Talisman: Lower Capex, Gas Drilling To Squeeze 2009 Output
14:36 EST Tuesday, November 04, 2008
OTTAWA -(Dow Jones)- Talisman Energy Inc. (TLM) expects to cut spending next year from 2008's reduced levels on the weakness in financial and commodity markets, squeezing production forecasts, Chief Executive John Manzoni said Tuesday.
The Calgary-based company is now likely to spend C$5 billion to C$5.3 billion in 2008, down from the previous estimate of C$5.5 billion, Manzoni said on a call to discuss third-quarter earnings.
It also expects 2009 capital spending plans to be lower still, the latest among Canadian oil and gas companies to announce or hint at budget cuts next year as the credit crunch stymies their ability to tap debt markets.
"We will prioritize spending in 2009 depending on returns," Chief Financial Officer Scott Thomson said. He added that the lack of major financial commitments next year affords the company some flexibility with its budget.
Talisman's conventional natural gas operations in North America will feel the brunt of these cuts, which Manzoni described as a "marginal activity," particularly in Alberta. The resource-rich province is bringing in higher oil and gas royalty rates from Jan. 1, rendering large swathes of gas drilling uneconomic at current gas prices, according to industry participants.
The company will instead focus on unconventional plays such as the Montney tight gas resource in Alberta or the Marcellus shale in Pennsylvania, Manzoni said. These are promising but early stage reserves and shifting cash away from producing conventional resources will have an impact on output next year, he added.
-By Hyun Young Lee, Dow Jones Newswires; 613-237-0669; hyunyoung.lee@ dowjones.com