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New factual Seeking Alpha article about TGA was out yesterday:

https://seekingalpha.com/article/4273688-transglobe-energy-location-cash

Among other positives, its production will far exceed guidance of 14,500 boepd this year reaching 18,000-19,000 boepd thanks to the new discoveries and development wells that exceed expectations.

Its dividend is fully sustainable and a dividend hike is very likely because FREE cash flow this year will exceed $35 million.

TGA's original production guidance for 2019 was 14,500 boepd, see company's past news.

Based on today's news, production at 17,000 boepd is well above original guidance:

https://www.trans-globe.com/news?article=127

Thanks also to these new oil discoveries and development wells:

1) the gusher South Ghazalat of 3,840 bopd that will start flowing 1,000 bopd in Q4 from only the one interval

2) the K-63 Development well as an Asl A formation oil well with an internally estimated 74 feet of net oil pay

3) the previously drilled H-30 development well with estimated 25 feet of net oil pay

4) the HW-2X discovery well drilled in April continues to clean up and is currently producing ~700 bopd

production in Q4 2019 will definitely exceed 18,000 boepd and will most likely reach 19,000 boepd by year end.

So TGA's production in 2019 will definitely be 20% above guidance and will likely be about 30% above original production guidance by year end.

And this does NOT include any potential new production from the exploration well that will be drilled in the second half of 2019. If it is successful, production could reach 20,000 boepd by year end:

" The drilling rig is scheduled to move to NW Gharib to drill an exploration well at NWG 38D-1 targeting the Red Bed formation in an adjacent fault block to the east of the producing 38A pool. The Company initiated water injection in the NWG 38A Red Bed pool during the quarter to maintain reservoir pressure and increase recoveries. "

So production is up, Brent price remains high, so Q2, Q3, Q4 will be even better than Q1.

TGA's current enterprise value is less than 2 times its annual cash flow.

Based on US$34 million CapEx for 2019, TGA will generate at least US$35 million FREE CASH FLOW this year.

So a dividend hike is very likely.

TGA is the definition of a dirt cheap company with a fully sustainable dividend and a stellar balance sheet.

The stock can jump any time like it suddenly jumped and doubled in 2018.

TGA's production in Q1 2019 rose compared to Q4 2018 far exceeding 2019 guidance of 15,000!

According to the news today, TGA's production continued to rise in Q2 2019 reaching almost 17,000 boepd in April thanks to very strong wells in Egypt.

And 2 more wells in Egypt were tied in in May, according to today's news.

And 2 more wells again in Egypt will be drilled in Q2 2019:

"Following H-30, the drilling rig is scheduled to drill a development well at West Bakr (K-63) and one exploration well at North West Gharib (NWG 38 D-1)."


Also in the Western Desert, TGA filed a development lease application with EGPC last February for the South Ghazalat SGZ 6X oil discovery and is targeting production from this concession prior to year end. No additional production has been forecast from South Ghazalat in the production guidance for 2019, see TGA's guidance where the company says it clearly. Meanwhile, the two South Ghazalat wells are gushers reaching 3,800 bopd according to previous press releases.

So TGA could reach 20,000 boepd in December 2019!

I quote this excellent factual post from Stockhouse.com, the Canadian board for TGL.

By the way TGL trades on the Nasdaq too under the ticker TGA and TGA closed at US$1.81 yesterday.

Now that the reserves report is out, we can easily calculate TGA's NAV per share. I calculated it and it's US$3.61 per share based on its proved reserves alone. Not proved and probable, just proved reserves alone. And the calculation does not include any value for the company's undeveloped land in Egypt and in Canada. Zero value for the undeveloped land. If you add a very low value for the undeveloped land in both countries, TGA's NAV per share goes to US$4 per share, based on its proved reserves alone.

Meanwhile TGA is at US$1.81 per share today, so TGA is an easy double from here based on its NAV.

See the details:

Cash & cash equivalents are US$51.7 million and interest-bearing debt is US$52.4 million, while the estimated market value of inventoried crude oil of approximately 600,000 barrels is US$34.9 million (as of December 2018), according to the latest presentation.

So net debt is NEGATIVE at approximately US$34.2 million, which means that net debt will be added to NPV-10.

According to the latest reserves report, NPV-10 for Proved Reserves is US$227 million.

So see the table below:

1P reserves 2P reserves
NPV discounted 10%
after tax (US$ million) 227 323
Net Debt (US$ million) 34.2 34.2
Total (US$ million) 261.2 357.2
Outstanding Shares
(million) 72.4 72.4
NAV per share (US$) 3.61 4.93


And I say it again. As you see, I have not added any value for the undeveloped acreage that is approximately 600,000 net acres in Egypt and 40,000 net acres in Canada. Zero value for the undeveloped land in both countries.

TransGlobe Energy's new presentation for April 2019 is out:

https://www.trans-globe.com/upload/announcement/132/07/2019-04-24-april-corporate-presentation-final.pdf

See that TGL has very low operating costs both in Egypt and in Canada, which maximizes the operating netback.

In Canada, TGL is one of the lowest cost oil-weighted producers with OpEx at CAD$12.70 per boe.

Most oil-weighted names in Canada have OpEx from CAD$15 to CAD$20 per boe.

In Egypt, its OpEx is just $9.90 per bbl.

All of the above are in slide 28 of the presentation.

Original production guidance for 2019 was 14,500 boepd, see March 2019 press release.

Based on today's excellent news:

January 2019: ~15.8 MBoepd

February 2019: ~15.0 MBoepd

March 2019 ~16.9 MBoepd

TGA also says that the new YUSR oil discovery was NOT connected in Q1 2019 but this new discovery was drilled subsequent to the quarter, so production will keep rising in the next months.

TGA also decided to drill 3 more wells in this prolific H Block (2 development, 1 exploration), so production will keep rising by year end reaching 19,000 or 20,000 boepd:

"Drilled a discovery oil well in H Block. The HW-2X exploration well was drilled to a total depth of 1,654 meters (5,425 feet) and cased as a Yusr oil well. Based on open-hole logs and wireline samples, the well encountered an internally estimated 34.5 meters (113 feet) of net oil pay in the Yusr formation. The HW 2X well is scheduled for completion this month and expected to be on production in early May. Following HW-2X, the drilling rig is scheduled to drill two development wells at (H-30 and K-63) and one exploration well (NWG 38 D-1)."

And this does NOT include any production from the gushers in South Ghazalat of 3,800 bbls/d that will be added in the second half of 2019 according to the news today!

Based on today's excellent news, TGA is currently running almost 10% above original production guidance for 2019 and the new Yusr oil discovery alone of 113 feet net oil pay (!!!) will clearly push TGA's 2019 production even higher by year end.

There is also more good news in the next couple of quarters. If the upcoming 3 wells in the same H Block are successful too, TGA's production will approach or exceed 19,000 boepd by year end:

"Drilled a discovery oil well in H Block. The HW-2X exploration well was drilled to a total depth of 1,654 meters (5,425 feet) and cased as a Yusr oil well. Based on open-hole logs and wireline samples, the well encountered an internally estimated 34.5 meters (113 feet) of net oil pay in the Yusr formation. The HW 2X well is scheduled for completion this month and expected to be on production in early May. Following HW-2X, the drilling rig is scheduled to drill two development wells at (H-30 and K-63) and one exploration well (NWG 38 D-1)."

TGA has also pointed out that the original 2019 production guidance in the latest annual report of March does not include any production from South Ghazalat's gushers (3,800 bbls/d) whose production starts in the second half of 2019 (see today's news) or production from South Alamein's gusher (1,140 bbls/d) where the negotiations for access are ongoing.


So Cash & cash equivalents are US$51.7 million (Dec 2018)

Debt was US$52.4 million (Dec 2018)

The 600,000 bbls oil inventory (cash equivalent) has estimated market value US$34.9 million (Dec 2018), see presentation.

So net debt is negative at about US$34 million.

So TGA's enterprise value at about US$2 per share is about US$110 million.

So TGA's Enterprise Value currently is less than 2 times its annual operating cash flow for 2019 that will exceed US$70 million this year.

Dirt cheap with a pristine balance sheet is an understatement.

Also based on today's increased production for Q1 2019 and high Brent and Edmonton light prices, FREE cash flow in 2019 will definitely exceed US$40 - 45 million because 2019 CapEx is just US$34 million (see guidance), so a dividend hike is very likely.

The dividend is just US$5 million annually, so TGA can afford to raise it by 50% or 100%.

I quote it from Stockhouse website, the main Canadian board for TGL:
------------------------------------------------------------------------------------------------------------

Other Catalysts: Upward Revision and 3 Exploration Wells

Read the latect CC on Seeking Alpha. TGA says that it is running above guidance due to increased production in the West Bakr and North West Gharib Concessions in Egypt and the 6 Cardium wells that were tied in in January 2019. Here is the excerpt:

“ As Lloyd just mentioned, we are currently running above guidance, but at this time we are not revising our full year estimates.”

So the company will most likely revise the original guidance upwards in the next weeks if nothing changes and production remains above guidance. The existing production guidance does not include any news from South Ghazalat (3,800 bbls/d) whose production starts in the second half of 2019 or news from South Alamein (1,140 bbls/d) where the negotiations for access are ongoing, see excerpt:

"No additional production has been forecast from South Ghazalat pending approval of the SGZ 6X development plan. Additional investment in South Alamein is conditional on negotiating the necessary extensions following the military rejection of access to the SA 24 X exploration well surface location."


This upward revision and rising oil prices (Brent, Edmonton light) aside, TGA just drilled or will drill soon 3 additional exploration wells that can be strong catalysts moving the stock:

1) NW Gharib exploration well in Egypt (NWG 38A-8): Positive indications to-date from this well because TGA says in the annual report:

"Based on wireline logs and samples (MDT), it appears that NWG 38A-8 has extended the NG 38A red bed oil pool to the south. The well is scheduled for completion and testing later this month."


2) West Bakr exploration well in Egypt: TGA targets the formation that was proven to be successful by an offset operator, so the company is cautiously optimistic about its chances of having discovery there, see excerpt below:

“With respect to the West Bakr exploration well, the target on that one, it’s a bit, a bit challenging to give you a whole prospect size on that. We do know that the wells to the south there’s a pool down there that is producing something in the order of 2,500 barrels a day from three wells. So we’re optimistic, we’re going to get a positive well if it extends that far north. Typically those wells would recover in the three to five hundred thousand barrels per well range, but until we test the structure it’s hard to say.”


3) South Harmattan exploration well in Canada: TGA says that it drills 4 Cardium horizontal wells in 2019 including an outpost well to begin evaluating the South Harmattan acreage acquired in 2018. Success in the South Harmattan area could add between 30 and 40 additional potential drilling locations (one mile Hz wells at four per section), according to the annual report.

Read all the insightful articles about TGL on Seeking Alpha website, the best financial website:

https://seekingalpha.com/symbol/TGA?s=tga

TransGlobe's (TGA in the US) crude oil inventory is about 600,000 bbls, read the report, and it is considered to be "cash equivalent" item, see presentation, so its "cash and cash equivalent" exceed its debt and its net debt is negative.

TGA's enterprise value now at US$1.90 per share on Nasdaq is less than 2 times its annual cash flow for 2019 that will exceed US$70 million. So it's a technically oversold and dirt cheap company with a stellar balance sheet.

Negotiations for El Alamein are ongoing, so TGA will announce news regarding access to the South Alamein gusher of 1,140 bopd any day now.

TGA will announce the beginning of the development for the gushers of 3,800 bbls/d at South Ghazalat any day now, read the annual report. Another strong catalyst that can move the stock a lot.

TGA made profits in 2018 and will make profits in 2019 again, Brent this year is higher than 2018 and TGA's has biggest exposure to Brent (Egypt) than to Edmonton light (Canada).

TGA's CapEx in 2019 is just US$34 million, according to the guidance.

So TGA will generate free cash flow about US$40 million in 2019 or more.

The dividend is just US$5 million annually, so TGA can afford to raise it by 50% or 100%.

TGA says again and again in the conference calls that they want to grow their production organically and through acquisitions this year. Thanks to its free cash flow of about US$40 million in 2019, TGA can afford to acquire another small producer.

Due to its high valuation, AMER is not a takeover target either. Keep this in mind too.

AMER remains very expensive compared to its peers in Colombia. Very expensive. There are much cheaper plays with pristine balance sheets.

SIA drills in Vietnam, so another idea for a diversified energy portfolio is international oil producer TransGlobe Energy (TGL) that drills in Egypt and Canada.

TGL is a profitable company that generated more than $30 million free cash flow in 2018 and gives 4% dividend (semi-annual).

TGL's current Enterprise Value is less than 2 times its annual cash flow. Dirt cheap.

Many catalysts ahead excluding the oil price such as the gushers of 3,800 bbls/d in South Alamein and Ghazalat, the Cardium wells in Canada and the new acquisitions thanks to its free cash flow in 2019 again.

Free cash flow in 2019 is estimated about $40 million because CapEx in 2019 is just $34 million, see guidance.

Do your dd to verify all of the above.

Malcy was promoting Caza Oil a few years ago. But Caza Oil filed for bankruptcy ....

TaffEvans, thanks for the "excellent" "factual" "fundamental" analysis about grossly undervalued TransGlobe Energy (TGL). In the meantime, I will collect another semi-annual dividend from TGL this week.

TaffEvans, thanks for the "excellent" "factual" "fundamental" analysis.

I think Gulf Keystone Petroleum (GKP) has to resolve its diversification issue and lower its geopolitical risk too. GKP is highly dependent on one play in one country, which is one of the riskiest countries in the world. GKP has exited Algeria. So I believe GKP's current Enterprise Value is too high if you take into account all these factors.

For instance, see Transglobe (TGL). There is a huge valuation gap between GKP and TGL that supports TGL's tremendous upside potential from its current levels.

TGL is just unknown because it's new on AIM. However, TGL has very strong fundamentals with zero net debt and zero leverage, gives 4% dividend, a dividend hike is on the horizon, generates free cash flow and has production growth both in Egypt and in Canada.

Also TGL's current Enterprise Value of about US$110 million is less than 2 times its annual cash flow!

Also TGL will generate at least US$30 million free cash flow this year and it will use this free cash to acquire other companies and increase its production, according to the latest management statements.

Do your own dd to verify everything.

I think it's a handful of reasons that will keep investors away from Cairn Energy (CNE) including no key catalysts on the horizon, expensive risky offshore wells, and losses at the bottom line.

By the way, compare CNE's Enterprise Value with Transglobe Energy's (TGL) Enterprise Value although they have the same production.

CNE's production is 17,500 boepd and TGL's production is 15,500 boepd based on the latest press release and growing.

There is a huge valuation gap that supports TGL's tremendous upside potential from its current levels.

TGL is just unknown because it's new on AIM. However, TGL has very strong fundamentals with zero net debt and zero leverage, gives 4% dividend, a dividend hike is on the horizon, generates free cash flow and has production growth both in Egypt and in Canada.

Also TGL will generate at least US$30 million free cash flow this year and it will use this cash to acquire other companies and increase its production, according to the latest management statements.

Food for thought, guys.....

I think the biggest risk with TLW is that it drills offshore wells that are very expensive and very risky of course. The small dividend can't compensate for this risk....

OPHR drills offshore wells that are very expensive and very risky. I will definitely avoid it. I prefer Transglobe Energy (TGL) instead that drills onshore low cost wells in Canada and Egypt while generating free cash flow, trading less than 2 times its annual cash flow and giving 4% dividend.