TransGlobe Energy Corporation Announces Second Quarter 2014 Financial and Operating Results

TransGlobe Energy Corporation Announces Second Quarter 2014 Financial and 
Operating Results 
CALGARY, ALBERTA -- (Marketwired) -- 08/13/14 --   TransGlobe Energy
Corporation ("TransGlobe" or the "Company") (TSX: TGL)(NASDAQ: TGA)
is pleased to announce its financial and operating results for the
three and six months ended June 30, 2014. All dollar values are
expressed in United States dollars unless otherwise stated.  


 
 
--  Second quarter production averaged 16,112 Bopd (16,485 Bopd sales); 
 
--  Second quarter funds flow of $43.2 million (includes one-time other
    revenue of $9.25 million); 
 
--  Second quarter earnings of $26.2 million (includes a $2.0 million non-
    cash unrealized gain on convertible debentures); 
 
--  Spent $17.1 million on exploration and development during the quarter; 
 
--  Drilled eight wells in the quarter resulting in eight oil wells (100%
    success); 
 
--  Commenced exploration drilling on North West Gharib concession; 
 
--  Collected $45.1 million in accounts receivable from the Egyptian
    Government during the quarter; 
 
--  Ended the quarter with $110.1 million in cash and cash equivalents;
    positive working capital of $271.5 million or $182.7 million net of debt
    (including convertible debentures); 
 
--  Paid $0.10/share special dividend and $0.05/share quarterly dividend
    during the second quarter. 

Aconference call to discuss TransGlobe's 2014 second quarter results
presented in this news release will be held Wednesday, August 13,
2014 at 9:00 AM Mountain Time (11:00 AM Eastern Time) and is
accessible to all interested parties by dialing (416) 340-2218 or
toll-free at 1-866-225-0198 (see also TransGlobe's news release dated
August 5, 2014). The webcast may be accessed at
http://www.gowebcasting.com/5600 
FINANCIAL AND OPERATING RESULTS 
(US$000s, except per share, price, volume amounts and % change) 


 
 
                   Three Months Ended June 30      Six Months Ended June 30 
                  ----------------------------------------------------------
Financial              2014     2013 % Change       2014      2013 % Change 
----------------------------------------------------------------------------
Oil revenue         144,208  152,646       (6)   297,348   312,561       (5)
Oil revenue, net                                                            
 of royalties        76,040   76,223        -    154,406   155,589       (1)
Production and                                                              
 operating expense   19,025   17,529        9     38,603    32,061       20 
General and                                                                 
 administrative                                                             
 expense              6,844    6,319        8     13,852    13,419        3 
Depletion,                                                                  
 depreciation and                                                           
 amortization                                                               
 expense             12,233   12,060        1     25,398    23,240        9 
Income taxes         17,861   19,416       (8)    37,142    43,337      (14)
Funds flow from                                                             
 operations(i)       43,185   32,887       31     75,672    68,892       10 
  Basic per share      0.58     0.45                1.02      0.93          
  Diluted per                                                               
   share               0.57     0.40                1.00      0.84          
Net earnings         26,199   10,397      152     42,891    35,275       22 
Net earnings -                                                              
 diluted             26,199    (183)        -     42,891    21,244      102 
  Basic per share      0.35     0.14                0.57      0.48          
  Diluted per                                                               
   share               0.35        -                0.57      0.26          
Capital                                                                     
 expenditures        17,490   19,295       (9)    31,855    37,488      (15)
Dividends paid       11,229        -      100     11,229         -      100 
Dividends paid per                                                          
 share                 0.15        -                0.15         -          
Working capital     271,524  286,805       (5)   271,524   286,805       (5)
Long-term debt,                                                             
 including current                                                          
 portion                  -   15,224     (100)         -    15,224     (100)
Convertible                                                                 
 debentures          88,814   81,830        9     88,814    81,830        9 
Common shares                                                               
 outstanding                                                                
  Basic (weighted-                                                          
   average)          74,826   73,884        1     74,766    73,845        1 
  Diluted                                                                   
   (weighted-                                                               
   average)          75,657   82,345       (8)    75,702    82,094       (8)
Total assets        705,859  670,996        5    705,859   670,996        5 
----------------------------------------------------------------------------
(i) Funds flow from operations is a measure that represents cash generated  
 from operating activities before changes in non-cash working capital and   
 may not be comparable to measures used by other companies.                 
 
Operating                                                                   
----------------------------------------------------------------------------
Average production                                                          
 volumes (Bopd)      16,112   18,417      (13)    17,083    18,209       (6)
Average sales                                                               
 volumes (Bopd)      16,485   18,539      (11)    17,204    18,225       (6)
Average price ($                                                            
 per Bbl)             96.14    90.48        6      95.49     94.75        1 
Operating expense                                                           
 ($ per Bbl)          12.68    10.39       22      12.40      9.72       28 
----------------------------------------------------------------------------

CORPORATE SUMMARY 
TransGlobe Energy Corporation's ("TransGlobe" or the "Company") total
production averaged 16,112 barrels of oil per day ("Bopd") during the
quarter which is down from Q1-2014 production of 18,067 Bopd. 
In the Eastern Desert the Company began its exploration drilling
program at NW Gharib on June 25, 2014. Oil was discovered in the
first NW Gharib well in the Lower Nukhul immediately north of the
Arta Lower Nukhul pool in West Gharib. In late August a second
drilling rig will mobilize to NW Gharib, and both drilling rigs are
expected to remain in NW Gharib through 2015. Year-to-date the
Company has drilled 18 wells in the Eastern Desert resulting in 15
oil wells, one water injector and two wells which were plugged and
suspended. The Company has commenced the Eastern Desert (NW Gharib,
SW Gharib and SE Gharib) seismic acquisition program will includes
1,000+ square kilometers of 3-D seismic and 300+ kilometers of 2-D
seismic. 
Eastern Desert production continues to be impacted by the faulty
progressive capacity pumps ("PCPs") at West Gharib. In early August,
the first batch of replacement pumps arrived in the field. The 20
replacement pumps are the smaller pumps which could be flown to
Egypt. The larger pumps have been manufactured and are expected to
arrive (by sea) in August/September. It is expected that the
replacement pumps will be installed and the field will be optimized
by the end of the year provided the replacement pumps perform. 
In the Western Desert the Company participated in three wells
year-to-date at East Ghazalat, resulting in two oil wells and one dry
hole. Drilling continues on North Dabaa 2 (appraisal well) with
results expected later in August. The 400 square kilometer 3-D
seismic acquisition program for the South Ghazalat block is expected
to begin in 2015 upon completion of the Eastern Desert program. 
Dated Brent oil prices averaged $108.95 in the second quarter of
2014. Egypt crude is sold at a quality discount to Dated Brent and
received a blended price of $95.74 during the quarter. The Company
had funds flow of $43.2 million and ended the quarter with positive
working capital of $271.5 million or $182.7 million net of debt (the
convertible debentures). The Company collected $45.1 million of
accounts receivable from the Egyptian government during the quarter,
resulting in an accounts receivable balance of $182.7 million as at
June 30, 2014. 
The Company had net earnings in the quarter of $26.2 million, which
included the reverse termination fee received from Caracal Energy
Inc. of $9.3 million upon termination of the arrangement agreement.
Net earnings also includes a $2.0 million non-cash unrealized gain on
convertible debentures, which represents a fair value adjustment in
accordance with IFRS, but does not represent a cash gain or a change
in the future cash outlay required to repay the convertible
debentures. 
TransGlobe paid a total of $11.2 million ($0.15/share) to its common
shareholders during the second quarter of 2014 in the form of
dividends which included a one-time special dividend of $7.5 million
($0.10/share) from the Caracal reverse termination fee. The Company
intends to continue paying a quarterly dividend, and a third quarter
dividend of $0.05/share has been approved by TransGlobe's board of
directors. The third quarter dividend will be paid on September 30,
2014.  
The Company remains in a strong financial position and is embarking
on an exciting period of high potential exploration commencing with
drilling at NW Gharib, in parallel with a large 3-D seismic
acquisition program on the new concessions. The Company believes that
the same structural configuration that created the pools found in the
West Gharib and West Bakr concessions is present in the NW Gharib, SW
Gharib and SE Gharib blocks, which will be tested over the next few
years. In addition, the Company will continue to pursue business
development opportunities both within and outside of Egypt.  
Management and the board of directors remain committed to expanding
the Company's portfolio of assets to increase returns to shareholders
and mitigate the risks inherent in a concentrated portfolio,
particularly political or economic concentration. 
OPERATIONS UPDATE 
ARAB REPUBLIC OF EGYPT  
West Gharib, Arab Republic of Egypt (100% working interest, operated) 
Operations and Exploration  
The Company drilled two wells during the second quarter resulting in
an oil well at Hana and an oil well at Arta (a side track of a dry
hole which was plugged back and suspended in Q1). The Hana well is
producing 100 Bopd from the main Markha pool and the Arta side track
is producing 180 Bopd from the Upper Nukhul. 
Subsequent to quarter-end, one additional well was drilled at Hana
targeting the Markha as a water injector and a deeper exploratory
test (TD of 8,888 feet) to evaluate the Thebes formation. The Thebes
is a potential resource type project which is characterized as a
thick (400+ feet) regional carbonate with low porosity which has
produced small amounts of oil on test (reported short test of up to
200 Bopd) from exploration wells drilled in the area during the
1960's and 70's. The well encountered approximately 320 feet of low
porosity Thebes and was cased as a potential Thebes oil well and
future water injector for the main Hana Markha pool. A portion of the
Thebes was cored (87 feet) and is being analyzed prior to designing a
completion test. It is expected that the Thebes will be completed and
tested in late 2014. If results from the Hana well are encouraging,
additional test wells will be required to properly evaluate the
potential resource recoveries and associated economics prior to a
Thebes resource development. Based on internal mapping over the Hana
development lease exclusively, it is estimated that the Thebes
formation could contain 90 million barrels of Petroleum initially in
Place (PIIP) on an un-risked deterministic basis. 
Year-to-date the Company has drilled eight wells resulting in seven
oil wells and one dry hole (subsequently side tracked) at West
Gharib.  
The rig is currently drilling a development well at Hana West prior
to moving to the new North West Gharib concession for the balance of
2014.  
Production  
Production from West Gharib averaged 9,987 Bopd to TransGlobe during
the second quarter, a 10% (1,113 Bopd) decrease from the previous
quarter. 
Production to TransGlobe averaged 9,422 Bopd in July.  
Production at West Gharib continues to be adversely impacted by a
combination of premature failures of new progressive cavity pumps
("PCPs") and increased water cuts associated with natural declines.
The manufacturer of the failed PCPs has completed a detailed review
of the failed pumps and the manufacturing process for the pumps.
Subsequent to the review, the manufacturer has modified its processes
and advised the Company that they will provide replacements at no
cost to the Company for the forty pumps which were supplied during
the past year. The new pumps are manufactured, with the first batch
of 20 pumps arriving in country in late July and in the field in
early August following testing by the manufacturer in Egypt. The
remaining 20 pumps (larger pumps) are scheduled to arrive by sea in
Egypt in August/September. In addition, the Company placed a special
order for nine replacement pumps from the Company's previous pump
supplier which were manufactured and are scheduled to arrive in Egypt
in late August. It is expected that the replacement pumps will be
installed and field optimization will be completed by the end of the
year provided the replacement pumps perform. The installation of the
new pumps should allow the Company to restore 800 to 1,000 Bopd of
shut-in and curtailed production. 


 
 
Quarterly West Gharib Production                                            
 (Bopd)                                             2014                2013
----------------------------------------------------------------------------
                                           Q-2       Q-1       Q-4       Q-3
----------------------------------------------------------------------------
Gross production rate                    9,987    11,100    11,983    12,274
TransGlobe working interest              9,987    11,100    11,983    12,274
TransGlobe net (after royalties)         5,950     6,350     6,600     6,865
TransGlobe net (after royalties and                                         
 tax) (i)                                4,405     4,562     4,592     4,812
----------------------------------------------------------------------------
 
(i)  Under the terms of the West Gharib Production Sharing Concession,      
     royalties and taxes are paid out of the Government's share of          
     production sharing oil.                                                

West Bakr, Arab Republic of Egypt (100% working interest, operated) 
Operations and Exploration  
The Company drilled three wells in the second quarter resulting in
two oil wells (H-field and K-field) and one H-field water injector.
The H-field oil well encountered three Yusr zones (A, B & C) and was
initially completed in the lower most Yusr C zone which is awaiting
additional perforations due to poor inflow. The K-field well was
completed in the main Asl A zone and placed on production at an
initial rate of 480 Bopd in July. 
Subsequent to quarter end, the Company drilled two oil wells (H-field
and K-field) which are scheduled for completion during the third
quarter. 
Year to date the Company has drilled eight wells resulting in seven
oil wells and one water injection well at West Bakr. The drilling rig
is currently shut down for scheduled maintenance prior to drilling in
M-field and is expected to remain working in West Bakr throughout
2014. 
Production 
Production from West Bakr averaged 5,182 Bopd to TransGlobe during
the second quarter, a 10% (575 Bopd) decrease from the previous
quarter. Production decreases are primarily attributed to an increase
in well servicing and lower production from multi zone new wells. The
wells were completed in the deeper formations first (which have lower
productivity due to thinner zones and structural proximity to water). 
Production averaged 4,946 Bopd in July. 
During the second quarter the Company contracted an additional
workover rig to conduct an initial 10 well remedial program to
re-enter suspended oil wells, evaluate un-swept oil potential, and
recomplete/equip wells for production. The first well (H-field) was
recompleted and placed on production in late July at an initial rate
of 450 Bopd. Concurrently the Company has commenced a program to
install larger pump jacks on higher volume producers to optimize well
performance. The first three larger pump jacks were received and
installed in late June with an additional three pump jacks installed
in July. The initial three wells are producing an additional 180 Bopd
(60 Bopd/well) with further optimization planned for August. The
remaining fourteen large volume pump jacks are expected to be
installed over the balance of 2014. 


 
 
Quarterly West Bakr Production                                              
 (Bopd)                                                                     
----------------------------------------------------------------------------
                                           Q-2       Q-1       Q-4       Q-3
----------------------------------------------------------------------------
Gross production rate                    5,182     5,757     5,521     5,393
TransGlobe working interest              5,182     5,757     5,521     5,393
TransGlobe net (after royalties)         1,843     2,024     2,026     1,488
TransGlobe net (after royalties and                                         
 tax) (i)                                1,471     1,611     1,631     1,102
----------------------------------------------------------------------------
 
(i)  Under the terms of the West Bakr Production Sharing Concession,        
     royalties and taxes are paid out of the Government's share of          
     production sharing oil.                                                

North West Gharib Block, Arab Republic of Egypt (100% working interest) 
Operations and Exploration 
In June, the Company mobilized a drilling rig to the first
exploration well on the North West Gharib ("NWG") concession (NWG 1)
which began drilling on June 25. 
Subsequent to the quarter two wells were drilled resulting in an oil
well at NWG 1 and a suspended well at NWG 2. Oil was discovered at
NWG 1 in the Lower Nukhul immediately north of the West Gharib main
Arta Lower Nukhul pool. Approximately 33 feet of net oil pay was
identified on well logs and the well was cased for completion as a
future oil producer. NWG 2 was unable to reach the target formation
due to a combination of swelling shales and lost circulation. The
well has been plugged back to the base of surface casing and
suspended as a potential future side track candidate. The drilling
rig is currently drilling a Nukhul prospect at NWG 3 located
approximately two kilometers north east of NWG 2. 
In August the Company will move a second drilling rig (currently
drilling at West Gharib) to NWG 10, which is targeting a deeper
Markha/Rudeis exploration target on the southeast corner of the
concession. 
Both drilling rigs are currently scheduled to remain in NWG through
2015. A map showing the approximate locations of NWG 1 through 18 is
available on the Company website at
http://www.trans-globe.com/operations/egypt/nw-gharib.html 
The Company has identified 79 drilling locations based on existing
3-D seismic and geological modeling of the area. Based on current
mapping the Company has internally estimated a prospective resource
of 71 million barrels on an un-risked deterministic basis for the NWG
block. The 2014 drilling program will target up to 58 million barrels
of the total 71 million barrels of prospective resource identified to
date. The following table summarizes the prospects that will be
tested in 2014. 


 
 
                                                     Prospective            
                                                   Resources (i)            
                                                    (millions of  Chance of 
Wells            Description                            barrels)    Success 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
NWG 1, 2, 3, 4,  Nukhul Pools proximal to Arta /                            
 5, 7             East Arta                                  6.9   40 to 60%
NWG 6            Nukhul structure                           11.8         16%
NWG 8            Nukhul structure                            1.9         24%
NWG 9            Nukhul structure                            1.8         12%
NWG 10           Markhu / Rudeis structure                  33.0         15%
NWG 11           Nukhul structure                            3.0         35%
NWG 12 to 18     Appraisal wells to NWG 1 to 5, 7              -            
----------------------------------------------------------------------------
Planned 2014                                                                
 drilling                                                                   
 program                                                    58.4            
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
(i)  Internally estimated on an un-risked deterministic basis.              

New Exploration Blocks, Eastern & Western Desert (100% working
interest, operated)  
Exploration Seismic  
Based on surface and remote-sensing mapping, the Company believes the
same structural configuration that created the pools found in the
West Gharib concession is present in the NWG, SW Gharib ("SWG") and
SE Gharib ("SEG") blocks. The historical field size distribution data
indicates that the average field size in the broader onshore Gulf of
Suez (Eastern Desert) area is roughly 20 million barrels per field of
recoverable resource. The Company has identified an additiona
l 15
areas of interest ("leads") in the NWG block, four leads on the SWG
block and two leads on the SEG block that will be followed up and
further refined by field mapping and the high-resolution seismic
acquisition program. 
The Company has approved and commenced a large (1,000+ square
kilometers of 3-D and 300+ kilometers of 2-D) seismic acquisition
program for the Eastern Desert to be followed with an additional 400+
square kilometers of 3-D seismic acquisition in the Western Desert
(South Ghazalat concession). It is expected the total seismic
acquisition program will be completed by the second quarter of 2015
at an estimated cost of $36 million. 
East Ghazalat Block, Arab Republic of Egypt (50% working interest) 
Operations and Exploration  
The Company participated in one oil well during the second quarter.
Year-to-date the Company has participated in three wells resulting in
two Safwa oil wells and one dry hole. Drilling commenced on the
14,500 foot North Dabaa 2 appraisal well with results expected in
late August. The North Dabaa 1 discovery well tested natural
gas/condensate from the Khatatba formation (press release November
13, 2013). Following the North Dabaa 2 appraisal well, the rig is
scheduled to move to the Safwa development lease to drill the first
horizontal development well targeting the Upper Bahariya in the Safwa
field. 
Production 
Production from East Ghazalat averaged 1,573 Bopd (786 Bopd to
TransGlobe) during the second quarter, a 352 Bopd (81%) increase to
TransGlobe from the previous quarter. Production increases are
attributed to the new Safwa producer which effectively doubled field
production in mid-March. 
The Safwa field production averaged 1,374 Bopd (687 Bopd to
TransGlobe) in July. 


 
 
Quarterly East Ghazalat Production                                          
 (Bopd)                                             2014                2013
----------------------------------------------------------------------------
                                           Q-2       Q-1       Q-4       Q-3
----------------------------------------------------------------------------
Gross production rate                    1,573       868       670       421
TransGlobe working interest                786       434       335       211
TransGlobe net (after royalties)           395       218       168       106
TransGlobe net (after royalties and                                         
 tax) (i)                                  315       174       134        84
----------------------------------------------------------------------------
 
(i)  Under the terms of the East Ghazalat Production Sharing Concession,    
     royalties and taxes are paid out of the Government's share of          
     production.                                                            

South Alamein, Arab Republic of Egypt (100% working interest, operated) 
Operations and Exploration 
The Company has not provided guidance for any wells in 2014 due to
the pr
olonged delays in receiving military approvals for new wells
primarily in the central portion of the concession which includes the
Boraq discovery. The Company has negotiated and received EGPC
approval that the final exploration period for approximately 800
square kilometers of the concession (which has been deemed non
accessible by the military due to ongoing training and other
activities in the area) has been suspended effective July 8, 2012.
The South Alamein concession was scheduled to reach the end of the
final exploration period on April 4, 2014. Effective April 4, 2014
the remaining exploration lands outside of the restricted access zone
were relinquished in accordance with the concession agreement. The
relinquished lands were evaluated and were not considered
prospective. The remaining lands and the South Alamein concession
agreement are extended until such time as military access is
approved, at which time the Company will have approximately 20 months
to complete additional exploration and appraisal in the final
exploration phase. All other provisions of the South Alamein
concession agreement remain in place. The current South Alamein
concession lands include the Boraq discovery and the remaining
exploration prospects of interest. The Company continues to actively
engage the military to find solutions to obtain access to the
remaining concession area. 
REPUBLIC OF YEMEN 
Block 32, Republic of Yemen (13.81% working interest) 
Operations and Exploration  
No wells were drilled during the second quarter.  
Production  
Sales production from Block 32 averaged 841 Bopd (116 Bopd to
TransGlobe) during the second quarter. The reported gross sales
production rate represents the amount of oil that was lifted and sold
during the quarter. It is expected that sales production rates and
the field production rates will vary quarter to quarter depending on
the timing of tanker liftings during the respective quarter.  
The actual field production during the second quarter averaged 1,133
Bopd (156 Bopd to TransGlobe) which is approximately 17% higher than
the previous quarter. Production in 2014 continues to be partially
impacted due to pipeline and general service/supply interruptions.  
Production from the block averaged 1,594 Bopd (220 Bopd to
TransGlobe) during July. 


 
 
Quarterly Block 32 Production and                                           
 Sales (Bopd)                                       2014                2013
----------------------------------------------------------------------------
                                           Q-2       Q-1       Q-4       Q-3
----------------------------------------------------------------------------
Gross field production rate              1,133       968     1,995     2,310
Gross sales production rate                841       938     2,718     1,673
TransGlobe working interest                116       130       375       231
TransGlobe net (after royalties)            91       103       283       169
TransGlobe net (after royalties and                                         
 tax) (i)                                   83        94       256       150
----------------------------------------------------------------------------
 
(i)  Under the terms of the Block 32 Production Sharing Agreement, royalties
     and taxes are paid out of the Government's share of production.        

Block 72, Republic of Yemen (20% working interest)  
Operations and Exploration  
No new wells were drilled during the quarter. The joint venture
partners initially approved the Gabdain #3 exploration well in the
2013 budget, subject to the resolution of logistic/security issues in
the area which have not been resolved to date. The well is included
in the 2014 exploration budget subject to resolution of tribal issues
in the area. 
Block S-1, Republic of Yemen (25% working interest)  
Operations and Exploration  
No wells were drilled during the second quarter.  
Production  
Sales production from Block S-1 averaged 1,652 Bopd (413 Bopd to
TransGlobe) during the second quarter. The reported gross sales
production rate represents the amount of oil that was lifted and sold
during the quarter. It is expected that sales production rates and
the field production rates will vary quarter to quarter depending on
the timing of tanker liftings during the respective quarter. 
Field production was zero during the second quarter due to an attack
on the sales pipeline on February 24, 2014. The pipeline attack
related primarily to unresolved contractor issues with local tribes
which were under negotiation. The operator made progress on a number
of labor issues during the second quarter and repaired the pipeline
in early July. The pipeline was attacked a few days later and remains
shut in pending resolution of additional labor issues. When a
settlement is reached it is expected that the operations and
production will commence within a few days. 


 
 
Quarterly Block S-1 Production and                                          
 Sales (Bopd)                                       2014                2013
----------------------------------------------------------------------------
                                           Q-2       Q-1       Q-4       Q-3
----------------------------------------------------------------------------
Gross field production rate                  -     2,568     1,624         -
Gross sales production rate              1,652     2,044         -         -
TransGlobe working interest                413       511         -         -
TransGlobe net (after royalties)           288       357         -         -
TransGlobe net (after royalties and                                         
 tax) (i)                                  257       318         -         -
----------------------------------------------------------------------------
 
(i)  Under the terms of the Block S-1 Production Sharing Agreement,         
     royalties and taxes are paid out of the Government's share of      
    
     production.                                                            

Block 75, Republic of Yemen (25% working interest)  
Operations and Exploration  
No wells were drilled during the quarter.  
Future drilling is suspended pending resolution of logistics and
security concerns. 
READER ADVISORIES  
Forward-Looking Statements 
Certain statements or information contained herein may constitute
forward-looking statements or information under applicable securities
laws, including, but not limited to, management's assessment of
future plans and operations, the anticipated amount and timing of
future dividend payments, the sustainability of future dividend
payments, anticipated increases to the Company's reserves and
production, collection of accounts receivable from the Egyptian
Government, drilling plans and the timing thereof, commodity price
risk management strategies, adapting to the current political
situations in Egypt and Yemen, reserve estimates, management's
expectation for results of operations for 2014, including expected
2014 average production, funds flow from operations, the 2014 capital
program for exploration and development, the timing and method of
financing thereof, method of funding drilling commitments, and
commodity prices and expected volatility thereof. Statements relating
to "reserves" are deemed to be forward-looking statements, as they
involve the implied assessment, based on certain estimates and
assumptions, that the reserves described can be profitably produced
in the future. 
Forward-looking statements or information relate to the Company's
future events or performance. All statements other than statements of
historical fact may be forward-looking statements or information.
Such statements or information are often but not always identified by
the use of words such as "seek", "anticipate", "plan", "continue",
"estimate", "expect", "may", "will", "project", "predict",
"potential", "targeting", "intend", "could", "might", "should", 
"believe", and similar expressions. 
Forward-looking statements or information necessarily involve risks
including, without limitation, risks associated with oil and gas
exploration, development, exploitation, production, marketing and
transportation, loss of markets, economic and political instability,
volatility of commodity prices, currency fluctuations, imprecision of
reserve estimates, environmental risks, competition from other
producers, inability to retain drilling rigs and other services,
incorrect assessment of the value of acquisitions, failure to realize
the anticipated benefits of acquisitions, delays resulting from or
inability to obtain required regulatory approvals and ability to
access sufficient capital from internal and external sources. The
recovery and reserve estimates of the Company's reserves provided
herein are estimates only and there is no guarantee that the
estimated reserves will be recovered. Events or circumstances may
cause actual results to differ materially from those predicted, as a
result of the risk factors set out and other known and unknown risks,
uncertainties, and other factors, many of which are beyond the
control of the Company. 
In addition, forward-looking statements or information are based on a
number of factors and assumptions which have been used to develop
such statements and information in order to provide shareholders with
a more complete perspective on the Company's future operations. Such
statements and information may prove to be incorrect and readers are
cautioned that such statements and information may not be appropriate
for other purposes. Although the Company believes that the
expectations reflected in such forward-looking statements or
information are reasonable, undue reliance should not be placed on
forward-looking statements or information because the Company can
give no assurance that such expectations will prove to be correct. In
addition to other factors and assumptions which may be identified
herein, assumptions have been made regarding, among other things: the
impact of increasing competition; the general stability of the
economic and political environment in which the Company operates; the
timely receipt of any required regulatory approvals; the ability of
the Company to obtain qualified staff, equipment and services in a
timely and cost efficient manner; drilling results; the ability of
the operator of the projects which the Company has an interest in to
operate the field in a safe, efficient and effective manner; the
ability of the Company to obtain financing on acceptable terms; field
production rates and decline rates; the ability to replace and expand
oil and natural gas reserves through acquisition, development and
exploration; the timing and costs of pipeline, storage and facility
construction and expansion and the ability of the Company to secure
adequate product transportation; future commodity prices; currency,
exchange and interest rates; the regulatory framework regarding
royalties, taxes and environmental matters in the jurisdictions in
which the Company operates; and the ability of the Company to
successfully market and receive payment for its oil and natural gas
products. 
Readers are cautioned that the foregoing list is not exhaustive of
all factors and assumptions which have been used. As a consequence,
actual results may differ materially from those anticipated in the
forward-looking statements. Additional information on these and other
factors that could affect the Company's operations and financial
results are included in reports on file with Canadian securities
regulatory authorities and may be accessed through the SEDAR website
(www.sedar.com), EDGAR website (www.sec.gov) and at the Company's
website (www.trans-globe.com). Furthermore, the forward-looking
statements or information contained herein are made as at the date
hereof and the Company does not undertake any obligation to update
publicly or to revise any of the included forward-looking statements,
whether as a result of new information, future events or otherwise,
except as may be required by applicable securities laws. 
The reader is further cautioned that the preparation of financial
statements in accordance with IFRS requires management to make
certain judgments and estimates that affect the reported amounts of
assets, liabilities, revenues and expenses. Estimating reserves is
also critical to several accounting estimates and requires judgments
and decisions based upon available geological, geophysical,
engineering and economic data. These estimates may change, having
either a negative or positive effect on net earnings as further
information becomes available, and as the economic environment
changes. 
DIVIDENDS 
On August 11, 2014, TransGlobe's Board of Directors approved and
declared a quarterly dividend of $0.05 per share, payable in cash as
follows: 


 
 
                                                                   Per share
Ex-dividend date              Record date         Payment date        amount
----------------------------------------------------------------------------
September 11, 2014     September 15, 2014   September 30, 2014         $0.05
----------------------------------------------------------------------------
----------------------------------------------------------------------------

The initiation of a quarterly dividend payment program in the second
quarter of 2014 is a key component of TransGlobe's objective to
create value for its shareholders. The Company believes that it is
well positioned to sustain a quarterly dividend payment, and intends
to approve and declare regular quarterly dividends on a go-forward
basis. 
The actual amount of future quarterly dividends will be proposed by
management and subject to the approval and discretion of the Board.
The Board reviews proposed dividend payments in conjunction with
their review of quarterly financial and operating results. Future
dividend levels will be dependent upon economic factors including
commodity prices, capital expenditure programs and production
volumes, and will be evaluated regularly to ensure that dividend
payments do not compromise the strong financial position or the
growth of the Company. 
The quarterly dividend declared on August 11, 2014 has been
designated as an eligible dividend under the Income Tax Act (Canada). 
MANAGEMENT STRATEGY AND OUTLOOK 
The 2014 outlook provides information as to management's expectation
for results of operations for 2014. Readers are cautioned that the
2014 outlook may not be appropriate for other purposes. The Company's
expected results are sensitive to fluctuations in the business
environment and may vary accordingly. This outlook contains
forward-looking statements that should be read in conjunction with
the Company's disclosure under "Forward-Looking Statements".  
2014 Outlook  
Production guidance for 2014 is under review due to prolonged pump
issues at West Gharib and continued tribal issues in Yemen.  
Production 
sales to June 30, 2014 averaged 17,204 Bopd with July
production averaging 15,275 Bopd.  
It is expected that third quarter production will be in the 15,000
Bopd range. Due to the timing uncertainties to restore production at
West Gharib and Yemen, it is difficult to predict fourth quarter
production increases at this time. Fourth quarter production guidance
will be provided when the timing of replacement pump
installation/optimization and performance has been established. 
Should production remain in the 15,000 Bopd range for the balance of
the year, total production for 2014 would average approximately
16,000 Bopd for 2014. 
With production at 15,000 Bopd for the balance of the year (16,000
Bopd average for 2014), funds flow from operations would be
approximately $126.5 million ($117 million excluding the $9.3
termination fee from Caracal) assuming an average Dated Brent oil
price of $100/Bbl for the balance of the year. The funds flow
sensitivity to a $10/Bbl change in Brent for the balance of the year
is approximately $6 million. 


 
 
2014 Capital Budget                       Six Months Ended              2014
($ millions)                                 June 30, 2014    Capital Budget
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Egypt                                                 30.4              93.6
Yemen                                                  1.0               6.4
Corporate                                              0.4                 -
----------------------------------------------------------------------------
Total                                                 31.8             100.0
----------------------------------------------------------------------------
----------------------------------------------------------------------------

As at June 30, 2014 the Company had spent approximately 32% of the 2014
budget. Capital spending is fore
cast to increase in the second half
of 2014 with the addition of a third drilling rig (late June) and a
large seismic acquisition program (commencing in August) in the
Eastern Desert. 
Although the Company's capital budget remains at $100.0 million, it
is expected that $85.0 - $90.0 million will be invested in Egypt
during 2014, with minimal investment in Yemen due to tribal issues. 
The 2014 capital program is split 68:32 between development and
exploration, respectively. The Company plans to participate in up to
51 wells in 2014. The Company intends to fund it entire 2014 capital
budget through the use of working capital and cash generated by
operating activities. 
ADDITIONAL MEASURES  
Funds Flow from Operations  
This document contains the term "funds flow from operations", which
should not be considered an alternative to or more meaningful than
"cash flow from operating activities" as determined in accordance
with IFRS. Funds flow from operations is a measure that represents
cash generated from operating activities before changes in non-cash
working capital. Management considers this a key measure as it
demonstrates TransGlobe's ability to generate the cash necessary to
fund future growth through capital investment. Funds flow from
operations may not be comparable to similar measures used by other
companies. 


 
 
Reconciliation of Funds Flow from Operations                                
                                      Three Months Ended    Six Months Ended
                                                 June 30             June 30
----------------------------------------------------------------------------
($000s)                                   2014      2013      2014      2013
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cash flow from operating activities     33,467    16,347    36,678    68,247
Changes in non-cash working capital      9,718    16,540    38,994       645
----------------------------------------------------------------------------
Funds flow from operations(i)           43,185    32,887    75,672    68,892
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
(i)  Funds flow from operations does not include interest or financing      
     costs. Interest expense is included in financing costs on the Condensed
     Consolidated Interim Statements of Earnings and Comprehensive          
     Income.Cash interest paid is reported as a financing activity on the   
     Condensed Consolidated Interim Statements of Cash Flows.               

Debt-to-funds flow ratio  
Debt-to-funds flow is a measure that is used to set the amount of
capital in proportion to risk. The Company's debt-to-funds flow ratio
is computed as long-term debt, including the current portion, plus
convertible debentures over funds flow from operations for the
trailing twelve months. Debt-to-funds flow may not be comparable to
similar measures used by other companies.  
Netback  
Netback is a measure that represents sales net of royalties (all
government interests, net of income taxes), operating expenses and
current taxes. Management believes that netback is a useful
supplemental measure to analyze operating performance and provide an
indication of the results generated by the Company's principal
business activities prior to the consideration of other income and
expenses. Netback may not be comparable to similar measures used by
other companies.  
TRANSGLOBE'S BUSINESS  
TransGlobe is a Canadian-based, publicly-traded, oil exploration and
production company whose activities are concentrated in two main
geographic areas: the Arab Republic of Egypt ("Egypt") and the
Republic of Yemen ("Yemen").  
SELECTED QUARTERLY FINANCIAL INFORMATION 


 
 
                        2014                            2013            2012
----------------------------------------------------------------------------
($000s,                                                                     
 except per                                                                 
 share,                                                                     
price and                                                                   
 volume                                                                     
 amounts)        Q-2     Q-1     Q-4     Q-3     Q-2     Q-1     Q-4     Q-3
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Average                                                                     
 production                                                                 
 volumes                                                                    
 (Bopd)       16,112  18,067  18,519  18,197  18,417  18,001  17,875  18,143
Average sales                                                               
 volumes                                                                    
 (Bopd)       16,485  17,932  18,213  18,109  18,539  17,909  19,148  17,124
Average price                                                               
 ($/Bbl)       96.14   94.89   96.10   97.18   90.48   99.21   98.70   96.88
Oil sales    144,208 153,140 161,035 161,900 152,646 159,915 173,864 152,624
Oil sales,                                                                  
 net of                                                                     
 royalties    76,040  78,366  81,196  78,531  76,223  79,366  92,281  74,540
Cash flow                                                                   
 from                                                                       
 operating                                                                  
 activities   33,467   3,211 109,226  22,035  16,347  51,900  65,250   2,368
Funds flow                                                                  
 from                                                                       
 operations                                                                 
 (i)          43,185  32,487  36,743  33,483  32,887  36,005  46,839  35,397
Funds flow                                                                  
 from                                                                       
 operations                                                                 
 per share                                                                  
  - Basic       0.58    0.44    0.49    0.45    0.45    0.49    0.63    0.49
  - Diluted     0.57    0.43    0.49    0.44    0.40    0.44    0.57    0.47
Net earnings  26,199  16,692   6,893  16,344  10,397  24,878  34,836  11,774
Net earnings                                                                
 - diluted    26,199  16,692   6,893  16,344    (183) 21,427  32,156  11,774
Net earnings                              
                                  
 per share                                                                  
  - Basic       0.35    0.22    0.09    0.22    0.14    0.34    0.48    0.16
  - Diluted     0.35    0.22    0.09    0.22       -    0.26    0.39    0.16
Dividends                                                                   
 paid         11,229       -       -       -       -       -       -       -
Dividends                                                                   
 paid per                                                                   
 share          0.15       -       -       -       -       -       -       -
 
Total assets 705,859 692,341 675,800 723,708 670,996 672,675 653,425 635,529
Cash and cash                                                               
 equivalents 110,057 107,607 122,092 128,162 101,435 112,180  82,974  45,732
Convertible                                                                 
 debentures   88,814  87,765  87,539  85,300  81,830  93,842  98,742 102,920
Total long-                                                                 
 term debt,                                                                 
 including                                                                  
 current                                                                    
 portion           -       -       -  39,040  15,224  17,097  16,885  31,878
Debt-to-funds                                                               
 flow ratio                                                                 
 (ii)            0.6     0.6     0.6     0.8     0.6     0.7     0.8     1.0
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
(i)  Funds flow from operations is a measure that represents cash generated 
     from operating activities before changes in non-cash working capital   
     and may not be comparable to measures used by other c
ompanies.         
(ii) Debt-to-funds flow ratio is measure that represents total long-term    
     debt (including the current portion) plus convertible debentures over  
     funds flow from operations from the trailing 12 months and may not be  
     comparable to measures used by other companies.                        

During the second quarter of 2014, TransGlobe:  


 
 
--  Maintained a strong financial position, reporting a debt-to-funds flow
    ratio of 0.6 at June 30, 2014; 
 
--  Reported net earnings of $26.2 million, which includes the $9.3 million
    reverse termination fee received from Caracal Energy Inc. ("Caracal")
    upon termination of the arrangement agreement between TransGlobe and
    Caracal and $2.0 million in an unrealized gain on the convertible
    debenture; 
 
--  Experienced a decrease in oil sales compared to Q1-2014 and Q2-2013
    primarily as a result of decreased sales volumes, which was partially
    offset by increased oil prices; 
 
--  Achieved funds flow from operations of $43.2 million, which represents a
    significant increase from both the prior quarter and Q2-2013. Funds flow
    from operations is elevated in the current quarter due to the receipt of
    the reverse termination fee from Caracal in the amount of $9.3 million; 
 
--  Experienced an increase in cash flow from operating activities as
    compared to Q1-2014, which is mostly due to the reverse termination fee
    received from Caracal along with higher collections on accounts
    receivable balances; 
 
--  Spent $17.5 million on capital programs, which was funded entirely with
    funds flow from operations and cash on hand; and 
 
--  Paid a special dividend of $0.10/share and a quarterly dividend of
    $0.05/share during the second quarter of 2014. 

2014 TO 2013 NET EARNINGS VARIANCES 


 
 
                                                  $ Per Share               
                                          $000s       Diluted    % Variance 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Q2-2013 net earnings(i)                  10,397          0.14               
----------------------------------------------------------------------------
Cash items                                                                  
Volume variance                         (17,843)        (0.23)         (171)
Price variance                            9,405          0.12            90 
Royalties                                 8,255          0.11            79 
Expenses:                                                                   
  Production and operating               (1,496)        (0.02)          (14)
  Cash general and administrative            85             -             1 
  Exploration                              (156)            -            (2)
  Current income taxes                    2,939          0.04            28 
  Realized foreign exchange gain                                            
   (loss)                                   (43)            -             - 
  Interest on long-term debt                350             -             3 
Other income                              9,152          0.12            88 
----------------------------------------------------------------------------
Total cash items variance                10,648          0.14           102 
----------------------------------------------------------------------------
Non-cash items                                                              
Unrealized foreign exchange gain         (5,288)        (0.07)          (51)
Depletion and depreciation                 (173)            -            (2)
Unrealized gain (loss) on                                                   
 financial instruments                   (7,105)        (0.09)          (68)
Stock-based compensation                 19,710          0.26           190 
Deferred income taxes                      (610)        (0.01)           (6)
Deferred lease inducement                (1,384)        (0.02)          (13)
Amortization of deferred financing                                          
 costs                                        4             -             - 
----------------------------------------------------------------------------
Total non-cash items variance             5,154          0.07            50 
----------------------------------------------------------------------------
Q2-2014 net earnings                     26,199          0.35           152 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
(i)  Diluted earnings per share for Q2-2013 is presented prior to the       
     dilutive effect of the convertible debentures in that period           

Net earnings increased to $26.2 million in Q2-2014 compared to $10.4
million in Q2-2013. The earnings impact of decreased volumes was
almost completely offset by increased prices and reduced royalty
costs. The largest earnings variance item from Q2-2013 to Q2-2014
relates to the impairment loss recorded on the Company's South Mariut
assets in Q2-2013 in the amount of $19.7 million, for which there was
no corresponding impairment loss recorded in Q2-2014. The reverse
termination fee received from Caracal in the amount of $9.3 million
(included in other income) also created a positive earnings variance
from Q2-2013 to Q2-2014. Partially offsetting these positive earnings
variances was a decrease in the mark-to-market gain on convertible
debentures along with a foreign exchange loss of $3.1 million in
Q2-2014 compared to a gain of $2.2 million in Q2-2013. 
BUSINESS ENVIRONMENT 
The Company's financial results are influenced by fluctuations in
commodity prices, including price differentials. The following table
shows select market benchmark prices and foreign exchange
rates: 


 
 
                
                                2014                    2013
----------------------------------------------------------------------------
                                         Q-2     Q-1     Q-4     Q-3     Q-2
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Dated Brent average oil price                                               
 ($/Bbl)                              108.95  108.18  109.27  110.27  102.44
U.S./Canadian Dollar average                                                
 exchange rate                         1.091   1.103   1.050   1.039   1.023
----------------------------------------------------------------------------
----------------------------------------------------------------------------

The price of Dated Brent oil averaged 1% higher in Q2-2014 compared
with Q1-2014. All of the Company's production is priced based on
Dated Brent and shared with the respective governments through PSCs.
When the price of oil increases, it takes fewer barrels to recover
costs (cost recovery barrels) which are assigned 100% to the Company.
The contracts provide for cost recovery per quarter up to a maximum
percentage of total revenue. Timing differences often exist between
the Company's recognition of costs and their recovery as the Company
accounts for costs on an accrual basis, whereas cost recovery is
determined on a cash basis. If the eligible cost recovery is less
than the maximum defined cost recovery, the difference is defined as
"excess". In Egypt, depending on the PSC, the Contractor's share of
excess ranges between 0% and 30%. In Yemen, under the Production
Sharing Agreements, the excess is treated as production sharing oil.
If the eligible cost recovery exceeds the maximum allowed percentage,
the unclaimed cost recovery is carried forward to the next quarter.
Typically maximum cost recovery or cost oil ranges from 25% to 30% in
Egypt and 50% to 60% in Yemen. The balance of the production after
maximum cost recovery is shared with the respective governments
(production sharing oil). In Egypt, depending on the contract, the
government receives 70% to 86% of the production sharing oil or
profit oil. In Yemen, the government receives 65% of the production
sharing oil or profit oil. Production sharing splits are set in each
contract for the life of the contract. Typically the government's
share of production sharing oil increases when production exceeds
pre-set production levels in the respective contracts. During times
of increased oil prices, the Company receives less cost oil and may
receive more production sharing oil. For reporting purposes, the
Company records the respective government's share of production as
royalties and taxes (all taxes are paid out of the government's share
of production). 
Egypt has been experiencing significant political changes over the
past three years and while this has had an impact on the efficient
operations of th
e government in general, business processes and the
Company's operations have generally proceeded as normal. While
exploration and development activities have generally been
uninterrupted, the Company has continued to experience delays in the
collection of accounts receivable from the Egyptian Government. The
Company is in continual discussions with the Egyptian Government to
improve the delayed cash collections, and expects to recover the
accounts receivable balance in full. During the first six months of
2014, the Company collected $74.5 million in accounts receivable from
the Egyptian Government. 
The Egyptian government recently implemented higher gasoline, diesel
and natural gas prices, effectively reducing the subsidies carried by
the government. These price increases are expected to have a material
impact on Egypt's current budget deficit and are also expected to
enable the Egyptian government to make more timely payments for its
purchases of oil and gas from international oil companies. Given the
political sensitivity of the reduction of fuel subsidies, it is
extremely encouraging to see the Egyptian Government take decisive
action in this regard. The fact that the newly formed government is
willing to take actions that may not be popular from a political
perspective to improve the Egyptian economy is viewed as very
positive by TransGlobe. 
In an effort to expand the Company's exploration opportunities in
Egypt, TransGlobe submitted a bid on a single exploration block on
July 3, 2014 in the EGPC bid round. It is expected that the blocks
will be awarded to successful bidders during this year. 
OPERATING RESULTS AND NETBACK  
Daily Volumes, Working Interest before Royalties and Other (Bopd)  
Production Volumes 


 
 
                        Three Months Ended June 30  Six Months Ended June 30
----------------------------------------------------------------------------
                                 2014         2013         2014         2013
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Egypt                          15,956       18,111       16,619       17,890
Yemen                             156          306          464          319
----------------------------------------------------------------------------
Total Company                  16,112       18,417       17,083       18,209
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Sales Volumes 


 
 
                        Three Months Ended June 30  Six Months Ended June 30
----------------------------------------------------------------------------
                                 2014         2013         2014         2013
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Egypt                          15,956       18,111       16,619       17,890
Yemen                             529          428          585          335
----------------------------------------------------------------------------
Total Company                  16,485       18,539       17,204       18,225
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Netback 


 
 
Consolidated                                                                
                                                    Six Months Ended June 30
----------------------------------------------------------------------------
                                                    2014                2013
----------------------------------------------------------------------------
(000s, except per Bbl amounts)               $     $/Bbl         $     $/Bbl
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Oil sales                              297,348     95.49   312,561     94.75
Royalties                              142,942     45.90   156,972     47.59
Current taxes                           37,997     12.20    44,116     13.37
Production and operating expenses       38,603     12.40    32,061      9.72
----------------------------------------------------------------------------
Netback                                 77,806     24.99    79,412     24.07
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Consolidated                                                                
                                                  Three Months Ended June 30
----------------------------------------------------------------------------
                                                    2014                2013
----------------------------------------------------------------------------
(000s, except per Bbl amounts)               $     $/Bbl         $     $/Bbl
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Oil sales                              144,209     96.14   152,646     90.48
Royalties                               68,169     45.44    76,423     45.30
Current taxes                           18,103     12.07    21,042     12.47
Production and operating expenses       19,025     12.68    17,529     10.39
----------------------------------------------------------------------------
Netback                                 38,912     25.95    37,652     22.32
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Egypt                                                                       
         
                                           Six Months Ended June 30
----------------------------------------------------------------------------
                                                    2014                2013
----------------------------------------------------------------------------
(000s, except per Bbl amounts)               $     $/Bbl         $     $/Bbl
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Oil sales                              285,963     95.07   306,034     94.51
Royalties                              139,721     46.45   154,496     47.71
Current taxes                           37,153     12.35    43,326     13.38
Production and operating expenses       32,292     10.74    28,081      8.67
----------------------------------------------------------------------------
Netback                                 76,797     25.53    80,131     24.75
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Egypt                                                                       
                                                  Three Months Ended June 30
----------------------------------------------------------------------------
                                                    2014                2013
----------------------------------------------------------------------------
(000s, except per Bbl amounts)               $     $/Bbl         $     $/Bbl
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Oil sales                              139,020     95.74   148,545     90.13
Royalties                               66,699     45.94    74,852     45.42
Current taxes                           17,718     12.20    20,536     12.46
Production and operating ex
penses       15,985     11.01    15,350      9.31
----------------------------------------------------------------------------
Netback                                 38,618     26.59    37,807     22.94
----------------------------------------------------------------------------
----------------------------------------------------------------------------

The netback per Bbl in Egypt increased 16% and 3%, respectively, in the
three and six months ended June 30, 2014 compared with the same
periods of 2013. The main driver of the increased netbacks was the
effect of a 6% and 1% increase in realized oil prices, respectively,
in the three and six months ended June 30, 2014 compared with the
same periods of 2013. Production and operating expenses increased by
$1.70/Bbl and $2.07/Bbl, respectively, which was principally a result
of increased well servicing costs relating to faulty progressive
cavity pumps at West Gharib, along with increased costs at West Bakr
associated with replacing pump jacks that are at the end of their
life cycles. The increase in production and operating expenses
resulted in a decrease in the amount of royalties and current taxes
as a percentage of revenue per Bbl for the three and six months ended
June 30, 2014 as compared to the same periods in 2013. Total
government take (royalties and current taxes) as a percentage of
revenue was 61% and 62%, respectively, for the three and six months
ended June 30, 2014 compared with 64% and 65%, respectively, for the
same periods of 2013. 
The average selling price during the three months ended June 30, 2014
was $95.74/Bbl, which represents a gravity/quality adjustment of
approximately $13.21/Bbl to the average Dated Brent oil price for the
period of $108.95/Bbl.  


 
 
Yemen                                                                       
                                                    Six Months Ended June 30
----------------------------------------------------------------------------
                                                    2014                2013
----------------------------------------------------------------------------
(000s, except per Bbl amounts)               $     $/Bbl         $     $/Bbl
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Oil sales                               11,385    107.52    6,527    107.64 
Royalties                                3,221     30.42    2,476     40.83 
Current taxes                              844      7.97      790     13.03 
Production and operating expenses        6,311     59.60    3,980     65.64 
----------------------------------------------------------------------------
Netback                                  1,009      9.53     (719)   (11.86)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Yemen                                                                       
                                                  Three Months Ended June 30
----------------------------------------------------------------------------
                                                    2014                2013
----------------------------------------------------------------------------
(000s, except per Bbl amounts)               $     $/Bbl         $     $/Bbl
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Oil sales                                5,189    107.79    4,101    105.29 
Royalties                                1,470     30.54    1,571     40.34 
Current taxes                              385      8.00      506     12.99 
Production and operating expenses        3,040     63.15    2,179     55.95 
----------------------------------------------------------------------------
Netback                                    294      6.10     (155)    (3.99)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

In Yemen, the Company experienced netbacks per Bbl of $6.10 and $9.53,
respectively, in the three and six months ended June 30, 2014.
Production and operating expenses remain at elevated levels on a per
Bbl basis in 2014 as a result of production shut-ins on Block S-1 and
Block 32 during the first half of the year. While production volumes
were down, the Company continued to incur the majority of the
operating costs which significantly impacted operating expenses per
Bbl. These operating costs will be recovered from cost oil when
production resumes. 
Royalties and taxes as a percentage of revenue decreased to 36% in
the three and six months ended June 30, 2014, compared with 51% and
50%, respectively, in the same periods of 2013. The reduced
government take is the result of the recovery of cost pools that were
built up during periods when production was shut-in.  
GENERAL AND ADMINISTRATIVE EXPENSES ("G&A") 


 
 
                                                   Six Months Ended June 30 
----------------------------------------------------------------------------
                                                    2014               2013 
----------------------------------------------------------------------------
(000s, except Bbl amounts)                   $     $/Bbl         $    $/Bbl 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
G&A (gross)                            14,708      4.72    12,706      3.85 
Stock-based compensation                2,728      0.88     2,562      0.78 
Capitalized G&A and overhead                                                
 recoveries                            (3,584)    (1.15)   (1,849)    (0.56)
----------------------------------------------------------------------------
G&A (net)                              13,852      4.45    13,419      4.07 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
                                                 Three Months Ended June 30 
----------------------------------------------------------------------------
                                                    2014               2013 
----------------------------------------------------------------------------
(000s, except Bbl amounts)                   $     $/Bbl         $    $/Bbl 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
G&A (gross)                             6,898      4.60     5,799      3.44 
Stock-based compensation                1,894      1.26     1,284      0.76 
Capitalized G&A and overhead                       
                         
 recoveries                            (1,948)    (1.30)     (764)    (0.45)
----------------------------------------------------------------------------
G&A (net)                               6,844      4.56     6,319      3.75 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

G&A expenses (net) increased 22% and 9%, respectively, in the three and
six months ended June 30, 2014 compared with the same periods in
2013. G&A (gross) was elevated in the three and six months ended June
30, 2014 mostly due to an increase in banking fees associated with
the letters of credit ($60.2 million) required to backstop the
Company's financial commitments under the PSCs that were ratified in
late 2013 in Egypt. These banking fees were capitalized in their
respective concessions, which is the reason for the increased
capitalized G&A. Stock-based compensation has increased in both the
three and six months periods ended June 30, 2014 compared to the same
periods in 2013 mostly as a result of the issuance of restricted
share units, performance share units and deferred share units during
Q2-2014. 
FINANCE COSTS  
Finance costs for the three and six months ended June 30, 2014 were
$1.9 million and $3.8 million, respectively (2013 - $2.2 million and
$4.4 million, respectively). Interest expense on the convertible
debentures for the three and six-month periods ended June 30, 2014
were $1.3 million and $2.6 million, respectively (2013 - $1.4 million
and $2.9 million, respectively). The decrease in this portion of the
interest expense is due to foreign exchange fluctuations, as the
interest on the convertible debentures is paid in Canadian dollars.
The remaining decrease in interest expense is due to a lower
utilization of the Company's Borrowing Base Facility thus far in 2014
as compared to 2013. 


 
 
------------------------------------------------------------------
-----
-----
                        Three Months Ended June 30  Six Months Ended June 30
----------------------------------------------------------------------------
(000s)                           2014         2013         2014         2013
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Interest expense                1,579        1,929        3,195        3,869
Amortization of deferred                                                    
 financing costs                  279          283          555          545
----------------------------------------------------------------------------
Finance costs                   1,858        2,212        3,750        4,414
----------------------------------------------------------------------------
----------------------------------------------------------------------------

The Company had no long-term debt outstanding under the Borrowing Base
Facility as at June 30, 2014 (June 30, 2013 - $18.5 million). The
term of the facility extends to December 31, 2017 and the borrowing
base is currently $100.0 million. The Borrowing Base Facility bears
interest at LIBOR plus an applicable margin that varies from 5.0% to
5.5% depending on the amount drawn or utilized under the facility.
The unutilized portion of the facility bears interest at 50% of the
applicable margin. 
In February 2012, the Company sold, on a bought-deal basis, C$97.8
million ($97.9 million) aggregate principal amount of convertible
unsecured subordinated debentures with a maturity date of March 31,
2017. The debentures are convertible at any time and from time to
time into common shares of the Company at a price of C$14.89 per
common share. Under certain circumstances the debentures may also be
redeemed by the Company. The conversion price of the convertible
debentures will adjust for any amounts paid out as dividends on the
common shares of the Company, provided that the dividend payment
causes the conversion price to change by 1% or more. Interest of 6%
is payable semi-annually in arrears on March 31 and September 30. At
maturity or redemption, the Company has the option to settle all or
any portion of principal obligations by delivering to the debenture
holders sufficient common shares to satisfy these obligations.  
DEPLETION AND DEPRECIATION ("DD&A") 


 
 
                                                    Six Months Ended June 30
----------------------------------------------------------------------------
                                                    2014                2013
----------------------------------------------------------------------------
(000s, except per Bbl amounts)               $     $/Bbl         $     $/Bbl
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Egypt                                   24,030      7.99    22,430      6.93
Yemen                                    1,150     10.86       634     10.46
Corporate                                  218         -       176         -
----------------------------------------------------------------------------
                                        25,398      8.16    23,240      7.05
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
                                                  Three Months Ended June 30
----------------------------------------------------------------------------
                                                    2014                2013
----------------------------------------------------------------------------
(000s, except per Bbl amounts)               $     $/Bbl         $     $/Bbl
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Egypt                                   11,660      8.03    11,540      7.00
Yemen                                      448      9.31       432     11.09
Corporate                                  125         -        88         -
----------------------------------------------------------------------------
                                        12,233      8.15    12,060      7.15
----------------------------------------------------------------------------
----------------------------------------------------------------------------

In Egypt, DD&A increased 15% on a per Bbl basis for the three and six
month periods ended June 30, 2014 compared to the same periods in
2013. This increase is mostly due to a lower reserve base over which
to deplete costs in Egypt along with increased future capital costs
at West Bakr. 
In Yemen, DD&A decreased 16% on a per Bbl basis for the three months
ended June 30, 2014 and remained relatively consistent on a per Bbl
basis for the six months ended June 30, 2014 compared to the same
periods in 2013. The decrease in the three month period ended June
30, 2014 is mostly due to the fact that Block S-1 recorded sales
during the second quarter of 2014 and did not during the second
quarter of 2013. Block S-1 carries a lower depletion rate on a per
Bbl basis than Block 32 and therefore caused a decrease in the
consolidated Yemen depletion rate for the three months ended June 30,
2014. 
CAPITAL EXPENDITURES 


 
 
                                                    Six Months Ended June 30
----------------------------------------------------------------------------
($000s)                                               2014              2013
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Egypt                                               30,445            36,093
Yemen                                                  984             1,377
Corporate                                              426                18
----------------------------------------------------------------------------
Total                                               31,855            37,488
----------------------------------------------------------------------------
----------------------------------------------------------------------------

In Egypt, total capital expenditures in the first six months of 2014
were $30.4 million (2013 - $36.1 million). During the first six
months of the year, the Company drilled seven wells at West Gharib
(four oil wells and one dry hole at Arta, one oil well at East Arta,
and one oil well at Hana). The Company also drilled six oil wells at
West Bakr and two oil wells and one dry hole at East Ghazalat. 
OUTSTANDING SHARE DATA 
As at June 30, 2014, the Company had 74,931,494 common shares issued
and outstanding and 6,467,467 stock options issued and outstanding,
which are exercisable in accordance with their terms into a 
maximum
of 6,467,467 common shares of the Company. 
LIQUIDITY AND CAPITAL RESOURCES  
Liquidity describes a company's ability to access cash. Companies
operating in the upstream oil and gas industry require sufficient
cash in order to fund capital programs necessary to maintain and
increase production and reserves, to acquire strategic oil and gas
assets and to repay debt. TransGlobe's capital programs are funded
principally by cash provided from operating activities. A key measure
that TransGlobe uses to evaluate the Company's overall financial
strength is debt-to-funds flow from operations (calculated on a
12-month trailing basis). TransGlobe's debt-to-funds flow from
operations ratio, a key short-term leverage measure, remained strong
at 0.6 times at June 30, 2014 (December 31, 2013 - 0.6). This is
within the Company's internal guidance of no more than 2.0 times. 
The table below illustrates TransGlobe's sources and uses of cash
during the periods ended June 30, 2014 and 2013: 


 
 
Sources and Uses of Cash                                                    
                                                 Three Months Ended June 30 
----------------------------------------------------------------------------
($000s)                                                  2014          2013 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cash sourced                                                                
  Funds flow from operations(i)                        75,672        68,892 
  Exercise of options                                   1,606           500 
----------------------------------------------------------------------------
                                                       77,278        69,392 
Cash used                                                                   
  Capital expenditures                                 31,855        37,488 
  Dividends
 paid                                       11,229             - 
  Deferred financing costs                                  -         2,205 
  Transfer to restricted cash                               1             1 
  Finance costs                                         4,056         3,558 
  Other                                                   639         1,517 
----------------------------------------------------------------------------
                                                       47,780        44,769 
----------------------------------------------------------------------------
                                                       29,498        24,623 
Changes in non-cash working capital                   (41,533)       (6,162)
----------------------------------------------------------------------------
Increase in cash and cash equivalents                 (12,035)       18,461 
Cash and cash equivalents - beginning of period       122,092        82,974 
----------------------------------------------------------------------------
Cash and cash equivalents - end of period             110,057       101,435 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
(i)  Funds flow from operations is a measure that represents cash generated 
     from operating activities before changes in non-cash working capital.  

Funding for the Company's capital expenditures was provided by cash
generated by operating activities. The Company expects to fund its
2014 exploration and development program of $100.0 million including
contractual commitments through the use of working capital and cash
generated by operating activities. Fluctuations in commodity prices,
product demand, foreign exchange rates, interest rates and various
other risks including timely collections of accounts receivable from
the Egyptian Government may impact capital resources. 
Working capital is the amount by which current assets exceed current
liabilities. At June 30, 2014, the Company had working capital of
$271.5 million (December 31, 2013 - $242.0 million). The increase to
working capital in Q2-2014 is principally the result of an increase
in accounts receivable combined with a decrease in accounts payable,
which was partially offset by a decrease in cash and cash
equivalents. The majority of the Company's accounts receivable are
due from Egyptian General Petroleum Company ("EGPC"), and the
continued political changes in the country have increased EGPC's
credit risk, which has increased the Company's credit risk. The
Company is in continual discussions with EGPC and the Egyptian
Government to determine solutions to the delayed cash collections,
and expects to recover the entire accounts receivable balance in
full. 
To date, the Company has experienced no difficulties with
transferring funds abroad. 
At June 30, 2014, TransGlobe had $100.0 million available under a
Borrowing Base Facility of which no amounts were drawn, however, the
Company was utilizing $60.2 million of the facility in the form of
letters of credit.  
COMMITMENTS AND CONTINGENCIES 
As part of its normal business, the Company entered into arrangements
and incurred obligations that will impact the Company's future
operations and liquidity. The principal commitments of the Company
are as follows: 


 
 
                                                 Payment Due by Period (1 2)
----------------------------------------------------------------------------
                 Recognized in                Less                      More
                  Financial   Contractual     than    1 - 3   4 - 5     than
($000s)           Statements   Cash Flows   1 year    years   years  5 years
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Accounts payable                                                            
 and accrued     Yes -                                                      
 liabilities      Liability        32,753   32,753        -       -        -
Convertible      Yes -                                                      
 debentures       Liability        88,814        -   88,814       -        -
Office and                                                                  
 equipment and                                                              
 rig leases      No                19,638   13,870    2,571   1,964    1,233
Minimum work                                                                
 commitments (3) No                60,988      750   60,238       -        -
----------------------------------------------------------------------------
Total                             202,193   47,373  151,623   1,964    1,233
----------------------------------------------------------------------------
 
(1)  Payments exclude ongoing operating costs, finance costs and payments   
     made to settle derivatives.                                            
(2)  Payments denominated in foreign currencies have been translated at June
     30, 2014 exchange rates.                                               
(3)  Minimum work commitments include contracts awarded for capital projects
     and those commitments related to exploration and drilling obligations. 

The Company is subject to certain office, equipment and drilling rig
leases. 
Pursuant to the PSC for North West Gharib in Egypt, the Company has a
minimum financial commitment of $35.0 million and a work commitment
to drill 30 wells and acquire 200 square kilometers of 3-D seismic
during the initial-three year exploration period, which commenced on
November 7, 2013. 
Pursuant to the PSC for South East Gharib in Egypt, the Company has a
minimum financial commitment of $7.5 million and a work commitment to
drill two wells, acquire 200 square kilometers of 3-D seismic and
acquire 300 kilometers of 2-D seismic during the initial three-year
exploration period, which commenced on November 7, 2013. 
Pursuant to the PSC for South West Gharib in Egypt, the Company has a
minimum financial commitment of $10.0 million and a work commitment
to drill four wells and acquire 200 square kilometers of 3-D seismic
during the initial three-year exploration period, which commenced on
November 7, 2013.  
Pursuant to the PSC for South Ghazalat in Egypt, the Company has a
minimum financial commitment of $8.0 million and a work commitment to
drill two wells and acquire 400 square kilometers of 3-D seismic
during the initial three-year exploration period, which commenced on
November 7, 2013.  
Pursuant to the PSC for Block 75 in Yemen, the Contractor (Joint
Interest Partners) has a remaining minimum financial commitment of
$3.0 million ($0.8 million to TransGlobe) for one exploration well in
the first exploration period, which has been extended to March 9,
2015.  
In the normal course of its operations, the Company may be su
bject to
litigation proceedings and claims. Although it is not possible to
estimate the extent of potential costs, if any, management believes
that the ultimate resolution of such contingencies would not have a
material adverse impact on the results of operations, financial
position or liquidity of the Company.  
The Company is not aware of any material provisions or other
contingent liabilities as at June 30, 2014.  
CHANGES IN ACCOUNTING POLICIES  
IFRS 10 (revised) "Consolidated Financial Statements" 
In October 2012, the IASB issued amendments to IFRS 10 to define
investment entities, provide an exception to the consolidation of
investment entities by a parent company, and prescribe fair value
measurement to measure such entities. These amendments are effective
for annual periods beginning on or after January 1, 2014;
accordingly, the Company adopted this standard for the year ended
December 31, 2014. The adoption of this standard had no material
impact on the Condensed Consolidated Interim Financial Statements. 
IFRS 12 (revised) "Disclosure of interests in other entities"  
In October 2012, the IASB issued amendments to IFRS 12 to prescribe
disclosures about significant judgments and assumptions used to
determine whether an entity is an investment entity as well as other
disclosures regarding the measurement of such entities. These
amendments are effective for annual periods beginning on or after
January 1, 2014; accordingly, the Company adopted this standard for
the year ended December 31, 2014. The adoption of this standard had
no material impact on the Condensed Consolidated Interim Financial
Statements.  
IAS 32 (revised) "Financial Instruments: Presentation"  
In December 2011, the IASB issued amendments to IAS 32 to address
inconsistencies when applying the offsetting criteria. These
amendments clarify some of the criteria required to be met in order
to permit the offsetting of financial assets and financial
liabilities. These amendments are effective for annua
l periods
beginning on or after January 1, 2014; accordingly, the Company has
adopted this standard for the year ended December 31, 2014. The
adoption of this standard had no material impact on the Condensed
Consolidated Interim Financial Statements. 
IFRIC 21 (new) "Levies" 
In May 2013, the IASB issued IFRIC 21, "Levies" which was developed
by the IFRS Interpretations Committee ("IFRIC"). IFRIC 21 clarifies
that an entity recognizes a liability for a levy when the activity
that triggers payment, as identified by the relevant legislation,
occurs. The interpretation also clarifies that no liability should be
recognized before the specified minimum threshold to trigger that
levy is reached. IFRIC 21 is effective for annual periods beginning
on or after January 1, 2014; accordingly, the Company has adopted
this standard for the year ended December 31, 2014. The adoption of
this standard had no material impact on the Condensed Consolidated
Interim Financial Statements. 
INTERNAL CONTROLS OVER FINANCIAL REPORTING  
TransGlobe's management designed and implemented internal controls
over financial reporting, as defined under National Instrument 52-109
Certification of Disclosure in Issuers' Annual and Interim Filings,
of the Canadian Securities Administrators and as defined in Rule
13a-15 under the US Securities Exchange Act of 1934. Internal
controls over financial reporting is a process designed under the
supervision of the Chief Executive Officer and the Chief Financial
Officer and effected by the Board of Directors, management and other
personnel to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements
for external purposes in accordance with IFRS, focusing in particular
on controls over information contained in the annual and interim
financial statements. Due to its inherent limitations, internal
controls over financial reporting may not prevent or detect
misstatements on a timely basis. A system of internal controls over
financial reporting, no matter how well conceived or operated, can
provide only reasonable, not absolute, assurance that the objectives
of the internal controls over financial reporting are met. Also,
projections of any evaluation of the effectiveness of internal
control over financial reporting to future periods are subject to the
risk that the controls may become inadequate because of changes in
conditions, or that the degree of compliance with policies or
procedures may deteriorate. 
No changes were made to the Company's internal control over financial
reporting during the period ended June 30, 2014 that have materially
affected, or are reasonably likely to materially affect, the internal
controls over financial reporting. 
Condensed Consolidated Interim Statements of Earnings and
Comprehensive Income 
(Unaudited - Expressed in thousands of U.S. Dollars, except per share
amounts) 


 
 
                                 Three Months Ended        Six Months Ended 
                                            June 30                 June 30 
                                   2014        2013        2014        2013 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
REVENUE                                                                     
  Oil sales, net of                                                         
   royalties                  $  76,040   $  76,223   $ 154,406   $ 155,589 
  Finance revenue                    85         183         182         229 
  Other revenue                   9,250           -       9,250           - 
----------------------------------------------------------------------------
                                 85,375      76,406     163,838     155,818 
----------------------------------------------------------------------------
 
EXPENSES                                                                    
  Production and operating       19,025      17,529      38,603      32,061 
  General and administrative      6,844       6,319      13,852      13,419 
  Foreign exchange (gain)                                                   
   loss                           3,121      (2,210)         11      (3,728)
  Finance costs                   1,858       2,212       3,750       4,414 
  Exploration                       227          71         665         178 
  Depletion, depreciation                                                   
   and amortization              12,233      12,060      25,398      23,240 
  Unrealized (gain) loss on                                                 
   financial instruments         (1,993)     (9,098)      1,526     (12,088)
  Impairment of exploration                                                 
   and evaluation assets              -      19,710           -      19,710 
----------------------------------------------------------------------------
                                 41,315      46,593      83,805      77,206 
----------------------------------------------------------------------------
 
Earnings before income taxes     44,060      29,813      80,033      78,612 
Income tax expense                                                          
 (recovery) - current            18,103      21,042      37,997      44,116 
- deferred                         (242)     (1,626)       (855)       (779)
----------------------------------------------------------------------------
                                 17,861      19,416      37,142      43,337 
----------------------------------------------------------------------------
NET EARNINGS AND                                                            
 COMPREHENSIVE INCOME FOR                                                   
 THE PERIOD                   $  26,199   $  10,397   $  42,891   $  35,275 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Earnings per share                                                          
  Basic                       $    0.35   $    0.14   $    0.57   $    0.48 
  Diluted                     $    0.35   $       -   $    0.57   $    0.26 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Condensed Consolidated Interim Balance Sheets 
(Unaudited - Expressed in thousands of U.S. Dollars) 


 
 
                                                                       As at
                                                        As at       December
                                                     June 30,            31,
                                                         2014           2013
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
AS
SETS                                                                      
Current                                                                     
  Cash and cash equivalents                       $   110,057    $   122,092
  Accounts receivable                                 182,724        148,284
  Prepaids and other                                   10,710          8,460
  Product inventory                                       786          1,525
----------------------------------------------------------------------------
                                                      304,277        280,361
Non-Current                                                                 
  Restricted cash                                       1,547          1,546
  Deferred financing costs                              2,123          2,678
  Intangible exploration and evaluation assets         92,619         89,991
  Property and equipment                                                    
    Petroleum properties                              292,463        288,756
    Other assets                                        4,650          4,288
  Goodwill                                              8,180          8,180
----------------------------------------------------------------------------
                                                  $   705,859    $   675,800
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
LIABILITIES                                                                 
Current                                                                     
  Accounts payable and accrued liabilities        $    32,753    $    38,392
----------------------------------------------------------------------------
                                                       32,753         38,392
Non-Current                                                                 
  Convertible debent
ures                               88,814         87,539
  Deferred taxes                                       48,008         48,863
  Other long-term liabilities                             760            816
----------------------------------------------------------------------------
                                                      170,335        175,610
----------------------------------------------------------------------------
 
SHAREHOLDERS' EQUITY                                                        
  Share capital                                       162,723        160,561
  Contributed surplus                                  17,202         15,692
  Retained earnings                                   355,599        323,937
----------------------------------------------------------------------------
                                                      535,524        500,190
----------------------------------------------------------------------------
                                                  $   705,859    $   675,800
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Condensed Consolidated Interim Statement of Changes in Shareholders'
Equity 
(Unaudited - Expressed in thousands of U.S. Dollars) 


 
 
                                 Three Months Ended        Six Months Ended 
                                            June 30                 June 30 
                                   2014        2013        2014        2013 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Share Capital                                                               
  Balance, beginning of                                                     
   period                     $ 161,531   $ 159,259   $ 160,561   $ 158,721 
  Stock options exercised           890         104       1,606         500 
  Transfer from contributed                                                 
   surplus on exercise of                                                   
   options                          302          38         556         180 
----------------------------------------------------------------------------
  Balance, end of period      $ 162,723   $ 159,401   $ 162,723   $ 159,401 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Contributed Surplus                                                         
  Balance, beginning of                                                     
   period                     $  16,310   $  12,879   $  15,692   $  11,714 
  Stock-based compensation                                                  
   expense                        1,194       1,503       2,066       2,810 
  Transfer to share capital                                                 
   on exercise of options          (302)        (38)       (556)       (180)
----------------------------------------------------------------------------
  Balance, end of period      $  17,202   $  14,344   $  17,202   $  14,344 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
 
Retained Earnings                                                           
  Balance, beginning of                                                     
   period                     $ 340,629   $ 290,303   $ 323,937   $ 265,425 
  Net earnings and total                                                    
   comprehensive income          26,199      10,397      42,891      35,275 
  Dividends                     (11,229)          -     (11,229)          - 
----------------------------------------------------------------------------
  Balance, end of period      $ 355,599   $ 300,700   $ 355,599   $ 300,700 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Condensed Consolidated Interim Statements of Cash Flows 
(Unaudited - Expressed in thousands of U.S. Dollars) 


 
 
                                 Three Months Ended        Six Months Ended 
                                            June 30                 June 30 
                                   2014        2013        2014        2013 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
CASH FLOWS RELATED TO THE                                                   
 FOLLOWING ACTIVITIES:                                                      
 
OPERATING                                                                   
  Net earnings for the                                                      
   period                     $  26,199   $  10,397   $  42,891   $  35,275 
  Adjustments for:                                                          
    Depletion, depreciation                                                 
     and amortization            12,233      12,060      25,398      23,240 
    Deferred lease                                                          
     inducement                     113         113         218         228 
    Impairment of                                                           
     exploration and                                                        
     evaluation costs                 -      19,710           -      19,710 
    Stock-based compensation      1,894       1,284       2,728       2,562 
    Finance costs                 1,858       2,212       3,750       4,414 
    Income tax expense           17,861      19,416      37,142      43,337 
    Unrealized (gain) loss                                                  
     on financial            
                                               
     instruments                 (1,993)     (9,098)      1,526     (12,088)
    Unrealized (gain) loss                                                  
     on foreign currency                                                    
     translation                  3,123      (2,165)         16      (3,670)
  Income taxes paid             (18,103)    (21,042)    (37,997)    (44,116)
  Changes in non-cash                                                       
   working capital               (9,718)    (16,540)    (38,994)       (645)
----------------------------------------------------------------------------
Net cash generated by (used                                                 
 in) operating activities        33,467      16,347      36,678      68,247 
----------------------------------------------------------------------------
 
INVESTING                                                                   
  Additions to intangible                                                   
   exploration and                                                          
   evaluation assets             (2,506)     (1,040)     (3,702)     (4,516)
  Additions to petroleum                                                    
   properties                   (14,183)    (18,229)    (27,263)    (32,906)
  Additions to other assets        (801)        (26)       (890)        (66)
  Changes in restricted cash          -           -          (1)         (1)
  Changes in non-cash                                                       
   working capital               (2,854)     (4,624)     (2,539)     (5,517)
----------------------------------------------------------------------------
Net cash generated by (used                                                 
 in) investing activities       (20,344)    (23,919)    (34,395)    (43,006)
----------------------------------------------------------------------------
 
FINANCING                                                                   
  Issue of common shares for                                                
   cash                             890         104       1,606         500 
  Financing costs                     -      (2,155)          -      (2,205)
  Interest paid                    (209)       (185)     (4,056)     (3,558)
  Dividends paid                (11,229)          -     (11,229)          - 
  Increase (decrease) in                                                    
   other long-term                                                          
   liabilities                     (140)       (141)       (270)       (285)
----------------------------------------------------------------------------
Net cash generated by (used                                                 
 in) financing activities       (10,688)     (2,377)    (13,949)     (5,548)
----------------------------------------------------------------------------
Currency translation                                   
                     
 differences relating to                                                    
 cash and cash equivalents           15        (796)       (369)     (1,232)
----------------------------------------------------------------------------
NET INCREASE (DECREASE) IN                                                  
 CASH AND CASH EQUIVALENTS        2,450     (10,745)    (12,035)     18,461 
 
CASH AND CASH EQUIVALENTS,                                                  
 BEGINNING OF PERIOD            107,607     112,180     122,092      82,974 
----------------------------------------------------------------------------
 
CASH AND CASH EQUIVALENTS,                                                  
 END OF PERIOD                $ 110,057   $ 101,435   $ 110,057   $ 101,435 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

TransGlobe Energy Corporation is a Calgary-based, growth-oriented oil
and gas exploration and development company focused on the Middle
East/North Africa region with production operations in the Arab
Republic of Egypt and the Republic of Yemen. TransGlobe's common
shares trade on the Toronto Stock Exchange under the symbol TGL and
on the NASDAQ Exchange under the symbol TGA. TransGlobe's convertible
debentures trade on the Toronto Stock Exchange under the symbol
TGL.DB. 
Cautionary Statement to Investors: 
This news release may include certain statements that may be deemed
to be "forward-looking statements" within the meaning of the U.S.
Private Securities Litigation Reform Act of 1995. Such statements
relate to possible future events. All statements other than
statements of historical fact may be forward-looking statements.
Forward-looking statements are often, but not always, identified by
the use of words such as "seek", "anticipate", "plan", "continue",
"estimate", "expect", "may", "will", "project", "predict",
"potential", "targeting", "intend", "could", "might", "should",
"believe" and similar expressions. These statements involve known and
unknown risks, uncertainties and other factors that may cause actual
results or events to differ materially from those anticipated in such
forward-looking statements. Although TransGlobe's forward-looking
statements are based on the beliefs, expectations, opinions and
assumptions of the Company's management on the date the statements
are made, such statements are inherently uncertain and provide no
guarantee of future performance. In particular, this press release
contains forward-looking statements regarding the Company's
appraisal, development and evaluation plans and the focus of the
Company's exploration budget. In addition, information and statements
relating to "resources" are deemed to be forward-looking information
and statements, as they involve the implied assessment, based on
certain estimates and assumptions, that the resources described exist
in the quantities predicted or estimated, and that the resources
described can be profitably produced in the future. Actual results
may differ materially from TransGlobe's expectations as reflected in
such forward-looking statements as a result of various factors, many
of which are beyond the control of the Company. 
These factors include, but are not limited to, unforeseen changes in
the rate of production from TransGlobe's oil and gas properties,
changes in price of crude oil and natural gas, adverse technical
factors associated with exploration, development, production or
transportation of TransGlobe's crude oil and natural gas reserves,
changes or disruptions in the political or fiscal regimes in
TransGlobe's areas of activity, changes in tax, energy or other laws
or regulations, changes in significant capital expenditures, delays
or disruptions in production due to shortages of skilled manpower,
equipment or materials, economic fluctuations, and other factors
beyond the Company's control. With respect to forward-looking
st
atements contained in this press release, assumptions have been
made regarding, among other things: the Company's ability to obtain
qualified staff and equipment in a timely and cost-efficient manner;
the regulatory framework governing royalties, taxes and environmental
matters in the jurisdictions in which the Company conducts and will
conduct its business; future capital expenditures to be made by the
Company; future sources of funding for the Company's capital
programs; geological and engineering estimates in respect of the
Company's reserves and resources; and the geography of the areas in
which the Company is conducting exploration and development
activities. TransGlobe does not assume any obligation to update
forward-looking statements if circumstances or management's beliefs,
expectations or opinions should change, other than as required by
law, and investors should not attribute undue certainty to, or place
undue reliance on, any forward-looking statements. Please consult
TransGlobe's public filings at www.sedar.com and
www.sec.gov/edgar.shtml for further, more detailed information
concerning these matters, including additional risks related to
TransGlobe's business. 
Contacts:
Investor Relations
Steve Langmaid
(403) 444-4787
investor.relations@trans-globe.com
www.trans-globe.com
 
 
Press spacebar to pause and continue. Press esc to stop.