TransGlobe Energy Corporation Announces First Quarter 2014
Financial and Operating Results
CALGARY, ALBERTA--(Marketwired - May 7, 2014) - TransGlobe
Energy Corporation ("TransGlobe" or the "Company")
(TSX:TGL)(NASDAQ:TGA) is pleased to announce its financial and
operating results for the three months ended March 31, 2014. All
dollar values are expressed in United States dollars unless
otherwise stated.
- First quarter production averaged 18,067 Bopd (17,932 Bopd
sales);
- First quarter funds flow of $32.5 million;
- First quarter earnings of $16.7 million (includes a $3.5
million unrealized loss on convertible debentures);
- Spent $14.3 million on exploration and development during the
quarter;
- Drilled nine wells in the quarter resulting in seven oil wells,
one dry hole, and one well that was suspended for a future
sidetrack;
- Ended the quarter with $107.6 million in cash and cash
equivalents; positive working capital of $258.9 million or $171.1
million net of debt (including convertible debentures);
- Collected $29.4 million in accounts receivable from the
Egyptian Government during the quarter;
- Received all access approvals for 15 of 18 wells at North West
Gharib; drilling is expected to commence in June.
A conference call to discuss TransGlobe's 2014 first quarter
results presented in this news release will be held Wednesday, May
7, 2014 at 9:00 AM Mountain Time (11:00 AM Eastern Time) and is
accessible to all interested parties by dialing 416-340-2218 or
toll free at 1-866-225-0198 (see also TransGlobe's news release
dated May 1, 2014). The webcast may be accessed at
http://www.gowebcasting.com/5453
| FINANCIAL AND OPERATING RESULTS |
|
| (US$000s, except per share, price, volume amounts and %
change) |
|
|
|
|
|
Three months ended March 31 |
|
| Financial |
2014 |
2013 |
% Change |
|
| Oil revenue |
153,140 |
159,915 |
(4 |
) |
| Oil revenue, net of royalties |
78,366 |
79,366 |
(1 |
) |
| Production and operating expense |
19,578 |
14,532 |
35 |
|
| General and administrative expense |
7,008 |
7,100 |
(1 |
) |
| Depletion, depreciation and amortization expense |
13,165 |
11,180 |
18 |
|
| Income taxes |
19,281 |
23,921 |
(19 |
) |
| Funds flow from operations |
32,487 |
36,005 |
(10 |
) |
|
Basic
per share |
0.44 |
0.49 |
|
|
|
Diluted per share |
0.43 |
0.44 |
|
|
| Net earnings |
16,692 |
24,878 |
(33 |
) |
| Net earnings - diluted |
16,692 |
21,427 |
(22 |
) |
|
Basic
per share |
0.22 |
0.34 |
|
|
|
Diluted per share |
0.22 |
0.26 |
|
|
| Capital expenditures |
14,365 |
18,193 |
(21 |
) |
| Working capital |
258,858 |
277,997 |
(7 |
) |
| Long-term debt, including current portion |
- |
17,097 |
(100 |
) |
| Convertible debentures |
87,765 |
93,842 |
(6 |
) |
| Common shares outstanding |
|
|
|
|
|
Basic
(weighted average) |
74,637 |
73,805 |
1 |
|
|
Diluted (weighted average) |
75,520 |
82,228 |
(8 |
) |
| Total assets |
692,341 |
672,675 |
3 |
|
|
|
|
|
|
| Operating |
|
|
|
|
| Average production volumes (Bopd) |
18,067 |
18,001 |
- |
|
| Average sales volumes (Bopd) |
17,932 |
17,909 |
- |
|
| Average price ($ per Bbl) |
94.89 |
99.21 |
(4 |
) |
| Operating expense ($ per Bbl) |
12.13 |
9.02 |
35 |
|
CORPORATE SUMMARY
TransGlobe Energy Corporation's ("TransGlobe" or the "Company")
total production averaged 18,067 barrels of oil per day ("Bopd")
during the quarter which is down slightly from Q4-2013
production.
In the Eastern Desert the Company is currently proceeding with
lease construction on the approved NW Gharib wells. Drilling in NW
Gharib is expected to commence in June, with a second rig arriving
in July. Year-to-date the Company has drilled eleven wells in the
Eastern Desert resulting in nine oil wells, one water injector well
and one well which was plugged back to surface casing and suspended
for a future sidetrack. The Company has received access approvals
to begin the seismic acquisition program in the NW Gharib, SW
Gharib and SE Gharib blocks, and expects seismic acquisition to
commence in the third quarter of 2014 subject to crew availability.
The Eastern Desert seismic acquisition program will include 1,000+
square kilometers of 3-D and 300+ kilometers of 2-D.
In the Western Desert the Company participated in three wells
year-to-date at East Ghazalat, resulting in two oil wells and one
dry hole. The 3-D seismic acquisition program for the South
Ghazalat block is expected to cover 800 square kilometers.
TransGlobe has applied for and received military access approvals
for South Ghazalat.
Dated Brent oil prices averaged $108.18 in the first quarter of
2014, which was consistent with Q4-2013 prices. Egypt crude is sold
at a quality discount to Dated Brent and received a blended price
of $94.43 during the quarter. The Company had funds flow of $32.5
million and ended the quarter with positive working capital of
$258.9 million or $171.1 million net of debt (including the
convertible debentures). The Company collected $29.4 million of
accounts receivable from the Egyptian government during the
quarter, resulting in an accounts receivable balance of $174.0
million as at March 31, 2014.
The Company had net earnings in the quarter of $15.6 million,
which included a $3.5 million non-cash unrealized loss on
convertible debentures. The $3.5 million loss represents a fair
value adjustment in accordance with IFRS, but does not represent a
cash loss or a change in the future cash outlay required to repay
the convertible debentures.
On March 15, 2014, TransGlobe announced a proposed merger with
Caracal Energy Inc. ("Caracal"). On April 14, 2014, the arrangement
agreement was terminated due to the fact that Caracal received an
unsolicited cash offer to acquire all of the outstanding shares of
Caracal, and the unsolicited offer constituted a "Superior
Proposal" under the terms of the arrangement agreement.
Accordingly, Caracal terminated the agreement and paid TransGlobe
the reverse termination fee of $9.25 million in accordance with the
terms of the agreement. The Company was disappointed with the
termination of the agreement to merge with Caracal. Although the
Caracal merger was a much larger transaction than what we had been
seeking, it met all the attributes of a deal that would have
increased shareholder returns while maintaining our stated strategy
of onshore, operated oil development and exploration in our region
of expertise. Management and the board of directors remain
committed to expanding the Company's portfolio of assets to
increase returns to shareholders and mitigate the risks inherent in
a concentrated portfolio, particularly political or economic
concentration. In addition, TransGlobe has obtained the required
approvals for the previously announced (and subsequently suspended)
dividend of $0.05/share per quarter. TransGlobe will also pay a
special dividend of $0.10/share from the proceeds of the reverse
termination fee received from Caracal.
The Annual General and Special Meeting of Shareholders was
rescheduled to June 10, 2014, which was the earliest date available
following the termination of the Caracal arrangement agreement.
The Company remains in a strong financial position and is
embarking on an exciting period of high potential exploration
commencing with drilling at NW Gharib, in parallel with a large 3-D
seismic acquisition program on the new concessions. The Company
believes that the same structural configuration that created the
pools found in the West Gharib and West Bakr concessions is present
in the NW Gharib, SW Gharib and SE Gharib blocks, which will be
tested over the next few years. In addition, the Company will
continue to pursue business development opportunities both within
and outside of Egypt.
|
| Annual
General and Special Meeting of Shareholders |
| Tuesday,
June 10, 2014 at 3:00 p.m. Mountain Time |
|
Centennial Place West, Ten Peaks Room |
| 3rd
Floor, 250 5th Street S.W., Calgary, Alberta, Canada |
|
OPERATIONS UPDATE
ARAB REPUBLIC OF EGYPT
West Gharib, Arab Republic of Egypt (100% working interest,
operated)
Operations and Exploration
Five wells were drilled in the Arta/East Arta area during the
first quarter resulting in two Lower Nukhul oil wells, two Upper
Nukhul oil wells, of which one well was plugged back to surface
casing and suspended for a future sidetrack. The two Lower Nukhul
oil wells were completed and placed on production at initial rates
of 300 Bopd and 700 Bopd respectively. The two Upper Nukhul wells
are scheduled for completion and stimulation during the second
quarter.
Subsequent to quarter-end, one additional development oil well
was drilled at Hana, which is scheduled for completion in May. The
drilling rig then moved to the Arta well which was plugged and
suspended in the first quarter for a potential sidetrack location
and is currently drilling. The drilling rig is scheduled to remain
in West Gharib during the first half of 2014 and is scheduled to
move to the North West Gharib concession for exploration/appraisal
drilling for the remainder of 2014.
Production
Production from West Gharib averaged 11,100 Bopd to TransGlobe
during the first quarter, a 7% (883 Bopd) decrease from the
previous quarter.
Production to TransGlobe averaged 10,230 Bopd in April.
Production at West Gharib thus far in the year has been
adversely impacted by a combination of lower than expected drilling
results, premature failures of new progressive cavity pumps
("PCPs") and increased water cuts associated with natural
declines.
The two Arta Lower Nukhul development wells drilled early in Q1
encountered approximately 50% less net pay at the top of the
structure. The two wells are currently on production at
approximately 1,000 Bopd combined, which is 1,000 Bopd less than in
the original 2014 plan.
In 2013, the Company received several consignments of PCPs from
a new manufacturer who was the successful bidder in the 2013 tender
process. The new pumps were used to replace existing PCPs and for
new wells starting in late 2013 / early 2014. Unfortunately
approximately 60% of the new pumps failed prematurely from as early
as a few weeks up to three months, which is significantly less than
the historical run times of 1 to 2 years for PCPs in West Gharib.
The poor PCP performance has adversely impacted 2014 production due
to increased down time associated with the more frequent pump
changes, slower response time for pump changes due to increased
demands on service rig availability and a shortage of properly
sized replacement pumps which has impacted well optimization plans.
Approximately 40% of the West Gharib production was produced using
PCPs with the balance produced using sucker rod pumps. The PCPs are
often used for higher volume producers, which further impacts
production when shut-in for pump changes. The Company is working
with the pump manufacturer to determine if the problem is an
elastomer design issue, a manufacturing issue for this batch of
pumps, or some combination of both. The Company received a new
consignment of pumps from this supplier which may or may not have
similar problems depending upon the root cause of the failures.
Concurrently the Company placed a special order for additional
pumps with another supplier/manufacturer which are expected to
arrive in Egypt early in the third quarter. The Company is
currently tendering a 2 year supply agreement for PCPs. This
contract is expected to be awarded by early June, at which time the
Company can procure a proper supply of new pumps. It is estimated
that the PCP failures impacted 2014 average Q1 production by
approximately 1,000 Bopd and will continue to impact future
production until the faulty pumps are replaced with more reliable
pumps. Given the current outlook for the supply chain delivery
time, we do not expect the pump situation to be fully resolved and
all wells properly optimized until Q4-2014.
|
Quarterly West Gharib Production (Bopd) |
2014 |
2013 |
|
|
Q-1 |
Q-4 |
Q-3 |
Q-2 |
| Gross
production rate |
11,100 |
11,983 |
12,274 |
12,829 |
|
TransGlobe working interest |
11,100 |
11,983 |
12,274 |
12,829 |
|
TransGlobe net (after royalties) |
6,350 |
6,600 |
6,865 |
7,066 |
|
TransGlobe net (after royalties and tax) * |
4,562 |
4,592 |
4,812 |
4,995 |
| * Under the terms of the West Gharib Production Sharing
Concession, royalties and taxes are paid out of the Government's
share of production sharing oil. |
West Bakr, Arab Republic of Egypt (100% working interest,
operated)
Operations and Exploration
The Company drilled three oil wells during the first quarter
(two in the K-field and one in the H-field). The first K-field well
encountered oil in the Asl A, B and E which was completed in the
Asl E and placed on production at an initial rate of 190 Bopd in
late January. The second K-field well encountered oil in the Asl A,
which was completed and is producing approximately 20 Bopd due to
high water cuts. The H-field well only encountered oil in the Bakr
formation and was placed on production at the end of March at an
initial rate of 30 Bopd.
Subsequent to quarter end, the Company drilled two wells in the
H-field resulting in an oil well and a water injection well for the
H-field water flood. The oil well encountered oil pay in the three
Yusr zones (A, B & C) and will be completed in the lower most
Yusr C zone this month.
The rig is currently drilling in the K-field and it is expected
that it will continue working in West Bakr throughout 2014.
Production
Production from West Bakr averaged 5,757 Bopd to TransGlobe
during the first quarter, a 4% (236 Bopd) increase from the
previous quarter. Production increases compared to 2013 are
attributable to new drilling and successful well work over
activities.
Production averaged 5,240 Bopd in April. In general 2014
production is behind plan due to lower production from new wells,
which is a combination of completing multi-zone wells in the deeper
formations first (which have lower productivity due to thinner
zones and structural proximity to water) along with mixed early
drilling results in 2014.
|
Quarterly West Bakr Production (Bopd) |
2014 |
2013 |
|
|
Q-1 |
Q-4 |
Q-3 |
Q-2 |
| Gross
production rate |
5,757 |
5,521 |
5,393 |
4,889 |
|
TransGlobe working interest |
5,757 |
5,521 |
5,393 |
4,889 |
|
TransGlobe net (after royalties) |
2,024 |
2,026 |
1,488 |
1,624 |
|
TransGlobe net (after royalties and tax) * |
1,611 |
1,631 |
1,102 |
1,274 |
| * Under the terms of the West Bakr Production Sharing
Concession, royalties and taxes are paid out of the Government's
share of production sharing oil. |
North West Gharib Block, Arab Republic of Egypt (100% working
interest)
Operations and Exploration
During the fourth quarter of 2013 and the first quarter of 2014
the Company prepared and submitted an initial 18 wells for the
necessary approvals on the North West Gharib ("NWG") block in the
Eastern Desert. The Company has received environmental approval for
18 wells and military access approval for the first 15 wells
submitted, with the remaining approvals anticipated in the coming
weeks. The Company is proceeding with lease construction on the
approved wells and is finalizing a long term drilling contract for
a 1,200 horsepower ("hp") drilling rig which is expected to start
drilling on NWG #1 in June. The NWG #1 well is targeting an
Upper/Lower Nukhul prospect immediately north of the West Gharib
main Arta Lower Nukhul pool. In addition, the drilling rig
currently in West Gharib is scheduled to move to NWG in July and
remain in NWG for the balance of the year.
The Company has identified 79 drilling locations based on
existing 3-D seismic and geological modeling of the area. Based on
current mapping the Company has internally estimated a prospective
resource of 71 million barrels on an un-risked deterministic basis
for the NWG block. The 2014 drilling program will target up to 58
million barrels of the total 71 million barrels of prospective
resource identified to date.
New Exploration Blocks, Eastern & Western Desert (100%
working interest, operated)
Exploration Seismic
Based on surface and remote-sensing mapping, the Company
believes the same structural configuration that created the pools
found in the West Gharib concession is likely present in the NWG,
SW Gharib ("SWG") and SE Gharib ("SEG") blocks. The historical
field size distribution data indicates that the average field size
in the broader onshore Gulf of Suez (Eastern Desert) area is
roughly 20 million barrels per field of recoverable resource. The
Company has identified an additional 15 areas of interest ("leads")
in the NWG block, four leads on the SWG block and two leads on the
SEG block that will be followed up and further refined by field
mapping and the high-resolution seismic acquisition program. The
Company has approved a large (1,000+ square kilometers of 3-D and
300+ kilometers of 2-D) seismic acquisition program for the Eastern
Desert in 2014. The Company has submitted and received the
necessary military approvals for the planned Eastern Desert seismic
program. The Company is targeting early Q3 to commence seismic
acquisition in the Eastern Desert.
In the Western Desert, the Company will conduct an 800 square
kilometer 3-D seismic acquisition program during the initial
evaluation of the South Ghazalat concession. During the quarter the
Company submitted the applications for and received the necessary
military approvals. This large block is situated on the western
margin of the prolific Abu Gharadig Basin, immediately west of the
non-operated East Ghazalat block, where a Jurassic gas-condensate
discovery was made and announced late in 2013.
The total seismic program (approximately 1,800 square kilometers
of 3-D seismic and 300 kilometers of 2-D seismic) is out to tender,
with bids due in early May. It is expected that the contracts will
be finalized and awarded during the second quarter. The Company's
target is to commence acquisition in the Eastern Desert during
third quarter of 2014 subject to crew availability. It is expected
the full program, providing broad coverage of the new concessions,
will be completed in early 2015.
East Ghazalat Block, Arab Republic of Egypt (50% working
interest)
Operations and Exploration
The Company participated in two wells during the quarter
resulting in one oil well at Safwa and one dry hole at East
Ghazalat #3. Subsequent to the quarter an additional oil well was
drilled on the Safwa development lease. The drilling rig was
released following the completion of the three well drilling
program.
The first Safwa well was placed on production in mid-March at an
initial flowing rate of 680 Bopd. The second Safwa well was placed
on production in April at an initial pumping rate of 560 Bopd.
The operator filed and received approval for the North Dabaa
development lease which includes 6 development blocks
(approximately 18 square kilometers), effective February 18, 2014.
The Company has approved an exploration/appraisal well offsetting
the North Dabaa gas/condensate discovery (announced November 13,
2013 in the third quarter press release) as part of the 2014
capital budget. The North Dabaa #2 well is planned to commence
drilling in the third quarter subject to rig availability.
Production
Production from East Ghazalat averaged 868 Bopd (434 Bopd to
TransGlobe) during Q1, a 30% increase from the previous quarter.
Production increases are attributed to the new Safwa producer which
effectively doubled field production in mid-March.
The Safwa field production averaged 1,580 Bopd (790 Bopd to
TransGlobe) in April with the addition of the second Safwa
development well drilled in April.
|
Quarterly East Ghazalat Production (Bopd) |
2014 |
2013 |
|
|
Q-1 |
Q-4 |
Q-3 |
Q-2 |
| Gross
production rate |
868 |
670 |
421 |
786 |
|
TransGlobe working interest |
434 |
335 |
211 |
393 |
|
TransGlobe net (after royalties) |
218 |
168 |
106 |
189 |
|
TransGlobe net (after royalties and tax) * |
174 |
134 |
84 |
149 |
| *Under the terms of the East Ghazalat Production
Sharing Concession, royalties and taxes are paid out of the
Government's share of production. |
South Alamein, Arab Republic of Egypt (100% working interest,
operated)
Operations and Exploration
The Company has not provided guidance for any wells in 2014 due
to the prolonged delays in receiving military approvals for new
wells primarily in the central portion of the concession which
includes the Boraq discovery. The Company has negotiated and
received EGPC approval that the final exploration period for
approximately 800 square kilometers of the concession (which has
been deemed non accessible by the military due to ongoing training
and other activities in the area) will be suspended effective July
8, 2012. The South Alamein concession was scheduled to reach the
end of the final exploration period on April 4, 2014. Effective
April 4, 2014 the remaining exploration lands outside of the
restricted access zone were relinquished in accordance with the
concession agreement. The relinquished lands were evaluated and
were not considered prospective. The remaining lands and the South
Alamein concession agreement are extended until such time as
military access is approved, at which time the Company will have
approximately 20 months to complete additional exploration and
appraisal in the final exploration phase. All other provisions of
the South Alamein concession agreement (including historical cost
pools of approximately $92.0 million) remain in place. The current
South Alamein concession lands include the Boraq discovery and the
remaining exploration prospects of interest. The Company continues
to actively engage the military to find solutions which will
provide the access to the remaining concession area.
The Company has the financial capacity to increase the 2014
capital program if the necessary approvals can be obtained in
2014.
REPUBLIC OF YEMEN
Block 32, Republic of Yemen (13.81% working interest)
Operations and Exploration
No wells were drilled during the first quarter.
Production
Sales production from Block 32 averaged 938 Bopd (130 Bopd to
TransGlobe) during the quarter. The reported gross sales production
rate represents the amount of oil that was lifted and sold during
the quarter. It is expected that sales production rates and the
field production rates will vary quarter to quarter depending on
the timing of tanker liftings during the respective quarter.
The actual field production during the first quarter averaged
968 Bopd (134 Bopd to TransGlobe) which is approximately 50% lower
than the previous quarter due to pipeline and general
service/supply interruptions. Production from Block 32 was shut-in
February 9 due to tribal issues which have affected service and
supplies for the field operations in the region. Limited production
operations recommenced February 25 following the partial resumption
of services. Some progress has been made over the past 3 months,
however, access to diesel continues to be the main impediment to
production. A portion of the Tasour field is on production using
diesel from the Tasour diesel topping plant; the balance of the
Tasour field and the Godah field were shut-in.
Production from the block averaged 833 Bopd (115 Bopd to
TransGlobe) during April. The Godah field, which produces
approximately 900 Bopd (125 Bopd to TransGlobe) was restarted in
early May.
|
Quarterly Block 32 Production and Sales (Bopd) |
2014 |
2013 |
|
|
Q-1 |
Q-4 |
Q-3 |
Q-2 |
| Gross
field production rate |
968 |
1,995 |
2,310 |
2,211 |
| Gross
sales production rate |
938 |
2,718 |
1,673 |
3,100 |
|
TransGlobe working interest |
130 |
375 |
231 |
428 |
|
TransGlobe net (after royalties) |
103 |
283 |
169 |
264 |
|
TransGlobe net (after royalties and tax) * |
94 |
256 |
150 |
211 |
| * Under the terms of the Block 32 Production Sharing Agreement,
royalties and taxes are paid out of the Government's share of
production. |
Block 72, Republic of Yemen (20% working interest)
Operations and Exploration
No new wells were drilled during the quarter. The joint venture
partners initially approved the Gabdain #3 exploration well in the
2013 budget, subject to the resolution of logistic/security issues
in the area which have not been resolved to date. The well is
included in the 2014 exploration budget subject to resolution of
tribal issues in the area.
YEMEN WEST - Marib Basin
Block S-1, Republic of Yemen (25% working interest)
Operations and Exploration
No wells were drilled during the first quarter.
Production
Sales production from Block S-1 averaged 2,044 Bopd (511 Bopd to
TransGlobe) during the quarter. The reported gross sales production
rate represents the amount of oil that was lifted and sold during
the quarter. It is expected that sales production rates and the
field production rates will vary quarter to quarter depending on
the timing of tanker liftings during the respective quarter.
Field production averaged 2,568 Bopd during the first quarter
(642 Bopd to TransGlobe).
Field production averaged approximately 3,447 Bopd (862 Bopd to
TransGlobe) during January and 4,436 Bopd (1,109 Bopd to
TransGlobe) during February. Block S-1 production was shut-in
approximately 11 days in January due to export pipeline
restrictions. It had produced continuously during February until
the sales pipeline was attacked in late February. The pipeline
attack was primarily over unresolved contractor issues with local
tribes which are under negotiation. When a settlement is reached it
is expected that the operations and production will commence within
a few days.
|
Quarterly Block S-1 Production and Sales (Bopd) |
2014 |
2013 |
|
|
Q-1 |
Q-4 |
Q-3 |
Q-2 |
| Gross
field production rate |
2,568 |
1,624 |
- |
- |
| Gross
sales production rate |
2,044 |
- |
- |
- |
|
TransGlobe working interest |
511 |
- |
- |
- |
|
TransGlobe net (after royalties) |
357 |
- |
- |
- |
|
TransGlobe net (after royalties and tax) * |
318 |
- |
- |
- |
| * Under the terms of the Block S-1 Production Sharing
Agreement, royalties and taxes are paid out of the Government's
share of production. |
Block 75, Republic of Yemen (25% working interest)
Operations and Exploration
No wells were drilled during the quarter.
Future drilling is suspended pending resolution of logistics and
security concerns.
READER ADVISORIES
Forward-Looking Statements
Certain statements or information contained herein may
constitute forward-looking statements or information under
applicable securities laws, including, but not limited to,
management's assessment of future plans and operations, the
anticipated amount and timing of future dividend payments, the
sustainability of future dividend payments, anticipated increases
to the Company's reserves and production, collection of accounts
receivable from the Egyptian Government, drilling plans and the
timing thereof, commodity price risk management strategies,
adapting to the current political situations in Egypt and Yemen,
reserve estimates, management's expectation for results of
operations for 2014, including expected 2014 average production,
funds flow from operations, the 2014 capital program for
exploration and development, the timing and method of financing
thereof, method of funding drilling commitments, and commodity
prices and expected volatility thereof. Statements relating to
"reserves" are deemed to be forward-looking statements, as they
involve the implied assessment, based on certain estimates and
assumptions, that the reserves described can be profitably produced
in the future.
Forward-looking statements or information relate to the
Company's future events or performance. All statements other than
statements of historical fact may be forward-looking statements or
information. Such statements or information are often but not
always identified by the use of words such as "seek", "anticipate",
"plan", "continue", "estimate", "expect", "may", "will", "project",
"predict", "potential", "targeting", "intend", "could", "might",
"should", "believe", and similar expressions.
Forward-looking statements or information necessarily
involve risks including, without limitation, risks associated with
oil and gas exploration, development, exploitation, production,
marketing and transportation, loss of markets, economic and
political instability, volatility of commodity prices, currency
fluctuations, imprecision of reserve estimates, environmental
risks, competition from other producers, inability to retain
drilling rigs and other services, incorrect assessment of the value
of acquisitions, failure to realize the anticipated benefits of
acquisitions, delays resulting from or inability to obtain required
regulatory approvals and ability to access sufficient capital from
internal and external sources. The recovery and reserve estimates
of the Company's reserves provided herein are estimates only and
there is no guarantee that the estimated reserves will be
recovered. Events or circumstances may cause actual results to
differ materially from those predicted, as a result of the risk
factors set out and other known and unknown risks, uncertainties,
and other factors, many of which are beyond the control of the
Company.
In addition, forward-looking statements or information are
based on a number of factors and assumptions which have been used
to develop such statements and information in order to provide
shareholders with a more complete perspective on the Company's
future operations. Such statements and information may prove to be
incorrect and readers are cautioned that such statements and
information may not be appropriate for other purposes. Although the
Company believes that the expectations reflected in such
forward-looking statements or information are reasonable, undue
reliance should not be placed on forward-looking statements or
information because the Company can give no assurance that such
expectations will prove to be correct. In addition to other factors
and assumptions which may be identified herein, assumptions have
been made regarding, among other things: the impact of increasing
competition; the general stability of the economic and political
environment in which the Company operates; the timely receipt of
any required regulatory approvals; the ability of the Company to
obtain qualified staff, equipment and services in a timely and cost
efficient manner; drilling results; the ability of the operator of
the projects which the Company has an interest in to operate the
field in a safe, efficient and effective manner; the ability of the
Company to obtain financing on acceptable terms; field production
rates and decline rates; the ability to replace and expand oil and
natural gas reserves through acquisition, development and
exploration; the timing and costs of pipeline, storage and facility
construction and expansion and the ability of the Company to secure
adequate product transportation; future commodity prices; currency,
exchange and interest rates; the regulatory framework regarding
royalties, taxes and environmental matters in the jurisdictions in
which the Company operates; and the ability of the Company to
successfully market and receive payment for its oil and natural gas
products.
Readers are cautioned that the foregoing list is not
exhaustive of all factors and assumptions which have been used. As
a consequence, actual results may differ materially from those
anticipated in the forward-looking statements. Additional
information on these and other factors that could affect the
Company's operations and financial results are included in reports
on file with Canadian securities regulatory authorities and may be
accessed through the SEDAR website (www.sedar.com), EDGAR website
(www.sec.gov) and at the Company's website (www.trans-globe.com).
Furthermore, the forward-looking statements or information
contained herein are made as at the date hereof and the Company
does not undertake any obligation to update publicly or to revise
any of the included forward-looking statements, whether as a result
of new information, future events or otherwise, except as may be
required by applicable securities laws.
The reader is further cautioned that the preparation of
financial statements in accordance with IFRS requires management to
make certain judgments and estimates that affect the reported
amounts of assets, liabilities, revenues and expenses. Estimating
reserves is also critical to several accounting estimates and
requires judgments and decisions based upon available geological,
geophysical, engineering and economic data. These estimates may
change, having either a negative or positive effect on net earnings
as further information becomes available, and as the economic
environment changes.
DIVIDENDS
On May 5, 2014, TransGlobe's Board of Directors approved and
declared a special dividend of $0.10 per share and the initial
quarterly dividend of $0.05 per share, payable in cash as
follows:
|
Ex-dividend date |
Record date |
Payment date |
Per share amount |
| May
20, 2014 |
May 22, 2014 |
May 28, 2014 |
$0.10 |
|
June 12, 2014 |
June 16, 2014 |
June 30, 2014 |
$0.05 |
The initiation of a quarterly dividend payment program is a key
component of TransGlobe's objective to create value for its
shareholders. The Company believes that it is well positioned to
sustain a modest quarterly dividend payment, and intends to approve
and declare regular quarterly dividends on a go-forward basis.
The actual amount of future quarterly dividends will be proposed
by management and subject to the approval and discretion of the
Board. The Board reviews proposed dividend payments in conjunction
with their review of quarterly financial and operating results.
Future dividend levels will be dependent upon economic factors
including commodity prices, capital expenditure programs and
production volumes, and will be evaluated regularly to ensure that
dividend payments do not compromise the strong financial position
or the growth of the Company.
The dividends (both special and quarterly) declared on May 5,
2014 have been designated as eligible dividends under the
Income Tax Act (Canada).
MANAGEMENT STRATEGY AND OUTLOOK
The 2014 outlook provides information as to management's
expectation for results of operations for 2014. Readers are
cautioned that the 2014 outlook may not be appropriate for other
purposes. The Company's expected results are sensitive to
fluctuations in the business environment and may vary accordingly.
This outlook contains forward-looking statements that should be
read in conjunction with the Company's disclosure under
"Forward-Looking Statements".
2014 Production Outlook
Production guidance has been lowered to a range of 17,000 to
19,000 Bopd for 2014, with a mid-point of 18,000 Bopd. The 18,000
Bopd mid-point of guidance for 2014 is essentially flat with 2013
production. The changes in 2014 production guidance are summarized
below.
In Egypt, production from West Gharib is approximately 1,500
Bopd behind the 2014 plan due to premature progressive cavity pump
("PCP") failures and two high volume development wells at Arta
which are producing at 50% of the planned volumes. West Bakr
production is approximately 900 Bopd behind the 2014 plan due to
mixed drilling results in early 2014. East Ghazalat production is
approximately 200 Bopd ahead of the 2014 plan due to positive
development drilling at Safwa. The Company has not included any
production from the North West Gharib ("NWG") and South Alamein
concessions in the 2014 plan. The Company is planning to drill 14
to 16 wells at NWG in 2014 (starting early June) which could impact
production in late 2014 if successful and approved for development
prior to the fourth quarter. Development of the South Alamein Boraq
discovery remains contingent upon receiving surface access
approvals from the Military.
In Yemen, Block 32 is approximately 300 Bopd behind the 2014
plan due to regional tribal issues which has restricted diesel
supplies and shut down development/appraisal drilling activities
planned for 2014. Block S-1 is forecast to produce at 50% for the
year due to ongoing tribal negotiations.
Year-to-date 2014 production is described in greater detail in
the Operations Update section of the interim report. The reduction
in production guidance for 2014 has not impacted reserves assigned
at year end 2013.
In the near-term, second quarter production is expected to range
between 16,500 and 17,000 Bopd due to uncertainties relating to the
performance of PCPs in West Gharib and tribal issues in Yemen.
| Production Forecast |
|
|
|
2014 Guidance |
2014 Mid-point |
2013 Actual |
% Change |
|
|
Barrels of oil per day |
17,000 - 19,000 |
18,000 |
18,284 |
(1.5 |
) |
2014 Funds Flow From Operations Outlook
Funds flow from operations guidance of $125.0 million
($1.66/share), which is based on an annual average Dated Brent oil
price of $100/Bbl and using the mid-point of the production
guidance. The funds flow sensitivity to a $10/Bbl change in Brent
for the balance of the year is approximately $11 million.
| Funds Flow Forecast |
|
|
($ millions) |
2014 Guidance |
2013 Actual |
% Change |
|
|
Funds flow from operations |
125.0 |
139.1 |
(10 |
) |
|
Brent oil price ($ per bbl) |
100.00 |
108.64 |
(8 |
) |
| 2014
Capital Budget |
|
|
($ millions) |
|
|
Egypt |
93.6 |
|
Yemen |
6.4 |
|
Total |
100.0 |
|
|
The 2014 capital program is split 68:32 between development and
exploration, respectively. The Company plans to participate in 51
wells in 2014. It is anticipated that the Company will fund its
2014 capital budget from funds flow from operations and working
capital.
ADDITIONAL MEASURES
Funds Flow from Operations
This document contains the term "funds flow from operations",
which should not be considered an alternative to or more meaningful
than "cash flow from operating activities" as determined in
accordance with IFRS. Funds flow from operations is a measure that
represents cash generated from operating activities before changes
in non-cash working capital. Management considers this a key
measure as it demonstrates TransGlobe's ability to generate the
cash flow necessary to fund future growth through capital
investment. Funds flow from operations may not be comparable to
similar measures used by other companies.
Reconciliation of Funds Flow from Operations
| Three months ended March 31 |
|
|
($000s) |
2014 |
2013 |
|
| Cash
flow from operating activities |
3,211 |
51,900 |
|
|
Changes in non-cash working capital |
29,276 |
(15,895 |
) |
|
Funds flow from operations* |
32,487 |
36,005 |
|
| * Funds flow from operations does not include interest costs.
Interest expense is included in financing costs on the Condensed
Consolidated Interim Statements of Earnings and Comprehensive
Income. Cash interest paid is reported as a financing activity on
the Condensed Consolidated Interim Statements of Cash Flows. |
Debt-to-funds flow ratio
Debt-to-funds flow is a measure that is used to set the amount
of capital in proportion to risk. The Company's debt-to-funds flow
ratio is computed as long-term debt, including the current portion,
plus convertible debentures over funds flow from operations for the
trailing twelve months. Debt-to-funds flow may not be comparable to
similar measures used by other companies.
Netback
Netback is a measure that represents sales net of royalties (all
government interests, net of income taxes), operating expenses and
current taxes. Management believes that netback is a useful
supplemental measure to analyze operating performance and provide
an indication of the results generated by the Company's principal
business activities prior to the consideration of other income and
expenses. Netback may not be comparable to similar measures used by
other companies.
TRANSGLOBE'S BUSINESS
TransGlobe is a Canadian-based, publicly traded, oil exploration
and production company whose activities are concentrated in two
main geographic areas: the Arab Republic of Egypt ("Egypt") and the
Republic of Yemen ("Yemen").
SELECTED QUARTERLY FINANCIAL INFORMATION
|
2014 |
2013 |
2012 |
| ($000s, except per share, price and volume
amounts) |
|
|
|
|
|
|
|
Q-1 |
Q-4 |
Q-3 |
Q-2 |
|
Q-1 |
Q-4 |
Q-3 |
Q-2 |
| Average production volumes (Bopd) |
18,067 |
18,519 |
18,197 |
18,417 |
|
18,001 |
17,875 |
18,143 |
16,978 |
|
|
|
|
|
|
|
|
|
|
| Average sales volumes (Bopd) |
17,932 |
18,213 |
18,109 |
18,539 |
|
17,909 |
19,148 |
17,124 |
16,978 |
| Average price ($/Bbl) |
94.89 |
96.10 |
97.18 |
90.48 |
|
99.21 |
98.70 |
96.88 |
95.84 |
| Oil sales |
153,140 |
161,035 |
161,900 |
152,646 |
|
159,915 |
173,864 |
152,624 |
148,078 |
| Oil sales, net of royalties |
78,366 |
81,196 |
78,531 |
76,223 |
|
79,366 |
92,281 |
74,540 |
73,633 |
| Cash flow from operating activities |
3,211 |
109,226 |
22,035 |
16,347 |
|
51,900 |
65,250 |
2,368 |
24,603 |
| Funds flow from operations * |
32,487 |
36,743 |
33,483 |
32,887 |
|
36,005 |
46,839 |
35,397 |
35,174 |
| Funds flow from operations per share |
|
|
|
|
|
|
|
|
|
|
-
Basic |
0.44 |
0.49 |
0.45 |
0.45 |
|
0.49 |
0.63 |
0.49 |
0.48 |
|
-
Diluted |
0.43 |
0.49 |
0.44 |
0.40 |
|
0.44 |
0.57 |
0.47 |
0.43 |
| Net earnings |
16,692 |
6,893 |
16,344 |
10,397 |
|
24,878 |
34,836 |
11,774 |
30,149 |
| Net earnings - diluted |
16,692 |
6,893 |
16,344 |
(183 |
) |
21,427 |
32,156 |
11,774 |
20,821 |
| Net earnings per share |
|
|
|
|
|
|
|
|
|
|
-
Basic |
0.22 |
0.09 |
0.22 |
0.14 |
|
0.34 |
0.48 |
0.16 |
0.41 |
|
-
Diluted |
0.22 |
0.09 |
0.22 |
- |
|
0.26 |
0.39 |
0.16 |
0.25 |
| Total assets |
692,341 |
675,800 |
723,708 |
670,996 |
|
672,675 |
653,425 |
635,529 |
620,937 |
| Cash and cash equivalents |
107,607 |
122,092 |
128,162 |
101,435 |
|
112,180 |
82,974 |
45,732 |
72,230 |
| Convertible debentures |
87,765 |
87,539 |
85,300 |
81,830 |
|
93,842 |
98,742 |
102,920 |
95,043 |
| Total long-term debt, including current portion |
- |
- |
39,040 |
15,224 |
|
17,097 |
16,885 |
31,878 |
37,855 |
| Debt-to-funds flow ratio ** |
0.6 |
0.6 |
0.8 |
0.6 |
|
0.7 |
0.8 |
1.0 |
1.0 |
|
|
|
|
|
|
|
|
|
|
| * Funds flow from operations is a measure that
represents cash generated from operating activities before changes
in non-cash working capital and may not be comparable to measures
used by other companies. |
| ** Debt-to-funds flow ratio is measure that represents
total long-term debt (including the current portion) plus
convertible debentures over funds flow from operations from the
trailing 12 months and may not be comparable to measures used by
other companies. |
During the first quarter of 2014, TransGlobe has:
- Maintained a strong financial position, reporting a
debt-to-funds flow ratio of 0.6 at March 31, 2014;
- Reported net earnings of $16.7 million, which includes a $3.5
million unrealized non-cash loss on convertible debentures;
- Experienced a decrease in oil sales compared to Q1-2013
primarily as a result of decreased oil prices;
- Achieved funds flow from operations of $32.5 million;
- Experienced a significant decrease in cash flow from operating
activities as compared to Q4-2013, which was almost entirely due to
higher cash collections in Q4-2013; and
- Spent $14.4 million on capital programs, which was funded
entirely with funds flow from operations.
2014 TO 2013 NET EARNINGS VARIANCES
|
|
$
Per Share |
|
|
|
|
$000s |
Diluted |
|
% Variance |
|
| Q1-2013 net earnings* |
24,878 |
|
0.33 |
|
|
|
| Cash items |
|
|
|
|
|
|
| Volume variance |
184 |
|
- |
|
- |
|
| Price variance |
(6,959 |
) |
(0.09 |
) |
(28 |
) |
| Royalties |
5,775 |
|
0.08 |
|
23 |
|
| Expenses: |
|
|
|
|
|
|
|
Production and operating |
(5,046 |
) |
(0.07 |
) |
(20 |
) |
|
Cash
general and administrative |
(362 |
) |
- |
|
(1 |
) |
|
Exploration |
(331 |
) |
- |
|
(1 |
) |
|
Current income taxes |
3,180 |
|
0.04 |
|
13 |
|
|
Realized foreign exchange gain (loss) |
(10 |
) |
- |
|
- |
|
|
Interest on long-term debt |
324 |
|
- |
|
1 |
|
| Other income |
51 |
|
- |
|
- |
|
| Total cash items variance |
(3,194 |
) |
(0.04 |
) |
(13 |
) |
| Non-cash items |
|
|
|
| Unrealized foreign exchange gain |
1,602 |
|
0.02 |
|
6 |
|
| Depletion and depreciation |
(1,985 |
) |
(0.03 |
) |
(8 |
) |
| Unrealized gain (loss) on financial instruments |
(6,509 |
) |
(0.09 |
) |
(26 |
) |
| Stock-based compensation |
444 |
|
0.01 |
|
2 |
|
| Deferred income taxes |
1,460 |
|
0.02 |
|
6 |
|
| Deferred lease inducement |
10 |
|
- |
|
- |
|
| Amortization of deferred financing costs |
(14 |
) |
- |
|
- |
|
| Total non-cash items variance |
(4,992 |
) |
(0.07 |
) |
(20 |
) |
| Q1-2014 net earnings |
16,692 |
|
0.22 |
|
(33 |
) |
| * Diluted earnings per share for Q1-2013 is presented
prior to the dilutive effect of the convertible debentures in that
period |
Net earnings decreased to $16.7 million in Q1-2014 compared to
$24.9 million in Q1-2013. Reduced prices and increased production
and operating costs resulted in a reduction in government take as a
percentage of revenue from 65% in Q1-2013 to 62% in Q1-2014. The
resulting decreases in royalties and current income taxes offset
approximately 75% of the impact of decreased prices and increased
operating costs. The remaining earnings variance relates mostly to
the recognition of an unrealized loss on convertible debentures of
$3.5 million in Q1-2014 compared with an unrealized gain on
convertible debentures of $3.0 million in Q1-2013.
BUSINESS ENVIRONMENT
The Company's financial results are influenced by fluctuations
in commodity prices, including price differentials. The following
table shows select market benchmark prices and foreign exchange
rates:
|
|
2014 |
2013 |
|
|
Q-1 |
Q-4 |
Q-3 |
Q-2 |
Q-1 |
| Dated
Brent average oil price ($/Bbl) |
108.18 |
109.27 |
110.27 |
102.44 |
112.59 |
|
U.S./Canadian Dollar average exchange rate |
1.103 |
1.050 |
1.039 |
1.023 |
1.009 |
The average price of Dated Brent oil averaged 1% lower in
Q1-2014 compared with Q4-2013. All of the Company's production is
priced based on Dated Brent and shared with the respective
governments through PSCs. When the price of oil increases, it takes
fewer barrels to recover costs (cost recovery barrels) which are
assigned 100% to the Company. The contracts provide for cost
recovery per quarter up to a maximum percentage of total revenue.
Timing differences often exist between the Company's recognition of
costs and their recovery as the Company accounts for costs on an
accrual basis, whereas cost recovery is determined on a cash basis.
If the eligible cost recovery is less than the maximum defined cost
recovery, the difference is defined as "excess". In Egypt,
depending on the PSC, the Contractor's share of excess ranges
between 0% and 30%. In Yemen, under the Production Sharing
Agreements, the excess is treated as production sharing oil. If the
eligible cost recovery exceeds the maximum allowed percentage, the
unclaimed cost recovery is carried forward to the next quarter.
Typically maximum cost recovery or cost oil ranges from 25% to 30%
in Egypt and 50% to 60% in Yemen. The balance of the production
after maximum cost recovery is shared with the respective
governments (production sharing oil). In Egypt, depending on the
contract, the government receives 70% to 86% of the production
sharing oil or profit oil. In Yemen, the government receives 65% of
the production sharing oil or profit oil. Production sharing splits
are set in each contract for the life of the contract. Typically
the government's share of production sharing oil increases when
production exceeds pre-set production levels in the respective
contracts. During times of increased oil prices, the Company
receives less cost oil and may receive more production sharing oil.
For reporting purposes, the Company records the respective
government's share of production as royalties and taxes (all taxes
are paid out of the Government's share of production).
Egypt has been experiencing significant political changes over
the past three years and while this has had an impact on the
efficient operations of the government in general, business
processes and the Company's operations have generally proceeded as
normal. While exploration and development activities have generally
been uninterrupted, the Company has continued to experience delays
in the collection of accounts receivable from the Egyptian
Government. The Company is in continual discussions with the
Egyptian Government to improve the delayed cash collections, and
expects to recover the accounts receivable balance in full. During
the first quarter of 2014, the Company collected $29.4 million in
accounts receivable from the Egyptian Government.
The Company has received environmental approvals for all 18 well
plans submitted for the NW Gharib block, and has received military
approvals for the first 15 well plans submitted. The remaining
military approvals are expected in the coming weeks. In addition,
our partner that operates the East Ghazalat concession filed and
received an approved development plan for the North Dabaa discovery
in the first quarter. The timely receipt of these approvals is a
positive indication that Egypt's oil and gas processes continue to
normalize despite the recent political changes.
OPERATING RESULTS AND NETBACK
Daily Volumes, Working Interest before Royalties and Other
(Bopd)
Sales Volumes
| Three months ended March 31 |
|
|
2014 |
2013 |
|
Egypt |
17,291 |
17,667 |
|
Yemen |
641 |
242 |
|
Total Company |
17,932 |
17,909 |
Netback
|
Consolidated |
|
|
|
|
|
|
Three months ended March 31 |
|
|
2014 |
2013 |
|
(000s, except per Bbl amounts) |
$ |
$/Bbl |
$ |
$/Bbl |
| Oil
sales |
153,140 |
94.89 |
159,915 |
99.21 |
|
Royalties |
74,774 |
46.33 |
80,549 |
49.97 |
|
Current taxes |
19,894 |
12.33 |
23,074 |
14.32 |
|
Production and operating expenses |
19,578 |
12.13 |
14,532 |
9.02 |
|
Netback |
38,894 |
24.10 |
41,760 |
25.90 |
|
|
|
|
|
|
|
|
|
|
|
Egypt |
|
|
|
|
|
|
|
Three months ended March 31 |
|
|
2014 |
2013 |
|
(000s, except per Bbl amounts) |
$ |
$/Bbl |
$ |
$/Bbl |
| Oil
sales |
146,944 |
94.43 |
157,489 |
99.05 |
|
Royalties |
73,023 |
46.92 |
79,644 |
50.09 |
|
Current taxes |
19,435 |
12.49 |
22,790 |
14.33 |
|
Production and operating expenses |
16,307 |
10.48 |
12,731 |
8.01 |
|
Netback |
38,179 |
24.54 |
42,324 |
26.62 |
The netback per Bbl in Egypt decreased 8% in Q1-2014 compared
with Q1-2013. The main reason for the decreased netback was the
effect of a 5% reduction in realized oil prices as compared to
Q1-2013. Production and operating expenses increased by 31% on a
per Bbl basis, which was principally related to a significant
increase in well servicing costs relating to faulty progressive
cavity pumps at West Gharib, which has also negatively impacted
production, combined with increased fuel costs. The increase in
production and operating expenses resulted in an increase in cost
oil allocated to the Company, which reduced royalties and taxes on
a per Bbl basis. In Q1-2014, the average selling price was
$13.75/Bbl lower (Q1-2013 - $13.54 lower) than the average Dated
Brent oil price for the period of $108.18/Bbl (Q1-2013 - $112.59)
which is a result of a gravity/quality adjustment.
Royalties and taxes as a percentage of revenue decreased to 63%
in Q1-2014 compared with 65% in Q1-2013. This decrease is due to
higher operating costs which has increased the Company's cost
recovery, combined with decreased oil prices which reduces excess
cost oil.
|
Yemen |
|
|
|
|
|
|
Three months ended March 31 |
|
|
|
2014 |
2013 |
|
|
(000s, except per Bbl amounts) |
$ |
$/Bbl |
$ |
|
$/Bbl |
|
| Oil
sales |
6,196 |
107.40 |
2,426 |
|
111.39 |
|
|
Royalties |
1,751 |
30.35 |
905 |
|
41.55 |
|
|
Current taxes |
459 |
7.96 |
284 |
|
13.04 |
|
|
Production and operating expenses |
3,271 |
56.70 |
1,801 |
|
82.69 |
|
|
Netback |
715 |
12.39 |
(564 |
) |
(25.89 |
) |
In Yemen, the Company achieved a netback per Bbl of $12.39 in
the three months ended March 31, 2014. While production and
operating expenses per Bbl were reduced substantially as compared
to Q1-2013, they remain at elevated levels in Q1-2014 as a result
of production shut-ins on Block S-1 and Block 32 during the
quarter. While production volumes were down, the Company continued
to incur the majority of the operating costs which significantly
impacted operating expenses per Bbl. These operating costs will be
recovered from cost oil when production resumes.
Royalties and taxes as a percentage of revenue decreased to 36%
from 49% in the three months ended March 31, 2014, compared with
2013. The reduced government take is the result of the recovery of
cost pools that were built up in 2013 while Block S-1 was
shut-in.
GENERAL AND ADMINISTRATIVE EXPENSES
("G&A")
|
|
Three months ended March 31 |
|
|
|
2014 |
|
2013 |
|
|
(000s, except Bbl amounts) |
$ |
$/Bbl |
|
$ |
|
$/Bbl |
|
|
G&A (gross) |
7,810 |
|
4.84 |
|
6,907 |
|
4.29 |
|
|
Stock-based compensation |
834 |
|
0.52 |
|
1,278 |
|
0.79 |
|
|
Capitalized G&A and overhead recoveries |
(1,636 |
) |
(1.01 |
) |
(1,085 |
) |
(0.67 |
) |
|
G&A (net) |
7,008 |
|
4.35 |
|
7,100 |
|
4.41 |
|
G&A expenses in Q1-2014 were consistent with Q1-2013 both on
a net and per Bbl basis. G&A (gross) was elevated in Q1-2014
compared to Q1-2013 mostly due to an increase in banking fees
associated with the letters of credit ($60.5 million) required to
backstop the Company's financial commitments under the recently
ratified PSCs in Egypt. These banking fees were capitalized in
their respective concessions, which is the reason for the increased
capitalized G&A. The reduction in stock-based compensation is
mainly due to a 21% reduction in the number of outstanding stock
options as at March 31, 2014 compared to March 31, 2013, combined
with the fact that the stock options outstanding in Q1-2014 are on
average further along in their life cycles than those that were
outstanding in Q1-2013.
FINANCE COSTS
Finance costs for the three-month period ended March 31, 2014
decreased to $1.9 million compared with $2.2 million in the same
period in 2013. Interest expense on the convertible debentures for
the three-month period ended March 31, 2014 was $1.3 million
(Q1-2013 - $1.5 million). The decrease in this portion of the
interest expense is due to foreign exchange fluctuations, as the
interest on the convertible debentures is paid in Canadian dollars.
The remaining decrease in interest expense is due to a lower
utilization of the Company's Borrowing Base Facility as at March
31, 2014 compared to March 31, 2013.
| Three months ended March 31 |
|
(000s) |
2014 |
2013 |
|
Interest expense |
|
$
1,616 |
|
$
1,940 |
|
Amortization of deferred financing costs |
|
276 |
|
262 |
|
Finance costs |
|
$ 1,892 |
|
$ 2,202 |
The Company had no long-term debt outstanding under the
Borrowing Base Facility as at March 31, 2014 (March 31, 2013 -
$18.5 million). The term of the facility extends to December 31,
2017 and the borrowing base is currently $100.0 million. The
Borrowing Base Facility bears interest at LIBOR plus an applicable
margin that varies from 5.0% to 5.5% depending on the amount drawn
or utilized under the facility.
In February 2012, the Company sold, on a bought-deal basis,
C$97.8 million ($97.9 million) aggregate principal amount of
convertible unsecured subordinated debentures with a maturity date
of March 31, 2017. The debentures are convertible at any time and
from time to time into common shares of the Company at a price of
C$15.10 per common share. Under certain circumstances the
debentures may also be redeemed by the Company. The conversion
price of the convertible debentures will adjust for any amounts
paid out as dividends on the common shares of the Company. Interest
of 6% is payable semi-annually in arrears on March 31 and September
30. At maturity or redemption, the Company has the option to settle
all or any portion of principal obligations by delivering to the
debenture holders sufficient common shares to satisfy these
obligations.
DEPLETION AND DEPRECIATION ("DD&A")
|
|
Three months ended March 31 |
|
|
2014 |
2013 |
|
(000s, except per Bbl amounts) |
$ |
$/Bbl |
$ |
$/Bbl |
|
Egypt |
12,370 |
7.95 |
10,890 |
6.85 |
|
Yemen |
702 |
12.17 |
202 |
9.27 |
|
Corporate |
93 |
- |
88 |
- |
|
|
13,165 |
8.16 |
11,180 |
6.94 |
In Egypt, DD&A increased 16% on a per Bbl basis in the three
months ended March 31, 2014 compared to 2013. This increase is
mostly due to a lower reserve base over which to deplete costs in
Egypt along with increased future capital costs at West Bakr.
In Yemen, DD&A increased 31% on a per Bbl basis in the three
months ended March 31, 2014 compared to 2013 due to a declining
reserve base at Block 32 combined with increased future capital
costs.
CAPITAL EXPENDITURES
| Three months ended March 31 |
|
($000s) |
2014 |
2013 |
|
Egypt |
13,916 |
17,688 |
|
Yemen |
434 |
495 |
|
Corporate |
15 |
10 |
|
Total |
14,365 |
18,193 |
In Egypt, total capital expenditures in 2014 were $13.9 million
(2013 - $17.7 million). During Q1-2014, the Company drilled five
wells in West Gharib (four oil wells and one well which was plugged
back to surface casing and suspended for a future sidetrack). The
Company also drilled three oil wells at West Bakr and two wells at
East Ghazalat (one oil well and one dry hole).
OUTSTANDING SHARE DATA
As at March 31, 2014, the Company had 74,714,494 common shares
issued and outstanding and 5,595,467 stock options issued and
outstanding, which are exercisable in accordance with their terms
into a maximum of 5,595,467 common shares of the Company.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity describes a company's ability to access cash.
Companies operating in the upstream oil and gas industry require
sufficient cash in order to fund capital programs necessary to
maintain and increase production and reserves, to acquire strategic
oil and gas assets and to repay debt. TransGlobe's capital programs
are funded principally by cash provided from operating activities.
A key measure that TransGlobe uses to evaluate the Company's
overall financial strength is debt-to-funds flow from operations
(calculated on a 12-month trailing basis). TransGlobe's
debt-to-funds flow from operations ratio, a key short-term leverage
measure, remained strong at 0.6 times at March 31, 2014 (December
31, 2013 - 0.8). This was within the Company's internal guideline
of no more than 2.0 times. The following table illustrates
TransGlobe's sources and uses of cash during the periods ended
March 31, 2014 and 2013:
| Sources and Uses of Cash |
|
|
|
|
Three months ended March 31 |
| ($000s) |
2014 |
|
2013 |
| Cash sourced |
|
|
|
|
Funds
flow from operations* |
32,487 |
|
36,005 |
|
Exercise of options |
716 |
|
396 |
|
33,203 |
|
36,401 |
| Cash used |
|
|
|
|
Capital expenditures |
14,365 |
|
18,193 |
|
Deferred financing costs |
- |
|
50 |
|
Transfer to restricted cash |
1 |
|
1 |
|
Finance costs |
3,847 |
|
3,373 |
|
Other |
514 |
|
580 |
|
18,727 |
|
22,197 |
|
14,476 |
|
14,204 |
| Changes in non-cash working capital |
(28,961 |
) |
15,002 |
| Increase (decrease) in cash and cash equivalents |
(14,485 |
) |
29,206 |
| Cash and cash equivalents - beginning of period |
122,092 |
|
82,974 |
| Cash and cash equivalents - end of period |
107,607 |
|
112,180 |
| * Funds flow from operations is a measure that
represents cash generated from operating activities before changes
in non-cash working capital, and may not be comparable to measures
used by other companies. |
Funding for the Company's capital expenditures was provided by
funds flow from operations. The Company expects to fund its 2014
exploration and development program of $100.0 million including
contractual commitments through the use of working capital and cash
generated by operating activities. Fluctuations in commodity
prices, product demand, foreign exchange rates, interest rates and
various other risks including timely collections of accounts
receivable from the Egyptian Government may impact capital
resources.
Working capital is the amount by which current assets exceed
current liabilities. At March 31, 2014, the Company had working
capital of $258.9 million (December 31, 2013 - $242.0 million). The
increase to working capital in Q1-2014 is due almost entirely to an
increase in accounts receivable, which was partially offset by a
decrease in cash and cash equivalents. The majority of the
Company's accounts receivable are due from Egyptian General
Petroleum Company ("EGPC"), and the recent political changes in the
country have increased EGPC's credit risk, which has increased the
Company's credit risk. The Company is in continual discussions with
EGPC and the Egyptian Government to improve the delayed cash
collections, and expects to recover the entire accounts receivable
balance in full.
To date, the Company has experienced no difficulties with
transferring funds abroad.
At March 31, 2014, TransGlobe had $100.0 million available under
a Borrowing Base Facility of which no amounts were drawn, however,
the Company was utilizing $60.5 million in the form of letters of
credit.
COMMITMENTS AND CONTINGENCIES
As part of its normal business, the Company entered into
arrangements and incurred obligations that will impact the
Company's future operations and liquidity. The principal
commitments of the Company are as follows:
|
|
|
Payment Due by Period 1 2 |
|
($000s) |
|
Recognized in Financial Statements |
Contractual Cash Flows |
Less than 1 year |
1-3 years |
4-5 years |
More than 5 years |
|
Accounts payable and accrued liabilities |
|
Yes -
Liability |
37,096 |
37,096 |
- |
- |
- |
|
Convertible debentures |
|
Yes -
Liability |
87,765 |
- |
87,765 |
- |
- |
|
Office and equipment leases 3 |
|
No |
13,554 |
7,867 |
2,611 |
1,890 |
1,186 |
|
Minimum work commitments 4 |
|
No |
61,250 |
750 |
60,500 |
- |
- |
|
Total |
|
|
199,665 |
45,713 |
150,876 |
1,890 |
1,186 |
| 1 Payments exclude ongoing operating costs, finance
costs and payments made to settle derivatives. 2 Payments
denominated in foreign currencies have been translated at March 31,
2014 exchange rates. 3 Office and equipment leases include all
drilling rig contracts. 4 Minimum work commitments include
contracts awarded for capital projects and those commitments
related to exploration and drilling obligations. |
Pursuant to the PSC for North West Gharib in Egypt, the Company
has a minimum financial commitment of $35.0 million and a work
commitment to drill 30 wells and acquire 200 square kilometers of
3-D seismic during the initial-three year exploration period, which
commenced on November 7, 2013.
Pursuant to the PSC for South East Gharib in Egypt, the Company
has a minimum financial commitment of $7.5 million and a work
commitment to drill two wells, acquire 200 square kilometers of 3-D
seismic and acquire 300 kilometers of 2-D seismic during the
initial three-year exploration period, which commenced on November
7, 2013.
Pursuant to the PSC for South West Gharib in Egypt, the Company
has a minimum financial commitment of $10.0 million and a work
commitment to drill four wells and acquire 200 square kilometers of
3-D seismic during the initial three-year exploration period, which
commenced on November 7, 2013.
Pursuant to the PSC for South Ghazalat in Egypt, the Company has
a minimum financial commitment of $8.0 million and a work
commitment to drill two wells and acquire 400 square kilometers of
3-D seismic during the initial three-year exploration period, which
commenced on November 7, 2013.
Pursuant to the PSC for Block 75 in Yemen, the Contractor (Joint
Interest Partners) has a remaining minimum financial commitment of
$3.0 million ($0.8 million to TransGlobe) for one exploration well
in the first exploration period, which has been extended to March
9, 2015.
In the normal course of its operations, the Company may be
subject to litigations and claims. Although it is not possible to
estimate the extent of potential costs, if any, management believes
that the ultimate resolution of such contingencies would not have a
material adverse impact on the results of operations, financial
position or liquidity of the Company.
The Company is not aware of any material provisions or other
contingent liabilities as at March 31, 2014.
EVENTS AFTER THE REPORTING PERIOD
Termination of Arrangement Agreement with Caracal Energy
Inc.
On March 15, 2014, TransGlobe announced that they had entered
into an arrangement agreement to merge with Caracal Energy Inc.
("Caracal") by way of an exchange of shares. On April 14, 2014,
TransGlobe announced the termination of the arrangement agreement
after being advised by Caracal that it had received an unsolicited
cash offer to acquire all of the outstanding shares of Caracal, and
that the unsolicited offer constituted a "Superior Proposal" under
the terms of the arrangement agreement. Accordingly, Caracal
terminated the agreement and paid TransGlobe the reverse
termination fee of $9.25 million in accordance with the terms of
the agreement.
Declaration of Special and Quarterly Dividend
On May 5, 2014, the Board of Directors declared a special
dividend of $0.10 per common share and a quarterly dividend of
$0.05 per common share, both of which will be paid in cash. The
special dividend is payable to shareholders of record on May 22,
2014, and will be paid on May 28, 2014. The first quarterly
dividend is payable to shareholders of record on June 16, 2014, and
will be paid on June 30, 2014.
CHANGES IN ACCOUNTING POLICIES
IFRS 10 (revised) "Consolidated Financial
Statements"
In October 2012, the IASB issued amendments to IFRS 10 to define
investment entities, provide an exception to the consolidation of
investment entities by a parent company, and prescribe fair value
measurement to measure such entities. These amendments are
effective for annual periods beginning on or after January 1, 2014;
accordingly, the Company adopted this standard for the year ended
December 31, 2014. The adoption of this standard had no material
impact on the Condensed Consolidated Interim Financial
Statements.
IFRS 12 (revised) "Disclosure of interests in other
entities"
In October 2012, the IASB issued amendments to IFRS 12 to
prescribe disclosures about significant judgments and assumptions
used to determine whether an entity is an investment entity as well
as other disclosures regarding the measurement of such entities.
These amendments are effective for annual periods beginning on or
after January 1, 2014; accordingly, the Company adopted this
standard for the year ended December 31, 2014. The adoption of this
standard had no material impact on the Condensed Consolidated
Interim Financial Statements.
IAS 32 (revised) "Financial Instruments:
Presentation"
In December 2011, the IASB issued amendments to IAS 32 to
address inconsistencies when applying the offsetting criteria.
These amendments clarify some of the criteria required to be met in
order to permit the offsetting of financial assets and financial
liabilities. These amendments are effective for annual periods
beginning on or after January 1, 2014; accordingly, the Company has
adopted this standard for the year ended December 31, 2014. The
adoption of this standard had no material impact on the Condensed
Consolidated Interim Financial Statements.
IFRIC 21 (new) "Levies"
In May 2013, the IASB issued IFRIC 21, "Levies", which
was developed by the IFRS Interpretations Committee ("IFRIC").
IFRIC 21 clarifies that an entity recognizes a liability for a levy
when the activity that triggers payment, as identified by the
relevant legislation, occurs. The interpretation also clarifies
that no liability should be recognized before the specified minimum
threshold to trigger that levy is reached. IFRIC 21 is effective
for annual periods beginning on or after January 1, 2014;
accordingly, the Company has adopted this standard for the year
ended December 31, 2014. The adoption of this standard had no
material impact on the Condensed Consolidated Interim Financial
Statements.
INTERNAL CONTROLS OVER FINANCIAL REPORTING
TransGlobe's management designed and implemented internal
controls over financial reporting, as defined under National
Instrument 52-109 Certification of Disclosure in Issuers'
Annual and Interim Filings, of the Canadian Securities
Administrators and as defined in Rule 13a-15 under the US
Securities Exchange Act of 1934. Internal controls over financial
reporting is a process designed under the supervision of the Chief
Executive Officer and the Chief Financial Officer and effected by
the Board of Directors, management and other personnel to provide
reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with IFRS, focusing in particular on
controls over information contained in the annual and interim
financial statements. Due to its inherent limitations, internal
controls over financial reporting may not prevent or detect
misstatements on a timely basis. A system of internal controls over
financial reporting, no matter how well conceived or operated, can
provide only reasonable, not absolute, assurance that the
objectives of the internal controls over financial reporting are
met. Also, projections of any evaluation of the effectiveness of
internal control over financial reporting to future periods are
subject to the risk that the controls may become inadequate because
of changes in conditions, or that the degree of compliance with
policies or procedures may deteriorate.
No changes were made to the Company's internal control over
financial reporting during the period ended March 31, 2014 that
have materially affected, or are reasonably likely to materially
affect, the internal controls over financial reporting.
| Condensed Consolidated Interim Statements of Earnings
and Comprehensive Income |
| (Unaudited - Expressed in thousands of U.S. Dollars,
except per share amounts) |
|
|
Three months ended March 31 |
|
|
2014 |
|
2013 |
|
| REVENUE |
|
|
|
|
|
Oil
sales, net of royalties |
$ |
78,366 |
|
$ |
79,366 |
|
|
Finance revenue |
|
97 |
|
|
46 |
|
|
|
78,463 |
|
|
79,412 |
|
|
|
|
|
|
|
|
| EXPENSES |
|
|
|
|
|
|
|
Production and operating |
|
19,578 |
|
|
14,532 |
|
|
General and administrative |
|
7,008 |
|
|
7,100 |
|
|
Foreign exchange (gain) loss |
|
(3,110 |
) |
|
(1,518 |
) |
|
Finance costs |
|
1,892 |
|
|
2,202 |
|
|
Exploration |
|
438 |
|
|
107 |
|
|
Depletion, depreciation and amortization |
|
13,165 |
|
|
11,180 |
|
|
Unrealized (gain) loss on financial instruments |
|
3,519 |
|
|
(2,990 |
) |
|
|
42,490 |
|
|
30,613 |
|
|
|
|
|
|
|
|
| Earnings before income taxes |
|
35,973 |
|
|
48,799 |
|
|
|
|
|
|
|
|
| Income tax expense (recovery) |
|
|
|
|
|
|
|
-
current |
|
19,894 |
|
|
23,074 |
|
|
- deferred |
|
(613 |
) |
|
847 |
|
|
|
19,281 |
|
|
23,921 |
|
| NET EARNINGS AND COMPREHENSIVE INCOME FOR THE
PERIOD |
$ |
16,692 |
|
$ |
24,878 |
|
|
|
|
|
|
|
|
| Earnings per share |
|
|
|
|
|
|
|
Basic |
$ |
0.22 |
|
$ |
0.34 |
|
|
Diluted |
$ |
0.22 |
|
$ |
0.26 |
|
|
|
|
|
|
|
|
|
| Condensed Consolidated Interim Balance Sheets |
| (Unaudited - Expressed in thousands of U.S.
Dollars) |
|
|
As at |
As at |
|
March 31, 2014 |
December 31, 2013 |
| ASSETS |
|
|
|
|
| Current |
|
|
|
|
|
Cash and cash equivalents |
$ |
107,607 |
$ |
122,092 |
|
Accounts receivable |
|
174,037 |
|
148,284 |
|
Prepaids and other |
|
11,070 |
|
8,460 |
|
Product inventory |
|
3,240 |
|
1,525 |
|
|
295,954 |
|
280,361 |
| Non-Current |
|
|
|
|
|
Restricted cash |
|
1,547 |
|
1,546 |
|
Deferred financing costs |
|
2,402 |
|
2,678 |
|
Intangible exploration and evaluation assets |
|
90,113 |
|
89,991 |
|
Property and equipment |
|
|
|
|
|
|
Petroleum properties |
|
290,016 |
|
288,756 |
|
|
Other
assets |
|
4,129 |
|
4,288 |
|
Goodwill |
|
8,180 |
|
8,180 |
|
$ |
692,341 |
$ |
675,800 |
|
|
|
|
|
| LIABILITIES |
|
|
|
|
| Current |
|
|
|
|
|
Accounts payable and accrued liabilities |
$ |
37,096 |
$ |
38,392 |
|
|
37,096 |
|
38,392 |
| Non-Current |
|
|
|
|
|
Convertible debentures |
|
87,765 |
|
87,539 |
|
Deferred taxes |
|
48,250 |
|
48,863 |
|
Other long-term liabilities |
|
760 |
|
816 |
|
|
173,871 |
|
175,610 |
|
|
|
|
|
| SHAREHOLDERS' EQUITY |
|
|
|
|
|
Share capital |
|
161,531 |
|
160,561 |
|
Contributed surplus |
|
16,310 |
|
15,692 |
|
Retained earnings |
|
340,629 |
|
323,937 |
|
|
518,470 |
|
500,190 |
|
$ |
692,341 |
$ |
675,800 |
|
|
|
|
|
|
| Condensed Consolidated Interim Statement of Changes in
Shareholders' Equity |
| (Unaudited - Expressed in thousands of U.S.
Dollars) |
|
|
Three months ended March 31 |
|
|
2014 |
2013 |
|
|
|
|
|
| Share Capital |
|
|
|
Balance, beginning of period |
$ |
160,561 |
|
$ |
158,721 |
|
|
Stock
options exercised |
|
716 |
|
|
396 |
|
|
Transfer from contributed surplus on exercise of options |
|
254 |
|
|
142 |
|
|
Balance, end of period |
$ |
161,531 |
|
$ |
159,259 |
|
|
|
|
|
|
|
| Contributed Surplus |
|
|
|
|
|
Balance, beginning of period |
$ |
15,692 |
|
$ |
11,714 |
|
|
Share-based compensation expense |
|
872 |
|
|
1,307 |
|
|
Transfer to share capital on exercise of options |
|
(254 |
) |
|
(142 |
) |
|
Balance, end of period |
$ |
16,310 |
|
$ |
12,879 |
|
|
|
|
|
|
|
| Retained Earnings |
|
|
|
|
|
Balance, beginning of period |
$ |
323,937 |
|
$ |
265,425 |
|
|
Net earnings and total comprehensive income |
|
16,692 |
|
|
24,878 |
|
|
Balance, end of period |
$ |
340,629 |
|
$ |
290,303 |
|
|
|
|
|
|
|
|
|
|
| Condensed Consolidated Interim Statements of Cash
Flows |
|
| (Unaudited - Expressed in thousands of U.S.
Dollars) |
|
|
|
|
Three months ended March 31 |
|
|
2014 |
|
2013 |
|
| CASH FLOWS RELATED TO THE FOLLOWING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| OPERATING |
|
|
|
|
|
|
|
Net earnings for the period |
$ |
16,692 |
|
$ |
24,878 |
|
|
Adjustments for: |
|
|
|
|
|
|
|
|
Depletion, depreciation and amortization |
|
13,165 |
|
|
11,180 |
|
|
|
Deferred lease inducement |
|
105 |
|
|
115 |
|
|
|
Stock-based compensation |
|
834 |
|
|
1,278 |
|
|
|
Finance costs |
|
1,892 |
|
|
2,202 |
|
|
|
Income tax expense |
|
19,281 |
|
|
23,921 |
|
|
|
Unrealized (gain) loss on financial instruments |
|
3,519 |
|
|
(2,990 |
) |
|
|
Unrealized (gain) loss on foreign currency translation |
|
(3,107 |
) |
|
(1,505 |
) |
|
Income taxes paid |
|
(19,894 |
) |
|
(23,074 |
) |
|
Changes in non-cash working capital |
|
(29,276 |
) |
|
15,895 |
|
| Net cash generated by (used in) operating
activities |
|
3,211 |
|
|
51,900 |
|
|
|
|
|
|
|
|
| INVESTING |
|
|
|
|
|
|
|
Additions to intangible exploration and evaluation
assets |
|
(1,196 |
) |
|
(3,476 |
) |
|
Additions to petroleum properties |
|
(13,080 |
) |
|
(14,677 |
) |
|
Additions to other assets |
|
(89 |
) |
|
(40 |
) |
|
Changes in restricted cash |
|
(1 |
) |
|
(1 |
) |
|
Changes in non-cash working capital |
|
315 |
|
|
(893 |
) |
| Net cash generated by (used in) investing
activities |
|
(14,051 |
) |
|
(19,087 |
) |
|
|
|
|
|
|
|
| FINANCING |
|
|
|
|
|
|
|
Issue of common shares for cash |
|
716 |
|
|
396 |
|
|
Financing costs |
|
- |
|
|
(50 |
) |
|
Interest paid |
|
(3,847 |
) |
|
(3,373 |
) |
|
Increase (decrease) in other long-term liabilities |
|
(130 |
) |
|
(144 |
) |
| Net cash generated by (used in) financing
activities |
|
(3,261 |
) |
|
(3,171 |
) |
| Currency translation differences relating to cash and
cash equivalents |
|
(384 |
) |
|
(436 |
) |
| NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS |
|
(14,485 |
) |
|
29,206 |
|
| CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |
|
122,092 |
|
|
82,974 |
|
| CASH AND CASH EQUIVALENTS, END OF PERIOD |
$ |
107,607 |
|
$ |
112,180 |
|
|
|
|
|
|
|
|
TransGlobe Energy Corporation is a Calgary-based,
growth-oriented oil and gas exploration and development company
focused on the Middle East/North Africa region with production
operations in the Arab Republic of Egypt and the Republic of Yemen.
TransGlobe's common shares trade on the Toronto Stock Exchange
under the symbol TGL and on the NASDAQ Exchange under the symbol
TGA. TransGlobe's convertible debentures trade on the Toronto Stock
Exchange under the symbol TGL.DB.
Cautionary Statement to Investors:
This news release may include certain statements that may be
deemed to be "forward-looking statements" within the meaning of the
U.S. Private Securities Litigation Reform Act of 1995. Such
statements relate to possible future events. All statements other
than statements of historical fact may be forward-looking
statements. Forward-looking statements are often, but not always,
identified by the use of words such as "seek", "anticipate",
"plan", "continue", "estimate", "expect", "may", "will", "project",
"predict", "potential", "targeting", "intend", "could", "might",
"should", "believe" and similar expressions. These statements
involve known and unknown risks, uncertainties and other factors
that may cause actual results or events to differ materially from
those anticipated in such forward-looking statements. Although
TransGlobe's forward-looking statements are based on the beliefs,
expectations, opinions and assumptions of the Company's management
on the date the statements are made, such statements are inherently
uncertain and provide no guarantee of future performance.
In particular, this press release contains forward-looking
statements regarding the Company's appraisal, development and
evaluation plans and the focus of the Company's exploration budget.
In addition, information and statements relating to "resources" are
deemed to be forward-looking information and statements, as they
involve the implied assessment, based on certain estimates and
assumptions, that the resources described exist in the quantities
predicted or estimated, and that the resources described can be
profitably produced in the future. Actual results may
differ materially from TransGlobe's expectations as reflected in
such forward-looking statements as a result of various factors,
many of which are beyond the control of the Company. These factors
include, but are not limited to, unforeseen changes in the rate of
production from TransGlobe's oil and gas properties, changes in
price of crude oil and natural gas, adverse technical factors
associated with exploration, development, production or
transportation of TransGlobe's crude oil and natural gas reserves,
changes or disruptions in the political or fiscal regimes in
TransGlobe's areas of activity, changes in tax, energy or other
laws or regulations, changes in significant capital expenditures,
delays or disruptions in production due to shortages of skilled
manpower, equipment or materials, economic fluctuations, and other
factors beyond the Company's control. With respect to
forward-looking statements contained in this press release,
assumptions have been made regarding, among other things: the
Company's ability to obtain qualified staff and equipment in a
timely and cost-efficient manner; the regulatory framework
governing royalties, taxes and environmental matters in the
jurisdictions in which the Company conducts and will conduct its
business; future capital expenditures to be made by the Company;
future sources of funding for the Company's capital programs;
geological and engineering estimates in respect of the Company's
reserves and resources; and the geography of the areas in which the
Company is conducting exploration and development activities.
TransGlobe does not assume any obligation to update
forward-looking statements if circumstances or management's
beliefs, expectations or opinions should change, other than as
required by law, and investors should not attribute undue certainty
to, or place undue reliance on, any forward-looking statements.
Please consult TransGlobe's public filings at www.sedar.com and
www.sec.gov/edgar.shtml for further, more detailed information
concerning these matters, including additional risks
related to TransGlobe's business.
TransGlobe Energy CorporationSteve LangmaidInvestor
Relations(403)
444-4787investor.relations@trans-globe.comwww.trans-globe.com
TransGlobe Energy (TSX:TGL)
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