TransGlobe Energy Corp. shares jumped more than 12% in Toronto and New York trading Monday, making the stock the best performer on the S&P/TSX Composite Index as that exchange's trading wound down.
The Calgary-based oil and gas producer has most of its operations in Egypt and Yemen. On Thursday, the company said its West Gharib production operations had not been affected by the recent political demonstrations in Egypt. In December, its production averaged 8,247 barrels per day from Egypt, according to TransGlobe.
On Monday, oil futures closed down 1.7% at $87.48 a barrel as talks between the regime of Egyptian President Hosni Mubarak with opposition leaders led investors to predict a more peaceful leadership change.
TGA sells all of its oil under contacts tied to Brent Crude so it is definitely off to a good start in the 1st quarter. Brent Crude is currently trading at about a $10/bbl premium to West Texas Intermediate (WTI), the futures contract price quoted above. - Dan
TGA up 12% on heavy volume
TGA up 12% on heavy volume
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: TGA up 12% on heavy volume
Fred Kozak of Canaccord Genuity defended his Buy call and $19 target for TGA on Feb. 4. He sees a 2011E exit rate of just over 15,000 bbl/d.
Re: TGA up 12% on heavy volume
I agree with Fred but I have decide (after much thought) that it is best to move TGA to the Watch List until the mess in Egypt clears up. I believe that TGA is currently trading at a 30% to 40% discount to Fair Value but the situation in Egypt will keep a dark cloud over the stock. Shareholders are likely to sell into each rally, surpressing the share price.
Getting the East Ghazalat Block on-line later this year is a big part of my valuation. There is now some doubt that the operator will be able to secure all the services necessary to build production facilities and get the wells completed to sales.
Long-term investors should hang tough. TGA is going to report strong Q4 results and even stronger earnings and cash flows in the 1st quarter. It has incredible exploration upside.
There are several great stocks on our Watch List and TGA is one of them.
Getting the East Ghazalat Block on-line later this year is a big part of my valuation. There is now some doubt that the operator will be able to secure all the services necessary to build production facilities and get the wells completed to sales.
Long-term investors should hang tough. TGA is going to report strong Q4 results and even stronger earnings and cash flows in the 1st quarter. It has incredible exploration upside.
There are several great stocks on our Watch List and TGA is one of them.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: TGA up 12% on heavy volume
The International Energy Agency (IEA) estimates that Egypt exported less than 100,000 barrels per day of oil in 2010 and about 60,000 barrels per day of oil products such as naphtha and jet fuel. Italy is the leading market for these exports.
Recent trends suggest Egyptian exports may dwindle in coming years: Domestic oil consumption has soared 25 to 30 percent over the past decade, while the country’s output remains well under its 1993 peak of 941,000 barrels per day. Shrinking production and rising consumption will continue to squeeze exports.
Natural gas is a slightly different story. Egypt exports nearly 20 billion cubic meters of natural gas, primarily in the form of liquefied natural gas (LNG). Italy and South Korea are the two biggest markets for Egyptian gas. But global LNG markets remain oversupplied, and prices are depressed in many markets; the loss of Egyptian supply wouldn’t change the supply and demand balance.
Libya and Algeria, on the other hand, produce about 1.65 and 1.8 million barrels per day of oil, respectively, and export significant quantities. Should the unrest in Egypt and Tunisia spread to these two countries and disrupt the oil industry, journalists’ dire forecasts might have a sliver of credence. But fear of contagion appears overblown. Despite some protests in Algeria, the status quo hasn’t come under serious threat.
Moreover, it’s not clear that unrest would disrupt production. Foreign oil companies have evacuated staff from Egypt and halted drilling activities, but the nation continues to export natural gas. Over the long term, any Egyptian government will need the revenue generated by oil and natural gas exports, limiting the likelihood of a prolonged shutdown.
Recent trends suggest Egyptian exports may dwindle in coming years: Domestic oil consumption has soared 25 to 30 percent over the past decade, while the country’s output remains well under its 1993 peak of 941,000 barrels per day. Shrinking production and rising consumption will continue to squeeze exports.
Natural gas is a slightly different story. Egypt exports nearly 20 billion cubic meters of natural gas, primarily in the form of liquefied natural gas (LNG). Italy and South Korea are the two biggest markets for Egyptian gas. But global LNG markets remain oversupplied, and prices are depressed in many markets; the loss of Egyptian supply wouldn’t change the supply and demand balance.
Libya and Algeria, on the other hand, produce about 1.65 and 1.8 million barrels per day of oil, respectively, and export significant quantities. Should the unrest in Egypt and Tunisia spread to these two countries and disrupt the oil industry, journalists’ dire forecasts might have a sliver of credence. But fear of contagion appears overblown. Despite some protests in Algeria, the status quo hasn’t come under serious threat.
Moreover, it’s not clear that unrest would disrupt production. Foreign oil companies have evacuated staff from Egypt and halted drilling activities, but the nation continues to export natural gas. Over the long term, any Egyptian government will need the revenue generated by oil and natural gas exports, limiting the likelihood of a prolonged shutdown.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: TGA up 12% on heavy volume
I was surprised Ross did not take the opportunity on the conference call today to be a bit more reassuring about the business conditions and operations in Egypt. He would not take questions about it, thus your concern, Dan, about East Ghazalat has to rise in importance, not be assuaged. I have shares subject to call away Saturday at $15 and I see no reason now not to let them be taken should they close at $15 or better on Friday.
Re: TGA up 12% on heavy volume
Wise move. Regardless of how good TGA's fundamentals are, the unrest in the region will be a dark cloud over its share price for months. TGA has been dropped from the Sweet 16.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group