HAMILTON, Bermuda, Dec. 19, 2014 (GLOBE NEWSWIRE) -- TransAtlantic Petroleum Ltd. (NYSE-MKT:TAT) (TSX:TNP) (the "Company" or "TransAtlantic") announced today that it expects to issue between $25.0 and $55.0 million of convertible notes in a private placement. If $55.0 million of notes are issued, the notes will not be convertible into more than 19.9% of the Company's currently outstanding common shares. A portion of the debt offering is expected to close in the fourth quarter of 2014. The Company plans to use the proceeds for short-term debt repayment, working capital, and general corporate purposes, primarily in the Company's Albanian operations.
"We made the decision to issue convertible notes in a difficult market to fortify our balance sheet and allow us to replace short-term payables in Albania with longer-term debt," commented TransAtlantic's Chairman and Chief Executive Officer, Malone Mitchell 3rd. "We did not reach the decision to issue convertible notes lightly. We considered several financing alternatives, but with the recent, precipitous decline in the price of oil, traditional sources of financing are not currently available. Our family and related entities intend to purchase a portion of the offering that is at least proportionate to our ownership of the Company."
Through the first 17 days of December 2014, TransAtlantic's net production in Turkey and Albania averaged more than 7,000 BOEPD. "Production is at an all-time high. Our core regions in Turkey, the Molla area and the Şelmo field, generate attractive returns at a Brent crude price of $60 per barrel. Nonetheless, we have decided to slow our drilling activity and take the time to back-test our results with an improved understanding of the reservoirs. This discipline will enable us to further optimize our drilling and completions techniques, which we expect will reduce future well costs and improve well productivity, leading to greater returns on invested capital," Mr. Mitchell said.
The Company expects to temporarily reduce its operations to two drilling rigs by mid-January 2015. One rig will be located in the Molla oil area of southeast Turkey and a second rig will be located in the Delvina gas field in Albania. At year-end 2014, a third rig will be drilling a well in the Thrace Basin of northwest Turkey.
"In the present environment, we will drill oil wells that have attractive returns, even at lower commodity prices, such as the wells in the Molla area and select wells in the Şelmo field. Economics remain strong on gas wells and we are drilling the Delvina-34 well in Albania. We expect the well to help prove up the gas and condensate potential of the field," Mr. Mitchell said.
The Company is in the process of integrating its acquisition of Stream Oil & Gas Ltd. "We are very pleased with our acquisition of Stream. Improving the working capital situation in Albania is painful, but the potential of our Albanian fields far exceeds their booked reserves, which all relate to existing wellbores. We believe the core samples we plan to obtain in the Albanian oil fields may prove up reserves that surpass the value of all existing Albanian oil wells. And the deliverability of a single new well in the Delvina gas field in Albania has the potential to exceed our current net gas production in the entire Thrace Basin," Mr. Mitchell said. TransAtlantic also received final approval from the Bulgarian government to acid stimulate the Deventci-R2 well in Bulgaria and expects to do so in early 2015.
TransAtlantic has analyzed the impact of lower oil prices on its 2015 annual Adjusted EBITDAX. Assuming no wells drilled in 2015 and a Brent crude price of $50 per barrel, the Company estimates annual Adjusted EBITDAX of approximately $47 million. Assuming no wells drilled in 2015 and a Brent crude price of $70 per barrel, the Company estimates annual Adjusted EBITDAX of approximately $65 million. Both scenarios take into account realized hedge gains, current lease operating expenses and G&A expenses. Assuming the Company maintains its current production level throughout 2015, TransAtlantic estimates annual Adjusted EBITDAX would be between $65 million at a Brent crude price of $50 per barrel and $89 million at a Brent crude price of $70 per barrel.
In the first quarter of 2015, the Company expects to issue its annual capital expenditure guidance for 2015. "Right now, our focus is on managing our liquidity and formulating a prudent operating plan for 2015. We will drill wells that provide attractive returns at lower oil prices and conduct operations that are necessary to maintain our licenses. We will position ourselves to grow production once we believe the price of oil has stabilized and we are ready to increase our level of activity. We will emerge from this down-cycle prepared to take full advantage of the opportunities in our portfolio," Mr. Mitchell concluded.
About TransAtlantic
TransAtlantic Petroleum Ltd. is an international oil and natural gas company engaged in the acquisition, exploration, development and production of oil and natural gas. The Company holds interests in developed and undeveloped properties in Turkey, Albania and Bulgaria.
(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 concerning 2015 projected Adjusted EBITDAX, the proceeds of a convertible notes offering and the production and sale of oil and natural gas, 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, prices of Brent crude and natural gas and investor demand for convertible notes.
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, investor demand for convertible notes; market prices for natural gas, natural gas liquids and oil products; estimates of reserves and economic assumptions; the ability to produce and transport natural gas, natural gas liquids and oil; the results of exploration and development drilling and related activities; economic conditions in the countries and provinces in which the Company carries on business, especially economic slowdowns; actions by governmental authorities, receipt of required approvals, increases in taxes, legislative and regulatory initiatives relating to fracture stimulation activities, changes in environmental and other regulations, and renegotiations of contracts; political uncertainty, including actions by insurgent groups or other conflict; outcomes of litigation; the negotiation and closing of material contracts; shortages of drilling rigs, equipment or oilfield services; the integration of Stream.
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, are derived by the Company by converting natural gas to oil in the ratio of six thousand cubic feet ("MCF") of natural gas to one barrel of oil. A BOE conversion ratio of 6 MCF to 1 barrel 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.
Note on Adjusted EBITDAX
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 gains and losses, foreign exchange gains and losses, non-cash share-based compensation expense and significant non-recurring expenses.
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 and impairment of oil and natural gas 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. 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 projected Adjusted EBITDAX to permit a comparative analysis of its projected operating performance and projected debt servicing ability relative to other companies. The Company does not intend to provide a reconciliation of projected Adjusted EBITDAX to projected net income.