Talisman Energy Generates a Record $6.2 Billion in Cash Flow and a Record $3.5 Billion in Net Income for 2008

Market Wire, March, 2009

Talisman Energy Inc. (TSX: TLM) (NYSE: TLM) reported its operating and financial results for 2008. Highlights for the year include:

- Cash flow(1) was a record $6.2 billion, up 42% from a year ago due to higher commodity prices; cash flow in the fourth quarter was $1.6 billion, up 54% from a year earlier, due primarily to realized gains on derivative contracts;

- Net income was $3.5 billion, an increase of 69% from a year earlier, and $1.2 billion for the quarter, almost double a year ago;

- Earnings from continuing operations(1) were $2.5 billion, an increase of 167%. The total for the quarter was $537 million, more than four times higher than the previous year, despite a significant decline in oil prices;

- Production averaged 432,000 boe/d, a decrease of 4% relative to 2007; however, excluding discontinued operations, production was 3% higher than the previous year;

- Net debt(1) at year end was $3.9 billion, down from $4.3 billion a year earlier;

- Total exploration and development spending was $5.1 billion;

- The Company spent $1.8 billion on unconventional programs in North America, adding substantial amounts of acreage and progressing development of the Montney and Marcellus plays;

- Development projects were brought onstream in Southeast Asia (Song Doc, Northern Fields gas), and the Rev Field (Norway) started production in January 2009;

- The Company acquired exploration acreage in the Kurdistan region of northern Iraq, expanded its exploration holdings in Colombia and entered into two Joint Study Agreements offshore Indonesia;

- Talisman continued to focus its operations, completing sales of 12,000 boe/d of non-core assets for approximately $1 billion, including properties in Denmark and the Netherlands;

- Yesterday, the Company announced it has entered into an agreement to sell non-core assets in southeast Saskatchewan for proceeds of approximately $720 million; and

- The Company replaced 75% of 2008 production with proved reserves (excluding price-related revisions).

(1) The terms "cash flow", "earnings from continuing operations" and "net debt" are non-GAAP measures. Please see the advisories and reconciliations elsewhere in this press release.

"2008 was a year of change for Talisman," said John A. Manzoni, President & CEO. "We set the Company in a new strategic direction and realigned major parts of the organization in support of the new strategy. We've also successfully navigated a very dynamic economic environment, posting record financial results despite the collapse in oil and natural gas prices in the fourth quarter.

"Talisman paid down a significant amount of long-term debt last year and we are in excellent financial shape. The Company entered into a number of derivative contracts last year to protect its capital programs against a drop in prices and this contributed to very strong fourth quarter results. The 2009 capital program has been designed for a volatile and uncertain economic environment and low commodity prices.

"Talisman generated a record $3.5 billion in net income for the year, a 69% increase over 2007 despite writedowns associated with year end pricing and reserves. Earnings from continuing operations were $2.5 billion, 167% higher than the prior year.

"Cash flow was $6.2 billion, up 42% year over year, and $1.6 billion in the fourth quarter. Talisman paid down $935 million of long-term debt, net of cash, last year. However, the impact on our year-end numbers was less than this because of the currency effect of the weaker Canadian dollar.

"Production from continuing operations averaged 419,000 boe/d for the year, an increase of 3%, with production gains from Corridor (Indonesia), Tweedsmuir (UK) and new wells in North America (Monkman, Foothills, Bigstone). Including assets, which were sold during the year or slated for sale, production was 432,000 boe/d. This was slightly above our last guidance provided at the end of the third quarter.

"Talisman replaced 75% of its production through drilling and non-price revisions last year. The Company wrote down 159 mmboe of proved reserves, almost all in the UK North Sea, due to low year-end prices. However, using average 2008 prices, these price-related revisions would have been positive instead of negative.

"We replaced 106% of production in North America, with approximately half of our proved reserve additions coming from unconventional drilling programs. Proved reserves in unconventional areas account for about 11% of our North American total, which means there is a lot of running room.

"International reserve additions can be lumpy, depending on both project approvals and drilling results, and this was the case in 2008. For example, we have a number of development projects moving towards approval in Southeast Asia. Talisman's new strategy will improve reserve replacement and finding and development costs over time.

"Since the introduction of the strategy last May, we have made significant progress towards our objectives of profitable long-term growth, high-impact exploration and focusing the portfolio.