Calgary-based Talisman Energy Inc. said it plans to spend a record C$2.35 billion on exploration and development in 2004, of which, C$1.13 billion is earmarked for North America. The company also reconfirmed its annual production growth expectations of 5-10% per share through 2006.

The company estimates that production will average between 415,000-445,000 boe/d in 2004, marking a fairly significant increase over 2003’s figure of approximately 398,000 boe/d. Most of the year-over-year increase is expected to come from Malaysia, Vietnam and Algeria.

Cash flow per share is expected to average between C$17-$21 based on WTI oil prices of US$25-28/bbl, Nymex natural gas prices of US$4.75-5.50/MMBtu and a C$/US$ exchange rate of $0.73-$0.77.

“We have worked hard to establish Talisman’s unique portfolio of North American deep gas and international growth opportunities,” said CEO Jim Buckee. “We are well positioned to meet our stated goals for production growth in 2004, 2005 and 2006 from existing development projects.

“In addition, we have built a high reward exploration portfolio, with sizeable, albeit higher risk, prospects in all of our operating areas, in particular Colombia, Qatar, Alaska and Trinidad,” Buckee added. “Talisman’s balance sheet is strong, mitigating against the effects of a downturn in commodity prices and giving us flexibility to continue to grow our programs. All in all, our 2004 spending plans are tailor made for both growth and value creation.”

For 2004, Talisman said it has hedged 12% of its North American natural gas production and 37% of its liquids production through a combination of financial and physical fixed price contracts and collars. Gas volumes have been hedged at an average price of C$5/Mcf, while 56,000 b/d of oil volumes has been hedged with collars at US$24-$29/bbl, with an additional 23,000 b/d fixed at US$28/bbl.

While Talisman increased its North America gas production volumes by 5% in 2003, the company said it expects continuing growth in Appalachia (30%), Deep Basin (15%) and the Alberta Foothills (10%) will contribute to an expected 3-5% increase in 2004 natural gas volumes.

Of the budgeted C$2.35 billion in exploration and development spending in 2004, roughly two-thirds will be directed at development projects and one-third at exploration. The majority (C$1.2 billion) will be spent on drilling, with 640 gross domestic and 118 gross international wells planned, the company said. Strategically, Talisman said it expects to organically grow its North American gas production at rates of 3-5% over the next five years while generating surplus funds for high impact, high value international programs.

Seventy-seven percent of the C$1.13 billion Talisman has allotted for North America will be focused on natural gas projects. Major focus areas include Alberta Foothills (C$130 million), Bigstone & Wild River (C$110 million), the Deep Basin (C$100 million), the Greater Arch (C$100 million), Edson (C$90 million) and the eastern United States (C$85 million).

In addition to unveiling the company’s budget for 2004, Talisman also announced that its Fortuna Energy Inc. subsidiary recently completed the Andrews Hz No.1 gas well in the Corning area of New York State, in the Appalachian Basin. The well flowed on test at rates in excess of 18 MMcf/d, limited by surface equipment, with a flowing pressure of 1,300 psi.

“Based on initial flow results, the Andrews well has the capability to be the most prolific well encountered in the region to date and has an unconstrained potential in excess of 30 MMcf/d,” Fortuna Energy said. “Tie-in work is already underway and the well is expected to be on stream in early March at a pipeline-restricted rate of 8-10 MMcf/d.”

Including the new well, Fortuna Energy estimates that it currently has 30 MMcf/d of shut-in gas production behind pipe in the region. However, the company noted that additional pipeline sales capacity should be available by early April. For 2004, Fortuna Energy said it plans to drill a total of 11 horizontal Black River wells, increasing production to over 80 MMcf/d, 30% above 2003.

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