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CALGARY - Talisman Energy Inc. (TSX:TLM) is spending $570 million to bulk up its land holdings in two of the continent's most promising shale gas plays, a move that further sharpens the Calgary-based company's focus on unconventional natural gas.
Talisman said Tuesday it has amassed 170,000 additional net acres in northeastern British Columbia's Montney and Pennsylvania's Marcellus plays and is looking to intensify its drilling activities in both places in the coming months.
"We're now confident that we have sufficient running room for Talisman in the highest quality acreage for an extended drilling campaign to drive sustainable growth over multiple years," chief executive officer John Manzoni told analysts on a conference call Tuesday.
As a result of the heightened activity, Talisman's capital spending this year is expected to be about $4.5 billion, compared to its original budget of $3.6 billion.
Talisman also said its North American operations will be reorganized into two businesses - shale and conventional - each with its own business model and strategic roles.
The company will also open an office in Pittsburgh to handle its increased presence in Pennsylvania. Talisman said it plans to double the number of drilling rigs in the state to six by year end, and possibly ramp that up to 10 next year.
Talisman has added 90,000 acres of what it calls "Tier 1" properties in the Marcellus, doubling its holdings there.
Tier 1 means the gas can be produced at a cost of US$4 per 1,000 cubic feet.
With Tuesday's natural gas prices settling at US$4.92 per 1,000 cubic feet, the company is able to turn a profit by drilling on those lands.
Its Tier 1 acreage in the Montney has increased by 80,000 to 166,000 net acres. Talisman expects to drill 20 pilot wells in the region this year, moving to a commercial development in the beginning of 2010.
Technological advancements have allowed producers to unlock huge natural gas volumes from shale rock formations that had once been too difficult and costly to tap into.
Tuesday's announcement came after the company reported a 98 per cent drop in third-quarter profits, as falling commodity prices and lower production output took their toll on earnings and revenue.
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