TransGlobe Energy Corporation today announces its 2020 capital budget, 2020 production guidance, and 2019 year-end reserves. All dollar values are expressed in US dollars unless otherwise stated. 

2020 BUDGET HIGHLIGHTS

TransGlobe has set its 2020 capital budget at $37.1 MM (before capitalized G&A);

• Egypt $23.7 MM
• Canada $13.4 MM

2020 average production guidance is set at 14.5 to 15.5 Mboepd with a midpoint of 15.0 Mboepd. The Company is taking a cautious approach to guidance with a significant portion of investment scheduled for the second half of the year following 2019 where production increases exceeded expectations

• Egypt 11.9 – 12.7 Mbopd
• Canada 2.6 – 2.8 Mboepd

The 2020 drilling program includes 16 Egypt wells (12 development and 4 exploration) and 4 Canadian horizontal Cardium wells (4 development) at South Harmattan.

OPERATIONAL UPDATE

• Production averaged 15.3 MBoepd in December 2019 and 16.0 Mboepd for the year ended 2019 versus the most recently updated 2019 guidance of 15.5 to 16.0 MBoepd provided on October 30, 2019;
• South Ghazalat-6X’s upper Bahariya reservoir was brought on stream on December 24, 2019 at a field estimated initial rate of 800 - 1,000 Bopd light and medium crude, as planned. However, the well rate has been restricted to a field estimated 250 - 350 Bopd light and medium crude to evaluate the well, manage the reservoir and optimize the separation of oil, gas and water;
• The SHAMS-2 rig, contracted in Egypt to drill HW-2A (Eastern Desert appraisal well to HW-2X) followed by SGZ-6A (Western Desert appraisal well on upper and lower Bahariya to SGZ-6X), has mobilized to location at HW-2A and is undergoing inspection prior to the commencement of drilling;
• NWG-38D-1 has been stimulated and is cleaning up;
• Negotiations continue with the Egyptian government to amend, extend and consolidate the Company’s Eastern Desert concession agreements;
• In Canada, as previously announced, the 2-mile well in South Harmattan has achieved a calculated IP30 estimated at 417 Boepd and a calculated estimated IP60 is 341 Boepd both calculated on a productive day basis. Although the production history is relatively short and not necessarily indicative of long-term performance or ultimate recovery, due to the nature and extent of the undeveloped area targeted by the well, the Company is very encouraged about the resource potential of the 18.5 undeveloped 100% working interest sections of land that it holds in the South Harmattan area.

2019 RESERVES SUMMARY

• Total gross proved reserves (“1P”) of 25.4 MMboe decreased 1.5 MMboe or 5% from year-end 2018 (YE 2018: 26.9 MMboe) primarily due to annual production of ~5.8 MMboe, that was substantially offset by ~2.8 MMboe of positive net revisions and ~2.0 MMboe of drilling additions.
• Total gross proved plus probable reserves (“2P”) of 45.3 MMboe increased ~1.2 MMboe or 3% from year-end 2018 (YE 2018: 44.1 MMboe) resulting primarily from ~4.4 MMboe of positive net revisions and ~3.4 MMboe of drilling additions offset by ~5.8 MMboe of annual production.
• 2P reserves were comprised of 59% Egypt (medium/heavy oil) and 41% Canada (14% conventional natural gas, 13% natural gas liquids and 14% light crude oil).
• Replaced 82% and 135% of 2019 production (~5.8 MMboe) on a respective 1P and 2P gross reserves basis (excluding economic factors).
• Total proved plus probable plus possible (“3P”) gross reserves of 63.3 MMboe (YE 2018: 61.8 MMboe) representing a 1.5 MMboe or 2% increase.

Egypt

• 2P drilling additions of 3.4 MMbbl resulted from the successful extension of H field with the HW-2X well, infill drilling at K field with K-63 and the conversion of undeveloped reserves at Northwest Gharib and M and H fields.
• Positive 2P technical revisions of 3.8 MMbbl occurred at West Bakr due to better performance resulting from production optimization projects. Optimization projects also resulted in positive technical revisions of 0.6 MMbbl at West Gharib and other concessions revisions were essentially neutral.

Canada

• 2P drilling additions of 2.0 MMboe resulted from the extension at Harmattan with the successful drilling of the 2-mile horizontal outpost well in South Harmattan.
• Minor 2P negative technical revisions of 0.2 MMboe resulted from reduced Wabamun gas locations and performance. 2P Economic factors yielded a negative revision of 0.8 MMboe due to lower commodity price forecasts, primarily from natural gas.
• Net present value of future net revenues of $288 MM after tax (2P reserves discounted at 10%, forecast pricing), 11% lower compared to year-end 2018.
• Canadian net present value of future net revenues in USD (2P reserves discounted at 10%, forecast pricing after tax) of $102 MM is 13% lower compared to 2018 primarily due to reduced gas locations and commodity pricing.
• Egyptian net present value of future net revenues in USD (2P reserves discounted at 10%, forecast pricing after tax) decreased 11% year over year to $185 MM primarily due to higher royalties at West Bakr.

Randy Neely, Chief Executive Officer of TransGlobe, said:
“We are pleased with the results of the 2019 drilling program and we aim to build upon this success in 2020. The 2020 plan is focused on the most value accretive projects within the portfolio to maximize free cash flow to fund future value growth opportunities and bolster the current production base.

In Egypt, the focus is on growing production in the Eastern Desert while we continue to evaluate the potential of the South Ghazalat acreage. In Canada, the focus is on developing South Harmattan where we have made a potentially significant discovery of resources in a new, effectively undrilled area, where we already have a significant footprint.

Our 2020 budget underlines the confidence we have in the potential of the TransGlobe portfolio.”

2020 CAPITAL GUIDANCE

The Company’s 2020 capital program of $37.1 MM (before capitalized G&A) includes $23.7 MM for Egypt and $13.4 MM for Canada. The 2020 Plan was prepared to focus on value accretive projects within its portfolio, maximize free cash flow to direct at future value growth opportunities and to maintain the Company’s production base.

Egypt

The $23.7 MM Egypt program has $5.4 MM (23%) allocated to exploration and $18.3 MM (77%) to development. The primary focus of the 2020 Egypt plan is to sustain Eastern Desert production and to evaluate the South Ghazalat development lease in the Western Desert while we await finalization of the consolidation of our Eastern Desert PSCs. South Ghazalat production has been forecast at a rate constrained by reservoir management considerations on the upper Bahariya reservoir, with additional production forecasted from the lower Bahariya.

The $5.4 MM 2020 exploration program in Egypt includes three exploration wells in the Eastern Desert (one well in West Bakr, two wells in NW Gharib), and one exploration well in South Ghazalat in the Western Desert. The West Bakr exploration well is in H block targeting the Yusr reservoir in an adjacent fault block to the HW-2X discovery placed on production during 2019. The NW Gharib exploration wells are targeting undrilled faults block north and west of the NWG 38A pool. The South Ghazalat exploration well targets a prospect to the east of the SGZ-6X discovery placed on production during 2019.

The 2020 development program is principally focused on the Eastern Desert and includes: four development wells in West Bakr (two each in H and K pools), one Red Bed appraisal well in the NW Gharib 3X pool, six development wells targeting the Arta Nukul reservoir in West Gharib and NW Gharib, ten recompletions in West Bakr, four recompletions in West Gharib, water handling expansion at West Bakr and development/ maintenance projects in the Eastern Desert (West Bakr, NW Gharib and West Gharib). A single development well is planned in the SGZ-6X pool, targeting the prolific lower Bahariya reservoir, in the Western Desert.

Canada

The $13.4 MM Canada program consists of four (4 net) horizontal (multi-stage stimulated) wells targeting the Cardium light oil resource at Harmattan and additional maintenance/development capital. The Cardium drilling program in 2020 consists of three 2-mile and one 1-mile development wells in South Harmattan.

2020 PRODUCTION OUTLOOK

The 2020 production outlook for the Company is provided as a range to reflect timing and performance contingencies.

Total corporate production is expected to range between 14.5 Mboepd and 15.5 Mboepd for 2020 (mid-point of 15.0 Mboepd) with a 93% weighting to oil and liquids. Egypt oil production is expected to range between 11.9 and 12.7 Mbopd in 2020. Canadian production is expected to range between 2.6 and 2.8 Mboepd in 2020.

OPERATIONS UPDATE

ARAB REPUBLIC OF EGYPT

Western Desert – South Ghazalat (100% WI)
Production was initiated at South Ghazalat on December 24, 2019 from the SGZ-6X well following the installation of production facilities at site. Initial oil production was in the range of a field estimated 800 - 1,000 Bopd light and medium crude, however, the gas oil ratio rapidly increased to a level that interfered with the ability to separate oil from water in the facilities. This, combined with prudent management practices on the upper Bahariya reservoir completed in this well, has led to the well now being produced at a restricted field estimated 250 – 350 Bopd of light and medium crude. The lower Bahariya reservoir also tested oil in this well and remains a future recompletion target.

The SHAMS-2 rig, contracted in Egypt to drill HW-2A (Eastern Desert appraisal well to HW-2X) followed by SGZ-6A (Western Desert appraisal well on upper and lower Bahariya to SGZ-6X), has mobilized to location at HW-2A and is undergoing inspection during rig up prior to the commencement of drilling.

Eastern Desert (100% WI)
As noted above, the SHAMS-2 rig has mobilized to the HW-2A location in West Bakr, where it will shortly drill a Yusr reservoir appraisal well to the successful HW-2X exploration well which continues to produce in excess of a field estimated 700 Bopd of heavy crude.

Stimulation of NWG 38 D-1 has been completed and the well put on production. The well is currently cleaning up.

PSC Consolidation

Constructive negotiations with Egyptian General Petroleum Corporation (“EGPC”) to amend, extend and consolidate the Company’s Eastern Desert concession agreements continue in line with previous disclosure, with the anticipated successful conclusion of negotiations likely to lead to a revised agreement in the second half of 2020.

CANADA

As a result of the initial success of the 2-mile appraisal/outpost well in South Harmattan (details previously released on January 30, 2020), the Company has focused additional capital into Canada for 2020 as part of its continual focus on growing cash flow and value across the asset portfolio.

Link to TransGlobe Energy Egypt country profile