Talisman Energy Inc.

Talisman Energy Inc.

January 11, 2005 08:05 ET

Talisman Energy Targets 10% Production per Share Growth in 2005


NEWS RELEASE TRANSMITTED BY CCNMatthews

FOR: TALISMAN ENERGY INC.

TSX, NYSE SYMBOL: TLM

JANUARY 11, 2005 - 08:05 ET

Talisman Energy Targets 10% Production per Share
Growth in 2005

CALGARY, ALBERTA--(CCNMatthews - Jan. 11, 2005) - Talisman Energy Inc.
(TSX:TLM) (NYSE:TLM) has announced a record $3.1 billion exploration and
development program for 2005, representing an increase of approximately
15% over 2004. North America and the North Sea account for 80% of
expected spending. The budget includes $1.5 billion for drilling as the
Company continues to add significant new production volumes through the
drill bit.

Talisman expects 5% production growth in 2005, with a mid-point estimate
of approximately 460,000 boe/d. With continued share repurchases, the
Company intends to increase production per share by approximately 10% in
2005. Production in 2004 is estimated at 437,000 boe/d with production
per share up 10% over the previous year.

Talisman expects to generate $3.6-3.8 billion in cash flow in 2005,
based on a US$40/bbl WTI oil price, a US$6.25/mmbtu NYMEX natural gas
price and a US$/C$ exchange rate of $0.80. The Company plans to release
its final 2004 results on March 2, 2005. Talisman has provided
additional guidance details on its website at www.talisman-energy.com.

"2004 was a stellar year for Talisman and the momentum is continuing
into 2005," said Dr. Jim Buckee, President and Chief Executive Officer.
"We expect to generate a record $10 in cash flow per share this year, an
increase of 25% over 2004. Unit operating costs could fall by more than
5% this year with new low cost production in Trinidad and the stronger
Canadian dollar. The Company continues to layer in growth in each of its
core operating areas with a view to increasing our production by 100,000
boe/d between now and the end of 2007.

"We made a number of large domestic natural gas discoveries last year,
which show signs of continuing in 2005, reinforcing our position as the
leading deep gas explorer in Western Canada. In addition, we will
continue our successful drilling program in the northeastern United
States. We plan to spend over $1.4 billion in North America, with almost
90% directed at natural gas projects. Talisman expects to participate in
over 500 gross wells including 10-12 high impact exploration wells,
increasing our North American natural gas production by 4-5% this year.

"In the North Sea, Talisman increased production by an estimated 7% in
2004, bringing the North Tartan field onstream and adding additional
exploration acreage in Norway. The Company's largest single project in
2005 will be development of the Tweedsmuir and Tweedsmuir South fields
in the North Sea. Production is expected to start late in 2006, adding
approximately 45,000 boe/d net to Talisman in 2007.

"The major contributor to growth in 2004 was the PM-3 project in
Malaysia/Vietnam, which averaged over 40,000 boe/d for the year, net to
Talisman. This year, we expect to start production from the South Angsi
field, which will add an estimated 6,500 bbls/d net to Talisman this
year and 12,000 bbls/d next year. We also expect to sanction development
of the PM-3 northern fields.

"In Indonesia, Talisman has a 36% interest in the Corridor PSC with very
large natural gas reserves. In August, the Company announced a long-term
contract for the sale of 2.3 tcf to the Indonesian national gas
transmission and distribution company. In 2005, we will start expansion
of our gas processing facilities with deliveries expected in the first
quarter of 2007.

"Production doubled in Algeria in 2004, averaging over 13,000 bbls/d.
This year, we expect to sanction the MLSE development project and we
will commence facilities expansion to handle increased liquids volumes
in 2007. Production is about to start in Trinidad and is expected to
average approximately 14,000 bbls/d net to Talisman in 2005. We have up
to eight exploration wells planned in Trinidad, including our first two
onshore locations.

"In addition, we will continue our high impact wildcat exploration
drilling programs in Colombia and Peru and plan to spud our first well
in Qatar this year. We will also spend upwards of $20 million in Alaska
with a view to drilling our next exploration well there in 2006.

"The Company increased its dividend payment in 2004, repurchased
approximately nine million shares in November and December and increased
liquidity with a three for one share split. Our balance sheet is very
strong, with net debt at year end 2004 estimated at about $2.5 billion.
Of course, the key measure of success for Talisman shareholders is share
price performance. Talisman shares ended the year at a new record high
closing price of $32.35 per share, an annual increase of 32%."

CASH FLOW

Talisman expects to generate cash flow of $9.80-10.40 per share in 2005,
based on the mid-point of the production guidance range. This is a
25-30% increase over the estimated 2004 figure.



2003 2004(1) 2005(2)
---- ------ ------
Cash flow ($b) 2.7 3.0 3.6-3.8
CFPS 7.07 7.90 9.80-10.40

Average shares outstanding (mm) 386 383 366
Production (000 boe/d) 398 437 445-475

WTI oil (US$/bbl) 30.99 41.47 40.00
NYMEX gas (US$/mmbtu) 5.44 6.09 6.25
US$/C$ 0.71 0.77 0.80
C$/pounds sterling 2.29 2.38 2.25

(1)Preliminary
(2)Forecast


Cash flow estimates are based on the pricing and exchange rate
assumptions shown. The number of average shares is contingent on
Talisman repurchasing approximately 10 million shares in the first
quarter of 2005. Other items affecting cash flow include royalties,
operating costs, G&A, interest expense, stock based compensation expense
and current income taxes and PRT. Additional information on these
assumptions, as well as sensitivities, is provided later in this news
release.

PRODUCTION

Talisman has set targets of 5-10% production per share growth on a
go-forward basis. The Company produced approximately 437,000 boe/d in
2004. Fourth quarter production averaged an estimated 447,000 boe/d, a
7% increase over the fourth quarter of 2003.


2003 2004(1) 2005(2)
Oil & Liquids (bbls/d) ---- ------ ------
---------------------
North America 59,578 57,200 54,000-56,000
North Sea 113,075 121,200 117,000-125,000
Indonesia 15,758 13,200 5,000-7,000
Malaysia/Vietnam 8,672 22,400 28,000-30,000
Algeria 6,594 13,400 15,000-17,000
Sudan 13,039 - -
Trinidad - 12,000-16,000
------- ------- ---------------
216,716 227,400 231,000-251,000


Natural Gas (mmcf/d)
-------------------
North America 864 890 920-940
North Sea 109 113 110-120
Indonesia 112 139 150-170
Malaysia/Vietnam 5 117 105-115
---- ----- -----------
1090 1,259 1,285-1,345

000 boe/d 398 437 445-475

Production per share (boe) 0.38 0.42 0.44-0.47

(1)Preliminary
(2)Estimated


Production in 2005 is expected to average between 445,000-475,000 boe/d,
with most of the increase coming from Trinidad, Malaysia and North
America. Production per share is forecast to increase by 10%, contingent
on Talisman repurchasing an additional 10 million common shares in the
first quarter of 2005. Talisman believes it can sustain 5-10% production
per share growth in 2006 and again in 2007, from existing development
programs (deep gas in North America, PM-305 in Malaysia, Tweedsmuir in
the North Sea, Algeria expansion, Corridor gas sales in Indonesia).

Liquid volumes are expected to increase between 2-10%. The major
increases come from first oil production in Trinidad and startup of the
South Angsi field in Malaysia. Indonesian oil volumes are lower with the
planned relinquishment of the Tanjung concession. Gas volumes are
forecast to increase 2-7%. The majority of the increase is expected to
come from Talisman's successful deep gas drilling programs in North
America.

CAPITAL SPENDING

Talisman has budgeted approximately $3.1 billion in exploration and
development spending in 2005, up 15% over 2004.



Exploration & Development ($ million)

2003 2004(1) 2005(2)
----- ------ ------
North America 1,109 1,480 1,445
North Sea 496 550 1,025
Indonesia 41 25 75
Malaysia/Vietnam 275 240 235
Algeria 34 15 55
Trinidad 130 195 100
Other 95 151 125
----- ----- -----

2,180 2,656 3,060
(1)Preliminary
(2)Estimated


Approximately half of the money will be spent on drilling with 525
domestic and 102 international exploration and development wells
planned. The other major budget items are plant and equipment ($1.1
billion) and land/G&G ($300 million).

Exploration and development spending in North America is estimated at
$1,445 million (47% of total Company spending). Ninety per cent of
conventional North American spending will be gas focused.

Capital spending in the North Sea is expected to increase to just over
one billion dollars in 2005. The increase reflects the program to
develop the Tweedsmuir fields, with first production expected late in
2006.

Indonesian spending will increase with expansion of the gas processing
facility at Grissik in the Corridor Block. Spending in Malaysia and
Vietnam is expected to total $235 million, including completion of the
South Angsi project and additional gas processing facilities at PM-3.
Algerian spending will increase with expansion of the MLN facilities.
Spending in Trinidad will drop this year with completion of the
Angostura oil and gas development. Approximately two-thirds of the
budget in Trinidad will be directed towards exploration, including two
onshore wells.

SENSITIVITIES AND OTHER ITEMS

The 2005 sensitivities to changes in volumes, prices and exchange rates
are as follows:


Cash flow ($ million)
--------------------
WTI oil price increase US$1.00/bbl 55
North American natural gas price increase
(C$0.10/mcf) 24
Exchange rate (US$0.01) 50
Volumes + 10% liquids 183
Volumes + 10% natural gas 180


The sensitivities take into account current Talisman hedges for 2005.
Talisman has hedged approximately 1.6% of North American gas production
and 2.5% of worldwide liquids production through a combination of
financial and physical fixed price contracts and collars. Gas volumes
have been hedged at an average price of approximately C$3.50/mcf.
Approximately 6,000 bbls/d of oil volumes have been fixed at
US$26.97/bbl.

Other key variables include:

Royalties are estimated at 16% of gross revenue (before hedging impact),
essentially unchanged from the 2004 rate.

Unit operating and transportation costs are expected to fall by 5-7% in
2005, averaging approximately $7.70/boe. Reasons include an assumed
stronger Canadian dollar and commencement of low cost production in
Trinidad.

Unit G&A costs are expected to decrease, averaging approximately
$1.14/boe in 2005 versus $1.17 in 2004.

Interest expense in both 2004 and 2005 is expected to average
approximately $150 million. Estimated cash income tax and cash PRT in
2005 are expected to be essentially unchanged from 2004 estimates.
However, these are highly sensitive to commodity price realizations and
capital expenditure levels.

Talisman Energy Inc. is a large, independent oil and gas producer with
operations in Canada and, through its subsidiaries, the North Sea,
Indonesia, Malaysia, Vietnam, Algeria, Trinidad and the United States.
Talisman's subsidiaries also conduct business in Colombia, Qatar and
Peru. Talisman has adopted the International Code of Ethics for Canadian
Business and is committed to maintaining high standards of excellence in
corporate citizenship and social and environmental responsibility
wherever its business is conducted. The Company is a participant in the
United Nations Global Compact, a voluntary initiative that brings
together companies, governments, civil society and other groups to
advance human rights, labour and environmental principles. Talisman's
shares are listed on the Toronto Stock Exchange in Canada and the New
York Stock Exchange in the United States under the symbol TLM.

Financial Information

All dollar amounts are stated in Canadian dollars, except where
otherwise indicated. Unless otherwise indicated below, the Canadian
financial information included in this news release is set out in
accordance with Canadian generally accepted accounting principles, which
differ from generally accepted accounting principles in the U.S. See the
notes to the Company's consolidated financial statements for information
concerning significant differences between Canadian and U.S. generally
accepted accounting principles.

Non-GAAP Financial Measures

Cash flow per share is one measure used by the Company to assess
operating results. Cash flow per share is not defined by Canadian or US
GAAP and as such does not have a standardized meaning prescribed by
Canadian or US GAAP. Cash flow per share may not be comparable to
similarly titled measures reported by other companies. Cash flow per
share should not be considered an alternative to, or more meaningful
than, cash provided by operating, investing and financing activities or
net income per share as determined in accordance with Canadian or US
GAAP as an indicator of the Company's performance or liquidity. Cash
flow per share as presented in this news release has been calculated on
a consistent basis for the year ended December 31, 2004 and the year
ending December 31, 2005.

This news release does not include an estimate of the 2004 and 2005 net
income per share as it is not practicable to do so at this time.

Forward-looking Statements

This news release contains statements concerning future projects and
growth, anticipated cash flow, estimated volumes and timing of future
production, business plans for development and drilling, drilling and
operating costs, or other expectations, beliefs, plans, goals,
objectives, assumptions, information and statements about future events,
conditions, results of operations or performance that constitute
"forward-looking statements" within the applicable securities
legislation.

Forward-looking statements are based on current expectations, estimates
and projections that involve a number of risks and uncertainties, which
could cause actual results to differ materially from those anticipated
by the Company and described in the forward-looking statements. These
risks and uncertainties include:

- the risks of the oil and gas industry, such as operational risks in
exploring for, developing and producing crude oil and natural gas and
market demand;

- risks and uncertainties involving geology of oil and gas deposits;

- the uncertainty of reserves estimates and reserves life;

- the uncertainty of estimates and projections relating to production,
costs and expenses;

- potential delays or changes in plans with respect to exploration or
development projects or capital expenditures;

- fluctuations in oil and gas prices, foreign currency exchange rates
and interest rates;

- health, safety and environmental risks;

- uncertainties as to the availability and cost of financing;

- uncertainties related to the litigation process, such as possible
discovery of new evidence or acceptance of novel legal theories and the
difficulties in predicting the decisions of judges and juries;

- risks in conducting foreign operations (for example, political and
fiscal instability or the possibility of civil unrest or military
action);

- general economic conditions;

- the effect of acts of, or actions against international terrorism; and

- the possibility that government policies or laws may change or
governmental approvals may be delayed or withheld.

We caution that the foregoing list of risks and uncertainties is not
exhaustive. Additional information on these and other factors, which
could affect the Company's operations or financial results, are included
in the Company's Annual Report under the headings "Management's
Discussion and Analysis- Risks and Uncertainties", "- Liquidity and
Capital Resources", and "- Outlook for 2004", as well as in the
Company's other reports on file with Canadian securities regulatory
authorities and the United States Securities and Exchange Commission.

Forward-looking statements are based on the estimates and opinions of
the Company's management at the time the statements are made. The
Company assumes no obligation to update forward-looking statements
should circumstances or management's estimates or opinions change.

Advisory - Reserves Data and Other Oil and Gas Information

Talisman's disclosure of reserves data and other oil and gas information
is made in reliance on an exemption granted to Talisman by Canadian
securities regulatory authorities, which permits Talisman to provide
disclosure in accordance with US disclosure requirements. The
information provided by Talisman may differ from the corresponding
information prepared in accordance with Canadian disclosure standards
under National Instrument 51-101 (NI 51-101). Talisman's proved reserves
have been calculated using the standards contained in Regulation S-X of
the U.S. Securities and Exchange Commission ("SEC"). Probable reserves
have been calculated using the definition for probable reserves set out
by the Society of Petroleum Engineers/World Petroleum Congress
("SPE/WPC"). Further information about the differences between the U.S.
requirements and the NI 51-101 requirements is set forth under the
heading "Note Regarding Reserves Data and Other Oil and Gas Information"
in Talisman's Annual Information Form.

The exemption granted to Talisman also permits it to disclose internally
evaluated reserves data. While Talisman annually obtains an independent
audit of a portion of its reserves, no independent reserves evaluator or
auditor was involved in the preparation of the reserves data disclosed
in this report.

Throughout this news release, Talisman makes reference to production
volumes. Where not otherwise indicated, such production volumes are
stated on a gross basis, which means they are stated prior to the
deduction of royalties and similar payments. In the U.S., net production
volumes are reported after the deduction of these amounts.

Throughout this report, 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 ration 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.

You may read any document Talisman furnishes to the SEC at the SEC's
public reference rooms at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549 and 500 West Meridian Street, Suite 1400, Chicago, Illinois
60661. You may also obtain copies of the same documents from the public
reference room of the SEC at 450 Fifth Street, N.W., Washington D.C.
20549 by paying a fee. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms.

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