Talisman Cutting Back in Marcellus from 10 Rigs to 3

Talisman Energy is the latest major driller to announce they are cutting back on drilling in the dry gas Marcellus to instead concentrate on drilling in wet gas areas.

On their yearly earnings call yesterday, Talisman disclosed that for the year, their Marcellus production rocketed from 181 million cubic feet of gas per day (mmcfe/d) at the end of 2010, to 413 mmcfe/d at the end of 2011. The Marcellus has been by far the largest unconventional gas play for Talisman in the U.S. But they’re going to reduce the number of drilling rigs they have in the Marcellus from the current 10 down to three this year.

Here’s the relevant section on Talisman’s shale plays in North America from yesterday’s annual earnings report update:

We are shifting our focus to the liquids-rich parts of our portfolio. We expect to grow our liquids production in North America from approximately 25,000 bbls/d in 2012, to over 60,000 bbls/d by 2015.

North American exploration and development spending for the year was $2.2 billion, the majority of which was spent in the Marcellus and Eagle Ford shale plays.

Production from ongoing operations increased by 37%, with natural gas production increasing by 41% due principally to successful development in the Marcellus and Eagle Ford. Shale production doubled year over year, averaging 500 mmcfe/d.

In the Marcellus we ended the year with 10 operated rigs. Production is expected to remain relatively flat going forward as we reduce activity in light of low natural gas prices. The company may reduce to as few as three rigs over the course of the year.

In the liquids-rich Eagle Ford we ended the year with 10 operated rigs. In 2012, we expect this to increase to 14 rigs. Production is expected to at least double from approximately 30 mmcfe/d as we build out our drilling programs and secure access to additional egress.

In the Montney, we plan to reduce our program to four rigs, from 11 in the fourth quarter of last year, primarily due to low gas prices. We will continue our program to optimize recovery in the thick Montney shale.

In the second quarter of the year, Talisman acquired a significant amount of acreage in the liquids-rich Duvernay shale in Alberta, where we now hold approximately 360,000 net acres. We commenced a pilot program last year and plan to drill at least six wells in 2012.

The company continued to develop its conventional assets with exploration and development spending of more than $400 million. This year we will focus on expanding our liquids-rich Wild River play, as well as continuing the pilot programs in the Cardium oil and wet gas windows.*

*Talisman Energy (Feb 15, 2012) – Talisman Energy 2011: 157% Reserves Replacement; Underlying Production Growth up 9%; Fourth Quarter Cash Flow up 25%