TGA - Stonegate Capital Partners Updates Coverage on Transglobe Energy Corp. (NASDAQ:TGA)

DALLAS, TX / ACCESSWIRE / June 16, 2020 / Transglobe Energy Corp. (NASDAQ:TGA)

The full report can be accessed by clicking on the following link: http://stonegateinc.com/reports/TGA%20Q1FY20.pdf

SUMMARY

TransGlobe has been in the international oil and gas industry for over 20 years has been highly active and successful across diverse geological basins in several countries with a variety of fiscal regimes. 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 been successful in navigating the company through a variety of changes including low oil prices and revolutions, and as a result Transglobe is well positioned to navigate future volatility in the market.

• TransGlobe had an average production base of roughly 16,041 Boepd in 2019 and recently reported ~15.0 MBoepd for Q120, and ~14.4 MBoepd during the month of April a decrease of 1% and 2%, respectively. The slight dip in production was predominantly due to management's proactive decision to reduce 2020 capital spending as a result of the rapid and significant decrease in worldwide crude oil prices. The recently revised 2020 capital budget includes a total of ~$7.1M, with ~$5.0M allocated to Egypt and ~$2.1M to Canada.

• Due to the recent drop in oil prices, TransGlobe has reduced their original capital budget in an effort to reduce expenses. The revised plan includes two wells (one in Egypt and one in Canada) that were spudded before the recent oil price volatility. Additionally, the capital budget includes capital related to HSE, select recompletions, and certain land retention commitments. In addition, the Company has noted they will reduce go forward 2020 G&A costs by approximately 35%. • Due to reduced 2020 capital expenditure program, corporate production is expected to range between 13.3 and 14.3 Mboepd (midpoint 13.8 Mboepd) with a 93% weighting to oils and liquids; this includes 11.3 to 12.1 Mbopd for Egypt, and 2.0 to 2.1 Mboepd for Canada.

• 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 operating cost structure 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 drilled four horizontal Cardium oil wells in the Harmattan area of Canada and stimulated, equipped and tied in these four wells along with six additional wells drilled in 2018.

• 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 operating cost structure 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 drilled four horizontal Cardium oil wells in the Harmattan area of Canada and stimulated, equipped and tied in these four wells along with six additional wells drilled in 2018.

• Based on a February 2020 GLJ Petroleum Consultants evaluation, the Company reported 25.4 MMboe total proved (1P reserves), as well as 45.3 MMboe total, proved + probable (2P reserves), a ~6% decrease and ~3% increase, respectively, from 2018 year-end.

• TGA had inventoried entitlement crude oil in Egypt of 242.1 Mbbls as of 3/31/20 valued at $6.2M on its balance sheet, which is down from 964.5 Mbbls valued at $17.5M at 12/31/2019.

On a comparable company basis for FY20 estimates, TGA currently trades at an EV/S multiple of 0.5x while its peers trade at an average multiple of 3.2x, and at an EV/EBITDA of 1.1x vs. the average of its peers at 6.0x. See page 9 for details.

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:

Stonegate Capital Partners
Shane Martin, CFA
(214) 987-4121
shane@stonegateinc.com

SOURCE: Stonegate Capital Partners