TIDMTGL
RNS Number : 8294Z
TransGlobe Energy Corporation
27 January 2022
TRANSGLOBE ENERGY CORPORATION ANNOUNCES ITS
2022 CAPITAL BUDGET & 2022 PRODUCTION GUIDANCE
AIM & TSX: "TGL" & NASDAQ: "TGA"
Calgary, Alberta, January 27, 2022 - TransGlobe Energy
Corporation ("TransGlobe" or the "Company") announces its 2022
capital budget and production guidance. All dollar values are
expressed in US dollars unless otherwise stated.
2022 BUDGET HIGHLIGHTS
-- 2022 capital budget of $57.7MM (before capitalized G&A);
o Egypt $33.1MM
o Canada $24.6MM
-- Investment is spread evenly throughout the year and 2022
average production guidance is set at 12.4 to 13.4 MBoepd with a
midpoint of 12.9 MBoepd:
o Egypt 10.0 - 10.8 MBopd;
o Canada 2.4 - 2.6 MBoepd;
o Company expects exit production to be in the range of 12.8 to
14.2 MBoepd, representing a year over year increase of
approximately 12% over December 2021 production based on the
midpoint of guidancef
-- The 2022 drilling program includes 17 Egypt wells and 7
Canadian Cardium wells in South Harmattan, all 100% WI.
-- *The Company anticipates field operating netbacks for 2022 of
$26/Bbl in Egypt Eastern Desert, at an average Brent price of
$80/Bbl, and of $33/Boe in Canada, at an average WTI price of
$75/Bbl and AECO price of CAD$2/MCF.
*Field operating netback is a "supplementary financial measure"
as such term is defined in National Instrument 52-112 - Non-GAAP
and Other Financial Measures Disclosure ("NI 52-112") and is
calculated as petroleum and natural gas sales (net of royalties),
less taxes and production and operating expenses. For further
information see "Field Operating Netback per Bbl and Boe
Calculations", "Oil and Gas Advisories" and "Financial Measures
Advisories" in this news release.
Randy Neely, President & CEO's Statement
"With the agreement to merge our Eastern Desert concessions
executed, and recent commodity price improvements, the Company is
rapidly moving forward to increase investment in Egypt and Canada
to support our growth plans in both countries. In Egypt, the focus
will be chiefly on maintaining / growing production in the Eastern
Desert while we work to further mature our contingent resource
portfolio through the drilling of our first horizontal multi-stage
completion wells. In Canada, the focus will be on developing our
South Harmattan acreage, following on from our very successful 2021
drilling program, and continuing to expand the discovered resource
base. Our 2022 budget underlines the confidence we have in the
potential of the TransGlobe portfolio. With the much improved terms
in the Eastern Desert, expectation of continued strong oil prices,
and the realization of the amounts owing from the effective date
adjustment on the consolidation of the Eastern Desert concessions,
the Company expects to revisit its dividend policy in the near
term."
2022 CAPITAL GUIDANCE
The Company's 2022 capital program of $57.7MM (before
capitalized G&A) includes $33.1MM for Egypt and $24.6MM for
Canada. The 2022 Plan was prepared to focus on value accretive
projects within the Company's portfolio, maximize free cash flow to
direct at future value growth opportunities, to increase the
Company's production base and to allow the Company to revisit its
dividend policy.
Egypt
As announced on January 20, 2022, the Company has executed its
agreement (the "Agreement") with the Egyptian General Petroleum
Corporation ("EGPC") to merge its three existing Eastern Desert
concessions with a 15-year primary term and improved Company
economics. An official signing ceremony with the Minister of
Petroleum and Mineral Resources was held on January 19, 2022. The
Agreement consolidates the three existing producing concessions in
the Eastern Desert which, in December 2021, had a combined average
production of 9,394 Bopd (8,590 Bopd Heavy Crude; 803 Bopd Light
and Medium Crude).
The Agreement is effective as of February 1, 2020, and, as such,
there will be an effective date adjustment owed to the Company for
the difference in the historic commercial terms and the revised
commercial terms applied against the production since the effective
date. The quantum of the effective date adjustment is expected to
be finalized with EGPC in the coming months. The Agreement has a
40% cost recovery limit and a variable profit share. Detailed
commercial terms of the Agreement are presented at the end of this
release.
The 2022 $33.1MM Egypt capital program is predominantly weighted
towards 13 development wells within the Eastern Desert, including
two Arta Nukhul horizontal multi-stage completion wells.
Additionally, two exploration wells are planned for the second half
of the year along with a further two water injection wells,
bringing the total planned number of wells in Egypt to 17. The
Egypt capital program includes $12.6MM of other spending, of which
half relates to materials, including long-lead capital items which
are expected to provide continuity into 2023. With the finalization
of the concession agreement, the primary focus of the 2022 Egypt
plan is to accelerate the exploitation of the Company's Eastern
Desert acreage while optimising the potential of modern, horizontal
multi-stage completion wells in accessing the Company's contingent
resource base.
The 13 well development program, already underway, consists of
nine vertical development wells in K-field, the two previously
mentioned horizontal wells in Arta field, and two further vertical
wells in Arta field.
Egypt production is expected to average between 10.0 and 10.8
MBopd for the year.
Canada
The $24.6MM Canada program consists of drilling seven (seven
net) horizontal wells all targeting the Cardium light oil resource
at South Harmattan along with additional maintenance/development
capital. The Cardium drilling program in 2022 consists of six
1-mile and one 2-mile wells. Two of these wells are expected to be
drilled in Q1 2022. The remaining five wells are expected to be
drilled in late June through August, and all wells are expected to
be completed and brought onstream in late summer to early fall
2022.
Canada production is expected to average between 2.4 and 2.6
MBoepd for the year.
Detailed Capital Plan
The approved 2022 capital program is summarized in the following
table:
TransGlobe Net Capital Gross Well Count
(US$MM)
Development Exploration Total New Drills Total
Capex(2) Wells
----------------- ------------ ---------- ----------------- -------
Wells Other(1) Wells Dev Expl Inj
------ --------- ------------ ---------- ---- ----- ---- -------
Eastern Desert 18.9 12.4 1.6 32.9 13 2 2 17
------ --------- ------------ ---------- ---- ----- ---- -------
South Ghazalat - 0.2 - 0.2 - - -
------ --------- ------------ ---------- ---- ----- ---- -------
Egypt 18.9 12.6 1.6 33.1 13 2 2 17
------ --------- ------------ ---------- ---- ----- ---- -------
Canada 21.1 3.5 - 24.6 7 7
------ --------- ------------ ---------- ---- ----- ---- -------
Total 40.0 16.1 1.6 57.7 20 2 2 24
------ --------- ------------ ---------- ---- ----- ---- -------
1. Other includes completions, workovers, recompletions and equipping, and HSE capital.
2. Table may not total due to rounding.
Field Operating Netback per Bbl and Boe Calculations(1)
2022 Volume Sales Petroleum and Production Field
Price natural gas and Operating Operating
sales, net Expenses(3) Netback(7)
of royalties(2)(3)
(Bbl/Boe) ($) ($) ($) ($)
Egypt Eastern
Desert
------------- ------- -------------------- --------------- ------------
Oil 1.00 Bbl $74(4) $42 $15 $26
------------- ------- -------------------- --------------- ------------
Canada
------------- ------- -------------------- --------------- ------------
Light Oil 0.42 Bbl $70(5) $27 $3 $24
------------- ------- -------------------- --------------- ------------
Natural Gas
Liquids 0.29 Bbl $47 $12 $2 $10
------------- ------- -------------------- --------------- ------------
Natural Gas 0.29 Boe $10(6) $1 $2 -$1
------------- ------- -------------------- --------------- ------------
Combination 1.00 Boe $41 $8 $33
------------- ------- -------------------- --------------- ------------
1. The petroleum and natural gas sales, royalties, taxes and
production and operating expenses are estimated based on the
mid-point of the production guidance given for each of Egypt and
Canada.
2. Royalties for Egypt includes taxes. TransGlobe's share of all
Egyptian taxes and royalties are paid out of the Egyptian
government's share of production.
3. Supplementary financial measure. See "Financial Measures Advisories".
4. $80/ Bbl Brent less $6/ Bbl discount.
5. $75/ Bbl WTI less $5/ Bbl discount.
6. AECO price estimate of CAD$2.00/MCF, multiplied by six and
adjusted for the US/CAD exchange rate of 1.26.
7. Field operating netback is a "supplementary financial
measure" as such term is defined in NI 52-112. For further
information see "Oil and Gas Advisories" and "Financial Measures
Advisories" in this news release.
About TransGlobe
TransGlobe Energy Corporation is a cash flow focused oil and gas
exploration and development company whose current activities are
concentrated in the Arab Republic of Egypt and Canada. TransGlobe's
common shares trade on the Toronto Stock Exchange and the AIM
market of the London Stock Exchange under the symbol TGL and on the
NASDAQ Exchange under the symbol TGA.
For further information, please contact:
TransGlobe Energy Corporation +1 403 264 9888
Randy Neely, President and CEO investor.relations@trans-globe.com
Eddie Ok, CFO http://www.trans-globe.com
or via Tailwind Associates
Tailwind Associates (Investor Relations) +1 403 618 8035
Darren Engels darren@tailwindassociates.ca
http://www.tailwindassociates.ca
Canaccord Genuity (Nomad & Joint-Broker)
Henry Fitzgerald-O'Connor
James Asensio +44(0) 20 7523 8000
Shore Capital (Joint Broker)
Toby Gibbs
John More +44(0) 20 7408 4090
Advisory on Forward-Looking Information and Statements
Certain statements included in this news release constitute
forward-looking statements or forward-looking information under
applicable securities legislation. Such forward-looking statements
or information are provided for the purpose of providing
information about management's current expectations and plans
relating to the future. Readers are cautioned that reliance on such
information may not be appropriate for other purposes.
Forward-looking statements or information typically contain
statements with words such as "anticipate", "strengthened",
"confidence", "believe", "expect", "plan", "intend", "estimate",
"may", "will", "would" or similar words suggesting future outcomes
or statements regarding an outlook. In particular, forward-looking
information and statements contained in this document include, but
are not limited to, the Company's estimated 2022 capital spending
in Egypt and Canada, including the capital spending to be allocated
to each well; the Company's anticipated 2022 capital budget; the
Company's anticipated 2022 production, including the allocation of
such production between development and exploration wells and other
spending; the Company's anticipated exit production rates; the
Company's expectations that it will increase investments and growth
in Egypt and Canada; the Company's , strategy and focus in 2022,
including the drilling of wells and growing production; the
Company's plans to maximize free cash flow, to increase the
Company's production base and to allow the Company to revisit it's
dividend policy; the potential payments of dividends in the future;
the number of and location of wells to be drilled by the Company in
2022 and the anticipated timing thereof; the focus of the Egypt
2022 capital program; the ability of the Company's long-lead
capital items to provide continuity into 2023; the expected timing
of determining the effective date adjustment with EGPC under the
Agreement; the anticipated netback to be generated by the Company's
Eastern Desert acreage and in Canada; and other matters.
Forward-looking statements or information are based on a number
of factors and assumptions which have been used to develop such
statements and information but which may prove to be incorrect.
Although the Company believes that the expectations reflected in
such forward-looking statements or information are reasonable,
undue reliance should not be placed on forward-looking statements
because the Company can give no assurance that such expectations
will prove to be correct. Many factors could cause TransGlobe's
actual results to differ materially from those expressed or implied
in any forward-looking statements made by, or on behalf of,
TransGlobe.
In addition to other factors and assumptions which may be
identified in this news release, assumptions have been made
regarding, among other things, anticipated production volumes; the
timing of drilling wells and mobilizing drilling rigs; the number
of wells to be drilled; the Company's ability to obtain qualified
staff and equipment in a timely and cost-efficient manner; the
regulatory framework governing royalties, taxes and environmental
matters in the jurisdictions in which the Company conducts and will
conduct its business; future capital expenditures to be made by the
Company; future sources of funding for the Company's capital
programs; geological and engineering estimates in respect of the
Company's reserves and resources; the geography of the areas in
which the Company is conducting exploration and development
activities; current commodity prices and royalty regimes;
availability of skilled labour; future exchange rates; the price of
oil; the impact of increasing competition; conditions in general
economic and financial markets; availability of drilling and
related equipment; effects of regulation by governmental agencies;
future operating costs; uninterrupted access to areas of
TransGlobe's operations and infrastructure; recoverability of
reserves and future production rates; that TransGlobe will have
sufficient cash flow, debt or equity sources or other financial
resources required to fund its capital and operating expenditures
and requirements as needed; that TransGlobe's conduct and results
of operations will be consistent with its expectations; that
TransGlobe will have the ability to develop its properties in the
manner currently contemplated; current or, where applicable,
proposed industry conditions, laws and regulations will continue in
effect or as anticipated as described herein; that the estimates of
TransGlobe's reserves and resource volumes and the assumptions
related thereto (including commodity prices and development costs)
are accurate in all material respects; the Company's estimated 2022
capital spending and production will be as anticipated and
allocated in the manner described herein and other matters.
Forward-looking statements or information are based on current
expectations, estimates and projections that involve a number of
risks and uncertainties which could cause actual results to differ
materially from those anticipated by the Company and described in
the forward-looking statements or information. These risks and
uncertainties which may cause actual results to differ materially
from the forward-looking statements or information include, among
other things, operating and/or drilling costs are higher than
anticipated; unforeseen changes in the rate of production from
TransGlobe's oil and gas properties; changes in price of crude oil
and natural gas; adverse technical factors associated with
exploration, development, production or transportation of
TransGlobe's crude oil reserves; changes or disruptions in the
political or fiscal regimes in TransGlobe's areas of activity;
changes in tax, energy or other laws or regulations; changes in
significant capital expenditures; delays or disruptions in
production due to shortages of skilled manpower equipment or
materials; economic fluctuations; competition; lack of availability
of qualified personnel; the results of exploration and development
drilling and related activities; obtaining required approvals of
regulatory authorities; volatility in market prices for oil;
fluctuations in foreign exchange or interest rates; environmental
risks; ability to access sufficient capital from internal and
external sources; failure to negotiate the terms of contracts with
counterparties; failure of counterparties to perform under the
terms of their contracts; the Company's 2022 production in Egypt
and Canada will be less than anticipated; the Company's exit
production rates will be less than anticipated; the Company will
not increase investments and growth in Egypt and Canada; the
Company will successfully drill less than the number of wells that
it anticipates; the Company will be unable to maximize free cash
flow and increase the Company's production base; the Company does
not revisit its dividend policy and does not pay dividends in the
future; the amount and allocation of 2022 capital spending
disclosed herein will be different than anticipated; the Company's
drilling plans and the anticipated timing thereof will be different
than as disclosed herein; the Company's long-lead capital items
will not provide continuity into 2023; the netback generated by the
Company's Eastern Desert acreage will be less than anticipated; the
netback generated in Canada is less than anticipated; and other
factors beyond the Company's control. Readers are cautioned that
the foregoing list of factors is not exhaustive. Please consult
TransGlobe's public filings at www.sedar.com and
www.sec.goedgar.shtml for further, more detailed information
concerning these matters, including additional risks related to
TransGlobe's business.
The Company's future dividend payments, if any, and the level
thereof is uncertain. Any decision to implement a divided policy or
pay dividends will be subject to the discretion of the board of
directors of the Company and may depend on a variety of factors,
including, without limitation the Company's business performance,
financial condition, financial requirements, growth plans, expected
capital requirements and other conditions existing at such future
time including, without limitation, contractual restrictions and
satisfaction of the solvency tests imposed on the Company under
applicable corporate law. There can be no assurance that dividends
will be paid in the future.
The forward-looking statements or information contained in this
news release are made as of the date hereof and the Company
undertakes no obligation to update publicly or revise any
forward-looking statements or information, whether as a result of
new information, future events or otherwise unless required by
applicable securities laws. The forward-looking statements or
information contained in this news release are expressly qualified
by this cautionary statement.
This news release contains information that may be considered a
financial outlook under applicable securities laws about the
Company's anticipated capital expenditures for 2022 and the
Company's petroleum and natural gas sales (net of royalties), less
taxes and production and operating taxes disclosed under the
heading "Field Operating Netback per Bbl and Boe Calculations" in
this news release. Such financial information has been prepared by
management to provide an outlook of the Company's financial results
and activities and may not be appropriate for other purposes. This
information has been prepared based on a number of assumptions,
risk factors, limitations and qualifications including those
discussed in this news release. The actual results of operations of
the Company and the resulting financial results may vary from the
amounts set forth herein, and such variations may be material. The
Company and management believe that the financial outlook has been
prepared on a reasonable basis, reflecting management's best
estimates and judgments. The financial outlook contained in this
news release was made as of January 27, 2022 and the Company
disclaims any intent or obligation to update publicly the news
release, whether as a result of new information, future events or
otherwise, unless required pursuant to applicable law.
Oil and Gas Advisories
Mr. Ron Hornseth, B.Sc., General Manager - Canada for TransGlobe
Energy Corporation, and a qualified person as defined in the
Guidance Note for Mining, Oil and Gas Companies, June 2009, of the
London Stock Exchange, has reviewed the technical information
contained in this report. Mr. Hornseth is a professional engineer
who obtained a Bachelor of Science in Mechanical Engineering from
the University of Alberta. He is a member of the Association of
Professional Engineers and Geoscientists of Alberta ("APEGA") and
the Society of Petroleum Engineers ("SPE") and has over 20 years'
experience in oil and gas.
This news release contains a number of oil and gas metrics,
including field operating netback, which do not have standardized
meanings or standard methods of calculation and therefore such
measures may not be comparable to similar measures used by other
companies and should not be used to make comparisons. Such metrics
have been included herein to provide readers with additional
measures to evaluate TransGlobe's operating results; however, such
measures are not reliable indicators of the future performance of
TransGlobe and future performance may not compare to the
performance in previous periods and therefore such metrics should
not be unduly relied upon. Management of TransGlobe uses these oil
and gas metrics for its own performance measurements and to provide
securityholders with measures to compare TransGlobe's operations
over time. Readers are cautioned that the information provided by
these metrics, or that can be derived from the metrics presented in
this news release, should not be relied upon for investment or
other purposes.
Boes may be misleading, particularly if used in isolation. A Boe
conversion ratio of six thousand cubic feet of natural gas to one
barrel of oil equivalent (6 MCF: 1 Bbl) is based on an energy
equivalency conversion method primarily applicable at the burner
tip and does not represent a value equivalency at the wellhead.
Given that the value ratio based on the current price of crude oil
as compared to natural gas is significantly different from the
energy equivalency of 6:1, utilizing a conversion on a 6:1 basis
may be misleading as an indication of value.
The following abbreviations used in this press release have the
meanings set forth below:
Bbl barrel
Bopd barrels of oil per day
Bpd barrels per day
Boe barrel of oil equivalent
MBopd thousand barrels of oil per day
Boepd barrels of oil equivalent per day
MBoepd thousand barrels of oil equivalent per day
MCF thousand cubic feet
WI working interest
Financial Measures Advisories
NI 52-112 defines a supplementary financial measure as a
financial measure that: (i) is, or is intended to be, disclosed on
a periodic basis to depict the historical or expected future
financial performance, financial position or cash flow of an
entity; (ii) is not disclosed in the financial statements of the
entity; (iii) is not a non-GAAP financial measure (as defined in NI
52-112); and (iv) is not a non-GAAP ratio (as defined in NI
52-112). The supplementary financial measures used in this press
release are "field operating netback", "Petroleum and natural gas
sales, net of royalties per Bbl" and "Production and operating
expenses per Bbl and per Boe". Field operating netback is
calculated as set forth under the heading "Field Operating Netback
per Bbl and Boe Calculations" in this news release. Such
supplementary financial measure does not have a standardized
meaning or a standard method of calculation and therefore such
supplementary financial measure may not be comparable to similar
measures used by other companies and should not be used to make
comparisons. Such measure has been included herein to provide
readers with supplementary information to evaluate TransGlobe's
operating results; however, such measure is a not reliable
indicator of the future performance of TransGlobe and should not be
relied upon. Petroleum and natural gas sales, net of royalties per
Bbl is calculated as one Bbl multiplied by the estimated sales
price net of royalties. Production and operating expenses per
barrel is calculated by dividing the applicable aggregate expenses
by the production (Bbl / Boe) in the applicable period.
Egypt Agreement Commercial Terms
The now finalized Agreement for TransGlobe's Eastern Desert
assets contains the following commercial terms with regard to cost
recovery petroleum, profit oil and excess cost oil:
-- Cost recovery petroleum - expenditures shall be recovered out
of 40% of all petroleum produced from the merged development
area
-- Profit oil - 60% of all petroleum produced from the merged
development area shall be split between the Company and EGPC on the
following basis
Brent Price Crude Oil produced (Bopd)
US$/Bbl
Less than More than More than More than More than
or equal 5,000 Bopd 10,000 Bopd 15,000 Bopd 25,000 Bopd
to 5,000 and less and less and less
Bopd than or than or than or
equal to equal to equal to
10,000 Bopd 15,000 Bopd 25,000 Bopd
------------- --------------- --------------- --------------- ---------------
EGPC Cont. EGPC Cont. EGPC Cont. EGPC Cont. EGPC Cont.
% % % % % % % % % %
----- ------ ------ ------- ------ ------- ------ ------- ------ -------
Less than or equal
to 40 US$ 67 33 68 32 69 31 70 30 71 29
----- ------ ------ ------- ------ ------- ------ ------- ------ -------
More than 40 US$ and
less than or equal
to 60 US$ 68 32 69 31 70 30 71 29 72 28
----- ------ ------ ------- ------ ------- ------ ------- ------ -------
More than 60 US$ and
less than or equal
to 80 US$ 70 30 71 29 72 28 74 26 76 24
----- ------ ------ ------- ------ ------- ------ ------- ------ -------
More than 80 US$ and
less than or equal
to 100 US$ 72.5 27.5 73 27 74 26 76 24 78 22
----- ------ ------ ------- ------ ------- ------ ------- ------ -------
More than 100 US$ 75 25 76 24 77 23 78 22 80 20
----- ------ ------ ------- ------ ------- ------ ------- ------ -------
-- Excess cost oil - In the event that the value of the cost
recovery oil exceeds actual recoverable costs, the value of the
excess cost oil shall be shared between the Company and EGPC with
the Company receiving 15% of the excess and EGPC receiving 85%
-- Cost pools of $146 MM from the three historical concessions
will be recoverable from total production from the effective date
and eligible capital costs from the effective date will be
recovered over four years.
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END
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