Talisman Expects to Spend $2 Billion in 2002

Talisman Energy Inc. plans to invest $2 billion in exploration and development programs in 2002, up six percent from 2001. In the absence of major transactions, production in 2002 is expected to average between 450,000-480,000 boe/d, up approximately 10% from 2001.

"Our prospect inventory is large enough and diversified enough to high grade our investment projects and deliver both value and growth, despite the uncertain near term outlook for commodity prices," said Dr. Jim Buckee, president and chief executive officer. "We expect to spend about $2 billion in 2002, which is less than our projected cash flow at annual average prices of US$19/bbl for WTI oil and US$3/mcf for NYMEX gas.

"Canada and the North Sea combined will account for two-thirds of our spending. Major new areas of investment this year will be Algeria, Malaysia and Trinidad. We will spend approximately $70 million in Algeria, with first production expected in 2003 and approximately $215 million in Malaysia, with planned production of over 40,000 boe/d in 2004. The capital budget for Trinidad is $110 million for exploration, appraisal and development of our recent, very large oil and gas discoveries.

"Without any significant asset sales or acquisitions, we expect approximately 10% production growth in 2002 and again in 2003, with further growth in 2004. Talisman's production in the fourth quarter of 2001 averaged over 450,000 boe/d."

Talisman's cash flow per share is expected to be $15-16 in 2002, based on an annual average US$19/bbl WTI oil price and an average of US$3.00/mcf for NYMEX gas. The Company estimates 2001 cash flow per share of $18.25-18.50. Talisman plans to release its 2001 financial results in early March.

Talisman expects to increase its production by approximately 10% in 2002. Taking the midpoint of the range, oil production is expected to increase by 17% in 2002. Most of the increase will come from the North Sea, reflecting a full year of production from Ross/Blake, the start up of the Halley and Hannay oil fields and ongoing development drilling.

Total natural gas production is expected to increase by about 3%. Canadian exploration and development spending is expected to be 15% lower in 2002, reflecting uncertain natural gas prices. Talisman maintains a 2-3 year prospect inventory in Canada, which provides the Company flexibility in setting Canadian spending levels.

Talisman estimates that exploration and development spending will increase 6% to $1.98 billion in 2002, up from $1.88 billion in 2001. Over 70% of the budget will be directed towards development projects. Approximately three quarters of the Canadian budget will be directed towards natural gas spending with major areas of investment being the Greater Arch, Alberta Foothills and Bigstone Wild River areas. The Company will also evaluate its heavy oil and coal bed methane leases in Western Canada. The North Sea budget is again weighted heavily towards development in the Clyde, Buchan, Ross/Blake core areas and the Flotta Catchment Area. Indonesian spending is expected to be around $90 million, with the focus on developing facilities and reserves to meet gas contract commitments. In Sudan, almost three-quarters of the budget will be allocated to development projects, drilling and facilities at Bamboo and Munga. The drilling program includes 38 wells, with seven wells in Block 4. In Malaysia, the majority of capital spending is directed towards development of the PM3 Block. The planned program in other parts of the world includes appraisal and development of our recent oil and gas discoveries in Trinidad ($110 million) with oil production anticipated in late 2003 or 2004. Spending in Algeria will focus on developing existing discoveries in Block 405 ($70 million), with first production expected in early 2003. Talisman also plans to spend approximately $30 million in Colombia, drilling three wells and conducting a seismic program.

Subject to regulatory approval, the Company plans to renew its normal course issuer bid in March. Talisman repurchased over three million shares during 2001 at an average price of $54.51 per share. At year-end 2001, Talisman had 133.7 million shares outstanding.

Unit operating costs in most countries are expected to be the same or lower in 2002. Unit DD&A charges should increase from approximately $8.50/boe in 2001 to approximately $9.00 this year. Debt to debt plus equity at year-end 2002 is expected to be about 0.47 (unchanged from 2001) with a debt to cash flow ratio of approximately 1.7 (estimated at 1.4, year end 2001). Treating Preferred Securities as equity, these ratios would be 0.41 and 1.5, respectively, at year-end 2002.

Talisman has hedged approximately 50,000 bbls/d (17%) of its 2002 oil production. Approximately 20,000 bbls/d have been locked in at US$24.00 Brent with the remaining 30,000 bbls/d under three way WTI collars which have ceilings averaging US$29.50 and provide a US$3.50/bbl premium should oil prices fall below US$21.50/bbl. An estimated 215 mmcf/d (25%) of Talisman's 2002 domestic gas portfolio has been hedged at an average price of approximately $4.35/mcf at the sales point, using fixed price swaps and three way collars.


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