(millions of Canadian dollars, unless otherwise stated)	2004	2003	2002
		(Restated)1	(Restated)1
Net income	663	1,012	544
Dividends	114	90	80
Per share2 (Canadian dollars)
Net Income	1.77	2.56	1.29
Dividends	0.30	0.23	0.20
Production (mboe/d)	438	398	445
Production per share2 (boe/share)	0.42	0.38	0.40
Average sales price3 ($/boe)	42.75	38.51	32.89
Gross sales3	6,874	5,610	5,351
Operating costs3 ($/boe)	7.04	6.74	6.44
DD&A, exploration and dry hole expense	2,199	1,899	1,821
Cash provided by operating activities	3,134	2,592	2,415
Exploration and development spending	2,538	2,180	1,848
Total assets	12,408	11,780	12,017
Total long-term debt and preferred securities	2,457	2,634	3,428
Proved reserves additions (before acquisitions and divestitures)(mmboe)	265	143	157
Proved reserves (mmboe)	1,488	1,362	1,485
Reserves replacement ratio4	166%	99%	121%

1. Restatement of prior years to effect retroactive adoption of the new accounting policy on asset retirement obligations as at January 1, 2004. See note 2 to the Consolidated Financial Statements
2. All per share amounts have been retroactively restated to reflect the impact of the Company's three for one stock split. See note 9 to the Consolidated Financial Statements.
3. During 2004, the Company reclassified transportation costs on a retroactive basis. Previously, these costs had been partially netted off against revenues. See note 2 to the Consolidated Financial Statements.
4. See the MD&A section entitled Reserves Replacement for method of calculation

This Management’s Discussion and Analysis (MD&A) dated March 14, 2005, should be read in conjunction with the Consolidated Financial Statements of the Company. In particular, note 20 provides segmented financial information that forms the basis for much of the following discussion and analysis. The Company’s Consolidated Financial Statements and the financial data included in the MD&A have been prepared in accordance with accounting principles generally accepted in Canada. A summary of the differences between accounting principles generally accepted in Canada (Canadian GAAP) and those generally accepted in the United States (US GAAP) is contained in note 21 to the Consolidated Financial Statements.

Unless otherwise stated, references to production and reserves represent Talisman’s working interest share (including royalty interests and net profits interests) before deduction of royalties. Throughout this MD&A the calculation of barrels of oil equivalent (boe) is calculated at a conversion rate of six thousand cubic feet (mcf) of natural gas for one barrel of oil and is based on an energy equivalence conversion method. BOEs may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf:1 bbl is based on an energy equivalence conversion method primarily applicable at the burner tip and does not represent a value equivalence at the wellhead.

Dollar amounts included in the MD&A are expressed in Canadian dollars unless otherwise indicated. All comparative percentages are between the years ended December 31, 2004 and December 31, 2003, unless stated otherwise.

Talisman Energy Inc. has a number of subsidiaries which conduct business in various parts of the world. Talisman Energy Inc.’s financial statements are prepared on a consolidated basis. For ease of reference, throughout this MD&A the terms “Talisman” and the “Company” are used to refer collectively to Talisman Energy Inc., its direct and indirect subsidiaries and partnership interests held by Talisman Energy Inc. and its subsidiaries, unless the context indicates otherwise.

Additional information relating to the Company, including the Company’s Annual Information Form, can be found on the Canadian System for Electronic Document Analysis and Retrieval (SEDAR) at www.sedar.com. The Company’s annual report on Form 40-F may be found in the EDGAR database at www.sec.gov.