In a year’s time, production from shale plays has gone from 6% of Calgary-based Talisman Energy Inc.’s North American gas production to 36%, the company said last week.

“We continue to deliver very strong results from our North American shale portfolio…Natural gas production from continuing operations in North America was up 24% compared to the third quarter of 2009,” said CEO John A. Manzoni.

“We have almost doubled our land position in the Eagle Ford Shale [in South Texas] and, at the same time, increased the liquids proportion of our total acreage. We are now very well positioned in the high-quality, liquids-rich transition window of the play.”

In early October Talisman announced the creation of a 50/50 joint venture with Statoil, with Talisman as the initial operator, to acquire 97,000 net acres of Eagle Ford Shale properties in the liquids-rich transition window.

In North America, production from continuing operations was 786 MMcfe/d, an increase of 19% year over year, with natural gas volumes from continuing operations increasing by 24% to 663 MMcf/d. Production from shale averaged 243 MMcf/d during the quarter, up from 39 MMcf/d a year earlier.

Manzoni said North American production growth was largely driven by the company’s activities in the Marcellus Shale of Appalachia. There Talisman’s production averaged 222 MMcf/d during the quarter, up from 38 MMcf/d a year ago. “With production currently averaging approximately 270 MMcf/d, we are very confident that we will exit 2010 at the upper end of the 250-300 MMcf/d target range we have projected all year,” Manzoni said.

In the Montney Shale, the company drilled seven horizontal development wells and brought two new wells on stream at Farrell Creek. Talisman continued its pilot program in the Greater Cypress area, drilling two wells and completing four horizontal wells during the quarter. Talisman exited the quarter with production of 18 MMcf/d in the Montney and remains on track to reach the 40-60 MMcf/d range by year-end, the company said.

“We are increasingly excited by our Montney Shale acreage, drilling seven development and two pilot wells in the quarter,” Manzoni said. “With excellent results in the Farrell Creek area, Talisman is evaluating a strategic partnership to help fund development of this very large shale resource.

“In Quebec, we drilled one well and completed two others during the quarter and now plan to complete the remaining two wells in the first half of 2011.”

Net income for the quarter was C$121 million compared to C$30 million a year earlier as a result of increased netbacks. Earnings from continuing operations, which exclude nonoperational items, were C$22 million during the quarter, versus $95 million a year earlier. The decline was primarily due to unfavorable foreign exchange variances and cash gains on financial instruments in 2009.

“We are well positioned during this period of low natural gas prices in North America. Our balance sheet is strong, with approximately C$2 billion of cash at the end of the quarter, although this will come down as we close some acquisitions and due to the natural phasing of capital spending,” Manzoni said. “And, of course, we still have undrawn bank lines of C$2.8 billion. We have options in terms of capital allocation into next year and will finalize these plans over the coming months.”

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