Calgary-based Talisman Energy Inc. reported Wednesday a significant increase in its fourth quarter production as it develops new core areas. The company posted its fifth consecutive annual increase in cash flow, which increased 3% to C$2.7 billion, while cash flow per share grew 7% to C$21.21.

The company’s earnings per share more than doubled to C$7.65 in 2003, while total net income surpassed C$1 billion for the first time. Higher net income reflected both increased cash flow and a C$296 million gain on the sale of Talisman’s indirect interest in a project in Sudan. Fourth quarter earnings were C$0.80/share or C$107 million. Excluding Sudan, net income per share was 145% higher than 2002.

However, production was down, averaging 398,000 boe/d, down from 445,000 boe/d in 2002, which included 60,000 bbls/d from Sudan. Production in the fourth quarter averaged 419,000 boe/d, representing a 15% increase in production per share over the same period a year earlier, excluding Sudan.

“This has been a pivotal year for Talisman,” said CEO Jim Buckee. “We have repositioned the company, exiting Sudan and establishing or expanding positions in the United States, the North Sea and Southeast Asia. We also bolstered our midstream assets in west central Alberta, adding infrastructure in support of our North American natural gas growth targets of 3-5% per annum.”

He also said that the company’s results from Appalachia were “very encouraging. Over the past four months we have tested five wells at combined rates of 69 MMcf/d. Several wells have tested around 20 MMcf/d and were restricted by surface equipment.”

Talisman is “poised to deliver 5-10% production per share growth in 2004, 2005 and 2006,” said Buckee. “We’ve also added a number of higher impact exploration plays to our portfolio in areas like Alaska, Colombia and Qatar, which are riskier but could deliver large upside.” This year, production is expected to be between 415,000-445,000 boe/d and, year-to-date, has averaged over 430,000 boe/d.

At year’s end, Talisman reported 1.36 Bboe of proved reserves comprised of natural gas and relatively light, high quality crude oil and liquids. Finding and development costs averaged C$14.28/boe (US$11.71/boe net). The company noted that the figure does not reflect more than 100 MMboe of international probable reserves at Corridor in Indonesia and J1/J5 in the North Sea, which are expected to be transferred to the proved category in 2004. “Because of this imprecise match between spending and reserves bookings, we believe that Talisman’s three-year average reserve replacement cost of C$8.76/boe (US$7.72/boe net) better reflects our underlying performance.

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