Talisman Inks Unconventional Gas Agreement with Hallwood

Talisman Energy Inc. announced that its wholly owned limited partnership FEI Shale L.P. (Fortuna) has reached agreement to earn up to a one-third working interest in US properties owned by Hallwood Energy L.P.

"This agreement gives us exposure in a number of areas where we have not been active, including the deep Barnett and Fayetteville shales," said John Manzoni, President and Chief Executive Officer. "We also have a technical services agreement which is a significant part of this deal. Hallwood has a proven track record in the early stage development of shale programs and we will use this to augment our experience in the piloting and development of our unconventional plays."

The agreement calls for a financial commitment of up to US $125 million by Fortuna over a period of 12 to 18 months depending on the pace of drilling. Upon completion of the capital program, Fortuna will have earned a one-third interest in substantially all of Hallwood's assets, including properties in Texas, Arkansas and Louisiana, for a total of 108,000 acres (net to Fortuna). The 2008 drilling program calls for 11 wells with the potential for up to 1,000 locations on evaluated lands.

The key plays include Hallwood's 40% working interest in over 43,000 acres in the West Texas Deep Barnett and Woodford shales (Reeves and Culberson counties) and Hallwood's 24,500 net acres in the Arkansas Fayetteville shale (White and Faulkner counties). Fortuna would earn approximately 14,000 net acres in these two areas. In total, 285,000 gross acres (approximately 95,000 net acres to Fortuna) have yet to be evaluated, the majority of which are in Arkansas.

As part of the agreement, Hallwood will provide Talisman and its affiliates with technical and consulting services for one year. Talisman and its affiliates will have access to Hallwood's technical staff for assistance on its developing plays in the Montney, the Bakken, the Utica and Lorraine shales in Quebec and Marcellus shales in New York and Pennsylvania. Hallwood was instrumental in the development of the Johnson County Barnett shale between 2001 and 2005, which was then sold to a large US exploration and production company.