TransGlobe Energy Corporation Announces Closing of Canadian Asset Acquisition

TransGlobe Energy Corporation Announces Closing of Canadian Asset Acquisition

TransGlobe Energy Corporation (TSX:TGL)(NASDAQ:TGA) (“TransGlobe” or the “Company”) announces the closing of the Canadian acquisition in the Harmattan area of west central Alberta and a mid-quarter Egypt update for the fourth quarter of 2016. All dollar values are expressed in Canadian dollars unless otherwise stated.

Acquisition Highlights- Canada

  • Current production ~3,100 barrels of oil equivalent (“boe”) per day (57% liquids weighted)1
  • Operatorship and high working interest in the majority of assets (~88% of current production)
  • Total Proved reserves ~11.8 million boe2, 5
  • Total Proved plus Probable reserves ~21.3 million boe2, 5
  • Proved plus Probable NPV10 of $110 million5
  • Total Proved plus Probable Reserve Life Index of 18.9 years3
  • Total 145 net drilling locations: 45 Proved plus Probable locations2, 5 and 100+ additional unbooked drilling locations4
  • Total acreage ~110,000 acres (~95,000 net acres)
  • Total consideration of $80 million (~US$59 million) comprised of $65 million (~US$48 million) cash and a vendor take back note of $15 million5
  • Effective date is December 1st, 2016

Notes:

  1. Based on September 2016 field estimates provided by vendor.
  2. Gross working interest reserves before the deduction of any royalties and without including any royalty interests receivable.
  3. Reserves life index is calculated by dividing Proved plus Probable reserves as at September 30, 2016 by the average annual production for the period ended on that date.
  4. Potential unbooked drilling opportunities are based on TransGlobe internal estimates prepared in accordance with the Canadian Oil and Gas Evaluation Handbook (“COGE Handbook“) by a non-independent qualified reserves evaluator. See “Oil & Gas Information” below.
  5. Reserves estimates were evaluated by DeGolyer & MacNaughton Canada Limited (“DMCL“) effective September 30, 2016 using DMCL’s September 30, 2016 forecast prices and costs in accordance with National Instrument 51-101 – Standards of Disclosure of Oil and Gas Activities (“NI -51-101“) and the COGE Handbook (the “DMCL Canadian Report“).
  6. Subject to customary purchase price adjustments

Acquisition Metrics – Canada

  • $25,806 per flowing boe/d
  • $6.78 per boe of Proved reserves
  • $3.76 per boe of Proved plus Probable reserves

Harmattan Acquisition Strategic Rationale

The Harmattan acquisition provides the Company with a meaningful re-entry into Canada with concentrated, high working interest assets in proven, low risk development light oil and liquid-rich gas play types. The acquisition provides ample drilling locations and running room to increase reserves and production through horizontal drilling and multi-stage frac technology. The Harmattan acquisition meets the Company’s strategy to diversify and expand operations into lower political risk OECD countries with attractive netbacks to support growth in the current oil price environment and plays to the Company’s core strength of value creation through development drilling and reservoir management.

The acquired assets provide a stable production base (established declines of approximately 12% over the past 12 months) with embedded growth potential. In addition to the 45 net drilling locations assigned in the 2P reserves, the Company has identified an additional 100+ net locations on the acquisition lands providing a significant development growth platform. The purchase includes a 100% interest in a central oil battery and flow lines with significant under-utilized capacity allowing for future production growth. The gas production is pipeline connected to large third party gas processing facilities with spare capacity. The development nature of the acquisition complements the Company’s high impact exploration and development growth potential in Egypt.

Pro Forma TransGlobe

Egypt1 Canada2 Pro-Forma3
Production (boepd)4 12,800 3,100 15,900
Proved Reserves (Million boe)6,7 19.5 11.8 31.3
Proved NPV10 ($US millions)7,8 168 48 216
Proved plus Probable reserves (Million boe)6,7 30.3 21.3 51.6
Proved plus Probable NPV10 ($US millions)7,8 259 75 334
Proved plus Probable Reserve Life Index (years)5 6.4 18.9 9.0
Total Gross Acreage 1,259,087 110,000 1,369,087

Notes:

  1. The reserves data set out in respect of Egypt was evaluated by DMCL effective June 30, 2016 using DMCL ‘s June 30, 2016 forecast prices and costs in accordance with NI 51-101 and the COGE Handbook (the “DMCL Egyptian Report“).
  2. The reserves data set out in respect of Canada was evaluated by DMCL effective September 30, 2016 using DMCL’s September 30, 2016 forecast prices and costs in accordance with NI 51-101 and the COGE Handbook.
  3. See “Oil & Gas Information” below for certain cautionary statements regarding the pro forma disclosure set out above.
  4. Based on Q4 2016 production estimates.
  5. Reserves life index is calculated by dividing Proved plus Probable reserves as at June 30, 2016 (in the case of Egypt) and as at September 30, 2016 (in the case of Canada) by the average annual production for the periods ended on those dates.
  6. Gross working interest reserves before the deduction of any royalties and without including any royalty interests receivable.
  7. Reserves and NPV Values for Canada were derived from the DMCL Canadian Report effective September 30, 2016 and translated to US dollars using the Bank of Canada noon rate on December 19th, 2016 of 1.3397 Canadian dollars to 1.00 US dollars. Reserves and NPV Values for Egypt were derived from the DMCL Egyptian Report effective June 30, 2016 and were prepared in US dollars.
  8. NPV Values for Egypt and Canada presented on an after tax basis.

Financing Considerations

The acquisition was funded with $65 million in cash from the balance sheet and a 10%, 24-month vendor take back loan of $15 million.

Separately, the Company continues to actively evaluate various alternatives to refinance the convertible debenture due March 31st, 2017 and is in advanced discussions with multiple parties and expects to make a final decision in early 2017.

SOURCE:  https://www.trans-globe.com/news/release?id=2112950

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