TransGlobe has signed a production sharing agreement with the Ministry of Petroleum and Mineral Resources at an official signing ceremony, the company announced.
The agreement merges the three producing concessions (West Gharib, West Bakr, and North West Gharib) which in December 2021 had an average production of 9,394 barrels of oil per day (bbl/d) (8,590 bbl/d in Heavy Crude; 803 bbl/d in Light and Medium Crude).
TransGlobe’s President and Ceo Randy Neely said, “This agreement with the Egyptian General Petroleum Corporation, resets the TransGlobe business in Egypt; not only does it give us the added time to exploit the existing producing fields to their maximum potential, including the pursuit of identified contingent resources (detailed in the news release dated December 3, 2020), the improved fiscal terms incentivize TransGlobe to continue to invest across our Eastern Desert portfolio.”
The company’s statement said that it has paid the initial modernization payment of $15 million, in addition to a signature bonus of $1 million as a precondition for the official signing. Furthermore, it will be required to pay another $10 million on February 1st for each of the next five years beginning on February 1, 2022.
In addition, the company has committed to spending a minimum of $50 million over each five-year period for the 15 years of the primary term (total $150 million). The statement added that amounts spent beginning on the agreement effective date of February 1, 2020 will be included against the capital commitment.
“Our strong financial position allowed us to fund the payment of the modernization payment and the signature bonus through cash on hand and cash from operations, and we expect to fund subsequent payments in the same manner.
TransGlobe is well positioned to generate increased free cash, and with supportive commodity prices and settlement of the effective date adjustment associated with the Agreement, we expect we will be in a position to revisit our dividend policy in the near-term,” Neely added.
