CALGARY, ALBERTA (NYSE: TLM) announced its spending plans and
production guidance for 2008. The Company plans to spend $4.4
billion on exploration and development in 2008, down from an
estimated $4.6 billion in 2007. The major underpinnings of this
program are:
- Increased investment in Southeast Asia and Norway, reflecting
project developments and exploration opportunities.
- Some reduction in spending on UK development projects,
reflecting the completion of a number of projects in 2007, and
consistent with taking a more measured pace. Developments at Auk
and Burghley are being progressed.
- Some reduction in North American spending in light of
uncertainty in both natural gas prices and Alberta royalties,
although North America will still account for over one-third of
total spending.
The Company expects production from continuing operations to
grow 5-10% annually to 2010. Production in 2008 is expected to be
between 435,000 and 460,000 boe/d, with the range primarily defined
by ongoing commissioning of the Tweedsmuir field in the North
Sea.
Commenting on this outlook, John Manzoni, President & Chief
Executive Officer said: "Although our outlook for growth to 2010
remains robust at 5-10% per annum, 2008 volumes are now expected to
come in 3-8% higher than production from continuing operations in
2007. Early estimates of production in 2007 are around 452,000
boe/d. Asset sales last year were circa 28,000 boe/d, so underlying
production from continuing operations was 424,000 boe/d. The 2008
projection is lower than our previous expectations.
"Around 60% of the reduction from our previous projections comes
from the North Sea and is due to a number of factors. These include
asset sales, which were not contemplated previously and delays in
commissioning various projects during the second half of 2007,
including Tweedsmuir. Tweedsmuir remains in commissioning phase.
The range of 2008 outcomes largely reflects the range of Tweedsmuir
volumes for the year, which ranges from today's production level of
16,000 boe/d up to 40,000 boe/d. We have also taken a more measured
view of project timing in light of our recent experiences and
prevailing industry conditions. And finally, there have been some
minor reassessments of operating uptime and reservoir
performance.
"Around 20% of the reduction is a result of decisions to reduce
capital programs, primarily in North America, but also in the UK,
in order to improve our project delivery performance. We intend to
maintain flexibility in our expenditure in North America both up
and down, depending on the gas price. The remaining 20% reduction
arises from other operational issues, and project delays
internationally, including the Corallina riser failure in Australia
and slower than expected ramp up of West Java natural gas sales,
although the pipeline is now completed and volumes are
increasing.
"I am disappointed in our projections for 2008 compared to our
prior estimates. However, we have set the business on a path which
I believe is realistic and deliverable, and I am determined that we
increase internal and external confidence, that we will meet the
projections we set. These projections incorporate our experience
from the second half of 2007 as well as a realistic view of project
delivery in today's environment, in particular in the UK business,
where over the next few years we are bringing on a number of
brownfield projects. Steps are underway to improve the delivery of
these projects.
"The predictability of our growth profile has not been good.
However, after examining the portfolio, I believe the issues are
mainly around delays, and some optimistic projections on uptime, in
particular on assets recently brought into the portfolio, rather
than a reduction of reserves.
"Despite these short-term production issues, which we will fix,
I am very encouraged by our financial strength, recent exploration
successes in Vietnam and the UK North Sea, development projects in
the pipeline and the long-term potential of our assets. During 2008
we expect to see a continuing strengthening of the balance sheet,
building from the second half of 2007. In the medium term, we have
projects underway which will deliver 5-10% per annum growth in the
2008-2010 period, based on today's portfolio. Execution and
delivery of these projects will be a short term priority.
"We are in the process of undertaking a strategic review to
underpin growth in the longer term. This includes a full review of
development and exploration opportunities within the existing
portfolio, as well as an overall review of portfolio balance. I
look forward to communicating the outcomes from this review during
the second quarter."
2008 Capital Program
Total exploration and development spending in 2008 will be
reduced by about 6% from an estimated $4,650 million in 2007. Of
the planned $4,375 million exploration and development budget, 45%
is being allocated to the North Sea, 34% to North America, 17% in
Southeast Asia and 4% for the rest of the world. Approximately
three quarters of spending is on development projects and one
quarter is earmarked for exploration.
Spending in Norway and Southeast Asia is expected to increase by
approximately $400 million this year (an increase of 34%). The
Company has a number of development projects underway in these
regions including Rev and Yme in Norway and the Northern Fields and
Song Doc developments in Southeast Asia.
In addition, the Company will continue drilling in its highly
prospective offshore exploration block in Vietnam. The Company is
also increasing exploration activity in Norway with six wells
planned.
Spending will be reduced in the UK North Sea in 2008, following
the completion of a number of field developments in 2007. The
Company will progress the development of the Burghley field toward
approval, as well as a major redevelopment of the Auk field and
continued appraisal of the Cayley discovery.
The Company is reducing spending in North America, drilling
higher return prospects, following up on drilling successes in 2007
and adding drilling locations in order to high grade its prospect
inventory. In addition, Talisman will step up work on its
non-conventional tight gas and shale opportunities and drill a
number of wells in the US Foothills.
North America
The Company plans to spend $1.5 billion in North America in
2008, participating in 300 gross wells (230 net). Spending over
2007 and 2008 has been reduced by approximately $1 billion compared
to the outlook a year ago. The majority of North American spending
will continue to be directed towards natural gas drilling. At
planned spending levels, Talisman believes it can sustain existing
production levels in North America, generating free cash flow at
current natural gas prices, while maintaining flexibility.
Talisman will build on its success in the multi-zone Outer
Foothills play in Alberta and British Columbia, following up on a
number of promising discoveries made in Ojay, Hinton and Solomon in
2007. Development of our tighter gas opportunities in Wild River,
Edson and Bigstone provide a large number of relatively low risk
wells with outcomes that are predictable.
Major drilling programs are planned for the Alberta and BC
Foothills again in 2008 where Talisman has a strategic land
position supported by its midstream operations. However, spending
in some parts of the Alberta Foothills is being reduced due to
proposed royalty changes, which have made some higher cost, high
deliverability gas wells uneconomic. We believe Talisman's
expertise as the leading gas driller in the Canadian Foothills is
transferable to the Western US, where the Company plans to drill
two wells in the first half of 2008. If successful, we will
increase our focus in this new and exciting area.
The Company has large unconventional natural gas resources
within its existing land base and plans are underway to continue
evaluating this potential and develop it as a long term strategic
resource. This includes initiatives in the Montney play in the
Greater Arch area as well as a better understanding of the shale
potential in Appalachia, Quebec and Western Canada.
Capital costs are expected to moderate in 2008, although the
Company expects unit operating costs to increase 10-15% reflecting
increased production in the Outer Foothills and higher property
taxes.
North Sea
Planned spending in 2008 is relatively unchanged at
approximately $2 billion, although with the capital spend largely
complete at Blane, Duart, Enoch and Tweedsmuir, there is a shift in
spending from the UK towards Norway. Total UK capital expenditure
is expected to decrease to $1,140 million and to increase to $850
million (up 35%) in Scandinavia. This includes $100 million of
exploration spending in the UK and $170 million in Norway.
The UK development program will focus on continuing exploitation
of existing core areas, progressing new projects at Burghley and
starting redevelopment of the Auk field, which was acquired at the
end of 2006. Development drilling programs will continue primarily
at Montrose, Claymore and Tartan. A key part of the UK exploration
program will be the continued appraisal of the Cayley
discovery.
In Norway, the Company will continue the development of the Rev
field, with production due to start in 2008, and the Yme field,
with production due to start in 2009. Since 2003, Talisman has
built the third largest acreage holding in Norway and 2008 will see
six exploration wells drilled.
Southeast Asia
In Southeast Asia, the Company plans to increase spending by
approximately $180 million (33%) in 2008 on existing project
developments, ongoing exploration and appraisal of our offshore
acreage in Vietnam and prospect identification and delineation in
Indonesia. The majority of the spending increase will be in the
PM-3 Commercial Arrangement Area between Malaysia and Vietnam as we
progress completion of the Northern Fields development where first
natural gas sales are expected in mid-2008 and first oil in the
first half of 2009.
In Vietnam, we will see first production from Song Doc, and on
Block 15-2/01 Talisman will progress unitization and development
plans around the Hai Su Trang and Te Giac Trang discoveries. In
Indonesia, gas volumes are flowing through the pipeline from
Corridor to West Java and are expected to build through the year
and work is progressing on the next tranche of gas sales
contracts.
The Company has a very active drilling program planned in 2008.
In addition to participating in 57 development wells (mainly on
Northern Fields and Song Doc), Talisman plans to spend
approximately $200 million on exploration. In Vietnam, we are very
encouraged by the Hai Su Den exploration well, which is testing a
large basement structure and we plan to drill up to four additional
exploration and three appraisal wells in Block 15-2/01 this
year.
Overall production volumes in Southeast Asia are expected to be
relatively flat in 2008, with a significant increase expected in
2009, following completion of the Northern Fields project and with
increasing Indonesian natural gas volumes going to West Java.
Algeria, Tunisia, Trinidad and International Exploration
Capital expenditure on developments is expected to be $42
million in Algeria, Trinidad and Tunisia.
Excluding North America, exploration spending in 2008 is
budgeted at approximately $600 million. The most likely places for
substantial resource additions in 2008 are in Vietnam and Norway.
Key wells planned for Norway include Bjorn (currently drilling) and
Trow, Marsvin and TR3. In Vietnam, two key wells (Hai Su Nau and
Hai Su Bac) are expected to spud in the first quarter.
In the UK, the Company plans to drill four exploration wells and
one appraisal well. In Indonesia, Talisman plans to shoot seismic
over the deepwater Sageri and Pasangkayu blocks in Indonesia,
preparing for drilling in 2009. In South America, the Company
expects to acquire seismic in Colombia and start the drilling of
one exploration well, while in Peru a well to appraise the earlier
discovery is expected to spud towards the end of 2008.
In Alaska, the Company will acquire additional seismic data
during 2008.
A conference call will be held to discuss this press release at
11:00 am MST on Tuesday, January 15, 2008. To participate in the
call, please contact the Talisman Energy conference operator at
10:50 a.m. MST (12:50 p.m. EST), 10 minutes prior to the conference
call.
Conference Operator Dial in Numbers:
1-800-731-5774 (North America) or
1-416-644-3418 (Local Toronto & International)
The conference call will also be broadcast live on the internet
and can be accessed by going to the Talisman website
(www.talisman-energy.com) and following the links from the home
page. Alternatively, you can point your browser to:
www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2139940
Talisman Energy Inc. is an independent upstream oil and gas
company headquartered in Calgary, Alberta, Canada. The Company and
its subsidiaries have operations in North America, the North Sea,
Southeast Asia, and North Africa. Talisman's subsidiaries are also
active in a number of other international areas. Talisman is
committed to conducting its business in an ethically, socially and
environmentally responsible manner. The Company is a participant in
the United Nations Global Compact and included in the Dow Jones
Sustainability (North America) Index. 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.
Forward-Looking Information:
This press release contains statements that constitute
"forward-looking information" or "forward-looking statements"
(collectively "forward-looking information") within the meaning of
applicable securities legislation. This forward-looking information
includes, among others, statements regarding:
- business plans for drilling, exploration and development,
appraisal and estimated timing;
- estimates of production, production growth, and operations
performance;
- estimates of future sales;
- estimated amounts and timing of capital expenditures;
- estimates of operating costs and unit operating costs;
- business strategy and plans or budgets;
- estimated timing and results of new development, including new
production;
- royalty rates; and
- other expectations, beliefs, plans, goals, objectives,
assumptions, information and statements about possible future
events, conditions, results of operations or performance.
Often, but not always, forward-looking information uses words or
phrases such as: "expects", "does not expect" or "is expected",
"anticipates" or "does not anticipate", "plans" or "planned",
"estimates" or "estimated", "projects" or "projected", "forecasts"
or "forecasted", "believes", "intends", "likely", "possible",
"probable", "scheduled", "positioned", "goal", "objective" or state
that certain actions, events or results "may", "could", "would",
"might" or "will" be taken, occur or be achieved.
Various assumptions were used in drawing the conclusions or
making the forecasts and projections contained in the
forward-looking information contained in this press release.
Information regarding business plans for drilling, exploration and
development, assumes that the extraction of crude oil, natural gas
and natural gas liquids remains economic.
Undue reliance should not be placed on forward-looking
information. Forward-looking information is based on current
expectations, estimates and projections that involve a number of
risks, which could cause actual results to vary and in some
instances to differ materially from those anticipated by Talisman
and described in the forward-looking information contained in this
press release. The material risk factors include, but are not
limited to:
- the risks of the oil and gas industry, such as operational
risks in exploring for, developing and producing crude oil and
natural gas, market demand and unpredictable facilities
outages;
-risks and uncertainties involving geology of oil and gas
deposits;
- 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;
- risk that adequate pipeline capacity to transport the gas to
market may not be available;
- fluctuations in oil and gas prices, foreign currency exchange
rates and interest rates;
- the outcome and effects of any future acquisitions and
dispositions;
- the ability of the Company to integrate any assets it may
acquire or the performance of those assets;
- health, safety and environmental risks;
- uncertainties as to the availability and cost of financing and
changes in capital markets;
- risks in conducting foreign operations (for example, political
and fiscal instability or the possibility of civil unrest or
military action);
- competitive actions of other companies, including increased
competition from other oil and gas companies and companies
providing alternative sources of energy;
- changes in general economic and business conditions;
- the effect of acts of, or actions against, international
terrorism;
- the possibility that government policies or laws may change or
governmental approvals may be delayed or withheld;
- results of the Company's risk mitigation strategies, including
insurance; and
- the Company's ability to implement its business strategy.
Readers are cautioned that the foregoing list of risk factors 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 most recent Annual Information Form
and Annual Financial Report. In addition, information is available
in the Company's other reports on file with Canadian securities
regulatory authorities and the United States Securities and
Exchange Commission.
Forward-looking information is based on the estimates and
opinions of the Company's management at the time the information is
released. The Company assumes no obligation to update
forward-looking information should circumstances or management's
estimates or opinions change, except as required by law.
Production
Throughout this press release, Talisman makes reference to
forecasted production volumes. 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. U.S. readers may refer to the table headed "Continuity of
Proved Net Reserves" in Talisman's most recent Annual Information
Form for a statement of Talisman's net production volumes by
reporting segment that are comparable to those made by U.S.
companies subject to SEC reporting and disclosure requirements.
Boe Conversion
Throughout this press release, 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.
Contacts: Talisman Energy Inc. David Mann Senior Manager,
Corporate & Investor Communications (403) 237-1196 (403)
237-1210 (FAX) Email: tlm@talisman-energy.com Talisman Energy Inc.
Christopher J. LeGallais Senior Manager, Investor Relations (403)
237-1957 (403) 237-1210 (FAX) Email: tlm@talisman-energy.com
Website: www.talisman-energy.com
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