Talisman-operated Tartan platform

In the UK Central North Sea, Talisman has established a number of operated commercial hubs, which provide significant value creation through low risk development, adjacent exploration opportunities, secondary recovery and third-party tariff revenue. Talisman operates the second largest number of oil fields in the UK North Sea.

Talisman is also building a new core area in the Norwegian sector of the Central North Sea. The Central North Sea has large remaining potential with an estimated 42 billion boe yet to find. The Company has a large drilling program under way, designed to increase oil and liquids production 20-25% by 2008.

2004 in Review

• Liquids production averaged 121,861 bbls/d, an increase of 8% versus 113,075 bbls/d in 2003.
• Natural gas production averaged 114 mmcf/d, compared to 109 mmcf/d in 2003.
• Exploration and development spending was $507 million.
• Talisman drilled 20 successful oil and gas wells.
• Talisman added 81 mmboe of proved reserves and had
328 mmboe of proved reserves at year end (86% developed).
• Operating costs averaged $11.93/boe, up from $10.22/boe in 2003, due in part to a stronger pound sterling.
• Talisman successfully appraised the Tweedsmuir South discovery.
• Development of the Tweedsmuir and Tweedsmuir South oil fields commenced in August.
• Talisman acquired the Flotta Catchment Area interests of the Intrepid Energy group.
• Production from the Tartan North development commenced ahead of schedule in August.
• Talisman expanded its position in Norway; the Company was awarded five new licenses and also acquired additional exploration acreage.
• Talisman announced plans to construct an offshore wind farm demonstrator project at Beatrice.

2005 Outlook

• Production targets are 117,000-125,000 bbls/d of oil and liquids and 110-120 mmcf/d of natural gas.
• Development of the Tweedsmuir and Tweedsmuir South oil fields will continue.
• Exploration and development spending is expected to be approximately $1 billion. The Tweedsmuir development is the primary reason for the increase in spending compared to 2004.
• Talisman plans to participate in up to 10 exploration and 30 development wells.
• In February 2005, Talisman announced the acquisition of all of the outstanding shares of Pertra A.S. in Norway. This includes a 70% interest in the operated Varg oilfield. This acquisition is expected to add approximately 10,000 bbls/d to the 2005 targets set out above.

A New Development at Tweedsmuir

On August 26, 2004, Talisman celebrated its tenth anniversary in the North Sea. The Company has grown its production from 30,000 boe/d in 1995 to over 140,000 boe/d.

Talisman also announced development of the $770 million, 70 mmboe Tweedsmuir and Tweedsmuir South fields, helping to ensure future growth. These fields are expected to start production in late 2006, averaging 45,000 boe/d net to Talisman in 2007.