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Reserves

Reserves and estimated future net revenues, as presented by DeGolyer and MacNaughton Canada Limited ("DeGolyer") of Calgary, Alberta, and part of the DeGolyer and MacNaughton Worldwide Petroleum Consulting group headquartered in Dallas, Texas.

In 2013 and 2014, DeGolyer and MacNaughton Canada Limited(“DeGolyer”) of Calgary, Alberta, independent petroleum engineering consultants based in Calgary and part of the DeGolyer and MacNaughton Worldwide Petroleum Consulting group headquartered in Dallas, Texas, were retained by the Company’s Reserve Committee, to independently evaluate 100% of TransGlobe’s reserves as at December 31, 2014 and December 31, 2013.

The reserves data set forth below was prepared by DeGolyer with an effective date of December 31, 2014 and December 31, 2013, respectively. The reserves data summarizes the crude oil reserves of the Company and the net present values of future net revenue for these reserves using forecast prices and costs and constant prices and costs. The Company reports in U.S. currency and therefore the reports have been stated in U.S. dollars. The reports of DeGolyer have been prepared in accordance with the standards contained in the Canadian Oil and Gas Evaluation Handbook prepared jointly by The Society of Petroleum Evaluation Engineers (Calgary Chapter) and the Canadian Institute of Mining, Metallurgy & Petroleum (Petroleum Society), as amended from time to time (the "COGE Handbook") and the reserve definitions contained in National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities ("NI 51-101") and the COGE Handbook.

Total Proved reserves for the Company decreased 30% from 31.6 million barrels of oil (“MMBbl”) at December 31, 2013 to 22.1 MMBbl at December 31, 2014.

Total Proved plus Probable reserves for the Company decreased by 26% from 45.3 MMBbl at December 31, 2013 to 33.5 MMBbl at December 31, 2014.

At year-end 2014, Proved reserves of 2.7 MMBbl and Proved plus Probable reserves of 4.4 MMBbl in Yemen were reclassified as Contingent Resources. 

The Company’s Reserves Committee, comprised of independent directors, has reviewed and recommended acceptance of the 2014 and 2013 yearend reserve evaluations prepared by DeGolyer.

In general, estimates of economically recoverable crude oil and natural gas reserves and the future net cash flows there from are based upon a number of variable factors and assumptions, such as historical production from the properties, production rates, ultimate reserve recovery, timing and amount of capital expenditures, marketability of crude oil, royalty rates, the assumed effects of regulation by governmental agencies and future operating costs, all of which may vary materially from actual results. For those reasons, among others, estimates of the economically recoverable crude oil and natural gas reserves attributable to any particular group of properties, classification of such reserves based on risk of recovery and estimates of future net revenues associated with reserves may vary and such variations may be material. The actual production, revenues, taxes and development and operating expenditures with respect to the reserves associated with the Company's properties may vary from the information presented herein and such variations could be material. In addition, there is no assurance that the forecast price and cost assumptions contained in the reports prepared by DeGolyer will be attained and variances could be material.

The recovery and reserve estimates of crude oil reserves provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered. Actual crude oil may be greater than, or less than, the estimates provided herein. Note that columns may not add due to rounding.

The information relating to the Company's reserves contains forward-looking statements relating to future net revenues, forecast capital expenditures, future development plans and costs related thereto, forecast operating costs and anticipated production. See "Reader Advisories - Forward-Looking Statements".

Possible reserves are those additional reserves that are less certain to be recovered than probable resources. There is a 10% probability that the quantities actually received will equal or exceed the sum of proved plus probable plus possible reserves.

All reserves (gross and net) presented are based on Forecast Pricing.

RESERVES

The estimated future net revenues presented below are calculated using the average price received as of December 31 of the respective reporting periods. The prices were held constant for the life of the reserves.

  2014 2013
  Light & Medium
Crude Oil

Heavy Oil

Total Bbl

Total Bbl

Company Gross* Net** Gross* Net** Gross* Net** Gross* Net**
By Category (MMBbl) (MMBbl) (MMBbl) (MMBbl) (MMBbl) (MMBbl) (MMBbl) (MMBbl)
Proved                
Developed Producing 3.4 2.2 12.9 7.3 16.3 9.5 22.4 11.8
Developed Non-producing 0.2 0.1 0.9 0.5 1.1 0.6 2.0 1.0
Undeveloped 0.3 0.2 4.5 2.0 4.7 2.2 7.2 3.3
Total Proved 3.9 2.5 18.2 9.9 22.1 12.3 31.6 16.2
Probable 2.3 1.4 9.0 4.2 11.3 5.6 13.6 6.4
Proved plus Probable 6.2 3.9 27.2 14.1 33.5 18.0 45.3 22.5
Possible 1.4 0.7 8.5 3.7 9.9 4.5 10.0 4.5
Proved plus Probable plus Possible 7.6 4.6 35.8 17.8 43.3 22.4 55.3 27.1
 
  2014 2013
  Light & Medium
Crude Oil

Heavy Oil

Total Bbl

Total MBbl

Company Gross* Net** Gross* Net** Gross* Net** Gross* Net**
By Area (MMBbl) (MMBbl) (MMBbl) (MMBbl) (MMBbl) (MMBbl) (MMBbl) (MMBbl)
Proved                
Egypt 3.9 2.5 18.2 9.9 22.1 12.3 28.8 14.6
Yemen 0.0 0.0 0.0 0.0 0.0 0.0 2.8 1.5
Total Proved 3.9 2.5 18.2 9.9 22.1 12.3 31.6 16.2
Proved plus Probable                
Egypt 6.2 3.9 27.2 14.1 33.5 18.0 40.8 20.1
Yemen 0.0 0.0 0.0 0.0 0.0 0.0 4.5 2.4
Total Proved plus Probable 6.2 3.9 27.2 14.1 33.5 18.0 45.3 22.5
Proved plus Probable plus Possible                
Egypt 7.6 4.6 35.8 17.8 43.3 22.4 49.7 24.0
Yemen 0.0 0.0 0.0 0.0 0.0 0.0 5.6 3.1
Total Proved plus Probable plus Possible 7.6 4.6 35.8 17.8 43.3 22.4 55.3 27.1
* Gross reserves are the Company's working interest share before the deduction of royalties.
** Net reserves are the Company's working interest share after the deduction of royalties. Net reserves in Egypt and Yemen include the Company’s share of future cost recovery and production sharing oil after the Government's royalty interest but before reserves relating to income taxes payable. Under this method, a portion of the reported reserves will increase as oil prices decrease (and vice versa) as the barrels necessary to achieve cost recovery change with prevailing oil prices.

ESTIMATED FUTURE NET REVENUES

All evaluations and reviews of future net cash flow are stated prior to any provision for interest costs or general and administrative costs and after the deduction of estimated future capital expenditures for wells to which reserves have been assigned. It should not be assumed that the estimated future net cash flow shown below is representative of the fair market value of the Company’s properties. There is no assurance that such price and cost assumptions will be attained and variances could be material. The recovery and reserve estimates of crude oil, NGL and natural gas reserves provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered. Actual crude oil, NGL and natural gas reserves may be greater than or less than the estimates provided herein.

The estimated future net revenues presented below are calculated using the independent engineering evaluator’s price forecast.

  Present Value of Future Net Revenues, After Income Tax
Independent Evaluator's Price Forecast
  December 31, 2014
Discounted at
December 31, 2013
Discounted at
($USMM) Undiscounted 5% 10% 15% 20% Undiscounted 5% 10% 15% 20%
Proved                    
Egypt 342.0 292.0 255.0 226.0 203.0 606.0 515.0 449.0 400.0 361.0
Yemen 0.0 0.0 0.0 0.0 0.0 56.0 51.0 46.0 42.0 39.0
Total Proved 342.0 292.0 255.0 226.0 203.0 663.0 566.0 495.0 442.0 400.0
                     
Proved plus Probable                    
Egypt 503.0 410.0 344.0 296.0 260.0 789.0 648.0 549.0 478.0 424.0
Yemen 0.0 0.0 0.0 0.0 0.0 87.0 75.0 65.0 58.0 52.0
Total Proved plus Probable 503.0 410.0 344.0 296.0 260.0 876.0 722.0 615.0 536.0 476.0
                     
Proved plus Probable plus Possible                    
Egypt 652.0 512.0 419.0 354.0 306.0 939.0 752.0 626.0 537.0 471.0
Yemen 0.0 0.0 0.0 0.0 0.0 113.0 92.0 78.0 67.0 59.0
Total Proved plus Probable plus Possible 652.0 512.0 419.0 354.0 306.0 1,052.0 844.0 704.0 605.0 531.0

The following table summarizes the independent evaluator’s reference price forecast used to estimate future net revenues.

  Egypt Yemen
  Oil
$/Bbl
Oil
$/Bbl
Year 2014 2013 2014 2013
2015 69.00 101.80 - 99.34
2016 75.40 101.64 - 99.58
2017 82.03 101.51 - 99.84
2018 88.90 101.42 - 99.76
2019 96.01 101.58 - 99.96
Thereafter* 2.0% 2.0% - 2.0%
* Percentage change represents the increase in each year after 2019 to the end of the reserve life.

The estimated future net revenues presented below are calculated using the average price received as of December 31 of the respective reporting periods. The prices were held constant for the life of the reserves.

 
Present Value of Future Net Revenues, After Income Tax
US millions ("$USMM")
Constant Pricing
 
December 31, 2014
Discounted at
December 31, 2013
Discounted at
($USMM) Undiscounted 5% 10% 15% 20% Undiscounted 5% 10% 15% 20%
Proved                    
Egypt 443.0 389.0 348.0 317.0 292.0 640.0 543.0 474.0 421.0 380.0
Yemen 0.0 0.0 0.0 0.0 0.0 61.0 54.0 49.0 44.0 41.0
Total Proved 443.0 389.0 348.0 317.0 292.0 701.0 597.0 522.0 465.0 421.0
                     
Proved plus Probable                    
Egypt 608.0 512.0 443.0 392.0 354.0 825.0 680.0 578.0 503.0

446.0

Yemen 0.0 0.0 0.0 0.0 0.0 95.0 80.0 69.0 61.0 55.0
Total Proved plus Probable 608.0 512.0 443.0 392.0 354.0 920.0 760.0 647.0 564.0 501.0
                     
Proved plus Probable plus Possible                    
Egypt 767.0 625.0 528.0 459.0 408.0 978.0 787.0 658.0 566.0 497.0
Yemen 0.0 0.0 0.0 0.0 0.0

122.0

99.0 84.0 72.0 64.0
Total Proved plus Probable plus Possible 767.0 625.0 528.0 459.0 408.0 1100.0 887.0 742.0 638.0 560.0

 

The following table summarizes the constant pricing used to estimate future net revenues.

  December 31
Oil $/Bbl 2014 2013
Egypt * 87.84 93.17
Yemen * 0.0 106.07
* The constant price case is based on the average of the reference price received on the first day of each month during the respective year adjusted for respective differentials.