Ms. Tabitha Bailey reports
TRANSATLANTIC PETROLEUM ANNOUNCES CHANGES IN BOARD AND ACCOUNTING FIRM AND PROVIDES UPDATES ON HEDGING, RESPONSE TO OIL PRICE DECLINE, SERIES A PREFERRED SHARE DIVIDENDS, POTENTIAL RELIANCE ON SEC ORDER, LICENSE DEADLINE EXTENSIONS, AND ANNUAL MEETING
TransAtlantic Petroleum Ltd. has made changes to the company's board of directors and independent registered accounting firm, has provided an update on its hedging program its response to the recent oil price decline, has declared coming dividends on its 12.0 per cent Series A convertible redeemable preferred shares, is potentially relying on a Securities and Exchange Commission (SEC) order for reporting relief, has extended the deadlines for the work requirements under the company's explorations licences in Turkey, and will hold a 2020 annual meeting of shareholders.
Board of directors
The company deeply regrets to announce that Bob G. Alexander, a member of the company's board of directors, passed away on April 5, 2020. Mr. Alexander had been a director of the company since 2010. Mr. Alexander had extensive experience as an executive officer in the oil and natural gas service industry, and had extensive financial, executive leadership and organizational experience. He was a petroleum engineer, and the board of directors regularly relied on his engineering expertise. Mr. Alexander served on various committees of the board of directors, including serving as chairman of the special committee formed in connection with the sale of the company's oil field service business.
On April 3, 2020, Mel G. Riggs, a member of the company's board of directors, informed the board of directors that he will not stand for re-election as a director and will step down at the end of his term, effective as of the annual meeting. Mr. Riggs will continue to serve as a director until such time.
On April 6, 2020, the board of directors appointed K. Kirk Krist as a director, effective April 7, 2020, to fill the vacancy created by the death of Mr. Alexander. The board of directors had previously identified Mr. Krist as director nominee to stand for election at the annual meeting. Mr. Krist, 61, has served as president and chief executive officer of The K. Kirk Krist Company, a Houston-based private company specializing in oil and gas leasing, land management, farmouts, mergers, investments, venture capital, acreage swaps, mineral interests, overrides, royalties, acquisitions, and divestitures, since 1981. From 1997 until a 2010 sale to Halliburton, Mr. Krist served as a member of the board of directors and, from 2002 to 2006, as chairman of the board of directors of Boots & Coots International Well Control Inc., a well control service company. Mr. Krist served as chairman and chief executive officer of Applied Snubbing Technology from 1997 until its sale in 1999 to Cudd Pressure Control/RPC. Mr. Krist served as chief executive officer and president of K. Kirk Krist & Associates Inc. (KKK&A), a Houston-based land management service company, from 1981 until 1997 when Mr. Krist sold his interest in KKK&A to its management team. Mr. Krist earned a BBA from the University of Texas.
Independent registered public accounting firm
On April 7, 2020, after a request by the audit committee of the company's board of directors in connection with the company's efforts to reduce general and administrative expenses, RBSM LLP notified the company that RBSM will not seek reappointment as the company's independent registered public accounting firm for the year ending Dec. 31, 2020, and has resigned, effective April 7, 2020.
Effective April 8, 2020, the company's board of directors appointed DMF Sistem Uluslararasi Bagimsiz Denetim Danismanlik ve YMM AS to serve as the company's independent registered public accounting firm until the appointment of an independent registered public accounting firm at the annual meeting. The company has consulted with DMF on certain Turkish tax matters, and DMF has served as the company's statutory auditor in Turkey since 2011.
On April 3, 2020, the company entered into a new swap contract with DenizBank AS, which hedged approximately 2,000 barrels of oil per day of the company's oil production in Turkey. The swap contract had a Brent strike price of $36 and is in place from May, 2020, through February, 2021.
Response to recent oil price decline
As discussed in the company's annual report on Form 10-K for the year ended Dec. 31, 2019, 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 the coronavirus COVID-19, as well as the ability of OPEC (Organization of the Petroleum Exporting Countries) and Russia to agree on a perceived need to implement further production cuts in response to weaker worldwide demand. To mitigate the impact of reduced prices on the company's 2020 cash flows and liquidity, the company has implemented cost reduction measures to reduce operating costs and general and administrative expenses, including reductions in staff and compensation, which the company expects will reduce labour expenses in Dallas, Tex., by approximately 50 per cent. The company will continue to implement cost-cutting initiatives during the second quarter of 2020.
Dividends on Series A preferred shares
Given the company's current hedges, the recent oil price decline and the implemented cost reduction measures, the company currently anticipates that it may pay the remaining quarterly dividends in 2020 on its 12.0 per cent Series A convertible redeemable preferred shares in its common shares, par value 10 cents per share, as permitted by the certificate of designation for the Series A preferred shares. If the dividend is paid in common shares, the dividend rate will be 16 per cent of the liquidation preference on the Series A preferred shares. Such payments may result in significant dilution to the holders of common shares.
Potential reliance on Securities and Exchange Commission order for reporting relief
As a result of the reductions in staff and compensation, associated shifts in accounting responsibilities, and the suspension of in-person operations at the company's headquarters as a result of COVID-19, the company anticipates that it may need to rely on SEC order 34-88465 under the Securities Exchange Act of 1934 extending the deadlines for filing certain reports for registrants impacted by COVID-19, in connection with the company's quarterly report on Form 10-Q for the quarter ended March 31, 2020. The company will file the March 31, 2020, Form 10-Q as soon as practicable and will provide an update as to the anticipated filing date for the March 31, 2020, Form 10-Q prior to the original filing deadline for the report.
Licence deadline extensions
The company has applied for and received a six-month extension on the deadlines for work requirements under the company's explorations licences in Turkey, including the Temrez and Selmo exploration licences.
The company currently intends to host its annual meeting on June 5, 2020, at 1 p.m. Central Time (2 p.m. Eastern Time) in ballroom B at the Clubs of Prestonwood, 15909 Preston Rd., Dallas, Tex., 75248. After the meeting, the company will offer an audio recording of the annual meeting. To listen to the audio recording, please visit the company's website, click on investors and select annual meeting.
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.
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