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In 2012 compared with 2011, TransGlobe,
-- Increased Proved reserves by 16% to 32.8 MMBbl and Proved plus Probable reserves by 10% to 48.7 MMBbl, representing production replacements of 172% and 170%, respectively, primarily from the development of its operated West Gharib and West Bakr concessions in Egypt;-- Increased total sales volumes by 44%, as a result of a 56% increase in sales volumes from Egypt offset by a 43% decline in sales volumes in Yemen;-- Increased funds flow from operations by 28% primarily due to increased production;-- Increased net earnings to $87.7 million due to an increase in net sales revenue of $69.9 million, which was partially offset by a combined increase of $51.5 million in operating costs, current income taxes, depletion and depreciation expense, general and administrative expenses and finance costs. The increase in finance costs is due to the issuance of the convertible debentures in February 2012, whereas the other increased costs were the result of increased activity due to the Company's growth through the acquisitions completed in 2012, along with the first full year of operations at West Bakr;-- Issued convertible unsecured subordinated debentures with an aggregate principal amount of $97.9 million; and-- Decreased long-term debt by $40.7 million which assisted in maintaining a strong debt-to-funds flow ratio of 0.8 at December 31, 2012 (0.5 at December 31, 2011).2012 TO 2011 NET EARNINGS VARIANCES $ Per Share $000s Diluted % Variance--------------------------------------------------------------------------------------------------------------------------------------------------------2011 net earnings 81,392 1.09----------------------------------------------------------------------------Cash itemsVolume variance 195,595 2.57 241Price variance (11,397) (0.15) (14)Royalties (114,286) (1.52) (140)Expenses: Production and operating (15,705) (0.21) (19) Cash general and administrative (7,765) (0.10) (10) Exploration 1,193 0.02 1 Current income taxes (14,586) (0.19) (18) Realized foreign exchange gain (loss) (142) - - Realized derivative gain (loss) 630 0.01 1 Issue costs for convertible debentures (4,630) (0.06) (6) Interest on long-term debt (4,212) (0.06) (5)Other income (15) - -----------------------------------------------------------------------------Total cash items variance 24,680 0.31 31----------------------------------------------------------------------------Non-cash itemsUnrealized derivative loss 52 - -Unrealized foreign exchange loss 557 0.01 1Depletion and depreciation (11,865) (0.16) (15)Unrealized loss on financial instruments (425) (0.01) (1)Gain on acquisition (13,187) (0.17) (16)Impairment loss 12,071 0.16 15Stock-based compensation (1,440) (0.02) (2)Deferred income taxes (3,917) (0.05) (5)Deferred lease inducement (108) - -Amortization of deferred financing costs (76) - -----------------------------------------------------------------------------Total non-cash items variance (18,338) (0.24) (23)----------------------------------------------------------------------------2012 net earnings 87,734 1.16 8--------------------------------------------------------------------------------------------------------------------------------------------------------
