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Press release from GlobeNewswire (a Nasdaq OMX company)

TransAtlantic Petroleum Announces Second Quarter 2013 Financial Results and Provides an Operations Update

Wednesday, August 07, 2013

TransAtlantic Petroleum Announces Second Quarter 2013 Financial Results and Provides an Operations Update

13:15 EDT Wednesday, August 07, 2013

HAMILTON, Bermuda, Aug. 7, 2013 (GLOBE NEWSWIRE) -- TransAtlantic Petroleum Ltd. (TSX:TNP) (NYSE:TAT) (the "Company" or "TransAtlantic") today announced financial results for the quarter ended June 30, 2013 and provided an operations update.

Highlights

  • TransAtlantic's current production is 4,058 Boe/d
  • Net income from continuing operations for the second quarter of 2013 was $2.9 million
  • Adjusted EBITDAX from continuing operations for the second quarter of 2013 was $17.6 million (Adjusted EBITDAX is a non-GAAP financial measure that is defined and reconciled to net income at the end of this press release)
 
Second Quarter 2013 Results
 
  For the Three Months Ended
  June 30, 2013 June 30, 2012 March 31, 2013
Net Sales:      
Oil (Mbbls) 230 233 239
Natural gas (MMcf) 816 1,081 801
Total net sales (Mboe)  366 413 373
Total net sales (Boe/d)  4,022 4,538 4,144
       
Realized Commodity Pricing:      
Oil ($/bbl unhedged) $94.13 $97.49 $103.00
Oil ($/bbl hedged)  $92.03 $94.17 $97.76
       
Natural gas ($/Mcf unhedged)  $9.57 $8.49 $10.12
Natural gas ($/Mcf hedged)  $9.57 $8.49 $10.12

Total revenues were $31.8 million for the three months ended June 30, 2013, as compared to $34.4 million for the same period in 2012 and $35.5 million for the three months ended March 31, 2013. Net income from continuing operations for the three months ended June 30, 2013 was $2.9 million, or $0.01 per share (basic and diluted), as compared to net income from continuing operations of $8.6 million, or $0.02 per share (basic and diluted), for the three months ended June 30, 2012 and net income from continuing operations of $3.0 million, or $0.01 per share (basic and diluted) for the three months ended March 31, 2013. Net income for the second quarter of 2013 included $4.8 million of unrealized mark-to-market derivative gains and a $5.0 million revaluation of contingent consideration. These items were offset by $11.9 million of exploration, abandonment and impairment charges (only approximately $0.5 million of which represented cash expenses during the quarter) and $2.5 million of foreign exchange losses.

Adjusted EBITDAX from continuing operations for the three months ended June 30, 2013 was $17.6 million, as compared to $21.7 million for the three months ended June 30, 2012 and $19.5 million for the quarter ended March 31, 2013.

Operational Update

TransAtlantic's current production is 4,058 Boe/d. The Company is currently operating five drilling rigs: three in southeastern Turkey and two in the Thrace Basin in northwestern Turkey.

Southeastern Turkey – Molla Area

TransAtlantic has completed the shooting of 125 km2 (48 square miles) of its planned 800 km2 (300 square mile) Molla 3D seismic program and progresses at a rate of approximately 5 km2 (2 square miles) per day. The Company has shot seismic over the Turkish Petroleum Corporation (TPAO) discovery to the northwest of its acreage and has begun processing data to evaluate offset well locations. The Company expects to shoot 3D seismic of the Bahar Field in September 2013.

TransAtlantic is currently drilling the 3,000-foot lateral portion of the Göksu-5H (100% working interest), the fifth horizontal well drilled on its Mardin program in southeastern Turkey. The Company expects the Göksu-5H to be drilled and completed for approximately $3.5 million to a total measured depth of approximately 8,700 feet.

The Company recently tested the Oba-1H (100% working interest), a Mardin horizontal well with a total measured depth of 9,650 feet and a 2,600-foot lateral. The well was drilled and completed for $3.3 million. The Oba-1H produced oil with a high percentage of water. TransAtlantic expects to execute a remediation plan to isolate the water zones in an effort to lower the amount of water produced. The Company has secured a coil tubing unit to perform the completion and production operations. The unit has arrived in Turkey and is expected to be operational in September 2013. The Company will also perform a workover on Alibey-1H (100% working interest) with the coil tubing unit.

TransAtlantic plugged back the Bahar-2H (100% working interest) horizontal well at a total measured depth of approximately 8,700 feet. The Hazro formation tested between 170 and 200 Bbl/d of oil with no water and the Company is currently installing production equipment. TransAtlantic expects to produce from this interval through the completion of the Molla 3D project.

The Company completed drilling the Çatak-1 (100% working interest), an 11,000-foot vertical Bedinan well which encountered oil shows in the Mardin, Hazro, Dadas shale and first and third Bedinan sands. The Hazro F4, Bedinan 1 and Bedinan 2 formations were cored and are being transported to Houston for analysis. The main Bedinan target was encountered 100 feet high to the Bahar-1 and indicates an encouraging expansion of the Bahar field structure 2.4 km (1.5 miles) southwest of the Bahar-1.

TransAtlantic is preparing to spud a vertical Bedinan exploration well, the Ambarcık-2 (50% working interest) on its 50%-owned Arpatepe license. The Company expects to drill and complete the well for between $3.4 and $3.8 million to a depth of 9,750 feet. The Ambarcık-2 will test the Mardin and Bedinan formations on a structure located 5 km (3 miles) northeast of the Arpatepe Field. The well is interpreted to be updip from the Ambarcık-1, which was drilled in 1989 and had oil shows in both formations. The Company also expects to spud the Arpatepe-7 (50% working interest) well in the Arpatepe field, which has an expected depth of 8,200 feet to target the Bedinan zone. Additionally, TransAtlantic is preparing to spud a well on its recently acquired acreage in East Molla to test its Cretaceous and Paleozoic potential.

Southeastern Turkey – Selmo Area

The Selmo-13H, which was completed in July 2013 and has an 1,800-foot lateral, is currently producing approximately 200 Bbl/d of oil. The well is on a restricted flow capacity test to determine the optimum long-term pumping rate, as the well is the first of its kind in the Selmo Field. TransAtlantic completed its third water disposal well in the field in anticipation of the need to move greater volumes associated with its horizontal program.

The Company has commenced drilling the Selmo-22H2 (100% working interest), which is targeting the MSD zone and expects the well to cost $2.7 million to drill and complete to a total measured depth of approximately 7,500 feet with a 1,400-foot lateral.

Northwestern Turkey – Thrace Basin

TransAtlantic recently completed its first horizontal well in the Thrace Basin, the DTD-19HK (41.5% working interest), with a seven-stage fracture stimulation of its 1,600-foot lateral section. The well cost approximately $3.5 million to drill and complete in the Kesan formation in the southern Thrace Basin. The Company is currently cleaning out the horizontal section and will run production tubing to put the well on a long term test.

The Company spud its second horizontal well in the Thrace Basin, the BTD-4H (41.5% working interest), which is targeting the Teslimkoy formation in the southern Thrace Basin. TransAtlantic expects to spend $1.5 million drilling the BTD-4H to a total measured depth of approximately 6,300 feet with an expected lateral of 2,800 feet.

The Company recently performed a fracture stimulation on the TDR-14, a vertical well targeting the Kesan formation at a depth of approximately 5,700 feet, and the well is flowing on test production at 1 MMcf/d.

TransAtlantic recently drilled the Göçerler-7 (50% working interest), a directional well targeting the Osmancık formation at a depth of approximately 4,400 feet in central Thrace Basin. The well encountered approximately 20 meters (65 feet) of net pay and will be cased for completion. TransAtlantic set an internal record for two-day continuous drilling of 3,257 feet. The average rate of penetration with directional tools was 68 feet per hour. The Göçerler-7 is expected to cost $1.5 million to drill and complete.

Based on the evaluation of core samples from the Hayrabolu-10 well and the results of the Pancarköy-1 well, the Company now believes that the deeper horizons of the central Thrace Basin have limited potential.

TransAtlantic continues to move forward with its hydraulic fracture stimulation campaign targeting bypassed unconventional pay in the Thrace Basin.  The most recent recompletion yielded further positive results in the Mezardere formation with initial production of 800 Mcf/d following a small fracture stimulation. Results remain encouraging for the Mezardere play and TransAtlantic expects to continue to stimulate bypassed pay in existing wells to assess the economics and reserves associated with a potential new drilling campaign.

TransAtlantic expects to commence the Osmanlı 3D seismic shoot of approximately 234 km2 (90 square miles) in August 2013. The Company has the sole right to develop wells with the acquired seismic data unless its partners pay 150% of their interest in seismic costs in addition to their interest in well costs.

Bulgaria

TransAtlantic expects to spud the Deventci-R2 well in the next 60-90 days. The Company is finalizing a joint venture agreement in Bulgaria.

Outlook

TransAtlantic expects to exit the third quarter of 2013 with sales of approximately 4,350 Boe/d. Year to date, the Company has drilled 14 wells and completed 9 wells of its capital program. TransAtlantic expects to drill and complete 38 total wells in 2013.

Note on December 31, 2012 Proved Reserves, PV-10 and Standardized Measure

During review procedures associated with mid-year reserve analysis, TransAtlantic discovered that the future lease operating expenses used in its reserves calculation were overstated, resulting in an immaterial understatement of its present value of estimated future net revenues ("PV-10") and standardized measure of discounted future net cash flows ("Standardized Measure") as of December 31, 2012. The correction resulted in a proved reserve volume increase of approximately 19 Mboe, related to one of its fields where the economic life exceeds its remaining lease term. For the year ended December 31, 2012, this change in volumes had a negligible impact on the consolidated GAAP financial statements. A reconciliation of the reported and corrected PV-10 and Standardized Measure are presented below:

       
U.S. Dollars in  thousands As Reported Change As Corrected
Total PV-10: $511,078 $52,679 $563,757
Future income taxes: (106,411) (15,395) (121,806)
Discount of future income taxes a 10% per annum: 31,210 5,437 36,647
Standardized measure: $435,877 $42,721 $478,598

Conference Call

The Company has scheduled a conference call for Thursday, August 8, 2013 at 7:30 a.m. Central (8:30 a.m. Eastern) to discuss second quarter 2013 financial results.

Investors who would like to participate in the conference call should dial (877) 878-2762 or (678) 809-1005 approximately 10 minutes prior to the scheduled start time and ask for the TransAtlantic conference call. The conference ID is 22972280. A replay will be available through August 15, 2013 and may be accessed by dialing (855) 859-2056 or (404) 537-3406. The conference ID is 22972280.

An enhanced webcast of the conference call and replay will be available through the Company's website at www.transatlanticpetroleum.com. To access the live webcast and replay, click on "Investors," select "Events & Presentations," and click on "Listen to webcast" under the event listing. The webcast requires Microsoft Windows Media Player or RealOne Player.

Quarterly Report on Form 10-Q

The Company expects to file its Quarterly Report on Form 10-Q for the three months ended June 30, 2013 on August 7, 2013.

 
 
TransAtlantic Petroleum Ltd.
Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
 
  For the Three Months Ended June 30, For the Six Months Ended June 30
U.S. Dollars and shares in thousands, except per share amounts  2013 2012 2013 2012
         
Revenues:        
Oil and natural gas sales $29,455 $31,890 $62,180 $66,557
Sales of purchased natural gas 1,966 2,001 4,240 3,663
Other 342 537 855 1,714
Total revenues 31,763 34,428 67,275 71,934
Costs and expenses:        
Production 3,328 4,293 8,855 7,928
Exploration, abandonment and impairment  11,885 6,883 15,749 9,679
Cost of purchased natural gas   1,866 1,900  4,046 3,636
Seismic and other exploration  1,090 848 1,333 1,511
Revaluation of contingent consideration  (5,000)  -- (5,000) --
General and administrative  6,893 9,280 14,416 18,557
Depreciation, depletion and amortization  9,581 9,382 18,557 18,551
Accretion of asset retirement obligations  124 164 253 415
Total costs and expenses  29,767 32,750 58,209 60,277
Operating income  1,996 1,678  9,066  11,657
Other income (expense):        
Interest and other expense  (955) (2,018) (1,845) (5,277)
Interest and other income 307 348 682 482
Gain on commodity derivative contracts  4,278 14,304 3,502  1,869
Foreign exchange (loss) gain (2,543) (1,073) (3,030) 3,199
Total other income (expense)  1,087 11,561 (691) 273
Income from continuing operations before income taxes 3,083 13,239 8,375 11,930
Current income tax expense  (528) (422)  (1,867)  (2,442)
Deferred income tax benefit (expense)  348 (4,247) (573) (2,388)
Net income from continuing operations 2,903 8,570 5,935 7,100
Net income (loss) from discontinued operations, net of taxes -- 16,536 (93) 14,379
Net income $2,903 $25,106 $5,842 $21,479
Foreign currency translation adjustment   (13,543) 1,141 (16,379) 14,504
Comprehensive (loss) income  $(10,640) $26,247 $(10,537) $35,983
Basic and diluted net income per common share:        
From continuing operations 0.01  0.02  0.02 0.02
From discontinued operations 0.00 0.05 0.00 0.04
Basic weighted average number of shares outstanding 368,936 366,536 368,911 366,486
Diluted weighted average number of shares outstanding 368,936 368,855 368,911 368,288
 
 
TransAtlantic Petroleum Ltd.
Summary Consolidated Statements of Cash Flows
(Unaudited)
 
  For the Six Months Ended June 30,
U.S. Dollars in thousands 2013 2012
     
Net cash provided by operating activities from continuing operations  $55,722 $48,013
Net cash used in investing activities from continuing operations  (60,451) (29,628)
Net cash provided by (used in) financing activities from continuing operations 7,000 (125,547)
Net cash (used in) provided by discontinued operations  (55) 119,537
Effect of exchange rate changes on cash  (1,064) 388
Net increase in cash and cash equivalents  $1,152 $12,763
 
 
TransAtlantic Petroleum Ltd.
Summary Consolidated Balance Sheets
 
  As of
U.S. Dollars in thousands June 30, 2013 December 31, 2012
  (Unaudited)  
ASSETS    
Current assets:    
Cash and cash equivalents  $15,920 $14,768
Accounts receivable  39,355 52,769
Prepaid and other current assets  2,009 2,339
Deferred income taxes  3,680 1,895
Assets held for sale  534 1,619
Total current assets  61,498 73,390
Property and equipment, net 254,849 256,152
Total other assets  27,680 28,716
Total assets  $344,027 $358,258
     
LIABILITIES & SHAREHOLDERS' EQUITY    
Current liabilities:    
 Accounts payable  $30,870 $28,498
 Accrued liabilities and other 23,203 30,790
 Derivative liabilities  1,516 3,908
 Liabilities held for sale  7,169 8,416
Total current liabilities  62,758 71,612
Total liabilities  139,856 144,431
Total shareholders' equity  204,171 213,827
Total liabilities and shareholders' equity  $344,027 $358,258
 
 
Reconciliation of Net Income to Adjusted EBITDAX
 
  For the Three Months Ended June 30, For the Six Months Ended June 30,
U.S. Dollars in thousands  2013 2012 2013 2012
         
Net income from continuing operations $2,903 $8,570 $5,935 $7,100
Adjustments:        
Interest and other, net  648 1,670 1,163 4,795
Income tax expense 180 4,669 2,440 4,830
Exploration, abandonment, and impairment  11,885 6,883 15,749 9,679
Seismic expense 1,035 806 1,143 989
Foreign exchange loss (gain) 2,543 1,073 3,030 (3,199)
Share-based compensation  497 608 878 1,103
Unrealized derivative gain   (4,762)  (15,077) (5,238) (4,116)
Accretion of asset retirement obligation  124 164 253 415
Depreciation, depletion, and amortization 9,581 9,382 18,557 18,551
Revaluation of contingent consideration (5,000) -- (5,000) --
Net other items  (2,003) 2,986 (1,815) 3,807
Adjusted EBITDAX from continuing operations   $17,631 $21,734 $37,095 $43,954

Adjusted EBITDAX is a non-GAAP financial measure that represents earnings from continuing operations before income taxes, interest, depreciation, depletion, amortization, impairment, abandonment, and exploration expenses, unrealized derivative gains and losses, foreign exchange gains and losses, non-cash share-based compensation expense and significant non-recurring expenses.

The Company believes Adjusted EBITDAX assists management and investors in comparing the Company's performance and ability to fund capital expenditures and working capital requirements on a consistent basis without regard to depreciation, depletion and amortization and impairment of oil and natural gas properties and exploration expenses, which can vary significantly from period to period. In addition, management uses Adjusted EBITDAX as a financial measure to evaluate the Company's operating performance. Adjusted EBITDAX is also widely used by investors and rating agencies. 

Adjusted EBITDAX is not a measure of financial performance under GAAP. Accordingly, it should not be considered as a substitute for net income, income from operations, or cash flow provided by operating activities prepared in accordance with GAAP. Net income, income from operations, or cash flow provided by operating activities may vary materially from Adjusted EBITDAX. Investors should carefully consider the specific items included in the computation of Adjusted EBITDAX. The Company has disclosed Adjusted EBITDAX to permit a comparative analysis of its operating performance and debt servicing ability relative to other companies.

About TransAtlantic

TransAtlantic Petroleum Ltd. is an international oil and natural gas company engaged in the acquisition, exploration, development and production of oil and natural gas. The Company holds interests in developed and undeveloped properties in Turkey and Bulgaria.

 (NO STOCK EXCHANGE, SECURITIES COMMISSION OR OTHER REGULATORY AUTHORITY HAS APPROVED OR DISAPPROVED THE INFORMATION CONTAINED HEREIN.)

Forward-Looking Statements

This news release contains statements concerning the drilling, completion and cost of wells, the production and sale of oil and natural gas, the acquisition of seismic data, as well as other expectations, plans, goals, objectives, assumptions or information about future events, conditions, results of operations or performance that may constitute forward-looking statements or information under applicable securities legislation. Such forward-looking statements or information are based on a number of assumptions, which may prove to be incorrect. In addition to other assumptions identified in this news release, assumptions have been made regarding, among other things, the ability of the Company to continue to develop and exploit attractive foreign initiatives.

Although the Company believes that the expectations reflected in such forward-looking statements or information are reasonable, undue reliance should not be placed on forward-looking statements because the Company can give no assurance that such expectations will prove to be correct. Forward-looking statements or information are based on current expectations, estimates and projections that involve a number of risks and uncertainties which could cause actual results to differ materially from those anticipated by the Company and described in the forward-looking statements or information. These risks and uncertainties include, but are not limited to, market prices for natural gas, natural gas liquids and oil products; estimates of reserves and economic assumptions; the ability to produce and transport natural gas, natural gas liquids and oil; the results of exploration and development drilling and related activities; economic conditions in the countries and provinces in which the Company carries on business, especially economic slowdowns; actions by governmental authorities, receipt of required approvals, increases in taxes, legislative and regulatory initiatives relating to fracture stimulation activities, changes in environmental and other regulations, and renegotiations of contracts; political uncertainty, including actions by insurgent groups or other conflict; outcomes of litigation; the negotiation and closing of material contracts; shortages of drilling rigs, equipment or oilfield services.

The forward-looking statements or information contained in this news release are made as of the date hereof and the Company undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

Note on Boe

Barrels of oil equivalent, or Boe, are derived by the Company by converting natural gas to oil in the ratio of six thousand cubic feet ("Mcf") of natural gas to one bbl of oil. A Boe conversion ratio of 6 Mcf to 1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Boe may be misleading, particularly if used in isolation.
 

CONTACT: Taylor Miele
Director of Investor Relations
(214) 265-4746
Wil Saqueton
VP & CFO
(214) 220-4323
TransAtlantic Petroleum Ltd.
16803 Dallas Parkway
Addison, Texas 75001
http://www.transatlanticpetroleum.com

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