North America

Drilling b-60-E well at Monkman

Talisman is the leading deep gas explorer in Western Canada and the Company has established a new core gas area in the Northeastern US.

Talisman expects its North American operations to continue to generate substantial free cash flow. The Company’s strategy is to explore the deeper more prolific parts of the basin. Over the past five years, Talisman has added more deep gas production than any other company in Canada, resulting in higher reserve additions and production per well than its peers. The Company has also built a significant midstream business to facilitate access to markets and generate third-party revenues.

2004 in Review

• Natural gas production averaged 885 mmcf/d, up from 864 mmcf/d in 2003.
• Liquids production averaged 57,392 bbls/d, compared to 59,578 bbls/d in 2003.
• Talisman drilled 444 gross natural gas wells and 137 oil wells (94% success).
• Exploration and development spending was $1.45 billion. Eighty-three per cent of spending was directed toward natural gas projects.
• The Company added 365 bcf of proved natural gas reserves through drilling, net of revisions. At year end, Talisman had 2.6 tcf of proved gas reserves.
• Conventional operating costs averaged $5.30/boe, up from $5.01 in 2003.
• Talisman constructed the first cogeneration facility at a sour gas processing plant in Alberta at Edson. This project will reduce carbon dioxide emissions by 22,000 tonnes a year.
• The Company acquired over 430,000 acres in the Northeastern US, almost doubling its existing acreage.
• Talisman set new production records in the Northeastern US, Alberta Foothills, Deep Basin, Southern Alberta Foothills and Bigstone/Wild River regions.
• The Company drilled another successful Paleozoic gas well (b-60-E) in its core Monkman area. The Company has built a strategic land position in the area.
• Talisman transported and processed record gas volumes through its midstream business.

2005 Outlook

• Exploration and development spending is expected to be $1.4 billion, with over 90% directed towards natural gas projects.
• Production targets are 920-940 mmcf/d of natural gas and 54,000-56,000 bbls/d of oil and liquids.
• Talisman plans to participate in 525 wells, including 23 in Appalachia, eight in Monkman, 147 in the Edson area and 29 in the Alberta Foothills.
• Talisman plans to spend $54 million to expand and optimize its operated pipeline systems and associated infrastructure and to build the Lynx pipeline to tie in reserves from the Northern Alberta Foothills.

A major new discovery in Northeastern British Columbia

Talisman is repeating history in the Monkman area. On April 7, 1992, Talisman (then BP Canada) announced that the Brazion well, c-59-E/93-P-5 tested at a rate of 85 mmcf/d from the Triassic formation. On November 1, 2004 Talisman announced that a deeper (Paleozoic) well, Brazion b-60-E/93-P-5 had tested at 40 mmcf/d restricted by surface equipment. The well was brought on stream in December at a rate of 66 mmcf/d sales gas (Talisman 80%). This is a major discovery and could be the key to significant new gas finds deep beneath Talisman’s existing infrastructure in the Monkman area.

To date, the Triassic play has produced 2 tcf of natural gas. Talisman hopes this deeper play will be as prolific.