Talisman Energy Generates $4.7 Billion in Cash Flow in 2005; 516,000 boe/d Fourth Quarter Production; 189% Proved Reserves Replacement.

CALGARY, Alberta -- Talisman Energy Inc. (TSX:TLM) (NYSE:TLM) released its 2005 consolidated financial and operating results today. The Company set new quarterly and annual records for production, cash flow and earnings from operations.

Cash flow(1) increased 60% to $4,672 million ($12.69/share), compared to $2,916 million ($7.61/share) a year ago. The Company generated $1,468 million ($4.01/share) in cash flow during the fourth quarter, more than double the $679 million ($1.78/share) a year earlier.

Net income was $1,561 million ($4.24/share), an increase of 139% over the $654 million ($1.71/share) in 2004. Net income during the fourth quarter was $533 million ($1.45/share), an increase of 340% versus $121 million ($0.32/share) a year ago.

Earnings from operations(1) were $2,058 million ($5.59/share), compared to $764 million ($1.99/share) in 2004. During the fourth quarter of 2005, Talisman generated $621 million ($1.70/share) in earnings from operations. This was a 322% increase over the $147 million ($0.39/share) for the comparable period a year earlier.

Talisman increased its annual production by 7% to 470,000 boe/d. Oil and liquids production was up 9% to 249,984 bbls/d. The 21,550 bbls/d increase came predominantly from the North Sea (up 10,855 bbls/d) and the first year of production from Trinidad and Tobago, which averaged 10,111 bbls/d. Talisman increased natural gas production by 5% to 1.3 bcf/d. The Company grew its North American  natural gas volumes by 3% to 915 mmcf/d and natural gas volumes in Southeast Asia by 9% to 284 mmcf/d.

Production in the fourth quarter averaged 516,000 boe/d, an increase of 14% over the same period in 2004. On November 18, 2005, the Company effectively acquired control of Paladin Resources plc. Paladin contributed an average of 5,650 boe/d for the year based on production from that date.

(1) The terms "cash flow" and "earnings from operations" are non-GAAP measures. Please see advisories elsewhere in this news release.

"2005 was a great year," said Dr. Jim Buckee, President and Chief Executive Officer. "We had a very strong fourth quarter, with production growth of 14%, minor hedges and cash flow per share up 125% over 2004. For the full year, we grew production per share by 11% and replaced 189% of production with high quality reserves. This includes replacement of 162% of North Sea liquids production and 117% of North America natural gas production through discoveries, additions and revisions. Talisman's momentum will continue in 2006 and beyond from a number of significant developments already in progress.

"We have continued to grow our North American gas volumes at a time when the industry is struggling to maintain production levels. Gas volumes in the fourth quarter were up 2% over the same period a year ago, averaging 907 mmcf/d. We estimate that we currently have about 100 mmcf/d of gas awaiting tie-in or completion of infrastructure, with a number of projects underway to bring this gas to market.

"North Sea liquids production was 25% above the fourth quarter of 2004. We had successful development programs in the Clyde, Claymore, Tartan, Gyda and Varg areas. In total, we drilled 28 successful oil and gas wells in the North Sea last year. The acquired Paladin assets were producing about 45,000 boe/d (worldwide) in December. I think shareholders will be very pleased with the Paladin acquisition as we continue to develop the opportunity set.

"Production in Southeast Asia was up 18% in the fourth quarter with strong demand for Corridor gas in both Indonesia and Singapore. Production volumes in the quarter also benefited from the South Angsi field in Malaysia, commissioned in August, which was producing over 17,000 bbls/d net to Talisman at year end. Elsewhere, production from the Greater Angostura Project in Trinidad and Tobago started in January 2005 and contributed over 10,000 bbls/d for the year.

"I am feeling very sanguine about the future. Our capital spending program is $4.4 billion this year, of which approximately  half is directed at drilling. Talisman has no shortage of economic drilling prospects. North America accounts for approximately 45% of our total capital program. Although there have been industry-wide cost pressures, we continue to take steps to mitigate them. All of our projects are economic and we have the rigs needed to carry out our programs.

"We have a $1.6 billion capital program in the North Sea, with the newly acquired Paladin properties accounting for about one-quarter of our North Sea spending this year. We have completed about 50% of the 45,000 bbls/d Tweedsmuir Project, with first production expected at the end of the first quarter of next year. Expansion of the Corridor gas project is underway in Indonesia, with first sales to West Java also commencing in the first quarter of 2007. In Malaysia/Vietnam, the Northern Fields development is underway, which will add incremental volumes in 2008. We expect to produce between 515,000-545,000 boe/d in 2006 prior to planned asset sales and deliver top line growth of about 10% annually through at least 2008.

"Our international exploration program saw discoveries in the North Sea, Malaysia/Vietnam, Peru and Tunisia in 2005. We have a very exciting program in 2006, with 16 high impact wells planned. In Alaska, the first well of the planned two well program spud in February and is currently drilling ahead. Our first onshore  exploration well in Trinidad spud at the end of September 2005 and is expected to be completed in early March, with further drilling planned for 2006. We are evaluating options in Peru, including additional drilling, to follow on from the successful Situche Central well. A further well is also planned in Qatar in the fourth quarter. We also have continuous exploration drilling in both the UK and Norwegian sectors of the North Sea. The Paladin acquisition brought acreage with many additional drilling locations and exploration upside.

"Oil and gas prices were up approximately 40% last year; I continue to believe that we remain in a higher oil price environment. Even with WTI prices averaging US$56.70/bbl, oil demand increased again last year, reaching 83 mmbbls/d. The industry needs to add an estimated 4-6 mmbbls/d of new production capacity every year to offset declines from existing fields and political unrest in many petroleum exporting countries has also kept upward pressure on oil prices. Higher prices are required to ration demand and bring on new supplies.

Seven Consecutive Years of Record Cash Flow

Cash flow in 2005 was $4,672 million on gross sales of $9,554 million.

Three months ended             Year ended
                        ---------------------------------------------
December 31               2005     2004     %    2005     2004     %
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Cash flow ($mm)(1)       1,468      679   116   4,672    2,916    60
Cash flow ($/share)(1)    4.01     1.78   125   12.69     7.61    67
Net income ($mm)           533      121   340   1,561      654   139
Net income ($/share)      1.45     0.32   358    4.24     1.71   148
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Long term debt
 ($mm at year end)                              4,263    2,457
Shares outstanding
 (mm at year end)                                 366      375
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(1) non-GAAP measure

Cash flow was $1.8 billion above 2004 levels. Significant increases came from higher prices ($3,023 million), increased volumes ($377 million) and lower hedging losses ($403 million less than last year). These gains were offset by higher royalties and taxes ($1,076 million), the impact of a stronger Canadian dollar on realized prices ($720 million) and increased operating costs ($261 million).

Net income for the year totaled $1,561 million, approximately $900 million higher than last year. Increased cash flow was offset by non-cash items, including increased future tax ($322 million), depreciation, depletion and amortization ($193 million) and stock based compensation ($391 million) expense.

The Company no longer calculates a diluted cash flow per share amount. Since the introduction in mid-2003 of a cash payment feature attached to the outstanding stock options, approximately 97% of options have been exercised using the cash payment feature. Since the diluted per share calculation assumes all options will be exercised for shares, with no adjustment to account for the fact that actual options exercised

for cash have resulted in a reduction of cash flow, management feels that the diluted cash flow per share figure is not relevant as the underlying assumptions are not a realistic view of expected results.

Talisman uses the successful efforts accounting method. The differences between the full cost and successful efforts methods of accounting make it difficult to compare net income between companies. In periods of growth and high exploration spending, it is likely that net income determined using the full cost method would be higher than net income determined using the more conservative successful efforts method.

Liquidity and Capital Resources

Talisman's long-term debt at year end was $4.3 billion, up from $2.5 billion at the end of last year. During 2005, the Company generated $4.9 billion of cash provided by operating activities and spent $3.2 billion on exploration and development and a net $3.1 billion on acquisitions. The Company repurchased 9,089,100 common shares under its normal course issuer bid (NCIB) during 2005, for a total of $355 million ($39.01/share).

Two common share dividends were paid in 2005 for a total of $125 million (an aggregate of $0.34/share). The Company's dividend is determined semi-annually by the Board of Directors. At year end, there were 366 million common shares outstanding, down from 375 million at December 31, 2004.

At the end of 2005, Talisman's ratio of debt to cash provided by operating activities was 0.88:1 and the ratio of debt to debt plus equity was 43%.

Earnings from Operations up 169%

In order to better illustrate Talisman's operating performance on an internally consistent basis, the Company has calculated an earnings from operations number. This metric adjusts for significant one-time events as well as other non-operational impacts on earnings such as the mark-to-market effect of changes in share prices on stock based compensation expense and changes to tax rates. This calculation does not reflect differing accounting policies and conventions between companies.

Earnings from operations were $2,058 million in 2005.

($ millions, except per share amounts)

                               Three months ended         Year ended
                              ---------------------------------------
December 31                       2005       2004     2005      2004
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Net income                         533        121    1,561       654

Stock-based compensation (1,2)      88          5      446       119
Tax effects of unrealized
 foreign exchange gains on
 foreign denominated debt (2)       (1)        15       49        37

Tax rate reductions and other (2)    2          6        2       (46)
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Earnings from operations (3)       621        147    2,058       764
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$ per share (3)                   1.70       0.39     5.59      1.99
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(1) Stock-based compensation expense relates to the appreciated value
    of the Company's outstanding stock options and cash units at
    December 31, 2005, which was first expensed during the second
    quarter of 2003. The Company's stock-based compensation expense
    is based on the difference between the Company's share price and
    its stock options or cash units exercise price.

(2) Tax adjustments include the impact of Canadian corporate tax rate
    reductions in 2004, as well as future taxes relating in part to
    unrealized foreign exchange gains associated with the impact of a
    stronger Canadian dollar on foreign currency denominated debt and
    insurance expenses.

(3) This is a non-GAAP measure.

In certain of Talisman's international operations, production is stored in tanks until there is sufficient quantity of oil to fill a tanker. As a result of an increase in unlifted oil volumes, which were previously insignificant, the Company has changed its practice for recording revenue. Unlifted oil volumes are now recorded as inventory, at cost. Had this change not been initiated net income in the fourth quarter would have been $43 million higher, $15 million of which relates to prior periods.

Cash Flow

Below is a reconciliation of cash provided by operating activities calculated in accordance with generally accepted accounting principles (GAAP) to cash flow (which is a non-GAAP measure of financial performance). Please refer to the section in this news release entitled Advisory - Non-GAAP Financial Measures for further explanation and details.

($ millions)                   Three months ended         Year ended
                              ---------------------------------------
                                  2005       2004     2005      2004
December 31                                                (Restated)
---------------------------------------------------------------------
Cash provided by
 operating activities            1,699        725    4,871     3,119
Changes in non-cash
 working capital                  (231)       (46)    (199)     (203)
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Cash flow                        1,468        679    4,672     2,916
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Stock-Based Compensation

Stock-based compensation expense relates to the appreciated value of the Company's outstanding stock options and cash units at December 31, 2005.

The Company's stock option plans were amended during 2003 to provide employees and directors who hold stock options with the choice upon exercise to purchase a share of the Company at the stated exercise price or to receive a cash payment in exchange for surrendering the option. The cash payment alternative is expected to result in reduced shareholder dilution in the future as it is anticipated that most holders of the stock options will elect to take a cash payment. Such cash payments made by the Company to stock option holders are deductible by the Company for income tax purposes, making these plans more cost effective. Since the introduction of the cash feature, approximately 97% of options have been exercised for cash.

The Company's stock-based compensation expense is based on the difference between the Company's share price and its stock options, or cash units exercise price. As a result of record high share prices throughout the year, $633 million was expensed in 2005, of which $480 million was non-cash and $153 million cash.

Additional stock-based compensation expense or recoveries in future periods is dependent on the movement of the Company's share price and the number of outstanding options and cash units.

Production per share up by 11%

                               Three months ended         Year ended
                              ---------------------------------------
December 31                       2005       2004     2005      2004
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Oil and liquids (bbls/d)
North America                   57,108     57,322   56,304    57,392
North Sea                      159,918    127,943  132,716   121,861
Southeast Asia
 and Australia                  49,111     35,018   35,476    35,644
North Africa                    15,112     15,329   15,377    13,537
Trinidad and Tobago             10,790          -   10,111         -
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                               292,039    235,612  249,984   228,434
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Natural gas (mmcf/d)
North America                      907        891      915       885
North Sea                          151        121      120       114
Southeast Asia and Australia       286        280      284       260
                                 ------     ------   ------    ------
                                 1,344      1,292    1,319     1,259
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000 boe/d                          516        451      470       438
---------------------------------------------------------------------
000 boe/d (net of royalties)       430        379      390       365
boe per share (gross)                                 0.47      0.42
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---------------------------------------------------------------------

Production for the year averaged 470,000 boe/d, an increase of 7% over 2004 and Talisman increased production per share by 11%. Fourth quarter volumes were 516,000 boe/d, an increase of 14% over the comparable period a year earlier. Production from the acquired Paladin properties averaged 5,650 boe/d for the year. Consolidation of the Paladin assets occurred on November 18, 2005.

Talisman increased its oil and liquids production by 9% over the prior year and 24% compared to the fourth quarter of 2004. North American liquids volumes were down slightly, reflecting declines from existing fields and the Company's focus on natural gas. The increase in North Sea liquids volumes reflects the Paladin acquisition as well as successful drilling programs at Clyde, Claymore, Tartan, Varg and Gyda. Liquids volumes in Southeast Asia and Australia were up 40% in the fourth quarter of 2005 with commencement of production from the South Angsi field in Malaysia. At year end, South Angsi was producing 17,244 bbls/d net to Talisman. Talisman also recorded its first oil volumes from Trinidad and Tobago in 2005 with the startup of the Greater Angostura Project.

Total natural gas volumes were up 5% for the year. Talisman increased its gas production in North America by 3% in 2005 on the strength of a successful natural gas drilling program. Natural gas sales in Southeast Asia and Australia were up 9% with higher demand for Corridor gas from Caltex and Singapore Power.

On December 19, 2005, the Company issued guidance for expected 2006 production volumes, with a range of 515,000-545,000 boe/d, before planned asset sales.

189% Production Replacement

Talisman Proved
 Reserves                  Oil & NGLs(1)   Natural Gas(1)      BOE(1)
(excluding Syncrude)   (million barrels)  (billion cu ft)  (millions)
---------------------------------------------------------------------
Dec 31, 2004                        618            5,223       1,488

Discoveries, additions and
 extensions                          78              514         163
Net acquisitions                     97              118         117
Revisions                            33               38          40
Production                          (90)            (476)       (169)

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Total Proved
 Dec 31, 2005                       736            5,417       1,639

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Total Probable
 Dec 31, 2005                       493            2,704         943
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(1) Talisman working interest reserves before royalties payable, plus
    royalty interests and net profits interest

Talisman replaced 189% of production from all sources in 2005 (proved reserves) and 120% through drilling and revisions. At year end, Talisman had 5.4 tcf of proved natural gas reserves (up 4%) and 736 mmbbls of proved oil and liquids reserves (up 19%). Talisman increased its total proved reserves by 10% to 1.6 billion boe. Net of royalties, Talisman had 1.3 billion boe of proved reserves (up 9%).

At year end, Talisman had a reserve life index of 9.7 years for proved reserves and 15.2 years for proved and probable reserves.

Approximately 45% of Talisman's reserves are high quality oil and liquids and 55% natural gas. North America accounts for 38% of the Company's total proved reserves, the North Sea 27% and Southeast Asia and Australia 30%. At year end, the Company had 943 mmboe of probable reserves, which comprise a large part of Talisman's development inventory.

Exploration and development spending during 2005 totalled $3,079 million, excluding Syncrude and midstream expenditures. Including the Paladin acquisition, $3.1 billion was spent on acquisitions (net of dispositions).

Talisman has an internal qualified reserves engineer who reviews all of the Company's reserves estimates. In addition, approximately 80% of Talisman's proved reserves have been reviewed by outside engineering firms over the past three years.

Over the past three years, Talisman has added 611 mmboe of proved reserves through discoveries, additions and extensions (including revisions) and 784 mmboe of proved reserves including net acquisitions. During this period, exploration and development spending was $7,405 million and $11,586 million including acquisitions and dispositions. Detailed reserves reconciliation tables are provided elsewhere in this news release.

The reserves replacement ratio of 120% (before acquisitions) was calculated by dividing the sum of changes (revisions of estimates, improved recovery and discoveries) to estimated proved oil and gas reserves during 2005 by the Company's 2005 conventional production. The reserves replacement ratio of 189% was calculated by dividing the sum of changes (revisions of estimates, improved recovery, discoveries, acquisitions and dispositions) to estimated proved oil and gas reserves during 2005 by the Company's 2005 conventional production.

The Company's management uses reserves replacement ratios, as described above, as an indicator of the Company's 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 and property acquisitions. Its predictive and comparative value is also limited for the same reasons. In addition, since the ratio does not include the cost, value or timing of future production of new reserves, it cannot be used as a measure of value creation.

Netbacks up 73% in the Fourth Quarter

Total Company
                               Three Months Ended         Year Ended
                              ---------------------------------------
December 31                       2005       2004     2005      2004
                              ---------------------------------------
WTI oil price US$/bbl            60.05      48.29    56.70     41.40
NYMEX gas price US$/mcf          12.85       6.87     8.55      6.09

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Talisman netback ($/boe)
Sales price                      64.26      43.88    56.67     42.75
Hedging Loss                     (0.43)     (3.99)   (0.46)    (3.02)
Royalties                        10.56       6.80     9.41      7.04
Operating cost                    9.04       7.06     8.41      7.26
Transportation                    1.26       1.20     1.21      1.20
                                 ------     ------   ------    ------
Netback ($/boe)(1)               42.97      24.83    37.18     24.23
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Oil and liquids netback ($/bbl)  41.93      24.04    40.62     23.99
Natural gas netback ($/mcf)       7.38       4.30     5.56      4.08
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(1) Netbacks do not include synthetic oil and pipeline operations.
    Additional netback information by major product type and region
    is contained elsewhere in this news release.

World oil prices continued to increase during 2005, up 37% over 2004 levels, with WTI reaching US$70.85 in August 2005. Oil demand continued to grow in 2005, reaching an estimated 83 mmbbls/d, an increase of 1.5%. Lack of significant spare production capacity, especially for higher quality crude oil, and continuing political unrest in a number of oil exporting regions contributed to higher prices.

NYMEX gas prices were up 40% on average, tracking oil prices. Gas prices have also weakened of late, reflecting "demand destruction" in the US from higher prices and growing inventory levels due to mild winter weather.

Hedging losses were down significantly with most of the remaining 2005 hedges entered into two to three years ago. The Company's average royalty rate increased from 16% in 2004 to 17% in 2005, reflecting higher prices.

Unit operating costs increased by 16% to $8.41/boe. Much of the increase in operating costs is due to higher energy prices, which also benefit Talisman. Additional increases were due to a change in production mix, specifically, increased volumes from Norway. The Company expects unit operating cost increases in the 5% range this year. However, Talisman anticipates bringing on a mix of low cost projects over the next two to three years which should result in lower average unit operating costs.

Talisman's netbacks averaged $37.18/boe in 2005, an increase of 53%. North Sea oil and liquids netbacks averaged $45.76/bbl, up 81%. North American natural gas netbacks averaged $6.16/mcf, up 39%.

Additional Information

Corporate and Other

(millions of dollars)                             2005        2004(1)
---------------------------------------------------------------------
G & A expense                                      201         183
Interest expense                                   166         173
Capitalized interest                                19          13
Stock-based compensation                           633         171
Other revenue                                      165          85
Other expense                                       39          89
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(1) Effective January 1, 2005 the Company retroactively adopted
    certain changes to the Canadian Institute of Chartered
    Accountants ("CICA") accounting standard for financial
    instruments.  The change to this standard requires that the
    Company's preferred securities, all of which were redeemed in
    2004, be treated as debt rather than equity. See note 1 to the
    abbreviated Notes to the
    Consolidated Financial Statements.

General and administrative (G&A) expense increased due to additional personnel, salary increases and administrative costs. On a unit basis, G&A was $1.17/boe compared to $1.14/boe in 2004.

The sum of interest on long-term debt and capitalized interest remained relatively flat at $185 million during 2005. Interest capitalized over the last year is associated with the Tweedsmuir development project in the North Sea, which is scheduled to come on production late in the first quarter of 2007.

Other revenue includes pipeline and custom treating revenues of $141 million for 2005, compared to $73 million in 2004. Pipeline revenues in the North Sea increased $61 million.

Capital Spending(1),(3)

(millions of dollars)                             2005        2004
---------------------------------------------------------------------
North America                                    1,763       1,500
North Sea                                        1,392         721
Southeast Asia and Australia                       305         235
North Africa                                        27           8
Trinidad and Tobago                                 72         191
Other(2)                                           134         125
Corporate, IS and Administrative                    28          26
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                                                 3,721       2,806
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(1) Includes expenditures for exploration, development and asset
    acquisitions net of dispositions, but excludes corporate
    acquisitions.
(2) Other includes Colombia, Peru, Qatar and Alaska.
(3) Includes interest costs which are capitalized on major
    development projects until facilities are completed and ready
    for use.

Natural gas continues to be the focus of the Company's capital investment activities in North America, supplemented by low risk oil projects. Of the $1.8 billion of capital spending in North America, $658 million related to exploration activities and development accounted for $951 million. The Company participated in 495 gross gas wells and 171 gross oil wells in North America with a success rate of 97%. Development spending was concentrated in the predominantly gas producing core areas in the Alberta Foothills, Greater Arch, Deep Basin, Monkman/BC Foothills, Edson and Appalachia regions. In addition, the Company spent $154 million on property acquisitions, net of dispositions.

Total capital spending in the North Sea was $1.4 billion, including $165 million for exploration, $867 million for development and $360 million for net property acquisitions. Development activity included ongoing development of the Tweedsmuir project, as well as drilling and recompletion activity within the Clyde, Tartan, Piper and Claymore fields in the UK and the Gyda and Varg fields in Norway. A total of 25 successful development wells and three successful exploration wells (including the 13/23b-5 well, adjacent to the Ross and Blake fields and 16/22-7 near the Balmoral field) were drilled in the North Sea during 2005. The corporate acquisition of Paladin added producing assets in both the UK and Norway in addition to exploration acreage.

Malaysia/Vietnam accounted for $250 million of the $305 million of total capital spending in Southeast Asia, with the South Angsi field development in PM-305 and the PM-3 CAA development. Talisman participated in 10 successful development wells and six successful exploration wells in Malaysia/Vietnam in 2005. A total of $55 million was spent in Indonesia, primarily on the Suban phase 2 development.

Capital spending in North Africa totaled $27 million in 2005, with Talisman participating in 10 successful wells. In Trinidad and Tobago, a total of $72 million was spent primarily on Angostura development and the Eastern Block onshore exploration activity. A potentially significant exploration discovery was made in northern Peru.

During 2005, the Company spent $49 million in Alaska on seismic and preparations for exploration drilling. Talisman spent $24 million in Colombia on exploration drilling during 2005, as well as $20 million on exploration drilling in Peru and $14 million on seismic and exploration drilling in Qatar.

Spending plans for 2006 were provided on December 19, 2005. Talisman expects to spend approximately $4.4 billion on exploration and development this year.

Depreciation, Depletion and Amortization Expense

                                  2005                  2004
                            $/boe    $millions    $/boe    $millions
---------------------------------------------------------------------
North America               12.42          946    10.47          785
North Sea                   12.23          670    12.83          661
Southeast Asia and
 Australia                   4.98          144     6.02          174
North Africa                 6.80           36     5.99           30
Trinidad and Tobago         13.11           47        -            -
---------------------------------------------------------------------
                            10.88        1,843    10.29        1,650
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---------------------------------------------------------------------

The Company's 2005 depreciation, depletion and amortization expense increased 6% to $10.88/boe. DD&A rates in North America increased to $12.42/boe with higher drilling costs, increased spending on infrastructure projects and increased land costs. In the North Sea, unit DD&A rates fell by 5% due to 2004 reserves additions and a lower pound sterling exchange rate. Unit DD&A rates in Southeast Asia decreased by 17% as a result of increased reserves in Malaysia/Vietnam and the expiry of the Tanjung concession.

Income Taxes

The Company's effective tax rate for 2005, after deducting Petroleum Revenue Tax (PRT), was 44% compared to 36% in 2004.

Effective Income Tax Rate

(millions of dollars)                             2005        2004(1)
---------------------------------------------------------------------
Income before tax                                2,984         1,150
Less PRT
 Current                                           150           124
 Future                                             39             5
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                                                   189           129
---------------------------------------------------------------------
                                                 2,795         1,021
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Income tax expense / (recovery)
 Current                                         1,058           478
 Future                                            176          (111)
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                                                 1,234           367
---------------------------------------------------------------------
Effective income tax rate (%)                       44            36
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(1) Effective January 1, 2005 the Company retroactively adopted
    certain changes to the Canadian Institute of Chartered
    Accountants ("CICA") accounting standard for financial
    instruments. The change to this standard requires that the
    Company's preferred securities, all of which were redeemed in
    2004, be treated as debt rather than equity. See note 1 of the
    abbreviated notes to the Consolidated Financial Statements.

A normalized effective tax rate after removing the impact of the Canadian and UK tax rate changes and the tax on unrealized foreign exchange gains on foreign denominated debt would have been 42% in 2005 and 38% in 2004. The increase in the 2005 effective tax rate results in part from a higher proportion of income from Norway in addition to the impact of increased taxable income in North America, the UK and Southeast Asia and Australia at higher marginal rates of tax. Foreign exchange rate fluctuations over the past two years have resulted in taxes on gains related to inter-company loans and non-Canadian dollar denominated debt, for which there is no corresponding component of the unrealized gain reflected in income before taxes.

Current income tax expense increased to $1,058 million in 2005, due primarily to higher commodity prices and volumes, which resulted in increases in current taxes of $222 million in Norway, $157 million in Southeast Asia, $67 million in the UK, $53 million in North America and $14 million in North Africa. In Trinidad and Tobago, production first came onstream during 2005 and current income tax expense was $64 million.

In December 2005, the UK government announced an income tax rate increase on petroleum profits from 40% to 50%, which will be effective during the second quarter of 2006 and includes a one time non-cash "catch-up" expense estimated to be approximately $300 million.

The UK government levies PRT on North Sea fields which received development approval before April 1993, based on gross profit after allowable deductions, including capital and operating expenditures. PRT, which is deductible for purposes of calculating corporate income tax, increased as a result of both higher prices and volumes on fields in the UK subject to PRT. During 2005, $14 million of PRT was recorded in countries other than the UK.

Talisman Energy Inc. is a large, independent upstream oil and gas company headquartered in Calgary, Alberta, Canada. Talisman has operations in Canada and its subsidiaries operate in the North Sea, Southeast Asia, Australia, North Africa, the United States and Trinidad and Tobago. Talisman's subsidiaries are also active in a number of other international areas, including Colombia, Gabon, Peru, Romania and Qatar. Talisman is committed to conducting its business in an ethically, socially and environmentally responsible manner and is a participant in the United Nations Global Compact, a voluntary initiative that brings together companies, governments, civil society and other groups to advance human rights, labour and environmental principles. Talisman's shares are listed on the Toronto Stock Exchange in Canada and the New York Stock Exchange in the United States under the symbol TLM.

Advisory - forward-looking statements

This news release contains statements that constitute forward-looking statements and forward-looking information (collectively, "forward-looking statements") within the meaning of applicable securities legislation.

Forward-looking statements are included throughout this news release, which include, among others, statements regarding:

- estimates of future sales, production and production per share and operations or financial performance;

- business plans for drilling, exploration and development;

- the estimated amounts and timing of capital expenditures;

- the estimated timing of development, including new production;

- estimates of operating costs;

- business strategy and plans or budgets;

- outlook for oil and gas prices;

- anticipated liquidity, capital resources and debt levels;

- royalty rates and exchange rates; and

- other expectations, beliefs, plans, goals, objectives, assumptions, information and statements about possible future events, conditions, results of operations or performance.

Statements concerning oil and gas reserves contained in this news release may be deemed to be forward-looking statements as they involve the implied assessment that the resources described can be profitably produced in the future, based on certain estimates and assumptions.

Often, but not always, forward-looking statements use words or phrases such as: "expects", "does not expect" or "is expected", "anticipates" or "does not anticipate", "plans" or "planned", "estimates" or "estimated", "projects" or "projected", "forecasts" or "forecasted", "believes", "intends", "likely", "possible", "probable", "scheduled" , "positioned", "goal" , "objective" or state that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved.

Various assumptions were used in drawing the conclusions or making the forecasts and projections contained in the forward-looking statements throughout this news release. Statements which discuss business plans for drilling, exploration and development in 2006 assume that the extraction of crude oil, natural gas and natural gas liquids remains economic. In preparing its 2006 budget Talisman assumed a US$57/bbl West Texas Intermediate oil price, a US$9.00/mmbtu New York Mercantile Exchange natural gas price, a US$/Canadian$ exchange rate of $0.84 and a Canadian$/British Pounds Sterling rate of 2.10 in determining the 2006 planned operations described in this news release.

Forecasted production volumes are based on the mid-point of the estimated production range. Statements regarding estimated future production and production growth, as well as estimated financial results which are derived from or depend upon future production estimates do not reflect the impact of any potential asset acquisitions or dispositions. The completion of any contemplated asset dispositions is contingent on various factors including favorable market conditions, the ability of the Company to negotiate acceptable terms of sale and receipt of any required approvals for such dispositions. The amount of taxes and cash payments made upon surrender of existing stock options is inherently difficult to predict.

Forward-looking statements are based on current expectations, estimates and projections that involve a number of risks and uncertainties, which could cause actual results to differ materially from those anticipated by Talisman and described in the forward-looking statements. These risks and uncertainties include:

- the risks of the oil and gas industry, such as operational risks in exploring for, developing and producing crude oil and natural gas, and market demand;

- risks and uncertainties involving geology of oil and gas deposits;

- the uncertainty of reserves estimates and reserves life;

- the uncertainty of estimates and projections relating to production, costs and expenses;

- potential delays or changes in plans with respect to exploration or development projects or capital expenditures;

- fluctuations in oil and gas prices, foreign currency exchange rates and interest rates;

- the outcome and effects of completed acquisitions, as well as any future acquisitions or dispositions;

- the ability of the Company to integrate any assets it has acquired or may acquire or the performance of those assets;

- health, safety and environmental risks;

- uncertainties as to the availability and cost of financing and changes in capital markets;

- uncertainties related to the litigation process, such as possible discovery of new evidence or acceptance of novel legal theories and difficulties in predicting the decisions of judges and juries;

- risks in conducting foreign operations (for example, political and fiscal instability or the possibility of civil unrest or military action);

- changes in general economic and business conditions;

- the effect of acts of, or actions against, international terrorism;

- the possibility that government policies or laws may change or governmental approvals may be delayed or withheld;

- results of the Company's risk mitigation strategies, including insurance and any hedging programs; and

- the Company's ability to implement its business strategy.

We caution that the foregoing list of risks and uncertainties is not exhaustive. Additional information on these and other factors which could affect the Company's operations or financial results are included: (1) under the heading "Risk Factors" in the Company's Annual Information Form; and (2) under the headings "Management's Discussion and Analysis - Risks and Uncertainties" and elsewhere in the Company's 2004 Annual Report Financial Review. Additional information may also be found in the Company's other reports on file with Canadian securities regulatory authorities and the United States Securities and Exchange Commission.

Forward-looking statements are based on the estimates and opinions of the Company's management at the time the statements are made. The Company assumes no obligation to update forward-looking statements should circumstances or management's estimates or opinions change.

Advisory - reserves data and other oil and gas information

Talisman's disclosure of reserves data and other oil and gas information is made in reliance on an exemption granted to Talisman by Canadian securities regulatory authorities, which permits Talisman to provide disclosure in accordance with US disclosure requirements. The information provided by Talisman may differ from the corresponding information prepared in accordance with Canadian disclosure standards under National Instrument 51-101 (NI 51-101). Talisman's proved reserves have been calculated using the standards contained in Regulation S-X of the US Securities and Exchange Commission. US practice is to disclose net proved reserves after deduction of estimated royalty burdens, including net profits interests. Talisman makes additional voluntary disclosure of gross proved reserves. Probable reserves which Talisman also discloses voluntarily have been calculated using the definition for probable reserves set out by the Society of Petroleum Engineers/World Petroleum Congress. Further information on the differences between the US requirements and the NI 51-101 requirements is set forth under the heading "Note Regarding Reserves Data and Other Oil and Gas Information" in Talisman's Annual Information Form.

The exemption granted to Talisman also permits it to disclose internally evaluated reserves data. All reserves data in this news release reflects Talisman's estimates of its reserves. While Talisman annually obtains an independent audit of a portion of its reserves, no independent qualified reserves evaluator or auditor was involved in the preparation of the reserves data disclosed in this report.

Throughout this press release, the calculation of barrels of oil equivalent (boe) is calculated at a conversion rate of six thousand cubic feet (mcf) of natural gas for one barrel of oil and is based on an energy equivalence conversion method. Boes may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf:1 bbl is based on an energy equivalence conversion method primarily applicable at the burner tip and does not represent a value equivalence at the wellhead.

Throughout this press release, Talisman makes reference to production volumes. Where not otherwise indicated, such production volumes are stated on a gross basis, which means they are stated prior to the deduction of royalties and similar payments. In the United States, net production volumes are reported after the deduction of these amounts.

The reserves life index of 9.7 years for proved reserves was calculated by dividing the year end proved reserves by the Company's 2005 conventional production. The reserves life index of 15.2 years for proved and probable reserves was calculated by dividing the year end proved and probable reserves by the Company's 2005 conventional production.

Advisory - non-GAAP financial measures

Included in this news release are references to financial measures commonly used in the oil and gas industry such as cash flow and cash flow per share and earnings from operations. These terms are not defined by Generally Accepted Accounting Principles (GAAP) in either Canada or the US. Consequently these are referred to as non-GAAP measures. Cash flow, as commonly used in the oil and gas industry, represents net income before exploration costs, DD&A, future taxes and other non-cash expenses. Cash flow is used by the Company to assess operating results between years and with peer companies using different accounting policies. Cash flow should not be considered an alternative to, or more meaningful than, cash provided by operating, investing and financing activities or net income as determined in accordance with Canadian GAAP as an indicator of the Company's performance or liquidity. Cash flow per share is cash flow divided by the average number of common shares outstanding during the period. Debt to cash flow is a non-GAAP measure. Earnings from operations is calculated by adjusting the Company's net income per the financial statements, for certain items of a non-operational nature, on an after-tax basis. This term is not defined by Generally Accepted Accounting Principles in either Canada or the United States. The Company uses this information to evaluate performance of core operational activities on a comparable basis between periods. Our reported results of cash flow, cash flow per share and earnings from operations may not be comparable to similarly titled measures reported by other companies.

Talisman Energy Inc.
Highlights
(unaudited)

                               Three months ended        Years ended
                                      December 31        December 31
                                    2005     2004      2005     2004
---------------------------------------------------------------------
Financial                                                  (restated
                                                                 (1))
(millions of Canadian dollars
 unless otherwise stated)
Cash flow                          1,468      679     4,672    2,916
Net income                           533      121     1,561      654
Exploration and development
 expenditures                        980      728     3,179    2,538
Per common share (Canadian dollars)
 Cash flow                          4.01     1.78     12.69     7.61
 Net income                         1.45     0.32      4.24     1.71
---------------------------------------------------------------------
Production
(daily average)
Oil and liquids (bbls/d)
 North America                    54,254   54,464    53,611   54,393
 North Sea                       159,918  127,943   132,716  121,861
 Southeast Asia & Australia       49,111   35,018    35,476   35,644
 North Africa                     15,112   15,329    15,377   13,537
 Trinidad & Tobago                10,790        -    10,111        -
 Synthetic oil                     2,854    2,858     2,693    2,999
---------------------------------------------------------------------
Total oil and liquids            292,039  235,612   249,984  228,434
---------------------------------------------------------------------
Natural gas (mmcf/d)
 North America                       907      891       915      885
 North Sea                           151      121       120      114
 Southeast Asia & Australia          286      280       284      260
---------------------------------------------------------------------
Total natural gas                  1,344    1,292     1,319    1,259
---------------------------------------------------------------------
Total mboe/d                         516      451       470      438
---------------------------------------------------------------------
---------------------------------------------------------------------
Prices (2)
Oil and liquids ($/bbl)
 North America                     54.84    44.05     52.62    42.11
 North Sea                         66.53    50.26     64.78    48.29
 Southeast Asia & Australia        68.30    53.81     68.79    51.29
 North Africa                      68.02    46.50     66.71    51.17
 Trinidad & Tobago                 63.78        -     63.40        -
---------------------------------------------------------------------
Crude oil and natural gas liquids  64.62    49.10     62.78    47.45
 Synthetic oil                     71.42    61.61     69.88    52.19
---------------------------------------------------------------------
Total oil and liquids              64.68    49.24     62.86    47.51
---------------------------------------------------------------------
Natural gas ($/mcf)
 North America                     12.25     6.99      9.05     6.83
 North Sea                          8.35     6.08      7.08     5.55
 Southeast Asia & Australia         6.72     4.55      6.40     4.74
---------------------------------------------------------------------
Total natural gas                  10.63     6.38      8.30     6.28
---------------------------------------------------------------------
Total ($/boe) (includes synthetic) 64.30    44.00     56.74    42.81
---------------------------------------------------------------------
---------------------------------------------------------------------

(1) Effective January 1, 2005 the Company retroactively adopted
    certain changes to the Canadian Institute of Chartered
    Accountants ("CICA") accounting standard for financial
    instruments. The changes to this standard required the Company's
    preferred securities, all of which were redeemed in 2004, to be
    treated as debt rather than equity. See note 1 to the abbreviated
    notes to the Consolidated Financial Statements.
(2) Prices are before hedging.
(3) Includes unlisted oil volumes as at December 31, 2005 of 3,670
    bbls/d, 1,400 bbls/d, 650 bbls/d for the North Sea, Southeast
    Asia and Australia, North Africa and Trinidad and Tobago
    respectively.
(4) Includes gas acquired for injection and subsequent resale of 23
    mmcf/d and 3 mmcf/d for the three months ended December 31, 2005
    and 2004 respectively and 15 mmcf/d and 5 mmcf/d in the full
    years 2005 and 2004 respectively.


Talisman Energy Inc.
Consolidated Balance Sheets
(unaudited)

December 31 (millions of Canadian dollars)        2005          2004
---------------------------------------------------------------------
Assets                                                     (restated
Current                                                       note 1)
 Cash and cash equivalents                         130            38
 Accounts receivable                             1,311           836
 Inventories                                       170            78
 Prepaid expenses                                   20            18
---------------------------------------------------------------------
                                                 1,631           970
---------------------------------------------------------------------

Accrued employee pension benefit asset              57            61
Other assets                                        74            64
Goodwill                                         1,504           466
Property, plant and equipment                   15,073        10,847
---------------------------------------------------------------------
                                                16,708        11,438
---------------------------------------------------------------------
Total assets                                    18,339        12,408
---------------------------------------------------------------------
---------------------------------------------------------------------


Liabilities
Current
 Accounts payable and accrued liabilities        2,383         1,302
 Income and other taxes payable                    649           341
---------------------------------------------------------------------
                                                 3,032         1,643
---------------------------------------------------------------------

Deferred credits                                    74            70
Asset retirement obligations                     1,320         1,272
Other long-term obligations                        217            35
Long-term debt                                   4,263         2,457
Future income taxes                              3,638         2,100
---------------------------------------------------------------------
                                                 9,512         5,934
---------------------------------------------------------------------

---------------------------------------------------------------------
Non-controlling interest                            66             -
---------------------------------------------------------------------
Contingencies and commitments
Shareholders' equity
Common shares                                    2,609         2,666
Contributed surplus                                 69            71
Cumulative foreign currency translation           (265)          (76)
Retained earnings                                3,316         2,170
---------------------------------------------------------------------
                                                 5,729         4,831
---------------------------------------------------------------------
Total liabilities and shareholders' equity      18,339        12,408
---------------------------------------------------------------------
---------------------------------------------------------------------

See accompanying notes.


Talisman Energy Inc.
Consolidated Statements of Income
(unaudited)

                               Three months ended        Years ended
(millions of Canadian dollars         December 31        December 31
 except as otherwise noted)         2005     2004      2005     2004
---------------------------------------------------------------------
                                                           (restated
Revenue                                                       note 1)
 Gross sales                       2,891    1,828     9,554    6,874
 Less hedging loss                    20      165        77      480
---------------------------------------------------------------------
 Gross sales, net of hedging       2,871    1,663     9,477    6,394
 Less royalties                      488      281     1,595    1,124
---------------------------------------------------------------------
 Net sales                         2,383    1,382     7,882    5,270
 Other                                50       20       165       85
---------------------------------------------------------------------
Total revenue                      2,433    1,402     8,047    5,355
---------------------------------------------------------------------

Expenses
 Operating                           416      302     1,459    1,198
 Transportation                       60       50       206      192
 General and administrative           58       64       201      183
 Depreciation, depletion and
  amortization                       511      447     1,843    1,650
 Dry hole                             77       89       241      311
 Exploration                          96       71       275      238
 Interest on long-term debt           45       38       166      173
 Stock-based compensation            121        7       633      171
 Other                                30       74        39       89
---------------------------------------------------------------------
Total expenses                     1,414    1,142     5,063    4,205
---------------------------------------------------------------------
Income before taxes                1,019      260     2,984    1,150
---------------------------------------------------------------------
Taxes
 Current income tax                  315      204     1,058      478
 Future income tax (recovery)        107      (99)      176     (111)
 Petroleum revenue tax                64       34       189      129
---------------------------------------------------------------------
                                     486      139     1,423      496
---------------------------------------------------------------------
Net income                           533      121     1,561      654
---------------------------------------------------------------------
---------------------------------------------------------------------

Per common share (Canadian dollars)
 Net income                         1.45     0.32      4.24     1.71
 Diluted net income                 1.42     0.31      4.14     1.68
---------------------------------------------------------------------
---------------------------------------------------------------------
Average number of common shares
 outstanding (millions)              366      381       368      383
Diluted number of common shares
 outstanding (millions)              376      387       377      390
---------------------------------------------------------------------
---------------------------------------------------------------------

See accompanying notes.


Consolidated Statements of Retained Earnings
(unaudited)

                               Three months ended        Years ended
                                      December 31        December 31
(millions of Canadian dollars)      2005     2004      2005     2004
---------------------------------------------------------------------
                                        (restated          (restated
                                           note 1)            note 1)
Retained earnings,
 beginning of period               2,894    2,327     2,170    1,852
Net income                           533      121     1,561      654
Common share dividends               (63)     (56)     (125)    (114)
Purchase of common shares            (48)    (222)     (290)    (222)
---------------------------------------------------------------------
Retained earnings, end of period   3,316    2,170     3,316    2,170
---------------------------------------------------------------------
---------------------------------------------------------------------

See accompanying notes.


Talisman Energy Inc.
Consolidated Statements of Cash Flows
(unaudited)


                               Three months ended        Years ended
                                      December 31        December 31
(millions of Canadian dollars)      2005     2004      2005     2004
---------------------------------------------------------------------
                                                           (restated
Operating                                                     note 1)
Net income                           533      121     1,561      654
Items not involving cash             839      487     2,836    2,024
Exploration                           96       71       275      238
---------------------------------------------------------------------
                                   1,468      679     4,672    2,916
Changes in non-cash working
 capital                             231       46       199      203
---------------------------------------------------------------------
Cash provided by operating
 activities                        1,699      725     4,871    3,119
---------------------------------------------------------------------
Investing
Corporate acquisitions            (2,549)       -    (2,549)       -
Capital expenditures
 Exploration, development
  and corporate                     (988)    (735)   (3,206)  (2,565)
 Acquisitions                         (7)     (18)     (544)    (317)
Proceeds of resource property
 dispositions                          6       70        17       75
Investments                            -        4        (4)       -
Changes in non-cash working
 capital                             136      110       142       50
---------------------------------------------------------------------
Cash used in investing
 activities                       (3,402)    (569)   (6,144)  (2,757)
---------------------------------------------------------------------
Financing
Long-term debt repaid               (285)     (99)   (1,294)  (1,069)
Long-term debt issued              1,848      330     3,129      912
Short-term borrowings                  -        -
Common shares issued (purchased)     (55)    (286)     (352)    (284)
Common share dividends               (63)     (56)     (125)    (114)
Deferred credits and other           (12)     (29)       (9)     164
Changes in non-cash working
 capital                               -       (2)       (3)     (10)
---------------------------------------------------------------------
Cash provided by (used in)
 financing activities              1,433     (142)    1,346     (401)
---------------------------------------------------------------------
Effect of translation on
 foreign currency cash and
 cash equivalents                     25       (4)       19      (21)
---------------------------------------------------------------------
Net (decrease) increase in cash
 and cash equivalents               (245)      10        92      (60)
Cash and cash equivalents,
 beginning of period                 375       28        38       98
---------------------------------------------------------------------
Cash and cash equivalents,
 end of period                       130       38       130       38
---------------------------------------------------------------------
---------------------------------------------------------------------

See accompanying notes.

ABBREVIATED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

The Consolidated Financial Statements of Talisman Energy Inc. ("Talisman" or the "Company") have been prepared by management in accordance with Canadian generally accepted accounting principles. Certain information and disclosures normally required to be included in notes to annual consolidated financial statements have been condensed or omitted.

1. Change in accounting policy

Preferred securities

Effective January 1, 2005 the Company retroactively adopted certain changes to the Canadian Institute of Chartered Accountants ("CICA") accounting standard for financial instruments. The change to this standard requires that the Company's preferred securities, all of which were redeemed in 2004, be treated as debt rather than equity. Previously preferred securities charges were charged directly to retained earnings but under these changes to the accounting standard they would have been charged to interest expense. In addition, since the preferred securities would have been treated as debt, the balance would have been revalued at each balance sheet date with the offsetting movement reflected in the cumulative foreign currency translation account. As a result there would not have been a gain on the redemption of the preferred securities. There was no impact to the 2005 results as the preferred securities were fully redeemed by the end of the second quarter in 2004.

The adjustment required to the December 31, 2004 Consolidated Balance
Sheet to implement this change in accounting is as follows:
---------------------------------------------------------------------
                                           As
                                   previously                     As
                                     reported  Adjustments  restated
---------------------------------------------------------------------
Cumulative foreign currency translation  (150)          74       (76)
Retained earnings                       2,244          (74)    2,170
---------------------------------------------------------------------
---------------------------------------------------------------------

The adjustment to the Consolidated Statement of Income for the year
ended December 31, 2004 is as follows:
---------------------------------------------------------------------
                                           As
                                   previously                     As
                                     reported  Adjustments  restated
---------------------------------------------------------------------
Interest on long-term debt                158           15       173
Future income tax (recovery)             (105)          (6)     (111)
---------------------------------------------------------------------
Net income                                663           (9)      654
Preferred securities charges,
 net of tax                                (9)           9         -
Gain on redemption of preferred
 securities, net of tax                    23          (23)        -
---------------------------------------------------------------------
Net income available to common
 shareholders                             677          (23)      654
---------------------------------------------------------------------

Per common share (Canadian dollars)
 Net income                              1.77         (.06)     1.71
 Diluted net income                      1.74         (.06)     1.68
---------------------------------------------------------------------
---------------------------------------------------------------------

The adjustment to the Consolidated Statement of Income for the year
ended December 31, 2003 is as follows:
---------------------------------------------------------------------
                                           As
                                   previously                     As
                                     reported  Adjustments  restated
---------------------------------------------------------------------
Interest on long-term debt                137           41       178
Future income tax (recovery)              (48)          (5)      (53)
---------------------------------------------------------------------
Net income                              1,012          (36)      976
Preferred securities charges,
 net of tax                               (22)          22         -
---------------------------------------------------------------------
Net income available to common
 shareholders                             990          (14)      976
---------------------------------------------------------------------

Per common share (Canadian dollars)
 Net income                              2.56         (.03)     2.53
 Diluted net income                      2.53         (.03)     2.50
---------------------------------------------------------------------
---------------------------------------------------------------------


2. Selected Cash Flow Information
---------------------------------------------------------------------
                               Three months ended        Years ended
                                      December 31        December 31
                                    2005     2004      2005     2004
---------------------------------------------------------------------
                                                           (restated
                                                              note 1)
---------------------------------------------------------------------
Net income                           533      121     1,561      654
---------------------------------------------------------------------
Items not involving cash
 Depreciation, depletion
  and amortization                   511      447     1,843    1,650
 Property impairments                  6       31        31       31
 Dry hole                             77       89       241      311
 Net loss (gain) on asset
  disposals                           (1)      28        (3)      30
 Stock-based compensation             91      (10)      480       89
 Future taxes and deferred
  petroleum revenue tax              137      (84)      215     (106)
 Other                                18      (14)       29       19
---------------------------------------------------------------------
                                     839      487     2,836    2,024
---------------------------------------------------------------------
Exploration                           96       71       275      238
---------------------------------------------------------------------
                                   1,468      679     4,672    2,916
---------------------------------------------------------------------
Changes in non-cash working
 capital                             231       46       199      203
---------------------------------------------------------------------
---------------------------------------------------------------------
Cash provided by operating
 activities                        1,699      725     4,871    3,119
---------------------------------------------------------------------
---------------------------------------------------------------------


3. Segmented Information

                           North America (1)         North Sea (2)
                      -----------------------------------------------
                           Three                   Three
                          months       Years      months       Years
                           ended       ended       ended       ended
                        December    December    December    December
(millions of                  31          31          31          31
 Canadian dollars)    2005  2004  2005  2004  2005  2004  2005  2004
---------------------------------------------------------------------
 Revenue
 Gross sales         1,317   812 4,129 3,115   988   659 3,320 2,385
 Hedging                21    47    78   151    (1)  118    (1)  329
 Royalties             261   143   816   599    19    10    56    37
---------------------------------------------------------------------
 Net sales           1,035   622 3,235 2,365   970   531 3,265 2,019
 Other                  14    14    76    62    35     6    88    23
---------------------------------------------------------------------
 Total revenue       1,049   636 3,311 2,427 1,005   537 3,353 2,042
---------------------------------------------------------------------
 Segmented expenses
 Operating             131   114   478   421   247   159   859   662
 Transportation         24    18    75    75    24    18    79    66
 DD&A                  242   227   946   785   206   179   670   661
 Dry hole               46    38   122   128    15    14    53   109
 Exploration            36    36   128   123    19     6    53    28
 Other                  (1)   34   (10)   18    14    16    54    30
---------------------------------------------------------------------
 Total segmented
  expenses             478   467 1,739 1,550   525   392 1,768 1,556
---------------------------------------------------------------------
 Segmented income
  before taxes         571   169 1,572   877   480   145 1,585   486
---------------------------------------------------------------------
 Non-segmented
  expenses
 General and
  administrative
 Interest
 Stock-based
  compensation
 Currency
  translation
---------------------------------------------------------------------
 Total non-segmented
  expenses
---------------------------------------------------------------------
 Income before
  taxes
---------------------------------------------------------------------
 Capital
  expenditures
 Exploration           212   181   658   590    50    11   165   150
 Development           261   246   879   821   253   101   867   357
 Midstream              42    34    72    41     -     -     -     -
---------------------------------------------------------------------
 Exploration and
  development          515   461 1,609 1,452   303   112 1,032   507
 Property
  acquisitions
 Midstream
  acquisitions
 Proceeds on
  dispositions
 Other
  non-segmented
---------------------------------------------------------------------
 Net capital
  expenditures
---------------------------------------------------------------------
 Property, plant
  and equipment                  6,985 6,214             6,072 3,074
 Goodwill                          291   291             1,086    75
 Other                             663   419               614   347
---------------------------------------------------------------------
 Segmented assets                7,939 6,924             7,772 3,496
 Non-segmented
  assets
---------------------------------------------------------------------
 Total assets
---------------------------------------------------------------------
---------------------------------------------------------------------

                            Southeast Asia
                           and Australia (3)        North Africa (4)
                      -----------------------------------------------
                           Three                   Three
                          months       Years      months       Years
                           ended       ended       ended       ended
                        December    December    December    December
(millions of                  31          31          31          31
 Canadian dollars)    2005  2004  2005  2004  2005  2004  2005  2004
---------------------------------------------------------------------
 Revenue
 Gross sales           459   291 1,527 1,120    69    66   349   254
 Hedging                 -     -     -     -     -     -     -     -
 Royalties             174   102   553   391    25    26   135    97
---------------------------------------------------------------------
 Net sales             285   189   974   729    44    40   214   157
 Other                   1     -     1     -     -     -     -     -
---------------------------------------------------------------------
 Total revenue         286   189   975   729    44    40   214   157
---------------------------------------------------------------------
 Segmented expenses
 Operating              29    24    87    98     6     5    24    17
 Transportation         10    11    43    42     2     3     9     9
 DD&A                   45    32   144   174     7     9    36    30
 Dry hole                4    12    11    25     -     4     -     4
 Exploration            20     3    40    20     -     -     -     -
 Other                   1   (12)    1    (9)    -     -     -     -
---------------------------------------------------------------------
 Total segmented
  expenses             109    70   326   350    15    21    69    60
---------------------------------------------------------------------
 Segmented income
  before taxes         177   119   649   379    29    19   145    97
---------------------------------------------------------------------
 Non-segmented
  expenses
 General and
  administrative
 Interest
 Stock-based
  compensation
 Currency
  translation
---------------------------------------------------------------------
 Total non-segmented
  expenses
---------------------------------------------------------------------
 Income before
  taxes
---------------------------------------------------------------------
 Capital
  expenditures
 Exploration            32    16    74    54     2     -     2     -
 Development            45    62   231   201    13     1    25     8
 Midstream               -     -     -     -     -     -     -     -
---------------------------------------------------------------------
 Exploration
  and development       77    78   305   255    15     1    27     8
 Property
  acquisitions
 Midstream
  acquisitions
 Proceeds on
  dispositions
 Other non-segmented
---------------------------------------------------------------------
 Net capital
  expenditures
---------------------------------------------------------------------
 Property, plant
  and equipment                  1,465 1,050               177   178
 Goodwill                          123   100                 4     -
 Other                             348   221                43    36
---------------------------------------------------------------------
 Segmented assets                1,936 1,371               224   214
 Non-segmented
  assets
---------------------------------------------------------------------
 Total assets
---------------------------------------------------------------------
---------------------------------------------------------------------


                           Trinidad and Tobago          Other
                      -----------------------------------------------
                           Three                   Three
                          months       Years      months       Years
                           ended       ended       ended       ended
                        December    December    December    December
(millions of                  31          31          31          31
 Canadian dollars)    2005  2004  2005  2004  2005  2004  2005  2004
---------------------------------------------------------------------
 Revenue
 Gross sales            58     -   229     -     -     -     -     -
 Hedging                 -     -     -     -     -     -     -     -
 Royalties               9     -    35     -     -     -     -     -
---------------------------------------------------------------------
 Net sales              49     -   194     -     -     -     -     -
 Other                   -     -     -     -     -     -     -     -
---------------------------------------------------------------------
 Total revenue          49     -   194     -     -     -     -     -
---------------------------------------------------------------------
 Segmented expenses
 Operating               3     -    11     -     -     -     -     -
 Transportation          -     -     -     -     -     -     -     -
 DD&A                   11     -    47     -     -     -     -     -
 Dry hole                2    12    21    12    10     9    34    33
 Exploration             1     3     5    21    20    23    49    46
 Other                   -     1     -     1     4    19     1    19
---------------------------------------------------------------------
 Total segmented
  expenses              17    16    84    34    34    51    84    98
---------------------------------------------------------------------
 Segmented income
  before taxes          32   (16)  110   (34)  (34)  (51)  (84)  (98)
---------------------------------------------------------------------
 Non-segmented expenses
 General and
  administrative
 Interest
 Stock-based
  compensation
 Currency translation
---------------------------------------------------------------------
 Total non-segmented
  expenses
---------------------------------------------------------------------
 Income before taxes
---------------------------------------------------------------------
 Capital expenditures
 Exploration            15     5    51    33    47    37   134   125
 Development             8    34    21   158     -     -     -     -
 Midstream               -     -     -     -     -     -     -     -
---------------------------------------------------------------------
 Exploration and
 development            23    39    72   191    47    37   134   125
 Property acquisitions
 Midstream
  acquisitions
 Proceeds on
  dispositions
 Other non-segmented
---------------------------------------------------------------------
 Net capital
  expenditures
---------------------------------------------------------------------
 Property, plant and
  equipment                         275   182               99   149
 Goodwill                             -     -                -     -
 Other                               24    11               13     -
---------------------------------------------------------------------
 Segmented assets                   299   193              112   149
 Non-segmented assets
---------------------------------------------------------------------
 Total assets
---------------------------------------------------------------------
---------------------------------------------------------------------

                                                Total
                      -----------------------------------------------
                                      Three months             Years
                                             ended             ended
                                       December 31       December 31
(millions of Canadian dollars)       2005     2004     2005     2004
---------------------------------------------------------------------
 Revenue
 Gross sales                       2,891     1,828    9,554    6,874
 Hedging                              20       165       77      480
 Royalties                           488       281    1,595    1,124
---------------------------------------------------------------------
 Net sales                         2,383     1,382    7,882    5,270
 Other                                50        20      165       85
---------------------------------------------------------------------
 Total revenue                     2,433     1,402    8,047    5,355
---------------------------------------------------------------------
 Segmented expenses
 Operating                           416       302    1,459    1,198
 Transportation                       60        50      206      192
 DD&A                                511       447    1,843    1,650
 Dry hole                             77        89      241      311
 Exploration                          96        71      275      238
 Other                                18        58       46       59
---------------------------------------------------------------------
 Total segmented expenses          1,178     1,017    4,070    3,648
---------------------------------------------------------------------
 Segmented income before taxes     1,255       385    3,977    1,707
---------------------------------------------------------------------
 Non-segmented expenses
 General and administrative           58        64      201      183
 Interest                             45        38      166      173
 Stock-based compensation            121         7      633      171
 Currency translation                 12        16       (7)      30
---------------------------------------------------------------------
 Total non-segmented expenses        236       125      993      557
---------------------------------------------------------------------
 Income before taxes               1,019       260    2,984    1,150
---------------------------------------------------------------------
 Capital expenditures
 Exploration                         358       250    1,084      952
 Development                         580       444    2,023    1,545
 Midstream                            42        34       72       41
---------------------------------------------------------------------
 Exploration and development         980       728    3,179    2,538
 Property acquisitions                 3        36      536      330
 Midstream acquisitions                -         -        -        -
 Proceeds on dispositions             (7)      (74)     (22)     (88)
 Other non-segmented                   9         6       28       26
---------------------------------------------------------------------
 Net capital expenditures            985       696    3,721    2,806
---------------------------------------------------------------------
 Property, plant and equipment                       15,073   10,847
 Goodwill                                             1,504      466
 Other                                                1,705    1,034
---------------------------------------------------------------------
 Segmented assets                                    18,282   12,347
 Non-segmented assets                                    57       61
---------------------------------------------------------------------
 Total assets                                        18,339   12,408
---------------------------------------------------------------------
---------------------------------------------------------------------


                                      Three months             Years
                                             ended             ended
                                       December 31       December 31
(1) North America                    2005     2004     2005     2004
---------------------------------------------------------------------
Canada                                938      568    2,965    2,199
US                                    111       68      346      228
---------------------------------------------------------------------
Total revenue                       1,049      636    3,311    2,427
---------------------------------------------------------------------
Canada                                                6,551    5,738
US                                                      434      476
---------------------------------------------------------------------
Property, plant and equipment                         6,985    6,214
---------------------------------------------------------------------
---------------------------------------------------------------------

                                      Three months             Years
                                             ended             ended
                                       December 31       December 31
(2) North Sea                        2005     2004     2005     2004
---------------------------------------------------------------------
United Kingdom                        775      492    2,683    1,897
Netherlands                            18       11       56       36
Norway                                202       34      604      109
Denmark                                10        -       10        -
---------------------------------------------------------------------
Total revenue                       1,005      537    3,353    2,042
---------------------------------------------------------------------
United Kingdom                                        4,620    2,858
Netherlands                                              45       41
Norway                                                1,149      175
Denmark                                                 258        -
---------------------------------------------------------------------
Property, plant and equipment                         6,072    3,074
---------------------------------------------------------------------
---------------------------------------------------------------------

                                      Three months             Years
                                             ended             ended
                                       December 31       December 31
(3) Southeast Asia and Australia     2005     2004     2005     2004
---------------------------------------------------------------------
Indonesia                             115       80      408      346
Malaysia                              165      106      539      363
Vietnam                                 6        3       28       20
Australia                               -        -        -        -
---------------------------------------------------------------------
Total revenue                         286      189      975      729
---------------------------------------------------------------------
Indonesia                                               371      327
Malaysia                                                818      701
Vietnam                                                  23       22
Australia                                               253        -
---------------------------------------------------------------------
Property, plant and equipment                         1,465    1,050
---------------------------------------------------------------------
---------------------------------------------------------------------

                                      Three months             Years
                                             ended             ended
                                       December 31       December 31
(4) North Africa                     2005     2004     2005     2004
---------------------------------------------------------------------
Algeria                                42       40      212      157
Tunisia                                 2        -        2        -
---------------------------------------------------------------------
Total Revenue                          44       40      214      157
---------------------------------------------------------------------
---------------------------------------------------------------------
Algeria                                                 162      178
Tunisia                                                  15        -
---------------------------------------------------------------------
Property, plant and equipment                           177      178
---------------------------------------------------------------------
---------------------------------------------------------------------


Talisman Energy Inc.
Product Netbacks
(unaudited)

                                      Three months ended December 31
---------------------------------------------------------------------
(C$ - production
 before royalties)                    2005   2004(1)    2005    2004
---------------------------------------------------------------------
                                    Oil and liquids      Natural gas
                                             ($/bbl)          ($/mcf)
---------------------------------------------------------------------
North         Sales price            54.84    44.05    12.25    6.99
America       Hedging (gain)          4.28     8.64        -    0.04
              Royalties              10.69     8.76     2.46    1.20
              Transportation          0.51     0.46     0.23    0.21
              Operating costs         8.33     7.79     0.95    0.80
              -------------------------------------------------------
                                     31.03    18.40     8.61    4.74
---------------------------------------------------------------------
---------------------------------------------------------------------
North Sea     Sales price            66.53    50.26     8.35    6.08
              Hedging (gain)         (0.07)   10.02        -       -
              Royalties               0.84     0.52     0.48    0.37
              Transportation          1.27     1.09     0.40    0.38
              Operating costs        17.14    12.61     0.96    0.72
              -------------------------------------------------------
                                     47.35    26.02     6.51    4.61
---------------------------------------------------------------------
---------------------------------------------------------------------
Southeast     Sales price            68.30    53.81     6.72    4.55
Asia &        Royalties              27.27    21.94     1.98    1.20
Australia     Transportation         (0.12)    0.18     0.43    0.38
              Operating costs         5.04     5.60     0.30    0.25
              -------------------------------------------------------
                                     36.11    26.09     4.01    2.72
---------------------------------------------------------------------
---------------------------------------------------------------------
North Africa  Sales price            68.02    46.50     5.80       -
              Royalties              25.00    18.48        -       -
              Transportation          1.65     1.64        -       -
              Operating costs         5.06     3.77        -       -
              -------------------------------------------------------
                                     36.31    22.61     5.80       -
---------------------------------------------------------------------
---------------------------------------------------------------------
Trinidad      Sales price            63.78        -
& Tobago      Royalties              10.73        -
              Operating costs         2.45        -
              -------------------------------------------------------
                                     50.60        -
---------------------------------------------------------------------
---------------------------------------------------------------------
Total         Sales price            64.62    49.10    10.63    6.38
Company       Hedging (gain)          0.77     7.53        -    0.03
              Royalties               8.81     6.85     2.14    1.12
              Transportation          0.86     0.84     0.29    0.26
              Operating costs        12.25     9.84     0.82    0.67
              -------------------------------------------------------
                                     41.93    24.04     7.38    4.30
---------------------------------------------------------------------
---------------------------------------------------------------------


                                     Twelve months ended December 31
---------------------------------------------------------------------
(C$ - production
 before royalties)                    2005   2004(1)    2005    2004
---------------------------------------------------------------------
                                    Oil and liquids      Natural gas
                                             ($/bbl)          ($/mcf)
---------------------------------------------------------------------
North         Sales price            52.62    42.11     9.05    6.83
America       Hedging (gain)          3.99     5.95        -    0.10
              Royalties              10.79     8.59     1.80    1.31
              Transportation          0.50     0.49     0.19    0.20
              Operating costs         7.24     6.75     0.90    0.79
              -------------------------------------------------------
                                     30.10    20.33     6.16    4.43
---------------------------------------------------------------------
---------------------------------------------------------------------
North Sea     Sales price            64.78    48.29     7.08    5.55
              Hedging (gain)         (0.02)    7.36        -       -
              Royalties               0.71     0.43     0.49    0.42
              Transportation          1.19     1.14     0.50    0.35
              Operating costs        17.14    14.06     0.82    0.55
              -------------------------------------------------------
                                     45.76    25.30     5.27    4.23
---------------------------------------------------------------------
---------------------------------------------------------------------
Southeast     Sales price            68.79    51.29     6.40    4.74
Asia          Royalties              27.28    21.24     1.95    1.19
& Australia   Transportation          0.09     0.23     0.41    0.41
              Operating costs         4.48     5.57     0.30    0.27
              -------------------------------------------------------
                                     36.94    24.25     3.74    2.87
---------------------------------------------------------------------
---------------------------------------------------------------------
North Africa  Sales price            66.71    51.17     5.80       -
              Royalties              25.72    19.65        -       -
              Transportation          1.65     1.76        -       -
              Operating costs         4.52     3.51        -       -
              -------------------------------------------------------
                                     34.82    26.25     5.80       -
---------------------------------------------------------------------
---------------------------------------------------------------------
Trinidad      Sales price            63.40        -
& Tobago      Royalties               9.82        -
              Operating costs         2.94        -
              -------------------------------------------------------
                                     50.64        -
---------------------------------------------------------------------
---------------------------------------------------------------------
Total         Sales price            62.78    47.45     8.30    6.28
Company       Hedging (gain)          0.85     5.42        -    0.07
              Royalties               8.64     6.84     1.71    1.21
              Transportation          0.86     0.88     0.27    0.26
              Operating costs        11.81    10.32     0.76    0.66
              -------------------------------------------------------
                                     40.62    23.99     5.56    4.08
---------------------------------------------------------------------
---------------------------------------------------------------------

(1) Unit operating costs include pipeline operations for the North
    Sea. Prior years have been restated accordingly. Netbacks do not
    include synthetic oil.


Talisman Energy Inc.
Product Netbacks (1)
(unaudited)


                            Three months ended Twelve months ended
(US$ - production net of           December 31         December 31
 royalties)                       2005    2004(2)     2005    2004(2)
---------------------------------------------------------------------
North        Oil and liquids
America       (US$/bbl)
              Sales price        46.75   36.05       43.55   32.44
              Hedging (gain)      4.53    8.81        4.16    5.81
              Transportation      0.54    0.47        0.52    0.48
              Operating costs     8.82    7.96        7.54    6.55
             --------------------------------------------------------
                                 32.86   18.81       31.33   19.60
             --------------------------------------------------------
             Natural gas
              (US$/mcf)
              Sales price        10.44    5.74        7.51    5.26
              Hedging (gain)         -    0.04           -    0.10
              Transportation      0.25    0.21        0.20    0.19
              Operating costs     1.02    0.79        0.93    0.76
             --------------------------------------------------------
                                  9.17    4.70        6.38    4.21
---------------------------------------------------------------------
North Sea    Oil and liquids
              (US$/bbl)
              Sales price        56.74   41.14       53.74   37.23
              Hedging (gain)     (0.06)   8.27       (0.02)   5.77
              Transportation      1.10    0.90        1.00    0.89
              Operating costs    14.83   10.40       14.37   10.89
             --------------------------------------------------------
                                 40.87   21.57       38.39   19.68
             --------------------------------------------------------
             Natural gas
              (US$/mcf)
              Sales price         7.13    4.99        5.88    4.29
              Transportation      0.36    0.33        0.44    0.29
              Operating costs     0.87    0.63        0.73    0.47
             --------------------------------------------------------
                                  5.90    4.03        4.71    3.53
---------------------------------------------------------------------
Southeast    Oil and liquids
Asia &        (US$/bbl)
Australia     Sales price        58.25   43.93       57.24   39.49
              Transportation     (0.16)   0.25        0.12    0.30
              Operating costs     7.16    7.72        6.18    7.32
             --------------------------------------------------------
                                 51.25   35.96       50.94   31.87
             --------------------------------------------------------
             Natural gas
              (US$/mcf)
              Sales price         5.73    3.72        5.29    3.65
              Transportation      0.52    0.43        0.49    0.42
              Operating costs     0.37    0.28        0.35    0.27
             --------------------------------------------------------
                                  4.84    3.01        4.45    2.96
---------------------------------------------------------------------
North        Oil
Africa        (US$/bbl)
              Sales price        58.04   38.06       55.16   39.48
              Transportation      2.22    2.22        2.22    2.20
              Operating costs     6.82    5.10        6.09    4.41
             --------------------------------------------------------
                                 49.00   30.74       46.85   32.87
             --------------------------------------------------------
             Natural gas
              (US$/mcf)
              Sales price         4.97       -        4.97       -
             --------------------------------------------------------
                                  4.97       -        4.97       -
---------------------------------------------------------------------
Trinidad      Oil (US$/bbl)
& Tobago      Sales price        54.35       -       52.44       -
              Operating costs     2.49       -        2.86       -
             --------------------------------------------------------
                                 51.86       -       49.58       -
---------------------------------------------------------------------
Total        Oil and liquids
Company       (US$/bbl)
              Sales price        55.10   40.16       52.07   36.57
              Hedging (gain)      0.76    7.15        0.82    4.90
              Transportation      0.85    0.80        0.83    0.79
              Operating costs    12.12    9.34       11.36    9.25
             --------------------------------------------------------
                                 41.37   22.87       39.06   21.63
             --------------------------------------------------------
             Natural gas
              (US$/mcf)
              Sales price         9.07    5.23        6.89    4.84
              Hedging (gain)         -    0.03           -    0.07
              Transportation      0.32    0.26        0.28    0.25
              Operating costs     0.88    0.67        0.80    0.63
             --------------------------------------------------------
                                  7.87    4.27        5.81    3.89
---------------------------------------------------------------------

(1) Per US reporting practice, netbacks calculated using US$ and
    production after deduction of royalty volumes.
(2) Unit operating costs include pipeline operations for the North
    Sea. Prior years have been restated accordingly.
    Netbacks do not include synthetic oil.



Talisman Energy Inc.
Production net of royalties (1)
(unaudited)

                                            Three             Twelve
                                     months ended       months ended
                                      December 31        December 31
                                    2005     2004      2005     2004
---------------------------------------------------------------------

Oil and liquids (bbls/d)
 North America                    43,676   43,636    42,613   43,303
 North Sea                       157,888  126,622   131,258  120,768
 Southeast Asia & Australia       29,505   20,738    21,406   20,884
 North Africa                      9,558    9,235     9,449    8,338
 Trinidad & Tobago                 8,975        -     8,545        -
 Synthetic oil (Canada)            2,743    2,748     2,587    2,868
---------------------------------------------------------------------
Total oil and liquids            252,345  202,979   215,858  196,161
---------------------------------------------------------------------

Natural gas (mmcf/d)
 North America                       725      738       733      715
 North Sea                           142      113       112      105
 Southeast Asia & Australia          202      206       198      194
 North Africa                          -        -         -        -
---------------------------------------------------------------------
Total natural gas                  1,069    1,057     1,043    1,014
---------------------------------------------------------------------

Total mboe/d                         430      379       390      365
---------------------------------------------------------------------
---------------------------------------------------------------------

(1) Information provided per US reporting practice of calculating
    production after deduction of royalty volumes.


Continuity of Gross Proved Reserves (1)
                                                           Southeast
                                         North     North    Asia and
                                       America       Sea   Australia
                                            (2)       (3)         (4)
---------------------------------------------------------------------
Crude Oil and Liquids (mmbbls)
Total proved
 Proved reserves at December 31, 2002    199.1     249.7        60.6
 Discoveries, additions, and extensions   16.0       8.2        25.2
 Purchase of reserves                      1.3      21.1           -
 Sale of reserves                         (5.3)        -           -
 Net revisions and transfers              (0.1)     18.7         7.6
 2003 Production                         (20.8)    (41.3)       (9.0)
---------------------------------------------------------------------
 Proved reserves at December 31, 2003    190.2     256.4        84.4
 Discoveries, additions, and extensions   17.3      29.8        13.0
 Purchase of reserves                      0.2      34.1         1.3
 Sale of reserves                         (2.6)     (3.3)          -
 Net revisions and transfers              (2.2)     24.6         3.4
 2004 Production                         (19.9)    (44.6)      (13.0)
---------------------------------------------------------------------
 Proved Reserves at December 31, 2004    183.0     297.0        89.1
 Discoveries, additions, and extensions   12.6      43.9        12.7
 Purchase of reserves                      0.2      74.9        22.1
 Sale of reserves                         (0.0)     (0.9)          -
 Net revisions and transfers              (2.8)     34.3        (1.3)
 2005 Production                         (19.6)    (48.4)      (12.9)
---------------------------------------------------------------------
Proved reserves at December 31, 2005     173.4     400.8       109.7
Proved Developed
December 31, 2002                        190.0     212.6        19.7
December 31, 2003                        186.4     213.0        29.5
December 31, 2004                        171.0     254.0        39.9
December 31, 2005                        161.0     312.3        67.7
---------------------------------------------------------------------
Natural Gas (bcf)
Total proved
Proved reserves at December 31, 2002   2,593.4     262.1     1,528.3
Discoveries, additions, and extensions   351.5       1.0       107.0
Purchase of reserves                     107.1      14.4           -
Sale of reserves                         (14.3)        -           -
Net revisions and transfers              (77.0)     17.5       (20.6)
2003 Production                         (315.8)    (39.9)      (42.7)
---------------------------------------------------------------------
Proved reserves at December 31, 2003   2,644.9     255.1     1,572.0
Discoveries, additions, and extensions   478.5       8.0       765.3
Purchase of reserves                      22.8       0.1           -
Sale of reserves                         (72.7)     (0.5)          -
Net revisions and transfers             (113.2)    (33.2)      (58.7)
2004 Production                         (324.9)    (41.6)      (95.2)
---------------------------------------------------------------------
Proved reserves at December 31, 2004   2,635.4     187.9     2,183.4
Discoveries, additions, and extensions   361.0      24.0       129.1
Purchase of reserves                      16.8      61.3        38.9
Sale of reserves                          (1.2)        -           -
Net revisions and transfers               28.6      14.1        (3.4)
2005 Production                         (333.8)    (38.5)     (103.6)
---------------------------------------------------------------------
Proved reserves at December 31, 2005   2,706.8     248.8     2,244.4
Proved Developed
December 31, 2002                      2,278.7     232.8       723.8
December 31, 2003                      2,404.0     220.1       920.9
December 31, 2004                      2,207.3     160.6       858.2
December 31, 2005                      2,226.5     189.7       793.2


                                       North Trinidad
                                      Africa      and
                                          (5)  Tobago  Sudan   Total
---------------------------------------------------------------------
Crude Oil and Liquids (mmbbls)
Total proved
 Proved reserves at December 31, 2002   27.4     19.2  160.9   716.9
 Discoveries, additions, and extensions  3.9        -      -    53.3
 Purchase of reserves                      -        -      -    22.4
 Sale of reserves                          -        - (156.1) (161.4)
 Net revisions and transfers             0.1        -      -    26.3
 2003 Production                        (2.4)       -   (4.8)  (78.3)
---------------------------------------------------------------------
 Proved reserves at December 31, 2003   29.0     19.2    -   579.2
 Discoveries, additions, and extensions 13.9        -      -    74.0
 Purchase of reserves                      -        -      -    35.6
 Sale of reserves                          -        -      -    (5.9)
 Net revisions and transfers            (0.7)    (7.8)     -    17.3
 2004 Production                        (5.0)       -      -   (82.5)
---------------------------------------------------------------------
 Proved Reserves at December 31, 2004   37.2     11.4      -   617.7
 Discoveries, additions, and extensions  8.6     (0.1)     -    77.7
 Purchase of reserves                    0.8        -      -    98.0
 Sale of reserves                          -        -      -    (0.9)
 Net revisions and transfers             2.7      0.9      -    33.8
 2005 Production                        (5.6)    (3.7)     -   (90.2)
---------------------------------------------------------------------
Proved reserves at December 31, 2005    43.7      8.5      -   736.1
Proved Developed
December 31, 2002                        4.8        -  143.4   570.5
December 31, 2003                       25.5        -      -   454.4
December 31, 2004                       27.9     11.0      -   503.8
December 31, 2005                       26.2      8.5      -   575.7
---------------------------------------------------------------------
Natural Gas (bcf)
Total proved
Proved reserves at December 31, 2002       -    223.5      - 4,607.3
Discoveries, additions, and extensions     -        -      -   459.5
Purchase of reserves                       -        -      -   121.5
Sale of reserves                           -        -      -   (14.3)
Net revisions and transfers                -        -      -   (80.1)
2003 Production                            -        -      -  (398.4)
---------------------------------------------------------------------
Proved reserves at December 31, 2003       -    223.5      - 4,695.5
Discoveries, additions, and extensions     -        -      - 1,251.8
Purchase of reserves                       -        -      -    22.9
Sale of reserves                           -        -      -   (73.2)
Net revisions and transfers                -     (7.0)     -  (212.1)
2004 Production                            -        -      -  (461.7)
---------------------------------------------------------------------
Proved reserves at December 31, 2004       -    216.5      - 5,223.2
Discoveries, additions, and extensions     -        -      -   514.1
Purchase of reserves                     1.4        -      -   118.4
Sale of reserves                           -        -      -    (1.2)
Net revisions and transfers                -     (1.3)     -    38.0
2005 Production                            -        -      -  (475.9)
---------------------------------------------------------------------
Proved reserves at December 31, 2005     1.4    215.2      - 5,416.6
Proved Developed
December 31, 2002                          -        -      - 3,235.3
December 31, 2003                          -        -      - 3,545.0
December 31, 2004                          -        -      - 3,226.1
December 31, 2005                        0.9        -      - 3,210.3

Notes:
(1) See oil and gas advisory.
(2) North American net proved reserves exclude synthetic crude oil
    reserves: 2002 - 43.2 mmbbls; 2003 - 42.3 mmbbls; 2004 - 41.2
    mmbbls; and 2005 - 40.2 mmbbls.
(3) North Sea for 2002 includes the UK and the Netherlands; for 2003
    and 2004 the North Sea includes the UK, the Netherlands and
    Norway, but excludes Denmark.
(4) Southeast Asia and Australia for 2002, 2003 and 2004 includes
    Indonesia and Malaysia/Vietnam, but excludes Australia.
(5) North Africa for 2002, 2003 and 2004 includes Algeria, but
    excludes Tunisia.


Continuity of Net Proved Reserves (1)
                                                           Southeast
                                         North     North    Asia and
                                       America       Sea   Australia
                                            (2)       (3)         (4)
---------------------------------------------------------------------
Crude Oil and Liquids (mmbbls)
Total proved
 Proved reserves at December 31, 2002    164.1     247.6        36.1
 Discoveries, additions and extensions    13.1       8.3        17.0
 Purchase of reserves                      1.1      21.1           -
 Sale of reserves                         (4.6)        -           -
 Net revisions and transfers               1.1      19.4         4.8
 2003 Production                         (16.4)    (41.4)       (5.4)
---------------------------------------------------------------------
 Proved reserves at December 31, 2003    158.4     255.0        52.5
 Discoveries, additions and extensions    14.0      29.7         2.0
 Purchase of reserves                      0.2      34.0         0.9
 Sale of reserves                         (2.1)     (3.3)          -
 Net revisions and transfers              (2.5)     24.0        (1.3)
 2004 Production                         (15.8)    (44.3)       (7.9)
---------------------------------------------------------------------
 Proved Reserves at December 31, 2004    152.2     295.1        46.2
 Discoveries, additions and extensions    10.6      44.4        16.4
 Purchase of reserves                      0.1      74.7        17.0
 Sale of reserves                         (0.0)     (0.9)          -
 Net revisions and transfers              (5.2)     31.7       (16.0)
 2005 Production                         (15.5)    (47.9)       (7.7)
---------------------------------------------------------------------
Proved Reserves at December 31, 2005     142.2     397.1        55.9
Proved Developed
December 31, 2002                        157.2     210.8        11.9
December 31, 2003                        155.4     211.8        18.6
December 31, 2004                        142.6     252.3        19.2
December 31, 2005                        132.0     309.0        35.8
---------------------------------------------------------------------
Natural Gas (bcf)
Total proved
Proved reserves at December 31, 2002   1,986.1     237.9       968.9
Discoveries, additions and extensions    276.3       1.0        64.0
Purchase of reserves                      92.2      14.4           -
Sale of reserves                         (11.4)        -           -
Net revisions and transfers              (14.9)     19.8        (6.1)
2003 Production                         (247.6)    (37.5)      (40.1)
---------------------------------------------------------------------
Proved reserves at December 31, 2003   2,080.7     235.6       986.7
Discoveries, additions and extensions    370.6       8.0       521.9
Purchase of reserves                      19.1       0.1           -
Sale of reserves                         (57.1)     (0.5)          -
Net revisions and transfers              (19.2)    (26.4)       93.5
2004 Production                         (260.6)    (39.5)      (47.3)
---------------------------------------------------------------------
Proved reserves at December 31, 2004   2,133.5     177.3     1,554.8
Discoveries, additions and extensions    274.9      23.4        81.7
Purchase of reserves                      11.7      61.3        30.8
Sale of reserves                          (1.1)        -           -
Net revisions and transfers                2.5      13.5       (94.0)
2005 Production                         (265.6)    (36.2)      (73.1)
---------------------------------------------------------------------
Proved reserves at December 31, 2005   2,155.9     239.3     1,500.2
Proved Developed
December 31, 2002                      1,746.9     210.0       471.6
December 31, 2003                      1,890.4     200.7       593.9
December 31, 2004                      1,788.2     150.0       624.0
December 31, 2005                      1,771.8     181.1       548.8


                                       North Trinidad
                                      Africa      and
                                          (5)  Tobago  Sudan   Total
---------------------------------------------------------------------
Crude Oil and Liquids (mmbbls)
Total proved
 Proved reserves at December 31, 2002   13.9     18.9   94.3   574.9
 Discoveries, additions and extensions   2.3        -      -    40.7
 Purchase of reserves                      -        -      -    22.2
 Sale of reserves                          -        -  (91.7)  (96.3)
 Net revisions and transfers             0.5     (0.8)     -    25.0
 2003 Production                        (0.1)           (2.6)  (65.9)
---------------------------------------------------------------------
 Proved reserves at December 31, 2003   16.6     18.1      -   500.6
 Discoveries, additions and extensions   8.1        -      -    53.8
 Purchase of reserves                      -        -      -    35.1
 Sale of reserves                          -        -      -    (5.4)
 Net revisions and transfers             0.3     (7.2)     -    13.3
 2004 Production                        (3.1)       -      -   (71.1)
---------------------------------------------------------------------
 Proved Reserves at December 31, 2004   21.9     10.9      -   526.3
 Discoveries, additions and extensions   4.7     (0.9)     -    75.2
 Purchase of reserves                    0.7        -      -    92.5
 Sale of reserves                          -        -      -    (0.9)
 Net revisions and transfers             0.3      0.8      -    11.6
 2005 Production                        (3.5)    (3.1)     -   (77.7)
---------------------------------------------------------------------
Proved Reserves at December 31, 2005    24.1      7.7      -   627.0
Proved Developed
December 31, 2002                        2.4        -   84.1   466.4
December 31, 2003                       14.6        -      -   400.4
December 31, 2004                       16.5     10.5      -   441.1
December 31, 2005                       14.6      7.7      -   499.1
---------------------------------------------------------------------
Natural Gas (bcf)
Total proved
Proved reserves at December 31, 2002       -    220.0      - 3,412.9
Discoveries, additions and extensions      -        -      -   341.3
Purchase of reserves                       -        -      -   106.6
Sale of reserves                           -        -      -   (11.4)
Net revisions and transfers                -     (9.0)     -   (10.2)
2003 Production                            -        -      -  (325.2)
---------------------------------------------------------------------
Proved reserves at December 31, 2003       -    211.0      - 3,514.0
Discoveries, additions and extensions      -        -      -   900.5
Purchase of reserves                       -        -      -    19.2
Sale of reserves                           -        -      -   (57.6)
Net revisions and transfers                -      5.5      -    53.4
2004 Production                            -        -      -  (347.4)
---------------------------------------------------------------------
Proved reserves at December 31, 2004       -    216.5      - 4,082.1
Discoveries, additions and extensions      -        -      -   380.0
Purchase of reserves                     1.2        -      -   105.0
Sale of reserves                           -        -      -    (1.1)
Net revisions and transfers                -     (2.9)     -   (80.9)
2005 Production                            -        -      -  (374.9)
---------------------------------------------------------------------
Proved reserves at December 31, 2005     1.2    213.6      - 4,110.2
Proved Developed
December 31, 2002                          -        -      - 2,428.5
December 31, 2003                          -        -      - 2,685.0
December 31, 2004                          -        -      - 2,562.2
December 31, 2005                        0.8        -      - 2,502.5

Notes:
(1) See oil and gas advisory.
(2) North American net proved reserves exclude synthetic crude oil
    reserves: 2002 - 36.7 mmbbls; 2003 - 35.8 mmbbls; 2004 - 35.2
    mmbbls; and 2005 - 34.3 mmbbls.
(3) North Sea for 2002 includes the UK and the Netherlands; for 2003
    and 2004 the North Sea includes the UK, the Netherlands and
    Norway, but excludes Denmark.
(4) Southeast Asia and Australia for 2002, 2003 and 2004 includes
    Indonesia and Malaysia/Vietnam, but excludes Australia.
(5) North Africa for 2002, 2003 and 2004 includes Algeria, but
    excludes Tunisia.

Talisman Energy Inc. (NYSE:TLM) (TSX:TLM)