FINANCIAL AND OPERATING RESULTS

Additional financial information is provided in the Company's Condensed Consolidated Financial Statements together with the notes related thereto, as well as TransGlobe's Management's Discussion and Analysis for the three months ended 2022 and 2021. These documents, along with other documents affecting the rights of securityholders and other information relating to the Company, may be found on SEDAR at www.sedar.com and in the Company's Annual Report on Form 40-F for the fiscal year ended December 31, 2021, filed on EDGAR at www.sec.gov.

(US$000s, except per share, price, volume amounts and % change)

	Three Months Ended March 31
Financial	2022			2021			% Change
Petroleum and natural gas sales		81,510			42,277			93
Petroleum and natural gas sales, net of royalties		52,954			18,052			193
Realized derivative loss on commodity contracts		50			1,545			(97	)
Unrealized derivative loss on commodity contracts		1,356			2,970			(54	)
Production and operating expense		13,279			9,449			41
Selling costs		483			34			1,321
General and administrative expense		6,865			5,037			36
Depletion, depreciation and amortization expense		6,870			4,815			43
Income tax expense		8,558			4,660			84
Cash flow used in operating activities		(23,782	)		(3,940	)		504
Funds flow from operations1		27,131			81			33,395
Basic per share2		0.37			0.00
Diluted per share2		0.37			0.00
Net earnings (loss)		48,810			(11,024	)		(543	)
Basic per share		0.67			(0.15	)
Diluted per share		0.66			(0.15	)
Capital expenditures3		8,849			2,907			204
Working capital6		60,414			7,055			756
Long-term debt, including current portion		3,144			21,699			(86	)
Common shares outstanding
Basic (weighted average)		72,790			72,542			-
Diluted (weighted average)		74,316			72,891			2
Total assets		323,663			197,150			64
Operating
Average production volumes (boe/d)		12,446			12,221			2
Average sales volumes (boe/d)		11,964			9,691			23
Inventory (Mbbls)		43.4			455.7			(90	)
Average realized sales price ($/boe)4		75.70			48.47			56
Production and operating expenses ($/boe)5		12.33			10.83			14

¹   Non-GAAP financial measure that does not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other companies. The most directly comparable GAAP measure for funds flow from operations is cash flow generated by operating activities. Refer to "Non-GAAP and Other Financial Measures" contained within the Q1-2022 MD&A.

²   Non-GAAP ratio that does not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other companies. Includes a non-GAAP financial measure component of funds flow from operations. Refer to "Non-GAAP and Other Financial Measures" contained within the Q1-2022 MD&A.

³   Non-GAAP financial measure that does not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other companies. The most directly comparable GAAP measure for capital expenditures is cash flow used in investing activities. Refer to "Non-GAAP and Other Financial Measures" contained within the Q1-2022 MD&A.

⁴   Supplementary financial measure that is comprised of petroleum and natural gas sales, as determined in accordance with IFRS, divided by the Company's average daily production volumes.

⁵    Supplementary financial measure that is comprised of production and operating expenses, as determined in accordance with IFRS, divided by the Company's average daily production volumes.

⁶    Supplementary financial measure that is comprised of current assets less current liabilities, as determined in accordance with IFRS.

		2022				2021
Average reference prices and exchange rates		Q-1				Q-4				Q-3				Q-2				Q-1
Crude oil
Dated Brent average oil price ($/bbl)			100.30				79.59				73.47				68.83				60.82
Edmonton Sweet index ($/bbl)			92.64				73.19				66.61				63.01				52.54
Natural gas
AECO ($/MMBtu)			3.68				3.89				2.97				2.48				2.30
US/Canadian Dollar average exchange rate			1.27				1.26				1.26				1.23				1.27

CORPORATE SUMMARY

TransGlobe Energy Corporation ("TransGlobe" or the "Company") produced an average of 12,446 barrels of oil equivalent per day ("boe/d") during the first quarter of 2022. Egypt production was 10,090 barrels of oil per day ("bbls/d") and Canada production was 2,356 boe/d. Production for the quarter was within full year 2022 guidance of 12,400 to 13,400 boe/d and 3% lower than the previous quarter. The decrease was primarily due to increased watercuts at South Ghazalat and the fall-off in initial flush production from the horizontal wells brought on stream in Q4-2021 in Canada.

TransGlobe's Egyptian crude oil is sold at a quality discount to Dated Brent. The Company received an average price of $81.49 per barrel in Egypt during the quarter. In Canada, the Company received an average of $89.19 per barrel of oil, $41.75 per barrel of NGLs and $3.79 per thousand cubic feet ("Mcf") of natural gas during the quarter.

During Q1-2022, the Company had funds flow from operations of $27.1 million and ended the quarter with positive working capital of $60.4 million, including cash of $37.2 million. The Company had net earnings in the quarter of $48.8 million, inclusive of an $8.0 million gain on concession merger and a $1.4 million unrealized derivative loss on commodity contracts which represents a fair value adjustment on the Company's hedging contracts at March 31, 2022. Net income was also inclusive of a non-cash impairment reversal of $26.0 million on the Company's petroleum and natural gas ("PNG") assets that was recognized as a result of the Company's improved commercial terms under the Merged Concession and a further increase and stabilization of forecasted commodity prices in Q1-2022.

In Egypt, the Company sold one cargo lifting of 459.6 Mbbls of entitlement crude oil during the quarter for net proceeds of $36.5 million, which were collected in March 2022. Subsequent to the quarter, TransGlobe sold a ~450 Mbbl cargo of entitlement crude oil with proceeds expected in early June. All Canadian production was sold during the quarter.

As announced on January 20, 2022, the agreement with the Egyptian General Petroleum Corporation to merge the Company's three existing Eastern Desert concessions was executed. In advance of the Minister of Petroleum and Mineral Resources of the Arab Republic of Egypt (the "Minister") executing the Merged Concession agreement with TransGlobe, the Company paid the first modernization payment ($15.0 million) and signature bonus ($1.0 million) as part of the conditions precedent to the official signing ceremony on January 19, 2022. On February 1, 2022, the Company paid the second modernization payment ($10.0 million). In accordance with the Merged Concession agreement, TransGlobe will make a further four annual equalization payments of $10.0 million each beginning February 1, 2023 until February 1, 2026. The Company also has minimum financial work commitments of $50.0 million per each five-year period of the primary development term, commencing on the February 1, 2020 effective date. The results achieved in Q1-2022 are inclusive of the impact of the Merged Concession.

In Egypt, during the quarter, the Company drilled and cased three development oil wells in the Eastern Desert, while a fourth development oil well was drilled during Q1-2022, with casing run subsequent to the quarter. The K-67 development well was drilled to a total depth of 1,440 meters. The well was completed in the Asl-B and is currently on production at a rate of 153 bbls/d (heavy crude, field estimate). The second well, Arta-76, was drilled to a total depth of 1,074 meters, and encountered an internally estimated 12 meters of net oil pay in the Nukhul reservoir. TransGlobe drilled and cased a third development oil well, NWG-1E, to a total depth of 1,219 meters, encountering an internally estimated 9 meters of oil pay in the Nukhul reservoir. Arta-76 and NWG-1E will be stimulated as part of a multi-well stimulation campaign in Q2-2022, subsequent to which they will be put on production. The Company drilled a fourth development well in the Eastern Desert, K-71, to a total depth of 1,448 meters and encountered an internally estimated 19 meters of net oil pay in the Asl-A reservoir and 23 meters of net oil pay in the Asl-B reservoir. The well was cased subsequent to the quarter and is currently producing at a rate of 480 bbls/d (heavy crude, field estimate) from the Asl-B reservoir.

In Canada, the Company successfully drilled one 2-mile and one 1-mile Harmattan horizontal Cardium reservoir wells in the South Harmattan area, with stimulation and equipping anticipated in June and July. Subsequent to the end of Q1 the Company drilled two additional 2-mile Cardium wells from the 15‑11 surface location.

As a result of macroeconomic events precipitated by the conflict in Ukraine and COVID-19 lockdowns in China, the Company evaluated the risks around the 2022/ 2023 capital program and committed to the acquisition of equipment and materials to ensure a continuous drilling program beyond late 2022 and into 2023. In addition, seeking increased development efficiencies in the Company's Cardium development in Canada and harnessing continued robust product pricing and expected rapid returns, the Board has approved the replacement of three originally budgeted 1-mile horizontal wells with three 2-mile horizontal wells. Finally, significant additional costs were incurred following unforeseen and significant hole problems drilling K-71 in the Eastern Desert.

Due to these factors, along with general inflationary pressures on equipment and services propelled by the macroeconomic situation, the Company now expects capital spending to be in the range of $70.5 million (before capitalized G&A) versus an original budget of $57.7 million. The Company is screening its asset portfolio for the disposal of non-core assets that do not provide a material contribution to free cashflow to help offset this capital increase.

OPERATIONS UPDATE

ARAB REPUBLIC OF EGYPT

EASTERN DESERT

(100% working interest, operated)

Operations and Exploration

The Company continued to use the EDC-64 rig in its Eastern Desert drilling campaign, managing to drill and case three additional development wells in K-Field, Arta Field and the NWG-Field during the quarter.

 

The K-68 well, drilled at the end of 2021, was completed in the Asl-A reservoir in January and is currently producing at a rate of 91 bbls/d (heavy crude, field estimate).

 

K-67 was drilled to a total depth of 1,440 meters, and was fully logged and evaluated. The well encountered an internally estimated 16 meters of net oil pay in the Asl-A and 17 meters of net oil pay in the Asl-B. The well was completed in the Asl-B and is currently on production at a rate of 153 bbls/d (heavy crude, field estimate).

 

Arta-76 was drilled to a total depth of 1,074 meters and was fully logged and evaluated.  The well encountered an internally estimated 12 meters of net oil pay in the Nukhul reservoir.

 

NWG-1E was drilled to a total depth of 1,219 meters and encountered 9 meters of oil pay in the Nukhul reservoir after being fully logged and evaluated.

 

Both Arta-76 and NWG-1E will be stimulated as part of a multi-well stimulation campaign in Q2-2022, subsequent to which they will be put on production.

 

The K-71 well experienced unforeseen and significant drilling challenges but was ultimately drilled to a total depth of 1,448 meters, fully logged and evaluated. The well encountered an internally estimated 19 meters of net oil pay in the Asl-A reservoir and 23 meters of net oil pay in the Asl-B reservoir. The well was cased subsequent to the quarter, and is currently producing at a rate of 480 bbls/d (heavy crude, field estimate) from the Asl-B reservoir.

 

Following K-71, the EDC-64 rig was redeployed to drill the K-78 well.

 

The Company is currently working to mitigate potential supply chain issues brought about by the conflict in Ukraine and COVID-19 lockdowns in China by engaging alternative materials suppliers and advancing materials orders. To date, TransGlobe's operations have not been impacted by any material supply shortages.

 

Production

Production averaged 10,038 bbls/d during the quarter, an increase of 3% (267 bbls/d) from the previous quarter. The increase was primarily due to well optimizations in Egypt.

Production in April 2022 averaged ~9,967 bbls/d.

Sales

The Company sold one cargo lifting of 459.6 Mbbls of entitlement crude oil during the quarter.

Quarterly Eastern Desert Production (bbls/d)	2022			2021
	Q-1			Q-4			Q-3			Q-2
Gross production rate1		10,038			9,771			10,653			9,917
TransGlobe production sold (inventoried)		(482	)		-			1,525			3,465
Total sales		9,556			9,771			12,178			13,382
Government share (royalties and tax)		4,440			5,549			6,050			5,229
TransGlobe sales (after royalties and tax)2		5,116			4,222			6,128			8,153
Total sales		9,556			9,771			12,178			13,382

¹    Quarterly production by concession (bbls/d):

Eastern Desert - 10,038 (Q1-2022)              

West Gharib - 2,648 (Q4- 2021), 2,932 (Q3- 2021), and 3,024 (Q2-2021)

     West Bakr - 6,804 (Q4- 2021), 7,257 (Q3-2021), and 6,327 (Q2-2021)

     North West Gharib - 319 (Q4- 2021), 464 (Q3-2021), and 566 (Q2-2021)

²    Under the terms of the Production Sharing Concession Agreements, royalties and taxes are paid out of the government's share of production sharing oil.