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 (“TransGlobe” or the “Company”) (TSX
& AIM: “TGL” & NASDAQ: “TGA”) is pleased to
announce its financial and operating results for the three and six
months ended June 30, 2018. All dollar values are expressed in
United States dollars unless otherwise stated. TransGlobe's
Consolidated Financial Statements together with the notes related
thereto, as well as TransGlobe's Management's Discussion and
Analysis for the three and six month periods ended June 30, 2018
and 2017, are available on TransGlobe's website at
www.trans-globe.com.
Highlights
- Second quarter production averaged 13,779 boepd (Egypt 11,912
bopd, Canada 1,867 boepd) with Canadian production impacted during
May by a scheduled gas plant turnaround;
- Second quarter sales averaged 19,301 boepd due to increased
cargo liftings during the quarter;
- Positive second quarter funds flow of $33.5 million ($0.46 per
share). Before unrealized hedging losses, funds flow was $44.3
million ($0.61 per share);
- Second quarter net earnings of $7.4 million inclusive of an
unrealized loss of $10.8 million and a realized loss of $5.8
million on derivative commodity contracts;
- Drilled three oil wells in Egypt (K45, Arta 54 & NWG 38A)
and commissioned the K-station phase 2 expansion during the
quarter;
- Subsequent to the quarter, drilled three wells in Egypt
resulting in one oil well (M-North) and two dry holes (NWS 9X &
SGZ 1X);
- Acquired 16 net sections (10,240 acres) of Crown exploratory
Cardium rights year to date, south of the Harmattan Cardium pool
and increased the 2018 Budget to drill a horizontal evaluation
Cardium well on the newly acquired lands prior to year-end;
- Finalized the 2018 Canadian drilling plan, targeting 6 gross (5
net) Cardium horizontal development wells (including one extended
reach 2 mile horizontal well) and one Cardium horizontal evaluation
well;
- The Company's common shares were admitted to the AIM market of
the London Stock Exchange and began trading under the ticker “TGL”
on June 29, 2018. In addition, the Company intends to establish an
executive office in London in September 2018.
- Sold two cargoes of TransGlobe's entitlement crude oil for net
proceeds totaling $53.3 million (sale proceeds collected in May and
July) and sold 82,361 barrels of inventoried entitlement crude oil
to EGPC for $4.6 million;
- Ended the quarter with positive working capital of $60.5
million, including cash and cash equivalents of $38.1 million. The
Company expects to fund its remaining 2018 capital program,
accelerate debt repayments and explore business development
opportunities with its working capital;
- Spent $5.9 million on exploration and development assets during
the quarter;
- Subsequent to quarter-end, lifted the third cargo of 2018 on
July 19th, a total of ~501 thousand barrels, for estimated proceeds
of $32 million. The timing of the next cargo is expected to be
finalized in Q3;
- Subsequent to quarter-end, the corporation declared a dividend
of $0.035 per share payable September 14, 2018 to shareholders of
record on August 31, 2018.
A conference call to discuss TransGlobe's 2018 second quarter
results presented in this news release will be held on Tuesday,
August 14, 2018 at 8:00 AM Mountain (10:00 AM Eastern time
and 3:00 PM London, UK) and is accessible to all interested parties
in Canada and US by dialing 416-340-2218 or toll free at
1-800-377-0758 and United Kingdom at 00-80065789868The webcast may
be accessed at http://www.gowebcasting.com/9329.The international
dial-in https://www.confsolutions.ca/ILT?oss=1P1R8003770758
FINANCIAL AND OPERATING RESULTS(US$000s, except
per share, price, volume amounts and % change)
|
|
Three Months Ended June 30 |
|
Six Months Ended June 30 |
Financial |
|
2018 |
|
|
|
2017 |
|
|
|
% Change |
|
|
2018 |
|
|
|
2017 |
|
|
|
% Change |
|
Petroleum and natural
gas sales |
|
99,220 |
|
|
|
64,711 |
|
|
|
53 |
|
|
152,171 |
|
|
|
111,265 |
|
|
|
37 |
|
Petroleum and natural
gas sales, net of royalties |
|
68,454 |
|
|
|
40,439 |
|
|
|
69 |
|
|
93,169 |
|
|
|
62,900 |
|
|
|
48 |
|
Realized derivative
gain (loss) on commodity contracts |
|
(5,781 |
) |
|
|
1,529 |
|
|
|
(478 |
) |
|
(5,899 |
) |
|
|
1,529 |
|
|
|
(486 |
) |
Unrealized derivative
gain (loss) on commodity contracts |
|
(10,816 |
) |
|
|
6,578 |
|
|
|
(264 |
) |
|
(16,862 |
) |
|
|
2,849 |
|
|
|
(692 |
) |
Production and
operating expense |
|
17,299 |
|
|
|
15,079 |
|
|
|
15 |
|
|
27,940 |
|
|
|
25,400 |
|
|
|
10 |
|
Selling costs |
|
1,080 |
|
|
|
1,502 |
|
|
|
(28 |
) |
|
1,126 |
|
|
|
1,502 |
|
|
|
(25 |
) |
General and
administrative expense |
|
7,583 |
|
|
|
3,362 |
|
|
|
126 |
|
|
11,579 |
|
|
|
7,808 |
|
|
|
48 |
|
Depletion, depreciation
and amortization expense |
|
10,478 |
|
|
|
10,363 |
|
|
|
1 |
|
|
17,326 |
|
|
|
18,875 |
|
|
|
(8 |
) |
Income taxes
expense |
|
6,785 |
|
|
|
5,505 |
|
|
|
23 |
|
|
12,804 |
|
|
|
10,925 |
|
|
|
17 |
|
Cash flow generated
(used) in operating activities |
|
18,886 |
|
|
|
(2,753 |
) |
|
|
786 |
|
|
11,731 |
|
|
|
(5,250 |
) |
|
|
323 |
|
Funds flow from
operations1 |
|
33,499 |
|
|
|
16,855 |
|
|
|
99 |
|
|
37,422 |
|
|
|
19,357 |
|
|
|
93 |
|
Basic per
share |
|
0.46 |
|
|
|
0.23 |
|
|
|
|
|
0.52 |
|
|
|
0.27 |
|
|
|
|
Diluted
per share |
|
0.46 |
|
|
|
0.23 |
|
|
|
|
|
0.52 |
|
|
|
0.27 |
|
|
|
|
Net earnings
(loss) |
|
7,361 |
|
|
|
(56,622 |
) |
|
|
113 |
|
|
(2,759 |
) |
|
|
(69,499 |
) |
|
|
96 |
|
Basic per
share |
|
0.10 |
|
|
|
(0.78 |
) |
|
|
|
|
(0.04 |
) |
|
|
(0.96 |
) |
|
|
|
Diluted
per share |
|
0.10 |
|
|
|
(0.78 |
) |
|
|
|
|
(0.04 |
) |
|
|
(0.96 |
) |
|
|
|
Capital
expenditures |
|
5,855 |
|
|
|
8,230 |
|
|
|
(29 |
) |
|
10,490 |
|
|
|
18,948 |
|
|
|
(45 |
) |
Working capital |
|
60,464 |
|
|
|
60,319 |
|
|
|
— |
|
|
60,464 |
|
|
|
60,319 |
|
|
|
— |
|
Long-term debt,
including current portion |
|
62,173 |
|
|
|
83,725 |
|
|
|
(26 |
) |
|
62,173 |
|
|
|
83,725 |
|
|
|
(26 |
) |
Common shares
outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
Basic
(weighted average) |
|
72,206 |
|
|
|
72,206 |
|
|
|
— |
|
|
72,206 |
|
|
|
72,206 |
|
|
|
— |
|
Diluted
(weighted average) |
|
72,851 |
|
|
|
72,206 |
|
|
|
1 |
|
|
72,606 |
|
|
|
72,206 |
|
|
|
1 |
|
Total
assets |
|
329,542 |
|
|
|
337,596 |
|
|
|
(2 |
) |
|
329,542 |
|
|
|
337,596 |
|
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating |
|
|
|
|
|
|
|
|
|
|
|
|
Average production
volumes (boepd) |
|
13,779 |
|
|
|
16,465 |
|
|
|
(16 |
) |
|
14,076 |
|
|
|
16,597 |
|
|
|
(15 |
) |
Average sales volumes
(boepd) |
|
19,301 |
|
|
|
19,259 |
|
|
|
— |
|
|
15,548 |
|
|
|
16,558 |
|
|
|
(6 |
) |
Inventory (bbls) |
|
510,255 |
|
|
|
1,274,057 |
|
|
|
(60 |
) |
|
510,255 |
|
|
|
1,274,057 |
|
|
|
(60 |
) |
Average sales price ($
per Boe) |
|
56.49 |
|
|
|
36.92 |
|
|
|
53 |
|
|
54.07 |
|
|
|
37.13 |
|
|
|
46 |
|
Operating
expense ($ per Boe) |
|
9.85 |
|
|
|
8.52 |
|
|
|
16 |
|
|
9.93 |
|
|
|
8.36 |
|
|
|
19 |
|
Notes: |
|
|
|
|
|
|
|
|
|
|
|
|
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. |
Average reference prices |
2018 |
2017 |
|
|
Q-2 |
|
Q-1 |
|
Q-4 |
|
Q-3 |
|
Q-2 |
|
Crude
oil |
|
|
|
|
|
|
|
|
|
|
Dated Brent average oil price (US$/bbl) |
|
74.50 |
|
66.81 |
|
61.53 |
|
52.11 |
|
49.67 |
|
Edmonton Sweet index (US$/bbl) |
|
62.43 |
|
56.98 |
|
54.26 |
|
45.32 |
|
46.03 |
|
Natural
gas |
|
|
|
|
|
|
|
|
|
|
AECO (C$/mmbtu) |
|
1.18 |
|
2.08 |
|
1.69 |
|
1.45 |
|
2.78 |
|
US/Canadian Dollar average exchange rate |
|
1.291 |
|
1.264 |
|
1.270 |
|
1.247 |
|
1.345 |
|
|
|
|
|
|
|
|
|
|
|
|
|
CORPORATE SUMMARY
TransGlobe Energy Corporation ("TransGlobe" or
the "Company") produced an average of 13,779 barrels of oil
equivalent per day ("boepd") during the second quarter of 2018.
Production was impacted by an extensive workover program in Egypt
at West Bakr and a turnaround in Canada that occurred during the
quarter. Egypt production was 11,912 barrels of oil per day
("bopd") and Canada production was 1,867 boepd.
During the quarter, the Company completed two
cargo liftings for a total of 902,467 barrels of entitlement crude
oil with net proceeds of $53.3 million. TransGlobe also sold 82,361
barrels of inventoried entitlement crude oil to EGPC during the
quarter for $4.6 million. As at June 30, 2018 the Company had
approximately 0.5 million barrels of inventoried entitlement crude
oil. Subsequent to quarter-end, the Company lifted approximately
501,000 barrels ("bbls") of entitlement crude oil on July 19, for
estimated net proceeds of $32 million to be received in mid-August.
All Canadian production was sold during the quarter.
TransGlobe's Egyptian crude oil is sold at a
quality discount to Dated Brent. The Company received an average
price of $59.39 per barrel during the quarter. In Canada, the
Company received an average of $60.87 per barrel of oil and $1.08
per thousand cubic feet ("mcf") of natural gas in the second
quarter of 2018.
During the second quarter of 2018, the Company
had funds flow from operations of $33.5 million and ended the
quarter with positive working capital of $60.5 million, including
cash and cash equivalents of $38.1 million. The Company had net
earnings in the quarter of $7.4 million, which included a $10.8
million unrealized loss on derivative commodity contracts. The loss
on derivative commodity contracts represents a fair value
adjustment on the Company's hedging contracts as at June 30,
2018.
In Egypt, the Company drilled three development
oil wells during the second quarter of 2018. In West Bakr, the K-45
well was the second South K-field well drilled this year; the well
was completed during May 2018 and is currently producing at a rate
of 380 bopd. In West Gharib, the Arta 54 well was the second well
drilled this year in the boundary area between the Arta pool and
offsetting NWG development lease #3. The well was completed and
placed on production at a pre-frac rate of 60+ bopd. Arta 54 was
fraced and placed back on production in early August. The NWG 38A
Injector well was also completed and confirmed oil in the lower
portion of the Red Bed and will require a frac prior to
producing.
The Company completed a four well (Arta 48, Arta
54, NWG 1AX, NWG 5X) stimulation program during May/June 2018
targeting Nukhul and tight Red Bed conglomerate wells. The wells
have all been fraced and are being placed on production for post
frac clean-up. It is expected that each of the wells will produce
at an initial 30 day average rate of 120 to 150 bopd after
recovering frac fluid based on offsetting producers.
During the second quarter, the Company spud NWS
9 targeting a stacked Cretaceous prospect. Subsequent to the
quarter, the well was drilled to a total depth of 5,950 feet with
no signs of hydrocarbons and was abandoned. Subsequent to
quarter-end, the Company has mobilized a 2,000 HP drilling rig to
NWS 12 targeting a stacked Cretaceous/Jurassic prospect. The well
has been spud and the Company anticipates drilling time of
approximately 60 days for the prospect.
Subsequent to the quarter, the Company drilled
the first of two planned exploration wells in the south western
portion of South Ghazalat Concession (“SGZ”). SGZ 1X was drilled to
a total depth of 3,068 feet with no hydrocarbon shows and abandoned
for a total cost of ~$0.7 million. Based on the SGZ 1X results, the
planned SGZ 2X well was cancelled in favour of an alternate
exploration prospect (SGZ 6X) located on the eastern portion of the
concession offsetting the Raml oil field in the Abu Gharadig basin.
The SGZ 6X prospect is targeting stacked Cretaceous targets similar
to the Raml and SW Raml fields. It is expected that SGZ 6X will be
drilled in October following mine clearance and lease
construction.
In Canada, a planned turnaround at the main
third-party owned and operated natural gas processing plant in
Harmattan resulted in the majority of the Company's Canadian
production being shut-in during the month of May. During this
period, the Company completed a 3 week maintenance program at its
central oil processing battery and main natural gas compressor
site. The 2018 production guidance numbers include the planned
turnaround. The Cardium development drilling program is scheduled
to commence in August 2018, consisting of six horizontal wells (5
net), including one two-mile horizontal, which will be drilled from
a common pad to improve efficiencies and reduce costs.
TransGlobe was admitted to the London Stock Exchange’s AIM under
the ticker “TGL” on June 29, 2018. TransGlobe retained Canaccord
Genuity as its nominated advisor (“NOMAD”) to support the listing
on the AIM.
The Board has decided to resume dividend payments to
shareholders. The Company will aspire to pay a semi-annual
dividend to shareholders determined at each period after
consideration for: ongoing production maintenance; growth through
acquisitions; maintaining a conservative balance sheet to manage
for commodity price volatility; payment irregularity in Egypt and
solvency requirements; and the cash flow generating capability of
the business. The Board has approved a dividend payment
to shareholders of $0.035/share payable on September 14, 2018.
2018 Outlook
The 2018 production outlook for the Company is
provided as a range to reflect timing and performance
contingencies. The Company has reduced the upper end of production
guidance due to minor project timing delays in Egypt and Canada.
Total corporate production is expected to range between 14,200 and
14,800 barrels of oil equivalent per day ("boepd") for 2018
(mid-point of 14,500 boepd) with a 94% weighting to oil and
liquids. Egypt oil production is expected to range between 12,000
and 12,400 barrels of oil per day ("bopd") in 2018. Canadian
production is expected to range between 2,200 and 2,400 boepd in
2018, inclusive of an adjustment for the Harmattan area plant and
facility turnaround in May.
OPERATIONS UPDATE
ARAB REPUBLIC OF EGYPT
EASTERN DESERT
West Gharib, Arab Republic of Egypt
(100% working interest, operated)
Operations and Exploration
During the second quarter of 2018, the Arta-54
development well in the Arta Red Bed pool was drilled to a depth of
3,711 feet and encountered approximately 128 feet of Nukhul/Red Bed
formation with an internally estimated 24.5 feet of net oil pay.
The well was completed and placed on production at a pre-frac rate
of 60+ bopd. The well was fraced and is currently producing at a
rate of 205 bopd. This is the second well drilled this year in the
boundary area between the Arta pool and the offsetting NWG
development lease #3.
The Arta-48 development well that was originally
drilled in the first quarter, had a fracture stimulation completed
in May and is currently producing at a rate of 200 bopd.
Production
Production from West Gharib averaged 5,015 bopd
to TransGlobe during the second quarter of 2018, a 2% (89 bopd)
decrease from the previous quarter primarily due to natural
declines which were partially offset by the new stimulated wells at
Arta 48 and 54.
Production averaged 5,068 bopd during July.
Sales
The Company sold 82,361 barrels of inventoried
entitlement crude to EGPC for $4.6 million and sold an additional
123,251 barrels of inventoried entitlement crude to a third-party
for $7.7 million in Q2-2018.
Quarterly West
Gharib Production (bopd) |
|
2018 |
2017 |
|
|
Q-2 |
|
Q-1 |
|
Q-4 |
|
Q-3 |
|
Gross production
rate |
|
5,015 |
|
5,104 |
|
5,015 |
|
5,741 |
|
TransGlobe working
interest |
|
5,015 |
|
5,104 |
|
5,015 |
|
5,741 |
|
TransGlobe production
inventoried (sold) |
|
297 |
|
(21 |
) |
774 |
|
(5,715 |
) |
Total sales |
|
4,718 |
|
5,125 |
|
4,241 |
|
11,456 |
|
Government share (royalties and tax) |
|
2,459 |
|
2,504 |
|
2,459 |
|
2,826 |
|
TransGlobe sales (after royalties and tax)1 |
|
2,259 |
|
2,621 |
|
1,782 |
|
8,630 |
|
Note: |
|
|
|
|
|
1 Under the terms of the West Gharib Production Sharing
Concession, royalties and taxes are paid out of the Government's
share of production sharing oil. |
|
West Bakr, Arab Republic of Egypt (100%
working interest, operated)
Operations and Exploration
During the second quarter of 2018, the K-45
development well was drilled to a total depth of 5,831 feet and
encountered the main Asl A sand approximately 66 feet structurally
higher than the K-46 well and is structurally the highest well in
South K-field Asl A & B pools. The well encountered an
internally estimated 195 feet of net oil pay, comprising of 120
feet of net oil pay in the Asl A pool (A1, A2, and A3) and 75 feet
in the Asl B pool. The well was completed in May and is currently
producing at a rate of 380 bopd from the Asl B pool.
Subsequent to the quarter, drilling commenced on
a two well infill program (M-North and M-South) targeting the main
Asl A formation in the M pool inside the reduced buffer zone
between the West Bakr M field and the adjacent GPC Mesada field to
the west. M-North was drilled to a total depth of 1,559 meters and
cased as an Asl A oil well. M-North encountered an internally
estimated 132 feet of net Asl A oil pay. The M-North well is
scheduled for completion in August. Drilling will commence on the
M-South location in mid-August. Following M-South, the rig is
scheduled to move to NW Gharib to drill a potential water injector
in the NWG 38A pool.
During the quarter, the Company completed
construction of the Phase 2 K-field facility expansion to double
the current fluid handling capacity from 15,000 bpd to 30,000 bpd
of fluid and initiated a well optimization campaign targeting wells
with excess production capacity that had been constrained due to
fluid handling at K station. The Phase 2 K-field facility
expansion was commissioned during the quarter along with additional
water handling capacity to handle the increased fluid production.
Concurrently the H station phase 2 facility expansion to increase
fluid handling capacity from 10,000 bpd to 20,000 bpd is nearing
completion with commissioning scheduled for August. The Phase 2
expansions at K and H stations will allow for accelerated fluid
withdrawal rates supporting incremental production volumes and
additional reserves from the K and M fields in K station; and the H
fields in H station.
Construction will commence on Phase 3 expansions
to add a third process train and triple the respective original
facility capacities in K and H stations by early 2019.
Production
Production from West Bakr averaged 5,747 bopd to
TransGlobe during the second quarter, representing a 9% (473 bopd)
increase from the previous quarter due to increased production
associated with the K station phase 2 facility expansion and the
successful K-45 development well.
Production averaged 6,160 bopd during July
primarily due to the facility expansion at K station and associated
well optimization.
Sales
The Company sold 779,217 barrels of inventoried
entitlement crude to third parties through two cargo liftings for
$45.6M million in Q2-2018.
Quarterly West
Bakr Production (bopd) |
|
2018 |
2017 |
|
|
Q-2 |
|
Q-1 |
|
Q-4 |
|
Q-3 |
Gross production
rate |
|
5,747 |
|
5,274 |
|
5,024 |
|
5,651 |
TransGlobe working
interest |
|
5,747 |
|
5,274 |
|
5,024 |
|
5,651 |
TransGlobe production
inventoried (sold) |
|
(6,235 |
) |
2,136 |
|
(3,511 |
) |
2,288 |
Total sales |
|
11,982 |
|
3,138 |
|
8,535 |
|
3,363 |
Government share (royalties and tax) |
|
3,419 |
|
3,138 |
|
2,990 |
|
3,363 |
TransGlobe sales (after royalties and tax)1 |
|
8,563 |
|
— |
|
5,545 |
|
— |
Note: |
|
|
|
|
|
1 Under the terms of the West Bakr Production Sharing
Concession, royalties and taxes are paid out of the Government's
share of production sharing oil. |
|
North West Gharib, Arab Republic of
Egypt (100% working interest, operated)
Operations and Exploration
During the second quarter of 2018 the NWG
38A-Inj injector well was drilled to a total depth of 5,552 feet
and was initially planned as a water injector well. The well
encountered 92 feet of Red Bed with an internally estimated net oil
pay of 34 feet. The NWG-38A-Inj well has extended the NWG 38 pool
Red Bed zone to the south by 0.4 kilometers and is approximately 83
feet structurally lower than the NWG 38A-2 well, which was the
previous lowest known oil in the pool. The well was completed in
June and has confirmed oil in the lower portion of the Red Bed. The
well is currently under evaluation as stimulation alternatives are
considered.
Following the M-South well in West Bakr, the
Company has scheduled an additional well (NWG 38A-7) targeting the
Red Bed pool in a structurally lower position approximately 0.4
kilometers southeast of NWG 38A-Inj. Should the NWG 38A-7 well also
encounter additional oil column, the Company has planned an
additional well further south at NWG 38A-8 as a contingency for
reservoir pressure support.
Production
Production from NW Gharib averaged 1,151 bopd to
TransGlobe during the second quarter, a 18% (247 bopd) decrease
from the previous quarter, primarily due to natural declines and
curtailed production from the NWG 38A pool to manage pressure
declines prior to water injection.
Production averaged 1,083 bopd during July.
Sales
TransGlobe did not sell its entitlement share of
production from NW Gharib during the quarter.
Quarterly North
West Gharib Production (bopd) |
|
2018 |
2017 |
|
|
Q-2 |
Q-1 |
Q-4 |
Q-3 |
Gross production
rate |
|
1,151 |
1,399 |
1,212 |
876 |
TransGlobe working
interest |
|
1,151 |
1,399 |
1,212 |
876 |
TransGlobe production
inventoried (sold) |
|
417 |
507 |
439 |
318 |
Total sales |
|
734 |
892 |
773 |
558 |
Government share (royalties and tax) |
|
734 |
892 |
773 |
558 |
TransGlobe sales (after royalties and tax)1 |
|
— |
— |
— |
— |
Note: |
|
|
|
|
|
1 Under the terms of the North West Gharib Production
Sharing Concession, royalties and taxes are paid out of the
Government's share of production sharing oil. |
|
WESTERN DESERT
South Alamein, Arab Republic of Egypt
(100% working interest, operated)
Operations and Exploration
No wells were drilled during the quarter.
The Company received a seven-month extension
(January 2019) to the final exploration phase to reapply for access
to drill the SA-24X prospect, which has been submitted.
No production is currently budgeted from the
South Alamein exploration asset in 2018.
North West Sitra, Arab Republic of Egypt
(100% working interest, operated)
Operations and Exploration
During the second quarter of 2018, the Company
commenced drilling the first of two planned exploration wells in
North West Sitra (“NWS”) at NWS 9X targeting a stacked Cretaceous
prospect. Subsequent to the quarter, the well was drilled to a
total depth of 5,950 feet with no signs of hydrocarbons and was
abandoned for a total cost of ~$1.0 million.
Subsequent to the quarter, the Company commenced
drilling NWS 12X in late July following acceptance testing of a
larger drilling rig (2,000 hp). NWS 12X is targeting a
stacked Cretaceous/Jurassic prospect with an estimated drilling
time of approximately 60 days.
No production is currently budgeted from the
Western Desert exploration assets in 2018.
South Ghazalat, Arab Republic of Egypt
(100% working interest, operated)
Operations and Exploration
No wells were drilled during the second quarter
of 2018.
Subsequent to the quarter, the Company drilled
the first of two planned exploration wells in the south western
portion of South Ghazalat Concession (“SGZ”). SGZ 1X was drilled to
a total depth of 3,068 feet with no hydrocarbon shows and abandoned
for a total cost of ~$0.7 million. Based on the SGZ 1X results, the
planned SGZ 2X well was cancelled in favour of an alternate
exploration prospect (SGZ 6X) located on the eastern portion of the
concession offsetting the Raml oil field in the Abu Gharadig basin.
The drilling rig was released following SGZ 1X. The SGZ 6X prospect
is targeting stacked Cretaceous targets similar to the Raml and SW
Raml fields. It is expected that SGZ 6X will be drilled in October
following mine clearance and lease construction.
CANADA
Operations and Exploration
No wells were drilled during the second quarter of 2018.
During May, the Company completed a three week
turnaround/maintenance program on the Company’s central oil
processing battery and the main natural gas compressor. The work
was planned to coincide with a scheduled turnaround at the main
natural gas processing plant in the Harmattan area, which is
operated by a third-party. The majority of the Canadian production
was shut-in during May to accommodate this outage. Production was
brought back online on May 26th, 2018. The third-party operated gas
plant should not require a similar scheduled shutdown for a
five-year period. The 2018 production guidance numbers included the
planned turnaround.
The Company has finalized the 2018 Cardium
development drilling program, anticipated to commence in late
August/early September. The program will include six gross (five
net) horizontal Cardium development wells to be drilled from a
common pad to improve efficiencies and reduce costs. The Company is
planning to drill one two-mile extended reach horizontal (“ERH”)
well to evaluate the performance of ERH wells in the Harmattan
area. The remainder of the 2018 drilling program will consist of
one-mile horizontal wells.
Year to date, the Company has acquired 16 net
sections (10,240 acres) of Cardium prospective exploration lands to
the south/south west of the Harmattan pool during 2018. These lands
were acquired at Crown land sales at an average cost of less than
C$63.00/acre ($49.4/acre). The Company has approved an increase to
the 2018 capital program to drill a horizontal evaluation well on
the new lands to evaluate a portion of the newly acquired Cardium
rights. If successful, the new lands could provide a significant
development opportunity which is proximal to the Company's
Harmattan production and facilities. The Harmattan Cardium pool has
typically been developed by drilling four horizontal wells per
section.
Production
Production from Canada averaged 1,867 boepd to
TransGlobe during the second quarter, a 28% (731 boepd) decrease
from the previous quarter, primarily due to the planned shut-in for
the turnaround program in May.
Production has averaged 2,383 boepd during
July.
Quarterly
Canada Production (boepd) |
|
2018 |
2017 |
|
|
Q-2 |
Q-1 |
Q-4 |
Q-3 |
Canada crude oil
(bbls/d) |
|
497 |
675 |
775 |
518 |
Canada NGLs
(bbls/d) |
|
521 |
894 |
915 |
1,081 |
Canada natural gas
(mcf/d) |
|
5,094 |
6,176 |
6,058 |
6,268 |
Total production (boe/d) |
|
1,867 |
2,598 |
2,700 |
2,644 |
|
|
|
|
|
|
Condensed Consolidated Interim Statements of Earnings
(Loss) and Comprehensive Income (Loss)
(Unaudited - Expressed in thousands of US Dollars,
except per share amounts)
|
Three Months EndedJune 30 |
|
Six Months EndedJune 30 |
|
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
REVENUE |
|
|
|
|
Petroleum
and natural gas sales, net of royalties |
$ |
68,454 |
|
$ |
40,439 |
|
$ |
93,169 |
|
$ |
62,900 |
|
Finance revenue |
126 |
|
19 |
|
219 |
|
44 |
|
|
68,580 |
|
40,458 |
|
93,388 |
|
62,944 |
|
|
|
|
|
|
EXPENSES |
|
|
|
|
Production and operating |
17,299 |
|
15,079 |
|
27,940 |
|
25,400 |
|
Selling
costs |
1,080 |
|
1,502 |
|
1,126 |
|
1,502 |
|
General
and administrative |
7,583 |
|
3,362 |
|
11,579 |
|
7,808 |
|
Foreign
exchange loss (gain) |
(18 |
) |
82 |
|
(21 |
) |
67 |
|
Finance
costs |
1,353 |
|
1,717 |
|
2,701 |
|
3,265 |
|
Depletion, depreciation and amortization |
10,478 |
|
10,363 |
|
17,326 |
|
18,875 |
|
Asset
retirement obligation accretion |
66 |
|
57 |
|
133 |
|
117 |
|
Loss
(gain) on financial instruments |
16,597 |
|
(8,107 |
) |
22,761 |
|
(4,227 |
) |
Impairment loss |
— |
|
67,520 |
|
— |
|
68,711 |
|
Gain on
disposition of assets |
(4 |
) |
— |
|
(202 |
) |
— |
|
|
54,434 |
|
91,575 |
|
83,343 |
|
121,518 |
|
|
|
|
|
|
Net
earnings (loss) before income taxes |
14,146 |
|
(51,117 |
) |
10,045 |
|
(58,574 |
) |
|
|
|
|
|
Income tax expense – current |
6,785 |
|
5,505 |
|
12,804 |
|
10,925 |
|
NET EARNINGS (LOSS) FOR THE PERIOD |
$ |
7,361 |
|
$ |
(56,622 |
) |
$ |
(2,759 |
) |
$ |
(69,499 |
) |
|
|
|
|
|
OTHER COMPREHENSIVE INCOME (LOSS) |
|
|
|
|
Currency translation adjustments |
(675 |
) |
(32 |
) |
(1,679 |
) |
(615 |
) |
COMPREHENSIVE INCOME (LOSS) FOR THE PERIOD |
$ |
6,686 |
|
$ |
(56,654 |
) |
$ |
(4,438 |
) |
$ |
(70,114 |
) |
|
|
|
|
|
Earnings (loss) per share |
|
|
|
|
Basic |
$ |
0.10 |
|
$ |
(0.78 |
) |
$ |
(0.04 |
) |
$ |
(0.96 |
) |
Diluted |
$ |
0.10 |
|
$ |
(0.78 |
) |
$ |
(0.04 |
) |
$ |
(0.96 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidated Interim Balance
Sheets
(Unaudited - Expressed in thousands of US
Dollars)
|
As at |
|
As at |
|
June 30, 2018 |
|
December 31, 2017 |
ASSETS |
|
|
|
Current |
|
|
|
Cash and
cash equivalents |
$ |
38,088 |
|
$ |
47,449 |
Accounts
receivable |
41,490 |
|
18,090 |
Prepaids
and other |
4,450 |
|
4,745 |
Product inventory |
7,907 |
|
11,474 |
|
91,935 |
|
81,758 |
Non-Current |
|
|
|
Intangible exploration and evaluation assets |
43,059 |
|
41,478 |
Property
and equipment |
|
|
|
Petroleum
and natural gas assets |
191,314 |
|
200,981 |
Other assets |
3,234 |
|
3,485 |
|
$ |
329,542 |
|
$ |
327,702 |
|
|
|
|
LIABILITIES |
|
|
|
Current |
|
|
|
Accounts
payable and accrued liabilities |
$ |
24,694 |
|
$ |
27,104 |
Derivative commodity contracts |
6,777 |
|
4,015 |
|
31,471 |
|
31,119 |
Non-Current |
|
|
|
Derivative commodity contracts |
18,052 |
|
3,955 |
Long-term
debt |
62,173 |
|
69,999 |
Asset
retirement obligation |
11,533 |
|
12,332 |
Other long-term liabilities |
245 |
|
290 |
|
123,474 |
|
117,695 |
|
|
|
|
SHAREHOLDERS’ EQUITY |
|
|
|
Share
capital |
152,084 |
|
152,084 |
Accumulated other comprehensive income |
1,114 |
|
2,793 |
Contributed surplus |
23,828 |
|
23,329 |
Retained earnings |
29,042 |
|
31,801 |
|
206,068 |
|
210,007 |
|
$ |
329,542 |
|
$ |
327,702 |
|
|
|
|
|
|
Condensed Consolidated Interim Statement
of Changes in Shareholders’ Equity
(Unaudited - Expressed in thousands of US
Dollars)
|
Three Months EndedJune 30 |
|
Six Months EndedJune 30 |
|
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
|
|
|
|
|
Share Capital |
|
|
|
|
Balance, beginning of period |
$ |
152,084 |
|
$ |
152,084 |
|
$ |
152,084 |
|
$ |
152,084 |
|
Balance, end of period |
$ |
152,084 |
|
$ |
152,084 |
|
$ |
152,084 |
|
$ |
152,084 |
|
|
|
|
|
|
Accumulated Other Comprehensive Income (Loss) |
|
|
|
|
Balance,
beginning of period |
$ |
1,789 |
|
$ |
(583 |
) |
$ |
2,793 |
|
$ |
— |
|
Currency
translation adjustment |
(675 |
) |
(32 |
) |
(1,679 |
) |
(615 |
) |
Balance, end of period |
$ |
1,114 |
|
$ |
(615 |
) |
$ |
1,114 |
|
$ |
(615 |
) |
|
|
|
|
|
Contributed Surplus |
|
|
|
|
Balance,
beginning of period |
23,471 |
|
22,914 |
|
23,329 |
|
22,695 |
|
Share-based compensation expense |
357 |
|
167 |
|
499 |
|
386 |
|
Balance, end of period |
$ |
23,828 |
|
$ |
23,081 |
|
$ |
23,828 |
|
$ |
23,081 |
|
|
|
|
|
|
Retained Earnings |
|
|
|
|
Balance,
beginning of period |
$ |
21,681 |
|
$ |
97,660 |
|
$ |
31,801 |
|
$ |
110,537 |
|
Net earnings (loss) and comprehensive income (loss) |
7,361 |
|
(56,622 |
) |
(2,759 |
) |
(69,499 |
) |
Balance, end of period |
$ |
29,042 |
|
$ |
41,038 |
|
$ |
29,042 |
|
$ |
41,038 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidated Interim
Statements of Cash Flows
(Unaudited - Expressed in thousands of US
Dollars)
|
Three Months EndedJune 30 |
|
Six Months EndedJune 30 |
|
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
CASH FLOWS RELATED TO THE FOLLOWING
ACTIVITIES: |
|
|
|
|
|
|
|
|
|
OPERATING |
|
|
|
|
Net
earnings (loss) |
$ |
7,361 |
|
$ |
(56,622 |
) |
$ |
(2,759 |
) |
$ |
(69,499 |
) |
Adjustments for: |
|
|
|
|
Depletion, depreciation and amortization |
10,478 |
|
10,363 |
|
17,326 |
|
18,875 |
|
Asset
retirement obligation accretion |
66 |
|
57 |
|
133 |
|
117 |
|
Deferred
lease inducement |
(22 |
) |
(21 |
) |
(45 |
) |
(43 |
) |
Impairment loss |
— |
|
67,520 |
|
— |
|
68,711 |
|
Share-based compensation |
3,418 |
|
421 |
|
3,685 |
|
650 |
|
Finance
costs |
1,353 |
|
1,717 |
|
2,701 |
|
3,265 |
|
Unrealized (gain) loss on financial instruments |
10,816 |
|
(6,578 |
) |
16,862 |
|
(2,698 |
) |
Unrealized loss on foreign currency translation |
(7 |
) |
(2 |
) |
(22 |
) |
(21 |
) |
Gain on
asset dispositions |
(4 |
) |
— |
|
(202 |
) |
— |
|
Asset
retirement obligations settled |
40 |
|
— |
|
(257 |
) |
— |
|
Changes in non-cash working capital |
(14,613 |
) |
(19,608 |
) |
(25,691 |
) |
(24,607 |
) |
Net cash generated by (used in) operating activities |
18,886 |
|
(2,753 |
) |
11,731 |
|
(5,250 |
) |
|
|
|
|
|
INVESTING |
|
|
|
|
Additions
to intangible exploration and evaluation assets |
(673 |
) |
(3,667 |
) |
(1,581 |
) |
(14,115 |
) |
Additions
to petroleum properties |
(5,084 |
) |
(4,279 |
) |
(8,674 |
) |
(4,473 |
) |
Additions
to other assets |
(98 |
) |
(284 |
) |
(235 |
) |
(360 |
) |
Proceeds
from asset dispositions |
4 |
|
— |
|
202 |
|
— |
|
Changes
in restricted cash |
— |
|
8,515 |
|
— |
|
10,465 |
|
Changes in non-cash working capital |
159 |
|
(2,436 |
) |
(635 |
) |
516 |
|
Net cash used in investing activities |
(5,692 |
) |
(2,151 |
) |
(10,923 |
) |
(7,967 |
) |
|
|
|
|
|
FINANCING |
|
|
|
|
Interest
paid |
(1,233 |
) |
(1,891 |
) |
(2,481 |
) |
(5,582 |
) |
Increase
in long-term debt |
108 |
|
10,140 |
|
249 |
|
85,140 |
|
Repayment
of convertible debentures |
— |
|
— |
|
— |
|
(73,375 |
) |
Repayments of long-term debt |
(5,000 |
) |
(11,041 |
) |
(7,797 |
) |
(11,041 |
) |
Net cash used in financing activities |
(6,125 |
) |
(2,792 |
) |
(10,029 |
) |
(4,858 |
) |
Currency translation differences relating to cash and cash
equivalents |
(65 |
) |
152 |
|
(140 |
) |
387 |
|
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS |
7,004 |
|
(7,544 |
) |
(9,361 |
) |
(17,688 |
) |
CASH AND
CASH EQUIVALENTS, BEGINNING OF PERIOD |
31,084 |
|
21,324 |
|
47,449 |
|
31,468 |
|
CASH AND CASH EQUIVALENTS, END OF PERIOD |
$ |
38,088 |
|
$ |
13,780 |
|
$ |
38,088 |
|
$ |
13,780 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
About TransGlobe
TransGlobe Energy Corporation is a
Calgary-based, growth-oriented 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.
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",
"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 Company's strategy to grow its annual cash flow;
expectations regarding its acquisition efforts; anticipated
drilling, completion and testing plans, including, the anticipated
timing thereof, prospects being targeted by the Company, and rig
mobilization plans; expected future production from certain of the
Company's drilling locations; TransGlobe's plans to drill
additional wells, including the types of wells, anticipated number
of locations and the timing of drilling thereof; the timing of rig
movement and mobilization and drilling activity; the Company's
plans to file development lease applications for certain of its
discoveries, including the expected timing of filing of such
applications and the expected timing of receipt of regulatory
approvals; anticipated production and ultimate recoveries from
wells; to negotiate future military access (including the expected
timing thereof), including the anticipated timing of wells on
production; TransGlobe's plans to continue exploration, development
and completion programs in respect of various discoveries; future
requirements necessary to determine well performance and estimated
recoveries; 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. Brett Norris, M.Sc., P Geo, - Vice President
Exploration 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. Norris obtained a Master’s of Science Degree in
Geology from the University of Western Ontario. He is a
Registered Professional Geoscientist in the province of Alberta 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.
Certain type curve information included to in
this news release, including IP30, represents estimates of the
production decline and ultimate volumes expected to be recovered
from wells over the life of the well. This information is based on
management-generated type curves based on a combination of
historical performance of older wells and management's expectation
of what might be achieved from future wells. The information
represents what management thinks an average well will achieve.
Individual wells may be higher or lower but over a larger number of
wells management expects the average to come out to the type curve.
Over time type curves can and will change based on achieving more
production history on older wells or more recent completion
information on newer wells.
The following abbreviations used in this press release have the
meanings set forth below:
BopdMBopdBoepdMBoepdMBbl |
|
barrels of
oil per daythousand barrels of oil per daybarrels of oil equivalent
per daythousand barrels of oil equivalent per daythousand
barrels |
|
|
|
For further information, please contact:
Investor
Relations |
|
|
Telephone:
403.264.9888 |
|
|
Email:
investor.relations@trans-globe.com |
|
|
Web site:
http://www.trans-globe.com |
|
|
|
|
|
TransGlobe
Energy |
|
Via FTI Consulting |
Ross Clarkson, Chief
Executive Officer |
|
www.trans-globe.com |
Randy Neely,
President |
|
|
Eddie Ok, Chief
Financial Officer |
|
|
|
|
|
Canaccord
Genuity (Nomad & Joint Broker) |
|
+44 (0) 20 7523
8000 |
Henry
Fitzgerald-O'Connor |
|
|
James Asensio |
|
|
|
|
|
GMP First
Energy (Joint Broker) |
|
+44(0)207 448 0200 |
Jonathan Wright |
|
|
|
|
|
FTI Consulting
(Financial PR) |
|
+44 (0) 203 727
1000 |
Ben Brewerton |
|
|
Emerson Clarke |
|
transglobeenergy@fticonsulting.com |
|
|
|
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