Transglobe Energy Corporation announces year end 2019 financial and operating results
March 11, 202011:00 PM Globe Newswire
This Announcement contains inside information as defined in Article 7 of the Market Abuse Regulation No. 596/2014 (“MAR”). Upon the publication of this Announcement, this inside information is now considered to be in the public domain.CALGARY, Alberta – TransGlobe Energy Corporation (“TransGlobe” or the “Company”) (AIM & TSX: “TGL” & NASDAQ: “TGA”) is pleased to announce its financial and operating results for the three months and year ended December 31, 2019. All dollar values are expressed in United States dollars unless otherwise stated. TransGlobe’s audited Consolidated Financial Statements together with the notes related thereto, as well as TransGlobe’s Management’s Discussion and Analysis for the years ended December 31, 2019 and 2018, are available on TransGlobe’s website at www.trans-globe.com.2019 HIGHLIGHTS:Produced an average of 16,041 Boepd and sold 14,954 Boepd as compared to 14,439 Boepd and 15,013 Boepd in 2018, an 11% increase in production year over year with sales remaining flat;Inventoried entitlement crude oil in Egypt increased to 964.5 Mbbls as at December 31, 2019 from 568.1 Mbbls as at December 31, 2018;Drilled eight wells and performed twelve completions and workovers in Egypt during 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;Completed Phase 2 expansions of the West Bakr K and H stations to double processing capacity;Drilled four horizontal Cardium oil wells in the Harmattan area and stimulated, equipped and tied in these four wells along with six Cardium oil wells that were drilled in 2018 in Canada;Ended the year with 45.3 MMBoe of 2P reserves, up 3% from 2018 year end of 44.1 MMBoe;Funds flow from operations decreased by 26% to $46.9 million ($0.65 per share), from $63.3 million ($0.87 per share) in 2018;Reported a net loss of $4.0 million ($0.06 per share), inclusive of a $7.9 million non-cash impairment loss on exploration and evaluation assets and a $1.6 million unrealized derivative loss on commodity contracts;Spent $36.9 million on exploration and development activities, funded entirely from cash flow from operations and cash on hand;Paid a dividend with $0.035 per share ($2.5 million) paid on April 18, 2019 to shareholders of record on March 29, 2019, and $0.035 per share ($2.5 million) paid on September 13, 2019 to shareholders of record on August 30, 2019;Ended the year with positive working capital of $32.2 million (including cash and cash equivalents of $33.3 million); andReduced long term debt from $52.3 million in 2018 to $37.0 million at the end of the year.2020 (to date):January 2020 average production of 15.2 Mboepd, February 2020 average production of 15.2 Mboepd;Completed a sale of 440 Mbbls of inventoried entitlement crude oil to EGPC in February 2020 for total proceeds of $24 million;Lifting a cargo of entitlement crude oil from Egypt in March with proceeds anticipated in April;Entered into an additional derivative commodity contract for the month of March 2020 hedging 195,000 Bbls; andRevised the 2020 outlook and capital budget to respond to current market conditions.FINANCIAL AND OPERATING RESULTSAdditional financial information is provided for in the Company’s audited Consolidated Financial Statements together with the notes related thereto, as well as TransGlobe’s Management’s Discussion and Analysis for the years ended December 31, 2019 and 2018. These documents, along with other documents affecting the rights of securityholders and other information relating to the Company, may be found on SEDAR at www.sedar.com and in the Company’s Annual Report on Form 40-F for the fiscal year ended December 31, 2019, filed on EDGAR at www.sec.gov.(US$000s, except per share, price, volume amounts and % change)Three months ended December 31 Years ended December 31 Financial2019 2018% Change2019 2018% ChangePetroleum and natural gas sales 64,201 72,628(12) 278,929 299,144(7)Petroleum and natural gas sales, net of royalties 28,473 40,605(30) 140,096 176,227(21)Realized derivative loss on commodity contracts 218 8,057(97) 1,259 16,386(92)Unrealized derivative loss (gain) on commodity contracts 1,201 (29,492)(104) 1,586 (9,335)(117)Production and operating expense 15,119 13,11615 50,626 53,298(5)Selling costs 638 45042 1,287 2,103(39)General and administrative expense 3,868 2,00593 16,611 18,688(11)Depletion, depreciation and amortization expense 8,764 8,2147 34,948 34,2912Income tax expense 6,003 6,612(9) 26,098 26,340(1)Cash flow generated by operating activities 23,740 9,822142 44,836 69,192(35)Funds flow from operations 3,171 8,842(64) 46,871 63,282(26)Funds flow from operations per share Basic per share 0.04 0.12 0.65 0.87Diluted per share 0.04 0.12 0.65 0.86Net (loss) earnings (8,202)30,719(127) (3,995)15,677(125)Net (loss) earnings per share Basic per share (0.11)0.43 (0.06)0.22 Diluted per share (0.11)0.43 (0.06)0.22Capital expenditures 10,996 17,433(37) 36,932 40,706(9)Dividends declared – –– 5,078 2,527101Dividends declared per share – –– 0.07 0.035100Working capital 32,194 50,987(37) 32,194 50,987(37)Long-term debt, including current portion 37,041 52,355(29) 37,041 52,355(29)Common shares outstanding Basic (weighted average) 72,542 72,206– 72,514 72,206– Diluted (weighted average) 72,542 72,706– 72,514 72,631–Total assets 308,325 318,296(3) 308,325 318,296(3) Operating Average production volumes (Boepd) 15,362 15,2701 16,041 14,43911Average sales volumes (Boepd) 14,688 14,4831 14,954 15,013–Inventory (Mbbls) 964.5 568.170 964.5 568.170Average realized sales price ($/Boe) 47.51 54.51(13) 51.10 54.59(6)Production and operating expense ($/Boe) 11.19 9.8414 9.28 9.73(5)1 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.SELECTED ANNUAL INFORMATION($000s, except per share amounts, price and volumes)2019 % Change2018% Change2017Operations Average production volumes Crude oil (Bbls/d) 14,527 1412,708(5)13,411NGLs (Bbls/d) 582 (25)780(21)988Natural gas (Mcf/d) 5,594 (2)5,707(14)6,644Total (Boepd) 16,041 1114,439(7)15,506Average sales volumes Crude oil (Bbls/d) 13,441 113,282(10)14,754NGLs (Bbls/d) 582 (25)780(21)988Natural gas (Mcf/d) 5,594 (2)5,707(14)6,644Total (Boepd) 14,954 –15,013(11)16,849Average realized sales prices Crude oil ($/Bbl) 55.31 (7)59.573344.71NGLs ($/Bbl) 22.93 (16)27.172721.31Natural gas ($/mcf) 1.32 51.26(26)1.70Total oil equivalent ($/Boe) 51.10 (6)54.593341.07Inventory (Mbbls) 964.5 70568.1(27)776.8Petroleum and natural gas sales 278,929 (7)299,14418252,591Petroleum and natural gas sales, net of royalties 140,096 (21)176,22719148,464Cash flow generated by operating activities 44,836 (35)69,1921659,450Funds flow from operations1 46,871 (26)63,2821455,592Funds flow from operations per share: Basic 0.65 0.870.77Diluted 0.65 0.860.77Net earnings (loss) (3,995) (125)15,677120(78,736)Net earnings (loss) per share: Basic (0.06) 0.22(1.09)Diluted (0.06) 0.22(1.09)Capital expenditures 36,932 (9)40,706738,159Dividends declared 5,078 1012,527100–Dividends declared per share 0.07 1000.035100–Total assets 308,325 (3)318,296(3)327,702Cash and cash equivalents 33,251 (36)51,705947,449Working capital 32,194 (37)50,987150,639Total long-term debt, including current portion 37,041 (29)52,355(25)69,999Net debt-to-funds flow from operations ratio2 0.10 0.020.35Reserves Total proved (MMBoe)3 25.4 (6)26.9(2)27.5Total proved plus probable (MMBoe)3 45.3 344.1(4)45.91 Funds flow from operations (before finance costs) 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. See “Non-GAAP Financial Measures”. 2 Net debt-to-funds flow from operations ratio is a measure that represents total long-term debt (including the current portion) net of working capital, over funds flow from operations for the trailing 12 months, and may not be comparable to measures used by other companies. See “Non-GAAP Financial Measures”. 3 As determined by the Company’s 2019, 2018 & 2017 independent reserves evaluator, GLJ Petroleum Consultants Ltd. (“GLJ”), in their reports dated February 4, 2020, January 22, 2019 and January 9, 2018 with effective dates of December 31, 2019, December 31, 2018 and December 31, 2017. The reports of GLJ have been prepared in accordance with the standards contained in the Canadian Oil and Gas Evaluation Handbook prepared jointly by The Society of Petroleum Evaluation Engineers (Calgary Chapter) and the Canadian Institute of Mining, Metallurgy & Petroleum (Petroleum Society), as amended from time to time and National Instrument 51-101.In 2019 compared with 2018, TransGlobe:Reported an 11% increase in production volumes compared to 2018. In Egypt, the increase was primarily due to new wells and successful well optimization projects in West Bakr, offset by natural declines. In Canada, production was higher primarily due to new production from both the 2018 and 2019 drilling program, partially offset by natural declines;Ended 2019 with the inventoried crude oil of 964.5 Mbbls, an increase of 396.4 Mbbls over inventoried crude oil levels at December 31, 2018;Reported positive funds flow from operations of $46.9 million (2018 – $63.3 million). The decrease in funds flow from operations from 2018 is primarily due to excess cost oil in West Bakr and lower commodity prices;Ended the year with positive working capital of $32.2 million, including $33.3 million in cash and cash equivalents as at December 31, 2019;Petroleum and natural gas revenue decreased by 7% mainly due to a 6% decrease in average realized sales prices;Reported a net loss of $4.0 million (2018 – net earnings of $15.7 million). The 2019 net loss was inclusive of a $7.9 million non-cash impairment loss on the Company’s exploration and evaluation assets, primarily attributable to the South Alamein concession, and a $1.6 million unrealized derivative loss on commodity contracts. Before impairment and the unrealized loss on derivative commodity contracts, the Company had net earnings of $5.5 million;Spent $36.9 million on capital expenditures, funded entirely from cash flow from operations and cash on hand;Paid a dividend of $0.035 per share ($2.5 million) on April 18, 2019 to shareholders of record on March 29, 2019, and $0.035 per share ($2.5 million) September 13, 2019 to shareholders of record on August 30, 2019; andRepaid $16.5 million of long-term debt with cash on hand.OPERATING RESULTS AND NETBACKDaily Volumes, Working Interest before RoyaltiesProduction Volumes2019 2018Egypt crude oil (Bbls/d) 13,713 12,150Canada crude oil (Bbls/d) 814 558Canada NGLs (Bbls/d) 582 780Canada natural gas (Mcf/d) 5,594 5,707Total Company (Boepd) 16,041 14,439Sales Volumes (excludes volumes held as inventory)2019 2018Egypt crude oil (Bbls/d) 12,627 12,724Canada crude oil (Bbls/d) 814 558Canada NGLs (Bbls/d) 582 780Canada natural gas (Mcf/d) 5,594 5,707Total Company (Boepd) 14,954 15,013NetbackConsolidated netback2019 2018($000s, except per Boe amounts)$ $/Boe $$/BoePetroleum and natural gas sales 278,929 51.10 299,14454.59Royalties2 138,833 25.44 122,91722.43Current taxes2 26,098 4.78 26,3404.81Production and operating expenses 50,626 9.28 53,2989.73Selling costs 1,287 0.24 2,1030.38Netback1 62,085 11.36 94,48617.241 The Company achieved the netbacks above on sold barrels of oil equivalent for the year ended December 31, 2019 and December 31, 2018 (these figures do not include TransGlobe’s Egypt entitlement barrels held as inventory at December 31, 2019 and December 31, 2018). 2 Royalties and taxes are settled at the time of production. Fluctuations in royalty and tax costs per boe are due to timing differences between the production and sale of the Company’s entitlement crude oil.Egypt2019 2018($000s, except per Bbl amounts)$ $/Bbl $$/BblOil sales 256,193 55.59 278,11159.88Royalties2 136,616 29.64 120,27125.90Current taxes2 26,098 5.66 26,3405.67Production and operating expenses 43,252 9.38 45,5629.81Selling costs 1,287 0.28 2,1030.45Netback1 48,940 10.63 83,83518.051 The Company achieved the netbacks above on sold barrels of oil equivalent for the year ended December 31, 2019 and December 31, 2018 (these figures do not include TransGlobe’s Egypt entitlement barrels held as inventory at December 31, 2019 and December 31, 2018). 2 Royalties and taxes are settled at the time of production. Fluctuations in royalty and tax costs per bbl are due to timing differences between the production and sale of the Company’s entitlement crude oil.Netback per barrel in Egypt decreased by 42% in 2019 compared to 2018. The decrease was due to a 7% lower realized oil price, 14% higher royalty expense, offset by a 4% decrease in operation and production expenses and a 38% decrease in selling costs. The decrease was also due to higher production volumes (13%) without a corresponding increase in sales volumes. Royalties and taxes are settled on a production basis, therefore netback is reduced in periods where production increases and when production is higher than sales.Royalties and taxes as a percentage of revenue were 64% in 2019 (2018 – 53%). Royalties and taxes are settled on a production basis, therefore, the correlation of royalties and taxes to oil sales fluctuates depending on the timing of entitlement oil sales. If sales volumes had been equal to production volumes during the year, royalties and taxes as a percentage of revenue would have been 58% (2018 – 55%). In periods when the Company sells less than its entitlement production, royalties and taxes as a percentage of revenue will be higher than the terms of the PSCs. In periods when the Company sells more than its entitlement production, royalties and taxes as a percentage of revenue will be lower than the terms set out in the PSCs. The relative increase, from 55% in 2018 to 58% in 2019, was due to excess cost oil in the West Bakr concession during the fourth quarter of 2019. Excess cost oil occurs when the current costs and historic cost amortization, permissible within the PSC, are less than the proportion of cost oil value. In the case of West Bakr, 100% of excess cost oil belongs to EGPC, which effectively increases the royalty burden.In Egypt, the average selling price for the year ended December 31, 2019 was $55.59/Bbl (2018 – $59.88/Bbl), which was $8.77/Bbl lower (2018 – $11.18/Bbl lower) than the average Dated Brent oil price of $64.36/Bbl for 2019 (2018 – $71.06/Bbl). The difference between the average selling price and Dated Brent is due to a gravity/quality adjustment and is also impacted by the specific timing of direct sales.In Egypt, operation and production expenses fluctuate periodically due to changes in inventory volumes as a portion of costs are capitalized and expensed when sold. Production and operating expenses decreased by 5% ($2.3 million) in 2019 compared with 2018. The decrease was primarily related to the lower workover costs ($1.5 million) and the impact of the adoption of IFRS 16 ($1.5 million). This was partially offset by higher service and fuel costs due to higher production and diesel prices.Canada2019 2018($000s, except per Boe amounts)$ $/Boe $$/BoeCrude oil sales 15,159 51.02 10,66652.37Natural gas sales 2,705 7.95 2,6327.58NGL sales 4,872 22.93 7,73527.17Total sales 22,736 26.75 21,03325.17Royalties 2,217 2.61 2,6463.17Production and operating expenses 7,374 8.68 7,7369.26Netback 13,145 15.46 10,65112.74Netbacks per boe in Canada increased by 21% in 2019 compared with 2018. The increase is mainly due to a 6% higher realized sales price, an 18% decrease in royalties and a decrease of 6% in production and operating expenses.In 2019, the Company’s Canadian operations incurred $0.4 million lower royalty costs than in 2018. The reduction in royalties is primarily due to lower royalties on oil wells drilled during the 2018 and 2019 capital programs as a result of royalty holidays on the new drills. A further reduction in royalties was caused by Gas Cost Allowance (“GCA”) rebates received in 2019. Royalties amounted to 10% of petroleum and natural gas sales revenue during 2019 compared to 13% during the prior year. TransGlobe pays royalties to the Alberta provincial government and landowners in accordance with an established royalty regime. In Alberta, Crown royalty rates are based on reference commodity prices, production levels and well depths, and are offset by certain incentive programs in place to promote drilling activity by reducing overall royalty expense.The year over year decrease in operation and production expenses for 2019 was primarily due to a facilities maintenance program which was completed in 2018, and generally occurs every 5 years. Additionally, certain costs historically recorded as operating expenses were recorded as depletion, depreciation and amortization in 2019 due to the adoption of IFRS 16.Consolidated Statements of Earnings (Loss) and Comprehensive Income (Loss)(Expressed in thousands of U.S. Dollars, except per share amounts)Years Ended December 31 2019 2018 REVENUE Petroleum and natural gas sales, net of royalties 140,096 176,227Finance revenue 471 570 140,567 176,797 EXPENSES Production and operating 50,626 53,298Selling costs 1,287 2,103General and administrative 16,611 18,688Foreign exchange gain (147) (289)Finance costs 4,256 5,075Depletion, depreciation and amortization 34,948 34,291Asset retirement obligation accretion 215 270Loss on financial instruments 2,845 7,051Impairment loss 7,937 14,500Gain on disposition of assets (114) (207) 118,464 134,780 Earnings before income taxes 22,103 42,017 Income tax expense – current 26,098 26,340NET (LOSS) EARNINGS (3,995) 15,677 OTHER COMPREHENSIVE (LOSS) INCOME Currency translation adjustments 2,073 (3,732)COMPREHENSIVE (LOSS) INCOME (1,922) 11,945 Net (loss) earnings per share Basic (0.06) 0.22Diluted (0.06) 0.22Consolidated Balance Sheets(Expressed in thousands of US Dollars)As at As at December 31, 2019 December 31, 2018 ASSETS Current Cash and cash equivalents 33,251 51,705Accounts receivable 10,681 12,014Derivative commodity contracts – 1,198Prepaids and other 4,338 5,385Product inventory 17,516 8,692 65,786 78,994Non-Current Derivative commodity contracts – 171Intangible exploration and evaluation assets 33,706 36,266Property and equipment Petroleum and natural gas assets 196,150 195,263 Other 4,296 3,079Deferred taxes 8,387 4,523 308,325 318,296 LIABILITIES Current Accounts payable and accrued liabilities 32,156 28,007Derivative commodity contracts 217 –Current portion of lease obligations 1,219 – 33,592 28,007Non-Current Long-term debt 37,041 52,355Asset retirement obligations 13,612 12,113Other long-term liabilities 614 1,007Lease obligations 589 –Deferred taxes 8,387 4,523 93,835 98,005 SHAREHOLDERS’ EQUITY Share capital 152,805 152,084Accumulated other comprehensive income (loss) 1,134 (939)Contributed surplus 24,673 24,195Retained earnings 35,878 44,951 214,490 220,291 308,325 318,296Consolidated Statements of Changes in Shareholders’ Equity(Expressed in thousands of US Dollars)Years Ended December 31 2019 2018 Share Capital Balance, beginning of year 152,084 152,084Stock options exercised 547 –Transfer from contributed surplus on exercise of options 174 –Balance, end of year 152,805 152,084 Accumulated Other Comprehensive Income (Loss) Balance, beginning of year (939) 2,793Currency translation adjustment 2,073 (3,732)Balance, end of year 1,134 (939) Contributed Surplus Balance, beginning of year 24,195 23,329Share-based compensation expense 652 866Transfer to share capital on exercise of options (174) –Balance, end of year 24,673 24,195 Retained Earnings Balance, beginning of year 44,951 31,801Net (loss) earnings (3,995) 15,677Dividends (5,078) (2,527) Balance, end of year 35,878 44,951Consolidated Statements of Cash Flows(Expressed in thousands of US Dollars)Years Ended December 31 2019 2018 OPERATING Net (loss) earnings (3,995)15,677Adjustments for: Depletion, depreciation and amortization 34,948 34,291Asset retirement obligation accretion 215 270Deferred lease inducement – (90)Impairment loss 7,937 14,500Share-based compensation 2,237 3,536Finance costs 4,256 5,075Unrealized loss (gain) on financial instruments 1,586 (9,335)Unrealized gain on foreign currency translation (153)(135)Gain on asset dispositions (114)(207)Asset retirement obligations settled (46)(300)Changes in non-cash working capital (2,035)5,910Net cash generated by operating activities 44,836 69,192 INVESTING Additions to intangible exploration and evaluation assets (5,377)(9,288)Additions to petroleum and natural gas assets (30,626)(30,832)Additions to other assets (929)(586)Proceeds from asset dispositions 114 207Changes in non-cash working capital (291)251Net cash used in investing activities (37,109)(40,248) FINANCING Issue of common shares for cash 547 –Interest paid (3,664)(4,767) Increase in long-term debt 476 508 Payments on lease obligations (1,945)– Repayments of long-term debt (16,523)(17,797) Dividends paid (5,078)(2,527)Changes in non-cash working capital (200)(3)Net cash used in financing activities (26,387)(24,586) Currency translation differences relating to cash and cash equivalents 206 (102)NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (18,454)4,256CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 51,705 47,449CASH AND CASH EQUIVALENTS, END OF YEAR 33,251 51,705LIQUIDITY AND CAPITAL RESOURCESLiquidity 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 that maintain and increase production and reserves, to acquire strategic oil and gas assets, to repay current liabilities and debt and ultimately to provide a return to shareholders. TransGlobe’s capital programs are funded by existing working capital and cash provided from operating activities. The Company’s cash flow from operations varies significantly from quarter to quarter, depending on the timing of oil sales from cargoes lifted in Egypt, and these fluctuations in cash flow impact the Company’s liquidity. TransGlobe’s management will continue to steward capital and focus on cost reductions in order to maintain balance sheet strength through the current volatile oil price environment.Funding for the Company’s capital expenditures is provided by cash flows from operations and cash on hand. The Company expects to fund its 2020 exploration and development program through the use of working capital and cash flow from operations. The Company also expects to pay down debt, return money to shareholders, and explore business development opportunities with its working capital. Fluctuations in commodity prices, product demand, foreign exchange rates, interest rates and various other risks may impact capital resources and capital expenditures.Working capital is the amount by which current assets exceed current liabilities. As at December 31, 2019, the Company had a working capital surplus of $32.2 million (December 31, 2018 – $51.0 million). The decrease in working capital is primarily the result of a decrease in cash from repayments on long-term debt, dividend payments, lower income in 2019 principally due to lower commodity prices, and funding of the 2019 capital program.As at December 31, 2019, the Company’s cash equivalents balance consisted of short-term deposits with an original term to maturity at purchase of one month or less. All of the Company’s cash and cash equivalents are on deposit with high credit-quality financial institutions.Over the past 10 years, the Company experienced delays in the collection of accounts receivable from EGPC. The length of delay peaked in 2013, returned to historical delays of up to six months in 2017, and has since fluctuated within an acceptable range. As at December 31, 2019, amounts owing from EGPC were $5.7 million. The Company considers there to be minimal credit risk associated with amounts receivable from EGPC.In Egypt, the Company completed a fourth crude oil sale in Q4-2019 for total proceeds of $22.6 million, which were collected in December 2019. The Company incurs a 30-day collection cycle on sales to third-party international buyers. Depending on the Company’s assessment of the credit of crude oil purchasers, they may be required to post irrevocable letters of credit to support the sales prior to the cargo lifting, which has significantly reduced the Company’s credit risk profile. As at December 31, 2019, the Company held 964.5 mbbls of entitlement oil as inventory.As at December 31, 2019, the Company had $94.2 million of revolving credit facilities with $37.5 million drawn and $56.7 million available. The Company has a prepayment agreement with Mercuria that allows for a revolving balance of up to $75.0 million, of which $30.0 million was drawn and outstanding. During 2019, the Company repaid $15.0 million of this prepayment agreement. The Company also has a revolving Canadian reserves-based lending facility with ATB totaling C$25.0 million ($19.2 million), of which C$9.8 million ($7.5 million) was drawn and outstanding. During 2019, the Company had drawings of C$0.6 million ($0.5 million) and repayments of C$2.0 million ($1.5 million) on this facility. TransGlobe regularly communicates with its lenders and remains confident in its ability to weather the current oil price disruption.The Company paid a dividend of $0.035 per share ($2.5 million) on April 18, 2019 to shareholders of record on March 29, 2019, and $0.035 per share ($2.5 million) on September 13, 2019 to shareholders of record on August 30, 2019. In light of the global oil price disruption, the Company has decided to suspend its first quarter dividend payment to manage cash, until such a time that it is appropriate to reinstate. The Board of Directors will evaluate its decision on a semi-annual basis going forward.MANAGEMENT STRATEGY AND OUTLOOKThe 2020 outlook provides information as to management’s expectation for results of operations for 2020. Readers are cautioned that the 2020 outlook may not be appropriate for other purposes. The Company’s expected results are sensitive to fluctuations in the business environment, including disruptions caused by the ongoing political changes and civil unrest occurring in the jurisdictions that the Company operates in, 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”, outlined on the first page of the Management’s Discussion and Analysis (“MD&A”).2020 OutlookThe 2020 production outlook for the Company is provided as a range to reflect timing and performance contingencies.Global reaction to the spread of COVID-19 and the resultant reduction in oil demand has negatively affected current and future forecasts of oil prices in 2020. This has been compounded by OPEC+, led by Saudi Arabia and Russia, failing to reach an agreement on constraining output in face of lower global demand to support global oil prices and Saudi Arabia and Iraq’s stated intention to discount April deliveries and increase supply into the market. Oil prices are now markedly lower than those the Company used as the basis for its 2020 capital program.TransGlobe maintains a strong balance sheet with modest debt, and its operated 100% position across its producing assets gives it significant capital flexibility and a high degree of discretion in its forward investment program. The Company intends to use all available tools to minimize balance sheet risk and position itself for future success.The Company has re-evaluated its priorities in the short term and is taking decisive action to reduce its previously announced capital program in 2020, and focus only on those investments that are critical to HSE and value preservation. In addition, and to balance the reduction in capital investment, the Company is analyzing operating costs both in Egypt and Canada to identify all possible optimization opportunities.Contingency plans have been implemented to protect TransGlobe’s staff and contractors and ensure business continuity in light of COVID-19. At this time, the virus is not expected to have a significant impact on the Company’s day-to-day operations.As a result of the reduced 2020 capital program, total corporate production is now expected to range between 13.3 and 14.3 Mboepd (mid-point of 13.8 Mboepd) for 2020 with a 93% weighting to oil and liquids. Egypt oil production is expected to range between 11.3 and 12.1 Mbopd (mid-point of 11.7 Mbopd) in 2020. Canadian production is expected to range between 2.0 and 2.2 Mboepd (mid-point of 2.1 Mboepd) in 2020. The 2020 mid-point production guidance broken out by product type is summarized below:Mid-point production guidance Egypt Canada Total Light and medium crude oil (Bbls/d)9577061,663Heavy crude oil (Bbls/d)10,743–10,743Conventional natural gas (Mcf/d)–5,3945,394Natural gas liquids (Bbls/d)–495492Total (Boepd) 11,700 2,100 13,800Funds flow from operations in any given period is dependent upon the timing and market price of crude oil sales in Egypt. Because these factors are difficult to accurately predict, the Company has not provided funds flow from operations guidance for 2020. Funds flow from operations and inventory levels in Egypt may fluctuate significantly from quarter to quarter due to the timing of crude oil sales.The below chart provides a comparison of well netbacks in the Company’s Egyptian and Canadian assets under multiple price sensitivities. A typical Cardium well produces both oil and natural gas/NGLs. The price of each commodity varies significantly, therefore the below chart presents the netback of each revenue stream separately.Netback sensitivity Benchmark crude oil price ($/Bbl)30.0040.0050.0060.0070.00Benchmark natural gas price ($/Mcf)0.750.951.101.301.50Netback ($/Boe)Egypt – crude oil1(2.07)2.065.848.0710.31Canada – crude oil213.9422.7431.0439.2847.50Canada – natural gas and NGLs2(2.28)(0.82)0.101.362.901 Egypt assumptions: using anticipated 2020 Egypt production profile, Gharib Blend price differential estimate of $12.00/bbl applied consistently at all price points, concession differentials of 4%, 5% and 3% applied to WG/WB/NWG, respectively, operating costs estimated at ~$9.50/bbl, and maximum cost recovery resulting from accumulated cost pools in WG and NWG. 2 Canada assumptions: using anticipated 2020 Canada production profile, Edmonton Light price differential estimate of C$5.40/bbl, Edmonton Light to Harmattan discount of C$2.50/bbl, operating costs estimated at ~C$11.40/boe, NGL mixture price at 45% of Edmonton Light, and takes into consideration Canadian tax pools.2020 Capital BudgetThe Company’s revised 2020 budgeted capital program is $7.1 million (before capitalized G&A) and includes $5.0 million for Egypt and $2.1 million for Canada. This reduced plan includes two wells (one in Egypt and one in Canada) that were spudded prior to the recent oil price disruption and capital related to HSE, select recompletions and workovers as well as certain land retention commitments.EgyptThe $5.0 million Egypt program is 100% allocated to development. The primary focus of the 2020 Egypt budget is the drilling of the HW-2A development well at West Bakr, targeting the Yusr sands. This well spudded prior to the price disruption. Other expenditures include required HSE equipment, contractual training bonuses and select recompletion and well optimization projects that have robust economics even in low price environments.CanadaThe $2.1 million Canada program consists of one horizontal (multi-stage stimulated) well targeting the Cardium light oil resource in South Harmattan (the 100/13-16-029-03W5/0 well). This well also spudded prior to the price disruption. The well will be drilled but will not be completed in order to preserve the economic value of the flush production that comes from the initial phase of production for this type of well.The revised 2020 capital program is summarized in the following table:TransGlobe 2020 Capital ($MM) Gross Well Count Development Exploration DrillingConcession Wells Other1 Wells Total2 Development Exploration TotalWest Gharib––– – –––West Bakr1.23.8– 5.0 1–1NW Gharib––– – –––South Ghazalat––– – –––Egypt 1.2 3.8 – 5.0 1 – 1Canada 1.7 0.4 – 2.1 1 – 12020 Total 2.9 4.2 – 7.1 2 – 2Splits (%)100%0%100%100%0%100%1 Other includes completions, workovers, recompletions and equipping.