TransGlobe Energy Corporation, announces a Canadian operations update and appointment of an investor relations advisor. All dollar values are expressed in US dollars unless otherwise stated.
Canada - Appraisal Update in South Harmattan
The Company is pleased to provide an operational update on its 2019 Cardium drilling program. The final well of the program was a 2-mile appraisal / outpost well, drilled to 2115m (TVD) and 5028m (TMD). This well was stimulated and equipped to test the petroleum type and productivity of an undeveloped extension to the Cardium resource play in the South Harmattan area. The Company is pleased to report that this well has now been on production for 60 days at very encouraging initial rates and has been added to the Company's inventory of producing wells.
The calculated IP30 is estimated at 415 Boepd, including 379 Bopd of light oil, and the calculated estimated IP60 is 341 Boepd, including 302 Bopd of light oil, both calculated on a productive day basis. Although the production history is relatively short and not necessarily indicative of long-term performance or ultimate recovery, due to the nature and extent of the undeveloped area targeted by the well, the Company is very encouraged about the resource potential of the 18.5 undeveloped working interest sections of land that it holds in the South Harmattan area. Typically, each Cardium section is developed with four 1-mile horizontal wells at ~$2.4 million per well, with further well optimization possible using 2-mile horizontal wells across adjacent sections at ~$3.1 million per well. Accordingly, South Harmattan could represent a significant new resource play to the Company.
Background to the Drilling in South Harmattan
TransGlobe’s Canadian operations are concentrated on the prolific Cardium formation that spans a very large area from southwest Alberta to northeast British Columbia, with the producing area concentrated along the eastern slopes of the Rocky Mountains to the northwest of Calgary. There have been over 10,000 wells drilled into the Cardium formation, beginning in the late 1940s, including an estimated 3,900 horizontal wells targeting the lower permeability (“lower-perm”) sandstone, which lays at depths ranging from 1,200 to 2,300m. TransGlobe’s Harmattan lands are concentrated in the lower-perm sandstone, positioned at the southern-most end of what is considered the productive area of the formation.
The Company’s technical team developed a concept that an area to the southwest of Harmattan (South Harmattan), despite being positioned between what was believed to be a hydrocarbon transition zone (oil phase to natural gas phase), would prove to be a productive, undeveloped extension of the Cardium resource play and be oil prone rather than natural gas prone.
After undertaking technical work in support of the concept, in 2018 the Company acquired the mineral rights to an additional sixteen sections (each section is one square mile) of Crown Cardium rights in this area to add to its existing land base. Lands acquired from the Alberta government (Crown land) currently qualify for horizontal drilling royalty incentives to enhance development of resources in Alberta, which effectively reduce the initial royalties to 5% until well costs are recovered from production.
The above appraisal well, now added to the Company's inventory of producing wells, is the first well the Company has drilled into the newly acquired South Harmattan lands.
As a result of this initial success of the 2-mile appraisal/outpost well in South Harmattan, the Company has initiated a review of its drilling program for 2020 to incorporate this new well result and high-grade the opportunities to deploy capital across its portfolio.
The 2020 Canadian drilling program will be designed to include the development and further maturation of this South Harmattan Cardium resource.
TransGlobe will news release its year-end 2019 Reserves and 2020 Budget on Wednesday, February 5 and will hold a conference call and webcast on Thursday, February 6 to review those items and South Harmattan in more detail (information on the webcast will be provided in the February 5 news release). The 2020 budget will continue to align with TransGlobe’s focus of maximizing returns.
TransGlobe has engaged Tailwind Associates as the Company’s investor relations advisor. Darren Engels, formerly a Director, Institutional Research, at GMP FirstEnergy, heads Tailwind. Darren has nearly two decades of business, financial, and investment experience of which 15 years were at FirstEnergy, a Calgary-based boutique investment bank where he was responsible for research coverage of international energy companies, for which he was a top ranked stock analyst, according to Bloomberg.
Randy Neely, Chief Executive Officer of TransGlobe, said:
“TransGlobe has developed a strong asset portfolio, including resource plays in Canada, mature producing fields in Egypt’s Eastern Desert, and exploration opportunities in Egypt’s Western Desert. This range of opportunities allows us to optimally manage the risk-reward profile of our exploration and development spending, and allocate capital to the projects that will have the most significant impact on shareholder value.
“In Canada, we have made a potentially significant discovery of resources in a new, effectively undrilled area, where we already have a significant footprint. These projects will continue to deliver on our strategic focus of building a profitable, growth oriented international portfolio which can provide increasing and real returns to shareholders.
“In Egypt, we have been making steady progress on the consolidation, amendment and extension of our Eastern Desert PSCs, which, when completed, will provide the foundation for the Company to grow production and reserves for years to come.
“We are heading into 2020 with confidence.”