Calgary-based Talisman Energy Inc. will spend approximately C$3.6 billion on exploration and development in 2009, down from C$4.38 billion last year, the company said last Tuesday. At the same time, Talisman expects production to remain at levels similar to those of 2008.
Talisman expects to spend 33% of its capital program in North America, with the rest being spent on North Sea development (27%), Southeast Asia growth projects (19%) and other international projects (21%).
"In North America spending is expected to be approximately C$1.2 billion this year," said Talisman CEO John Manzoni. "Spending on unconventional gas programs will account for approximately C$1 billion of the total, with about two-thirds of unconventional spending budgeted for the Marcellus and Montney plays."
Talisman set the plans assuming a US$5/MMBtu New York Mercantile Exchange (Nymex) natural gas price and a US$40/bbl West Texas Intermediate oil price.
"We have assumed what we hope to be a conservative scenario for oil and gas prices in 2009," Manzoni said.
Last May Talisman laid out a strategy that included expanding its North American unconventional natural gas operations and selling up to C$2 billion worth of assets (see NGI, May 26, 2008). In July the company said it would add up to C$500 million more to its C$2 billion North American capital spending budget to accelerate exploration and development activities in unconventional natural gas plays (see NGI, Aug. 4, 2008).
"Talisman entered 2009 with a strong balance sheet and our objective this year is to preserve financial flexibility by living within our means and continue to advance our new strategy," Manzoni said. "We have achieved good progress on the strategy introduced last May and this new direction for the company is proving to be robust."
Talisman's 2009 production will be "broadly similar" to 2008 at approximately 430,000 boe/d, Manzoni said.
"We have significantly more investment opportunities than available cash in the current environment, which allows us to be flexible in where we focus investment," he said. "We will concentrate on continued implementation of our strategic priorities, sometimes at the expense of current production, because we believe our strategy will deliver the highest returns over time...This shift in spending towards higher quality strategic projects is expected to provide sustainable long-term growth at lower risk."
According to Manzoni, the company sold noncore assets comprising approximately 12,000 boe/d of production with after-tax proceeds of around C$1 billion in 2008 and intends to continue to divest assets, "recognizing that sales may be difficult in the current financial environment."
Talisman's North American holdings include acreage in the Marcellus Shale in Pennsylvania and New York, and in the Outer Foothills and Montney formations of Alberta and British Columbia. The company plans to drill 36 gross horizontal wells the Marcellus in 2009, with up to five rigs drilling by the third quarter. With continued success in Pennsylvania, the program could ramp up to 16 rigs in the area by 2010. Talisman also plans to drill 49 gross wells in the Montney area and will have nine rigs drilling there by the end of the year.
Talisman plans to issue its final 2008 results on March 5.
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