TransGlobe Energy Announces Year End 2021 Financial & Operating Results

Source: www.oilegypt.com 3/17/2022, Location: Africa

TransGlobe Energy Corporation (TGL) ("TransGlobe") is pleased to announce its financial and operating results for the three months and year ended December 31, 2021. All dollar values are expressed in United States dollars unless otherwise stated. TransGlobe's Consolidated Financial Statements together with the notes related thereto, as well as TransGlobe's Management's Discussion and Analysis for the years ended December 31, 2021 and 2020, are available on TransGlobe's website at www.trans-globe.com.

FINANCIAL HIGHLIGHTS:

- 2021 sales averaged 13,478 boe/d in 2021 with an average realized price of $58.79/boe; average realized price on Egyptian sales of $62.94/bbl and Canadian sales of $38.40/boe;

- Funds flow from operations of $44.8 million ($0.62 per share) in 2021;

- 2021 net earnings of $40.3 million ($0.56 per share), inclusive of a $31.5 million non-cash impairment reversal and a $0.1 million unrealized loss on derivative commodity contracts;

- The Company ended the year with positive working capital of $21.0 million, including cash of $37.9 million;

OPERATIONAL HIGHLIGHTS:

- 2021 production averaged 12,854 boe/d (Egypt 11,336 bbls/d, Canada 1,518 boe/d), a decrease of 4% from 2020 primarily attributable to natural declines in Egypt, partially offset by the re-commencement of Eastern Desert drilling and well optimization activities;

- Inventoried entitlement crude oil in Egypt decreased to nil as at December 31, 2021 from 227.9 Mbbls as at December 31, 2020;

- Ended the year with 46.1 MMboe of 2P reserves, up 19% from 2020 year end of 38.9 MMboe;

- Drilled and completed eight development oil wells and performed six recompletions in the Eastern Desert in Egypt;

- Drilled one exploration well and performed one recompletion in the Western Desert in Egypt;

- Drilled three horizontal Cardium oil wells and completed one standing well at Harmattan in Canada;

CORPORATE HIGHLIGHTS:

- As previously announced, the amendment, extension and merger of the Company's Eastern Desert concession agreements into a single agreement (the "Merged Concession agreement") was ratified by Egypt's Parliament and signed into law by the President in December 2021;

2022 (TO DATE) HIGHLIGHTS:

- As previously announced, TransGlobe signed the Merged Concession agreement at an official signing ceremony with the Ministry of Petroleum held on January 19, 2022;

- The Company remitted the initial modernization payment of $15.0 million and signature bonus of $1.0 million as part of the conditions precedent to the official signing of the Merged Concession agreement;

- In accordance with the Merged Concession agreement, TransGlobe made another modernization payment to EGPC in the amount of $10.0 million on February 1, 2022;

- January 2022 average production of 12,291 boe/d, February 2022 average production of 12,392 boe/d;

- A cargo of Gharib blend crude shipped at the end of January 2022, marketed by Mercuria Energy Trading;

- Declared a dividend of $0.10 per common share, which will be paid in cash on May 12, 2022 to shareholders of record on April 29, 2022.

FINANCIAL AND OPERATING RESULTS

Additional financial information is provided in the Company's audited Consolidated Financial Statements together with the notes related thereto, as well as TransGlobe's Management's Discussion and Analysis for the years ended December 31, 2021 and 2020. These documents, along with other documents affecting the rights of securityholders and other information relating to the Company, may be found on SEDAR at www.sedar.com and in the Company's Annual Report on Form 40-F for the fiscal year ended December 31, 2021, filed on EDGAR at www.sec.gov.

In 2021 compared with 2020, TransGlobe:

- Reported a 4% decrease in production volumes compared to 2020. This was primarily attributable to natural declines in Egypt, partially offset by the re-commencement of Eastern Desert drilling and well optimization activities;

- Ended 2021 with nil crude oil inventory, a decrease of 227.9 Mbbls over inventoried crude oil levels at December 31, 2020. This was primarily due to annual sales volumes exceeding production volumes and the Q3-2021 cargo lifting that resulted in an overlift;

- Reported positive funds flow from operations of $44.8 million (2020 - $30.4 million). The increase in funds flow from operations from 2020 is primarily due to higher commodity prices, partially offset by lower production and excess cost oil in West Bakr;

- Petroleum and natural gas sales increased by 61%, primarily due to a 76% increase in average realized sales prices, partially offset by a 13% decrease in sales volumes in 2021;

- Reported net earnings of $40.3 million (2020 - net loss of $77.4 million) inclusive of a $0.1 million unrealized derivative loss on commodity contracts and a combined $31.5 million non-cash impairment reversal on the Company's petroleum and natural gas ("PNG") assets;

- Ended the year with positive working capital of $21.0 million, including $37.9 million in cash as at December 31, 2021;

- Spent $26.8 million on capital expenditures, funded entirely from cash flow from operations and cash on hand; and

- Repaid $18.9 million of long-term debt with cash on hand.

OPERATING RESULTS AND NETBACK

Egypt

In Egypt, petroleum and natural gas sales increased by $84.3 million to $257.3 million from 2020. This was primarily due to an increase in realized prices, partially offset by a decrease in sales volumes from the prior year. The realized sales price for the year ended December 31, 2021 was $62.94/bbl (2020 - $35.94/bbl), which was $7.74/bbl lower (2020 - $5.82/bbl lower) than the average Dated Brent oil price of $70.68/bbl for 2021 (2020 - $41.76/bbl). The difference between the average selling price and Dated Brent is due to a gravity/quality adjustment and is also impacted by the specific timing of direct sales.

In Egypt, royalties and taxes in 2021 increased by $67.0 million from 2020, representing 59% of petroleum and natural gas sales in 2021 (2020 - 49%). Royalties and taxes are settled on a production basis, therefore, the correlation of royalties and taxes to oil sales fluctuates depending on the timing of entitlement oil sales. If sales volumes had been equal to production volumes during the year, royalties and taxes as a percentage of revenue would have been 63% (2020 - 58%). In periods when the Company sells less than its entitlement production, royalties and taxes as a percentage of revenue will be higher than the terms of the production sharing concessions ("PSCs"). In periods when the Company sells more than its entitlement production, royalties and taxes as a percentage of revenue will be lower than the terms set out in the PSCs. The increase in total royalties and taxes, and the relative increase from 49% in 2020 to 59% in 2021, was due to excess cost oil in the West Bakr concession, partially offset by sales outpacing production in 2021. Excess cost oil occurs when the current costs and historic cost amortization, permissible within the PSCs, are less than the proportion of cost oil value. In the case of West Bakr, 100% of excess cost oil belongs to EGPC, which effectively increases the royalties and taxes burden.

In Egypt, production and operating expenses fluctuate periodically due to changes in inventory volumes as a portion of costs are capitalized and expensed when sold. Production and operating expenses decreased by 7% ($3.9 million) in 2021 compared with 2020. The decrease was primarily due to a decrease in crude oil sales in 2021 compared to 2020, resulting in less operating costs previously capitalized to inventory being expensed in 2021 compared to 2020 ($2.2 million). The decrease was also due to lower production handling fees. These decreases were partially offset by an increase in manpower cost and workovers. The increase in production and operating expenses per bbl from $12.11/bbl in 2020 to $13.30/bbl in 2021 was primarily due to a comparative 5% decrease in production in Egypt.

Selling costs increased by $1.8 million to $3.9 million in 2021. Selling costs per bbl increased by 118% to $0.96/bbl in 2021. These increases were due to the specific shipping terms of the two cargo liftings that occurred in Egypt in 2021 when compared to the two cargo liftings that occurred in 2020.

Canada

In Canada, petroleum and natural gas sales increased by $16.2 million to $31.9 million from 2020. This was primarily due to an increase in realized prices, partially offset by a decrease in sales volumes from the prior year.

In Canada, royalties increased by $2.7 million from 2020, representing 16% of petroleum and natural gas sales during 2021 compared to 15% during the prior year. This increase was primarily due to an increase in crown royalties and in freehold and overriding royalties as a result of improved commodity pricing, and a decrease in Gas Cost Allowance ("GCA") rebates received in 2021 compared to 2020. This was partially offset by lower royalties due to royalty holidays on the three oil wells drilled during 2021. TransGlobe pays royalties to the Alberta provincial government and landowners in accordance with an established royalty regime. In Alberta, Crown royalty rates are based on reference commodity prices, production levels and well depths, and are offset by certain incentive programs in place to promote drilling activity by reducing overall royalty expense.

Production and operating expenses increased by 15% ($0.9 million) in 2021 compared with 2020. The increase was primarily due to an increase in chemical costs and power and utilities due to an increase in commodity prices and the strengthening of the Canadian dollar in 2021. This was partially offset by a decrease in transportation costs and gas processing fees.


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