EX-99.1 8 a2012aif.htm EXHIBIT 2012 AIF










TRANSGLOBE ENERGY CORPORATION
ANNUAL INFORMATION FORM
Year Ended December 31, 2012







March 14, 2013







1

TABLE OF CONTENTS
 
Page

 
 
CURRENCY AND EXCHANGE RATES
2

ABBREVIATIONS
2

CONVERSIONS
3

FORWARD-LOOKING STATEMENTS
3

CERTAIN DEFINITIONS
5

TRANSGLOBE ENERGY CORPORATION
6

GENERAL DEVELOPMENT OF THE BUSINESS
7

DESCRIPTION OF THE BUSINESS AND PRINCIPAL PROPERTIES
10

STATEMENT OF RESERVES DATA AND OTHER OIL AND GAS INFORMATION
13

DIVIDEND POLICY
35

DESCRIPTION OF CAPITAL STRUCTURE
35

MARKET FOR SECURITIES
39

PRIOR SALES
40

ESCROWED SECURITIES AND SECURITIES SUBJECT TO CONTRACTUAL RESTRICTIONS ON TRANSFER
40

DIRECTORS AND OFFICERS
40

INTERESTS OF EXPERTS
42

LEGAL PROCEEDINGS AND REGULATORY ACTIONS
42

INTERESTS OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS
43

TRANSFER AGENT AND REGISTRAR
43

MATERIAL CONTRACTS
43

AUDIT COMMITTEE INFORMATION
43

RISK FACTORS
44

ADDITIONAL INFORMATION
53

SCHEDULE "A"
Report on Reserves Data by Independent Qualified Reserves Evaluator or Auditor
SCHEDULE "B"
Report of Management and Directors on Oil and Gas Disclosure
SCHEDULE "C"
Charter of Audit Committee





TRANSGLOBE ENERGY CORPORATION
ANNUAL INFORMATION FORM
Year Ended December 31, 2012
 
 
March 14, 2013
CURRENCY AND EXCHANGE RATES
All dollar amounts in this Annual Information Form, unless otherwise indicated, are stated in United States ("U.S.") currency. TransGlobe Energy Corporation ("TransGlobe" or the "Company") has adopted the U.S. dollar as the functional currency for its consolidated financial statements. The exchange rates for the average of the daily noon buying rates during the period and the end of period noon buying rate for the U.S. dollar in terms of Canadian dollars as reported by the Bank of Canada were as follows for each of the years ended December 31, 2012, 2011 and 2010.
 
Year Ended December 31, 2012
Year Ended December 31, 2011
Year Ended December 31, 2010
End of Period
Cdn$0.9949
Cdn$1.0162
Cdn$0.9931
Period Average
Cdn$0.9996
Cdn$0.9891
Cdn$1.0299


ABBREVIATIONS
Oil and Natural Gas Liquids
 
Natural Gas
 
 
 
 
 
 
Bbl
Barrel
 
Mcf
thousand cubic feet
Bbls
Barrels
 
MMcf
million cubic feet
Mbbls
thousand barrels
 
Mcf/d
thousand cubic feet per day
MMbbls
million barrels
 
MMcf/d
million cubic feet per day
Mstb
1,000 stock tank barrels
 
MMBtu
million British Thermal Units
Bbls/d
barrels per day
 
Bcf
billion cubic feet
Bopd or bopd
barrels of oil per day
 
Tcf
trillion cubic feet
NGLs
natural gas liquids
 
GJ
gigajoule
STB
stock tank barrels
 
 
 
 
 
 
 
 
Other
 
 
 
 
 
 
 
 
 
km2
square kilometres
m3
cubic metres
$M
thousands of dollars
$MM
millions of dollars
WTI
West Texas Intermediate, the reference price paid in U.S. dollars at Cushing, Oklahoma for crude oil of standard grade
psi
pounds per square inch



3

CONVERSIONS
The following table sets forth certain conversions between Standard Imperial Units and the International System of Units (or metric units).
To Convert From
To
Multiply By
Mcf
cubic metres
0.28174
cubic metres
cubic feet
35.494
Bbls
cubic metres
0.159
cubic metres
Bbls oil
6.293
feet
metres
0.305
metres
feet
3.281
miles
kilometres
1.609
kilometres
miles
0.621
acres
hectares
0.405
hectares
acres
2.471
gigajoules
MMBtu
0.950


FORWARD-LOOKING STATEMENTS
This annual information form (the "Annual Information Form") may include certain statements deemed to be "forward-looking statements" within the meaning of applicable Canadian and United States securities laws. These statements relate to future events or the Company's future performance. All statements other than statements of historical fact are forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as "seek", "may", "will", "should", "expect", "plan", "anticipate", "continue", "believe", "estimate", "predict", "project", "potential", "targeting", "intend", "could", "might", "continue", "should" or the negative of these terms or other comparable terminology. These statements are only predictions. In addition, this Annual Information Form may contain forward-looking statements attributed to third-party industry sources. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. The Company believes the expectations reflected in those forward-looking statements are reasonable but no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this Annual Information Form should not be unduly relied upon.
Undue reliance should not be placed on these forward-looking statements, as there can be no assurance that the plans, intentions or expectations upon which they are based will occur. By its nature, forward-looking information involves numerous assumptions, known and unknown risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts, projections and other forward-looking statements will not occur and may cause actual results or events to differ materially from those anticipated in such forward-looking statements. Forward-looking statements in this Annual Information Form include, but are not limited to, statements with respect to:
the performance characteristics of the Company's oil properties;
oil production levels;
the quantity of oil reserves;
capital expenditure programs;
supply and demand for oil and commodity prices;
drilling plans;
expectations regarding the Company's ability to raise capital and to continually add to reserves though acquisitions, exploration and development;
estimated funds from operations for 2013;
estimated timing of development of undeveloped reserves;
future abandonment and reclamation costs;
anticipated average production for 2013;
expected exploration and development spending and the funding thereof;
treatment under governmental regulatory regimes and tax laws;
realization of the anticipated benefits of acquisitions and dispositions;
tax horizon;
adverse technical factors associated with exploration, development, production or transportation of crude oil reserves; and
changes or disruptions in the political or fiscal regimes in the Company's areas of activity.
Statements relating to "reserves" or "resources" are deemed to be forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions that some or all of the resources and reserves described can be profitably produced in the future. Readers are cautioned that the foregoing list of factors is not exhaustive. The forward-looking statements contained in this Annual Information Form and certain documents incorporated by reference herein are expressly qualified by this cautionary statement.
Although the forward-looking statements contained in this Annual Information Form are based upon assumptions which management of the Company believes to be reasonable, the Company cannot assure investors that actual results will be consistent with these forward-looking statements. With respect to forward-looking statements contained in this Annual Information Form, the Company has made assumptions regarding: current commodity prices and royalty regimes; availability of skilled labour; timing and amount of capital expenditures; future exchange rates; the price of oil; the impact of increasing competition; conditions in general economic and financial markets; availability of drilling and related equipment; effects of regulation by governmental agencies; royalty rates; future operating costs; that the Company will have sufficient cash flow, debt or equity sources or other financial resources required to fund its capital and operating expenditures and requirements as needed; that the Company's conduct and results of operations will be consistent with its expectations; that the Company will have the ability to develop the Company's oil properties in the



4

manner currently contemplated; current or, where applicable, proposed assumed industry conditions, laws and regulations will continue in effect or as anticipated as described herein; the estimates of the Company's reserves volumes and the assumptions related thereto (including commodity prices and development costs) are accurate in all material respects; and other matters.
Actual operational and financial results may differ materially from TransGlobe's expectations contained in the forward-looking statements as a result of various risk factors, many of which are beyond the control of the Company. These risk factors include, but are not limited to:
unforeseen changes in the rate of production from the Company's oil fields;
changes or disruptions in the political or fiscal regimes in the Company's areas of activity;
changes in the price of crude oil;
adverse technical factors associated with exploration, development, production or transportation of the Company's crude oil reserves;
changes in Egypt or Yemen tax, energy or other laws or regulations;
geopolitical risks associated with the Company's operations in Egypt and Yemen;
changes in significant capital expenditures;
delays in production starting up due to an industry shortage of skilled manpower, equipment or materials;
the cost of inflation;
the performance characteristics of the Company's oil properties;
oil production levels;
the quantity of oil reserves;
capital expenditure programs;
supply and demand for oil and commodity prices;
drilling plans;
expectations regarding the Company's ability to raise capital and to continually add to reserves through acquisitions, exploration and development;
treatment under governmental regulatory regimes and tax laws;
realization of the anticipated benefits of acquisitions and dispositions;
general economic conditions in Canada, the United States, Egypt, Yemen and globally;
general economic stability of the Company’s financial lenders and creditors;
payment of crude oil marketing contracts and associated financial hedging instruments;
industry conditions, including fluctuations in the price of oil;
governmental regulation of the oil and gas industry, including environmental regulation;
fluctuation in foreign exchange or interest rates;
risks inherent in oil and natural gas operations;
geological, technical, drilling and processing problems;
unanticipated operating events which can reduce production or cause production to be shut-in or delayed;
failure to obtain industry partner and other third-party consents and approvals, when required;
stock market volatility and market valuations;
competition for, among other things, capital, acquisitions of reserves, undeveloped land and skilled personnel;
incorrect assessments of the value of acquisitions;
the need to obtain required approvals from regulatory authorities; and
the other factors considered under "Risk Factors" in this Annual Information Form.
Forward-looking statements and other information contained herein concerning the oil and natural gas industry in the countries in which it operates and the Company's general expectations concerning this industry are based on estimates prepared by management of the Company using data from publicly available industry sources as well as from resource reports, market research and industry analysis and on assumptions based on data and knowledge of this industry which the Company believes to be reasonable. However, this data is inherently imprecise, although generally indicative of relative market positions, market shares and performance characteristics. While the Company is not aware of any material misstatements regarding any industry data presented herein, the oil and natural gas industry involves numerous risks and uncertainties and is subject to change based on various factors.
The Company believes that the expectations reflected in the forward-looking statements contained in this Annual Information Form are reasonable, but no assurance can be given that these expectations will prove to be correct, and investors should not attribute undue certainty to, or place undue reliance on, such forward-looking statements. Such statements speak only as of the date of this Annual Information Form. If circumstances or management’s beliefs, expectations or opinions should change, the Company does not intend, and does not assume any obligation, to update these forward-looking statements, except as required by applicable Canadian and United States securities laws. Please consult the Company's SEDAR profile at www.sedar.com for further, more detailed information concerning these matters.





5

CERTAIN DEFINITIONS
In this Annual Information Form, the following words and phrases have the following meanings, unless the context otherwise requires:
"ABCA" means the Business Corporations Act, R.S.A. 2000, c. B 9, as amended, including the regulations promulgated thereunder;
"Brent" means the reference price paid in U.S. dollars for a barrel of light sweet crude oil produced from the Brent field in the UK sector of the North Sea;
"Business Day" means a day, other than a Saturday or Sunday, or a statutory holiday, on which major Canadian chartered banks are open for business in Calgary, Alberta;
"Cdn" means Canadian;
"Change of Control" has the meaning attributed thereto under "Description of Capital Structure - Debentures - Repurchase upon a Change of Control";
"Change of Control Purchase Date" means the date specified for purchase in a Debenture Offer;
"COGE Handbook" means 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;
"Common Shares" means the common shares of the Company;
"Conversion Date" means the date on which a Debenture is surrendered for conversion when the register of the Debenture Trustee is open and in accordance with the provisions of the Indenture;
"Conversion Price" means Cdn$15.10 per Common Share, subject to adjustment in accordance with the Indenture;
"CSA 51-324" means the Staff Notice 51-324 - Glossary to NI 51-101 Standards of Disclosure For Oil And Gas Activities of the Canadian Securities Administrators;
"Current Market Price" means, on any day, the volume weighted average trading price of the Common Shares on the TSX (or such other recognized stock exchange) for the 20 consecutive trading days ending on the fifth trading day preceding such date;
"Debenture Offer" has the meaning attributed thereto under "Description of Capital Structure - Debentures - Repurchase Upon a Change of Control";
"Debenture Trustee" means Olympia Trust Company;
"Debentures" means the Cdn$97,750,000 aggregate principal amount of 6.00% convertible unsecured subordinated debentures due on the Maturity Date;
"DeGolyer" means DeGolyer and MacNaughton Canada Limited, independent petroleum consultants;
"DeGolyer Report" means the report of DeGolyer dated January 18, 2013 evaluating the Egypt and Yemen crude oil reserves of the Company as at December 31, 2012;
"Dry Hole" or "Dry Well" or "Non-Productive Well" means a well found to be incapable of producing either oil or natural gas in sufficient quantities to justify completion as an oil or natural gas well;
"East Ghazalat" means the East Ghazalat Concession area in Egypt;
"Exploratory Well" means a well drilled either in search of a new, as-yet undiscovered oil or natural gas reservoir or to greatly extend the known limits of a previously discovered reservoir;
"Egypt" means the Arab Republic of Egypt;
"Event of Default" has the meaning attributed thereto under "Description of Capital Structure - Debentures - Events of Default";
"Gross" or "gross" means:
(a)
in relation to the Company's interest in production and reserves, its "Company gross reserves", which are the Company's working interest (operating and non-operating) share before deduction of royalties and without including any royalty interest of the Company;
(b)
in relation to wells, the total number of wells in which the Company has an interest; and
(c)
in relation to properties, the total area of properties in which the Company has an interest;
"IFRS" means International Financial Reporting Standards as issued by the International Accounting Standards Board;
"Indenture" means the amended and restated convertible debenture indenture dated February 22, 2012 between the Company and the Debenture Trustee under which the Debentures were issued;
"Interest Obligation" means the Company's obligation to pay interest on the Debentures in accordance with the Indenture;
"Interest Payment Date" means the date interest is paid on the Debentures, being March 31 and September 30 in each year;
"Maturity Date" means March 31, 2017;



6

"NASDAQ" means National Association of Securities Dealers Automated Quotations, OMX Global Select Market;
"Net" or "net" means:
(a)
in relation to the Company's interest in production and reserves, the Company's working interest (operating and non-operating) share after deduction of royalty obligations, plus the Company's royalty interest in production or reserves;
(b)
in relation to the Company's interest in wells, the number of wells obtained by aggregating the Company's working interest in each of its gross wells; and
(c)
in relation to the Company's interest in a property, the total area in which the Company has an interest multiplied by the working interest owned by the Company;
"NI 51-101" means National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities;
"NI 51-102" means National Instrument 51-102 - Continuous Disclosure Obligations;
"Offer Price" has the meaning attributed thereto under "Description of Capital Structure - Debentures - Repurchase Upon a Change of Control";
"OXY" means Occidental Petroleum Corporation and its subsidiaries;
"PSA" means production sharing agreement;
"PSC" means production sharing concession;
"Redemption Date" means the date set for the redemption of the Debentures;
"SEDAR" means the System for Electronic Document Analysis and Retrieval;
"Senior Indebtedness" has the meaning attributed thereto under "Description of Capital Structure - Debentures - Subordination";
"shareholders" means the holders from time to time of Common Shares;
"South Alamein" means the South Alamein Concession area in Egypt;
"South Mariut" means the South Mariut Concession area in Egypt;
"Tax Act" means the Income Tax Act (Canada), R.S.C. 1985, c. 1 (5th Supp.), as amended, including the regulations promulgated thereunder, each as amended from time to time;
"TransGlobe" or the "Company" means TransGlobe Energy Corporation, a corporation organized and registered under the laws of Alberta, Canada, and as the context requires, its subsidiary companies;
"TSX" means the Toronto Stock Exchange;
"U.S." means the United States of America;
"West Bakr" means the West Bakr Concession area in Egypt;
"West Gharib" means the West Gharib Concession area in Egypt; and
"Yemen" means the Republic of Yemen.
Certain other terms used herein but not defined herein are defined in NI 51-101 and/or CSA 51-324, unless the context otherwise requires, shall have the same meanings herein as in NI 51-101 and/or CSA 51-324.

TRANSGLOBE ENERGY CORPORATION
General
TransGlobe Energy Corporation ("TransGlobe" or the "Company") was incorporated on August 6, 1968 and was organized under variations of the name "Dusty Mac" as a mineral exploration and extraction venture under The Company Act (British Columbia). In 1992, the Company entered into the oil and gas exploration and development field in the United States and later in Yemen, Canada and Egypt, ceasing operations as a mining company. The Company's U.S. oil and gas properties were sold in 2000 to fund opportunities in Yemen and the Company's Canadian oil and gas assets and operations were divested in early 2008 to assist with the funding of opportunities in Egypt and Yemen. The Company changed its name to TransGlobe Energy Corporation on April 2, 1996 and on June 9, 2004, the Company continued from the Province of British Columbia to the Province of Alberta pursuant to the ABCA.
TransGlobe, through its wholly-owned subsidiaries, is primarily engaged in the exploration for, and the development and production of, oil in Egypt and Yemen.
The Common Shares have been listed on the TSX under the symbol "TGL" since November 7, 1997 and on the NASDAQ under the symbol "TGA" since January 18, 2008. Prior to listing on the NASDAQ, the Company had its U.S. listing on the American Stock Exchange since 2003. The Debentures have been listed on the TSX under the symbol "TGL.DB" since February 22, 2012.
The Company's principal office is located at 2300, 250 - 5th Street S.W., Calgary, Alberta, T2P 0R4. The Company's registered office is located at 2400, 525 – 8th Avenue S.W., Calgary, Alberta, T2P 1G1.



7

Intercorporate Relationships
The following table sets out the name and jurisdiction of incorporation of the Company's direct and indirect wholly-owned subsidiaries and the Company's ownership interest therein as of the date hereof:
Name of Subsidiary
Jurisdiction of Incorporation
Ownership
TransGlobe West Gharib Inc.(1)
Turks & Caicos Islands, B.W.I.
100%
TG West Yemen Inc. (1)
Turks & Caicos Islands, B.W.I.
100%
TransGlobe Petroleum International Inc.
Turks & Caicos Islands, B.W.I.
100%
TG Holdings Yemen Inc.(1)
Turks & Caicos Islands, B.W.I.
100%
TransGlobe Petroleum Egypt Inc.(1)
Turks & Caicos Islands, B.W.I.
100%
TransGlobe GOS Inc.(1)
Turks & Caicos Islands, B.W.I.
100%
TG South Alamein II SARL (1) (2)
Luxembourg, Luxembourg
100%
TransGlobe West Bakr Inc. (1)
Turks & Caicos Islands, B.W.I.
100%
TG Holdings Egypt Inc. (1)
Turks & Caicos Islands, B.W.I.
100%
TG South Alamein Inc. (1)
Turks & Caicos Islands, B.W.I.
100%
TG South Mariut Inc. (1)
Turks & Caicos Islands, B.W.I.
100%
Notes:
 
 
(1)  These companies are 100% owned directly by TransGlobe Petroleum International Inc., which company is a wholly-owned subsidiary of the Company.
(2)  At December 31, 2012 TG South Alamein II SARL was registered in Amsterdam, the Netherlands under the name TG South Alamein II B.V., and subsequent to December 31, 2012 continued to Luxembourg.

TG Holdings Yemen Inc. owns TransGlobe's interests in Block 32 and Block 72 in Yemen. TG West Yemen Inc. owns TransGlobe's interests in Block 75 and Block S1 in Yemen. TransGlobe Petroleum Egypt Inc. owned TransGlobe's interest in the Nuqra Block 1 in Egypt until the expiry of the Nuqra Block 1 PSC in July 2012. TransGlobe West Gharib Inc. owns TransGlobe's interest in the West Gharib concession in Egypt. TransGlobe GOS Inc. owns TransGlobe's interest in the East Ghazalat concession in Egypt. TransGlobe West Bakr Inc. owns TransGlobe's interest in the West Bakr concession in Egypt. TG South Alamein II SARL owns 50% of TransGlobe's interest in the South Alamein concession. TG South Alamein Inc. owns 50% of TransGlobe's interest in the South Alamein concession. TG South Mariut Inc. owns TransGlobe's interest in the South Mariut concession in Egypt. TG Holdings Egypt Inc. holds a 100% interest in the TG South Alamein Inc. and TG South Mariut Inc. companies.
Unless the context otherwise requires, reference in this Annual Information Form to "TransGlobe" or the "Company" includes the Company and its direct and indirect wholly-owned subsidiaries.
GENERAL DEVELOPMENT OF THE BUSINESS
TransGlobe is an independent international upstream oil and gas company with headquarters in Calgary, Canada whose main business activities consist of the exploration, development and production of crude oil and natural gas liquids. The Company currently has exploration and production operations in Egypt and Yemen.
During the past three years, TransGlobe has developed its business interests through a combination of acquisitions, divestitures, exploration and development. During this period, TransGlobe's primary focus has been on six concessions in Egypt (a 100% working interest in the West Gharib Concession, a 100% working interest in West Bakr Concession, a 50% working interest in the East Ghazalat Concession, a 100% working interest in the South Alamein Concession, a 60% working interest in the South Mariut Concession and a 71.43% working interest in Nuqra Block 1 prior to expiry in July 2012) and four PSAs in Yemen (a 13.81087% working interest in Block 32, a 25% working interest in Block S-1, a 20% working interest in Block 72 and a 25% working interest in Block 75).
2010
In January 2010, the Company announced a farm-in agreement with Vegas Oil & Gas SA ("Vegas") to earn a 50% interest in the East Ghazalat Concession in the Western Desert of Egypt. The East Ghazalat Concession is operated by Vegas, a privately owned oil and gas company.
In Egypt during 2010, the Company drilled 25 wells in West Gharib and six wells in East Ghazalat. The West Gharib drilling resulted in 20 oil wells and five dry holes. The drilling was primarily focused on the emerging Nukhul oil resource appraisal and development. At East Ghazalat, the Company participated in drilling six wells, resulting in four oil wells on the Safwa structure and two dry holes during 2010. The operator of the East Ghazalat Concession filed a notice of commercial discovery for the Safwa wells in December of 2010.
In West Yemen during 2010, the Company participated in five wells in Block S-1 resulting in five oil wells. In East Yemen during 2010, the Company participated in three wells in Block 32 resulting in two oil wells and one dry hole.



8

2011
On February 1, 2011, the Company completed the issuance of 5,000,000 Common Shares pursuant to an underwritten bought-deal financing for gross proceeds of approximately Cdn$75.0 million.
In Egypt during 2011, the Company drilled 44 wells in West Gharib, two wells in Nuqra and one well in East Ghazalat. The West Gharib drilling resulted in 36 oil wells, five service wells and three dry holes. The drilling was primarily focused on the Upper and Lower Nukhul oil appraisal and development in the Arta/East Arta leases. In East Ghazalat, the Company participated in drilling one exploration dry hole during 2011. The operator of the East Ghazalat Concession filed a development plan for the Safwa discovery (drilled in 2010) and received approval of the Safwa development lease in July 2011. The operator put forward a 2012 budget and work program targeting Safwa first production in the second quarter of 2012. At Nuqra, the Company drilled two exploration dry holes in early 2011.
On March 28, 2011, the Company announced the signing of a sale and purchase agreement with The Egyptian Petroleum Development Co. Ltd. (of Japan) ("EPEDECO") to acquire their 100% working interest in the West Bakr Concession in the Eastern Desert of Egypt. On December 29, 2011, the Company completed the strategic acquisition of the West Bakr Concession from EPEDECO for $60 million plus adjustments, effective July 1, 2010. The West Bakr adjusted purchase price at closing net of working capital acquired was $39.5 million. The Company acquired approximately 4,350 bopd of oil production and reserves of 7.4 million bbls on a proved basis or 11.6 million bbls on a proved plus probable basis effective December 29, 2011 on a working interest basis before deduction of royalties.
In June of 2011, the Company entered into an agreement to acquire the 50% operated working interest of Cepsa Egypt SA B.V. ("Cepsa Egypt"), a wholly-owned subsidiary of Compania Espanola De Petroleos, S.A.U. (of Spain) in the South Alamein exploration concession in the Western Desert for $3.0 million plus an inventory adjustment. The transaction closed as a Share Purchase Agreement on July 26, 2012. Further information regarding the transaction can be found below under "General Development of the Business - 2012".
In Yemen during 2011, the Company participated in drilling one oil discovery and one dry hole in Block 72 and one oil well in Block S-1. The planned drilling program for West Yemen (Block S-1 and Block 75) was suspended in early 2011 due to security and logistics concerns in the area, which had deteriorated as a result of ongoing political unrest in Yemen. The West Yemen export pipeline was sabotaged several times during the year. Block S-1 production (approximately 2,250 bopd to the Company) was shut in for approximately 7 months of 2011 due to the pipeline attacks.
2012
In Egypt during 2012, the Company drilled 24 wells in West Gharib, seven wells in West Bakr and two wells in East Ghazalat. The West Gharib drilling resulted in 21 oil wells and three dry holes. The drilling was primarily focused on the Upper and Lower Nukhul oil appraisal and development in the Arta/East Arta leases. The drilling at West Bakr resulted in five oil wells and two dry holes. In East Ghazalat, the Company participated in drilling two exploration dry holes during 2012. The operator of the East Ghazalat concession received approval of the Safwa development lease in July 2011, and Safwa first production was achieved during the third quarter of 2012.
On February 22, 2012, the Company completed a short form prospectus financing pursuant to which Cdn$85.0 million aggregate principal amount of 6.00% convertible unsecured subordinated debentures were issued (the "Debenture Offering"). A syndicate of underwriters co-led by Scotia Capital Inc. and Macquarie Capital Markets Canada Ltd., and including Canaccord Genuity Corp., RBC Dominion Securities Inc., Dundee Securities Ltd., FirstEnergy Capital Corp. and GMP Securities L.P. (collectively, the "Underwriters") acted as underwriters for the Debenture Offering. Pursuant to the Debenture Offering, the Underwriters were also granted an over-allotment option, exercisable, in whole or in part, at any time up until 30 days after completion of the Debenture Offering, to purchase up to an additional Cdn$12.75 million aggregate principal amount of 6.00% convertible unsecured subordinated debentures due on the Maturity Date, to cover over-allotments. The over-allotment option was exercised by the Underwriters in full and on February 29, 2012 the Company issued Cdn$12.75 million aggregate principal amount of 6.00% convertible unsecured subordinated debentures. For a summary of the terms of the Debentures, see "Description of Capital Structure - Debentures".
On June 7, 2012, the Company completed a Share Purchase Agreement to acquire 100% of the common shares of a wholly-owned subsidiary of EP Energy LLC which holds, though wholly-owned subsidiaries, a non-operated 50% interest in the South Alamein PSC in Egypt and an operated 60% working interest in the South Mariut PSC in Egypt. The South Alamein concession covers an area of 355,832 acres and an extensive 3-D seismic covers the entire area. There is currently one oil discovery well in the South Alamein concession. The South Mariut concession covers an area of approximately 828,000 acres. The transaction was structured as an all-cash deal, effective April 1, 2012, funded through working capital and the proceeds of the issuance of the Debentures. Total consideration for the transaction was $22.9 million, which included the initial $15.0 million base purchase price plus $7.9 million in consumable drilling equipment inventory (which is classified as exploration and evaluation assets), working capital and other closing adjustments.
On July 26, 2012, pursuant to the Share Purchase Agreement entered into by TransGlobe, the Company completed the acquisition 100% of the common shares of Cepsa Egypt, a wholly-owned subsidiary of Compania Espanola De Petroleos, S.A.U. (“Cepsa”), a company registered in Spain. Cepsa Egypt holds an operated 50% working interest in the South Alamein PSC in Egypt. As a result, the Company now holds a 100% working interest in the South Alamein concession through two wholly-owned subsidiaries. The transaction was structured as an all-cash deal, effective July 1, 2012, funded through working capital. Total consideration for the transaction was $4.5 million, which included the initial $3.0 million base purchase price plus $1.5 million in consumable drilling equipment inventory (which is classified as exploration and evaluation assets), working capital and other closing adjustments. Initial work by TransGlobe will focus on appraisal and development of the Boraq–2X discovery which includes drilling at least two appraisal wells and readying the Boraq–2X well for production.
On November 6, 2012, the Company was informed by Egyptian General Petroleum Company ("EGPC") that it was the successful bidder on four concessions in the 2011/2012 bid round. TransGlobe won three concessions in the Eastern Desert near the West Gharib/West Bakr operations (NW Gharib, SW Gharib and SE Gharib) and one concession in the Western Desert (South Ghazalat). It is expected that the concessions will be awarded in late 2013 following the ratification process which culminates when each concession is passed into law by the People's Assembly (Parliament). The new concessions will increase the Company's Egyptian exploration land holdings by approximately 3,241 square kilometers (~ 800,000 acres). Three concessions (NW Gharib, SW Gharib and SE Gharib) are proximal to the Company's core producing area at West Gharib/West Bakr onshore Gulf of Suez in the Eastern Desert. The South Ghazalat concession is located in the Western Desert west of the Company's East Ghazalat concession. All four concessions have a 7 year exploration term which will commence when the respective concessions are passed into law. The seven year term is comprised of three phases starting with an initial three year exploration period and two additional two year extension periods. The new concessions provide for the approval of 20 year development leases on commercial discoveries. The Company committed to spending $101 million



9

in the first exploration period (3 years) including; signature bonuses, the acquisition of new 2D and 3D seismic, and an extensive drilling program approaching 40 wells.
Recent Developments
In Egypt, 4 additional oil wells and one dry hole were drilled at West Gharib, 3 additional oil wells were drilled at West Bakr and one dry hole was drilled at South Mariut to date in 2013.
Significant Acquisitions
TransGlobe did not complete any significant acquisitions during its most recently completed financial year for which disclosure is required under Part 8 of NI 51-102.




10

DESCRIPTION OF THE BUSINESS AND PRINCIPAL PROPERTIES
General
TransGlobe is engaged in the exploration for and the development and production of crude oil and natural gas in Egypt and Yemen. The Company also regularly reviews potential acquisitions and new international exploration blocks to supplement its exploration and development activities.
TransGlobe's major operations and principal activities are in the oil and gas exploration and production business. The Company has had operations in Egypt, Yemen and Canada during the past eight, 15 and 13 years respectively. In Egypt, the Company has an interest in five PSCs: West Gharib, West Bakr, East Ghazalat, South Alamein and South Mariut. The Company was also awarded four additional land blocks (North West Gharib, South East Gharib, South West Gharib and South Ghazalat) during the 2012 bid round, the PSCs for which are currently pending Government ratification. In Yemen, the Company has interests in four PSAs: Block 32, Block 72, Block 75 and Block S-1. The Company sold its Canadian assets located in the Province of Alberta on April 30, 2008.
All of the Company's operations occur outside of Canada and therefore are subject to political and regulatory risk in those other jurisdictions. See "Risk Factors".
Summary of International Land Holdings
International Land (Egypt and Yemen) - Summary of PSCs/PSAs
EASTERN DESERT EGYPT
Block*
 
West Gharib
 
West Bakr
 
NW Gharib**
 
SE Gharib**
 
SW Gharib**
Basin
 
Gulf of Suez
 
Gulf of Suez
 
Gulf of Suez
 
Gulf of Suez
 
Gulf of Suez
Year acquired
 
2007
 
2011
 
2012 pending
 
2012 pending
 
2012 pending
Status
 
Development
 
Development
 
Pending
 
Pending
 
Pending
Operator
 
TransGlobe
 
TransGlobe
 
TransGlobe
 
TransGlobe
 
TransGlobe
TransGlobe WI (%)
 
100%
 
100%
 
100%
 
100%
 
100%
Block Area (acres)
 
34,856
 
11,600
 
162,000
 
125,653
 
48,309
Expiry date
 
2019-2026
 
2020
 
 
 
 
 
 
Extensions
 
 
 
 
 
 
 
 
 
 
Exploration
 
N/A
 
N/A
 
3/2/2 years
 
3/2/2 years
 
3/2/2 years
Development
 
+ 5 years
 
+ 5 years
 
20 years
 
20 years
 
20 years
Notes:
 
 
 
 
 
 
 
 
 
 
* The exploration period on Nuqra Block #1 expired in July 2012. Since no commercial discoveries were made during the exploration period, the Company has relinquished this land.
** Lands have been awarded to TransGlobe through the 2012 bid round, however, PSA is pending Government ratification.
WESTERN DESERT EGYPT
Block*
 
East Ghazalat
 
South Alamein
 
South Mariut
 
South Ghazalat**
Basin
 
Western Desert
 
Western Desert
 
Western Desert
 
Western Desert
Year acquired
 
2010
 
2012
 
2012
 
2012 pending
Status
 
Exploration
 
Exploration
 
Exploration
 
Pending
Operator
 
Vegas
 
TransGlobe
 
TransGlobe
 
TransGlobe
TransGlobe WI (%)
 
50%
 
100%
 
60%
 
100%
Block Area (acres)
 
112,071
 
335,832
 
827,679
 
465,299
Expiry date
 
June 2014
 
April 2014
 
April 2013
 
 
Extensions
 
 
 
 
 
 
 
 
Exploration
 
N/A
 
N/A
 
2nd extension
 
3/2/2 years
 
 
 
 
 
 
24 months
 
 
Development
 
20 years
 
20 years
 
20 years
 
20 years
Notes:
 
 
 
 
 
 
 
 
* The exploration period on Nuqra Block #1 expired in July 2012. Since no commercial discoveries were made during the exploration period, the Company has relinquished this land.
** Lands have been awarded to TransGlobe through the 2012 bid round, however, PSA is pending Government ratification.



11

Egypt

YEMEN
Block
 
32
 
72
 
S-1
 
75
Basin
 
Masila
 
Masila
 
Marib
 
Marib
Year acquired
 
1997
 
2004/2005
 
1998
 
2007
Status
 
Development
 
Exploration
 
Development
 
Exploration
Operator
 
DNO
 
Total
 
OXY
 
OXY
TransGlobe WI (%)
 
13.81087%
 
20%
 
25%
 
25%
Block Area (acres)
 
146,000
 
450,000
 
285,000
 
263,000
Expiry date
 
Nov 2020
 
Sept 2013
 
Oct 2023
 
March 2014
Extensions:
 
 
 
 
 
 
 
 
Exploration
 
N/A
 
N/A
 
N/A
 
2nd Phase
 
 
 
 
 
 
 
 
36 months
Development
 
+ 5 years
 
20 + 5 years
 
+ 5 years
 
20 + 5 years
Yemen



12

Summary of International PSA/PSC Terms
All of the Company's international blocks are PSAs or PSCs between the host government and the Contractor (Joint Interest Partners). The government and the contractors take their share of production based on the terms and conditions of the respective contracts. The contractors' share of all taxes and royalties are paid out of the governments' share of production.
The PSAs/PSCs provide for the government to receive a percentage gross royalty on the gross production. The remaining oil production, after deducting the gross royalty, if any, is split between cost sharing oil and production sharing oil. Cost sharing oil is up to a maximum percentage as defined in the specific PSA/PSC. Cost oil is assigned to recover approved operating and capital costs spent on the specific project. Unutilized cost sharing oil or excess cost oil (maximum cost recovery less actual cost recovery) is shared between the government and the Contractor as defined in the specific PSAs/PSCs. Each PSA/PSC is treated individually in respect of cost recovery and production sharing purposes. The remaining production sharing oil (total production, less gross royalty, less cost oil) is shared between the government and the Contractor as defined in the specific PSAs/PSCs.
The following tables summarize the Company's international PSA/PSC terms for the first tranche(s) of production for each block. All of the contracts have different terms for production levels above the first tranche, which are unique to each contract. The government's share of production increases and the contractor's share of production decreases as the production volumes go to the next production tranche.
Egypt (PSCs)
EGYPT
Block
 
West Gharib
 
West Bakr
 
East Ghazalat
 
South Alamein
 
South Mariut
Production Tranche (MBopd)
 
0-5 / 5-10
 
0-50
 
0-5
 
0-5
 
0-5
 
 
10-15
 
 
 
 
 
 
 
 
Max. cost oil
 
30%
 
30%
 
25%
 
30%
 
35%
Excess cost oil
 
 
 
 
 
 
 
 
 
 
Contractor
 
30%
 
0%
 
0%
 
0%
 
0%
Depreciation per quarter:
 
 
 
 
 
 
 
 
 
 
   Operating
 
100%
 
100%
 
100%
 
100%
 
100%
   Capital
 
6.25%
 
5%
 
5%
 
5%
 
5%
Production Sharing Oil:
 
 
 
 
 
 
 
 
 
 
Contractor
 
30% / 27.5%
 
15%
 
20%
 
14%
 
18%
 
 
25.0%
 
 
 
 
 
 
 
 
Government
 
70% / 72.5%
 
85%
 
80%
 
86%
 
82%
 
 
75.0%
 
 
 
 
 
 
 
 
Note
The exploration period on Nuqra Block #1 expired in July 2012. Since no commercial discoveries were made during the exploration period, the Company has relinquished this land.
Yemen (PSAs)
Block
 
32(1)
 
72
 
S-1
 
75
Production Tranche (Mbopd)
 
0-25
 
0-25
 
0-25
 
0-25
Gross royalty
 
3%
 
3%
 
3%
 
3%
Max. cost oil
 
60%
 
50%
 
50%
 
50%
Excess cost oil
 
Prod. Sharing
 
Prod. Sharing
 
Prod. Sharing
 
Prod. Sharing
Depreciation per quarter:
 
 
 
 
 
 
 
 
   Operating
 
100%
 
100%
 
100%
 
100%
   Capital
 
12.5%
 
12.5%
 
12.5%
 
12.5%
Production Sharing Oil:
 
 
 
 
 
 
 
 
   Contractor
 
33.25%
 
32.4%
 
34.2%
 
34.2%
   Government
 
66.75%
 
67.6%
 
65.8%
 
65.8%
1  Block 32 terms will revert to original PSA terms if production exceeds 25,000 Bopd or proved reserves exceed 30 million barrels. Reserves may be audited every two years by an independent evaluator at the request of the Government of Yemen. At December 31, 2012 proved reserves were less than 30 million barrels. The next potential reserve audit is November 2013.

Operations Review (2012)
In 2012, the Company increased total production by 44% to 17,496 Bopd (201112,132 Bopd). Production from Egypt averaged 16,656 Bopd to TransGlobe during 2012 (201110,671 Bopd). Production from Yemen averaged 840 Bopd to TransGlobe during 2012 (20111,461 Bopd).
2013 Outlook Highlights
Production is expected to average between 21,000 and 24,000 Bopd, a 20% to 37% increase over the 2012 average production;
Exploration and development spending is budgeted to be $129.0 million excluding acquisitions, a 152% increase from 2012 which is expected to be funded from funds flow from operations and cash on hand; and



13

Funds flow from operations is estimated at $161.0 million, representing an increase of 5% from 2012, using the mid-point of production guidance and an average oil price assumption for the year of $100/Bbl for Dated Brent oil.

Human Resources
The Company currently employs 114 full-time employees and 7 full-time and 10 part-time consultants. The Company intends to add additional professional and administrative staff as the needs arise.

STATEMENT OF RESERVES DATA AND OTHER OIL AND GAS INFORMATION
The report on reserves data in Form 51-101F2 and the report of management and directors on reserves data and other information in Form 51-101F3 are attached as Schedules "A" and "B", respectively, to this Annual Information Form, which forms are incorporated herein by reference.
The statement of reserves data and other oil and gas information set forth below (the "DeGolyer Report") is dated January 18, 2013, with the effective date being December 31, 2012.
Disclosure of Reserves Data
All of the Company's reserves herein reported were evaluated by independent evaluators in accordance with NI 51-101 for the year ended December 31, 2012. In 2012, DeGolyer and MacNaughton Canada Limited ("DeGolyer"), independent petroleum engineering consultants based in Calgary, Alberta and part of the DeGolyer and MacNaughton Worldwide Petroleum Consulting group headquartered in Dallas, Texas, were retained by the Company's Reserves Committee to independently evaluate 100% of TransGlobe's reserves as at December 31, 2012.
The reserves data set forth below (the "Reserves Data") was prepared by DeGolyer with an effective date of December 31, 2012. The Reserves Data summarizes the oil, liquids and natural gas reserves of the Company and the net present values of future net revenue for these reserves using forecast prices and costs and constant prices and costs. The Company reports in U.S. currency and therefore the reports have been converted to U.S. dollars at the prevailing conversion rate at December 31 of the respective years. See "Currency and Exchange Rates".
The DeGolyer Report has been prepared in accordance with the standards contained in the COGE Handbook and the reserve definitions contained in NI 51-101 and the COGE Handbook. The Reserves Data conforms with the requirements of NI 51-101. Additional information not required by NI 51-101 has been presented to provide continuity and additional information which the Company believes is important to the readers of this information.
All evaluations and reviews of future net cash flow are stated prior to any provision for interest costs or general and administrative costs and after the deduction of estimated future capital expenditures for wells to which reserves have been assigned. It should not be assumed that the estimated future net cash flow shown below is representative of the fair market value of the Company's properties. There is no assurance that such price and cost assumptions will be attained and variances could be material. The recovery and reserve estimates of crude oil, NGLs and natural gas reserves provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered. Actual crude oil, NGLs and natural gas reserves may be greater than or less than the estimates provided herein.
In general, estimates of economically recoverable crude oil and natural gas reserves and the future net cash flows there from are based upon a number of variable factors and assumptions, such as historical production from the properties, production rates, ultimate reserve recovery, timing and amount of capital expenditures, marketability of crude oil and natural gas, royalty rates, the assumed effects of regulation by governmental agencies and future operating costs, all of which may vary materially from actual results. For those reasons, among others, estimates of the economically recoverable crude oil and natural gas reserves attributable to any particular group of properties, classification of such reserves based on risk of recovery and estimates of future net revenues associated with reserves may vary and such variations may be material. The actual production, revenues, taxes and development and operating expenditures with respect to the reserves associated with the Company's properties may vary from the information presented herein and such variations could be material. In addition, there is no assurance that the forecast price and cost assumptions contained in the DeGolyer Report will be attained and variances could be material.
The estimates of reserves and future net revenue for individual properties may not reflect the same confidence level as estimates of reserves and future net revenue for all properties, due to the effects of aggregation.
The information relating to the Company's reserves contains forward-looking statements relating to future net revenues, forecast capital expenditures, future development plans and costs related thereto, forecast operating costs and anticipated production. See "Forward-Looking Statements" and "Risk Factors".
Possible reserves are those additional reserves that are less certain to be recovered than probable resources. There is a 10% probability that the quantities actually received will equal or exceed the sum of proved plus probable plus possible reserves.




14

Reserves Data – Forecast Prices and Costs
SUMMARY OF OIL AND GAS RESERVES
TOTAL COMPANY
AS OF DECEMBER 31, 2012
(FORECAST PRICES AND COSTS)
 
 
Light & Medium
 
 
 
 
 
 
 
 
 
 
Crude Oil
 
Heavy Oil
 
Total Bbls
 
 
Gross(1)

 
Net(2)

 
Gross(1)

 
Net(2)

 
Gross(1)

 
Net(2)

By Category
 
(Mbbls)

 
(Mbbls)

 
(Mbbls)

 
(Mbbls)

 
(Mbbls)

 
(Mbbls)

Proved
 
 
 
 
 
 
 
 
 
 
 
 
Developed producing
 
3,077

 
1,683

 
23,036

 
10,553

 
26,113

 
12,236

Developed non-producing
 
4,155

 
2,210

 
1,389

 
756

 
5,544

 
2,966

Undeveloped
 
127

 
69

 
983

 
358

 
1,110

 
427

Total Proved
 
7,359

 
3,962

 
25,408

 
11,667

 
32,767

 
15,629

Probable
 
5,510

 
2,840

 
10,441

 
4,036

 
15,951

 
6,876

Proved+Probable
 
12,869

 
6,802

 
35,849

 
15,703

 
48,718

 
22,505

Possible
 
4,234

 
1,995

 
9,454

 
3,407

 
13,688

 
5,402

Proved+Probable+ Possible
 
17,103

 
8,797

 
45,303

 
19,110

 
62,406

 
27,907

Notes:
1)  Gross reserves are the Company's working interest share before the deduction of royalties.
2)  Net reserves are the Company's working interest share after the deduction of royalties. Net reserves in Egypt and Yemen include the Company's share of future cost recovery and production sharing oil after the Government's royalty interest but before reserves relating to income taxes payable. Under this method, a portion of the reported reserves will increase as oil prices decrease (and vice versa) as the barrels necessary to achieve cost recovery change with prevailing oil prices.

SUMMARY OF OIL AND GAS RESERVES
EGYPT
AS OF DECEMBER 31, 2012
(FORECAST PRICES AND COSTS)
 
 
Light & Medium
 
 
 
 
 
 
 
 
 
 
Crude Oil
 
Heavy Oil
 
Total Bbls
 
 
Gross(1)

 
Net(2)

 
Gross(1)

 
Net(2)

 
Gross(1)

 
Net(2)

By Category
 
(Mbbls)

 
(Mbbls)

 
(Mbbls)

 
(Mbbls)

 
(Mbbls)

 
(Mbbls)

Proved
 
 
 
 
 
 
 
 
 
 
 
 
Developed producing
 
2,824

 
1,516

 
23,036

 
10,553

 
25,860

 
12,069

Developed non-producing
 
1,419

 
757

 
1,389

 
756

 
2,808

 
1,513

Undeveloped
 
127

 
69

 
983

 
358

 
1,110

 
427

Total Proved
 
4,370

 
2,342

 
25,408

 
11,667

 
29,778

 
14,009

Probable
 
3,646

 
1,858

 
10,441

 
4,036

 
14,087

 
5,894

Proved+Probable
 
8,016

 
4,200

 
35,849

 
15,703

 
43,865

 
19,903

Possible
 
3,141

 
1,403

 
9,454

 
3,407

 
12,595

 
4,810

Proved+Probable+ Possible
 
11,157

 
5,603

 
45,303

 
19,110

 
56,460

 
24,713

Notes:
1)  Gross reserves are the Company's working interest share before the deduction of royalties.
2)  Net reserves are the Company's working interest share after the deduction of royalties. Net reserves in Egypt and Yemen include the Company's share of future cost recovery and production sharing oil after the Government's royalty interest but before reserves relating to income taxes payable. Under this method, a portion of the reported reserves will increase as oil prices decrease (and vice versa) as the barrels necessary to achieve cost recovery change with prevailing oil prices.





15

SUMMARY OF OIL AND GAS RESERVES
YEMEN
AS OF DECEMBER 31, 2012
(FORECAST PRICES AND COSTS)
 
 
Light & Medium
 
 
 
 
 
 
Crude Oil
 
Total Bbls
 
 
Gross(1)

 
Net(2)

 
Gross(1)
 
Net(2)
By Category
 
(Mbbls)

 
(Mbbls)

 
(Mbbls)
 
(Mbbls)
Proved
 
 
 
 
 
 
 
 
Developed producing
 
253

 
167

 
253

 
167

Developed non-producing
 
2,736

 
1,453

 
2,736

 
1,453

Undeveloped
 

 

 

 

Total Proved
 
2,989

 
1,620

 
2,989

 
1,620

Probable
 
1,864

 
981

 
1,864

 
981

Proved+Probable
 
4,853

 
2,601

 
4,853

 
2,601

Possible
 
1,094

 
593

 
1,094

 
593

Proved+Probable+ Possible
 
5,947

 
3,194

 
5,947

 
3,194

Notes:
 
 
 
 
 
 
 
 
1)   Gross reserves are the Company's working interest share before the deduction of royalties.
2)   Net reserves are the Company's working interest share after the deduction of royalties. Net reserves in Egypt and Yemen include the Company's share of future cost recovery and production sharing oil after the Government's royalty interest but before reserves relating to income taxes payable. Under this method, a portion of the reported reserves will increase as oil prices decrease (and vice versa) as the barrels necessary to achieve cost recovery change with prevailing oil prices.

NET PRESENT VALUES OF FUTURE NET REVENUES
TOTAL COMPANY
AS OF DECEMBER 31, 2012
(FORECAST PRICES & COSTS)
The estimated future net revenues presented in the tables below do not represent fair market value. The estimated future net revenues presented below are calculated using the price forecasts and inflation rates set forth below under "Pricing Assumptions".
 
 
Before Income Tax(1)
 
After Income Tax(1)
US$
 
Discounted at %/yr
 
Discounted at %/yr
$MM
 
0%

 
5%

 
10%

 
15%

 
20%

 
0%

 
5%

 
10%

 
15%

 
20%

Proved
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Developed producing
 
639.6

 
533.3

 
460.7

 
408.2

 
368.7

 
639.6

 
533.3

 
460.7

 
408.2

 
368.7

Developed non-producing
 
131.1

 
110.2

 
95.1

 
83.9

 
75.0

 
131.1

 
110.2

 
95.1

 
83.9

 
75.0

Undeveloped
 
10.9

 
9.0

 
7.5

 
6.3

 
5.3

 
10.9

 
9.0

 
7.5

 
6.3

 
5.3

Total Proved
 
781.6

 
652.5

 
563.3

 
498.4

 
449.0

 
781.6

 
652.5

 
563.3

 
498.4

 
449.0

Probable
 
278.7

 
198.3

 
149.0

 
116.4

 
93.7

 
278.7

 
198.3

 
149.0

 
116.4

 
93.7

Total Proved+Probable
 
1,060.3

 
850.8

 
712.3

 
614.8

 
542.7

 
1,060.3

 
850.8

 
712.3

 
614.8

 
542.7

Possible
 
237.0

 
184.1

 
147.2

 
120.7

 
101.2

 
237.0

 
184.1

 
147.2

 
120.7

 
101.2

Total Proved+Probable +Possible
 
1,297.3

 
1,034.9

 
859.5

 
735.5

 
643.9

 
1,297.3

 
1,034.9

 
859.5

 
735.5

 
643.9

Note:
1) In Egypt and Yemen, under the terms of the PSAs, income tax is current and assessed on all production sharing oil; therefore all Egypt and Yemen future net revenues are after Egypt and Yemen income tax.




16

NET PRESENT VALUES OF FUTURE NET REVENUES
EGYPT
AS OF DECEMBER 31, 2012
(FORECAST PRICES AND COSTS)
 
 
Before Income Tax(1)
 
After Income Tax(1)
US$
 
Discounted at %/yr
 
Discounted at %/yr
$MM
 
0%

 
5%

 
10%

 
15%

 
20%

 
0%

 
5%

 
10%

 
15%

 
20%

Proved
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Developed producing
 
634.6

 
528.6

 
456.2

 
403.9

 
364.5

 
634.6

 
528.6

 
456.2

 
403.9

 
364.5

Developed non-producing
 
72.4

 
58.7

 
49.4

 
42.8

 
37.8

 
72.4

 
58.7

 
49.4

 
42.8

 
37.8

Undeveloped
 
10.9

 
9.0

 
7.5

 
6.3

 
5.3

 
10.9

 
9.0

 
7.5

 
6.3

 
5.3

Total Proved
 
717.9

 
596.3

 
513.1

 
453.0

 
407.6

 
717.9

 
596.3

 
513.1

 
453.0

 
407.6

Probable
 
242.0

 
171.3

 
128.5

 
100.4

 
80.9

 
242.0

 
171.3

 
128.5

 
100.4

 
80.9

Total Proved+Probable
 
959.9

 
767.6

 
641.6

 
553.4

 
488.5

 
959.9

 
767.6

 
641.6

 
553.4

 
488.5

Possible
 
211.0

 
165.8

 
133.5

 
110.1

 
92.7

 
211.0

 
165.8

 
133.5

 
110.1

 
92.7

Total Proved+Probable +Possible
 
1,170.9

 
933.4

 
775.1

 
663.5

 
581.2

 
1,170.9

 
933.4

 
775.1

 
663.5

 
581.2

Note:
1)   In Egypt and Yemen, under the terms of the PSAs, income tax is current and assessed on all production sharing oil; therefore all Egypt and Yemen future net revenues are after Egypt and Yemen income tax.

NET PRESENT VALUES OF FUTURE NET REVENUES
YEMEN
AS OF DECEMBER 31, 2012
(FORECAST PRICES AND COSTS)
 
 
Before Income Tax(1)
 
After Income Tax(1)
US$
 
Discounted at %/yr
 
Discounted at %/yr
$MM
 
0%

 
5%

 
10%

 
15%

 
20%

 
0%

 
5%

 
10%

 
15%

 
20%

Proved
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Developed producing
 
5.0

 
4.7

 
4.5

 
4.3

 
4.2

 
5.0

 
4.7

 
4.5

 
4.3

 
4.2

Developed non-producing
 
58.7

 
51.5

 
45.7

 
41.1

 
37.2

 
58.7

 
51.5

 
45.7

 
41.1

 
37.2

Undeveloped
 

 

 

 

 

 

 

 

 

 

Total Proved
 
63.7

 
56.2

 
50.2

 
45.4

 
41.4

 
63.7

 
56.2

 
50.2

 
45.4

 
41.4

Probable
 
36.7

 
27.0

 
20.5

 
16.0

 
12.8

 
36.7

 
27.0

 
20.5

 
16.0

 
12.8

Total Proved+Probable
 
100.4

 
83.2

 
70.7

 
61.4

 
54.2

 
100.4

 
83.2

 
70.7

 
61.4

 
54.2

Possible
 
25.9

 
18.3

 
13.7

 
10.6

 
8.5

 
25.9

 
18.3

 
13.7

 
10.6

 
8.5

Total Proved+Probable +Possible
 
126.3

 
101.5

 
84.4

 
72.0

 
62.7

 
126.3

 
101.5

 
84.4

 
72.0

 
62.7

Note:
1)   In Egypt and Yemen, under the terms of the PSAs, income tax is current and assessed on all production sharing oil; therefore all Egypt and Yemen future net revenues are after Egypt and Yemen income tax.





17

TOTAL FUTURE NET REVENUES
(UNDISCOUNTED)
AS OF DECEMBER 31, 2012
(FORECAST PRICES AND COSTS)
 
 
 

 
 

 
 

 
 

 
Well

 
Future Net

 
 

 
Future Net

 
 
 

 
 

 
 

 
 

 
Abandonment

 
Revenue

 
 

 
Revenue

 
 
 

 
 

 
 

 
 

 
and

 
Before

 
 

 
After

 
 
 

 
 

 
Operating

 
Development

 
Reclamation

 
Income

 
Income

 
Income

 
 
Revenue

 
Royalties

 
Costs

 
Costs

 
Costs(2)

 
Taxes

 
Taxes

 
Taxes

Reserves Category
 
(US$MM)

 
(US$MM)

 
(US$MM)

 
(US$MM)

 
(US$MM)

 
(US$MM)

 
(US$MM)

 
(US$MM)

Proved Reserves
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Egypt(1)
 
2,910.0

 
1,519.8

 
661.7

 
10.5

 

 
717.9

 

 
717.9

Yemen(1)
 
317.6

 
145.4

 
108.0

 
0.6

 

 
63.7

 

 
63.7

Total Company
 
3,227.6

 
1,665.2

 
769.7

 
11.1

 

 
781.6

 

 
781.6

Proved+Probable Reserves
 

 

 

 

 

 

 

 

Egypt(1)
 
4,296.2

 
2,310.0

 
971.2

 
55.1

 

 
959.9

 

 
959.9

Yemen(1)
 
526.7

 
243.4

 
181.7

 
1.1

 

 
100.4

 

 
100.4

Total Company
 
4,822.9

 
2,553.4

 
1,153.0

 
56.2

 

 
1,060.3

 

 
1,060.3

Proved+Probable
 

 

 

 

 

 

 

 

Possible Reserves
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Egypt(1)
 
5,513.2

 
3,054.3

 
1,211.2

 
76.8

 

 
1,170.9

 

 
1,170.9

Yemen(1)
 
648.8

 
299.2

 
219.2

 
4.1

 

 
126.3

 

 
126.3

Total Company
 
6,162.0

 
3,353.5

 
1,430.4

 
80.9

 

 
1,297.3

 

 
1,297.3

Notes:
1)   In Egypt and Yemen, under the terms of the PSAs, income tax is current and assessed on all production sharing oil; therefore all Egypt and Yemen future net revenues are after Egypt and Yemen income tax. Income taxes payable in Egypt and Yemen have been recorded as a Operating Costs for reporting purposes.
2)   Please see "Additional Information Concerning Abandonment and Reclamation Costs" below.
3)   Values are calculated by considering existing tax pools for the Company in the evaluation of the Company's properties, and take into account current federal tax regulations. Values do not represent an estimate of the value at the business entity level, which may be significantly different. For information at the business entity level, please see the Company's financial statements and management's discussion and analysis for the year ended December 31, 2012.

NET PRESENT VALUE OF FUTURE NET REVENUES
BY PRODUCTION GROUP
AS OF DECEMBER 31, 2012
(FORECAST PRICES AND COSTS)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Egypt

 
Egypt

 
Yemen

 
Yemen

 
Total

 
Total

 
 
 
 
Future net

 
 
 
Future net

 
 
 
Future net

 
 
 
 
 
 
Revenue

 
Unit Value

 
Revenue

 
Unit Value

 
Revenue

 
Unit Value

 
 
 
 
 Before Taxes(1)

 
Before Tax

 
Before Taxes(1)

 
Before Tax

 
Before Taxes(1)

 
Before Tax

 
 
 
 
(discounted

 
(discounted

 
(discounted

 
(discounted

 
(discounted

 
(discounted

 
 
 
 
at

 
at

 
at

 
at

 
at

 
at

 
 
 
 
10%/year)

 
10%/year)

 
10%/year)

 
10%/year)

 
10%/year)

 
10%/year)

Reserves Category
 
Product Group
 
(US$MM)

 
($/Bbl)

 
(US$MM)

 
($/Bbl)

 
(US$MM)

 
($/Bbl)

Total Proved
 
Light and Medium Oil
 
89.1

 
38.04

 
50.2

 
30.99

 
139.4

 
35.18

 
 
Heavy Oil
 
424.0

 
36.34

 

 

 
424.0

 
36.34

Proved+Probable
 
Light and Medium Oil
 
133.7

 
31.83

 
70.7

 
27.18

 
204.3

 
30.04

 
 
Heavy Oil
 
507.9

 
32.34

 

 

 
507.9

 
32.34

Proved+Probable +Possible
 
Light and Medium Oil
 
166.5

 
29.72

 
84.4

 
26.42

 
250.9

 
28.52

 
 
Heavy Oil
 
608.6

 
31.85

 

 

 
608.6

 
31.85

Note:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) In Egypt and Yemen, under the terms of the PSAs, income tax is current and assessed on all production sharing oil; therefore all Egypt and Yemen future net revenues are after Egypt and Yemen income tax.









18

Reserves Data – Constant Prices and Costs
SUMMARY OF OIL AND GAS RESERVES
TOTAL COMPANY
AS OF DECEMBER 31, 2012
(CONSTANT PRICES AND COSTS)
 
 
Light & Medium
 
 
 
 
 
 
 
 
 
 
Crude Oil
 
Heavy Oil
 
Total Bbls
 
 
Gross(1)

 
Net(2)

 
Gross(1)

 
Net(2)

 
Gross(1)

 
Net(2)

By Category
 
(Mbbls)

 
(Mbbls)

 
(Mbbls)

 
(Mbbls)

 
(Mbbls)

 
(Mbbls)

Proved
 
 
 
 
 
 
 
 
 
 
 
 
Developed producing
 
3,087

 
1,674

 
23,072

 
10,391

 
26,159

 
12,065

Developed non-producing
 
4,201

 
2,185

 
1,389

 
745

 
5,590

 
2,930

Undeveloped
 
127

 
69

 
990

 
358

 
1,117

 
427

Total Proved
 
7,415

 
3,928

 
25,451

 
11,494

 
32,866

 
15,422

Probable
 
5,508

 
2,744

 
10,419

 
3,930

 
15,927

 
6,674

Proved+Probable
 
12,923

 
6,672

 
35,870

 
15,424

 
48,793

 
22,096

Possible
 
4,220

 
1,964

 
9,463

 
3,332

 
13,683

 
5,296

Proved+Probable+ Possible
 
17,143

 
8,636

 
45,333

 
18,756

 
62,476

 
27,392

Notes:
 
 
 
 
 
 
 
 
 
 
 
 
(1)  Gross reserves are the Company's working interest share before the deduction of royalties.
(2)  Net reserves are the Company's working interest share after the deduction of royalties. Net reserves in Egypt and Yemen include the Company's share of future cost recovery and production sharing oil after the Government's royalty interest but before reserves relating to income taxes payable. Under this method, a portion of the reported reserves will increase as oil prices decrease (and vice versa) as the barrels necessary to achieve cost recovery change with prevailing oil prices.

SUMMARY OF OIL AND GAS RESERVES
EGYPT
AS OF DECEMBER 31, 2012
(CONSTANT PRICES AND COSTS)

 
 
Light & Medium
 
 
 
 
 
 
 
 
 
 
Crude Oil
 
Heavy Oil
 
Total Bbls
 
 
Gross(1)

 
Net(2)

 
Gross(1)

 
Net(2)

 
Gross(1)

 
Net(2)

By Category
 
(Mbbls)

 
(Mbbls)

 
(Mbbls)

 
(Mbbls)

 
(Mbbls)

 
(Mbbls)

Proved
 
 
 
 
 
 
 
 
 
 
 
 
Developed producing
 
2,833

 
1,509

 
23,072

 
10,391

 
25,905

 
11,900

Developed non-producing
 
1,417

 
744

 
1,389

 
745

 
2,806

 
1,489

Undeveloped
 
127

 
70

 
990

 
358

 
1,117

 
428

Total Proved
 
4,377

 
2,323

 
25,451

 
11,494

 
29,828

 
13,817

Probable
 
3,651

 
1,800

 
10,419

 
3,930

 
14,070

 
5,730

Proved+Probable
 
8,028

 
4,123

 
35,870

 
15,424

 
43,898

 
19,547

Possible
 
3,137

 
1,362

 
9,463

 
3,332

 
12,600

 
4,694

Proved+Probable+ Possible
 
11,165

 
5,485

 
45,333

 
18,756

 
56,498

 
24,241

Notes:
 
 
 
 
 
 
 
 
 
 
 
 
(1)    Gross reserves are the Company's working interest share before the deduction of royalties.
(2)    Net reserves are the Company's working interest share after the deduction of royalties. Net reserves in Egypt and Yemen include the Company's share of future cost recovery and production sharing oil after the Government's royalty interest but before reserves relating to income taxes payable. Under this method, a portion of the reported reserves will increase as oil prices decrease (and vice versa) as the barrels necessary to achieve cost recovery change with prevailing oil prices.





19

SUMMARY OF OIL AND GAS RESERVES
YEMEN
AS OF DECEMBER 31, 2012
(CONSTANT PRICES AND COSTS)
 
 
Light & Medium
 
 
 
 
 
 
Crude Oil
 
Total Bbls
 
 
Gross(1)

 
Net(2)

 
Gross(1)

 
Net(2)

By Category
 
(Mbbls)

 
(Mbbls)

 
(Mbbls)

 
(Mbbls)

Proved
 
 
 
 
 
 
 
 
Developed producing
 
254

 
165

 
254

 
165

Developed non-producing
 
2,784

 
1,440

 
2,784

 
1,440

Undeveloped
 

 

 

 

Total Proved
 
3,038

 
1,605

 
3,038

 
1,605

Probable
 
1,857

 
944

 
1,857

 
944

Proved+Probable
 
4,895

 
2,549

 
4,895

 
2,549

Possible
 
1,083

 
602

 
1,083

 
602

Proved+Probable+ Possible
 
5,978

 
3,151

 
5,978

 
3,151

Notes:
 
 
 
 
 
 
 
 
(1)   Gross reserves are the Company's working interest share before the deduction of royalties.
(2)   Net reserves are the Company's working interest share after the deduction of royalties. Net reserves in Egypt and Yemen include the Company's share of future cost recovery and
      production sharing oil after the Government's royalty interest but before reserves relating to income taxes payable. Under this method, a portion of the reported reserves will
      increase as oil prices decrease (and vice versa) as the barrels necessary to achieve cost recovery change with prevailing oil prices.

NET PRESENT VALUES OF FUTURE NET REVENUES
TOTAL COMPANY
AS OF DECEMBER 31, 2012
(CONSTANT PRICES AND COSTS)
The estimated future net revenues presented do not represent fair market value. The estimated future net revenues presented below are calculated using the average price received on December 31, 2012 and December 31, 2011 as applicable. The prices were held constant and costs were not inflated for the life of the reserves as summarized below under "Pricing Assumptions".
 
 
Before Income Tax(1)
 
After Income Tax(1)
US$
 
Discounted at %/yr
 
Discounted at %/yr
$MM
 
0%

 
5%

 
10%

 
15%

 
20%

 
0%