Talisman Energy announced its spending plans and production guidance for 2008. The Company plans to spend $4.4 billion on exploration and development in 2008, down from an estimated $4.6 billion in 2007.
The major underpinnings of this program include increased investment in Southeast Asia and Norway, reflecting project developments and exploration opportunities.
Some reduction in spending on UK development projects is also included, reflecting the completion of a number of projects in 2007, and consistent with taking a more measured pace. Developments at Auk and Burghley are being progressed.
And the budget includes a reduction in North American spending in light of uncertainty in both natural gas prices and Alberta royalties, although North America will still account for over one-third of total spending.
The Company expects production from continuing operations to grow 5-10% annually to 2010. Production in 2008 is expected to be between 435,000 and 460,000 boe/d, with the range primarily defined by ongoing commissioning of the Tweedsmuir field in the North Sea.
Commenting on this outlook, John Manzoni, President & Chief Executive Officer said: "Although our outlook for growth to 2010 remains robust at 5-10% per annum, 2008 volumes are now expected to come in 3-8% higher than production from continuing operations in 2007. Early estimates of production in 2007 are around 452,000 boe/d. Asset sales last year were circa 28,000 boe/d, so underlying production from continuing operations was 424,000 boe/d. The 2008 projection is lower than our previous expectations.
"Around 60% of the reduction from our previous projections comes from the North Sea and is due to a number of factors. These include asset sales, which were not contemplated previously and delays in commissioning various projects during the second half of 2007, including Tweedsmuir. Tweedsmuir remains in commissioning phase. The range of 2008 outcomes largely reflects the range of Tweedsmuir volumes for the year, which ranges from today's production level of 16,000 boe/d up to 40,000 boe/d. We have also taken a more measured view of project timing in light of our recent experiences and prevailing industry conditions. And finally, there have been some minor reassessments of operating uptime and reservoir performance.
"Around 20% of the reduction is a result of decisions to reduce capital programs, primarily in North America, but also in the UK, in order to improve our project delivery performance. We intend to maintain flexibility in our expenditure in North America both up and down, depending on the gas price. The remaining 20% reduction arises from other operational issues, and project delays internationally, including the Corallina riser failure in Australia and slower than expected ramp up of West Java natural gas sales, although the pipeline is now completed and volumes are increasing.
"I am disappointed in our projections for 2008 compared to our prior estimates. However, we have set the business on a path which I believe is realistic and deliverable, and I am determined that we increase internal and external confidence, that we will meet the projections we set. These projections incorporate our experience from the second half of 2007 as well as a realistic view of project delivery in today's environment, in particular in the UK business, where over the next few years we are bringing on a number of brownfield projects. Steps are underway to improve the delivery of these projects."
Total exploration and development spending in 2008 will be reduced by about 6% from an estimated $4,650 million in 2007. Of the planned $4,375 million exploration and development budget, 45% is being allocated to the North Sea, 34% to North America, 17% in Southeast Asia and 4% for the rest of the world. Approximately three quarters of spending is on development projects and one quarter is earmarked for exploration.
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