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Talisman Energy Reports Third Quarter Results


Talisman Energy Reports Third Quarter Results

New CEO Signals Lower Capital Spending in 2013

On Track to Meet 2012 Production Guidance

CALGARY, ALBERTA -- (Marketwire) -- 10/30/12 -- Talisman Energy Inc. (TSX:TLM) (NYSE:TLM) reported its operating and financial results for the third quarter of 2012. All values in this release are unaudited and in US$ unless otherwise stated.

"Our third quarter results reflect the strengths and challenges of our portfolio. Underlying production increased 6% as a result of strong performance in Southeast Asia, Colombia and the Eagle Ford, and we expect to achieve our full-year production target," said Hal Kvisle, President and Chief Executive Officer. "However, the financial benefit of these production gains is being offset by low natural gas prices in North America and lower production in the North Sea.

"We are working toward a disciplined capital plan for 2013 in the range of $3 billion, smaller and more focused than we've seen in recent years. Our objective is to fund our most promising and profitable investment opportunities, focusing on near-term cash generation while keeping our balance sheet in good shape. We will provide more details in January after we complete our annual planning process."

2012 Third Quarter Overview


 
--  Hal Kvisle appointed President and Chief Executive Officer on September
    10, 2012. 
--  Production from ongoing operations increased 6% over last year to
    415,000 boe/d, driven by gas volumes in North America and liquids growth
    in Southeast Asia, Colombia and the Eagle Ford. Full-year production
    guidance remains unchanged. 
--  Year-to-date cash flow(1) is $2.3 billion, down 10% from last year, as
    low North American natural gas prices and lower North Sea production
    were partially offset by higher production in Southeast Asia. 
--  The net loss of $731 million in the quarter is largely the result of
    $443 million in after-tax impairment charges, reflecting the impact of
    the company's planned exit from Peru, ongoing uncertainty with the Yme
    development in Norway, the prohibitions on shale operations in Quebec,
    and declining reservoir performance at Rev in Norway. 
--  In Malaysia, Talisman is on track to assume operatorship of the new
    Kinabalu PSC in late December 2012. In Vietnam the HST/HSD development
    remains on schedule and on budget, with first oil projected for the
    second half of 2013. 
--  The company continues to make progress toward closing the $1.5 billion
    UK joint venture agreement with Sinopec by year-end. 
--  Talisman has decided to exit Peru in order to focus on near-term
    opportunities in its three core regions. 
--  The company declared a quarterly dividend of US$0.0675 per common share.

(1) The term "cash flow" is a non-GAAP measure. Please see advisories and reconciliations elsewhere in this news release.

Corporate Update

With the appointment of Hal Kvisle as CEO in September, Talisman is focusing on total shareholder returns and near-term profitability, in particular, generating reliable cash flow per share growth.

To achieve this, Talisman has set four key priorities:


 
--  We will live within our means. We will set capital spending budgets that
    can be funded by operating cash flows. We will pay down debt, strengthen
    our balance sheet and build financial capacity to act opportunistically
    when attractive acquisition or development opportunities come our way. 
--  We will focus our capital program on projects that come onstream more
    quickly and deliver sustainable cash flow over the longer term. We will
    reduce up front capital on high-risk exploration in multiple regions
    around the world. We will continue to explore, but in regions we know
    well and in a lower risk part of the exploration spectrum. 
--  We intend to build and strengthen our three core regions - the Americas,
    Southeast Asia and the North Sea - and we will shed non-core assets and
    focus on our best properties in all three regions. 
--  We will improve operational performance and reduce all aspects of our
    cost structure. We will do things better, faster and at lower cost,
    maintaining our focus on safe and responsible operating practices. 

Financial Results


 
----------------------------------------------------------------------------
September 30                          Three Months Ended   Nine Months Ended
----------------------------------------------------------------------------
                                         2012       2011     2012       2011
----------------------------------------------------------------------------
                                                                            
Cash flow(2) ($ million)                  693        902    2,347      2,610
----------------------------------------------------------------------------
Cash flow per share(2)                   0.68       0.88     2.29       2.55
----------------------------------------------------------------------------
                                                                            
Earnings (loss) from operations(2)                                          
 ($ million)                              (36)       165      202        490
----------------------------------------------------------------------------
Earnings (loss) from operations per                                         
 share(2)                               (0.04)      0.16     0.20       0.48
----------------------------------------------------------------------------
                                                                            
Net income (loss) ($ million)            (731)       521     (244)       893
----------------------------------------------------------------------------
Net income (loss) per share             (0.71)      0.51    (0.24)      0.87
----------------------------------------------------------------------------
                                                                            
Average shares outstanding - basic                                          
 (million)                              1,026      1,024    1,025      1,024
----------------------------------------------------------------------------

Cash flow(2) is down 10% year to date as low North American gas prices and lower North Sea production were partially offset by higher volumes in Southeast Asia. Cash flow(2) is also lower relative to the second quarter as a result of an increase in oil inventories, which fluctuate quarter on quarter, as well as foreign exchange movements.

Year-to-date earnings from operations(2) were also down due to lower netbacks and higher DD&A charges. Earnings from operations(2) were down from the second quarter primarily as a result of increased oil inventories and changes in foreign exchange rates.

Net income was down relative to the corresponding period in 2011 largely as a result of asset impairments. This included one-time costs associated with events during the quarter, including the company's planned exit from Peru, ongoing uncertainty at Yme in Norway, the prohibitions on shale operations in Quebec, and declining reservoir performance at the Rev field in Norway. The after-tax impairment charge for the quarter was $443 million.

Exploration and development spending(2) in the quarter was $893 million, down 13% from the previous quarter. Year-to-date exploration and development spending(2) is $3 billion, and is expected to be approximately $4 billion in 2012.

Net debt(2) at the end of the third quarter was $4.5 billion. The company will use the proceeds from the UK Sinopec joint venture to maintain a strong balance sheet rather than repurchasing shares.

(2) The terms "cash flow," "cash flow per share" "earnings (loss) from operations," "earnings (loss) from operations per share," "exploration and development spending" and "net debt" are non-GAAP measures. Please see the advisories and reconciliations elsewhere in this news release.

Netbacks


 
----------------------------------------------------------------------------
September 30                          Three Months Ended   Nine Months Ended
----------------------------------------------------------------------------
                                          2012      2011      2012      2011
----------------------------------------------------------------------------
Realized Asian gas price ($/mcf)          8.88      9.40      9.41      9.31
----------------------------------------------------------------------------
Realized North American gas price                                           
 ($/mcf)                                  2.67      4.08      2.43      4.12
----------------------------------------------------------------------------
Total company sales price ($/boe)        57.19     65.38     59.17     66.54
----------------------------------------------------------------------------
Total company netback ($/boe)            27.87     35.13     30.46     38.48
----------------------------------------------------------------------------
Oil and liquids netback ($/bbl)          48.05     56.43     55.32     61.26
----------------------------------------------------------------------------
Natural gas netback ($/mcf)               2.55      3.47      2.47      3.65
----------------------------------------------------------------------------
WTI benchmark ($/bbl)                    92.22     89.76     96.23     95.48
----------------------------------------------------------------------------
Brent benchmark ($/bbl)                 109.61    113.46    112.14    111.93
----------------------------------------------------------------------------
NYMEX benchmark ($/mmbtu)                 2.81      4.19      2.62      4.23
----------------------------------------------------------------------------

The company's realized net natural gas price in Southeast Asia has averaged approximately $9/mcf over the past two years in sharp contrast to North America. Talisman's realized net price of $57.19/boe was 13% lower than the same period in 2011 due to lower oil and liquids prices, as well as lower natural gas prices in North America.The company's average gross netback was $27.87/boe, 21% lower than 2011.

WTI oil prices averaged $92.22/bbl and Brent oil prices averaged $109.61/bbl during the quarter, essentially flat over the previous quarter. NYMEX natural gas prices increased 24% over the second quarter to $2.81 and continue to rise, having reached $3.60 in recent weeks.

Production


 
----------------------------------------------------------------------------
September 30                          Three Months Ended   Nine Months Ended
----------------------------------------------------------------------------
                                          2012      2011      2012      2011
----------------------------------------------------------------------------
Oil and liquids (mbbls/d)                                                   
----------------------------------------------------------------------------
North America                               26        23        27        22
                                    ----------------------------------------
Southeast Asia                              39        34        42        33
                                    ----------------------------------------
North Sea                                   71        81        77       100
                                    ----------------------------------------
Other                                       23        23        23        22
----------------------------------------------------------------------------
  Total oil and liquids (mbbls/d)          159       161       169       177
----------------------------------------------------------------------------
Natural gas (mmcf/d)                                                        
----------------------------------------------------------------------------
North America                              953       865     1,005       875
                                    ----------------------------------------
Southeast Asia                             509       522       529       505
                                    ----------------------------------------
North Sea                                   28        13        34        50
                                    ----------------------------------------
Other                                       43        35        41        33
----------------------------------------------------------------------------
  Total natural gas (mmcf/d)             1,533     1,435     1,609     1,463
----------------------------------------------------------------------------
  Total (mboe/d)                           415       400       437       421
----------------------------------------------------------------------------
Less: Assets sold - North America                                           
 (mboe/d)                                    -         8         5         8
----------------------------------------------------------------------------
Production from ongoing operations                                          
 (mboe/d)                                  415       392       432       413
----------------------------------------------------------------------------

Total production increased by 4% over the previous year, driven by increased gas volumes in North America (up 15,000 boe/d) and liquids growth in Southeast Asia and North America (up 8,000 boe/d). Production from ongoing operations increased by 6%. Volumes were lower relative to the second quarter due principally to planned maintenance activity in the North Sea and Southeast Asia.

Production guidance for the year remains unchanged.

North America

Production


 
----------------------------------------------------------------------------
September 30                          Three Months Ended   Nine Months Ended
----------------------------------------------------------------------------
                                          2012      2011      2012      2011
----------------------------------------------------------------------------
Shale (mmcfe/d)                                                             
----------------------------------------------------------------------------
  Marcellus                                507       407       527       388
----------------------------------------------------------------------------
  Montney/pilots                            78        44        74        56
----------------------------------------------------------------------------
  Eagle Ford                                90        32        83        23
----------------------------------------------------------------------------
Total shale (mmcfe/d)                      675       483       684       467
----------------------------------------------------------------------------
                                                                            
----------------------------------------------------------------------------
Conventional total, excluding assets                                        
 sold (mboe/d)                              72        79        76        82
----------------------------------------------------------------------------
Assets sold (mboe/d)                         -         8         5         8
----------------------------------------------------------------------------
                                                                            
----------------------------------------------------------------------------
Total NAO gas production (mmcf/d)          953       865     1,005       875
----------------------------------------------------------------------------
Total NAO liquids production                                                
 (mbbls/d)                                  26        23        27        22
----------------------------------------------------------------------------
Total NAO production (mboe/d)              185       167       195       168
----------------------------------------------------------------------------

Talisman's North American business delivered a strong quarter, with production averaging 185,000 boe/d, up 11% from a year ago. Oil and liquids volumes increased by 13%, while natural gas production increased 10% from the same period last year. Production was down over the previous quarter due to asset sales, including 6,000 boe/d from West Whitecourt and Shaunavon, and natural declines in our conventional portfolio.

Capital expenditure totaled $258 million, of which 86% was related to shale activity. Operating costs were down 29% over the previous quarter due to dispositions, the completion of prior-period Pennsylvania impact fee assessments in the second quarter, and adjustments made in the third quarter to prior period cost estimates.

In the Eagle Ford, the company continues to set new production records, averaging 15,000 boe/d (90 mmcfe/d) for the quarter. Liquids production averaged 8,800 bbls/d, up 21% from the second quarter due to the higher liquids content from the wells that came onstream. The company remains on target to reach full-year production of between 14,000 - 17,000 boe/d. Transition toward shared operatorship with Statoil is progressing, as per Talisman's contractual obligations. Talisman will start to transfer operatorship of the eastern part of the play in 2013. The existing joint venture agreement remains in force, with each company continuing to hold a 50% share of the entire play area.

In a depressed natural gas price environment, Talisman is maintaining its strategic, low-cost position in the Marcellus with limited capital spending. Reservoir performance continues to exceed expectations, with lower-than-predicted decline rates. At current minimal activity levels, production is expected to continue to decrease over the coming months.

The Montney and other pilots are delivering as planned, with production up slightly over the previous quarter, averaging 78 mmcfe/d.

In the liquids-rich Duvernay, the company has drilled and completed four wells and has test results from three.

Given the prohibitions on shale drilling in Quebec, the company has no current plans to develop its assets in the province. As a result, Talisman has fully impaired its investment, amounting to $82 million after tax.

Southeast Asia

Production


 
----------------------------------------------------------------------------
September 30                          Three Months Ended   Nine Months Ended
----------------------------------------------------------------------------
                                          2012      2011      2012      2011
----------------------------------------------------------------------------
Malaysia liquids (mbbls/d)                  14        18        16        18
----------------------------------------------------------------------------
Malaysia gas (mmcf/d)                      108       121       119       118
----------------------------------------------------------------------------
Malaysia total (mboe/d)                     32        38        36        37
----------------------------------------------------------------------------
Indonesia liquids (mbbls/d)                 11        12        11        11
----------------------------------------------------------------------------
Indonesia gas (mmcf/d)                     401       401       410       387
----------------------------------------------------------------------------
Indonesia total (mboe/d)                    78        79        79        76
----------------------------------------------------------------------------
Vietnam (mboe/d)                             2         2         2         2
----------------------------------------------------------------------------
Australia (mboe/d)                          12         2        13         2
----------------------------------------------------------------------------
Total (mboe/d)                             124       121       130       117
----------------------------------------------------------------------------

In Southeast Asia, third quarter production was in line with expectations at 124,000 boe/d, up 2% over the same quarter last year and down 5% from the previous quarter due to a planned turnaround at PM-3 CAA. Liquids production increased 15% over the same quarter in 2011, averaging 39,000 bbls/d. This was primarily due to the ramp up at Jambi Merang and a full quarter of production from Kitan compared to last year. Natural gas production for the quarter averaged more than 500 mmcf/d, with prices averaging $8.88/mcf.

In Malaysia, production averaged 32,000 boe/d, down 14% over last quarter due to planned maintenance activities. The Kinabalu transition plan is progressing well, and Talisman is on target to assume operatorship in December of this year.

In Indonesia, underlying production increased by 5% over the same period last year due to the ramp up at Jambi Merang and increased volumes from Corridor, offset by the Suban unitization that occurred in December 2011.

In Vietnam, production has remained steady at an average of 2,000 bbls/d. The HST/HSD development is progressing on schedule and on budget, with two jackets now installed and the drilling rig on location. Pipeline tie-ins and development drilling are in progress. First production is planned for the second half of 2013.

The Kitan field in Australia/Timor Leste continues to exceed expectations, producing an average of 9,200 boe/d in the third quarter.

North Sea

Production (mboe/d)


 
----------------------------------------------------------------------------
September 30                          Three Months Ended   Nine Months Ended
----------------------------------------------------------------------------
                                          2012      2011      2012      2011
----------------------------------------------------------------------------
UK                                          55        57        56        74
----------------------------------------------------------------------------
Norway                                      21        26        26        34
----------------------------------------------------------------------------
Total (mboe/d)                              76        83        82       108
----------------------------------------------------------------------------

Production in the North Sea decreased by 8% relative to the same period last year. UK production was relatively flat while Norway was impacted by natural declines in Brage and Varg.

Talisman is working toward closing its joint venture agreement with Sinopec by year-end. Sinopec has agreed to acquire a 49% equity interest in Talisman's UK North Sea business for $1.5 billion. The joint venture will lead to further investment in the UK North Sea, which will improve operating performance, fund infill drilling and major projects, thereby extending field life and deferring decommissioning.

During the quarter, the UK government announced a brownfield allowance for the Montrose Area Redevelopment project. Talisman received necessary approvals to commence development in October. The project involves integration of established fields and infrastructure with two undeveloped fields, Cayley and Shaw. The project will develop tie-backs to extend field life and provide additional infill drilling opportunities. Project costs will be approximately $750 million net to Talisman (post-Sinopec closing) and production is expected to start in 2016.

Infill wells at Rev and Clyde were drilled and completed. The rig has moved to Varg to drill two wells on the field.

Recent reservoir performance issues at Rev have led to an adjustment of reserves. The company has taken an after-tax impairment of $55 million.

During the third quarter, the decision was made to de-man the Yme platform for safety related reasons and it has not been re-manned. Management has conducted further analysis of the platform which indicated additional project uncertainty and resulted in an additional impairment of $497 million pre-tax ($125 million after-tax). This represents an impairment of the remaining book value of the property, plant and equipment of Yme, leaving a deferred tax asset of $521 million relating to the investment in the project. Management continues to work with all stakeholders to evaluate project options.

Colombia

In the foothills region, Equion brought two new Piedemonte wells onstream, with combined production of nearly 9,000 bbls/d gross condensate. Talisman anticipates that the development project to add additional gas compression and pipeline facilities at Piedemonte will move ahead following agreement with local labour groups.

Also in the foothills region, the Huron-2 appraisal well in the Niscota block has now drilled through the first reservoir target, and log data is encouraging. The company expects to drill to a planned total depth of 18,500 feet to evaluate a second potential reservoir zone before testing the well.

Talisman, like the rest of the industry, continues to experience delays in acquiring the necessary regulatory requirements to bring its CPO-9 and CPE-6 discoveries online. With permits in place, the company plans to resume drilling on Block CPO-9 by the end of the year.

Exploration

In the Kurdistan Region of northern Iraq, the company will focus on further testing of the Oligocene reservoir in the Kurdamir-2 exploration well, where light oil flowed in March 2012. Talisman completed testing of the Cretaceous and Eocene reservoirs and found oil. While the company was encouraged to find hydrocarbons within these zones, commercial flow rates were not achieved. Talisman has accelerated plans to drill a follow-up exploration well, Kurdamir-3, in early 2013 to evaluate the downdip extent of the oil pay in the Oligocene reservoir. The company also expects to commence a 3D-seismic program across the Kurdamir and Topkhana structures in late 2012.

In Sierra Leone, Talisman spudded its first deepwater exploration well on the West African Transform Margin, where the company has a 30% working interest.

Following disappointing exploration results, Talisman has decided to exit Peru in order to focus on near-term opportunities in its core areas.

Common Share and Preferred Share Dividend Declaration

The company has declared a quarterly dividend on the company's common shares of US$0.0675 per share. The dividend will be paid on December 31, 2012 to shareholders of record at the close of business on November 19, 2012.

The company has also declared a quarterly dividend of C$0.2625 on its Cumulative Redeemable Rate Reset First Preferred Shares, Series 1. The dividend will be paid on December 31, 2012 to shareholders of record at the close of business on November 19, 2012.

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.

Forward-Looking Information

This news 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 strategy, priorities and plans; expected 2012 and 2013 capital spending; expected 2012 production, company-wide and regionally; planned company priorities, including setting capital spending budgets to be funded by operating cash flows, paying down debt, focussing the capital program on near-term projects with sustainable cash flow, reducing spending on high-risk exploration, strengthening core areas, disposing of non-core assets, improving operational performance and reducing the company's cost structure; expected timing of transferring of operatorship of the eastern Eagle Ford to Statoil; expected transfer of operatorship to Talisman at Kinabalu; expected drilling and first production at HST/HSD; planned closing of the Sinopec joint venture; and expected investment in the UK North Sea for improved performance, infill drilling and major projects, and related expected extension in field life and deferred decommissioning; planned cost, tie-backs, drilling, production and timing of the Montrose Area redevelopment; expected advancement of the development project at Piedemonte following agreement with local labour groups; planned drilling depth at the Huron-2 appraisal well; planned drilling and 3D-seismic program in Kurdistan; and other business strategy, plans and priorities.

The factors or assumptions on which the forward-looking information is based include: assumptions inherent in current guidance; projected capital investment levels; the flexibility of capital spending plans and the associated sources of funding; the successful and timely implementation of capital projects; the continuation of tax, royalty and regulatory regimes; ability to obtain regulatory and partner approval; commodity price and cost assumptions; and other risks and uncertainties described in the filings made by the company with securities regulatory authorities. The company believes the material factors, expectations and assumptions reflected in the forward-looking information are reasonable, but no assurance can be given that these factors, expectations and assumptions will prove to be correct. Forward-looking information for periods past 2012 assumes escalating commodity prices.

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 news 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; uncertainty related to securing sufficient egress and markets to meet shale gas production; 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; the impact of the economy on the ability of the counterparties to the company's commodity price derivative contracts to meet their obligations under the contracts; potential delays or changes in plans with respect to exploration or development projects or capital expenditures; fluctuations in oil and gas prices, foreign currency exchange rates and interest rates; the outcome and effects of any future acquisitions and dispositions; 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); changes in general economic and business conditions; the possibility that government policies or laws may change or governmental approvals may be delayed or withheld; and results of the company's risk mitigation strategies, including insurance and any hedging activities.

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. 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 (SEC). Forward-looking information is based on the estimates and opinions of the company's management at the time the information is presented. The company assumes no obligation to update forward-looking information should circumstances or management's estimates or opinions change, except as required by law.

Unless the context indicates otherwise, references in this news release to "Talisman" or the "company" include, for reporting purposes only, the direct or indirect subsidiaries of Talisman Energy Inc. and the partnership interests held by Talisman Energy Inc. and its subsidiaries. Such use of "Talisman" or the "company" to refer to these other legal entities and partnership interests does not constitute waiver by Talisman Energy Inc. or such entities or partnerships of their separate legal status, for any purpose.

The completion of any contemplated disposition or acquisition is contingent on various factors, including favourable market conditions, the ability of the company to negotiate acceptable terms of sale and receipt of any required approvals for such disposition. Completion of the Sinopec joint venture transaction is subject to specified conditions precedent, including regulatory approvals and government approvals from the United Kingdom, the European Union, and the People's Republic of China.

Oil and Gas Information

Throughout this news release, Talisman makes reference to production volumes. Unless otherwise stated, 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 US, net production volumes are reported after the deduction of these amounts.

Barrel of oil equivalent (boe) throughout this news release is calculated at a conversion rate of six thousand cubic feet (mcf) of natural gas for one barrel of oil (bbl). This news release also includes reference to mcf equivalents (mcfes) which are calculated at a conversion rate of one barrel of oil to 6,000 cubic feet of gas. Boes and mcfes may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf:1 bbl and an mcfe conversion ratio of 1 bbl: 6 mcf are based on an energy equivalence conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Talisman also discloses its company netbacks in this news release. Netbacks per boe are calculated by deducting from sales price associated royalties, operating and transportation costs.

Non-GAAP Financial Measures

Included in this news release are references to financial measures commonly used in the oil and gas industry such as cash flow, earnings from operations, exploration and development spending and net debt. These terms are not defined by International Financial Reporting Standards (IFRS). Consequently, these are referred to as non-GAAP measures. Talisman's reported results of such measures may not be comparable to similarly titled measures reported by other companies.

Cash Flow

US$ million, except per share amounts


 
                                     Three Months Ended   Nine Months Ended 
----------------------------------------------------------------------------
                                     Sept 30,  Sept 30,  Sept 30,  Sept 30, 
                                         2012      2011      2012      2011 
----------------------------------------------------------------------------
                                                                            
Cash provided by operating                                                  
 activities                               381       522     2,170     2,301 
Changes in non-cash working capital       282       346        70       125 
Add: Exploration expenditure               81        87       228       335 
Add: Pennsylvania impact fee(1)             -         -        25         - 
Less: Finance costs (cash)                (51)      (53)     (146)     (151)
----------------------------------------------------------------------------
Cash flow                                 693       902     2,347     2,610 
----------------------------------------------------------------------------
Cash flow per share                      0.68      0.88      2.29      2.55 
----------------------------------------------------------------------------
Diluted cash flow per share              0.68      0.87      2.27      2.51 
----------------------------------------------------------------------------
                                                                            
(1) Pennsylvania impact fee amount represents the one-time impact of the    
    retrospective application of the legislation to wells drilled pre-2012. 

Cash flow, as commonly used in the oil and gas industry, represents net income before exploration costs, DD&A, deferred taxes and other non-cash expenses. Cash flow is used by the company to assess operating results between years and between peer companies using different accounting policies. Cash flow should not be considered an alternative to, or more meaningful than, cash provided by operating, investing and financing activities or net income as determined in accordance with IFRS as an indicator of the company's performance or liquidity. Cash flow per share is cash flow divided by the average number of common shares outstanding during the period. Diluted cash flow per share is cash flow divided by the diluted number of common shares outstanding during the period, as reported in the interim condensed consolidated financial statements filed on October 30, 2012. A reconciliation of cash provided by operating activities to cash flow is provided above.

Earnings (Loss) from Operations

US$ million, except per share amounts


 
                                     Three Months Ended   Nine Months Ended 
----------------------------------------------------------------------------
                                     Sept 30,  Sept 30,  Sept 30,  Sept 30, 
                                         2012      2011      2012      2011 
----------------------------------------------------------------------------
                                                                            
Net income (loss)                        (731)      521      (244)      893 
--------------------------------------
--------------------------------------
(Gain) loss on disposals (tax                                               
 adjusted)                                  -         5      (565)     (152)
Unrealized (gain) loss on financial                                         
 instruments(tax adjusted)(1)              95      (184)       95      (102)
Share-based payments (tax                                                   
 adjusted)(2)                              52      (267)      (24)     (338)
Foreign exchange on debt (tax                                               
 adjusted)                                 10        (8)       22         - 
Impairment (tax adjusted)                 443         -       818        39 
Pennsylvania impact fee (tax                                                
 adjusted)(3)                               -         -        16         - 
Deferred tax adjustments(4)                95        98        84       150 
----------------------------------------------------------------------------
Earnings (loss) from operations           (36)      165       202       490 
----------------------------------------------------------------------------
Earnings (loss) from operations per                                         
 share                                  (0.04)     0.16      0.20      0.48 
----------------------------------------------------------------------------
Diluted earnings (loss) from                                                
 operations per share                   (0.04)     0.16      0.20      0.47 
----------------------------------------------------------------------------
                                                                            
(1) Unrealized (gain) loss on financial instruments relates to the change in
    the period of the mark-to-market value of the company's held-for-trading
    financial instruments.                                                  
(2) Share-based payments relate principally to the mark-to-market value of  
    the company's outstanding stock options and cash units at September 30. 
    The company uses the Black-Scholes option pricing model to estimate the 
    fair value of its share-based payment plans.                            
(3) Pennsylvania impact fee amount represents the one-time impact of the    
    retrospective application of the legislation to wells drilled pre-2012. 
(4) Deferred tax adjustments largely comprise tax on foreign exchange on tax
    pools. Year-to-date 2011 also includes a deferred tax expense of $225   
    million in respect of a UK tax rate change occurring in that period.    
    Third quarter 2012 includes a deferred tax expense of $137 million in   
    respect of a UK tax change related to decommissioning.                  

Earnings (loss) from operations are calculated by adjusting the company's net income (loss) per the financial statements for certain items of a non-operational nature, on an after tax basis. The company uses this information to evaluate performance of core operational activities on a comparable basis between periods. Earnings (loss) from operations per share are earnings (loss) from operations divided by the average number of common shares outstanding during the period. Diluted earnings (loss) from operations per share are earnings (loss) from operations divided by the diluted number of common shares outstanding during the period, as reported in the interim condensed consolidated financial statements filed on October 30, 2012. A reconciliation of net income (loss) to earnings (loss) from operations is provided above.

Exploration and Development Spending

US$ million


 
                                      Three Months Ended   Nine Months Ended
----------------------------------------------------------------------------
                                      Sept 30,  June 30,  Sept 30,  Sept 30,
                                          2012      2012      2012      2011
----------------------------------------------------------------------------
                                                                            
Exploration, development and other         812       936     2,759     3,016
Exploration expensed                        81        91       228       335
----------------------------------------------------------------------------
Exploration and development spending       893     1,027     2,987     3,351
----------------------------------------------------------------------------

Exploration and development spending is calculated by adjusting the capital expenditure per the financial statements for exploration costs that were expensed as incurred.

Net Debt

US$ million


 
                                                        As at     
------------------------------------------------------------------
                                                    Sept 30, 2012 
------------------------------------------------------------------
                                                                  
Long-term debt                                               5,012
Bank indebtedness                                                -
------------------------------------------------------------------
Cash and cash equivalents                                    (496)
------------------------------------------------------------------
Net debt                                                     4,516
------------------------------------------------------------------

Net debt is calculated by adjusting the company's long-term debt per the financial statements for bank indebtedness, cash and cash equivalents. The company uses this information to assess its true debt position and eliminate the impact of timing differences.


 
                            Talisman Energy Inc.                            
                                 Highlights                                 
                                 (unaudited)                                
                                                                            
                                              Three months       Nine months
                                                     ended             ended
                                              September 30      September 30
                                             2012     2011     2012     2011
----------------------------------------------------------------------------
Financial                                                                   
(millions of US$ unless otherwise stated)                                   
Cash flow (1)                                 693      902    2,347    2,610
Net income (loss)                            (731)     521     (244)     893
Exploration and development spending (1)      893    1,196    2,987    3,351
Per common share (US$)                                                      
 Cash flow (1)                               0.68     0.88     2.29     2.55
 Net income (loss)                          (0.71)    0.51    (0.24)    0.87
----------------------------------------------------------------------------
Production                                                                  
(Daily Average - Gross)                                                     
Oil and liquids (bbls/d)                                                    
 North America                             25,836   23,107   27,117   22,314
 North Sea                                 71,440   81,114   76,598   99,735
 Southeast Asia                            38,759   33,574   41,678   33,091
 Other                                     23,013   22,785   23,471   21,984
----------------------------------------------------------------------------
Total oil and liquids                     159,048  160,580  168,864  177,124
----------------------------------------------------------------------------
Natural gas (mmcf/d)                                                     
   
 North America                                953      865    1,005      875
 North Sea                                     28       13       34       50
 Southeast Asia                               509      522      529      505
 Other                                         43       35       41       33
----------------------------------------------------------------------------
Total natural gas                           1,533    1,435    1,609    1,463
----------------------------------------------------------------------------
Total mboe/d (2)                              415      400      437      421
----------------------------------------------------------------------------
Prices                                                                      
Oil and liquids (US$/bbl)                                                   
 North America                              65.38    72.93    70.16    73.81
 North Sea                                 110.53   114.15   112.42   111.35
 Southeast Asia                            109.58   117.82   113.36   117.95
 Other                                     103.08   112.06   114.68   112.97
----------------------------------------------------------------------------
Total oil and liquids                      101.89   108.69   106.18   108.05
----------------------------------------------------------------------------
Natural gas (US$/mcf)                                                       
 North America                               2.67     4.08     2.43     4.12
 North Sea                                   8.99     7.36     9.68     8.55
 Southeast Asia                              8.88     9.40     9.41     9.31
 Other                                       4.23     4.54     4.43     4.22
----------------------------------------------------------------------------
Total natural gas                            4.89     6.05     4.93     6.06
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total (US$/boe) (2)                         57.19    65.38    59.17    66.54
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Cash flow, exloration and development spending and cash flow per share  
    are non-GAAP measures.                                                  
(2) 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.     
                                                                            
                                                                            
                            Talisman Energy Inc.                            
                    Condensed Consolidated Balance Sheets                   
                                 (unaudited)                                
                                                                            
                                                September 30,   December 31,
(millions of US$)                                        2012           2011
----------------------------------------------------------------------------
                                                                            
Assets                                                                      
Current                                                                     
  Cash and cash equivalents                               496            474
  Accounts receivable                                   1,528          1,550
  Risk management                                          15             42
  Inventories                                             174            164
  Prepaid expenses                                         34             24
----------------------------------------------------------------------------
                                                        2,247          2,254
----------------------------------------------------------------------------
                                                                            
Other assets                                              111            101
Investments                                               375            395
Risk management                                            26             24
Goodwill                                                1,310          1,317
Property, plant and equipment                          15,050         15,909
Exploration and evaluation assets                       3,493          3,954
Deferred tax assets                                     1,415            272
----------------------------------------------------------------------------
                                                       21,780         21,972
----------------------------------------------------------------------------
Total assets                                           24,027         24,226
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Liabilities                                                                 
Current                                                                     
  Bank indebtedness                                         -             60
  Accounts payable and accrued liabilities              2,672          2,622
  Risk management                                          80              -
  Income and other taxes payable                          287            371
  Current portion of long-term debt                       579            410
----------------------------------------------------------------------------
                                                        3,618          3,463
----------------------------------------------------------------------------
                                                                            
Decommissioning liabilities                             3,173          2,982
Other long-term obligations                               386            346
Risk management                                            15              -
Long-term debt                                          4,433          4,485
Deferred tax liabilities                                2,836          2,932
----------------------------------------------------------------------------
                                                       10,843         10,745
----------------------------------------------------------------------------
                                                                            
Shareholders' equity                                                        
Common shares                                           1,638          1,561
Preferred shares                                          191            191
Contributed surplus                                       123            186
Retained earnings                                       6,826          7,292
Accumulated other comprehensive income                    788            788
----------------------------------------------------------------------------
                                                        9,566         10,018
----------------------------------------------------------------------------
Total liabilities and shareholders' equity             24,027         24,226
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
                           Talisman Energy Inc.                             
            Condensed Consolidated Statements of Income (Loss)              
                               (unaudited)                                 
 
                                                                            
                                 Three months ended       Nine months ended 
                                       September 30            September 30 
(millions of US$)                  2012        2011        2012        2011 
----------------------------------------------------------------------------
                                                                            
Revenue                                                                     
 Sales                            1,708       1,944       5,647       6,132 
 Other income                        14          12          59          58 
----------------------------------------------------------------------------
Total revenue and other                                                     
 income                           1,722       1,956       5,706       6,190 
----------------------------------------------------------------------------
                                                                            
Expenses                                                                    
 Operating                          604         553       1,823       1,560 
 Transportation                      61          51         178         159 
 General and administrative         130          97         382         303 
 Depreciation, depletion and                                                
  amortization                      570         455       1,745       1,403 
 Impairment                       1,037           -       2,163         102 
 Dry hole                            66          33         191         173 
 Exploration                         81          87         228         335 
 Finance costs                       74          73         213         209 
 Share-based payments                                                       
  expense (recovery)                 61        (285)        (11)       (345)
 (Gain) loss on held-for-                                                   
  trading financial                                                         
  instruments                       116        (120)        128         131 
 (Gain) loss on asset                                                       
  disposals                           -           8        (759)       (206)
 Other, net                          62         (38)         96          43 
----------------------------------------------------------------------------
Total expenses                    2,862         914       6,377       3,867 
----------------------------------------------------------------------------
Income (loss) before taxes       (1,140)      1,042        (671)      2,323 
----------------------------------------------------------------------------
Taxes                                                                       
 Current income tax                 152         272         803       1,151 
 Deferred income tax                                                        
  (recovery)                       (561)        249      (1,230)        279 
----------------------------------------------------------------------------
                                   (409)        521        (427)      1,430 
----------------------------------------------------------------------------
Net income (loss)                  (731)        521        (244)        893 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
                                                                            
Per common share (US$):                                                     
 Net income (loss)                (0.71)       0.51       (0.24)       0.87 
 Diluted net income (loss)        (0.71)       0.24       (0.30)       0.49 
----------------------------------------------------------------------------
Weighted average number of                                                  
 common shares outstanding                                                  
 (millions)                                                                 
 Basic                            1,026       1,024       1,025       1,024 
 Diluted                          1,026       1,033       1,034       1,040 
----------------------------------------------------------------------------
 

 
                            Talisman Energy Inc.                            
              Condensed Consolidated Statements of Cash Flows               
                                (unaudited)                                 
                                                                            
                                     Three months ended   Nine months ended 
                                           September 30        September 30 
(millions of US$)                        2012      2011      2012      2011 
----------------------------------------------------------------------------
                                                                            
Operating activities                                                        
Net income (loss)                        (731)      521      (244)      893 
Add: Finance costs (cash and non-                                           
 cash)                                     74        73       213       209 
Dividends from equity investments           -         9         -         9 
Items not involving cash                1,320       265     2,271     1,315 
----------------------------------------------------------------------------
                                          663       868     2,240     2,426 
Changes in non-cash working capital      (282)     (346)      (70)     (125)
----------------------------------------------------------------------------
Cash provided by operating                                                  
 activities                               381       522     2,170     2,301 
----------------------------------------------------------------------------
                                                                            
Investing activities                                                        
Capital expenditures                                                        
 Exploration, development and other      (812)   (1,109)   (2,759)   (3,016)
 Corporate acquisitions, net of cash                                        
  acquired                                  -         -         -      (156)
 Property acquisitions                    (57)     (158)      (59)     (731)
Proceeds of resource property                                               
 dispositions                               1        (5)      940       534 
Repayment of note receivable                -        40         -        40 
Acquisition deposit                         -         -         -        18 
Investments                                (7)        -       (11)       54 
Changes in non-cash working capital       160        80        18        (7)
----------------------------------------------------------------------------
Cash used in investing activities        (715)   (1,152)   (1,871)   (3,264)
----------------------------------------------------------------------------
                                                                            
Financing activities                                                        
Long-term debt repaid                       -         -      (991)     (310)
Long-term debt issued                     255       232     1,096       232 
Common shares issued                        6        (5)        9       109 
Common shares purchased                   (11)      (48)      (24)      (90)
Finance costs (cash)                      (51)      (53)     (146)     (151)
Deferred credits and other                  6        12        
15        (8)
Common share dividends                    (69)        -      (207)     (138)
Preferred share dividends                  (2)        -        (7)        - 
Changes in non-cash working capital        19        33        28        32 
----------------------------------------------------------------------------
Cash provided by (used in) financing                                        
 activities                               153       171      (227)     (324)
----------------------------------------------------------------------------
Effect of translation on foreign                                            
 currency cash and cash equivalents         8        (7)       10        26 
----------------------------------------------------------------------------
Net increase (decrease) in cash and                                         
 cash equivalents                        (173)     (466)       82    (1,261)
Cash and cash equivalents net of                                            
 bank indebtedness, beginning of                                            
 period                                   669       858       414     1,653 
----------------------------------------------------------------------------
Cash and cash equivalents net of                                            
 bank indebtedness, end of period         496       392       496       392 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Cash and cash equivalents                 496       421       496       421 
Bank indebtedness                           -       (29)        -       (29)
----------------------------------------------------------------------------
Cash and cash equivalents net of                                            
 bank indebtedness, end of period         496       392       496       392 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 

 
                            Talisman Energy Inc.                            
                            Segmented Information                           
                                 (unaudited)                                
                                                                            
                                                                            
                                            North America (1)               
                            ------------------------------------------------
                                  Three months ended       Nine months ended
                                        September 30            September 30
                            ------------------------------------------------
(millions of US$)                  2012         2011       2012         2011
----------------------------------------------------------------------------
Revenue                                                                     
Sales                               343          424      1,036        1,276
Other income                         12            9         51           45
----------------------------------------------------------------------------
Total revenue and other                                                     
 income                             355          433      1,087        1,321
----------------------------------------------------------------------------
Segmented expenses                                                          
Operating                           116          123        429          334
Transportation                       28           19         76           49
DD&A                                279          205        828          609
Impairment                          109            -        184            -
Dry hole                              1            1         22            4
Exploration                           1            9         24           53
Other                                 9            1         43            7
----------------------------------------------------------------------------
Total segmented expenses            543          358      1,606        1,056
----------------------------------------------------------------------------
Segmented income (loss)                                                     
 before taxes                      (188)          75       (519)         265
----------------------------------------------------------------------------
Non-segmented expenses                                                      
General and administrative                                                  
Finance costs                                                               
Share-based payments expense                                                
 (recovery)                                                                 
Currency translation                                                        
(Gain) loss on held-for-                                                    
 trading financial                                                          
 instruments                                                                
(Gain) loss on asset                                                        
 disposals                                                                  
----------------------------------------------------------------------------
Total non-segmented expenses                                                
----------------------------------------------------------------------------
Income (loss) before taxes                                                  
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Capital expenditure                                                         
Exploration                          42           30        104          168
Development                         216          595      1,147        1,324
----------------------------------------------------------------------------
Exploration and development         258          625      1,251        1,492
----------------------------------------------------------------------------
Acquisitions                                                                
Proceeds on dispositions                                                    
Other non-segmented                                                         
----------------------------------------------------------------------------
Net capital expenditures                                                    
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Property, plant and                                                         
 equipment                                                7,128        6,740
Exploration and evaluation                                                  
 assets                                                   2,103        2,370
Goodwill                                                    133          140
Other                                                     1,100          987
----------------------------------------------------------------------------
Segmented assets                                         10,464       10,237
Non-segmented assets                                                        
----------------------------------------------------------------------------
Total assets (5)                                                            
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Decommissioning liabilities                        
                         
 (5)                                                        355          394
----------------------------------------------------------------------------
 
                            Talisman Energy Inc.                            
                            Segmented Information                           
                                 (unaudited)                                
                                                                            
                                                                            
                                              North Sea (2)                 
                            ------------------------------------------------
                                 Three months ended        Nine months ended
                                       September 30             September 30
                            ------------------------------------------------
(millions of US$)                  2012        2011        2012         2011
----------------------------------------------------------------------------
Revenue                                                                     
Sales                               714         853       2,429        3,108
Other income                          1           2           5           12
----------------------------------------------------------------------------
Total revenue and other                                                     
 income                             715         855       2,434        3,120
----------------------------------------------------------------------------
Segmented expenses                                                          
Operating                           365         299       1,026          916
Transportation                       17          16          55           62
DD&A                                153         135         483          502
Impairment                          747           -       1,725          102
Dry hole                              4          (2)         21           75
Exploration                          10          10          32           28
Other                                19           8          40           22
----------------------------------------------------------------------------
Total segmented expenses          1,315         466       3,382        1,707
----------------------------------------------------------------------------
Segmented income (loss)                                                     
 before taxes                      (600)        389        (948)       1,413
----------------------------------------------------------------------------
Non-segmented expenses                                                      
General and administrative                                                  
Finance costs                                                               
Share-based payments expense                                                
 (recovery)                                                                 
Currency translation                                                        
(Gain) loss on held-for-                                                    
 trading financial                                                          
 instruments                                                                
(Gain) loss on asset                                                        
 disposals                                                                  
----------------------------------------------------------------------------
Total non-segmented expenses                                                
----------------------------------------------------------------------------
Income (loss) before taxes                                                  
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Capital expenditure                                                         
Exploration                           7           -          64          105
Development                         294         288         786          840
----------------------------------------------------------------------------
Exploration and development         301         288         850          945
----------------------------------------------------------------------------
Acquisitions                                                                
Proceeds on dispositions                                                    
Other non-segmented                                                         
----------------------------------------------------------------------------
Net capital expenditures                                                    
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Property, plant and                                                         
 equipment                                                4,668        5,809
Exploration and evaluation                                                  
 assets                                                     416          538
Goodwill                                                    866          866
Other                                                     1,621          645
----------------------------------------------------------------------------
Segmented assets                                          7,571        7,858
Non-segmented assets                                                        
----------------------------------------------------------------------------
Total assets (5)                                                            
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Decommissioning liabilities                                                 
 (5)                                                      2,579        2,390
----------------------------------------------------------------------------
                                                                            
  1. North America                  2012        2011        2012        2011
----------------------------------------------------------------------------
  Canada                             194         269         629         859
  US                                 161         164         458         462
----------------------------------------------------------------------------
  Total revenue and other                                                   
   income                            355         433       1,087       1,321
----------------------------------------------------------------------------
  Canada                                                   3,675       3,937
  US                                                       3,453       2,803
----------------------------------------------------------------------------
  Property, plant and                                                       
   equipment (5)                                           7,128       6,740
----------------------------------------------------------------------------
  Canada                                                   1,084       1,207
  US                                                       1,019       1,163
----------------------------------------------------------------------------
  Exploration and evaluation                                                
   assets (5)                                              2,103       2,370
----------------------------------------------------------------------------
                                                                            
  2. North Sea                      2012        2011        2012        2011
---------------------------------------------------
-------------------------
  UK                                 515         577       1,694       2,179
  Norway                             200         278         740         941
----------------------------------------------------------------------------
  Total revenue and other                                                   
   income                            715         855       2,434       3,120
----------------------------------------------------------------------------
  UK                                                       4,321       3,927
  Norway                                                     347       1,882
----------------------------------------------------------------------------
  Property, plant and                                                       
   equipment (5)                                           4,668       5,809
----------------------------------------------------------------------------
  UK                                                          34         210
  Norway                                                     382         328
----------------------------------------------------------------------------
  Exploration and evaluation                                                
   assets (5)                                                416         538
----------------------------------------------------------------------------
                                                                            
  5. Current year represents balances at September 30.                      
  Prior year represents balances at December 31.                            
                                                                            
                            Talisman Energy Inc.                            
                            Segmented Information                           
                                 (unaudited)                                
                                                                            
                                                                            
                                                          Southeast Asia (3)
                                    ----------------------------------------
                                            Three months                    
                                                   ended   Nine months ended
                                            September 30        September 30
                                    ----------------------------------------
(millions of US$)                         2012      2011     2012       2011
----------------------------------------------------------------------------
Revenue                                                                     
Sales                                      501       526    1,696      1,354
Other income                                 -         1        -          1
----------------------------------------------------------------------------
Total revenue and other income             501       527    1,696      1,355
----------------------------------------------------------------------------
Segmented expenses                                                          
Operating                                   99       113      306        260
Transportation                              15        14       42         42
DD&A                                       103        87      326        212
Impairment                                   -         -        -          -
Dry hole                                    32        35       66         92
Exploration                                 32        37       70        172
Other                                        3         1      (10)         5
----------------------------------------------------------------------------
Total segmented expenses                   284       287      800        783
----------------------------------------------------------------------------
Segmented income (loss) before taxes       217       240      896        572
----------------------------------------------------------------------------
Non-segmented expenses                                                      
General and administrative                                                  
Finance costs                                                               
Share-based payments expense                                                
 (recovery)                                                                 
Currency translation                                                        
(Gain) loss on held-for-trading                                             
 financial instruments                                                      
(Gain) loss on asset disposals                                              
----------------------------------------------------------------------------
Total non-segmented expenses                                                
----------------------------------------------------------------------------
Income (loss) before taxes                                                  
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Capital expenditure                                                         
Exploration                                 24        61       64        189
Development                                105        24      243        117
----------------------------------------------------------------------------
Exploration and development                129        85      307        306
----------------------------------------------------------------------------
Acquisitions                                                                
Proceeds on dispositions                                                    
Other non-segmented                                                         
----------------------------------------------------------------------------
Net capital expenditures                                                    
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Property, plant and equipment                               2,429      2,501
Exploration and evaluation assets                             485        498
Goodwill                                                      149        149
Other                                                         597        560
----------------------------------------------------------------------------
Segmented assets                                            3,660      3,708
Non-segmented assets                                                        
----------------------------------------------------------------------------
Total assets (5)                                                            
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Decommissioning liabilities (5)                               213        208
----------------------------------------------------------------------------
 
                                                                            
                            Talisman Energy Inc.                            
                            Segmented Information                           
                                 (unaudited)                                
                                                                            
                                                                            
                                                                   Other (4)
                                    ----------------------------------------
                                           Three months          Nine months
                                                  e
nded                ended
                                           September 30         September 30
                                    ----------------------------------------
(millions of US$)                        2012      2011      2012       2011
----------------------------------------------------------------------------
Revenue                                                                     
Sales                                     150       141       486        394
Other income                                1         -         3          -
----------------------------------------------------------------------------
Total revenue and other income            151       141       489        394
----------------------------------------------------------------------------
Segmented expenses                                                          
Operating                                  24        18        62         50
Transportation                              1         2         5          6
DD&A                                       35        28       108         80
Impairment                                181         -       254          -
Dry hole                                   29        (1)       82          2
Exploration                                38        31       102         82
Other                                       4         8         2         20
----------------------------------------------------------------------------
Total segmented expenses                  312        86       615        240
----------------------------------------------------------------------------
Segmented income (loss) before taxes     (161)       55      (126)       154
----------------------------------------------------------------------------
Non-segmented expenses                                                      
General and administrative                                                  
Finance costs                                                               
Share-based payments expense                                                
 (recovery)                                                                 
Currency translation                                                        
(Gain) loss on held-for-trading                                             
 financial instruments                                                      
(Gain) loss on asset disposals                                              
----------------------------------------------------------------------------
Total non-segmented expenses                                                
----------------------------------------------------------------------------
Income (loss) before taxes                                                  
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Capital expenditure                                                         
Exploration                                74        41       198         82
Development                                27        42        67        115
----------------------------------------------------------------------------
Exploration and development               101        83       265        197
----------------------------------------------------------------------------
Acquisitions                                                                
Proceeds on dispositions                                                    
Other non-segmented                                                         
----------------------------------------------------------------------------
Net capital expenditures                                                    
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Property, plant and equipment                                 825        859
Exploration and evaluation assets                             489        548
Goodwill                                                      162        162
Other                                                         815        788
----------------------------------------------------------------------------
Segmented assets                                            2,291      2,357
Non-segmented assets                                                        
----------------------------------------------------------------------------
Total assets (5)                                                            
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Decommissioning liabilities (5)                                74         43
----------------------------------------------------------------------------
 
                                                                            
                            Talisman Energy Inc.                            
                           Segmented Information                            
                                (unaudited)                                 
                                                                            
                                                                            
                                                                      Total 
                                    --------------------------------------- 
                                           Three months         Nine months 
                                                  ended               ended 
                                           September 30        September 30 
                                    ----------------------------------------
(millions of US$)                        2012      2011      2012      2011 
----------------------------------------------------------------------------
Revenue                                                                     
Sales                                   1,708     1,944     5,647     6,132 
Other income                               14        12        59        58 
----------------------------------------------------------------------------
Total revenue and other income          1,722     1,956     5,706     6,190 
----------------------------------------------------------------------------
Segmented expenses                                                          
Operating                                 604       553     1,823     1,560 
Transportation                             61        51       178       159 
DD&A                                      570       455     1,745     1,403 
Impairment                              1,037         -     2,163       102 
Dry hole                                   66        33       191       173 
Exploration                                81        87       228       335 
Other                                      35        18        75        54 
----------------------------------------------------------------------------
Total segmented expenses                2,454     1,197     6,403     3,786 
----------------------------------------------------------------------------
Segmented income (loss) before taxes     (732)      759      (697)    2,404 
----------------------------------------------------------------------------
Non-segmented expenses                                                      
General and administrative                130        97       382       303 
Finance costs                              74        73       213       209 
Share-based payments expense                                                
 (recovery)                                61      (285)      (11)     (345)
Currency translation                       27       (56)       21       (11)
(Gain) loss on held-for-trading           116      (120)      128       131 
 financial instruments                             
                         
(Gain) loss on asset disposals              -         8      (759)     (206)
----------------------------------------------------------------------------
Total non-segmented expenses              408      (283)      (26)       81 
----------------------------------------------------------------------------
Income (loss) before taxes             (1,140)    1,042      (671)    2,323 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Capital expenditure                                                         
Exploration                               147       132       430       544 
Development                               642       949     2,243     2,396 
----------------------------------------------------------------------------
Exploration and development               789     1,081     2,673     2,940 
----------------------------------------------------------------------------
Acquisitions                               57       159        59     1,516 
Proceeds on dispositions                   (1)      (35)     (940)     (574)
Other non-segmented                        21        33        89        77 
----------------------------------------------------------------------------
Net capital expenditures                  866     1,238     1,881     3,959 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Property, plant and equipment                              15,050    15,909 
Exploration and evaluation assets                           3,493     3,954 
Goodwill                                                    1,310     1,317 
Other                                                       4,133     2,980 
----------------------------------------------------------------------------
Segmented assets                                           23,986    24,160 
Non-segmented assets                                           41        66 
----------------------------------------------------------------------------
Total assets (5)                                           24,027    24,226 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Decommissioning liabilities (5)                             3,221     3,035 
----------------------------------------------------------------------------
                                                                            
  3. Southeast Asia                       2012      2011      2012      2011
----------------------------------------------------------------------------
  Indonesia                                283       300       891       834
  Malaysia                                  99       158       422       386
  Vietnam                                   21        14        59        50
  Australia                                 98        55       324        85
----------------------------------------------------------------------------
  Total revenue and other income           501       527     1,696     1,355
----------------------------------------------------------------------------
  Indonesia                                                  1,026     1,023
  Malaysia                                                     813       883
  Vietnam                                                      388       297
  Papua New Guinea                                              44        47
  Australia                                                    158       251
----------------------------------------------------------------------------
  Property, plant and equipment (5)                          2,429     2,501
----------------------------------------------------------------------------
  Indonesia                                                     12        12
  Malaysia                                                      35        41
  Vietnam                                                        9         5
  Papua New Guinea                                             429       440
----------------------------------------------------------------------------
  Exploration and evaluation assets                                         
   (5)                                                         485       498
----------------------------------------------------------------------------
                                                                            
                                                                            
  4. Other                                2012      2011      2012      2011
----------------------------------------------------------------------------
  Algeria                                   65        61       177       195
  Colombia                                  86        80       312       199
----------------------------------------------------------------------------
  Total revenue and other income           151       141       489       394
----------------------------------------------------------------------------
  Algeria                                                      272       284
  Colombia                                                     553       575
----------------------------------------------------------------------------
  Property, plant and equipment (5)                            825       859
----------------------------------------------------------------------------
  Colombia                                                     110        75
  Kurdistan                                                    307       303
  Peru                                                           4       133
  Other                                                         68        37
----------------------------------------------------------------------------
  Exploration and evaluation assets                                         
   (5)                                                         489       548
----------------------------------------------------------------------------
                                                                            
  5. Current year represents balances at September 30.                      
  Prior year represents balances at December 31.                            

Contacts: Talisman Energy Inc. - Media and General Inquiries Phoebe Buckland External Communications 403-237-1657 403-237-1210 (FAX) tlm@talisman-energy.com

Talisman Energy Inc. - Shareholder and Investor Inquiries Lyle McLeod, Vice-President Investor Relations 403-237-1020 403-237-1902 (FAX) tlm@talisman-energy.com www.talisman-energy.com

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