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Talisman - Corporate Presentation Jan 2010
Talisman - Corporate Presentation Jan 2010
Southeast Asia
North Sea
North America
Self funding
Sustainable cash flow built in growth
Oil price leverage
Norway exploration
Growth through
Unconventional gas
Oil
North
Linked
Sea
Gas
32%
12%
North America 10yr ROACE (%) International Portfolio 10yr ROACE (%)
Commodity Price US$/mmbtu Commodity Price US$ WTI
40% $4 40% $40
10% 10%
0% 0%
-10% -10%
Conventional Unconventional North Sea SE Asia
60
38 40
33
18
23.5
20.3 20.2
10.9
9 15–20
Unconventional
North America Gas
13 4%
9
North Sea
15
Oil
Gas
46%
50%
14
SE Asia
22
1P
2P
Typical Industry Unconventional
1P Range
Disposals North America: Lease 10, non-core assets • Lease 10, Midstream, Non-core conventional and
unconventional
UK: Core and non-core assets • Netherlands, Beatrice, UK Core (on hold)
Other: Trinidad and Tobago • Trinidad and Tobago, Denmark, Yme Dilution
Exit: 35–45 mboe/d, $1.5–2.0 Billion 38 mboe/d, $3.2 Billion to date
NA Evaluate five unconventional plays and • Evaluated five plays, 270–290 wells drilled/planned
drill 240–290 wells
Unconventional
Capital: $2.5–$3.0 Billion • $3.4 Billion, including land
Exploration Key exploration wells: 27 • 25 wells drilled and two currently drilling
• Discoveries: Kitan, Grevling, Huron, Godwin, Shaw,
Kurdamir
• Successful appraisals: Hai Su Den, Situche
Bid Rounds: Norway, others • Four blocks Colombia, Block 158 Peru, Blocks K-44,
K-39 and K-9 KRG (Kurdistan), three Barents Sea
blocks, Blocks 133 & 134 Vietnam, Andaman III Block
Indonesia, Sabah blocks SB309/SB310 Malaysia,
ten blocks PNG
Midstream $300
NA Conventional $660
Total $3,170
40% 1.0 x
20% 0.5 x
0.0 x
0% 0.0 x
2004 2008 3Q 2004 2008 3Q
2009 2009
3.0x
$6
2.5x
$5
Average = 1.96x
2.0x
$4
Average = $3.3 Billion
1.5x $3
1.0x $2
0.5x $1
0.0x $0
Talisman Talisman
3Q 2009 Disclosure
Other 331
331 2,510 58
3,180
Montney Marcellus
793 17.7
Marcellus 951 9.8
951
1
124
31
0
Conventional West TX Woodford Haynesville Fayetteville
Barnett Utica (8–12 bcf/well) Marcellus
Muskwa Montney
10.9
• Material Growth
–Current portfolio has built in
growth
OPEX ($/boe)
2004–2008 Average
–Large accessible YTF resources
17.5
9.7
7.0
• Competitively Positioned
4.5
–Well established relationships
–Staff in five countries
Total North North Sea SE Asia
America
–Incumbent advantage
0
2002 2008 2013
CAPEX
269 316 235 305 331 512 767
($C Millions)
Free Cash Flow
(82) (82) 195 220 361 122 5
($C Millions)
1.5 100 40
Forecast Performance
$65/bbl ROACE
$55/bbl
75 30
1.0
50 20
0.5
25 10
0.0 0 0
2005 2008 2009 2005 2008 2009
C$/boe
30
25
20
15
10
2004 2005 2006 2007 2008 3Q 2009
YTD
Norway
UK North Sea
KRG (Kurdistan)
Vietnam
Malaysia
Colombia Indonesia
Peru PNG
60
2009-2013 Exploration targets:
• ca. 600 mmboe resource adds in 5 years
50% 40 • Less than $5/boe Finding Cost
• ca. C$600MM capital budget per year
20
0% 0
2007 2008 2009E 2010E 2011
Target
2010 Activity
North America
• Marcellus shale: drill 170 wells
• Montney shale: drill 35-40 wells (development/pilot)
• Quebec: continue piloting activity
• Non-core conventional asset dispositions
North Sea
• Auk North & South, Burghley, Yme development
• Infill drilling
SE Asia
• HSD/HST and Kitan development
• Malaysia infill drilling and platform upgrades
• PNG appraisal
International Exploration
• 10 new core area wells
• Colombia (2), Peru (1), Kurdistan (2), Makassar Strait (2), PNG (3)
5.2
4.9
4.5
NA Unconventional
NA Conventional
Other
SE Asia
Norway
UK
International Exploration
Key milestones
2009 2010
Unconventional
Marcellus •Six rig development - drilled 53 wells •Drill 170 net wells
Montney Core •Drilled 21 wells
Montney Shale •Three pilot areas •Drill 25 horizontal development wells and
10-15 pilot wells
Quebec •Commence horizontal pilots •Complete and test four horizontal pilot wells
Divestments
Continue non-core divestments
Appendix
2008 North American Year End Resources 2008 % Undeveloped Gas Reserve Bookings
% PUD
60
10%
Proved
reserves
3.6 tcf
40
38
5% 33
Probable
reserves
1.6 tcf
18
85%
Contingent
Talisman
resource Unconventional Gas Peers
North America
30 tcf
Spacing (acres/well) 80
Marcellus Shale Fairway
TLM Shale Acreage
Major Pipelines
2010 Secured Egress Capacity (mmcfe/d) ~ 200
7.0
2 bcf 4 bcf 6 bcf
6.0 2008 2009
## Well Number
0.0
0 50 100 150 200 250 300
Days
Operational Highlights
• 27 horizontal wells on stream (23 Op + 4 Non-Op) – on average exceeding 3.5 bcf type curve
• Current production of 65 mmcf/d (sales gas)
• 2010 program has commenced with six rigs
• 2010 target exit production rate of 250 - 300 mmcf/d
Completions Logistics
Invert Drilling Fluid
Operational Improvements
4.0 Facility Standardization
3.0
First Fourth Last Target
Well Well Well
3.0 3.0
2.0 2.0
1.0 1.0
0.0 0.0
Wells Wells
8
19
19 11
10
12
14
0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0
$US Million
January 2010 www.talisman-energy.com Page 15 of 35
Montney - proven and expanding play
Dev Pilot
6.0
4 bcf Type Curve 2009 2009
2008
3 bcf Type Curve Target YTD*
5.0
# Wells (Gross) 52 25 17
2.0 EUR per Well (bcfe) 2.8 – 3.0 4.0 3.0 – 4.0
0.0
0 50 100 150 200 250 300 350 400 450
Days
Operational Highlights
• Leading horizontal driller
• Significant strides in reducing costs; targeting <C$4/mcf breakeven
• 15 horizontal wells currently on stream – on average exceeding type curve
• Most recent five horizontal well test rates averaged 4.0 mmcf/d
* 3Q 2009 Disclosure
50 Competitors
Talisman
140 22
wells wells
25 • Lean Well delivery driving top tier
performance metrics
• Learning faster
0
Wells 1-5 Wells 6-20 Last Well • Developing faster
4.0
3.0 50%
2.0
1.0
0.0
Wells 1-5 Wells 6-10 Wells 11-15 Wells 16-20 Last Well
Target
Complete
• Creating an engaged and
Tie-in
motivated workforce
Current performance
Starting performance
Neutron Gas
GR
Metrics (Pilot) Density
Porosity
Saturation
0
0 20 40 60
Days
Key Metrics
Net Acres 771,000*
Industry Perspective
Acres following earning
Dispositions
1,500 Conventional excl Dispositions 2,000
1,500
1,000
1,000
500
500
0 0
2000 2008 3Q 2000 2008 3Q
2009 2009
YTD YTD
Legend
Vi Oil Producing Platform
M etn
al
ay am Gas
Future Platform
si
a
Song Doc Prospects
Gas export to
Ca Mau, Vietnam
Northern
Southern
Fields
Fields
Gas export to
PM-3
Resak, Malaysia
Legend
Vi Oil Producing Platform
M etn
al
ay am Song Doc Gas
Future Platform
si Prospects
a
Gas export to
Ca Mau, Vietnam
Northern Southern
Fields Fields
Gas export to
PM-3
Resak, Malaysia
Duri
Singapore
Sumatra
Corridor
Jakarta
Java
300
$8.73 $2.79
100
0
2002 2008 3Q Realized Royalties Opex Netback
2009 Price
YTD
0
2009 2010 2011 2012 2013
• Development Optimization of the PM-3 CAA Southern Field’s main oil reservoirs
• Improve average oil recovery factor from 25% to 35% via re-completions, infill drilling and
water injection
• Offsets natural field production decline
• Targeting 53 mmbbls 3P reserves and additional prospective resources
productio
Block 15-2/01 JOC
n HSD
Legend
Oligocene Clastic Reservoir
Basement Reservoir
Gas Export HST Future Development area
EPS Platform
Future Platform
Early development
Schematic
South North
basement
Northern
North Sea
19%
25 50
West of Central
Billion 51%
Shetland 14% North Sea 14
boe
Southern
North Sea
Northern
North Sea Central 33
Fulmar
Hub
Irish 22
Sea 14
Southern
North Sea Fulmar Hub
Source: Oil & Gas UK March 2009, DECC
Schedule
Auk South Redevelopment
• Project Sanction: October 2008 • Auk rejuvenation to access
• First Oil: 2011 29 mmboe 2P reserves
Schedule
• Project sanction 4Q 2008
Auk South • First oil 2012
Fulmar
Target Area • Peak production 11 mboe/d
Hub
Cayley
Flotta Montrose
Flotta Godwin
Fiddich
Hub Arbroath
Wood
Exploration
2 wells drilled Brechin
(1H 2009) Shaw Arkwright
Talisman Fields
Talisman Recent Discoveries
MonArb Discoveries/Prospects/Leads
Aberdeen
Hub Export Pipelines
Fulmar Hub
Exploration
1 well (2010)
Fulmar
Hub Flyndre
Cawdor
No
Halley
rw
2008 year end reserves and resources Fulmar
a
MonArb Fulmar
y
(mmboe)
Orion
Clyde Affleck
2P reserves 72 112
P3 reserves 40 42 Auk
Near Term
Talisman acreage
• Grevling discovery (15/12-21)
• Tested oil from 3 formations
• Evaluating development options
PL490 – 10%
• Norwegian Petroleum Directorate PL531 (Veslemoy) PL491 – 20%
estimates 40-130 mmboe 20th Round Award Feb ’09
(25% equity) Strategic entry
recoverable reserves
Snøhvit
Goliat
Norway
Grevling
Long Term
• Entry into Barents Sea through 20th Round award
Varg and acreage swap (1Q 2009)
• Access to large prospects to replenish Norway
exploration inventory
• Veslemoy – 1 commitment well planned in 2012
Rubiales
• Seismic acquisition underway
Exploration Drilling Timeline
Block 9 2009 2013
Foothills
Block 6
Foreland
Heavy Oil
Peru
Kalimantan
Talisman JSA • 3D seismic acquisition completed on
Pasangkayu and 2D on Sageri
Pasangkayu PSC
• Two Pasangkayu wells in 2010
• First Sageri well (south of Exxon
Sultan 1 – hydrocarbons present) to
begin drilling in Q4 2010
GSF Explorer
Sultan 1
Sageri PSC
Arun
• Exploration well planned for 2012
LNG Plant
Kms
0 25 50 75 100
Malaysia – Sabah
Murphy/Shell Fields:
• Over 13,000 square kilometres of
> 1100 MMBO rec.
highly prospective shallow water
Malaysia acreage
Samarang Field:
450 MMBO rec.
Block 134
Lowland Area
(Foreland • Evaluate early condensate production
Basin)
scheme in 2010
Kms
0 60 120 180 240
Note: Return on capital employed = Net income plus tax effected interest / (average shareholders' equity + average debt)
Commodity Information
WTI (average US$/bbl) 41.40 56.70 66.25 72.31 99.65
NYMEX gas (Average US$/mmbtu) 6.09 8.55 7.26 6.92 8.95
US$/C$ exchange rate (year end) 0.8308 0.8577 0.8581 1.0120 0.8166
Realized product pricing, before hedging activities & after transportation costs (gross basis)
Crude oil & liquids ($C/bbl) 46.57 61.92 68.75 73.78 96.43
Natural gas ($C/mcf) 6.02 8.03 6.95 6.73 9.01
The forward-looking information included in this presentation is based on Talisman 2010 capital program as announced on
January 11, 2010. Talisman has set its 2010 capital expenditure plans assuming: (1) Talisman’s production in 2010 will be
broadly the same as 2009 at around 425,000 boe/d, excluding any sales in North America during the year; (2) a US $60/bbl
WTI oil price for 2010; and (3) a US $3.50/mmbtu NYMEX natural gas price for 2010. Production estimates are subject to the
timing of development activities and include the anticipated completion of planned dispositions. The completion of any
contemplated disposition is contingent on various factors including market conditions, the ability of the Company to negotiate
acceptable terms of sale and receipt of any required approvals of such dispositions.
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 this presentation. The material risk factors
include, but are not limited to: operational risks in exploring for, developing and producing crude oil and natural gas, market
demand and unpredictable facilities outages; risks and uncertainties involving geology of oil and gas deposits; the
uncertainty of reserves and resources estimates, reserves life and underlying reservoir risk; the uncertainty of estimates and
projections relating to production, costs and expenses; the impact of the economy and credit crisis on the ability of the
counterparties to the Company’s commodity price derivative contracts to meet their obligations under the contracts; potential
delays or changes in plans with respect to exploration or development projects or capital expenditures; fluctuations in oil and
gas prices, foreign currency exchange rates and interest rates; the outcome and effects of any future acquisitions and
dispositions; health, safety and environmental risks; uncertainties as to the availability and cost of financing and changes in
capital markets; risks in conducting foreign operations; changes in general economic and business conditions; uncertainties
as to the availability and cost of financing and changes in capital markets; the possibility that government policies or laws
may change or governmental approvals may be delayed or withheld; and results of the Company’s risk mitigation strategies,
including insurance and hedging activities. The foregoing list of risk factors is not exhaustive. Forward-looking information is
based on the estimates and opinions of the Company’s management at the time the statements are made. The Company
assumes no obligation to update forward-looking statements should circumstances or management’s estimates or opinions
change, except as required by law.
Resources
In this presentation, Talisman also discloses contingent resources, prospective resources and OGIP as at December 31,
2008. Talisman also discloses prospective undiscovered resource additions. Where not otherwise indicated, the contingent
and prospective resources included in this presentation are best estimates. Information on the high and low estimates can be
found at the end of these advisories.
Prospective resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from
undiscovered accumulations by application of future development projects. Prospective resources have both an associated
chance of discovery and a chance of development. There is no certainty that any portion of the resources will be discovered.
If discovered, there is no certainty that it will be commercially viable to produce any portion of the resources. Talisman’s
prospective resources in the Nam Con Son Basin are partially risked for chance of discovery, but have not been risked for
chance of development. If a discovery is made, there is no certainty that it will be developed or, if it is developed, there is no
certainty as to the timing of such development. Where not otherwise indicated, references to “resource adds” in this
presentation refer to unrisked prospective resources.
OGIP is defined as original gas in place and is that quantity of petroleum that is estimated to exist originally in naturally
occurring accumulations. It includes that quantity of gas that is estimated, as of a given date, to be contained in known
accumulations, prior to production. All OGIP estimates in this presentation are discovered with the exception of the OGIP
estimate for Quebec which is undiscovered. There is no certainty that any portion of the Quebec resources will be
discovered. A recovery project cannot be defined for this volume of undiscovered original gas in place at this time. There is
no certainty that it will be commercially viable to produce any portion of the resources.
Gross Production
Where not otherwise indicated, production volumes are stated on a gross basis, which means they are stated prior to the
deduction of royalties and similar payments. In the U.S., net production volumes are reported after the deduction of these
amounts. U.S. readers may refer to the table headed “Continuity of Proved Net Reserves” in Talisman’s Annual Information
Form dated March 9, 2009 for a statement of Talisman’s net production volumes.
Boe/Mcfe conversion
Throughout this presentation, 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 and is based on an energy equivalence conversion method. This presentation also
includes references to mcf equivalent (mcfe) which are calculated at a conversion of rate of one barrel of oil to six thousand
cubic feet of gas (1 bbl:6 mcf). 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 do not represent a value equivalency at the wellhead.
F&D
In this presentation, Talisman discloses historic 5 year average finding and development costs per boe (“F&D”) for each of
the Company, North America, North Sea and Southeast Asia. The annual F&D costs for the Company and each area by
year, for the last 3 years included in the 5 year average are as follows: Company: 2008-$42.83, 2007- $25.85, 2006-$21.70;
North America: 2008-$34.39, 2007-$22.62, 2006-$22.96; North Sea: 2008-$38.81, 2007-$28.77, 2006-$18.47; Southeast
Asia: 2008-$166.03, 2007-$20.11, 2006-$124.77. Historic F&D is calculated by dividing the total costs incurred in oil and gas
activities (excluding acquisition costs) by the gross proved reserves additions which include additions and revisions of gross
proved reserves. Gross proved reserves include proved developed and proved undeveloped reserves and represent
Talisman’s working interest. Various factors impact both historic reserve additions including: successful wells, improved
recovery, new sales contracts and revisions to the economic parameters of a field as a result of changes in commodity
prices, development costs or operating costs. All 2008 F&D numbers exclude the impact of price revisions on reserves
resulting from SEC year end prices in 2008. F&D is used by the Company to determine the cost of reserves additions in a
period. Talisman’s reported F&D may not be comparable to similarity titled measures used by other companies. It should be
noted that F&D is a measure that has limitations. As an annual measure, the ratio is limited because it may vary widely,
based on the extent and timing of new discoveries, project sanctioning and capital expenditures. The Company uses a 5
Netbacks
Talisman also discloses netbacks for the UK, North America and Corridor in this presentation. Netbacks per boe are
calculated by deducting from the sales price associated royalties, operating and transportation costs.
Analogous Information
Throughout this presentation, Talisman discloses analogous information as defined by NI 51-101 which is relevant to the
Company for comparative purposes. The Company cannot confirm that the analogous information was prepared by a
qualified reserves evaluator nor that it was prepared in accordance with the COGEH Handbook.
Reserves Estimates
SE Asia:
PM-3 CAA: 1P 89mmboe, 2P 154mmboe
Song Doc: 1P 2.7mmboe, 2P 5.4mmboe
Corridor: 1P 1.73 tcfe, 2P 2.4 tcfe, P3 660 bcfe
PM-3 IOR: 1P 0 mmboe, 2P 15 mmboe, 3P, 53 mmboe
Corridor New Contracts: 1P 15mmboe, 2P 41mmboe
HSD/HST: 1P 0mmboe, 2P 52mmboe (not yet sanctioned)
UK and Norway:
Auk South: 1P 23mmboe, 2P 29mmboe
Auk North Target Area: 1P 13mmboe, 2P 17mmboe
Auk South Target Area: 1P 23mmboe, 2P 29mmboe
Monarb Hub: 1P 23mmboe, 2P 72mmboe, P3 40mmboe
Fulmar Hub: 1P 83mmboe, 2P 112mmboe, P3 42mmboe
Auk South: 1P 23mmboe, 2P 29mmboe
Auk North: 1P 13mmboe, 2P 17mmboe
Burghley: 1P 2mmboe, 2P 3mmboe
Affleck: 1P 4mmboe, 2P 9mmboe
Yme: 1P 28mmboe, 2P 43mmboe