Talisman Energy (TLM)

2011 Guidance Call

January 11, 2011 1:00 p.m. ET

Executives

John Manzoni – CEO

L. Scott Thomson – CFO and EVP - Finance

Paul Smith – EVP, North American Operations

Richard Herbert – EVP, Exploration

Paul Blakeley – President, Operations

Analysts

Andrew Fairbanks - Merrill Lynch

Juan Pineros - InterBolsa

Greg Lynch - private investor

Katherine Minyard - JP Morgan

John Malone - Ticonderoga Securities

Brad Marcotte - UBS

Alex Shields - Le Devoir

Jeff Lewis - Alberta Oil Magazine

Pat Roche - Daily Oil Bulletin

Jayman Patel - SG America Securities

Mike Dunn – FirstEnergy Capital

Marcus Ermisch - Calgary Sun

Presentation

Operator

At this time I would like to welcome everyone to the Talisman Energy Inc. 2011 guidance conference call. [Operator Instructions.]

This call contains forward-looking information. Certain material factors and assumptions were applied in making the forecast and projections to be discussed in this call and actual results could differ materially from those anticipated by Talisman and described in the forward looking information. Please refer to the cautionary advisories in the January 11, 2011 news release in Talisman’s most recent annual information form, which contain official information about the applicable risk factors and assumptions.

I would like to remind everyone that this conference call is being recorded on Tuesday, January 11 at 11 am Mountain Time. I will not turn the conference over to Mr. John Manzoni. You may begin your conference.

John Manzoni

Thank you operator. Ladies and gentlemen, good morning. This is John Manzoni and thank you for joining our conference call today, where we'll run through the main components of our activities for 2011. I'm joined here in Calgary by the management team, who will of course be happy to answer your questions after Scott and I have run over the key points.

I want to draw your attention to the fact that everything I say today will be in U.S. dollars, because from the first of this year we will be reporting in U.S. dollars. We've made that decision because our functional currency is predominantly U.S. dollars, and many of our peer companies report that way.

We'll report fourth quarter 2010 results next month in Canadian dollars, and then for our 1Q results, we'll be in U.S. dollars. I hope it's not too confusing for you, because I will talk about the 2010 cap ex number, for instance, in U.S. dollars in this call, just to make the comparables easier as we discuss 2011. But given the fact that for 2010 anyway, the Canadian and U.S. dollar numbers are very similar, I hope you'll be able to follow.

Before looking forward, I think it's helpful to recap the key achievements of 2010, because that sets the context for what we'll set out to do this year. Of course, the numbers aren't finalized yet, and won't be until we release our year-end results in mid-February, but we can certainly give you a sense.

So to recap 2010, first and most importantly, we continued to improve our safety record. I think we'll have improved our injury rate by about 10-15% over 2009 on top of the 40% improvement we saw the previous year. So we're building a safer business, and we've set ourselves some ambitious targets again this year to continue that journey.

We successfully sold $2.2 billion of assets through last year, all with very good metrics, and that allowed us to reposition the portfolio substantially through the year, with about $2 billion of acquisitions including some discoveries in Norway, the BP Colombia acquisition with our partner Ecopetrol, and our deepening in the Eagle Ford jointly with Statoil.

And of course, just before Christmas, we came to an agreement with Sasol, who will become our partner in the Farrell Creek Area of the Montney. In addition to jointly developing the area, we'll commence a joint feasibility study to investigate the possibility of a gas-to-liquids option for Farrell Creek gas, which I think is a very interesting option for the future.

We've built from a small base to become the largest Marcellus producer, exiting the year at 315 million cubic feet a day, above the top end of the range we had previously outlined. And in 2010 we saw further progress in repositioning our expiration program.

We added promising new licenses in Latin America and Southeast Asia in our core exploration areas, and entered Poland to explore its shale gas potential. And we had expiration success in Colombia in the exciting heavy oil trend in the southeast of the country, with an oil discovery in Block 9, and encouragement from stratigraphic drilling in Block 6.

We successfully appraised the Situche Central discovery in Peru, and we encountered an oil lake below the previously tested [gas cap] in the Kurdamir 1 well in Kurdistan. We also participated in successful appraisal of the Beta discovery in Norway, which flowed and more than 10,000 barrels a day on test.

We're currently drilling the TR1 well in the U.K., which will complete operations in the next few weeks, and early results are encouraging. In Indonesia, the Pasangkayu Bravo well was disappointing and failed to find hydrocarbons, but we're a little more excited about the prospects for South Makassar, which we'll drill this year.

Our capital costs have been well managed through the last year, with projects largely being delivered on time and on budget, and we expect to end up having spent just under $4 billion cash capital on exploration and development activities in 2010.

F&D costs came down more than 45% from 2008-2009 and as we projected all through last year, I anticipate we'll be able to report a further reduction of between 25% and 30% in total F&D and around 45% to 50% in drill bit F&D when we announce our results in a month's time, and production has now started to grow.

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