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John Manzoni, president and CEO of Talisman Energy.

Jeff McIntosh/Jeff McIntosh/THE CANADIAN PRESS

Talisman Energy Inc. plans to spend slightly more than $4-billion on capital projects this year, about 11 per cent less than in 2011.

The Calgary-based international oil and gas producer said early Tuesday that represents a decrease of about $500-million from 2011 and reflects a planned drilling decline because of low natural gas prices.

Capital spending in North America is expected to be approximately $1.8-billion in 2012, which is about $400-million lower than 2011.

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Talisman emerged as a publicly traded company from BP Canada and operates in North America, the North Sea and Southeast Asia.

Production averaged about 425,000 barrels of oil equivalent in 2011, an increase of 9 per cent. Production growth of up to 5 per cent is expected this year.

"Our plans for 2012 have been shaped by low North American natural gas prices and a cautious view of the economic landscape in general," Talisman president and chief executive officer John Manzoni, said in an outlook release before stock markets opened Tuesday.

"We are reducing capital spending in dry gas plays in North America, which accounts for the majority of the decrease over 2011. Underpinning this is a belief that North American gas prices will remain low for some time; we have also assumed a relatively conservative oil price forecast."

He said Talisman is shifting focus to the liquids-rich parts of its portfolio and expects strong growth in liquids production in North America.

In discussing its third-quarter results, Talisman had said in November that its 2012 plans would likely include a greater focus on liquids-rich natural gas and asset sales.

Like many natural gas producers, Talisman has been coping with stubbornly low natural gas prices by drilling in areas rich in valuable liquids. Natural gas liquids, used to make plastics and petrochemicals, track oil prices more closely than they do ordinary dry natural gas.

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More than a year ago, Talisman bulked up its presence in a liquids-rich part of the Eagle Ford shale in Texas, alongside Norway's Statoil. The company signalled in November that capital in 2012 will likely be funnelled toward the Eagle Ford, and away from dry gas holdings in the Marcellus play in northeastern United States and the Montney formation in Western Canada.

In the North Sea, too, Talisman said it may look to scale back. Higher taxes, pipeline outages, maintenance delays and other issues have made that region volatile recently.

Another strategy natural gas producers have adopted recently is to ink joint-venture deals. Last December, Talisman agreed to sell a 50-per-cent stake in two of its shale properties in northeastern British Columbia to South Africa's Sasol for $1.05-billion each.

The two companies have been studying whether it's economically feasible to build a plant in Western Canada that would convert natural gas into liquid fuels.

The company, with about 3,100 employees, also has holdings in Quebec's Utica shale and the Pennsylvania and New York portions of the Marcellus shale.

Talisman's other key areas of focus include offshore production in Southeast Asia, as well as operations in South America and the Middle East.

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