EARNINGS / TransGlobe Energy Announces Six Month
Financial and Operating Results
TSE, ASE SYMBOL: TGL
ASE SYMBOL: TGL.S
NASDAQ SYMBOL: TGLEF
MAY 25, 1998
CALGARY, ALBERTA--TransGlobe Energy Corporation (ASE, symbol
"TGL"; TSE symbol "TGL"; NASDAQ symbol "TGLEF") announced its
financial and operating results for the six month period ended
March 31, 1998.
EXPLORATION UPDATE
Block S-1, Yemen
The Production Sharing Agreement (the "PSA") with the Ministry of
Oil and Mineral Resources covering Block S-1 in the Republic of
Yemen has been approved by the Yemen Cabinet and is presently
being reviewed by the Yemen Parliament. Ratification by the Yemen
Parliament is expected shortly.
TransGlobe have started the re-processing and interpretation of
the existing seismic data. A 150 square kilometer 3-D seismic
program is expected to begin in the fall of 1998. The first well
in a three well exploration program in the Block S-1 is planned to
be drilled during the first quarter of 1999 and expected to
evaluate a discovery previously made by a major oil company.
Block 32, Yemen
The exploration work in the Block 32, the Republic of Yemen, where
the Company participated in the Tasour-1 oil discovery is expected
to resume in late summer with a seismic program to delineate the
Tasour structure and firm up additional exploratory drilling
locations followed by drilling of two appraisal and one
exploratory wells. TransGlobe management has estimated the proven
reserves in the Tasour structure at 5.9 million barrels of
recoverable oil with a probable additional reserves of 8.7 million
barrels. An independent reserves report will be prepared for
inclusion in the Company's annual reserves statement. Additional
appraisal wells will be needed to prove sufficient reserves to
warrant development. The appraisal-drilling program is planned to
start in early 1999. The Company has increased its working
interest in Block 32 from 8 percent to 9.81087 percent, at no cost
to the Company, by assuming a pro-rata share of a withdrawing
partner.
East Meridian, Montana
During the quarter, the Company participated in the BROG 13-19
well in Richland County, Montana at a 50 percent working interest
(40 percent net revenue interest). The well was drilled
horizontally and is currently producing at 235 barrels of light
oil per day from the Red River "C" formation. In addition the
Company participated at a 25 percent working interest level in the
Johnson 21-1 well which was plugged an abandoned. TransGlobe's
management is reviewing the drilling results obtained to date in
the Richland County, Montana project and may commit to additional
exploratory wells during 1998.
FINANCIAL UPDATE (All dollar values are expressed in the United
States dollars unless otherwise stated.)
Capital expenditures in the United States for the quarter were
$1,000,517 of which $665,000 were incurred on the drilling and
completion of the BROG 13-19 well and the balance on the
carry-over charges related to the CWI BN 17-1 and Johnson 21-1
wells as well as the Moline Lake prospect. In Yemen, the Company
incurred $299,996 in capital expenditures during the three months
ended March 31, 1998. These expenditures were primarily related to
the Company's share of the seismic reprocessing and local office
costs for Block 32.
The Company's oil and condensate production increased by 89
percent from the previous quarter and 675 percent over the same
period in 1997. The oil and condensate production averaged 216
barrels per day during the quarter compared to 114 barrels per day
for the immediately preceding quarter and 32 barrels per day for
the same period in 1997. The impact of strong production gains was
more than offset by the steep decline in the world crude oil
prices. The Company averaged $13.79 per barrel of oil and
condensate during the quarter as compared to $18.31 in the
previous quarter and $22.34 in the same period in 1997, declines
of 25 percent and 38 percent respectively.
Natural gas production during the quarter declined to 629 mcf per
day from 760 mcf per day in the previous quarter. This drop in
production was primarily due to the mechanical problems
encountered in the Madera 30-1 well during February and March,
1998. As compared to the same period in 1997, the natural gas
production declined from 941 mcf per day to current levels as a
result of the Madera 30-1 well attaining two separate pay-outs in
December 1996 and May 1997 which resulted in TransGlobe's net
revenue interest reducing to 35.4 percent from 56 percent.
The Company averaged $2.26 per mcf during the three-month period
ended March 31, 1998 as compared to $3.11per mcf during the
preceding quarter and $2.98 per mcf for the same period in 1997.
The decline in the natural gas prices was related to the warmer
than normal winter weather conditions experienced in the United
States.
Oil and gas revenue (net of royalties) and operating expenses were
$292,825 and $73,537 compared to $301,015 and $39,340
respectively for the immediately preceding quarter and $290,015
and $31,791 for the same period in 1997. The decline in revenue
was due to lower oil and gas prices partially offset by higher oil
production. The increase in operating expenses was due to the salt
water disposal charges in the Larson 18-1 well, costing the
Company $40,797 for the six month period. This well is now
abandoned, and the operating expenses are back to their normal
levels.
The Company's general and administrative expenses were $632,589
for the six month period ended March 31, 1998 as compared to
$683,641 for the same period in 1997, a reduction of 7.5 percent.
Included in the general and administrative expenses were legal
fees related to the Company's shareholders' rights protection plan
and the recent issue of debentures and promissory notes and a bank
financing. These charges are non-recurring in nature and
consequently the Company's management expects a further reduction
in general and administrative expenses during the remainder of the
year.
In February 1998, the Company issued 92,819 common shares,
unsecured debentures and promissory notes in the amount of Cdn.
$700,000 and Cdn. $500,000 respectively to fund its exploration
activities in Yemen and the United States. The common shares and
debentures were subscribed by arm's length investors and the
promissory notes were issued to some directors and officers of the
Company and their associates. Debentures and promissory notes bear
interest at prime plus 1 percent and mature on September 1, 1998.
The holders of the common shares and debentures were issued
warrants to purchase 326,965 common shares at an exercise price of
$1.70 per share and the holders of the promissory notes were
issued warrants to purchase 178,569 common shares at an exercise
price of $1.75 per share.
In April, 1998, the Company arranged a revolving reducing demand
loan for $750,000 with the National Bank of Canada. The Company is
repaying the revolving loan by $25,000 per month commencing April
1998. The loan bears interest at the National Bank's U.S. base
rate plus 1 percent and is secured by a general assignment of book
debts, a first floating charge debenture over all assets of the
Company, a guarantee from the Company's wholly owned United States
subsidiary and other pledges and negative pledges.
/T/
Operating and Financial Results Summary
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Three months ended
March 31, December March 31,
1998 31, 1997 1997
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Production:
Oil and condensate
(barrels per day) 216 114 32
Natural gas (mcf per day) 629 760 941
Product prices:
Oil and condensate
( per barrel) $13.79 $18.31 $22.34
Natural gas (per mcf) $2.26 $3.11 $2.98
Oil and gas revenue net
of royalties $292,825 $301,015 $290,015
Operating expenses 73,537 39,340 31,791
Net operating income $219,288 $261,675 $258,224
Capital expenditures:
United States $1,000,517 $545,481 $278,429
Republic of Yemen 299,996 536,351 248,498
Total $1,300,513 $1,081,832 $526,927
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/T/
On behalf of the Board of Directors of
TRANSGLOBE ENERGY CORPORATION
"Ross G. Clarkson, President & CEO" |
