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Talisman Paring Portfolio to Focus on North America, Selected Assets

As part of a strategy that includes expanding its North American unconventional natural gas operations, Talisman Energy Inc. wants to sell up to C$2 billion worth of assets.

CEO John Manzoni said last week that he Calgary-based producer plans to spend C$1.1-1.3 billion in North America between now and the end of 2009 to evaluate the natural gas potential of its 2.5 million net acres of unconventional land in North America. Talisman also wants to pour more money into its holdings in Norway and Southeast Asia, said the CEO.

Manzoni, who left BP plc to take over Talisman nine months ago, said the company's strategy "needed rethinking." Management "started with four objectives. First, we wanted to lengthen the stride, creating a portfolio which gave confidence in longer-term production growth. The second objective was to increase our focus on fewer, more material assets. Third was the requirement to maintain healthy returns through capital discipline, while delivering sustainable growth. And last, but not least, we set about to improve our delivery against the targets we set."

In North America, C$900 million will be budgeted through 2009 to develop programs "where we have seen early success," he said. "This includes drilling approximately 200 wells in the Outer Foothills, Montney and Bakken areas. Additionally, we expect to spend up to C$420 million on pilot programs in other parts of the Outer Foothills and Montney, as well as in Quebec and Appalachia. By the end of 2009, we will be able to make informed choices about ongoing levels of investment into our unconventional resource plays."

Talisman's existing operations in North America and the North Sea will give the company a firm base to underpin production growth elsewhere, said Manzoni.

"Our objective is to reposition our UK business as a steady, high-quality stream of cash flow, with a sustainable production level of between 80,000-100,000 boe/d through 2013 from existing assets. We will continue to be a major conventional natural gas producer in North America, particularly in the high-deliverabiity deep parts of the basin and multi-zone plays."

The CEO said he was "confident that we have identified a way forward with an action plan that will focus the portfolio, grow the existing base, evaluate and exploit new growth opportunities and optimize our global exploration program."

As Talisman repositions its portfolio over the next 18 months, the company is forecasting production to grow at an average annual rate of 5-8%, based on its continuing operations at the end of 2007.

"We see the majority of this growth coming from development projects nearing completion in Norway and Southeast Asia," said Manzoni. "This growth range includes the impact of additional noncore asset disposals planned for this period. As we complete the majority of the rationalization program, we expect to increase production 5-10% annually from the end of 2009 through 2012."

Although "timing will clearly depend on the markets," Manzoni said Talisman plans to sell assets that now produce 35,000-45,000 boe/d, with expected proceeds of C$1.5-2.0 billion by the end of next year. Talisman is planning into spend up to C$5.8 billion for its capital program in 2009, but Manzoni said "the final amount will depend on the success and pace of our unconventional natural gas programs."

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