Talisman Energy Inc. (Talisman Energy) has reported a net income of $455 million, or $0.45 per share, for the first quarter of 2009, compared with the net income of $466 million, or $0.46 per share, in the year-ago quarter. It also reported a cash flow of $1.3 billion for the first quarter of 2009, compared with the cash flow of $1.21 billion in the year-ago quarter.

– Cash flow (1) during the quarter was $1.3 billion, an increase of 6% from a year ago. Cash flow from continuing operations (1) was also $1.3 billion, up 14% from the same period a year ago.

– Earnings from continuing operations (1) were $303 million, compared to $429 million a year ago.

– Production averaged 450,000 barrels of oil per day (boe/d), up 7%, compared with the year-ago quarter, despite the sale of non-core assets over the past year. Production from continuing operations averaged 436,000 boe/d, 11% above the same quarter 2008.

– Net debt (1) at quarter end was $3.6 billion, down from $3.9 billion at December 31, 2008.

– Netbacks were down 46% from a year earlier, averaging $24.48/boe.

– During first quarter of 2009, the company announced first gas production from the Rev Field in Norway and first oil production from the Northern Fields project in Southeast Asia.

– The company’s unconventional natural gas strategy in North America is on track with 22 gross wells drilled first quarter of 2009 in the Marcellus and Montney.

– Talisman Energy announced an agreement to sell non-strategic assets in Saskatchewan for $720 million.

– The company entered into an agreement for the sale of its Trinidad assets for approximately $380 million.

– The Company announced the appointment of Paul Smith as Executive Vice-President, International Operations (West) and Richard Herbert as Executive Vice-President, Exploration.

Talisman’s financial and operating performance in the quarter was strong, said John A. Manzoni, president and chief executive officer. We continue to strengthen the Company’s balance sheet, which gives us financial flexibility; we are driving down costs and improving efficiency; we are bringing development projects on stream; and, delivering on strategy implementation.

It was a great quarter from an operations standpoint. Production from continuing operations was up 11% year over year. UK production increased by 28%, due in part to improvements in operating efficiency. Production in Scandinavia rose 26%, with contributions from the Rev Field and development drilling success. Production in Southeast Asia was 13% higher with increased sales from Corridor.

The first quarter exceeded our internal projections for production and gives us a strong start to delivering our production target for the year. We are still early in the year and the guidance we provided in January of 430,000 boe/d, with downside of no greater than 5%, remains valid. As usual, production in the second and third quarters will be lower due to maintenance shutdowns.

Cash generation was also strong during the quarter, up 6% to $1.3 billion, despite low commodity prices. The strong cash flow results in large part from the hedging program put in place during the last 12 months. We have hedges in place over the remainder of the year, although we expect lower cash contributions from these. Cash flow also benefited from higher production volumes and lower taxes.

With higher cash flow and proceeds from non-core asset sales, we have improved upon our already strong financial position. Talisman’s long-term debt is now at $3.6 billion (net of cash) versus $3.9 billion at year end and we have paid off our bank lines.

Net income was down 2% compared to a year ago, totaling $455 million, largely due to lower realized prices, higher DD&A and dry hole costs, partly offset by gains on non-core asset sales. Excluding unusual items, earnings from continuing operations were $303 million, compared to $429 million a year earlier.

Unit operating costs are down 6% versus a year ago. In the UK, unit costs are down 27%, due to production gains and improved efficiency, exchange rate movements and the disposal of some higher cost properties. In North America, underlying costs are also reducing, although the quarter included some one-off costs, which mask this reduction. We have a number of internal cost initiatives underway across all our businesses and we expect further reductions.

The strategy is proving robust to lower commodity prices. We are making good progress on non-core asset sales. Including the Saskatchewan and Trinidad sales, we will generate proceeds of approximately $2.2 billion from non-core assets with associated volumes of about 25,000 boe/d.

First oil from the Northern Fields oil development was achieved on schedule during the quarter. We announced first natural gas volumes in July of last year and expect to commission the dry gas facilities by mid-year. In Norway, we announced first production from the Rev Field in January. First production from Affleck in the UK is expected in the third quarter and we continue to progress projects at Auk, Burghley and Yme in the North Sea and Block 15-2/01, and the Corridor expansion in Southeast Asia.

We spent approximately $250 million on unconventional gas plays in North America during the quarter. In the Marcellus Shale, we drilled four wells during the quarter, with each well performing better than the previous one. Improved drilling efficiency should now enable us to complete the 2009 program with a maximum of three rigs instead of five.

We drilled 11 gross wells in the Montney Core where Talisman is achieving top tier performance on drilling and completion costs. We are encouraged by the results of ongoing pilot work in the Montney Shale and have drilled our fourth unconventional pilot well in Quebec.

In international exploration, we drilled a successful sidetrack on Block 15-2/01 in Vietnam. Talisman has made a discovery with the Godwin well in the Central Graben in the UK. We are also encouraged by a new discovery in Norway, which is preparing to test. Early indications are promising in Colombia; however, we still have a couple of months before the well is completed and we are drilling a well on Block 64 in Peru. Results from our first well in the Kurdistan region of northern Iraq were also encouraging, but inconclusive due to operational difficulties in completing the well. And we have also added new blocks in Peru and offshore Vietnam.

In summary, it was a strong quarter, both operationally and financially. The Company is in excellent financial shape and we are making good progress on our strategy for profitable long-term growth.