TransGlobe Energy Corporation (TSX: TGL) (NASDAQ: TGA)
("TransGlobe" or the "Company") is pleased to announce its
financial and operating results for the three and six months ended
June 30, 2011. All dollar values are expressed in United States
dollars unless otherwise stated.
HIGHLIGHTS
-- Rapid production growth in West Gharib, 2nd quarter production of 11,356
Bopd; up 30% from Q1-2011;
-- Record Q2 average production of 11,826 Bopd, (Egypt 11,356 Bopd, Yemen
470 Bopd);
-- July production averaged 13,313 Bopd, (Egypt 11,685 Bopd, Yemen 1,628
Bopd) with Block S-1 back on production starting July 16th;
-- Record production since July 17th, averaging approximately 14,080 Bopd,
(Egypt 11,260 Bopd, Yemen 2,820 Bopd);
-- Record Q2 funds flow of $29.3 million ($0.39/share), a 21% increase over
Q1-2011;
-- Second quarter net earnings of $21.9 million ($0.29/share);
-- Drilled 10 wells in the second quarter resulting in six oil wells, two
injector and one water source well at West Gharib and one dry well at
Nuqra;
-- Initiated a secondary recovery waterflood on the Arta/East Arta Lower
Nukhul pool in early July;
-- East Ghazalat Safwa Field development plan approved in July, first
production is targeted for December 2011;
-- Expanded the Company's opportunity base in the Western Desert by
acquiring a 50% interest and operatorship of the South Alamein
Concession for $3.0 million.
A conference call to discuss TransGlobe's second quarter results
presented in this report will be held on Monday, August 8, 2011 at
9:00 a.m. Mountain Time (11:00 a.m. Eastern Time) and is accessible
to all interested parties by dialing (416) 340-8530 or toll-free
1-877-240-9772 (see also TransGlobe's news release dated August 2,
2011). Online the webcast may be accessed at
http://events.digitalmedia.telus.com/transglobe/080811/index.php
FINANCIAL AND OPERATING RESULTS
(US$000s, except per share, price, volume amounts and %
change)
Financial Three months ended June 30 Six months ended June 30
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2011 2010 % Change 2011 2010 % Change
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Oil revenue 113,615 61,540 85 211,610 123,191 72
Oil revenue, net
of royalties
and other 62,513 35,638 75 115,376 73,042 58
Derivative gain
(loss) on
commodity
contracts (35) 311 - (586) 289 -
Operating
expense 9,095 6,247 46 16,642 12,034 38
General and
administrative
expense 4,737 3,388 40 9,256 6,744 37
Depletion,
depreciation
and accretion
expense 8,203 6,136 34 15,963 12,389 29
Income taxes 17,169 9,785 75 33,704 18,525 82
Funds flow from
operations(i) 29,306 16,579 77 53,604 35,433 51
Basic per share 0.40 0.25 0.74 0.54
Diluted per
share 0.39 0.24 0.72 0.52
Net earnings 21,874 9,711 125 24,763 22,312 11
Basic per share 0.30 0.15 0.34 0.34
Diluted per
share 0.29 0.14 0.33 0.33
Capital
expenditures 19,077 14,036 36 39,384 27,265 44
Working capital 147,090 51,890 183 147,090 51,890 183
Long-term debt,
including
current portion 56,998 49,977 14 56,998 49,977 14
Common shares
outstanding
Basic
(weighted-
average) 72,959 66,031 10 72,036 65,733 10
Diluted
(weighted-
average) 75,563 68,394 10 74,726 67,612 11
Total assets 420,956 264,490 59 420,956 264,490 59
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(i) Funds flow from operations is a non-IFRS measure that represents cash
generated from operating activities before changes in
non-cash working capital
Operating
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Average
production
volumes (Bopd) 11,826 9,206 28 11,523 9,449 22
Average price ($
per Bbl) 105.57 73.46 44 101.46 72.03 41
Operating
expense ($ per
Bbl) 8.45 7.46 13 7.98 7.04 13
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CORPORATE SUMMARY
TransGlobe Energy Corporation's ("TransGlobe" or the "Company")
total production increased to a record 11,826 barrels of oil per
day ("Bopd") during the quarter. This record was achieved during a
difficult period of political transition in both the Arab Republic
of Egypt ("Egypt") and the Republic of Yemen ("Yemen"). The
political environment in Egypt has stabilized and business
processes and operations are returning to normal. Yemen is still
unsettled and the Company had 2,300 Bopd shut-in on Block S-1
during the entire second quarter. Production was restored in Block
S-1, Yemen on July 16th, increasing the Company's total production
to over 14,000 Bopd.
The focus of the 2011/2012 drilling program continues on
developing the Arta/East Arta pools in the West Gharib project in
Egypt. There are two drilling rigs assigned to this project and a
third rig commenced drilling in May. The West Gharib project area
is now the primary producing asset in the Company's portfolio and
continues to be the growth engine for the future. Early production
gains from the Lower Nukhul in Arta/East Arta have offset the
shut-in production in Yemen. This has allowed the Company to
maintain 2011 production guidance of 13,000 to 13,500 Bopd.
The pending acquisition of 4,000 Bopd in the West Bakr
Concession (100% WI) announced March 25 will add a new project area
adjacent to the West Gharib properties. There are numerous
development opportunities and operational synergies expected from
the acquisition. The Company completed its due diligence and
submitted the deed of assignment for Government approval. Closing
is planned to occur shortly after receiving all Government
approvals.
In the Western Desert, the East Ghazalat Safwa development was
approved in July. The commencement of first production
(approximately 800 to 1,200 Bopd to TransGlobe) is expected in
December of this year.
The Company entered into an agreement to acquire a 50% interest
in its first operated project in the Western Desert of Egypt in the
South Alamein concession. The acquisition includes a Cretaceous
light oil discovery at Boraq 2X which will be appraised and
developed in the near term. The acquisition is subject to the
normal government approvals of the acquisition and approval of the
Boraq development plan. The South Alamein concession is a large
558,000 acre exploration license which has a number of prospects
identified on 3-D seismic.
With the addition of West Bakr and the commencement of
production at East Ghazalat, total Company production could reach
20,000 Bopd by year end.
Brent oil prices remained strong, averaging $117 per barrel in
the second quarter. During the quarter, the Company had record
funds flow of $29.3 million, to exit the quarter with positive
working capital of $147 million and long-term debt of $60.0
million.
The Company has a very strong financial position and continues
the pursue business development opportunities in Egypt to expand
its growing opportunity base. Year-to-date, the Company has
collected $90.0 million from the Egyptian Government and continues
to receive payments on a regular basis.
OPERATIONS UPDATE
ARAB REPUBLIC OF EGYPT
West Gharib, Arab Republic of Egypt (100% working interest,
TransGlobe operated)
Operations and Exploration
During the second quarter, nine wells were drilled resulting in
six oil wells, two water injectors and one water source well. Seven
of the nine wells drilled in the second quarter were targeting the
Nukhul formation at Arta/East resulting in two Upper Nukhul oil
wells, two Lower Nukhul oil wells (Upper Nukhul present, but not
completed), two Lower Nukhul water injectors and one water source
well for the Lower Nukhul waterflood enhanced recovery scheme. Oil
wells were drilled at Hana West and Hoshia when the third drilling
rig arrived. The Hana West #10 well was placed on production at an
initial rate of 960 Bopd from the Rudeis formation in early June.
The Hoshia #10 well was placed on production at an initial rate of
100 Bopd from the Nukhul formation in July.
Subsequent to the quarter, five additional oil wells were
drilled resulting in four Upper Nukhul oil wells in the Arta/East
Arta pools and one oil well at Hoshia #12.
Two drilling rigs are scheduled to remain in the Arta/East Arta
area primarily focused on the Nukhul formation for the balance of
the year. The third rig is currently scheduled to drill wells in
the Hoshia and West Hoshia area in the third quarter.
Production
Production from West Gharib averaged 11,356 Bopd to TransGlobe
during the second quarter, a 30% (2,618 Bopd) increase from the
previous quarter. Production increases were primarily attributable
to increased Nukhul production from the Arta/East Arta pools and
from Hana West. West Gharib's production in July averaged 11,685
Bopd, comparable with June production. By mid-July the increased
trucked volumes at West Gharib were exceeding the process capacity
to receive oil and water at the GPC operated Ras Gharib terminal.
The Company has initiated a number of projects in the field to
reduce the amount of water that is currently trucked with the oil
to GPC. The Company is also working with EGPC and GPC to look at
short term debottlenecking activities to increase system capacity.
It is expected that the production constraint will be progressively
removed over the next 30 to 60 days. It is estimated that
approximately 700 Bopd of oil sales has been curtailed since
mid-July.
Lower Nukhul Development
The Lower Nukhul (Arta/East Arta) pool has dominated production
growth in the second quarter, increasing from 1,246 Bopd in January
to approximately 5,000 Bopd in June/July. The excellent reservoir
quality of the Lower Nukhul sandstone reservoir allows for high
production rates. Based on drilling to date, the Lower Nukhul pool
is estimated to have a Petroleum Initially in Place ("PIIP") of
approximately 38 to 50 million barrels ("MMBbl") (P90 to P10). This
estimate is based on in-house deterministic calculations using the
well control in the Lower Nukhul reservoir and the 3-D seismic
interpretation. The Company initiated reservoir simulation modeling
and design work on a waterflood project to provide pressure support
and enhance recoveries for the pool commencing in the third
quarter. The Company initiated water injection into the lower
Nukhul pool on July 4th and will ramp up injection during the third
quarter. Based on preliminary in-house reservoir simulation work it
is expected that recovery factors for the Lower Nukhul pool will
increase to the 30%+ range with a waterflood.
Upper Nukhul Development
The Upper Nukhul formation at Arta/East Arta is a thick (150
feet) mixture of clastics and carbonates which requires a fracture
stimulation ("frac") to enhance productivity and recovery factors.
The initial frac program was focused on the original Arta wells
located near the crest of the Arta structure during the first half
of 2010. Starting in May of 2010 new wells were drilled to
delineate the extent of the Upper Nukhul formation at Arta/East
Arta resulting in better quality Upper Nukhul wells on the flank of
the structure.
In total (existing wells and new wells), the frac'd Upper Nukhul
wells have averaged 230 Bopd in the first month of production after
a frac with a 68% decline rate in the first year. Only four
existing wells have been on production longer than nine months
following a frac.
The new producing Upper Nukhul wells drilled after May 2010 have
averaged 325 Bopd/well during the first month of production after a
frac. For planning purposes the Company has assumed a new well
initial production rate of 250 Bopd/well with a 70% decline in the
first year, a 35% decline in the second year and 25% per year
thereafter. On average the new wells are on plan or exceeding plan
based on early production histories of nine months or less.
Quarterly West Gharib Production (Bopd)
2011 2010
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Q-2 Q-1 Q-4 Q-3
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Gross production rate 11,356 8,738 7,941 7,601
TransGlobe working
interest 11,356 8,738 7,941 7,601
TransGlobe net (after
royalties) 6,235 4,820 4,634 4,626
TransGlobe net (after
royalties and tax)(i) 4,306 3,293 3,338 3,460
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(i) 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 (SUBJECT TO CLOSING 100%
working interest, TransGlobe operated)
On March 28, 2011, the Company announced it had entered into a
Sale and Purchase Agreement ("SPA") to acquire all the Egyptian
assets of The Egyptian Petroleum Development Co. Ltd. (of Japan)
("EPEDECO") for $60 million plus or minus adjustments, effective
July 1, 2010 subject to approval from the Egyptian Government.
EPEDECO holds a 100% working interest in the West Bakr Production
Sharing Concession ("PSC").
The West Bakr PSC is located onshore in the western Gulf of Suez
rift basin of Egypt adjacent to TransGlobe's West Gharib Concession
and is producing approximately 4,000 Bopd gross (before the
production sharing split with the Government of Egypt). The Company
has identified a number of optimization/development projects and
drilling opportunities that could increase production and
recoverable reserves.
The produced oil ranges from 17 degrees to 20 degrees API and is
pipeline connected to the Ras Gharib terminal on the coast, which
is the same export terminal to which West Gharib production is
currently trucked. The West Bakr blend has historically received
Brent minus 25% pricing.
The West Bakr Concession production sharing terms are as
follows: cost oil of 30%, production sharing of 15% to the
Contractor and 85% to the Government, excess cost oil goes 100% to
the Government, capital investments are amortized over five years
and operating expenses are amortized in the quarter incurred. All
Government royalties and taxes are paid out of the Government's
share of production sharing oil.
TransGlobe has completed due diligence and submitted the deed of
assignment for Government approval. TransGlobe expects to close the
acquisition shortly after receiving the necessary Government
approvals.
East Ghazalat Block, Arab Republic of Egypt (50% working
interest)
Operations and Exploration
On July 12, 2011 the Safwa development lease was approved by the
Government. The Safwa development lease has a 20-year term (expires
July 11, 2031) and covers approximately 11,040 acres or 15
development blocks. The Safwa development lease is subject to a
4-year review (July 11, 2015) to determine which development blocks
are producing or contributing to production. The non-producing
(non-contributing) blocks will be relinquished following the
review. The Safwa Development lease could be extended an additional
5 years (July 11, 2036).
The East Ghazalat exploration concession is in the first
two-year extension period (expires June, 2012). An additional
two-year extension is available following a relinquishment of 25%
of the original concession area. All work commitments have been
met.
The operator has proposed an initial development budget of $2.6
million ($1.3 million to TransGlobe) to complete and equip the
existing four wells for production. Processing facilities will be
rented for the initial production phase until facility design and
construction has been completed. Facility design work is expected
to commence following the next drilling phase in 2012. The operator
is targeting first production to commence in December 2011. It is
expected that the wells will initially be capable of producing
400-600 Bopd per well from the Bahariya formation, which could
contribute an additional 800 to 1,200 Bopd of light (34 degrees
API) sweet crude to the Company by year-end. Production will
initially be trucked to a sales pipeline approximately 95
kilometers north and west of the Safwa field.
The East Ghazalat Concession production sharing terms are as
follows: cost oil of 25%, production sharing of 20% to the
Contractor and 80% to the Government, excess cost oil goes 100% to
the Government, capital investments are amortized over five years
and operating expenses are amortized in the quarter incurred. All
Government royalties and taxes are paid out of the Government's
share of production sharing oil.
South Alamein, Arab Republic of Egypt (SUBJECT TO CLOSING - 50%
working interest, TransGlobe operated)
On June 29, 2011, the Company announced it had entered into a
Sale and Purchase Agreement ("SPA") to acquire Cepsa Egypt's 50%
operated working interest in South Alamein for $3.0 million plus an
inventory adjustment, effective on and subject to approval from the
Egyptian Government. El Paso South Alamein ("El Paso SA"), a
subsidiary of Houston-based El Paso Corporation, holds the
remaining 50% interest in the South Alamein Production Sharing
Contract ("PSC"). Ancillary to this transaction is an agreement
between TransGlobe and El Paso SA on a go-forward appraisal program
in exchange for El Paso SA waiving its preferential right under its
joint operating agreement with Cepsa Egypt. TransGlobe will assume
operatorship of the South Alamein Concession upon closing of this
transaction.
The South Alamein Concession is located onshore in the Western
Desert of Egypt and includes portions of the prolific Alamein and
Tiba basins. The current size of this exploration concession is
2,258 square kilometers (558,120 acres). The concession includes an
oil discovery well, Boraq-2X, which tested a combined 1,700 Bopd of
38 degrees to 40 degrees API oil from two Cretaceous zones. Initial
work by TransGlobe will focus on appraisal and development the
Boraq-2X discovery which includes drilling at least two appraisal
wells and readying the Boraq-2X well for production. The Boraq-2X
discovery is close to existing infrastructure which should reduce
development time and capital.
The Company plans to submit a revised budget and development
plan for the Boraq discovery to the Egyptian Government for
approval, following closing of the transaction.
The South Alamein PSC is in the first, three-year extension
period which expires on April 5, 2012. A further two-year extension
(April 5, 2014) is available following a 30% relinquishment of the
original concession area. An extensive 3-D seismic acquisition
program was executed over the entire South Alamein Concession area.
This has resulted in several well-defined prospects throughout the
area and will provide TransGlobe with numerous exploration drilling
opportunities. TransGlobe expects to carry out an exploration
drilling program after the Boraq field is brought into
production.
TransGlobe expects to close the acquisition after receiving the
necessary Egyptian Government approvals.
Nuqra Block 1, Arab Republic of Egypt (71.43% working interest,
TransGlobe operated)
Operations and Exploration
During the second quarter, the Company drilled one exploration
well (Diwan #1) which was plugged and abandoned. Diwan #1 was
drilled to a total depth of 6,750 feet, approximately 304 feet into
the Basement. The well encountered good quality reservoir sands
which were not hydrocarbon bearing.
The 3.65 million acre Nuqra Block exploration concession is in
the second and final extension period which is scheduled to expire
in July 2012. The Company has met all the work commitments of the
second extension period and has no plans for further exploration at
this time.
YEMEN EAST- Masila Basin
Block 32, Republic of Yemen (13.81% working interest)
Operations and Exploration
No wells were drilled during the second quarter.
Production
Production from Block 32 averaged 3,401 Bopd (470 Bopd to
TransGlobe) during the quarter, representing a 12% decrease from
the previous quarter primarily due to natural declines.
In July, production averaged approximately 3,235 Bopd (447 Bopd
to TransGlobe).
Block 32 production is exported to the Indian Ocean via the
Nexen operated export pipeline which has not been impacted by
recent political unrest in Yemen.
Quarterly Block 32 Production (Bopd)
2011 2010
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Q-2 Q-1 Q-4 Q-3
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Gross production rate 3,401 3,869 4,206 4,232
TransGlobe working
interest 470 534 581 585
TransGlobe net (after
royalties) 263 241 344 332
TransGlobe net (after
royalties and tax)(i) 195 135 265 248
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(i) Under the terms of the Block 32 PSA, royalties and taxes are paid
out of the Government's share of production sharing oil.
Block 72, Republic of Yemen (20% working interest)
Operations and Exploration
The Government has approved a six-month extension to the second
exploration period and has extended the expiry date to January 11,
2012. All work commitments of the Second exploration period have
been completed.
In addition, Total E&P Yemen was approved as operator of
Block 72 on May 24, 2011.
YEMEN WEST- Marib Basin
Block S-1, Republic of Yemen (25% working interest)
Operations and Exploration
The operator suspended the drilling program in the first quarter
due to security and logistic concerns associated with the political
events in Yemen.
Production
The oil export pipeline for Block S-1 production from Marib to
the Ras Eisa port on the Red Sea was shut down from March 17, 2011
to July 15, 2011. Production from TransGlobe's An Nagyah field on
Block S-1 was shut-in for approximately 4 months until repairs to
the export pipeline were completed in mid-July. The pipeline was
damaged by local tribal groups who prevented repair crew access to
the pipeline until an agreement was reached with the
government.
Production from Block S-1 averaged 0 Bopd (0 Bopd to TransGlobe)
during the second quarter due to the damaged export pipeline.
Production for the month of July averaged 4,724 Bopd (1,181 Bopd
to TransGlobe). July production was impacted by zero production for
the first 15 days of July. Current production is approximately
9,100 Bopd (2,275 Bopd to TransGlobe).
Quarterly S-1 Block Production (Bopd)
2011(ii) 2010
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Q-2 Q-1 Q-4 Q-3
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Gross production rate - 7,784 9,068 7,812
TransGlobe working
interest - 1,946 2,267 1,952
TransGlobe net (after
royalties) - 1,003 1,188 1,003
TransGlobe net (after
royalties and tax)(i) - 758 895 756
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(i) Under the terms of the S-1 Block PSA, royalties and taxes are paid out
of the Government's share of production sharing oil.
(ii) Production shut-in from March 17 to July 15, 2011.
Block 75, Republic of Yemen (25% working interest)
Operations and Exploration
The PSA for Block 75 was ratified and signed into law effective
March 8, 2008. The first, three-year exploration phase has a work
commitment of 3-D seismic and one exploration well. The 3-D seismic
was acquired in 2009. One exploration well was planned as part of
the 2011 Block S-1/75 drilling program. The first exploration phase
was extended six months to September 8, 2011.
With the suspension of the Block S-1/Block 75 drilling program
in the first quarter of 2011, the Block 75 exploration well
(Osaylan SW) which was scheduled for the second quarter of 2011 has
been deferred. The Operator has declared Force Majeure under the
PSA due to logistics and security concerns associated with the
suspended drilling program. The Osaylan SW exploration well is
targeting a Lam formation exploration prospect which has an
internally estimated gross PIIP of 184 MMBbl using the
probabilistic P-mean case.
MANAGEMENT'S DISCUSSION AND ANALYSIS
August 4, 2011
Management's discussion and analysis ("MD&A") should be read
in conjunction with the unaudited Condensed Consolidated Interim
Financial Statements for the three and six months ended June 30,
2011 and 2010 and the audited financial statements and MD&A for
the year ended December 31, 2010 included in the Company's annual
report. Additional information relating to the Company, including
the Company's Annual Information Form, is on SEDAR at
www.sedar.com. The Company's annual report and Form 40-F may be
found on EDGAR at www.sec.gov.
As of January 1, 2011, TransGlobe Energy Corporation adopted
International Financial Reporting Standards ("IFRS"), and the
following disclosure, as well as the associated Condensed
Consolidated Interim Financial Statements, have been prepared in
accordance with IFRS. The Company's effective transition date is
January 1, 2010, to accommodate 2010 IFRS comparative figures. The
Company has provided information throughout this document to assist
users in understanding the transition from Canadian Generally
Accepted Accounting Principles ("GAAP"). A summary of all of the
significant changes including the various reconciliations of GAAP
financial statements to those prepared under IFRS is included in
Note 23 in the Company's unaudited Condensed Consolidated Interim
Financial Statements for the three and six months ended June 30,
2011. Further information, including full disclosure of the
accounting policies adopted on transition to IFRS along with
additional reconciliations of GAAP financial statements to those
prepared under IFRS, can be found in the notes to the Condensed
Consolidated Interim Financial Statements for the three months
ended March 31, 2011.
READER ADVISORIES
Forward-Looking Statements
This MD&A may include certain statements that may be deemed
to be "forward-looking statements" within the meaning of the U.S.
Private Securities Litigation Reform Act of 1995. Such statements
relate to possible future events. All statements other than
statements of historical fact may be forward-looking statements.
Forward-looking statements are often, but not always, identified by
the use of words such as "seek", "anticipate", "plan", "continue",
"estimate", "expect", "may", "will", "project", "predict",
"potential", "targeting", "intend", "could", "might", "should",
"believe" and similar expressions. These statements involve known
and unknown risks, uncertainties and other factors that may cause
actual results or events to differ materially from those
anticipated in such forward-looking statements. Although
TransGlobe's forward-looking statements are based on the beliefs,
expectations, opinions and assumptions of the Company's management
on the date the statements are made, such statements are inherently
uncertain and provide no guarantee of future performance. Actual
results may differ materially from TransGlobe's expectations as
reflected in such forward-looking statements as a result of various
factors, many of which are beyond the control of the Company. These
factors include, but are not limited to, unforeseen changes in the
rate of production from TransGlobe's oil and gas properties,
changes in price of crude oil and natural gas, adverse technical
factors associated with exploration, development, production or
transportation of TransGlobe's crude oil and natural gas reserves,
changes or disruptions in the political or fiscal regimes in
TransGlobe's areas of activity, changes in tax, energy or other
laws or regulations, changes in significant capital expenditures,
delays or disruptions in production due to shortages of skilled
manpower, equipment or materials, economic fluctuations, and other
factors beyond the Company's control. TransGlobe does not assume
any obligation to update forward-looking statements, other than as
required by law, if circumstances or management's beliefs,
expectations or opinions should change and investors should not
attribute undue certainty to, or place undue reliance on, any
forward-looking statements. Please consult TransGlobe's public
filings at www.sedar.com and www.sec.gov for further, more detailed
information concerning these matters.
Non-IFRS 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 non-IFRS
measure that represents cash generated from operating activities
before changes in non-cash working capital. Management considers
this a key measure as it demonstrates TransGlobe's ability to
generate the cash flow necessary to fund future growth through
capital investment. Funds flow from operations may not be
comparable to similar measures used by other companies.
Reconciliation of funds flow from operations
Three Months Ended June 30 Six Months Ended June 30
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(000s) 2011 2010 2011 2010
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Cash flow from operating
activities 52,604 13,548 55,817 24,818
Changes in non-cash
working capital (23,298) 3,031 (2,213) 10,615
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Funds flow from
operations 29,306 16,579 53,604 35,433
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Debt-to-funds flow ratio
Debt-to-funds flow is a non-IFRS measure that is used to set the
amount of capital in proportion to risk. The Company's
debt-to-funds flow ratio is computed as long-term debt, including
the current portion, 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 non-IFRS measure that represents sales net of
royalties (all government interests, net of income taxes),
operating expenses and current taxes. Management believes that
netback is a useful supplemental measure to analyze operating
performance and provide an indication of the results generated by
the Company's principal business activities prior to the
consideration of other income and expenses. Netback may not be
comparable to similar measures used by other companies.
TRANSGLOBE'S BUSINESS
TransGlobe is a Canadian-based, publicly traded, oil exploration
and production company whose activities are located in two
geographic areas, the Arab Republic of Egypt ("Egypt") and the
Republic of Yemen ("Yemen"). Egypt and Yemen include the Company's
exploration, development and production of crude oil.
SELECTED QUARTERLY FINANCIAL INFORMATION
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2011 2010
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($000s, except
per share,
price and
volume amounts) Q-2 Q-1 Q-4 Q-3 Q-2 Q-1
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Average sales
volumes (Bopd) 11,826 11,218 10,789 10,138 9,206 9,694
Average price
($/Bbl) 105.57 97.06 79.83 71.27 73.46 70.66
Oil sales 113,615 97,995 79,240 66,470 61,540 61,651
Oil sales, net
of royalties
and other 62,513 52,863 45,198 38,980 35,638 37,404
Cash flow from
operating
activities 52,604 3,213 16,129 13,645 13,548 11,270
Funds flow from
operations(i) 29,306 24,298 18,464 19,081 16,579 18,854
Funds flow from
operations per
share
- Basic 0.40 0.34 0.28 0.29 0.25 0.29
- Diluted 0.39 0.33 0.26 0.28 0.24 0.28
Net earnings
(loss) 21,874 2,889 8,932 9,321 9,711 12,601
Net earnings
(loss) per
share
- Basic 0.30 0.04 0.13 0.14 0.15 0.19
- Diluted 0.29 0.04 0.13 0.13 0.14 0.19
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total assets 420,956 404,184 345,625 278,426 264,490 248,837
Cash and cash
equivalents 122,659 86,353 57,782 15,412 21,437 18,845
Total long-term
debt, including
current portion 56,998 56,731 86,420 46,045 49,977 49,888
Debt-to-funds
flow ratio(ii) 0.6 0.7 1.2 0.6 0.9 0.9
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
2009(iii)
----------------------------------------------------------------------------
($000s, except
per share,
price and
volume amounts) Q-4 Q-3
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Average sales
volumes (Bopd) 8,656 8,864
Average price
($/Bbl) 62.84 57.41
Oil sales 50,044 46,818
Oil sales, net
of royalties
and other 28,788 28,495
Cash flow from
operating
activities 12,594 1,264
Funds flow from
operations(i) 9,703 12,603
Funds flow from
operations per
share
- Basic 0.15 0.19
- Diluted 0.15 0.19
Net earnings
(loss) 2,516 (1,618)
Net earnings
(loss) per
share
- Basic 0.04 (0.02)
- Diluted 0.04 (0.02)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total assets 228,882 228,964
Cash and cash
equivalents 16,177 14,804
Total long-term
debt, including
current portion 49,799 52,686
Debt-to-funds
flow ratio(ii) 1.1 1.3
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(i) Funds flow from operations is a non-IFRS measure that represents cash
generated from operating activities before changes in non-cash working
capital.
(ii) Debt-to-funds flow ratio is a non-IFRS measure that represents total
current and long-term debt over funds flow from operations for the
trailing 12 months.
(iii) Financial information presented for 2009 has been prepared in
accordance with GAAP. This information has not been restated for
differences between GAAP and IFRS.
During the second quarter of 2011, TransGlobe has:
-- Maintained a strong financial position, reporting a debt-to-funds flow
ratio of 0.6 at June 30, 2011 (June 30, 2010 - 0.9);
-- Funded capital programs entirely with funds flow from operations;
-- Reported a 77% increase in funds flow from operations due to a 44%
increase in commodity prices along with a 28% increase in sales volumes
compared to Q2-2010; and
-- Reported net earnings in Q2-2011 of $21.9 million (Q2-2010 - $9.7
million). Please refer to the 2011 Variances table for details on the
variance from Q2-2010 to Q2-2011.
2011 VARIANCES
$ Per Share
$000s Diluted % Variance
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Q2-2010 net earnings 9,711 0.14
----------------------------------------------------------------------------
Cash items
Volume variance 24,787 0.34 255
Price variance 27,287 0.36 281
Royalties (25,199) (0.33) (259)
Expenses:
Operating (2,848) (0.04) (29)
Realized derivative loss 51 - 1
Cash general and
administrative (976) (0.02) (10)
Current income taxes (9,949) (0.13) (102)
Realized foreign exchange
gain 306 - 3
Interest on long-term debt (463) (0.01) (5)
Other income 130 - 1
----------------------------------------------------------------------------
Total cash items variance 13,126 0.17 136
----------------------------------------------------------------------------
Non-cash items
Unrealized derivative gain (397) (0.01) (5)
Unrealized foreign exchange
loss (98) - (1)
Depletion and depreciation (2,067) (0.03) (21)
Impairment loss (416) (0.01) (4)
Stock-based compensation (254) - (3)
Deferred income taxes 2,565 0.03 26
Deferred lease inducement (119) - (1)
Amortization of deferred
financing costs (177) - (2)
----------------------------------------------------------------------------
Total non-cash items
variance (963) (0.02) (11)
----------------------------------------------------------------------------
Q2-2011 net earnings 21,874 0.29 125
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net income increased to $21.9 million in Q2-2011 compared to
$9.7 million in Q2-2010, which was mainly due to significant
increases in commodity prices and production volumes. Partially
offsetting these increases were increased royalties and taxes,
along with increased operating costs and depletion and depreciation
expense.
BUSINESS ENVIRONMENT
The Company's financial results are significantly influenced by
fluctuations in commodity prices, including price differentials.
The following table shows select market benchmark prices and
foreign exchange rates:
2011 2010
----------------------------------------------------------------------------
Q-2 Q-1 Q-4 Q-3 Q-2
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Dated Brent average
oil price ($/Bbl) 117.36 104.97 86.41 76.86 78.30
U.S./Canadian Dollar
average exchange
rate 0.968 0.997 1.013 1.039 1.028
----------------------------------------------------------------------------
----------------------------------------------------------------------------
The price of Dated Brent oil averaged 50% higher in Q2-2011
compared with Q2-2010. The recent political instability in Egypt
and Yemen could present challenges to the Company if the issues
persist over an extended period of time. TransGlobe's management
believes the Company is well positioned to adapt to the current
political situations in Egypt and Yemen due to its increasing
production, manageable debt levels, positive cash generation from
operations and the availability of cash and cash equivalents.
All of the Company's production is priced based on Dated Brent
and shared with the respective governments through Production
Sharing Agreements. When the price of oil goes up, it takes fewer
barrels to recover costs (cost recovery barrels) which are assigned
100% to the Company. The contracts provide for cost recovery per
quarter up to a maximum percentage of total revenue. Typically
maximum cost recovery ranges from 25% to 60% of production
depending on the country and the contract. Generally the balance of
the production is shared with the respective government (production
sharing oil). Depending on the contract, the government receives 70
to 85% of the production sharing oil. Production sharing splits are
set in each contract for the life of the contract. Typically the
government's share of production sharing oil increases when
production exceeds pre-set production levels in the respective
contracts. During times of increased oil prices, the Company
receives less cost oil and more production sharing oil. For
reporting purposes, the Company records the respective government's
share of production as royalties and taxes (all taxes are paid out
of the government's share of production).
OPERATING RESULTS AND NETBACK
Daily Volumes, Working Interest before Royalties and Other
(Bopd)
Three Months Ended Six Months Ended
June 30 June 30
----------------------------------------------------------------------------
2011 2010 2011 2010
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Egypt - Oil sales 11,356 6,631 10,054 6,739
Yemen - Oil sales 470 2,575 1,469 2,710
----------------------------------------------------------------------------
Total Company - daily sales
volumes 11,826 9,206 11,523 9,449
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Netback
Consolidated
Six Months Ended June 30
----------------------------------------------------------------------------
2011 2010
----------------------------------------------------------------------------
(000s, except per Bbl amounts) $ $/Bbl $ $/Bbl
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Oil sales 211,610 101.46 123,191 72.03
Royalties and other 96,234 46.14 50,149 29.32
Current taxes 35,491 17.02 17,834 10.43
Operating expenses 16,642 7.98 12,034 7.04
----------------------------------------------------------------------------
Netback 63,243 30.32 43,174 25.24
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three Months Ended June 30
----------------------------------------------------------------------------
2011 2010
----------------------------------------------------------------------------
(000s, except per Bbl amounts) $ $/Bbl $ $/Bbl
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Oil sales 113,615 105.57 61,540 73.47
Royalties and other 51,102 47.49 25,902 30.92
Current taxes 19,163 17.81 9,214 11.00
Operating expenses 9,095 8.45 6,247 7.46
----------------------------------------------------------------------------
Netback 34,255 31.82 20,177 24.09
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Egypt
Six Months Ended June 30
----------------------------------------------------------------------------
2011 2010
----------------------------------------------------------------------------
(000s, except per Bbl amounts) $ $/Bbl $ $/Bbl
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Oil sales 183,646 100.92 85,125 69.79
Royalties and other 82,621 45.40 32,783 26.88
Current taxes 31,567 17.35 13,014 10.67
Operating expenses 12,865 7.07 7,487 6.14
----------------------------------------------------------------------------
Netback 56,593 31.10 31,841 26.10
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three Months Ended June 30
----------------------------------------------------------------------------
2011 2010
----------------------------------------------------------------------------
(000s, except per Bbl amounts) $ $/Bbl $ $/Bbl
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Oil sales 108,672 105.16 43,094 71.42
Royalties and other 49,004 47.42 16,839 27.91
Current taxes 18,462 17.87 6,701 11.11
Operating expenses 7,547 7.30 3,845 6.37
--------------------------------------------------------------------------
Netback 33,659 32.57 15,709 26.03
----------------------------------------------------------------------------
----------------------------------------------------------------------------
The netback per Bbl in Egypt increased 25% and 19% respectively,
in the three and six months ended June 30, 2011 compared with the
same periods of 2010, mainly as a result of oil prices increasing
by 47% and 45%, respectively, which was partially offset by higher
royalty and tax rates. The average selling price during the three
months ended June 30, 2011 was $105.16/Bbl, which represents a
quality adjustment of approximately $12.20/Bbl relative to the
average Dated Brent oil price for the period of $117.36/Bbl.
Royalties and taxes as a percentage of revenue increased to 62%
in the three and six months ended June 30, 2011, compared with 54%
in the same period of 2010. Royalty and tax rates fluctuate in
Egypt due to changes in the cost oil whereby the Production Sharing
Contract ("PSC") allows for recovery of operating and capital costs
through a reduction in government take. Cost recovery for the
purposes of calculating cost oil is based on expenses incurred and
paid in the period plus capital costs which are amortized over four
years.
Operating expenses on a per Bbl basis for both the three and six
month periods ended June 30, 2011 increased by 15% compared with
the same periods of 2010. This is mainly due to increases in
workovers, oil treatment fees, fuel costs and labour costs during
the three and six month periods ended June 30, 2011 compared with
the same periods in 2010.
Yemen
Six Months Ended June 30
----------------------------------------------------------------------------
2011 2010
----------------------------------------------------------------------------
(000s, except per Bbl amounts) $ $/Bbl $ $/Bbl
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Oil sales 27,964 105.17 38,066 77.60
Royalties and other 13,613 51.20 17,366 35.40
Current taxes 3,924 14.76 4,820 9.83
Operating expenses 3,777 14.21 4,547 9.27
----------------------------------------------------------------------------
Netback 6,650 25.00 11,333 23.10
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three Months Ended June 30
----------------------------------------------------------------------------
2011 2010
----------------------------------------------------------------------------
(000s, except per Bbl amounts) $ $/Bbl $ $/Bbl
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Oil sales 4,943 115.57 18,446 78.72
Royalties and other 2,098 49.05 9,063 38.68
Current taxes 701 16.39 2,513 10.72
Operating expenses 1,548 36.19 2,402 10.25
----------------------------------------------------------------------------
Netback 596 13.94 4,468 19.07
----------------------------------------------------------------------------
----------------------------------------------------------------------------
The Yemen three month and six month netbacks on a per Bbl basis
are significantly influenced by the shut-in of Block S-1 production
for the entire second quarter and 14 days in the first quarter.
During the shut-in period on Block S-1, the Company continued to
incur the majority of the operating costs which significantly
impacted the per Bbl operating costs and the resulting per Bbl
netbacks for the respective periods. These operating costs will be
recovered in future quarters.
In Yemen, the netback per Bbl decreased 27% in the three months
ended June 30, 2011 and increased 8% in the six months ended June
30, 2011, compared with the same periods in 2010. This is mainly
due to production being shut-in on Block S-1 for the entire second
quarter of 2011. The effects of the shut-in on Block S-1 were
partially offset by increases in oil prices received for Block 32
production of 47% and 36%, respectively, in the three and six
months ended June 30, 2011 compared to the same periods in
2010.
Royalties and taxes as a percentage of revenue changed to 57%
and 63%, respectively, in the three and six months ended June 30,
2011, compared with 63% and 58%, respectively, in the same periods
in 2010. Royalty and taxes fluctuate in Yemen due to changes in the
amount of cost sharing oil, whereby the Block 32 and Block S-1
Production Sharing Agreements ("PSAs") allow for the recovery of
operating and capital costs through a reduction in Ministry of Oil
and Minerals' take of oil production.
Operating expenses on a per Bbl basis for the three and six
months ended June 30, 2011 increased by 253% and 53%, respectively,
mostly due to decreases in production volumes of 82% and 46%,
respectively. These decreases in production volumes are mainly the
result of production being shut-in on Block S-1 from March 17, 2011
through to the end of the second quarter. While production volumes
were down, the Company continued to incur the majority of the
operating costs on Block S-1 which significantly impacted operating
expenses per Bbl.
DERIVATIVE COMMODITY CONTRACTS
TransGlobe uses hedging arrangements as part of its risk
management strategy to manage commodity price fluctuations and
stabilize cash flows for future exploration and development
programs. The hedging program is actively monitored and adjusted as
deemed necessary to protect the cash flows from the risk of
commodity price exposure.
The estimated fair value of unrealized commodity contracts is
reported on the Condensed Consolidated Interim Balance Sheets, with
any change in the unrealized positions recorded to earnings. The
fair values of these transactions are based on an approximation of
the amounts that would have been paid to, or received from,
counter-parties to settle the transactions outstanding as at the
balance sheet date with reference to forward prices and market
values provided by independent sources. The actual amounts realized
may differ from these estimates.
The realized losses on commodity contracts in the first six
months of 2011 and 2010 relates mostly to the purchase of separate
new financial floor derivative commodity contracts for $0.4 million
each, in each respective period. The mark-to-market valuation of
TransGlobe's future derivative commodity contracts decreased from a
$0.3 million asset at December 31, 2010 to a $0.1 million asset at
June 30, 2011, thus resulting in a $0.2 million unrealized loss on
future derivative commodity contracts being recorded in the
period.
Three Months Ended Six Months Ended
June 30 June 30
----------------------------------------------------------------------------
(000s) 2011 2010 2011 2010
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Realized cash (loss) gain on
commodity contracts(i) - (51) (364) (417)
Unrealized gain (loss) on
commodity contracts(ii) (35) 362 (222) 706
----------------------------------------------------------------------------
Total derivative gain (loss) on
commodity contracts (35) 311 (586) 289
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(i) Realized cash gain (loss) represents actual cash settlements, receipts
and premiums paid under the respective contracts.
(ii) The unrealized loss on derivative commodity contracts represents the
change in fair value of the contracts during the period.
If the Dated Brent oil price remains at the level experienced at
the end of Q2-2011, the derivative asset will be realized over the
balance of the year. However, a 10% decrease in Dated Brent oil
prices would result in a $0.1 million increase in the derivative
commodity contract asset, thus decreasing the unrealized loss by
the same amount. Conversely, a 10% increase in Dated Brent oil
prices would result in a $0.1 million decrease in the derivative
commodity contract asset, thus increasing the unrealized loss by
the same amount. The following commodity contracts are outstanding
as at June 30, 2011:
Period Dated Brent
Pricing
Volume Type Put
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Crude Oil
------------------------
July 1, 2011 -
December 31, 2011 40,000 Bbl/month Financial Floor $ 65.00
July 1, 2011 -
December 31, 2011 20,000 Bbl/month Financial Floor $ 75.00
----------------------------------------------------------------------------
----------------------------------------------------------------------------
As at June 30, 2011, the total volumes hedged for the balance of 2011 are:
Six months
2011
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Bbls 360,000
Bopd 1,957
----------------------------------------------------------------------------
----------------------------------------------------------------------------
At June 30, 2011, all of the derivative commodity contracts were classified
as current assets.
GENERAL AND ADMINISTRATIVE EXPENSES ("G&A")
Six Months Ended June 30
----------------------------------------------------------------------------
2011 2010
----------------------------------------------------------------------------
$ $/Bbl $ $/Bbl
----------------------------------------------------------------------------
----------------------------------------------------------------------------
G&A (gross) 8,572 4.11 6,693 3.91
Stock-based compensation 1,342 0.64 569 0.33
Capitalized G&A and overhead
recoveries (658) (0.31) (518) (0.30)
----------------------------------------------------------------------------
G&A (net) 9,256 4.44 6,744 3.94
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three Months Ended June 30
----------------------------------------------------------------------------
2011 2010
----------------------------------------------------------------------------
$ $/Bbl $ $/Bbl
----------------------------------------------------------------------------
----------------------------------------------------------------------------
G&A (gross) 4,333 4.08 3,302 3.94
Stock-based compensation 688 0.58 434 0.52
Capitalized G&A and overhead
recoveries (284) (0.26) (348) (0.42)
----------------------------------------------------------------------------
G&A (net) 4,737 4.40 3,388 4.04
----------------------------------------------------------------------------
----------------------------------------------------------------------------
G&A expenses (net) increased 40% (9% increase on a per Bbl
basis) and 37% (13% on a per Bbl basis) in the three and six months
ended June 30, 2011, compared with the same periods in 2010. This
is due in large part to increased staffing and associated costs.
The increase in stock-based compensation is due to an increase in
the total value of new options awarded during the second quarter of
2011 as compared to those issued during 2010, along with an
increase to the expense recognized on share appreciation rights due
to the appreciation of the share price from 2010 to 2011.
FINANCE COSTS
Finance costs for the three and six months ended June 30, 2011
increased to $1.2 million and $2.5 million (2010 - $0.5 million and
$1.0 million, respectively). Finance costs include interest on
long-term debt and amortization of transaction costs associated
with long-term debt. In the quarter, the Company expensed $0.3
million of transaction costs (2010 - $0.1 million). The Company had
$60.0 million of debt outstanding at June 30, 2011 (June 30, 2010 -
$50.0 million). The long-term debt that was outstanding at June 30,
2011 bore interest at LIBOR plus an applicable margin that varies
from 3.75% to 4.75% (2010 - LIBOR plus 3.0%) depending on the
amount drawn under the facility.
DEPLETION AND DEPRECIATION ("DD&A")
Six Months Ended June 30
----------------------------------------------------------------------------
2011 2010
----------------------------------------------------------------------------
(000s, except per Bbl amounts) $ $/Bbl $ $/Bbl
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Egypt 13,965 7.67 8,968 7.35
Yemen 1,758 6.61 3,317 6.76
Corporate 240 - 104 -
----------------------------------------------------------------------------
15,963 7.65 12,389 7.24
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three Months Ended June 30
----------------------------------------------------------------------------
2011 2010
----------------------------------------------------------------------------
(000s, except per Bbl amounts) $ $/Bbl $ $/Bbl
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Egypt 7,723 7.47 4,503 7.46
Yemen 368 8.60 1,580 6.74
Corporate 112 - 53 -
----------------------------------------------------------------------------
8,203 7.62 6,136 7.32
----------------------------------------------------------------------------
----------------------------------------------------------------------------
In Egypt, DD&A remained unchanged on a per Bbl basis in the
three months ended June 30, 2011 compared with the same period in
2010, and increased 4% on a per Bbl basis for the six month period
ended June 30, 2011 compared with the same period in 2010. Very
little change was experienced as capital additions and increases in
future capital costs were offset by increases in Proved and
Probable reserves.
In Yemen, DD&A increased 28% and decreased 2% on a per Bbl
basis for the three and six months ended June 30, 2011,
respectively. While the per Bbl rate for the six month period is
relatively consistent with the same period of the prior year, the
increase in the three month period ended June 30, 2011 compared to
the same period of the prior year is due to a different mix of
properties being depleted. The per Bbl rate for the six month
period is a combination of Block 32 and Block S-1, whereas the per
Bbl rate for the three month period is Block 32 only, as Block S-1
was shut-in for the entire period. Actual depletion expense
decreased by 77% in the three month period ended June 30, 2011 due
to the shut-in on Block S-1.
In Egypt, exploration and evaluation properties of $1.6 million
(2010 - $16.9 million) relating to West Gharib ($0.5 million) and
East Ghazalat ($1.1 million) were excluded from the costs subject
to DD&A in the quarter. In Yemen, exploration and evaluation
property costs of $14.2 million (2010 - $11.8 million) relating to
Block 72 and Block 75 were excluded from the costs subject to
DD&A in the quarter.
IMPAIRMENT OF EXPLORATION AND EVALUATION ASSETS
On the Nuqra Block, the Company drilled two exploration wells
during the six months ended June 30, 2011, both of which were dry.
The 3.65 million acre Nuqra Block exploration concession is in the
second and final extension period which is scheduled to expire in
July 2012. The Company has met all the work commitments of the
second extension period and has no plans for further exploration in
the Nuqra Block at this time. As a result, the Company recorded an
impairment loss on these exploration and evaluation assets in the
amount of $12.1 million ($0.16/share) during the six month period
ended June 30, 2011. All exploration and evaluation expenditures
incurred at Nuqra up to June 30, 2011 have been written off as an
impairment loss.
Under IFRS, these costs had to be applied directly against net
earnings as Nuqra has been identified as one of the Company's
cash-generating units. Impairment testing under IFRS is performed
at the cash-generating unit level as opposed to the country level
under previous Canadian GAAP, under which, these costs would have
been transferred to the full cost pool in Egypt and would have been
depleted using the unit of production method.
CAPITAL EXPENDITURES
Six Months Ended June 30
----------------------------------------------------------------------------
($000s) 2011 2010
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Egypt 32,976 25,570
Yemen 5,008 1,621
Corporate 1,400 74
----------------------------------------------------------------------------
Total 39,384 27,265
----------------------------------------------------------------------------
----------------------------------------------------------------------------
In Egypt, total capital expenditures in the first six months of
2011 were $33.0 million (2010 - $25.6 million). The Company drilled
and completed 14 wells in West Gharib, resulting in 13 oil wells
(eight at Arta, four at East Arta and one at Hana West) and one
water injector well at East Arta. The Company also drilled three
dry holes (one at East Ghazalat and two at Nuqra).
In Yemen, total capital expenditures in 2011 were $5.0 million
(2010 - $1.6 million). Two oil development wells were drilled in
the first six months of 2011 at Block S-1, along with one oil
exploration discovery well and one dry hole at Block 72.
Corporate expenditures in 2011 were primarily due to costs
incurred for the new head office in Calgary.
OUTSTANDING SHARE DATA
As at June 30, 2011, the Company had 72,985,171 common shares
issued and outstanding. On February 1, 2011, the Company closed an
equity offering of 5,000,000 common shares at C$15.00 per common
share for gross proceeds of C$75.0 million (US$75.6 million).
LIQUIDITY AND CAPITAL RESOURCES
Liquidity describes a company's ability to access cash.
Companies operating in the upstream oil and gas industry require
sufficient cash in order to fund capital programs necessary to
maintain and increase production and reserves, to acquire strategic
oil and gas assets and to repay debt. TransGlobe's capital programs
are funded principally by cash provided from operating activities.
A key measure that TransGlobe uses to evaluate the Company's
overall financial strength is debt-to-funds flow from operating
activities (calculated on a 12-month trailing basis). TransGlobe's
debt-to-funds flow from operating activities ratio, a key
short-term leverage measure, remained strong at 0.6 times at June
30, 2011. This was within the Company's target range of no more
than 2.0 times.
The following table illustrates TransGlobe's sources and uses of
cash during the periods ended June 30, 2011 and 2010:
Sources and Uses of Cash
Six Months Ended June 30
----------------------------------------------------------------------------
($000s) 2011 2010
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cash sourced
Funds flow from operations(i) 53,604 35,433
Transfer from restricted cash 1,164 -
Exercise of options 1,613 5,744
Issuance of common shares, net
of share issuance costs 71,583 -
Other 772 -
----------------------------------------------------------------------------
128,736 41,177
Cash used
Capital expenditures 36,020 24,603
Repayment of long term debt 30,000 -
Deferred financing costs - 699
Other 52 -
----------------------------------------------------------------------------
66,072 25,302
----------------------------------------------------------------------------
62,664 15,875
Changes in non-cash working
capital 2,213 (10,615)
----------------------------------------------------------------------------
Increase in cash and cash
equivalents 64,877 5,260
Cash and cash equivalents -
beginning of period 57,782 16,177
----------------------------------------------------------------------------
Cash and cash equivalents - end of
period 122,659 21,437
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(i) Funds flow from operations is a non-IFRS measure that represents cash
generated from operating activities before changes in non-cash working
capital.
Funding for the Company's capital expenditures was provided by
funds flow from operations. The Company expects to fund its 2011
exploration and development program of $90.0 million ($50.6 million
remaining) and contractual commitments through the use of working
capital and cash generated by operating activities. The use of new
financing during 2011 may also be utilized to finance new
opportunities. Fluctuations in commodity prices, product demand,
foreign exchange rates, interest rates and various other risks may
impact capital resources.
Working capital is the amount by which current assets exceed
current liabilities. At June 30, 2011, the Company had working
capital of $147.1 million (December 31, 2010 - $88.2 million). The
increase to working capital in 2011 is due almost entirely to a
higher cash balance as at June 30, 2011 compared to December 31,
2010. This increase in cash is due to the issuance of common shares
in the first quarter of 2011 and collections on accounts receivable
in the second quarter of 2011.
At June 30, 2011, TransGlobe had a $100.0 million Borrowing Base
Facility of which $60.0 million was drawn. As repayments on the
Borrowing Base Facility are not expected to commence until 2013,
the entire balance is presented as a long-term liability on the
Condensed Consolidated Balance Sheets. Repayments will be made on a
semi-annual basis according to the scheduled reduction of the
facility.
($000s) June 30,2011 December 31, 2010
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Bank debt 60,000 90,000
Deferred financing costs (3,002) (3,580)
----------------------------------------------------------------------------
Long-term debt (net of deferred
financing costs) 56,998 86,420
----------------------------------------------------------------------------
----------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES
As part of its normal business, the Company entered into
arrangements and incurred obligations that will impact the
Company's future operations and liquidity. The principal
commitments of the Company are as follows:
($000s) Payment Due by Period 1 2
----------------------------------------------------------------------------
Recognized Less More
in Financial Contractual than 1-3 4-5 than
Statements Cash Flows 1 year years years 5 years
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Accounts
payable and
accrued Yes -
liabilities Liability 48,097 48,097 - - -
Long-term debt Yes -
Liability 60,000 - 38,736 21,264 -
Office and
equipment
leases No 18,126 8,924 3,355 1,972 3,875
Minimum work
commitments(3) No 1,750 1,750 - - -
----------------------------------------------------------------------------
Total 127,973 58,771 42,091 23,236 3,875
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Payments exclude ongoing operating costs, finance costs and payments
made to settle derivatives.
(2) Payments denominated in foreign currencies have been translated at
June 30, 2011 exchange rates.
(3) Minimum work commitments include contracts awarded for capital
projects and those commitments related to exploration and drilling
obligations.
Pursuant to the PSA for Block 75 in Yemen, the Contractor (Joint
Venture Partners) has a remaining minimum financial commitment of
$3.0 million ($0.8 million to TransGlobe) for one exploration well.
The first, 36-month exploration period commenced March 8, 2008.
During the first quarter of 2011, the Contractor received an
extension on the first exploration period to September 8, 2011 and
subsequently has declared Force Majeure under the PSA due to
logistic and security issues. The Company issued a $1.5 million
letter of credit (expiring November 15, 2011) to guarantee the
Company's performance under the first exploration period. The
letter is secured by a guarantee granted by Export Development
Canada.
Pursuant to the August 18, 2008 asset purchase agreement for a
25% financial interest in eight development leases on the West
Gharib Concession in Egypt, the Company has committed to paying the
vendor a success fee to a maximum of $2.0 million if incremental
reserve thresholds are reached in the South Rahmi development
lease, to be evaluated annually. As at December 31, 2010, no
additional fees are due in 2011.
Pursuant to a one-year extension to the West Hoshia development
lease, which is part of the Concession agreement for West Gharib in
Egypt, the Company provided a $1.0 million production guarantee to
drill one exploration well prior to October 14, 2011.
In the normal course of its operations, the Company may be
subject to litigations and claims. Although it is not possible to
estimate the extent of potential costs, if any, management believes
that the ultimate resolution of such contingencies would not have a
material adverse impact on the results of operations, financial
position or liquidity of the Company.
Although the Company believes that it has title to its petroleum
properties, it cannot control or completely protect itself against
the risk of title disputes or challenges.
The Company is not aware of any material provisions or other
contingent liabilities as at June 30, 2011.
Proposed Transactions
On March 25, 2011, the Company entered into an agreement to
acquire a 100% working interest in the West Bakr Concession
agreement in the Arab Republic of Egypt from the Egyptian Petroleum
Development Co. Ltd. (of Japan) ("EPEDECO") subject to the approval
of the Egyptian Government and customary closing conditions. The
proposed transaction provides for operatorship of three fields with
28 producing wells, located immediately adjacent to the Company's
West Gharib development leases. West Bakr is producing
approximately 4,000 Bopd and had Proved reserves of 7.4 million
barrels and Proved Plus Probable reserves of 8.8 million barrels
effective July 1, 2010 (third party evaluator). The Company has
structured the transaction as an all-cash deal, effective July 1,
2010, to acquire all the Egyptian assets of EPEDECO, funded through
working capital and the Borrowing Base Facility. Consideration for
the transaction is $60 million plus or minus adjustments to be
determined based on customary due diligence and other closing
conditions. Because of uncertainty related to the amount of closing
adjustments affecting total consideration and the successful
approval of the transaction by the Egyptian Government, management
is not able to estimate the amount of any contingent assets or
liabilities nor provide any assurances that it will successfully
close the subject transaction. Accordingly, no amount has been
accrued in the Condensed Consolidated Interim Financial Statements
for the three and six months ended June 30, 2011 related to the
contingency.
On June 29, 2011, the Company entered into an agreement to
acquire a 50% working interest in the South Alamein Concession
agreement in the Arab Republic of Egypt from Cepsa Egypt SA B.V.
("Cepsa Egypt"), a wholly-owned subsidiary of Compania Espanola De
Petroleos, S.A. (of Spain), subject to the approval of the Egyptian
Government and customary closing conditions. The proposed
transaction provides for the operatorship of the concession and
near-term appraisal/development of one oil discovery well and of a
significant number of ready to drill exploration projects, located
in Egypt's Western Desert. The Company has structured the
transaction as an all-cash deal effective on and subject to
approval from the Egyptian Government. Consideration for the
transaction is $3.0 million plus an inventory adjustment to be
determined based on customary due diligence and other closing
conditions. Because of uncertainty related to the amount of closing
adjustments affecting total consideration and the successful
approval of the transaction by the Egyptian Government, management
is not able to estimate the amount of any contingent assets or
liabilities nor provide any assurances that it will successfully
close the subject transaction. Accordingly, no amount has been
accrued in the Condensed Consolidated Interim Financial Statements
for the three and six months ended June 30, 2011 related to the
contingency.
MANAGEMENT STRATEGY AND OUTLOOK FOR 2011
The 2011 outlook provides information as to management's
expectation for results of operations for 2011. Readers are
cautioned that the 2011 outlook may not be appropriate for other
purposes. The Company's expected results are sensitive to
fluctuations in the business environment and may vary accordingly.
This outlook contains forward-looking statements that should be
read in conjunction with the Company's disclosure under
"Forward-Looking Statements", outlined on the first page of this
MD&A.
2011 Outlook Highlights
-- Production is expected to average between 13,000 Bopd and 13,500 Bopd, a
33% increase over the 2010 average production;
-- Exploration and development spending is budgeted to be $71.3 million, a
7% increase from 2010 (allocated 88% to Egypt, 10% to Yemen and 2% to
Corporate) funded from funds flow from operations and cash-on-hand; and
-- Using the low-end of production guidance and an average oil price
assumption of $95.00/Bbl for Dated Brent oil for the remaining two
quarters of 2011, funds flow from operations is expected to be $119.0
million for the year.
2011 Updated Production Outlook
Production for 2011 is expected to average between 13,000 and
13,500 Bopd, representing a 33% increase over the 2010 average
production of 9,960 Bopd. Production from Egypt is expected to
average approximately 11,000 Bopd during 2011, up 52% from an
average of 7,259 Bopd in 2010. The balance of approximately 2,000
Bopd from the Yemen properties represents a 26% decrease from an
average of 2,701 Bopd in 2010 due to production shutdown on Block
S-1. The Block S-1 export pipeline was damaged March 17 and was
down until July 15. Current total production is over 14,000 Bopd.
The forecast assumes East Ghazalat production coming on-line in
December at a rate of 900 Bopd but excludes any production from the
West Bakr acquisition. The forecast will be revised upwards when
this acquisition closes.
Production Forecast
June 30
Year to Date 2011 Guidance 2010 Actual % Change
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Barrels of oil per
day 11,523 13,000 - 13,500 9,960 33
----------------------------------------------------------------------------
----------------------------------------------------------------------------
2011 Updated Funds Flow From Operations Outlook
The updated funds flow forecasts are shown below assuming a
range of Dated Brent oil pricing and the low-end of guidance for
the next two quarters of 2011:
Updated 2011 2010
Funds Flow From Funds Flow From
Average Dated Brent for Remainder Operations Operations
Of Year ($/Bbl) ($ millions)(ii) ($ millions)(ii) % Change
----------------------------------------------------------------------------
----------------------------------------------------------------------------
75 105 73 44
95 119 73 63
115 134 73 84
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(i) Funds flow from operations is a non-IFRS measure that represents cash
generated from operating activities before changes in non-cash working
capital.
(ii) Six months ended June 30, 2011 average Dated Brent was $111.16/Bbl;
2010 average Dated Brent was $79.42/Bbl.
TransGlobe has entered into a Sale and Purchase Agreement to
acquire 100% working interest in the West Bakr Production Sharing
Concession. The expected impact on TransGlobe's 2011 funds flow
from operations is initially in the range of $1.2 million per month
at $95/Bbl average Dated Brent oil price. Closing is subject to
closing conditions and Egyptian Government approval. TransGlobe
cannot make assurances that it will successfully close the subject
transaction.
2011 Revised Capital Budget
($ million) Six Months
Ended 2011 2011 2011
June 30, Annual Acquisition Annual
2011 Budget Budget Budget
Actual (Firm) (Contingent) (Total)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Egypt 33.0 62.8 71.0 133.8
Yemen 5.0 6.8 - 6.8
Corporate 1.4 1.7 - 1.7
----------------------------------------------------------------------------
Total 39.4 71.3 71.0 142.3
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Firm Budget
In Egypt:
-- West Gharib drilling budget has been reduced by $5.3 million mostly due
to lower average per well costs which decreased from $1.2 million to
$1.1 million. The main reason for the decrease is that the original
budget assumed all Upper Nukhul frac'd wells while our actual program
includes Lower Nukhul, Hanna West and Hoshia wells which do not require
fracs.
-- In East Ghazalat the budget is down $8.5 million as there is no new
drilling planned compared to 6 wells in the original 2011 budget which
are delayed to 2012 and expected facilities spending reduced from $3.5
million to $1.3 million in 2011.
In Yemen:
-- Block S-1 budget down $3.4 million as only 2 wells were completed before
the civil unrest started and no further wells are planned for the rest
of the year.
-- Block 75 budget down $1.9 million as no wells are anticipated in the
rest of the year while the original budget included two wells.
Contingent Acquisition Budget
-- The acquisition price of $60.0 million for West Bakr and $3.0 million
for South Alamein.
-- The West Bakr work program for 2011 is dependent on when closing occurs.
The Company has identified approximately $8.0 million of projects for
the balance of 2011 which includes approximately $1.0 million for
recompletion/workovers, $5.0 million for 3 - 4 wells and $2.0 million
for facility upgrades/inventory/contingency projects.
CHANGES IN ACCOUNTING POLICIES
New Accounting Policies
International Financial Reporting Standards ("IFRS")
In October 2009, the Accounting Standards Board issued a third
and final IFRS Omnibus Exposure Draft confirming that publicly
accountable enterprises were required to apply IFRS, in full and
without modification, for all financial periods beginning on or
after January 1, 2011. The adoption of IFRS required the
restatement, for comparative purposes, of amounts reported by the
Company for the year ended December 31, 2010, including the opening
balance sheet as at January 1, 2010. The Company's second financial
statements prepared under IFRS are the interim financial statements
for the three and six months ended June 30, 2011. These financial
statements include reconciliations of the previously disclosed
comparative period financial statements prepared in accordance with
Canadian GAAP to IFRS, as set out in Note 23. Full disclosure of
the Company's significant accounting policies adopted on transition
to IFRS can be found in the Condensed Consolidated Interim
Financial Statements for the three months ended March 31, 2011.
INTERNAL CONTROLS OVER FINANCIAL REPORTING
TransGlobe's management designed and implemented internal
controls over financial reporting, as defined under National
Instrument 52-109 Certification of Disclosure in Issuers' Annual
and Interim Filings, of the Canadian Securities Administrators.
Internal controls over financial reporting is a process designed
under the supervision of the Chief Executive Officer and the Chief
Financial Officer and effected by the Board of Directors,
management and other personnel to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with IFRS, focusing in particular on controls over
information contained in the annual and interim financial
statements. Due to its inherent limitations, internal controls over
financial reporting may not prevent or detect misstatements on a
timely basis. A system of internal controls over financial
reporting, no matter how well conceived or operated, can provide
only reasonable, not absolute, assurance that the objectives of the
internal controls over financial reporting are met. Also,
projections of any evaluation of the effectiveness of internal
control over financial reporting to future periods are subject to
the risk that the controls may become inadequate because of changes
in conditions, or that the degree of compliance with policies or
procedures may deteriorate.
All changes in accounting policies that were required to address
reporting and the adoption of IFRS have been made in consideration
of the integrity of internal control over financial reporting and
disclosure controls and procedures. Throughout TransGlobe's
transition project, the Company ensured that all changes in
accounting policies relating to IFRS had controls and procedures to
ensure that information was captured appropriately. With respect to
internal controls over financial reporting and disclosure controls
and procedures, the Company did not require any material changes in
control procedures as a result of the transition to IFRS; however,
the Company supplemented its existing control procedures for the
transition period by increasing the level of third party
consultation, management and executive involvement, monitoring, and
governance, as well as the level of awareness and education of key
parties involved in the transition project in order to ensure the
project was successful.
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Condensed Consolidated Interim Statement of Earnings and Comprehensive
Income
(Unaudited - Expressed in thousands of U.S. Dollars, except per share
amounts)
Three Months Ended Six Months Ended
June 30 June 30
2011 2010 2011 2010
----------------------------------------------------------------------------
----------------------------------------------------------------------------
REVENUE
Oil sales, net of royalties and
other $ 62,513 $ 35,638 $ 115,376 $ 73,042
Derivative gain (loss) on
commodity contracts (35) 311 (586) 289
Finance revenue 133 3 195 7
----------------------------------------------------------------------------
62,611 35,952 114,985 73,338
----------------------------------------------------------------------------
EXPENSES
Production and operating 9,095 6,247 16,642 12,034
General and administrative 4,737 3,388 9,256 6,744
Foreign exchange (gain) loss (41) 167 80 331
Finance costs 1,158 518 2,501 1,003
Depletion, depreciation and
amortization 8,203 6,136 15,963 12,389
Impairment of exploration and
evaluation assets 416 - 12,076 -
----------------------------------------------------------------------------
23,568 16,456 56,518 32,501
----------------------------------------------------------------------------
Earnings before income taxes 39,043 19,496 58,467 40,837
Income taxes - current 19,163 9,214 35,491 17,834
Income taxes - deferred (1,994) 571 (1,787) 691
----------------------------------------------------------------------------
17,169 9,785 33,704 18,525
----------------------------------------------------------------------------
NET EARNINGS AND COMPREHENSIVE
INCOME FOR THE PERIOD $ 21,874 $ 9,711 $ 24,763 $ 22,312
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Earnings per share
Basic $ 0.30 $ 0.15 $ 0.34 $ 0.34
Diluted $ 0.29 $ 0.14 $ 0.33 $ 0.33
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Condensed Consolidated Interim Balance Sheets
(Unaudited - Expressed in thousands of U.S. Dollars, except per share
amounts)
As at As at
June 30, 2011 December 31, 2010
----------------------------------------------------------------------------
----------------------------------------------------------------------------
ASSETS
Current
Cash and cash equivalents $ 122,659 $ 57,782
Accounts receivable 70,230 69,085
Derivative commodity contracts 80 303
Prepaids and other 2,218 2,867
----------------------------------------------------------------------------
195,187 130,037
Non-Current
Restricted cash 2,223 3,387
Intangible exploration and
evaluation assets 16,370 22,609
Property and equipment
Petroleum properties 194,977 178,639
Other assets 4,019 2,773
Goodwill 8,180 8,180
----------------------------------------------------------------------------
$ 420,956 $ 345,625
----------------------------------------------------------------------------
----------------------------------------------------------------------------
LIABILITIES
Current
Accounts payable and accrued
liabilities $ 48,097 $ 41,808
----------------------------------------------------------------------------
48,097 41,808
Non-Current
Long-term debt 56,998 86,420
Deferred taxes 33,420 35,207
Other long-term liabilities 891 -
----------------------------------------------------------------------------
139,406 163,435
----------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Share capital 153,815 80,106
Contributed surplus 6,673 5,785
Retained earnings 121,062 96,299
----------------------------------------------------------------------------
281,550 182,190
----------------------------------------------------------------------------
$ 420,956 $ 345,625
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Condensed Consolidated Statement of Changes in Shareholders' Equity
(Unaudited - Expressed in thousands of U.S. Dollars)
Three Months Ended Six Months Ended
June 30 June 30
2011 2010 2011 2010
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Share Capital
Balance, beginning of period $ 153,309 $ 66,277 $ 80,106 $ 66,106
Stock options exercised 414 5,614 1,613 5,744
Share issuance - - 75,594 -
Share issue costs (5) - (4,011) -
Stock-based compensation on
exercise 97 2,346 513 2,387
----------------------------------------------------------------------------
Balance, end of period $ 153,815 $ 74,237 $ 153,815 $ 74,237
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Contributed Surplus
Balance, beginning of period $ 5,952 $ 8,148 $ 5,785 $ 8,057
Stock-based compensation
expense 818 396 1,401 528
Transfer to share capital on
exercise of options (97) (2,346) (513) (2,387)
----------------------------------------------------------------------------
Balance, end of period $ 6,673 $ 6,198 $ 6,673 $ 6,198
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Retained Earnings
Balance, beginning of period $ 99,188 $ 68,335 $ 96,299 $ 55,734
Net earnings 21,874 9,711 24,763 22,312
----------------------------------------------------------------------------
Balance, end of period $ 121,062 $ 78,046 $ 121,062 $ 78,046
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Condensed Consolidated Interim Statements of Cash Flows
(Unaudited - Expressed in thousands of U.S. Dollars)
Three Months Ended Six Months Ended
June 30 June 30
2011 2010 2011 2010
----------------------------------------------------------------------------
----------------------------------------------------------------------------
CASH FLOWS RELATED TO THE
FOLLOWING ACTIVITIES:
OPERATING
Net income for the period $ 21,874 $ 9,711 $ 24,763 $ 22,312
Adjustments for:
Depletion, depreciation and
amortization 8,203 6,136 15,963 12,389
Deferred lease inducement 119 - 119 -
Impairment of exploration and
evaluation costs 416 - 12,076 -
Stock-based compensation 688 434 1,401 569
Finance costs 1,158 518 2,501 1,003
Income tax expense 17,169 9,785 33,704 18,525
Unrealized (gain) loss on
commodity contracts 35 (362) 222 (706)
Unrealized loss on foreign
currency translation 98 - 269 -
Interest paid (1,291) (429) (1,923) (825)
Income taxes paid (19,163) (9,214) (35,491) (17,834)
Changes in non-cash working
capital 23,298 (3,031) 2,213 (10,615)
----------------------------------------------------------------------------
Net cash generated by (used in)
operating activities 52,604 13,548 55,817 24,818
----------------------------------------------------------------------------
INVESTING
Additions to intangible
exploration and evaluation
assets (3,308) (6,404) (5,268) (8,299)
Additions to petroleum
properties (12,796) (9,377) (28,890) (15,925)
Additions to other assets (1,425) (90) (1,862) (379)
Changes in restricted cash - - 1,164 -
----------------------------------------------------------------------------
Net cash generated by (used in)
investing activities (17,529) (15,871) (34,856) (24,603)
----------------------------------------------------------------------------
FINANCING
Issue of common shares for cash 414 5,614 77,207 5,744
Issue costs for common shares (5) - (4,011) -
Deferred financing costs - (699) - (699)
Repayments of long-term debt - - (30,000) -
Increase in other long-term
liabilities 772 - 772 -
----------------------------------------------------------------------------
Net cash generated by (used in)
financing activities 1,181 4,915 43,968 5,045
----------------------------------------------------------------------------
Currency translation differences
relating to cash and cash
equivalents 50 - (52) -
----------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 36,306 2,592 64,877 5,260
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 86,353 18,845 57,782 16,177
----------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END
OF PERIOD $ 122,659 $ 21,437 $ 122,659 $ 21,437
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cautionary Statement to Investors:
This news release may include certain statements that may be
deemed to be "forward-looking statements" within the meaning of the
U.S. Private Securities Litigation Reform Act of 1995. Such
statements relate to possible future events. All statements other
than statements of historical fact may be forward-looking
statements. Forward-looking statements are often, but not always,
identified by the use of words such as "seek", "anticipate",
"plan", "continue", "estimate", "expect", "may", "will", "project",
"predict", "potential", "targeting", "intend", "could", "might",
"should", "believe" and similar expressions. These statements
involve known and unknown risks, uncertainties and other factors
that may cause actual results or events to differ materially from
those anticipated in such forward-looking statements. Although
TransGlobe's forward-looking statements are based on the beliefs,
expectations, opinions and assumptions of the Company's management
on the date the statements are made, such statements are inherently
uncertain and provide no guarantee of future performance. Actual
results may differ materially from TransGlobe's expectations as
reflected in such forward-looking statements as a result of various
factors, many of which are beyond the control of the Company. These
factors include, but are not limited to, unforeseen changes in the
rate of production from TransGlobe's oil and gas properties,
changes in price of crude oil and natural gas, adverse technical
factors associated with exploration, development, production or
transportation of TransGlobe's crude oil and natural gas reserves,
changes or disruptions in the political or fiscal regimes in
TransGlobe's areas of activity, changes in tax, energy or other
laws or regulations, changes in significant capital expenditures,
delays or disruptions in production due to shortages of skilled
manpower, equipment or materials, economic fluctuations, and other
factors beyond the Company's control. TransGlobe does not assume
any obligation to update forward-looking statements if
circumstances or management's beliefs, expectations or opinions
should change, other than as required by law, and investors should
not attribute undue certainty to, or place undue reliance on, any
forward-looking statements. Please consult TransGlobe's public
filings at www.sedar.com and www.sec.gov/edgar.shtml for further,
more detailed information concerning these matters.
Contacts: TransGlobe Energy Corporation Scott Koyich Investor
Relations 403.264.9888 investor.relations@trans-globe.com
www.trans-globe.com
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