Market Overview

Talisman Energy 2014 Fourth Quarter and Full-Year Results

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CALGARY, ALBERTA--(Marketwired - Feb. 10, 2015) - Talisman Energy Inc. (TSX:TLM) (NYSE: TLM) reported its operating and unaudited financial results for 2014. All values are in US$ unless otherwise stated.

"Our 2014 results reflect the significant progress we made throughout the year to improve the reliability and predictability of our company," said Hal Kvisle, President and CEO. "Production from ongoing operations for the year averaged 357,000 boe/d, up 6% over 2013, with liquids accounting for approximately 40% of production. Capital spending(1) was approximately $3 billion in 2014, down approximately 5% from 2013, reflecting our disciplined commitment to focus our capital program. Cash flow(1) was $2.2 billion in 2014, in line with 2013, despite the significant decline of the global commodity price environment in the second half of last year. Including proceeds from dispositions received earlier in the year, we balanced our cash flows. Production, cash flow and capital spending were in-line with guidance."

"During the quarter, we announced a transaction with Repsol S.A., which will deliver significant and immediate value return to shareholders and create a bigger, more diversified global energy company. Talisman's assets and people will have an important place in the combined enterprise, as we will roughly double Repsol's upstream business. Repsol is dedicated to maintaining a strong commitment to Canada and the local and regional economies in which Talisman operates globally. The transaction remains on track to close during the second quarter of this year."

Full Year 2014 Summary:



-- Production averaged 369,000 boe/d in 2014. Production from ongoing
operations averaged 357,000 boe/d, up 6% from 2013. Liquids production
averaged 141,000 bbl/d, up 7% over 2013.

-- Cash flow for 2014 was approximately $2.2 billion, in-line with
guidance, including $150 million of hedging protection received in the
fourth quarter.

-- Capital spending for 2014 was approximately $3 billion, down $156
million from 2013 and below the company's original full year guidance of
$3.2 billion.

-- Net G&A for 2014 was $405 million, down 7% from 2013.

-- Gross debt at year-end 2014 was $5.1 billion, down $175 million year-
over-year.



(1) The terms "capital spending" and "cash flow" are non-GAAP measures. Please see advisories and reconciliations elsewhere in this release.

Repsol S.A. Offer for Talisman

On December 15, 2014, Talisman announced that it had entered into an arrangement agreement with Repsol S.A. under which Repsol will acquire all of the outstanding common shares of Talisman for US $8.00 per share in cash. In addition, under the transaction, Talisman will be allowed to pay aggregate cash dividends of US$0.18 per common share prior to closing, including the dividend declared and paid on December 31, 2014. Talisman's and Repsol's boards of directors unanimously approved the arrangement agreement.

Completion of the transaction is subject to approval by two-thirds of the votes cast by holders of common shares at the special meeting, court approval of the arrangement, and satisfaction or waiver of customary closing conditions, including applicable government and regulatory approvals. It is anticipated that the completion of the transaction will occur in the second quarter of 2015 and all regulatory approvals are on track.

A copy of the arrangement agreement, the information circular and related documents have been filed with Canadian securities regulators and the U.S. Securities and Exchange Commission and are available at www.sedar.com and www.sec.gov/edgar.

Financial Results

The table includes the company's proportionate share of results from Talisman Sinopec Energy UK Limited (TSEUK) and Equion Energia Limited (Equion).



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December 31, 2014 Q4 14 Q3 14 Q4 13 2014 2013
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Cash flow ($ million) 508 507 580 2,198 2,196
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Cash flow per share(2) 0.49 0.49 0.56 2.13 2.13
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Earnings (loss) from operations ($
million) (2) (143) 48 (116) (25) (248)
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Net income (loss) ($ million) (1,590) 425 (1,005) (911) (1,175)
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Net income (loss) per share (1.54) 0.41 (0.98) (0.89) (1.15)
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Average shares outstanding - basic
(million) 1,032 1,033 1,031 1,033 1,030
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Cash flow in the fourth quarter was $508 million, in-line with the third quarter, benefiting from approximately $150 million of hedging settlements. Cash flow for 2014 was approximately $2.2 billion, in-line with 2013.

In the fourth quarter, the company recorded a loss from operations of $143 million, compared to earnings of $48 million in the third quarter, primarily due to declining commodity prices, dry hole and DD&A arising from price-related reserves write downs in the fourth quarter. For the year, Talisman recorded a loss from operations of $25 million compared to a loss from operations of $248 million in 2013.

(2) The terms "cash flow per share" and "earnings (loss) from operations" are non-GAAP measures. Please see advisories and reconciliations elsewhere in this release.

The company recorded a net loss of $911 million for the year, compared with a $1,175 million net loss in 2013.

The company recorded after-tax impairments during the fourth quarter of approximately $1.37 billion, primarily as a result of a deterioration in forward commodity prices. The company partially impaired its investment in the Eagle Ford by $614 million due entirely to price declines, and fully impaired its investment in Block K44 in the Kurdistan region of Iraq by $234 million after determining that future investment in a capital constrained environment was unlikely. In addition, the company fully wrote off its North Sea goodwill balance of $287 million, and partially wrote down its investment in Equion by $133 million. Price related impairments were partially offset by the booking of a mark-to-market gain on the company's hedge positions of $1.2 billion in the quarter.

During the fourth quarter, the TSEUK joint venture recorded a net loss, which included after-tax impairments of $633 million net to Talisman, as a result of lower commodity pricing and higher decommissioning and development cost estimates. The loss in the fourth quarter has resulted in Talisman reflecting a $186 million liability in its December 31, 2014 balance sheet, representing its obligation to fund TSEUK.

Production

Table includes Talisman's share of production from subsidiaries and equity-accounted entities.



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December 31, 2014 Q4 14 Q3 14 Q4 13 2014 2013
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Oil and liquids (mbbls/d)
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North America 45 41 40 43 35
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Southeast Asia 40 43 47 43 44
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North Sea 31 26 28 30 32
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Other (including Colombia and
Algeria) 24 25 22 25 21
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Total oil and liquids (mbbls/d) 140 135 137 141 132
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Natural gas (mmcf/d)
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North America 770 745 928 794 883
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Southeast Asia 509 494 524 510 516
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North Sea 19 22 8 19 9
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Other (including Colombia and
Algeria) 49 49 45 48 43
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Total natural gas (mmcf/d) 1,347 1,310 1,505 1,371 1,451
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Total mboe/d 365 353 387 369 373
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Assets sold or held for sale (mboe/d)
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North America(3) - 2 30 9 31
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Southeast Asia(4) 1 3 3 3 4
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Total Assets sold or held for sale
(mboe/d) 1 5 33 12 35
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Production from ongoing operations
(mboe/d) 364 348 354 357 338
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(3) Includes Montney (closed March 12, 2014), Monkman (closed April 16,
2014) and Ojay and Northern Alberta Foothills (closed July 31, 2014).
(4) Includes Southeast Sumatra (closed October 23, 2014) and Northwest Java
(sales agreement reached May 2013).



Total production was 369,000 boe/d in 2014, down 1% from 2013. Production from ongoing operations averaged 357,000 boe/d in 2014, up 6% over 2013. Liquids production averaged 141,000 bbl/d in 2014, up 7% over 2013.

The Americas



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December 31, 2014 Q4 14 Q3 14 Q4 13
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Gas
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Edson-Duvernay-Groundbirch 200 178 181
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Marcellus 472 462 475
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Eagle Ford 78 76 68
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Other 20 20 21
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Gas from ongoing operations (mmcf/d) 770 736 745
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Liquids
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Edson-Duvernay-Groundbirch 11 10 9
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Eagle Ford 24 21 20
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Chauvin 10 10 11
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Liquids from ongoing operations (mbbls/d) 45 41 40
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Total production from ongoing operations (mboe/d) 173 163 165
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Assets sold or held for sale (mmcfe/d) (5) - 9 183
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Total North America production (mboe/d) 173 165 195
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(5) Includes Montney (closed March 12, 2014), Monkman (closed April 16,
2014) and Ojay and Northern Alberta Foothills (closed July 31, 2014).



In North America, total production and production from ongoing operations averaged 173,000 boe/d for the fourth quarter, up 5% year-over-year due to increased volumes from Canada and Eagle Ford. Quarter-over-quarter total production increased 5% due to reduced facility downtime and new wells brought onstream in the quarter. Total liquids production increased 13% year-over-year on higher volumes in Eagle Ford, Greater Edson and Duvernay.

In the Eagle Ford, production averaged 37,000 boe/d in the fourth quarter, up 9% over the previous quarter. Fourth quarter production included a 3,500 boe/d prior period NGL adjustment. Liquids volumes averaged 24,000 bbls/d, up 14% versus the previous quarter. In the fourth quarter, 32 gross wells were brought onstream, offset by natural declines, leading to a December exit rate of 35,000 boe/d.

In the Marcellus, production for the quarter averaged 472 mmcf/d, up 2% from the previous quarter. In the Friendsville area, nine wells were brought onstream in the fourth quarter resulting in a December exit rate of 489 mmcf/d. The company drilled three pacesetter wells in the quarter and the Friendsville well results are exceeding internal expectations.

In Canada, production from ongoing operations for the quarter in the Greater Edson area (which includes Wild River), was 41,000 boe/d, up 13% year-over-year, reflecting Talisman's efforts to direct its capital towards high value production. Quarter-over-quarter production was up 8% due to the completion of scheduled facility maintenance in the prior quarter and new wells being brought on-stream in the quarter. In the Duvernay, completions operations commenced on two Waskahigan area wells in December.

Colombia

In Colombia, production in the fourth quarter averaged 21,000 boe/d, up 20% year-over-year, and similar to the previous quarter. In the foothills region, net Equion production averaged 17,000 boe/d. Three wells are currently drilling in the Piedemonte block and the first phase of the processing and handling plant expansion came on-stream at the end of 2014.

In Block CPO-9, nine of 10 Akacias wells were on long-term test during the quarter, producing an average of 3,800 boe/d net to Talisman.

In the fourth quarter, an 8-day flow test of the Nueva Esperanza-1 structure, stabilized at a daily flow rate of 910 barrels of 8 degree API crude oil with less than 2% water cut during the last day of flow. The Nueva Esperanza-1 structure is adjacent to, and along the same structural trend as the Akacias field. Nueva Esperanza-2, which is a downdip appraisal well, was also drilled in the fourth quarter and is currently on short-term test with the clean-up period completed and the well now producing oil with a very low water cut. A second appraisal well spudded at the end of January.

Southeast Asia



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December 31, 2014 Q4 14 Q3 14 Q4 13
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Malaysia liquids (mbbls/d) 21 21 19
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Malaysia gas (mmcf/d) 112 83 112
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Malaysia (mboe/d) 40 35 37
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Indonesia liquids (mbbls/d) 6 7 6
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Indonesia gas (mmcf/d) 391 402 400
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Indonesia (mboe/d) 72 73 73
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Vietnam liquids (mbbls/d) 9 10 15
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Vietnam gas (mmcf/d) 5 5 8
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Vietnam (mboe/d) 10 11 17
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Australia (mboe/d) 3 3 4
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Total production from ongoing operations (mboe/d) 125 122 131
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Assets sold or held for sale (mboe/d) (6) 1 3 3
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Southeast Asia total (mboe/d) 126 125 134
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(6) Includes Southeast Sumatra (closed October 23, 2014).



Production from ongoing operations averaged 125,000 boe/d in the fourth quarter, up slightly from the previous quarter with higher volumes at PM-3 following completion of its annual turnaround in the third quarter, and strong performance at Kinabalu. Production from ongoing operations was down approximately 5% year-over-year due to the early payout of the carry recovery volumes at HST/HSD in Vietnam in the third quarter, and fluctuating gas demand at Corridor in Indonesia. This was partially offset by a significant production increase at Kinabalu over the same period last year following the successful completion of the infill well program and strong facility performance.

In Indonesia, production from ongoing operations averaged 72,000 boe/d during the fourth quarter, compared to 73,000 boe/d in both the previous quarter and the same period last year. Corridor production was 58,000 boe/d during the quarter, down slightly from the previous quarter due to fluctuating gas demand in the region. Drilling is progressing on the first well of a three well development program at Corridor and is expected to be completed in the first quarter.

In Malaysia, production averaged 40,000 boe/d in the fourth quarter, up 14% from the previous quarter due to the completion of a turnaround in the third quarter. At Kinabalu, production averaged 10,000 boe/d, up 25% from the previous quarter following the successful completion of a multi-well infill program and improved uptime. At PM-3, fourth-quarter production was 27,000 boe/d, up 13% over the previous quarter following the completion of an annual turnaround, but down year-over-year due to fluctuating demand. Two exploration wells were drilled at Sabah during the quarter. While hydrocarbons were encountered, the wells were not commercial.

In Vietnam, production averaged 10,000 boe/d in the fourth quarter, down 9% from the previous quarter, due to the early payout of the carry recovery volumes earlier in the third quarter. Two exploration wells demonstrating hydrocarbons were successfully drilled during the quarter. The first well and follow-on sidetrack tested the Red Emperor Extension in Block 136, adjacent to Talisman's fully appraised Red Emperor discovery in Block 07/03.

Algeria

In Algeria, production averaged 11,000 boe/d during the fourth quarter, in line with the previous period and the same period last year.

Other Operating Areas

North Sea

Talisman's share of UK production averaged 17,000 boe/d, up 42% from the previous quarter and 21% year-over-year. The increase was largely due to the return of production following planned turnarounds in the third quarter.

In Norway, fourth quarter average daily production was 17,000 boe/d, down 6% from the third quarter but up 13% year-over-year. The Brynhild field (TLM 10% WI) started production late in the quarter at a rate of approximately 800 bbls/d net to Talisman.

Dividends

Under the Arrangement Agreement with Repsol, Talisman is allowed to pay aggregate cash dividends of US$0.18 per common share prior to closing, including the dividend declared and paid on December 31, 2014 of $0.0675 per common share. The Company anticipates that a dividend aggregating the remaining allowable amount of $0.1125 per share will be declared prior to the completion of the Arrangement. However, no determination has been made by the Board with regard to such dividend and there is no assurance that such a dividend will be declared.

The company has declared a quarterly dividend of C$0.2625 on its Cumulative Redeemable Rate Reset First Preferred Shares, Series 1. The dividend will be paid on March 31, 2015 to shareholders of record at the close of business on March 13, 2015.

About Talisman Energy Inc.

Talisman Energy Inc. is a global upstream oil and gas company, headquartered in Canada. Talisman has two core operating areas: the Americas (North America and Colombia) and Asia-Pacific. Talisman is committed to conducting business safely, in a socially and environmentally responsible manner, and is included in the Dow Jones Sustainability (North America) Index. Talisman is listed on the Toronto and New York stock exchanges under the symbol TLM. Please visit our website at www.talisman-energy.com.

Advisories

This news release contains information that constitutes "forward-looking information" or "forward-looking statements" (collectively "forward-looking information") within the meaning of applicable securities legislation. This forward-looking information includes, among others, statements regarding: business strategy, priorities and plans; planned drilling and other exploration and development activities; timing of closing of the corporate transaction with Repsol S. A., the expected size, characteristics and commitments of the resulting enterprise; and other expectations, beliefs, plans, goals, objectives, assumptions, information and statements about possible future events, conditions, results of operations or performance. The company priorities and goals disclosed in this news release are objectives only and the achievement of these objectives cannot be guaranteed.

The factors or assumptions on which the forward-looking information is based include: assumptions inherent in current guidance; projected capital investment levels; the flexibility of capital spending plans and the associated sources of funding; the successful and timely implementation of capital projects; the continuation of tax, royalty and regulatory regimes; ability to obtain regulatory and partner approval; commodity price and cost assumptions; and other risks and uncertainties described in the filings made by the Company with securities regulatory authorities. The Company believes the material factors, expectations and assumptions reflected in the forward-looking information are reasonable but no assurance can be given that these factors, expectations and assumptions will prove to be correct. Forward-looking information for periods past 2014 assumes escalating commodity prices. Closing of the Repsol corporate transaction will be subject to receipt of all necessary shareholder, court and regulatory approvals and contractual conditions.

Undue reliance should not be placed on forward-looking information. Forward-looking information is based on current expectations, estimates and projections that involve a number of risks which could cause actual results to vary and in some instances to differ materially from those anticipated by Talisman and described in the forward-looking information contained in this news release. The material risk factors include, but are not limited to: the risks of the oil and gas industry, such as operational risks in exploring for, developing and producing crude oil and natural gas; risks and uncertainties involving geology of oil and gas deposits; risks associated with project management, project delays and/or cost overruns; uncertainty related to securing sufficient egress and access to markets; the uncertainty of reserves and resources estimates, reserves life and underlying reservoir risk; the uncertainty of estimates and projections relating to production, costs and expenses, including decommissioning liabilities; risks related to strategic and capital allocation decisions, including 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, interest rates and tax or royalty rates; the outcome and effects of any future acquisitions and dispositions; health, safety, security and environmental risks, including risks related to the possibility of major accidents; environmental regulatory and compliance risks, including with respect to greenhouse gases and hydraulic fracturing; uncertainties as to access to capital, including the availability and cost of credit and other financing, and changes in capital markets; risks in conducting foreign operations (for example, civil, political and fiscal instability and corruption); risks related to the attraction, retention and development of personnel; changes in general economic and business conditions; the possibility that government policies, regulations or laws may change or governmental approvals may be delayed or withheld; and results of the Company's risk mitigation strategies, including insurance and any hedging activities. Fluctuations in crude oil or natural gas prices could have a material adverse effect on the Company's operations and financial condition, the value of its oil and natural gas reserves and its level of expenditure for oil and gas exploration and development. Downward trends in commodity prices could result in downward adjustments to the Company's estimated reserves and asset values which could result in further impairment of assets.

The foregoing list of risk factors is not exhaustive. Additional information on these and other factors which could affect the Company's operations or financial results or strategy are included in Talisman's most recent Annual Information Form. In addition, information is available in the Company's other reports on file with Canadian securities regulatory authorities and the United States Securities and Exchange Commission. Forward-looking information is based on the estimates and opinions of the Company's management at the time the information is presented. The Company assumes no obligation to update forward-looking information should circumstances or management's estimates or opinions change, except as required by law.

Oil and Gas Information

Throughout this news release, Talisman makes reference to production volumes. Unless otherwise stated, such production volumes are stated on a gross basis, which means they are stated on a Company interest basis prior to the deduction of royalties and similar payments.

Barrel of oil equivalent (boe) throughout this news release is calculated at a conversion rate of six thousand cubic feet (mcf) of natural gas for one barrel of oil (bbl). This news release also includes reference to mcf equivalents (mcfes) which are calculated at a conversion rate of one barrel of oil to 6,000 cubic feet of gas. Boes and mcfes may be misleading, particularly if used in isolation. A boe conversion ratio of 6 mcf:1 bbl and an mcfe conversion ratio of 1 bbl: 6 mcf are based on an energy equivalence conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

Talisman uses the term "pacesetter" well in its description of its drilling results in the Friendsville area. Pacesetter wells in this context refers to the fastest wells drilled by Talisman in the area, measured from spud to rig release. As used in the context of the Company's Colombian assets, long-term testing indicates continuous well production going to market at the most recent weekly average. A permit for long term testing is required for a well to produce oil until the permit for full field development has been granted.

In this news release, Talisman discloses well test results for the Nueva Esperanza-1 well drilled in the T2 formation, with no significant production or pressure decline observed during such test. The flow test utilized an electro submersible pumping system and 309 feet of perforations in such formation. The data pertaining to Nueva Esperanza-1 and Nueva Esperanza-2 should be considered preliminary until a pressure transient analysis and/or well flow test interpretation has been done. The test results are not necessarily indicative of long-term performance or of ultimate recovery.

Non-GAAP Financial Measures

Included in this news release are references to financial measures commonly used in the oil and gas industry such as cash flow, earnings (loss) from operations and capital spending. These terms are not defined by International Financial Reporting Standards (IFRS). Consequently, these are referred to as non-GAAP measures. Talisman's reported results of such measures m

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