Talisman Energy Reports Record Net Income of $1.4 Billion, Cash Flow Increases 48%

Talisman Energy Reports Record Net Income of $1.4 Billion, Cash Flow Increases 48% to $1.7 Billion, Production From Continuing Operations Up 10%
05:00 EST Tuesday, November 04, 2008

CALGARY, ALBERTA--(Marketwire - Nov. 4, 2008) - Talisman Energy Inc. (TSX:TLM) (NYSE:TLM) reported its operating and financial results for the third quarter of 2008.
- Cash flow(1) during the quarter was $1.7 billion, an increase of 48% from a year ago and relatively unchanged from the second quarter. Cash flow from continuing operations(1) was also $1.7 billion.

- Net income was a record $1.4 billion, an increase of 305% from a year earlier, driven by increased netbacks, mark-to-market gains on derivative contracts and stock-based compensation recovery.
- Earnings from continuing operations(1) were $731 million, up 189% compared to the third quarter in 2007, driven by increased volumes and higher netbacks.
- Production averaged 443,000 boe/d, 1% above the third quarter of 2007, despite the sale of approximately 40,000 boe/d of non-core assets over the past year. Production was also 3% above the previous quarter.
- Production from continuing operations averaged 435,000 boe/d, 10% above the same quarter last year and 4% higher than the second quarter of 2008.
- Netbacks for the quarter were $56.19/boe, up 60% from a year ago, but below $61.33/boe in the second quarter.
- Net debt(1) at quarter end was $3.7 billion, down from $4.3 billion at December 31, 2007.
- Talisman's unconventional gas strategy is on track, with 210 gross (129 net) wells drilled year-to-date in unconventional plays, including success in Quebec and Pennsylvania.
- The Company continued to focus operations with the agreed sale of non-core interests in the Netherlands.
- Talisman declared a C$0.10 per share dividend, payable on December 31, 2008.
(1) The terms "cash flow", "cash flow from continuing operations", "earnings from continuing operations" and "net debt" are non-GAAP measures. Please see the advisories and reconciliations elsewhere in this press release.
"Talisman delivered another solid quarter," said John A. Manzoni, President & Chief Executive Officer. "Cash flow, at $1.7 billion, was close to the record set in the previous quarter and up 48% compared to a year ago. Production from continuing operations was up 10% year on year. We set a new record for net income in the quarter at $1.4 billion, although roughly one-third of this came from non-cash gains on our derivatives position. Excluding one-time items, earnings from continuing operations were almost three times the levels reported in the third quarter of last year. Unit operating costs fell slightly during the quarter, as anticipated.
"Strategic implementation continued on track during the quarter. We are making significant progress in the delineation and development of our unconventional resource base in North America and have spent over $1 billion to date, reflecting the impact of accelerated drilling and land purchases.
"The Company continues to build a substantial position in several parts of the Montney shale play, among which is one of the best land positions in the Groundbirch area in BC. With approximately 40,000 net acres in this area, we are accelerating our development plans.
"We are pleased with the progress of our unconventional drilling programs. Overall, Talisman has drilled more than 200 gross wells in unconventional play areas so far this year. We've also had encouraging early results from our first shale tests in Quebec and Pennsylvania.
"The UK North Sea continued to generate substantial amounts of free cash flow during the quarter, with netbacks averaging over $80/boe.
"In Malaysia/Vietnam, growth projects are being progressed, with Northern Fields first gas delivered on time during the quarter, and although start up of Song Doc has been slightly delayed, we expect first oil in the next few weeks. Northern Fields first oil remains on track for the first quarter of 2009. Early development plans for the Hai Su Trang and Hai Su Den fields are also moving toward approval. First production from Rev and Yme in Norway remains on track for the announced dates.
"We have important exploration wells currently drilling in Kurdistan and Colombia, where we have recently added new acreage. In the fourth quarter, we will spud wells in the UK (Godwin), Norway (TR3) and Qatar (TQ-3).
"Our sales program was progressed during the quarter with the agreed sale of assets in the Netherlands. The Trinidad sale is also on track.
"Production for the quarter was strong and benefited from the new projects coming on stream and the completion of planned shutdowns in the UK in particular. However, the Song Doc delay along with the extension of a planned maintenance shutdown at PM-3 CAA means that we now expect annual production to be closer to 430,000 boe/d than our previous target of 435,000 boe/d, since the achievement of this was always dependent on new project delivery in the last quarter of the year.
"The current economic environment remains volatile, and it is important that Talisman continues to implement its strategy through a period of relatively weak commodity prices. Talisman has a strong balance sheet and significant levels of liquidity.
"While we are in the early stages of finalizing our investment plans for 2009, capital programs for next year will be adjusted to ensure that we maintain our current balance sheet strength and liquidity levels through a period of weaker commodity prices. We are currently high-grading our spending plans to invest in those projects that are consistent with the strategy and have the highest returns. This is likely to result in a slowdown in expenditures in North American conventional drilling and prioritizing among our unconventional plays.
"We intend to maintain flexibility and liquidity over the next 12-24 months. Our investment plans will be finalized over the remaining months of this year and we will provide details around capital spending levels and the impact on deliverables in January.
"In summary, the third quarter was a solid quarter of delivery and we are making good progress on the strategy. Talisman is in strong financial shape and we will act to ensure our investment patterns for the remainder of this year and into 2009 allow us to preserve that strength while maintaining momentum in implementing our strategy. "Talisman Generates a Record $1.4 Billion in Net Income

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