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Stonegate Capital Partners Updates Coverage on TransGlobe Energy Corporation

DALLAS, TX / ACCESSWIRE / January 16, 2019 / TransGlobe Energy Corporation (TGA)

Company Description

TransGlobe Energy Corporation ("Company") ("TGA") is an independent oil and gas exploration and production company, with current operations in Alberta, Canada, and the Arab Republic of Egypt. TGA also operated in Yemen for 19 years, before selling those interests in 2015. The Company has operated in Egypt since 2004 and holds interests in production sharing concessions in the Eastern Desert and the Western Desert regions. TransGlobe operated in Canada from 1999 to 2008 and re-entered Canada in December 2016. The Company's Canadian holdings include production and working interests in Cardium light oil and Mannville liquid-rich gas assets in the Harmattan area, located in west central Alberta. TransGlobe Energy is headquartered in Calgary, Alberta, and has approximately 70+ employees.

Summary

TransGlobe has been in the international oil and gas industry for over 20 years and has drilled more than 400 gross wells in varying geological formations, political climates and economic environments. Through the execution of a disciplined business plan involving cost-cutting measures, a strategic acquisition, and key contracts with the Egyptian government and third-party marketers, TGA's management has steered the Company through a difficult period involving low oil prices and political turmoil, and, as a result, TransGlobe is well-positioned to return to profitability in the near-term.

  • TransGlobe had an average production base of roughly 14,331 Boepd in Q318 and most recently reported ~16.3 MBoepd for December thus far. TGA has a number of low-risk development projects in Canada and Egypt, along with some potentially high-impact exploration opportunities in Egypt. The most recent 2019 capital budget includes a total of ~$34.1M, with ~$24.1M allocated to Egypt and ~$10.0M to Canada.
  • As Egypt has regained political and economic stability in recent years, TransGlobe's original 2019 budget plans included completion of 4 development wells in the Eastern Desert, in addition to multiple recompletions and well optimizations, as well as 2 exploration wells (but recent news discloses 2 wells bumped up to 2018). In the Western Desert, the focus is on appraisal and development of the SG 6X light oil discovery in South Ghazalat and resolution of access/contract extension issues at South Alamein.
  • At year-end 2016, the Company acquired some producing high-quality light oil and liquids-rich gas plays in west central Alberta, Canada. The acquisition was designed to diversify TGA geographically as well as expand operations outside areas with geopolitical risk, and it came with 149 potential drilling opportunities. The historical low operating costs and favorable royalty and tax structure of the area support growth at current oil prices and provide opportunities to increase reserves and production in proven plays using advanced horizontal drilling and multi-stage frac technology. In 2019, TransGlobe plans 4 horizontal Cardium wells (3 development and 1 outpost) to maintain and grow Canadian light oil production.
  • Based on a 12/31/17 GLJ Petroleum Consultants evaluation, the Company reported 27.6 MMboe total proved (1P reserves) as well as 45.9 MMboe total proved + probable (2P reserves), both an 8% decrease from 2016 year-end, primarily due to production during 2017.
  • TGA had average sales of 14,490 Boepd in Q318. The Company did not sell any entitlement crude oil to EGPC during the 3rd quarter but reported one cargo lifting of 502K barrels of entitlement crude oil sold for net proceeds of $31.7M. Notably, as of September 30, 2018, the Company had ~0.5M barrels of entitlement oil in inventory valued at $15.74 per barrel on its balance sheet as well as $62.7M in cash.
  • For 2019, corporate production is expected to range between 14,000 and 15,000 Boepd (midpoint 14,500) with a 94% weighting to oils and liquids; this includes 11,600 to 12,400 Bopd for Egypt, and 2,400 to 2,600 Boepd for Canada.
  • On a comparable company basis for FY18 estimates, TGA currently trades at an EV/S multiple of 0.7x while its peers trade at an average multiple of 2.3x, and at an EV/EBITDA of 1.3x vs. the average of its peers at 4.7x. On a P/CFPS basis, TGA trades at 2.1x based on 2018E vs. the average of its peers at 3.2x. See page 9 for details.

    The full report can be accessed by clicking on the following link:

    http://www.stonegateinc.com/reports/TGA%20UPDATE%20JAN%202019.pdf

    About Stonegate Capital Partners

    Stonegate Capital Partners is a Dallas-based corporate advisory firm dedicated to serving the specialized needs of small-cap public companies. Since our inception, our mission has been to find innovative, undervalued public companies for our network of leading institutional investors who seek high quality investment opportunities.

    CONTACT:

    Laura Engel, (214) 987-4121
    laura@stonegateinc.com

    SOURCE: Stonegate Capital Partners