Seeing no increase in natural gas prices, Talisman Energy Inc. is reducing its capital expenditures (capex) budget in dry natural gas plays from 2011 and is closing in on liquids this year.

The Calgary-based company plans to shrink its capex by $500 million this year. That means not only a move from the Marcellus and Montney shales to the Eagle Ford and Duvernay shales, but also to oil opportunities overseas (see NGI, Feb. 21, 2011). The company also hopes to sell some noncore conventional assets in North America.

“We expect to spend approximately $4 billion in cash capital expenditures this year,” CEO John Manzoni said. “We are reducing capital spending in dry gas plays in North America, which accounts for the majority of the decrease over 2011. Underpinning this is a belief that North American gas prices will remain low for some time; we have also assumed a relatively conservative oil price forecast.”

Talisman produced around 425,000 boe/d in 2011, up 9% from 2010. While the company believes it could increase production as much as 10% by maintaining spending on dry gas, it is projecting only 5% growth for the coming year, “focusing on profitability rather than headline production growth.” Talisman expects to increase North American liquids production from 25,000 b/d this year to 60,000 b/d in 2015.

Of the $1.8 billion set aside for North America, Talisman plans to spend 40% on liquids-rich opportunities. The company plans to spend $500 million in the Eagle Ford this year, up from $350 million in 2011, and it expects to bring four additional rigs into the play this year, increasing its total to 14.

On the flip side, Talisman plans to spend “upwards of $600 million” in the Marcellus “with significant investment in infrastructure in new parts of the play.” That means cutting its rig count from 11 in 2011 to between five and seven this year. Because of the productivity of existing wells, Talisman said it can maintain production at current levels of around 500 MMcf/d despite a decrease in drilling. The company produced a record 485 MMcf/d from the Marcellus in the fourth quarter of 2011.

In Canada Talisman plans to shift focus from the gassy Montney Shale to the more liquids-prone Duvernay. The company is planning a four-rig program in the Montney of British Columbia, while planning a six-well program in the liquids-rich Duvernay of Alberta.

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