Ross Clarkson - Chief Executive Officer Randy Neely - President Lloyd Herrick - Vice President and Chef Operating Officer Eddie Ok - Vice President, Finance and Chief Financial Officer.

Jenny Xenos - Canaccord Genuity Al Stanton - RBC.

Good morning, ladies and gentlemen and welcome to the TransGlobe Energy’s Q1 2018 Conference Call and Webcast. This webcast includes certain statements that maybe 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 would 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 first quarter 2018 conference call. This is Ross Clarkson, CEO and 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 will start out with a summary of the financial and operating highlights and then we go into a discussion of the plans for the balance of the year. And that will be followed by 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 quarter were about 14,400 Boes per day compared to approximately 16,700 Boes per day in Q1 ‘17.

We had a net crude inventory build of around 0.25 million barrels as we produced more hydrocarbons and sold and ended the quarter with just over 1 million barrels of Egyptian crude and inventory.

As discussed in the quarter, we had a cargo scheduled for the last week of March, where our ship was pushed out into early April due to weather issues at the port. It departed April 7 and we expect to receive proceeds around 26.5 million in the next few days.

Our quarterly funds flow from operations, have shown a welcome improvement over the prior quarter due to our sustained price increase across WTI and Brent. For the quarter, even with selling less than our produced volumes, funds will improve to over 50% quarter-over-quarter.

While crude prices were significantly stronger in the current quarter which had a real impact to our bottom line, these increases were partially offset by continued pricing weakness in Canadian dry gas. We had higher than expected OpEx in the quarter in both Egypt of approximately 10.7 per barrel and Canada of approximately 9.32 per Boe.

Egypt’s rise was attributable to a continual run of workover operations that we accelerated to the current quarter and Canada had additional costs attributable to workover activities and cost associated with the extended bout of cold weather we had over a very long unanticipated winter.

While we don’t expect this level of workover activity to continue through the remainder of the year, continued strength of commodity prices will pressure cost as service providers generally seek to share in any sustained price recovery.

G&A in the period was down about 9% and will look to hold the line on G&A exclusive of additional cost related to the AIM listing. Despite our weather pushed cargo lifting, we ended the quarter with $31 million in cash and over $45 million in working capital. Next slide please.

Our capital plan is balanced to a $55 per barrel Brent level and we are budgeting around $41 million of CapEx for the year, with $4.6 million of that total invested in Q1. We continue to actively manage our debt and capital allocation strategy with the intent of further reducing debt in 2018 and focusing on cash flow accretive investment decisions.

As has been previously announced, the company is progressing with its plans to list on the AIM by summer and will establish an executive office in London to increase investor interest and pursue business development activities. I will pass things over to Lloyd for additional detail on our operational overview and outlook..

Thanks Eddie. This slide summarizes our 2018 capital program of just under $42 million which we discussed during the year in the conference call.

At approximately one-third of the way through 2018, the program is progressing as proposed with the exception of South Alamein exploration well and a few months delay in the Phase 2 expansion of K-field which was commissioned this month.

With South Alamein we have requested an extension to the concession term to facilitate additional dialogue with the military and EGPC following the military’s rejection of our proposed exploration well site. To-date, we have drilled three oil wells in Egypt and are currently drilling a well at Arta-54 which should reach TD next week.

In the Western Desert, we have completed the mine plans and mobilized construction crews to start preparing Northwest Sitra and South Ghazalat well sites. As expected, drilling will commence in Northwest Sitra in mid to late June utilizing two drilling rigs.

In Canada, we have finalized the layout of the 2018 program and are targeting to commence the six well Cardium drilling program in July. We also will discuss these projects in more detail later in the presentation.

Next slide, this slide shows production by major producing area for the company, production during the four months for 2018 is on plan and relatively flat at about 14,400 Boes per day. As planned, we shut-in the Canadian production in early May due to a scheduled turnaround at the main gas processing plant serving the Harmattan area.

Concurrent with the planned turnaround, we are conducting maintenance on our central production facility and the main natural gas compression site which will be completed during the planned turnaround period in May. Gas plant turnarounds in Harmattan area are generally every 3 years to 5 years depending on the facility and the work done.

Based on the approved 2018 plan, we have provided and continued to provide the guidance of 14,200 Boes to 15,600 Boes for 2018 with the midpoint of about 14.9 for the year. I will now turn the presentation over to Ross to talk about the projects in more detail..

Okay. We are on Slide 7 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 is located there and then on the Western Desert, the big licenses in yellow, our three concessions South Alamein, South Ghazalat and Northwest Sitra.

We will look at first the Eastern Desert plans on the following slide, which is Slide 8. The pale green, stars there show the discoveries that we have on Northwest Gharib blocks that the pale sort of tan colored wells and some of those wells were brought on production. I will talk about those in a minute.

But the majority of our drilling this year, the high impact drilling is going to be focused on the southern most sort of orange colored glance which contain the Bakr or K-South and M fields.

In addition to the drilling on the various fields this year, we are commissioning an expanded water handling facility in the K-field and initiating some additional facility expansion on the H-field.

Both the fields have large oil in place numbers and can continue to produce for many more years provided we can separate or re-inject the increasing water cuts. And that’s why we have been working for the last 2 years really on expanding those facilities to extend the life of the fields and recover more oil out of the ground.

It may not sound like a really exciting project, but it does add a tremendous amount of value to the company. So let’s go on to the Slide 9 which is kind of our drilling summary here. We are talking – we are looking at some K-fields where we drilled two wells this year K-46 and then K-45.

They are right up on the orangey part of the field of the crestal area. And we are still optimizing the pump speeds on the wells, but so far they have added over 400 barrels a day of new oil production.

K-45 right on the top of the crust of the field is really interesting, because it encountered that upper Asl-A reservoir 10 meters or 33 feet structurally higher than anticipated. And also that brought the second reservoir the Asl-B up in with a full oil column.

Currently, we are just perforated in the Asl-B at this stage to produce that and that’s been over 300 barrels a day and cleaned up to virtually no water cut now. And we have a significant amount of oil behind pipe in the upper zone in the Asl-A that we can get to layer.

Drilling these crestal wells allows us to capture the Attic oil that probably would never have been produced from the down-dip wells. We have one additional location there at K-31 right up in that Northwest corner of the pool and the expanded K-field water handling facilities that we talked about really allow us to produce these fields for years now.

Jumping over to Slide 10, we are on a map of the M or Meseda field which straddles the boundary with GPC lands to the West. And the red crystal area is bifurcated by the boundary between the two parties and the GPC regulations really restricted both operators from drilling right on the top of the structure.

They had a 250 meter offset requirement from that boundary. And we have worked with EGPC and the offset operator Dublin Petroleum to agree on closer spacing across the crest of the field to better drain that pool.

Transglobe plans to drill M-North and M-South wells as soon as receive the surface access approvals and that will probably occur in July-August. We are also working on a plant to twin the M-19 well which is currently producing from a deeper horizon much deeper the Acyl D at a fairly high rate.

So we have got the thick pay section of the Acyl A behind pipe and we probably wouldn’t get to it for several years. With the current higher oil prices it makes a lot of sense to accelerate the oil production by tuning [ph] this well to produce the Acyl A. And these are big wells.

They typically come on between 300 barrels to 500 barrels a day, so they go a long way towards offsetting declines and increasing our production.

Moving on to Slide 11, a couple of maps on that the Northwest Gharib development leases where we are still working on developing these fields that we discovered in these leases and we will probably be working on these fields for several more years before we completely understand what we have got here.

The number one lease is seeing the most work this year, because it has the more prolific red bed formation.

As Lloyd mentioned we are going to be moving our drilling rig onto the Northwest Gharib 38 pool to drill a water injector in the next few weeks, really working to get the surface facilities in place at the same time so we can start water flooding this pool to increase recoveries.

And this is the same red bed reservoir that we found in the Arta field where we successfully increased recoveries and reserves through water flooding. And then there are several up dip locations to be drilled on that pool to fully develop that.

And as you can see on the structure map, it’s fairly complex here with lots of faulting and we are going to have to drill additional wells to the North to figure out all other pools over time. Moving on to Slide 12, this is centered around the Arta of pool on the map there. Most of those wells have been drilled a few years ago.

With the two new development leases adjacent to the North and the South. On the northern number two lease we completed and fracked the Northwest Gharib number 1X and got a smaller oil well and then we plan to complete the adjacent Northwest Gharib 1A well and frac that and bringing it on production in the next month.

And then on the Southern development lease number three we completed the Northwest Gharib number 5B for 90 barrels a day and plan to complete the adjacent Northwest Gharib 5X in Q2 also. And one of the more interesting projects that we are working on now is evaluating horizontal development of this field.

We are conducting some core studies and modeling to determine if this really makes sense. Under the current vertical well development program that we have done, we will only recover 8% of the 60 million to 80 million barrels in place in this big pool.

Horizontal development will increase that recoveries, so we are working on the analysis really to see how robust the economics are. Usually, these projects are the easiest and cheapest oil you will ever find, largely because you have already found the oil and you are simply improving the recovery, so stay tuned on that.

I think we will see some news on that as we move further the balance of the year and that could be a 2019 project to start moving into horizontal development on that field. Moving on the Western Desert on Slide 13, you can see East to West our three PSCs of South Alamein, South Ghazalat and Northwest Sitra.

The two Western licenses Northwest Sitra and South Ghazalat have that new 3D seismic that we were working on over the last 2 years, that’s all mapped up with many prospects and we are now selected our top four to be drilled in 2018. We have got all the license approvals. We completed our rig selection.

We contracted two rigs for the program to handle both shallow and deeper wells. The construction crews are now out in the field building roads and well sites in preparation for a late June startup drilling. And this year will be a four well exploration program out there, two on each block.

And then at the South Alamein license, our first choice for a drastic drilling location was rejected – the surface access was rejected by the military, so we have requested a contract extension EGPC to allow us more time to work with the military on access.

And EGPC have been very accommodating in these discussions, so we expect to finalize the extension shortly. Let’s look over at a map on the Northwest – sorry the Sitra seismic on the next slide.

And I showed this in the last conference call, I mean we are looking at a cretaceous structure map and a lot of red blobs on there, really all the prospects we have identified to-date. And the two darker red structures Northwest Sitra-9X and 12X are the first wells that we are going be drilling starting in June here.

I kind of get excited by this map because there is a lot of identified closures and they are along trend lines. And that means if you drill one structure and it’s successful it de-risks a whole bunch of other structures along that trend line.

And that’s what we would really like to see it because each individual one is only in the 3 million to 15 million barrel kind of size, but if you get one and you suddenly de-risk a whole bunch and you can be really in a company changing project.

Those results are going to start rolling in through July and August and into September, so stay tuned on that. Slide 15, we will move on to the main portion of our Canadian assets where we have been drilling and producing horizontal Cardium formation oil wells.

Once again, this area is only 40 minutes North of Calgary, so it’s extremely easy to run and we are really pleased with this acquisition as it really is the exactly the kind of asset that we look for, it’s under-large and underdeveloped.

We added a lot of value in 2017 through optimization, cost reductions and drilling on our first three horizontal wells. This year, we have expanded this program to six wells from a single pad, which really reduces the costs. We are also planning to drill our first 2 mile horizontal.

Other operators have experienced significantly better production and recoveries for a smaller incremental increase in the cost by going to 2 mile horizontal wells in the Cardium.

The new wells will increase our percentage of oil production relative to gas production in our Canadian asset base and that increases our overall netbacks and cash flow for the Canadian division. Natural gas prices are still very low in Canada, so we focused all of our investments on oil production.

As Lloyd mentioned, we are concurrently shut-in as the main processing plant where our product is tied to, is on the maintenance turnaround that happens typically every 3 years to 5 years. We are using this shut-in period to conduct our own maintenance on our installations and we should be back up by the end of the month.

This turnaround was factored into our 2018 forecast. So in summary, I mean we are really positioned to grow this year. We have got higher oil prices that we are quite excited about, we hope that continues. Certainly at $75 Brent, we are making a lot more money than we were at $55 or $45, so it’s a much better environment for us.

And as a result, we can start to look at steering up our growth and getting a little more active that we are just evaluating, a lot of it will depend on that exploration results in the Western Desert as to where we allocate our capital as we go through the balance of the year.

We have been looking at a few acquisitions in Egypt and done a few little land acquisitions in Canada really around our existing asset base and we hope to grow that a little further, but our main focus is still Egypt. That is really where we see the biggest growth for the company.

Canada really provides that balance in our cash flow and our stability and that’s what’s created such a strong balance sheet. The last bullet there is share prices lagged oil price recovery as you all know it’s starting to rebound or we are starting to get an impact on our share price.

Some of that maybe to do with accessing the AIM market, because it’s certainly a lot more interested investors in Egypt over there. With that I am going to turn it back to the Q&A session for everybody and let’s see if anybody has any questions..

Thank you. We will now take questions from the telephone line. [Operator Instructions] Our first question is from Jenny Xenos from Canaccord Genuity. Please go ahead..

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

First of all, could you please confirm for me your oil lifting schedule in Egypt for the year?.

Jenny it’s Randy. While this time we were expecting lifting in June and we are still discussing the actual timeline or timetable for the two liftings in the second half of the year actually going now in Egypt next week, so we hope get more clarity on that..

Okay.

So, there is still four liftings planned and the one in June will you be likely – will that be booked in July then most likely?.

No, we expect we will lift in that in June. We probably won’t receive the funds until July just given typically at 30-day receivable cycle for lifting..

So, am I correct in essentially assuming that there will be two liftings in Q2?.

Yes that’s what we expect at this time..

Fantastic.

And that’s also the name you mentioned that the military rejected your proposed exploration well location, what are the chances you think that a location will get approved in that area in the near-term and in the case that it doesn’t, will you just drill the 4 wells in Northwest Sitra and South Ghazalat or will you be adding another location at the Sitra Ghazalat?.

Yes, Jenny, it’s Lloyd here. As you know it’s difficult to predict where the military is going to land on this. At this point, all we have is a rejection that’s typically all you get. So, we are in discussions with Egypt to see what we can move that along.

At this point in time, it doesn’t look optimistic that we will get access to that well at least this year. That’s why we are going for the extension. So, I think it’s more likely than not that we won’t be drilling the well in South Alamein during this calendar year, but we are going to trying to get that sorted out over the next few months..

So, does that mean that you will drill just the 4 exploration wells then at Northwest Sitra, South Ghazalat most likely or will you add another well there?.

No, we wouldn’t. The current plan is to drill those 4 wells, assess where we are at. We have lots of time on those concessions moving forward. So, the focus would be to see what we can do with Alamein. Job one is to get the extension, which I have had numerous discussions, all very positive, he has been very supportive.

So we are quite confident we will get an extension to that concession to allow continued dialogue with the military. I mean, if you recall years ago, they didn’t let us get into Borak. So, we prevailed eventually and got in, but it is an area of interest to the military. They do a lot of their training out there in that area.

So, it’s always a negotiation, but we are still hopeful we can get out that well that we really want to drill..

Understood.

Could you please talk to us about your remaining drilling locations in the Eastern Desert including the Asl-A and Red Bed location, I saw in the map there in the K field that you have at least 7 more drilling locations?.

Yes, those ones will be scheduled probably into 2019 and 2020, the structurally lower ones, those are really to increase sweep and efficiency in the K-South pool. The first steps. is just to get this system expansion up, increase the volumes from the current producers and then we are also doing some more simulation modeling.

So, we will high-grade those locations. Some of those may move around. We maybe able to optimize that oil recovery without drilling some of those structurally lower ones, but hopefully we will get more out of the higher ones, like the ones we just drilled. So, I think we will – so now, we will look at optimizing what we have drilled.

We may drill another crestal one and then based on those results and the simulation work we are doing, we will decide whether we want to infill on the structurally lower ones..

What about outside the K-field, Lloyd?.

Well, we have got some steps we want to do in M field of course in that boundary area, that’s a nice structural trough there. So, we will get those done. We are going to optimize that, all those wells into the K-station as well, so it’s all been sort of tied up in those K-field expansion and modernization that we have conducted, so….

And how many wells – how many drilling locations have been identified in the boundary area?.

Well, that’s the negotiation. I think the current thinking is we will drill two, they will drill two. We will assess and decide whether we want to add more wells..

Okay, understood.

And the final question if I may, you are currently paying, you have significant amounts of cash on your balance sheet and you are currently paying LIBOR plus 6% if my memory serves me right on your Mercuria facility and the interest rates obviously have been moving, do you plan to hedge that interest at all or would you consider paying down some of that facility with your cash on the balance sheet?.

Yes. Jenny, it’s Randy again. At this point in time, we do plan to continue to pay down the facility over the course of the year, so that’s the short answer. We are – we have kind of the strategy to just pay this down as we move to oil. So yes, we are paying LIBOR plus sorry LIBOR plus 600 points on the prepayment facility.

And we will be paying it down over the year as we have been doing….

Are there plans though to accelerate that to pay down maybe a little bit more just using the cash on balance sheet or will you just be paying it down and if the listings occur?.

We haven’t formalized any additional plans on accelerating repayments.

We are looking all those things given the uptick in price is pretty reason for us and we are still assessing as Lloyd said and Eddie said earlier, our budget for the year was stays up $55 oil and so we are just – we are really just seeing now currently in this quarter having just lifted the realization of those funds coming in.

So, we are starting to assess what we will do with the excess cash..

Great. Thank you so much..

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

Yes. Good morning, guys.

I was going to ask about – I was going to use the term excess cash, but I was going to ask about the plans for the spending, there was a comment earlier in the presentation about using some of the windfall to increase development spending, but I would appreciate some sort of guidance as to where you see the allocation of any free cash flow and to some extent you have hinted with respect to the lifting schedule.

So, if there is a lifting schedule, is there a lump sum that is paid down with each schedule.

And then after that, I suppose the question is what is most important in terms of increased CapEx, perhaps even a dividend I assume buybacks are completely off the agenda, but I would appreciate the long answer, whatever that is?.

It’s Ross here. Well, that’s a – that is a long answer. Right now, the strategy is typically we will pay down $5 million per lifting, so that’s about $20 million reduction in debt, I mean it really depends on that schedule. But we are comfortable that with that that’s where we would head. Okay, that still leaves us with some surplus cash.

And as Randy said this is a relatively new phenomenon, so we are evaluating okay, how much additional could we get after in terms of expanding the budget, because there is a timeline in getting things started in Egypt, maybe there is a few things we can do, but we haven’t really arrived on that.

We have had discussions on both share buyback and dividend and when do we reinitiate something on the dividend if we as you know we used to pay a dividend. And I think that discussion will probably be more realistically addressed in the second quarter reports in around August, because we get a few months of higher prices behind us.

I think we will have a lot more confidence in where we are going. So all of the things are being considered both expansion of budget share buyback and dividend as well as our planned debt reduction..

And then finally, a lot of the excess cash or whatever and the guidance on the production is dependent on a second half rebound in production where we are going to see a step down or schedule step down in Q2, are you very confident that where you are seeing the growth and where you are anticipating the growth there is no reason to change a few on a recovery through late Q2 and into Q3?.

Well, certainly, it was the wells we have drilled so far in the K field and even the completions we have done in Northwest Gharib. Yes, we are on track. We don’t see any difficulty in meeting it also in Canada. So, we are on track for our guidance. I don’t see that is the problem right now..

Cool. Thank you..

Thank you. [Operator Instructions] Our next question is from Ron Zola [ph]. Please go ahead..

Yes, hi. I think my question has been partially answered. It’s kind of exciting to actually see the growth initiatives taking place here and it’s great that you have a strong balance sheet to give you the opportunity to not only do more development and exploration, but also look at potential acquisitions. So that’s kind of exciting.

Also, pleased to see the listing on AIM to bolster the investor interest. My question is related more to the dividends and you had mentioned that historically you had paid a dividend and then when the oil price eroded, you made two quick moves.

Even though your balance sheet was strong at the time, you cut the dividend and then soon after that discontinued it and I believe there is potentially a clientele effect there where many of the historical investors were looking forward to that dividend.

In terms of bolstering interest in the stock, have you strongly considered instituting a modest dividend or did you think that, that would have adverse effect on some of your growth initiatives?.

Ron, it’s Randy. It’s definitely under consideration. As Ross just mentioned, we are really looking at everything across the board.

And clearly, as oil prices have picked up through the past 9 months, but really accelerated over the past couple of months, this has come to the forefront in terms of the thinking as the company look forward in terms of how we allocate capital going forward in terms of investing, in terms of shareholder returns and of course in terms of acquisitions.

So, all of these things are definitely being considered. And with respect to dividend, we want to make sure that it’s sustainable, because we felt that we need to put some things. If we do put something in place, we want to be able to maintain it for the foreseeable future, so definitely being considered..

Great. That all made perfect sense to me. Sustainability is important and with oil prices you really never know, so I am very pleased with that answer. No further questions..

Okay. Thanks, Ron..

Thanks Ron..

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

Okay..

I am sorry we do have one further question one further question from a participant just a moment. [Operator Instructions] So, we have no further questions at this time. Please go ahead..

Okay, thank you very much everyone for listening in on our Q1 2018 conference call. I think the next 3 to 6 months are going to be pretty exciting around here. So, we are certainly looking forward to finally getting out into the Western Desert and certainly the existing assets have gotten still lots of remaining potential.

So you will see some interesting wells as we go through the balance of the summer and into the fall. So, that’s about it. Let’s look forward to another call in August..

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