Talisman Energy has substantially increased its landholdings in two of the top unconventional natural gas plays in North America and is increasing its development programs.

"I am very excited as we accelerate our shale programs in North America on the heels of excellent drilling results and the continued growth of a very large, high-quality land position in two of the best shale plays in North America," said Paul Smith, Executive Vice President, North American Operations. "We have positioned ourselves for a significant increase in drilling and production in the Marcellus shale next year and are planning to move segments of our Montney shale play to commercial development at the beginning of next year.

"We have been successful in doubling our Tier 1 unconventional acreage in the Pennsylvania Marcellus and the Montney shales over the past few months. Recognizing that not all shale acreage is created equal, we define Tier 1 as top quality acreage with an expected full cycle breakeven of approximately $4/mcf. In these two plays alone, we have added 170,000 net acres through a combination of acquisitions and swaps for C$570 million. The Company now holds approximately 350,000 net acres of Tier 1 land in these two areas, with the potential for 4,800 net drilling locations.

"I am also pleased to announce that we are restructuring our North American operations into two businesses, Shale and Conventional, recognizing each has a different business model and each will play different strategic roles within Talisman. Jim Fraser, who has headed our very successful Marcellus program, will be in charge of the Shale business. Jonathan Wright, who has led Talisman's business in Malaysia, and who has extensive experience in North America, will run our Conventional operations.

"We have seen excellent drilling results in the Pennsylvania Marcellus and each well looks better than the previous one. Average drilling and completion (D&C) costs are down to US$4.3 million per well. Our average assumption for expected ultimate recovery (EUR) over all Tier 1 acreage has increased by 17%, to 3.5 bcf per well, with the last five wells displaying EURs of 6 bcf. Average 30-day initial production (IP) rates for wells drilled year-to-date was 4.5 mmcf/d, with the last six wells at 5 mmcf/d or better. We are currently producing over 50 mmcf/d (sales gas) and expect to exit the year at approximately 70 mmcf/d.

"With the growing success of our Pennsylvania shale program, we have decided to open an office in Pittsburgh because it makes sense to shift our center of gravity and manage the rapid growth of our US shale development programs closer to the majority of our activity. We will be keeping our field office in Horseheads, New York.

"Our pilot programs in the Montney shale have also been very successful with 20 pilot wells now planned for 2009. We have de-risked segments of the Montney shale play and expect to commence commercial development in some areas at the beginning of next year.

"We have demonstrated considerable success in accelerating our shale gas growth strategy over a relatively short period of time. This has given us the confidence to accelerate our programs in the Marcellus and Montney shales. We are also seeing continuing success in our Montney Core unconventional program, with an expected exit rate of 50 mmcf/d, and we are drilling the first of two planned horizontal wells in Quebec."

Tags: Talisman Energy