Talisman Energy Inc. has reported its operating and financial results for the third quarter of 2010.

Highlights • Cash flow (1) during the quarter was $727 million, a decrease from $838 million a year ago, which included significant cash gains on financial instruments. Year-to-date, cash flow was $2.4 billion. • Net income was $121 million, a four-fold increase from $30 million a year earlier, primarily due to increased commodity prices. • Earnings from continuing operations (1) were $22 million, compared to $95 million in the third quarter of 2009, largely due to the impact of foreign exchange rate movements on working capital balances. • Production from continuing operations averaged 389,000 boe/d, 12% above last year. Production averaged 404,000 boe/d, 1% over the third quarter of 2009. • Net debt (1) at quarter end was $1.6 billion, down from $2.1 billion at December 31, 2009. • Production from the Pennsylvania Marcellus shale play averaged 222 mmcf/d during the quarter and was approximately 270 mmcf/d at the beginning of November. • The company entered into an agreement to acquire a material land position in the liquids rich window of the Eagle Ford shale play. • Talisman announced the joint acquisition of BP Exploration Company (Colombia) Limited, which will add over 12,000 boe/d of production, as well as exploration and development upside. • The company entered into agreements to acquire interests in licences in Norway, which include a number of oil discoveries. • Production from the Burghley field started on schedule, with an initial gross rate of 15,000 bbls/d. • Talisman declared a semi-annual dividend of 12.5 cents per share, payable on December 31, 2010 to shareholders of record at the close of business on December 10, 2010.

(1) The terms "cash flow", "earnings from continuing operations" and "net debt" are non-GAAP measures.

"Talisman had a very active third quarter in terms of acquisitions, each of which strengthen our portfolio in line with the strategy," said John A. Manzoni, President & CEO. "We have almost doubled our land position in the Eagle Ford shale and, at the same time, increased the liquids proportion of our total acreage. We are now very well positioned in the high quality, liquids rich transition window of the play.

"The acquisition in Colombia will add existing production, with exploration and development upside in an area contiguous with our existing acreage in the Niscota Block. It also provides access to a very strategic pipeline, which will help underpin our exploration program. Recent exploration drilling results have been very encouraging with two stratigraphic tests on Block 6 showing oil and the third nearing completion. We are also encouraged by an exploration well on Block 9, which is about to test.

"In Norway, we completed two relatively small deals, acquiring an interest in the Beta and Grosbeak discoveries, which will level our long-term production profile and provide exploration upside. Our disposition program is progressing in line with our stated goals. Our non-core asset sales in North America have been heavily weighted towards natural gas and should generate in excess of $2 billion in proceeds this year.

"We have achieved the majority of the portfolio transition we laid out around a year ago and expect to see production growth from this point. Excluding the effect of asset sales, production this quarter is up 12% year over year, and 4% compared to the second quarter. In light of expected additional volume increases in the fourth quarter, and timing of asset sales, we now expect production for 2010 to average around 415,000 boe/d, above our previous guidance of just over 400,000 boe/d.

"We continue to deliver very strong results from our North American shale portfolio. Shale now accounts for 36% of our North American natural gas volumes, up from 6% a year ago. Natural gas production from continuing operations in North America was up 24% compared to the third quarter of 2009.

"This is largely driven by the Pennsylvania Marcellus, where Talisman's production averaged 222 mmcf/d during the quarter, up from 38 mmcf/d a year ago. With production currently averaging approximately 270 mmcf/d, we are very confident that we will exit 2010 at the upper end of the 250-300 mmcf/d target range we have projected all year.

"We are increasingly excited by our Montney shale acreage, drilling seven development and two pilot wells in the quarter. With excellent results in the Farrell Creek area, Talisman is evaluating a strategic partnership to help fund development of this very large shale resource. In Quebec, we drilled one well and completed two others during the quarter and now plan to complete the remaining two wells in the first half of 2011.

"North Sea volumes were up 11% year over year, with strong infill drilling results and improved uptime in Norway. First oil from the UK Burghley field was delivered in late October, and the Auk North development is on schedule, with first oil targeted for early 2011. In Norway, the Yme topsides are ready for installation, and we are now waiting for a clear weather window to complete tow-out and installation. Once on location, installation will take approximately three months, which we expect to complete in the first half of next year.

"In Southeast Asia, Talisman continues to deliver strong production volumes, with growing sales from the Corridor project in Indonesia and successful infill drilling at the PM-3 CAA field offshore Malaysia/Vietnam. The Jambi Merang project in Indonesia is on schedule for mid-2011, with two out of three development wells drilled.

"Cash flow is down from a year ago; however, this is due to significant cash proceeds, which were realized from hedges in 2009. Excluding the impact of these hedges, cash flow would have been 11% higher than the same quarter last year, as higher production volumes and netbacks more than offset higher cash taxes and royalties.

"Net income during the quarter was up four-fold versus a year ago, largely due to higher commodity prices. Earnings from continuing operations were $22 million during the quarter, with a negative impact of approximately $70 million compared to the third quarter of last year, due to the impact of foreign currency movements on working capital balances.

"We are well positioned during this period of low natural gas prices in North America. Our balance sheet is strong, with approximately $2 billion of cash at the end of the quarter, although this will come down as we close some acquisitions and due to the natural phasing of capital spending. And, of course we still have undrawn bank lines of $2.8 billion. We have options in terms of capital allocation into next year and will finalize these plans over the coming months.

"I believe this quarter reflects the start of a new phase for Talisman. We are now delivering strong underlying production growth, we have increased production guidance for 2010, and I am very confident we can maintain this momentum of increasing profitability and production into next year."

Production Production from continuing operations averaged 389,000 boe/d, a 12% increase over the previous year. This was due principally to increased oil and liquids volumes in Scandinavia and increased gas volumes in North America, Scandinavia and Southeast Asia, partially offset by decreased oil and liquids volumes in the UK and Southeast Asia. Total production was relatively flat, the result of asset sales.

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