2011-03-09-2011-03-08

To buy assets in BC Montney shale play including 50% WI in Cypress A assets, including 28600 net acres, gaining 5.6 Tcfe 3P.

Talisman Energy Inc. (Toronto: TLM; NYSE: TLM) plans to deepen its initial venture with Sasol Ltd. (NYSE: SSL) in the Montney shale play to include the sale of a 50% net working interest in its Cypress A assets for C$1.05 billion. Talisman will operate and manage the Cypress A and Farrell Creek areas as an integrated development project.

"This transaction allows Talisman and Sasol to unlock additional value in the world-class Montney shale play and potentially accelerate development of the resources in the area," says John A. Manzoni, president and chief executive of Talisman. "The Cypress A assets are very similar to Farrell Creek and, with our partner, we will now build an integrated long-term development plan for the area."

"This additional acquisition of another high quality natural gas asset will accelerate our upstream growth, while also potentially advancing Sasol's already strong GTL value proposition utilizing our proprietary technology," adds Sasol chief executive Pat Davies.

In December 2010, Talisman and Sasol announced a similar transaction for the acquisition of a 50% net interest in Talisman's Farrell Creek properties in the Montney shale play, with Sasol acquiring an estimated 4.8 trillion cubic feet equivalent (Tcfe) of net contingent resource. This transaction closed on March 1.

The Cypress A transaction represents the sale of approximately 14% (5.6 Tcfe) of Talisman's remaining estimated 39 Tcfe of net contingent resource in the play, and approximately 17% (28,600 net acres) of the company's net Tier 1 acreage in the Montney shale. Sasol will pay 25% of the consideration (approximately C$260 million) in cash at closing. Sasol will also provide an additional C$790 million to fund 75% of Talisman's future capital commitments in the integrated joint-venture development area.

The Cypress A transaction is expected to close by the end of third-quarter 2011.

Upon closing, Talisman will hold an estimated 34 Tcfe of net contingent resource and 139,000 net acres of Tier 1 acreage in the Montney shale play, including Farrell Creek, Greater Groundbirch and the Greater Cypress area. The Cypress A properties are part of the Greater Cypress area, approximately 25 miles northwest of Farrell Creek. The Talisman-Sasol JV does not expect to commence commercial development at Cypress A, which is less mature than Farrell Creek, for several years. A number of options for long term egress from the area are being considered.

Sasol and Talisman have commenced a feasibility study to examine a world scale gas-to-liquids (GTL) facility in Western Canada, with Talisman having the option to participate as a 50% partner in the facility. This could provide a strategic alternative to traditional North America pipeline or LNG markets. The GTL process produces premium, clean liquids fuel. Sasol is leading this study with a front-end engineering design decision likely in the second half of next year.

Goldman, Sachs & Co. and Jefferies & Company are advisors to Talisman.