TransGlobe Energy Corporation Announces 2005 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, 2005. 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. The calculations of barrels of oil equivalent ("Boe") are based on a conversion rate of six thousand cubic feet of natural gas to one barrel of crude oil. Boe's may be misleading, particularly if used in isolation. A Boe conversion ratio of 6 Mcf:1 Bbl is based on an energy equivalency equivalency the combining power of an electrolyte. See also equivalent. conversion method primarily applicable at the burner A drive that writes write-once optical discs such as CD-Rs and DVD-Rs. A "burner" implies a one-time recording, but the term is erroneously used to refer to drives that "write" to re-recordable CD-RW and DVD-RW/+RW media as well. See burn, CD-R and DVD-R. tip and does not represent a value equivalency at the wellhead well·head n. 1. The source of a well or stream. 2. A principal source; a fountainhead. 3. The structure built over a well. wellhead Noun 1. .
HIGHLIGHTS:
- Record average production of 4,991 Boepd for the year.
- Record cash flow of $38,077,000 for the year.
- Working Capital of $9,471,000.
FINANCIAL AND OPERATING UPDATE
(Expressed in thousands of U.S. Dollars, except per share
and volume amounts)
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Three Months Ended Twelve Months Ended
Dec. 31 Dec. 31
------------------------ -----------------------
Financial 2005 2004 Change 2005 2004 Change
--------------------------------------------- -----------------------
Oil and gas revenue 24,780 18,548 34% 90,350 49,495 83%
Oil and gas revenue
net of royalties 14,442 11,756 23% 58,911 31,630 86%
Operating expense 2,645 2,814 (6)% 10,253 7,064 45%
General and
administrative
expense 910 680 34% 2,821 1,664 70%
Stock-based
compensation 145 452 (68)% 723 1,310 (45)%
Depletion,
depreciation and
accretion expense 4,097 4,197 (2)% 16,990 10,346 64%
Income taxes 2,623 2,799 (6)% 8,353 4,995 67%
Cash flow from
operations(2) 8,603 6,326 36% 38,077 17,325 120%
Basic per share 0.15 0.12 0.66 0.32
Diluted per share 0.14 0.11 0.63 0.31
Net income 4,331 768 464% 19,850 5,919 235%
Basic per share 0.07 0.01 0.34 0.11
Diluted per share 0.07 0.01 0.33 0.10
Capital expenditures 9,554 11,075 (14)% 32,654 26,367 24%
Working capital 9,471 2,839 234%
Common shares
outstanding
Basic (weighted
average) 57,903 54,388 6%
Diluted (weighted
average) 60,330 56,719 6%
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Reserves (MBoe)
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Total Proven 7,830 6,664 17%
Total Proven
+ Probable 10,485 10,427 1%
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Production and
Sales Volumes
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Total production
(Boepd)(1) 5,132 4,979 3% 4,991 3,865 29%
Total sales
(Boepd)(1) 4,935 5,384 (8)% 4,959 3,796 31%
Oil and liquids
(Bopd) 4,307 4,726 (9)% 4,312 3,298 31%
Average price
($ per barrel) 54.14 38.01 42% 50.82 36.24 40%
Gas (Mcfpd) 3,769 3,942 (4)% 3,880 2,987 30%
Average price
($ per Mcf) 9.49 5.47 73% 7.27 5.19 40%
Operating expense
($ per Boe) 5.83 5.68 3% 5.67 5.09 11%
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(1) The differences in production and sales volumes result from
inventory changes at Block S-1, Yemen
(2) Cash flow from operations is a non-GAAP measure that represents
cash generated from operating activities before changes in
non-cash working capital
OPERATIONS 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) During the quarter one exploration well was drilled and abandoned at Balan Balan strong and courageous colossus. [Span. Lit.: Amadis de Gaul] See : Giantism #1 and one water injection well was drilled at Tasour #20. The diesel topping plant commenced operations during December, producing all the diesel required for power generation on Block 32. Approximately 380 barrels of crude oil per day is required to meet current diesel needs. Block S-1, Republic of Yemen (25% working interest) During the quarter three wells were drilled on Block S-1: An Nagyah #17, An Nagyah #18 and Hatat #1. The An Nagyah #17 well completed as a producing oil well after flowing at a stabilized sta·bi·lize v. sta·bi·lized, sta·bi·liz·ing, sta·bi·liz·es v.tr. 1. To make stable or steadfast. 2. rate of 3,250 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 1.8 million cubic feet of gas per day on a 48/64 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. . The An Nagyah #17 well encountered the Lam A 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 reservoir and was completed in a 575 meter horizontal section. An Nagyah #18 was completed as the first producing Lower Lam B oil well after flowing at a stabilized rate of 1,300 barrels of light (43 degree API) oil per day and 838 thousand cubic feet of gas per day on a 48/64 inch choke. The well reached a total depth of 2020 meters, with a 780 meter horizontal section. The Lower Lam B formation is found below the main Lam A producing horizon in the An Nagyah field. The An Nagyah #18 well adds a new oil zone and additional reserves to the An Nagyah field. It is expected that an additional one to two horizontal wells will be required to develop the Lower Lam B pool. The Hatat #1 wildcat wildcat, common name of two Old World cats, the European wildcat, Felis sylvestris, of Europe and W Asia, and the African wildcat, or kaffir cat, F. lybica, of Africa and Asia. exploration well was plugged and abandoned after failing to test hydrocarbons hydrocarbons (hīˈ·drō·kärˑ·b  nz),n. from a 596 meter interval of Granitic gran·ite n. 1. A common, coarse-grained, light-colored, hard igneous rock consisting chiefly of quartz, orthoclase or microcline, and mica, used in monuments and for building. 2. Basement This article is about the section of a building. For the foundation, see Basement rock. A basement is one or more floors of a building that are either completely or partially below the ground floor. Slab-on-grade buildings do not have basements. . Although several fractures Fractures Definition A fracture is a complete or incomplete break in a bone resulting from the application of excessive force. Description with 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 were encountered during drilling, the fractures were non-productive in the Hatat #1 well bore. In September September: see month. 2005 Occidental Petroleum Occidental Petroleum Corporation ("Oxy") NYSE: OXY is an international oil and gas exploration and production company with operations in the United States, Middle East/North Africa and Latin America regions. announced the acquisition of Vintage Petroleum. The acquisition closed on January January: see month. 30, 2006. Occidental oc·ci·den·tal or Oc·ci·den·tal adj. Of or relating to the countries of the Occident or their peoples or cultures; western. n. A native or inhabitant of an Occidental country; a westerner. Noun 1. through its 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. (Vintage) is now the operator of Block S-1. Block 72, Republic of Yemen (33% working interest) During the quarter a seismic acquisition program consisting of 255 km of 2-D data commenced on Block 72. The acquisition of the data was completed in early 2006 and processing is underway. A two well exploration drilling program is planned for late 2006. Nuqra Block 1, Arab Republic of 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. (50% working interest, Operator) TransGlobe completed reprocessing Reprocessing may refer to:
Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of The Company participated in drilling a record 20 wells during the fourth quarter of 2005 representing 65% of the total 31 wells drilled in Canada during 2005. The 2005 drilling program resulted in 21 gas, 7 oil and 3 dry wells for an overall success rate of 90%. The majority of the wells were drilled in the Nevis, Gadsby Gadsby could refer to:
Central Alberta is the most densely populated rural area in the province. Agriculture and energy make up an important part of the economy. . Of the 31 wells drilled, TransGlobe had an average working interest of 79% in 26 wells and a carried interest after payout pay·out n. 1. The act or an instance of paying out. 2. A percentage of corporate earnings that is paid as dividends to shareholders. in 5 wells which were farmed out to a third party. Included in the 31 wells were 8 successful CBM CBM Commodore Business Machines CBM Coalbed Methane CBM Christoffel Blindenmission CBM Condition Based Maintenance CBM Confidence-Building Measures CBM Curriculum Based Measurement (education) CBM Cubic Meter wells targeting the Horseshoe Canyon Horseshoe Canyon can refer to:
In December, production averaged 889 Boepd. Several wells were connected during late December and January which increased 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. production to approximately 1,100 Boepd in February February: see month. . There are an additional 14 (11 net) wells, representing 400 Boepd to the Company still requiring pipeline connections. This work is anticipated to be carried out during the first half of 2006. FORWARD LOOKING STATEMENTS This press release 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, well production performance, exploitation and exploration successes, continued availability of capital and financing, and general economic, market or business conditions. NON-GAAP MEASURES This document contains the term "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 ", which should not be considered an alternative to, or more meaningful than "cash flow from operation activities" as determined 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 Generally Accepted Accounting Principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting (GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ). Cash flow from operations is a non-GAAP measure that represents cash generated from operating activities before changes in non-cash working capital. We consider this a key measure as it demonstrates our 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.
OUTLOOK
2006 Production Outlook
2006 2005 Change (1)
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Barrels of oil equivalent Boepd 5,300 to 5,600 4,991 9%
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(1) % growth based on mid point of guidance
2006 Cash Flow From Operations Outlook
($000's) 2006(1) 2005 Change (1)
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Cash flow from operations 43,000 to 45,000 38,077 16%
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(1) Based on a dated Brent oil price of $55.00/Bbl and an AECO gas
price of C$7.50/Mcf, from existing fields in Yemen and planned
development in Canada.
2006
Cash Flow from
Sensitivity Operations
($000's) Increase/Decrease
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$1.00 per barrel increase in dated Brent 560
C$1.00 per Mcf increase in AECO 1,700
2006 Capital Budget
($000's) 2006
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Canada 20,400
Yemen - Block S-1 11,900
- Block 32 3,500
- Block 72 2,100
Egypt 7,400
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Total 45,300
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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, 2005 and 2004 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. Annual Financial Results Cash flow from operations for the twelve months 2005 increased 120% to $38,077,000 compared to $17,325,000 in 2004 primarily due to: - Sales volumes increased 31% to 4,959 Boepd which increased revenue $17,683,000; - Average commodity prices increased 40% to $49.92/Boe which increased revenue $23,172,000; - Offset by: -- Royalties increasing $13,574,000 due to increased production, prices and Block S-1 royalty rate. Furthermore, in Q4-2005 TransGlobe recovered its historical exploration cost pools at Block S-1 resulting in increased royalties of approximately $2.0 million. -- Operating costs operating costs npl → gastos mpl operacionales increasing $3,189,000 due to the increased production and an 11% increase in costs per Boe; -- Current income tax increasing $2,602,000 due to the increased production and prices in 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. ; -- Cash general and administrative expense increasing $905,000. Net income for the twelve months 2005 increased 235% to $19,850,000 compared to $5,919,000 in 2004 primarily due to: - Cash flow from operations increasing, as described above, which also increased net income; - Stock compensation expense, 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) , decreasing $587,000; - 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, increasing $6,644,000. -- Future income taxes, a non-cash expense, increasing $756,000. Fourth Quarter Financial Results Production Overall, production volumes increased 3% to 5,132 Boepd in Q4-2005 compared Q4-2004. In the Republic of Yemen, production volumes increased 5% in the Q4-2005 to 4,268 Bopd from 4,079 Bopd in the Q4-2004 primarily due to increased production at Block S-1 as a result of developmental drilling and the pipeline completion, offset partially by decreased production at Block 32 due to natural declines. Block 32 production averaged 1,592 Bopd during Q4-2005 compared to 2,631 Bopd during Q4-2004 and Block S-1 production averaged 2,676 Bopd in Q4-2005 compared to 1,448 Bopd in Q4-2004. Production from Block S-1 was curtailed during December 2005 by delays in the construction and installation of additional processing equipment. In Canada, production volumes decreased 4% in Q4-2005 to 864 Boepd (73% natural gas) from 900 Boepd in Q4-2004. Revenue net of royalties Revenue net of royalties increased 23% to $14,442,000 for Q4-2005 compared to $11,756,000 for Q4-2004. In the Republic of Yemen, revenues net of royalties in Q4-2005 increased 17% to $10,910,000 compared to $9,358,000 in Q4-2004 primarily as a result of oil prices increasing 43%, offset partially by sales volumes decreasing 8%. The decrease in sales volumes is a result of natural declines at Block 32 offset partially by increased sales volumes at Block S-1. The average oil price for the Company's production in the Republic of Yemen for Q4-2005 was $54.37 per barrel compared to $37.97 in Q4-2004. Oil production from the Tasour field in the Republic of Yemen is purchased by Nexen
Nexen is an energy company based in Calgary, Alberta. 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 Exxon Mobil Corporation or ExxonMobil (NYSE: XOM), a multi-national American corporation and a direct descendant of John D. Rockefeller's Standard Oil company[2] Sales & Supply Corporation and the oil price is based on an average dated Brent price for the month when liftings occur less a quality/transportation differential. In Canada, revenue net of royalties in Q4-2005 increased 47% to $3,532,000 compared to $2,398,000 in Q4-2004 due to a 73% increase in gas prices and a 40% increase in oil and liquids prices, offset partially by a 4% decrease in production. Gas prices averaged $9.49 per Mcf in Canada for Q4-2005 compared to $5.47 per Mcf Q4-2004. Oil and liquids prices in Canada averaged $54.14 per barrel for Q4-of 2005 compared to $38.72 per barrel Q4-2004. Unrealized gain Unrealized Gain A profit that results from holding on to an asset rather than cashing it in and using the funds. Notes: Let's say you own a stock that has doubled, but you haven't sold it yet. This is said to be an unrealized gain. on commodity contracts In September 2005, the Company entered into a crude oil costless collar for 15,000 barrels per month from January 1, 2006 to December 31, 2006. The transaction consisted of the purchase of a $50.00 per barrel 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. put (floor) and a $77.93 per barrel dated Brent call (ceiling). The estimated fair value of the unrealized commodity contracts was $83,000 at December 31, 2005 and is reported on the consolidated balance sheet consolidated balance sheet A balance sheet in which assets and liabilities of a parent company and its controlled subsidiaries are combined, thereby presenting balance sheet items for the parent and its subsidiaries as if they were a single firm. . The change in the unrealized positions of $294,000 for Q4-2005 was recorded to income. The fair values of these transactions are based on an approximation approximation /ap·prox·i·ma·tion/ (ah-prok?si-ma´shun) 1. the act or process of bringing into proximity or apposition. 2. a numerical value of limited accuracy. of the amounts that would have been paid to or received from counter parties to settle the transactions outstanding as at December 31, 2005 with reference to forward prices and market values provided by independent sources. The actual amounts realized may differ from these estimates. Operating costs Operating costs were $2,645,000 ($5.83 per Boe) in Q4-2005 compared to $2,814,000 ($5.68 per Boe) in Q4-2004. In Yemen, operating costs increased 9% to average $5.75 per barrel in Q4-2005 compared to $5.29 per barrel in Q4-2004 primarily as a result of increased diesel costs at Block 32, offset partially by reduced trucking costs associated with oil transportation at Block S-1. On Block 32 a diesel topping plant was constructed in 2005 to manufacture diesel from produced crude oil which will reduce diesel costs significantly on a go forward basis. The plant became operational in December 2005. In Canada, operating costs decreased 19% to average $6.20 per Boe in Q4-2005 compared to $7.64 per Boe in Q4-2004. General and administrative expense General and administrative expense ("G&A") was $910,000 ($2.00 per Boe) for Q4-2005 compared to $680,000 ($1.37 per Boe) in Q4-2004. The increased expenses relate to increased personnel and overhead costs overhead costs see fixed costs. due to additional staff and increased public company costs associated with the Company preparing for new Sarbanes Oxley Oxley refers to several things: People
Stock based compensation 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 $145,000 ($0.32 per Boe) in Q4-2005 compared to $452,000 ($0.91 per Boe) in Q-4 2004. The decrease is mainly due to options granted in March 2004 which were fully expensed by March 2005. Depletion, depreciation and accretion Depletion, depreciation and accretion was $4,097,000 ($9.03 per Boe) for Q4-2005 compared to $4,197,000 ($8.47 per Boe) in Q4-2004. Income taxes Current income tax expense 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. The government's share of production sharing oil includes royalties and income taxes. Current income tax expense increased 15% to $2,209,000 in Q4-2005 compared to $1,925,000 in Q4-2004. The current income tax increase is due to increased revenue in Yemen. The current income tax rate over Yemen revenue net of royalties remained consistent at 20% in Q4-2005 and Q4-2004. In 2003, 2004 and 2005, future income tax assets were recognized relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc Canadian tax pools that the Company can use to utilize to reduce future taxable income Under the federal tax law, gross income reduced by adjustments and allowable deductions. It is the income against which tax rates are applied to compute an individual or entity's tax liability. The essence of taxable income is the accrual of some gain, profit, or benefit to a taxpayer. in Canada. These assets were recognized as a direct result of increased reserves in Canada and increased commodity prices.
Finding and Development Costs
2005 2004
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(000's, except per Proved + Proved +
Boe amounts) Proved Probable Proved Probable
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Total capital expenditure $ 32,654 $ 32,654 $ 26,367 $ 26,367
Net change from previous
year's future capital 8,418 9,449 8,796 597
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$ 41,072 $ 42,103 $ 35,163 $ 26,964
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Reserve additions and
revisions (MBoe) 2,987 1,879 4,332 4,804
Average cost per Boe $ 13.75 $ 22.41 $ 8.12 $ 5.61
Three year average cost
per Boe $ 9.57 $ 8.19 $ 7.42 $ 5.37
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The finding and development costs shown above have been calculated in accordance 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 Liquidity describes a company's ability to access cash. Companies operating in the upstream From the consumer to the provider. See downstream. (networking) upstream - Fewer network hops away from a backbone or hub. For example, a small ISP that connects to the Internet through a larger ISP that has their own connection to the backbone is downstream from the larger oil and gas industry require sufficient cash in order to fund capital programs necessary to maintain and increase production and proved reserves proved reserves The quantity of minerals expected to be recoverable under current economic and operating conditions. The amount of proved reserves is important in valuing the stock of a company with significant holdings in natural resources. , to acquire strategic oil and gas assets and repay debt. TransGlobe's capital programs are funded principally by cash provided from operating activities. The following table illustrates TransGlobe's sources and uses of cash during the years ended December 31, 2005 and 2004:
Sources and Uses of Cash
($000's) 2005 2004
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Cash sourced
Cash flow from operations(1) 38,077 17,325
Issue of common shares 1,218 10,006
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39,295 27,331
Cash used
Exploration and development expenditures 32,654 26,367
Other 155 871
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32,809 27,238
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Net cash 6,486 93
Increase in non-cash working capital 747 443
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Increase in cash and cash equivalents 7,233 536
Cash and cash equivalents - beginning of year 4,988 4,452
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Cash and cash equivalents - end of year 12,221 4,988
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(1) Cash flow from operations is a non-GAAP measure that represents
cash generated from operating activities before changes in
non-cash working capital.
Funding for the Company's capital expenditures in 2005 was provided by cash flow from operations, working capital and an 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 2004. Working capital is the amount by which current assets Current Assets Appearing on a company's balance sheet, it represents cash, accounts receivable, inventory, marketable securities, prepaid expenses, and other assets that can be converted to cash within one year. exceeds current liabilities Current Liabilities Usually appearing on a company's balance sheet, it represents the amount owed for interest, accounts payable, short-term loans, expenses incurred but unpaid, and other debts due within one year. . At December 31, 2005 the Company had working capital of $9,471,000 (2004 - $2,839,000), zero debt and an unutilized loan facility of $7,000,000. Accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying increased due primarily to higher revenue receivables Receivables An asset designation applicable to all debts, unsettled transactions or other monetary obligations owed to a company by its debtors or customers. Receivables are recorded by a company's accountants and reported on the balance sheet, and they and include all debts owed as a result of volume and price increases. This was offset by increased accounts payable due primarily to increased capital expenditures in late 2005 related to the Canadian drilling program, increased operating costs in both Canada and Yemen due to higher volumes, offset by reduced Yemen capital payables Payables Related: Accounts payable compared to 2004 mainly due to the 2004 pipeline construction at Block S-1 which was completed in June June: see month. 2005. The Company expects to fund its approved 2006 exploration and development program of $45.3 million through the use of working capital and cash flow. The use of our credit facility or equity financing during 2006 are expected to be utilized only 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. 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 September 2005, the Company entered into a crude oil costless collar for 15,000 barrels per month from January 1, 2006 to December 31, 2006. The transaction consisted of the purchase of a $50.00 per barrel dated Brent put (floor) and a $77.93 per barrel dated Brent call (ceiling). Upon the determination that proved 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. Pursuant to the Company's farm-in agreement on the Nuqra Concession in Egypt, the Company is committed to spend $6 million before July July: see month. 1, 2009 to earn its 50% working interest. As at December 31, 2005, the Company has spent $2,065,000 of earning expenditures. 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. . Pursuant to the PSA for Block 72, Yemen, the Contractor (Joint Venture Partners) has a minimum financial commitment of $4 million ($1.32 million to TransGlobe) during the first exploration period of 30 months for exploration work, including reprocessing of seismic data, acquisition of new seismic data and drilling two exploration wells.
Consolidated Statements of Income and Retained Earnings (Deficit)
(Unaudited - Expressed in thousands of U.S. Dollars)
Three Months Ended Twelve Months Ended
Dec. 31 Dec. 31
2005 2004 2005 2004
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REVENUE
Oil and gas sales,
net of royalties $ 14,442 $ 11,756 $ 58,911 $ 31,630
Unrealized gain on
commodity contracts 294 - 83 -
Other income 34 4 46 13
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14,770 11,760 59,040 31,643
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EXPENSES
Operating 2,645 2,814 10,253 7,064
General and administrative 910 680 2,821 1,664
Stock-based compensation 145 452 723 1,310
Foreign exchange loss 11 15 42 289
Interest 8 35 8 56
Depletion, depreciation
and accretion 4,097 4,197 16,990 10,346
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7,816 8,193 30,837 20,729
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Income before income taxes 6,954 3,567 28,203 10,914
Income taxes
- future 414 874 471 (285)
- current 2,209 1,925 7,882 5,280
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2,623 2,799 8,353 4,995
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NET INCOME 4,331 768 19,850 5,919
Retained earnings (deficit),
beginning of year 14,834 (1,453) (685) (6,604)
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Retained earnings (deficit),
end of period $ 19,165 $ (685) $ 19,165 $ (685)
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Net income per share
Basic $ 0.07 $ 0.01 $ 0.34 $ 0.11
Diluted $ 0.07 $ 0.01 $ 0.33 $ 0.10
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Consolidated Balance Sheets
(Unaudited - Expressed in thousands of U.S. Dollars)
December December
31, 2005 31, 2004
ASSETS
Current
Cash and cash equivalents $ 12,221 $ 4,988
Accounts receivable 7,414 6,029
Oil inventory 436 389
Prepaid expenses 463 274
Unrealized commodity contracts 83 -
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20,617 11,680
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Property and equipment
Republic of Yemen 30,898 26,054
Canada 30,261 19,111
Arab Republic of Egypt 2,512 992
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63,671 46,157
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Future income tax asset 1,886 2,299
Deferred financing costs 112 386
$ 86,286 $ 60,522
---------------------------------------------------------------------
---------------------------------------------------------------------
LIABILITIES
Current
Accounts payable and accrued liabilities $ 11,146 $ 8,841
Asset retirement obligations 1,503 902
---------------------------------------------------------------------
12,649 9,743
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SHAREHOLDERS' EQUITY
Share capital 48,922 47,296
Contributed surplus 1,908 1,593
Cumulative currency translation adjustment 3,642 2,575
Retained earnings (deficit) 19,165 (685)
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73,637 50,779
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$ 86,286 $ 60,522
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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
2005 2004 2005 2004
---------------------------------------------------------------------
CASH FLOWS RELATED TO THE
FOLLOWING ACTIVITIES:
OPERATING
Net income $ 4,331 $ 768 $ 19,850 $ 5,919
Adjustments for:
Depletion, depreciation
and accretion 4,097 4,197 16,990 10,346
Amortization of deferred
financing costs 75 35 291 35
Future income taxes 414 874 471 (285)
Stock-based compensation 145 452 723 1,310
Unrealized gain on
commodity contracts (294) - (83) -
Settlement of asset
retirement obligations (165) - (165) -
Changes in non-cash
working capital 54 (2,050) 1,280 (4,259)
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8,657 4,276 39,357 13,066
---------------------------------------------------------------------
FINANCING
Issue of common shares
for cash 203 9,919 1,218 10,006
Deferred financing costs - (421) (17) (421)
Changes in non-cash
working capital - 13 (24) 24
---------------------------------------------------------------------
203 9,511 1,177 9,609
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INVESTING
Exploration and development
expenditures
Republic of Yemen (3,855) (7,900) (17,939) (15,275)
Canada (5,335) (2,893) (13,189) (10,100)
Arab Republic of Egypt (364) (282) (1,526) (992)
Changes in non-cash
working capital 2,566 1,271 (509) 4,678
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(6,988) (9,804) (33,163) (21,689)
---------------------------------------------------------------------
Effect of exchange rate
changes on cash and cash
equivalents (107) (450) (138) (450)
---------------------------------------------------------------------
NET INCREASE IN CASH AND
CASH EQUIVALENTS 1,765 3,533 7,233 536
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 10,456 1,455 4,988 4,452
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CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 12,221 $ 4,988 $ 12,221 $ 4,988
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Segmented information
Three Months Ended Twelve Months Ended
Dec.31 Dec. 31
(000's) 2005 2004 2005 2004
---------------------------------------------------------------------
Oil and gas sales,
net of royalties
Republic of Yemen $ 10,910 $ 9,358 $ 47,384 $ 24,966
Canada 3,532 2,398 11,527 6,664
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14,442 11,756 58,911 31,630
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Operating expenses
Republic of Yemen 2,152 2,181 8,219 5,449
Canada 493 633 2,034 1,615
---------------------------------------------------------------------
2,645 2,814 10,253 7,064
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Depletion, depreciation
and accretion
Republic of Yemen 2,846 3,391 13,172 8,162
Canada 1,248 806 3,812 2,184
Arab Republic of Egypt 3 - 6 -
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4,097 4,197 16,990 10,346
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Segmented operations 7,700 4,745 31,668 14,220
Unrealized gain on
commodity contracts 294 - 83 -
Other income 34 4 46 13
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8,028 4,749 31,797 14,233
General and administrative 910 680 2,821 1,664
Stock-based compensation 145 452 723 1,310
Foreign exchange loss 11 15 42 289
Interest 8 35 8 56
Income taxes 2,623 2,799 8,353 4,995
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Net income $ 4,331 $ 768 $ 19,850 $ 5,919
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TransGlobe Energy Corporation (TSX:TGL) (AMEX:TGA) |
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