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Talisman Reveals 2001 Cap Spending Program

Talisman Reveals 2001 Cap Spending Program

With the cry for increased natural gas production being heard across the North America, it's no wonder that exploration and production companies such as Calgary-based Talisman Energy are upping their capital expenditure programs to try and meet demand. The company announced last week it will boost its exploration and development budget by 44% over year 2000 levels to C$1.7 billion.

The company expects to produce on average between 430,000 and 450,000 boe/d, up from 2000's output of approximately 410,000 boe/d. Talisman forecasts that domestic gas production will be almost 800 MMcf/d due to production increases from the Alberta Foothills, Central Alberta and West Whitecourt. The producer warns there will be a decrease from in output from the North Sea due to asset sales completed in late 2000.

"Over the past five years, we have grown production per share by about 10% annually and expect a comparable number in 2001," said Dr. Jim Buckee, CEO of Talisman. "Cash flow in 2000 was over C$17/share and we could see in excess of C$18/share this year assuming US$4.50 NYMEX gas, $24 WTI oil prices and a continuation of our share buyback program throughout the year. I see no shortage of opportunities for Talisman, but we will not let the glitter of high prices distract our emphasis on value at mid-cycle."

Talisman said it expects production to rise by 5-10% in 2001, based only on existing projects. Of the company's 2000 production, about 47% was in Canada, 32% in the North Sea and 21% split between Indonesia and Sudan.

With 32% of the 2001 budget focused on development, and 16% dedicated to exploration, almost half of the spending will go towards drilling endeavors. Talisman said it expects to participate in 850 wells worldwide this year, 650 of those in Canada. The north country producer says three quarters of the allotted budget for Canadian projects will be used for natural gas interests, with the remaining quarter going to oil.

Tailsman said it uses both physical contracts and financial instruments to mitigate oil and gas commodity risk. Almost 19% of 2001 Canadian gas volumes are fixed at an average price of about C$2.76 per Mcf, falling to approximately 12% in 2002 at an average price of C$3.10 per Mcf.

Alex Steis

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