Ross Clarkson - President and CEO Randy Neely - VP, Finance and CFO Lloyd Herrick - VP, COO.

Laura Engel - Stonegate Capital Partners Gavin Wylie - Scotia Bank James Carmichael - Peel Hunt Jenny Xenos - Canaccord Genuity Al Stanton - RBC.

Good morning, ladies and gentlemen, and welcome to the TransGlobe Energy Q3, 2017 Corporation Conference Call and Webcast. This webcast includes certain statements that may be deemed to be forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995.

All statements in this webcast, other than statements of historical facts that address future production, reserve potential, exploration drilling, exploitation activities, and events or developments that the Company expects, are forward-looking statements.

Although, TransGlobe believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in the forward-looking statements.

Factors that could cause actual results to differ materially from those in forward-looking statements, include oil and gas prices, well production performance, exploitation and exploration successes, continued availability of capital and financing, and general economic, market or business conditions. I'd now like to turn the meeting over to Mr.

Ross Clarkson, President and Chief Executive Officer. Please go ahead..

Good morning, everyone and welcome to TransGlobe Energy Corporation's Third Quarter 2017 Conference Call. This is Ross Clarkson, President and CEO; and with me I have Mr. Lloyd Herrick, Vice President and COO; and Mr. Randy Neely, Vice President Finance and CFO.

Today, we're in our earlier in this call to accommodate some of the European and Middle East investors and as usual we will start out with a summary of the financial and operating highlights, and then we go into a discussion on the plans for the balance of the year and some talk about next year. Then will be followed by a Q&A session.

Randy Neely right now will review the financials and highlights of the quarter starting on the next slide..

Thanks, Ross, and good morning everyone and thanks for joining us. Well, we had a very similar Q3 and we had in Q2. Cash flow from operations came in at 19.2 million up from our Q2 results 16.9 and materially over every quarter since Q3, 2014.

This quarter's results being greater than Q2 due to a number of factors but most importantly, higher oil prices combined with higher sales volumes. Realized oil prices in Egypt are up 30%, over Q3, 2016 which is due to both in increasing rent price and to a decrease gear heavy oil differential.

Our cargo in September had a realized differential of less than $8, which is at the lower end of our expected long-term average range of $8 to $11. In Canada oil prices were also up quarter over quarter but results were negatively impacted by low to very low natural gas prices during the quarter.

Since the beginning of the year we've now decreased our crude oil inventory holdings in Egypt by 277,000 barrels, which has resulted in increase revenue, cash flow and income in the quarter in nine months ending September 30.

As we've explained in the past, these variations in inventory can have both positive and negative effects on our quarterly and annual financial results depending on whether or inventory barrels are increasing or decreasing.

For the quarter we had a net loss of 6.9 million which is impacted by a previously announced slight down of our accumulated South Alamein exploration cost of 10.3 million and the non-cash impact of loss on our oil hedge book at 3.2. Adjusting for those two items would have resulted in positive income from the quarter of above 6.6 million.

From an operating cost prospective we saw per barrel OpEx and Egypt moved up a little in the quarter over the prior quarter which for the probably some inflation adjustment for field staff but still down 10% per barrel as compared to Q3, 2016.

G&A is down over last year due to a number of factors including the currency devaluation which occurred in Q4 last year. During the quarter we spent 10 million, little over 10 million in capital expense including both our Egyptian and Canadian exploration development cost.

We ended the quarter with 58.8 million of positive working capital, which excludes market adjustment for our inventory crude oil which at the end of the quarter we had just under 1 million barrels in Egypt. For clarity in Canada we sell all of our production in the month that is produced.

We now expect full year capital expenditures coming in around 41 million excluding capitalized G&A expenditures and this is within our original announced budget about 56 million, we adjusted down our capital expenditures early in Q2 due to low oil prices at the time as compared to our budget and we had not at that time predicted a rebound in the prices that we are recently experiencing.

While our sales for our quarter averaged approximately 18,000 barrels of oil equivalent per day, production averaged approximately 15,00 BOE per day the nine-month average is approximately 16,000 BOE per day.

As just mentioned we have brought our inventory balance down to just under 1 million barrels and we currently expect that decrease to between 6000 and 7000 barrels by year end.

These direct sales to EGPC provide local currency for Egyptian pound denominated operating in G&A cost, year to date we've sold EGPC approximately 41 million in crude and our EGPC AR balance is increased approximately 11 million.

So effectively we have used or utilize approximately 31 million of the proceeds to those sales in the current year to date. We’re awaiting our 2018 cargo lifting schedule, we expect to receive later this quarter. We've also reduced our borrowings recently under our prepayment agreement by 5 million and we expect to reduce it further in Q4.

I will now turn the mic over to Lloyd for an ops update..

Thanks, Randy. This slide shows our daily production by major producing areas for the company. As disclosed in the Q3 results, Egypt production in September, October and November is lower due to well servicing issues relating to work over rates.

In early August the company released the Eastern Desert service rig due to performance and escalating agency issues. As pointed out on the graph we released the rig.

Quiet surely after we released the rig a number of the wells went down, the second rig -- replacement rig was contracted and mobilizing in late September by which time about 1,500 barrels of day was shut in or awaiting pump or rod changes. Second rig has been contracted and is expected in the field next week to work on the backlog and well servicing.

It's expected it will be working probably by the second half of November following the normal certification and testing process. With a second rig it's expected that the backlog of pump and rod jobs will be cleared prior to year-end.

In addition to well servicing several rig completion workovers that were planned for Q4 will be moved into the 2018 program. In Canada as Randy said, we shut in approximately 100 Boe of dry gas due to the very low spot gas prices. The liquid spot gas prices have improved in November and the wells are being brought back on production this week.

We also completed and tied in three new Cardium horizontal wells in the latter half of October which we are in the very early post frac cleanup stage, which Ross will review later in the webcast. With the lower production in agents it's expected that production for the year will be on the low end of guidance of about 15,500 BoEs for 2017.

I'll now turn it over to Ross to talk about the projects in more detail..

So, we are on Slide 6, which is the locator map for the Egyptian assets. Two focus areas here, the eastern desert where we were producing all our oil out of three PSEs at this time. And then the Western Desert which has three concessions also South Alamein South Ghazalat and North West Sitra.

And we will move on to the next slide we will look at more detail on the eastern desert. So, in the eastern desert in 2017 the exploration and development program summarized a bit on Slide 7. And the paled green stars which shows the discoveries we have made so far recently in the North West Gharib block.

And two of those discoveries are located north and south of the Arta field, which are really extensions of that field. And then we have received development leases on all the pale and covered areas up there in Q2 and Q3. So, what we have now locked down all the development areas for 25-year periods.

And some of the wells in there were brought on production following the approval of the development leases and we will talk about those in detail in the northern development area first which is on the next slide. Slide 8, it shows the five discoveries in the Northern Red Bed trends as the black wells on the map.

And the southern boxed area is the first development permit we received approval on and then the northern triangular area is the adjacent development lease that most recently was approved. So, with the approvals we restarted drilling in Q4 to add some additional development wells to this area.

It's quite complicated for as you can you on the map and it's going to take some time -- really some time and some drilling to figure all these tools out. The good thing is that we have found some really good great reservoirs in the all wells drilled to date. And reservoir is the key risk in this area and it seems to be a bit better in this location.

The other key risk is the structural closure and that’s really hard to see on seismic, I got to say that’s tough. The only way to figure it out is to drill wells and then do detailed analysis on the faults and the dip of bed found in wellbores.

Unfortunately, we have some oil tools to work with here and good flow rates so we believe the overall project will be quite economic. The focus really has shifted now to mainly on appraisal and development program as compared to 2016 in the first half of 2017 which was almost all exploration drilling.

And we have a rig currently drilling at North West 38A2 which is the tool on the Eastern side of the southernmost development lease.

And the first two wells in this pool you can see the bullets there they are pretty phenomenon 900 barrels a day combined actually as of this morning they are well over that and the reservoir pay is quite thick with no water line seeing to date. We need to drill more wells into this pool to see just where it extends to.

Moving onto the next map, this is a map little bit further south on the Arta field complex that we discovered in 2010. And I put this up to show the two new development leases that are on the north and south extensions of the Arta fields.

We fracked one well in each extension to prove oil recovery and then submitted the development lease applications which were recently approved, so now we brought on those wells Northwest Gharib 1x and Northwest Gharib 5D wells into production.

Initial rates of 210 and 90 barrels a day and those wells are still cleaning up and being optimized have fluid level in them. so, we expect those rates to increase as we get the pump is optimized.

In 2018 we will frac the other two wells one of each development area and put those on production and then we will start looking at additional drilling out there. One of the benefits of getting these new developed leases is having a continues ownership across the field extension.

In Egypt you can only drill within 400 meters of the boundary lines so you're not drilling owner but we not out of the Jason owner and you can see the gaps near the well density near the edges of our leases and we will now be able to drove wells into those exclusion zones and fully drain the reservoirs.

And that gives us more drilling inventory wells for development wells for the future. Moving on to the Western desert on slide 10, you can see east to west are 3 TFCs, South Alamein, South Ghazalat and North West Sitra.

The two western licenses are Sitra and South Ghazalat have 3D seismic that’s currently being mapped up and the mapping should be completed shortly when prospects will be ranked and ordered for drilling. We expect that will set us up for a four well exploration program next year, two on each block which will occur, I guess around mid-year 2018.

In Alamein we tested over 1100 barrels a day out of the original discovery well at Boraq 2, unfortunately we did not confirm that oil pool with the offset well at Boraq size. And this is continue to do, all the Boraq 5 well log samples and oil shows all that we had successful apprise well.

However, the ability was much lower than Boraq 2 and we did not recover any oil from the well. So, we've now stepped back to reevaluated the cretaceous targets and we're considering adding a new exploration well on a larger Jurassic target identified on the 3d size mix.

We could drill this target in the Jurassic target in the first half of 2018, if we get all the approvals in place and it's about 9 million barrels on a mean basis, so if they work it would give us sufficient volumes to proceed with development assuming they're successful.

We would also bring Boraq 2 the one we tested at 1100 barrels a day on production if we went ahead with the development in the area. Just quickly over to Canada on the next slide, the Canadian acquisition is proving to be a great investment. Production holding up well and the new wells we drilled in the summer are definitely meeting our expectations.

The area we will be talking about is on the less side of the locator map in there, just off north of Calgary. So, flip over to the next side, look at some detail in that area.

On Slide 12, I highlighted that three wells we drilled this summer which is the red oval and we completed those wells in September and October, we did one-mile horizontals with 40 stage, 15 tones per stage completions, much higher density then the previous wells in the area.

And the new wells are now on production, we have some preliminary results, very preliminary and we've also picked up some new lands in the area about 1,600 acres and [acquired] land sales to build up our drilling inventory. And based on the good results to-date, our plan is to double the program in 2018 to drill six new wells.

And you could see all the green lines and blue lines on there, those are approved and probable locations that we've already identified for drilling.

On Slide 13 this is the plot of the production history from a 187 Cardium horizontal wells in the Harmattan area, and the three red lines are the probabilities of P10, P50 and P90 averages from all of those wells, just trying to get an idea what everyone else has done.

In our three new wells are the green, blue and purple dots on the left axis, we have only about early days on it but you can see we have some production ideas on where they are going to head, the wells are still cleaning up the frac fluid and we're just getting our pumps optimized, the upper most well there flows for several days, it flowed on its own and then it cleaned up very quickly to very small water cut, and we're just getting the pumping rods into the well and given the high fluid level and natural inflow we expect this well will probably exceed the P10 curve,.

The second well also has a high fluid well level and we're pumping that, we're just getting that set up, we expect that will also meet or exceed that P10 curve.

And the third well is a bit lower because it's still cleaning up, we're still got roughly 40% water cut, that's frac fluid, and in that well we did frac into the offsetting well bores, but we're not sure if it's going to come up to the same rate, but it certainly looks like it's probably going to exceed the P50 level, so overall, we're very happy with this first horizontal drilling campaign.

Our costs are lower, our results are top tier, which will result in IRRs in the 40% to 50% range which is really outstanding for this kind of investment, and that's almost double our initial plan, and these results will upgrade the entire Cardium resource base and reduce our future development capital in the reserve port so it's going to upgrade the value of the entire assets, we're pretty pleased with these results.

There're incremental gains but that's the nature of drilling these horizontal type wells. So, on the next slide, Just really a quick talk about the incredible value proposition for TransGlobe investors.

All the international companies have been out of favor through the down turn and really all -- most of them are trading at incredibly cheap valuations and we're probably one of the best valuations right now.

We're seeing that oil price recovery it's underway, we're starting to see some strengthening in the oil prices, and our balance sheet is very strong coming out of the down turn and we've reduced our costs to bring the company back in to profitability of lower prices.

2018 will have a diversity of growth catalyst, including development drilling in Eastern Desert and in Canada coupled with high impact exploration drilling in the Western Desert, and we've also recently started looking at a couple of potential acquisitions in Egypt, our Canadian acquisition has become more valuable with the recent well results and we'll probably do some additional land expansion around the core area.

All of this provides significant catalysts for the shares over the next 12 months.

So, in conclusion the company is in great shape with the production base of roughly 16,000 barrels a day right now, and inventory of projects to deliver on future growth, all of those projects are at 100% or very high working interest which allows us to scale up or down quickly without hardness so we can react very quickly to volatile commodity prices.

And we believe the share price is severely compressed because of general investor focus on North American share place and not on the international story. They are not getting much interest in the North American markets. Whereas in European markets there is still in interest in international place.

Because of that dynamic we focused a lot of investor relations effort in the UK Europe and middle east and will continue to do so. We will also investigate the possibility of London AIM listing really to better -- and that would be an additional listing and that would be to better access those markets.

Let's turn it over to operator, see if we have any questions at this stage..

[Operator Instructions] Our first question is from Laura Engel from Stonegate Capital Partners. Please go ahead..

As far as Egypt and the upcoming listings, it looked like one had been moved up a bit so am I correct that there are still two remaining for 2017 and then any color on -- although you don’t have schedule yet for 2018 maybe how early on in the year might look compared to the activities you had recent quarters?.

Were you asking about the listings I didn’t quite hear you?.

Yes, so do we still have if I'm correct two listings remaining in 2017?.

No, we had three listings scheduled for the year one was June, one September and one originally December got moved up to November. So, it will be....

And then you are waiting on the 2018 schedule any thoughts on how the early quarters might compare to recent activity?.

We don’t have any visibility on that yet Bunchy we expect -- we would like to see up to five listings next year to keep our inventory at least flat to going down although we have had a lot of success in selling the list some oil directly to EGPC with the devaluation of the currency we are not taking nearly the risk that we were before taking in pounds.

And of course, we continue to have Egyptian denominated expenses in the country that we can use those pounds for as well as offset with government contracts et cetera..

And then on the South Alamein when might you know more about the additional programs you might look at and if you decide not to proceed what will be the fate of the Boraq 2 as far as timing or considering shutting that one in..

This is Ross here. Right now, we have applied for that location license and approval for that Jurassic test expect that hopefully will come in the next few months. And we could be out there drilling on that perhaps in the spring time, assuming we get all those approvals.

And Boraq 2 right now doesn’t stand on its own as a large enough pool to produce independently so we do need some additional oil which is why we relooked at the area and decided to drill some additional wells, exploration type wells. So, we will know all the answers to that in the first six months of next year..

I guess last question on with the development plan and just discussing the things that investors can look forward coming up, what would you say will be the biggest milestone or biggest driver for the value of your stock, in the next say three to six, we can look forward..

We got a lot of different projects on the go and some of them are very low risk, easy adds, development projects in the eastern desert that will continue to keep our production levels but the real high impact is only exploration drilling in the western desert or possibly an acquisition of some new assets, I mean those are kind of the real high impact project that are coming and most of that happening in the next six to nine months.

.

The next question is from Gavin Wylie from Scotia Bank. Please go ahead. .

Ross just two quick questions for me, one is on cost on the drilling side for Canada and I was just wondering, if you could remind me, perhaps you said that positive if you have, what the cost of the first three wells actually did average for drilling complete full in and what was that versus kind where you had the future development capital in the two key reserve report and then the third part of that is where do you see kind of the target rate from a cost prospective for that full drilling complete.

And just a second question just on the 2018 program, I know you will provide much more detailed 2018 capital guidance sometime late in the year early next year, but just wondering if you kind give us a sense of what that program will look like in terms of activity levels in Egypt and in Canada, even if it's like a rough number of wells, activity up down type thing, just a little bit more clarity on what 2018 is going to look like..

Its Lloyd here, I will jump in on the first part of your question, those Cardium wells all in we're seeing about CAD2.5 million that’s drill completed tied in and on production.

We did have some -- we were actually quite a bit ahead of the curve but we did have some weather impact in the middle of our frac jobs a few things like that add a little bit extra cost due to delays and standby stuff but on the reserve book at the yearend we had I believe was CAD3 million in the book per well.

We see uplift, we think there is potential to potentially bring that to 2.5 down but we’re also hearing there could be cost pressure. So, we're pretty happy with the 2.5.

Budget wise really, we will be looking at probably targeting around cash flow so it depends sort of where the oil prices are headed and hopefully I think we're looking at a $55 Brent kind of as a planning tool, we haven't affirmed all up, of course we bought exploration around, we know we have four wells we're drilling out in the far western desert, possible another well or two in Alamein.

The eastern desert, excuse me, we haven't totally firmed that up, we got a handful of wells and we may expand that if we see this strengthening in the current oil prices north of $60 Brent, a lot of things start to move forward in Canada as Ross said earlier, I think initially we're looking at least a six well program, we may scale up or down depending on where prices land so that’s pretty much the package.

.

So, the next question is from James Carmichael from Peel Hunt. Please go ahead. .

Just couple of questions on South Alamein, you mentioned that you'd be targeting about 9 million barrels in the Jurassic target if you decide to go ahead and drill that, can you just give a feel for what the minimum volume that you need to discover in that to justify development and also just remind me of the resources you're attributing to Boraq 2 at the moment?.

We would probably look at sort of 3 million to 5 million recoverable barrels, as a minimum kind of target and right now with Boraq 2 it's not that big, I would guess we're probably 0.5 million to 1.5 million barrels kind of the range on that wells, so it's not quite there, so that's why we're drilling a bigger target to try and get to a sort of a break over number..

And if you do decide to go ahead and drill that Jurassic park will that be in addition to the wells on the South Ghazalat and Sitra or we need to shift to another one to the program?.

Yes, that would be in addition, the four wells out in Ghazalat and Sitra are committed wells, under the PFC commitments whereas the stuff we do on the Alamein, all the commitments have been met there, so those are additional..

And then you mentioned using sort of $55 Brent in terms of planning.

I noticed that you've seen the discounts on your crude sales, now are quite a bit over the last year or so can you give me a sort of feel of what's driving that and how you see that going forward?.

Well that $55 is just kind of our planning forward look, I mean clearly that the Brent is higher right now we don't count on it..

Just to jump in there Ross, the GMP, the differentials -- they've moved around obviously quite a bit over the last year, year and a half, but we saw the marrow pretty substantially initially because of the OPEC cuts, so the OPEC cuts were cutting heavy -- so heavies went into higher demand in the region, recently though in the last month or so because of events in Kurdistan as well as the hurricanes, you had an increase in heavies in the region and as a result we're seeing a little softening in the differentials right now, but not substantially sort of like going back to more historic numbers, this quarter what we've seen so far.

So, for next year we're expecting them to be in that kind of $10 range, that's what we use internally for budgeting purposes..

And then just lastly the second workover rig, will that be sufficient to see production grow substantially in 2018 or will that be reliant on some of the program you outlined in earlier question? And then I guess just when would we expect some sort of firm guidance for 2018?.

The second service rig we think with that we'll get hold of shut in wells, probably 15 to 20 wells that are down right now, we'll get those back up by year end. That gets us sort of back to our current levels, and any additional growth would have to come from planned workovers, recompletions, and drilling.

And as far as the 2018 guidance I expect we'll have something firmed up either mid late December or early in the New Year which has been our historical advantage..

Thank you. [Operator Instructions]. Our next question is from Jenny Xenos from Canaccord Genuity. Please go ahead..

Maybe just with regards to the acquisitions that you are considering in Egypt could you tell us what you are seeing out there and what type of things you find attractive, what might you will consider an attractive acquisition?.

Jenny this is Ross, I don’t think we are going to say that in the public forum..

Something that makes money..

But do you have any criteria or threshold any rate to return that you would like to see in order to consider these types of acquisitions that’s what I'm getting at?.

Yes, Jenny if you have seen our history we generally buy assets, we think we can apply expertise to the increased value and really grow. So, it's generally a producing asset but maybe an under loved or undercapitalized one. And that’s been our modus operandi for many years..

Focused on oil..

And it's all oil yes..

And are there any commitments that you have within the four wells in the western desert?.

No, I think that’s it..

That’s it for the current rate..

So, these are the only commitments and those wells are about $2 million short if I'm not mistaken is that number correctly?.

It varies a bit the shallower ones are probably on the 1.5 to 2 million and there are some deeper potential targets could be as much as 2.5 million to 3 million per well. So, once we firm those we will have a better idea of the total cost but I think in general terms we are looking probably in the 8 million for western desert..

So, $8 million to cover those commitments next year..

In that ball park, yes..

And the next question is from Al Stanton from RBC. Please go ahead..

Just a quick question about the wells in Canada. I see them as you said tracking the P10 line. But I was wondering how they would compare to if you looked at the vintage of the wells. I'm wondering how better your wells and performance than the previous owners, because obviously you have gone with a much more sophisticated completion.

I'm wondering if you are seeing better results -- materially better results than the previous owners?.

It’s a bit early to make that call, but certainly two out of the three wells -- I mean they flow for quite a good period of time which is very encouraging at pretty good rates. We have very high fuel level so we feel confident that we are certainly going to be above the P50 and probably above that topline number with those wells.

And that’s in large part because of the increased tonnage and frac density. We really think we are going to get a nice uplift from that where.

We were internally modeling maybe a 20% or 30% number as a way of an uplift from sort of the average curve, I think we are on track for that and probably better but it’s a pretty small distribution we only drilled three wells for a resource play.

Ideally you would like to have more wells to get better statistic of representation but on balance we are very positive about it. We think it's going to be probably the star well that we will drill going forward..

Yes, Al this is Ross here. Those wells that are in the background on that chart, the 187, there hasn’t been a well droved in this area for a lot of years. So, if we come in at the upper end of those curves, we're essentially beating 90% of all the wells out there through this increased program. So, I think we're pretty pleased with that. .

And you talk about expansion, what is the environmental like, I mean obviously I can see the differentials in it and things like the oil price and gas prices over there, I mean what does that mean for the mood of the current owners of the asset, are they inclined to divest them or what's the state of the market in Alberta?.

In Alberta, a lot of the land is already held out there, there is bits of crown in freehold that we been picking our way out. But there is a lot of rationalization going on as well.

I mean we're looking into it and its attractive to us is not necessarily core to some of the larger producers where they have -- they have more focused in something like say the [mountain] or some other point.

We will keep chipping our way out it but we got quite a bit of running room right now, with the current portfolio and we're proving up the technology and those tight curves, and we think there is a lot of value creation potential of there..

We have no further questions at this time. So, we would like to turn the meeting back over to Mr. Clarkson..

Okay, everyone thanks you very much for participating a lot of great call this year, this quarter. And we probably have some information out in early mid-December on Canadian sort of rates and somewhere between mid-December and early January we will have our plan for next year. Thank you very much..

Thank you. The conference has now ended. Please disconnect your lines this time and we thank you very much for your participation..