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TransAtlantic Petroleum Ltd (2)
Symbol TNP
Shares Issued 62,230,058
Close 2020-03-25 C$ 0.38
Recent Sedar Documents

TransAtlantic Petroleum loses $5.36M (U.S.) in 2019

2020-03-25 17:18 ET - News Release

Ms. Tabitha Bailey reports

TRANSATLANTIC PETROLEUM ANNOUNCES FOURTH QUARTER AND YEAR-END 2019 FINANCIAL RESULTS AND PROVIDES AN OPERATIONS UPDATE

TransAtlantic Petroleum Ltd. has released its financial results for the quarter and year ended Dec. 31, 2019, and has provided an operations update. Additional information can be found on the company's website.

Summary:

  • Estimated proven reserves as of Dec. 31, 2019, were 10.67 million barrels of oil equivalent, up 3 per cent from 10,383,000 boe as of Dec. 31, 2018. Estimated proven developed reserves as of Dec. 31, 2019, were 6,004 Mboe, up 11 per cent from 5,423 Mboe as of Dec. 31, 2018. Estimated proven undeveloped reserves as of Dec. 31, 2018, were 4,666 Mboe, down 6 per cent from 4,960 Mboe as of Dec. 31, 2018.
  • Net loss in the fourth quarter of 2019 was $2.5-million, down 253 per cent from a loss of $700,000 in the fourth quarter of 2018, and down 336 per cent from net income of $1.1-million in the third quarter of 2019. Net loss in 2019 was $5.4-million, down 3 per cent from a loss of $5.2-million in 2018.
  • Adjusted EBITDAX (net (loss) income plus interest and other income, net, income tax expense, exploration, abandonment, and impairment, seismic and other exploration expense, foreign exchange loss, share-based compensation expense, loss (gain) on derivative contracts, cash settlements on commodity derivative contracts, accretion of asset retirement obligation, depreciation, depletion and amortization, and net other items) in the fourth quarter of 2019 was $8.5-million, up 36 per cent from $6.2-million in the fourth quarter of 2018 and up 8 per cent from $7.8-million in the third quarter of 2019 (1). Adjusted EBITDAX in 2019 was $39.2-million, up 6 per cent from $37.1-million in 2018.
  • Total debt as of Dec. 31, 2019, was $20.0-million, down 23.4 per cent from $26.1-million as of Sept. 30, 2019. Net debt as of Dec. 31, 2019, was $10.3-million, down 11 per cent from $11.6-million as of Sept. 30, 2019 (2).
  • Revenues in the fourth quarter of 2019 were $16.5-million, up 6 per cent from $15.5-million in the fourth quarter of 2018, and up 12 per cent from $14.7-million in the third quarter of 2019. Revenues in 2019 were $67.4-million, down 5 per cent from $70.8-million in 2018.
  • Average daily net sales volumes in the fourth quarter of 2019 were 2,763 barrels of oil equivalent per day, up 4 per cent from 2,662 boe per day in the third quarter of 2019, and down 8 per cent from 3,016 boe per day in the fourth quarter of 2018. Average daily net sales volumes for 2019 were 2,844 boe per day, down 2 per cent from 2,892 boe per day in 2018.
  • Operating income in the fourth quarter of 2019 was $5.1-million, up 82 per cent from $2.8-million in the fourth quarter of 2018 and up 24 per cent from $4.1-million in the third quarter of 2019. Operating income for 2019 was $18.9-million, down 26 per cent from $25.5-million in 2018.

(1) Adjusted EBITDAX is a non-generally accepted accounting principle financial measure.

(2) Net debt is a non-GAAP financial measure consisting of total debt as reflected on the company's balance sheet minus cash and cash equivalents as reflected on the company's balance sheet. For Dec. 31, 2019, total debt was $20.0-million, and cash and cash equivalents were $9.7-million. For Sept. 30, 2019, total debt was $26.1-million, and cash and cash equivalents were $14.5-million.

 
                             RESULTS OF OPERATIONS
 
                                          For the three months ended                
                              Dec. 31, 2019      Sept. 30, 2019      Dec. 31, 2018 
Net sales                                                                         
Oil (Mbbl)                              245                 237                271 
Natural gas (MMcf)                       53                  47                 44 
Total net sales (Mboe)                  254                 245                278 
Average net sales (boe/d)             2,763               2,662              3,016 
Realized commodity prices                                                         
Oil ($/bbl unhedged)                 $65.10              $60.12             $56.04 
Oil ($/bbl hedged)                    65.10               60.12              54.92 
Natural gas ($/Mcf)                    5.98                6.18               6.06 

Total revenues were $16.5-million for the three months ended Dec. 31, 2019, as compared with $14.7-million for the three months ended Sept. 30, 2019, and $15.5-million for the three months ended Dec. 31, 2018. The company had a net loss of $2.5-million, or four cents per share (basic and diluted), for the three months ended Dec. 31, 2019, as compared with net income of $1.1-million, or two cents per share (basic and diluted), for the three months ended Sept. 30, 2019, and a net loss of $700,000, or one cent per share (basic and diluted), for the three months ended Dec. 31, 2018. Capital expenditures and seismic and corporate expenditures totalled $4.7-million for the three months ended Dec. 31, 2019, as compared with $10.2-million for the three months ended Sept. 30, 2019, and $6.6-million for the three months ended Dec. 31, 2018.

Adjusted EBITDAX for the three months ended Dec. 31, 2019, was $8.5-million, as compared with $7.8-million for the three months ended Sept. 30, 2019, and $6.2-million for the three months ended Dec. 31, 2018.

2019 annual results of operations

Total revenues were $67.4-million for the year ended Dec. 31, 2019, as compared with $70.8-million for the year Dec. 31, 2018. The company had a net loss of $5.4-million, or 10 cents per share (basic and diluted), for the year ended Dec. 31, 2019, as compared with a net loss of $5.2-million, or 10 cents per share (basic and diluted), for the year ended Dec. 31, 2018. Capital expenditures and seismic and corporate expenditures totalled $31.0-million for the year ended Dec. 31, 2019, as compared with $23.7-million for the year ended Dec. 31, 2018.

Adjusted EBITDAX for the year ended Dec. 31, 2019, was $39.2-million, as compared with $37.1-million for the year ended Dec. 31, 2018.

Decline in oil prices, effect on liquidity and going concern

During 2019, the company repaid its $20.4-million term loan under the company's general credit agreement with DenizBank AS in full in accordance with its terms. Additionally, the company repaid its $10.0-million term loan with DenizBank in full accordance with its terms. The company also entered into a $20.0-million term loan with DenizBank under the credit agreement. Each term loan is described in the company's periodic reports filed from time to time with the Securities and Exchange Commission (the SEC).

The company's primary sources of liquidity for 2019 were cash and cash equivalents, cash flow from operations, and borrowings under the 2019 term loan. At Dec. 31, 2019, the company had cash and cash equivalents of $9.7-million, $2.9-million in long-term debt, $17.1-million in short-term debt, and a working capital surplus of $2.0-million, compared with cash and cash equivalents of $9.9-million, no long-term debt, $22.0-million in short-term debt, and a working capital surplus of $2.5-million at Dec. 31, 2018.

As of Dec. 31, 2019, the company had $20.0-million of debt and $46.1-million of 12 per cent Series A convertible redeemable preferred shares outstanding.

On March 9, 2020, the company unwound its commodity derivative contracts with respect to its future crude oil production. In connection therewith, the company received approximately $6.5-million of proceeds, which the company used to pay down the 2019 term loan. After the paydown, the company had approximately $10.6-million outstanding under the 2019 term loan.

In March, 2020, crude oil prices declined to approximately $25 per barrel for Brent crude as a result of market concerns about the economic impact from COVID-19, as well as the ability of OPEC and Russia to agree on a perceived need to implement further production cuts in response to weaker worldwide demand. The current futures forward curve for Brent crude indicates that prices may continue at or near current prices for an extended time. As a result, the company has reduced its planned capital expenditures to those necessary for production lease maintenance and those projecting a return on invested capital at current prices. To mitigate the impact of reduced prices on its 2020 cash flows and liquidity, the company plans to implement cost reduction measures to reduce its operating costs and general and administrative expenses. In connection therewith, the company intends to prioritize financing operating expenditures over general and administrative expenditures, whenever possible.

Notwithstanding these measures, there remain risks and uncertainties regarding the company's ability to generate sufficient revenues at current oil prices to pay its debt obligations and accounts payable when due. As a result, there is substantial doubt about the company's ability to continue as a going concern.

Reserves update and comparison

The attached reserves table summarizes net proven, probable and possible reserves at Dec. 31, 2019, and 2018.

                                                        RESERVES 

                                        2019 reserves                                  2018 reserves   

                      Oil and condensate    Natural gas    Total    Oil and condensate     Natural gas      Total
                                   (Mbbl)         (MMcf)   (Mboe)                (Mbbl)          (MMcf)     (Mboe)
Reserves category
Proven reserves
Proven developed                   5,624          2,281    6,004                 5,047           2,256      5,423
Proven undeveloped                 4,635            185    4,666                 4,929             184      4,960
Total proven                      10,259          2,466   10,670                 9,976           2,440     10,383
Probable reserves
Probable developed                   920            815    1,056                   901             787      1,032
Probable undeveloped               6,292             30    6,297                 4,847              30      4,852
Total probable                     7,212            845    7,353                 5,748             817      5,884
Possible reserves
Possible developed                 1,062            951    1,221                 1,132             906      1,283
Possible undeveloped               5,680             33    5,686                 5,072              32      5,077
Total possible                     6,742            984    6,907                 6,204             938      6,360

Estimates of reserves are inherently imprecise and are continually subject to revision based on production history, results of additional exploration and development, price changes, and other factors. For more information regarding estimates of reserves, please refer to the company's annual report on Form 10-K for the year ended Dec. 31, 2019, filed with the SEC.

Proven reserves

At Dec. 31, 2019, estimated proven reserves were 10.67 million boe, an increase of 287 Mboe, or 3 per cent, compared with 10,383 Mboe at Dec. 31, 2018. This increase was primarily attributable to the discovery of 1,059 Mboe of productive pay in the Beloka formation in the Yeniev field. This increase was partially offset by 1,038 Mboe for volumes sold during 2019.

Operational update

Southeastern Turkey

Molla

During 2020, the company plans to continue its recompletion, workover and production optimization plans in its producing fields, including Bahar, Yeniev, Goksu, Pinar, Southeast Bahar, Catak and Karagoz. Drilling additional wells will be dependent on oil prices.

Bahar field

In the first quarter of 2020, the company started construction of phase 2 electrification of the Bahar field to replace diesel-generated power with gas-generated power, which will be distributed to each well in the field. The phase 2 electrification is expected to be completed and operational in the second quarter of 2020.

Goksu field

The company whipstocked the Goksu-4H well in January, 2020. The well was redrilled to a total depth of 5,720 feet. Although the company encountered high permeability in the Mardin formation, tests did not indicate commercial quantities of oil.

Arpatepe field

In the first quarter of 2020, the company started implementation of a full-field water flood of the Arpatepe field. The company plans to recomplete four wells in the field as water injection wells and one well as a water source well. Additionally, the company plans to build a central facility and gathering system to handle increased volumes.

Selmo

During 2020, the company plans to continue its recompletion, workover and production optimization operations in the Selmo field.

Bulgaria

The company is currently evaluating future activity in Bulgaria.

Sale of Petrogas

On Feb. 24, 2020, the company sold the shares in its wholly owned subsidiary Petrogas Petrol Gaz ve Petrokemya Urunleri Insaat Sanayive Ticaret AS, which held the Edirne, Dogu Adatepe, Adatepe and Gocerler production leases and 14 employees, to Reform Ham Petrol Dogal Gaz Arama Uretim Sanayi ve Ticaret AS in exchange for $1.5-million and a release of all plugging and abandonment obligations for 65 wells on the Petrogas leases and certain former leases. During 2019, average production for the Petrogas leases was approximately 500,000 cubic feet per day or 83 boe per day.

Conference call

The company will host a live webcast and conference call on March 26, 2020, at 7:30 a.m. Central Time (8:30 a.m. Eastern Time), to discuss the company's 2019 annual and fourth quarter financial results and provide an operations update. Investors who would like to participate in the conference call should call 877-878-2762 or 678-809-1005 approximately 10 minutes prior to the scheduled start time and ask for the TransAtlantic conference call. The conference ID is 1354568.

A live webcast of the conference call and replay will be available through the company's website. To access the webcast and replay, click on investors, select events and presentations, and click on listen to webcast under the event list. The webcast requires iOS, Microsoft Windows Media Player or RealOne Player.

A telephonic replay of the call will be available through March 28, 2020, and may be accessed by dialling 855-859-2056 or 404-537-3406. The conference ID is 1354568.

                       CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) 
                            (in U.S. dollars, except per-share amounts)
 
                                                  For the three months ended      For the 12 months ended
                                                              Dec. 31,                      Dec. 31,
                                                         2019           2018          2019           2018
Revenues
Oil and natural gas sales                             $16,292        $15,409       $66,829        $70,268
Other                                                     179            116           551            521
                                                     --------       --------      --------       --------
Total revenues                                         16,471         15,525        67,380         70,789
                                                     --------       --------      --------       --------
Costs and expenses
Production                                              3,298          2,789        11,674         10,769
Transportation costs                                    1,299          1,280         5,101          4,665
Exploration, abandonment and impairment                     -              8         6,267            401
Seismic and other exploration                              97            149           330            489
General and administrative                              3,538          5,057        11,785         14,719
Depreciation, depletion and amortization                3,048          3,386        13,227         14,059
Accretion of asset retirement obligations                  56             50           213            174
                                                     --------       --------      --------       --------
Total costs and expenses                               11,336         12,719        48,597         45,276
                                                     --------       --------      --------       --------
Operating income                                        5,135          2,806        18,783         25,513
                                                     --------       --------      --------       --------
Other (expense) income
Interest and other expense                             (2,656)        (2,399)      (10,667)       (10,048)
Interest and other income                                 171            240           947          1,082
(Loss) gain on commodity derivative contracts            (936)         3,359          (966)        (1,797)
Foreign exchange (loss)                                (2,384)        (3,305)       (4,569)       (10,292)
                                                     --------       --------      --------       --------
Total other expense                                    (5,805)        (2,105)      (15,255)       (21,055)
                                                     --------       --------      --------       --------
Income (loss) before income taxes                        (670)           701         3,528          4,458
Current income tax expense                               (476)          (139)       (3,119)        (2,820)
Deferred income tax expense                            (1,379)        (1,277)       (5,775)        (6,854)
                                                     --------       --------      --------       --------
Net (loss)                                             (2,525)          (715)       (5,366)        (5,216)
Other comprehensive income (loss)
Foreign currency translation adjustment                (1,492)         5,962        (5,326)       (17,255)
                                                     --------       --------      --------       --------
Comprehensive (loss) income                            (4,017)         5,247       (10,692)       (22,471)
Net (loss) per common share
Basic net (loss) per common share                       (0.04)         (0.01)        (0.10)         (0.10)
Diluted net (loss) per common share                     (0.04)         (0.01)        (0.10)         (0.10)

About TransAtlantic Petroleum Ltd.

The company is an international oil and natural gas company engaged in the acquisition, exploration, development and production of oil and natural gas. The company holds interests in developed and undeveloped properties in Turkey and Bulgaria.

We seek Safe Harbor.

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