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Press release from Marketwire

TransGlobe Energy Corporation Announces First Quarter 2012 Financial and Operating Results

Monday, May 07, 2012

TransGlobe Energy Corporation Announces First Quarter 2012 Financial and Operating Results07:00 EDT Monday, May 07, 2012CALGARY, ALBERTA--(Marketwire - May 7, 2012) - TransGlobe Energy Corporation ("TransGlobe" or the "Company") (TSX:TGL) (NASDAQ:TGA) is pleased to announce its financial and operating results for the three months ended March 31, 2012. All dollar values are expressed in United States dollars unless otherwise stated.HIGHLIGHTS-- Record first quarter average production of 16,720 Bopd, (Egypt 16,423 Bopd, Yemen 297 Bopd), a 39% increase over fourth quarter 2011; -- First quarter funds flow of $36.1 million ($0.48/share), a 36% increase over fourth quarter 2011;-- First quarter net earnings of $18.8 million ($0.25/share), prior to a $7.8 million $0.10/share) non-cash unrealized loss on financial instruments (convertible debentures) resulting in reported net earnings of $11.0 million ($0.15/share); -- Drilled 9 wells in first quarter resulting in 9 oil wells at West Gharib; -- Raised gross proceeds of Cdn$97.8 million through a convertible debenture offering in February; -- Announced $15.0 million Share Purchase Agreement (May 1, 2012) to acquire interests in South Alamein and South Mariut;-- Increased capital budget to $89.3 million (an increase of $13.6 million). A conference call to discuss TransGlobe's 2012 first quarter results presented in this news release will be held Monday, May 7, 2012 at 9:00 AM Mountain Time (11:00 AM Eastern Time) and is accessible to all interested parties by dialing 1-416-340-2216 or toll-free 1-866-226-1792 (see also TransGlobe's news release dated May 1, 2012). The webcast may be accessed at http://events.digitalmedia.telus.com/transglobe/050712/index.php.---------------------------------------------------------------------------- TransGlobe Energy Corporation's Annual General Meeting of Shareholders Tuesday, May 8, 2012 at 3:00 PM Mountain Time Bow Glacier Room Centennial Place West, 3rd Floor, 250 - 5th Street S.W., Calgary, Alberta, Canada ----------------------------------------------------------------------------FINANCIAL AND OPERATING RESULTS(US$000s, except per share, price, volume amounts and % change) Three Months Ended March 31 Financial 2012 2011 % Change --------------------------------------------------------------------------------------------------------------------------------------------------------Oil revenue 159,426 97,995 63 Oil revenue, net of royalties and other 77,212 52,863 46 Derivative gain (loss) on commodity contracts (124) (551) 77 Operating expense 11,966 7,547 59 General and administrative expense 6,688 4,506 48 Depletion, depreciation and amortization expense 11,749 7,760 51 Income taxes 21,585 16,535 31 Funds flow from operations(i) 36,088 24,930 45 Basic per share 0.49 0.35 Diluted per share 0.48 0.34 Net earnings 10,975 2,889 280 Basic per share 0.15 0.04 Diluted per share 0.15 0.04 Capital expenditures 4,472 20,307 (78)Working capital 263,693 135,283 95 Long-term debt, including current portion 57,910 56,731 2 Convertible debentures 105,835 - - Common shares outstanding Basic (weighted-average) 73,061 71,103 3 Diluted (weighted-average) 75,333 73,765 2 Total assets 648,012 404,184 60 --------------------------------------------------------------------------------------------------------------------------------------------------------(i) Funds flow from operations is a measure that represents cash generated from operating activities before changes in non-cash working capital and may not be comparable to measures used by other companies. Operating --------------------------------------------------------------------------------------------------------------------------------------------------------Average production volumes (Bopd) 16,720 11,218 49 Average price ($ per Bbl) 104.78 97.06 8 Operating expense ($ per Bbl) 7.86 7.48 5 --------------------------------------------------------------------------------------------------------------------------------------------------------CORPORATE SUMMARYTransGlobe Energy Corporation's ("TransGlobe" or the "Company") total production increased to a record 16,720 barrels of oil per day ("Bopd") during the quarter. This record was largely due to the recent acquisition of the West Bakr properties in the Gulf of Suez region adjacent to the Company's West Gharib properties. One of the Company's contracted drilling rigs has recently started drilling the first of three wells on the West Bakr properties. The political environment in Egypt continues to improve and business processes and operations are proceeding as normal. Yemen is still unsettled and the Company has 2,250 Bopd shut-in on Block S-1 since October 8, 2011. Although the Company expects the situation in Yemen will be resolved and production will resume, it is difficult to predict when.The focus of the 2012 drilling program will be primarily on the West Gharib/West Bakr properties in the first half and with several development and appraisal wells in the East Ghazalat and South Alamein projects slated for the second half.The pending acquisition of the South Alamein and South Mariut concessions announced May 1, 2012 will add two new project areas in the Western Desert region of Egypt. There are numerous exploration and development opportunities and operational synergies expected to arise from the acquisition. Closing could occur as early as June.Also in the Western Desert, plans are underway to bring the East Ghazalat Safwa discovery into production in 2012. The commencement of first production (approximately 800 to 1,200 Bopd to TransGlobe) is expected by the third quarter.All of the Company's production is priced to 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 are assigned 100% to the Company) which generally results in more production sharing oil or profit oil. Production sharing oil is split with the respective Government. The splits are fixed for the life of the contract and do not change with the price of oil. During times of increased oil prices, the Company receives less cost oil and more production sharing oil (or profit oil). During times of increased oil prices, the Government receives more production sharing oil due to lower cost 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).Dated Brent oil prices were strong during the quarter at $118.49 per barrel in the first quarter. The West Gharib/West Bakr crude is sold at a quality discount to Dated Brent and received $104.78 during the quarter. The Company had funds flow of $36.1 million and closed a C$97.8 million convertible debenture financing to exit the quarter with positive working capital of $263.7 million and long-term debt and convertible debentures of $163.7 million.The Company had net earnings in the quarter of $11.0 million, which was net of a $7.8 million non-cash unrealized loss on financial instruments (convertible debentures). The $7.8 million loss represents a fair value adjustment in accordance with IFRS, but does not represent a cash expense or an increase in the future cash outlay required to pay back the convertible debentures.Subsequent to the quarter, the Company has collected $30.1 million of receivables in Egypt.The Company has a very strong financial position and is working on several business development opportunities in Egypt to expand its opportunity base.OPERATIONS UPDATEARAB REPUBLIC OF EGYPTWest Gharib, Arab Republic of Egypt (100% working interest, TransGlobe operated)Operations and ExplorationDuring the first quarter, nine oil wells were drilled resulting in nine Nukhul oil wells in the Arta/East Arta pools. Subsequent to the quarter, three additional oil wells were drilled resulting in three Nukhul oil wells in the Arta/East Arta pools. In April one of the drilling rigs was moved to the West Bakr Concession where it is currently drilling. One drilling rig is currently drilling at West Gharib primarily focused on the Nukhul formation in the Arta/East Arta pools.ProductionProduction from West Gharib averaged 12,065 Bopd to TransGlobe during the first quarter, a 7% (785 Bopd) increase over the previous quarter. Production increases in the quarter are attributed to improved water separation in the field and to new wells. The Company commissioned a new multi-well battery in the Arta field during the second week of December which has improved water separation in the field and increased oil sales. The Company continues to progress a number of facilities projects including a new multi-well battery at Hoshia to reduce the amount of water trucked with the oil and to increase tankage/processing capacity allocations at the General Petroleum Corporation ("GPC") terminal. The Company has temporarily deferred completion of new wells which require fracture stimulation until additional capacity is available at the GPC terminal.Production averaged 12,052 Bopd to TransGlobe during April. It is estimated that approximately 500 Bopd of production remains curtailed in April due to facility constraints. Of the twelve wells drilled in 2012, ten wells are awaiting completion and stimulation. It is estimated that 2,000 Bopd of additional production inventory exists from these ten wells. The estimate is based on historical performance from Upper Nukhul producers which have averaged 200 Bopd during the first 90 days of production following fracture stimulation. The wells will be completed and brought into production to offset natural declines and as additional capacity becomes available at the GPC terminal.Quarterly West Gharib Production (Bopd) 2012 2011 ---------------------------------------------------------------------------- Q-1 Q-4 Q-3 Q-2--------------------------------------------------------------------------------------------------------------------------------------------------------Gross production rate 12,065 11,280 11,138 11,356TransGlobe working interest 12,065 11,280 11,138 11,356TransGlobe net (after royalties) 6,581 6,255 6,137 6,235TransGlobe net (after royalties and tax)(i) 4,536 4,358 4,247 4,306--------------------------------------------------------------------------------------------------------------------------------------------------------(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 (100% working interest, TransGlobe operated)As announced January 3, 2012, TransGlobe West Bakr Inc. ("TGWB"), a wholly-owned subsidiary of TransGlobe Energy Corporation, acquired all the Egyptian assets of The Egyptian Petroleum Development Co. Ltd. (of Japan) ("EPEDECO") on December 29, 2011.Operations and ExplorationSince closing at year-end 2011, the Company has moved quickly to integrate the West Bakr staff and operations into the TransGlobe Egypt operations. Working with our new Joint Venture operating company (West Bakr Production Company) an initial three-well drilling program was prepared and approved. The initial three-well program is targeting approximately 1,500 Bopd (500 Bopd/well) of new production. No wells were drilled in West Bakr during the first quarter.Subsequent to the quarter, the Company moved a drilling rig from the adjacent West Gharib concession and drilling commenced in late April in the H field.In addition to the initial drilling program, an additional nine drilling targets have been identified. It is expected that the initial three-well program will be expanded during the year. If a drilling rig is kept in West Bakr for the balance of the year it is estimated that approximately 10-12 wells could be drilled in the area in 2012.Concurrently, a work-over/re-completion program targeting an additional 1,500 Bopd was prepared and presented for approval. The first recompletion was completed in late April resulting in an initial increase in production of approximately 300 bopd.Based on the initial drilling and recompletion opportunities at West Bakr it is expected that production could increase to the 6,000 to 8,000 Bopd range over the next 12 months. This would exceed the current West Bakr sales capacity at the GPC terminal which is estimated at approximately 6,000 Bopd so additional facilities optimization would be required at the GPC terminal.Concurrent with production and reserve growth initiatives, the Company initiated an engineering study to identify and assess potential infrastructure synergies between West Bakr and the adjacent West Gharib operations. The initial study is focused on the utilization of excess processing and export pipeline capacity in the West Bakr concession to maximize the oil delivered to GPC and to reduce trucking expense. In addition, the Company is working with GPC and Egyptian General Petroleum Corporation ("EGPC") to expand existing export capacity and secure alternate sales points within the existing government-run infrastructure.The produced West Bakr oil ranges from 17 degrees to 20 degrees API and is pipeline connected to the GPC operated Ras Gharib terminal on the coast. The West Gharib production is currently trucked to the same terminal. The West Bakr blend has historically received Dated Brent minus 22 to 25% pricing.ProductionProduction from West Bakr averaged 4,358 Bopd to TransGlobe during the first quarter. Production averaged 4,314 Bopd to TransGlobe during April.Quarterly West Bakr Production (Bopd) 2012 2011 ---------------------------------------------------------------------------- Q-1 Q-4(i) Q-3 Q-2--------------------------------------------------------------------------------------------------------------------------------------------------------Gross production rate 4,358 138 - -TransGlobe working interest 4,358 138 - -TransGlobe net (after royalties) 1,239 45 - -TransGlobe net (after royalties and tax)(ii) 926 35 - ---------------------------------------------------------------------------------------------------------------------------------------------------------(i) Purchased December 29, 2011, includes three days of production.(ii) Under the terms of the West Bakr Production Sharing Concession, royalties and taxes are paid out of the Government's share of production sharingoil.East Ghazalat Block, Arab Republic of Egypt (50% working interest)Operations and ExplorationNo wells were drilled during the first quarter.On July 12, 2011, the Safwa development lease was approved by the Government of Egypt. The Safwa development lease has a 20-year term expiring in 2031 and covers approximately 11,040 acres or 15 development blocks. The Safwa development lease could be extended an additional 5 years to 2036.The East Ghazalat exploration concession is in the first two-year extension period which 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 commenced a work plan to complete and equip the existing four wells for production commencing by the end of the second quarter.It is expected that the existing 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, sweet crude (34 degrees API) to the Company by the end of the second quarter.South Alamein, Arab Republic of Egypt (SUBJECT TO CLOSING -100% 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 the South Alamein concession for $3.0 million plus an inventory adjustment, effective on and subject to approval from the Egyptian Government. The Cepsa asset purchase is conditional upon Government approval of a deed of assignment. The deed of assignment was signed by EGPC in late March and has been sent to the Minister of Petroleum for final approval.On May 1, 2012 the Company announced it has entered into a Share Purchase Agreement to acquire companies which hold a 50% interest in the South Alamein Production Sharing Concession ("PSC") and hold an operated 60% working interest in the South Mariut PSC. It is expected that the corporate purchase could close in early June.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 gross size of this exploration concession is 1,423 square kilometers (355,832 acres) following a 25% relinquishment of non-prospective acreage on April 4, 2012, and moves the concession into the final 2-year exploration phase. The concession includes an oil discovery well, Boraq-2X. The primary Cretaceous zone tested at a rate of 800 to 1,323 bopd of 34 API oil with no water and a 13% pressure drawdown. Test rates are not necessarily indicative of long-term performance but it is anticipated that when combined with secondary tested zones within the Cretaceous, the well should be capable of initial production of approximately 1,700 bopd. Initial work by TransGlobe will focus on appraisal and development of the Boraq-2X oil 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. An extensive 3-D seismic acquisition program was acquired over the entire South Alamein concession area. TransGlobe's technical team has identified six, drill-ready prospects on the remaining exploration lands. Drilling on these prospects is planned for the 2013 exploration program.The Company plans to submit a revised budget and development plan for the Boraq discovery to the Egyptian Government for approval following the closing of the Cepsa Transaction which is expected to occur in the Q2 2012.South Mariut, Arab Republic of Egypt (SUBJECT TO CLOSING -60% working interest, TransGlobe operated)On May 1, 2012 the Company announced it has entered into a Share Purchase Agreement to acquire companies which hold a 50% interest in the South Alamein PSC and hold an operated 60% working interest in the South Mariut PSC. It is expected that the corporate purchase could close in early June, subject to a waiver or non-exercise of a 30-day preferential right of purchase held by the remaining 40% working interest joint venture partner at South Mariut.The South Mariut concession is located in the Western Desert of Egypt and is onshore along the Mediterranean coast line, adjacent to prolific offshore hydrocarbon fields and southwest of the city of Alexandria. The southern boundary of the South Mariut concession is approximately 20 kilometers north of the South Alamein concession. The current gross size of this exploration concession is approximately 3,350 square kilometers (approx. 828,000 acres). The South Mariut concession is in the first, three-year extension period which expires on April 5, 2013. A further two-year extension is available under the production sharing contract.The South Mariut partners have acquired approximately 1,200 square kilometers of 3-D seismic over the original area and executed several studies supporting the prospectivity of the South Mariut concession area. The joint venture partners have approved (subject to rig availability) a $9.6 million exploration well (Al-Azayem -1) for 2012. The current operator has received all the necessary approvals and is in discussion with several contractors to supply a 2,000 horsepower drilling rig. The well is targeting several stacked horizons with four-way closures identified on 3-D seismic, with total depth expected at approximately 14,500 feet in the Jurassic formation. TransGlobe has internally estimated a combined 236 million barrels gross of undiscovered Petroleum Initially In Place ("PIIP") on a probabilistic P-mean basis for this prospect.The South Mariut concession production sharing terms are as follows: cost oil of 35%, sharing of profit oil with 18% to the Contractor, 82% to the Government of Egypt, with 100% excess cost recovery oil to the Government. Capital investments are amortized over five years and operating costs are fully recovered in the quarter incurred and paid. All taxes and royalties are paid out of the Government's share of profit oil.Nuqra Block 1, Arab Republic of Egypt (71.43% working interest, TransGlobe operated)Operations and ExplorationThe 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 BasinBlock 32, Republic of Yemen (13.81% working interest)Operations and ExplorationNo wells were drilled during the first quarter.ProductionProduction sales from Block 32 averaged 2,151 Bopd (297 Bopd to TransGlobe) during the quarter. Actual field production averaged 2,695 Bopd (372 Bopd to TransGlobe) which is approximately 18% lower than the previous quarter due to natural declines and shut-in production during February. Production was shut-in from February 14th to the 17th due to a labour strike at the Petro Masila operated export pipeline system.Production averaged approximately 2,773 Bopd (383 Bopd to TransGlobe) during April.Effective January 1, 2012 the Block 32 joint venture partnership terminated the crude oil marketing agreement with Nexen and entered into a marketing agreement with Arcadia Marketing Pte of Singapore ("Arcadia"). The first quarter production is the average of the crude oil which was sold during the quarter. The balance of the production will be sold in the subsequent quarter. It is expected that sales and production will vary quarter to quarter due to the reduced frequency of tanker lifting's associated with the volumes marketed by Arcadia.Quarterly Block 32 Production (Bopd) 2012 2011 ---------------------------------------------------------------------------- Q-1 Q-4 Q-3 Q-2--------------------------------------------------------------------------------------------------------------------------------------------------------Gross production rate 2,151 3,276 3,144 3,401TransGlobe working interest 297 452 434 470TransGlobe net (after royalties) 166 254 259 263TransGlobe net (after royalties and tax)(i) 120 188 201 195--------------------------------------------------------------------------------------------------------------------------------------------------------(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 ExplorationThe Operator received a nine-month extension to September 11, 2012 for the second exploration period. The joint venture partners approved one contingent exploration/appraisal well for 2012. The well is subject to further technical evaluation of the original discovery well at Gabdain #1 and logistic/security issues in Yemen.YEMEN WEST- Marib BasinBlock S-1, Republic of Yemen (25% working interest)Operations and ExplorationNo wells were drilled during the quarter.ProductionProduction from TransGlobe's An Nagyah field on Block S-1 has remained shut-in since the export pipeline from Marib to the Ras Eisa port on the Red Sea was damaged October 8, 2011.The pipeline has not been repaired due to local tribal groups preventing access to the pipeline. Typically the pipeline can be repaired within 24 to 48 hours once access to the pipeline has been obtained. TransGlobe's working interest share of production was approximately 2,250 Bopd prior to being shut-in on October 8, 2011.Quarterly Block S-1 Production (Bopd) 2012 2011 ---------------------------------------------------------------------------- Q-1 Q-4 Q-3 Q-2--------------------------------------------------------------------------------------------------------------------------------------------------------Gross production rate - 736 7,336 -TransGlobe working interest - 184 1,834 -TransGlobe net (after royalties) - 93 1,097 -TransGlobe net (after royalties and tax)(i) - 69 907 ---------------------------------------------------------------------------------------------------------------------------------------------------------(i) Under the terms of the Block S-1 PSA, royalties and taxes are paid out of the Government's share of production sharing oil.Block 75, Republic of Yemen (25% working interest)Operations and ExplorationThe 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 however the drilling program was cancelled in the first quarter of 2011 due to logistics and security concerns. The first exploration phase has been extended to March 9, 2013.MANAGEMENT'S DISCUSSION AND ANALYSISMay 4, 2012Management's discussion and analysis ("MD&A") should be read in conjunction with the unaudited Condensed Consolidated Interim Financial Statements for the three months ended March 31, 2012 and 2011 and the audited financial statements and MD&A for the year ended December 31, 2011 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 Form 40-F may be found on EDGAR at www.sec.gov.READER ADVISORIESForward-Looking StatementsCertain statements or information contained herein may constitute forward-looking statements or information under applicable securities laws, including management's assessment of future plans and operations, drilling plans and the timing thereof, commodity price risk management strategies, adapting to the current political situations in Egypt and Yemen, reserve estimates, the resolution of potential litigation and claims and impact on the Company of the costs of resolutions, completion of the acquisition of the 50% working interest in the South Alamein Concession agreement in the Arab Republic of Egypt, management's expectation for results of operations for 2012, including expected 2012 average production, funds flow from operations, the 2012 capital program for exploration and development, the timing and method of financing thereof, method of funding drilling commitments, commodity prices and expected volatility thereof and use of proceeds from recent financings.Forward-looking statements or information relate to the Company's future events or performance. All statements other than statements of historical fact may be forward-looking statements or information. Such statements or information are often but not always identified by the use of words such as "seek", "anticipate", "plan", "continue", "estimate", "expect", "may", "will", "project", "predict", "potential", "targeting", "intend", "could", "might", "should", "believe", and similar expressions.Forward-looking statements or information necessarily involve risks including, without limitation, risks associated with oil and gas exploration, development, exploitation, production, marketing and transportation, loss of markets, economic and political instability, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, competition from other producers, inability to retain drilling rigs and other services, incorrect assessment of the value of acquisitions, failure to realize the anticipated benefits of acquisitions, delays resulting from or inability to obtain required regulatory approvals and ability to access sufficient capital from internal and external sources. The recovery and reserve estimates of the Company's reserves are estimates only and there is no guarantee that the estimated reserves will be recovered. Events or circumstances may cause actual results to differ materially from those predicted, as a result of the risk factors set out and other known and unknown risks, uncertainties, and other factors, many of which are beyond the control of the Company.In addition, forward-looking statements or information are based on a number of factors and assumptions which have been used to develop such statements and information in order to provide shareholders with a more complete perspective on the Company's future operations. Such statements and information may prove to be incorrect and readers are cautioned that such statements and information may not be appropriate for other purposes. Although the Company believes that the expectations reflected in such forward-looking statements or information are reasonable, undue reliance should not be placed on forward-looking statements or information because the Company can give no assurance that such expectations will prove to be correct. In addition to other factors and assumptions which may be identified herein, assumptions have been made regarding, among other things: the impact of increasing competition; the general stability of the economic and political environment in which the Company operates; the timely receipt of any required regulatory approvals; the ability of the Company to obtain qualified staff, equipment and services in a timely and cost efficient manner; drilling results; the ability of the operator of the projects which the Company has an interest in to operate the field in a safe, efficient and effective manner; the ability of the Company to obtain financing on acceptable terms; field production rates and decline rates; the ability to replace and expand oil and natural gas reserves through acquisition, development and exploration; the timing and costs of pipeline, storage and facility construction and expansion and the ability of the Company to secure adequate product transportation; future commodity prices; currency, exchange and interest rates; the regulatory framework regarding royalties, taxes and environmental matters in the jurisdictions in which the Company operates; and the ability of the Company to successfully market and receive payment for its oil and natural gas products.Readers are cautioned that the foregoing list is not exhaustive of all factors and assumptions which have been used. As a consequence, actual results may differ materially from those anticipated in the forward-looking statements. Additional information on these and other factors that could affect the Company's operations and financial results are included in reports on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com), EDGAR website (www.sec.gov) and at the Company's website (www.trans-globe.com). Furthermore, the forward-looking statements or information contained herein are made as at the date hereof and the Company does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.The reader is further cautioned that the preparation of financial statements in accordance with IFRS requires management to make certain judgments and estimates that affect the reported amounts of assets, liabilities, revenues and expenses. Estimating reserves is also critical to several accounting estimates and requires judgments and decisions based upon available geological, geophysical, engineering and economic data. These estimates may change, having either a negative or positive effect on net earnings as further information becomes available, and as the economic environment changes.Additional MeasuresFunds Flow from OperationsThis document contains the term "funds flow from operations", which should not be considered an alternative to or more meaningful than "cash flow from operating activities" as determined in accordance with IFRS. Funds flow from operations is a measure that represents cash generated from operating activities before changes in non-cash working capital. Management considers this a key measure as it demonstrates 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 March 31 ----------------------------------------------------------------------------($000s) 2012 2011--------------------------------------------------------------------------------------------------------------------------------------------------------Cash flow from operating activities 1,771 3,490Changes in non-cash working capital 34,317 21,440----------------------------------------------------------------------------Funds flow from operations(i) 36,088 24,930--------------------------------------------------------------------------------------------------------------------------------------------------------(i) Funds flow from operations does not include interest or financing costs. Interest expense is included in financing costs on the Condensed Consolidated Interim Statements of Earnings and Comprehensive Income. Cash interest paid is reported as a financing activity on the Condensed Consolidated Interim Statements of Cash Flows.Debt-to-funds flow ratioDebt-to-funds flow is a 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, plus convertible debentures over funds flow from operations for the trailing twelve months. Debt-to-funds flow may not be comparable to similar measures used by other companies.NetbackNetback is a measure that represents sales net of royalties (all government interests, net of income taxes), operating expenses and current taxes. Management believes that netback is a useful supplemental measure to analyze operating performance and provide an indication of the results generated by the 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 BUSINESSTransGlobe is a Canadian-based, publicly-traded, oil exploration and production company whose activities are concentrated in two main geographic areas, the Arab Republic of Egypt ("Egypt") and the Republic of Yemen ("Yemen"). Egypt and Yemen include the Company's exploration, development and production of crude oil.SELECTED QUARTERLY FINANCIAL INFORMATION 2012 2011 ---------------------------------------------------------------------------- ($000s, except per share, price and volume amounts) Q-1 Q-4 Q-3 Q-2 Q-1--------------------------------------------------------------------------------------------------------------------------------------------------------Average sales volumes (Bopd) 16,720 12,054 13,406 11,826 11,218Average price ($/Bbl) 104.78 99.12 104.00 105.57 97.06Oil sales 159,426 109,919 128,265 113,615 97,995Oil sales, net of royalties and other 77,212 60,609 71,769 62,513 52,863Cash flow from operating activities 1,771 2,330 3,575 54,235 3,490Funds flow from operations(i) 36,088 26,469 38,099 30,478 24,930Funds flow from operations per share - Basic 0.49 0.36 0.52 0.42 0.35 - Diluted 0.48 0.35 0.51 0.40 0.34Net earnings 10,975 30,519 26,110 21,874 2,889Net earnings per share - Basic 0.15 0.42 0.36 0.30 0.04 - Diluted 0.15 0.41 0.35 0.29 0.04--------------------------------------------------------------------------------------------------------------------------------------------------------Total assets 648,012 525,806 465,262 420,956 404,184Cash and cash equivalents 127,313 43,884 105,007 122,659 86,353Convertible debentures 105,835 - - - -Total long-term debt, including current portion 57,910 57,609 57,303 56,998 56,731Debt-to-funds flow ratio(ii) 1.2 0.5 0.5 0.6 0.7-------------------------------------------------------------------------------------------------------------------------------------------------------- 2010 ---------------------------------------------------------------------------- ($000s, except per share, price and volume amounts) Q-4 Q-3 Q-2--------------------------------------------------------------------------------------------------------------------------------------------------------Average sales volumes (Bopd) 10,789 10,138 9,206Average price ($/Bbl) 79.83 71.27 73.46Oil sales 79,240 66,470 61,540Oil sales, net of royalties and other 45,198 38,980 35,638Cash flow from operating activities 17,010 15,024 13,283Funds flow from operations(i) 19,355 19,849 17,007Funds flow from operations per share - Basic 0.29 0.30 0.26 - Diluted 0.28 0.29 0.25Net earnings 8,932 9,321 9,711Net earnings per share - Basic 0.13 0.14 0.15 - Diluted 0.13 0.13 0.14--------------------------------------------------------------------------------------------------------------------------------------------------------Total assets 345,625 278,426 264,490Cash and cash equivalents 57,782 15,412 21,437Convertible debentures - - -Total long-term debt, including current portion 86,420 46,045 49,977Debt-to-funds flow ratio(ii) 1.1 0.7 0.9--------------------------------------------------------------------------------------------------------------------------------------------------------(i) Funds flow from operations is a measure that represents cash generated from operating activities before changes in non-cash working capital, and may not be comparable to measures used by other companies.(ii) Debt-to-funds flow ratio is a measure that represents total long-term debt (including current portion) and convertible debentures over funds flow from operations for the trailing 12 months, and may not be comparable to measures used by other companies.During the first quarter of 2012, TransGlobe has:-- Experienced an increase in average sales volumes due to the West Bakr acquisition, which added volumes of 4,358 Bopd in Q1-2012, along with volume increases in West Gharib of 3,327 Bopd; -- Maintained a strong financial position, reporting a debt-to-funds flow ratio of 1.2 at March 31, 2012 (March 31, 2011 - 0.7); -- Funded capital programs entirely with funds flow from operations; -- Reported funds flow from operations that varies significantly from cash flow from operating activities. These measures fluctuate from quarter to quarter depending on the timing of collections of accounts receivable and payment of accounts payable; -- Reported a decrease in net earnings of $19.5 million from Q4-2011 to Q1- 2012. This was mostly due to a bargain purchase gain of $13.2 million in Q4-2011 combined with an unrealized loss on financial instruments (convertible debentures) of $7.8 million in Q1-2012; and -- Reported an increase in net earnings of 280% in Q1-2012 compared to Q1- 2011. An impairment loss of $11.6 million was recognized in Q1-2011 that significantly reduced earnings in that quarter. Furthermore, increased production and prices were experienced in Q1-2012, which were partially offset by an unrealized loss on financial instruments (convertible debentures) of $7.8 million. 2012 VARIANCES $ Per Share $000s Diluted % Variance --------------------------------------------------------------------------------------------------------------------------------------------------------Q1-2011 net earnings 2,889 0.04 ----------------------------------------------------------------------------Cash items Volume variance 53,638 0.72 1,857 Price variance 7,793 0.10 270 Royalties (37,082) (0.49) (1,283)Expenses: Operating (4,419) (0.06) (153) Realized derivative loss 364 - 13 Cash general and administrative (1,641) (0.02) (57) Exploration (547) (0.01) (19) Current income taxes (6,983) (0.09) (242) Realized foreign exchange gain (28) - (1) Issue costs for convertible debentures (4,389) (0.06) (152) Interest on long-term debt (486) (0.01) (17)Other income 63 - 2 ----------------------------------------------------------------------------Total cash items variance 6,283 0.08 218 ----------------------------------------------------------------------------Non-cash items Unrealized derivative gain 63 - 2 Unrealized foreign exchange loss 521 0.01 18 Depletion and depreciation (3,989) (0.05) (138)Unrealized loss on financial instruments (7,840) (0.10) (271)Impairment loss 11,644 0.15 403 Stock-based compensation (427) (0.01) (15)Deferred income taxes 1,933 0.03 67 Deferred lease inducement (114) - (4)Amortization of deferred financing costs 12 - - ----------------------------------------------------------------------------Total non-cash items variance 1,803 0.03 62 ----------------------------------------------------------------------------Q1-2012 net earnings 10,975 0.15 280 --------------------------------------------------------------------------------------------------------------------------------------------------------Net earnings increased to $11.0 million in Q1-2012 compared to $2.9 million in Q1-2011, which was mainly due to increased production volumes. Partially offsetting the increased volumes were increases in royalties, income taxes, operating costs, convertible debenture issue costs, unrealized loss on financial instruments (convertible debentures) and depletion and depreciation expense. Also contributing to the increase from Q1-2011 to Q1-2012 was an impairment loss recognized in Q1-2011 of $11.6 million.The non-cash unrealized loss on financial instruments (convertible debentures) has arisen because the Company has elected to carry the convertible debenture liability at fair value on its Condensed Consolidated Interim Balance Sheets. Fair value is determined based on the quoted market price of the convertible debentures as at the period end date. As at March 31, 2012, the convertible debentures were trading at a price of C$108.00 for a C$100.00 par value debenture. As such, an 8% ($7.8 million) increase to the convertible debenture liability was recorded as at March 31, 2012, with a corresponding loss recorded on the Condensed Consolidated Interim Statement of Earnings and Comprehensive Income. As the market price of the convertible debentures fluctuates from period to period, so will the fair value of the convertible debenture liability, and therefore so will the unrealized gain or loss on financial instruments (convertible debentures). This fair value adjustment has had a significant impact on net earnings in the first quarter 2012, and depending on the magnitude of fluctuations in the trading price of the convertible debentures in future periods, could have a material impact on the Company's net earnings in future periods. While this fair value adjustment is made in accordance with IFRS, it does not represent a cash expense or an increase in the future cash outlay required to pay back the convertible debentures.BUSINESS ENVIRONMENTThe Company's financial results are significantly influenced by fluctuations in commodity prices, including price differentials. The following table shows select market benchmark prices and foreign exchange rates: 2012 2011 ---------------------------------------------------------------------------- Q-1 Q-4 Q-3 Q-2 Q-1--------------------------------------------------------------------------------------------------------------------------------------------------------Dated Brent average oil price ($/Bbl) 118.49 109.31 113.44 117.36 104.97U.S./Canadian Dollar average exchange rate 1.001 1.023 0.980 0.968 0.997--------------------------------------------------------------------------------------------------------------------------------------------------------The price of Dated Brent oil averaged 13% higher in Q1-2012 compared with Q1-2011. 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 may receive 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).The political environment in Egypt continues to improve and business processes and operations are proceeding as normal. Yemen is still unsettled and the Company has 2,250 Bopd shut-in on Block S-1 since October 8, 2011. Although the Company expects the situation in Yemen will be resolved and production will resume, it is difficult to predict when.OPERATING RESULTS AND NETBACKDaily Volumes, Working Interest Before Royalties and Other (Bopd) Three Months Ended March 31 ---------------------------------------------------------------------------- 2012 2011 % Change --------------------------------------------------------------------------------------------------------------------------------------------------------Egypt - Oil sales 16,423 8,738 88 Yemen - Oil sales 297 2,480 (88)----------------------------------------------------------------------------Total Company - daily sales volumes 16,720 11,218 49 --------------------------------------------------------------------------------------------------------------------------------------------------------NetbackConsolidated Three Months Ended March 31 ---------------------------------------------------------------------------- 2012 2011 ----------------------------------------------------------------------------(000s, except per Bbl amounts) $ $/Bbl $ $/Bbl--------------------------------------------------------------------------------------------------------------------------------------------------------Oil sales 159,426 104.78 97,995 97.06Royalties and other 82,214 54.03 45,132 44.70Current taxes 23,311 15.32 16,328 16.17Operating expenses 11,966 7.86 7,547 7.48----------------------------------------------------------------------------Netback 41,935 27.57 28,988 28.71--------------------------------------------------------------------------------------------------------------------------------------------------------Egypt Three Months Ended March 31 ---------------------------------------------------------------------------- 2012 2011 ----------------------------------------------------------------------------(000s, except per Bbl amounts) $ $/Bbl $ $/Bbl--------------------------------------------------------------------------------------------------------------------------------------------------------Oil sales 156,190 104.51 74,974 95.34Royalties and other 80,733 54.02 33,617 42.75Current taxes 22,829 15.28 13,105 16.66Operating expenses 9,948 6.66 5,318 6.76----------------------------------------------------------------------------Netback 42,680 28.55 22,934 29.17--------------------------------------------------------------------------------------------------------------------------------------------------------The netback per Bbl in Egypt decreased 2% in the three months ended March 31, 2012 compared with the same period of 2011, mainly as a result of a 26% increase in royalties on a per Bbl basis. The average selling price during the three months ended March 31, 2012 was $104.51/Bbl, which represents a gravity/quality adjustment of approximately $13.98/Bbl to the average Dated Brent oil price for the period of $118.49/Bbl.Royalties and taxes as a percentage of revenue increased to 66% in the three months ended March 31, 2012, compared with 62% in the same period of 2011. This increase is due to the fact that Q1-2011 included only West Gharib production, whereas Q1-2012 includes West Gharib and West Bakr production. West Bakr production is subject to higher Government takes according to the West Bakr Production Sharing Concession ("PSC"). Royalty and tax rates fluctuate in Egypt due to changes in the cost oil whereby the 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 according to the relevant PSC.Operating expenses remained consistent on a per Bbl basis for the three months ended March 31, 2012 compared with the same period of 2011.Yemen Three Months Ended March 31 ---------------------------------------------------------------------------- 2012 2011 ----------------------------------------------------------------------------(000s, except per Bbl amounts) $ $/Bbl $ $/Bbl--------------------------------------------------------------------------------------------------------------------------------------------------------Oil sales 3,236 119.73 23,021 103.14Royalties and other 1,481 54.80 11,515 51.59Current taxes 482 17.83 3,223 14.44Operating expenses 2,018 74.67 2,229 9.99----------------------------------------------------------------------------Netback (745) (27.57) 6,054 27.12--------------------------------------------------------------------------------------------------------------------------------------------------------In Yemen, the Company experienced negative netbacks per Bbl of $27.57 in the three months ended March 31, 2012. Operating expenses on a per Bbl basis increased substantially (647%) in the three months ended March 31, 2012 compared to the same period in 2011 as a result of production being shut-in on Block S-1 for the entire three month period ended March 31, 2012. While production volumes were down, the Company continued to incur the majority of the operating costs on Block S-1 which significantly increased operating expenses per Bbl.Royalties and taxes as a percentage of revenue decreased to 61% from 64% in the three months ended March 31, 2012, compared with 2011. Royalty and tax rates 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.Production from Block S-1 remains shut-in following an attack on the oil export pipeline on October 8, 2011, and production will not commence until repairs to the export pipeline can be completed. It is difficult to predict when production will resume as local tribal groups are currently preventing access to the pipeline.DERIVATIVE COMMODITY CONTRACTSTransGlobe 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 loss on commodity contracts in the first three months of 2011 relates mostly to the purchase of a new financial floor derivative commodity contract for $0.4 million; no derivative commodity contracts were purchased in the first three months of 2012. The mark-to-market valuation of TransGlobe's future derivative commodity contracts decreased the asset by $0.1 million from December 31, 2011 to March 31, 2012, thus resulting in a $0.1 million unrealized loss on future derivative commodity contracts being recorded in the period. Three Months Ended March 31 ----------------------------------------------------------------------------($000s) 2012 2011 --------------------------------------------------------------------------------------------------------------------------------------------------------Realized cash loss on commodity contracts(i) - (364)Unrealized gain (loss) on commodity contracts(ii) (124) (187)----------------------------------------------------------------------------Total derivative gain (loss) on commodity contracts (124) (551)--------------------------------------------------------------------------------------------------------------------------------------------------------(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 Q1-2012, the derivative asset will be realized over the balance of the year. The effect of a 10% increase or decrease in commodity prices on the derivative commodity contracts would not have a material impact on net earnings for the three months ended March 31, 2012. The following commodity contracts are outstanding as at March 31, 2012: Dated BrentPeriod Volume Type Pricing Put--------------------------------------------------------------------------------------------------------------------------------------------------------Crude Oil ------------------ April 1, 2012 - June 30, 2012 20,000 Bbl/month Financial Floor $80.00--------------------------------------------------------------------------------------------------------------------------------------------------------The total volumes hedged for the balance of 2012 are:--------------------------------------------------------------------------------------------------------------------------------------------------------Bbl 60,000Bopd (April 1, 2012 - June 30, 2012) 659--------------------------------------------------------------------------------------------------------------------------------------------------------At March 31, 2012, all of the derivative commodity contracts were classified as current assets.GENERAL AND ADMINISTRATIVE EXPENSES ("G&A") Three Months Ended March 31 ---------------------------------------------------------------------------- 2012 2011 ----------------------------------------------------------------------------(000s, except per Bbl amounts) $ $/Bbl $ $/Bbl --------------------------------------------------------------------------------------------------------------------------------------------------------G&A (gross) 6,271 4.12 4,167 4.08 Stock-based compensation 1,140 0.75 713 0.71 Capitalized G&A and overhead recoveries (723) (0.47) (374) (0.37)----------------------------------------------------------------------------G&A (net) 6,688 4.40 4,506 4.42 --------------------------------------------------------------------------------------------------------------------------------------------------------G&A expenses (net) increased 48% (no change on a per Bbl basis) in the three months ended March 31, 2012, compared with the same period in 2011. This is mostly due to increased staffing and associated costs and increased professional fees, along with the G&A expenses associated with West Bakr. The increase in stock-based compensation is due partly to an increase in the total value of new options awarded during 2011 as compared to those issued during 2010, combined with an increase in the expense recorded on share appreciation rights in the first quarter of 2012 as a result of a strengthening share price.FINANCE COSTSFinance costs for the three months ended March 31, 2012 increased to $6.2 million (2011 - $1.3 million). Finance costs include interest on long-term debt and convertible debentures, issue costs on convertible debentures and amortization of transaction costs associated with long-term debt. Three Months Ended(000s) March 31 ---------------------------------------------------------------------------- 2012 2011--------------------------------------------------------------------------------------------------------------------------------------------------------Interest expense $ 1,517 $ 1,031Issue costs for convertible debentures 4,389 -Amortization of deferred financing costs 300 312----------------------------------------------------------------------------Finance costs $ 6,206 $ 1,343--------------------------------------------------------------------------------------------------------------------------------------------------------The Company had $60.0 million of long-term debt outstanding at March 31, 2012 (March 31, 2011 - $60.0 million). The long-term debt that was outstanding at March 31, 2012 bore interest at LIBOR plus an applicable margin that varies from 3.75% to 4.75% depending on the amount drawn under the facility.In February 2012, the Company closed an agreement with a syndicate of underwriters under which the members of the syndicate purchased, on a bought-deal basis, C$97.8 million (US$97.9 million) aggregate principal amount of convertible unsecured subordinated debentures with a maturity date of March 31, 2017. Transaction costs of $4.4 million relating to the issuance of the convertible debentures were expensed in the three months ended March 31, 2012. The debentures are convertible at any time and from time to time into common shares of the Company at a price of C$15.10 per common share. The debentures will not be redeemable by the Company on or before March 31, 2015 other than in limited circumstances in connection with a change of control of TransGlobe. After March 31, 2015 and prior to March 31, 2017, the debentures may be redeemed by the Company at a redemption price equal to the principal amount plus accrued and unpaid interest, provided that the weighted-average trading price of the common shares for the 20 consecutive trading days ending five trading days prior to the date on which notice of redemption is provided is not less than 125 percent of the conversion price. Interest of 6% will be payable semi-annually in arrears on March 31 and September 30 of each year, commencing on September 30, 2012. The Company has the option to settle all or any portion of principal obligations by delivering to the debenture holders sufficient common shares to satisfy these obligations.DEPLETION AND DEPRECIATION ("DD&A") Three Months Ended March 31 ---------------------------------------------------------------------------- 2012 2011 ----------------------------------------------------------------------------(000s, except per Bbl amounts) $ $/Bbl $ $/Bbl--------------------------------------------------------------------------------------------------------------------------------------------------------Egypt 11,301 7.56 6,242 7.94Yemen 248 9.18 1,390 6.23Corporate 200 - 128 ----------------------------------------------------------------------------- 11,749 7.72 7,760 7.69--------------------------------------------------------------------------------------------------------------------------------------------------------In Egypt, DD&A decreased 5% on a per Bbl basis for the three month period ended March 31, 2012, due to decreased estimated future capital costs which was partially offset by increased production.In Yemen, DD&A decreased 82% for the three months ended March 31, 2012, due to the fact that no depletion was recorded on Block S-1 for the entire three month period ended March 31, 2012 as production was shut-in.CAPITAL EXPENDITURES Three Months Ended March 31----------------------------------------------------------------------------($000s) 2012 2011----------------------------------------------------------------------------Egypt 4,415 16,754Yemen 18 2,187Corporate 39 1,366----------------------------------------------------------------------------Total 4,472 20,307--------------------------------------------------------------------------------------------------------------------------------------------------------In Egypt, total capital expenditures in the first three months of 2012 were $4.4 million (2011 - $16.8 million). The Company drilled nine oil wells at West Gharib (seven at Arta and two at East Arta). The capital cost per well drilled in West Gharib has decreased due to a number of factors. Production in West Gharib is currently curtailed due to volume constraints at the processing facility, and as a result that Company has chosen not to proceed with the completion and equipping of new wells which will require fracture stimulations, which has reduced capital spending. Furthermore, movable equipment is being redeployed from shut-in wells to producing wells. Capital expenditures in West Gharib were reduced due to the reversal of prior period accruals. There were no wells drilled at West Bakr, East Ghazalat or Nuqra in the first quarter of 2012. There was no drilling activity in the first three months of 2012 in Yemen.OUTSTANDING SHARE DATAAs at March 31, 2012, the Company had 73,112,638 common shares issued and outstanding.LIQUIDITY AND CAPITAL RESOURCESLiquidity 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 operations (calculated on a 12-month trailing basis). TransGlobe's debt-to-funds flow from operations ratio, a key short-term leverage measure, remained strong at 1.2 times at March 31, 2012. 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 March 31, 2012 and 2011:Sources and Uses of Cash Three Months Ended March 31 ----------------------------------------------------------------------------($000s) 2012 2011 --------------------------------------------------------------------------------------------------------------------------------------------------------Cash sourced Funds flow from operations(i) 36,088 24,930 Transfer from restricted cash - 1,164 Issue of convertible debentures 97,851 - Exercise of options 268 1,199 Issuance of common shares, net of share issuance costs - 71,588 Other 507 - ---------------------------------------------------------------------------- 134,714 98,881 Cash used Capital expenditures 4,472 20,307 Repayment of long-term debt - 30,000 Finance costs 5,196 632 Transfer to restricted cash 1 - Other 164 102 ---------------------------------------------------------------------------- 9,833 51,041 ---------------------------------------------------------------------------- 124,881 47,840 Changes in non-cash working capital (41,452) (19,269)----------------------------------------------------------------------------Increase in cash and cash equivalents 83,429 28,571 Cash and cash equivalents - beginning of period 43,884 57,782 ----------------------------------------------------------------------------Cash and cash equivalents - end of period 127,313 86,353 --------------------------------------------------------------------------------------------------------------------------------------------------------(i) Funds flow from operations is a 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 2012 exploration and development program of $89.3 million ($84.8 million remaining) and contractual commitments through the use of working capital and cash generated by operating activities. The use of new financing during 2012 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 March 31, 2012, the Company had working capital of $263.7 million (December 31, 2011 - $140.0 million). The increase to working capital in 2012 is the result of a higher cash balance due to the issuance of convertible debentures in the first quarter of 2012 along with increased accounts receivable due to higher oil prices, higher sales volumes and slower collections. The majority of these receivables are due from the Egyptian Government, and the recent political unrest in the country has increased the Company's credit risk. Despite these factors, the Company still expects to collect in full all outstanding receivables. Subsequent to March 31, 2012, the Company collected $30.1 million of the receivables that were outstanding in Egypt at the end of the quarter.In February 2012, the Company closed an agreement with a syndicate of underwriters under which the members of the syndicate purchased, on a bought-deal basis, C$97.8 million (US$97.9 million) aggregate principal amount of convertible unsecured subordinated debentures with a maturity date of March 31, 2017. The debentures are convertible at any time and from time to time into common shares of the Company at a price of C$15.10 per common share. The debentures will not be redeemable by the Company on or before March 31, 2015 other than in limited circumstances in connection with a change of control of TransGlobe. After March 31, 2015 and prior to March 31, 2017, the debentures may be redeemed by the Company at a redemption price equal to the principal amount plus accrued and unpaid interest, provided that the weighted average-trading price of the common shares for the 20 consecutive trading days ending five trading days prior to the date on which notice of redemption is provided is not less than 125 percent of the conversion price. Interest of 6% will be payable semi-annually in arrears on March 31 and September 30 of each year, commencing on September 30, 2012. The Company has the option to settle all or any portion of principal obligations by delivering to the debenture holders sufficient common shares to satisfy these obligations.At March 31, 2012, 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 the second quarter of 2013, the entire balance is presented as a long-term liability on the Condensed Consolidated Interim Balance Sheets. Repayments will be made on a semi-annual basis according to the scheduled reduction of the facility.($000s) March 31, 2012 December 31, 2011 --------------------------------------------------------------------------------------------------------------------------------------------------------Bank debt 60,000 60,000 Deferred financing costs (2,090) (2,391)----------------------------------------------------------------------------Long-term debt (net of deferred financing costs) 57,910 57,609 --------------------------------------------------------------------------------------------------------------------------------------------------------COMMITMENTS AND CONTINGENCIESAs 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 ---------------------------------------------------------------------------- More Recognized Less than in Financial Contractual than 1-3 4-5 5 Statements Cash Flows 1 year years years years--------------------------------------------------------------------------------------------------------------------------------------------------------Accounts payable and accrued liabilities Yes-Liability 79,480 79,480 - - -Long-term debt Yes-Liability 60,000 - 47,995 12,005 -Convertible debentures Yes-Liability 97,995 - - 97,995 -Office and equipment leases No 15,023 6,502 2,959 2,063 3,499Minimum work commitments 3 No 750 750 - - -----------------------------------------------------------------------------Total 253,248 86,732 50,954 112,063 3,499--------------------------------------------------------------------------------------------------------------------------------------------------------1 Payments exclude ongoing operating costs, finance costs and payments made to settle derivatives.2 Payments denominated in foreign currencies have been translated at March 31, 2012 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 Interest Partners) has a remaining minimum financial commitment of $3.0 million ($0.8 million to TransGlobe) for one exploration well in the first exploration period, which has been extended to March 9, 2013. Drilling has been suspended in Yemen due to security and logistics concerns.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, 2011, no additional fees are due in 2012.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.The Company is not aware of any material provisions or other contingent liabilities as at March 31, 2012.Proposed TransactionsOn 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 successful approval of the transaction by the Egyptian Government, management is not able to 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 months ended March 31, 2012 related to the contingency.On May 1, 2012 the Company announced it entered into a Share Purchase Agreement to acquire a company and its wholly-owned subsidiaries which hold a 50% interest in the South Alamein PSC in Egypt and hold an operated 60% working interest in the South Mariut PSC in Egypt. The proposed acquisition will provide a new operated exploration concession at South Mariut and increase the Company's interest in South Alamein to 100% when combined with the Cepsa transaction. Both exploration concessions are located in Egypt's Western Desert. The Company has structured the transaction as an all-cash deal effective April 1, 2012. Consideration for the transaction is $15.0 million plus inventory and working capital adjustments to be determined based on customary due diligence. In addition, the wholly-owned subsidiary company which holds the 60% working interest in South Mariut is subject to a 30 day preferential right which is held by the 40% working interest partner. Because of uncertainty related to the preferential right and customary due diligence, management is not able to 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 months ended March 31, 2012 related to the contingency.MANAGEMENT STRATEGY AND OUTLOOK FOR 2012The 2012 outlook provides information as to management's expectation for results of operations for 2012. Readers are cautioned that the 2012 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.2012 Outlook Highlights-- Production is expected to average between 16,000 Bopd and 20,000 Bopd, a 32% to 65% increase over the 2011 average production; -- Exploration and development spending is budgeted to be $89.3 million (firm plus contingent) excluding acquisitions; and -- Funds flow from operations is estimated at $155 million, an increase of 30%, using midpoint production guidance and an average oil price assumption of $110.00 per barrel Dated Brent oil price for the remaining three quarters of 2012. 2012 Production OutlookProduction for 2012 is expected to average between 16,000 and 20,000 Bopd, representing a 32% to 65% increase over the 2011 average production of 12,132 Bopd. The large spread in the estimated production is due to a number of variables outside of the Company's control such as government approvals, the start of production at East Ghazalat and the repair of the export pipeline for Block S-1 in Yemen.Production Forecast 2012 Guidance 2011 Actual % Change--------------------------------------------------------------------------------------------------------------------------------------------------------Barrels of oil per day 16,000 - 20,000 12,132 32 - 65--------------------------------------------------------------------------------------------------------------------------------------------------------2012 Updated Funds Flow From Operations OutlookFunds flow from operations is estimated at $155 million ($2.06/share) based on an annual average Dated Brent oil price of $110/Bbl and using the mid-point of the production guidance. Variations in production and commodity prices during 2012 could significantly change this outlook. An increase or decrease in the average Dated Brent oil price of $10/Bbl for the remainder of the year would result in a corresponding change in anticipated 2012 funds flow by approximately $10.5 million or $0.14/share.Funds Flow Forecast($millions) 2012 Updated Guidance 2011 Actual % Change --------------------------------------------------------------------------------------------------------------------------------------------------------Funds flow from operations 155.0 120.0 30 ----------------------------------------------------------------------------Dated Brent oil price ($ per Bbl) 110.00 111.27 (1)--------------------------------------------------------------------------------------------------------------------------------------------------------Revised 2012 Capital Budget -------------------------------------------------------------------------------------------------------------------------------------------------------- Three Months Ended Revised 2012 Original 2012 March 31, 2012 Annual Budget Annual Budget--------------------------------------------------------------------------------------------------------------------------------------------------------Egypt 4.4 85.0 69.2Yemen - 4.0 5.5Corporate 0.1 0.3 1.0----------------------------------------------------------------------------Total 4.5 89.3 75.7--------------------------------------------------------------------------------------------------------------------------------------------------------The 2012 capital budget was increased by $13.6 million to $89.3 million to include the pending transaction (announced May 1, 2012) to acquire an additional 50% interest in South Alamein and a 60% interest in South Mariut.The revised 2012 capital program is split 67:33 between development and exploration, respectively. The Company plans to participate in 39 wells in 2012. It is anticipated that the Company will fund its 2012 capital budget from funds flow from operations and working capital.CHANGES IN ACCOUNTING POLICIESNew Accounting PoliciesIFRS 7 (revised) "Financial Instruments: Disclosures"In October 2010, the International Accounting Standards Board ("IASB") issued amendments to IFRS 7 to provide additional disclosure on the transfer of financial assets including the possible effects of any residual risks that the transferring entity retains. These amendments are effective for annual periods beginning after July 1, 2011; therefore, the Company has adopted them effective January 1, 2012 for the year ending December 31, 2012. These amendments had no material impact to the Condensed Consolidated Interim Financial Statements.IAS 12 (revised) "Income Taxes"In December 2010, the IASB issued amendments to IAS 12 to remove subjectivity in determining on which basis an entity measures the deferred tax relating to an asset. The amendments introduce a presumption that entities will assess whether the carrying value of an asset will be recovered through the sale of the asset. These amendments are effective for annual periods beginning on or after January 1, 2012; therefore, the Company has adopted them effective January 1, 2012 for the year ending December 31, 2012. These amendments had no material impact to the Condensed Consolidated Interim Financial Statements.Future Changes to Accounting PoliciesThe following standards and interpretations have not been adopted as they apply to future periods. They may result in changes to the Company's existing accounting policies and other note disclosures:IFRS 9 (revised) "Financial Instruments: Classification and Measurement"In November 2009, the IASB issued IFRS 9 as part of its project to replace IAS 39, "Financial Instruments: Recognition and Measurement". In October 2010, the IASB updated IFRS 9 to include the requirements for financial liabilities. IFRS 9 replaces the multiple rules in IAS 39 with a single approach to determine whether a financial asset is measured at amortized cost or fair value. The approach in IFRS 9 is based on how an entity manages its financial instruments in the context of its business model and the contractual cash flow characteristics of the financial assets. IFRS 9 is effective for annual periods beginning on or after January 1, 2013. The Company is currently evaluating the impact of this standard on its Consolidated Financial Statements.IFRS 10 (new) "Consolidated Financial Statements"In May 2011, the IASB issued IFRS 10 to replace SIC-12, "Consolidation - Special Purpose Entities", and parts of IAS 27, "Consolidated and Separate Financial Statements". IFRS 10 establishes principles for the presentation and preparation of consolidated financial statements when an entity controls one or more other entities. IFRS 10 is effective for annual periods beginning on or after January 1, 2013. The Company is currently evaluating the impact of this standard on its Consolidated Financial Statements.IFRS 11 (new) "Joint Arrangements"In May 2011, the IASB issued IFRS 11 to replace IAS 31, "Interests in Joint Ventures", and SIC-13, "Jointly Controlled Entities - Non-monetary Contributions by Venturers". IFRS 11 requires entities to follow the substance rather than legal form of a joint arrangement and removes the choice of accounting method. IFRS 11 is effective for annual periods beginning on or after January 1, 2013. The Company is currently evaluating the impact of this standard on its Consolidated Financial Statements.IFRS 13 (new) "Fair Value Measurement"In May 2011, the IASB issued IFRS 13 to clarify the definition of fair value and provide guidance on determining fair value. IFRS 13 amends disclosure requirements included within other standards and establishes a single framework for fair value measurement and disclosure. IFRS 13 is effective for annual periods beginning on or after January 1, 2013. The Company is currently evaluating the impact of this standard on its Consolidated Financial Statements.IAS 1 (revised) "Presentation of Financial Statements"In June 2011, the IASB issued amendments to IAS 1 to require separate presentation for items of other comprehensive income that would be reclassified to profit or loss in the future from those that would not. These amendments are effective for annual periods beginning on or after July 1, 2012. The Company is currently evaluating the impact of these amendments to its Consolidated Financial Statements.IAS 19 (revised) "Employee Benefits"In June 2011, the IASB issued amendments to IAS 19 to revise certain aspects of the accounting for pension plans and other benefits. The amendments eliminate the corridor method of accounting for defined benefit plans, change the recognition pattern of gains and losses, and require additional disclosures. These amendments are effective for annual periods beginning on or after January 1, 2013. The Company does not expect the impact of this standard on its Consolidated Financial Statements to be material.IAS 28 (revised) "Investments in Associates and Joint Ventures"In May 2011, the IASB issued amendments to IAS 28 to prescribe the accounting for investments in associates and set out the requirements for applying the equity method when accounting for investments in associates and joint ventures. These amendments are effective for annual periods beginning on or after January 1, 2013. The Company is currently evaluating the impact of these amendments to its Consolidated Financial Statements.INTERNAL CONTROLS OVER FINANCIAL REPORTINGTransGlobe'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.No changes were made to the Company's internal control over financial reporting during the period ended March 31, 2012 that have materially affected, or are reasonably likely to materially affect, the internal controls over financial reporting.CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTSCondensed Consolidated Interim Statements of Earnings and Comprehensive Income(Unaudited - Expressed in thousands of U.S. Dollars, except per share amounts) Three Months Ended March 31 2012 2011 --------------------------------------------------------------------------------------------------------------------------------------------------------REVENUE Oil sales, net of royalties and other $ 77,212 $ 52,863 Derivative (loss) on commodity contracts (124) (551) Finance revenue 125 62 ---------------------------------------------------------------------------- 77,213 52,374 ----------------------------------------------------------------------------EXPENSES Production and operating 11,966 7,547 General and administrative 6,688 4,506 Foreign exchange (gain) loss (372) 121 Finance costs 6,206 1,343 Exploration 560 13 Depletion, depreciation and amortization 11,749 7,760 Unrealized loss on financial instruments 7,840 - Impairment of exploration and evaluation assets 16 11,660 ---------------------------------------------------------------------------- 44,653 32,950 ----------------------------------------------------------------------------Earnings before income taxes 32,560 19,424 Income tax expense (recovery) - current 23,311 16,328 - deferred (1,726) 207 ---------------------------------------------------------------------------- 21,585 16,535 ----------------------------------------------------------------------------NET EARNINGS AND COMPREHENSIVE INCOME FOR THE PERIOD $ 10,975 $ 2,889 ----------------------------------------------------------------------------Earnings per share Basic $ 0.15 $ 0.04 Diluted $ 0.15 $ 0.04 --------------------------------------------------------------------------------------------------------------------------------------------------------Condensed Consolidated Interim Balance Sheets(Unaudited - Expressed in thousands of U.S. Dollars) As at As at March 31, December 31, 2012 2011--------------------------------------------------------------------------------------------------------------------------------------------------------ASSETS Current Cash and cash equivalents $ 127,313 $ 43,884 Accounts receivable 209,476 162,225 Derivative commodity contracts 1 125 Prepaids and other 6,383 7,441---------------------------------------------------------------------------- 343,173 213,675Non-Current Restricted cash 2,227 2,226 Intangible exploration and evaluation assets 17,708 17,453 Property and equipment Petroleum properties 273,119 280,524 Other assets 3,605 3,748 Goodwill 8,180 8,180---------------------------------------------------------------------------- $ 648,012 $ 525,806--------------------------------------------------------------------------------------------------------------------------------------------------------LIABILITIES Current Accounts payable and accrued liabilities $ 79,480 $ 73,692---------------------------------------------------------------------------- 79,480 73,692Non-Current Long-term debt 57,910 57,609 Convertible debentures 105,835 - Deferred taxes 51,166 52,891 Other long-term liabilities 1,072 1,122---------------------------------------------------------------------------- 295,463 185,314----------------------------------------------------------------------------SHAREHOLDERS' EQUITY Share capital 154,631 154,263 Contributed surplus 9,252 8,538 Retained earnings 188,666 177,691---------------------------------------------------------------------------- 352,549 340,492---------------------------------------------------------------------------- $ 648,012 $ 525,806--------------------------------------------------------------------------------------------------------------------------------------------------------Condensed Consolidated Interim Statements of Changes in Shareholders' Equity(Unaudited - Expressed in thousands of U.S. Dollars) Three Months Ended March 31 2012 2011 --------------------------------------------------------------------------------------------------------------------------------------------------------Share Capital Balance, beginning of period $ 154,263 $ 80,106 Stock options exercised 268 1,199 Share issuance - 75,594 Share issue costs - (4,006) Stock-based compensation on exercise 100 416 ---------------------------------------------------------------------------- Balance, end of period $ 154,631 $ 153,309 --------------------------------------------------------------------------------------------------------------------------------------------------------Contributed Surplus Balance, beginning of period $ 8,538 $ 5,785 Stock-based compensation expense 814 583 Transfer to share capital on exercise of options (100) (416)---------------------------------------------------------------------------- Balance, end of period $ 9,252 $ 5,952 --------------------------------------------------------------------------------------------------------------------------------------------------------Retained Earnings Balance, beginning of period $ 177,691 $ 96,299 Net earnings 10,975 2,889 ---------------------------------------------------------------------------- Balance, end of period $ 188,666 $ 99,188 --------------------------------------------------------------------------------------------------------------------------------------------------------Condensed Consolidated Interim Statements of Cash Flows(Unaudited - Expressed in thousands of U.S. Dollars) Three Months Ended March 31 2012 2011 --------------------------------------------------------------------------------------------------------------------------------------------------------CASH FLOWS RELATED TO THE FOLLOWING ACTIVITIES: OPERATING Net earnings for the period $ 10,975 $ 2,889 Adjustments for: Depletion, depreciation and amortization 11,749 7,760 Deferred lease inducement 114 - Impairment of exploration and evaluation costs 16 11,660 Stock-based compensation 1,140 713 Finance costs 6,206 1,343 Income tax expense 21,585 16,535 Unrealized (gain) loss on commodity contracts 124 187 Unrealized loss on financial instruments 7,840 - Unrealized (gain) loss on foreign currency translation (350) 171 Taxes paid (23,311) (16,328) Changes in non-cash working capital (34,317) (21,440)----------------------------------------------------------------------------Net cash generated by (used in) operating activities 1,771 3,490 ----------------------------------------------------------------------------INVESTING Additions to intangible exploration and evaluation assets (271) (4,102) Additions to petroleum properties (3,961) (14,762) Additions to other assets (240) (1,443) Changes in restricted cash (1) 1,164 Changes in non-cash working capital (7,940) 1,816 ----------------------------------------------------------------------------Net cash generated by (used in) investing activities (12,413) (17,327)----------------------------------------------------------------------------FINANCING Issue of common shares for cash 268 76,793 Issue costs for common shares - (4,006) Interest paid (807) (632) Issue of convertible debentures 97,851 - Issue costs for convertible debentures (4,389) - Repayments of long-term debt - (30,000) Decrease in other long-term liabilities (164) - Changes in non-cash working capital 805 355 ----------------------------------------------------------------------------Net cash generated by (used in) financing activities 93,564 42,510 ----------------------------------------------------------------------------Currency translation differences relating to cash and cash equivalents 507 (102)----------------------------------------------------------------------------NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 83,429 28,571 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 43,884 57,782 ----------------------------------------------------------------------------CASH AND CASH EQUIVALENTS, END OF PERIOD $ 127,313 $ 86,353 --------------------------------------------------------------------------------------------------------------------------------------------------------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.FOR FURTHER INFORMATION PLEASE CONTACT: Scott KoyichTransGlobe Energy CorporationInvestor Relations403.264.9888investor.relations@trans-globe.comwww.trans-globe.com