Talisman Energy Inc. reported its operating and financial results for the third quarter of 2010.

"Talisman had a very active third quarter in terms of acquisitions, each of which strengthen our portfolio in line with the strategy," said John A. Manzoni, President & CEO.

"We have achieved the majority of the portfolio transition we laid out around a year ago and expect to see production growth from this point. Excluding the effect of asset sales, production this quarter is up 12% year over year, and 4% compared to the second quarter. In light of expected additional volume increases in the fourth quarter, and timing of asset sales, we now expect production for 2010 to average around 415,000 boe/d, above our previous guidance of just over 400,000 boe/d.

Production

2010

(3 months ended)

2009

(3 months ended)

2010

(9 months ended)

2009

(9 months ended)

Oil & Liquids (bbls/d)

175,721

192,293

188,062

212,949

Natural Gas (mmcf/d)

1,369

1,253

1,371

1,271

Total (mboe/d)

404

401

416

425

Continuing Operations (mboe/d)



389



348



383



362

Production from continuing operations averaged 389,000 boe/d, a 12% increase over the previous year. This was due principally to increased oil and liquids volumes in Scandinavia and increased gas volumes in North America, Scandinavia and Southeast Asia, partially offset by decreased oil and liquids volumes in the UK and Southeast Asia. Total production was relatively flat, the result of asset sales.

In North America, production from continuing operations was 786 mmcfe/d (131,000 boe/d), an increase of 19% year-over-year, with natural gas volumes from continuing operations increasing by 24% to 663 mmcf/d. Production from shale averaged 243 mmcf/d during the quarter, up from 39 mmcf/d a year earlier. Shale now accounts for 36% of Talisman's North American natural gas production, up from 6% at the end of the third quarter of 2009.

Total production averaged 875 mmcfe/d (145,800 boe/d) for the third quarter, down 9% from a year ago as a result of non-core asset sales. Capital spending in North America was $517 million, including $471 million related to shale activities.

Eagle Ford

In early October, Talisman announced the creation of a 50/50 joint-venture with Statoil, with Talisman as the initial operator, to acquire 97,000 net acres of high-quality, Eagle Ford shale properties in the liquids rich transition window. The net cost to Talisman of this new acreage will be approximately US$485 million, after Statoil purchases a 50% working interest in Talisman's existing 37,000 net acres in the Eagle Ford. Upon completion of these transactions, expected by year end, Talisman will hold approximately 70,000 net acres. In addition, the joint-venture has options to acquire up to an additional 22,000 acres of land. Talisman expects to have four rigs running in the area by the end of the year.

"We have almost doubled our land position in the Eagle Ford shale and, at the same time, increased the liquids proportion of our total acreage,” said Manzoni. “We are now very well positioned in the high quality, liquids rich transition window of the play.

Marcellus

In the Pennsylvania Marcellus area, production averaged 222 mmcf/d during the quarter, up from 38 mmcf/d during the third quarter of 2009 (up 55% from the previous quarter) and was approximately 270 mmcf/d at the beginning of November. Talisman is confident it will exit the year at the upper end of its 250-300 mmcf/d target. The company drilled 116 gross (109.9 net) Marcellus shale wells during the first three quarters of 2010. Talisman brought 42 gross (41 net) new wells on stream during the quarter for a total of 79 gross (75.5 net) wells since the beginning of the year.

"[Our growth] is largely driven by the Pennsylvania Marcellus, where Talisman's production averaged 222 mmcf/d during the quarter, up from 38 mmcf/d a year ago,” said Manzoni. “With production currently averaging approximately 270 mmcf/d, we are very confident that we will exit 2010 at the upper end of the 250-300 mmcf/d target range we have projected all year.”

Montney

In the Montney shale, the company drilled seven horizontal development wells and brought two new wells on stream at Farrell Creek. Talisman continued its pilot program in the Greater Cypress area, drilling two wells and completing four horizontal wells during the quarter. Talisman exited the quarter with production of 18 mmcf/d in the Montney and remains on track to reach the 40-60 mmcf/d range by year end.

"We are increasingly excited by our Montney shale acreage, drilling seven development and two pilot wells in the quarter,” said Manzoni. “With excellent results in the Farrell Creek area, Talisman is evaluating a strategic partnership to help fund development of this very large shale resource. In Quebec, we drilled one well and completed two others during the quarter and now plan to complete the remaining two wells in the first half of 2011.”

Utica

In the Quebec Utica Shale Talisman drilled one gross well (0.8 net) and completed two wells during the quarter. The remaining two wells will be completed during the first half of 2011.

Production from Talisman's conventional areas was 509 mmcf/d natural gas and 21,000 bbls/d of liquids. The company drilled a total of 37 gross conventional wells (34 net) in the third quarter.

Cardium

In the Cardium play in Alberta, Talisman spudded its first operated pilot well in October, with two more operated pilot wells planned this year.

Talisman continues to progress the sale of conventional, non-core assets in North America. In the third quarter, the company completed sales for a total consideration of $348 million. In the first nine months Talisman has completed transactions for a total of $1.7 billion and expects to complete the sale of in excess of $2 billion of non-core North American assets during 2010.

UK

Production in the UK averaged 71,700 boe/d in the third quarter of 2010, an 11% increase from the previous quarter and flat compared to the same period last year. Increased quarterly production was mainly due to planned shutdowns at Buchan, MonArb and Ross/Blake having less of an impact compared to those in the second quarter at Tweedsmuir and Piper. A Tartan area shutdown is expected to take place during the fourth quarter.

The company spent approximately $154 million on development in the UK during the quarter, primarily directed towards the Auk North project. Auk North is on schedule with first oil targeted for early 2011, with a well spud during the quarter still drilling. Auk South is steadily progressing with construction started on the living quarters during the quarter and first oil is expected in 2012. First oil at the Burghley project was achieved on schedule in late October, with initial gross production of 15,000 bbls/d. Talisman has a 37% working interest in Burghley.

Norway

Production in Norway averaged 50,300 boe/d in the quarter, a 38% increase over the same period in 2009 and flat compared to the previous quarter. The increase over last year predominantly reflects increased operating efficiency at the host platform for the Rev field and successful infill wells at Varg.

Successful infill wells were completed at both Brage and Veslefrikk during the quarter, both of which were spud in the previous quarter.

The Yme topsides were completed and are currently in Stavanger undergoing preparations for the offshore tow and installation, which are weather dependent. Once the topsides are on location, commissioning will take approximately three months. The final pre-startup Yme well was drilled successfully at the end of the quarter, with final well operations taking place in the fourth quarter.

Talisman entered into agreements to acquire a 35% working interest in the PL378 Grosbeak discovery and a 20% interest in the PL375 Beta discovery. These acquisitions also bring exploration upside. Drilling in the area is currently underway with a well at the Beta discovery, and further wells in the licenses are expected to start drilling at the end of this year and during 2011.

The company spent $128 million on development in Norway during the quarter, with approximately two-thirds of the spend on the Yme redevelopment and the development well, with most of the remainder on development drilling.

Other Operating Areas

In August, Talisman and Ecopetrol announced the joint acquisition of BP Exploration Company (Colombia) Limited. This acquisition adds 330,000 net acres in close proximity to Talisman's existing holdings in the Niscota Block in the under explored Foothills trend. These assets are of high quality, with both exploration and development upside.

International Exploration

International exploration spending during the third quarter was $162 million. The company continues active drilling in the North Sea, Latin America and Southeast Asia, and there are also a number of seismic programs on going in the next quarter.

In Indonesia, the company is participating in two deep water wells in the North Makassar Basin. The first well, Bravo-1, is currently drilling.

In Poland, seismic acquisition is planned to commence in fourth quarter.

About Talisman Energy Inc.

Talisman Energy Inc. is a global, diversified, upstream oil and gas company, headquartered in Canada. Talisman's three main operating areas are North America, the North Sea and Southeast Asia. The company also has a portfolio of international exploration opportunities. Talisman is committed to conducting business safely, in a socially and environmentally responsible manner, and is included in the Dow Jones Sustainability (North America) Index. Talisman is listed on the Toronto and New York stock exchanges under the symbol TLM. Please visit our website at www.talisman-energy.com.