Calgary-based Talisman Energy Inc. said Tuesday it plans to reduce the number of rigs it operates in the Marcellus Shale by the end of the year, but it will increase development in the Eagle Ford and Farrell Creek shales, which are both liquids-rich.

The 2011 capital spending plans reflect Talisman's decision to slash spending in its North American dry gas plays by 35% year/year because of low gas prices. The bulk of the 2011 North American spending, now set at US$1.7 billion, will go to increased development in liquids-rich and conventional oil properties, said CEO John Manzoni.

Talisman's North American shale-related production this year is expected to average 455-525 MMcfe/d (75,000-85,000 boe/d), with an additional 90,000 boe/d of conventional production.

"In North America, our emphasis will shift to liquids, and we will reduce gas-directed spending by 35%," said Manzoni. "Our reduced gas-directed drilling remains profitable at US$4 prices and our land retention commitments are relatively minor. We will slow the Marcellus program, with plans to move from 12 rigs at year-end to nine over the course of this year. However, upon completion of the recently announced deal with Sasol, we expect to increase drilling activity at Farrell Creek, where our partner is carrying the majority of the capital costs."

Last month Talisman sold a half-stake in the Farrell Creek properties, which are in northeastern British Columbia, to Sasol Ltd. for C$1.05 billion (see Shale Daily, Dec. 21, 2010). Also last year Talisman and Norway's Statoil ASA formed a joint venture to acquire 97,000 net acres in the Eagle Ford (see Shale Daily, Oct. 12, 2010).

Eight rigs are to be operated in the Eagle Ford play by year's end, with "net Talisman production expected to average 55-65 MMcfe/d, just under half of which will be liquids," said Manzoni.

By revving up its liquids development, Talisman expects 5-10% production growth this year. "We have repositioned the portfolio and our company is now set to deliver sustainable, profitable growth," said the CEO. With capital discipline "a priority...we will be very mindful of North American gas prices as we move through the year."

In the Marcellus Shale Talisman plans to spend US$800 million, including infrastructure capital. The company plans to reduce the number of rigs in the play to nine from 12 over the course of 2011. The plan is to drill about 100 net wells in the Marcellus this year. Even with fewer rigs, output in 2011 is forecast to average 350-400 MMcf/d, up from an average of 180 MMcf/d in 2010. Marcellus production was 315 MMcf/d at year's end.

Talisman's plans in the Farrell Creek area of British Columbia are to "progress the development" with 35 net wells in 2011. As part of the agreement with Sasol, Talisman plans to expand to an eight-rig program from four rigs and plans to spend about US$100 million. Production net to Talisman is expected to average 50-60 MMcf/d net in 2011.

Following its entry into the Eagle Ford Shale in 2010, Talisman said it plans to drill about 35 net wells this year. The company expects to ramp up to eight operated rigs (from four currently) by year's end; spending is set at about US$300 million. Net annual production from this play is estimated at 55-65 MMcfe/d. Approximately half of this production is expected to be liquids.