TransGlobe Energy Corp., the Canadian oil producer that gets more than 90 percent of its revenue from Egypt, fell after Egypt’s army ousted President Mohamed Mursi and the outlook for the country remained uncertain.
TransGlobe dropped 3.9 percent to C$6.48 by the 4 p.m. close in Toronto, the largest decline since June 20, when the company revised its 2013 output and announced a $20 million charge for exploration expenses.
“They’re just getting punished for association with Egypt,” said David Popowich, an analyst with Macquarie Group Ltd. in Calgary. “It’s unwarranted,” he said.
TransGlobe has operated in Egypt since 2004, through the rule of Hosni Mubarak and the 2011 revolution that ended his presidency. The parts of the government that matter to oil production -- the Ministry of Energy and the national oil company -- haven’t changed in 20 years, said Popowich.
“I really don’t expect the fiscal terms in Egypt to change with this change in power,” he said. Popowich rates TransGlobe a buy with a target price of $14.25. Ten analysts surveyed by Bloomberg had buy ratings, while two had holds.
The uncertainty of the last few years has had an impact on the pace of permitting and new drilling approval, said Popowich.
“Things have just kind of ground to a halt and I think that once we have certainty on who’s going to be filling the political holes at the top then you’ll start to see this pick up again,” he said.