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Talisman Energy First Quarter Results


Talisman Energy First Quarter Results

Steady Progress on Strategic Priorities

2013 Guidance Unchanged

CALGARY, ALBERTA -- (Marketwired) -- 05/01/13 -- Talisman Energy Inc. (TSX:TLM) (NYSE:TLM) has reported its operating and financial results for the first quarter of 2013. All values in this release are in US$ unless otherwise stated.

Effective January 1, 2013, Talisman adopted new rules under IFRS for investments in its UK and Equion joint ventures. The after tax operating results of these joint ventures are now disclosed as a single line "income (loss) from joint ventures and associates." For more information, please see notes 4 and 8 to the company's Financial Statements and the Adoption of New Accounting Standards section in the interim MD&A. For comparative purposes, Talisman has included non-GAAP figures in this press release, which include results from the UK and Equion joint ventures.

2013 First Quarter Overview


 
--  Production was 372,000 boe/d, relatively flat versus the fourth quarter,
    after adjusting for the sale of a 49% equity interest in Talisman's UK
    North Sea business in December 2012. The 2013 production guidance range
    is unchanged, with liquids volumes expected to rise in the second half
    of 2013 in North America (Eagle Ford), Colombia, Malaysia (Kinabalu) and
    Vietnam (HST/HSD). 
--  Cash flow(1) was $517 million, down from the fourth quarter largely as a
    result of the UK transaction, lower production and netbacks in North
    America and higher royalties in Asia. The company expects to meet its
    2013 cash flow guidance, based on growth in higher margin liquids
    production in the second half of the year. 
--  The company recorded a net loss of $213 million in the quarter, compared
    to net income of $376 million in the fourth quarter. This was due to
    significant gains recorded in the previous quarter on the sale of a 49%
    equity interest in its UK North Sea business, and the revaluation of
    Talisman's interest in the Ocensa pipeline. 
--  Capital spending(1) during the quarter averaged $775 million, down
    approximately 25% compared to both the prior year and the fourth
    quarter. Talisman has set its 2013 capital budget at approximately $3
    billion, with 90% of spending directed at high netback liq
uids and
    international gas opportunities.  
--  In Colombia, the company successfully completed the Akacias-18 well, the
    first of a seven-well, two-rig appraisal program in the heavy oil Block
    CPO-9. The company plans to bring in a third rig later this year to
    drill an exploration well. 
--  The Kurdamir-3 appraisal well is currently drilling in Kurdistan. The 3D
    seismic acquisition program over the Topkhana and Kurdamir blocks is
    proceeding. 

(1) The terms "cash flow" and "capital spending" are non-GAAP measures. Please see the advisories and reconciliations elsewhere in this news release.

"Talisman set out four strategic priorities last October, which we have translated into goals for 2013. As I discussed at our investor open house in March, we are transforming Talisman, with a strong focus on two core regions: the Americas and Asia-Pacific," said Hal Kvisle, President and CEO.

"We have stabilized our financial position and constrained capital spending to live within our means. We are more focused, having completed the sale of a 49% equity interest in our UK business. Nearly 90% of our assets are now in the Americas and Asia-Pacific core regions. We are taking steps to exit a number of non-core countries, and actively working to unlock $2-3 billion in net asset value through sales or joint ventures. We expect to see significant growth in higher margin liquids production in the second half of this year and into 2014. And finally, we are taking steps to improve operating efficiency and lower costs.

"Our first priority is to live within our means, allocating capital to our best opportunities in the Americas and Asia-Pacific. We set out capital spending guidance of approximately $3 billion, against a cash flow forecast of approximately $2.5 billion for 2013. We are still on track to meet both goals. Our capital run rate in the first quarter was $775 million. Cash flow was down relative to the fourth quarter of last year, largely due to the impact of the UK transaction, and lower netbacks and natural gas production in North America. Our cash flow forecast is expected to meet guidance, predicated on higher-margin volume growth in the second half of this year from the Eagle Ford, Kinabalu, Vietnam and Colombia.

"Production for the quarter, adjusting for the UK transaction, was essentially flat, compared to the fourth quarter of 2012. North American natural gas volumes continue to decline, reflecting limited investment in the current price environment. This decline was largely offset by growth in Norway and Asia-Pacific.

"Eagle Ford production was flat during the quarter; however, we have increased the number of completion crews and expect to see production build in the second quarter as newly completed wells come on stream.

"Our second priority is to focus our capital program on opportunities that bring high margin production on stream more quickly. Approximately 90% of our capital spending this year is directed at growing near-term, high margin production.

"Our third priority is to improve operational performance. In the Eagle Ford, we reduced drilling cycle times to less than 25 days in the first quarter, and lowered average drilling and completion costs. We will drill, complete and tie in more wells for less capital, aiming to meet or exceed top performance benchmarks in our parts of the Eagle Ford play.

"Cost reduction and performance improvement programs have been initiated in all parts of Talisman. During the quarter, we announced staff reductions as part of our plan to reduce our annual G&A run rate by $100-150 million by the end of the year.

"Our fourth priority is to unlock value within our portfolio through divestments or joint ventures. Our target is to realize $2-3 billion in proceeds through the sale or joint venture of non-core assets over the next 12-18 months. We are making progress on the divestment of assets outside of our core regions as well as the divestment of minor assets within our core regions.

"In Kurdistan, following the Kurdamir-2 oil discovery in 2012, our objective this year is to understand the extent of the resource in the Kurdamir and Topkhana blocks. In the first quarter, we began drilling Kurdamir-3, which is expected to reach target depth in the third quarter.

"We are making progress. We will improve profitability by focusing on high margin production and controlling costs in all parts of our business. We will sustain and grow our two core regions through production optimization, cost management and astute capital investments. We are taking measurable steps to build shareholder value, and this progress will continue over the course of the year."

Financial Results

Table includes results from Talisman Sinopec Energy UK Limited (TSEUK) and Equion Energia Limited (Equion)


 
----------------------------------------------------------------------------
March 31                                          Q1 13     Q4 12      Q1 12
----------------------------------------------------------------------------
Cash flow ($ million)                               517       675        851
----------------------------------------------------------------------------
Cash flow per share                 
               0.50      0.66       0.83
----------------------------------------------------------------------------
Earnings (loss) from operations(2)($million)        (60)     (107)       167
----------------------------------------------------------------------------
Earnings (loss) from operations per share(2)      (0.06)    (0.10)      0.16
----------------------------------------------------------------------------
Net income (loss) ($ million)                      (213)      376        291
----------------------------------------------------------------------------
Net income (loss) per share                       (0.21)     0.37       0.28
----------------------------------------------------------------------------
Average shares outstanding - basic (million)      1,027     1,025      1,023
----------------------------------------------------------------------------
                                                                            
(2) The terms "earnings (loss) from operations" and "earnings (loss) from   
    operations per share" are non-GAAP measures. Please see the advisories  
    and reconciliations elsewhere in this news release.                     

Cash flow was down $158 million, compared to the fourth quarter of 2012. Approximately $70 million of this reduction relates to the sale of a 49% equity interest in Talisman's UK North Sea business in December 2012.

Cash flow in North America was down approximately $60 million, due to lower natural gas volumes (as a result of a strategic reduction in dry gas spend), decreased wellhead prices in Chauvin driven by higher differentials, increased transportation costs in the Montney, higher processing and transportation costs in the Eagle Ford in anticipation of a production ramp-up, and prior period adjustments. Cash flow from North America is expected to increase with higher Eagle Ford volumes in the second quarter.

In Southeast Asia, despite higher production and revised Corridor gas prices, cash flow was down slightly relative to the fourth quarter. Production at Kinabalu averaged 4,000 boe/d; however, the company did not ship any cargoes to market until after the end of the quarter and no revenue or cash flow was recorded during the period. Cash flow was also affected by a one-time investment credit settlement in Indonesia and short-term increases in Malaysian royalty rates due to low current capital spending. Going forward, Talisman expects to see higher incremental cash flow from Southeast Asia with increased liquids production at HST/HSD and Kinabalu, the effect of the revised gas price agreement in Indonesia, and lower royalty rates in Malaysia as drilling activity ramps up.

Cash flow was also impacted by higher finance costs of $26 million. Interest costs are no longer capitalized on Auk South and Yme as the company is now considering alternative development options.

Year over year, cash flow is down due to lower volumes and netbacks. Talisman's cash flow guidance for 2013 is unchanged at approximately $2.5 billion, with expected growth in liquids production in the second half of the year.

The company recorded a loss of $60 million (on a non-GAAP basis) from operations, excluding non-operational items, compared to a loss of $107 million in the fourth quarter of 2012.

Talisman recorded a net loss of $213 million in the first quarter, compared to net income of $376 million in the fourth quarter of 2012. The prior quarter included a number of significant one-time gains, including the sale of a 49% equity interest in the UK North Sea business and the revaluation of Talisman's interest in the Ocensa pipeline in Colombia.

DD&A charges, including Talisman's share of the UK and Equion joint ventures, were $260 million lower than the previous quarter as a result of the UK sale ($117 million) and as a result of one-off charges in the fourth quarter associated with reserves write downs in the UK and North America. During the first quarter, the UK joint venture recorded an impairment charge of $68 million after-tax (net to Talisman) relating to the impact on reserves from the unsuccessful Tweedsmuir TP-3 well.

Capital spending totalled $775 million during the quarter. Talisman's capital spending guidance of approximately $3 billion for 2013 is unchanged. Net debt(3) at March 31, 2013 was $4.1 billion.

(3) The term "net debt" is a non-GAAP measure. Please see the advisories and reconciliations elsewhere in this news release.

Netbacks

The North Sea results include Talisman Sinopec Energy UK Limited (TSEUK), and "Other" results include Equion Energia Limited (Equion).


 
March 31                                           Q1 13     Q4 12     Q1 12
----------------------------------------------------------------------------
WTI benchmark ($/bbl)                              94.37     88.18    102.93
----------------------------------------------------------------------------
Brent benchmark ($/bbl)                           112.55    110.02    118.49
----------------------------------------------------------------------------
NYMEX benchmark ($/mmbtu)                           3.35      3.36      2.77
----------------------------------------------------------------------------
Oil and liquids netback ($/bbl)                                             
----------------------------------------------------------------------------
North America                                      37.69     44.17     53.26
                                              ------------------------------
Southeast Asia                                     28.06     36.31     56.76
                                              ------------------------------
North Sea                                          45.05     33.43     78.37
                                              ------------------------------
Other                                              63.02     58.72     66.88
----------------------------------------------------------------------------
Total oil and liquids ($/bbl)                      41.02     40.09     68.02
----------------------------------------------------------------------------
Natural gas netback ($/mcf)                                                 
----------------------------------------------------------------------------
North America                                       1.21      1.50      0.62
                                              ------------------------------
Southeast Asia                                      5.70      4.85      5.83
                                              ------------------------------
North Sea                                           6.04      4.67      7.97
                                              ------------------------------
Other                                               2.24      1.36      3.15
----------------------------------------------------------------------------
Total natural gas ($/mcf)                           2.93      2.69      2.61
----------------------------------------------------------------------------
Total company netback ($/boe)                      25.67     24.82     36.79
----------------------------------------------------------------------------

WTI prices were up 7% over the previous quarter, averaging $94.37/bbl, but are down year over year. NYMEX natural gas prices were essentially flat compared to the fourth quarter, although in recent weeks they have climbed to over $4.40/mmbtu, reflecting a more balanced North America supply-demand picture.

Oil and liquids netbacks are up slightly over the quarter, as a result of lower unit operating costs due to the UK transaction. Year over year, oil and liquids netbacks are down significantly, reflecting lower benchmark prices.

Average royalty rates increased principally due to the UK transaction, which reduced the company's exposure to low UK royalty rates, and higher short-term rates in Southeast Asia. Royalty rates in Southeast Asia are expected to fall as the company increases capital spending in the region over the course of the year.

Gas netbacks are up from the previous quarter and year over year. In North America, netbacks have doubled, compared to a year ago with strengthening NYMEX prices. However, they are down relative to the fourth quarter, due to higher unit operating costs.

In Southeast Asia, gas netbacks are up significantly versus the fourth quarter, primarily due to higher price realizations. During the quarter, gas prices in Indonesia increased as a result of previously announced revisions to gas pricing agreements at Corridor coming into effect. This includes retroactive adjustments for prior periods.

Production

Table includes Talisman's share of production from subsidiaries and equity-accounted entities.


 
----------------------------------------------------------------------------
March 31                                           Q1 13     Q4 12     Q1 12
----------------------------------------------------------------------------
Oil and liquids (mbbls/d)                                                   
----------------------------------------------------------------------------
North America                                         29        29        28
                                              ------------------------------
Southeast Asia                                        41        40        45
                                              ------------------------------
North Sea                                             37        53        89
                                              ------------------------------
Other (including Colombia and Algeria)                22        21        25
----------------------------------------------------------------------------
Total oil and liquids (mbbls/d)                      129       143       187
----------------------------------------------------------------------------
Natural gas (mmcf/d)                                                        
----------------------------------------------------------------------------
North America                                        875       924     1,024
                                              ------------------------------
Southeast Asia                                       531       511       548
                                              ------------------------------
North Sea                                             16        20        43
                                              ------------------------------
Other (including Colombia and Algeria)                39        43        37
----------------------------------------------------------------------------
Total natural gas (mmcf/d)                         1,461     1,498     1,652
----------------------------------------------------------------------------
Total (mboe/d)                                       372       392       462
----------------------------------------------------------------------------
Assets sold (mboe/d)                                                        
----------------------------------------------------------------------------
North America                                          -         -         7
----------------------------------------------------------------------------
North Sea                                              -        17        31
----------------------------------------------------------------------------
Production from ongoing operations (mboe/d)          372       375       424
----------------------------------------------------------------------------

Production averaged 372,000 boe/d, down 5% from the previous quarter and 19% year over year. Lower production volumes in the quarter were essentially the result of the sale of a 49% equity interest in Talisman's UK North Sea business in December 2012, with an impact of approximately 17,000 boe/d.

Natural gas volumes in North America were lower relative to the fourth quarter (8,000 boe/d), reflecting limited capital spending in the current price environment. However these declines were largely offset by growth in Southeast Asia and Norway liquids.

Talisman continues to direct its capital program to projects that will grow higher margin production in the near to medium term. Accordingly, liquids volumes are expected to increase significantly in the second half of 2013 with growth in North America (Eagle Ford), Colombia, Malaysia (Kinabalu) and Vietnam (HST/HSD). The company's production guidance range for 2013 remains unchanged.

The Americas

North America

Production


 
----------------------------------------------------------------------------
March 31                                           Q1 13     Q4 12     Q1 12
----------------------------------------------------------------------------
Gas                                                                         
----------------------------------------------------------------------------
Edson-Duvernay-Montney                               360       382       407
----------------------------------------------------------------------------
Marcellus                                            442       475       529
----------------------------------------------------------------------------
Eagle Ford                                            51        48        36
----------------------------------------------------------------------------
Other                                                 22        19        27
----------------------------------------------------------------------------
Gas from ongoing operations (mmcf/d)                 875       924       999
----------------------------------------------------------------------------
Liquids                                                                     
----------------------------------------------------------------------------
Edson-Duvernay-Montney                                 6         6         5
----------------------------------------------------------------------------
Eagle Ford                                            12        11         7
----------------------------------------------------------------------------
Chauvin                                               11        12        13
----------------------------------------------------------------------------
Liquids from ongoing operations (mbbls/d)             29        29        25
----------------------------------------------------------------------------
Assets sold (mboe/d)                                   -         -         7
----------------------------------------------------------------------------
Total North America gas production (mmcf/d)          875       924     1,024
----------------------------------------------------------------------------
Total North America liquids production                                      
 (mbbls/d))                                           29        29        28
----------------------------------------------------------------------------
Total North America production (mboe/d)              175       183       198
----------------------------------------------------------------------------

Production in North America averaged 175,000 boe/d, a 4% decrease from the previous quarter and down 12% from a year ago. Talisman continues to shift to higher value liquids, with the majority of capital directed towards oil and liquids rich plays. Natural gas volumes were down 5% relative to the fourth quarter, reflecting natural declines in the Marcellus and Canada Foothills. Liquids production (which represents approximately 17% of total North America production) remained flat quarter over quarter.

The company remains on target to deliver full year production guidance of 170-176 mboe/d, including 30-35 mbbls/d of liquids.

In the Eagle Ford, production was up 58% year over year, and liquids volumes have increased more than 70%. For the quarter, Talisman's share of production (50% working interest) averaged 21,000 boe/d, up slightly from the previous quarter.

The company increased the number of full-time completion crews from one to three at the end of the first quarter. Talisman expects to increase the number of gross operated wells on stream from 18 in the first quarter to more than 50 in the second quarter. In addition, four new facilities will be brought on stream during the second quarter, with total gross processing capacity of 37,000 bbls/d liquids and 190 mmcf/d of gas. As a result, we remain confident of reaching our full-year production target in the Eagle Ford of approximately 30,000 boe/d.

Talisman continues to make significant improvements in Eagle Ford capital investment efficiency. Drilling cycle times have been reduced to less than 25 days, with drilling and completion costs down to approximately $8 million per well. During the quarter, Talisman began transferring the first of three rigs in the eastern part of the play to Statoil, in accordance with the Talisman-Statoil joint venture agreement.

In the Marcellus, production averaged 442 mmcf/d, down from 475 mmcf/d in the previous quarter. Production optimization activities have successfully reduced base decline from approximately 10% per quarter to less than 7% per quarter. One rig is currently operating in the Marcellus, focused on land retention and lease obligations. Talisman has an inventory of approximately 50 drilled but uncompleted Marcellus wells that can be completed and tied in.

In the southern portion of the liquids-rich Duvernay play, three short-lateral wells have been drilled to evaluate fracture effectiveness and assess production characteristics. The first short-lateral well was fracked with five effective stages, and came on stream with an initial production rate of over 350 bbls/d of condensate. The second short-lateral well was fracked with seven effective stages and tested 1.1 mmcf/d with 120 bbls/d of condensate. Based on learnings from these initial wells, Talisman's most recent well was drilled with a 5,400 foot lateral and will be completed with 12 frack stages during the second quarter.

In the Montney, production averaged approximately 12,000 boe/d, down nearly 8% from the previous quarter, reflecting natural declines and limited capital spending. The company is running a three-rig program in 2013, focusing on the early development of its joint venture position in the eastern liquids-rich part of the Farrell Creek play. Together with the company's partner Sasol, appraisal activity has commenced on the large adjacent Cypress A acreage position.

In Edson, the third party deep cut processing plant is ahead of schedule, and is expected to be on-stream in the third quarter. Talisman operated two drilling rigs over the first quarter in Wild River to develop incremental gas volumes for the deep cut plant. In Edson, a horizontal drilling program targeting the liquids-rich Wilrich formation is on track to begin in the third quarter, with volumes processed through the Talisman-owned Edson facility.

As part of efforts to focus and unlock value from the North America portfolio, the company has commenced a process to joint venture or divest its North Duvernay holdings and parts of its Montney holdings. A data room is expected to open in the second quarter for the North Duvernay, and targeted discussions continue with respect to the company's large Montney holdings.

Colombia

First quarter production remained flat quarter over quarter at an average of 17,000 boe/d. The company successfully drilled and completed the Akacias-18 well, and has two rigs operating as part of the planned seven-well appraisal program on the CPO-9 heavy oil block. A third rig has been mobilized to drill an exploration well in block CPO-9 later in the year. In the foothills region, Talisman completed and is testing the Huron-2 appraisal well in the Niscota block. Drilling of the Huron-3 well is ongoing, and the company expects to reach target depth by the end of the year. At Piedemonte, phase one of the facilities expansion project is progressing to plan.

In January 2013, the shareholders and regulators in Colombia converted the Ocensa pipeline from a cost centre to a profit centre, allowing owners to market spare capacity (Talisman's ownership position in the pipeline is approximately 12%). As Talisman's production from blocks CPO-9, CPE-6 and the Niscota Block ramp up, the company's long-term capacity in Ocensa will provide access to export facilities on the Caribbean coast. The company is evaluating the sale of all or part of its Ocensa ownership, while retaining rights to pipeline capacity.

Asia-Pacific

Production


 
----------------------------------------------------------------------------
March 31                                           Q1 13     Q4 12     Q1 12
----------------------------------------------------------------------------
Malaysia liquids (mbbls/d)                            20        17        18
----------------------------------------------------------------------------
Malaysia gas (mmcf/d)                                132       132       128
----------------------------------------------------------------------------
Malaysia total (mboe/d)                               42        39        39
----------------------------------------------------------------------------
Indonesia liquids (mbbls/d)                           11        11        12
----------------------------------------------------------------------------
Indonesia gas (mmcf/d)                               397       379       420
----------------------------------------------------------------------------
Indonesia total (mboe/d)                              77        74        82
----------------------------------------------------------------------------
Vietnam liquids (mbbls/d)                              2         2         2
----------------------------------------------------------------------------
Vietnam gas (mmcf/d)                                   2         -         -
----------------------------------------------------------------------------
Vietnam (mboe/d)                                       2         2         2
----------------------------------------------------------------------------
Australia (mboe/d)                                     8        10        13
----------------------------------------------------------------------------
Total (mboe/d)                                       129       125       136
----------------------------------------------------------------------------

Production averaged 129,000 boe/d, up 3% from the previous quarter following the Kinabalu PSC transfer of operatorship to Talisman. Compared to the same quarter last year, production fell by 5%, principally due to short-term fluctuations in demand at Corridor and natural declines at Kitan.

Natural gas production for the quarter averaged 531 mmcf/d, with prices averaging $10.22/mcf. This is up 15% from the fourth quarter and is primarily due to a previously announced gas pricing agreement at Corridor taking effect, including retroactive revenue adjustments from prior periods.

In Malaysia, production averaged 42,000 boe/d, up 8% over the previous quarter. This was primarily due to a full quarter of production from Kinabalu, averaging 4,000 boe/d, and is e xpected to increase significantly during 2013 as initial platform upgrades are completed and a workover program commences. The addition of Kinabalu to the portfolio provides near-term exploration synergies and development upside in the Sabah basin. The company began drilling its first Sabah exploration well in mid-April.

In Indonesia, production for the quarter averaged 77,000 boe/d, up 4% over the previous quarter following the completion of planned maintenance at Corridor and Tangguh. First quarter production year over year is down 6%, due to higher nominations for gas from Corridor in the same period last year, and a working interest repayment in 2012 at Jambi Merang.

The HST/HSD development offshore Vietnam is progressing on schedule and on budget, with both jackets installed and topsides now in place. All drilling and completion activities are finished. First oil is expected around mid-year, and the company aims to deliver near-term peak net production of approximately 12,000 boe/d.

Production in Australia/Timor Leste for the quarter was 8,000 boe/d, down 20% from the previous quarter primarily due to natural declines.

In Papua New Guinea, acquisition of 440 kilometres of 2D seismic data was successfully completed in three exploration licenses. Prospects generated from this data will support a multi-well exploration drilling program, commencing in the second half of this year.

Other Operating Areas

The North Sea

In December 2012, Talisman sold a 49% equity interest in its UK business to Sinopec for $1.5 billion and established the Talisman Sinopec Energy UK Limited (TSEUK) joint venture.

Talisman's share of UK production averaged 21,000 boe/d, essentially flat over the fourth quarter after accounting for the sale. Operational issues at Bleo Holm, Claymore and Auk North were largely offset by the completion of planned turnarounds at Buchan, Monarb and Blane.

In the UK, a drilling rig has been secured, with drilling operations to commence in the second half of 2013. The Montrose Area Redevelopment project is underway, with major contracts now in place.

The company's TP-3 development well at Tweedsmuir was unsuccessful, resulting in a reserves write down and an impairment of $68 million after tax, representing Talisman's share.

In Norway, average daily production was 19,000 boe/d, up 6% over the previous quarter due to a successful Varg drilling campaign. In March, the company, on behalf of its joint venture partners, reached an agreement with SBM Offshore to terminate the existing Yme project, including scrapping the existing above-surface structure and terminating all existing contracts and arbitration. The agreement includes an upfront payment of $470 million ($282 million net) to Talisman and partners, which will be used to pay for decommissioning of the topside unit.

Kurdistan Region of Iraq

In Kurdistan, the company spudded the Kurdamir-3 appraisal well in February, and expects to reach target depth in the third quarter. The 3D seismic acquisition program over the Topkhana and Kurdamir blocks is progressing, and the company plans to drill the Topkhana-2 appraisal well later this year. Talisman is also reviewing options for field development so it can begin to generate cash flow from Kurdistan.

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 June 28, 2013 to shareholders of record at the close of business on May 15, 2013.

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 July 2, 2013 to shareholders of record at the close of business on May 15, 2013.

Talisman Energy Inc. is a global upstream oil and gas company, headquartered in Canada. Talisman has two core operating areas: the Americas (North America and Colombia) and Asia-Pacific. 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 increase in liquids production in the second half of 2013; expected cash flow; expected improvements in the company's operating efficiency and expected lower costs; expected capital spending; expected reduction in G&A run rate; expected sales or joint ventures and timing of such transactions; expected drilling activity in North America, Colombia, PNG, the North Sea and Kurdistan; expected first production from HST/HSD; expected additional facilities and processing capacity in North America; expected benefits of the company's interest in the Ocensa pipeline; and other expectations, beliefs, plans, goals, objectives, assumptions, information and statements about possible future events, conditions, results of operations or performance. The company priorities disclosed in this news release are objectives only and their achievement cannot be guaranteed.

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 2013 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; risks and uncertainties involving geology of oil and gas deposits; risks associated with project management, project delays and/or cost overruns; uncertainty related to securing sufficient egress and access to markets; 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, including decommissioning liabilities; risks related to strategic and capital allocation decisions, including 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, interest rates and tax or royalty rates; the outcome and effects of any future acquisitions and dispositions; health, safety, security and environmental risks, including risks related to the possibility of major accidents; environmental regulatory and compliance risks, including with respect to greenhouse gases and hydrau lic fracturing; uncertainties as to the availability and cost of credit and other financing and changes in capital markets; risks in conducting foreign operations (for example, civil, political and fiscal instability and corruption); risks related to the attraction, retention and development of personnel; changes in general economic and business conditions; the possibility that government policies, regulations 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 or strategy are included in Talisman'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. 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.

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.

In this news release, all references to "core" and "non-core" assets and properties align with the company's current public disclosure regarding its assets and properties.

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

Forecasted Cash Flow

This news release also contains discussions of anticipated cash flow. The material assumptions used in determining estimates of cash flow are: the anticipated production volumes; estimates of realized sales prices, which are in turn driven by benchmark prices, quality differentials and the impact of exchange rates; estimated royalty rates; estimated operating expenses; estimated transportation expenses; estimated general and administrative expenses; estimated interest expense, including the level of capitalized interest; and the anticipated amount of cash income tax and petroleum revenue tax. The amount of is inherently difficult to predict.

Anticipated production volumes are, in turn, based on the midpoint of the estimated production range and do not reflect the impact of any potential asset dispositions or acquisitions. The completion of any contemplated asset acquisitions or dispositions 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 acquisitions or dispositions.

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 (loss) from operations, capital 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                     
----------------------------------------------------------------------------
                                    March 31,   December 31,      March 31, 
                                         2013           2012           2012 
----------------------------------------------------------------------------
                                                                            
----------------------------------------------------------------------------
Cash provided by operating                                                  
 activities                               331            497            914 
----------------------------------------------------------------------------
Changes in non-cash working                                                 
 capital                                   21              4           (153)
----------------------------------------------------------------------------
Add: Exploration expenditure               75            118             56 
----------------------------------------------------------------------------
Add: Pennsylvania impact fee(1)             -              -             18 
----------------------------------------------------------------------------
Add: Restructuring costs                   17              -              - 
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Less: Finance costs (cash)                (70)           (44)           (49)
----------------------------------------------------------------------------
Cash flow from subsidiaries               374            575            786 
----------------------------------------------------------------------------
                                                                            
----------------------------------------------------------------------------
Add: Cash provided by operating                                             
 activities from equity                                                     
 accounted entities                       149             49             66 
----------------------------------------------------------------------------
Change in non-cash working                                                  
 capital from equity accounted                                              
 entities                                  (5)            51             (1)
----------------------------------------------------------------------------
Less: Dividends and                                                         
 distributions received from                                                
 equity accounted entities                  -              -              - 
----------------------------------------------------------------------------
Add: Exploration expenditure                                                
 from equity accounted entities             2              -              - 
----------------------------------------------------------------------------
Less: Finance costs (cash) from                                             
 equity accounted 
entities                 (3)             -              - 
----------------------------------------------------------------------------
Cash flow from equity accounted                                             
 entities                                 143            100             65 
----------------------------------------------------------------------------
                                                                            
----------------------------------------------------------------------------
Cash Flow(2)                              517            675            851 
----------------------------------------------------------------------------
Cash flow per share                      0.50           0.66           0.83 
----------------------------------------------------------------------------
Diluted cash flow per share              0.50           0.65           0.83 
----------------------------------------------------------------------------
                                                                            
(1) Pennsylvania impact fee amount represents the one-time impact of the    
    retrospective application of the legislation to wells drilled pre-2012. 
(2) Includes cash flow from subsidiaries and Talisman's share of equity     
    accounted entities' cash flow.                                          

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 including Talisman's share of cash flow from equity accounted entities. 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 May 1, 2013. 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                     
----------------------------------------------------------------------------
                                    March 31,   December 31,      March 31, 
                                         2013           2012           2012 
----------------------------------------------------------------------------
                                                                            
----------------------------------------------------------------------------
Net income (loss)                        (213)           376            291 
----------------------------------------------------------------------------
Gain on disposals (tax                                                      
 adjusted)                                  -           (862)          (377)
----------------------------------------------------------------------------
Unrealized (gain) loss on                                                   
 financial instruments(tax                                                  
 adjusted)(1)                              43            (46)            37 
----------------------------------------------------------------------------
Share-based payments (tax                                                   
 adjusted)(2)                              24            (40)           (46)
----------------------------------------------------------------------------
Foreign exchange on debt (tax                                               
 adjusted)                                (23)             3             15 
----------------------------------------------------------------------------
Impairment (tax adjusted)                  44            278            302 
----------------------------------------------------------------------------
Pennsylvania impact fee (tax                                                
 adjusted)(3)                               -              -             11 
----------------------------------------------------------------------------
Restructuring costs (tax                                                    
 adjusted)                                 13              -              - 
----------------------------------------------------------------------------
Gain on revaluation of                                                      
 investment (tax adjusted)(4)               -           (245)             - 
----------------------------------------------------------------------------
Derecognition of deferred tax                                               
 assets(5)                                  -            429              - 
----------------------------------------------------------------------------
Deferred tax adjustments(6)                52              -            (66)
----------------------------------------------------------------------------
Earnings (loss) from                                                        
 operations(7)                            (60)          (107)           167 
----------------------------------------------------------------------------
Earnings (loss) from operations                                             
 per share                              (0.06)         (0.10)          0.16 
----------------------------------------------------------------------------
Diluted earnings (loss) from                                                
 operations per share                   (0.06)         (0.10)          0.16 
----------------------------------------------------------------------------
                                                                            
(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 March 31. 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) Gain on revaluation of investment represents the fair value adjustment  
    recorded upon the restructuring of Talisman's investment in Oleoducto   
    Central S.A.                                                            
(5) Derecognition of deferred tax assets from the US operations.            
(6) Deferred tax adjustments largely comprise tax on foreign exchange on tax
    pools.                                                                  
(7) Earnings (loss) from operations include results and adjustments from    
    subsidiaries and Talisman's share of equity accounted entities.         

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 adjustments include items from subsidiaries and Talisman's share of equity accounted entities. The company uses this information to evaluate performance of core operational activities on a comparable basis between periods. Earn ings (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 May 1, 2013. A reconciliation of net income (loss) to earnings (loss) from operations is provided above.


 
Capital Spending                                                            
US$million                                                                  
                                                                            
                                     Three Months Ended                     
----------------------------------------------------------------------------
                                     March 31,   December 31,      March 31,
                                          2013           2012           2012
----------------------------------------------------------------------------
                                                                            
----------------------------------------------------------------------------
Subsidiaries                                                                
----------------------------------------------------------------------------
Exploration, development and                                                
 other                                     569            834            993
----------------------------------------------------------------------------
Exploration expensed                        75            118             56
----------------------------------------------------------------------------
Exploration and development                                                 
 spending - Subsidiaries                   644            952          1,049
----------------------------------------------------------------------------
                                                                            
----------------------------------------------------------------------------
Talisman's share of equity                                                  
 accounted entities                                                         
----------------------------------------------------------------------------
Exploration, development and                                                
 other                                     130             65             18
----------------------------------------------------------------------------
Exploration expensed                         1              -              -
----------------------------------------------------------------------------
Exploration and development                                                 
 spending - joint ventures                 131             65             18
----------------------------------------------------------------------------
                                                                            
----------------------------------------------------------------------------
Capital spending for                                                        
 subsidiaries and joint                                                     
 ventures                                  775          1,017          1,067
----------------------------------------------------------------------------

Capital spending (or run rate or exploration and development spending) is calculated by adjusting the capital expenditure per the financial statements for exploration costs that were expensed as incurred and adding Talisman's share of joint ventures.


 
Net Debt                                                                    
US$million                                                                  
                                                                            
                                                    Three Months Ended      
----------------------------------------------------------------------------
                                                             March 31, 2013 
----------------------------------------------------------------------------
                                                                            
----------------------------------------------------------------------------
Long-term debt                                                        4,509 
----------------------------------------------------------------------------
Cash and cash equivalents, net of bank                                      
 indebtedness                                                          (276)
----------------------------------------------------------------------------
Cash and cash equivalents from equity                                       
 accounted entities(1)                                                      
----------------------------------------------------------------------------
  TSEUK                                                                 (30)
----------------------------------------------------------------------------
  Equion                                                                (62)
----------------------------------------------------------------------------
Total net debt                                                        4,141 
----------------------------------------------------------------------------
(1) Includes Talisman's share of joint ventures' cash and cash equivalents. 

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

Sensitivities

Talisman's financial performance is affected by factors such as changes in production volumes, commodity prices and exchange rates. The estimated annualized impact of these factors for 2013 (excluding the effect of derivative contracts) is summarized in the following table, based on a Dated Brent oil price of approximately $105/bbl, a NYMEX natural gas price of approximately $3.60/mmbtu and exchange rates of US$1=C$1 and UKGBP 1=US$1.60.


 
----------------------------------------------------------------------------
($ millions)                                   Cash Provided                
                                                by Operating                
                                                  Activities      Cash Flow 
                                Net Income(1)       (GAAP(2))  (Non-GAAP(3))
----------------------------------------------------------------------------
Volume changes                                                              
----------------------------------------------------------------------------
Oil - 10,000 bbls/d                        80            130            195 
----------------------------------------------------------------------------
Natural gas - 60 mmcf/d                    15             55             55 
----------------------------------------------------------------------------
Price changes(4)                                                            
----------------------------------------------------------------------------
Oil - $1.00/bbl                            20             25             35 
----------------------------------------------------------------------------
Natural gas (North America)(5)                                              
 - $0.10/mcf                               15             25             25 
----------------------------------------------------------------------------
Exchange rate changes                                                       
----------------------------------------------------------------------------
US$/C$ decreased by US$0.01               (10)           (10)     
      (10)
----------------------------------------------------------------------------
US$/UKGBP  increased by US$0.02             -              -             (5)
----------------------------------------------------------------------------
(1) Net income includes Talisman's share of net income (loss) from TSEUK and
    Equion, after tax.                                                      
(2) Changes in cash flow provided by operating activities (GAAP) excludes   
    TSEUK and Equion due to the application of equity accounting.           
(3) Changes in cash flow (Non-GAAP) includes TSEUK and Equion and is        
    included for comparative purposes only.                                 
(4) The impact of price changes excludes the effect of commodity            
    derivatives. See specific commodity derivative terms in the 'Risk       
    Management' section of the MD&A, and note 19 to the interim condensed   
    Consolidated Financial Statements.                                      
(5) Price sensitivity on natural gas relates to North American natural gas  
    only. The company's exposure to changes in the natural gas prices in the
    Norway and Malaysia/Vietnam and Colombia is not material. Most of the   
    natural gas price in Indonesia is based on the price of crude oil and,  
    accordingly, has been included in the price sensitivity for oil except  
    for a small portion which is sold at a fixed price.                     
                                                                            
                            Talisman Energy Inc.                            
                                 Highlights                                 
                                (unaudited)                                 
                                                                            
                                               Three months ended March 31  
                                                        2013           2012 
----------------------------------------------------------------------------
Financial                                                                   
(millions of US$ unless otherwise stated)                                   
Cash flow (1)                                            517            851 
Net income (loss)                                       (213)           291 
Exploration and development spending (1)                 775          1,067 
Per common share (US$)                                                      
 Cash flow (1)                                         (0.50)         (0.83)
 Net income (loss)                                     (0.21)          0.28 
----------------------------------------------------------------------------
Production (3)                                                              
(Daily Average - Gross)                                                     
Oil and liquids (bbls/d)                                                    
 North America                                        28,873         27,940 
 Southeast Asia                                       41,103         44,848 
 North Sea                                            16,739         88,753 
 Other                                                11,991         14,280 
----------------------------------------------------------------------------
Total oil and liquids                                 98,706        175,821 
----------------------------------------------------------------------------
Natural gas (mmcf/d)                                                        
 North America                                           875          1,024 
 Southeast Asia                                          531            548 
 North Sea                                                14             43 
 Other                                                     -              - 
----------------------------------------------------------------------------
Total natural gas                                      1,420          1,615 
----------------------------------------------------------------------------
Total mboe/d (2)                                         335            444 
----------------------------------------------------------------------------
Prices (3)                                                                  
Oil and liquids (US$/bbl)                                                   
 North America                                         63.88          77.20 
 Southeast Asia                                       112.35         122.99 
 North Sea                                            111.21         120.53 
 Other                                                110.25         128.51 
----------------------------------------------------------------------------
Total oil and liquids                                  97.72         114.92 
----------------------------------------------------------------------------
Natural gas (US$/mcf)                                                       
 North America                                          3.31           2.49 
 Southeast Asia                                        10.22           9.85 
 North Sea                                             10.36           9.91 
 Other                                                     -              - 
----------------------------------------------------------------------------
Total natural gas                                       5.96           5.19 
----------------------------------------------------------------------------
Total (US$/boe) (2)                                    54.01          64.22 
----------------------------------------------------------------------------
                                                                            
(1) Cash flow, exploration 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.     
(3) 2012 Production and price from Other, was restated to reflect the change
    to equity accounting of Equion on adoption of IFRS 11.                  
                                                                            
                            Talisman Energy Inc.                            
                   Condensed Consolidated Balance Sheets                    
                                (unaudited)                                 
                                                                            
                                                   March 31,   December 31, 
(millions of US$)                                       2013           2012 
----------------------------------------------------------------------------
                                                                  (Restated)
Assets                                                                      
Current                                                                     
  Cash and cash equivalents                              319            553 
  Accounts receivable                                    907            884 
  Risk management                                         13             48 
  Income and other taxes receivable                       22             10 
  Inventories                                            140            122 
  Prepaid expenses                                        26             19 
----------------------------------------------------------------------------
                                                       1,427          1,636 
----------------------------------------------------------------------------
                                                                            
Other assets                                             169             55 
Restricted cash                                          245        
      - 
Investments                                            1,758          1,791 
Risk management                                           24             26 
Goodwill                                                 775            775 
Property, plant and equipment                         10,616         10,462 
Exploration and evaluation assets                      3,292          3,319 
Deferred tax assets                                    1,180          1,273 
----------------------------------------------------------------------------
                                                      18,059         17,701 
----------------------------------------------------------------------------
Total assets                                          19,486         19,337 
----------------------------------------------------------------------------
                                                                            
Liabilities                                                                 
Current                                                                     
  Bank indebtedness                                       43              - 
  Accounts payable and accrued liabilities             1,704          1,744 
  Risk management                                         83             81 
  Income and other taxes payable                          75             84 
  Loans from joint ventures                              258            148 
  Current portion of long-term debt                      151              8 
----------------------------------------------------------------------------
                                                       2,314          2,065 
----------------------------------------------------------------------------
                                                                            
Decommissioning liabilities                            1,514          1,514 
Other long-term obligations                              540            256 
Risk management                                           10              1 
Long-term debt                                         4,358          4,434 
Deferred tax liabilities                               1,082          1,157 
----------------------------------------------------------------------------
                                                       7,504          7,362 
----------------------------------------------------------------------------
                                                                            
Shareholders' equity                                                        
Common shares                                          1,708          1,639 
Preferred shares                                         191            191 
Contributed surplus                                       92            121 
Retained earnings                                      6,866          7,148 
Accumulated other comprehensive income                   811            811 
----------------------------------------------------------------------------
                                                       9,668          9,910 
----------------------------------------------------------------------------
Total liabilities and shareholders' equity            19,486         19,337 
----------------------------------------------------------------------------
                                                                            
                            Talisman Energy Inc.                            
             Condensed Consolidated Statements of Income (Loss)             
                                (unaudited)                                 
                                                                            
                                                                            
                                               Three months ended March 31  
(millions of US$)                                       2013           2012 
----------------------------------------------------------------------------
                                                                  (Restated)
Revenue                                                                     
  Sales                                                1,098          1,975 
  Other income                                            27             26 
  Income (loss) from joint ventures &                                       
   associates, after tax                                  (2)            55 
----------------------------------------------------------------------------
Total revenue and other income                         1,123          2,056 
----------------------------------------------------------------------------
                                                                            
Expenses                                                                    
  Operating                                              329            564 
  Transportation                                          51             59 
  General and administrative                             103            119 
  Depreciation, depletion and amortization               421            574 
  Impairment                                               7          1,053 
  Dry hole                                                 -             60 
  Exploration                                             75             56 
  Finance costs                                           78             71 
  Share-based payments (recovery) expense                 22            (41)
  Loss on held-for-trading financial                                        
   instruments                                            80             47 
  Gain on asset disposals                                  -           (505)
  Other, net                                               6             72 
----------------------------------------------------------------------------
Total expenses                                         1,172          2,129 
----------------------------------------------------------------------------
Loss before taxes                                        (49)           (73)
----------------------------------------------------------------------------
Taxes                                                                       
  Current income tax                                     147            405 
  Deferred income tax (recovery)                          17           (769)
----------------------------------------------------------------------------
                                                         164           (364)
----------------------------------------------------------------------------
Net income (loss)                                       (213)           291 
----------------------------------------------------------------------------
                                                                            
                                                                            
Per common share (US$):                                                     
  Net income (loss)                                    (0.21)          0.28 
  Diluted net income (loss)                            (0.21)          0.24 
----------------------------------------------------------------------------
Weighted average number of common shares                                    
 outstanding (millions)                                                     
  Basic                                                1,027          1,023 
  Diluted                                              1,031          1,028 
----------------------------------------------------------------------------
                                                                            
                            Talisman Energy Inc.                            
              Condensed Consolidated Statements of Cash Flows               
                                (unaudited)                           
      
                                                                            
                                                                            
                                               Three months ended March 31  
(millions of US$)                                       2013           2012 
----------------------------------------------------------------------------
                                                                  (Restated)
Operating activities                                                        
Net income (loss)                                       (213)           291 
Add: Finance costs (cash and non-cash)                    78             71 
Items not involving cash                                 487            399 
----------------------------------------------------------------------------
                                                         352            761 
Changes in non-cash working capital                      (21)           153 
----------------------------------------------------------------------------
Cash provided by operating activities                    331            914 
----------------------------------------------------------------------------
                                                                            
Investing activities                                                        
Capital expenditures                                                        
  Exploration, development and other                    (569)          (993)
  Property acquisitions                                    -             (2)
Proceeds of resource property dispositions                 -            502 
Yme removal obligation                                   282              - 
Restricted cash                                         (245)             - 
Investments                                               (7)            (5)
Loan to TSEUK                                            (70)             - 
Changes in non-cash working capital                      (84)            72 
----------------------------------------------------------------------------
Cash used in investing activities                       (693)          (426)
----------------------------------------------------------------------------
                                                                            
Financing activities                                                        
Long-term debt repaid                                      -           (429)
Long-term debt issued                                     93            258 
Loans from joint ventures                                110             35 
Common shares issued                                      60              2 
Common shares purchased                                  (44)            (4)
Finance costs (cash)                                     (70)           (49)
Common share dividends                                   (70)             - 
Preferred share dividends                                 (2)            (3)
Deferred credits and other                                (9)            (7)
Changes in non-cash working capital                       18              7 
----------------------------------------------------------------------------
Cash provided by (used in) financing                                        
 activities                                               86           (190)
----------------------------------------------------------------------------
Effect of translation on foreign currency cash                              
 and cash equivalents                                     (1)             7 
----------------------------------------------------------------------------
Net increase (decrease) in cash and cash                                    
 equivalents                                            (277)           305 
Cash and cash equivalents net of bank                                       
 indebtedness, beginning of period                       553            340 
----------------------------------------------------------------------------
Cash and cash equivalents net of bank                                       
 indebtedness, end of period                             276            645 
----------------------------------------------------------------------------
                                                                            
Cash and cash equivalents                                319            645 
Bank indebtedness                                        (43)             - 
----------------------------------------------------------------------------
Cash and cash equivalents net of bank                                       
 indebtedness, end of period                             276            645 
----------------------------------------------------------------------------

Contacts: Talisman Energy Inc. - Media and General Inquiries: Phoebe Buckland Manager, External Communications 403-237-1657 tlm@talisman-energy.com

Talisman Energy Inc. - Shareholder and Investor Inquiries: Lyle McLeod Vice-President, Investor Relations 403-767-5732 tlm@talisman-energy.com www.talisman-energy.com

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