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TransAtlantic Petroleum Ltd. Announces First Quarter 2012 Earnings and Operations Update

HAMILTON, Bermuda, May 10, 2012 (GLOBE NEWSWIRE) -- TransAtlantic Petroleum Ltd. (TSX:TNP) (NYSE Amex:TAT) (the "Company") announces results for the quarter ended March 31, 2012 and provides an operational update.

Selected Highlights

  • Net sales volumes in the first quarter of 2012 averaged 4,965 barrels of oil equivalent ("boe") per day, an increase of 27% over the same period in 2011 and a 7% decline from the fourth quarter of 2011;
      
  • Adjusted EBITDAX from continuing operations for the first quarter of 2012 totaled $22.4 million (Adjusted EBITDAX is a non-GAAP financial measure that is defined and reconciled to net income later in this press release);
      
  • First quarter of 2012 results were impacted by $11.0 million of unrealized mark-to-market derivative losses, $4.3 million of foreign exchange gains, $0.8 million of general and administrative expense associated with the sale of the Company's oilfield services business and a $2.2 million loss from discontinued operations.

First Quarter 2012 Operating Summary

    For the three months ended  
    March 31, 2012   March 31, 2011   December  31, 2011  
Net Sales              
Oil (Mbbls):   224   219   231  
Natural Gas (MMcf):   1,367   803   1,576  
Total Net Sales (Mboe):   452   353   494  
Total Net Sales (boe/day):   4,965   3,920   5,367  
               
Realized Commodity Pricing              
Oil ($/bbl – Unhedged):   $108.38   $108.17   $101.28  
Oil ($/bbl – Hedged):   $101.80   $104.91   $97.22  
               
Natural Gas ($/Mcf – Unhedged):   $7.60   $7.29   $7.25  
Natural Gas ($/Mcf – Hedged):   $7.60   $7.29   $7.25  

First Quarter 2012 Results

For the three months ended March 31, 2012, total net sales increased to approximately 452 thousand barrels of oil equivalent ("Mboe"), compared to net sales of approximately 353 Mboe for the same period last year and approximately 494 Mboe in the fourth quarter of 2011. During the three months ended March 31, 2012, the Company sold an average of 4,965 boe per day. Total net sales were comprised of approximately 224 thousand net barrels ("Mbbls") of oil at an average rate of approximately 2,462 net bbls per day and approximately 1,367 net million cubic feet ("MMcf") of natural gas at an average rate of approximately 15.0 net MMcf per day.

For the quarter ended March 31, 2012, the Company's average realized price (unhedged) was $108.38 per bbl of oil and $7.60 per thousand cubic feet ("Mcf") of natural gas, compared to an average realized price of $108.17 per bbl and $7.29 per Mcf in the quarter ended March 31, 2011 and $101.28 per bbl and $7.25 per Mcf in the quarter ended December 31, 2011.

Total revenues increased to $34.9 million for the three months ended March 31, 2012 compared to $29.1 million realized in the same period in 2011 and $33.6 million for the three months ended December 31, 2011. Net loss from continuing operations for the three months ended March 31, 2012 was $2.6 million, or $0.01 per share (basic and diluted), compared to $11.8 million, or $0.03 per share (basic and diluted), for the three months ended March 31, 2011 and $57.0 million, or $0.16 per share (basic and diluted) for the three months ended December 31, 2011. Reported net loss for the first quarter of 2012 included $11.0 million of unrealized mark-to-market derivative losses, $4.3 million of foreign exchange gains, $0.8 million of general and administrative expense associated with the sale of the Company's oilfield services business and a $2.2 million loss from discontinued operations.

Adjusted EBITDAX from continuing operations for the three months ended March 31, 2012 was $22.4 million compared to $15.7 million for the three months ended March 31, 2011 and $20.9 million for the quarter ended December 31, 2011.

Operational Review

During the first quarter of 2012, TransAtlantic and its subsidiaries spudded 8 gross wells, completed 10 gross wells and executed eleven fracs. The Company's 7-day average net production rate as of May 7, 2012 was approximately 4,673 net boe per day, including approximately 12.1 MMcf per day of natural gas and approximately 2,657 bbls per day of oil.

Thrace Basin

In the Thrace Basin of northwestern Turkey, the Company's net sales of natural gas for the first quarter of 2012 averaged approximately 14.9 MMcf per day, compared to an average of approximately 8.9 MMcf per day in the first quarter 2011 and 16.9 MMcf per day in the three months ended December 31, 2011.

Frac Program. TransAtlantic and its partners have seen continued success with the Thrace Basin frac program, including the successful execution of the first multi-zone frac. The Company's first multi-stage frac in the Thrace Basin is expected to commence during the second quarter of 2012.

The following table details our frac results in the Thrace Basin for wells completed during 2012: 

Well Working
Interest
(%)
Frac Date Net Pay
(meters)
Porosity
(%)
Peak
24-hour
Test Rate
(MMcf/day)
Initial
7-Day
Average
(MMcf/day)
DTD-11 41.5% 1/7/2012 3 11 1.1 0.8
Kayra Derin-1 41.5% 2/4/2012 7 12 0.1(1) --
TDR-5 41.5% 2/11/2012 9 14 3.0 2.1
Senova-1 41.5% 2/15/2012 4 18 0.2 N/A(2)
Kuzey Kayi-2 41.5% 2/19/2012 3 12 0.7 0.6
DTD-10 41.5% 3/9/2012 5 11 0.2 0.2
Kayi-12 41.5% 3/19/2012 6 15 0.3 0.2
BTD-1 41.5% 3/21/2012 3 12 -- --
TDR-4 41.5% 3/24/2012 3 17 1.6 1.2
DTD-4 41.5% 3/28/2012 3 12 0.3 0.2
(1) The Kayra Derin-1 frac'd into a water zone.            
(2) The Senova-1 was frac'd and tested to extend a license but was not tied to a gathering system. The well is located approximately 30 kilometers west of the Tekirdag Field Area. The well is currently producing into a CNG system at restricted volumes.            

TransAtlantic's Thrace Basin unconventional program to-date has focused on proving the efficacy of applying fracture stimulation to the portions of the Mezardere formation that have already been shown to be productive via historical drilling to depths up to approximately 6,500 feet (~2,000 meters). Results to-date, combined with data from more than 100 penetrations, indicate production and drainage from each wellbore is likely to be optimized with one to four fracs, with each draining an approximate 50 acre area, and a base case estimated recovery of 330 MMcf per stage.

The next stage of the Company's proof of concept frac program is to test the deeper portions of the Mezardere formation in order to determine the appropriate total depth to drill each well and ultimately the optimum number of frac stages per well. Once defined, TransAtlantic and its partners will have a sufficient overview of the play from which to structure and execute a development plan for the basin. Testing of the deeper intervals began in January 2012 with the initial completion of the Pancarkoy-1 exploration well (100% working interest), and two additional deep wells are in process, the Suleymaniye-2 (41.5% working interest) and the Baglik-1 (formerly the DTD Deep-1, 41.5% working interest).

The Pancarkoy-1 underwent an initial frac on the deepest four meters of pay in January, confirming the presence of gas, but experiencing high water influx believed to be caused by the frac wings reaching a water bearing zone. In April 2012 two additional zones were fraced each producing gas that could not be sustained due to high water production. We have identified at least two more sands within the Mezardere formation that we expect to test, initially by conventional means.

The Suleymaniye-2, an approximately 8,000-foot (2,450 meters) well targeting the Osmancik and Mezardere formations on a license southwest of the Pancarkoy-1 well, reached total depth in February 2012, targeting a four-way structural high to a previously drilled well that generated natural gas shows in the targeted interval. The well is scheduled to commence completion this week as TransAtlantic's first multi-stage frac in the Thrace Basin.

The Baglik-1 was spud in March targeting four prospective intervals and is the first deep test in the Tekirdag Field Area on the same geological structure as our existing dataset of shallower re-entry fracs. The Baglik-1 recently reached total depth of approximately 11,800 feet (3,600 meters) and is expected to be completed during the second quarter of 2012. Over 400 feet (130 meters) of net pay have been identified in the shallow sections and we are currently evaluating the deeper sands, where we see low log porosity with log evidence of natural fracturing. We plan to complete and frac the Baglik-1 during the second quarter of 2012, focusing initially on the deeper sands before moving uphole and completing the shallower sands.

TransAtlantic plans to drill approximately eight (gross) deep wells this year to explore the prospectivity of the Thrace Basin. The rig that drilled the Baglik-1 well is currently moving to the next deep well in the Tekirdag Field Area, the Kayi Derin-1 Deep.

Southeastern Turkey

Molla (100% working interest). During the first quarter of 2012, TransAtlantic completed the Goksu-2 well with an initial production rate of approximately 400 bbls of oil per day from the Mardin group and the well has produced more than 16,600 bbls of oil after 74 days of production. The next well in the prospect area, the Bahar-1, is located approximately seven miles (11 kilometers) north of the Goksu location and was spud in March to test the Hazro, Mardin and Bedinan formations as well as the Dadas shale. Drilling of the Bahar-1 encountered the Mardin and Hazro as expected and core is currently being collected from the Dadas shale below 9,400 feet before continuing drilling to the Bedinan. Following the Bahar-1, the Company expects to drill the Goksu-3H horizontally into the Mardin formation. If drilled horizontally, the Goksu-3H would represent the Company's first horizontal well drilled in Turkey.

TransAtlantic has applied for a 61,561 acre (24,913 hectare) exploration license immediately offsetting the Company's existing Molla licenses. If the acreage is awarded to TransAtlantic, it will hold exploration and production licenses totaling approximately 160,000 contiguous net acres in southeastern Turkey (65,000 hectares), all of which is prospective for the Dadas shale formation.

Selmo (100% working interest). Net sales at the Selmo oil field in the first quarter of 2012 averaged approximately 2,225 bbls per day, compared to approximately 2,284 bbls per day in the first quarter of 2011 and 2,393 bbls per day during the fourth quarter of 2011. During the first quarter of 2012, the Company completed two wells at Selmo and spudded four new wells.

Arpatepe (50% working interest). Net sales at the Arpatepe oil field averaged 111 bbls per day during the first quarter of 2012 compared to approximately 148 bbls per day in the first quarter of 2011 and 117 bbls per day during the fourth quarter of 2011. The Arpatepe-5 is currently commencing first production and the Arpatepe-6 well is expected to be completed later in the second quarter of 2012.

Outlook

The Company expects net production during the second quarter of 2012 to average approximately 4,700 boe per day and be balanced between natural gas and oil. After an activity slowdown during the first quarter and the early part of the second quarter, TransAtlantic now has six operated rigs running, including four rigs in the Thrace Basin and two rigs in southeastern Turkey. Production is expected to increase in the latter part of the second quarter of 2012, contingent upon continued success in our Thrace Basin frac and overall exploration and development programs.

Sale of Oilfield Services Business

On March 15, 2012, TransAtlantic signed a stock purchase agreement to sell its oilfield services business, which is substantially comprised of its wholly owned subsidiaries Viking International Limited ("Viking International") and Viking Geophysical Services, Ltd. ("Viking Geophysical" and, together with Viking International, "Viking"), to Dalea Partners, LP ("Dalea", an affiliate of N. Malone Mitchell, 3rd, the Company's Chairman and Chief Executive Officer) for an aggregate purchase price of $164.0 million, consisting of $152.5 million in cash, subject to a net working capital adjustment, and a $11.5 million promissory note from Dalea. The Company expects Dalea to assign the stock purchase agreement to a joint venture owned by Dalea and funds advised by Abraaj Investment Management Limited prior to closing. The sale of Viking is subject to the approval of regulatory authorities, the receipt of equity financing by the buyer and other customary closing conditions, all of which are expected to occur during the second quarter of 2012.

Derivative Profile

As of March 31, 2012, TransAtlantic had outstanding derivative contracts with respect to its future oil production as set forth in the table below. No changes have been made to the Company's derivative portfolio subsequent to quarter-end. 

Type  


Period
 

Quantity
(bbl/day)
  Weighted
Average
Floor
($/bbl)
  Weighted
Average
Ceiling
($/bbl)
  Weighted
Average
Additional
Call ($/bbl)
Collar   April 1, 2012 to December 31, 2012   600   $61.50   $109.83   NM
Collar   January 1, 2013 to December 31, 2013   400   $75.00   $125.50   NM
Collar   January 1, 2014 to December 31, 2014   380   $75.00   $124.25   NM
3-way collar   January 1, 2012 to December 31, 2012   240   $70.00   $100.00   $129.50
3-way collar   April 1, 2012 to June 30, 2012   350   $85.00   $116.25   $137.38
3-way collar   July 1, 2012 to December 31, 2012   205   $85.00   $97.13   $162.13
3-way collar   January 1, 2013 to December 31, 2013   831   $85.00   $97.13   $162.13
3-way collar   January 1, 2014 to December 31, 2014   726   $85.00   $97.13   $162.13
3-way collar   January 1, 2015 to December 31, 2015   1,016   $85.00   $91.88   $151.88

Conference Call

The Company has scheduled a conference call for Friday, May 11, 2012 at 10:00 a.m. Eastern (9:00 a.m. Central) to provide an operations update and discuss the Company's financial results.

Investors who would like to participate in the conference call should dial 877-878-2762, or 678-809-1005 for international calls, approximately 10 minutes prior to the scheduled start time, and ask for the TransAtlantic conference call. The conference ID is 79286411. A replay will be available until 11:59 p.m. Eastern on May 25, 2012. The number for the replay is 855-859-2056, or 404-537-3406 for international calls, and the conference ID is 79286411.

An enhanced webcast of the conference call and replay will be available through the Company's website. To access the conference call and replay, click on "Investors," select "Events," and click on "Webcast" found below the event listing. The webcast requires Microsoft Windows Media Player or RealOne Player.

 

TransAtlantic Petroleum Ltd.    
Consolidated Statements of Operations    
(unaudited)    
     
  For the Three Months Ended March 31,    
U.S. dollars and shares in thousands, except per share amounts   2012   2011  
         
Revenues:        
Oil and natural gas sales $ 34,661    $ 28,676   
Other 274   403  
Total revenues 34,935   29,079  
Costs and expenses:        
Production 3,635   4,102  
Exploration, abandonment and impairment 2,796   7,232  
Seismic and other exploration 664   2,252  
General and administrative 9,748   9,085  
Depreciation, depletion and amortization 9,169   4,630  
Accretion of asset retirement obligation 252   214  
Total costs and expenses 26,264   27,515  
Operating income 8,671   1,564  
Other (expense) income:        
Interest and other expense (3,259)   (3,597)  
Interest and other income 273   157  
Loss on commodity derivative contracts (12,435)   (9,311)  
Foreign exchange gain 4,272   4  
Total other expense (11,149)   (12,747)  
Loss from continuing operations before income taxes (2,478)   (11,183)  
Current income tax benefit (expense) (2,020)   (2,538)  
Deferred income tax benefit 1,859   1,874  
Net loss from continuing operations $ (2,639)   $ (11,847)  
Net loss from discontinued operations, net of taxes (2,157)   (9,308)  
Net loss (4,796)   (21,155)  
Other comprehensive income 14,374   2,299  
Comprehensive loss $ 9,578   $ (18,856)  
Basic and diluted net loss per common share:        
From continuing operations $ (0.01)   $ (0.03)  
From discontinued operations $ (0.01)   $ (0.03)  
Basic and diluted weighted average number of shares outstanding 366,436   341,142  

 

TransAtlantic Petroleum Ltd.      
Summary Consolidated Statements of Cash Flows      
(unaudited)      
       
  For the Three Months Ended    
U.S. dollars in thousands March 31, 2012   March 31, 2011    
           
Net cash provided by (used in) operating activities from continuing operations $ 11,296   3,684    
Net cash used in investing activities from continuing operations (13,117)   (18,030)    
Net cash provided by financing activities from continuing operations 8,137   8,281    
Net cash used in discontinued operations (7,049)   (8,573)    
Effect of exchange rate changes on cash and cash equivalents 704   162    
Net decrease in cash and cash equivalents $  (29)   $  (14,476)    

 

TransAtlantic Petroleum Ltd.  
Summary Consolidated Balance Sheets  
   
  As of
U.S. dollars in thousands March 31, 2012   December 31, 2011
  (unaudited)    
ASSETS      
Current assets:      
Cash and cash equivalents $ 15,087   $ 15,116
Accounts receivable 43,740   42,694
Prepaid and other current assets 10,750   8,810
Deferred income taxes 3,179   2,124
Assets held for sale 134,972   128,117
Total current assets 207,728   196,861
Property and equipment, net 255,156   235,724
Other 12,957   13,187
Total assets $ 475,841   $ 445,772
       
LIABILITIES & SHAREHOLDERS' EQUITY      
Current liabilities:      
 Accounts payable 23,985   26,056
 Short term debt 88,542   80,732
 Accrued liabilities and other 22,165   19,481
 Derivative liabilities 8,256   3,716
 Liabilities held for sale 25,939   26,714
Total current liabilities 168,887   156,699
Total liabilities 288,966   269,568
Total shareholders' equity 186,875   176,204
Total liabilities and shareholders' equity $ 475,841   $ 445,772

 

Reconciliation of Net Income to Adjusted EBITDAX  
  For the Three Months Ended March 31,
U.S. dollars in thousands   2012   2011
       
Net loss from continuing operations $ (2,639)   $ (11,847)
Adjustments:      
Interest and other, net 2,986   3,440
Income tax benefit 161   664
Exploration, abandonment, and impairment 2,796   7,232
Seismic and other exploration 183   1,489
Foreign exchange gain (loss) (4,272)   (4)
Share-based compensation 495   557
Derivative loss 12,435   9,311
Accretion of asset retirement obligation 252   214
Depreciation, depletion, and amortization 9,169   4,630
Other 821   --
Adjusted EBITDAX from continuing operations $ 22,387   15,686

Adjusted EBITDAX is a non-GAAP financial measure that represents earnings from continuing operations before income taxes, interest, depreciation, depletion, amortization, impairment, abandonment, and exploration expenses, unrealized derivative losses and non-cash share-based compensation expense.

The Company believes Adjusted EBITDAX assists management and investors in comparing the Company's performance and ability to fund capital expenditures and working capital requirements on a consistent basis without regard to depreciation, depletion and amortization, impairment of natural gas and oil properties and exploration expenses, which can vary significantly from period to period. In addition, management uses Adjusted EBITDAX as a financial measure to evaluate the Company's operating performance. Adjusted EBITDAX is also widely used by investors and rating agencies.

Adjusted EBITDAX is not a measure of financial performance under GAAP. Accordingly, it should not be considered as a substitute for net income, income from operations, or cash flow provided by operating activities prepared in accordance with GAAP. Information regarding income taxes, interest, depreciation, depletion, amortization, impairment, abandonment, and exploration expense is unavailable on a forward looking basis. Net income, income from operations, or cash flow provided by operating activities may vary materially from Adjusted EBITDAX. Investors should carefully consider the specific items included in the computation of Adjusted EBITDAX. The Company has disclosed Adjusted EBITDAX to permit a comparative analysis of its operating performance and debt servicing ability relative to other companies.

About TransAtlantic

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

The TransAtlantic Petroleum Ltd. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=12745

(NO STOCK EXCHANGE, SECURITIES COMMISSION OR OTHER REGULATORY AUTHORITY HAS APPROVED OR DISAPPROVED THE INFORMATION CONTAINED HEREIN.)

Forward-Looking Statements

This news release contains statements regarding expected results from future drilling, completion and fracture stimulation of exploration, appraisal and development wells, the consummation of the sale of  the Company's oilfield services business, expected payments and borrowings on credit facilities, entry into master services agreements, the acquisition and processing of seismic data, the drilling, testing, stimulation, completion and production of oil and gas wells, the Company's capital expenditure plans, as well as other expectations, plans, goals, objectives, assumptions or information about future events, conditions, results of operations or performance that may constitute forward-looking statements or information under applicable securities legislation. Such forward-looking statements or information are based on a number of assumptions, which may prove to be incorrect. In addition to other assumptions identified in this news release, assumptions have been made regarding, among other things, the ability of the Company to continue to develop and exploit attractive foreign initiatives.

Although the Company believes that the expectations reflected in such forward-looking statements or information are reasonable, undue reliance should not be placed on forward-looking statements because the Company can give no assurance that such expectations will prove to be correct. Forward-looking statements or information are based on current expectations, estimates and projections that involve a number of risks and uncertainties which could cause actual results to differ materially from those anticipated by the Company and described in the forward-looking statements or information. These risks and uncertainties include but are not limited to the continuing ability of the Company to operate effectively internationally, reliance on current oil and natural gas laws, rules and regulations, volatility of oil and natural gas prices, fluctuations in currency and interest rates, imprecision of resource estimates, the results of exploration, development and drilling, imprecision in estimates of future production capacity, changes in environmental and other regulations or the interpretation of such regulations, the ability to obtain necessary regulatory approvals, weather and general economic and business conditions.

The forward-looking statements or information contained in this news release are made as of the date hereof and the Company undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

Note on boe

Barrels of oil equivalent, or boe, is derived by the Company by converting natural gas to oil in the ratio of six thousand cubic feet ("Mcf") of natural gas to one bbl of oil. A boe conversion ratio of 6 Mcf to 1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Boe may be misleading, particularly if used in isolation.

CONTACT: Chad Potter, VP, Financial and Investor Relations
         Phone: (214) 220-4323
         Internet: http://www.transatlanticpetroleum.com
         Address: 16803 Dallas Parkway
         Suite 200
         Addison, Texas 75001
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