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North Sea

Talisman is the leading independent operator in both the UK and Norwegian sectors of the North Sea. In the UK in 2008, Talisman will focus on continuing exploitation of existing core areas. The Company recently completed appraisal of its Cayley discovery. In Norway, Talisman has built a well-balanced business and is now the third largest acreage holder in the Norwegian North Sea.

2007 in Review

During 2007, the Company spent $1.9 billion in the North Sea, completing the Tweedsmuir Phase 1, Enoch, Blane, Wood and Duart Phase 1 developments.

The Company drilled 17 successful oil and gas development wells in the UK and seven successful oil and gas development wells in Scandinavia. Talisman also drilled four successful exploration wells in the UK and three in Scandinavia. The Company added 66 mmboe of proved reserves during the year (before net acquisitions and dispositions) and had 484 mmboe of proved reserves at year end (80% developed).

At the end of 2007, Talisman completed the sale of its non-core Brae assets. The Company also announced the sale of its Beatrice assets planned for 2008.

Liquids production averaged 132,595 bbls/d, down slightly from 135,216 bbls/d in 2006, due to UK asset sales and delays in development projects. Natural gas production averaged 102 mmcf/d, down from 140 mmcf/d in 2006, with the reduction due primarily to asset sales. Production in 2007 included 15,044 boe/d from the Brae assets.

In the UK, operating costs averaged $22.87/boe, up from $17.19/boe in 2006, due in part to higher operating costs at the recently acquired Fulmar and Auk fields, plus increased costs for fuel gas and facility maintenance. In Scandinavia, operating costs averaged $23.64/boe, up from $20.89/boe in 2006, partially due to increased well workover costs.

Development of the Tweedsmuir and Tweedsmuir South oilfields continued with Phase 1 onstream in May 2007. The Enoch, Blane, Duart and Wood subsea developments were also brought onstream in 2007, and subsea developments at Affleck, Burghley and Auk progressed during the year. In Scandinavia, development of the Rev gas field and redevelopment of the Yme oilfield were both progressed in 2007. Development of Rev East, discovered in 2006, has been included in the Rev development.

Successful infill drilling was carried out in the Arbroath, Arkwright, Tartan, Claymore, Chanter and Affleck areas in the UK. Talisman also drilled the successful Cayley exploration well over year end. In Scandinavia, a successful infill drilling program was also carried out in the Gyda, Brage and Veslefrikk areas, as well as the successful completion of the Rev development wells.

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Further ... 2008

Exploration and development spending is expected to remain relatively unchanged from 2007; however, as the focus shifts to the Scandinavian sector, capital expenditures in the UK will decrease. This reflects the increased focus on exploration drilling in Norway as well as continuing expenditures on the Rev and Yme development projects. Talisman plans to participate in 10 exploration and 35 development wells in the North Sea.

In the UK, the Tweedsmuir Phase 2 project is expected to be completed during 2008, as well as the Phase 3 water injection project. Development of the Affleck field is also expected to be completed. The Auk and Burghley developments will also progress in 2008.

In Norway, completion of the Rev development project is planned, while redevelopment of the Yme project will progress.