TIDMTGL
RNS Number : 8870X
TransGlobe Energy Corporation
10 January 2022
The information contained within this Announcement is deemed by
TransGlobe Energy Corporation to constitute inside information as
stipulated under the Market Abuse Regulation (EU) No. 596/2014 as
it forms part of UK law by virtue of the European Union
(Withdrawal) Act 2018 ("MAR").
TRANSGLOBE ENERGY CORPORATION
OPERATIONS UPDATE
AIM & TSX: "TGL" & NASDAQ: "TGA"
Calgary, Alberta, January 10, 2022 - TransGlobe Energy
Corporation ("TransGlobe" or the "Company") announces an operations
update. All dollar values are expressed in US dollars unless
otherwise stated.
OVERVIEW
-- Production averaged 12.8 MBoepd in Q4, 2021 and 12.9 MBoepd
for the year ended 2021, meeting the upper end of 2021 guidance of
12-13 MBoepd (See "Oil & Gas Advisories" for production by
product type);
-- The amendment, extension and merger of the Company's Eastern
Desert concession agreements into a single agreement (the
"Agreement") has been ratified by Egypt's Parliament and signed
into law by President El-Sisi; payment by the Company of the first
modernization payment ($15 million) and signature bonus ($1
million) along with execution of the Agreement by all parties is
expected in the coming weeks;
-- A 2022 work program and budget is being prepared to continue
exploitation of the Agreement in the Eastern Desert of Egypt and
increase production in Canada, with the aim of maximizing Company
free cash flow and accelerating the maturation of contingent
resources into reserves;
-- The three 100% working interest South Harmattan horizontal
Cardium reservoir wells, drilled in Q3 of 2021, were successfully
brought into production in Canada in September and October, 2021,
and have achieved encouraging initial average production rates:
-- Drilled and cased three development wells in the Eastern Desert of Egypt;
-- Natural flow of SGZ-6X well at South Ghazalat ceased in
December and artificial lift has been mobilized to the site to
attempt to restore production;
-- A cargo of Gharib blend crude is scheduled to ship at the end
of January and has been marketed by Mercuria Energy Trading;
-- As previously disclosed, the Mercuria prepayment agreement
was fully repaid in 2021 and the Company's remaining debt
outstanding as at year end was $3.0 million outstanding against the
$17.7 million ATB Financial credit facility; and
-- The Company collected $27 million in receivables in Q4, 2021.
RANDY NEELY, PRESIDENT AND CEO's STATEMENT
"We are starting 2022 off on great footing in both Egypt and
Canada. With the ratification of our consolidated agreement now
complete, we will be finalizing our capital program for Egypt
shortly. In Canada, the latest well results exceeded our
expectations and continue to increase our confidence in the extent
of the play in the South Harmattan area, where we hold 22.5 net
sections of lands.
Our focus continues to be creating value for our stakeholders.
We are very encouraged by the opportunities we have to deploy
capital on value accretive projects across our portfolio. It
remains our expectation that we will be able to fund our 2022
capital program through free cash flow generated by our operations,
and with supportive commodity prices, we intend to revisit our
dividend policy in the coming months as the balance sheet
strengthens."
PRODUCTION
Production Summary (WI before royalties and taxes):
(Boepd) Q3 2021 Oct 2021 Nov 2021 Dec 2021 2021 Average
Egypt 11,276 10,922 9,784 9,481 10,578
-------- --------- --------- --------- -------------
Canada 2,066 2,791 2,883 2,617 2,292
-------- --------- --------- --------- -------------
Total 13,342 13,713 12,667 12,099 12,870
-------- --------- --------- --------- -------------
* See "Oil & Gas Advisories" for production by product
type.
Company production met the upper end of production guidance for
2021 of 12-13 MBoepd. In Egypt this was principally due to the
re-commencement of Eastern Desert drilling in Q2, 2021 in response
to the anticipated approval of the new Agreement. Canadian
production was boosted by placing the new horizontal wells on
production.
OPERATIONS UPDATE
Arab Republic of Egypt
Eastern Desert (100% WI)
The Company continued to use the EDC-64 rig in its Eastern
Desert drilling campaign, managing to drill and case three
additional development wells in K-Field and H-Field during the
quarter.
K-66 was drilled to a total depth of 1,809 meters, encountering
good gas and oil shows in the Asl-A, Asl-B, Asl-D, Asl-E, and Asl-F
reservoirs. Hole instability issues prevented wireline logging of
certain zones, however the Asl-A and Asl-B were logged and
evaluated, with an internally estimated 25.1 meters of net oil pay
in the Asl-A and 20.3 meters net oil pay in the Asl-B. The Asl-B
was perforated, put on production, and is currently producing at a
rate of 160 Bopd heavy crude oil (field estimate). The well is
expected to be recompleted on the Asl-A once the Asl-B is
exhausted. The deeper zones encountered by the well, the Asl-D,
Asl-E, and Asl-F reservoirs, are being considered as targets in
future drilling. Heavy crude is the expected product type for all
zones mentioned.
HE-2 was drilled to 1,800 meters total depth, encountering an
internally estimated net oil pay of 4 meters in the Asl-B reservoir
after being fully logged and evaluated. The expected product type
is heavy crude. The well was perforated in the Asl-B and is
currently on production at a rate of 220 Bopd heavy crude oil
(field estimate).
K-68 was drilled to a total depth of 1,403 meters. The well was
fully logged and evaluated, with an internally estimated 22.9
meters of net oil pay in the Asl-A reservoir and 4.6 meters of net
oil pay in the Asl-B reservoir. The well will be perforated in the
Asl-A reservoir and put on production in January 2022. The Asl-B is
expected to be recovered through existing up-dip completions on
that reservoir. Both zones are expected to be heavy crude oil.
Subsequent to the quarter the EDC-64 rig is being moved to the
K-67 well location, in the K-Field.
As previously disclosed, the Company announced a merged
concession agreement with a 15-year primary term and improved
Company economics in early December, 2020, and parliamentary
ratification and Presidential signature into law of the new
Agreement in December, 2021. The Company and Egyptian
counterparties anticipate signing the new Agreement, along with
payment by the Company of the first modernization payment ($15
million) and signature bonus ($1 million), in the coming weeks. The
effective date for the improved concession terms in the new
Agreement is February 1, 2020.
The Company is in the process of finalizing a 2022 work program
and budget that reflects our focus on free cash flow through
continued development activities on the contingent resource
projects previously disclosed, and production-sustaining
infrastructure improvements. The Company anticipates maintaining a
single drilling rig, along with a light rig for well maintenance
and recompletion activities in the Eastern Desert throughout
2022.
Western Desert - South Ghazalat (100% WI)
Natural flow of SGZ-6X well at South Ghazalat ceased in December
due to low reservoir pressure, and rigless-deployed artificial lift
equipment has been mobilized to site in an attempt to restore
production. Immediately prior to the well ceasing production, the
lower Bahariya reservoir at SGZ-6X was producing at a field
estimated 240 Bopd of light crude oil with a 71.5% watercut.
Initial well testing of the oil-bearing lower Bahariya reservoir
discovered in the SGZ-7B exploration well drilled in October, 2021
has indicated low productivity and sub-commercial flowrates. The
well has been suspended pending further evaluation of options to
improve productivity on the lower Bahariya reservoir, and to assess
the commercial potential of the gas-bearing upper Bahariya
reservoir.
Canada
The three 100% working interest South Harmattan horizontal
Cardium reservoir wells, successfully brought into production in
Canada in September and October, 2021, were equipped with pumps
after the initial flowback post-stimulation. All three wells
initially flowed without artificial lift, with the 2-mile well
(04-02) brought on production first, flowing unassisted for 47 days
prior to installation of a pump.
New well production summary (working interest)*:
Well Hz Initial Average Production**
Total (Boepd) Light and Medium Crude
Oil (Bopd)
------------------- -------------------------
IP30 IP60 IP30 IP60
--------- -------- ------------ -----------
04-02 2-mile 722 568 634 494
------- --------- -------- ------------ -----------
13-14 1-mile 338 250 290 210
------- --------- -------- ------------ -----------
16-12 1-mile 250 209 217 175
------- --------- -------- ------------ -----------
* See "Oil & Gas Advisories" for Initial Production by
product type.
**On a producing day basis
Although the production history is relatively short and not
necessarily indicative of long-term performance or ultimate
recovery, the Company is encouraged about the results, which are
significantly above internal type curve expectations for the area
on both the 1 and 2-mile wells.
Further development activity focused on increasing production
and further reducing uncertainty is anticipated in South Harmattan
in 2022. The Company holds 22.5 sections of land in the South
Harmattan area.
CORPORATE
The Company has a cargo of Gharib blend crude, marketed by
Mercuria Energy Trading, scheduled to ship at the end of January
and with proceeds expected by the beginning of March, 2022.
In December 2021 TransGlobe entered into costless collar natural
gas hedges for 2022 with ATB Financial. Below are the Company's
open hedge positions as of December 31, 2021:
AECO Natural Gas Q1 2022 Q2 2022 Q3 2022 Q4 2022
-------------------- -------- -------- -------- --------
Collars (GJ) 351,000 354,900 358,800 358,800
Bought Put (C$/GJ) 2.50 2.50 2.50 2.50
Sold Call (C$/GJ) 4.20 3.35 3.10 4.00
As previously disclosed, the amounts outstanding under the
Mercuria prepayment agreement were repaid in full during 2021. The
Company's remaining debt at year end was $3.0 million outstanding
against the $17.7 million ATB Financial credit facility.
TransGlobe collected $27 million of receivables in Q4, 2021 and
ended the year with over $37 million of cash and no net debt.
About TransGlobe
TransGlobe Energy Corporation is a cash flow focused oil and gas
exploration and development company whose current activities are
concentrated in the Arab Republic of Egypt and Canada. TransGlobe's
common shares trade on the Toronto Stock Exchange and the AIM
market of the London Stock Exchange under the symbol TGL and on the
NASDAQ Exchange under the symbol TGA.
For further information, please contact:
TransGlobe Energy Corporation +1 403 264 9888
Randy Neely, President and CEO investor.relations@trans-globe.com
Eddie Ok, CFO http://www.trans-globe.com
or via Tailwind Associates
Tailwind Associates (Investor +1 403 618 8035
Relations) darren@tailwindassociates.ca
Darren Engels http://www.tailwindassociates.ca
Canaccord Genuity (Nomad & Joint-Broker)
Henry Fitzgerald-O'Connor
James Asensio +44(0) 20 7523 8000
Shore Capital (Joint Broker)
Toby Gibbs
John More +44(0) 20 7408 4090
Advisory on Forward-Looking Information and 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", "strengthened",
"confidence", "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, that the Agreement will be signed by all
parties and the anticipated timing thereof; that the first
modernization payment and signature bonus will be paid and the
anticipated timing thereof; the Company's goal to maximize its free
cash flow and accelerate the maturation of contingent resources
into reserves; the anticipated shipment of the Company's cargo of
Gharib blend crude; the Company's expectations that it will be able
to fund its 2022 capital program through free cash flow generated
by operations; that the Company will revisit its dividend policy
and the anticipated timing thereof; that the Company's balance
sheet will strengthen in the coming months; the anticipated timing
of when well K-68 will be perforated and put on production; the
Company's expectation that it will maintain a single drilling rig
plus a light rig for well maintenance / recompletion activities in
the Eastern Desert throughout 2022; the Company's expectations that
further development activities in the South Harmattan area will be
focused on increasing production and reducing uncertainty;
prospects being targeted by the Company; rig mobilization plans;
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, that the Agreement will be signed by
all parties; that the first modernization payment and signature
bonus will be paid; anticipated production volumes; the timing of
drilling wells and mobilizing drilling rigs; that TransGlobe will
revisit its dividend policy; 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, that the Agreement will not be signed by all parties
when anticipated or at all; that the first modernization payment
and signature bonus will not be paid when anticipated or at all;
the Company will not be able to maximize its free cash flow and
accelerate the maturation of contingent resources into reserves;
that the Company's balance sheet will not strengthen in the coming
months; that TransGlobe will not revisit its dividend policy; well
K-68 will not be perforated and put on production; 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.
The Company's future dividend payments, if any, and the level
thereof is uncertain. Any decision to implement a divided policy or
pay dividends will be subject to the discretion of the board of
directors of the Company and may depend on a variety of factors,
including, without limitation the Company's business performance,
financial condition, financial requirements, growth plans, expected
capital requirements and other conditions existing at such future
time including, without limitation, contractual restrictions and
satisfaction of the solvency tests imposed on the Company under
applicable corporate law. There can be no assurance that dividends
will be paid in the future.
Oil and Gas Advisories
Mr. Ron Hornseth, B.Sc., General Manager - Canada 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 the technical information
contained in this report. Mr. Hornseth is a professional engineer
who obtained a Bachelor of Science in Mechanical Engineering from
the University of Alberta. He is a member of the Association of
Professional Engineers and Geoscientists of Alberta ("APEGA") and
the Society of Petroleum Engineers ("SPE") and has over 20 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.
Further, this press release includes estimates of pay thickness
and production rates in the K-Field and H-Field in the Eastern
Desert of Egypt (100% WI), which are considered to be anticipated
results or information that indicate the potential value or
quantities of resources under National Instrument 51-101 -
Standards of Disclosure for Oil and Gas Activities because the
disclosure in question may, in the opinion of a reasonable person,
indicate the potential value or quantities of resources in respect
of the Company's resources or a portion of its resources. Such
estimates have been prepared internally by management of TransGlobe
and have not been prepared or reviewed by an independent qualified
reserves evaluator or auditor. Anticipated results are subject to
certain risks and uncertainties, including those described above
under "Advisory on Forward-Looking Information and Statements" and
various geological, technical, operational, engineering,
commercial, and technical risks, including, but not limited to, the
risk that TransGlobe's exploration and development drilling and
related activities may provide different results; the risk that
TransGlobe may encounter unexpected drilling results; the
occurrence of unexpected events involved in the exploration for,
and the operation and development of, oil and gas; delays in
anticipated timing of drilling and completion of wells; geological,
technical, drilling and processing problems and other difficulties
in producing petroleum reserves; and the risk that if any resources
are discovered that it will not be commercially viable to produce
any portion thereof. In addition, the geotechnical analysis and
engineering to be conducted in respect of such resources is not
complete. Such risks and uncertainties may cause the anticipated
results disclosed herein to be inaccurate. Actual results may vary,
perhaps materially. There is no certainty that TransGlobe will
achieve the anticipated results from the K-Field and H-Field in the
Eastern Desert of Egypt or that any resources will be discovered.
If discovered, there is also no certainty that it will be
commercially viable to produce any portion of the resources.
References in this press release to production test rates, IP30,
IP60 and initial production rates are useful in confirming the
presence of hydrocarbons, however such rates are not determinative
of the rates at which such wells will continue production 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 production test results and initial production
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
Boepd barrels of oil equivalent per day
Bpd barrels per day
BOE barrel of oil equivalent
Boepd barrels of oil equivalent per day
GJ gigajoule
IP30 Average Production in the first 30 producing days after the
well was considered stabilized
IP60 Average Production in the first 60 producing days after the
well was considered stabilized
MBoepd thousand barrels of oil equivalent per day
MCFD thousand cubic feet per day
WI working interest
Production Disclosure (WI before royalties and taxes)
Light and Heavy Crude Conventional Natural Gas Total
Medium Crude Natural Gas Liquids
Bopd Bopd MCFD Bpd Boepd
-------------------- -------------- ------------ ------------- ------------ -------
2021 Production
Egypt 1050 9,528 10,578
Canada 753 4,704 756 2,293
Total 1,803 9,528 4,704 756 12,871
Q4-2021 Production
Egypt 1,123 8,942 10,065
Canada 1,154 4,981 778 2,762
Total 2,277 8,942 4,981 778 12,828
DEC-2021 Production
Egypt 891 8,590 9,481
Canada 977 4,860 830 2,617
Total 1,868 8,590 4,860 830 12,098
NOV-2021 Production
Egypt 1,131 8,653 9,784
Canada 1,242 5,097 792 2,884
Total 2,373 8,653 5,097 792 12,668
OCT-2021 Production
Egypt 1,347 9,575 10,922
Canada 1,246 4,991 713 2,791
Total 2,593 9,575 4,991 713 13,713
Q3-2021 Production
Egypt 1,262 10,014 11,276
Canada 601 4,734 677 2,067
Total 1,863 10,014 4,734 677 13,343
00/04-02-030-04W5/0
IP30 634 302 38 722
IP60 494 253 32 568
00/16-12-030-04W5/0
IP30 217 113 14 250
IP60 175 116 15 209
00/13-14-030-04W5/0
IP30 290 165 21 338
IP60 210 138 17 250
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