Reuters-Canada article: "Talisman confident it won't repeat 2011 misses" Jan 19, 2012

Not the best of news for Talisman lease holders.

Link to Reuters article...click here

CALGARY, Alberta(Reuters) - Talisman Energy Inc TLM.TO is pulling rigs out of some major North American shale gas plays to cope with sinking natural gas prices, but is confident it will meet this year's targets after disappointing investors in 2011, an executive said on Thursday.

Talisman, Canada's fifth-largest independent oil explorer, is reducing spending in the Marcellus shale region of the northeastern United States and in the Montney of British Columbia as gas prices fall to 10-year lows, Scott Thomson, the company's chief financial officer, said.

U.S. gas prices ended Thursday's session down 6 percent at $2.322 per million British thermal units on Thursday, after sliding to as low as $2.311, the lowest front-month contract since February 2002.

In the Marcellus, where Talisman is among the top producers, it is cutting its rig count from 11 to seven and possibly to as few as four, Thomson told an investor conference.

"We've been pretty consistent that the break-even price at the Marcellus is $3.50-$4 (per mmBtu) and that's why we drilled and spent the money there - because we were making money," he said. "I find it surprising that people haven't pulled back on gas spending."

He said it is likely more companies will cut spending there over the first two quarters of this year if gas prices stay at current levels.

In the Montney, where it has a joint venture with South Africa's Sasol Ltd (SOLJ.J: Quote) Talisman is going to four rigs from 10, partly to study the added complexity of the geology but also to conserve money amid the weak gas market, he said.

Last year, Talisman took flak from investors and analysts for twice clawing back its production targets due to problems with the construction of a platform at the Yme field in the North Sea and because of longer than expected maintenance turnarounds.

The shares lost 41 percent of their value in 2011.

This year, Talisman has set more conservative targets and is confident it will meet them, Thomson said. It expects production to be in a range of flat to up 5 percent.

The long-delayed Yme project, slated to start up around mid-year, does not figure in the forecast. Production in the British North Sea is expected to be 65,000 to 70,000 barrels a day, which is down from the end of 2011, partly due to a more cautious outlook for the maintenance downtime, he said.

"So, as I look at that 0-5 percent, I think it's extremely well underpinned and I don't expect to have the same problems we did in 2011," Thomson said.

Talisman shares rose 3.5 percent to $12.03 on the Toronto Stock Exchange on Thursday.