TIDMTGL
RNS Number : 5035H
TransGlobe Energy Corporation
03 December 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 AN
AGREEMENT
TO MERGE, EXT AND MODERNIZE ITS EASTERN DESERT CONCESSIONS
AIM & TSX: "TGL" & NASDAQ: "TGA"
Calgary, Alberta, December 03, 2020 - TransGlobe Energy
Corporation ("TransGlobe" or the "Company") announces it has
reached an agreement with the Egyptian General Petroleum
Corporation ("EGPC") to merge the Company's three existing Eastern
Desert concessions (the West Gharib, West Bakr and North West
Gharib concessions) into a new modernized concession agreement (the
"Merged Concession" or "Agreement"). The Agreement is subject to
the usual Egyptian Parliamentary ratification and the satisfaction
of other closing conditions. All dollar values are expressed in US
dollars unless otherwise stated.
KEY ELEMENTS OF THE MERGED CONCESSION
-- The West Gharib, West Bakr, and North West Gharib
concessions, including all existing development leases within these
concessions, will be merged into the Merged Concession with a new
15-year development term and a 5-year extension option.
-- Modernized financial concession terms promote increased
investment and implementation of new technology in the mature
fields through:
o Improved cost recovery terms to support continued investment
in higher-cost mature fields.
o Production sharing terms scaled to oil prices to support
TransGlobe's returns during lower oil prices and government returns
during higher oil prices.
o Improved netbacks and increased cash flows are expected to
fund new investments in incremental recovery projects.
-- Near-term operational netbacks (revenue less royalties, taxes
and operating expenses) are estimated to improve by the following
ranges relative to Brent pricing assuming current production
levels, operating costs and historical differentials to Brent:
Brent Oil Price ($/bbl) Netback Increase ($/bbl)
$40 $5 to $7
-------------------------
$50 $7 to $9
-------------------------
$60 $9 to $11
-------------------------
o Modernized terms are to be applied from the February 2020
effective date of the Merged Concession.
-- Incremental, internally estimated, Company Gross risked best
estimate Economic Contingent Resource volume of 59.1 million
barrels oil (Company Contingent Resources are separate from Company
reserves; please see Advisory Regarding Oil and Gas Information
later in this release).
-- Subject to final ratification, the Company will pay EGPC a
signature bonus and an equalization (or modernization) payment in
installments. The Company anticipates that the equalization payment
and signature bonus will be funded from existing resources and
expected improved cash flows.
o The equalization payment compensates EGPC for the improved
fiscal terms on the underlying base forecasted production.
o An initial equalization payment of $15 million and signature
bonus of $1 million are due on ratification, with five further
annual equalization payments of $10 million each being made over
five years (beginning February 1, 2022 until February 1, 2026).
-- Minimum financial work commitments of $50 million per each
five-year period of the primary development term, commencing on the
February 1, 2020 effective date. All investments which exceed the
five-year minimum $50 million threshold will carry forward to
offset against subsequent five-year commitments.
o For context, the Company's average annual capital expenditures
in Egypt over the last five full calendar years has been greater
than $30 million per year, and the Company expects to fund these
future investments from existing resources and future cash
flows.
-- Merge the existing Joint Venture Operating Companies' (Dara
Petroleum Company, West Bakr Petroleum Company and North West
Gharib Petroleum Company) assets, facilities, and infrastructure
into a new Joint Venture Operating Company in order to
substantially increase operational efficiencies.
PRESIDENT AND CEO COMMENTS
Randy Neely, President and CEO stated, "After a lengthy and
constructive negotiation, I believe we have arrived at an
incredible win-win amendment for both TransGlobe and EGPC. The
efficiencies gained from the consolidation of our Eastern Desert
concessions, along with the improved netbacks and extended term,
are expected to provide TransGlobe with the fiscal incentive and
time to unlock meaningful additional reserves and production
through the application of modern technology and optimization of
infrastructure. This will also allow us to move forward with
important ESG initiatives to improve our environmental footprint as
well as continue to be a major employer in the Ras Gharib region
for the foreseeable future.
We intend to continue to manage the finances of the Company with
a conservative approach and expect that, under a reasonable range
of oil prices, the Company will be able to fund the equalization
payments and a continuous capital investment program from existing
resources and cash flows. In addition, as soon as practicable,
direct returns to our shareholders will be prioritized.
This Agreement is a critical first step in achieving our stated
goal of becoming a leading independent Middle East/North Africa
region cashflow-focused energy producer. The Merged Concession will
provide the platform to allow us to increase our efforts on
completing complementary mergers and acquisitions to further
support this objective.
We appreciate the commitment and vision of the leadership team
at EGPC to extending the life of these mature oil fields and we
look forward to working closely with them to realize the
significant mutual benefits of this Merged Concession. In the
immediate future we will begin to plan for increased activities
that should in the near to medium term arrest and reverse recent
production declines."
BACKGROUND TO THE AGREEMENT
In 2017, H.E. Eng. Tarek El Molla (Minister of Petroleum &
Minerals) announced a Modernization Initiative to try to increase
oil production and reserves by 20% from existing oil pools
(brownfields). Since that time, TransGlobe and EGPC have been
discussing ways in which TransGlobe could increase recoveries and
production from its existing producing fields and have worked
extensively to evaluate various modernization fiscal structures to
provide a framework for continued brownfield investment in
TransGlobe's Eastern Desert concessions.
Encouraged by the Ministry's Modernization Initiative and
positive discussions with EGPC, the Company identified a number of
enhanced recovery and infrastructure efficiency projects targeting
incremental oil recovery from existing pools in the concessions.
Concurrently, the Company initiated detailed static and dynamic
reservoir modeling of several of the larger pools to evaluate
enhanced recovery strategies. Additional detail regarding these and
other Contingent Resources disclosed in this news release are
available below under "Advisory Regarding Oil and Gas
Information".
The existing concessions are comprised of 10 development leases,
which include a number of development leases approaching the end of
their primary terms in the next few years. All of the existing
development leases (each with a 20-year primary term) have a 5-year
extension available, however future investment under the existing
concessions is challenged due to limited remaining tenure on some
of the key development leases, and their fiscal terms. These
factors, combined with the prevailing lower oil prices and higher
operating costs associated with mature oil fields, made future
capital investments very challenging. All 10 existing development
leases are included in the Merged Concession.
SIGNIFICANT MUTUAL BENEFITS
The modernized fiscal terms and extended investment horizon
provide the necessary incentives and fiscal framework to support
increased investment to recover additional oil volumes in the
mid-term expected Brent oil price environment of $40-$60/bbl.
New investable projects will target a Company Gross risked best
estimate incremental 59.1 million barrels of Economic (Development
Pending/ On Hold and Development Unclarified) Contingent Resources
through drilling, increased operating efficiencies and the
application of new technologies over the 20 year term (15 year
primary + a 5 year option period). These Contingent Resources are
separate from our existing Proved plus Probable reserve base in the
eastern desert which were estimated at 26.3 million barrels of oil
(23.6 MMbbl heavy oil and 2.7 MMbbl light/medium oil) at
12/31/2019.
Investable projects are expected to arrest the historical
production declines (22% per year) and provide a stable production
and cash flow base for the next five+ years with potential to grow
and extend the life of existing fields. To date, of the 59.1
million barrels of risked Contingent Resources noted above, the
Company has technically matured a Company Gross risked best
estimate incremental 20.5 million barrels of Development Pending/
On Hold Contingent Resources from the Arta Nukhul, K-Field, and
H-Field pools based on their respective dynamic modelling, the
Merged Concession terms, and an estimated future capital investment
of $125 million. With this announcement, the Company will
prioritize the Arta Nukhul, H-Field, and K-Field pools' resource
maturation projects, which are expected to commence as soon as
reasonably practicable. See "Advisory Regarding Oil and Gas
Information" below for additional details.
Consolidation of the three concessions is expected to generate
additional efficiencies through consolidation of the existing joint
venture operating companies, optimized utilization of existing
infrastructure, and future infrastructure investments.
In addition, the merged workforce of the existing joint venture
operating companies provides the Company and EGPC with an
opportunity to train, develop, and deploy an integrated workforce
with enhanced operating capabilities to develop and operate other
brownfields in the future.
The Merged Concession is expected to provide further incentive
for the transfer of technologies, through horizontal drilling with
multi-staged completions, routinely employed in our Canadian
operations, possible tertiary recovery techniques, and also the
opportunity to pursue a number of infrastructure investments to
increase operating efficiencies.
In accordance with the Company's ESG initiatives, the Company
has identified several infrastructure investment projects such as
displacing diesel power generation in the field with reliable power
from the national power grid which are expected to increase
efficiencies, reduce operating costs, and significantly reduce GHG
emissions. The national power grid has been expanded throughout the
merged area, including connection to the substantial, new renewable
wind power projects in the region.
Significant additional benefits are expected to accrue to Egypt,
the Red Sea Governorate and the city of Ras Gharib through
additional investments, operating costs, and the associated
employment of the local workforce necessary to extend the life of
the existing fields.
TransGlobe Energy has posted a Merged Concession presentation to
our website ( www.trans-globe.com ) and will be hosting a webcast
and conference call to discuss the announcement further. Details of
the webcast will be provided in a separate announcement.
About TransGlobe
TransGlobe Energy Corporation is a cashflow-focused oil and gas
exploration and development company whose current activities are
concentrated in the Arab Republic of Egypt and Canada. TransGlobe's
common shares trade on the Toronto Stock Exchange and the AIM
market of the London Stock Exchange under the symbol TGL and on the
NASDAQ Exchange under the symbol TGA.
For Further information, please contact:
TransGlobe Energy Corporation +1 403 264 9888
Randy Neely, President and CEO investor.relations@trans-globe.com
Eddie Ok, CFO http://www.trans-globe.com
or via Tailwind Associates
or
FTI Consulting
Tailwinds Associates (Investor Relations) +1 403 618 8035
Darren Engels darren@tailwindassociates.ca
http://www.tailwindassociates.ca
FTI Consulting (Financial PR) +44(0) 20 3727 1000
Ben Brewerton transglobeenergy@fticonsulting.com
Genevieve Ryan
Canaccord Genuity (Nomad & Joint-Broker)
Henry Fitzgerald-O'Connor
James Asensio +44(0) 20 7523 8000
Shore Capital (Joint Broker)
Jerry Keen
Toby Gibbs +44(0) 20 7408 409
Advisory Regarding Oil and Gas Information
TransGlobe completed an internal evaluation of the Contingent
Resources (the "Contingent Resource Evaluation") attributed to the
pools included in the Company's existing 10 development leases
based on the new terms and conditions of the Merged Concession (the
"Evaluated Areas") which remains subject to ratification and
satisfaction of certain other closing conditions. TransGlobe's
wholly-owned subsidiaries have a 100% working interest in the
existing development leases and related concession agreements
covering the Evaluated Areas and would maintain that level of
interest upon ratification of the Merged Concession. The Evaluated
Areas are located onshore in Egypt's Eastern Desert. The Contingent
Resources Evaluation is effective September 30, 2020 and has been
prepared by a member of TransGlobe's management who is a qualified
reserves evaluator in accordance with the procedures and standards
contained in the Canadian Oil and Gas Evaluation ("COGE")
Handbook.
Contingent Resources should not be confused with reserves.
Readers should review the definitions and notes set forth below.
Actual resources may be greater than or less than the estimates
provided herein. There is uncertainty that it will be commercially
viable to produce any portion of the resources.
Gross Contingent Resources are the Company's working interest
share before the deduction of royalties. Net Contingent Resources
in Egypt include the Company's share of future cost recovery and
production sharing oil, and Contingent Resources relating to income
taxes. Under this method, a portion of the reported Contingent
Resources will increase as oil prices decrease and vice versa as
the barrels necessary to achieve cost recovery change with
prevailing oil prices.
Summary of Risked Best Estimate Contingent Resources for the
Evaluated Areas as of September 30, 2020
Best Estimate Risked Contingent Resources
(1)
Project Maturity Sub-Class Heavy crude oil
--------------------------------------------
Gross ( MM bbl) Net ( MM bbl)
----------------------- -------------------
Development Pending
/ On Hold 20.5 13.4
Development Unclarified 38.6 22.8
----------------------- -------------------
Total Economic Contingent
Resources 59.1 36.2
----------------------- -------------------
Development Not Viable 2.1 1.3
----------------------- -------------------
(1) Refer to "Resource Definitions" below for detailed
definitions of Contingent Resources.
The estimated cost to bring on commercial production from the
Development Pending / On Hold Contingent Resources is approximately
$125 million (discounted at 10 percent is approximately $81.2
million), and the expected timeline to bring these resources onto
production ranges from one to three years depending on the
Evaluated Area. TransGlobe's Development Pending / On Hold
Contingent Resources represent development projects within the
Evaluated Areas for which specific development plans have been
made. These resources are expected to be recovered using the same
conventional development technology that TransGlobe has already
proven to be effective in the Evaluated Areas, supplemented by some
horizontal well drilling and multi-stage stimulation that the
Company has successfully deployed in Canada
Contingent Resources Chance of Commerciality
The Evaluated Areas with Contingent Resources were risked for
the chance of commerciality ("CoC"), which is defined as
follows:
CoC = chance of development ("CoDev") × chance of discovery
("CoD")
wherein CoD for Contingent Resources is equal to one for all
Contingent Resources.
The chance of development is the estimated probability that,
once discovered, a known accumulation will be commercially
developed. Five factors have been considered in determining the
CoDev as follows:
CoDev = Ps (Economic Factor) × Ps (Technology Factor) × Ps
(Development Plan Factor) × Ps (Development Timeframe Factor) × Ps
(Other Contingency Factor)
wherein Ps is the probability of success
The five factors were assessed for each of the Evaluated Areas.
The following factors were assessed for TransGlobe's Contingent
Resources to be sub-classified and considered as Development
Pending/ On Hold Contingent Resources, Development Unclarified
Contingent Resources or Development Not Viable Contingent
Resources:
Economic Factor: For Development Pending/ On Hold the associated
development projects had robust economics (i.e., strong rate of
returns), and as such were assigned a factor of 0.9 to 1.0. The
remaining Contingent Resources sub-classes have factors ranging
from 0.6 to 1.00. The Contingent Resource Evaluation is based on
the October 1, 2020 forecast pricing and inflation published by GLJ
Petroleum Consultants Ltd., independent petroleum consultants,
shown in the following table:
Year Brent Reference Price Inflation Rate
($US/bbl) (1) (%/yr) (2)
2020 Q4 44.00 0.00
---------------------- --------------------
2021 46.75 1.00
---------------------- --------------------
2022 51.00 2.00
---------------------- --------------------
2023 56.50 2.00
---------------------- --------------------
2024 60.00 2.00
---------------------- --------------------
2025 62.95 2.00
---------------------- --------------------
2026 64.13 2.00
---------------------- --------------------
2027 65.33 2.00
---------------------- --------------------
2028 66.56 2.00
---------------------- --------------------
2029 67.81 2.00
---------------------- --------------------
2030+ +2.0%/yr thereafter 2.00%/yr thereafter
---------------------- --------------------
(1) Price forecast is GLJ forecast from Oct 1, 2020
(2) Inflation rates for forecasting expenditure prices and costs
Technology Factor: Much of TransGlobe's Contingent Resources
will be developed utilizing established technology, therefore, a
technology factor of 0.8 to 1.0 is utilized for all resource
Contingent Resources sub-classes. A lower factor here took into
account potential operational risks associated with horizontal,
multi-stage stimulated wells.
Development Plan Factor: Development plans and costs were
prepared and are in place. This factor ranges from 0.85 to 0.9 for
Development Pending / On Hold Contingent Resources. For the
remaining Contingent Resources sub-classes, the Development Plan
Factors range from 0.70 to 0.75 based on the level of detail.
Development Timeframe Factor: Several core areas within the
Evaluated Areas have portions of the Petroleum Initially-in-Place
("PIIP") volume developed and producing, with proved and probable
reserves assigned. Timing for the Contingent Resources portions of
these projects will depend on the pace of continued development
(including allocation of funds), available throughput capacity in
existing facilities, or construction of additional facilities.
Development Pending / On Hold projects have been assigned
Development Timeframe Factors of 1.0 reflecting a high level of
certainty in timing estimates and intent by TransGlobe to invest in
these projects in the near term. For the remaining Contingent
Resources sub-classes, the Timeframe Factors assigned range from
0.70 to 0.90.
Other Contingency Factor: For reserves to be assessed, all
contingencies must be eliminated. With respect to Contingent
Resources, this factor captures major contingencies, usually beyond
the control of TransGlobe, other than those captured by economic
status, technology status, project evaluation scenario status and
the development timeframe. The Other Contingency Factor has been
assessed as 1.0 for all Contingent Resources sub-classes.
These factors may be inter-related, and care has been taken to
ensure that risks are appropriately accounted for. The following
table summarizes the Chance of Commerciality applied to Contingent
Resources based on the factors assessed.
Summary of Chance of Commerciality of Best Estimate Contingent
Resources for the Evaluated Areas as of September 30, 2020:
Chance of Commerciality and Best Estimate Contingent Resources
([) (1)(2)]
Chance Best estimate Best estimate
of Commerciality unrisked risked
------------------ -------------- --------------
Heavy Crude Oil (MMbbl)
Development Pending / On Hold
Contingent Resources 85% 24.0 20.5
------------------ -------------- --------------
Development Unclarified Contingent
Resources 60% 65.1 38.6
------------------ -------------- --------------
Total Economic Contingent Resources - 89.1 59.1
------------------ -------------- --------------
Development Not Viable Contingent
Resources 26% 8.0 2.1
------------------ -------------- --------------
(1) All volumes listed in the table are Company Gross.
(2) Refer to "Resource Definitions" below for detailed
definitions of Contingent Resources
Risks and Significant Positive and Negative Factors
Continuous development through multi-year development programs
and significant levels of future capital expenditures are required
in order for Contingent Resources to be recovered in the future.
The principal risks that would inhibit the recovery of additional
resources relate to the potential for variations in the quality of
the Evaluated Areas formation where minimal well data currently
exists, access to the capital which would be required to develop
the resources, low crude oil prices that would curtail the
economics of development, the future performance of wells,
regulatory approvals, access to the required services at the
appropriate cost, access to market and the effectiveness of
stimulation technology and applications.
Furthermore, it should be understood that Contingent Resources
estimates reflect data as of the date of the Contingent Resources
Evaluation. Although only best estimates are reported, it should be
understood that there is a significant degree of uncertainty in
these estimates. Additional data may justify upward or downward
revisions to the estimates, which in turn would impact the
Contingent Resources estimates.
Contingencies
In the Evaluated Areas, the primary contingencies that prevent
the Contingent Resources from being classified as reserves are the
development of firm plans, including timing, infrastructure, and
the commitment of capital, and, in some cases, the verification of
commercial production rates. As continued delineation occurs, and
plans are firmed up, some Contingent Resources are expected to be
re-classified to reserves.
Projects have been defined to develop the resources in the
Evaluated Areas for the Development Pending/ On Hold Contingent
Resources at the evaluation date. Such projects, in the case of the
Evaluated Areas, have historically been developed sequentially over
a number of drilling seasons and are subject to annual budget
constraints, TransGlobe's policy of orderly development on a staged
basis, TransGlobe's short-term and long-term view of crude oil
prices, and the results of development activities in the area.
Resource Definitions
The following are excerpts from the definitions of resources and
reserves, contained in Section 5 of the COGE Handbook, which is
referenced by the Canadian Securities Administrators in "National
Instrument 51-101 Standards of Disclosure for Oil and Gas
Activities".
(a) Fundamental Resource Definitions
Contingent Resources are those quantities of petroleum
estimated, as of a given date, to be potentially recoverable from
known accumulations using established technology or technology
under development, but which are not currently considered to be
commercially recoverable due to one or more contingencies.
Contingencies may include factors such as economic, legal,
environmental, political, and regulatory matters, or a lack of
markets. It is also appropriate to classify as Contingent Resources
the estimated discovered recoverable quantities associated with a
project in the early evaluation stage. Contingent Resources are
further classified in accordance with the level of certainty
associated with the estimates and may be subclassified based on
project maturity and/or characterized by their economic status.
(b) Uncertainty Categories for Resource Estimates
The range of uncertainty of estimated recoverable volumes may be
represented by either deterministic scenarios or by a probability
distribution. Resources should be provided as low, best, and high
estimates as follows:
Low Estimate: This is considered to be a conservative estimate
of the quantity that will actually be recovered. It is likely that
the actual remaining quantities recovered will exceed the low
estimate. If probabilistic methods are used, there should be at
least a 90 per cent probability (P90) that the quantities actually
recovered will equal or exceed the low estimate.
Best Estimate: This is considered to be the best estimate of the
quantity that will actually be recovered. It is equally likely that
the actual remaining quantities recovered will be greater or less
than the best estimate. If probabilistic methods are used, there
should be at least a 50 per cent probability (P50) that the
quantities actually recovered will equal or exceed the best
estimate.
High Estimate: This is considered to be an optimistic estimate
of the quantity that will actually be recovered. It is unlikely
that the actual remaining quantities recovered will exceed the high
estimate. If probabilistic methods are used, there should be at
least a 10 per cent probability (P10) that the quantities actually
recovered will equal or exceed the high estimate.
This approach to describing uncertainty may be applied to
reserves, Contingent Resources and prospective resources. There may
be significant risk that sub-commercial and undiscovered
accumulations will not achieve commercial production. However, it
is useful to consider and identify the range of potentially
recoverable quantities independently of such risk.
(c) Discovered and Commercial Status and Risks Associated with
Resource Estimates Discovery Status
Total petroleum initially-in-place is first subdivided based on
the discovery status of a petroleum accumulation. Discovered PIIP,
production, reserves, and Contingent Resources are associated with
known accumulations. Recognition as a known accumulation requires
that the accumulation be penetrated by a well and have evidence of
the existence of petroleum. The COGE Handbook Consolidated 3rd
Edition, Section 1.4.7.2.1.2, provides additional clarification
regarding drilling and testing requirements relating to recognition
of known accumulations. On the other hand, Prospective resources is
undiscovered PIIP which is associated with accumulations yet to be
discovered.
Commercial Status
Commercial status differentiates reserves from Contingent
Resources. The following outlines the criteria that should be
considered in determining commerciality:
economic viability of the related development project;
a reasonable expectation that there will be a market for the
expected sales quantities of production required to justify
development;
evidence that the necessary production and transportation
facilities are available or can be made available;
evidence that legal, contractual, environmental, governmental,
and other social and economic concerns will allow for the actual
implementation of the recovery project being evaluated;
a reasonable expectation that all required internal and external
approvals will be forthcoming. Evidence of this may include items
such as signed contracts, budget approvals, and approvals for
expenditures, etc.;
evidence to support a reasonable timetable for development. A
reasonable time frame for the initiation of development depends on
the specific circumstances and varies according to the scope of the
project. While five years is recommended as a maximum time frame
for classification of a project as commercial, a longer time frame
could be applied where, for example, development of economic
projects are deferred at the option of the producer for, among
other things, market-related reasons or to meet contractual or
strategic objectives.
Commercial Risk Applicable to Resource Estimates
Estimates of recoverable quantities are stated in terms of the
sales products derived from a development program, assuming
commercial development. It must be recognized that reserves and
Contingent Resources involve different risks associated with
achieving commerciality. The likelihood that a project will achieve
commerciality is referred to as the "chance of commerciality." The
chance of commerciality varies in different categories of
recoverable resources as follows:
Reserves: To be classified as reserves, estimated recoverable
quantities must be associated with a project(s) that has
demonstrated commercial viability. Under the fiscal conditions
applied in the estimation of reserves, the chance of commerciality
is effectively 100 percent.
Contingent Resources: Not all technically feasible development
plans will be commercial. The commercial viability of a development
project is dependent on the forecast of fiscal conditions over the
life of the project. For Contingent Resources the risk component
relating to the likelihood that an accumulation will be
commercially developed is referred to as the "chance of
development." For Contingent Resources the chance of commerciality
is equal to the chance of development.
(d) Recovery Technology Status
Established Technology: A recovery method that has been proven
to be successful in commercial applications in the subject
reservoir and is a prerequisite for assigning reserves.
Technology under Development: A recovery process that has been
determined to be technically viable via field test and is being
field tested further to determine its economic viability in the
subject reservoir. Contingent Resources may be assigned if the
project provides information that is sufficient and of a quality to
meet the requirements for this resource class.
Experimental Technology: A technology that is being field tested
to determine the technical viability of applying a recovery process
to unrecoverable discovered PIIP in a subject reservoir. It cannot
be used to assign any class of recoverable resources (i.e.,
reserves and Contingent Resources).
(e) Economic Status of Resource Estimates
By definition, reserves are commercially (and hence
economically) recoverable. A portion of Contingent Resources may
also be associated with projects that are economically viable but
have not yet satisfied all requirements of commerciality.
Accordingly, it may be a desirable option to subclassify Contingent
Resources by economic status:
Economic Contingent Resources are those Contingent Resources
that are currently economically recoverable. The C ontingent R
esources sub-classes included are D evelopment P ending Contingent
Resources, Development on Hold C ontingent R esources , and
Development Unclarified C ontingent R esources .
Sub-Economic Contingent Resources are those Contingent Resources
that are not currently economically recoverable. The C ontingent R
esources sub-class included is Development Not Viable.
Where evaluations are incomplete such that it is premature to
identify the economic viability of a project, it is acceptable to
note that project economic status is "undetermined" (i.e.,
"Contingent Resources - economic status undetermined").
In examining economic viability, the same fiscal conditions
should be applied as in the estimation of reserves, i.e., specified
economic conditions, which are generally accepted as being
reasonable (refer to the COGE Handbook Consolidated 3rd Edition,
Section 1.4.7.2.1.3).
(f) Project Maturity Sub-Classes for Contingent Resources
Development Pending: Where resolution of the final conditions
for development is being actively pursued (high chance of
development).
Development on Hold: Where there is a reasonable chance of
development but there are major non-technical contingencies to be
resolved that are usually beyond the control of the operator.
Development Unclarified: When the evaluation is incomplete and
there is ongoing activity to resolve any risks or
uncertainties.
Development Not Viable: Contingent Resource that is not viable
in the conditions prevailing at the effective date of the
evaluation, and where no further data acquisition or evaluation is
currently planned and hence there is a low chance of
development.
Historic Financial Information regarding the Assets
The three concessions associated with the Merged Concession
generated $16 million of earnings in 2019 (which excludes allocated
finance expenses and losses on financial instruments).
Advisory Regarding Forward-Looking Information and
Statements
Certain statements included in this news release constitute
forward-looking statements or forward-looking information under
applicable securities legislation. Such forward-looking statements
or information are provided for the purpose of providing
information about management's current expectations and plans
relating to the future. Readers are cautioned that reliance on such
information may not be appropriate for other purposes.
Forward-looking statements or information typically contain
statements with words such as "anticipate", "believe", "expect",
"plan", "intend", "estimate", "may", "will", "would" or similar
words suggesting future outcomes or statements regarding an
outlook. In particular, forward-looking information and statements
contained in this document include, but are not limited to; the
anticipated timing of the final ratification of the Merged
Concession and respective closing commitments; anticipated
improvements to the Company's near-term operational netbacks; the
Agreement's ability to unlock meaningful additional reserves and
production; anticipated mid-term oil prices; the availability of
future investment opportunities for the Company and their ability
to increase production, provide a stable production / revenue base
in the future and extend the life of existing fields; estimated
capital investments to be made by the Company; the anticipated
timing of the Arta Nukhul, H-Field, and K-Field pools' resource
maturation projects; and other matters.
Forward-looking statements or information are based on a number
of factors and assumptions which have been used to develop such
statements and information but which may prove to be incorrect.
Although the Company believes that the expectations reflected in
such forward-looking statements or information are reasonable,
undue reliance should not be placed on forward-looking statements
because the Company can give no assurance that such expectations
will prove to be correct. Many factors could cause TransGlobe's
actual results to differ materially from those expressed or implied
in any forward-looking statements made by, or on behalf of,
TransGlobe.
In addition to other factors and assumptions which may be
identified in this news release, assumptions have been made
regarding, among other things, that the Merged Concession will be
ratified; respective closing commitments will be paid; anticipated
production volumes; 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, the Merged Concession not being ratified by
Parliament; respective closing commitments not being paid;
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. Ron Hornseth, B.Sc., General Manager - Canada for TransGlobe
Energy Corporation, and a qualified person as defined in the
Guidance Note for Mining, Oil and Gas Companies, June 2009, of the
London Stock Exchange, has reviewed the technical information
contained in this report. Mr. Hornseth is a professional engineer
who obtained a Bachelor of Science in Mechanical Engineering from
the University of Alberta. He is a member of the Association of
Professional Engineers and Geoscientists of Alberta and the Society
of Petroleum Engineers and has over 20 years' experience in oil and
gas.
Abbreviations
bbl barrel of oil
bbls barrels of oil
CoC chance of commerciality
CoD chance of discovery
CoDev chance of development
COGE Handbook Canadian Oil and Gas Evaluation Handbook
EGPC Egyptian General Petroleum Corporation
MMbbl million barrels of oil
PIIP Petroleum Initially-in-Place
Proved reserves those reserves that can be estimated with a high
degree of certainty to be recoverable. It is likely that the actual
remaining quantities recovered will exceed the estimated proved
reserves
Probable reserves those additional reserves that are less
certain to be recovered than proved reserves. It is equally likely
that the actual remaining quantities recovered will be greater or
less than the sum of the estimated proved plus probable
reserves.
Ps probability of success
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END
AGRGZMGZKFLGGZM
(END) Dow Jones Newswires
December 03, 2020 10:12 ET (15:12 GMT)
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