Talisman Energy Generates $960 Million in Cash Flow During the Quarter; Record Natural Gas Sales; First Trinidad Production; Daily Production Per Share Up 9%.

CALGARY Calgary (kăl`gərē), city (1991 pop. 710,677), S Alta., Canada, at the confluence of the Bow and Elbow rivers. The largest city in Alberta and the fastest-growing major city in Canada, Calgary is a corporate, transportation, and financial , Alberta Alberta (ălbûr`tə), province (2001 pop. 2,974,807), 255,285 sq mi (661,188 sq km), including 6,485 sq mi (16,796 sq km) of water surface, W Canada. -- Talisman Energy Talisman Energy TSX: TLM is one of Canada's largest petroleum companies. It was originally part of British Petroleum, known as BP Canada, but in 1992 it became an independent company named Talisman Energy. Inc. (TSX TSX Toronto Stock Exchange (TSE before April, 2002)
TSX Transfer from Stack Pointer to Index
TSX True Space Extension :TLM TLM Telemetry
TLM Transaction Level Modeling
TLM Tout Le Monde (French)
TLM The Leprosy Mission (Northern Ireland)
TLM Transmission Line Matrix
TLM The Little Mermaid (fairy tale) ) (NYSE NYSE

See: New York Stock Exchange :TLM) today reported its first quarter operating and financial results.

Cash flow was $960 million, an increase of 25% compared to $770 million a year earlier and $679 million in the fourth quarter of 2004. Cash flow per share was $2.59, an increase of 29% compared to $2.01 in the first quarter of 2004.

Net income was $258 million ($0.70/share) compared to $218 million ($0.57/share) a year ago and $121 million ($0.32/share) in the previous quarter.

Earnings from operations increased 89%, totaling $377 million ($1.02/share) versus $199 million ($0.52/share) a year earlier and $135 million ($0.35/share) in the fourth quarter of 2004. Earnings from operations are calculated to better illustrate Talisman's performance on an internally consistent basis. It adjusts for non-operational impacts on earnings such as the mark-to-market Mark-to-market

Adjustment of the book value or collateral value of a security to reflect current market value. effect of changes in share prices on stock based compensation expense and changes to tax rates.

Production averaged 457,000 boe/d, an increase of 5% over the first quarter of 2004 and 1.5% above the fourth quarter of 2004. Natural gas production averaged 1,332 mmcf/d in the quarter, a new record for the Company and an increase of 8% over the first quarter of 2004. Talisman's North American North American

named after North America.

North American blastomycosis
see North American blastomycosis.

North American cattle tick
see boophilusannulatus. natural gas production averaged 929 mmcf/d, an increase of 7% over the comparable quarter a year ago. Oil and liquids production averaged 235,492 bbls/d, an increase of 2% compared to a year ago. Production from Trinidad Trinidad (trēnēthäth`), town (1983 est. pop. 43,500), Sancti Spíritus prov., central Cuba. Tobacco processing is the chief industry, although other agricultural processing has been developed. commenced during the quarter, averaging 7,826 bbls/d.

"This was a very good quarter on all fronts," said Dr Jim Buckee, President & Chief Executive Officer. "We posted solid production numbers; with daily production per share up 9% compared to a year ago, we set a new record for North American gas sales and commenced production from the Greater Angostura Angostura: see Ciudad Bolívar. field in Trinidad and Tobago Trinidad and Tobago (trĭn`ĭdăd, təbā`gō), officially Republic of Trinidad and Tobago, republic (2005 est. pop. 1,088,000), 1,980 sq mi (5,129 sq km), West Indies. The capital is Port of Spain. . We also set a new record average production rate of 482,000 boe/d in March.

"Talisman's drilling program continues to deliver growth. We had a number of sizeable development drilling successes in the North Sea, a new discovery in Malaysia/Vietnam, we drilled a record number of wells in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. and continue to build our opportunity set. The Pertra Pertra (OSE: PERTRA) is a Norwegian petroleum company. It is based in Trondheim and was created when the oil exporation and production divsion of Petroleum Geo-Services was demerged in 2001. acquisition doubled the size of our operations in Norway Norway, Nor. Norge, officially Kingdom of Norway, constitutional monarchy (2005 est. pop. 4,593,000), 125,181 sq mi (324,219 sq km), N Europe, occupying the western part of the Scandinavian peninsula. and adds some very attractive exploration acreage. Similarly, the award of Block 15-2/01 in Vietnam Vietnam (vēĕt`näm), officially Socialist Republic of Vietnam, republic (v), 128,400 sq mi (332,642 sq km), Southeast Asia. Occupying the eastern coastline of the Southeast Asian peninsula, Vietnam is bounded by China on the north, by Laos will also provide new exploration opportunities.

"We generated a record $1.02/share in earnings from operations, which compares favorably fa·vor·a·ble
adj.
1. Advantageous; helpful: favorable winds.

2. Encouraging; propitious: a favorable diagnosis.

3. with a consensus number of approximately ap·prox·i·mate
adj.
1. Almost exact or correct: the approximate time of the accident.

2. $0.90/share. Even though this is often quoted as an earnings per share estimate, virtually all of the analysts covering Talisman talisman: see amulet.

talisman

amulet with which Saladin cures Richard the Lion-Hearted. [Br. Lit.: The Talisman]

See : Charms provide an operating earnings Operating Earnings

Profits after subtracting expenses such as marketing, cost of goods sold, administration and general operating costs from revenue.

Notes:
Tax and interest expenses are not subtracted - operating earnings are synonymous with EBIT (earnings before numbers for the 'street' estimate.

"Cash flow was also significantly higher than any other quarter in our history. Commodity prices continue to reflect the tension between growing demand and a lack of spare productive capacity. Talisman is also virtually unhedged this year, so these higher prices significantly benefit our shareholders.

"Talisman's production forecast remains intact at between 455,000-485,000 boe/d for the year, including 10,000 boe/d of added volumes in Norway. We lost five weeks of production from the Ross Ross , Sir Ronald 1857-1932.

British physician. He won a 1902 Nobel Prize for proving that malaria is transmitted to humans by the bite of the mosquito. and Blake fields due to some production chemistry issues. Since the shutdown shut·down
n.
A cessation of operations or activity, as at a factory.

shutdown
Noun

the closing of a factory, shop, or other business

Verb

shut down , production levels have been good and the production chemistry issues are being addressed. This lost production, higher cost Norway production and a stronger than expected pound sterling also led to higher North Sea operating costs operating costs npl → gastos mpl operacionales in the quarter. We expect to produce between 445,000-460,000 boe/d in the second quarter with anticipated plant turnarounds, returning to higher production levels in the third and fourth quarters.

(For additional guidance please visit Talisman's website.)

"Talisman is on track to deliver over $4 billion in cash flow for the year, or over $11 per share, assuming US$49/bbl WTI WTI West Texas Intermediate
WTI Western Transportation Institute (Montana State University)
WTI World Tribunal on Iraq
WTI With The Idea (used in chess to point to the idea behind a specific move) prices, US$7.00/mmbtu NYMEX See New York Mercantile Exchange.

NYMEX

See New York Mercantile Exchange (NYM). gas prices and an $0.80 Canadian dollar Noun 1. Canadian dollar - the basic unit of money in Canada; "the Canadian dollar has the image of loon on one side of the coin"
loonie

dollar - the basic monetary unit in many countries; equal to 100 cents ."

Talisman First Quarter Summary

- Record North American natural gas volumes.

- Appalachia Appalachia, region: see Appalachian Mountains.

Appalachia

West Virginia coal mining region known for its abysmal poverty. [Am. Hist.: NCE, 160]

See : Poverty production of 120 mmcf/d, more than double the previous year.

- Record North American midstream mid·stream
n.
1. The middle part of a stream.

2. The part of a course that is neither at the beginning nor at the end: the midstream of life.

Noun 1. volumes.

- Production from the Brazion b-60-E (TLM 80%) well at Monkman ranged between 60-70 mmcf/d of sales gas.

- Talisman doubled the size of its business in Norway with the acquisition of Pertra A.S. for US$175 million (including closing costs Closing Costs

The numerous expenses (over and above the price of the property) that buyers and sellers normally incur to complete a real estate transaction. Costs incurred include loan origination fee, discount points, appraisal fee, title search, title insurance, survey, taxes, ). The acquisition includes 70% of the Varg oil field and extensive exploration acreage.

- In Malaysia Malaysia (məlā`zhə), independent federation (2005 est. pop. 23,953,000), 128,430 sq mi (332,633 sq km), Southeast Asia. The official capital and by far the largest city is Kuala Lumpur; Putrajaya is the adminstrative capital. , South Angsi field development continued on schedule for mid- mid-
pref.
Middle: midbrain. 2005 startup (STARTing UP) "At startup" means when the computer is first turned on or when a program is first loaded. See Startup folder. .

- A successful exploration well and two sidetracks were drilled in the PM-3 CAA Caa

See CCC. offshore Malaysia/Vietnam.

- Talisman's subsidiary signed a Petroleum Contract with a 60% interest in Block 15-2/01 offshore Vietnam.

- Production from Trinidad averaged 7,826 bbls/d in the quarter and 12,025 bbls/d in March.

Cash flow, captioned as funds from operating activities in the Consolidated con·sol·i·date
v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates

v.tr.
1. To unite into one system or whole; combine: Statement of Cash Flows, in addition to earnings from operations (as illustrated in the table below) are non-GAAP measures. Please refer to the section in this press release entitled en·ti·tle
tr.v. en·ti·tled, en·ti·tling, en·ti·tles
1. To give a name or title to.

2. To furnish with a right or claim to something: Advisory Non-GAAP Financial Measures for further explanation and details.

Earnings from operations

To assist in understanding the Company's earnings from operations, the following table adjusts the Company's net income per the financial statements for certain items of a non-operational nature, on an after-tax basis After-tax basis

The comparison basis used to analyze the net after-tax returns on a corporate taxable bond and a municipal tax-free bond. . Talisman's reported results may not be comparable to similarly titled measures by other companies. The Company uses this data to evaluate performance of core operational exploration and production activities on a basis comparable between periods.

($ millions, except per share amounts)
                                                  Three months ended
March 31,                                               2005    2004
---------------------------------------------------------------------
Net income                                               258     218

Stock-based compensation (1)                             116      22

Tax effects of unrealized foreign exchange
 gains on foreign denominated debt (2)                     3      (9)

Tax rate reductions and other                              -     (32)
---------------------------------------------------------------------

Earnings from operations (3)                             377     199
---------------------------------------------------------------------
 Amounts per share - basic                              1.02    0.52
---------------------------------------------------------------------
 Amounts per share - diluted (4)                        0.99    0.51
---------------------------------------------------------------------
---------------------------------------------------------------------

Footnotes:

1. Stock-based compensation expense relates to the appreciated value of the Company's outstanding stock options and cash units at March 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. Future tax effect relating to relating to relate prep → concernant

relating to relate prep → bezüglich +gen, mit Bezug auf +acc unrealized foreign exchange gains associated with the impact of a stronger Canadian dollar on foreign denominated debt.

3. This is a non-GAAP measure.

4. Since the introduction in mid-2003 of a cash payment feature attached to the outstanding stock options, approximately 98% of options have been exercised using the cash payment feature.

Management's Discussion and Analysis Management's discussion and analysis (MD&A)

A report from management to shareholders that accompanies the firm's financial statements in the annual report. It explains the period's financial results and enables management to discuss topics that may not be apparent in the financial (MD&A)

(May 2, 2005)

This discussion and analysis should be read in conjunction conjunction, in astronomy
conjunction, in astronomy, alignment of two celestial bodies as seen from the earth. Conjunction of the moon and the planets is often determined by reference to the sun. with the Interim Consolidated Financial Statements Consolidated Financial Statements

The combined financial statements of a parent company and its subsidiaries.

Notes:
Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge as at March 31, 2005 and 2004 and the 2004 Audited Consolidated Financial Statements. All comparative percentages are between the quarters ended March 31, 2005 and 2004, unless stated otherwise. All amounts are in Canadian dollars unless otherwise indicated.

Quarterly results summary (unaudited)

                                                  Three months ended
---------------------------------------------------------------------
March 31,                                           2005        2004
---------------------------------------------------------------------
Financial (millions of C$
 unless otherwise stated)
Net income(1)                                        258         218
Exploration and development expenditures             749         614
C$ per common share(2)
 Net income(1)          - Basic                     0.70        0.57
                        - Diluted                   0.68        0.56
---------------------------------------------------------------------
---------------------------------------------------------------------
Production (daily average)
Oil and liquids (bbls/d)                         235,492     230,136
Natural gas (mmcf/d)                               1,332       1,236
---------------------------------------------------------------------
Total mboe/d (6mcf equals 1boe)                      457         436
Production (boe) per common share - Basic           0.11        0.10
---------------------------------------------------------------------
---------------------------------------------------------------------

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 Interim Consolidated Financial
   Statements.

2. Prior period per share amounts have been retroactively restated to
   reflect the impact of the Company's three for one stock split.
   See note 1 to the Interim Consolidated Financial Statements.

Net income for the quarter increased 18% to $258 million, as the impact of this period's improved commodity prices, 5% higher production and decreased hedging hedging, in commerce, method by which traders use two counterbalancing investment strategies so as to minimize any losses caused by price fluctuations. It is generally used by traders on the commodities market. losses more than offset increases in operating expenses Operating expenses

The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. , depreciation, depletion depletion n. when a natural resource (particularly oil) is being used up. The annual amount of depletion may, ironically, provide a tax deduction for the company exploiting the resource because if the resource they are exploiting runs out, they will no longer be able and amortization, stock-based compensation and taxes.

Company Netbacks (unaudited)

                                                  Three months ended
---------------------------------------------------------------------
March 31,                                           2005        2004
---------------------------------------------------------------------
Oil and liquids ($/bbl)
 Sales price                                       55.40       41.15
 Hedging expense                                    0.72        2.67
 Royalties                                          7.41        6.00
 Transportation                                     0.84        0.87
 Operating costs                                   10.43        9.26
---------------------------------------------------------------------
                                                   36.00       22.35
---------------------------------------------------------------------
---------------------------------------------------------------------
Natural gas ($/mcf)
 Sales price                                        6.73        6.13
 Hedging expense                                       -        0.04
 Royalties                                          1.37        1.15
 Transportation                                     0.28        0.25
 Operating costs                                    0.69        0.63
---------------------------------------------------------------------
                                                    4.39        4.06
---------------------------------------------------------------------
---------------------------------------------------------------------
Total $/boe (6mcf equals 1boe)
 Sales price                                       48.07       39.09
 Hedging expense                                    0.37        1.52
 Royalties                                          7.82        6.43
 Transportation                                     1.26        1.19
 Operating costs                                    7.38        6.64
---------------------------------------------------------------------
                                                   31.24       23.31
---------------------------------------------------------------------
---------------------------------------------------------------------

Netbacks do not include synthetic oil and pipeline operations.
Additional netback information by major product type and region is
included elsewhere in this interim report.

During the quarter, the Company's average netback net·back
n.
Linkage of the price of crude oil to the market price of products refined from it. was $31.24/boe, 34% higher than 2004. The rise in commodity prices, although partially offset by a 7% stronger Canadian dollar in relation to its US counterpart counterpart n. in the law of contracts, a written paper which is one of several documents which constitute a contract, such as a written offer and a written acceptance. , resulted in a Company realized price of $48.07/boe which was $8.98/boe (23%) higher than in 2004. The impact of this increase in realized price, along with decreased hedging losses was reduced by increased royalties Not to be confused with Royal family.

Royalties (sometimes, running royalties) are usage-based payments made by one party (the "licensee") to another (the "licensor") for ongoing use of an asset, most typically an intellectual property (IP) right. , operating costs and transportation expenses resulting in an increased netback of $7.93/boe.

Gross sales Gross Sales

A measure of overall sales that isn't adjusted for customer discounts or returns, calculated simply by adding all sales invoices, and not including operating expenses, cost of goods sold, payment of taxes, or any other charge.

Gross sales for the quarter ended March 31, 2005 were $2.0 billion, a 27% increase over 2004, as increased natural gas production in North America and Southeast Asia Southeast Asia, region of Asia (1990 est. pop. 442,500,000), c.1,740,000 sq mi (4,506,600 sq km), bounded roughly by the Indian subcontinent on the west, China on the north, and the Pacific Ocean on the east. , first oil production from Trinidad and increased oil and liquids production in the North Sea and Algeria Algeria (ăljēr`ēə), Arab. Al Djazair, Fr. Algérie, officially People's Democratic Republic of Algeria, republic (2005 est. pop. combined with higher commodity prices to more than offset the negative impact of a stronger Canadian dollar.

Daily Average Production (unaudited)

                                                  Three months ended
---------------------------------------------------------------------
March 31,                                           2005        2004
---------------------------------------------------------------------
Oil and liquids (bbls/d)
North America                                     56,275      58,291
North Sea                                        127,882     123,245
Southeast Asia                                    28,969      35,602
Algeria                                           14,540      12,998
Trinidad                                           7,826           -
---------------------------------------------------------------------
                                                 235,492     230,136
---------------------------------------------------------------------
---------------------------------------------------------------------
Natural gas (mmcf/d)
North America                                        929         872
North Sea(1)                                         129         133
Southeast Asia                                       274         231
---------------------------------------------------------------------
                                                   1,332       1,236
---------------------------------------------------------------------
---------------------------------------------------------------------
Total mboe/d (6mcf equals 1boe)                      457         436
---------------------------------------------------------------------
---------------------------------------------------------------------
1. Includes gas acquired for injection and subsequent resale of 8
   mmcf/d in both 2005 and 2004

The Company's average oil and liquids production for the quarter was 235 mbbls/d, up 2% compared to last year. In Trinidad, first oil came on production in January January: see month. of 2005 and during the quarter, in spite of in opposition to all efforts of; in defiance or contempt of; notwithstanding.

See also: Spite some early facilities constraints CONSTRAINTS - A language for solving constraints using value inference.

["CONSTRAINTS: A Language for Expressing Almost-Hierarchical Descriptions", G.J. Sussman et al, Artif Intell 14(1):1-39 (Aug 1980)]. , averaged 7,826 bbls/d, exiting the quarter at a March monthly average of 12,025 bbls/d. In the North Sea, oil and liquids production averaged 127,882 bbls/d, up 4% from 2004 as production increases from development drilling and asset acquisitions over the past year were partially offset by the impact of maintenance work which shut down the Ross/Blake field for over a month. During the quarter, the Company completed the acquisition of the Varg field producing assets in Norway. Southeast Asia oil and liquids production in the current quarter averaged 28,969 bbls/d, down 6,633 bbls/d or 19% from 2004 due to the expiry of the Tanjung and Jambi Jambi or Djambi (both: jäm`bē), city (1990 est. pop. 340,066), SE Sumatra, capital of Jambi prov., Indonesia, a port at the head of navigation on the Hari River. contracts. Oil and liquids production in Malaysia/Vietnam was up 984 bbls/d or 5% from 2004. Algeria production averaged 14,540 bbls/d, up 12% from 2004 despite a two week planned shutdown of the MLN MLN Million
MLN Modern Language Notes (literary journal)
MLN Management & Leadership Network (Northern Ireland)
MLN Missouri League for Nursing
MLN Main Listed Number facilities in the current quarter. In North America, oil and liquids production averaged 56,275 bbls/d during the quarter, down 3% from 2004 due to natural declines and the Company's continued focus on natural gas.

During the quarter, natural gas production averaged a record 1.3 bcf/d bcf/d Billion Cubic Feet Per Day (oil industry) , 8% above last year, mainly due to production increases in both North America and Southeast Asia. In North America, natural gas production was 929 mmcf/d, an increase of 57 mmcf/d or 7% over last year, with production increases in Appalachia, up 68 mmcf/d to 120 mmcf/d, Monkman, up 25 mmcf/d to 108 mmcf/d, and Bigstone/Wild River, up 11 mmcf/d to 102 mmcf/d more than offsetting decreases resulting from natural declines in other areas. In Southeast Asia, natural gas production was 274 mmcf/d, an increase of 43 mmcf/d or 19% over last year. Production in Malaysia/Vietnam averaged 119 mmcf/d this quarter, an increase of 23 mmcf/d. Indonesia Indonesia (ĭn'dənē`zhə), officially Republic of Indonesia, republic (2005 est. pop. 241,974,000), c.735,000 sq mi (1,903,650 sq km), SE Asia, in the Malay Archipelago. gas production increased 15% over last year averaging 155 mmcf/d with higher Corridor sales to Caltex Caltex is a petroleum brand name of Chevron Corporation, used in more than 60 countries in the Asia Pacific region, the Middle East, and southern Africa. Brief History and to Singapore Singapore (sĭng`gəpôr, sĭng`ə–, sĭng'gəpôr`), officially Republic of Singapore, republic (2005 est. pop. 4,426,000), 240 sq mi (625 sq km). . North Sea natural gas production decreased 3% during the quarter to 129 mmcf/d.

Prices and Exchange Rates (unaudited)

                                                  Three months ended
---------------------------------------------------------------------
March 31,                                           2005        2004
---------------------------------------------------------------------
Oil and liquids ($/bbl)
North America                                      46.50       37.56
North Sea                                          57.29       41.55
Southeast Asia                                     60.35       44.10
Algeria                                            60.90       44.62
Trinidad                                           57.78           -
---------------------------------------------------------------------
                                                   55.40       41.15
---------------------------------------------------------------------
---------------------------------------------------------------------
Natural gas ($/mcf)
North America                                       7.07        6.61
North Sea                                           6.98        5.85
Southeast Asia                                      5.44        4.50
---------------------------------------------------------------------
                                                    6.73        6.13
---------------------------------------------------------------------
---------------------------------------------------------------------
Total $/boe (6mcf equals 1boe)                     48.07       39.09
---------------------------------------------------------------------
---------------------------------------------------------------------
Hedging loss not included in the above prices
 Oil and liquids ($/bbl)                            0.72        2.67
 Natural gas ($/mcf)                                   -        0.04
 Total $/boe (6mcf equals 1boe)                     0.37        1.52
---------------------------------------------------------------------
---------------------------------------------------------------------
Benchmark prices and foreign exchange rates
 WTI (US$/bbl)                                     50.03       35.15
 Brent (US$/bbl)                                   47.62       31.95
 NYMEX (US$/mmbtu)                                  6.32        5.69
 AECO (C$/gj)                                       6.34        6.26
US/Canadian dollar exchange rate                   0.815       0.759
Canadian dollar / pound sterling exchange rate     2.319       2.424
---------------------------------------------------------------------
---------------------------------------------------------------------
 Excludes synthetic oil

Talisman's first quarter commodity price averaged $48.07/boe, up $8.98/boe or 23% from last year. Continuing strong demand, especially in China and India India, officially Republic of India, republic (2005 est pop. 1,080,264,000), 1,261,810 sq mi (3,268,090 sq km), S Asia. The second most populous country in the world, it is also sometimes called Bharat, its ancient name. India's land frontier (c. , contributed to crude oil's price remaining at near record levels. Although the average benchmark A performance test of hardware and/or software. There are various programs that very accurately test the raw power of a single machine, the interaction in a single client/server system (one server/multiple clients) and the transactions per second in a transaction processing system. price of WTI oil, at US$ 50.03 per barrel barrel: see English units of measurement. , was 42% higher than 2004, the stronger Canadian dollar and the wider heavy oil differentials limited the increase in the Company's realized price to 35% over the same period last year, at $55.40/bbl of oil and liquids.

Although the AECO AECO Aeromedical Evacuation Control Officer
AECO Advance Engineering Change Order
AECO Architecture, Engineering, Construction and Owner-operated reference price increased only 1% from last year, the proportion of the Company's North American gas sales in the US increased from 6% last year to 13% of sales in the current quarter, which resulted in a 7% increase in North America natural gas prices to $7.07/mcf during the quarter.

For the quarter ended March 31, 2005, Talisman recorded net hedging losses on commodity based derivative derivative: see calculus.

derivative

In mathematics, a fundamental concept of differential calculus representing the instantaneous rate of change of a function. financial instruments of $15 million, all associated with oil and liquids ($0.72/bbl), compared to losses of $55 million for oil and liquids ($2.67/bbl) and $5 million for natural gas ($0.04/mcf) during the same period in 2004. As of April 1, 2005, the Company has derivative and physical contracts for approximately 2% of its remaining 2005 estimated production. A summary of the contracts outstanding is included in notes 11 and 12 to the December December: see month. 31, 2004 Consolidated Financial Statements and in note 7 to the March 31, 2005 Interim Consolidated Financial Statements.

Royalties(1) (unaudited)

                                       Three months ended
---------------------------------------------------------------------
March 31,                        2005                     2004(2)
---------------------------------------------------------------------
                            %    $ millions          %    $ millions
---------------------------------------------------------------------
North America              20           166         20           143
North Sea                   1            10          2             9
Southeast Asia             37           109         32            75
Algeria                    40            32         51            27
Trinidad                   11             4          -             -
---------------------------------------------------------------------
                           16           321         17           254
---------------------------------------------------------------------
---------------------------------------------------------------------

1. Royalty rates do not include synthetic oil

2. During the second quarter of 2004, the Company reclassified
   transportation costs on a retroactive basis. Previously, these
   costs had been partially netted off against realized prices. This
   change reduced the royalty rate which is a percentage of reported
   prices. Accordingly, 2004 royalty rates have been restated. See
   note 1 to the Interim Consolidated Financial Statements.

The Company's royalty Compensation for the use of property, usually copyrighted works, patented inventions, or natural resources, expressed as a percentage of receipts from using the property or as a payment for each unit produced. expense for the first quarter was $321 million (16%), up from $254 million (17%), in 2004. Total royalty expense increased as a result of increases in both commodity prices and production, as the royalty rate remained relatively constant. In Southeast Asia, the rate increased due to the impact of the payout pay·out
n.
1. The act or an instance of paying out.

2. A percentage of corporate earnings that is paid as dividends to shareholders. of cost recovery pools at Corridor during the first quarter of 2004. In addition, rates for oil in Malaysia/Vietnam are tied to recently attained at·tain
v. at·tained, at·tain·ing, at·tains

v.tr.
1. To gain as an objective; achieve: attain a diploma by hard work.

2. cumulative production threshold levels Noun 1. threshold level - the intensity level that is just barely perceptible
intensity, intensity level, strength - the amount of energy transmitted (as by acoustic or electromagnetic radiation); "he adjusted the intensity of the sound"; "they measured the , which increased the rate to 34% from 32%. The Algeria royalty rate decreased as a portion of the revenue stream is allocated to profit oil, which increases the Algeria taxes payable while reducing the Company's effective royalty rate. The Algerian government's total take for the quarter including royalties and taxes equalled approximately 51%, similar to 2004 when no current taxes were payable. The 51% total government take is expected to continue for the next few years.

Operating Expense (unaudited)

                                       Three months ended
---------------------------------------------------------------------
March 31,                        2005                     2004
---------------------------------------------------------------------
                        $/boe    $ millions      $/boe    $ millions
---------------------------------------------------------------------
North America            5.16            98       4.96            91
North Sea               13.19           177      11.16           148
Southeast Asia           2.63            18       3.20            22
Algeria                  5.64             7       1.71             2
Trinidad                 4.00             3          -             -
---------------------------------------------------------------------
                         7.38           303       6.64           263
Synthetic oil           40.36             7      19.00             5
Pipeline                                 14                       12
---------------------------------------------------------------------
                                        324                      280
---------------------------------------------------------------------
---------------------------------------------------------------------

During the first quarter, total operating expenses increased by $44 million to $324 million, with the North Sea comprising $29 million of the 16% total increase from last year. Unit operating costs averaged $7.38/boe, up from $6.64/boe last year primarily related to the addition of the Varg production. North Sea unit operating costs increased $2.03/boe to $13.19/boe, due in part to maintenance costs from the extended shutdown at Ross/Blake and higher unit costs associated with the Varg field in Norway. In North America, unit operating costs increased due to higher processing fees and operational maintenance. Unit operating costs in Southeast Asia were down 18% to $2.63/boe due to increased production from Malaysia/Vietnam. Algeria unit operating costs increased due to minor adjustments related to prior periods in each of the reported quarters.

Transportation Expenses (unaudited)

Effective in the second quarter of 2004, the Company began accounting for transportation costs as expenses, on a retroactive Having reference to things that happened in the past, prior to the occurrence of the act in question.

A retroactive or retrospective law is one that takes away or impairs vested rights acquired under existing laws, creates new obligations, imposes new duties, or attaches a basis. Previously, these costs had been either netted off against the realized price or included as a component of operating costs, depending on the circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact.
2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or in the various geographic geographic /geo·graph·ic/ (je?o-graf´ik) in pathology, of or referring to a pattern that is well demarcated, resembling outlines on a map.

geographic

pertaining to geography. segments. Prior year comparatives have been restated to reflect this change in accounting policy. See note 1 to the Interim Consolidated Financial Statements for further details. The reclassification Reclassification

The process of changing the class of mutual funds once certain requirements have been met. These requirements are generally placed on load mutual funds. Reclassification is not considered to be a taxable event. has no impact on cash provided by operating activities or net income. The resulting transportation expenses for 2004 and comparable results for the current year are set forth in the table below:

Three months ended
---------------------------------------------------------------------
March 31,                        2005                     2004
---------------------------------------------------------------------
Oil and liquids         $/bbl    $ millions      $/bbl    $ millions
---------------------------------------------------------------------
 North America           0.45             3       0.51             3
 North Sea               1.14            13       1.11            13
 Southeast Asia          0.08             -       0.25             1
 Algeria                 1.65             2       1.79             2
---------------------------------------------------------------------
Natural gas             $/mcf                    $/mcf
---------------------------------------------------------------------
 North America           0.17            14       0.20            15
 North Sea               0.54             6       0.37             4
 Southeast Asia          0.55            14       0.42             9
---------------------------------------------------------------------
                                         52                       47
---------------------------------------------------------------------
---------------------------------------------------------------------

Depreciation, Depletion and Amortization (DD&A) (unaudited)

                                       Three months ended
---------------------------------------------------------------------
March 31,                        2005                     2004
---------------------------------------------------------------------
                        $/boe    $ millions      $/boe    $ millions
---------------------------------------------------------------------
North America           12.04           228       9.49           176
North Sea               12.16           164      12.23           162
Southeast Asia           4.57            31       6.60            44
Algeria                  6.80             9       6.09             7
Trinidad                13.33             9          -             -
---------------------------------------------------------------------
                        10.71           441       9.81           389
---------------------------------------------------------------------
---------------------------------------------------------------------

The 2005 first quarter DD&A expense was $441 million, up 13% from the same quarter of 2004, due to an increase in the per unit DD&A rate and higher production. The DD&A rate in North America increased primarily due to higher drilling costs and capital expenditures on infrastructure projects. The DD&A rate and total expense for Southeast Asia decreased as a result of the increase in reserves, primarily from Corridor, as total boe production remained relatively constant.

Other ($ millions except where noted) (unaudited)

                                                  Three months ended
---------------------------------------------------------------------
March 31,                                           2005        2004
---------------------------------------------------------------------
G&A ($/boe)                                         1.22        0.98
Dry hole expense                                      46          79
Stock-based compensation                             166          30
Other expense (income)                                24           3
Interest costs capitalized                             2           3
Interest expense                                      42          47
Other revenue                                         36          22
---------------------------------------------------------------------

General and administrative (G&A) expense increased over the same quarter of last year due to higher staff costs, increased costs associated with corporate governance Corporate Governance

The relationship between all the stakeholders in a company. This includes the shareholders, directors, and management of a company, as defined by the corporate charter, bylaws, formal policy, and rule of law. initiatives, and higher legal and pension costs.

Dry hole expense for the first quarter of 2005 was $46 million, $17 million of which was expensed in the North Sea for the North Saltire and Jenny jenny: see ass. wells. In North America dry hole expense was $18 million and included $9 million for the Sukunka a-37-J well. Other expense of $24 million included a write-down Write-Down

Reducing the book value of an asset because it is overvalued compared to the market value.

Notes:
This is usually reflected in the company's income statement as an expense, thereby reducing net income. related to the North Saltire property of $23 million. Other revenue of $36 million included $29 million of pipeline and processing revenue.

Stock-based compensation expense relates to the increase in value of the Company's outstanding stock options and cash units at March 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. The $166 million expense for the current quarter is due in part to 1.5 million options being exercised for cash at an average share price of $40.08 and an average exercise price of $17.09 for a cash expense of $35 million. The remaining $131 million expense for the current quarter is a result of a 28% increase in the Company's share price in the current quarter and the corresponding impact on the mark to market liability of the vested vested adj. referring to having an absolute right or title, when previously the holder of the right or title only had an expectation. Examples: after 20 years of employment Larry Loyal's pension rights are now vested. (See: vest, vested remainder) and prorated vested options and cash units outstanding.

Since the introduction of the cash feature, approximately 98% of options that have been exercised, have been exercised for cash, resulting in reduced dilution Dilution

A reduction in earnings per share of common stock that occurs through the issuance of additional shares or the conversion of convertible securities.

Notes:
Adding to the number of shares outstanding reduces the value of holdings of existing shareholders. of shares.

Taxes ($ millions) (unaudited)

Effective Income Tax Rate

                                                  Three months ended
---------------------------------------------------------------------
March 31,                                           2005      2004(1)
---------------------------------------------------------------------
Income before taxes                                  489         304
---------------------------------------------------------------------
Less PRT
 Current                                              33          17
 Deferred                                             10           7
---------------------------------------------------------------------
Total PRT                                             43          24
---------------------------------------------------------------------
                                                     446         280
---------------------------------------------------------------------
Income tax expense
 Current income tax                                  185          51
 Future income tax                                     3          11
---------------------------------------------------------------------
Total income tax expense                             188          62
---------------------------------------------------------------------
---------------------------------------------------------------------
Effective income tax rate                             42%         22%
---------------------------------------------------------------------
---------------------------------------------------------------------

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 Interim Consolidated Financial
   Statements.

The effective tax rate is expressed as a percentage of pre-tax pre-tax adj → anterior al impuesto

pre-tax adj → avant impôt(s)

pre-tax adj → al lordo d'imposta income adjusted for Petroleum Revenue Tax (PRT PRT Print
PRT Port
PRT Portugal (ISO country code)
PRT Printer
PRT Provincial Reconstruction Team (Iraq)
PRT Personal Rapid Transit
PRT Personal Rapid Transit ), which is deductible That which may be taken away or subtracted. In taxation, an item that may be subtracted from gross income or adjusted gross income in determining taxable income (e.g., interest expenses, charitable contributions, certain taxes). in determining taxable income Under the federal tax law, gross income reduced by adjustments and allowable deductions. It is the income against which tax rates are applied to compute an individual or entity's tax liability. The essence of taxable income is the accrual of some gain, profit, or benefit to a taxpayer. . The Company's effective tax rate for the current quarter is higher than in 2004 due to the effect of increased taxable income in higher tax jurisdictions (e.g. Norway) during the current quarter and the impact of Canadian Canadian (kənā`dēən), river, 906 mi (1,458 km) long, rising in NE New Mexico. and flowing E across N Texas and central Oklahoma into the Arkansas River in E Oklahoma. corporate tax rate reductions of $31 million in 2004. Excluding this adjustment, the effective tax rate on the Company's income in the first quarter of 2004 would have been 33%. During 2005, current tax increased to $185 million as a result of both higher commodity prices and increased production, which also increased PRT on North Sea operations.

Capital expenditures ($ millions) (unaudited)
                                                  Three months ended
                                               ----------------------
March 31,                                           2005        2004
---------------------------------------------------------------------
North America                                        461         381
North Sea                                            407         119
Southeast Asia                                        76          53
Algeria                                                2           3
Trinidad                                              15          50
Other                                                 20          24
---------------------------------------------------------------------
                                                     981         630
---------------------------------------------------------------------
---------------------------------------------------------------------
Capital expenditures include exploration and development expenditures
and net asset acquisitions but exclude administrative capital.

North America capital expenditures for the current quarter on exploration of $173 million and development of $279 million, included the drilling of 111 gas wells and 14 oil wells and $9 million for net asset acquisitions. Expenditures in the North Sea during the first quarter were comprised of $22 million of exploration spending, development spending of $162 million, which included the ongoing development of the Tweedsmuir The hamlet of Tweedsmuir (Sliabh Thuaidh in Gaelic) is situated 8 miles from the source of the River Tweed, in The Borders of Scotland. It is home to the Crook Inn. The Talla Reservoir and Fruid Reservoir are nearby. field, and $223 million primarily related to the acquisition of producing assets at Varg and extensive exploration acreage in Norway. In Southeast Asia, capital expenditures of $76 million included $14 million of exploration spending and development spending of $62 million, primarily on the South Angsi field development in Block PM-305 and ongoing development on Block PM 3. There have been no significant changes in the Company's outlook for the major projects underway as discussed in the Outlook for 2005 section of the Company's December 31, 2004 MD&A.

Long-term debt Long-Term Debt

Loans and financial obligations lasting over one year.

Notes:
For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. and liquidity

At March 31, 2005, Talisman's long-term debt was $2.9 billion, up from $2.5 billion at year-end year-end also year·end
n.
The end of a year.

adj.
Occurring or done at the end of the year: a year-end audit.

Noun 1. . This increase resulted primarily from the repurchase re·pur·chase
tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es
To buy (something) again.

n.
The act of buying something that one previously sold or owned.

Noun 1. of eight million common shares and the acquisition of the Varg assets in Norway, partially offset by cash provided by operating activities in excess of exploration and development capital expenditures.

At quarter end, debt to debt plus book equity was 38%. For the 12 months ended March 31, 2005, the debt to cash provided by operating activities ratio was 0.93:1.

During the first quarter of this year, the Company repurchased a total of 8,016,400 common shares under its normal course issuer bid (NCIB NCIB National Charities Information Bureau (now part of Wise Giving Alliance)
NCIB National Collection of Industrial Bacteria (Edinburgh, Scotland) )at an average price of $37.35/share. In March of this year, the Company renewed re·new
v. re·newed, re·new·ing, re·news

v.tr.
1. To make new or as if new again; restore: renewed the antique chair.

2. its NCIB to permit the purchase of up to 18,437,285 common shares, representing 5% of the total common shares outstanding at the time of the renewal. 949,200 of the total were repurchased under the renewed NCIB.

In May 2004, the Company implemented a three for one split of its issued and outstanding common shares. All per share statistics for 2004 have been restated to reflect this share split. As at March 31, 2005, there were 367,231,290 common shares outstanding, the same number as at April 30, 2005.

During April 2005, stock options for 423,550 shares were exercised for cash.

Talisman continually con·tin·u·al
adj.
1. Recurring regularly or frequently: the continual need to pay the mortgage.

2. investigates strategic acquisitions and opportunities, some of which may be material. In connection with any such transaction, the Company may incur To become subject to and liable for; to have liabilities imposed by act or operation of law.

Expenses are incurred, for example, when the legal obligation to pay them arises. An individual incurs a liability when a money judgment is rendered against him or her by a court. debt or issue equity.

Summary of Quarterly Results (millions of Cdn. dollars unless otherwise stated)

The following is a summary of quarterly results of the Company for the eight most recently completed quarters.

Three months ended (unaudited)
---------------------------------------------------------------------
               2005              2004                    2003
---------------------------------------------------------------------
              March    Dec.  Sept.  June  March    Dec.  Sept.  June
                 31     31     30     30     31     31     30     30
---------------------------------------------------------------------
Gross sales   1,977  1,827  1,788  1,705  1,554  1,351  1,272  1,220
Total revenue 1,677  1,401  1,355  1,337  1,262  1,128  1,077  1,023
Net income
 (1)(2)         258    121    122    193    218    104    121    190
Per common
 share amounts
 (Cdn dollars)
 Net income
  (1)(2)       0.70   0.32   0.32   0.50   0.57   0.27   0.31   0.49
 Diluted net
  income
  (1)(2)       0.68   0.31   0.31   0.50   0.56   0.27   0.31   0.48
---------------------------------------------------------------------
1. Net income and net income before discontinued operations and
   extraordinary items are the same.
2. 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 Interim Consolidated Financial
   Statements.

The following discussion highlights some of the more significant factors that impacted the results in the eight most recently completed quarters ended March 31, 2005.

During the first quarter of 2005, revenue rose over the last quarter of 2004, as a result of higher commodity prices, increased production and reduced hedging losses. Net income increased in the quarter as the increased revenue, combined with reductions in dry hole costs, exploration expenses, impairments, DD&A and G&A to more than offset the impact of increases in stock based compensation charges, royalties, operating costs and taxes.

During the fourth quarter of 2004, revenue increased over the previous quarter as increases in total volumes combined with higher gas prices to more than offset the impact of a stronger Canadian dollar and increased hedging losses. Net income remained relatively constant in the quarter as reductions in stock-based compensation, operating expenses and dry hole costs were offset by increases in DD&A, impairments and G&A expenses as well as a loss on disposal of fixed assets fixed assets npl → activo sg fijo

fixed assets npl → immobilisations fpl

fixed assets fix npl → .

In the third quarter of 2004, revenue rose over the second quarter as the increase in oil prices more than offset the reduction in production, resulting from maintenance shutdowns. Net income in the third quarter declined from the previous quarter, as the increase in revenue was more than offset by increases in hedging losses, dry hole costs, exploration expenses and current income taxes. In the first two quarters of 2004, revenue continued to rise due to increases in both commodity prices and production. These factors combined with the benefit of tax rate reductions to increase net income in the first quarter of 2004 over the last quarter of 2003. A higher charge for stock-based compensation and lower tax rate reductions resulted in a slight drop in net income during the second quarter of 2004 from the previous quarter.

Net income during the second quarter of 2003 increased by $160 million due to a reduction in the Canadian federal and provincial Provincial has several meanings and may refer to:

Provincial examinations: Bi-annual province-wide examinations for students between the grades of 10 to 12 in the province of British Columbia
Anything related to a province, a formal geographical division;

tax rates. The Company began recording stock-based compensation in the second quarter. The second quarter's net income was reduced by a $105 million ($70 million after tax) catch-up catch-up
n.
1. An approach or strategy intended to overcome a disadvantage or lead: The competition will be playing catch-up for the rest of the season.

2. expense relating to outstanding stock options. The third and fourth quarters of 2003 included an additional $80 million ($50 million after tax) of stock-based compensation expense.

New Canadian New Canadian
Noun

Canad a recent immigrant to Canada Accounting Pronouncements

The Canadian Institute of Chartered Accountants The Canadian Institute of Chartered Accountants (CICA) is the umbrella body for the Chartered Accountant profession in Canada and Bermuda. Membership of the CICA totals 70,000 Chartered Accountants and 8,500 students. (CICA CICA Competition In Contracting Act of 1984 (USA)
CICA Canadian Institute of Chartered Accountants
CICA Competition In Contracting Act
CICA Criminal Injuries Compensation Authority (UK) ) has issued a number of accounting pronouncements, some of which may impact the Company's reported results and financial position in future periods.

Comprehensive Income/Financial Instruments/Hedges

The CICA issued new standards in early 2005 for Comprehensive Income (CICA 1530), Financial Instruments (CICA 3855) and Hedges (CICA 3865), which will be effective for the reporting of year-end 2007. The new standards will bring Canadian rules in line with current rules in the US. The standards will introduce the concept of "Comprehensive Income" to Canadian GAAP GAAP

See: Generally Accepted Accounting Principles

GAAP

See generally accepted accounting principles (GAAP). and will require that an enterprise (a) classify clas·si·fy
tr.v. clas·si·fied, clas·si·fy·ing, clas·si·fies
1. To arrange or organize according to class or category.

2. To designate (a document, for example) as confidential, secret, or top secret. items of comprehensive income by their nature in a financial statement and (b) display the accumulated ac·cu·mu·late
v. ac·cu·mu·lat·ed, ac·cu·mu·lat·ing, ac·cu·mu·lates

v.tr.
To gather or pile up; amass. See Synonyms at gather.

v.intr.
To mount up; increase. balance of comprehensive income separately from retained earnings Retained Earnings

The percentage of net earnings not paid out in dividends, but retained by the company to be reinvested in its core business or to pay debt. It is recorded under shareholders equity on the balance sheet. and additional paid-in capital additional paid-in capital

Stockholder contributions that are in excess of a stock's stated or par value. For example, if a firm issues stock with a par value of $1 per share but sells the stock to investors at $10 per share, the firm's financial statements in the equity section of a statement of financial position. by their nature in a financial statement of financial position. Derivative contracts will be carried on the balance sheet at their mark-to-market value, with the change in value flowing to either net income or comprehensive income. Gains and losses on instruments that are identified as hedges will flow initially to comprehensive income and be brought into net income at the time the underlying hedged hedge
n.
1. A row of closely planted shrubs or low-growing trees forming a fence or boundary.

2. A line of people or objects forming a barrier: a hedge of spectators along the sidewalk. item is settled. It is expected that this standard will be effective for Talisman's 2007 reporting. Any instruments that do not qualify for hedge accounting Why is hedge accounting necessary?
Many financial institutions and corporate businesses (entities) use derivative financial instruments to hedge their exposure to different risks (eg interest rate risk, foreign exchange risk, commodity risk, etc). will be marked-to-market Marked-to-market

An arrangement whereby the profits or losses on a futures contract are settled each day. with the adjustment (tax effected) flowing through the income statement.

Talisman does not currently have any hedges in place that carry into 2006 so the impact would not be significant based on current positions.

Risks and Uncertainties

Litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute.

When a person begins a civil lawsuit, the person enters into a process called litigation.

Talisman continues to be subject to a lawsuit lawsuit: see procedure; tort. brought by the Presbyterian Church of Sudan Sudan (s

dăn`), officially Republic of Sudan, republic (2005 est. pop. 40,187,000), 967,494 sq mi (2,505,813 sq km), NE Africa. and others commenced in November November: see month. 2001 under the Alien alien, in law, any person residing in one political community while owing allegiance to another. A procedure known as naturalization permits aliens to become citizens. Tort Claims Act tort claims act n. a federal or state act which, under certain conditions, waives governmental immunity and allows lawsuits by people who claim they have been harmed by torts (wrongful acts), including negligence, by government agencies or their employees. in the United States District Court United States District Court

In the U.S., any of the 94 trial courts of general jurisdiction in the federal judicial system. Each state, as well as the District of Columbia and the Commonwealth of Puerto Rico, has at least one federal district court. for the Southern District of New York New York, state, United States
New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of . The lawsuit alleges that the Company conspired with, or aided and abetted, the Government of Sudan to commit violations of international law in connection with the Company's now disposed dis·pose
v. dis·posed, dis·pos·ing, dis·pos·es

v.tr.
1. To place or set in a particular order; arrange.

2. of interest in oil operations in Sudan. In December 2004, Talisman filed a motion for judgment on the pleadings Noun 1. judgment on the pleadings - a judgment rendered by the court prior to a verdict because no material issue of fact exists and one party or the other is entitled to a judgment as a matter of law , seeking dismissal A discharge of an individual or corporation from employment. The disposition of a civil or criminal proceeding or a claim or charge made therein by a court order without a trial or prior to its completion which, in effect, is a denial of the relief sought by the commencement of the of the lawsuit on the grounds that the Court lacks subject matter jurisdiction to hear the lawsuit, and filed its opposition papers to the certification of the lawsuit as a class action. On March 25, 2005, the Court refused to certify cer·ti·fy
v. cer·ti·fied, cer·ti·fy·ing, cer·ti·fies

v.tr.
1.
a. To confirm formally as true, accurate, or genuine.

b. the lawsuit as a class action. On March 15, 2005, the US Department of Justice submitted a Statement of Interest to the Court expressing the US Government's view that the lawsuit interferes with US-Canada relations. The Court subsequently asked the litigants to file submissions in relation to this development. It is uncertain when the Court will make a decision in relation to these matters. Talisman believes the lawsuit to be entirely without merit and is continuing to vigorously vig·or·ous
adj.
1. Strong, energetic, and active in mind or body; robust. See Synonyms at healthy.

2. Marked by or done with force and energy. See Synonyms at active. defend itself and does not expect the lawsuit to have a material adverse effect.

Kyoto Kyoto (kyō`tō), city (1990 pop. 1,461,140), capital of Kyoto prefecture, S Honshu, Japan, on the Kamo River. Yodo is its port. Kyoto is one of Japan's largest cities and an important cultural and spiritual center.

The Kyoto protocol Kyoto Protocol: see global warming. , ratified rat·i·fy
tr.v. rat·i·fied, rat·i·fy·ing, rat·i·fies
To approve and give formal sanction to; confirm. See Synonyms at approve. by the Canadian Federal Government in December 2002, came into force on February February: see month. 16, 2005. The protocol commits Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of to reducing greenhouse gas greenhouse gas
n.
Any of the atmospheric gases that contribute to the greenhouse effect.

greenhouse gas  emissions emissions npl → émissions fpl

emissions npl → Emissionen pl  to six percent below 1990 levels over the period 2008-2012. The Federal Government released a framework outlining its Climate Change action plan on April 13, 2005. The plan as released contains few technical details regarding the implementation of the Government's greenhouse gas reduction strategy. The Climate Change Working Group of Canadian Association of Petroleum Producers continues to work with the Federal and Alberta governments to develop an approach for implementing targets and enabling greenhouse gas control legislation, which protects the industry's competitiveness, limits the cost and administrative burden of compliance and supports continued investment in the sector.

As the federal government has yet to release a detailed Kyoto compliance plan, Talisman is unable to predict the impact of potential regulations upon its business; however, it is possible that the Company would face increases in operating costs in order to comply with the greenhouse gas emissions legislation.

Use of BOE equivalents

Unless otherwise stated, references to production represent Talisman's working interest share (including royalty interests royalty interest

The proportional ownership interest by the owner of oil and gas rights in income produced by the asset. See also overriding royalty interest. and net profits interest) before deduction deduction, in logic, form of inference such that the conclusion must be true if the premises are true. For example, if we know that all men have two legs and that John is a man, it is then logical to deduce that John has two legs. of royalties. Throughout the MD&A, 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 approximate ap·prox·i·mate
v.
To bring together, as cut edges of tissue.

adj.
1. Relating to the contact surfaces, either proximal or distal, of two adjacent teeth; proximate.

2. Close together. energy equivalence conversion method primarily applicable at the burner A drive that writes write-once optical discs such as CD-Rs and DVD-Rs. A "burner" implies a one-time recording, but the term is erroneously used to refer to drives that "write" to re-recordable CD-RW and DVD-RW/+RW media as well. See burn, CD-R and DVD-R. tip and does not represent a value equivalence at the wellhead well·head
n.
1. The source of a well or stream.

2. A principal source; a fountainhead.

3. The structure built over a well.

wellhead
Noun

1. .

Additional information related to the Company can be found on SEDAR SEDAR System for Electronic Document Analysis and Retrieval
SEDAR Southeast Data, Assessment, and Review at www.sedar.com.

Exploration and Operations Review

North America

During the first quarter of 2005, Talisman participated in a record 210 gross wells (126 operated) resulting in a total of 175 gas and 28 oil wells for an average success rate of 97%. Included in the 210 wells are 54 exploration wells, which resulted in 47 gas wells and two oil wells.

Total production from North America averaged 210,974 boe/d in first quarter of 2005. Natural gas production in North America averaged a record 929 mmcf/d, 57 mmcf/d higher (7% higher) than the first quarter of 2004. A new weekly record for natural gas of 945 mmcf/d was achieved in March. Liquids production averaged 56,275 bbls/d, a decrease of 3% over the same period last year and in line with expectations.

Talisman participated in 10 gas wells in the Alberta Foothills during the quarter. The 6-28-42-16W5 well (Talisman 100%) tested at a rate of approximately 11 mmcf/d and came onstream OnStream Holdings of the Netherlands was spun off from Philips in 1998 and went bankrupt for a second time in 2003. ^[1]

As a result of its first bankruptcy in 2001, the company was split into two parts, OnStream Data and OnStream MST. in April.

Production in Monkman continues to increase with the first quarter gas rates averaging 108 mmcf/d, a 43 % increase over fourth quarter 2004 and a 30% increase over the first quarter of 2004. The Brazion b-60-E well (Talisman 80%) commenced production on December 13, 2004 at 66 mmcf/d. It has consistently produced at 60-70 mmcf/d of total sales gas. There are three wells currently being drilled, of which two are Paleozoic prospects and one a Triassic prospect. East Spieker b-15-F, a 2004 well (Talisman 50%), came on stream in April at 3 mmcf/d and Sukunka c-3-A, another 2004 well (Talisman 100%), came on stream at 8 mmcf/d.

During the first quarter, production from the Edson Edson can refer to:

Edson, Alberta
Edson, Wisconsin
Edson, Merritt Austin, U.S. Marine Corps General
Edson (tractors)
Edson Buddle, United States soccer player for New York Metrostars
Edson de Jesus Nobre, Angolan footballer

area averaged 42,551 boe/d, an increase of 9% over the same period last year and 7% above the fourth quarter. Gas production increased to 227 mmcf/d, 18 mmcf/d higher than first quarter 2004, setting a new monthly production record of 238 mmcf/d in March. This area includes Bigstone/Wild River, Edson and West Whitecourt.

Bigstone/Wild River's quarterly production of 18,718 boe/d was up 13% over the first quarter of last year and 6% over the previous quarter. Thirty-one wells were drilled during the quarter with a 100% success rate. The 13-04-57-24W5 well (Talisman 100%) came on stream in April with an initial production rate of 6.8 mmcf/d sales gas. In March, Bigstone/Wild River set a new monthly production record of 107 mmcf/d. The Wild River Plant 3 expansion has just been completed resulting in increased capacity of 10 mmcf/d (Talisman share).

Talisman Midstream Operations (TMO TMO T-Mobile
TMO The Mac Observer (website)
TMO Timeout (Hekimian)
TMO Tenant Management Organisation (UK)
TMO Toprak Mahsulleri Ofisi ) transported and processed record gas volumes during the quarter. The Edson plant processed 203 mmcf/d, of which TMO contributed 133 mmcf/d. The Cutbank system gathered and processed 137 mmcf/d and we will be completing the construction of an additional 30 mmcf/d of capacity at Musreau in May TMO has submitted a pipeline construction application for the proposed Lynx lynx, name given to several related small, ferocious members of the cat family. All have small heads, tufted ears, and heavy bodies with long legs and short tails. All are primarily terrestrial, although they are able to climb trees. pipeline. The pipeline will allow production from Talisman's working interest lands in the North Alberta Foothills to move south and east to connect to the Central Foothills Gas Gathering System (CFGGS) and is targeted for commissioning by late 2006.

In Central Alberta Central Alberta (also named Alberta's Heartland) is a region located in the Canadian province of Alberta.

Central Alberta is the most densely populated rural area in the province. Agriculture and energy make up an important part of the economy. , the Ferrier Fer´ri`er

n. 1. A ferryman. 9-3-42-10W5 well (Talisman 73.7%) came on production in early April and is currently producing 11 mmcf/d sales gas and 800 bbls/d condensate condensate, matter in the form of a gas of atoms, molecules, or elementary particles that have been so chilled that their motion is virtually halted and as a consequence they lose their separate identities and merge into a single entity. . The Ferrier 2-9-42-10W5 well (Talisman 65%), a follow-up follow-up,
n the process of monitoring the progress of a patient after a period of active treatment.

follow-up

subsequent.

follow-up plan well to 9-3, tested at 5.6 mmcf/d in February.

Production in Appalachia averaged 120 mmcf/d, an 18% increase over the fourth quarter and a 132% increase over the same quarter last year. The Solderblom HZ #1 well (FEI FEI

Fédération Équestre Internationale. 100%), which came on stream in December 2004, hit a record high rate of 32 mmcf/d in March. Two wells were brought onstream in the quarter with combined sales of 6.5 mmcf/d. Two more wells, Drumm #1 and Behm, are waiting to be tied-in tied-in

a conformation defect in an animal in which a limb is perceptibly thinner at one point, e.g. tied-in below the knee, or below the hock. . Six gas wells were drilled in the first quarter, of which three were in the Belden Belden may refer to:

Belden, California
Belden, Nebraska
Belden, Mississippi
Belden Electronics Division, a design and manufacturer enterprise of wire and cable products
Westfield Belden Village, a mall in Canton, Ohio, United States

and Blake acreage. The Catlin Cat·lin , George 1796-1872.

American artist who painted portraits and tribal scenes in the American West and in South and Central America. Hill compressor compressor, machine that decreases the volume of air or other gas by the application of pressure. Compressor types range from the simple hand pump and the piston-equipped compressor used to inflate tires to machines that use a rotating, bladed element to achieve expansion that will be commissioned in early 2006 should provide an additional 8 mmcf/d of capacity.

North Sea

In February 2005, a Talisman subsidiary acquired all of the outstanding shares of Pertra A.S. of Norway for US$175 million (including closing costs). The acquisition effectively doubled the size of Talisman's business in Norway. As part of the transaction, Talisman's subsidiary acquired 70% ownership and operatorship of the Varg oil field, 70% of the undeveloped South Varg gas condensate field and extensive exploration acreage. The acquisition added 10,000 bbls/d to Talisman's production as of March 1. Subsequently Talisman has repaired the main production riser at Varg and started a development drilling program at the end of March.

Production in the North Sea averaged 149,462 boe/d in the quarter, up slightly from 148,043 in the fourth quarter of 2004 and 3% above the first quarter of 2004. The Ross/Blake FPSO FPSO Floating Production Storage and Off-loading (shipping & oil industry)
FPSO Foster Parent Society of Ontario
FPSO Fleet Publication Supply Office had an unplanned shutdown of five weeks in the first quarter as a result of production chemistry issues. Since the shutdown, production levels in April have been good and the production chemistry issues are being addressed.

Four successful operated development wells were completed in the first quarter. A Galleywell came on at 1,700 bbls/d and a Claymore well had an initial flow rate of 4,700 bbls/d. A new well at Tartan Tartan, in the Bible
Tartan (tär`tăn), in the Bible, official title of two Assyrians sent to Hezekiah by Sennacherib and Sargon.

tartan, pattern
tartan: see plaid. has been successful and will be tested in the second quarter. The Gyda A16 well came on production at 3,000 bbls/d. In addition the Gyda A31 well appears to be successful and will be completed in the second quarter.

Development drilling has commenced at Tweedsmuir. All main construction contracts have now been let at Tweedsmuir and first production is expected in early 2007.

Malaysia/Vietnam

Production in Malaysia/Vietnam averaged 41,876 boe/d in the first quarter of 2005 compared to 46,401 boe/d in the fourth quarter of 2004 and up 13% compared to a year ago. The drop in production from the prior quarter reflects the acceleration acceleration, change in the velocity of a body with respect to time. Since velocity is a vector quantity, involving both magnitude and direction, acceleration is also a vector. In order to produce an acceleration, a force must be applied to the body. of a planned two week shutdown from May into February. Two successful development wells were drilled in PM-3 CAA during the quarter.

A successful exploration well and two sidetrack wells were drilled at West Bunga Orkid in the PM-3 CAA. The well tested at 2,200 bbls/d from the I-45 reservoir reservoir (rĕz`əvôr, -vwär), storage tank or wholly or partly artificial lake for storing water. Building an embankment or dam to preserve a supply of water for irrigation is an ancient practice; India and Egypt have many old and . A successful appraisal well and sidetrack well were drilled to delineate oil and gas reservoirs gas reservoir

In geology, a naturally occurring storage area, characteristically a folded rock formation, that traps and holds natural gas. The reservoir rock must be permeable and porous to contain the gas, and it has to be capped by impervious rock in order to form an on the North Bunga Orkid discovery. The development plan for the northern field complex is being prepared.

The South Angsi project in Block PM-305 is on schedule for first production in mid-2005. The seven well development drilling program on the field is almost complete and confirms the expected reserves. A successful exploration well (Kuning-1) was drilled from the South Angsi platform to evaluate a near field prospect. The Murai well east of South Angsi also found oil pay.

At PM-314 in Malaysia, processing of the 1,024 square kilometre Square kilometre (U.S. spelling: square kilometer), symbol km², is a decimal multiple of the SI unit of surface area, the square metre, one of the SI derived units. 1 km² is equal to:

1,000,000 m²
100 ha (hectare)

Conversely:

1 m² = 0.

3D seismic program (acquired in 2004) is near completion and is indicating exploration prospects close to the South Angsi development.

On April 26, a wholly owned subsidiary Wholly Owned Subsidiary

A subsidiary whose parent company owns 100% of its common stock.

Notes:
In other words, the parent company owns the company outright and there are no minority owners. of Talisman signed a Petroleum Contract with a 60% interest in Block 15-2/01 offshore Vietnam. This block is prospective and is located in the heart of the Cui Long basin. The consortium's commitment on the 700,000 acre block includes a 3D seismic survey and a two well exploration program over the initial three year exploration phase.

Indonesia

Production in Indonesia averaged 32,755 boe/d in the first quarter, compared to 35,308 boe/d in the fourth quarter and 36,998 boe/d a year ago. Production decreased as expected due to the planned expiry of the Jambi and Tanjung production sharing contracts in 2004.

The PT Perusahaan Gas Negara (Persero) Tbk TBK - Tool Builder Kit ("PGN PGN Portable Game Notation (chess)
PGN Procuraduria General de la Nación (Spanish)
PGN Philadelphia Gay News
PGN Parameter Group Number
PGN Phi Gamma Nu (business fraternity) ") pipeline project and expansion of the Corridor facilities to supply 2.3 tcf of natural gas from Corridor to West Java West Java (Indonesian: :Jawa Barat) is a province of Indonesia, located on the island of Java. The capital is Bandung. History continued.

Trinidad

Development of the Greater Angostura field in Block 2c offshore Trinidad was completed on schedule with first production commencing in January; the completion of the export terminal was delayed to February and the tie in of the Canteen platform was delayed to the end of April. Production averaged 7,826 bbls/d (Talisman share) in the first quarter reaching 12,025 bbls/d in March. Full production is anticipated in early May following the tie-in tie-in
n.
One thing that is related to or connected with another.

Noun 1. tie-in - a fastener that serves to join or connect; "the walls are held together with metal links placed in the wet mortar during construction" of the Canteen platform.

Algeria

Production averaged 14,540 bbls/d in the first quarter, compared to 12,998 bbls/d a year ago. Production was down from 15,329 bbls/d in the fourth quarter due to a two week planned shutdown of the MLN plant in February.

The expansion of the Greater MLN facilities is expected to be sanctioned in the second quarter. Development options for the MLSE MLSE Maximum Likelihood Sequence Estimation (algorithm)
MLSE Maple Leafs Sports Entertainment
MLSE Model Law Structural Engineer
MLSE Maintenance Loop Signaling Entity
MLSE Maximum Likelihood Sequence Estimator field (located to the southeast Southeast or south east is the ordinal direction halfway between south and east. It the opposite of northwest.

Southeast or South East can refer to:

of Greater MLN) are being prepared.

Rest of World

In Qatar Qatar or Katar (both: kŭ`tər, gŭ–, kətär`), officially State of Qatar, independent emirate (2005 est. pop. 863,000), c. , processing of 3D seismic on Block 10 has been completed. The data is being interpreted Translated from source code into machine code one line at a time. See interpreted language and interpreter.

interpreted - interpreter and the first well (QT-1) is expected to spud in the fourth quarter.

In Peru, the Situche Central well was spud late in January 2005.

In Colombia Colombia (kəlŭm`bēə, Span. kōlōm`byä), officially Republic of Colombia, republic (2005 est. pop. 42,954,000), 439,735 sq mi (1,138,914 sq km), NW South America. Bogotá is the capital and largest city. , drilling continued on the Tangara-1 well.

Talisman Energy Inc. is a large, independent oil and gas producer with operations in Canada and, through its subsidiaries, the North Sea, Indonesia, Malaysia, Vietnam, Algeria, Trinidad and Tobago and the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. .Talisman's subsidiaries also conduct business in Colombia, Qatar and Peru.Talisman has adopted the International Code of Ethics Code of Ethics can refer to:

Ethical code, a code of professional responsibility, noting what behaviors are "ethical".
Code of Ethics (band), a 90's Christian New Wave/Pop band

for Canadian Business Canadian Business is the longest-publishing business magazine in Canada. It was founded in 1928 as The Commerce of the Nation, the organ of the Canadian Chamber of Commerce. The magazine was renamed Canadian Business in 1933. and is committed to maintaining high standards of excellence in corporate citizenship Corporate Citizenship

The extent to which businesses are socially responsible in meeting legal, ethical and economic responsibilities placed on them by shareholders. The aim it to create higher standards of living and quality of life in the community in which it operates, while and social and environmental responsibility wherever its business is conducted.The Company is a participant Participant

A party of a funding. It usually refers to the lowest rank or smallest level of funding. 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 Toronto Stock Exchange (TSE)

Canada's largest stock exchange, trading approximately 1,200 company stocks and 33 options. in Canada and the New York Stock Exchange New York Stock Exchange (NYSE)

World's largest marketplace for securities. The exchange began as an informal meeting of 24 men in 1792 on what is now Wall Street in New York City. in the United States under the symbol TLM.

Forward-looking Statements forward-looking statement

A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections.

This news release contains statements about future production growth and timing of production, cash flow and cash flow per share, earnings from operations, business plans for drilling, exploration and development, estimated future commodity prices and exchange rates, target dates for commissioning of a pipeline and a compressor expansion (as well as additional capacity following expansion), planned expansion of facilities or other expectations, beliefs, plans, goals, objectives, assumptions and statements about future events or performance that constitute "forward-looking statements" or "forward-looking for·ward-look·ing
adj.
Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan.

Adj. 1. information" within the meaning of applicable securities legislation.

Statements concerning oil and gas reserves contained in this report may be deemed to be forward-looking statements as they involve the implied Inferred from circumstances; known indirectly.

In its legal application, the term implied is used in contrast with express, where the intention regarding the subject matter is explicitly and directly indicated. assessment that the resources described can be profitably produced in the future, based on certain estimates and assumptions.

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 the Company 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 geology, science of the earth's history, composition, and structure, and the associated processes. It draws upon chemistry, biology, physics, astronomy, and mathematics (notably statistics) for support of its formulations. 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;

- health, safety and environmental risks;

- uncertainties as to the availability and cost of financing;

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

- risks in conducting foreign operations (for example, political and fiscal instability instability /in·sta·bil·i·ty/ (-stah-bil´i-te) lack of steadiness or stability.

detrusor instability or the possibility of civil unrest Unrest is a sociological phenomenon, for instance:

Industrial unrest
Labor unrest
Rebellion

Notable historical unrests

19th century Luddites
1978–79 Winter of Discontent (UK)
1989 Purple Rain Revolt, (South Africa)

or military action);

- general economic conditions;

- the effect of acts of, or actions against international terrorism Noun 1. international terrorism - terrorism practiced in a foreign country by terrorists who are not native to that country
act of terrorism, terrorism, terrorist act - the calculated use of violence (or the threat of violence) against civilians in order to attain ; and

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

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 in the Company's Annual Report under the headings "Management's Discussion and Analysis- Risks and Uncertainties", "- Liquidity and Capital Resources", and "- Outlook for 2005", under the heading "Risk Factors" in the Company's 2004 annual information form as well as in the Company's other reports on file with Canadian securities regulatory authorities Noun 1. regulatory authority - a governmental agency that regulates businesses in the public interest
regulatory agency

administrative body, administrative unit - a unit with administrative responsibilities 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 - Oil and Gas Information, Note Regarding US Disclosure Requirements

Throughout this news 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 U.S., net production volumes are reported after the deduction of these amounts.

Throughout this 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 ration ration

a fixed allowance of total feed for an animal for one day. Usually specifies the individual ingredients and their amounts and the amounts of the specific nutriments such as carbohydrate, fiber, individual minerals and vitamins. 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.

Advisory - Canadian Dollars and GAAP

Numbers are in Canadian dollars unless otherwise indicated. Unless otherwise indicated, financial information is presented in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.^[]

As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with Canadian generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records.

Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting that differ from generally accepted accounting principles in the US.

Advisory - Non-GAAP Financial Measures

This release includes references to terms such as cash flow, cash flow per share and earnings from operations These terms are not defined by Generally Accepted Accounting Principles in either Canada or the US. Consequently these are referred to as non-GAAP measures. Talisman's reported results of cash flow, cash flow per share and earnings from operations may not be comparable to similarly titled measures by other companies.

Cash flow, as commonly used in the oil and gas industry, appears as a separate caption on the Company's cash flow statement and represents net income before exploration costs, DD&A, future taxes and other non-cash expenses Noun 1. non-cash expense - an expense (such as depreciation) that is not paid for in cash
disbursal, disbursement, expense - amounts paid for goods and services that may be currently tax deductible (as opposed to capital expenditures) . Cash flow is used by the Company to assess operating results between years and between peer companies with 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 Indicator

Anything used to predict future financial or economic trends.

Notes:
In the context of technical analysis, an indicator is a mathematical calculation based on a securities price and/or volume. The result is used to predict future prices. 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.

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. The Company uses this data to evaluate performance of core operational activities on a comparable basis between periods. To assist in understanding the Company's earnings from operations, the following table adjusts the Company's net income per the financial statements, for certain items of a non-operational nature, on an after-tax basis.

Talisman Energy Inc.
Highlights
(unaudited)

                                                  Three months ended
                                                        March 31
                                                     2005       2004
---------------------------------------------------------------------
Financial                                                (restated 1)
(millions of Canadian dollars
 unless otherwise stated)
Cash flow (funds from operating activities)           960        770
Net income                                            258        218
Exploration and development expenditures              749        614
Per common share (dollars)
 Cash flow (funds from operating activities)         2.59       2.01
 Net income                                          0.70       0.57
---------------------------------------------------------------------
Production
(daily average)
Oil and liquids (bbls/d)
 North America                                     54,256     55,241
 North Sea                                        127,882    123,245
 Southeast Asia                                    28,969     35,602
 Algeria                                           14,540     12,998
 Trinidad                                           7,826          -
 Synthetic oil                                      2,019      3,050
---------------------------------------------------------------------
Total oil and liquids                             235,492    230,136
---------------------------------------------------------------------
Natural gas (mmcf/d)
 North America                                        929        872
 North Sea                                            129        133
 Southeast Asia                                       274        231
---------------------------------------------------------------------
Total natural gas                                   1,332      1,236
---------------------------------------------------------------------
Total mboe/d                                          457        436
---------------------------------------------------------------------
Prices (2)
Oil and liquids ($/bbl)
 North America                                      46.50      37.56
 North Sea                                          57.29      41.55
 Southeast Asia                                     60.35      44.10
 Algeria                                            60.90      44.62
 Trinidad                                           57.78          -
---------------------------------------------------------------------
Crude oil and natural gas liquids                   55.40      41.15
 Synthetic oil                                      55.87      43.91
---------------------------------------------------------------------
Total oil and liquids                               55.41      41.19
---------------------------------------------------------------------
Natural gas ($/mcf)
 North America                                       7.07       6.61
 North Sea                                           6.98       5.85
 Southeast Asia                                      5.44       4.50
---------------------------------------------------------------------
Total natural gas                                    6.73       6.13
---------------------------------------------------------------------
Total ($/boe) (includes synthetic)                  48.10      39.13
---------------------------------------------------------------------
---------------------------------------------------------------------

(1) Effective January 1, 2005, the Company retroactively adopted
    certain changes to the Canadian Institute of Chartered Accounts
    ("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 Interim Consolidated
    Financial Statements.
(2) Prices are before hedging.


Talisman Energy Inc.
Consolidated Balance Sheets


                                                March 31 December 31
(millions of Canadian dollars)                      2005        2004
---------------------------------------------------------------------
Assets                                                     (restated
Current                                                       note 1)
 Cash and cash equivalents                            66          38
 Accounts receivable                               1,027         836
 Inventories                                          81          78
 Prepaid expenses                                     14          18
---------------------------------------------------------------------
                                                   1,188         970
---------------------------------------------------------------------

Accrued employee pension benefit asset                60          61
Other assets                                          68          64
Goodwill (note 2)                                    619         466
Property, plant and equipment                     11,298      10,847
---------------------------------------------------------------------
                                                  12,045      11,438
---------------------------------------------------------------------
Total assets                                      13,233      12,408
---------------------------------------------------------------------


Liabilities
Current
 Accounts payable and accrued liabilities           1,541       1,302
  (notes 3 and 5)
 Income and other taxes payable                      355         341
---------------------------------------------------------------------
                                                   1,896       1,643
---------------------------------------------------------------------

Deferred credits                                     114         105
Asset retirement obligations (note 3)              1,314       1,272
Long-term debt (note 6)                            2,872       2,457
Future income taxes                                2,263       2,100
---------------------------------------------------------------------
                                                   6,563       5,934
---------------------------------------------------------------------
Contingencies and commitments (notes 7 and 9)

Shareholders' equity
Common shares (note 4)                             2,611       2,666
Contributed surplus                                   70          71
Cumulative foreign currency translation              (93)        (76)
Retained earnings                                  2,186       2,170
---------------------------------------------------------------------
                                                   4,774       4,831
---------------------------------------------------------------------
Total liabilities and shareholders' equity        13,233      12,408
---------------------------------------------------------------------
---------------------------------------------------------------------

See accompanying notes.

Interim statements are not independently audited.

Talisman Energy Inc.
Consolidated Statements of Income


Three months ended March 31
(millions of Canadian dollars)                      2005        2004
---------------------------------------------------------------------
                                                           (restated
Revenue                                                       note 1)
 Gross sales                                       1,977       1,554
 Less hedging loss                                    15          60
---------------------------------------------------------------------
 Gross sales, net of hedging                       1,962       1,494
 Less royalties                                      321         254
---------------------------------------------------------------------
 Net sales                                         1,641       1,240
 Other                                                36          22
---------------------------------------------------------------------
Total revenue                                      1,677       1,262
---------------------------------------------------------------------

Expenses
 Operating                                           324         280
 Transportation                                       52          47
 General and administrative                           50          39
 Depreciation, depletion and amortization            441         389
 Dry hole                                             46          79
 Exploration                                          43          44
 Interest on long-term debt                           42          47
 Stock-based compensation                            166          30
 Other                                                24           3
---------------------------------------------------------------------
Total expenses                                     1,188         958
---------------------------------------------------------------------
Income before taxes                                  489         304
---------------------------------------------------------------------
Taxes
 Current income tax                                  185          51
 Future income tax                                     3          11
 Petroleum revenue tax                                43          24
---------------------------------------------------------------------
                                                     231          86
---------------------------------------------------------------------
Net income                                           258         218
---------------------------------------------------------------------

Per common share (Canadian dollars)
 Net income                                         0.70        0.57
 Diluted net income                                 0.68        0.56
---------------------------------------------------------------------
Average number of common shares
 outstanding (millions)                              371         384
Diluted number of common shares
 outstanding (millions)                              380         391
---------------------------------------------------------------------
---------------------------------------------------------------------

See accompanying notes.

Interim statements are not independently audited.

Consolidated Statements of Retained Earnings


Three months ended March 31
 (millions of Canadian dollars)                     2005        2004
---------------------------------------------------------------------
                                                           (restated
                                                              note 1)
Retained earnings, beginning of period             2,170       1,852
Net income                                           258         218
Purchase of common shares (note 4)                  (242)          -
---------------------------------------------------------------------
Retained earnings, end of period                   2,186       2,070
---------------------------------------------------------------------
---------------------------------------------------------------------

See accompanying notes.

Interim statements are not independently audited.

Talisman Energy Inc.
Consolidated Statements of Cash Flows


Three months ended March 31
(millions of Canadian dollars)                      2005        2004
---------------------------------------------------------------------
                                                           (restated
Operating                                                     note 1)
Net income                                           258         218
Items not involving cash (note 8)                     659         508
Exploration                                           43          44
---------------------------------------------------------------------
Funds from operating activities                      960         770
Changes in non-cash working capital                  (88)        135
---------------------------------------------------------------------
Cash provided by operating activities                872         905
---------------------------------------------------------------------
Investing
Capital expenditures
 Exploration, development and corporate             (753)       (621)
 Acquisitions                                       (236)        (21)
Proceeds of resource property dispositions             1           4
Changes in non-cash working capital                   24          (4)
---------------------------------------------------------------------
Cash used in investing activities                   (964)       (642)
---------------------------------------------------------------------
Financing
Long-term debt repaid                                (72)       (197)
Long-term debt issued                                491           -
Common shares (purchased) issued                    (299)          2
Deferred credits and other                             4         150
Changes in non-cash working capital                   (2)         (3)
---------------------------------------------------------------------
Cash provided by (used in) financing activities      122         (48)
---------------------------------------------------------------------
Effect of translation on foreign currency cash        (2)         (3)
---------------------------------------------------------------------
Net increase in cash and cash equivalents             28         212
Cash and cash equivalents, beginning of period        38          98
---------------------------------------------------------------------
Cash and cash equivalents, end of period              66         310
---------------------------------------------------------------------
---------------------------------------------------------------------

See accompanying notes.

Interim statements are not independently audited.

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(tabular amounts in millions of Canadian dollars ("$") except as
 noted)

The Interim 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 con·dense
v. con·densed, con·dens·ing, con·dens·es

v.tr.
1. To reduce the volume or compass of.

2. To make more concise; abridge or shorten.

3. Physics
a. or omitted. The Interim Consolidated Financial Statements should be read in conjunction with the audited Annual Consolidated Financial Statements and the notes thereto there·to
adv.
1. To that, this, or it.

2. Archaic In addition to that; furthermore.

thereto
Adverb

Formal

1. to that or it

2. in Talisman's Annual Report for the year ended December 31, 2004.

1. Significant Accounting Policies

The Interim Consolidated Financial Statements have been prepared following the same accounting policies and methods of computation Computation is a general term for any type of information processing that can be represented mathematically. This includes phenomena ranging from simple calculations to human thinking. as the Consolidated Financial Statements for the year ended December 31, 2004 except for the following:

1a) Preferred Securities

Effective January 1, 2005 the Company retroactively ret·ro·ac·tive
adj.
Influencing or applying to a period prior to enactment: a retroactive pay increase.

[French rétroactif, from Latin 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 re·deem
tr.v. re·deemed, re·deem·ing, re·deems
1. To recover ownership of by paying a specified sum.

2. To pay off (a promissory note, for example).

3. in 2004, be treated as debt rather than equity. Previously preferred securities charges were charged directly to Retained Earnings but under the new 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 The liberation of an estate in real property from a mortgage.

Redemption is the process by which land that has been mortgaged or pledged is bought back or reclaimed. It is accomplished through a payment of the debt owed or a fulfillment of the other conditions. of the preferred securities. There was no impact to the 2005 results as the preferred securities were fully redeemed in 2004.

The adjustment required to the December 31, 2004 consolidated balance sheet consolidated balance sheet

A balance sheet in which assets and liabilities of a parent company and its controlled subsidiaries are combined, thereby presenting balance sheet items for the parent and its subsidiaries as if they were a single firm. to implement this change in accounting is as follows:

---------------------------------------------------------------------
                             As previously
                                  reported  Adjustments  As restated
---------------------------------------------------------------------
Cumulative foreign currency
 translation                          (150)          74          (76)
Retained earnings                    2,244          (74)       2,170

The adjustment required to the December 31, 2003 consolidated balance
sheet to implement this change in accounting is as follows:


---------------------------------------------------------------------
                             As previously
                                  reported  Adjustments  As restated
---------------------------------------------------------------------
Future income taxes                  2,127            2        2,129
Long-term debt                       2,203          392        2,595
Preferred securities                   431         (431)           -
Cumulative foreign currency
 translation                          (114)          88          (26)
Retained earnings                    1,903          (51)       1,852


The adjustment required to the December 31, 2002 consolidated balance
sheet to implement this change in accounting is as follows:

---------------------------------------------------------------------
                             As previously
                                  reported  Adjustments  As restated
---------------------------------------------------------------------
Other assets                            99            3          102
Future income taxes                  2,282           (9)       2,273
Long-term debt                       2,997          476        3,473
Preferred securities                   431         (431)           -
Cumulative foreign currency
 translation                           140            4          144
Retained earnings                    1,143          (37)       1,106


The adjustment to the income statement for the three months ended
March 31, 2004 is as follows:

---------------------------------------------------------------------
                             As previously
                                  reported  Adjustments  As restated
---------------------------------------------------------------------
Interest on long-term debt              38            9           47
Future income tax (recovery)            15           (4)          11
---------------------------------------------------------------------
Net income                             223           (5)         218
---------------------------------------------------------------------
Preferred securities charges,
 net of tax                             (5)           5           -
---------------------------------------------------------------------
Gain on redemption of preferred
 Securities, net of tax                 16          (16)           -
---------------------------------------------------------------------
Net income available to
 common share holders                  234          (16)         218
---------------------------------------------------------------------

---------------------------------------------------------------------
Per common share(1) (Canadian dollars)
---------------------------------------------------------------------
 Net income                            .61         (.04)         .57
---------------------------------------------------------------------
 Diluted net income                    .60         (.04)         .56
---------------------------------------------------------------------
1. Per share amounts have been retroactively restated to reflect the
   impact of the Company's three-for-one stock split. See note 9 to
   the 2004 Consolidated Financial Statements.


The adjustment to the income statement for the year ended December
31, 2004 is as follows:

---------------------------------------------------------------------
                             As previously
                                  reported  Adjustments  As 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 share holders                  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 income statement for the year ended December
31, 2003 is as follows:

---------------------------------------------------------------------
                             As previously
                                  reported  Adjustments  As 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 share holders                  990          (14)         976
---------------------------------------------------------------------

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


The adjustment to the income statement for the year ended December
31, 2002 is as follows:

---------------------------------------------------------------------
                             As previously
                                  reported  Adjustments  As restated
---------------------------------------------------------------------
Interest on long-term debt             164           45          209
Future income tax (recovery)           175          (18)         157
---------------------------------------------------------------------
Net income                             544          (27)         517
---------------------------------------------------------------------
Preferred securities charges,
 net of tax                            (24)          24           -
---------------------------------------------------------------------
Net income available to
 common share holders                  520           (3)         517
---------------------------------------------------------------------

---------------------------------------------------------------------
Per common share (Canadian dollars)
---------------------------------------------------------------------
 Net income                           1.29            -         1.29
---------------------------------------------------------------------
 Diluted net income                   1.27            -         1.27
---------------------------------------------------------------------

1b) Transportation Expenses

During the second quarter of 2004, the Company began accounting for transportation costs as expenses on a retroactive basis. Previously, these costs had been either netted off against the realized price or included as a component of operating costs, depending on the circumstances in the various geographic segments. Prior year comparatives have been restated to reflect this change in accounting policy. The change in accounting has no effect on net earnings but has increased revenue and decreased operating expenses in the three months ended March 31, 2004 as follows:

---------------------------------------------------------------------
                                                                2004
---------------------------------------------------------------------
Revenue                                                           31
Operating expenses                                               (16)
---------------------------------------------------------------------
Transportation expenses                                           47
---------------------------------------------------------------------
Net income                                                         -
---------------------------------------------------------------------


1c) Reclassification

Certain information provided for prior years has been reclassified to
conform to the presentation adopted in the current year.

2. Goodwill

During the first three months of 2005, the Company's Goodwill changed
 as follows:
---------------------------------------------------------------------
Opening balance at January 1, 2005                               466
Acquired during the period                                       158
Foreign currency translation effect                               (5)
---------------------------------------------------------------------
Closing balance at March 31, 2005                                 619
---------------------------------------------------------------------
---------------------------------------------------------------------
During the period ended March 31, 2005, the Company completed the
acquisition of 100% of all outstanding shares of Pertra A.S. The
purchase price of $215 million has been assigned to property plant
and equipment ($257 million), future income tax liability
($156 million), asset retirement obligations ($44 million), and the
remainder to goodwill ($158 million).

3. Asset Retirement Obligation

During the first three months of 2005, the Company's asset retirement
obligation changed as follows:

---------------------------------------------------------------------
ARO liability at January 1, 2005(1)                            1,295
Liabilities incurred during period                                43
Liabilities settled during period                                 (8)
Accretion expense                                                 19
Foreign currency translation                                     (12)
---------------------------------------------------------------------
ARO liability at March 31, 2005(1)                             1,337
---------------------------------------------------------------------
---------------------------------------------------------------------

1. Included in January 1, 2005 and March 31, 2005 liabilities are
   $23 million of short-term reclamation costs recorded in accounts
   payable on the balance sheet for a net ARO liability of $1,272
   and $1,314 respectively.


4. Share Capital

Talisman's authorized share capital consists of an unlimited number
of common shares without nominal or par value and unlimited first and
second preferred shares. No preferred shares have been issued.

Continuity of common shares (year to date)                2005
---------------------------------------------------------------------
                                                    Shares    Amount
---------------------------------------------------------------------
Balance at January 1,                          375,185,290    $2,666
Issued upon exercise of stock options               62,400         2
Purchased                                       (8,016,400)      (57)
---------------------------------------------------------------------
Balance at March 31,                           367,231,290     2,611
---------------------------------------------------------------------
---------------------------------------------------------------------

Pursuant to a normal course issuer bid renewed in March 2005, Talisman may repurchase up to 18,437,285 common shares representing 5% of the outstanding common shares of the Company at the time the normal course issuer bid was renewed. During the first three months of 2005 the Company repurchased 8,016,400 common shares, of which 949,200 common shares were repurchased under the renewed normal course issuer bid, for $299 million.

5. STOCK OPTIONS

Continuity of stock options (year to date)            2005
---------------------------------------------------------------------
                                           Number of         Average
                                             Options  Exercise Price
---------------------------------------------------------------------
Outstanding at January 1                  20,788,375           19.58
 Granted during the period                 5,838,830           42.03
 Exercised for common shares                (62,400)           14.39
 Exercised for cash payment              (1,541,742)           17.09
 Expired/forfeited                          (21,720)           20.40
---------------------------------------------------------------------
Outstanding at March 31                   25,001,343           24.99
---------------------------------------------------------------------
---------------------------------------------------------------------
Exercisable at March 31                    9,042,031           17.40
---------------------------------------------------------------------
---------------------------------------------------------------------

All options issued by the Company permit the holder to purchase one common share of the Company at the stated exercise price or to receive a cash payment equal to the appreciated value of the stock option.

Since the introduction of the cash feature, approximately 98% of options that have been exercised, have been exercised for cash, resulting in reduced dilution of shares.

Cash units

In addition to the Company's stock option plans Talisman's subsidiaries issue stock appreciation rights under the cash unit plans. Cash units are similar to stock options except that the holder does not have a right to purchase the underlying share of the Company.

Continuity of cash units (year to date)              2005
---------------------------------------------------------------------
                                              Number         Average
                                          Cash Units  Exercise Price
---------------------------------------------------------------------
Outstanding at January 1                   1,526,640           21.34
 Granted during the period                   981,135           42.02
 Expired/forfeited                           (1,800)           19.80
---------------------------------------------------------------------
Outstanding at March 31                    2,505,975           29.44
---------------------------------------------------------------------
---------------------------------------------------------------------
Exercisable at March 31                        9,900           19.81
---------------------------------------------------------------------
---------------------------------------------------------------------

During the period the Company recorded stock-based compensation
expense of $166 million (2004-$30 million). Of the total expense $35
million (2004-$27 million) relates to options exercised for cash at
an average share price of $40.08 (2004-$26.20)compared to an average
exercise price of $17.09 (2004-$14.05)for an average per option gain
of $22.99 (2004-$12.15).

The remaining $131 million (2004-$3 million) is a result of the 28%
(2004-5%) increase in the Company's share price during the period,
and the corresponding impact on the mark-to-market liability of the
vested and prorated vested options and cash units outstanding.

The total mark-to-market liability for stock options and cash units
is included in accounts payable and accrued liabilities and was $352
million as at March 31, 2005 (December 31, 2004 - $223 million).

6. Long-Term Debt

                                               March 31, December 31,
                                                   2005         2004
---------------------------------------------------------------------
Bank Credit Facilities (Canadian $ denominated)     744          328
Debentures and Notes (unsecured)
 US$ denominated (US$825 million)                   998          993
 Canadian $ denominated                             559          559
 Pounds Sterling denominated
  (Pounds Sterling 250 million)                     571          577
---------------------------------------------------------------------
                                                $ 2,872      $ 2,457
---------------------------------------------------------------------
---------------------------------------------------------------------

7. Commodity Based Sales Contracts Sales Contract

Contract between a seller and buyer for the sale of goods, services, or both.

The Company's outstanding commodity price derivative contracts have been designated as hedges of the Company's anticipated future commodity sales. The following tables summarize sum·ma·rize
intr. & tr.v. sum·ma·rized, sum·ma·riz·ing, sum·ma·riz·es
To make a summary or make a summary of.

sum commodity price derivative contracts and fixed price sales contracts outstanding at March 31, 2005:

a) Crude oil price derivative contracts

---------------------------------------------------------------------
Fixed price swaps                                     Remainder 2005
---------------------------------------------------------------------
(WTI oil index)
Volumes (bbls/d)                                               6,000
Price (US$/bbl)                                                26.97
---------------------------------------------------------------------

b) Physical natural gas contracts (North America)

---------------------------------------------------------------------
Fixed price sales               Remainder 2005       2006       2007
---------------------------------------------------------------------
Volumes (mcf/d)                         14,650     14,650     14,650
Weighted average price ($/mcf)            3.21       4.15       4.28
---------------------------------------------------------------------


8. Selected Cash Flow Information

                                                 2005           2004
                                                           (restated)
Three months ended March 31,                                 (note 1)
---------------------------------------------------------------------
Net income                                         258           218
---------------------------------------------------------------------
Items not involving current cash flow
 Depreciation, depletion and amortization          441           389
 Property impairments                               23             -
 Dry hole                                           46            79
 Net loss (gain) on asset disposals                 (1)            3
 Stock-based compensation                          131             3
 Future taxes and deferred petroleum
  revenue tax                                       13            19
 Other                                               6            15
---------------------------------------------------------------------
                                                   659           508
---------------------------------------------------------------------
Exploration                                         43            44
---------------------------------------------------------------------
Funds from operating activities                    960           770
---------------------------------------------------------------------

9. Contingencies Contingencies (ISSN 1048-9851) is the bimonthly magazine of the American Academy of Actuaries, providing a large and diverse readership with general interest and technical articles on a wide range of issues related to the actuarial profession. and Commitments

The Company continues to be subject to a lawsuit brought by the Presbyterian Church of Sudan and others commenced in November 2001 under the Alien Tort Claims Act in the United States District Court for the Southern District of New York. The lawsuit alleges that the company conspired with, or aided and abetted, the Government of Sudan to commit violations of international law in connection with the Company's now disposed of interest in oil operations in Sudan. In December 2004, Talisman filed a motion for judgment on the pleadings, seeking dismissal of the lawsuit on the grounds that the Court lacks subject matter jurisdiction to hear the lawsuit, and filed its opposition papers to the certification of the lawsuit as a class action. On March 25, 2005, the Court refused to certify the lawsuit as a class action. On March 15, 2005, the US Department of Justice submitted a Statement of Interest to the Court expressing the US Government's view that the lawsuit interferes with US-Canada relations. The Court subsequently asked the litigants to file submissions in relation to this development. It is uncertain when the Court will make a decision in relation to these matters. Talisman believes the lawsuit to be entirely without merit and is continuing to vigorously defend itself and does not expect the lawsuit to have a material adverse effect.

10. Segmented Information

Three months ended March 31

                  North         North     Southeast
(millions       America (1)       Sea (2)      Asia (3)      Algeria
 of Canadian  -------------------------------------------------------
 dollars)      2005   2004   2005   2004   2005   2004   2005   2004
---------------------------------------------------------------------
Revenue
Gross sales     829    728    735    536    292    237     80     53
Hedging          15     20      -     40      -      -      -      -
Royalties       166    143     10      9    109     75     32     27
---------------------------------------------------------------------
Net sales       648    565    725    487    183    162     48     26
Other            21     17     15      5      -      -      -      -
---------------------------------------------------------------------
Total
 revenue        669    582    740    492    183    162     48     26
---------------------------------------------------------------------
Segmented
 expenses
Operating       106     97    190    159     18     22      7      2
Transportation   17     18     19     17     14     10      2      2
DD&A            228    176    164    162     31     44      9      7
Dry hole         18     32     17     25      1      1      -      -
Exploration      21     24      5      6      3      2      -      -
Other            (2)   (12)    31      2     (3)     1      -      -
---------------------------------------------------------------------
Total
 segmented
 expenses       388    335    426    371     64     80     18     11
---------------------------------------------------------------------
Segmented
 income
 before
 taxes          281    247    314    121    119     82     30     15
---------------------------------------------------------------------
Non-segmented
 expenses
General and
 administrative
Interest
Stock-based
 compensation
Currency
 translation
---------------------------------------------------------------------
Total
 non-segmented
 expenses
---------------------------------------------------------------------
Income before
 taxes
---------------------------------------------------------------------
Capital
 expenditures
Exploration     173    134     22     40     14      9      -      -
Development     275    243    162     66     62     44      2      3
Midstream         4      1      -      -      -      -      -      -
---------------------------------------------------------------------
Exploration
 and
 development    452    378    184    106     76     53      2      3
Property
 acquisitions
Proceeds on
 dispositions
Other
 non-segmented
---------------------------------------------------------------------
Net capital
 expenditures (4)
---------------------------------------------------------------------
Property,
 plant and
 equipment    6,415  6,214  3,279  3,074  1,098  1,050    172    178
Goodwill        290    291    228     75    101    100      -      -
Other           472    419    441    347    280    221     17     36
---------------------------------------------------------------------
Segmented
 assets       7,177  6,924  3,948  3,496  1,479  1,371    189    214
Non-segmented
 assets
---------------------------------------------------------------------
Total assets (5)
---------------------------------------------------------------------


                          Trinidad         Other           Total
---------------------------------------------------------------------
(millions of
 Canadian dollars)      2005    2004   2005    2004    2005     2004
---------------------------------------------------------------------
Revenue
Gross sales               41       -      -       -    1977    1,554
Hedging                    -       -      -       -      15       60
Royalties                  4       -      -       -     321      254
---------------------------------------------------------------------
Net sales                 37       -      -       -    1641    1,240
Other                      -       -      -       -      36       22
---------------------------------------------------------------------
Total revenue             37       -      -       -    1677    1,262
---------------------------------------------------------------------
Segmented expenses
Operating                  3       -      -       -     324      280
Transportation             -       -      -       -      52       47
DD&A                       9       -      -       -     441      389
Dry hole                   3       -      7      21      46       79
Exploration                1       -     13      12      43       44
Other                      -       -      -       -      26       (9)
---------------------------------------------------------------------
Total segmented
 expenses                 16       -     20      33     932      830
---------------------------------------------------------------------
Segmented income
 before taxes             21       -    (20)    (33)    745      432
---------------------------------------------------------------------
Non-segmented expenses
General and
 administrative                                          50       39
Interest                                                 42       47
Stock-based
 compensation                                           166       30
Currency translation                                     (2)      12
---------------------------------------------------------------------
Total
 non-segmented
 expenses                                               256      128
---------------------------------------------------------------------
Income before taxes                                     489      304
---------------------------------------------------------------------
Capital expenditures
Exploration                8      15     20      24     237      222
Development                7      35      -       -     508      391
Midstream                  -       -      -       -       4        1
---------------------------------------------------------------------
Exploration and
 development              15      50     20      24     749      614
Property acquisitions                                   236       26
Proceeds on dispositions                                 (4)     (10)
Other non-segmented                                       4        8
---------------------------------------------------------------------
Net capital
 expenditures (4)                                       985      638
---------------------------------------------------------------------
Property,
 plant and
 equipment               283     182     51     149  11,298   10,847
Goodwill                   -       -      -       -     619      466
Other                     31      11     15       -   1,256    1,034
---------------------------------------------------------------------
Segmented assets         314     193     66     149  13,173   12,347
Non-segmented assets                                     60       61
---------------------------------------------------------------------
Total assets (5)                                     13,233   12,408
---------------------------------------------------------------------
---------------------------------------------------------------------



(1) North America                                      2005     2004
---------------------------------------------------------------------
Revenues                     Canada                     594      550
                                 US                      75       32
---------------------------------------------------------------------
                                                        669      582
---------------------------------------------------------------------
Property, plant
 and equipment (5)           Canada                   5,950    5,738
                                 US                     465      476
---------------------------------------------------------------------
                                                      6,415    6,214
---------------------------------------------------------------------

(2) North Sea                                          2005     2004
---------------------------------------------------------------------
Revenues             United Kingdom                     636      458
                        Netherlands                      14        9
                             Norway                      90       25
---------------------------------------------------------------------
                                                        740      492
---------------------------------------------------------------------
Property, plant
 and equipment (5)   United Kingdom                   2,837    2,858
                        Netherlands                      36       41
                             Norway                     406      175
---------------------------------------------------------------------
                                                      3,279    3,074
---------------------------------------------------------------------


(3) Southeast Asia                                     2005     2004
---------------------------------------------------------------------
Revenues                  Indonesia                      79       85
                           Malaysia                      97       73
                            Vietnam                       7        4
---------------------------------------------------------------------
                                                        183      162
---------------------------------------------------------------------
Property, plant and
 equipment (5)            Indonesia                     327      327
                           Malaysia                     749      701
                            Vietnam                      22       22
---------------------------------------------------------------------
                                                      1,098    1,050
---------------------------------------------------------------------

(4) Excluding corporate acquisitions.

(5) Current year represents balances as at March 31, prior year
    represents balances as at December 31.


Talisman Energy Inc.
Product Netbacks


                                      Three months      Three months
                                             ended             ended
                                          March 31          March 31
(C$ - production before royalties)    2005    2004      2005    2004
---------------------------------------------------------------------
                                   Oil and liquids       Natural gas
                                            ($/bbl)           ($/mcf)
---------------------------------------------------------------------
North          Sales price           46.50   37.56      7.07    6.61
America        Hedging (gain)         3.10    3.07         -    0.06
               Royalties              9.87    7.57      1.39    1.32
               Transportation         0.45    0.51      0.17    0.19
               Operating costs        6.32    5.90      0.79    0.77
              -------------------------------------------------------
                                     26.76   20.51      4.72    4.27
---------------------------------------------------------------------
North Sea      Sales price           57.29   41.55      6.98    5.85
               Hedging (gain)            -    3.55         -       -
               Royalties              0.43    0.13      0.47    0.66
               Transportation         1.14    1.11      0.54    0.37
               Operating costs       14.55   12.86      0.86    0.28
              -------------------------------------------------------
                                     41.17   23.90      5.11    4.54
---------------------------------------------------------------------
Southeast      Sales price           60.35   44.10      5.44    4.50
Asia           Hedging (gain)            -       -         -       -
               Royalties             25.27   17.82      1.75    0.81
               Transportation         0.08    0.25      0.55    0.42
               Operating costs        4.08    4.78      0.28    0.29
              -------------------------------------------------------
                                     30.92   21.25      2.86    2.98
---------------------------------------------------------------------
Algeria        Sales price           60.90   44.62
               Hedging (gain)            -       -
               Royalties             24.53   22.59
               Transportation         1.65    1.80
               Operating costs        5.64    1.71
              ---------------------------------------
                                     29.08   18.52
---------------------------------------------------------------------
Trinidad       Sales price           57.78       -
               Hedging (gain)            -       -
               Royalties              6.38       -
               Operating costs        4.00       -
              ---------------------------------------
                                     47.40       -
---------------------------------------------------------------------
Total Company  Sales price           55.40   41.15      6.73    6.13
               Hedging (gain)         0.72    2.67         -    0.04
               Royalties              7.41    6.00      1.37    1.15
               Transportation         0.84    0.87      0.28    0.25
               Operating costs       10.43    9.26      0.69    0.63
              -------------------------------------------------------
                                     36.00   22.35      4.39    4.06
---------------------------------------------------------------------
---------------------------------------------------------------------




Talisman Energy Inc.
Additional Information
Production net of royalties

                                                  Three months ended
                                                            March 31
                                                      2005      2004
---------------------------------------------------------------------

Oil and liquids (bbls/d)
 North America                                      42,736    43,954
 North Sea                                         126,911   122,868
 Southeast Asia                                     16,839    21,155
 Algeria                                             8,683     6,417
 Trinidad                                            6,962         -
 Synthetic oil (Canada)                              1,938     2,900
---------------------------------------------------------------------
Total oil and liquids                              204,069   197,294
---------------------------------------------------------------------

Natural gas (mmcf/d)
 North America                                         746       694
 North Sea                                             121       117
 Southeast Asia                                        186       185
---------------------------------------------------------------------
Total natural gas                                    1,053       996
---------------------------------------------------------------------

Total mboe/d                                           379       363
---------------------------------------------------------------------

Talisman Energy Inc.
Additional Information
Product Netbacks

                                                  Three months ended
                                                            March 31
(US$ - production net of royalties)                   2005      2004
---------------------------------------------------------------------
North          Oil and liquids (US$/bbl)
America         Sales price                          37.93     28.50
                Hedging (gain)                        3.22      2.90
                Transportation                        0.46      0.48
                Operating costs                       6.54      5.62
              -------------------------------------------------------
                                                     27.71     19.50
              -------------------------------------------------------
               Natural gas (US$/mcf)
                Sales price                           5.76      5.02
                Hedging (gain)                           -      0.06
                Transportation                        0.17      0.19
                Operating costs                       0.80      0.73
              -------------------------------------------------------
                                                      4.79      4.04
---------------------------------------------------------------------
North Sea      Oil and liquids (US$/bbl)
                Sales price                          46.76     31.52
                Hedging (gain)                           -      2.68
                Transportation                        0.94      0.84
                Operating costs                      12.00      9.79
              -------------------------------------------------------
                                                     33.82     18.21
              -------------------------------------------------------
               Natural gas (US$/mcf)
                Sales price                           5.69      4.44
                Hedging (gain)                           -         -
                Transportation                        0.48      0.31
                Operating costs                       0.76      0.24
              -------------------------------------------------------
                                                      4.45      3.89
---------------------------------------------------------------------
Southeast
Asia           Oil and liquids (US$/bbl)
                Sales price                          49.26     33.47
                Hedging (gain)                           -         -
                Transportation                        0.11      0.32
                Operating costs                       5.72      6.08
              -------------------------------------------------------
                                                     43.43     27.07
              -------------------------------------------------------
               Natural gas (US$/mcf)
                Sales price                           4.44      3.41
                Hedging (gain)                           -         -
                Transportation                        0.67      0.39
                Operating costs                       0.34      0.27
              -------------------------------------------------------
                                                      3.43      2.75
---------------------------------------------------------------------
Algeria        Oil (US$/bbl)
                Sales price                          49.73     33.87
                Hedging (gain)                           -         -
                Transportation                        2.26      2.76
                Operating costs                       7.70      2.66
              -------------------------------------------------------
                                                     39.77     28.45
---------------------------------------------------------------------
Trinidad       Oil (US$/bbl)
                Sales price                          47.11         -
                Hedging (gain)                           -         -
                Operating costs                       3.61         -
              -------------------------------------------------------
                                                     43.50         -
---------------------------------------------------------------------
Total Company  Oil and liquids (US$/bbl)
                Sales price                          45.22     31.23
                Hedging (gain)                        0.68      2.35
                Transportation                        0.79      0.77
                Operating costs                       9.84      8.20
              -------------------------------------------------------
                                                     33.91     19.91
---------------------------------------------------------------------
                Natural gas
               (US$/mcf)
                Sales price                           5.49      4.66
                Hedging (gain)                           -      0.04
                Transportation                        0.29      0.24
                Operating costs                       0.72      0.58
---------------------------------------------------------------------
                                                      4.48      3.80
---------------------------------------------------------------------

Netbacks do not include synthetic oil or pipeline operations.


Talisman Energy Inc.
Consolidated Financial Ratios
March 31, 2005


The following financial ratios are provided in connection with the
Company's shelf prospectus, filed with Canadian and US securities
regulatory authorities, and are based on the Company's consolidated
financial statements that are prepared in accordance with accounting
principles generally accepted in Canada.

The asset coverage ratios are calculated as at March 31, 2005.
The interest coverage ratios are for the 12 month period then ended.

---------------------------------------------------------------------
Interest coverage (times)
 Income (1)                                                      7.49
 Cash flow (2)                                                  21.50
Asset coverage (times)
 Before deduction of future income taxes and deferred credits(3) 3.95
 After deduction of future income taxes and deferred credits(4)  2.66
---------------------------------------------------------------------

 (1) Net income plus income taxes and interest expense; divided by
     the sum of interest expense and capitalized interest.
 (2) Cash flow plus current income taxes and interest expense;
     divided by the sum of interest expense and capitalized interest.
 (3) Total assets minus current liabilities; divided by long-term
     debt.
 (4) Total assets minus current liabilities and long-term liabilities
     excluding long-term debt; divided by long-term debt.

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

COPYRIGHT 2005 Business Wire
No portion of this article can be reproduced without the express written permission from the copyright holder.

Reader Opinion

Article Details
Printer friendly Cite/link Email Feedback
Publication:	Business Wire
Geographic Code:	1CANA
Date:	May 3, 2005
Words:	12910
Previous Article:	Stifel Financial to Report First Quarter 2005 Results Thursday May 5, 2005.
Next Article:	WindsorTech, d/b/a QSGI, Executes a New Line of Credit.
Topics:	Gas industry

Related Articles
Talisman Announces 'Spectacular' First Quarter Results.
Talisman Nine Month Cash Flow $2 Billion, Net Income $738 Million, 3Q Cash Flow Up Over Last Year, Record Production Volumes, 1.5 Million Shares...
Talisman Energy-$2.1 Billion In Cash Flow For Nine Months, Part 1 of 2.
Talisman Energy Reconfirms Growth Targets; Plans To Spend $2.35 Billion In 2004.
Talisman Energy Reports Organic Production Growth Of 16% Over First Quarter 2003 Cash Flow Of $779 Million.
Talisman Energy Targets 10% Production per Share Growth in 2005.
Talisman Energy Generates $2 Billion in Cash Flow Year to Date Sets New Record for a Quarter.
Talisman Energy Reports $1.2 Billion Cash Flow for the Third Quarter Record Production, Record Earnings from Operations.
Talisman Energy Expects Significant Production Growth in 2006; $5.2-$5.6 Billion in Cash Flow; $4.4 Billion in Exploration and Development Spending.
Talisman Energy Generates $4.7 Billion in Cash Flow in 2005; 516,000 boe/d Fourth Quarter Production; 189% Proved Reserves Replacement.