🕐07.05.14 - 11:27 Uhr

TRANSGLOBE ENERGY CORPORATION ANNOUNCES FIRST QUARTER 2014 FINANCIAL AND OPERATING RESULTS



TransGlobe Energy Corporation Announces First Quarter 2014 Financial and Operating Results
Marketwired
 
 
TransGlobe Energy Corporation
TSX:TGL
NASDAQ:TGA
Other Recent News | Printer Friendly Version

May 7, 2014
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 TransGlobes 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 TransGlobes 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 Corporations ("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 Companys 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) (i)                               4,562     4,592     4,812     4,995
---------------------------------------------------------------------------
(i) Under the terms of the West Gharib Production Sharing Concession,      
 royalties and taxes are paid out of the Governments 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) (i)                               1,611     1,631     1,102     1,274
---------------------------------------------------------------------------
(i) Under the terms of the West Bakr Production Sharing Concession,        
 royalties and taxes are paid out of the Governments 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 Companys 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) (i)                                 174       134        84       149
---------------------------------------------------------------------------
(i)Under the terms of the East Ghazalat Production Sharing Concession,     
 royalties and taxes are paid out of the Governments 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) (i)                                  94       256       150       211
---------------------------------------------------------------------------
(i) Under the terms of the Block 32 Production Sharing Agreement, royalties 
and taxes are paid out of the Governments 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) (i)                                 318         -         -         -
---------------------------------------------------------------------------
(i) Under the terms of the Block S-1 Production Sharing Agreement, royalties
and taxes are paid out of the Governments 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, managements 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 Companys 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, managements 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 Companys 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 Companys 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 Companys 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 Companys 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 Companys 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, TransGlobes 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 TransGlobes 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 managements expectation for results of operations for 2014.

Readers are cautioned that the 2014 outlook may not be appropriate for other purposes.

The Companys 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 Companys 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 TransGlobes 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(i)                         32,487       36,005 
------------------------------------------------------------------------- 
------------------------------------------------------------------------- 
(i) 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 Companys 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 Companys principal business activities prior to the consideration of other income and expenses.

Netback may not be comparable to similar measures used by other companies.

TRANSGLOBES 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                                                                 
 (i)          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                                                                 
 (ii)            0.6     0.6     0.8     0.6     0.7     0.8     1.0     1.0
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
(i) 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.

(ii) 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(i)                     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                                               	



Products & Services | Jobs