Reserves Replacement

Disclosure Requirements

As a Canadian public company, Talisman is subject to the oil and gas disclosure requirements of National Instrument 51-101 (NI 51-101) of the Canadian Securities Administrators. In prior years, Talisman has relied upon a discretionary exemption from certain of the requirements of NI 51-101 granted by the Canadian securities regulatory authorities which allowed Talisman to provide disclosure in accordance with the disclosure standards of the US Securities and Exchange Commission (SEC) in order to provide disclosure comparable to US and international peers. As a result of the expiry of that exemption, Talisman is providing oil and gas disclosure in accordance with both the SEC and NI 51-101 requirements.

SEC Reserves

Talisman’s gross proved reserves, compiled in accordance with the SEC disclosure requirements using average annual prices, are estimated as follows:

Talisman’s 2010 SEC reserves data has been compiled in accordance with the SEC’s reserves disclosure requirements adopted in 2009, which include an average annual pricing methodology. In addition, Talisman has adopted the FASB accounting standard Extractive Industries – Oil and Gas for both Canadian and US reporting purposes. See the ‘New US Accounting Pronouncements’ section of this MD&A.

Talisman added 249.0 mmboe of gross proved reserves (excluding price revisions) compared to production of 152.0 mmboe for a replacement of 164% of 2010 production. North America accounts for the largest increase in reserves as a result of the successful drilling programs in both the Pennsylvania Marcellus and Montney shale plays. Price-related revisions increased gross proved reserves by 21.7 mmboe, principally related to the Company’s UK operations. At December 31, 2010, North America, Southeast Asia and the UK accounted for 42%, 31% and 19% respectively of the Company’s gross total proved reserves. Proved undeveloped reserves accounted for 33% of the Company total and 34% in North America at the end of 2010.

At the year-end, gross proved shale reserves (1.8 tcf) accounted for 61% of gross proved North American natural gas reserves.

The Company uses reserves replacement ratios as an indicator of its ability to replenish annual production volumes and grow its reserves. It should be noted that a reserves replacement ratio is a statistical indicator that has limitations. As an annual measure, the ratio is limited because it typically varies widely based on the extent and timing of new discoveries, project sanctioning, property acquisitions and average prices. Its predictive and comparative value is also limited for the same reasons. In addition, since the ratio does not take into account the cost, value or timing of future production of new reserves, it cannot be used as a measure of value creation.

The proved reserves replacement ratios noted in the ‘Financial and Operating Highlights’ section of this MD&A were calculated as follows: 178% was calculated by dividing the sum of changes (discoveries, extensions and additions, price revisions and other revisions) to gross proved oil and gas reserves during 2010 by the Company’s 2010 gross production; and 164% was calculated by excluding price revisions from changes to gross proved oil and gas reserves.

NI 51-101 Reserves

Talisman’s gross proved and probable reserves, compiled in accordance with the NI 51-101 disclosure requirements, using forecast prices, are estimated as follows:

Information regarding the pricing assumptions used in the preparation of the estimates of NI 51-101 reserves is set forth under the heading ‘Note Regarding Reserves Data and Other Oil and Gas Information’ in Talisman’s most recent Annual Information Form.