part two

"We have doubled our Tier 1 acreage position, which we define as having an expected full cycle breakeven of approximately $4/mcf. We have added 90,000 acres in the Marcellus in Pennsylvania at a cost of approximately US$3,250 per acre, bringing our Tier 1 position to 180,000 net acres with about 1,800 net drilling locations.

"In the Montney shale, we expect to drill 20 pilot wells this year and are now ready to move segments of our Montney shale play to commercial development early next year. We have also doubled our Tier 1 landholdings in the Montney shale adding over 80,000 net acres at a cost of about C$3,500 per net acre. We now hold 166,000 net Tier 1 acres with approximately 3,000 net drilling locations.

"As part of our program to accelerate the transition into unconventional gas we are restructuring our North American organization into separate Conventional and Shale divisions, recognizing the different strategic objectives and different business models for each. We will continue to review options to release capital from our portfolio of conventional assets, including additional sales, depending on market conditions.

"Founded on our continued success and results to date, these steps represent an important milestone in the implementation of our unconventional gas strategy in North America.

"The other major strategic initiative during the quarter was the acquisition of a number of onshore blocks in Papua New Guinea where the Company sees opportunities to add substantial discovered and prospective gas resources. Talisman now has interests in eight blocks covering in excess of five million gross acres both onshore and offshore, containing several significant gas discoveries.