9 |
|
|
|
11 |
|
|
|
15 |
|
|
|
40 |
|
|
|
39 |
|
|
|
90 |
|
|
|
81 |
|
DD&A
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
15 |
|
|
|
20 |
|
|
|
31 |
|
|
|
30 |
|
|
|
379 |
|
|
|
430 |
|
|
|
790 |
|
|
|
822 |
|
Impairment, net of reversals
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(32 |
) |
|
|
48 |
|
|
|
(32 |
) |
Dry hole
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
14 |
|
|
|
- |
|
|
|
- |
|
|
|
11 |
|
|
|
13 |
|
|
|
28 |
|
Exploration
|
|
|
20 |
|
|
|
- |
|
|
|
20 |
|
|
|
- |
|
|
|
15 |
|
|
|
19 |
|
|
|
19 |
|
|
|
35 |
|
|
|
98 |
|
|
|
44 |
|
|
|
122 |
|
|
|
83 |
|
Other
|
|
|
4 |
|
|
|
2 |
|
|
|
4 |
|
|
|
(1 |
) |
|
|
(2 |
) |
|
|
2 |
|
|
|
5 |
|
|
|
7 |
|
|
|
103 |
|
|
|
27 |
|
|
|
141 |
|
|
|
39 |
|
Total segmented expenses
|
|
|
24 |
|
|
|
2 |
|
|
|
24 |
|
|
|
(1 |
) |
|
|
51 |
|
|
|
66 |
|
|
|
114 |
|
|
|
110 |
|
|
|
813 |
|
|
|
799 |
|
|
|
1,648 |
|
|
|
1,564 |
|
Segmented income (loss) from continuing operations before taxes
|
|
|
(134 |
) |
|
|
(51 |
) |
|
|
(335 |
) |
|
|
(57 |
) |
|
|
31 |
|
|
|
68 |
|
|
|
15 |
|
|
|
115 |
|
|
|
(262 |
) |
|
|
335 |
|
|
|
(660 |
) |
|
|
746 |
|
Non-segmented expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
83 |
|
|
|
103 |
|
|
|
167 |
|
|
|
205 |
|
Finance costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
79 |
|
|
|
83 |
|
|
|
163 |
|
|
|
166 |
|
Share-based payments expense (recovery)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(19 |
) |
|
|
23 |
|
|
|
(24 |
) |
|
|
(9 |
) |
Currency translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27 |
|
|
|
10 |
|
|
|
5 |
|
|
|
5 |
|
(Gain) loss on held-for-trading
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
131 |
|
|
|
171 |
|
|
|
(62 |
) |
|
|
231 |
|
financial instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Gain) loss on asset disposals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4 |
|
|
|
5 |
|
|
|
9 |
|
|
|
(554 |
) |
Total non-segmented expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
305 |
|
|
|
395 |
|
|
|
258 |
|
|
|
44 |
|
Income (loss) before taxes from continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(567 |
) |
|
|
(60 |
) |
|
|
(918 |
) |
|
|
702 |
|
Capital expenditure
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(4 |
) |
|
|
41 |
|
|
|
9 |
|
|
|
90 |
|
|
|
49 |
|
|
|
103 |
|
|
|
93 |
|
|
|
195 |
|
Development
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
11 |
|
|
|
2 |
|
|
|
20 |
|
|
|
7 |
|
|
|
156 |
|
|
|
312 |
|
|
|
375 |
|
|
|
709 |
|
Exploration and development
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
7 |
|
|
|
43 |
|
|
|
29 |
|
|
|
97 |
|
|
|
205 |
|
|
|
415 |
|
|
|
468 |
|
|
|
904 |
|
Acquisitions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8 |
|
|
|
13 |
|
|
|
8 |
|
|
|
13 |
|
Proceeds on dispositions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
(52 |
) |
|
|
- |
|
|
|
(1,392 |
) |
Other non-segmented
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16 |
|
|
|
16 |
|
|
|
19 |
|
|
|
20 |
|
Net capital expenditures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
229 |
|
|
|
392 |
|
|
|
495 |
|
|
|
(455 |
) |
Property, plant and equipment
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
256 |
|
|
|
|
|
|
|
|
|
|
|
253 |
|
|
|
264 |
|
|
|
|
|
|
|
|
|
|
|
8,654 |
|
|
|
9,064 |
|
Exploration and evaluation assets
|
|
|
|
|
|
|
|
- |
|
|
|
125 |
|
|
|
|
|
|
|
|
|
|
|
398 |
|
|
|
407 |
|
|
|
|
|
|
|
|
|
|
|
2,488 |
|
|
|
2,544 |
|
Goodwill
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
279 |
|
|
|
279 |
|
Investments in joint ventures and associates
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
530 |
|
|
|
523 |
|
|
|
|
|
|
|
|
|
|
|
530 |
|
|
|
523 |
|
Other
|
|
|
|
|
|
|
|
|
|
|
456 |
|
|
|
2,051 |
|
|
|
|
|
|
|
|
|
|
|
269 |
|
|
|
301 |
|
|
|
|
|
|
|
|
|
|
|
1,748 |
|
|
|
3,647 |
|
Assets held for sale
|
|
|
|
|
|
|
|
|
|
|
1,530 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
1,530 |
|
|
|
- |
|
Segmented assets
|
|
|
|
|
|
|
|
|
|
|
1,986 |
|
|
|
2,432 |
|
|
|
|
|
|
|
|
|
|
|
1,450 |
|
|
|
1,495 |
|
|
|
|
|
|
|
|
|
|
|
15,229 |
|
|
|
16,057 |
|
Non-segmented assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3 |
|
|
|
1,273 |
|
Total assets (5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,232 |
|
|
|
17,330 |
|
Decommissioning liabilities (5)
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
1,176 |
|
|
|
|
|
|
|
|
|
|
|
29 |
|
|
|
37 |
|
|
|
|
|
|
|
|
|
|
|
1,005 |
|
|
|
1,928 |
|
|
|
Three months ended
June 30
|
|
|
Six months ended
June 30
|
|
3. North Sea
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
UK
|
|
|
5 |
|
|
|
11 |
|
|
|
10 |
|
|
|
19 |
|
Norway
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Loss from TSEUK
|
|
|
(115 |
) |
|
|
(60 |
) |
|
|
(321 |
) |
|
|
(77 |
) |
Total revenue and other income
|
|
|
(110 |
) |
|
|
(49 |
) |
|
|
(311 |
) |
|
|
(58 |
) |
UK
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
Norway
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
256 |
|
Property, plant and equipment (5)
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
256 |
|
UK
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
Norway
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
125 |
|
Exploration and evaluation assets (5)
|
|
|
|
|
|
|
|
- |
|
|
|
125 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30
|
|
|
Six months ended
June 30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4. Other
|
|
|
2015 |
|
|
|
2014 |
|
|
|
2015 |
|
|
|
2014 |
|
Algeria
|
|
|
54 |
|
|
|
72 |
|
|
|
78 |
|
|
|
107 |
|
Colombia6
|
|
|
28 |
|
|
|
62 |
|
|
|
51 |
|
|
|
118 |
|
Total revenue and other income
|
|
|
82 |
|
|
|
134 |
|
|
|
129 |
|
|
|
225 |
|
Algeria
|
|
|
|
|
|
|
|
|
|
|
203 |
|
|
|
224 |
|
Colombia
|
|
|
|
|
|
|
|
|
|
|
50 |
|
|
|
40 |
|
Property, plant and equipment (5)
|
|
|
|
|
|
|
|
|
|
|
253 |
|
|
|
264 |
|
Colombia
|
|
|
|
|
|
|
|
|
|
|
202 |
|
|
|
208 |
|
Kurdistan
|
|
|
|
|
|
|
|
|
|
|
196 |
|
|
|
199 |
|
Exploration and evaluation assets (5)
|
|
|
|
|
|
|
|
398 |
|
|
|
407 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5. Current year represents balances at June 30. Prior year represents balances at December 31.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6. Balances include after-tax equity income from Equion.
|
|
33
Exhibit 99.2
TALISMAN ENERGY INC.
INTERIM MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE PERIOD ENDED JUNE 30, 2015
Management’s Discussion and Analysis (MD&A)
(July 30, 2015)
General
This interim MD&A should be read in conjunction with the unaudited interim condensed Consolidated Financial Statements of Talisman Energy Inc. ("Talisman" or "the Company") as at and for the three and six month periods ended June 30, 2015 and 2014, and the 2014 MD&A and audited annual Consolidated Financial Statements of the Company. The Company’s interim condensed Consolidated Financial Statements have been prepared in accordance with International Accounting Standard (IAS) 34, Interim Financial Reporting within International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).
Talisman’s financial statements are prepared on a consolidated basis and include the accounts of Talisman and its subsidiaries. Substantially all of Talisman’s activities are conducted jointly with others, and the condensed Consolidated Financial Statements reflect only the Company’s proportionate interest in such activities, with the exception of the Company’s investments in Talisman Sinopec Energy UK Limited (TSEUK) and Equion Energía Limited (Equion) which are accounted for using the equity method.
All comparisons are between the three month periods ended June 30, 2015 and 2014, unless stated otherwise. All amounts presented are in US$, except where otherwise indicated. Abbreviations used in this MD&A are listed in the section “Abbreviations and Definitions”. Unless otherwise indicated, amounts only reflect results from consolidated subsidiaries. Additional information relating to the Company, including its Annual Information Form (AIF), can be found on the Canadian System for Electronic Document Analysis and Retrieval (SEDAR) at www.sedar.com.
On May 8, 2015, the acquisition of Talisman by a wholly-owned subsidiary of Repsol S.A. (“Repsol”), by the way of an arrangement under the Canada Business Corporations Act, was completed. Repsol acquired all of the Company’s outstanding common and preferred shares. Upon the completion of the arrangement, the common shares were delisted from the Toronto Stock Exchange and the New York Stock Exchange, and the preferred shares were delisted from the Toronto Stock Exchange and converted into common shares on a 1:1 basis.
During the three month period ended June 30, 2015, Talisman and Repsol entered into a purchase and sale agreement whereby Repsol will acquire substantially all of the assets and liabilities of Talisman’s Norwegian operations. The transaction is expected to close prior to September 30, 2015. For further information, see the "Discontinued Operations" and "Transactions with Related Parties" section of the MD&A.
Use of "boe" and Change in Conversion Ratio
In conjunction with the acquisition of the Company by Repsol, the Company has adopted Repsol’s barrels of oil equivalent (boe) conversion ratio. For the period ended June 30, 2015, the Company now applies a conversion factor of 1 barrel of oil equivalent (boe) equals 5,615 standard cubic feet of gas. The previous conversion ratio used was 6,000 standard cubic feet of gas. Comparative periods have been adjusted to reflect the change in conversion. Boe may be misleading, particularly if used in isolation. A boe conversion ratio of 5.615mcf:1bbl is based on an energy equivalence conversion method primarily applicable at the burner tip and does not represent value equivalence at the wellhead.
FINANCIAL AND OPERATING HIGHLIGHTS1,2
($ millions, unless otherwise stated)
|
|
Six Months
Ended June 30,
|
|
|
|
Q2 |
|
|
|
Q1 |
|
|
|
Q4 |
|
|
|
Q3 |
|
|
|
Q2 |
|
|
|
Q1 |
|
|
|
Q4 |
|
|
|
Q3 |
|
|
|
2015
|
|
|
2014
|
|
|
|
2015 |
|
|
|
2015 |
|
|
|
2014 |
|
|
|
2014 |
|
|
|
2014 |
|
|
|
2014 |
|
|
|
2013 |
|
|
|
2013 |
|
Total revenue and other income from continuing operations
|
|
|
988 |
|
|
|
2,310 |
|
|
|
551 |
|
|
|
437 |
|
|
|
(71 |
) |
|
|
995 |
|
|
|
1,134 |
|
|
|
1,176 |
|
|
|
779 |
|
|
|
1,134 |
|
Total revenue and other income from discontinued operations3
|
|
|
144 |
|
|
|
273 |
|
|
|
83 |
|
|
|
61 |
|
|
|
115 |
|
|
|
141 |
|
|
|
108 |
|
|
|
165 |
|
|
|
150 |
|
|
|
110 |
|
Total revenue and other income
|
|
|
1,132 |
|
|
|
2,583 |
|
|
|
634 |
|
|
|
498 |
|
|
|
44 |
|
|
|
1,136 |
|
|
|
1,242 |
|
|
|
1,341 |
|
|
|
929 |
|
|
|
1,244 |
|
Net income (loss) from continuing operations
|
|
|
(1,285 |
) |
|
|
374 |
|
|
|
(888 |
) |
|
|
(397 |
) |
|
|
(1,154 |
) |
|
|
439 |
|
|
|
(207 |
) |
|
|
581 |
|
|
|
(830 |
) |
|
|
(78 |
) |
Net income (loss) from discontinued operations3
|
|
|
(406 |
) |
|
|
(120 |
) |
|
|
(364 |
) |
|
|
(42 |
) |
|
|
(436 |
) |
|
|
(14 |
) |
|
|
(30 |
) |
|
|
(90 |
) |
|
|
(175 |
) |
|
|
24 |
|
Net income (loss)
|
|
|
(1,691 |
) |
|
|
254 |
|
|
|
(1,252 |
) |
|
|
(439 |
) |
|
|
(1,590 |
) |
|
|
425 |
|
|
|
(237 |
) |
|
|
491 |
|
|
|
(1,005 |
) |
|
|
(54 |
) |
Per common share ($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)4
|
|
|
(1.63 |
) |
|
|
0.24 |
|
|
|
(1.20 |
) |
|
|
(0.43 |
) |
|
|
(1.54 |
) |
|
|
0.41 |
|
|
|
(0.23 |
) |
|
|
0.47 |
|
|
|
(0.98 |
) |
|
|
(0.05 |
) |
Diluted net income (loss)5
|
|
|
(1.67 |
) |
|
|
0.19 |
|
|
|
(1.24 |
) |
|
|
(0.43 |
) |
|
|
(1.54 |
) |
|
|
0.38 |
|
|
|
(0.24 |
) |
|
|
0.43 |
|
|
|
(0.98 |
) |
|
|
(0.08 |
) |
Income (loss) from continuing operations per common share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
(1.24 |
) |
|
|
0.36 |
|
|
|
(0.85 |
) |
|
|
(0.39 |
) |
|
|
(1.12 |
) |
|
|
0.42 |
|
|
|
(0.20 |
) |
|
|
0.56 |
|
|
|
(0.81 |
) |
|
|
(0.08 |
) |
Diluted
|
|
|
(1.28 |
) |
|
|
0.31 |
|
|
|
(0.89 |
) |
|
|
(0.39 |
) |
|
|
(1.12 |
) |
|
|
0.39 |
|
|
|
(0.21 |
) |
|
|
0.52 |
|
|
|
(0.81 |
) |
|
|
(0.11 |
) |
Production (Daily Average - Gross)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and liquids (mbbls/d)
|
|
|
125 |
|
|
|
129 |
|
|
|
127 |
|
|
|
124 |
|
|
|
125 |
|
|
|
119 |
|
|
|
132 |
|
|
|
125 |
|
|
|
120 |
|
|
|
120 |
|
Natural gas (mmcf/d)
|
|
|
1,323 |
|
|
|
1,287 |
|
|
|
1,321 |
|
|
|
1,325 |
|
|
|
1,328 |
|
|
|
1,276 |
|
|
|
1,308 |
|
|
|
1,268 |
|
|
|
1,312 |
|
|
|
1,234 |
|
Continuing operations (mboe/d)
|
|
|
361 |
|
|
|
358 |
|
|
|
362 |
|
|
|
360 |
|
|
|
362 |
|
|
|
346 |
|
|
|
365 |
|
|
|
351 |
|
|
|
354 |
|
|
|
340 |
|
Assets sold or held for sale (mboe/d)6
|
|
|
16 |
|
|
|
38 |
|
|
|
16 |
|
|
|
16 |
|
|
|
18 |
|
|
|
23 |
|
|
|
27 |
|
|
|
50 |
|
|
|
50 |
|
|
|
48 |
|
Total mboe/d (5.615mcf = 1boe)
|
|
|
377 |
|
|
|
396 |
|
|
|
378 |
|
|
|
376 |
|
|
|
380 |
|
|
|
369 |
|
|
|
392 |
|
|
|
401 |
|
|
|
404 |
|
|
|
388 |
|
1.
|
Includes the Company’s proportionate interest in production from joint ventures.
|
2.
|
For the period ended June 30, 2015, the Company adjusted the conversion ratio of barrels of oil equivalent (boe) of natural gas for one barrel of oil to a ratio of 5.615:1 from 6:1. Comparative periods have been adjusted to reflect the change in conversion.
|
3.
|
Discontinued Operations are the results associated with the expected Norway disposition.
|
4.
|
Net income (loss) per share includes an adjustment to the numerator for after-tax cumulative preferred share dividends.
|
5.
|
Diluted net income (loss) per share computed under IFRS includes an adjustment to the numerator for the change in the fair value of stock options and after-tax cumulative preferred share dividends.
|
6.
|
Includes discontinued operations.
|
During the second quarter of 2015, the Company had a net loss of $1.3 billion compared to net loss of $237 million in the same quarter in 2014 due principally to lower commodity prices, slightly lower volumes, increased losses from joint ventures, increased income taxes, and impairments from discontinued operations in Norway. These were partially offset by lower operating expenses.
Production volumes from continuing operations remained relatively consistent in the second quarter of 2015 compared to the second quarter of 2014, with a small increase in liquids output, slightly offset by a small decrease in natural gas production.
DAILY AVERAGE PRODUCTION
|
|
Three months ended June 30
|
|
|
|
Gross before royalties
|
|
|
Net of royalties
|
|
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
Oil and liquids from Consolidated Subsidiaries (mbbls/d)
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
|
41 |
|
|
|
45 |
|
|
|
36 |
|
|
|
35 |
|
Southeast Asia
|
|
|
38 |
|
|
|
45 |
|
|
|
26 |
|
|
|
28 |
|
North Sea2
|
|
|
12 |
|
|
|
11 |
|
|
|
12 |
|
|
|
11 |
|
Other
|
|
|
15 |
|
|
|
16 |
|
|
|
11 |
|
|
|
9 |
|
|
|
|
106 |
|
|
|
117 |
|
|
|
85 |
|
|
|
83 |
|
Oil and liquids from Joint Ventures (mbbls/d)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TSEUK
|
|
|
20 |
|
|
|
19 |
|
|
|
20 |
|
|
|
19 |
|
Equion
|
|
|
13 |
|
|
|
9 |
|
|
|
10 |
|
|
|
7 |
|
|
|
|
33 |
|
|
|
28 |
|
|
|
30 |
|
|
|
26 |
|
Total oil and liquids from Consolidated Subsidiaries and Joint Ventures (mbbls/d)
|
|
|
139 |
|
|
|
145 |
|
|
|
115 |
|
|
|
109 |
|
Natural gas from Consolidated Subsidiaries (mmcf/d)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
|
780 |
|
|
|
795 |
|
|
|
678 |
|
|
|
682 |
|
Southeast Asia
|
|
|
496 |
|
|
|
515 |
|
|
|
356 |
|
|
|
351 |
|
North Sea2
|
|
|
21 |
|
|
|
20 |
|
|
|
21 |
|
|
|
20 |
|
Other
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
1,297 |
|
|
|
1,330 |
|
|
|
1,055 |
|
|
|
1,053 |
|
Natural gas from Joint Ventures (mmcf/d)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TSEUK
|
|
|
5 |
|
|
|
2 |
|
|
|
5 |
|
|
|
2 |
|
Equion
|
|
|
40 |
|
|
|
48 |
|
|
|
32 |
|
|
|
37 |
|
|
|
|
45 |
|
|
|
50 |
|
|
|
37 |
|
|
|
39 |
|
Total natural gas from Consolidated Subsidiaries and Joint Ventures (mmcf/d)
|
|
|
1,342 |
|
|
|
1,380 |
|
|
|
1,092 |
|
|
|
1,092 |
|
Total Daily Production from Consolidated Subsidiaries (mboe/d)1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
|
180 |
|
|
|
186 |
|
|
|
157 |
|
|
|
157 |
|
Southeast Asia
|
|
|
126 |
|
|
|
137 |
|
|
|
89 |
|
|
|
91 |
|
North Sea2
|
|
|
16 |
|
|
|
15 |
|
|
|
16 |
|
|
|
15 |
|
Other
|
|
|
15 |
|
|
|
16 |
|
|
|
11 |
|
|
|
8 |
|
|
|
|
337 |
|
|
|
354 |
|
|
|
273 |
|
|
|
271 |
|
Total Daily Production from Joint Ventures (mboe/d)1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TSEUK
|
|
|
21 |
|
|
|
20 |
|
|
|
20 |
|
|
|
20 |
|
Equion
|
|
|
20 |
|
|
|
17 |
|
|
|
16 |
|
|
|
14 |
|
|
|
|
41 |
|
|
|
37 |
|
|
|
36 |
|
|
|
34 |
|
Total daily production from Consolidated Subsidiaries and Joint Ventures (mboe/d)
|
|
|
378 |
|
|
|
391 |
|
|
|
309 |
|
|
|
305 |
|
Less production from assets sold or held for sale (mboe/d)1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
|
- |
|
|
|
9 |
|
|
|
- |
|
|
|
7 |
|
Southeast Asia
|
|
|
- |
|
|
|
3 |
|
|
|
- |
|
|
|
2 |
|
North Sea2
|
|
|
16 |
|
|
|
15 |
|
|
|
16 |
|
|
|
15 |
|
|
|
|
16 |
|
|
|
27 |
|
|
|
16 |
|
|
|
24 |
|
Total production from continuing operations (mboe/d)1
|
|
|
362 |
|
|
|
364 |
|
|
|
293 |
|
|
|
281 |
|
1.
|
For the period ended June 30, 2015, the Company adjusted the conversion ratio of barrels of oil equivalent (boe) of natural gas for one barrel of oil to a ratio of 5.615:1 from 6:1. Comparative periods have been adjusted to reflect the change in conversion.
|
2.
|
Discontinued Operations are the results associated with the expected Norway disposition.
|
|
|
Six months ended June 30
|
|
|
|
Gross before royalties
|
|
|
Net of royalties
|
|
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
Oil and liquids from Consolidated Subsidiaries (mbbls/d)
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
|
43 |
|
|
|
43 |
|
|
|
37 |
|
|
|
34 |
|
Southeast Asia
|
|
|
38 |
|
|
|
45 |
|
|
|
26 |
|
|
|
28 |
|
North Sea2
|
|
|
13 |
|
|
|
13 |
|
|
|
13 |
|
|
|
13 |
|
Other
|
|
|
14 |
|
|
|
15 |
|
|
|
10 |
|
|
|
8 |
|
|
|
|
108 |
|
|
|
116 |
|
|
|
86 |
|
|
|
83 |
|
Oil and liquids from Joint Ventures (mbbls/d)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TSEUK
|
|
|
18 |
|
|
|
19 |
|
|
|
18 |
|
|
|
19 |
|
Equion
|
|
|
12 |
|
|
|
9 |
|
|
|
9 |
|
|
|
7 |
|
|
|
|
30 |
|
|
|
28 |
|
|
|
27 |
|
|
|
26 |
|
Total oil and liquids from Consolidated Subsidiaries and Joint Ventures (mbbls/d)
|
|
|
138 |
|
|
|
144 |
|
|
|
113 |
|
|
|
109 |
|
Natural gas from Consolidated Subsidiaries (mmcf/d)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
|
789 |
|
|
|
831 |
|
|
|
687 |
|
|
|
721 |
|
Southeast Asia
|
|
|
489 |
|
|
|
518 |
|
|
|
352 |
|
|
|
351 |
|
North Sea2
|
|
|
19 |
|
|
|
17 |
|
|
|
19 |
|
|
|
17 |
|
Other
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
1,297 |
|
|
|
1,366 |
|
|
|
1,058 |
|
|
|
1,089 |
|
Natural gas from Joint Ventures (mmcf/d)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TSEUK
|
|
|
3 |
|
|
|
2 |
|
|
|
3 |
|
|
|
2 |
|
Equion
|
|
|
42 |
|
|
|
47 |
|
|
|
32 |
|
|
|
38 |
|
|
|
|
45 |
|
|
|
49 |
|
|
|
35 |
|
|
|
40 |
|
Total natural gas from Consolidated Subsidiaries and Joint Ventures (mmcf/d)
|
|
|
1,342 |
|
|
|
1,415 |
|
|
|
1,093 |
|
|
|
1,129 |
|
Total Daily Production from Consolidated Subsidiaries (mboe/d)1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
|
184 |
|
|
|
192 |
|
|
|
159 |
|
|
|
162 |
|
Southeast Asia
|
|
|
125 |
|
|
|
137 |
|
|
|
89 |
|
|
|
91 |
|
North Sea2
|
|
|
16 |
|
|
|
16 |
|
|
|
16 |
|
|
|
16 |
|
Other
|
|
|
14 |
|
|
|
15 |
|
|
|
10 |
|
|
|
8 |
|
|
|
|
339 |
|
|
|
360 |
|
|
|
274 |
|
|
|
277 |
|
Total Daily Production from Joint Ventures (mboe/d)1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TSEUK
|
|
|
19 |
|
|
|
19 |
|
|
|
18 |
|
|
|
19 |
|
Equion
|
|
|
19 |
|
|
|
17 |
|
|
|
15 |
|
|
|
14 |
|
|
|
|
38 |
|
|
|
36 |
|
|
|
33 |
|
|
|
33 |
|
Total daily production from Consolidated Subsidiaries and Joint Ventures (mboe/d)1
|
|
|
377 |
|
|
|
396 |
|
|
|
307 |
|
|
|
310 |
|
Less production from assets sold or held for sale (mboe/d)1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
|
- |
|
|
|
19 |
|
|
|
- |
|
|
|
17 |
|
Southeast Asia
|
|
|
- |
|
|
|
3 |
|
|
|
- |
|
|
|
2 |
|
North Sea2
|
|
|
16 |
|
|
|
16 |
|
|
|
16 |
|
|
|
16 |
|
|
|
|
16 |
|
|
|
38 |
|
|
|
16 |
|
|
|
35 |
|
Total production from continuing operations (mboe/d)1
|
|
|
361 |
|
|
|
358 |
|
|
|
291 |
|
|
|
275 |
|
1.
|
For the period ended June 30, 2015, the Company adjusted the conversion ratio of barrels of oil equivalent (boe) of natural gas for one barrel of oil to a ratio of 5.615:1 from 6:1. Comparative periods have been adjusted to reflect the change in conversion.
|
2.
|
Discontinued Operations are the results associated with the expected Norway disposition.
|
Production represents gross production before royalties, unless noted otherwise. Production identified as net is production after deducting royalties.
Total production from continuing operations was 362 mboe/d, a decrease of 1% compared to 2014 due principally to decreased liquids production in Southeast Asia.
In North America, total production decreased by 3% compared to 2014. Oil and liquids production decreased by 9% due principally to operational issues and natural declines in the Eagle Ford, partially offset by development activity in Duvernay. Natural gas production decreased by 2% due to the disposition of non-core Western Canadian assets, partially offset by development activity in Edson and Marcellus.
In Southeast Asia, total production decreased by 8% compared to 2014. Total oil and liquids production decreased by 16% due principally to a reduction in the Company’s production entitlement at HST/HSD due to a partner’s carrying costs being fully recouped in 2014. Natural gas production decreased by 4% due principally to reduced demand and a full plant turnaround at Corridor, which was partially offset by increased production at PM3.
Total production in TSEUK increased by 5% due to improved uptime and enhanced production at Bleoholm and the restart of production in Monarb after an outage for safety remediation.
In the Other segment, including the Equion joint venture, total production increased 6% compared to 2014 due primarily to new wells in Floreña. Liquids production in Colombia remained consistent to the comparative quarter.
For details on production and netbacks related to the discontinued operations, see the "Discontinued Operations" section in this MD&A.
VOLUMES PRODUCED INTO (SOLD OUT OF) INVENTORY1,2
|
|
Three months ended June 30
|
|
|
Six months ended June 30
|
|
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
North America - bbls/d
|
|
|
(1,275 |
) |
|
|
(571 |
) |
|
|
(503 |
) |
|
|
(22 |
) |
Southeast Asia - bbls/d
|
|
|
10,134 |
|
|
|
3,822 |
|
|
|
4,918 |
|
|
|
3,375 |
|
|
|
|
(851 |
) |
|
|
(3,142 |
) |
|
|
(228 |
) |
|
|
259 |
|
Total produced into (sold out of) inventory – bbls/d
|
|
|
8,008 |
|
|
|
109 |
|
|
|
4,187 |
|
|
|
3,612 |
|
Total produced into (sold out of) inventory – mmbbls
|
|
|
0.7 |
|
|
|
- |
|
|
|
0.7 |
|
|
|
0.8 |
|
Inventory at June 30 - mmbbls
|
|
|
2.1 |
|
|
|
1.6 |
|
|
|
2.1 |
|
|
|
1.6 |
|
1.
|
Gross before royalties.
|
2.
|
Excludes results of discontinued operations associated with the expected Norway disposition.
|
In the Company's international operations, produced oil is frequently stored in tanks until there is sufficient volume to be lifted. The Company recognizes revenue and the related expenses on crude oil production when liftings have occurred and title has transferred. Volumes presented in the “Daily Average Production” table represent production volumes in the period, which include oil volumes produced into inventory and exclude volumes sold out of inventory.
During the three month period ended June 30, 2015, volumes in inventory increased to 2.1 mmbbls from 1.4 mmbbls at the end of the first quarter due principally to increased inventories in Southeast Asia, partially offset by decreased inventories in Algeria.
COMPANY NETBACKS1,2
|
|
Three months ended June 30
|
|
|
|
Gross before royalties
|
|
|
Net of royalties
|
|
Continuing Operations3
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
Oil and liquids ($/bbl)
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales price
|
|
|
50.33 |
|
|
|
91.52 |
|
|
|
50.33 |
|
|
|
91.52 |
|
Royalties
|
|
|
12.63 |
|
|
|
31.23 |
|
|
|
- |
|
|
|
- |
|
Transportation
|
|
|
1.37 |
|
|
|
1.46 |
|
|
|
1.75 |
|
|
|
2.10 |
|
Operating costs
|
|
|
11.32 |
|
|
|
16.47 |
|
|
|
14.43 |
|
|
|
23.62 |
|
|
|
|
25.01 |
|
|
|
42.36 |
|
|
|
34.15 |
|
|
|
65.80 |
|
Natural gas ($/mcf)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales price
|
|
|
3.72 |
|
|
|
6.15 |
|
|
|
3.72 |
|
|
|
6.15 |
|
Royalties
|
|
|
0.84 |
|
|
|
1.49 |
|
|
|
- |
|
|
|
- |
|
Transportation
|
|
|
0.25 |
|
|
|
0.21 |
|
|
|
0.32 |
|
|
|
0.27 |
|
Operating costs
|
|
|
0.97 |
|
|
|
1.04 |
|
|
|
1.25 |
|
|
|
1.36 |
|
|
|
|
1.66 |
|
|
|
3.41 |
|
|
|
2.15 |
|
|
|
4.52 |
|
Total $/boe (5.615mcf=1boe)4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales price
|
|
|
29.49 |
|
|
|
52.34 |
|
|
|
29.49 |
|
|
|
52.34 |
|
Royalties
|
|
|
7.04 |
|
|
|
15.52 |
|
|
|
- |
|
|
|
- |
|
Transportation
|
|
|
1.39 |
|
|
|
1.25 |
|
|
|
1.78 |
|
|
|
1.73 |
|
Operating costs
|
|
|
7.17 |
|
|
|
9.15 |
|
|
|
9.31 |
|
|
|
12.55 |
|
|
|
|
13.89 |
|
|
|
26.42 |
|
|
|
18.40 |
|
|
|
38.06 |
|
|
|
Six months ended June 30
|
|
|
|
Gross before royalties
|
|
|
Net of royalties
|
|
Continuing Operations3
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
Oil and liquids ($/bbl)
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales price
|
|
|
44.61 |
|
|
|
91.67 |
|
|
|
44.61 |
|
|
|
91.67 |
|
Royalties
|
|
|
11.71 |
|
|
|
31.03 |
|
|
|
- |
|
|
|
- |
|
Transportation
|
|
|
1.77 |
|
|
|
1.34 |
|
|
|
2.28 |
|
|
|
1.91 |
|
Operating costs
|
|
|
11.76 |
|
|
|
16.06 |
|
|
|
15.16 |
|
|
|
22.80 |
|
|
|
|
19.37 |
|
|
|
43.24 |
|
|
|
27.17 |
|
|
|
66.96 |
|
Natural gas ($/mcf)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales price
|
|
|
3.84 |
|
|
|
6.32 |
|
|
|
3.84 |
|
|
|
6.32 |
|
Royalties
|
|
|
0.85 |
|
|
|
1.50 |
|
|
|
- |
|
|
|
- |
|
Transportation
|
|
|
0.26 |
|
|
|
0.23 |
|
|
|
0.33 |
|
|
|
0.30 |
|
Operating costs
|
|
|
1.10 |
|
|
|
1.09 |
|
|
|
1.40 |
|
|
|
1.45 |
|
|
|
|
1.63 |
|
|
|
3.50 |
|
|
|
2.11 |
|
|
|
4.57 |
|
Total $/boe (5.615mcf=1boe)4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales price
|
|
|
28.36 |
|
|
|
52.35 |
|
|
|
28.36 |
|
|
|
52.35 |
|
Royalties
|
|
|
6.84 |
|
|
|
15.21 |
|
|
|
- |
|
|
|
- |
|
Transportation
|
|
|
1.54 |
|
|
|
1.29 |
|
|
|
1.97 |
|
|
|
1.77 |
|
Operating costs
|
|
|
7.81 |
|
|
|
9.10 |
|
|
|
10.14 |
|
|
|
12.39 |
|
|
|
|
12.17 |
|
|
|
26.75 |
|
|
|
16.25 |
|
|
|
38.19 |
|
1.
|
Netbacks do not include pipeline operations.
|
2.
|
Amounts shown only represent netbacks from consolidated subsidiaries and exclude netbacks from equity accounted entities.
|
3.
|
Excludes results of discontinued operations associated with the expected Norway disposition.
|
4.
|
For the period ended June 30, 2015, the Company adjusted the conversion ratio of barrels of oil equivalent (boe) of natural gas for one barrel of oil to a ratio of 5.615:1 from 6:1. Comparative periods have been adjusted to reflect the change in conversion.
|
During the quarter, the Company’s average gross netback was $13.89/boe, 47% lower than 2014 due principally to lower realized prices, partially offset by lower royalties and lower operating costs.
Talisman’s realized net sales price of $29.49/boe was 44% lower than 2014, due principally to lower commodity prices. Oil and liquids realized prices decreased by 45% and natural gas realized prices decreased by 40% from 2014.
The Company’s realized net sale price includes the impact of physical commodity contracts, but does not include the impact of financial commodity price derivatives discussed in the “Risk Management” section of this MD&A.
The Company’s composite royalty rate was 24%, down from 30% in 2014 due principally to lower commodity prices.
COMMODITY PRICES AND EXCHANGE RATES1,2
|
Three months ended June 30
|
Six months ended June 30
|
Continuing Operations
|
2015
|
2014
|
2015
|
2014
|
Oil and liquids ($/bbl)
|
|
|
|
North America
|
35.94
|
66.11
|
29.56
|
67.04
|
|
Southeast Asia
|
62.96
|
110.99
|
57.97
|
110.67
|
|
Other
|
58.24
|
107.76
|
53.61
|
106.07
|
|
|
50.33
|
91.52
|
44.61
|
91.67
|
Natural gas ($/mcf)
|
|
|
|
North America
|
2.22
|
4.35
|
2.41
|
4.62
|
|
Southeast Asia
|
6.08
|
8.94
|
6.14
|
9.04
|
|
|
3.72
|
6.15
|
3.84
|
6.32
|
Company $/boe (5.615mcf=1boe)3
|
29.49
|
52.34
|
28.36
|
52.35
|
Benchmark prices and foreign exchange rates
|
|
|
|
WTI |
(US$/bbl)
|
57.86
|
102.99
|
53.25
|
100.84
|
|
Dated Brent |
(US$/bbl)
|
61.92
|
109.63
|
57.95
|
108.93
|
|
WCS |
(US$/bbl)
|
46.35
|
83.01
|
40.13
|
79.29
|
|
LLS |
(US$/bbl)
|
62.95
|
105.53
|
57.89
|
104.99
|
|
NYMEX |
(US$/mmbtu)
|
2.67
|
4.57
|
2.82
|
4.73
|
|
AECO |
(C$/gj)
|
2.53
|
4.44
|
2.66
|
4.47
|
C$/US$ exchange rate
|
1.23
|
1.09
|
1.24
|
1.10
|
UK£/US$ exchange rate
|
0.65
|
0.59
|
0.66
|
0.60
|
1.
|
Amounts shown only represent consolidated subsidiaries and exclude prices from equity accounted entities.
|
2.
|
Excludes results of discontinued operations associated with the expected Norway disposition.
|
3.
|
For the period ended June 30, 2015, the Company adjusted the conversion ratio of barrels of oil equivalent (boe) of natural gas for one barrel of oil to a ratio of 5.615:1 from 6:1. Comparative periods have been adjusted to reflect the change in conversion.
|
Overall realized oil and liquids prices decreased by 45% in 2015 which was consistent with decreases in WTI and Brent pricing. In North America, realized natural gas prices decreased by 49% in 2015, and in Southeast Asia, realized natural gas prices decreased by 32%. A portion of natural gas pricing in Southeast Asia is sold via fixed-price contracts and as a result, the decline in gas prices was less than the decline in benchmark oil prices. Talisman’s overall realized natural gas price of $3.72/mcf decreased by 40% compared to 2014.
EXPENSES
Unit Operating Expenses1,2
|
|
Three months ended June 30
|
|
Continuing Operations
|
|
Gross before royalties
|
|
|
Net of royalties
|
|
($/boe)3
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
North America
|
|
|
6.64 |
|
|
|
7.67 |
|
|
|
7.63 |
|
|
|
9.12 |
|
Southeast Asia
|
|
|
7.19 |
|
|
|
11.06 |
|
|
|
10.22 |
|
|
|
16.65 |
|
Other
|
|
|
13.49 |
|
|
|
10.05 |
|
|
|
17.77 |
|
|
|
19.09 |
|
|
|
|
7.17 |
|
|
|
9.15 |
|
|
|
9.31 |
|
|
|
12.55 |
|
|
|
Six months ended June 30
|
|
Continuing Operations
|
|
Gross before royalties
|
|
|
Net of royalties
|
|
($/boe)3
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
North America
|
|
|
7.09 |
|
|
|
7.74 |
|
|
|
8.16 |
|
|
|
9.09 |
|
Southeast Asia
|
|
|
8.17 |
|
|
|
10.98 |
|
|
|
11.58 |
|
|
|
16.59 |
|
Other
|
|
|
13.75 |
|
|
|
9.35 |
|
|
|
19.52 |
|
|
|
18.23 |
|
|
|
|
7.81 |
|
|
|
9.10 |
|
|
|
10.14 |
|
|
|
12.39 |
|
1.
|
Represents operating expenses from consolidated subsidiaries, excluding operating expenses from equity investees.
|
2.
|
Excludes results of discontinued operations associated with the expected Norway disposition.
|
3.
|
For the period ended June 30, 2015, the Company adjusted the conversion ratio of barrels of oil equivalent (boe) to a ratio of 5.615:1 from 6:1. Comparative periods have been adjusted to reflect the change in conversion.
|
Total Operating Expenses1,2
|
|
Three months ended June 30
|
|
|
Six months ended June 30
|
|
Continuing Operations
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
($ millions)
|
|
|
|
|
|
|
North America
|
|
|
114 |
|
|
|
134 |
|
|
|
241 |
|
|
|
268 |
|
Southeast Asia
|
|
|
60 |
|
|
|
130 |
|
|
|
169 |
|
|
|
252 |
|
Other
|
|
|
19 |
|
|
|
16 |
|
|
|
34 |
|
|
|
23 |
|
|
|
|
193 |
|
|
|
280 |
|
|
|
444 |
|
|
|
543 |
|
1.
|
Represents operating expenses from consolidated subsidiaries, excluding operating expenses from equity investees.
|
2.
|
Excludes results of discontinued operations associated with the expected Norway disposition.
|
Total operating expenses decreased by 31% to $193 million due principally to operating expense reductions being implemented across the Company, favourable foreign exchange movements, the timing of liftings, and asset dispositions.
In North America, total operating expenses decreased by 15% to $114 million principally due to dispositions of non-core western Canadian properties in 2014, partially offset by increased production activity in remaining properties. Unit operating expenses in North America decreased by 13% due principally to a change in production mix as remaining assets have lower operating costs than assets disposed of in western Canada.
In Southeast Asia, total operating expenses decreased by 54% due primarily to a reduction in planned maintenance activity, revisions to estimated costs for prior periods, insurance proceeds for the jacket repair in HST/HSD in the current quarter and completion of the jacket repair in HST/HSD during 2014. Unit operating expenses in Southeast Asia decreased 35% due to the reasons noted above.
In the rest of the world, total operating expenses increased by 19% compared to the same period in 2014 due principally to increased costs in Akacias and revisions to estimated costs for prior periods, partially offset by timing of liftings. Unit operating costs increased by 34% due to the reasons noted above.
Unit Depreciation, Depletion and Amortization (DD&A) Expense1,2
|
|
Three months ended June 30
|
|
Continuing Operations
|
|
Gross before royalties
|
|
|
Net of royalties
|
|
($/boe)3
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
|
|
|
15.20 |
|
|
|
17.55 |
|
|
|
17.46 |
|
|
|
20.87 |
|
Southeast Asia
|
|
|
11.09 |
|
|
|
9.48 |
|
|
|
15.77 |
|
|
|
14.28 |
|
Other
|
|
|
11.94 |
|
|
|
10.99 |
|
|
|
15.74 |
|
|
|
20.88 |
|
|
|
|
13.43 |
|
|
|
13.99 |
|
|
|
16.80 |
|
|
|
18.53 |
|
|
|
Six months ended June 30
|
|
Continuing Operations
|
|
Gross before royalties
|
|
|
Net of royalties
|
|
($/boe)3
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
North America
|
|
|
15.20 |
|
|
|
16.41 |
|
|
|
17.50 |
|
|
|
19.26 |
|
Southeast Asia
|
|
|
11.56 |
|
|
|
9.54 |
|
|
|
16.38 |
|
|
|
14.42 |
|
Other
|
|
|
11.61 |
|
|
|
10.71 |
|
|
|
16.48 |
|
|
|
20.88 |
|
|
|
|
13.63 |
|
|
|
13.42 |
|
|
|
17.07 |
|
|
|
17.63 |
|
1.
|
Represents unit DD&A expenses from consolidated subsidiaries, excluding unit DD&A from equity investees.
|
2.
|
Excludes results of discontinued operations associated with the expected Norway disposition.
|
3.
|
For the period ended June 30, 2015, the Company adjusted the conversion ratio of barrels of oil equivalent (boe) of natural gas for one barrel of oil to a ratio of 5.615:1 from 6:1. Comparative periods have been adjusted to reflect the change in conversion.
|
Total DD&A Expense1,2
|
|
Three months ended June 30
|
|
|
Six months ended June 30
|
|
Continuing Operations
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
($ millions)
|
|
|
|
|
|
|
North America
|
|
|
252 |
|
|
|
296 |
|
|
|
509 |
|
|
|
562 |
|
Southeast Asia
|
|
|
112 |
|
|
|
114 |
|
|
|
250 |
|
|
|
230 |
|
Other
|
|
|
15 |
|
|
|
20 |
|
|
|
31 |
|
|
|
30 |
|
|
|
|
379 |
|
|
|
430 |
|
|
|
790 |
|
|
|
822 |
|
1.
|
Represents DD&A expenses from consolidated subsidiaries, excluding DD&A expense from equity investees.
|
2.
|
Excludes results of discontinued operations associated with the expected Norway disposition.
|
Total DD&A expense in North America decreased by 15% due principally to a lower depletable base in Eagle Ford as a result of an impairment recognized in 2014, partially offset by increased production in the Duvernay and Marcellus areas. Unit DD&A expenses decreased 13% compared to 2014 due to the same reasons noted above.
In Southeast Asia, total DD&A expense remained relatively stable and unit DD&A expense increased by 17% due principally to new well additions in Malaysia that have higher DD&A rates, and downward reserve revisions during 2014, partially offset by lower production in the current quarter and decreased production entitlement in HST/HSD.
In the rest of the world, total DD&A expense decreased 25% due principally to the timing of liftings in Colombia. Unit DD&A expense increased by 9% due to an increased depletable base in Colombia.
Unit DD&A expense for the Company decreased by 4% to $13.43/boe due to the reasons noted above.
Impairment1,2
|
|
Three months ended June 30
|
|
|
Six months ended June 30
|
|
Continuing Operations
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
($ millions)
|
|
|
|
|
|
|
Impairment losses
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Southeast Asia
|
|
|
- |
|
|
|
- |
|
|
|
48 |
|
|
|
- |
|
|
|
|
- |
|
|
|
- |
|
|
|
48 |
|
|
|
- |
|
Impairment reversals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
|
- |
|
|
|
(32 |
) |
|
|
- |
|
|
|
(32 |
) |
Southeast Asia
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
- |
|
|
|
(32 |
) |
|
|
- |
|
|
|
(32 |
) |
Net Impairment
|
|
|
- |
|
|
|
(32 |
) |
|
|
48 |
|
|
|
(32 |
) |
1.
|
Represents impairment expenses from consolidated subsidiaries, excluding impairment expenses from equity investees.
|
2.
|
Excludes results of discontinued operations associated with the expected Norway disposition.
|
In conjunction with the acquisition of the Company by Repsol, Repsol has completed a preliminary allocation of the purchase price for purposes of its accounting subsequent to the acquisition date. As part of the purchase price allocation, Repsol estimated fair values of the Company’s assets and liabilities. Based on this preliminary assessment, certain of the Company’s assets could be impaired or subject to impairment reversals in future periods. Management has not recorded any impairments or reversals in the June 30, 2015 financial statements as the estimates are considered preliminary and subject to further review. The magnitude of any impairments or reversals to be recorded in future periods will be determined as the purchase price allocation is finalized. This is expected to occur later in 2015.
Income (Loss) from Joint Ventures1
|
|
Three months ended June 30
|
|
|
Six months ended June 30
|
|
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
($ millions)
|
|
|
|
|
|
|
TSEUK
|
|
|
(115 |
) |
|
|
(60 |
) |
|
|
(321 |
) |
|
|
(77 |
) |
Equion
|
|
|
8 |
|
|
|
23 |
|
|
|
7 |
|
|
|
46 |
|
|
|
|
(107 |
) |
|
|
(37 |
) |
|
|
(314 |
) |
|
|
(31 |
) |
1.
|
Represents the Company’s proportionate interest in joint ventures.
|
The net loss in TSEUK increased by $55 million compared to 2014 due principally to impairments to the decommissioning obligation and asset caused by the change in discount rate used to measure the decommissioning liabilities and the decreased revenue from lower realized oil and liquids prices, partially offset by lower operating costs.
The net income in Equion of $8 million after-tax as compared to income of $23 million in 2014 is due principally to revenue from lower realized commodity prices and increased DD&A expense from new production, partially offset by lower current tax.
Corporate and Other 1,2
|
|
Three months ended June 30
|
|
|
Six months ended June 30
|
|
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
($ millions)
|
|
|
|
|
|
|
General and administrative (G&A) expense
|
|
|
83 |
|
|
|
103 |
|
|
|
167 |
|
|
|
205 |
|
Dry hole expense
|
|
|
- |
|
|
|
11 |
|
|
|
13 |
|
|
|
28 |
|
Exploration expense
|
|
|
98 |
|
|
|
44 |
|
|
|
122 |
|
|
|
83 |
|
Finance costs
|
|
|
79 |
|
|
|
83 |
|
|
|
163 |
|
|
|
166 |
|
Share-based payments expense (recovery)
|
|
|
(19 |
) |
|
|
23 |
|
|
|
(24 |
) |
|
|
(9 |
) |
(Gain) loss on held-for-trading financial instruments
|
|
|
131 |
|
|
|
171 |
|
|
|
(62 |
) |
|
|
231 |
|
(Gain) loss on asset disposals
|
|
|
4 |
|
|
|
5 |
|
|
|
9 |
|
|
|
(554 |
) |
Other income
|
|
|
41 |
|
|
|
30 |
|
|
|
81 |
|
|
|
77 |
|
Other expenses, net
|
|
|
130 |
|
|
|
37 |
|
|
|
146 |
|
|
|
44 |
|
1.
|
Represents corporate and other expense from consolidated subsidiaries, excluding corporate and other expense from equity investees.
|
2.
|
Excludes results of discontinued operations associated with the expected Norway disposition.
|
G&A expense decreased by $20 million relative to 2014 due principally to lower workforce costs.
Exploration expense increased by $54 million due principally to change of control provisions in seismic contracts primarily in North America and the North Sea as a result of the acquisition of Talisman by Repsol.
Finance costs include interest on long-term debt (including current portion), other finance charges and accretion expense relating to decommissioning liabilities. Finance costs were relatively stable as compared to prior year.
Share-based payments recovery during the three month period ended June 30, 2015 was $19 million due principally to the settlement of share-based payments in conjunction with the acquisition of the Company by Repsol.
Talisman recorded a loss on held-for-trading financial instruments of $131 million, due principally to an increase in oil and gas forward prices in comparison to the first quarter of 2015. See the "Risk Management" section of this MD&A for further details regarding the Company’s financial instruments.
Other income of $41 million consists primarily of marketing and other income of $21 million and pipeline and customer treating tariffs of $11 million.
Other expense of $130 million includes a foreign exchange loss of $27 million, restructuring costs of $23 million and $39 million in transaction costs related to the acquisition of the Company by Repsol and other miscellaneous expenses.
INCOME TAXES1,2
|
|
Three months ended June 30
|
|
|
Six months ended June 30
|
|
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
($ millions)
|
|
|
|
|
|
|
Income (loss) from continuing operations before taxes
|
|
|
(567 |
) |
|
|
(60 |
) |
|
|
(918 |
) |
|
|
702 |
|
Less: Petroleum Revenue Tax (PRT)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
2 |
|
|
|
- |
|
|
|
4 |
|
|
|
7 |
|
Deferred
|
|
|
- |
|
|
|
(5 |
) |
|
|
(3 |
) |
|
|
(2 |
) |
Total PRT
|
|
|
2 |
|
|
|
(5 |
) |
|
|
1 |
|
|
|
5 |
|
|
|
|
(569 |
) |
|
|
(55 |
) |
|
|
(919 |
) |
|
|
697 |
|
Income tax expense (recovery)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current income tax
|
|
|
63 |
|
|
|
134 |
|
|
|
131 |
|
|
|
258 |
|
Deferred income tax
|
|
|
256 |
|
|
|
18 |
|
|
|
235 |
|
|
|
65 |
|
Total income tax expense
|
|
|
319 |
|
|
|
152 |
|
|
|
366 |
|
|
|
323 |
|
Effective income tax rate (%)
|
|
|
(56 |
) |
|
|
(276 |
) |
|
|
(40 |
) |
|
|
46 |
|
1.
|
Represents income taxes from consolidated subsidiaries, excluding income taxes from equity investees.
|
2.
|
Excludes results of discontinued operations associated with the expected Norway disposition.
|
The effective tax rate is expressed as a percentage of income before taxes adjusted for PRT, which is deductible in determining taxable income. The effective tax rate in the second quarter of 2015 was impacted by pre-tax losses of $233 million in North America where tax rates are between 27% and 39%.
For the three month period ended June 30, 2015, the current tax expense decreased to $63 million compared to $134 million in 2014 due principally to lower net revenues.
For the three month period ended June 30, 2015, the deferred tax expense was $256 million compared to a deferred tax expense of $18 million in 2014.
Impacts to the effective tax rate and the deferred tax expense are principally due to:
|
·
|
Jurisdictional mix of income
|
|
·
|
De-recognition of Canadian tax assets as a result of the Repsol acquisition;
|
|
·
|
Foreign exchange on foreign denominated tax pools;
|
|
·
|
Substantially enacted Alberta corporate tax rate increase; and
|
|
·
|
The non-recognition of losses in the United States and exploration blocks.
|
CAPITAL EXPENDITURES1
|
|
Three months ended June 30
|
|
|
Six months ended June 30
|
|
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
($ millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
|
133 |
|
|
|
273 |
|
|
|
331 |
|
|
|
601 |
|
Southeast Asia
|
|
|
65 |
|
|
|
99 |
|
|
|
108 |
|
|
|
206 |
|
Other
|
|
|
7 |
|
|
|
43 |
|
|
|
29 |
|
|
|
97 |
|
Exploration and development expenditure from subsidiaries2
|
|
|
205 |
|
|
|
415 |
|
|
|
468 |
|
|
|
904 |
|
Corporate, IS and Administrative
|
|
|
16 |
|
|
|
16 |
|
|
|
19 |
|
|
|
20 |
|
Acquisitions
|
|
|
8 |
|
|
|
13 |
|
|
|
8 |
|
|
|
13 |
|
Proceeds of dispositions
|
|
|
- |
|
|
|
(52 |
) |
|
|
- |
|
|
|
(1,392 |
) |
Net capital expenditure for subsidiaries
|
|
|
229 |
|
|
|
392 |
|
|
|
495 |
|
|
|
(455 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TSEUK
|
|
|
101 |
|
|
|
169 |
|
|
|
210 |
|
|
|
333 |
|
Equion
|
|
|
10 |
|
|
|
27 |
|
|
|
20 |
|
|
|
34 |
|
Exploration and development expenditure from joint ventures3
|
|
|
111 |
|
|
|
196 |
|
|
|
230 |
|
|
|
367 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net capital expenditure for consolidated subsidiaries and joint ventures
|
|
|
340 |
|
|
|
588 |
|
|
|
725 |
|
|
|
(88 |
) |
1.
|
Excludes results of discontinued operations associated with the expected Norway disposition.
|
2.
|
Excludes exploration expense of $98 million (2014 - $44 million) for the three month period ended June 30, 2015 and $122 million (2014 - $83 million) for the six month period ended June 30, 2015.
|
3.
|
Represents the Company’s proportionate interest, excluding exploration expensed of $1 million net in TSEUK (2014 - $1 million) for the three month period ended June 30, 2015 and $1 million net in TSEUK (2014 - $3 million) for the six month period ended June 30, 2015.
|
Capital expenditures, excluding exploration expense, decreased in the second quarter of 2015 compared to the same quarter in 2014 due principally to decreased spending across all regions.
North America capital expenditures during the quarter totalled $133 million, a decrease of 51% from 2014. Of this, $120 million related to development activity, with the majority spent in the Eagle Ford, Marcellus and Edson areas. The remaining capital was mainly invested in exploration drilling activities, largely in the Duvernay.
In Southeast Asia, capital expenditures of $65 million included $25 million on development, with the majority spent in Indonesia and Malaysia. The majority of the remaining expenditures were exploration costs focused in Malaysia.
In the rest of the world, capital expenditures of $7 million included development activities in Akacias and exploration and evaluation activities in Colombia and the Kurdistan Region of Iraq.
In the TSEUK joint venture, net capital expenditures of $101 million consisted primarily of development activities at Montrose, Tweedsmuir and Flyndre/Cawdor. In the Equion joint venture, net capital expenditures of $10 million were principally for development activities in Piedemonte.
DISCONTINUED OPERATIONS
During the three month period ended June 30, 2015, Talisman and Repsol entered into a purchase and sale agreement whereby Repsol will acquire substantially all of the assets and liabilities of Talisman’s Norwegian operations (the “Disposal Group”) for proceeds of $47 million, including working capital. The transaction is expected to close prior to September 30, 2015.
In the interim condensed Consolidated Financial Statements, the Disposal Group’s assets and liabilities were reclassified as current assets or liabilities held for sale, its operating results included in net loss from discontinued operations and comparative period balances restated. The Disposal Group was remeasured to its recoverable amount of $47 million at June 30, 2015 and as a result, a loss of $472 million pre-tax ($292 million after-tax) was recorded in Norway.
Income Statement for Discontinued Operations
Three months ended June 30
|
|
2015
|
|
|
2014
|
|
Revenue
|
|
|
83 |
|
|
|
108 |
|
Expenses
|
|
|
(289 |
) |
|
|
(211 |
) |
|
|
|
(206 |
) |
|
|
(103 |
) |
Loss on remeasurement of discontinued operations
|
|
|
(472 |
) |
|
|
- |
|
Loss from discontinued operations before taxes
|
|
|
(678 |
) |
|
|
(103 |
) |
Income taxes
|
|
|
|
|
|
|
|
|
Current income tax recovery
|
|
|
(6 |
) |
|
|
(5 |
) |
Deferred income tax recovery
|
|
|
(308 |
) |
|
|
(68 |
) |
Loss from discontinued operations
|
|
|
(364 |
) |
|
|
(30 |
) |
|
|
|
|
Six months ended June 30
|
|
2015
|
|
|
2014
|
|
Revenue
|
|
|
144 |
|
|
|
273 |
|
Expenses
|
|
|
(401 |
) |
|
|
(547 |
) |
|
|
|
(257 |
) |
|
|
(274 |
) |
Loss on remeasurement of discontinued operations
|
|
|
(472 |
) |
|
|
- |
|
Loss from discontinued operations before taxes
|
|
|
(729 |
) |
|
|
(274 |
) |
Income taxes
|
|
|
|
|
|
|
|
|
Current income tax recovery
|
|
|
(7 |
) |
|
|
(5 |
) |
Deferred income tax recovery
|
|
|
(316 |
) |
|
|
(149 |
) |
Loss from discontinued operations
|
|
|
(406 |
) |
|
|
(120 |
) |
During the three month period ended June 30, 2015, the Company recorded an impairment of $118 million in Norway E&E assets to fully impair costs associated with a license after a dry exploration well confirmed the license to be uneconomic. In addition, the Company recorded an impairment of $30 million in Norway, due to an increase in the decommissioning obligation and asset caused by a 1.5% decrease in the credit-adjusted discount rate used to measure decommissioning liabilities.
Cash Flow for Discontinued Operations
The cash flows from discontinued operations, including changes in related non-cash working capital items, are as follows:
|
|
Three months ended June 30
|
|
|
Six months ended June 30
|
|
Discontinued Operations
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
Operating
|
|
|
(16 |
) |
|
|
64 |
|
|
|
(24 |
) |
|
|
37 |
|
Investing
|
|
|
(9 |
) |
|
|
(76 |
) |
|
|
(37 |
) |
|
|
(125 |
) |
Cash flows from discontinued operations
|
|
|
(25 |
) |
|
|
(12 |
) |
|
|
(61 |
) |
|
|
(88 |
) |
Netbacks for Discontinued Operations
|
|
Three months ended June 30
|
|
|
|
Gross before royalties
|
|
|
Net of royalties
|
|
Discontinued Operations
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
Total $/boe (5.615mcf=1boe)1
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales price
|
|
|
56.50 |
|
|
|
92.66 |
|
|
|
56.50 |
|
|
|
92.66 |
|
Transportation
|
|
|
3.40 |
|
|
|
3.68 |
|
|
|
3.40 |
|
|
|
3.68 |
|
Operating costs
|
|
|
35.51 |
|
|
|
62.47 |
|
|
|
35.51 |
|
|
|
62.47 |
|
DD&A
|
|
|
29.00 |
|
|
|
39.32 |
|
|
|
29.00 |
|
|
|
39.32 |
|
|
|
|
(11.41 |
) |
|
|
(12.81 |
) |
|
|
(11.41 |
) |
|
|
(12.81 |
) |
|
|
Six months ended June 30
|
|
|
|
Gross before royalties
|
|
|
Net of royalties
|
|
Discontinued Operations
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
Total $/boe (5.615mcf=1boe)1
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales price
|
|
|
52.76 |
|
|
|
94.55 |
|
|
|
52.76 |
|
|
|
94.55 |
|
Transportation
|
|
|
3.11 |
|
|
|
4.18 |
|
|
|
3.11 |
|
|
|
4.18 |
|
Operating costs
|
|
|
35.72 |
|
|
|
58.23 |
|
|
|
35.72 |
|
|
|
58.23 |
|
DD&A
|
|
|
30.39 |
|
|
|
44.81 |
|
|
|
30.39 |
|
|
|
44.81 |
|
|
|
|
(16.46 |
) |
|
|
(12.67 |
) |
|
|
(16.46 |
) |
|
|
(12.67 |
) |
1.
|
For the period ended June 30, 2015, the Company adjusted the conversion ratio of barrels of oil equivalent (boe) of natural gas for one barrel of oil to a ratio of 5.615:1 from 6:1. Comparative periods have been adjusted to reflect the change in conversion.
|
Commodity Pricing for Discontinued Operations
|
|
Three months ended June 30
|
|
|
Six months ended June 30
|
|
Discontinued Operations
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
Oil and liquids ($/bbl)
|
|
|
62.14 |
|
|
|
107.48 |
|
|
|
56.12 |
|
|
|
105.45 |
|
Natural gas ($/mcf)
|
|
|
6.74 |
|
|
|
7.82 |
|
|
|
7.10 |
|
|
|
8.67 |
|
|
|
|
56.50 |
|
|
|
92.66 |
|
|
|
52.76 |
|
|
|
94.55 |
|
LIQUIDITY AND CAPITAL RESOURCES
Talisman’s gross debt at June 30, 2015 was $4.8 billion, including loans from related parties of $831 million, compared to $5.1 billion at December 31, 2014.
During the quarter, the Company generated $1.0 billion of cash provided by operating activities and incurred capital expenditures of $232 million.
Talisman’s capital structure consists of shareholder's equity and debt. The Company makes adjustments to its capital structure based on changes in economic conditions and its planned requirements.
On May 8, 2015, TE Holdings SARL., a subsidiary of Talisman, entered into a $500 million revolving facility with Repsol Tesoreria Y Gestion Financiera, S.A. The facility matures on May 8, 2016 and bears an interest rate of LIBOR+0.80%. See "Transactions with Related Parties" section.
On May 8, 2015, Talisman also entered into a $1.0 billion revolving facility with Repsol Energy Resources Canada, Inc. The facility matures on May 8, 2018 and bears an interest rate of LIBOR+1.20%. See "Transactions with Related Parties" section.
In May 2014, the Company renewed its universal shelf prospectus under the Multi-Jurisdictional Disclosure System pursuant to which it may issue up to $3.5 billion of debt securities, common shares, preferred shares, subscription receipts, warrants and units. The Company simultaneously renewed its medium-term note shelf prospectus in Canada pursuant to which it may issue up to C$1.0 billion of medium-term notes in Canada. Both shelf prospectuses remain valid over a 25-month period.
Talisman manages its liquidity requirements by use of both short-term and long-term cash forecasts, and by maintaining appropriate undrawn capacity under committed bank and related parties credit facilities. The Company has in place committed bank facilities totaling $3.2 billion, all of which are committed through 2019. At June 30, 2015, there were no drawings in the form of bankers’ acceptance or commercial paper, and there was $85 million in letters of credit support outstanding. Available borrowing capacity under committed bank facilities was $3.1 billion at June 30, 2015. In addition, the Company also has in place related party facilities from Repsol totaling $1.5 billion, $500 million of which is committed through 2016 with the remainder committed through 2018. At June 30, 2015, $831 million were drawn under these facilities.
The authorized amount under the Company’s commercial paper program is $1.0 billion, but the amount available under this program is limited to the availability of backup funds under the Company’s Facility No. 1. For additional information regarding the Company’s Facilities, refer to note 18 to the Company’s 2014 audited Consolidated Financial Statements and note 14 in the Company’s interim condensed Consolidated Financial Statements.
In addition, the Company utilizes letters of credit pursuant to letter of credit facilities, most of which are uncommitted. At June 30, 2015, demand letters of credit guaranteed by the Company totaling $1.3 billion were issued, of which $1.2 billion were issued from uncommitted facilities. Of that total, $1.0 billion is provided as security for the costs of decommissioning obligations in the UK, as described below. The remaining outstanding letters of credit relate primarily to a retirement compensation arrangement, guarantees of minimum work commitments and decommissioning obligations in other areas.
TSEUK is required to provide letters of credit as security in relation to certain decommissioning obligations in the UK pursuant to contractual arrangements under Decommissioning Security Agreements (DSAs). At the commencement of the joint venture, Addax Petroleum UK Limited (Addax) assumed 49% of the decommissioning obligations of TSEUK. Addax’s parent company, China Petrochemical Corporation (Sinopec), has provided an unconditional and irrevocable guarantee for this 49% of the UK decommissioning obligations.
The UK government passed legislation in 2013 which provides for a contractual instrument, known as a Decommissioning Relief Deed, for the Government to guarantee tax relief on decommissioning costs at 50%, allowing security under DSAs to be posted on an after-tax basis and reducing the amount of letters of credit required to be posted by 50%. TSEUK has entered into a Decommissioning Relief Deed with the UK government and continues to negotiate with counterparties to amend all DSAs accordingly. Tax relief guaranteed by the UK government is limited to corporate tax paid since 2002. Under the limitation, TSEUK’s tax relief is capped at $2.2 billion, representing corporate income taxes paid and recoverable since 2002.
At June 30, 2015, TSEUK has $2.6 billion of demand shared facilities in place under which letters of credit of $1.9 billion have been issued. The Company guarantees 51% of all letters of credit issued under these shared facilities.
The Company also has obligations to fund, in proportion of its shareholding, the losses and net asset deficiency of TSEUK which arises from the Company’s past practice of funding TSEUK’s cash flow deficiencies, and the expectation that cash flow deficiencies will continue to be funded through 2015. In addition, the Company, in proportion of its shareholding, has provided certain guarantees to fund TSEUK’s decommissioning obligation if TSEUK is unable to, and the shareholders of TSEUK have provided equity funding facilities to TSEUK which include funding decommissioning liabilities. As such, the Company has recognized a negative investment value from the application of equity accounting. The Company’s obligation to fund TSEUK will increase to the extent future losses are generated within TSEUK. In addition, future contributions to the TSEUK joint venture could be impaired to the extent recoverability is not probable.
Any changes to decommissioning estimates influence the value of letters of credit to be provided pursuant to the DSAs. In addition, the extent to which shared facility capacity is available, and the cost of that capacity, is influenced by the Company’s investment grade credit rating.
Talisman monitors its balance sheet with reference to its liquidity and a debt-to-cash flow ratio. The main factors in assessing the Company’s liquidity are cash flow, including cash flow from equity accounted entities (defined in accordance with the Company’s debt covenant as cash provided by operating activities before adjusting for changes in non-cash working capital, and exploration expenditure), cash provided by and used in investing activities and available bank credit facilities and related parties facilities. The debt-to-cash flow ratio is calculated using debt (calculated by adding the gross debt and bank indebtedness, loans from related parties, production payments and finance lease) divided by cash flow for the year.
The Company is in compliance with all of its debt covenants. The Company’s principal financial covenant under its primary bank credit facility is a debt-to-cash flow ratio of less than 3.5:1, calculated quarterly on a trailing 12-month basis as of the last day of each fiscal quarter. For the trailing 12-month period ended June 30, 2015, the debt-to-cash flow ratio was 1.8:1. Considering the current commodity price environment, Talisman may require support from Repsol to ensure continued compliance with its liquidity and covenant requirements.
A significant proportion of Talisman’s accounts receivable balance is with customers in the oil and gas industry and is subject to normal industry credit risks. At June 30, 2015, approximately 84% of the Company's trade accounts receivable were aged less than 90 days and the largest single counterparty exposure, accounting for 7% of the total, was with a highly rated counterparty. Concentration of counterparty credit risk is managed by having a broad domestic and international customer base consisting primarily of highly rated counterparties.
During the three month period ended June 30, 2015, Talisman declared common share dividends of $0.1125 per common share for an aggregate dividend of $117 million. Subsequent to June 30, 2015, there was no movement in the number of common shares outstanding resulting in 1,044,166,027 common shares outstanding at July 30, 2015.
In the first quarter of 2015, Talisman declared preferred share dividends of C$0.2625 per share for an aggregate dividend of $2 million. On May 8, 2015, Repsol’s acquisition of Talisman was completed, whereby Repsol acquired all outstanding common and preferred shares of Talisman. The outstanding preferred shares were subsequently converted on a 1:1 basis into common shares. Consequently there were no preferred shares outstanding at June 30, 2015.
Subsequent to the acquisition of Talisman by Repsol on May 8, 2015, all share-based payment units have been settled and paid by May 29, 2015. At June 30, 2015 there were no stock options, RSUs, deferred share units (DSU) or long-term PSUs outstanding.
Talisman continually monitors its portfolio of assets and investigates business opportunities in the oil and gas sector. The Company may make acquisitions, investments or dispositions, some of which may be material. In connection with any acquisition or investment, Talisman may incur debt.
For additional information regarding the Company’s liquidity and capital resources, refer to note 20 to the Company’s 2014 audited Consolidated Financial Statements and notes 14, 17 and 18 in the Company’s interim condensed Consolidated Financial Statements.
SENSITIVITIES4
Talisman’s financial performance is affected by factors such as changes in production volumes, commodity prices and exchange rates. The estimated annualized impact of these factors for 2015 (excluding the effect of derivative contracts) is summarized in the following table, based on a Dated Brent oil price of approximately $63.50/bbl, a NYMEX natural gas price of approximately $3.12/mmbtu and exchange rates of US$0.80=C$1 and UK£1=US$1.51.
(millions of $)
|
|
Net Income
|
|
|
Cash Provided by Operating Activities3
|
|
Volume changes
|
|
|
|
|
|
|
Oil – 10,000 bbls/d
|
|
|
31 |
|
|
|
112 |
|
Natural gas – 60 mmcf/d
|
|
|
5 |
|
|
|
45 |
|
Price changes1
|
|
|
|
|
|
|
|
|
Oil – $1.00/bbl
|
|
|
25 |
|
|
|
31 |
|
Natural gas (North America)2 – $0.10/mcf
|
|
|
23 |
|
|
|
25 |
|
Exchange rate changes
|
|
|
|
|
|
|
|
|
US$/C$ decreased by US$0.01
|
|
|
(4 |
) |
|
|
(6 |
) |
US$/UK£ increased by US$0.02
|
|
|
(7 |
) |
|
|
7 |
|
1.
|
The impact of price changes excludes the effect of commodity derivatives. See specific commodity derivative terms in the ‘Risk Management’ section of this MD&A, and note 17 to the interim condensed Consolidated Financial Statements.
|
2.
|
Price sensitivity on natural gas relates to North America natural gas only. The Company’s exposure to changes in the natural gas prices in Norway, Vietnam and Colombia is not material. Most of the natural gas prices in Indonesia and Malaysia are based on the price of crude oil or high-sulphur fuel oil and, accordingly, have been included in the price sensitivity for oil. Most of the remaining part of Indonesia natural gas production is sold at a fixed price.
|
3.
|
Changes in cash flow provided by operating activities excludes TSEUK and Equion due to the application of equity accounting.
|
4.
|
Excludes results of discontinued operations associated with the expected Norway disposition.
|
COMMITMENTS AND OFF-BALANCE SHEET ARRANGEMENTS
As part of its normal business, the Company has entered into arrangements and incurred obligations that will impact the Company’s future operations and liquidity, some of which are reflected as liabilities in the Consolidated Financial Statements at year-end. The principal commitments of the Company are in the form of debt repayments, decommissioning obligations, lease commitments relating to corporate offices and ocean-going vessels, firm commitments for gathering, processing and transmission services, minimum work commitments under various international agreements, other service contracts and fixed price commodity sales contracts.
Additional disclosure of the Company’s decommissioning liabilities, debt repayment obligations and significant commitments can be found in notes 8, 16, 18, 19 and 24 to the 2014 audited Consolidated Financial Statements. A discussion of the Company’s derivative financial instruments and commodity sales contracts can be found in the “Risk Management” section of this MD&A.
There have been no additional significant changes in the Company’s expected future commitments, and the timing of those payments, since December 31, 2014.
TRANSACTIONS WITH RELATED PARTIES
Repsol’s acquisition of Talisman closed on May 8, 2015. During the period from May 8, 2015 to June 30, 2015, Talisman has entered into the following transactions, with Repsol, its ultimate parent.
On May 8, 2015, TE Holdings SARL., a subsidiary of Talisman, entered into a $500 million revolving facility with Repsol Tesoreria Y Gestion Financiera, S.A. The facility matures on May 8, 2016 and bears an interest rate of LIBOR+0.80%. As at June 30, 2015, $197 million has been drawn under this facility. Interest expense related to the facility recognized by Talisman during the period was less than $1 million.
On May 8, 2015, Talisman also entered into a $1.0 billion revolving facility with Repsol Energy Resources Canada, Inc. The facility matures on May 8, 2018 and bears an interest rate of LIBOR+1.20%. As at June 30, 2015, $634 million has been drawn under this facility. Interest expense related to the facility recognized by Talisman during the period was $1 million.
During the three month period ended June 30, 2015, Talisman and Repsol entered into a purchase and sale agreement whereby Repsol will acquire substantially all of the assets and liabilities of Talisman’s Norwegian operations. In the Company’s opinion, the consideration for this transaction represents fair value. For further information, see the "Discontinued Operations" section in this MD&A and note 4 in the Company’s interim condensed Consolidated Financial Statements.
In June 2015, Talisman (Algeria) B.V. (“TABV”) entered into a Sale and Purchase Agreement with Repsol Trading S.A., a subsidiary of Repsol, under which TABV will sell to Repsol approximately 615,000 barrels of Saharan Blend Crude Oil for an estimated $38 million. The sale price per barrel is based on June Dated Brent price of US$61.69/barrel minus the agreed differential of US$0.28/barrel. As at June 30, 2015, the amount included in accounts receivable balance as a result of this sale was $38 million.
In June 2014, the shareholders of TSEUK provided an equity funding facility totaling $1.2 billion to TSEUK, of which Talisman was committed to $612 million, for the purpose of funding capital, decommissioning and operating expenditures of TSEUK. In March 2015, the maximum available amount was increased to $1.5 billion. This facility expired on June 30, 2015. During the period from July 1, 2014 to December 31, 2014, the shareholders of TSEUK agreed to subscribe for common shares of TSEUK in the amount of $625 million under this facility, of which Talisman’s share was $319 million. During the six month period ended June 30, 2015, the shareholders of TSEUK agreed to subscribe for common shares of TSEUK in the amount of $710 million under this facility, of which Talisman’s share was $362 million. For further information see note 6 and note 19 in the interim condensed Consolidated Financial Statements.
In June 2015, the shareholders of TSEUK provided a new equity funding facility of $1.7 billion, of which Talisman is committed to $867 million, for the purpose of funding capital, decommissioning and operating expenditures of TSEUK. This facility is effective from July 1, 2015 and expires on December 31, 2016.
The shareholders of TSEUK have provided an unsecured loan facility totaling $2.4 billion to TSEUK, of which Talisman is committed to $1.2 billion, for the purpose of funding capital expenditures of TSEUK. In January 2015, an agreement was reached by the shareholders of TSEUK, in which the quarterly principal and interest payments of the facility were deferred until July 31, 2015. As at June 30, 2015, $1.0 billion has been drawn under this facility, of which Talisman’s share is $514 million (December 31, 2014 - $514 million).
In July 2015, the shareholders of TSEUK agreed to subscribe for common shares of TSEUK in the amount of $1.06 billion, of which Talisman’s share was $541 million, which settled remaining shareholder loans of $1.01 billion and accrued interest of $52 million, of which Talisman’s share was $514 million and $27 million, respectively.
RISK MANAGEMENT
Talisman monitors its exposure to variations in commodity prices, interest rates and foreign exchange rates. In response, Talisman may periodically enter into physical delivery transactions for commodities of fixed or collared prices and into derivative financial instruments to reduce exposure to unfavourable movements in commodity prices, interest rates and foreign exchange rates. The terms of these contracts or instruments may limit the benefit of favourable changes in commodity prices, interest rates and currency values, and may result in financial or opportunity loss due to delivery commitments, royalty rates and counterparty risks associated with contracts.
During the three and six month periods ended June 30, 2015, the Company received proceeds of $817 million and $1.3 billion, respectively, for settlement of its oil and gas derivative contracts, which included proceeds related to the liquidation of outstanding instruments. As at June 30, 2015, there was less than $1 million of risk management liability associated with the Company’s outstanding fixed price power swaps.
During the three month period ended June 30, 2015, the Company recorded a loss on held-for-trading financial instruments of $131 million (2014 - $171 million loss) and a gain of $62 million for the six month period ended June 30, 2015 (2014 - $231 million loss).
Subsequent to June 30, 2015, the Company has not entered into any additional new commodity price risk management derivative contracts.
USE OF ESTIMATES AND JUDGMENTS
The preparation of financial statements requires management to make estimates and assumptions that affect reported assets and liabilities, disclosures of contingencies and revenues and expenses. Management is required to adopt accounting policies that require the use of significant estimates and judgment. Actual results could differ materially from those estimates. Judgments and estimates are reviewed by management on a regular basis.
As a result of Repsol’s acquisition of Talisman in May 2015, credit-adjusted rates specific to Repsol have been used to discount Talisman’s decommissioning liabilities as at June 30, 2015. The provision has been discounted using a weighted average credit-adjusted rate of 2.0% at June 30, 2015 (December 31, 2014 – 3.5%), which excludes the impact of inflation.
For additional information regarding the use of estimates and judgments refer to the notes to the Company’s audited Consolidated Financial Statements and Annual MD&A for the year ended December 31, 2014.
CHANGES IN ACCOUNTING POLICIES
a) Accounting Policies Used
The interim condensed Consolidated Financial Statements have been prepared following the same accounting policies and methods of computation as the Company’s 2014 annual Consolidated Financial Statements except for the following:
Employee Benefits
|
·
|
IAS 19 Employee Benefits - Amendments to IAS 19. The amended standard clarified the requirements that relate to how contributions from employees or third parties that are linked to service should be attributed to periods of service. In addition, it permits a practical expedient if the amount of the contributions is independent of the number of years of service, in that contributions can be, but are not required to be recognized as a reduction in the service cost in the period in which the related service is rendered. The amendment is effective for annual periods beginning on or after July 1, 2014. Application of the amended standard does not have an impact on the Company’s financial statements as it reflects current accounting policy of the Company.
|
Operating Segments
|
·
|
IFRS 8 Operating Segments - Amendments to IFRS 8. The amended standard requires (i) disclosure of judgments made by management in aggregating segments, and (ii) a reconciliation of segmented assets to the Company’s assets when segment assets are reported. The amendment is effective for annual periods beginning on or after July 1, 2014. The amendment does not have an impact on the Company’s financial position or performance.
|
Share-based Payments
|
·
|
IFRS 2 Share-Based Payments - Amendments to IFRS 2. The standard amends the definitions of “vesting condition” and “market condition” and adds definitions for “performance condition” and “service condition”. The amendment is effective for annual periods beginning on or after July 1, 2014. The amendment does not have an impact on the Company as it reflects current accounting policy of the Company.
|
Fair Value Measurement
|
·
|
IFRS 13 Fair Value Measurement - Amendments to IFRS 13. The amended standard clarifies that short-term receivables and payables with no stated interest rates can be measured at invoice amounts if the effect of discounting is immaterial. It also clarifies that portfolio exception can be applied not only to financial assets and liabilities, but also to other contracts within scope of IAS 39 and IFRS 9. The amendment is effective for annual periods beginning on or after July 1, 2014. The application does not have a significant impact on the Company’s financial statements.
|
Related Parties
|
·
|
IAS 24 Related Parties - Amendments to IAS 24. The amended standard (i) revises the definition of related party to include an entity that provides key management personnel services to the reporting entity or its parent, and (ii) clarifies related disclosure requirements. The amendment does not have an impact on the Company’s financial statements as there is no entity performing key management services for the Company.
|
b) Accounting Pronouncements Not Yet Adopted
The Company continues to assess the impact of adopting the following pronouncements.
Financial Instruments
|
·
|
IFRS 9 Financial Instruments. IFRS 9 (July 2014) replaces earlier versions of IFRS 9 that had not yet been adopted by the Company and supersedes IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 introduces new models for classification and measurement of financial instruments, hedge accounting and impairment of financial assets and is mandatorily effective for periods beginning on or after January 1, 2018. The Company continues to review the standard as it is updated and monitor its impact on the Company’s financial statements.
|
Revenue from Contracts with Customers
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IFRS 15 Revenue from Contracts with Customers. IFRS 15 specifies that revenue should be recognized when an entity transfers control of goods or services at the amount the entity expects to be entitled to as well as requiring entities to provide users of financial statements with more informative, relevant disclosures. The standard supersedes IAS 18 Revenue, IAS 11 Construction Contracts, and a number of revenue-related interpretations. IFRS 15 will be effective for annual periods beginning on or after January 1, 2017. In an exposure draft in May 2015, the effective date of IFRS 15 was proposed to be deferred to January 1, 2018. Application of the standard is mandatory and early adoption is permitted. The Company has not yet determined the impact of the standard on the Company’s financial statements.
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INTERNAL CONTROL OVER FINANCIAL REPORTING
During the quarter, Talisman was acquired by Repsol which did not result in a material change to Internal Controls over Financial Reporting (ICFR) as of June 30, 2015. Integration with Repsol will likely impact ICFR over time; however, considering that ICFR of both companies are based on the criteria established in “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) (2013 Framework), it is not expected that these changes will materially affect ICFR.
LEGAL PROCEEDINGS AND CONTINGENCIES
From time to time, Talisman is the subject of litigation arising out of the Company's operations. Damages claimed under such litigation may be material or may be indeterminate and the outcome of such litigation may materially impact the Company’s financial condition or results of operations. While Talisman assesses the merits of each lawsuit and defends itself accordingly, the Company may be required to incur significant expenses or devote significant resources to defend itself against such litigation. These claims are not currently expected to have a material impact on the Company's financial position. A summary of specific legal proceedings and contingencies is as follows:
Galley Pipeline
In August 2012, a portion of the Galley pipeline, in which TSEUK has a 67.41% interest, suffered an upheaval buckle.
In September 2012, TSEUK, in which Talisman holds a 51% interest, claimed for the suffered losses as a consequence of the incidence to Oleum Insurance Company (''Oleum''), a wholly-owned Talisman subsidiary. TSEUK delivered a proof of loss seeking recovery under the insuring agreement of $315 million.
In November 2014, TSEUK delivered extensive documentation purporting to substantiate its claim. The information delivered to date does not support a determination of coverage and Oleum is seeking additional information from TSEUK to facilitate final coverage determination.
Addax Arbitration
On July 13, 2015, Addax Petroleum UK Limited and Sinopec International Petroleum Exploration and Production Corporation, filed a Notice of Arbitration against Talisman Energy Inc. and Talisman Colombia Holdco Limited in connection with the purchase of 49% shares of Talisman Energy (UK) Limited (now known as TSEUK). In the Company’s opinion, the claims included in the Notice of Arbitration are without merit.
Government and Legal Proceedings with Tax Implications
Specific tax claims which Talisman and its subsidiaries are parties to at June 30, 2015 are as follows:
Canada
The Canadian tax authorities, Canada Revenue Agency, ("CRA") regularly inspect the tax matters of the Talisman Group companies based in Canada. In 2015, verification and investigation activities related to the years 2006-2010 have been made.
As part of these proceedings, the CRA has questioned certain restructuring transactions, although this line of questioning has not resulted in court proceedings to date.
Indonesia
Indonesian Corporate Tax Authorities have been questioning various aspects of the taxation of permanent establishments that Talisman Group has in the country. These proceedings are pending a court hearing.
Malaysia
Talisman Malaysia Ltd. and Talisman Malaysia (PM3) Ltd., the Talisman Group's operating subsidiaries in Malaysia, have received notifications from the Inland Revenue Board (IRB) in respect of the years 2007, 2008 and 2011 questioning, primarily, the deductibility of certain costs. These proceedings are pending a court hearing.
Norway
As part of the process of verifying the tax affairs of Talisman Energy Norge AS, the Talisman Group's subsidiary in Norway, the Norwegian tax authorities have questioned the deductibility of certain items. These proceedings are pending a court hearing.
Timor-Leste
The authorities of Timor-Leste, questioned the deduction by TLM Resources (JPDA 06-105) Pty Limited, the Talisman Group's subsidiary in East Timor, of certain expenses for income tax purposes. This line of questioning is at a very preliminary stage of debate with the authorities.
ADVISORIES
Forward-Looking Statements
This interim MD&A 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, but is not limited to, statements regarding:
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Business strategy, plans, and priorities;
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Expected capital expenditures, timing and planned focus of such spending;
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The estimated impact on Talisman’s financial performance from changes in production volumes, commodity prices and exchange rates;
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Expected sources of capital to fund the Company’s capital program and potential acquisitions, investments or dispositions;
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Anticipated funding of the decommissioning liabilities;
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Expected future payment commitments and the estimated timing of such payments;
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Expected closing of the disposition of its Norwegian operations to Repsol;
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Matters with respect to continued compliance with covenants of credit facilities; and
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Other expectations, beliefs, plans, goals, objectives, assumptions, information and statements about possible future events, conditions, results of operations or performance.
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Statements concerning oil and gas reserves contained in this interim MD&A may be deemed to be forward-looking information as they involve the implied assessment that the resources described can be profitably produced in the future.
The factors or assumptions on which the forward-looking information is based include: 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 2015 assumes escalating commodity prices.
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 MD&A. The material risk factors include, but are not limited to:
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The risks of the oil and gas industry, such as operational risks in exploring for, developing and producing crude oil and natural gas;
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Risks and uncertainties involving geology of oil and gas deposits;
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Risks associated with project management, project delays and / or cost overruns;
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Uncertainty related to securing sufficient egress and access to markets;
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The uncertainty of reserves and resources estimates, reserves life and underlying reservoir risk;
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The uncertainty of estimates and projections relating to production, costs and expenses, including decommissioning liabilities;
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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;
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Fluctuations in oil and gas prices, foreign currency exchange rates, interest rates and tax or royalty rates;
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The outcome and effects of any future acquisitions and dispositions;
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Health, safety, security and environmental risks, including risks related to the possibility of major accidents;
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Environmental regulatory and compliance risks, including with respect to greenhouse gases and hydraulic fracturing;
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Uncertainties as to access to capital, including the availability and cost of credit and other financing, and changes in capital markets;
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Risks in conducting foreign operations (for example, civil, political and fiscal instability and corruption);
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Risks related to the attraction, retention and development of personnel;
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Changes in general economic and business conditions;
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The possibility that government policies, regulations or laws may change or governmental approvals may be delayed or withheld; and
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Results of the Company’s risk mitigation strategies, including insurance activities.
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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 are included in the Company’s most recent AIF and Annual Report. In addition, information is available in the Company’s other reports on file with Canadian securities regulatory authorities and the SEC.
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.
Advisory – Oil and Gas Information
Talisman makes reference to production volumes throughout this interim MD&A. Where not otherwise indicated, such production volumes are stated on a gross basis, which means they are stated prior to the deduction of royalties and similar payments. In the US, net production volumes are reported after the deduction of these amounts.
Talisman also discloses netbacks in this interim MD&A. Netbacks per boe are calculated by deducting from sales price associated royalties, operating and transportation costs.
ABBREVIATIONS AND DEFINITIONS
The following abbreviations and definitions are used in this MD&A:
AIF
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Annual Information Form
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bbl
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barrel
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bbls
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barrels
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bbls/d
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barrels per day
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bcf
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billion cubic feet
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boe
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barrels of oil equivalent
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boe/d
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barrels of oil equivalent per day
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COSO
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Committee of the Sponsoring Organizations of the Treadway Commission
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C$
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Canadian dollar
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DD&A
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Depreciation, depletion and amortization
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DSA
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Decommissioning Security Agreements
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DSU
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Deferred share unit
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E&E
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Exploration and evaluation
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EU
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European Union
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G&A
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General and administrative
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GAAP
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Generally Accepted Accounting Principles
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GHG
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Greenhouse gas emissions
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gj
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Gigajoule
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IFRS
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International Financial Reporting Standards
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LIBOR
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London Interbank Offered Rate
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LLS
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Light Louisiana Sweet
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LNG
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Liquefied Natural Gas
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mbbls/d
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thousand barrels per day
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mboe/d
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thousand barrels of oil equivalent per day
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mcf
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thousand cubic feet
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mcf/d
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thousand cubic feet per day
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mmbbls
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million barrels
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mmboe
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million barrels of oil equivalent
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mmbtu
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million British thermal units
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mmcf/d
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million cubic feet per day
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mmcfe/d
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million cubic feet equivalent per day
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MWh
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megawatt hour
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NGL
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Natural Gas Liquids
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NI
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National Instrument
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NOK
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Norwegian kroner
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NYMEX
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New York Mercantile Exchange
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PP&E
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Property, plant and equipment
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PRT
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Petroleum Revenue Tax
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PSC
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Production Sharing Contract
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PSU
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Performance share unit
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RSU
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Restricted share unit
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SEC
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US Securities and Exchange Commission
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tcf
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trillion cubic feet
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UK
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United Kingdom
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UK£
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Pound sterling
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US
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United States of America
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US$ or $
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United States dollar
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WCS
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Western Canadian Select
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WTI
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West Texas Intermediate
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Gross acres means the total number of acres in which Talisman has a working interest. Net acres means the sum of the fractional working interests owned in gross acres expressed as whole numbers and fractions thereof.
Gross production means Talisman’s interest in production volumes (through working interests and royalty interests) before the deduction of royalties. Net production means Talisman’s interest in production volumes after deduction of royalties payable by Talisman.
Gross wells means the total number of wells in which the Company has a working interest. Net wells means the sum of the fractional working interests owned in gross wells expressed as whole numbers and fractions thereof.
Conversion and equivalency factors
Imperial
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Metric
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1 ton
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=0.907 tonnes
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1 acre
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=0.40 hectares
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1 barrel
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=0.159 cubic metres
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1 cubic foot
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=0.0282 cubic metres
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Exhibit 99.3
Talisman Energy Inc.
Consolidated Financial Ratio
June 30, 2015
(unaudited)
The following financial ratios are provided in connection with the Company’s shelf prospectuses filed with Canadian and US securities regulatory authorities and are based on the Company’s Consolidated Financial Statements that are prepared in accordance with International Financial Reporting Standards.
The interest coverage ratio is for the 12-month period ended June 30, 2015.
June 30, 2015
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Interest coverage (times)
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Income1
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(8.34 |
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Income from continuing operations2
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(4.71 |
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1
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Net income plus income taxes and interest expense, divided by the sum of interest expense and capitalized interest.
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2
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Income from continuing operations plus income taxes and interest expense from continuing operations; divided by the sum of interest expense and capitalized interest from continuing operations.
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Exhibit 99.4
FORM 52-109F2
CERTIFICATION OF INTERIM FILINGS
I, Luis Cabra Dueñas, Vice-Chairman and Chief Executive Officer of Talisman Energy Inc., certify the following:
1.
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I have reviewed the interim financial report and interim MD&A (together the "interim filings") of Talisman Energy Inc. (the "issuer") for the interim period ended June 30, 2015.
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Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.
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3.
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Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.
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4.
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The issuer's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings, for the issuer.
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5.
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Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer's other certifying officer and I have, as at the end of the period covered by the interim filings:
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(a)
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designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that:
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(i)
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material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and
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(ii)
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information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and
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(b)
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designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer's GAAP.
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5.1
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The control framework the issuer's other certifying officer and I used to design the issuer's ICFR is the Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") (2013 Framework).
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6.
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The issuer has disclosed in its interim MD&A any change in the issuer's ICFR that occurred during the period beginning on April 1, 2015 and ended on
June 30, 2015 that has materially affected, or is reasonably likely to materially affect, the issuer's ICFR.
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Date: July 30, 2015
Luis Cabra Dueñas
Vice-Chairman and Chief Executive Officer
#12935009 V1
Exhibit 99.5
FORM 52-109F2
CERTIFICATION OF INTERIM FILINGS
I, David Newby, Senior Vice-President Finance, Treasurer and Chief Financial Officer of Talisman Energy Inc., certify the following:
1.
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I have reviewed the interim financial report and interim MD&A (together the "interim filings") of Talisman Energy Inc. (the "issuer") for the interim period ended June 30, 2015.
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2.
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Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.
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3.
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Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.
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4.
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The issuer's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings, for the issuer.
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5.
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Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer's other certifying officer and I have, as at the end of the period covered by the interim filings:
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(a)
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designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that:
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(i)
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material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and
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(ii)
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information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and
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(b)
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designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer's GAAP.
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5.1
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The control framework the issuer's other certifying officer and I used to design the issuer's ICFR is the Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") (2013 Framework).
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5.2 N.A.
5.3 N.A.
6.
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The issuer has disclosed in its interim MD&A any change in the issuer's ICFR that occurred during the period beginning on April 1, 2015 and ended on
June 30, 2015 that has materially affected, or is reasonably likely to materially affect, the issuer's ICFR.
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Date: July 30, 2015
David Newby
Senior Vice-President Finance, Treasurer and
and Chief Financial Officer
#12935009 V1