- Talisman 2010 Highlights
- About Our Company
- Financial and Operating Highlights
- President's Message
- Where We Operate
- Looking to 2011
- Management's Discussion and Analysis
- 2010 Performance
- 2010 Net Income Variance
- Continuing Operations Review
- Acquisitions
- Discontinued Operations
- Reserves Replacement
- Liquidity and Capital Resources
- Sensitivities
- Commitments and Off-Balance Sheet Arrangements
- Risk Management
- Summary of Quarterly Results
- Outlook for 2011
- Internal Control Over Financial Reporting and Disclosure Controls and Procedures
- Litigation
- Application of Critical Accounting Policies and Use of Estimates
- Changes in Reporting Conventions
- New US Accounting Pronouncements
- New Regulatory Developments
- International Financial Reporting Standards (IFRS)
- Risk Factors
- Advisories
- Abbreviations and Definitions
- Consolidated Financial Statements
- Report of Management
- Management Report on Internal Control Over Financial Reporting
- Independent Auditors' Report on Internal Controls Under Standards of the Public Company Accounting Oversight Board (United States)
- Independent Auditors' Report of Registered Public Accounting Firm
- Consolidated Balance Sheets
- Consolidated Statements of Income
- Consolidated Statements of Comprehensive Income (Loss)
- Consolidated Statements of Changes in Shareholders' Equity
- Consolidated Statements of Cash Flows
- Notes to the Consolidated Financial Statements
- Supplementary Oil and Gas Information
- Results of Operations from Oil and Gas Producing Activities
- Capitalized Costs Relating to Oil and Gas Activities
- Costs Incurred in Oil and Gas Activities
- Standardized Measure of Discounted Future Net Cash Flows from Proved Reserves
- Discounted Future Net Cash Flows from Proved Reserves
- Principal Sources of Changes in Discounted Cash Flows
- Continuity of Net Proved Reserves 1
- Additional Information
- Detailed Property Reviews
- Governance
- Investor Information
- Corporate Information
- Advisories
- Market Information
See the advisories included in Management’s Discussion and Analysis of this report.
Abbreviations and Definitions
See Management’s Discussion and Analysis of this report.
Boe Conversion
Throughout this annual report, barrels of oil equivalent (boe) is calculated at a conversion rate of six thousand cubic feet (mcf) of natural gas for one barrel of oil and is based on an energy equivalence conversion method. Boes may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf:1 bbl is based on an energy equivalence conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
Canadian Dollars and GAAP
Dollar amounts are presented in Canadian dollars, except where otherwise indicated. Unless otherwise indicated, the financial information is set out in accordance with Canadian GAAP which may differ from U.S. GAAP. See note 25 to Talisman’s Annual Consolidated Financial Statements for the significant differences between Canadian and U.S. GAAP.
Non-GAAP Financial Measures
Included in this report are references to financial measures commonly used in the oil and gas industry, such as cash flow, cash flow from continuing operations, cash flow per share, earnings from continuing operations, earnings from continuing operations per share and net debt. These terms are not defined by GAAP in either Canada or the US. Consequently, these are referred to as non-GAAP measures. Talisman’s reported cash flow, cash flow from continuing operations, cash flow per share, earnings from continuing operations, earnings from continuing operations per share and net debt may not be comparable to similarly titles measures by other companies.
Cash flow, as commonly used in the oil and gas industry, represents net income before exploration costs, DD&A, future taxes and other non-cash expenses. Cash flow is used by the company to assess operating results between years and between peer companies that use different accounting policies. Cash flow should not be considered an alternative to, or more meaningful than, cash provided by operating, investing and financing activities or net income as determined in accordance with Canadian GAAP as an indicator of the company’s performance or liquidity. Cash flow per share is cash flow divided by the average number of common shares outstanding during the period. A reconciliation of cash provided by operating activities to cash flow follows.
Cash Flow
| Three Months Ended | Year Ended | |||
|---|---|---|---|---|
| December 31 ($ millions, except per share amounts) | 2010 | 2009 | 2010 | 2009 |
| Cash provided by operating activities | 607 | 624 | 3,460 | 3,599 |
| Changes in non-cash working capital | 75 | 297 | (402) | 362 |
| Cash flow | 682 | 921 | 3,058 | 3,961 |
| Cash provided by discontinued operations1 | (6) | (62) | (190) | (385) |
| Cash flow from continuing operations | 676 | 859 | 2,868 | 3,576 |
| Cash flow per share | 0.67 | 0.91 | 3.00 | 3.90 |
| Cash flow from continuing operations per share | 0.66 | 0.85 | 2.82 | 3.52 |
- Comparatives restated for operations classified as discontinued in 2010.
Earnings from continuing operations are calculated by adjusting the company’s net income per the financial statements, for certain items of a non-operational nature, on an after tax basis. The company uses this information to evaluate performance of core operational activites on a comparable basis between periods. Earnings from continuing operations per share are earnings from continuing operations divided by the average number of common shares outstanding during the period. A reconciliation of net income to earnings from continuing operations follows.
Earnings from Continuing Operations
| Three Months Ended | Year Ended | |||
|---|---|---|---|---|
| December 31 ($ millions, except per share amounts) | 2010 | 2009 5 | 2010 | 2009 |
| Income (loss) from continuing operations | (313) | (181) | 408 | (658) |
| Unrealized (gains) losses on financial instruments (tax adjusted) 1 | 66 | 173 | (265) | 1,056 |
| Stock-based compensation (tax adjusted) 2 | 222 | 20 | 187 | 198 |
| Foreign exchange on net debt and future income taxes | 57 | (17) | 48 | (59) |
| Restructuring charges (tax adjusted) | – | 14 | – | 14 |
| Future tax rate changes | – | 21 | – | 21 |
| Future tax (recovery) of unrealized foreign exchange (losses) losses on net foreign denominated debt and other tax adjustments 3 | 52 | 38 | (31) | 59 |
| Earnings from continuing operations 4, 6 | 84 | 68 | 347 | 631 |
| Per share 4 | 0.08 | 0.07 | 0.34 | 0.62 |
- Stock-based compensation expense is based on the difference between the Company’s share price and its stock options or cash units exercise price.
- The Three months ended 2010 and Year ended 1010 amounts reflect the legislative change occurring in three months ended 2010 whereby the Company is unable to obtain a tax benefit.
- Tax adjustment reflects future taxes relating to unrealized foreign exchange gains and losses associated with the impact of fluctuations in the Canadian dollar on net foreign denominated debt.
- This is a non-GAAP measure. Refer to the section in the press release entitled ‘Non-GAAP Financial Measures’ for further explanation and details.
- Comparatives restated for operations classified as discontinued since December 31, 2009, and for foreign exchange on net debt and future income taxes in order to be presented on the same basis as in 2010.
Net debt is calculated by adjusting the company’s long-term debt per the financial statements for bank indebtedness, cash and cash equivalents. The company uses this information to assess its true debt position and eliminate the impact of timing differences.
Net Debt
| December 31 ($ millions) | 2010 | 2009 |
|---|---|---|
| Long-term debt (including current portion) | 4,181 | 3,780 |
| Bank indebtedness | 2 | 36 |
| Cash and cash equivalents | (1,646) | (1,690) |
| Net debt | 2,537 | 2,126 |