Independent Resources and Nostra Terra, which are both party to a 50:50 JV with the express purpose to acquire E&P assets in North Africa, have agreed to acquire TransGlobe’s East Ghazalat concession in Egypt. TGA holds a 50% working interest in East Ghazalat, for which the JV is to pay $3.5m. This represents a significant premium to our value for the asset of $2m, and hence we see this as a positive deal for TGA. The East Ghazalat concession had gross production of 880b/d in June 2015 (average), equating to production of 440b/d net to the JV. 2P reserves at East Ghazalat were estimated at c 1mbbl of oil at 30 June 2015, equating to a purchase price of $3.47/bbl. The concession also holds two natural gas discoveries, although these are presently unquantified.
TGA’s Egyptian assets are the focus of group activity with a material 15.1mb/d of current production coming from its remaining Eastern desert licenses, West Gharib (8.4mb/d) and West Bakr (6.1mb/d). These producing concessions are surrounded by three highly prospective exploration licenses, NW, SW and SE Gharib, awarded in November 2013. With production and facilities in place, surrounded by highly prospective exploration acreage, the area represents a production hub for the company.
In our opinion, the East Ghazalat concession had been experiencing a moderate amount of partner drag, so its disposal should free up management’s time to focus on assets in the group’s sole control.
(Source: Edison Investment Research)