CALGARY, ALBERTA–(Marketwired – April 10, 2017) – TransGlobe Energy Corporation (“TransGlobe” or the “Company”) (TSX:TGL)(NASDAQ:TGA) announces an operational update. All dollar values are expressed in US dollars unless otherwise stated.
- Finalized $75 million crude oil prepayment facility and marketing arrangement with Mercuria Energy Trading S.A. (“Mercuria”)
- $73.4 million (C$97.8 million) 6% Convertible Debentures repaid March 31st, 2017
- Sold 303,817 barrels of inventoried entitlement crude oil to EGPC for $12.7 million, to provide local currency for Q1/Q2 operational expenditures
- Advanced discussions with Canadian lender to establish a Canadian borrowing base for capital and operations in Alberta
- Company production for Q1-2017 averaged ~16,672 Boepd (~13,941 Bopd Egypt, ~2,731 Boepd Canada)
- NW Gharib development block averaged 1,009 Bopd for Q1-2017
- Preparing to drill South Alamein Boraq discovery
- Completed NW Sitra 600 km2 3-D seismic acquisition
Total Company production averaged 16,841 Boepd in March, comprised of 14,152 Bopd in Egypt and 2,689 Boepd in Canada (57% light oil and liquids).
Total Company production averaged approximately 16,672 Boepd in the first quarter, comprised of 13,941 Bopd in Egypt and 2,731 Boepd in Canada (57% light oil and liquids). This is an increase over the first quarter 2016 of approximately 38% including the Canadian acquisition or a 17% increase in Egyptian production.
ARAB REPUBLIC OF EGYPT
Subsequent to the Company’s March 7, 2017 press release, the Company has drilled and abandoned two exploration wells (NWG 39 & NWG 42).
NWG 39 was drilled to a total depth of 5,650 feet targeting a Red Bed prospect immediately north of the NWG Development lease #1. The well encountered thick Red Bed reservoir, which was wet and subsequently abandoned. The drilling rig has commenced drilling on NWG 40, which is the final exploration commitment well in the first exploration phase of the NWG concession. NWG 40 is targeting a Red Bed prospect immediately west of NWG 39. Following NWG 40 the rig is scheduled to move to the Western Desert to drill an appraisal well at South Alamein.
NWG 42 was drilled to a total depth of 6,400 feet targeting a separate Red Bed prospect north of the NWG Development lease #1. The well encountered thick Red Bed reservoir, which was wet and subsequently abandoned. The drilling rig is scheduled to move to the West Bakr concession to drill a development well (K-47) in the K-South field. Following K-47 the rig will return to NWG to drill appraisal wells in the NWG #1 development lease. The appraisal wells will offset the NWG 3 and NWG 38 Red Bed oil producers. NWG 3 was flowing naturally up the casing at a rate of 600-1,000 Bopd since late December 2016. At the end of March, the NWG 3 well was equipped with tubing and a down-hole pump. NWG 3 was put back on production in early April at an initial pumping rate of ~1,500 Bopd. NWG 38 was completed and placed on production at an initial pumping rate of ~750 Bopd in January and is currently producing at a rate of ~700 Bopd.
Concurrently, the Company completed and stimulated one well on each of the NWG 1 and NWG 5 discoveries (discovered in 2014). Both wells were put on short term pump production tests to recover the stimulation fluid and establish new oil production from the discoveries. The wells produced ~150 to 180 Bopd. Following the short production tests the wells were shut in pending approval of the respective Development leases. The Company will file development lease applications for the NWG 1 and NWG 5 discoveries prior to May 6th which is the expiry date of the first exploration phase on NWG. It is expected that new development leases could receive approval in 1 to 3 months from the application date.
The NWG 5 discovery is an upper Nukhul discovery similar to and located immediately south of Arta Upper Nukhul pool in the West Gharib concession. The NWG 5 discovery wells (discovery well and one appraisal well) are expected to produce at similar rates to the TransGlobe’s Arta Nukhul wells which typically have an initial 30 day production rate (IP 30) of 150-180 Bopd with ultimate recoveries of 120-150 MBbls per well on primary production
The NWG 1 discovery is located immediately north of the Arta Red Bed (Lower Nukhul) pool in the West Gharib Concession. The NWG 1 wells (discovery well and one appraisal well) encountered a tight Red Bed conglomerate sequence which requires stimulation to produce. Longer-term production from the NWG 1 wells will be required to establish expected per well recoveries and the associated reserve assignments.
In addition, the Company is preparing programs to complete and test the NWG 26 and 27 Red Bed discoveries during April, prior to filing a development lease application for the area immediately north of the NWG development lease #1. Depending on the results of the NWG 40 exploration well, it could be completed, and tested as part of the development lease application for the area.
The Company believes that by the end of the first exploration phase in NWG (May 6, 2017), the NWG exploration lands will be fully evaluated and the respective development lease applications are expected to be filed.
At South Alamein, the Company is currently constructing well sites for drilling in Boraq area of the concession. The initial drilling campaign will consist of a minimum of one well (Boraq 5) on the Boraq structural complex plus re-entering the Boraq 2 discovery well for additional testing. A drilling rig is scheduled to move from the Eastern Desert in the latter half of April with drilling expected to commence in early May at Boraq 5. Successful appraisal wells could lead to filing a Boraq development plan as early as Q2/Q3-2017 with first production targeted for year-end 2017/early 2018. In parallel, the Company will evaluate the remaining exploration prospects on the concession, targeting an exploration drilling program commencing in late 2017 and extending into 2018. The South Alamein concession was acquired in July 2012 and contains the Boraq 2X discovery (see May 1, 2012 press release for more details) and several additional exploration targets. The Boraq 2X discovery tested approximately 1,600 Bopd from two zones. The primary Cretaceous zone tested at a rate of 800 to 1,323 Bopd of 34 API oil with no water and a 13% pressure drawdown during a 28 hour drill stem test (DST). A secondary Cretaceous zone tested at a rate of 274 Bopd of 32-35 API oil and 4% water during a 23 hour DST. Test rates are not necessarily indicative of long-term performance or ultimate recovery but it is anticipated that the well should be capable of producing approximately 1,600 Bopd.
At NW Sitra, the Company completed the 600 km2 3-D seismic acquisition program at the end of March. The new data will be sent for processing with prospect mapping planned for the second half of 2017.
TransGlobe took over field operations February 1st and initiated surface land acquisition/permitting for up to eight wells in the Harmattan area. The initial 2017 program consists of eight horizontal (multi-stage frac) wells targeting the Cardium light oil resource at Harmattan. The Company is targeting June/July to commence the drilling program. It is expected that wells will cost ~C$2.7 million per well to drill, complete and place on production.
The Company continues to evaluate properties for acquisition in the greater Harmattan area.
The Company has advanced discussions with a Canadian based lender to establish a Canadian borrowing base for capital and operations in Alberta. The finalization of this facility is expected within the next month. Upon completion, the facility would initially be used to repay the existing C$15 million vendor-take-back loan outstanding.
CONVERTIBLE DEBENTURE RE-PAYMENT
The Company repaid the convertible debentures in full on March 31, 2017, which was the maturity date of the convertible debentures. The convertible debentures were denominated in Canadian dollars, and the aggregate face value of all outstanding convertible debentures was C$97.8 million ($73.4 million). The repayment was made using the funds received by drawing on the $75 million prepayment agreement with Mercuria.
During the quarter, in conjunction with the finalization of the Prepayment Agreement (see February 10, 2017 news release), the Company finalized a long term marketing arrangement with Mercuria, an international crude oil marketing firm. The Company currently has three cargo liftings allocated to it by EGPC in each of June, September and December. A typical Ras Gharib cargo lifting is between 500-540 Mbbls.
During Q1 the Company sold 303,817 inventoried entitlement crude oil barrels to EGPC for ~$12.7 million. The proceeds of these sales will be used to provide local currency payments for Q1/Q2 operational activities.
Prior to the end of Q1 the Company entered into Dated Brent swaps for 925,000 barrels at an average price of $50.81 for the June and September cargo liftings and entered into a Dated Brent collar ($45/$56) for 300,000 barrels for the December cargo lifting.
At quarter-end, the Company had an estimated 1.5 million entitlement barrels in inventory.
TransGlobe Energy Corporation is a Calgary-based, growth-oriented 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 under the symbol TGL and on the NASDAQ Exchange under the symbol TGA.