Ross Clarkson - CEO Randy Neely - President Lloyd Herrick - VP and COO Eddie Ok - VP of Finance and CFO.

Laura Engel - Stonegate Capital Partners Jenny Xenos - Canaccord Genuity Al Stanton - RBC Capital Markets.

Good morning, ladies and gentlemen, and welcome to the TransGlobe Energy's Q4 and Year-End 2017 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, Chief Executive Officer. Please go ahead, Mr. Clarkson..

Good morning everyone, and welcome to TransGlobe Energy Corporation's fourth quarter 2017 conference call. This is Ross Clarkson, CEO. With me I have Mr. Randy Neely, President; Mr. Lloyd Herrick, Vice President and COO; and Mr. Eddie Ok, Vice President Finance, and CFO.

As usual, we start out with a summary of the financial and operating highlights, and then we move in to a discussion of plans for the balance of the year. And then we follow that with a Q&A session. Eddie Ok will review the financials and highlights of the question starting on the next slides..

Thanks, Ross. Good morning to everyone and thanks for joining us on the call. Average production volumes for the year were approximately 15,500 Boe per day compared to around 12,000 Boe per day in 2016.

Compared to 2016, we were able to sell more barrels than we produced and ended the year with a net inventory drawdown, with sales volumes of about 16,800 Boe per day versus around 11,000 Boe per day sold in 2016.

Our annual funds flow from operations have shown a material improvement over the prior year, in large part due to a sustained price increase across WTI and Brent, and our success in reducing our crude oil inventories in Egypt.

For the year, we did sell more oil than was produced, which resulted in a crude oil inventory drawdown of almost 500,000 barrels which had a positive impact to our funds flow from operations. Our funds flow for the year was just under $56 million compared to negative funds flow of around $8.5 million for 2016.

The strengthened oil price through the second-half of 2017 was a real benefit to us as we lifted two cargos during the final six months of the year. Our final lifting of 2017 was completed in November, with proceeds received in December and a Gharib Blend quality discount to Brent of around $9 a barrel.

This continues to stabilize heavy oil differentials of sub-$10 that we observed in 2017 versus the differentials we were getting in 2015 and '16.

This was also the first full year of Canadian operations for the company since 2007, and we are very pleased with the operations results record to date, both from drilling success and cost discipline contributing to our bottom line.

We had a net loss for the year of approximately $79 million, which included impairment charges related to our exploration concessions in Egypt of around $79 million and an unrealized loss on hedges in place at year-end of approximately $8 million. 2017 was another year where cost control was a priority for us.

Operating costs were further reduced in the year as we implemented a number of initiatives that yielded positive results, with OpEx in Egypt down 12% year-over-year, and Canada down 24% year-over-year. G&A was another area of significant reduction. We were able to reduce costs by over 14% on an absolute basis, and over 30% on a per barrel basis.

We exited the year with over $50 million in working capital. Throughout 2017 we made real progress on our balance sheet. We repaid the vendor take-bake note used to partially finance the Canadian acquisition in addition to repaying $15 million of the amount outstanding under the prepayment agreement.

Our intention is to further reduce our debt load in 2018 as we project 14,200 to 15,600 Boepd for the year, 12,000 to 13,000 barrels per day for Egypt, and 2,200 to 2,600 Boes per day for Canada. Our capital plan is balanced to a $55 Brent level, and we are budgeting around $41 million for the year, $29 million in Egypt and $12 million in Canada.

I'll pass things over to Lloyd here for additional detail on our operational review and outlook..

Thanks, Eddie. This slide summarizes our capital program of $41.7 million for 2018. This year, $29.1 million or 70% of the program is focused on Egypt, and $12.2 million or 30% is dedicated to the Canadian operations.

The 2018 program can be grouped into three focus areas, with $17.4 million focused on development projects in the Eastern Desert, $11.7 million focused on exploration projects in the Western Desert, and $12.2 million focused on development projects in Canada.

The program includes 19 wells with 18 development wells planned for the Eastern Desert, five high-impact exploration wells planned for the Western Desert, and six development wells planned for Canada, which is a double from what we did this current year. Next slide. This slide is just a snapshot of our reserves by category year-over-year.

On a 2P basis, the 2017 year-end reserves were 45.9 million Boes versus 50 million Boes at the end of 2016. The 8% of reduction in reserves was primarily due to the production of 5.7 million Boes. In Egypt, the 2.2 million barrels of revisions and additions partially offset the 4.7 million of production.

In Canada, the 2.6 million Boes Cardium additions was offset by a million barrels of production, and 3.1 million Boes of undeveloped Mannville gas which was removed from the book primarily due to low gas prices. In total, the company replaced 62% of the 2017 production on a proven [Ph] basis, and 30% of the 2017 production on the 2P basis. Next slide.

This slide shows daily production by emerging [Ph] producing areas for the company. As previously disclosed, production in Egypt during Q3 and Q4 was impacted by well servicing issues related to workover rigs. The company mobilized a replacement rig in late September and a second rig in December.

In addition to normal pump and rod replacements during Q4, work commenced on several recompletions in early '18, which is reflected in the rising production since September-October of 2017. Based on the approved 2018 plan we have provided production guidance of 14,200 to 15,600 Boes for 2018, with a midpoint of 14,900 Boes for the year.

Currently production is approximately 14,500 Boes and expected to average about 14,300 Boes for the first quarter. I will now turn the presentation over to Ross to talk about projects in more detail..

Okay, we're on slide eight, which is the locator map for the Egyptian assets. Two focus areas here, the Eastern Desert on the Gulf of Suez, where all of our current oil production comes from, and then the Western Desert where there's a number of large concessions, South Alamein, South Ghazalat, and Northwest Sitra.

On the next slide we just talk about the Eastern Desert plans for a bit, that's slide nine. And there's a development program summarized on that slide about what we plan to do this year. A big focus is on West Bakr, and the pale green stars up on the north there show the discoveries we've made so far on the Northwest Gharib block.

And two of those discoveries are located north and south of the Arta field that are really extensions of that field. And then we got all our development leases approved in the third quarter, and those are the pale tan ones.

And then some of those wells have been brought on production following the approval of those development leases through the fourth quarter.

However the majority of our drilling this year, certainly five of the wells is really focused on southernmost tan colored block or orangey colored block there which contains the Bakr K, K-South and M fields where we see a huge amount of potential. We're going to go on to the next slide.

Lloyd is going to describe some of our Bakr development plans there on the next few slides..

Thanks, Ross. I'll take a few moments to discuss the West Bakr activities. As Ross said, that's where the bulk of the 2018 Easter Desert program is focused. This map is a structure map on the ASL A pool in the South-K field. South-K field had limited activity for many years due to military restrictions in the area.

In 2015, we negotiated access to the area and drilled three development wells at K-47, K-48, and K-51 during the 2016 and '17 period. Also, in 2016 we initiated facility design and construction projects to upgrade the K&H central production facilities. In September of 2017, Phase 1 was completed to upgrade and modernize the existing facilities.

Phase 2, to add a second production train to the facilities is scheduled for completion this month and should be operational in April, which will double our fluid handling capacity at both stations. Phase 3, to add a third production train to triple fluid handling capacity, is scheduled for this summer.

In addition to completing the facility expansion, the 2018 program includes the five new wells in the West Bakr and a number of recompletions at West Bakr. In K-South, we recently drilled K-46 which encountered 111 feet of total net pay in the ASL A 1,2, and 3, and in the ASL B.

It's expected that K-46 will be completed and placed on production later this month. A second well, K-45 is scheduled for drilling in Q2. Next slide. This slide is a structure map on the M pools located on the western boundary of our K block.

Since the initial discovery in West Bakr, GPC has drilled and extended the pool to the west which is also called the Meseda pool. During the initial development of the pool and the extension to the west, GPC and West Bakr agreed to a 250 meter buffer zone from the boundary for future development wells.

Since then, a number of wells have been drilled to delineate a pool on both sides of the boundary. And in 2018, we reached an agreement in principle with GPC to drill up to four new wells. Two wells each inside the buffer zone. Subject to approvals, we are planning to drill our two wells in the buffer zone in Q2.

In addition, we are evaluating the M-19 well which is currently producing about 350 Bopd from the lower ASL D formation. We are looking to either re-complete or re-drill a twin to produce the 60 ft of ASL A formation pay which is currently behind pipe.

All the production from the M-field is connected to the K station CPF for treating an export to the coast. With the K station upgrades and facility expansion underway, the company will have sufficient capacity for the increased production volumes. I will now turn it back to Ross to talk bit more about our Western Desert program..

So moving out to Slide 13, Western Desert blocks, you can see east to west are three production sharing contracts out there or concessions, South Alamein and South Ghazalat in NW Sitra. The two Western most licenses Sitra and South Ghazalat have that new 3D seismic that we shot. That's all now mapped up. And the mapping has identified many prospects.

And we selected the top four to be drilled in 2018. We have received all our license approvals recently. And we are now in the process of rig selection for a late May - early June spud date. We will get two rigs here contracted for this program because we have both shallow and deeper targets. So, we are going to use two rigs to get it all done quickly.

This year it's going to be a really interesting program with a four well program out there; two on each block. And on the South Alamein license, we are still in discussions with EGPC on the drilling plans and the potential development areas for that block. And we should have some news on that in the next few months.

Let's just jump over to a map on the next slide, and very colorful map here. We are looking at a structure on the cretaceous layers. The red blobs on the block are all the prospects we have identified to date. And you can see there is an awful lot of blobs there.

But two darker red ones NWS-09X and 12X are the first two that we are going to drill starting in May-June. And I get really excited by this map because there are so many different identified closures and there are long trend lines.

And what that really can mean is that if we drill one successful structure, then several more along the trend line can also be successful, or at least lower risk. So, the two locations we have identified or really set up to de-risk a bunch of other additional structures along that trend.

So these targets generally are any -- in the range of for recoverable oil sizes of between 3 million and 15 million barrels depending on your risk profile and where you rank them. But, the real key here is if few of them work out, it can be absolutely company changing. So, I am quite excited about this particular area.

Moving on to the next slide 14, this is the Canadian assets which I really wanted to talk about somewhat. We purchased these in late 2016. And area really is -- it's only 40 minutes north of Calgary. So, it's extremely easy to run this asset. We are really pleased with this acquisition as it's exactly the type of asset we generally look for.

It's under loved and underdeveloped. And on the next slide, I'll summarize the activities and results to date. So on next slide, I mean any acquisition, it takes at least a year after you make an acquisition, sometimes two years before you really know how well you did on that acquisition. But, let's look at the score card one year in.

So, we bought it for US 60 million or Canadian 80 million. And that was December 16. We got our team in place. We took over the operations on February 1st. We put our reserve base lending facility in place and paid back the vendor take back loan. And production and cash flow came in on target for the year.

We increased our oil percentage by drilling three horizontal Cardium oil wells. Those three wells were really a test of our concept for the asset, and they came in below budgeting cost which reduces your expected future development costs for the entire undrilled inventory of oil wells, so that adds value.

Those wells also came in at higher production rates than the average of the previous wells in the area and that increases your overall value of the future drilling. We also reduced operating cost by 31%, increasing the netback and ultimate value of the assets. We also renegotiated some of the freehold lease royalties, and that also increases value.

And we bought some additional Crown lands which increases our total drilling inventory for the area. So at the year-end, when we really sum it all up, we increased crude reserves, the NPV at 10% discounted value by 81%. And we increased the 2P NPV10 to $134 million or 57%.

And really, the summary of all of that is this just has been a great acquisition after one year. And we're really just getting started on this asset, so this is the kind of thing we look for. On the next slide, I mean just a summary.

The company is in good shape with the production base for the year at midpoint just under 15,000 Boes per day, an inventory of projects to deliver on future growth. And most of those projects are at 100% interest or very high working interest which allows us to scale up or down quickly to react to the volatile commodity prices.

And we believe the share prices to severely depress because of general investor focus on a few North American shale plays. International stories really aren't getting much interest in the North American markets. Whereas in the European and Middle East markets there's certainly an interest in international plays still.

And because of that dynamic we are really focusing a lot of our investor relations effort this year on the U.K., Europe, Middle East. We're also investigating the possibility of a London AIM listing. We've talked about that considerably and we're certainly well along on that process to look at it.

And really that's to better access markets where the investors are interested in international stories. Let's turn it back to the operator and see if there's any questions..

Thank you. We will now take questions from the telephone line. [Operator Instructions] And the first question is from Laura Engel from Stonegate Capital Partners. Please go ahead..

Good morning and congratulations on a strong finish for 2017.

Wondered if you could tell us as far as operational efficiencies described, how should we think about that continuing into 2018 versus the larger percentages you quoted for 2017, how significant will those continue to be?.

Are you referring to the operating costs?.

Right, reduction on the operating cost per barrel in some of the combined groups you mentioned optimization efforts that were described, et cetera..

Yes, it's Lloyd here, Lloyd Herrick..

Hi, Lloyd..

As far as the operational efficiency goes we've made pretty significant gains on them. I think there's going to be headwinds to significant gains on a per barrel basis on the go-forward. We are looking forward to getting our expanded facilities, say, in West Bakr up and fully optimized. We think that will lead to some efficiencies.

We had some great gains in the past year through the consolidation of our two joint ventures in Egypt, which has led to a lot of efficiencies. We still see additional gains there but they won't be as dramatic as what we've seen.

The other aspect of it is we're positioning ourselves to grow versus survive the last number of years, so I think you will see more capital focus on growth activities. So I think on balance, the operational efficiencies, we've squeezed the bulk of them out of it. We're going to certainly continue to focus on it.

But on a go-forward basis I wouldn't look for big reductions in the future on a per Boe basis..

Okay.

And then you touched on growth; related to that and the potential for acquisitions, will those be focused still in the Egypt and Canadian area or will you consider potential acquisitions outside those areas?.

This is Ross here. Yes, at this point in time, we are looking at both of those areas. But, we have got quite a bit on our plate right now. We look at a lot of stuff in that Egypt hemisphere. Actually, we looked just about everything that comes along. And we are very selective on when we make acquisitions.

It's not easy to find those gems that are under loved and undercapitalized. We also look at Canada to a certain degree. But, right now our focus is primarily over in the Egypt region..

Okay. Well, thank you. I'll get back in the queue..

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

Good morning, gentlemen. I have a few questions if I may please.

The first one with regards to sales in Egypt, what was the contribution to fund flow from your reducing inventory accrued from 1.3 barrels to under 0.8 million barrels in 2017? And what are you targeting to reduce inventories by in 2018? And finally, what are you budgeting for direct sales to EGPC now this year?.

Jenny, it's Randy. Well, I think if you look at it from the perspective of how many barrels were sold during the year, I mean we sold about 2.6 million barrels total out of Egypt. So, there is a 500,000 barrels of that would be associated with a reduction of inventory..

Yes..

Yes, that's round numbers, 20%..

So, 20% -- so, 20% of cash flow would be….

Twenty percent of the cash flow from Egypt..

From Egypt? And what are you targeting to or hoping to reduce inventories by in 2018? And what does that mean in terms of direct sales to EGPC?.

Well, we think that over the long term, we expect we can drop inventory down into the 2 to 300,000 barrels. But, we don't anticipate that we will be able to do that this year. We are expected to make steady progress towards that over the next couple of years. So, we would like to see our inventory come down to at least 0.5 million barrel this year.

And hopefully in the years ahead, we can drop it down into that 2 to 300,000 barrel range..

Okay, great. And you mentioned the four cargo liftings in 2018, which is great to see. The first lifting you said will take place at the end of March.

When will the remaining three liftings take place?.

Well, we are still working on final schedule for that. But, we expect it to be fairly evenly spaced throughout the rest of the year..

So, one a quarter roughly?.

Roughly, yes..

Okay. You mentioned that you plan to drill five exploration wells in the Western Desert. Could you please provide us with some more details on the schedule for these wells? I think you mentioned that you may be spudding the first two wells in May-June kind of timeframe.

How long will these wells take? When could we expect results from them? And also from the well in South Alamein, and also, what do you estimate your chances of success in the Western Desert?.

Yes, we've got the approvals on the well locations. And so, we are now in the process of preparing the sites and getting our rig contract signed up. So, that's why two rigs coming in at late May - early June. They are not long wells, Jenny. So, you can expect results in -- on those first two sometime in July - late July probably.

And then, we're going to immediately flow that with the two wells on Ghazalat. So, those are going to come in sort of August-September.

And then, the Alamein one, we are just actually -- as I said in conference call there that we just doing some discussions with EGPC on that drilling program over there and also talking with them a little bit about a potential development lease around the Bakr area. So, we will have some further news on that in the future..

Okay. Please remind me when that lease expires..

Alamein expires the end of June, but….

We are really quite open about extending it at this stage..

Okay..

Yes, we have had a number of discussions. So it's an ongoing discussion and we hope to have clarity around certainly by in the coming month or so..

Okay. Fantastic, thank you.

And do you still have some gas production shut-in in Canada?.

Not currently, other than maybe a few freeze-offs during the winter for some of the smaller wells, but it's largely on because the gas prices are, they're not great, but they're certainly better than they were in the summer. So everything is pretty much up and running at this time..

Great.

And could you please update us on the three Cardium wells performance, current performance if possible?.

Yes, just a quick look at it. We're pretty much right on our curves for the 90 days. It's averaging about 150 Boes a day with about an 80%-85% liquid ratio to that.

So one well's above the curve, one's right on the curve and the well that we didn't get all the fracs away because of communication with an offset well, it's a bit under the curve, but on balance we're very pleased with that performance. That had about a 30% increase built into the curves over the historical stuff that was done back circa 2012-2014.

So these are the first sort of what are called "Newer generation," Cardium wells that have been drilled in the area and so far they're pretty much tracking right on trend. So we're very pleased with it..

Fantastic.

And I just realized that one of my questions didn't get answered, what are you estimating the chances of success being for the five exploration wells in the western desert?.

Yes, our analysis on that puts them in between 25% and 35%, some of them are higher some of them are lower. But I guess, you'd average them around 30%..

So in other words out of five wells in theory we should expect one or two successives [Ph]?.

Yes, that is correct..

Okay, great, thank you so much..

It's not a big statistical sample, but yes that should work..

Yes, that's fair enough. Thank you so much gentlemen, thank you for your time..

Thank you..

Thank you. The next question is from Al Stanton from RBC. Please go ahead..

Yes, good morning.

So I was just flicking through some of the older presentations when there was some discussion about looking at the water flood and development optimization and facilities upgrades, I was wondering if there was anything that had been put on the backburner when the old price slumped that now warrants a bit more attention to help enhance production rates and also recovery rates in Egypt?.

Yes, and it's Lloyd here, yes, you're absolutely correct, there's a lot of stuff that got pushed back up certainly in the way of investment because of the oil price.

One of the key areas that we've identified certainly out in the west block, there's we think a lot of potential there and that's the reason we kicked off the facility work and design back in '16 and with the first phase done in 2017.

So it's more or less time to have those expansions in place, we're going to double and then triple the total fluid handing capacity. As you know these fields are fairly mature fields and longer life.

With that comes strong water drives, you're going to have to handle the fluids, you're going to have to handle that increasing water cut and that's where you get your efficiency. So it's all coming together, and the good news is the prices are much stronger now. So we're looking at a number of recompletions in addition to the new drills.

We're also looking at some pump upgrades going to more high-volume lift and we'll spool that up through 2018, we're going to -- we've got a couple of areas where we've essentially piled our projects within pools to see the performance of some commingling ideas.

So if that works the way we think it could, you could see a pretty good ramp-up into 2019, which is really the -- in the longer term plan is to get that spooled up in the next one to three years, so….

Would we see a switch from possible to probable reserves in 2018, or is this a ramp-up of the results you think you've already got in the 2P number?.

What we're optimistic about is some of this ramp-up will actually increase the recovery factors to get assigned. So I think you would see in addition to that it comes from the 3P into 2P we would definitely expect to see an increase in the book for that performance. These are targeted areas that are not currently on the books. .

Sure. Thanks, Lloyd, thank you guys..

Thanks, Al..

Thank you. There are no further questions registered at this time. I'd like to turn the meeting back over to Mr. Clarkson..

Thank you everyone for participating in our conference call.

We are pretty excited about this drilling program that's going to kick-off here, the exploration side, and also the development work as Lloyd was talking, that's going to add some serious amount of volumes as we go through the year, although we have to wait for results to see that, but we are pretty prompt about that, and we are certainly happier with the operations -- where it is and where it has been, it's been a top three years.

And we really feel we are starting to come out of that cycle, and starting to head in the right direction. So, stay tuned as we go through the summer. I think we are going to see some interesting results. Thank you..

Thank you. The conference has now ended. Please disconnect your lines at this time, and thank you for your participation..