The recycle ratio variances between 2012 and 2011 are driven primarily by changes in F&D and FD&A costs on a per Bbl basis, combined with a reduction in netback per Bbl. In 2011, FD&A costs per Bbl were less than F&D costs per Bbl as a result of the West Bakr acquisition, which added reserves at a cost of $5.47/Bbl on a Proved basis and $4.20/Bbl on a Proved plus Probable basis including future capital costs. The Company completed two acquisitions during 2012, neither of which contributed reserves on a Proved or Proved plus Probable basis. As such, FD&A costs per Bbl are higher than F&D costs per Bbl in 2012.
Due to the nature of international projects, the Company considers the three-year weighted average recycle ratios to provide a more useful measure of the Company's ability to successfully add reserves on an economic basis. The three-year weighted average ratios are consistent with Company expectations and with prior periods.
The recycle ratio measures the efficiency of TransGlobe's capital program by comparing the cost of finding and developing both proved reserves and proved plus probable reserves with the netback from production. The ratio is calculated by dividing the netback by the proved and proved plus probable finding and development cost on a per Bbl basis.
Recycle Netback Calculation($000s, except volumes and per Bbl amounts) 2012 2011 2010--------------------------------------------------------------------------------------------------------------------------------------------------------Net earnings 87,734 81,392 40,565Adjustments for non-cash items: Depletion, depreciation and amortization 46,946 35,081 28,140 Stock-based compensation 4,502 3,062 2,360 Deferred income taxes (528) (4,445) 1,894 Amortization of deferred financing costs 1,265 1,189 836 Amortization of deferred lease inducement 458 350 - Unrealized (gain) loss on commodity contracts 125 177 (816) Unrealized foreign exchange (gain) loss (141) 416 - Unrealized (gain) loss on financial instruments 425 - - Impairment of exploration and evaluation assets 76 12,147 - Gain on acquisition - (13,187) ---------------------------------------------------------------------------------------------------------------------------------------------------------Recycle netback(i) 140,862 116,182 72,979Sales volumes (MBbl) 6,380 4,428 3,635----------------------------------------------------------------------------Recycle netback per Bbl(i) 22.08 26.24 20.07--------------------------------------------------------------------------------------------------------------------------------------------------------(i) Netback, for the purposes of calculating the recycle ratio, is defined as net sales less operating, exploration, G&A (excluding non-cash items), foreign exchange (gain) loss, interest and current income tax expense per Bbl of production.
OUTSTANDING SHARE DATA
As at December 31, 2012, the Company had 73,793,638 common shares issued and outstanding and 5,110,001 options issued and outstanding, which are exercisable in accordance with their terms into a maximum of 5,110,001 common shares of the Company.
