Energy Prospectus

I am finally getting around to updating my forecast model for TGA. They had a darn good quarter and they seem to be getting straight with their receivable from the Egyptian government. Also, note that Yemen Block S-1 is back on production.

CALGARY, ALBERTA--(Marketwired - Nov 13, 2013) - TransGlobe Energy Corporation ("TransGlobe" or the "Company") (TGL.TO)(TGA) is pleased to announce its financial and operating results for the three and nine months ended September 30, 2013. All dollar values are expressed in United States dollars unless otherwise stated.
•Third quarter production averaged 18,197 Bopd (18,109 Bopd sales); < Slightly below my forecast.
•Third quarter funds flow of $33.5 million;
•Third quarter earnings of $16.3 million (includes a $1.6 million loss on convertible debentures);
•Spent $22.4 million on exploration and development during the quarter;
•The four PSCs (100% working interest) awarded in the 2011/2012 EGPC bid round were signed on November 7, 2013;
•Collected $40.8 million in accounts receivable from the Egyptian Government during the quarter and offset signature bonuses on new PSCs ($40.6 million) against accounts receivable subsequent to the quarter;
•Ended the quarter with $128.2 million in cash and cash equivalents; positive working capital of $318.8 million or $194.5 million net of debt (including convertible debentures);
•Drilled 11 wells in the quarter resulting in 10 oil wells and one gas/condensate well;
•Two new discoveries including oil at Block 32 in Yemen and gas/condensate at East Ghazalat in Egypt;
•Block S-1 in Yemen recommenced production on November 8, 2013.

This is very good news for TGA:
"The Company's accounts receivable was $239.7 million (Q2-2013 - $222.3 million) at the end of the quarter including collections of $40.8 million from the Egyptian Government during the quarter. The Company expects to collect a total of $250 million to $270 million by year end, representing a 59% to 72% increase over 2012 collections. The majority of the fourth quarter collections are expected to come in the form of a full cargo lifting and a partial cargo lifting, both scheduled for November, which have been allocated to the Company. The full cargo lifting occurred November 5 to 7, 2013. These full and partial liftings are expected to result in collections of approximately $65 million based on current pricing. Another large portion of the remaining collections will be the offset of signature bonuses on the four new PSCs awarded to the Company that were recently passed into law. The settlement of the signature bonuses, of $40.6 million, against the outstanding accounts receivable occurred prior to the official PSC signature ceremony held on November 7, 2013."

TransGlobe Energy (TGA): An updated Net Income & Cash Flow Forecast model has been posted under the Watch List Tab.

My Fair Value Estimate is $12.20/share (using a very low multiple of just 6X CFPS).
> TGA has a VERY STRONG balance sheet with more than enough working capital today to cover their entire 2014 capital program
> TGA has incredible exploration upside.

TGA is now generating a lot of free cash flow and I am expecting oil production to ramp up 1,000 bbls per day for several quarters in a row giving them even more cash flow. In their press release they indicated they will start paying dividends and/or buy back shares in 2014.

TGA sells all of their oil under contracts tied to Brent.

good summary of Transglobe - although it does not address the recent success (via DNO) in Yemen (I don't understand why TGA's management is so tight-lipped wrt this find):

http://seekingalpha.com/article/1865311 ... investment

That article is well done and clearly states why I keep my shares in TGA. In a "normal" world, TGA should be trading near $20/share. It has a rock solid balance sheet, lots of free cash flow, strong management team and HUGE exploration upside.

TGA has been assigned to one of our SMU interns and we will publish an updated profile in mid-December. Q3 production was 18,109 bopd (100% oil) and I now expect an exit rate near 20,500 bopd.

Dan, what's your view of the report today?

Thank you