TransGlobe Energy Corporation Announces 2004 Year End and Fourth Quarter Results.CALGARY Calgary (kăl`gərē), city (1991 pop. 710,677), S Alta., Canada, at the confluence of the Bow and Elbow rivers. The largest city in Alberta and the fastest-growing major city in Canada, Calgary is a corporate, transportation, and financial , Alberta Alberta (ălbûr`tə), province (2001 pop. 2,974,807), 255,285 sq mi (661,188 sq km), including 6,485 sq mi (16,796 sq km) of water surface, W Canada. -- TransGlobe Energy Corporation (TSX TSX Toronto Stock Exchange (TSE before April, 2002) TSX Transfer from Stack Pointer to Index TSX True Space Extension :TGL TGL Taeglich (German: daily) TGL Touch and Go Landing (aircraft flight training) TGL Temporary Guidance Leaflets TGL Technische Güte und Lieferbedingungen (German) ) (AMEX AMEX See: American Stock Exchange :TGA See TARGA. TGA - Targa Graphics Adaptor ) ("TransGlobe" or the "Company") is pleased to announce its financial and operating results for the three and twelve month periods ended December December: see month. 31, 2004. All dollar values are expressed in United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. dollars unless otherwise stated. Per barrel of oil equivalent The barrel of oil equivalent (bboe, sometimes BOE) is a unit of energy based on the approximate energy released by burning one barrel of crude oil. The US Internal Revenue Service defines it as equal to 5.8 × 106 BTU [1]. 5. ("Boe") amounts have been calculated using a conversion of 6,000 cubic feet of natural gas to one barrel of oil. FOURTH QUARTER 2004 HIGHLIGHTS: - Record average sales volumes of 5,384 Boepd for the quarter and 3,796 Boepd for the year. - Record cash flow of $6,326,000 and $17,325,000 for the quarter and year, respectively. - An Nagyah #12 horizontal well tested 4,800 Bopd. - Bought deal financing completed, $9.8 million net. - New bank facility completed, $7.0 million (undrawn un·draw tr.v. un·drew , un·drawn , un·draw·ing, un·draws To draw to one side, as a curtain. Adj. 1. undrawn - not represented in a drawing undelineated - not represented accurately or precisely ). - Assignment of interest and approval of TransGlobe as operator of Nuqra Block, Egypt Egypt (ē`jĭpt), Arab. Misr, biblical Mizraim, officially Arab Republic of Egypt, republic (2005 est. pop. 77,506,000), 386,659 sq mi (1,001,449 sq km), NE Africa and SW Asia. .
FINANCIAL AND OPERATING UPDATE
(Expressed in thousands of U.S. Dollars, except per share amounts)
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Three Months Twelve Months
Ended Dec. 31 Ended Dec. 31
Financial (000's -----------------------------------------------
US $'s, except per % %
share amounts) 2004 2003 Change 2004 2003 Change
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Oil and gas sales 18,548 7,495 147 49,495 27,336 81
Oil and gas sales
net of royalties 11,756 4,489 162 31,630 17,162 84
Operating expense 2,814 1,121 151 7,064 3,706 91
General and
administrative
expense 680 423 61 1,664 1,207 38
Stock-based
compensation 452 - 1,310 -
Depletion,
depreciation and
accretion 4,197 1,292 225 10,346 6,253 65
Income taxes 2,799 (1,489) 288 4,995 307 1527
Cash flow from
operations 6,326 1,895 234 17,325 9,347 85
Basic per share 0.12 0.04 0.32 0.18
Diluted per share 0.11 0.03 0.31 0.17
Net income 768 3,414 (77) 5,919 5,905 0
Basic per share 0.01 0.06 0.11 0.11
Diluted per share 0.01 0.06 0.10 0.11
Capital expenditures 11,075 4,011 176 26,367 14,229 85
Working capital 2,839 2,537 12
Common shares
outstanding
Basic (weighted
average) 54,388 52,071 4
Diluted (weighted
average) 56,719 53,779 5
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Reserves (MBoe)
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Total Proven (6 : 1) 6,664 3,746 78
Total Proven
+ Probable (6 : 1) 10,427 7,038 48
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Sales Volumes
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Oil and liquids
(Bpd) 4,726 2,535 86 3,298 2,435 35
Average price
(US$ per barrel) 38.01 28.83 32 36.24 28.06 29
Gas (Mcfpd) 3,942 1,704 131 2,987 1,200 149
Average price
(US$ per Mcf) 5.47 4.82 13 5.19 5.24 (1)
Total (Boepd) (6:1) 5,384 2,819 91 3,796 2,635 44
Operating expense
(US$ per Boe) 5.68 4.32 31 5.09 3.85 32
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EXPLORATION UPDATE Block 32, Republic of Yemen Noun 1. Republic of Yemen - a republic on the southwestern shores of the Arabian Peninsula on the Indian Ocean; formed in 1990 Yemen Aden-Abyan Islamic Army, Islamic Army of Aden, Islamic Army of Aden-Abyan, IAA - Yemen-based terrorist group that supports (13.81087% working interest) The Tasour #14 well was drilled and placed on production with initial production of 2,820 barrels of oil per day (389 barrels of oil per day to TransGlobe) and 1,330 barrels of water per day. In January January: see month. 2005 the drilling rig returned to Block 32 to drill Tasour #15, #16 and #17. Tasour #15 was drilled as a water injector near the central production facility and found a 2.5 meter oil column, which indicates the Tasour field could extend eastward. The Tasour #16 well was temporarily suspended sus·pend v. sus·pend·ed, sus·pend·ing, sus·pends v.tr. 1. To bar for a period from a privilege, office, or position, usually as a punishment: suspend a student from school. after encountering 6.0 meters of oil pay overlying overlying suffocation of piglets by the sow. The piglets may be weak from illness or malnutrition, the sow may be clumsy or ill, the pen may be inadequate in size or poorly designed so that piglets cannot escape. 3.0 meters of water bearing sandstone sandstone, sedimentary rock formed by the cementing together of grains of sand. The usual cementing material in sandstone is calcium carbonate, iron oxides, or silica, and the hardness of sandstone varies according to the character of the cementing material; quartz . The dip meter indicates a structurally higher location can be reached by sidetracking the well to the south of the current bottom hole location. The sidetrack drilling is planned after Tasour #17. The rig is currently drilling Tasour #17 approximately 2.0 kilometers east of Tasour #15 to test a possible eastern extension of the Tasour field. The eastern extension was identified on the recent 3-D seismic survey and by the Tasour #15 water injection well. Block S-1, Republic of Yemen (25% working interest) During the quarter, one producing horizontal oil well (An Nagyah #12) was drilled. One appraisal/exploratory oil well (An Nagyah #14) was drilling over year end. The An Nagyah #12 well was drilled to a total depth of 2,070 meters and completed as a producing Upper Lam oil well. The An Nagyah #12 well was tested from an 836 meter horizontal Upper Lam sandstone section at a rate of 4,801 barrels of light (43 degree API (Application Programming Interface) A language and message format used by an application program to communicate with the operating system or some other control program such as a database management system (DBMS) or communications protocol. ) oil per day and 2.6 million cubic feet of natural gas per day on a 64/64 inch choke (jargon) choke - To fail to process input or, more generally, to fail at any endeavor. E.g. "NULs make System V's "lpr(1)" choke." See barf, gag. at 389 psi PSI - Portable Scheme Interpreter flowing pressure. An Nagyah #12 was the second successful horizontal well drilled in the An Nagyah field and confirmed that horizontal drilling a drilling machine having a horizontal drill spindle. See also: Horizontal is the preferred development strategy for the pool. The An Nagyah #14 well was drilled to a total depth of 1,365 meters and suspended as a Lam 'B' oil well in early January 2005. The An Nagyah #14 well encountered a 19 meter oil column in the Lam 'B' (lower Lam) sandstone. The well was swab tested at a rate of approximately 80 barrels of light (40 degree API) oil per day. No water was produced during the test period. This discovery is located south of the An Nagyah field in a separate fault block. The An Nagyah #14 oil test has identified a new exploration fairway south of the main An Nagyah field. Additional work will be required to incorporate the well results and remap To map something for a second or subsequent time. Quite often, the words "remap" and "map" are used synonymously, even though they refer to an operation that is taking place for the first time. See map. the seismic in this area to identify future drilling locations. Following An Nagyah #14, the drilling rig was moved to the Malaki exploration prospect approximately nine kilometers south east of the An Nagyah pool. The Malaki #1 exploration well was drilled to a total depth of 2,315 meters. The well was plugged and abandoned after encountering minor hydrocarbon hydrocarbon (hī'drōkär`bən), any organic compound composed solely of the elements hydrogen and carbon. The hydrocarbons differ both in the total number of carbon and hydrogen atoms in their molecules and in the proportion of hydrogen shows. The Lam 'A' sandstone reservoirs were encountered structurally lower than the oil/water contact in the An Nagyah field and were water saturated saturated /sat·u·rat·ed/ (sach´ah-rat?ed) 1. denoting a chemical compound that has only single bonds and no double or triple bonds between atoms. 2. unable to hold in solution any more of a given substance. . The drilling rig has moved to the next drilling location at An Nagyah #15. The An Nagyah #15 well is planned as an 800 meter horizontal well in the northwest area of the An Nagyah field, adjacent to An Nagyah #12. In addition to the An Nagyah drilling activities, a workover rig was mobilized in the fourth quarter. The An Nagyah #2 well was successfully recompleted as a producing Lam 'A' oil well. The workover rig also re-completed the An Nagyah #3 well as a Lam 'A' gas injector. Natural gas from the An Nagyah pool is now being injected in·ject·ed adj. 1. Of or relating to a substance introduced into the body. 2. Of or relating to a blood vessel that is visibly distended with blood. injected 1. introduced by injection. 2. congested. into An Nagyah #3 to conserve the gas and to maintain reservoir pressure thereby enhancing oil recovery. Subsequent to the An Nagyah workovers, the Harmel harmel peganumharmala. #2 appraisal well was completed as a multizone oil well. The Harmel #2 was drilled in June June: see month. 2004 to appraise appraise v. to professionally evaluate the value of property including real estate, jewelry, antique furniture, securities, or in certain cases the loss of value (or cost of replacement) due to damage. the shallow oil reservoirs An oil reservoir, petroleum system or petroleum reservoir is often thought of as being an underground "lake" of oil, but it is actually composed of hydrocarbons contained in porous rock formations. found in the discovery well, Harmel #1. The Harmel #1 and #2 wells are being equipped with pumps and production testing equipment which are expected to be operational by the end of the March. It is expected that both Harmel wells will be production tested for three to six months. Production and test data obtained from the Harmel #1 and #2 wells will help to determine the commerciality of the medium gravity oil (22 degree API). The Harmel structure identified on 3-D seismic could require 80 to 90 shallow wells (700 to 800 meters in depth) to be fully developed. Early production (trucking) facilities were installed at An Nagyah during the first quarter of 2004 with an initial capacity of 2,500 Bopd (625 Bopd to TransGlobe). The oil production is currently being trucked 18 miles to the Jannah Jannah (Arabic:جنّة; djannah, Turkish: Cennet) is the Islamic conception of paradise. The Arabic form Jannah is a shortened version meaning simply "Garden". Hunt facility where it enters the pipeline to the Ras Isa loading terminal on the Red Sea. Trucking operations will be phased out following the construction of a central production facility ("CPF (Control Program Facility) The IBM System/38 operating system that included an integrated relational DBMS. ") at An Nagyah and a 28 kilometer kilometer one thousand (103) meters; 3280.83 feet; five-eighths of a mile; abbreviated km. (18 mile) pipeline to the Jannah Hunt export pipeline After commencing production the trucking facilities were steadily expanded to the current capacity of approximately 7,600 Bopd (1,900 Bopd to TransGlobe). After drilling An Nagyah #12 the field productive well capacity is in excess 12,000 Bopd. The pipeline and facility construction for the An Nagyah field is on schedule with a planned start up in June 2005. The An Nagyah field production is anticipated to increase to over 10,000 Bopd (2,500 Bopd to TransGlobe) when the facilities and pipeline are operational. The CPF is designed for an initial capacity of 10,000 to 12,000 Bopd (2,500 to 3,000 Bopd to TransGlobe), with expansion capabilities. The 10 inch pipeline has an ultimate design capacity of 80,000 Bopd to provide expansion capabilities for future developments. Block 72, Republic of Yemen (33% working interest) DNO ASA DNO ASA (OSE: DNO) originally Det norske oljeselskap is Norways fourth largest petroleum company with upstream operations in the North Sea, Middle East and Africa. The company has its headquarters in Oslo, Norway and is listed on the Oslo Stock Exchange. (operator at 34%), TG Holdings Yemen Yemen (yĕm`ən), officially Republic of Yemen, republic (2005 est. pop. 20,727,000), 207,300 sq mi (535,800 sq km), SW Asia, at the southern edge of the Arabian peninsula. Inc. (33%) and Ansan Ansan is a city in Gyeonggi Province, South Korea. It lies south of Seoul, and is part of the Seoul National Capital Area. It is connected to Seoul by rail via Seoul Subway Line 4. Wikfs (Hadramaut Hadramaut: see Hadhramaut. ) Limited (33%) ("Block 72 Joint Venture Group") were selected as the successful bidders for Block 72 in the Yemen International Bid Round for Exploration and Production of Hydrocarbons hydrocarbons (hīˈ·drō·kärˑ·b  nz),n. . TG Holdings Yemen Inc. is a wholly owned subsidiary Wholly Owned Subsidiary A subsidiary whose parent company owns 100% of its common stock. Notes: In other words, the parent company owns the company outright and there are no minority owners. of TransGlobe Energy Corporation. The Block 72 Production Sharing Agreement Production sharing agreements (PSAs) are used primarily to determine the share a private company will receive of the natural resources (usually oil) extracted from a particular country. has been approved by the Cabinet and is currently before the Yemen parliament for final approval. Block 72 encompasses 1,822 square kilometers (approximately 450,234 acres) and is located in the western Masila Basin adjacent to the billion barrel Canadian Canadian (kənā`dēən), river, 906 mi (1,458 km) long, rising in NE New Mexico. and flowing E across N Texas and central Oklahoma into the Arkansas River in E Oklahoma. Nexen
Nexen is an energy company based in Calgary, Alberta. Masila Block. The Block 72 Joint Venture Group plans to carry out a seismic acquisition program and the drilling of two exploration wells during the first exploration period of thirty months. It is anticipated that 3-D seismic will be acquired during 2005, with drilling commencing in late 2005 or early 2006. Any discoveries made on Block 72 would follow a similar development program to Block 32's whereby a separate oil processing facility and a pipeline would be constructed to connect to the Nexen export pipeline. Nuqra Block 1, Arab Republic of Egypt (50% working interest, Operator) As announced in the second quarter, TransGlobe Petroleum Egypt Inc. ("TransGlobe Egypt"), a wholly owned subsidiary of TransGlobe Energy Corporation, entered into a Farmout Agreement with Quadra A family of Macintosh computers that was popular in the early 1990s. See Macintosh.  Quadra 900 By this time, the hardware was fast enough to truly accommodate the sophisticated graphics-based software introduced years Egypt Limited ("QEL QEL Quality Evaluation Laboratory QEL Quotation Exchange Language "), a subsidiary of Quadra Resources Corp. headquartered in Calgary, and Rampex Petroleum International ("Rampex") headquartered in Cairo Cairo, city, Egypt Cairo (kī`rō), Arab. Al Qahirah, city (1996 pop. 6,789,479), capital of Egypt and the Cairo governorate, NE Egypt, a port on the Nile River near the head of its delta, at the boundary of ancient Upper and , Egypt. This agreement provides TransGlobe Egypt the opportunity to participate and earn a 50% working interest in the Nuqra Concession by paying 100% of the initial $6.0 million of expenditures in the Stage 1 and Stage 2 work programs. TransGlobe Egypt is the operator of the Nuqra Block. TransGlobe Petroleum Egypt Inc. was assigned as·sign tr.v. as·signed, as·sign·ing, as·signs 1. To set apart for a particular purpose; designate: assigned a day for the inspection. 2. a 50% interest in the project and approved as operator by the Egyptian Government in October October: see month. 2004. The Nuqra Concession is located in Upper Egypt near the city of Luxor Luxor (lŭk`sôr, l  k`–), city (1996 pop. 360,503), central Egypt, on the east bank of the Nile. It is 1 mi (1.6 km) SW of Karnak and occupies part of the site of Thebes. on the east bank of the Nile River Nile RiverArabic Bahr al-Nil River, eastern and northeastern Africa. The longest river in the world, it is about 4,132 mi (6,650 km) long from its remotest headstream (which flows into Lake Victoria) to the Mediterranean Sea. . The concession encompasses over two-thirds of the Kom Ombo Kom Ombo (كوم أمبو) (Coptic: Embo; Greek: Ὄμβοι Omboi, Ptol. iv. 5. § 73; Steph. B. s. v.; It. Anton. p. 165) or Ombos (Juv. xv. Basin, a rift basin analogous analogous /anal·o·gous/ (ah-nal´ah-gus) resembling or similar in some respects, as in function or appearance, but not in origin or development. a·nal·o·gous adj. to the Gulf of Suez Noun 1. Gulf of Suez - a northwestern arm of the Red Sea linked to the Mediterranean by the Suez Canal Red Sea - a long arm of the Indian Ocean between northeast Africa and Arabia; linked to the Mediterranean at the north end by the Suez Canal Basin, the Marib Basin in the Republic of Yemen, and the Muglad Basin in Sudan Sudan (s  dăn`), officially Republic of Sudan, republic (2005 est. pop. 40,187,000), 967,494 sq mi (2,505,813 sq km), NE Africa. , all of which contain major reserves. The Nuqra
Concession contains more than 30,000 square kilometers or 7,500,000
acres of exploration lands with 13 seismically defined leads identified
from over 4,000 km of existing 2-D seismic. Seismic and well data have
confirmed the existence of Jurassic and Cretaceous sediments and the
presence of a petroleum system which could potentially hold significant
oil reserves Oil reserves refer to portions of oil in place that are claimed to be recoverable under economic constraints.Oil in the ground is not a "reserve" unless it is claimed to be economically recoverable, since as the oil is extracted, the cost of recovery increases incrementally . TransGlobe has obtained the existing seismic data on the Nuqra Block and is currently reprocessing Reprocessing may refer to:
A geological survey is also underway to investigate surface outcrops and oil seeps in the Nuqra area. It is expected that a two well drilling Well drilling is the process of drilling a hole in the ground for the extraction of a natural resource such as ground water, natural gas, or petroleum. Drilling for the exploration of the nature of the material underground (for instance in search of metallic ore) is best described program will commence in late 2006. This would complete all the first period and second period PSA (Professional Services Automation) An information system designed to organize, track and manage all opportunities, work, resources, costs, revenues and invoices to improve the productivity and efficiency of the workforce. commitments ahead of schedule. Canada During the quarter, the Company drilled 3 gas wells (1.4 net) located in central Alberta Central Alberta (also named Alberta's Heartland) is a region located in the Canadian province of Alberta. Central Alberta is the most densely populated rural area in the province. Agriculture and energy make up an important part of the economy. (Nevis, Three Hills Creek Hills Creek is a name found in several places in the United States. In Tioga County, Pennsylvania:
For the year 2004, the Company drilled 15 wells (11.2 net) resulting in 10 gas wells, 2 oil wells, 3 dry holes. The wells were all drilled in central Alberta with the primary focus in the core areas of Nevis (5 Gas, 1 Oil) and Twining twine v. twined, twin·ing, twines v.tr. 1. To twist together (threads, for example); intertwine. 2. To form by twisting, intertwining, or interlacing. 3. (2 Gas). Two wells were abandoned at Cynthia after testing non-commercial gas and the remainder of the wells were drilled at Morningside (Oil), Gadsby (Gas), Three Hills Creek (Gas), Thorsby (Gas) and Lone Pine Creek Pine Creek may refer to:
Production in the fourth quarter averaged 900 Boepd. Production was partially curtailed due to natural gas compression capacity limitations at third party operated facilities in the Nevis and Twining areas (approximately 150 Boepd for the quarter). It is anticipated that additional compression will be installed by early 2005 to increase production. The Canadian 2005 drilling program is expected to commence in April or May after spring break-up to take advantage of lower equipment and service prices during the summer months. The Company plans to drill 10 to 15 wells in Canada during 2005. The majority of the wells will be drilled in the Nevis area, targeting natural gas.
OUTLOOK
2005 Production Outlook 2005 2004 %
Change(a)
----------------------------------------------------------------------
--
Barrels of oil equivalent (6 : 1) Boepd 5,800 3,796
58
to 6,200
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--
(a) % growth based on mid point of guidance
2005 Cash Flow From Operations Outlook
($000's) 2005(b) 2004 %
Change(b)
----------------------------------------------------------------------
--
Cash Flow From Operations 32,000 17,325
85%
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--
(b) Based on 6,000 Boepd, a dated Brent oil price of $38.00/Bbl and an
AECO gas price of Cdn$6.00/Mcf.
2005 Sensitivity ($000's) Cash Flow from Operations
Increase
----------------------------------------------------------------------
--
$1.00 per barrel increased
815
in Dated Brent
$0.10 per Mcf increase in AECO
120
----------------------------------------------------------------------
--
SUMMARY OF OPERATING AND FINANCIAL RESULTS Summary of Operating and Financial Results should be read in conjunction with the unaudited interim financial statements for the three months and twelve months ended December 31, 2004 and 2003 and the audited financial statements and management's discussion and analysis Management's discussion and analysis (MD&A) A report from management to shareholders that accompanies the firm's financial statements in the annual report. It explains the period's financial results and enables management to discuss topics that may not be apparent in the financial for the year ended December 31, 2004 included in the Company's annual report. All dollar values are expressed in United States dollars unless otherwise stated. Operating Results Production In the Republic of Yemen, sales volumes increased 84% in the fourth quarter of 2004 to 4,483 Bopd from 2,443 Bopd in the fourth quarter of 2003 primarily due to Block S-1 commencing production at the end of the first quarter of 2004. Block 32 averaged 2,631 Bopd during the fourth quarter of 2004 compared to 2,443 Bopd during the fourth quarter of 2003 and Block S-1 averaged 1,852 Bopd in the fourth quarter of 2004. In Canada, sales volumes from Canada averaged 900 Boepd (73% natural gas) during the fourth quarter of 2004 compared to 376 Boepd during the fourth quarter of 2003. Financial Cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses for the twelve months 2004 increased 85% to $17,325,000 compared to $9,347,000 in 2003 primarily due to: - Oil and gas sales, net of royalties, increasing $14,468,000 (84%) as a direct result of sales volumes increasing 44% and commodity prices increasing 25%; - Operating costs operating costs npl → gastos mpl operacionales increasing $3,358,000 (32% on a Boe basis) in 2004 compared to 2003 as a result of increased volumes and Block S-1 having a higher cost per Boe during the trucking phase. - Current income tax increasing $2,525,000 in 2004 compared to 2003 as a result of higher volumes with Block S-1 production commencing in 2004. Net income was unchanged in 2004 with 2003 at $5,919,000 due the above items which were offset by the following non-cash items: - Depletion depletion n. when a natural resource (particularly oil) is being used up. The annual amount of depletion may, ironically, provide a tax deduction for the company exploiting the resource because if the resource they are exploiting runs out, they will no longer be able , depreciation and accretion The act of adding portions of soil to the soil already in possession of the owner by gradual deposition through the operation of natural causes. The growth of the value of a particular item given to a person as a specific bequest under the provisions of a will between the , a non-cash expense Noun 1. non-cash expense - an expense (such as depreciation) that is not paid for in cash disbursal, disbursement, expense - amounts paid for goods and services that may be currently tax deductible (as opposed to capital expenditures) , increased $4,093,000 (15% on a Boe basis) in 2004 compared to 2003. - Future income tax recovery, a non-cash recovery, decreased $2,163,000 in 2004 compared to 2003. - Stock compensation expense, a non-cash expense, amounted to $1,310,000 in 2004 without a corresponding amount in the same period in 2003. Cash flow from operations is a non-GAAP measure that represents cash generated from operating activities before changes in non-cash working capital. Management considers cash flow from operations a key measure as it demonstrates the Company's ability to generate the cash flow necessary to fund future growth through capital investment. Cash flow from operations may not be comparable to similar measures used by other companies. Revenue net of royalties increased 162% to $11,756,000 for the fourth quarter 2004 compared to $4,489,000 for the same period in 2003. Revenues net of royalties from the Republic of Yemen were $9,358,000 in the fourth quarter 2004 compared to $3,656,000 in the same of 2003 and from Canada were $2,398,000 in the fourth quarter of 2004 compared to $833,000 in the same period of 2003. In the Republic of Yemen, revenues net of royalties in the fourth quarter 2004 increased 156% compared to the fourth quarter 2003 primarily as a result of sales volumes increasing 84% and oil prices increased 31%. The increase in sales volumes is a result of the An Nagyah field on Block S-1 commencing production at the end of the first quarter of 2004. The average oil price for the Company's production in the Republic of Yemen for the fourth quarter 2004 was $37.97 per barrel compared to $28.97 in the fourth quarter 2003. Oil production from the Tasour field in the Republic of Yemen is purchased by Nexen Marketing International Ltd. and the oil price is based on an average dated Brent price Hartley Brent Price (born December 9 1968 in Shawnee, Oklahoma) is an American former professional basketball player in the NBA. He is the younger brother of former Cleveland Cavaliers point guard Mark Price. less a quality/transportation differential between the dated Brent blend Brent Blend A type of sweet crude oil that is used as a benchmark for the prices of other crude oils. Notes: The brent blend is a mix of crude oil from several facilities in the Ninian and Brent fields on the North Sea. and the Yemen Masila crude oil blend. Oil production from the An Nagyah field in Yemen is purchased by ExxonMobil Sales & Supply Corporation and the oil price is based on an average dated Brent price less a quality/transportation differential between the dated Brent blend and the Yemen Marib crude oil blend. In Canada, revenue net of royalties in the fourth quarter increased 188% due to a 13% increase in gas prices, a 55% increase in oil and liquids prices and a 139% increase in production compared to the fourth quarter 2003. Gas prices averaged $5.47 per Mcf in Canada for the fourth quarter in 2004 and $4.82 per Mcf for the same period in 2003. Oil and liquids prices in Canada averaged $38.72 per barrel for the fourth quarter of 2004 and $24.96 per barrel for the same period 2003. Operating costs were $2,814,000 ($5.68 per Boe) in the fourth quarter 2004 compared to $1,121,000 ($4.32 per Boe) in the fourth quarter 2003. In Yemen, operating costs increased 37% to average $5.29 per barrel in the fourth quarter 2004 compared to $3.87 per barrel in the fourth quarter 2003 primarily as a result of Block S-1 commencing production in 2004 and having significantly higher operating costs during the initial trucking phase, averaging $7.00 per barrel. This is a reflection of higher costs associated with trucking and higher fixed costs fixed costs, n.pl the costs that do not change to meet fluctuations in enrollment or in use of services (e.g., salaries, rent, business license fees, and depreciation). per barrel until volumes are increased when full scale production commences in 2005. In Canada, operating costs increased 5% to average $7.64 per Boe in the fourth quarter of 2004 compared to $7.29 per Boe in the fourth quarter of 2003 due primarily to higher foreign exchange rates when converting Canadian dollars Noun 1. Canadian dollar - the basic unit of money in Canada; "the Canadian dollar has the image of loon on one side of the coin" loonie dollar - the basic monetary unit in many countries; equal to 100 cents to US dollars. General and administrative expense ("G&A") was $680,000 ($1.37 per Boe) for the fourth quarter 2004 as compared to $423,000 ($1.63 per Boe) in the comparable period 2003. During the twelve months 2004, general and administrative expenses increased to $1,664,000 ($1.20 per Boe) from $1,207,000 ($1.25 per Boe) in the comparable period in 2003. A new Canadian New Canadian Noun Canad a recent immigrant to Canada accounting standard was adopted in 2004 that requires the Company to record a compensation expense for the fair value of stock options over the vesting Vesting The process by which employees accrue non-forfeitable rights over employer contributions that are made to the employee's qualified retirement plan account. Notes: period granted to employees and directors since January 1, 2002. The non-cash stock-based compensation expense was $452,000 ($0.91 per Boe) in the fourth quarter of 2004 and $1,310,000 ($0.94 per Boe) for the twelve months 2004. Depletion, depreciation and accretion was $4,197,000 ($8.47 per Boe) for the fourth quarter 2004 compared to $1,292,000 ($4.98 per Boe) in the same period 2003. Depletion, depreciation and accretion increased to $10,346,000 ($7.45 per Boe) for the twelve months 2004 compared to $6,253,000 ($6.50 per Boe) for the twelve months 2003, reflecting the increase in the depletable de·plete tr.v. de·plet·ed, de·plet·ing, de·pletes To decrease the fullness of; use up or empty out. [Latin d costs in the Republic of Yemen and Canada, and higher foreign exchange rates when converting Canadian dollars to US dollars in Canada. Current income tax expense in the amount of $1,925,000 in the fourth quarter 2004 represents income taxes incurred and paid under the laws of the Republic of Yemen pursuant to the Production Sharing Agreement's on Block 32 and Block S-1 compared to $959,105 in the same period 2003. The current income tax increase is due to increased production volumes on Block S-1 due to the An Nagyah field commencing production in the first quarter of 2005 and Block 32 of which the Yemen government's share has increased due to recovery of all historical costs. The government's share of production sharing oil includes royalties and income taxes. The future income tax expense of $874,000 in the fourth quarter of 2004 is a result of recognizing future income tax assets of $1,160,000 in the third quarter of 2004 and $2,448,085 in 2003 which were utilized in the fourth quarter. The recording of these future tax benefits in Canada is a direct result of the successful drilling program carried out in 2003 and 2004 in Canada.
Finding and Development Costs
2004 2003
--------------------------------------
Proved + Proved +
(000's, except per Boe amounts) Proved Probable Proved Probable
---------------------------------------------------------------------
Total capital expenditure $ 26,367 $ 26,367 $ 14,229 $ 14,229
Net change from previous
year's future capital 8,796 597 2,159 11,303
---------------------------------------------------------------------
$ 35,163 $ 26,964 $ 16,388 $ 25,532
---------------------------------------------------------------------
Reserve additions
and revisions (MBoe) 4,332 4,804 2,360 4,872
Average cost per Boe $ 8.12 $ 5.61 $ 6.94 $ 5.24
Three year average
cost per Boe $ 7.42 $ 5.37 $ 6.40 $ 5.47
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The finding and development costs shown above have been calculated in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with Canadian National Instrument 51-101, Standards of Disclosure for Oil and Gas Activities introduced in 2003. The aggregate of the exploration and development costs incurred in the most recent financial year and the change during that year in estimated future development costs generally will not reflect total finding and development costs related to reserves additions for that year. Liquidity and Capital Resources Funding for the Company's capital expenditures in the fourth quarter 2004 was provided by cash flow from operations, working capital and issuance of share capital. At December 31, 2004 the Company had working capital of $2,839,000, zero debt and an unutilized loan facility of $7,000,000. The Company expects to fund its 2005 exploration and development program (budgeted at $32 million firm and contingent) through the use of working capital, cash flow and debt. The use of our credit facilities credit facilities npl → facilidades fpl de crédito credit facilities npl → facilités fpl de paiement credit facilities during 2005 is expected to remain within conservative guidelines guidelines, n.pl a set of standards, criteria, or specifications to be used or followed in the performance of certain tasks. of a debt to cash flow ratio of less than 0.5 : 1. The Company raised $9.8 million (net after costs) on a bought deal equity financing Equity Financing The act of raising money for company activities by selling common or preferred stock to individual or institutional investors. In return for the money paid, shareholders receive ownership interests in the corporation. in November and December 2004 to partially fund the Egyptian, Yemen and Canadian exploration program. This amount is included in the working capital at December 31, 2004. Equity financing may be utilized in the future to accelerate existing projects or to finance new opportunities. Fluctuations in commodity prices, product demand, foreign exchange rates, interest rates and various other risks may impact capital resources. In December 2003, the Company issued flow through shares with terms providing that the Company renounce TO RENOUNCE. To give up a right; for example, an executor may renounce the right of administering the estate of the testator; a widow the right to administer to her intestate husband's estate. 2. Canadian tax deductions Tax deduction An expense that a taxpayer is allowed to deduct from taxable income. tax deduction See deduction. in the amount of C$3,000,000 to subscribers with the entire amount to be expended ex·pend tr.v. ex·pend·ed, ex·pend·ing, ex·pends 1. To lay out; spend: expending tax revenues on government operations. See Synonyms at spend. 2. by the Company by December 31, 2004. The Company has fulfilled ful·fill also ful·fil tr.v. ful·filled, ful·fill·ing, ful·fills also ful·fils 1. To bring into actuality; effect: fulfilled their promises. 2. this expenditure commitment. Commitments and Contingencies Contingencies (ISSN 1048-9851) is the bimonthly magazine of the American Academy of Actuaries, providing a large and diverse readership with general interest and technical articles on a wide range of issues related to the actuarial profession. In June 2004, the Company entered into a one year fixed price contract to sell 10,000 barrels of oil per month in Block 32 commencing July 1, 2004 at $33.90 per barrel for Dated Brent Brent, outer borough (1991 pop. 226,100) of Greater London, SE England. The area is a rail and industrial center. Its manufactures include automobile parts, clocks and watches, and electrical equipment. plus or minus the Yemen Government's official selling price differential. Pursuant to the Company's farm-in agreement on the Nuqra Concession in Egypt, the Company is committed to spend $6 million over the next 5 years to earn its 50% working interest. As part of this commitment the Company issued a $2 million letter of credit on July 8, 2004 to Ganoub El Wadi Holding Petroleum Company which expires on February 14, 2007. This letter of credit is secured by a guarantee granted by Export Development Canada Export Development Canada (EDC) is Canada's export credit agency and a Crown corporation that provides financing and risk management services to Canadian exporters and investors in up to 200 markets worldwide. . Upon the determination that proven recoverable reserves are 40 million barrels or greater for Block S-1, Yemen, the Company will be required to pay a finders' fee to third parties in the amount of $281,000.
Consolidated Statements of Income and Deficit
(Unaudited - Expressed in thousands of U.S. Dollars)
Three Months Ended Twelve Months Ended
Dec. 31 Dec. 31
2004 2003 2004 2003
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(Restated) (Restated)
REVENUE
Oil and gas sales,
net of royalties $ 11,756 $ 4,489 $ 31,630 $ 17,162
Other income 4 364 13 374
---------------------------------------------------------------------
11,760 4,853 31,643 17,536
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EXPENSES
Operating 2,814 1,121 7,064 3,706
General and
administrative 680 423 1,664 1,207
Stock-based compensation 452 - 1,310 -
Foreign exchange loss 15 91 289 157
Interest 35 1 56 1
Depletion, depreciation
and accretion 4,197 1,292 10,346 6,253
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8,193 2,928 20,729 11,324
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Income before income
taxes 3,567 1,925 10,914 6,212
Income taxes
- future 874 (2,448) (285) (2,448)
- current 1,925 959 5,280 2,755
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2,799 (1,489) 4,995 307
---------------------------------------------------------------------
NET INCOME 768 3,414 5,919 5,905
Deficit, beginning
of period (1,453) (9,735) (6,393) (12,298)
Retroactive application
of changes in accounting
policies applied with
restatement - - 72 72
---------------------------------------------------------------------
Deficit, beginning of year,
as restated (6,321) (12,226)
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Retroactive application of
changes in accounting
policies applied without
restatement - - (283) -
---------------------------------------------------------------------
Deficit, end of period $ (685) $(6,321) $ (685) $ (6,321)
---------------------------------------------------------------------
---------------------------------------------------------------------
Net income per share
Basic $ 0.01 $ 0.06 $ 0.11 $ 0.11
Diluted $ 0.01 $ 0.06 $ 0.10 $ 0.11
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---------------------------------------------------------------------
Consolidated Balance Sheets
(Unaudited - Expressed in thousands of U.S. Dollars)
December 31, December 31,
2004 2003
---------------------------------------------------------------------
(Restated)
ASSETS
Current
Cash and cash equivalents $ 4,988 $ 4,452
Accounts receivable 6,029 2,383
Oil inventory 389 -
Prepaid expenses 274 161
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11,680 6,996
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Property and equipment
Republic of Yemen 26,054 18,563
Canada 19,111 8,470
Arab Republic of Egypt 992 -
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46,157 27,033
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Future income tax asset 2,299 1,572
Deferred financing costs 386 -
---------------------------------------------------------------------
$ 60,522 $ 35,601
---------------------------------------------------------------------
---------------------------------------------------------------------
LIABILITIES
Current
Accounts payable and accrued liabilities $ 8,841 $ 4,459
Asset retirement obligations 902 467
---------------------------------------------------------------------
9,743 4,926
---------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Share capital 47,296 36,996
Contributed surplus 1,593 -
Cumulative currency translation adjustment 2,575 -
Deficit (685) (6,321)
---------------------------------------------------------------------
50,779 30,675
---------------------------------------------------------------------
$ 60,522 $ 35,601
---------------------------------------------------------------------
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Consolidated Statements of Cash Flows
(Unaudited - Expressed in thousands U.S. Dollars)
Three Months Ended Twelve Months Ended
Dec. 31 Dec. 31
2004 2003 2004 2003
---------------------------------------------------------------------
(Restated) (Restated)
CASH FLOWS RELATED TO THE
FOLLOWING ACTIVITIES:
OPERATING
Net income $ 768 $ 3,414 $ 5,919 $ 5,905
Adjustments for:
Depletion, depreciation
and accretion 4,197 1,292 10,346 6,253
Gain on sale of property
and equipment - (363) - (363)
Amortization of deferred
financing costs 35 - 35 -
Future income taxes 874 (2,448) (285) (2,448)
Stock-based compensation 452 - 1,310 -
---------------------------------------------------------------------
Cash flow from operations 6,326 1,895 17,325 9,347
Changes in non-cash
working capital (2,050) 535 (4,259) 3,117
---------------------------------------------------------------------
4,276 2,430 13,066 12,464
---------------------------------------------------------------------
FINANCING
Issue of share capital 9,919 2,074 10,006 2,270
Repurchase of
share capital - - - (41)
Deferred financing costs (421) - (421) -
Changes in non-cash
working capital 13 - 24 -
---------------------------------------------------------------------
9,511 2,074 9,609 2,229
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INVESTING
Exploration and
development expenditures
Republic of Yemen (7,900) (1,709) (15,275) (9,012)
Canada (2,893) (2,302) (10,100) (5,217)
Arab Republic of Egypt (282) - (992) -
Proceeds on disposal of
property and equipment - 442 - 442
Changes in non-cash
working capital 1,271 (415) 4,678 951
---------------------------------------------------------------------
(9,804) (3,984) (21,689) (12,836)
---------------------------------------------------------------------
Effect of exchange
rate changes on cash
and cash equivalents (450) - (450) -
---------------------------------------------------------------------
NET INCREASE IN CASH AND
CASH EQUIVALENTS 3,533 520 536 1,857
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 1,455 3,932 4,452 2,595
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CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 4,988 $ 4,452 $ 4,988 $ 4,452
---------------------------------------------------------------------
---------------------------------------------------------------------
Segmented information
Three Months Ended Twelve Months Ended
Dec. 31 Dec. 31
(000's) 2004 2003 2004 2003
---------------------------------------------------------------------
(Restated) (Restated)
Oil and gas sales,
net of royalties
Republic of Yemen $ 9,358 $ 3,656 $ 24,966 $ 14,625
Canada 2,398 833 6,664 2,537
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11,756 4,489 31,630 17,162
---------------------------------------------------------------------
Operating
Republic of Yemen 2,181 869 5,449 3,012
Canada 633 252 1,615 694
---------------------------------------------------------------------
2,814 1,121 7,064 3,706
---------------------------------------------------------------------
Depletion, depreciation
and accretion
Republic of Yemen 3,391 1,025 8,162 5,516
Canada 806 267 2,184 737
---------------------------------------------------------------------
4,197 1,292 10,346 6,253
---------------------------------------------------------------------
Segmented operations 4,745 2,076 14,220 7,203
Other income, includes
a gain on sale of
property and equipment
in the United States
of $363,000 in 2003 4 364 13 374
---------------------------------------------------------------------
4,749 2,440 14,233 7,577
General and administrative 680 423 1,664 1,207
Stock-based compensation 452 - 1,310 -
Foreign exchange loss 15 91 289 157
Interest 35 1 56 1
Income taxes 2,799 (1,489) 4,995 307
---------------------------------------------------------------------
Net income $ 768 $ 3,414 $ 5,919 $ 5,905
---------------------------------------------------------------------
---------------------------------------------------------------------
The above includes certain statements that may be deemed to be "forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. " within the meaning of the US Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. All statements in this release, other than statements of historical facts, that address future production, reserve potential, exploration drilling, exploitation activities and events or developments that the company expects are forward-looking statements. Although TransGlobe believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in the forward-looking statements. Factors that could cause actual results to differ materially from those in forward-looking statements include oil and gas prices, exploitation and exploration successes, continued availability of capital and financing, and general economic, market or business conditions. TRANSGLOBE ENERGY CORPORATION s/s Lloyd Herrick Lloyd W. Herrick Vice President & C.O.O. TransGlobe Energy Corporation (TSX:TGL) (AMEX:TGA) |
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