TIDMTGL
RNS Number : 8617F
TransGlobe Energy Corporation
12 March 2020
This Announcement contains inside information as defined in
Article 7 of the Market Abuse Regulation No. 596/2014 ("MAR"). Upon
the publication of this Announcement, this inside information is
now considered to be in the public domain.
TRANSGLOBE ENERGY CORPORATION ANNOUNCES YEAR 2019 FINANCIAL AND
OPERATING RESULTS
AIM & TSX: "TGL" & NASDAQ: "TGA"
Calgary, Alberta, March 12, 2020 - TransGlobe Energy Corporation
("TransGlobe" or the "Company") is pleased to announce its
financial and operating results for the three months and year ended
December 31, 2019. All dollar values are expressed in United States
dollars unless otherwise stated. TransGlobe's audited Consolidated
Financial Statements together with the notes related thereto, as
well as TransGlobe's Management's Discussion and Analysis for the
years ended December 31, 2019 and 2018, are available on
TransGlobe's website at www.trans-globe.com .
2019 HIGHLIGHTS:
v Produced an average of 16,041 Boepd and sold 14,954 Boepd as
compared to 14,439 Boepd and 15,013 Boepd in 2018, an 11% increase
in production year over year with sales remaining flat;
v Inventoried entitlement crude oil in Egypt increased to 964.5
Mbbls as at December 31, 2019 from 568.1 Mbbls as at December 31,
2018;
v Drilled eight wells and performed twelve completions and
workovers in Egypt during 2019;
v South Ghazalat-6X's upper Bahariya reservoir was brought on
stream on December 24, 2019 at a field estimated initial rate of
800 - 1,000 Bopd light and medium crude, as planned;
v Completed Phase 2 expansions of the West Bakr K and H stations
to double processing capacity;
v Drilled four horizontal Cardium oil wells in the Harmattan
area and stimulated, equipped and tied in these four wells along
with six Cardium oil wells that were drilled in 2018 in Canada;
v Ended the year with 45.3 MMBoe of 2P reserves, up 3% from 2018
year end of 44.1 MMBoe;
v Funds flow from operations decreased by 26% to $46.9 million
($0.65 per share), from $63.3 million ($0.87 per share) in
2018;
v Reported a net loss of $4.0 million ($0.06 per share),
inclusive of a $7.9 million non-cash impairment loss on exploration
and evaluation assets and a $1.6 million unrealized derivative loss
on commodity contracts;
v Spent $36.9 million on exploration and development activities,
funded entirely from cash flow from operations and cash on
hand;
v Paid a dividend with $0.035 per share ($2.5 million) paid on
April 18, 2019 to shareholders of record on March 29, 2019, and
$0.035 per share ($2.5 million) paid on September 13, 2019 to
shareholders of record on August 30, 2019;
v Ended the year with positive working capital of $32.2 million
(including cash and cash equivalents of $33.3 million); and
v Reduced long term debt from $52.3 million in 2018 to $37.0
million at the end of the year.
2020 (to date):
v January 2020 average production of 15.2 Mboepd, February 2020
average production of 15.2 Mboepd;
v Completed a sale of 440 Mbbls of inventoried entitlement crude
oil to EGPC in February 2020 for total proceeds of $24 million;
v Lifting a cargo of entitlement crude oil from Egypt in March
with proceeds anticipated in April;
v Entered into an additional derivative commodity contract for
the month of March 2020 hedging 195,000 Bbls; and
v Revised the 2020 outlook and capital budget to respond to
current market conditions.
FINANCIAL AND OPERATING RESULTS
Additional financial information is provided for in the
Company's audited Consolidated Financial Statements together with
the notes related thereto, as well as TransGlobe's Management's
Discussion and Analysis for the years ended December 31, 2019 and
2018. These documents, along with other documents affecting the
rights of securityholders and other information relating to the
Company, may be found on SEDAR at www.sedar.com and in the
Company's Annual Report on Form 40-F for the fiscal year ended
December 31, 2019, filed on EDGAR at www.sec.gov .
(US$000s, except per share, price, volume amounts and %
change)
Three months ended December 31 Years ended December 31
---------------------------------- -------------------------------
Financial 2019 2018 % Change 2019 2018 % Change
------------------------- --------- -------- -------- --------- -------- --------
Petroleum and natural
gas sales 64,201 72,628 (12) 278,929 299,144 (7)
Petroleum and natural
gas sales, net of
royalties 28,473 40,605 (30) 140,096 176,227 (21)
Realized derivative
loss on commodity
contracts 218 8,057 (97) 1,259 16,386 (92)
Unrealized derivative
loss (gain) on
commodity contracts 1,201 (29,492) (104) 1,586 (9,335) (117)
Production and
operating expense 15,119 13,116 15 50,626 53,298 (5)
Selling costs 638 450 42 1,287 2,103 (39)
General and
administrative
expense 3,868 2,005 93 16,611 18,688 (11)
Depletion,
depreciation and
amortization expense 8,764 8,214 7 34,948 34,291 2
Income tax expense 6,003 6,612 (9) 26,098 26,340 (1)
Cash flow generated by
operating activities 23,740 9,822 142 44,836 69,192 (35)
Funds flow from
operations 3,171 8,842 (64) 46,871 63,282 (26)
Funds flow from
operations per share
Basic per share 0.04 0.12 0.65 0.87
Diluted per share 0.04 0.12 0.65 0.86
Net (loss) earnings (8,202) 30,719 (127) (3,995) 15,677 (125)
Net (loss) earnings
per share
Basic per share (0.11) 0.43 (0.06) 0.22
Diluted per share (0.11) 0.43 (0.06) 0.22
Capital expenditures 10,996 17,433 (37) 36,932 40,706 (9)
Dividends declared - - - 5,078 2,527 101
Dividends declared per
share - - - 0.07 0.035 100
Working capital 32,194 50,987 (37) 32,194 50,987 (37)
Long-term debt,
including current
portion 37,041 52,355 (29) 37,041 52,355 (29)
Common shares
outstanding
Basic (weighted
average) 72,542 72,206 - 72,514 72,206 -
Diluted (weighted
average) 72,542 72,706 - 72,514 72,631 -
Total assets 308,325 318,296 (3) 308,325 318,296 (3)
-------------------------- -------- -------- -------- --------- -------- --------
Operating
------------------------- -------- -------- -------- --------- -------- --------
Average production
volumes (Boepd) 15,362 15,270 1 16,041 14,439 11
Average sales volumes
(Boepd) 14,688 14,483 1 14,954 15,013 -
Inventory (Mbbls) 964.5 568.1 70 964.5 568.1 70
Average realized sales
price ($/Boe) 47.51 54.51 (13) 51.10 54.59 (6)
Production and
operating expense
($/Boe) 11.19 9.84 14 9.28 9.73 (5)
-------------------------- -------- -------- -------- --------- -------- --------
(1) 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.
SELECTED ANNUAL INFORMATION
($000s, except per share
amounts, price and volumes) 2019 % Change 2018 % Change 2017
----------------------------------- -------- -------- ------- -------- -------
Operations
Average production volumes
Crude oil (Bbls/d) 14,527 14 12,708 (5) 13,411
NGLs (Bbls/d) 582 (25) 780 (21) 988
Natural gas (Mcf/d) 5,594 (2) 5,707 (14) 6,644
------------------------------------- ------- -------- ------- -------- -------
Total (Boepd) 16,041 11 14,439 (7) 15,506
------------------------------------- ------- -------- ------- -------- -------
Average sales volumes
Crude oil (Bbls/d) 13,441 1 13,282 (10) 14,754
NGLs (Bbls/d) 582 (25) 780 (21) 988
Natural gas (Mcf/d) 5,594 (2) 5,707 (14) 6,644
------------------------------------- ------- -------- ------- -------- -------
Total (Boepd) 14,954 - 15,013 (11) 16,849
------------------------------------- ------- -------- ------- -------- -------
Average realized sales prices
Crude oil ($/Bbl) 55.31 (7) 59.57 33 44.71
NGLs ($/Bbl) 22.93 (16) 27.17 27 21.31
Natural gas ($/mcf) 1.32 5 1.26 (26) 1.70
------------------------------------- ------- -------- ------- -------- -------
Total oil equivalent ($/Boe) 51.10 (6) 54.59 33 41.07
------------------------------------- ------- -------- ------- -------- -------
Inventory (Mbbls) 964.5 70 568.1 (27) 776.8
Petroleum and natural gas sales 278,929 (7) 299,144 18 252,591
Petroleum and natural gas sales,
net of royalties 140,096 (21) 176,227 19 148,464
Cash flow generated by operating
activities 44,836 (35) 69,192 16 59,450
Funds flow from operations(1) 46,871 (26) 63,282 14 55,592
Funds flow from operations per
share:
Basic 0.65 0.87 0.77
Diluted 0.65 0.86 0.77
Net earnings (loss) (3,995) (125) 15,677 120 (78,736)
Net earnings (loss) per share:
Basic (0.06) 0.22 (1.09)
Diluted (0.06) 0.22 (1.09)
Capital expenditures 36,932 (9) 40,706 7 38,159
Dividends declared 5,078 101 2,527 100 -
Dividends declared per share 0.07 100 0.035 100 -
------------------------------------- ------- -------- ------- -------- -------
Total assets 308,325 (3) 318,296 (3) 327,702
Cash and cash equivalents 33,251 (36) 51,705 9 47,449
Working capital 32,194 (37) 50,987 1 50,639
Total long-term debt, including
current portion 37,041 (29) 52,355 (25) 69,999
Net debt-to-funds flow from
operations ratio(2) 0.10 0.02 0.35
------------------------------------- ------- -------- ------- -------- -------
Reserves
Total proved (MMBoe)(3) 25.4 (6) 26.9 (2) 27.5
Total proved plus probable
(MMBoe)(3) 45.3 3 44.1 (4) 45.9
------------------------------------- ------- -------- ------- -------- -------
(1) Funds flow from operations (before finance costs) 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. See "Non-GAAP
Financial Measures".
(2) Net debt-to-funds flow from operations ratio is a measure
that represents total long-term debt (including the current
portion) net of working capital, over funds flow from operations
for the trailing 12 months, and may not be comparable to measures
used by other companies. See "Non-GAAP Financial Measures".
(3) As determined by the Company's 2019, 2018 & 2017
independent reserves evaluator, GLJ Petroleum Consultants Ltd.
("GLJ"), in their reports dated February 4, 2020, January 22, 2019
and January 9, 2018 with effective dates of December 31, 2019,
December 31, 2018 and December 31, 2017. The reports of GLJ have
been prepared in accordance with the standards contained in the
Canadian Oil and Gas Evaluation Handbook prepared jointly by The
Society of Petroleum Evaluation Engineers (Calgary Chapter) and the
Canadian Institute of Mining, Metallurgy & Petroleum (Petroleum
Society), as amended from time to time and National Instrument
51-101.
In 2019 compared with 2018, TransGlobe:
-- Reported an 11% increase in production volumes compared to
2018. In Egypt, the increase was primarily due to new wells and
successful well optimization projects in West Bakr, offset by
natural declines. In Canada, production was higher primarily due to
new production from both the 2018 and 2019 drilling program,
partially offset by natural declines;
-- Ended 2019 with the inventoried crude oil of 964.5 Mbbls, an
increase of 396.4 Mbbls over inventoried crude oil levels at
December 31, 2018;
-- Reported positive funds flow from operations of $46.9 million
(2018 - $63.3 million). The decrease in funds flow from operations
from 2018 is primarily due to excess cost oil in West Bakr and
lower commodity prices;
-- Ended the year with positive working capital of $32.2
million, including $33.3 million in cash and cash equivalents as at
December 31, 2019;
-- Petroleum and natural gas revenue decreased by 7% mainly due
to a 6% decrease in average realized sales prices;
-- Reported a net loss of $4.0 million (2018 - net earnings of
$15.7 million). The 2019 net loss was inclusive of a $7.9 million
non-cash impairment loss on the Company's exploration and
evaluation assets, primarily attributable to the South Alamein
concession, and a $1.6 million unrealized derivative loss on
commodity contracts. Before impairment and the unrealized loss on
derivative commodity contracts, the Company had net earnings of
$5.5 million;
-- Spent $36.9 million on capital expenditures, funded entirely
from cash flow from operations and cash on hand;
-- Paid a dividend of $0.035 per share ($2.5 million) on April
18, 2019 to shareholders of record on March 29, 2019, and $0.035
per share ($2.5 million) September 13, 2019 to shareholders of
record on August 30, 2019; and
-- Repaid $16.5 million of long-term debt with cash on hand.
OPERATING RESULTS AND NETBACK
Daily Volumes, Working Interest before Royalties
Production Volumes
2019 2018
----------------------------- ------- ------
Egypt crude oil (Bbls/d) 13,713 12,150
Canada crude oil (Bbls/d) 814 558
Canada NGLs (Bbls/d) 582 780
Canada natural gas (Mcf/d) 5,594 5,707
------------------------------- ------ ------
Total Company (Boepd) 16,041 14,439
------------------------------- ------ ------
Sales Volumes (excludes volumes held as inventory)
2019 2018
----------------------------- ------- ------
Egypt crude oil (Bbls/d) 12,627 12,724
Canada crude oil (Bbls/d) 814 558
Canada NGLs (Bbls/d) 582 780
Canada natural gas (Mcf/d) 5,594 5,707
------------------------------- ------ ------
Total Company (Boepd) 14,954 15,013
------------------------------- ------ ------
Netback
Consolidated netback
2019 2018
------------------------------------ --------------- --------------
($000s, except per Boe amounts) $ $/Boe $ $/Boe
------------------------------------ -------- ----- ------- -----
Petroleum and natural gas sales 278,929 51.10 299,144 54.59
Royalties(2) 138,833 25.44 122,917 22.43
Current taxes(2) 26,098 4.78 26,340 4.81
Production and operating expenses 50,626 9.28 53,298 9.73
Selling costs 1,287 0.24 2,103 0.38
-------------------------------------- ------- ----- ------- -----
Netback(1) 62,085 11.36 94,486 17.24
-------------------------------------- ------- ----- ------- -----
(1) The Company achieved the netbacks above on sold barrels of
oil equivalent for the year ended December 31, 2019 and December
31, 2018 (these figures do not include TransGlobe's Egypt
entitlement barrels held as inventory at December 31, 2019 and
December 31, 2018).
(2) Royalties and taxes are settled at the time of production.
Fluctuations in royalty and tax costs per boe are due to timing
differences between the production and sale of the Company's
entitlement crude oil.
Egypt
2019 2018
------------------------------------ --------------- --------------
($000s, except per Bbl amounts) $ $/Bbl $ $/Bbl
------------------------------------ -------- ----- ------- -----
Oil sales 256,193 55.59 278,111 59.88
Royalties(2) 136,616 29.64 120,271 25.90
Current taxes(2) 26,098 5.66 26,340 5.67
Production and operating expenses 43,252 9.38 45,562 9.81
Selling costs 1,287 0.28 2,103 0.45
-------------------------------------- ------- ----- ------- -----
Netback(1) 48,940 10.63 83,835 18.05
-------------------------------------- ------- ----- ------- -----
(1) The Company achieved the netbacks above on sold barrels of
oil equivalent for the year ended December 31, 2019 and December
31, 2018 (these figures do not include TransGlobe's Egypt
entitlement barrels held as inventory at December 31, 2019 and
December 31, 2018).
(2) Royalties and taxes are settled at the time of production.
Fluctuations in royalty and tax costs per bbl are due to timing
differences between the production and sale of the Company's
entitlement crude oil.
Netback per barrel in Egypt decreased by 42% in 2019 compared to
2018. The decrease was due to a 7% lower realized oil price, 14%
higher royalty expense, offset by a 4% decrease in operation and
production expenses and a 38% decrease in selling costs. The
decrease was also due to higher production volumes (13%) without a
corresponding increase in sales volumes. Royalties and taxes are
settled on a production basis, therefore netback is reduced in
periods where production increases and when production is higher
than sales.
Royalties and taxes as a percentage of revenue were 64% in 2019
(2018 - 53%). Royalties and taxes are settled on a production
basis, therefore, the correlation of royalties and taxes to oil
sales fluctuates depending on the timing of entitlement oil sales.
If sales volumes had been equal to production volumes during the
year, royalties and taxes as a percentage of revenue would have
been 58% (2018 - 55%). In periods when the Company sells less than
its entitlement production, royalties and taxes as a percentage of
revenue will be higher than the terms of the PSCs. In periods when
the Company sells more than its entitlement production, royalties
and taxes as a percentage of revenue will be lower than the terms
set out in the PSCs. The relative increase, from 55% in 2018 to 58%
in 2019, was due to excess cost oil in the West Bakr concession
during the fourth quarter of 2019. Excess cost oil occurs when the
current costs and historic cost amortization, permissible within
the PSC, are less than the proportion of cost oil value. In the
case of West Bakr, 100% of excess cost oil belongs to EGPC, which
effectively increases the royalty burden.
In Egypt, the average selling price for the year ended December
31, 2019 was $55.59/Bbl (2018 - $59.88/Bbl), which was $8.77/Bbl
lower (2018 - $11.18/Bbl lower) than the average Dated Brent oil
price of $64.36/Bbl for 2019 (2018 - $71.06/Bbl). The difference
between the average selling price and Dated Brent is due to a
gravity/quality adjustment and is also impacted by the specific
timing of direct sales.
In Egypt, operation and production expenses fluctuate
periodically due to changes in inventory volumes as a portion of
costs are capitalized and expensed when sold. Production and
operating expenses decreased by 5% ($2.3 million) in 2019 compared
with 2018. The decrease was primarily related to the lower workover
costs ($1.5 million) and the impact of the adoption of IFRS 16
($1.5 million). This was partially offset by higher service and
fuel costs due to higher production and diesel prices.
Canada
2019 2018
------------------------------------ -------------- -------------
($000s, except per Boe amounts) $ $/Boe $ $/Boe
------------------------------------ ------- ----- ------ -----
Crude oil sales 15,159 51.02 10,666 52.37
Natural gas sales 2,705 7.95 2,632 7.58
NGL sales 4,872 22.93 7,735 27.17
-------------------------------------- ------ ----- ------ -----
Total sales 22,736 26.75 21,033 25.17
-------------------------------------- ------ ----- ------ -----
Royalties 2,217 2.61 2,646 3.17
Production and operating expenses 7,374 8.68 7,736 9.26
-------------------------------------- ------ ----- ------ -----
Netback 13,145 15.46 10,651 12.74
-------------------------------------- ------ ----- ------ -----
Netbacks per boe in Canada increased by 21% in 2019 compared
with 2018. The increase is mainly due to a 6% higher realized sales
price, an 18% decrease in royalties and a decrease of 6% in
production and operating expenses.
In 2019, the Company's Canadian operations incurred $0.4 million
lower royalty costs than in 2018. The reduction in royalties is
primarily due to lower royalties on oil wells drilled during the
2018 and 2019 capital programs as a result of royalty holidays on
the new drills. A further reduction in royalties was caused by Gas
Cost Allowance ("GCA") rebates received in 2019. Royalties amounted
to 10% of petroleum and natural gas sales revenue during 2019
compared to 13% during the prior year. TransGlobe pays royalties to
the Alberta provincial government and landowners in accordance with
an established royalty regime. In Alberta, Crown royalty rates are
based on reference commodity prices, production levels and well
depths, and are offset by certain incentive programs in place to
promote drilling activity by reducing overall royalty expense.
The year over year decrease in operation and production expenses
for 2019 was primarily due to a facilities maintenance program
which was completed in 2018, and generally occurs every 5 years.
Additionally, certain costs historically recorded as operating
expenses were recorded as depletion, depreciation and amortization
in 2019 due to the adoption of IFRS 16.
Consolidated Statements of Earnings (Loss) and Comprehensive
Income (Loss)
(Expressed in thousands of U.S. Dollars, except per share
amounts)
Years Ended December 31
2019 2018
-------------------------------------------------- --- ------------ ----------
REVENUE
Petroleum and natural gas sales, net of royalties 140,096 176,227
Finance revenue 471 570
---------------------------------------------------------- ----------- ----------
140,567 176,797
----------------------------------------------------- ----------- ----------
EXPENSES
Production and operating 50,626 53,298
Selling costs 1,287 2,103
General and administrative 16,611 18,688
Foreign exchange gain (147) (289)
Finance costs 4,256 5,075
Depletion, depreciation and amortization 34,948 34,291
Asset retirement obligation accretion 215 270
Loss on financial instruments 2,845 7,051
Impairment loss 7,937 14,500
Gain on disposition of assets (114) (207)
---------------------------------------------------------- ----------- ----------
118,464 134,780
----------------------------------------------------- ----------- ----------
Earnings before income taxes 22,103 42,017
Income tax expense - current 26,098 26,340
--------------------------------------------------- ----------- ----------
NET (LOSS) EARNINGS (3,995) 15,677
--------------------------------------------------- ----------- ----------
OTHER COMPREHENSIVE (LOSS) INCOME
Currency translation adjustments 2,073 (3,732)
---------------------------------------------------------- ----------- ----------
COMPREHENSIVE (LOSS) INCOME (1,922) 11,945
--------------------------------------------------- ----------- ----------
Net (loss) earnings per share
Basic (0.06) 0.22
Diluted (0.06) 0.22
---------------------------------------------------------- ----------- ----------
Consolidated Balance Sheets
(Expressed in thousands of US Dollars)
As at As at
December 31, 2019 December 31, 2018
---------------------------------------------- ------------------ -----------------
ASSETS
Current
Cash and cash equivalents 33,251 51,705
Accounts receivable 10,681 12,014
Derivative commodity contracts - 1,198
Prepaids and other 4,338 5,385
Product inventory 17,516 8,692
------------------------------------------------- ----------------- -----------------
65,786 78,994
Non-Current
Derivative commodity contracts - 171
Intangible exploration and evaluation assets 33,706 36,266
Property and equipment
Petroleum and natural gas assets 196,150 195,263
Other 4,296 3,079
Deferred taxes 8,387 4,523
------------------------------------------------- ----------------- -----------------
308,325 318,296
----------------------------------------------- ----------------- -----------------
LIABILITIES
Current
Accounts payable and accrued liabilities 32,156 28,007
Derivative commodity contracts 217 -
Current portion of lease obligations 1,219 -
------------------------------------------------- ----------------- -----------------
33,592 28,007
Non-Current
Long-term debt 37,041 52,355
Asset retirement obligations 13,612 12,113
Other long-term liabilities 614 1,007
Lease obligations 589 -
Deferred taxes 8,387 4,523
------------------------------------------------- ----------------- -----------------
93,835 98,005
----------------------------------------------- ----------------- -----------------
SHAREHOLDERS' EQUITY
Share capital 152,805 152,084
Accumulated other comprehensive income (loss) 1,134 (939)
Contributed surplus 24,673 24,195
Retained earnings 35,878 44,951
------------------------------------------------- ----------------- -----------------
214,490 220,291
----------------------------------------------- ----------------- -----------------
308,325 318,296
----------------------------------------------- ----------------- -----------------
Consolidated Statements of Changes in Shareholders' Equity
(Expressed in thousands of US Dollars)
Years Ended December 31
2019 2018
--------------------------------------------------------- ------------ ----------
Share Capital
Balance, beginning of year 152,084 152,084
Stock options exercised 547 -
Transfer from contributed surplus on exercise of options 174 -
------------------------------------------------------------ ----------- ----------
Balance, end of year 152,805 152,084
------------------------------------------------------------ ----------- ----------
Accumulated Other Comprehensive Income (Loss)
Balance, beginning of year (939) 2,793
Currency translation adjustment 2,073 (3,732)
------------------------------------------------------------ ----------- ----------
Balance, end of year 1,134 (939)
------------------------------------------------------------ ----------- ----------
Contributed Surplus
Balance, beginning of year 24,195 23,329
Share-based compensation expense 652 866
Transfer to share capital on exercise of options (174) -
------------------------------------------------------------ ----------- ----------
Balance, end of year 24,673 24,195
------------------------------------------------------------ ----------- ----------
Retained Earnings
Balance, beginning of year 44,951 31,801
Net (loss) earnings (3,995) 15,677
Dividends (5,078) (2,527)
------------------------------------------------------------ ----------- ----------
Balance, end of year 35,878 44,951
------------------------------------------------------------ ----------- ----------
Consolidated Statements of Cash Flows
(Expressed in thousands of US Dollars)
Years Ended December 31
2019 2018
---------------------------------------------------------------- ------------ ----------
OPERATING
Net (loss) earnings (3,995) 15,677
Adjustments for:
Depletion, depreciation and amortization 34,948 34,291
Asset retirement obligation accretion 215 270
Deferred lease inducement - (90)
Impairment loss 7,937 14,500
Share-based compensation 2,237 3,536
Finance costs 4,256 5,075
Unrealized loss (gain) on financial instruments 1,586 (9,335)
Unrealized gain on foreign currency translation (153) (135)
Gain on asset dispositions (114) (207)
Asset retirement obligations settled (46) (300)
Changes in non-cash working capital (2,035) 5,910
----------------------------------------------------------------- ----------- ----------
Net cash generated by operating activities 44,836 69,192
------------------------------------------------------------------ ----------- ----------
INVESTING
Additions to intangible exploration and evaluation assets (5,377) (9,288)
Additions to petroleum and natural gas assets (30,626) (30,832)
Additions to other assets (929) (586)
Proceeds from asset dispositions 114 207
Changes in non-cash working capital (291) 251
----------------------------------------------------------------- ----------- ----------
Net cash used in investing activities (37,109) (40,248)
------------------------------------------------------------------ ----------- ----------
FINANCING
Issue of common shares for cash 547 -
Interest paid (3,664) (4,767)
Increase in long-term debt 476 508
Payments on lease obligations (1,945) -
Repayments of long-term debt (16,523) (17,797)
Dividends paid (5,078) (2,527)
Changes in non-cash working capital (200) (3)
----------------------------------------------------------------- ----------- ----------
Net cash used in financing activities (26,387) (24,586)
------------------------------------------------------------------ ----------- ----------
Currency translation differences relating to cash and cash
equivalents 206 (102)
------------------------------------------------------------------ ----------- ----------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (18,454) 4,256
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 51,705 47,449
------------------------------------------------------------------ ----------- ----------
CASH AND CASH EQUIVALENTS, OF YEAR 33,251 51,705
------------------------------------------------------------------ ----------- ----------
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 that maintain and
increase production and reserves, to acquire strategic oil and gas
assets, to repay current liabilities and debt and ultimately to
provide a return to shareholders. TransGlobe's capital programs are
funded by existing working capital and cash provided from operating
activities. The Company's cash flow from operations varies
significantly from quarter to quarter, depending on the timing of
oil sales from cargoes lifted in Egypt, and these fluctuations in
cash flow impact the Company's liquidity. TransGlobe's management
will continue to steward capital and focus on cost reductions in
order to maintain balance sheet strength through the current
volatile oil price environment.
Funding for the Company's capital expenditures is provided by
cash flows from operations and cash on hand. The Company expects to
fund its 2020 exploration and development program through the use
of working capital and cash flow from operations. The Company also
expects to pay down debt, return money to shareholders, and explore
business development opportunities with its working capital.
Fluctuations in commodity prices, product demand, foreign exchange
rates, interest rates and various other risks may impact capital
resources and capital expenditures.
Working capital is the amount by which current assets exceed
current liabilities. As at December 31, 2019, the Company had a
working capital surplus of $32.2 million (December 31, 2018 - $51.0
million). The decrease in working capital is primarily the result
of a decrease in cash from repayments on long-term debt, dividend
payments, lower income in 2019 principally due to lower commodity
prices, and funding of the 2019 capital program.
As at December 31, 2019, the Company's cash equivalents balance
consisted of short-term deposits with an original term to maturity
at purchase of one month or less. All of the Company's cash and
cash equivalents are on deposit with high credit-quality financial
institutions.
Over the past 10 years, the Company experienced delays in the
collection of accounts receivable from EGPC. The length of delay
peaked in 2013, returned to historical delays of up to six months
in 2017, and has since fluctuated within an acceptable range. As at
December 31, 2019, amounts owing from EGPC were $5.7 million. The
Company considers there to be minimal credit risk associated with
amounts receivable from EGPC.
In Egypt, the Company completed a fourth crude oil sale in
Q4-2019 for total proceeds of $22.6 million, which were collected
in December 2019. The Company incurs a 30-day collection cycle on
sales to third-party international buyers. Depending on the
Company's assessment of the credit of crude oil purchasers, they
may be required to post irrevocable letters of credit to support
the sales prior to the cargo lifting, which has significantly
reduced the Company's credit risk profile. As at December 31, 2019,
the Company held 964.5 mbbls of entitlement oil as inventory.
As at December 31, 2019, the Company had $94.2 million of
revolving credit facilities with $37.5 million drawn and $56.7
million available. The Company has a prepayment agreement with
Mercuria that allows for a revolving balance of up to $75.0
million, of which $30.0 million was drawn and outstanding. During
2019, the Company repaid $15.0 million of this prepayment
agreement. The Company also has a revolving Canadian reserves-based
lending facility with ATB totaling C$25.0 million ($19.2 million),
of which C$9.8 million ($7.5 million) was drawn and outstanding.
During 2019, the Company had drawings of C$0.6 million ($0.5
million) and repayments of C$2.0 million ($1.5 million) on this
facility. TransGlobe regularly communicates with its lenders and
remains confident in its ability to weather the current oil price
disruption.
The Company paid a dividend of $0.035 per share ($2.5 million)
on April 18, 2019 to shareholders of record on March 29, 2019, and
$0.035 per share ($2.5 million) on September 13, 2019 to
shareholders of record on August 30, 2019. In light of the global
oil price disruption, the Company has decided to suspend its first
quarter dividend payment to manage cash, until such a time that it
is appropriate to reinstate. The Board of Directors will evaluate
its decision on a semi-annual basis going forward.
MANAGEMENT STRATEGY AND OUTLOOK
The 2020 outlook provides information as to management's
expectation for results of operations for 2020. Readers are
cautioned that the 2020 outlook may not be appropriate for other
purposes. The Company's expected results are sensitive to
fluctuations in the business environment, including disruptions
caused by the ongoing political changes and civil unrest occurring
in the jurisdictions that the Company operates in, 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", outlined on the first page of the
Management's Discussion and Analysis ("MD&A").
2020 Outlook
The 2020 production outlook for the Company is provided as a
range to reflect timing and performance contingencies.
Global reaction to the spread of COVID-19 and the resultant
reduction in oil demand has negatively affected current and future
forecasts of oil prices in 2020. This has been compounded by OPEC+,
led by Saudi Arabia and Russia, failing to reach an agreement on
constraining output in face of lower global demand to support
global oil prices and Saudi Arabia and Iraq's stated intention to
discount April deliveries and increase supply into the market. Oil
prices are now markedly lower than those the Company used as the
basis for its 2020 capital program.
TransGlobe maintains a strong balance sheet with modest debt,
and its operated 100% position across its producing assets gives it
significant capital flexibility and a high degree of discretion in
its forward investment program. The Company intends to use all
available tools to minimize balance sheet risk and position itself
for future success.
The Company has re-evaluated its priorities in the short term
and is taking decisive action to reduce its previously announced
capital program in 2020, and focus only on those investments that
are critical to HSE and value preservation. In addition, and to
balance the reduction in capital investment, the Company is
analyzing operating costs both in Egypt and Canada to identify all
possible optimization opportunities.
Contingency plans have been implemented to protect TransGlobe's
staff and contractors and ensure business continuity in light of
COVID-19. At this time, the virus is not expected to have a
significant impact on the Company's day-to-day operations.
As a result of the reduced 2020 capital program, total corporate
production is now expected to range between 13.3 and 14.3 Mboepd
(mid-point of 13.8 Mboepd) for 2020 with a 93% weighting to oil and
liquids. Egypt oil production is expected to range between 11.3 and
12.1 Mbopd (mid-point of 11.7 Mbopd) in 2020. Canadian production
is expected to range between 2.0 and 2.2 Mboepd (mid-point of 2.1
Mboepd) in 2020. The 2020 mid-point production guidance broken out
by product type is summarized below:
Mid-point production guidance Egypt Canada Total
-------------------------------------- ------- ------ ------
Light and medium crude oil (Bbls/d) 957 706 1,663
Heavy crude oil (Bbls/d) 10,743 - 10,743
Conventional natural gas (Mcf/d) - 5,394 5,394
Natural gas liquids (Bbls/d) - 495 492
---------------------------------------- ------ ------ ------
Total (Boepd) 11,700 2,100 13,800
---------------------------------------- ------ ------ ------
Funds flow from operations in any given period is dependent upon
the timing and market price of crude oil sales in Egypt. Because
these factors are difficult to accurately predict, the Company has
not provided funds flow from operations guidance for 2020. Funds
flow from operations and inventory levels in Egypt may fluctuate
significantly from quarter to quarter due to the timing of crude
oil sales.
The below chart provides a comparison of well netbacks in the
Company's Egyptian and Canadian assets under multiple price
sensitivities. A typical Cardium well produces both oil and natural
gas/NGLs. The price of each commodity varies significantly,
therefore the below chart presents the netback of each revenue
stream separately.
Netback sensitivity
-------------------------------------- ----- ----- ----- ----- -----
Benchmark crude oil price ($/Bbl) 30.00 40.00 50.00 60.00 70.00
Benchmark natural gas price ($/Mcf) 0.75 0.95 1.10 1.30 1.50
Netback ($/Boe)
Egypt - crude oil(1) (2.07) 2.06 5.84 8.07 10.31
Canada - crude oil(2) 13.94 22.74 31.04 39.28 47.50
Canada - natural gas and NGLs(2) (2.28) (0.82) 0.10 1.36 2.90
---------------------------------------- ----- ----- ----- ----- -----
(1) Egypt assumptions: using anticipated 2020 Egypt production
profile, Gharib Blend price differential estimate of $12.00/bbl
applied consistently at all price points, concession differentials
of 4%, 5% and 3% applied to WG/WB/NWG, respectively, operating
costs estimated at $9.50/bbl, and maximum cost recovery resulting
from accumulated cost pools in WG and NWG.
(2) Canada assumptions: using anticipated 2020 Canada production
profile, Edmonton Light price differential estimate of C$5.40/bbl,
Edmonton Light to Harmattan discount of C$2.50/bbl, operating costs
estimated at C$11.40/boe, NGL mixture price at 45% of Edmonton
Light, and takes into consideration Canadian tax pools.
2020 Capital Budget
The Company's revised 2020 budgeted capital program is $7.1
million (before capitalized G&A) and includes $5.0 million for
Egypt and $2.1 million for Canada. This reduced plan includes two
wells (one in Egypt and one in Canada) that were spudded prior to
the recent oil price disruption and capital related to HSE, select
recompletions and workovers as well as certain land retention
commitments.
Egypt
The $5.0 million Egypt program is 100% allocated to development.
The primary focus of the 2020 Egypt budget is the drilling of the
HW-2A development well at West Bakr, targeting the Yusr sands. This
well spudded prior to the price disruption. Other expenditures
include required HSE equipment, contractual training bonuses and
select recompletion and well optimization projects that have robust
economics even in low price environments.
Canada
The $2.1 million Canada program consists of one horizontal
(multi-stage stimulated) well targeting the Cardium light oil
resource in South Harmattan (the 100/13-16-029-03W5/0 well). This
well also spudded prior to the price disruption. The well will be
drilled but will not be completed in order to preserve the economic
value of the flush production that comes from the initial phase of
production for this type of well.
The revised 2020 capital program is summarized in the following
table:
TransGlobe 2020 Capital ($MM) Gross Well Count
------------- ---------------------------------------- -------------------------------
Development Exploration Drilling
--------------- ------------- -------------------------------
Concession Wells Other(1) Wells Total(2) Development Exploration Total
------------- ----- -------- ------------- -------- ----------- ----------- -----
West Gharib - - - - - - -
West Bakr 1.2 3.8 - 5.0 1 - 1
NW Gharib - - - - - - -
South
Ghazalat - - - - - - -
------------- ----- -------- ------------- -------- ----------- ----------- -----
Egypt 1.2 3.8 - 5.0 1 - 1
Canada 1.7 0.4 - 2.1 1 - 1
-------------- ----- -------- ------------- -------- ----------- ----------- -----
2020 Total 2.9 4.2 - 7.1 2 - 2
-------------- ----- -------- ------------- -------- ----------- ----------- -----
Splits (%) 100% 0% 100% 100% 0% 100%
-------------- --------------- ------------- -------- ----------- ----------- -----
1 Other includes completions, workovers, recompletions and equipping.
Advisory on Forward-Looking Statements
Certain statements included in this news release constitute
forward-looking statements or forward-looking information under
applicable securities legislation. Such forward-looking statements
or information are provided for the purpose of providing
information about management's current expectations and plans
relating to the future. Readers are cautioned that reliance on such
information may not be appropriate for other purposes.
Forward-looking statements or information typically contain
statements with words such as "anticipate", "believe", "expect",
"plan", "intend", "estimate", "may", "will", "would" or similar
words suggesting future outcomes or statements regarding an
outlook. In particular, forward-looking information and statements
contained in this document include, but are not limited to, the
plans for the Company's 2020 Canadian drilling program and the
details thereof; the Company's expectation relating to the
performance of the South Harmattan Cardium prospect; and the
expected benefits to the Company of consolidating, amending and
extending the Company's Eastern Desert PSCs and other matters.
Forward-looking statements or information are based on a number
of factors and assumptions which have been used to develop such
statements and information but which may prove to be incorrect.
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
because the Company can give no assurance that such expectations
will prove to be correct. Many factors could cause TransGlobe's
actual results to differ materially from those expressed or implied
in any forward-looking statements made by, or on behalf of,
TransGlobe.
In addition to other factors and assumptions which may be
identified in this news release, assumptions have been made
regarding, among other things, anticipated production volumes; the
timing of drilling wells and mobilizing drilling rigs; the number
of wells to be drilled; 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; the geography of the areas in
which the Company is conducting exploration and development
activities; current commodity prices and royalty regimes;
availability of skilled labour; future exchange rates; the price of
oil; the impact of increasing competition; conditions in general
economic and financial markets; availability of drilling and
related equipment; effects of regulation by governmental agencies;
future operating costs; uninterrupted access to areas of
TransGlobe's operations and infrastructure; recoverability of
reserves and future production rates; that TransGlobe will have
sufficient cash flow, debt or equity sources or other financial
resources required to fund its capital and operating expenditures
and requirements as needed; that TransGlobe's conduct and results
of operations will be consistent with its expectations; that
TransGlobe will have the ability to develop its properties in the
manner currently contemplated; current or, where applicable,
proposed industry conditions, laws and regulations will continue in
effect or as anticipated as described herein; that the estimates of
TransGlobe's reserves and resource volumes and the assumptions
related thereto (including commodity prices and development costs)
are accurate in all material respects; and other matters.
Forward-looking statements or information are based on current
expectations, estimates and projections that involve a number of
risks and uncertainties which could cause actual results to differ
materially from those anticipated by the Company and described in
the forward-looking statements or information. These risks and
uncertainties which may cause actual results to differ materially
from the forward-looking statements or information include, among
other things, operating and/or drilling costs are higher than
anticipated; 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 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; competition; lack of availability
of qualified personnel; the results of exploration and development
drilling and related activities; obtaining required approvals of
regulatory authorities; volatility in market prices for oil;
fluctuations in foreign exchange or interest rates; environmental
risks; ability to access sufficient capital from internal and
external sources; failure to negotiate the terms of contracts with
counterparties; failure of counterparties to perform under the
terms of their contracts; and other factors beyond the Company's
control. Readers are cautioned that the foregoing list of factors
is not exhaustive. Please consult TransGlobe's public filings at
www.sedar.com and www.sec.goedgar.shtml for further, more detailed
information concerning these matters, including additional risks
related to TransGlobe's business.
The forward-looking statements or information contained in this
news release are made as of the date hereof and the Company
undertakes no obligation to update publicly or revise any
forward-looking statements or information, whether as a result of
new information, future events or otherwise unless required by
applicable securities laws. The forward-looking statements or
information contained in this news release are expressly qualified
by this cautionary statement.
Oil and Gas Advisories
Mr. Darrin Drall, P.Eng., - Manager Engineering for TransGlobe
Energy Corporation, and a qualified person as defined in the
Guidance Note for Mining, Oil and Gas Companies, June 2009, of the
London Stock Exchange, has reviewed and approved the technical
information contained in this announcement. Mr. Drall obtained a
Bachelor of Science Degree in Engineering from the University of
Manitoba. He is a Registered Professional Engineer in the province
of Alberta (Association of Professional Engineers and Geoscientists
of Alberta) and in the province of Saskatchewan (Association of
Professional Engineers and Geoscientists of Saskatchewan) and has
over 30 years' experience in oil and gas.
BOEs may be misleading, particularly if used in isolation. A BOE
conversion ratio of six thousand cubic feet of natural gas to one
barrel of oil equivalent (6 mcf: 1 bbl) is based on an energy
equivalency conversion method primarily applicable at the burner
tip and does not represent a value equivalency at the wellhead.
Given that the value ratio based on the current price of crude oil
as compared to natural gas is significantly different from the
energy equivalency of 6:1, utilizing a conversion on a 6:1 basis
may be misleading as an indication of value.
References in this press release to production test rates, are
useful in confirming the presence of hydrocarbons, however such
rates are not determinative of the rates at which such wells will
commence production and decline thereafter and are not indicative
of long term performance or of ultimate recovery. While
encouraging, readers are cautioned not to place reliance on such
rates in calculating the aggregate production for TransGlobe. A
pressure transient analysis or well-test interpretation has not
been carried out in respect of all wells. Accordingly, the Company
cautions that the production test results should be considered to
be preliminary.
The following abbreviations used in this press release have the
meanings set forth below:
Bopd barrels of oil per day
Bbl barrels
Bbls/d barrels per day
Mbbls/d thousand barrels per day
Boe barrel of oil equivalent
Boepd barrels of oil equivalent per day
MBoepd thousand barrels of oil equivalent per day
MMBoe million barrels of oil equivalent
Mcf thousand cubic feet
Mcf/d thousand cubic feet per day
For further information, please
contact:
TransGlobe Energy Via FTI Consulting
Randy Neely, President and Chief
Executive Officer
Eddie Ok, Chief Financial Officer
Canaccord Genuity (Nomad & Sole
Broker) +44 (0) 20 7523 8000
Henry Fitzgerald-O'Connor
James Asensio
FTI Consulting (Financial PR) +44 (0) 20 3727 1000
Ben Brewerton transglobeenergy@fticonsulting.com
Genevieve Ryan
Tailwind Associates (Investor Relations)
Darren Engels darren@tailwindassociates.ca
http://www.tailwindassociates.ca
+1 403.618.8035
investor.relations@trans-globe.com
http://www.trans-globe.com
+1 403.264.9888
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR UUVORRWUOARR
(END) Dow Jones Newswires
March 12, 2020 03:00 ET (07:00 GMT)
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