* Q4 loss C$0.11/shr vs EPS C$1.17
* Cont ops EPS C$0.07 vs C$0.17 expected
* Cash flow C$0.91/shr vs C$1.54
* Production down 2 pct at 423,000 boe/d
* Shares fall 2.9 percent (Recasts to add detail and comment.)
CALGARY, Alberta, Feb 10 (Reuters) - Talisman Energy Inc TLM.TO, Canada's No. 4 independent oil explorer, posted weaker-than-expected results on Wednesday, sending its shares lower, even as it slashed the cost of replacing reserves as part of a strategy of pushing into shale gas development.
The results fell short of estimates that most analysts had made as maintenance at some facilities curtailed production. Even so, Talisman is sticking with a plan to refocus its North American operations.
The company has moved to tap the shale natural gas deposits that offer massive, though difficult to extract, reserves and lower production costs.
Indeed, Talisman said its cost in 2009 for replacing one barrel oil equivalent of reserves was $24.30 a barrel, 43 percent less than in 2008. With the move to exploit the big reserves on its unconventional gas fields in Pennsylvania, British Columbia and elsewhere, the company's chief executive said, costs may fall farther still.
"That's the inevitable outcome of us moving towards the shale business model," John Manzoni said on a conference call.
The company reported a net loss of C$111 million ($103.9 million), or 11 Canadian cents a share in the quarter, compared with a profit of C$1.20 billion, or C$1.17, in the year-prior period.
Earnings from continuing operations, which excludes the charges that pushed to company to a net loss, fell 85 percent to C$76 million, or 7 Canadian cents a share, from C$502 million, or 49 Canadian cents, a year ago. The result was well below the average analyst estimate of 17 Canadian cents, according to Thomson Reuters I/B/E/S.
Talisman's cash flow, a key indicator of its ability to pay for new drilling and major projects, fell 41 percent to C$921 million, or 91 Canadian cents a share, from C$1.56 billion or C$1.54, a year ago.
Natural gas prices were weak over the quarter, with the benchmark futures contract averaging $4.93 per million British thermal units, 23 percent less than the year-prior period.
However, oil prices were stronger, averaging $76.13 per barrel, 29 percent higher than the fourth quarter of 2008.
Talisman's overall production fell 2 percent to 423,000 barrels of oil equivalent per day, as it sold off properties it consider surplus because of its new strategy.
Revenue rose about 3 percent to C$2.18 billion.
Talisman shares fell 52 Canadian cents, or 2.9 percent, to C$17.48 midafternoon on the Toronto Stock Exchange. ($1=$1.06 Canadian) (Reporting by Scott Haggett and Ashutosh Joshi)