Talisman Energy CEO States People & Equipment Limiting Expansion

Talisman Energy Inc. has said it is likely it will not pursue expansion into new exploration areas because of a shortage of available staff and equipment. "There are no rigs available anywhere, while supplies of drilling engineers and sub-surface people are tight," Talisman Chief Executive James Buckee told a press conference. "It's put a brake on our enthusiasm on rushing into new places and is a real factor in considering where we go in the future."

Talisman is unusual among established Canadian energy companies as it has notfocused its attention on production from Alberta's oil sands, instead following a strategy of pursuing technical efficiency in conventional oil and natural gas exploration and development worldwide.

The company is currently evaluating its Situche Central prospect in Peru, but executives are worried about the potential operating environment in the country, given the uncertain outcome of Peru's current elections, Buckee said.

"Before we go too heavily into Peru we need to assess that the best we can," he said. He added that risk assessments likely will preclude Talisman from venturing into countries like Bolivia, Venezuela or Ecuador.

Talisman has also invested heavily in the North Sea, the company's largest producing province. Output volumes there reached 190,000 barrels of oil equivalent a day in the first quarter of 2006 and are expected to grow 35% by 2008 as new prospects come on stream.

However, the U.K.'s anticipated 10% increase in its supplemental tax on production had made the region less profitable, Buckee said. Talisman's first-quarter net earnings fell slightly after taking a C$325 million provision for future taxes in the U.K. "(The tax) is obviously a bad thing as it's taken away a lot of the value of the North Sea holdings," he said. "But on the other hand, the regime is still on the attractive end of the spectrum, if not quite as attractive as it was before."

Buckee added that the tax wouldn't affect the company's drilling plans in the North Sea. While the company is in discussions with Royal Dutch Shell PLC on acquiring the Auk and Fulmar fields, the lack of rigs and manpower would likely prevent the company from pursuing any subsequent acquisitions in the region. "Basically, the industry is full," he said. "There's no more space available, and we've got to back up and work with what we've got."

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Posted 11/05/06

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