May 12, 2010 / 11:14 AM / 8 years ago

UPDATE 3-Shales, Asia to boost Talisman output next year

* Sees 5-10 pct production growth next year

* See 2010 capex of C$4 bln

* To spend about C$1 bln on N. America shale plays

* Shares up 3.6 pct (Recasts to add details and comments, updates shares)

CALGARY, Alberta, May 12 (Reuters) - Talisman Energy Inc TLM.TO could cut spending next year to cope with low natural gas prices, though it still expects its strategic shift into North American shale gas and rising Asian output to boost production in 2011.

The company, Canada’s No. 4 independent oil explorer, said on Wednesday it may trim outlays on its shale gas business by a third, to C$1 billion ($980 million), should natural gas prices not rise from the current level of around $4 per million British thermal units.

It can make the cut because it doesn’t have to work on many of its leases to retain access to the properties. Talisman sees capital spending next year of about C$4 billion. It has a capital budget of about C$4.6 billion this year.

Even if it does cut spending, Talisman said it will still see the benefits of its move into the shale gas regions of northeastern British Columbia, the Marcellus shale in Pennsylvania and, most recently, the Eagle Ford shales of southern Texas.

New production from the shales and from Talisman’s Southeast Asian operations will boost output by 5 to 10 percent next year as the company returns to growth after spending two years retrenching and selling off properties it did not consider to be vital for its business.

“We’ve started to see a tipping point in terms of production, which will lead ... to absolute growth into next year,” John Manzoni, Talisman’s chief executive, said at a meeting with analysts.

Though production has sagged as the company sold off properties, Talisman expects its oil and gas output to begin growing again by the third quarter of this year and then to climb further as shale gas production rises.

The company said shale gas accounted for 3 percent of Talisman’s North American production last year. By 2011 that is expected to rise to 50 percent of its North American output.

Talisman said it sees 8 percent to 10 percent annual growth for four to five years from projects in its Southeast Asia portfolio.

It has also set a production target of 110,000 barrels of oil equivalent per day (boe/d) to 140,000 boe/d in the North Sea for the next 10 years.

The company, which reduced its reserve replacement costs by 40 percent in 2009, said it sees a further 20 percent to 25 percent reduction this year.

Talisman’s net debt at March 31 was C$1.8 billion, down from C$3.6 billion a year earlier.

The company’s shares were 64 Canadian cents, or 3.6 percent, higher at C$18.23 at midday on Wednesday on the Toronto Stock Exchange.

$1=$1.02 Canadian Reporting by Scott Haggett and Koustav Samanta; editing by Peter Galloway

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