TIDMTGL
RNS Number : 5102I
TransGlobe Energy Corporation
02 April 2020
This Announcement contains inside information as defined in
Article 7 of the Market Abuse Regulation No. 596/2014 ("MAR"). Upon
the publication of this Announcement, this inside information is
now considered to be in the public domain.
TRANSGLOBE ENERGY CORPORATION ANNOUNCES
FINANCIAL, OPERATIONS AND CORPORATE UPDATE
AIM & TSX: "TGL" & NASDAQ: "TGA"
Calgary, Alberta, April 2, 2020 - TransGlobe Energy Corporation
("TransGlobe" or the "Company") announces a Q1 financial,
operations and corporate update. All dollar values are expressed in
US dollars unless otherwise stated.
OVERVIEW
Corporate
-- Business continuity plans have been activated across our
locations in response to COVID-19 with no health and safety impacts
or disruption to production;
-- The previously announced 80% reduction in 2020 capital program has been fully implemented;
-- The Company has reduced monthly G&A costs across the
business by 35% through headcount reduction, universal salary
rollbacks and reducing all discretionary expenditures;
-- The Company currently holds cash of $26.7 million;
-- Negotiations continue with the Egyptian government to amend,
extend and consolidate the Company's Eastern Desert concession
agreements;
Production
-- Production guidance for 2020 remains unchanged at an average of 13,300 to 14,300 Boepd ;
-- Production averaged 14,965 Boepd in Q1 2020 to date (January
15,188 Boepd, February 15,169 Boepd and March to date 14,551 Boepd)
versus 15,345 Boepd in Q4 2019;
Operational
-- A 452 Mbbls cargo of Gharib blend crude was lifted in
mid-March with proceeds (inclusive of hedging gains) of $14.6
million anticipated in April;
-- Sold 758.5 Mbbls to EGPC in Q1 2020 for net proceeds of $37.3 million;
-- Drilled a Yusr development well in Egypt (HW-2A) with rig release imminent;
-- Drilled a 2-mile horizontal Cardium development well in the South Harmattan area, Canada (100/13-16-029-03W5/0) and released rig;
PRODUCTION
Production Summary (WI before royalties and taxes):
(Boepd) Q4 2019 Jan 2020 Feb 2020 Mar 2020 YTD Average
(to Mar 28(th)
)
Egypt 12,832 12,666 12,648 12,239 12,515
-------- --------- --------- ---------------- ------------
Canada 2,513 2,522 2,521 2,312 2,450
-------- --------- --------- ---------------- ------------
Total 15,345 15,188 15,169 14,551 14,965
-------- --------- --------- ---------------- ------------
During the quarter, production decreased marginally due to
natural declines in Egypt and Canada, with March production
impacted by severe weather in Egypt and the shut-in for 13 days of
the 2-20 well in Canada while drilling a well from the same
location.
Please see the table entitled "Production Disclosure" at the end
of this news release for the detailed constituent product types and
their respective quantities measured at the first point of sale for
all production amounts disclosed in this news release on a Bopd and
Boepd basis.
OPERATIONS UPDATE
Arab Republic of Egypt
Western Desert - South Ghazalat (100% WI)
SGZ-6X well is producing from the Upper Bahariya reservoir at a
rate restricted to a field estimated 200 - 250 Bopd light and
medium crude to evaluate the well, manage the reservoir and
optimize the separation of oil, gas and water.
Eastern Desert (100% WI)
During the first quarter of 2020, the Company drilled a
development oil well in the Eastern Desert at West Bakr. The HW-2A
development well was drilled to a total depth of 1,639 meters. Due
to stuck pipe, only the Yusr-B reservoir was fully logged and
evaluated with an internally estimated 0.3 meters of net oil pay.
The other Yusr reservoirs and the upper Bakr reservoir, though all
exhibiting good oil shows, were not logged at this time. HW-2A is
expected to be completed in April 2020 as a producer on 5.4m of oil
bearing Yusr-C reservoir observed on the mud logs. The SHAMS-2 rig
will be demobilized following the HW-2A completion.
Discussions with our joint venture operating partner are ongoing
to reduce operating expenditures. Any material operating cost
reductions in Egypt will require the assistance of the Company's
Egyptian joint venture partner, the Egyptian General Petroleum
Corporation ("EGPC");
Constructive negotiations with EGPC to amend, extend and
consolidate the Company's Eastern Desert concession agreements have
continued through the period, with both parties recognizing the
attractiveness of a revised agreement to stabilize and ultimately
improve investment in production, following a return to a more
normalized commodity price environment.
Canada
A 2-mile Cardium development well has been successfully drilled
and the rig released. Stimulation and equipping for production will
await improved oil prices . By extending the well trajectory by a
further 218 meters into an adjacent section, this well holds an
additional 7.5 sections of land in the South Harmattan fairway.
Prudently extending the well allowed TransGlobe to cost effectively
secure future upside potential in South Harmattan.
The 2-mile horizontal 2-20 well, completed in Q4 2019 and
de-risking the South Harmattan fairway, continues to produce at
field estimated rates of 234 Boepd (197 Bopd light oil, 119 Mcf/d
gas, 18 Bopd NGL). The Company is very encouraged that production
performance remains in line with Company expectations for this
significant new resource play.
Crude oil prices in Western Canada have been significantly
impacted by the current oversupply into the market exacerbated by
the COVID-19-related demand contraction. TransGlobe's light oil
production continues to be produced at a positive field netback. In
addition, natural gas prices have been relatively strong through
the first quarter averaging Cdn $1.83/MMbtu. Nonetheless, the
Company is exploring all avenues with its contractors and suppliers
to reduce operating costs in its Canadian operations.
CORPORATE
The Company is prudently conserving cash to proactively manage
its balance sheet in the current low commodity price
environment.
In addition to the previously announced 80% reduction in the
2020 capital program, the Company has undertaken a G&A cost
reduction exercise across all locations through staff reductions,
salary rollbacks and reducing all discretionary expenditures. This
also includes a rollback of non-executive director remuneration of
10%. The Company anticipates these actions will reduce on-going
monthly G&A by 35%, but there will be non-recurring
restructuring charges that will impact the Q1 and Q2 results.
The Company remains in constant communication with its lenders
(Mercuria Energy Trading and ATB Financial) and does not anticipate
deviating from its intended debt reduction schedule.
In this period of extreme volatility, the Company remains
forward looking and prepared to use its operational control to take
advantage of any sustained upward movement in oil price. TransGlobe
continues to be vigilant for attractive M&A opportunities.
COVID-19
The Company has had no reported cases of COVID-19 among its
staff, contractors or joint venture partners. Business continuity
plans have been implemented in all our locations and operations
continue as normal.
Randy Neely, President and CEO comments on the year ahead:
"Along with the actions taken to reduce spending and remain
solvent we are closely monitoring our liquidity and access to
credit. We have modeled the current year under current forward
anticipated commodity prices, adjusting for our reduced capital
plan, reduced G&A, as well as planned operating cost
reductions, and remain confident that the Company will remain
liquid for at least the next 12 months.
We have taken immediate and prudent action on Corporate
operations to mitigate the effects caused by the impact on oil
demand by COVID-19, compounded by oil oversupply resulting from the
breakdown in OPEC+. While we believe it would be easy to focus on
the short term alone, that would be a mistake. The fundamentals of
the energy market and its direction of increasing consumption
remain unchanged in the medium and long term, and we are not alone
in believing that oil and gas will continue to be major components
of the energy market for many years to come. While managing our
balance sheet and preserving cash are the right actions to take
today to ensure the Company's survival through these challenging
times, one thing we can be sure of is the pandemic will pass, so we
must also secure the long-term future of the Company for our
investors. Therefore, management and the Board of Directors will
continue to take the necessary steps to ensure we are positioned to
grow and remain relevant to investors, through Company actions and,
potentially, appropriate M&A to add resilience. Our focus will
continue to be on improving the terms of our existing concessions
to encourage increased investment from greater cash flows, and
positively leaning into the energy transition as the market
recovers."
About TransGlobe
TransGlobe Energy Corporation is a cash flow focused oil and gas
exploration and development company whose current activities are
concentrated in the Arab Republic of Egypt and Canada. TransGlobe's
common shares trade on the Toronto Stock Exchange and the AIM
market of the London Stock Exchange under the symbol TGL and on the
NASDAQ Exchange under the symbol TGA.
Advisory on Forward-Looking Information and Statements
Certain statements included in this news release constitute
forward-looking statements or forward-looking information under
applicable securities legislation. Such forward-looking statements
or information are provided for the purpose of providing
information about management's current expectations and plans
relating to the future. Readers are cautioned that reliance on such
information may not be appropriate for other purposes.
Forward-looking statements or information typically contain
statements with words such as "anticipate", "believe", "expect",
"plan", "intend", "estimate", "may", "will", "would" or similar
words suggesting future outcomes or statements regarding an
outlook. In particular, forward-looking information and statements
contained in this document include, but are not limited to ;
production guidance for 2020, the use of proceeds by the Company
from the sale of inventory in Q1 2020, internal estimate of net oil
pay at the HW-2A development well, completion of the HW-2A
development well and the timing thereof, expectations relating to
the liquidity of the Company for the next twelve months; and other
matters.
Forward-looking statements or information are based on a number
of factors and assumptions which have been used to develop such
statements and information but which may prove to be incorrect.
Although the Company believes that the expectations reflected in
such forward-looking statements or information are reasonable,
undue reliance should not be placed on forward-looking statements
because the Company can give no assurance that such expectations
will prove to be correct. Many factors could cause TransGlobe's
actual results to differ materially from those expressed or implied
in any forward-looking statements made by, or on behalf of,
TransGlobe.
The Company's expectation that it will remain liquid for the
next twelve months assumes, among other things, that there will be
a gradual and sustained recovery of crude oil prices in the near
future, that timely and anticipated crude oil liftings will occur
and payments for such liftings will be made when required, that its
counterparties will perform their payment Mercuria Energy Trading
and ATB Financial. In addition to other factors and assumptions
which may be identified in this news release, assumptions have been
made regarding, among other things, anticipated production volumes;
the timing of drilling wells and mobilizing drilling rigs; the
number of wells to be drilled; the Company's ability to obtain
qualified staff and equipment in a timely and cost-efficient
manner; the regulatory framework governing royalties, taxes and
environmental matters in the jurisdictions in which the Company
conducts and will conduct its business; future capital expenditures
to be made by the Company; future sources of funding for the
Company's capital programs; geological and engineering estimates in
respect of the Company's reserves and resources; the geography of
the areas in which the Company is conducting exploration and
development activities; current commodity prices and royalty
regimes; availability of skilled labour; future exchange rates; the
price of oil; the impact of increasing competition; conditions in
general economic and financial markets; availability of drilling
and related equipment; effects of regulation by governmental
agencies; future operating costs; uninterrupted access to areas of
TransGlobe's operations and infrastructure; recoverability of
reserves and future production rates; that TransGlobe will have
sufficient cash flow, debt or equity sources or other financial
resources required to fund its capital and operating expenditures
and requirements as needed; that TransGlobe's conduct and results
of operations will be consistent with its expectations; that
TransGlobe will have the ability to develop its properties in the
manner currently contemplated; current or, where applicable,
proposed industry conditions, laws and regulations will continue in
effect or as anticipated as described herein; that the estimates of
TransGlobe's reserves and resource volumes and the assumptions
related thereto (including commodity prices and development costs)
are accurate in all material respects; and other matters.
Forward-looking statements or information are based on current
expectations, estimates and projections that involve a number of
risks and uncertainties which could cause actual results to differ
materially from those anticipated by the Company and described in
the forward-looking statements or information. These risks and
uncertainties which may cause actual results to differ materially
from the forward-looking statements or information include, among
other things, operating and/or drilling costs are higher than
anticipated; unforeseen changes in the rate of production from
TransGlobe's oil and gas properties; changes in price of crude oil
and natural gas; adverse technical factors associated with
exploration, development, production or transportation of
TransGlobe's crude oil reserves; changes or disruptions in the
political or fiscal regimes in TransGlobe's areas of activity;
changes in tax, energy or other laws or regulations; changes in
significant capital expenditures; delays or disruptions in
production due to shortages of skilled manpower equipment or
materials; economic fluctuations; competition; lack of availability
of qualified personnel; the results of exploration and development
drilling and related activities; obtaining required approvals of
regulatory authorities; volatility in market prices for oil;
fluctuations in foreign exchange or interest rates; environmental
risks; ability to access sufficient capital from internal and
external sources; failure to negotiate the terms of contracts with
counterparties; failure of counterparties to perform under the
terms of their contracts; and other factors beyond the Company's
control. Readers are cautioned that the foregoing list of factors
is not exhaustive. Please consult TransGlobe's public filings at
www.sedar.com and www.sec.goedgar.shtml for further, more detailed
information concerning these matters, including additional risks
related to TransGlobe's business.
The forward-looking statements or information contained in this
news release are made as of the date hereof and the Company
undertakes no obligation to update publicly or revise any
forward-looking statements or information, whether as a result of
new information, future events or otherwise unless required by
applicable securities laws. The forward-looking statements or
information contained in this news release are expressly qualified
by this cautionary statement.
Oil and Gas Advisories
Mr. Darrin Drall, P.Eng., - Manager Engineering for TransGlobe
Energy Corporation, and a qualified person as defined in the
Guidance Note for Mining, Oil and Gas Companies, June 2009, of the
London Stock Exchange, has reviewed and approved the technical
information contained in this announcement. Mr. Drall obtained a
Bachelor of Science Degree in Engineering from the University of
Manitoba. He is a Registered Professional Engineer in the province
of Alberta (Association of Professional Engineers and Geoscientists
of Alberta) and in the province of Saskatchewan (Association of
Professional Engineers and Geoscientists of Saskatchewan) and has
over 30 years' experience in oil and gas.
This document includes an estimate of net oil pay thickness at
HW-2A development well, which estimate may be considered to be
anticipated results under National Instrument 51-101. The estimate
was prepared internally. The risks and uncertainties associated
with recovery of resources from HW-2A development well include, but
are not limited to: that the Company may encounter unexpected
drilling results;the occurrence of unexpected events in the
exploration for, and the operation and development of, oil and gas;
delays in anticipated timing of drilling and completion of wells;
geological, technical, drilling and processing problems; and other
difficulties in producing petroleum reserves.
BOEs may be misleading, particularly if used in isolation. A BOE
conversion ratio of six thousand cubic feet of natural gas to one
barrel of oil equivalent (6 mcf: 1 bbl) is based on an energy
equivalency conversion method primarily applicable at the burner
tip and does not represent a value equivalency at the wellhead.
Given that the value ratio based on the current price of crude oil
as compared to natural gas is significantly different from the
energy equivalency of 6:1, utilizing a conversion on a 6:1 basis
may be misleading as an indication of value.
References in this press release to production test rates, are
useful in confirming the presence of hydrocarbons, however such
rates are not determinative of the rates at which such wells will
commence production and decline thereafter and are not indicative
of long term performance or of ultimate recovery. While
encouraging, readers are cautioned not to place reliance on such
rates in calculating the aggregate production for TransGlobe. A
pressure transient analysis or well-test interpretation has not
been carried out in respect of all wells. Accordingly, the Company
cautions that the production test results should be considered to
be preliminary.
The following abbreviations used in this press release have the
meanings set forth below:
bbls barrels
Mbbl thousand barrels
MMbbl million barrels
Mbbl/d thousand barrel per day
boe barrels of oil equivalent of natural gas, on the basis of one
barrel of oil or NGLs for six thousand cubic feet of natural
gas
Mboepd thousand barrels of oil equivalent per day
MMboe million barrels of oil equivalent
Bopd barrels of oil per day
Mbopd thousand barrels of oil per day
Mcf/d thousand cubic feet per day
MMcf/d million cubic feet per day
Bcf billion cubic feet
NGL Natural Gas Liquids
MM million
Production Disclosure
Production Summary (WI before royalties and taxes):
(Boepd) Q4 2019 Jan -- Feb Mar -20 YTD
20 -- 20
(to Mar
28(th)
)
--------- -------- ------- ---------- -------
Egypt (Boepd) 12,832 12,666 12,648 12,239 12,515
--------- -------- ------- ---------- -------
Heavy Crude (bbl/d) 11,934 11,653 11,636 11,260 11,514
--------- -------- ------- ---------- -------
Light and Medium Crude (bbl/d) 898 1,013 1,012 979 1,001
--------- -------- ------- ---------- -------
Canada (Boepd) 2,513 2,522 2,521 2,312 2,450
--------- -------- ------- ---------- -------
Light and Medium Crude (bbl/d) 899 955 890 765 870
--------- -------- ------- ---------- -------
Natural Gas (Mcf/d) 5,395 4,992 5,125 4,853 4,987
--------- -------- ------- ---------- -------
Associated Natural Gas Liquids
(bbl/d) 709 732 777 739 748
--------- -------- ------- ---------- -------
Total (Boepd) 15,345 15,188 15,169 14,551 14,965
--------- -------- ------- ---------- -------
Production Guidance
(Boepd) Low High Mid-Point
------- ------- ----------
Egypt (Boepd) 11,300 12,100 11,700
------- ------- ----------
Heavy Crude (bbl/d) 10,396 11,132 10,743
------- ------- ----------
Light and Medium Crude (bbl/d) 904 968 957
------- ------- ----------
Canada (Boepd) 2,000 2,200 2,100
------- ------- ----------
Light and Medium Crude (bbl/d) 672 740 706
------- ------- ----------
Natural Gas (Mcf/d) 5,142 5,646 5,394
------- ------- ----------
Associated Natural Gas Liquids
(bbl/d) 471 519 495
------- ------- ----------
Total (Boepd) 13,300 14,300 13,800
------- ------- ----------
For further information, please
contact:
TransGlobe Energy Via FTI Consulting
Randy Neely, President and Chief
Executive Officer
Eddie Ok, Chief Financial Officer
Canaccord Genuity (Nomad & Sole
Broker) +44 (0) 20 7523 8000
Henry Fitzgerald-O'Connor
James Asensio
FTI Consulting (Financial PR) +44 (0) 20 3727 1000
Ben Brewerton transglobeenergy@fticonsulting.com
Genevieve Ryan
Tailwind Associates (Investor Relations)
Darren Engels darren@tailwindassociates.ca
http://www.tailwindassociates.ca
+1 403.618.8035
investor.relations@trans-globe.com
http://www.trans-globe.com
+1 403.264.9888
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
UPDEAELAEENEEEA
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