Discontinued Operations

In accordance with Canadian GAAP, Talisman reports the results of continuing and discontinued operations. Discontinued operations include the results from assets the Company expects to sell and the results, to the closing date, of assets that have been sold. Comparative results have been restated to reflect the impact of operations that have been classified as discontinued during 2010. See note 3 to the Consolidated Financial Statements.

In 2010, Talisman completed the sale of oil and gas producing properties in North America for proceeds of $2 billion, resulting in a gain of $173 million, net of a tax recovery of $105 million. The net investment in the Company’s Canadian self-sustaining operations has been reduced as a result of these disposal transactions and a capital distribution to the parent from the entity that held the assets and, accordingly, $465 million of non-taxable foreign exchange gains previously accumulated in other comprehensive loss were included in the carrying value of the assets used to determine the gain on disposal.

Also in 2010, Talisman completed the sale of assets in Tunisia for proceeds of $23 million, resulting in a loss of $5 million, net of tax of $nil. An after tax writedown of $3 million had previously been recorded in 2009.

In 2009, Talisman:

• sold oil and gas producing assets in Western Canada for proceeds of $1.2 billion, resulting in an after tax gain of $456 million;
• sold midstream assets in Western Canada for proceeds of $297 million, resulting in an after tax gain of $55 million;
• sold assets in the Netherlands for proceeds of $596 million, resulting in an after tax gain of $471 million;
• sold a 10% share in the Yme field offshore development and three exploration licences for proceeds of $113 million, resulting in an after tax gain of $6 million;
• sold assets in Trinidad and Tobago for proceeds of $278 million, resulting in an after tax gain of $93 million; and
• received $17 million relating to an agreement entered into in 2007 to sell assets in the UK, resulting in an after tax gain of $11 million.

In 2008, Talisman sold oil and gas producing assets in Western Canada and Denmark for proceeds of $247 million and $95 million, respectively, resulting in an after tax gain of $119 million and an after tax writedown of $46 million, respectively. In the UK, the Company recorded a positive after tax closing adjustment of $36 million, and an after tax write-down of $32 million in respect of oil and gas properties sold in 2007 and 2006.

Talisman has approximately $218 million of abandonment letters of credit in place from January 1, 2011 until December 31, 2011 in respect of asset retirement obligations relating to UK assets sold in 2008.

Results of Discontinued Operations

Daily Average Production Volumes of Discontinued Operations

All 27 mboe/d of production from discontinued operations in 2010 represents production from asset sales that closed in the year.