Canada’s Talisman Energy Inc. said it expects substantial cash flow and earnings from the $250 million in natural gas properties, production and facilities that subsidiary Fortuna Energy Inc. has acquired in northern New York State. The subsidiary has amassed 400,000 net acres of land in the Watkins Glen area with current production of 65 MMcf/d. Fortuna plans to spend $45 million in 2003, drilling up to 10 wells, shooting seismic and adding to existing infrastructure.

Talisman CEO Jim Buckee said the subsidiary see the potential for double-digit production growth from the Appalachian Basin holdings. The company is particularly focused on the Trenton-Black River play. “With low operating costs, a premium to Nymex prices and proximity to infrastructure, this is a very attractive, high netback area,” he said.

“We have already hedged gas prices on the majority of an equivalent volume of the acquired production for 18 months and will shortly increase this to cover total volumes,” he added. “Including these hedges, the acquisition is expected to be accretive to earnings and add about C$0.80 to Talisman’s cash flow per share this year.

“With in excess of 4.8 million shares repurchased since Oct. 31, 2002 and the addition of these producing assets, Talisman should comfortably beat its 2003 target of 5% production per share growth, post Sudan.” Talisman is selling its 25% interest in the Greater Nile Oil Project in Sudan to ONGC Videsh Ltd. for C$1.2 billion.

In recent transactions, Fortuna has acquired 150,000 net acres of land (mostly 100% working interest), 115 Bcf of proved gas reserves and 55 MMcf/d of production (reserves and production are before royalty interests). After adjusting for the value of land, seismic and tax pools, the acquisition cost of these proved reserves is $1.40/Mcf.

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