NEWS RELEASE TRANSMITTED BY CCNMatthews FOR: TALISMAN ENERGY INC. TSX, NYSE SYMBOL: TLM MARCH 4, 2003 Talisman Energy Generates $2.6 Billion in Cash Flow in 2002 CALGARY, ALBERTA-- Record High Cash Flow Per Share in the Fourth Quarter Quarterly Earnings Per Share 432% Above Previous Year Talisman Energy Inc. posted its fourthconsecutive annual increase in cash flow per share in 2002, generating a record high $5.72/share in the fourth quarter. Cash flow for the year increased 6.8% to $19.73/share, as a 6% increase in production volumes more than offset lower average natural gas prices. Total cash flow in 2002 was $2.6 billion on revenues of $5.3 billion. Net income for the fourth quarter was $1.33/share (versus $0.25/share in 2001) reflecting increased oil and natural gas prices during the quarter. Earnings for the year were $3.73/share, down from $5.25/share a year earlier due to higher non-cash expenses, exploration charges and provision for higher UK taxes. "Talisman had a very good year in 2002 and 2003 is shaping up to be even better," said Dr. Jim Buckee, President and Chief Executive Officer. "The Company's balance sheet is very strong, we have substantial new production volumes coming on stream in the next six to eight months and we are pursuing some very large and exciting exploration opportunities. Assuming US$28.50/bbl WTI oil prices and US$5.00/mcf NYMEX gas prices, we expect to generate over $21 in cash flow per share in 2003, and with current prices well above these estimates we are likely to substantially exceed this. "Our major oil and gas development project in Malaysia and Vietnam is 60% complete. Net volumes are expected to grow from 6,000 boe/d currently to over 20,000 boe/d in the fourth quarter of this year, and then to over 40,000 boe/d in 2004. First Algerian oil sales of approximately 1,800 bbls/d were booked in January and this is expected to increase to over 15,000 bbls/d by the fourth quarter. "Talisman's North American natural gas volumes averaged 860 mmcf/d in January and we are expecting a 5-7% increase in North American gas sales this year assisted by our new positioning in the US. "We expect production to average between 395,000-415,000 boe/d in 2003, including volumes for Sudan in the first quarter. Coupled with the repurchase of 5.8 million shares over the past four months, we should beat our earlier production guidance of 5% production per share growth in 2003, excluding Sudan. "Although there have been delays, completion of the Sudan sale is progressing. Discussions have progressed between the Government of Sudan and the other owners of the Greater Nile Oil Project and consent documentation is being finalized. The Government of Sudan supports Talisman's sale to ONGC Videsh Ltd. and we are working towards that objective. We continue to expect sale completion within March. "Talisman was successful with the drill bit in 2002, adding 196 mmboe of new proved reserves, replacing 121% of production at a cost of $8.87/boe. Over the past three years, approximately 90% of Talisman's proved reserves have been independently evaluated. During the year, the Company undertook an extensive review of thousands of oil and gas wells on smaller properties in Canada. These reviews, combined with our decision early in 2002 not to develop the Kildrummy field in the North Sea, resulted in a downward revision in our total proved reserves of approximately 38 mmboe, or less than 3% of the total. Over the past three years, net revisions and transfers have been positive, with 12 mmboe in proved reserve additions. "Talisman's finding and development costs for the year were $11.03/boe after revisions. More representative is the Company's three year performance, with finding, development and acquisition costs averaging $7.66/boe, while replacing 184% of production." Country Highlights In 2002, Talisman was one of the five most active drillers in Western Canada drilling 418 total oil and gas wells and recording an 88% success rate. The Company also established new production records in the Alberta Foothills and Chauvin areas. The Company drilled a successful test in the deep Mississippian play at Monkman, where there is potentially over one tcf of natural gas on Talisman's acreage. Three deep wells are planned for 2003. Talisman entered into an agreement to earn a 30% interest in two blocks off the coast of Nova Scotia. The Company plans to participate in an exploration well in the middle of this year. Talisman's wholly-owned subsidiary, Fortuna Energy Inc., has acquired natural gas properties, production and facilities in upper New York State. This is a growing core gas area for Talisman, with significant undeveloped potential in the deeper Trenton Black River Formation. The Company has identified over 50 locations on these lands and plans to drill 10 wells this year, with production expected to average 60-70 mmcf/d in 2003. Total spending in North America is budgeted at $975 million in 2003 with over 80% directed towards natural gas investments. The majority of this capital will be spent in the Greater Arch, Alberta Foothills, Monkman, Deep Basin and the Edson areas. Talisman plans to participate in over 580 wells in North America in 2003. The Company increased its North Sea production by 15% in 2002, in its highest netback region. A significant, commercial oil discovery was announced at J-1, and production commenced in the Halley and Hannay fields. Additional development in the Blake oil field (the Blake Flank) was approved with incremental production of 11,500 bbls/d expected in the third quarter of 2003 (TLM share 53.6%). Capital spending in the North Sea is budgeted at $532 million this year, with three quarters of the total allocated towards drilling. In Block PM-3CAA Malaysia/Vietnam production averaged 5,617 bbls/d in 2002 and is expected to increase to over 40,000 boe/d in 2004. Talisman was awarded a large new offshore exploration block in Vietnam adjacent to PM-3CAA and the first well is expected later this year. In Indonesia, the Company continues to develop its large natural gas reserves in the Corridor Block. Infrastructure to supply increased sales to the existing market (Duri steam flood) was completed by year end. A sales contract was signed to supply additional gas to Singapore and discussions are underway for major new gas sales contracts with Malaysia and West Java. Talisman also acquired a strategic interest (15%) in Transasia Pipeline Company Pvt. Ltd. which owns a 40% interest in the Duri Pipeline and will own a 40% interest in a pipeline to Singapore. Talisman plans to spend $367 million in Southeast Asia this year. Offshore Trinidad, oil and gas development on Block 2(c) was sanctioned and the project has started. First production is expected in early 2005 with Talisman's share estimated at 18,000-25,000 bbls/d. The Company was awarded a production sharing contract on Trinidad Block 3(a) adjacent to its existing offshore discoveries and acquired a 65% working interest in a large onshore exploration block. Four development and five offshore exploration wells are planned in 2003, with total spending of $149 million. In Colombia, Talisman holds interests in five exploration blocks. The Company plans to drill up to four wildcat exploration wells this year. Prospect sizes are in the 70-170 mmbbl range. First production has started from the Ourhoud field (TLM 2%) in Algeria, with production from the MLN field in Block 405a (TLM 35%) expected at the end of the second quarter. In November 2002, Talisman signed an Exploration and Production Sharing Agreement for a 100% working interest in offshore Block 10 in Qatar. Geophysical work is expected to begin in early 2003, once the agreement is ratified by official decree of the Emir of Qatar. On October 30, 2002, Talisman announced that it had entered into an agreement for the sale of its indirectly held interests in oil and gas properties in Sudan. /T/ Cash flow per share up 6.8% in 2002 Three months ended Years ended December 31 December 31 2002 2001 2002 2001 ------------------------------------------------------------------------ Financial (millions of Canadian dollars unless otherwise stated) Cash flow (3) 759 503 2,645 2,494 Net income (4) 182 40 524 733 Exploration and development expenditures 457 545 1,848 1,882 Per common share (1) (dollars) Cash flow (1) (3) 5.72 3.75 19.73 18.48 Net income (2) (4) 1.33 0.25 3.73 5.25 ------------------------------------------------------------------------ (1) Cash flow and diluted cash flow per share are reported prior to preferred security charges of $42 million for the year and $10 million for the quarter. (2) Net income available to common shareholders is reported after preferred security charges, net of tax, of $24 million for the year and $6 million for the quarter. (3) Cash flow and cash flow per share are non- GAAP measures and represent net income before exploration costs, DD&A, future taxes and other non-cash expenses. (4) The comparative amounts for 2001 have been restated for a new CICA accounting standard. Talisman generated a record $2.6 billion in cash flow in 2002. Increased volumes, combined with higher oil prices offset lower natural gas prices and higher operating costs. Cash flow per share was $19.73, up 6.8% over 2001. Cash flow in the fourth quarter was a record high $5.72/share. The Company currently expects 2003 cash flow per share of at least $21, based on WTI prices of US$28.50/bbl and NYMEX gas prices of US$5.00/mcf. Net income was $524 million in 2002, compared to $733 million a year earlier. Higher depreciation, depletion and amortization expenses, dry hole costs and provision for future taxes accounted for most of the change. Net income in the fourth quarter was $182 million, or 355% higher than the previous year. The major reason was a 53% increase in Talisman's realized commodity prices compared to the fourth quarter of 2001. Production Growth of 6% Three months ended Years ended Daily average production December 31 December 31 2002 2001 2002 2001 ------------------------------------------------------------------------ Oil and liquids (bbls/d) North America 59,677 62,872 59,808 63,275 North Sea 124,247 135,050 127,486 110,828 Southeast Asia 22,378 24,853 22,469 20,873 Sudan 61,151 55,325 60,109 53,257 Synthetic oil 3,129 2,611 2,868 2,781 ------------------------------------------------------------------------ Total oil and liquids 270,582 280,711 272,740 251,014 ------------------------------------------------------------------------ Natural gas (mmcf/d) North America 826 841 820 809 North Sea 112 139 122 108 Southeast Asia 90 99 94 93 ------------------------------------------------------------------------ Total natural gas 1,028 1,079 1,036 1,010 ------------------------------------------------------------------------ Total mboe/d (6 mcf = 1 boe) 442 460 445 419 ------------------------------------------------------------------------ ------------------------------------------------------------------------ Talisman increased its production volumes to a record 445,000 boe/d in 2002, led by 15% growth in the North Sea and 13% in Sudan. Over the course of the year inclement weather, extended maintenance, drilling delays and deferrals as well as regulatory issues adversely affected production volumes. Talisman Energy Inc. The Company expects production to average approximately 395,000-415,000 boe/d in 2003, including volumes for Sudan in the first quarter of the year. Talisman has set production per share growth targets of 5% or more in 2003 and 10% or more in 2004 on a comparative basis, excluding Sudan. Finding and Development Costs of $8.87/boe Talisman drilled 439 successful wells in 2002, adding 196 mmboe of reserves (before revisions and transfers), replacing 121% of production at a cost of $8.87/boe. Revisions and transfers reduced this amount by 38 mmboe and were principally related to appraisal results at Kildrummy (18 mmboe), together with a 15 mmboe one time reduction in Canadian proved reserves related to a comprehensive review of numerous small properties. Including net revisions and acquisitions, 159 mmboe of reserves were added (99% of production) at a cost of $12.15/boe. Over the last three years, the Company replaced approximately 184% of its production (including net acquisitions) at a cost of $7.66/boe. Net revisions and transfers over the past five years resulted in 54 mmboe of reserves being added to the Company's proved reserve base, or approximately 7%. 5-year Proved F&D costs ($/boe) 2002 3-year Average Average ------------------------------------------------------------------------ F&D Costs excluding revisions and transfers 8.87 6.98 7.15 F&D Costs 11.03 6.86 6.58 Total including acquisitions (FD&A) 12.15 7.66 7.29 At year end, Talisman had 717 mmbls of proved oil and liquids reserves and 4.6 tcf of natural gas reserves. Netbacks: Down 2% year over year Three months ended Years ended December 31 December 31 Total Company 2002 2001 2002 2001 ------------------------------------------------------------------------ Oil and liquids ($/bbl) Sales price 41.47 26.94 37.20 33.99 Hedging (gain) 0.37 (0.75) 0.09 (0.16) Royalties 8.85 4.29 6.83 6.22 Operating costs 8.53 7.27 7.99 7.15 ------------------------------------------------------------------------ 23.72 16.13 22.29 20.78 ------------------------------------------------------------------------ Natural gas ($/mcf) Sales price 5.20 3.45 4.03 5.22 Hedging (gain) (0.09) (0.28) (0.22) 0.02 Royalties 0.89 0.58 0.67 1.14 Operating costs 0.80 0.73 0.69 0.63 ------------------------------------------------------------------------ 3.60 2.42 2.89 3.43 ------------------------------------------------------------------------ Netback $/boe 22.90 15.51 20.34 20.70 (excluding synthetic oil and pipeline operations). Benchmark West Texas Intermediate (WTI) oil prices averaged $26.15/bbl in 2002, an increase of 1% over the previous year. However, prices strengthened considerably towards year end as markets reacted to political uncertainty and the oil workers strike in Venezuela. NYMEX gas prices were down 15% over 2001 levels, but also recovered towards year end impacted by tropical storms in the Gulf of Mexico, high oil prices and cold weather. Unit operating costs averaged $6.48/boe for the year, an increase of 12% over 2001. This increase reflects both industry-wide factors as well as a higher percentage of North Sea production (and the stronger UK Pound Sterling). Talisman's average royalty rate fell from 20% in 2001 to 18% in 2002, due largely to lower natural gas prices. Capital spending of $2 billion Capital Spending ($ million) 2002 2001 2000 ------------------------------------------------------------------------ Canada $ 939 $ 976 $ 813 North Sea 518 664 527 Southeast Asia 269 149 69 Sudan 98 117 70 Other 228 115 50 ------------------------------------------------------------------------ 2,052 $2,021 $ 1,529 ------------------------------------------------------------------------ ------------------------------------------------------------------------ Excludes corporate acquisitions Natural gas continues to be the focus of the Company's exploration activities in North America, supplemented by low risk oil projects. Of the $939 million of capital spending in North America, $321 million related to exploration activities, development accounted for $501 million, with the rest relating to net property acquisitions. Total capital spending in the North Sea of $518 million included $134 million for exploration and $297 million for development, with the remainder for property acquisitions. Expenditures included the Halley and Hannay developments, development drilling at Claymore, Buchan, Piper, Saltire, MacCulloch and the Tartan, Highlander and Petronella core area. Exploration spending primarily related to drilling the successful J-1 (Buchan) well, the Drum (Claymore) and Eta 2(Clyde) wells, as well as drilling costs related to non-commercial wells at Remus (Beatrice) and Kildrummy (Piper). The PM-3 CAA Development in Malaysia/Vietnam accounted for $175 million (including $25 million of capitalized interest) or 65% of total capital spending in Southeast Asia. A total of $73 million was spent in Indonesia with the majority on the Corridor gas facilities expansion and development drilling to support additional anticipated gas sales to Singapore and Malaysia. Capital spending in Sudan of $98 million was focused on ongoing development drilling and the addition of new pipeline pumping stations. Other areas accounted for $228 million of the 2002 capital spending. Talisman spent $78 million in Trinidad, $107 million in Algeria and $22 million in Colombia. The Company expects to spend $2.1 billion on exploration and development in 2003. Year End Debt to Cash Flow of 1.1 Talisman's long-term debt at year end was $3 billion including $265 million drawn on the Company's $1,049 million bank lines of credit. The Company repurchased 3,847,500 of its common shares under its normal course issuer bid ("NCIB") during 2002 for a total of $220 million ($57.24/share). Subsequent to year end, an additional 1,986,200 common shares were repurchased for $113 million ($56.70/share). The total common shares repurchased under the existing NCIB represents 87% of the 6,716,871 common shares currently permitted to be repurchased. The NCIB expires on March 25, 2003 and is expected to be renewed for an additional 5% of the Company's common shares outstanding at that time. Talisman Energy Inc. is a large independent oil and gas producer, with operations in Canada and, through its respective subsidiaries, the North Sea, Sudan, Indonesia, Malaysia, Vietnam, Algeria and the United States. The Company's subsidiaries also conduct business in Trinidad, Colombia and Qatar. Talisman has adopted the International Code of Ethics for Canadian Business and is committed to maintaining high standards of excellence in corporate citizenship and social responsibility wherever its business is conducted. Talisman's shares are listed on The Toronto Stock Exchange in Canada and the New York Stock Exchange in the United States under the symbol TLM. Unless otherwise indicated, all financial information in this press release is presented in Canadian dollars and in accordance with Canadian generally accepted accounting principles. Forward Looking Statements: This press release contains "forward-looking statements" within the meaning of the US Private Securities Litigation Reform Act of 1995, including estimates of future production and cash flows, business plans for drilling, exploration and production, the estimated amounts and timing of capital expenditures, the assumptions upon which estimates are based and other expectations, beliefs, plans, objectives, assumptions or statements about future events or performance (often, but not always, using words such as "expects", "anticipates", "plans", "estimates", or "intends", or stating that certain actions, events or results "may", or "will" be taken, occur or be achieved). 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 reflected in the statements. These risks include, but are not limited to: the risks of the oil and gas industry (for example, operational risks in exploring for, developing and producing crude oil and natural gas; risks and uncertainties involving geology of oil and gas deposits; the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to future production, costs and expenses and the success of exploration and development projects; potential delays or changes in plans with respect to exploration or development projects or capital expenditures; and health, safety and environmental risks); uncertainties as to the availability and cost of financing; risks in conducting foreign operations (for example, political and fiscal instability or the possibility of civil unrest or military action in countries such as Indonesia, Sudan, Algeria or Colombia); the effect of United States sanctions against Sudan; the conditions that must be met before the Company's sale of its interest in the Greater Nile Oil Project in Sudan will close; fluctuations in oil and gas prices and foreign currency exchange rates; and the possibility that government policies may change or governmental approvals may be delayed or withheld. Additional information on these and other factors which could affect the Company's operations or financial results are included in the Company's other reports on file with Canadian securities regulatory authorities and the United States Securities and Exchange Commission. Forward-looking statements are based on the estimates and opinions of the Company's management at the time the statements are made. The Company assumes no obligation to update forward-looking statements should circumstances or management's estimates or opinions change. The US Securities and Exchange Commission normally permits oil and gas companies to disclose in their filings with the SEC only proved reserves that have been demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. Accordingly, the probable reserves, established and the calculations with respect thereto included in this press release do not meet the SEC's standards for inclusion in documents filed with the SEC. Financial leverage and coverage ratios(1) 2002 2001 2000 ------------------------------------------------------------------------ Long-term debt(2) to cash flow(3) (times) 1.1 1.2 0.7 Long-term debt to debt-plus-equity(2) (%) 40 41 32 ------------------------------------------------------------------------ ------------------------------------------------------------------------ 1. Preferred securities are classified as equity and the related charges have been excluded from interest expenses. 2. Based on balances at December 31. 3. Cash flow is a non-GAAP measure. /T/ /T/ Highlights Three months ended Years ended December 31 December 31 2002 2001 2002 2001 ------------------------------------------------------------------------ Financial (millions of Canadian dollars unless otherwise stated) Cash flow (5) 759 503 2,645 2,494 Net income (1) 182 40 524 733 Exploration and development expenditures 457 545 1,848 1,882 Per common share (dollars) Cash flow (2) (5) 5.72 3.75 19.73 18.48 Net income (1) (3) 1.33 0.25 3.73 5.25 ------------------------------------------------------------------------ Production (daily average) Oil and liquids (bbls/d) North America 59,677 62,872 59,808 63,275 North Sea 124,247 135,050 127,486 110,828 Southeast Asia 22,378 24,853 22,469 20,873 Sudan 61,151 55,325 60,109 53,257 Synthetic oil 3,129 2,611 2,868 2,781 ------------------------------------------------------------------------ Total oil and liquids 270,582 280,711 272,740 251,014 ------------------------------------------------------------------------ Natural gas (mmcf/d) North America 826 841 820 809 North Sea 112 139 122 108 Southeast Asia 90 99 94 93 ------------------------------------------------------------------------ Total natural gas 1,028 1,079 1,036 1,010 ------------------------------------------------------------------------ Total mboe/d 442 460 445 419 ------------------------------------------------------------------------ Prices (4) Oil and liquids ($/bbl) North America 34.57 21.58 32.43 30.80 North Sea 41.77 30.15 38.76 36.07 Southeast Asia 45.04 27.63 39.46 35.97 Sudan 46.30 24.87 37.79 32.66 ------------------------------------------------------------------------ Crude oil and natural gas liquids 41.47 26.94 37.20 33.99 Synthetic oil 42.76 33.77 40.07 39.54 ------------------------------------------------------------------------ Total oil and liquids 41.49 27.00 37.22 34.05 ------------------------------------------------------------------------ Natural gas ($/mcf) North America 5.21 3.20 3.96 5.39 North Sea 4.51 4.48 3.89 4.35 Southeast Asia 6.00 4.06 4.72 4.80 ------------------------------------------------------------------------ Total natural gas 5.20 3.45 4.03 5.22 ------------------------------------------------------------------------ Total ($/boe) (includes synthetic) 37.50 24.54 32.15 32.95 ------------------------------------------------------------------------ ------------------------------------------------------------------------ (1) Comparative amounts for 2001 restated for new CICA accounting standard. (2) Cash flow per common share is calculated before deducting preferred security charges. (3) Net income per common share is calculated after deducting preferred security charges. (4) Prices are before hedging. (5) Cash flow and cash flow per share are non-GAAP measures. Talisman Energy Inc. Consolidated Balance Sheets December 31 (millions of Canadian dollars) 2002 2001 ------------------------------------------------------------------------ (restated) Assets Current Cash 27 17 Accounts receivable 719 654 Inventories 147 99 Prepaid expenses 24 29 ------------------------------------------------------------------------ 917 799 ------------------------------------------------------------------------ Accrued employee pension benefit asset 67 67 Other assets 99 25 Goodwill 469 467 Property, plant and equipment 10,042 9,461 ------------------------------------------------------------------------ 10,677 10,020 ------------------------------------------------------------------------ Total assets 11,594 10,819 ------------------------------------------------------------------------ ------------------------------------------------------------------------ Liabilities Current Accounts payable and accrued liabilities 803 869 Income and other taxes payable 186 146 Current portion of long-term debt - 189 ------------------------------------------------------------------------ 989 1,204 ------------------------------------------------------------------------ Deferred credits 57 87 Provision for future site restoration 813 619 Long-term debt 2,997 2,794 Future income taxes 2,236 1,989 ------------------------------------------------------------------------ 6,103 5,489 ------------------------------------------------------------------------ Shareholders' equity Preferred securities 431 431 Common shares 2,785 2,831 Contributed surplus 75 77 Cumulative foreign currency translation 140 - Retained earnings 1,071 787 ------------------------------------------------------------------------ 4,502 4,126 ------------------------------------------------------------------------ Total liabilities and shareholders' equity 11,594 10,819 ------------------------------------------------------------------------ ------------------------------------------------------------------------ Interim statements are not independently audited. Comparative amounts for 2001 restated for new CICA accounting standard. Talisman Energy Inc. Consolidated Statements of Income Three months ended Years ended (millions of Canadian dollars December 31 December 31 except per share amounts) 2002 2001 2002 2001 ------------------------------------------------------------------------ (restated) (restated) Revenue Gross sales 1,524 1,083 5,299 5,047 Less royalties 302 168 927 989 ------------------------------------------------------------------------ Net sales 1,222 915 4,372 4,058 Other 20 22 80 82 ------------------------------------------------------------------------ Total revenue 1,242 937 4,452 4,140 ------------------------------------------------------------------------ Expenses Operating 303 271 1,115 946 General and administrative 39 29 138 108 Depreciation, depletion and amortization 388 387 1,495 1,313 Dry hole 49 32 174 113 Exploration 70 43 185 147 Interest on long-term debt 42 36 164 139 Other 53 17 113 78 ------------------------------------------------------------------------ Total expenses 944 815 3,384 2,844 ------------------------------------------------------------------------ Income before taxes 298 122 1,068 1,296 ------------------------------------------------------------------------ Taxes Current income tax 66 66 258 342 Future income tax (recovery) 32 (18) 162 72 Petroleum revenue tax 18 34 124 149 ------------------------------------------------------------------------ 116 82 544 563 ------------------------------------------------------------------------ Net income 182 40 524 733 Preferred security charges, net of tax 6 7 24 24 ------------------------------------------------------------------------ Net income available to common shareholders 176 33 500 709 ------------------------------------------------------------------------ ------------------------------------------------------------------------ Per common share (dollars) Net income 1.33 0.25 3.73 5.25 Diluted net income 1.31 0.24 3.67 5.16 ------------------------------------------------------------------------ Average number of common shares outstanding (millions) Basic 133 134 134 135 Diluted 134 136 136 137 ------------------------------------------------------------------------ Consolidated Statements of Retained Earnings Three months ended Years ended December 31 December 31 (millions of Canadian dollars) 2002 2001 2002 2001 ------------------------------------------------------------------------ (restated) (restated) Retained earnings, beginning of period 1,071 904 787 308 Net income 182 40 524 733 Adoption of new accounting policy - (96) - (51) Common share dividends (40) (40) (80) (81) Purchase of common shares (136) (14) (136) (98) Preferred security charges, net of tax (6) (7) (24) (24) ------------------------------------------------------------------------ Retained earnings, end of period 1,071 787 1,071 787 ------------------------------------------------------------------------ ------------------------------------------------------------------------ Interim statements are not independently audited. Comparative amounts for 2001 restated for new CICA accounting standard. Talisman Energy Inc. Consolidated Statements of Cash Flows Three months ended Years ended December 31 December 31 (millions of Canadian dollars) 2002 2001 2002 2001 ------------------------------------------------------------------------ (restated) (restated) Operating Net income 182 40 524 733 Items not involving current cash flow 507 420 1,936 1,614 Exploration 70 43 185 147 ------------------------------------------------------------------------ Cash flow 759 503 2,645 2,494 Deferred gain on unwound hedges (6) 52 (43) 52 Changes in non-cash working capital (76) 16 (163) (177) ------------------------------------------------------------------------ Cash provided by operating activities 677 571 2,439 2,369 ------------------------------------------------------------------------ Investing Corporate acquisitions - (9) - (1,213) Capital expenditures Exploration, development and corporate (466) (554) (1,874) (1,912) Acquisitions (175) (39) (244) (186) Proceeds of resource property dispositions 14 14 30 47 Investments (34) - (36) - Changes in non-cash working capital (9) (30) 2 52 ------------------------------------------------------------------------ Cash used in investing activities (670) (618) (2,122) (3,212) ------------------------------------------------------------------------ Financing Long-term debt repaid - (60) (1,397) (568) Long-term debt issued 255 163 1,417 1,617 Common shares purchased (218) (22) (184) (117) Common share dividends (40) (40) (80) (81) Preferred security charges (10) (11) (42) (42) Deferred credits and other (17) (4) (21) (25) ------------------------------------------------------------------------ Cash (used in) provided by financing activities (30) 26 (307) 784 ------------------------------------------------------------------------ Net increase (decrease) in cash (23) (21) 10 (59) Cash, beginning of period 50 38 17 76 ------------------------------------------------------------------------ Cash, end of period 27 17 27 17 ------------------------------------------------------------------------ ------------------------------------------------------------------------ Interim statements are not independently audited. Comparative amounts for 2001 restated for new CICA accounting standard. North America (1) North Sea (2) ------------------------- -------------------------- Three months Years Three months Years (millions of ended ended ended ended Canadian December 31 December 31 December 31 December 31 dollars) 2002 2001 2002 2001 2002 2001 2002 2001 ------------------------------------------------------------------------ (restated) (restated) Revenue Gross sales 603 409 2,014 2,332 520 441 1,971 1,638 Royalties 119 72 373 558 22 31 96 93 ------------------------------------------------------------------------ Net sales 484 337 1,641 1,774 498 410 1,875 1,545 Other 10 10 38 34 8 11 40 46 ------------------------------------------------------------------------ Total revenue 494 347 1,679 1,808 506 421 1,915 1,591 ------------------------------------------------------------------------ Segmented expenses Operating 99 97 357 343 158 137 588 467 DD&A 161 158 614 585 181 177 701 558 Dry hole 37 8 128 54 9 16 9 21 Exploration 17 16 66 69 6 1 20 30 Other 30 3 77 11 21 (1) 55 (23) ------------------------------------------------------------------------ Total segmented expenses 344 282 1,242 1,062 375 330 1,373 1,053 ------------------------------------------------------------------------ Segmented income before taxes 150 65 437 746 131 91 542 538 ------------------------------------------------------------------------ Non-segmented expenses General and administrative Interest on long-term debt Currency translation ------------------------------------------------------------------------ Total non-segmented expenses ------------------------------------------------------------------------ Income before taxes ------------------------------------------------------------------------ Capital expenditures Exploration 88 68 321 314 29 41 134 106 Development 121 160 501 562 42 125 297 527 ------------------------------------------------------------------------ Exploration and development 209 228 822 876 71 166 431 633 Property acquisitions Proceeds on dispositions Other non-segmented ------------------------------------------------------------------------ Net capital expenditures (4) ------------------------------------------------------------------------ ------------------------------------------------------------------------ Property, plant and equipment 4,955 4,773 2,921 2,831 Goodwill 291 291 46 41 Other 350 265 387 371 ------------------------------------------------------------------------ Segmented assets 5,596 5,329 3,354 3,243 Non-segmented assets ------------------------------------------------------------------------ Total assets ------------------------------------------------------------------------ ------------------------------------------------------------------------ Southeast Asia (3) Sudan ------------------------- -------------------------- Three months Years Three months Years (millions of ended ended ended ended Canadian December 31 December 31 December 31 December 31 dollars) 2002 2001 2002 2001 2002 2001 2002 2001 ------------------------------------------------------------------------ Revenue Gross sales 142 102 486 439 259 131 828 638 Royalties 38 20 130 90 123 45 328 248 ------------------------------------------------------------------------ Net sales 104 82 356 349 136 86 500 390 Other 1 - 1 1 1 1 1 1 ------------------------------------------------------------------------ Total revenue 105 82 357 350 137 87 501 391 ------------------------------------------------------------------------ Segmented expenses Operating 25 21 86 70 21 16 84 66 DD&A 23 32 87 93 23 20 93 77 Dry hole - 4 4 8 3 4 13 16 Exploration 9 5 19 8 1 2 6 11 Other 5 (1) 11 (2) 6 1 (5) 11 ------------------------------------------------------------------------ Total segmented expenses 62 61 207 177 54 43 191 181 ------------------------------------------------------------------------ Segmented income before taxes 43 21 150 173 83 44 310 210 ------------------------------------------------------------------------ Non-segmented expenses General and administrative Interest on long-term debt Currency translation ------------------------------------------------------------------------ Total non-segmented expenses ------------------------------------------------------------------------ Income before taxes ------------------------------------------------------------------------ Capital expenditures Exploration 16 17 36 31 4 12 27 42 Development 72 55 233 110 16 17 71 75 ------------------------------------------------------------------------ Exploration and development 88 72 269 141 20 29 98 117 Property acquisitions Proceeds on dispositions Other non-segmented ------------------------------------------------------------------------ Net capital expenditures (4) ------------------------------------------------------------------------ Property, plant and equipment 1,093 924 772 767 Goodwill 132 135 - - Other 205 137 56 44 ------------------------------------------------------------------------ Segmented assets 1,430 1,196 828 811 Non-segmented assets ------------------------------------------------------------------------ Total assets ------------------------------------------------------------------------ ------------------------------------------------------------------------ Other Total ------------------------- -------------------------- Three months Years Three months Years (millions of ended ended ended ended Canadian December 31 December 31 December 31 December 31 dollars) 2002 2001 2002 2001 2002 2001 2002 2001 ------------------------------------------------------------------------ (restated) (restated) Revenue Gross sales - - - - 1,524 1,083 5,299 5,047 Royalties - - - - 302 168 927 989 ------------------------------------------------------------------------ Net sales - - - - 1,222 915 4,372 4,058 Other - - - - 20 22 80 82 ------------------------------------------------------------------------ Total revenue - - - - 1,242 937 4,452 4,140 Segmented expenses Operating - - - - 303 271 1,115 946 DD&A - - - - 388 387 1,495 1,313 Dry hole - - 20 14 49 32 174 113 Exploration 37 19 74 29 70 43 185 147 Other (6) 4 (7) 8 56 6 131 5 ------------------------------------------------------------------------ Total segmented expenses 31 23 87 51 866 739 3,100 2,524 ------------------------------------------------------------------------ Segmented income before taxes (31) (23) (87) (51) 376 198 1,352 1,616 ------------------------------------------------------------------------ Non-segmented expenses General and administrative 39 29 138 108 Interest on long-term debt 42 36 164 139 Currency translation (3) 11 (18) 73 ------------------------------------------------------------------------ Total non-segmented expenses 78 76 284 320 ------------------------------------------------------------------------ Income before taxes 298 122 1,068 1,296 ------------------------------------------------------------------------ ------------------------------------------------------------------------ Capital expenditures Exploration 37 34 110 74 174 172 628 567 Development 32 16 118 41 283 373 1,220 1,315 ------------------------------------------------------------------------ Exploration and development 69 50 228 115 457 545 1,848 1,882 Property acquisitions 175 39 244 186 Proceeds on dispositions (24) (14) (40) (47) Other non-segmented 9 9 26 30 ------------------------------------------------------------------------ Net capital expenditures (4) 617 579 2,078 2,051 ------------------------------------------------------------------------ ------------------------------------------------------------------------ Property, plant and equipment 301 166 10,042 9,461 Goodwill - - 469 467 Other 18 7 1,016 824 ------------------------------------------------------------------------ Segmented assets 319 173 11,527 10,752 Non-segmented assets 67 67 ------------------------------------------------------------------------ Total assets 11,594 10,819 ------------------------------------------------------------------------ ------------------------------------------------------------------------ Three months Years ended ended December 31 December 31 (1) North America 2002 2001 2002 2001 ------------------------------------------------------------------------ Revenues Canada 489 347 1,674 1,808 US 5 - 5 - ------------------------------------------------------------------------ 494 347 1,679 1,808 ------------------------------------------------------------------------ Property, plant Canada 4,848 4,769 and equipment US 107 4 ------------------------------------------------------------------------ 4,955 4,773 ------------------------------------------------------------------------ ------------------------------------------------------------------------ Three months Years ended ended December 31 December 31 (2) North Sea 2002 2001 2002 2001 ------------------------------------------------------------------------ Revenues United Kingdom 500 412 1,888 1,561 Netherlands 6 9 27 30 ------------------------------------------------------------------------ 506 421 1,915 1,591 ------------------------------------------------------------------------ Property, plant United Kingdom 2,875 2,791 and equipment Netherlands 46 40 ------------------------------------------------------------------------ 2,921 2,831 ------------------------------------------------------------------------ ------------------------------------------------------------------------ Three months Years ended ended December 31 December 31 (3) Southeast Asia 2002 2001 2002 2001 ------------------------------------------------------------------------ Revenues Indonesia 89 70 302 332 Malaysia 14 12 50 18 Vietnam 2 - 5 - ------------------------------------------------------------------------ 105 82 357 350 ------------------------------------------------------------------------ Property, plant Indonesia 515 508 and equipment Malaysia 565 407 Vietnam 13 9 ------------------------------------------------------------------------ 1,093 924 ------------------------------------------------------------------------ ------------------------------------------------------------------------ (4) Excluding corporate acquisitions. Comparative amounts for 2001 restated for new CICA accounting standard. Talisman Energy Inc. Product Netbacks Three months Twelve months ended ended December 31 December 31 ------------------------------------------------------------------------- (C$ - production before royalties) 2002 2001 2002 2001 North America Oil and liquids ($/bbl) Sales price 34.57 21.58 32.43 30.80 Hedging (gain) 0.36 (0.72) 0.06 (0.12) Royalties 7.42 4.56 6.85 6.88 Operating costs 6.20 5.84 5.55 5.22 -------------------------------------------------------- 20.59 11.90 19.97 18.82 -------------------------------------------------------- Natural gas ($/mcf) Sales price 5.21 3.20 3.96 5.39 Hedging (gain) (0.11) (0.37) (0.28) 0.02 Royalties 1.04 0.58 0.75 1.34 Operating costs 0.78 0.75 0.71 0.67 -------------------------------------------------------- 3.50 2.24 2.78 3.36 ------------------------------------------------------------------------- North Sea Oil and liquids ($/bbl) Sales price 41.77 30.15 38.76 36.07 Hedging (gain) 0.38 (0.72) 0.12 (0.17) Royalties 1.72 1.60 1.60 1.85 Operating costs 12.00 9.66 11.11 10.06 -------------------------------------------------------- 27.67 19.61 25.93 24.33 -------------------------------------------------------- Natural gas ($/mcf) Sales price 4.51 4.48 3.89 4.35 Hedging (gain) - - - - Royalties 0.27 0.84 0.48 0.46 Operating costs 0.92 0.66 0.61 0.46 -------------------------------------------------------- 3.32 2.98 2.80 3.43 ------------------------------------------------------------------------- Southeast Asia (1) Oil and liquids ($/bbl) Sales price 45.04 27.63 39.46 35.97 Hedging (gain) 0.36 (1.04) 0.06 (0.30) Royalties 17.13 7.74 14.83 10.69 Operating costs 8.67 6.89 7.93 7.13 -------------------------------------------------------- 18.88 14.04 16.64 18.45 -------------------------------------------------------- Natural gas ($/mcf) Sales price 6.00 4.06 4.72 4.80 Hedging (gain) - 0.01 - 0.02 Royalties 0.31 0.21 0.25 0.24 Operating costs 0.80 0.61 0.59 0.47 -------------------------------------------------------- 4.89 3.23 3.88 4.07 ------------------------------------------------------------------------- Sudan Oil ($/bbl) Sales price 46.30 24.87 37.79 32.66 Hedging (gain) 0.37 (0.73) 0.07 (0.13) Royalties 21.74 9.01 14.94 12.78 Operating costs 3.72 3.25 3.82 3.40 -------------------------------------------------------- 20.47 13.34 18.96 16.61 ------------------------------------------------------------------------- Total Company Oil and liquids ($/bbl) Sales price 41.47 26.94 37.20 33.99 Hedging (gain) 0.37 (0.75) 0.09 (0.16) Royalties 8.85 4.29 6.83 6.22 Operating costs 8.53 7.27 7.99 7.15 -------------------------------------------------------- 23.72 16.13 22.29 20.78 -------------------------------------------------------- Natural gas ($/mcf) Sales price 5.20 3.45 4.03 5.22 Hedging (gain) (0.09) (0.28) (0.22) 0.02 Royalties 0.89 0.58 0.67 1.14 Operating costs 0.80 0.73 0.69 0.63 -------------------------------------------------------- 3.60 2.42 2.89 3.43 (1) Includes operations in Indonesia and Malaysia/Vietnam. Netbacks do not include synthetic oil or pipeline operations. Talisman Energy Inc. Consolidated Financial Ratios December 31, 2002 The following financial ratios are provided in connection with the Company's continuous offering of medium term notes pursuant to the short form prospectus dated March 27, 2002 and a prospectus supplement dated March 28, 2002, and are based on the corporation's consolidated financial statements that are prepared in accordance with accounting principles generally accepted in Canada. The asset coverage ratios are calculated as at December 31, 2002. The interest coverage ratios are for the 12 month period then ended. Preferred Preferred Securities Securities as equity (5) as debt (6) ------------------------------------------------------------------------ Interest coverage (times) Income (1) 5.86 4.79 Cash flow (2) 16.23 13.27 Asset coverage (times) Before deduction of future income taxes and deferred credits (3) 3.54 3.05 After deduction of future income taxes and deferred credits (4) 2.50 2.16 ------------------------------------------------------------------------ (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. (5) The Company's preferred securities are classified as equity and the related charges have been excluded from interest expense. (6) Reflects adjusted ratios, had the preferred securities been treated as debt and the related charges been included in interest expense. Talisman Energy Inc. Additional Information for US Readers Production net of royalties Three months ended Twelve months ended December 31 December 31 2002 2001 2002 2001 ------------------------------------------------------------------------ Oil and liquids (bbls/d) North America 46,875 49,600 47,182 49,145 North Sea 119,142 127,883 122,231 105,138 Southeast Asia (1) 13,868 17,895 14,025 14,667 Sudan 32,442 35,282 36,346 32,422 Synthetic oil (Canada) 2,958 2,201 2,788 2,387 ------------------------------------------------------------------------ Total oil and liquids 215,285 232,861 222,572 203,759 ------------------------------------------------------------------------ Natural gas (mmcf/d) North America 662 689 665 608 North Sea 105 113 107 97 Southeast Asia (1) 86 94 89 89 ------------------------------------------------------------------------ Total natural gas 853 896 861 794 ------------------------------------------------------------------------ Total mboe/d 357 383 366 337 ------------------------------------------------------------------------ ------------------------------------------------------------------------ (1) Includes operations in Indonesia and Malaysia/Vietnam. Talisman Energy Inc. Additional Information for US Readers Product Netbacks Three months Twelve months ended ended December 31 December 31 (US$ - production net of royalties) 2002 2001 2002 2001 ------------------------------------------------------------------------- North America Oil and liquids (US$/bbl) Sales price 22.03 13.66 20.65 19.89 Hedging (gain) 0.29 (0.58) 0.04 (0.10) Operating costs 5.03 4.68 4.48 4.33 -------------------------------------------------------- 16.71 9.56 16.13 15.66 -------------------------------------------------------- Natural gas (US$/mcf) Sales price 3.32 2.02 2.52 3.48 Hedging (gain) (0.09) (0.28) (0.22) 0.02 Operating costs 0.62 0.58 0.56 0.57 -------------------------------------------------------- 2.79 1.72 2.18 2.89 ------------------------------------------------------------------------- North Sea Oil and liquids (US$/bbl) Sales price 26.61 19.08 24.68 23.29 Hedging (gain) 0.26 (0.48) 0.08 (0.12) Operating costs 7.98 6.45 7.38 6.83 -------------------------------------------------------- 18.37 13.11 17.22 16.58 -------------------------------------------------------- Natural gas (US$/mcf) Sales price 2.87 2.83 2.48 2.81 Hedging (gain) - - - - Operating costs 0.62 0.51 0.44 0.33 -------------------------------------------------------- 2.25 2.32 2.04 2.48 ------------------------------------------------------------------------- Southeast Asia (1) Oil and liquids (US$/bbl) Sales price 28.70 17.48 25.13 23.22 Hedging (gain) 0.37 (0.91) 0.06 (0.28) Operating costs 8.91 6.05 8.09 6.53 -------------------------------------------------------- 19.42 12.34 16.98 16.97 -------------------------------------------------------- Natural gas (US$/mcf) Sales price 3.82 2.57 3.01 3.10 Hedging (gain) - 0.01 - 0.01 Operating costs 0.54 0.41 0.40 0.32 -------------------------------------------------------- 3.28 2.15 2.61 2.77 ------------------------------------------------------------------------- Sudan Oil (US$/bbl) Sales price 29.50 15.74 24.06 21.09 Hedging (gain) 0.44 (0.72) 0.08 (0.14) Operating costs 4.46 3.22 4.02 3.60 -------------------------------------------------------- 24.60 13.24 19.96 17.63 ------------------------------------------------------------------------- Total Company Oil and liquids (US$/bbl) Sales price 26.18 17.28 23.74 21.95 Hedging (gain) 0.30 (0.57) 0.07 (0.13) Operating costs 6.85 5.55 6.25 5.64 -------------------------------------------------------- 19.03 12.30 17.42 16.44 -------------------------------------------------------- Natural gas (US$/mcf) Sales price 3.31 2.19 2.57 3.37 Hedging (gain) (0.07) (0.22) (0.17) 0.01 Operating costs 0.61 0.55 0.53 0.52 -------------------------------------------------------- 2.77 1.86 2.21 2.84 (1) Includes operations in Indonesia and Malaysia/Vietnam. Netbacks do not include synthetic oil or pipeline operations. /T/ -30-FOR FURTHER INFORMATION PLEASE CONTACT:
Talisman Energy Inc.
David Mann
Manager, Investor Relations & Corporate Communications
(403) 237-1196
(403) 237-1210 (FAX)
Email: tlm@talisman-energy.com
Website: www.talisman-energy.com
