Talisman Energy Inc. (TSX: TLM) (NYSE: TLM) has announced its
capital spending plans for 2009. The priorities for the coming year
are:
- Preserving financial strength and flexibility in a low price
environment.
- Advancing the strategy for long-term growth and building on
the success from last year.
- Continuing the focus on efficiency and costs.
The Company has budgeted for exploration and development
spending of approximately $3.6 billion in 2009 and plans to fund
these capital programs from cash flow and disposition proceeds.
Including non-cash lease costs, total capital spending is expected
to be approximately $4 billion. Talisman has set these plans
assuming a US$40/bbl WTI oil price and a US$5/mmbtu NYMEX natural
gas price in 2009.
The Company plans to issue its final 2008 results on March 5,
2009.
"We have assumed what we hope to be a conservative scenario for
oil and gas prices in 2009," said John A. Manzoni, President &
CEO. "Talisman entered 2009 with a strong balance sheet and our
objective this year is to preserve financial flexibility by living
within our means and continue to advance our new strategy. We have
achieved good progress on the strategy introduced last May and this
new direction for the Company is proving to be robust.
"We have significantly more investment opportunities than
available cash in the current environment, which allows us to be
flexible in where we focus investment. We will concentrate on
continued implementation of our strategic priorities, sometimes at
the expense of current production, because we believe our strategy
will deliver the highest returns over time. Based on our projected
investment pattern, 2009 production should be broadly similar to
last year, which is expected to come in at about 430,000 boe/d.
This shift in spending towards higher quality strategic projects is
expected to provide sustainable long-term growth at lower risk.
"We will maintain a flexible approach to spending this year,
which will allow us to navigate this dynamic environment. We plan
to fund our capital programs from cash generated by operations plus
proceeds from confirmed divestments. This includes approximately
US$500 million received last week from our previously announced
Netherlands sale.
"In line with our objective of focusing the portfolio, last year
we sold non core assets comprising around 12,000 boe/d of
production with after tax proceeds of around $1 billion. We intend
to continue this process, recognizing that sales may be difficult
in the current financial environment. We will also be mindful of
opportunities created in this commodity price environment where it
may be better value to buy than to build.
"While we are still in the process of evaluating our 2008
results, low year-end commodity prices will likely have a
significant negative impact on reported reserves, predominantly in
the UK. In addition, lower prices, combined with adding substantial
amounts of high quality unconventional land in North America, while
progressing a number of large international development projects,
are expected to result in high reserve replacement costs in 2008.
However, we expect the strategic shift to unconventional gas and a
focus on larger international exploration targets will lead to a
substantial reduction in these costs over time. We also see
indications that costs are coming down and we will continue to
manage our cost base carefully, both in terms of capital and
operating costs, continually looking for opportunities to reduce
them.
"The capital program is relatively balanced among: North America
(33%); North Sea development (27%); Southeast Asia growth projects
(19%); international exploration (18%, including North Sea and
Southeast Asia exploration); with the remaining 3% allocated for
the rest of the world.
"In North America, spending is expected to be approximately $1.2
billion this year. Spending on unconventional gas programs will
account for approximately $1 billion of the total, with about
two-thirds of unconventional spending budgeted for the Marcellus
and Montney plays. The North American unconventional program will
be the primary user of any incremental capital that becomes
available through the year either through higher prices or
additional non-core asset sales. We are encouraged by the results
in our core areas and see unconventional gas as one of the main
drivers of long term growth for Talisman.
"North Sea development spending is focused on project
developments at Yme in Norway, in addition to the Burghley
development and the Auk North and South redevelopment in the UK. We
will delay some planned asset sales in the UK in this environment;
however, our objective remains to establish the UK as a long term,
high quality generator of free cash flow. In Southeast Asia, the
emphasis will be on achieving first oil from Northern Fields in the
PM-3 CAA, continued development offshore Vietnam and increasing gas
sales in Indonesia from Corridor and Tangguh. We continue to look
for additional investment opportunities in this low cost, energy
rich part of the world.
"We have an exciting exploration program lined up this year with
a second well planned for the Kurdistan region of Northern Iraq,
appraisal of a previous Talisman discovery in Peru, completion of
the Huron-1 well in Colombia and the TR3 well in Norway. In
addition, there is an ongoing appraisal and evaluation program in
Block 15-2/01 in Vietnam. In total this year, we will participate
in 24 exploration and appraisal wells, 11 of which we will operate.
Our longer-term objective is to add 150 mmbbls of resources per
year at a cost of less than $5/bbl.
"Talisman enters 2009 with a strong balance sheet and a lot of
flexibility. We have made significant progress on our strategy in a
very short period of time and will continue implementation. I am
confident we will exit the year with the Company even better
positioned for sustainable growth and value creation."
The 2009 Capital Program
The 2009 capital program supports Talisman's new strategic
objectives outlined in May 2008. The Company has achieved
significant progress in the past seven months:
- Talisman sold interests in non-strategic properties in North
America, Denmark and the Netherlands, with aggregate proceeds of $1
billion.
- In North America, the Company spent $1.4 billion acquiring
substantial amounts of high quality unconventional natural gas
acreage and drilling approximately 186 gross unconventional pilot
and development wells in new areas.
- New projects were brought on in Southeast Asia (Northern
Fields gas in Malaysia and Song Doc in Vietnam).
- The Company added new exploration acreage in Colombia, the UK
and also acquired interests in two blocks in one of the most
prospective exploration areas in the world in the Kurdistan region
of Northern Iraq.
North America
As part of the 2008 strategic review, Talisman decided to
substantially increase its investment in unconventional natural
gas. A total of 186 gross unconventional wells were drilled in new
areas in 2008. The Company is continuing pilot programs in a number
of areas and moving to development of others. The Company also made
significant additions to its already sizeable unconventional land
base in 2008.
Talisman plans to spend $1.2 billion in North America in 2009,
focusing on projects in areas where the Company has a large,
material opportunity base. Approximately 80% of spending will be on
unconventional properties, with $710 million allocated to
development of the Pennsylvania Marcellus Shale and continued
piloting and development of the Montney. Spending on conventional
assets in North America will be limited to existing commitments on
heritage properties. Although this will impact 2009 volumes,
Talisman believes its unconventional opportunities have a better
risk/return profile.
Following on its success in 2008 in the Marcellus Shale in
Pennsylvania, where Talisman holds 140,000 net acres, the Company
plans to move into the development stage. Talisman plans to drill
36 gross horizontal wells in 2009, with up to five rigs drilling by
the third quarter. With continued success in Pennsylvania, the
program could ramp up to 16 rigs in the area by 2010.
Talisman plans to continue building on its success in the
Montney area, with a mix of pilot projects, development and land
acquisitions in 2009. Talisman is active in several regions within
the Montney. In 2009, the Company plans to drill 49 gross wells,
with the possibility of increasing this level with continued
success. By year-end, nine rigs will be drilling in the area.
Talisman holds 87,000 net acres of land in the Groundbirch area,
where it will continue its pilot program in 2009.
Talisman will continue to pilot and prepare its Quebec
landholdings for a 2010 drilling program. The Company will also
complete its drilling program in West Texas, which was part of the
Hallwood transaction entered into in 2008.
Talisman's drilling plans for 2009 include a total of 131 gross
unconventional development wells and 29 gross pilot wells. Talisman
expects to have a total of 16 unconventional rigs deployed by the
end of the year.
Southeast Asia
In Southeast Asia, the Company plans to leverage its successful
track record in Malaysia and Indonesia and plans to spend
approximately $850 million in 2009, primarily focusing on
developing growth projects in the region. The majority of spending
will be on development drilling in the Northern Fields in Malaysia,
where the Company expects to drill approximately 16 oil and gas
wells and on the continued appraisal and development of Block
15-2/01 in Vietnam. Talisman plans to drill three wells on the
Block, one appraisal/development well in the basement structure and
two exploration wells to test additional prospects.
In Malaysia, Talisman will progress Northern Field Development
to first oil in the second quarter of 2009. In Vietnam, sanction
for the development of the Hai Su Trang field and for the Hai Su
Den early production scheme is expected in the first half of 2009,
with first production anticipated in 2012. In Indonesia, the
Company expects first production from the Tangguh LNG project in
the second quarter of 2009 and will pursue sanction of Suban Phase
3 in the Corridor PSC for first gas sales in 2013. In addition,
Talisman will continue to evaluate exploration opportunities in
existing Joint Study Agreement blocks as well as licencing
rounds.
North Sea
In the North Sea, Talisman plans to spend approximately $1.4
billion in 2009, excluding a non-cash capitalized lease in Norway
of $270 million. Of this, approximately $750 million will be spent
in the UK and $630 million in Norway, without the non-cash lease.
Approximately $235 million will be spent on exploration drilling,
which includes two wells to follow-up on the Cayley discovery in
the UK.
In Norway, the overall objective is to grow operations through
development projects in the near term and through exploration in
the mid- to long-term. The cash capital program in Norway is
approximately $630 million, of which approximately $340 million
will be spent on Yme development and approximately $120 million on
exploration. Talisman's development program in Norway includes 13
development wells, nine of which are operated. Seven wells are
planned on Yme and two wells each on the Brage and Gyda fields.
In the UK, the overall aim is to hold production flat and
continue the UK as a free cash flow generator. Talisman plans
development spending of $560 million, including drilling and
completing two wells at Auk North, detailed engineering on the Auk
South project and commencing the Burghley project. In total, seven
new development wells are expected to be drilled in 2009. We have
slowed expenditure on a number of projects in order to take
advantage of a slowdown in the contracting environment.
North Africa
In North Africa, capital spending is expected to be $66 million
for 2009. Talisman anticipates the El Merk development project will
be sanctioned in the first quarter of 2009. Development drilling
will commence in the second quarter of 2009 and first oil is
planned for the first quarter of 2012. At the Ourhoud field, a
continuous development drilling program is planned through to
mid-2010.
Exploration
Talisman's global exploration strategy is to deliver organic
growth to the Company by defining new exploration opportunities
within the current asset base and identifying potential future core
production areas. Excluding North America, exploration spending in
2009 is budgeted at approximately $660 million. Key wells planned
include TR3 and Grevling in Norway, Situche Centrale appraisal in
Peru, Huron-1 in Colombia and a second well in the Kurdistan
exploration program.
In the North Sea, Talisman plans to support the existing core
areas with four operated wells in the UK and three in Norway. In
Southeast Asia, Talisman will complete the appraisal program on
Block 15-2/01 in Vietnam as well as progressing the evaluation of
Pasangkayu, Sageri and the Joint Study agreement blocks in
Indonesia.
In South America, Talisman will drill a well to appraise an
earlier discovery in Block 64 in Peru. The Company will continue
drilling operations of the Huron-1 well in the Niscota Block, drill
an additional well in El Caucho and progress the evaluation of the
recently awarded blocks in Colombia.
In the Kurdistan region of Northern Iraq, following the first
well, which is currently drilling on Block K44, Talisman will drill
the second of a three well commitment and acquire additional
seismic over Block K39.
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 information that constitutes
"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, appraisal and
development and estimated timing;
- estimates of production and production growth;
- expected impact of low year-end commodity prices;
- business strategy and plans, including planned land
acquisitions and pilot projects;
- estimated timing and results of new projects, including the
timing of new production first sales;
- estimated amounts and timing and sources of capital
expenditures;
- outlook for oil and gas prices;
- expected timing of results;
- objectives regarding resource additions and costs;
- expected timing of project sanctioning;
- expected acquisition of seismic; and
- other expectations, beliefs, plans, goals, objectives,
assumptions, information and statements about possible future
events, conditions, results of operations or performance.
The following material assumptions were used in drawing the
conclusions or making the forecasts and projections contained in
the forward-looking information contained in this press release.
Talisman has set its 2009 capital expenditure plans assuming a
US$40/bbl WTI oil price and a US$5/mmbtu NYMEX natural gas price.
Information regarding business plans generally 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 reserves and resources estimates, reserves
life and underlying reservoir risk;
- 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;
- changes in general economic and business conditions;
- fluctuations in oil and gas prices, foreign currency exchange
rates and interest rates;
- the outcome and effects of completed acquisitions, as well as
any future acquisitions and dispositions;
- the ability of the Company to integrate any assets it has
acquired or 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
- the Company's ability to implement its business strategy.
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 statements are
made. The Company assumes no obligation to update forward-looking
statements should circumstances or management's estimates or
opinions change, except as required by law.
Gross Production
Throughout this press release, Talisman makes reference to
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. - Media and General Inquiries:
David Mann Vice-President, Corporate & Investor Communications
(403) 237-1196 (403) 237-1210 (FAX) Talisman Energy Inc. -
Shareholder and Investor Inquiries: Christopher J. LeGallais
Vice-President, Investor Relations (403) 237-1957 (403) 237-1210
(FAX) Email: tlm@talisman-energy.com Website:
www.talisman-energy.com
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