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Additional Information

Reconciliation of Accounting Principles

Talisman's Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in Canada (Canadian GAAP), which, in most respects, conform to accounting principles generally accepted in the United States (US GAAP). A summary of the significant differences between Canadian and US GAAP follows. Additional information regarding US GAAP differences is contained in note 21 to the Company's audited Consolidated Financial Statements contained in the 2007 Annual Financial Report.

All financial data should be read in conjunction with the audited Consolidated Financial Statements of the Company contained in the 2007 Annual Financial Report.

Net Income in Accordance with US GAAP

Years ended December 31 (millions of C$ unless otherwise stated) 2007 2006 2005
    (restated) (restated)
       
Net income from continuing operations – Canadian GAAP 1,046 1,370 1,220
Reconciling items between Canadian GAAP and US GAAP (110) (76) (65)
Net income from continuing operations 936 1,294 1,155
Net income from discontinued operations 1,032 635 341
Income before cumulative effect of changes in accounting principles 1,968 1,929 1,496
Cumulative effect of changes in accounting principles, net of tax – (9) –
Net income – US GAAP 1,968 1,920 1,496
Net income per common share (C$) 1      
Basic 1.91 1.76 1.36
Diluted 1.87 1.71 1.32

Comprehensive Income in Accordance with US GAAP

Years ended December 31 (millions of C$) 2007 2006 2005
    (restated) (restated)
       
Net income – US GAAP 1,968 1,920 1,496
Foreign currency - translation of self-sustaining operations 947 179 40
Foreign currency - translation into reporting currency (1,242) 208 (229)
Employee benefits, net of tax (13) – (8)
Change in fair value of cash flow hedges, net of tax (98) 92 (20)
Other comprehensive income – US GAAP (406) 479 (217)
Comprehensive income – US GAAP 1,562 2,399 1,279

Balance Sheet Items in Accordance with US GAAP follows:

  2007       2006
December 31 (millions of C$) Canadian GAAP US GAAP Canadian GAAP US GAAP
Total liabilities and shareholders’ equity 21,443 21,579 21,481 21,765

All financial data should be read in conjunction with the audited Consolidated Financial Statements of the Company contained in the 2006 Annual Financial Report.

Net Production (after royalties)1

  2007 2006 2005 2004 2003
           
Oil and liquids (bbls/d)          
North America 34,298 39,382 42,613 43,303 45,035
United Kingdom 2 100,964 101,682 105,582 114,906 110,580
Scandinavia 3 30,474 32,327 25,676 5,862 2,711
Southeast Asia 4 23,774 29,211 21,406 20,884 14,853
Other5 13,832 14,816 17,994 8,338 10,348
Total oil and liquids 203,342 217,418 213,271 193,293 183,527
Natural gas (mmcf/d)          
North America 721 744 733 715 678
UK2 83 119 103 102 102
Scandinavia 3 14 14 9 3 1
Southeast Asia 4 199 214 198 194 110
Total natural gas 1,017 1,091 1,043 1,014 891
Total conventional (mboe/d) 373 399 387 362 332
Synthetic oil (Canada) (mbbls/d) 6   3.0 2.6 2.9 2.5
Total (mboe/d) 373 402 390 365 335
1 Production includes both production from sales completed in the year, until the date of closing, and production from asset sales expected to close subsequent to 2007. 2 United Kingdom includes the UK and the Netherlands.
3 Scandinavia includes Denmark from 2005.
4 Southeast Asia includes Indonesia, Malaysia/Vietnam and from 2005, Australia.
5 Other includes North Africa, including production from: Algeria, Tunisia from 2005, Sudan in 2003 and Trinidad and Tobago from 2005.
6 Talisman sold its indirect interest in Syncrude on January 2, 2007.

Reserves

Proved Reserves

  Oil & Liquids (mmbbls) Natural Gas (bcf) Total (mmboe)
December 31, 2006 766.5 5,402.9 1,667.0
Discoveries, extensions and additions 29.3 475.7 108.5
Net acquisitions (16.9) 40.5 (10.1)
Revisions 58.2 0.2 58.1
Production (87.8) (455.1) (163.7)
Total Proved, December 31, 2006 749.3 5,464.2 1,659.8
Total Probable, December 31, 2006 513 2,751.5 971.8

Historical Financial Summary

All financial data should be read in conjunction with the audited Consolidated Financial Statements of the Company contained in the 2007 Annual Financial Report.

Years ended December 31 (millions of C$) 20071 20061 20051 2004 2003
           
Balance sheets          
Total assets 21,443 21,481 18,354 12,408 11,780
Income statements          
Total revenue 7,919 7,646 7,028 4,840 4,598
Total expenses 5,902 4,718 4,593 3,909 3,650
Gain on sale of Sudan operations – – – – 296
Income from continuing operations before taxes 2,017 2,928 2,435 931 1,244
Taxes          
Current income tax 782 770 960 427 229
Future income tax (recovery) (67) 498 71 (143) (53)
Petroleum revenue tax 256 290 184 128 92
Net income from continuing operations 1,046 1,370 1,220 519 976
Net income from discontinued operations 1,032 635 341 135 -
Net Income 2,078 2,005 1,561 654 976
1 Adjusted for discontinued operations.

Historical Operations Summary

Years ended December 31 2007 2006 2005 2004 2003
Daily average production1          
Total oil and liquids (bbls/d) 240,714 261,635 249,984 228,434 216,716
Total natural gas (mmcf/d) 1,265 1,342 1,319 1,259 1,090
Total (mboe/d) 452 485 470 438 398
Production (boe/share) 2 0.16 0.162 0.155 0.139 0.125
Proved reserves (boe/share) 1.61 1.57 1.49 1.32 1.18
1 Production includes production for continuing and discontinued operations.

Historical Share Price Growth

(percentage change from January 1, 1992)

Ratios and Key Indicators

Years ended December 31
(millions of C$ except where indicated)		 2007 2006 2005 2004 2003
Net income 2,078 2,005 1,561 654 976
Cash flow 1 4,327 4,748 4,672 2,916 2,691
Exploration and development spending 4,445 4,578 3,179 2,538 2,180
Acquisitions 317 204 3,170 330 768
Dispositions 1,473 872 22 88 1,112
Debt/debt+equity (%) 38 38 43 34 36
Debt/cash flow (times) 1.1 1.0 0.9 0.8 1.0
Per common share (dollars)          
Net income (loss) 2.01 1.84 1.41 0.57 0.84
Cash flow 1 4.19 4.35 4.23 2.54 2.32
Average royalty rate (%) 17 17 17 16 16
Unit operating costs ($/boe) 12.14 9.98 8.41 7.26 6.98
Unit DD&A ($/boe) 14.90 12.09 10.88 10.29 9.87
All data includes continuing and discontinued operations.
1 Non-GAAP measure. See advisories on page 33.

Netbacks

Detailed information on the Company's netbacks can be found in Talisman's 2007 Annual Financial Report.

($/boe) 2007 2006 2005 2004 2003
Sales price 59.57 57.45 56.67 42.75 38.51
Hedging (gain) loss (0.63) (0.37) (0.46) (3.02) (1.34)
Royalty 10.19 9.58 9.41 7.04 6.18
Transportation 1.37 1.28 1.21 1.20 1.26
Operating expenses 12.14 9.98 8.41 7.26 6.75
Netback 36.50 36.98 37.18 24.23 22.99
Excludes synthetic oil.

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