TransGlobe Puts Canadian Assets On The Block

Calgary-based TransGlobe Energy Corporation says it plans to seek a buyer for its Canadian assets as it focuses on its properties in Yemen and Egypt where it has experienced higher growth rates and a higher return on investment.

The company anticipates the sale could be completed by April 2008, subject to satisfactory terms being achieved.

In Canada, two (0.7 net) potential gas wells and 10 (two net) Horseshoe Canyon coalbed methane wells were drilled in the Thorsby and Morningside areas in November and December.

TransGlobe is projecting a 2008 capital budget of $48 million, funded from cash flow and working capital and split equally between exploration and development. Estimated cash flow from operations for 2008 is between $47 million and $51 million based on an average dated Brent oil price of $80 per bbl and an average AECO gas price of $6 per mcf.

The forecast is based on an estimated production target of 5,500 to 5,700 bbls of oil equivalent (BOE) per day, assuming the Canadian properties are sold in April.

Total production in the fourth quarter of this year is expected to average approximately 7,000 BOE a day, a 34% increase over the third quarter due to the addition of the West Gharib producing assets in Egypt. TransGlobe's production is 85% oil and natural gas liquids and 15% natural gas.

In West Gharib where the company has an operated 45% to 70% working interest, the development well currently drilling at Hana #11 (70% working interest) is expected to reach total depth in the next week. The well has encountered oil in the main producing zone of the Hana field and will be drilled to a total depth of more than 2 700 metres to evaluate several exploration targets below the Hana field. The next scheduled well at Hana #13 may also be drilled to evaluate deeper horizons, depending upon the results of the current well. The wells can be placed on production immediately following completion and testing, during January.

TransGlobe is finalizing an agreement for a third drilling rig to begin operations in West Gharib by July 2008.

In the Nuqra Block 1 in Egypt (50% working interest and operator), the successful identification of a 460 metre interval of mature source rocks in the shallower Cretaceous section of the Narmer #1 exploration well and the discovery of oil on a non-owned block in the Cretaceous section of Al Baraka #1 on the west side of the Nile has encouraged the company to continue with additional exploration drilling on the block.

The existing seismic data was re-mapped and several Cretaceous targets were identified on the block for a future drilling program. The company is discussing rig sharing possibilities with the adjacent operators to facilitate a mid-2008 drilling program. TransGlobe said the acquisition of the West Gharib concession should facilitate cost effective exploration in the Nuqra block.

In Block 72 in Yemen (33% working interest), a seismic acquisition program, consisting of 410 square kilometres of 3-D (three-dimensional) seismic and 98 kilometres of 2-D (two dimensional) seismic is currently underway and is expected to be completed during the first quarter of 2008. An exploration well is expected to commence drilling in the second half of 2008, following the interpretation of the new seismic data. Two firm exploration wells are planned for 2008, plus one contingent well. The first exploration phase of Block 72 has been extended 12 months to January of 2009.

Also in Yemen, a production sharing agreement (PSA) is proceeding through the government approval and parliamentary ratification process and is expected to be completed in 2008.

TG Holdings Yemen Inc., a wholly-owned subsidiary of TransGlobe (33% non-working interest) was part of a joint venture group operated by DNO ASA (operator at 34%) that successfully bid on Block 84 in December 2006.

The 183,000 acre block in the Masila basin is adjacent to the Nexen Inc. Masila block where more than one billion bbls of oil have been discovered. The Block 84 joint venture group plans to carry out a 400 square kilometre 3-D seismic acquisition program and drill four exploration wells during the first exploration period of 42 months.

The PSA is now before the Yemen parliament for final approval and ratification in Block 75 in the Marib basin of Yemen West where TG Holdings has a 25% working interest with operator Occidental Petroleum Corporation. The joint venture group plans to carry out a 3-D seismic acquisition program and the drilling of one exploration well during the first exploration period of 36 months.

A combined seismic program of approximately 400 square kilometres is planned for early 2008 to define additional exploration drilling locations on the northwest portion of Block S-1 (25% working interest) and the north portion of Block 75. Drilling is planned for late 2008 or early 2009.

The timing of the 3-D seismic acquisition program and subsequent drilling is contingent upon receiving final approval and ratification of the Block 75 PSA.