TransGlobe Energy Corporation
Q3 2013 Earnings Call Transcript

Published: 13 Nov 2013

[Operator:]

Good morning, ladies and gentlemen. And welcome to the TransGlobe Energy Corporation Conference Call and Webcast. This webcast includes certain statements that may be deemed to be forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. All statements in this webcast other than statements of historical facts that address future prediction, reserve potential, exploration drilling, exploitation activities and events or developments that the company expects are forward-looking statements. Although TransGlobe believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in the forward-looking statements. Factors that could cause actual results to differ materially from those in the forward-looking statements include oil and gas prices, well production performance, exploitation and exploration successes, continued availability of capital and financing and generational economic, market or business conditions. I would now like to turn the meeting over to Mr. Ross Clarkson, President and Chief Executive Officer. Please go ahead Mr. Clarkson.

[Ross Clarkson:]

Good morning, everyone. And welcome to TransGlobe Energy Corporation’s third quarter 2013 conference call. This is Ross Clarkson here, President and the CEO. And with me I have Mr. Lloyd Herrick, Vice President and COO and Mr. Randy Neely, Vice President of Finance and CFO. As usual we will start out with a summary of the financial and operating highlights and then we will move into a discussion of some of the drilling results in Q3 and our plans for 2014. And then that will follow that with a Q&A session. Randy Neely will review the financials and highlights of the quarter starting on the next slide.

[Randy Neely:]

Thanks Ross. Good morning everyone. The company’s produced on average 18,197 barrels a day and sold on average 18,109 barrels a day this is down approximately 220 barrels a day or 1% from Q2 of this year and an increase of 6% over the prior year Q3 when we sold 17,124 barrels a day. Average oil price received was $97.18 per barrel which is essentially the same price received in Q3 of 2012 but up 8% from Q2 this year when we received $9.48 a barrel. Revenue before deduction of royalties for the quarter was $161.9 million up 6% from Q2 and also up 6% over Q3 of 2012. The increase over Q2 of this year is a result of increased price and increase over prior year is a result of increased sales volumes. We achieved funds flow from operations of $33.5 million or $0.44 per share during the quarter which was up 2% from the prior quarter but down 5% from the prior year. This lower result from prior year is chiefly due to higher government take during the quarter due to lower recognition of operating expenses as a result of timing differences between the company, when the company recognizes expenses. And when those expenses are included in the cost force the deduction against cost of oil. The company expects these timing differences to work themselves through the system over the coming year. Overall operating cost per barrel have been higher this year versus prior year on a corporate basis due to higher diesel and labor costs as well as the impact of having S1 offline until just recently. The company is generally insensitive to operating costs as the only share excess cost oil in the West Gharib Concession otherwise increases in operating costs simply resulting in decreased government take in Egypt, timing issues aside of course. General and administrative cost both on a per barrel basis and a gross basis are generally in line with the prior year, G&A cost per barrel have average 410 for the first nine months of this year versus 440 for all of last year. Financing costs were essentially flat with Q3 2012 and Q2 of this year. Net income of $16.3 million or $0.22 a share was impacted by non-cash charge of $1.6 million is related to the trading value of the convertible debenture and another $1.8 million relating to the change in the Canadian dollar versus U.S. dollar as it relates to the convertible debenture. On a whole the net income was up significantly from Q2 but this was chiefly due to impairment charge taken in Q2 for South Mariut, we’re moving the impairment charge and the impact of the convertible debenture for the net income calculations both the gain and loss per market value and gain and loss as a result of currency changes. For both Q3 and Q2 which show Q3 normalized net income of approximately $20 million in Q2 of approximately $17 million. The net difference being chiefly is a result of higher prices received during the quarter. In terms of the capital we spent $22.4 million or about two-thirds of our fund flow. Subsequent to the end of the quarter before PSAs were awarded to TransGlobe from the 2011, 2012 EGPC bid round which were ratified in the [indiscernible] Ross would like to talk about this more later. Now going to the next slide looking at the financial position at the end of the quarter the company held approximately $128 million in cash, $240 million in accounts receivable, $7 million deposits in pre-paid and hold approximately $57 million in accounts payable and improved liabilities. This left the company with positive working capital over $380 million at quarter end or approximately $4.31 a share. Deducting long-term debt of $124 million but these are companies with positive working capital net of debt of approximately $194 million the equivalent of approximately $2.63 a share. During the quarter we collected $40.7 million in accounts receivable bringing our total collections on a – to approximately $147.7 million for the period ending September 30th. This is approximately 88% for total revenue net of royalties in current taxes which is effectively reserved to us by the government. After this deduction from the sales the differences resulted in increased in AR from year end 2012 to the end of Q3 of approximately $20 million. Subsequent to the quarter end we have offset the signature bonuses of the $40.6 million as they relate to the new PSEs against AR and are scheduled full listing was just completed this last weekend. As such we expect to receive those funds in approximately 30 days. In total we expect to collect or offset between $105 million to $130 million in the fourth quarter which is similar to 2012 when the company collected $75 million or 47% of our total 2012 collections of $157 million in the fourth quarter. The key here is that we’re now anticipating collections of accounts receivable in the range of $250 million to $270 million for the year which is somewhere between 59% to 72% increase over our collections in 2012, as we achieved this level of collections we expect our AR balances certainly be sub $200 million which other than for one month earlier this year this has not been the case since early 2012 when our Egyptian production was under 16,500 barrels a day on average. It is with this increasing strength in our balance sheet and a flow returned to normal within EGPC that we have gained the confidence this year to review the net potential of either beginning a modest dividend program or initiating a share by back or combination of both in the coming year. I’ll now pass you on to Lloyd who will review our operating results for the period.

[Lloyd Herrick:]

Thanks Randy. The company production in Q3 was 18,197 barrels a day which is essentially flat with previous quarter. At West Gharib production average 12, 274 barrels a day which was down 4% from the previous quarter. Primarily due to natural declines which were partially offset by new wells which were stimulated and placed on production during the quarter. Production in October averaged 12,000 barrels a day in West Gharib. At West Bakr production averaged 5,393 barrels a day which was up 10% from the previous quarter primarily due to the contributions from new wells. Production in September and October averaged about 6,000 barrels a day. At East Ghazalat production averaged 211 barrels a day down from 393 primarily due to pump barriers on two wells during the quarter which were not repaired until late October. October production was about 216 barrels a day. However, it has increased over 400 barrels a day this past week with the wells back on production. In Yemen production averaged 319 barrels a day from Block 32 during the quarter on November 8th production was restarted on Block S1 after about a 12 month shutting period which was due to a prolonged labor negotiation. S1 is producing approximately 5000 barrels a day or 1250 barrels a day to TransGlobe. Next slide, this slide shows our daily production by concession for the past 12 months. And as you can see current production is over 20,000 barrels a day with the addition of about 1250 barrels a day from Block S1 on November 8th. Next slide, in the fourth quarter production averaged, in the third quarter production averaged, sorry, in October production averaged 18,519 barrels a day with the addition of Block S1 in November. It is estimated that production will average about 19,400 barrels a day in November and just over 20,000 barrels a day in December. Assuming S1 stays on production during that period. Based on the fourth quarter production estimates it’s estimated that funds flow for 2013 would be approximately $135 million or a $1.79 a share, assuming $100 brand for the fourth quarter. It is expected that the $82 million will be invested in expiration and development projects during 2013 which was approximately 60% of the 2013 funds flow. In addition the company has invested in additional $14.6 million in four new 100% PFCs in Egypt which were signed November 7th. This represents approximately 30% of the 2013 funds flow. I will now turn the presentation over to Ross to talk about our projects in more details.

[Ross Clarkson:]

Okay we’re on slide 9, which is the locator map for all of our Egypt position. As you know we acquired our one in the recent bid around a significant land position in both the Eastern and the Western Desert over the past year. Our total growth land position has increased to 1.3 million acres making us one of the larger land holders in the country with the big guys being Apache, ENI and Shell. Our drilling and production operations on these blocks continues pretty much as normal and is largely unaffected by political events during the third quarter. And the new interim government appears to be placing a greater emphasis on getting the economy working and we’re seeing some benefits from that renewed focus. For instance the ratification process for the new PFCs was recently completed and we attended the official signing ceremony last week. We’re preparing to commence work on the new licenses in 2014 and I’ll talk a little more about that later. Let’s move onto the Eastern Desert slide on slide 10, which is a zoom-in on our West Gharib assets with West Bakr in the center there with the orange light in it. We drilled five new oil wells in Q3 bringing our total for the year to 17 and we have 18 wells planned for 2013 so we’re well on target to achieve that. We have one rig dedicated to West Bakr, over to West Gharib. West Gharib is largely drilled up now with only a dozen or two wells left to be done in the development inventory and West Gharib will work will really shift to optimizing production and recovery factors as these fields mature. In 2014 the focus will shift to the new drilling on the light yellow land surrounding West Gharib which is called the North West Gharib licenses, it’s the new one that we just won, and this is really where most of the future production wells will come from. We’re still doing on going facility work in the area with the ultimate goal to have all our production moving through the pipeline at West Bakr to eliminate trucking to the coastal station. Onto West Bakr, the drilling successes to-date on this, have really confirmed our initial evaluation work indicating that this has been a really great acquisition for us. We’ve increased reserves and we’re starting to see that increased production as we put new wells on stream and we work older wells and replace a lot of the worn out equipment. West Bakr has hit new production records recently above anything that was achieved in the past 30 years by the previous operator and we still see room for improvement and further increases for production in West Bakr. Once again facility work here is also ongoing with the ultimate goal to have all our production moving through the pipeline and eliminate trucking to the coastal station. Onto slide 12, which shows a bigger zoomed out picture of the new Eastern Desert blocks in light yellow which were ratified last week as I mentioned before. There are not a lot of blobs on the two Southerly blocks not much exploration identified right now because we need to shoot 3D seismic down there. The North West Gharib block is currently the biggest near term production opportunity for the company although that may change after we get new 3D data. The plan here is to get drilling on the north West Gharib Block as quick as we can in 2014. And then start 3D seismic in the 12% of the map at the south end of North West Gharib and then work our way south, effectively covering the majority of the open lands. And then, drilling on the southern lands will follow in 2015. A key factor in having control over such a large area will be the synergies of common facilities drilling and production equipment and staff. All the oil from this area is exported from the coastal station at Ras Gharib which is the point of land we see little spur on the pipeline sticking out near the center of the map. We hope to be in a position to directly export and sell our crude in the future as we expand our operation in the area. And we are in discussions with EGPC on that right now. Moving on to the Western Desert to East Ghazalat on the next slide and this is our only non-operated block in Egypt. The operator Vegas was recently acquired by a Chinese state-owned oil company in a, on approximately $700 million acquisition, so we now have a new operator on this block. It appears that they are going to move forward with a more aggressive drilling program on this Block which we welcome. The exploration well at North Dabaa which we updated in the third quarter encountered a thin oil zone in the cretaceous but tested at about a 100 barrels a day, and then a gas common state zone in the Jurassic. The operator forecasted the Jurassic zone at 26 million cubic feet a day and 2,571 barrels of condensate which is a pretty rich gas on 100 barrels per million of liquid. We will probably drill an appraisal well in 2014 to determine the extent of this discovery and then it is possible that it could extend on to our new PSE this whole play which is just immediately adjacent to the West of East Ghazalat. There is a gas facility near-by and their operator is looking in to capacity availability. We shift onto the next slide which is slide 14, South Alamein and this is the one that we acquired from Cepsa in El Paso in July 2012. We did receive approvals for exploration locations at West Manar and Taef and are working on additional well approvals to continue this drilling campaign out here. We’re currently drilling on the Taef location and we’ll follow that with the West Manar location back-to-back. Both of these exploration wells carried significant potential although they are not without exploration risk. Hopefully we can continue the drilling campaign on Borak and other locations as we move in 2014. And then we move on the South Ghazalat further to the West, as we move across country this is one of the new PFCs that was recently ratified and there is very little 2D data out here so our plan is to shoot about 400 square kilometers of 3D data. With the same crew once it completed its Eastern dessert program. And that means we will be drilling exploration wells out here probably in late 2015. It is a pure exploration play but it is in the right neighborhood. On the right side of the map we have highlighted the new oil and gas and condensate discovery at East Ghazalat that may extend on to the new lands. And then you can see a lot of other fields out there that Apache and others have drilled, really a lot big discoveries out here so we are optimistic that the 3D will show us where to go. The new blocks are in excellent in exploration inventory and really contribute to our five year drilling plan. And now we shift over to Yemen which we haven’t had Yemen slide in the presentation for quite a while because there wasn’t much going on down there. This is recently changed. DNL drilled an exploration test on Block 32 and recently finished testing it at 5,900 barrels a day. And they are now working on plans to targeting this well to adjacent facilities and get it on production in 2014 we hope. It’s not going to have a material impact on our production numbers but it will keep the Block 32 project in a positive economic state until the end of the PSA about six years from now. And then on Block S1 on the West side we finally restarted production on November 8th and we are ramping up production now. An interesting factor about this is the accumulated operating cost on this project over the past year will mean we will get significant revenues for the first two quarters as we recover south operating costs. This is a really great contract and the barrels will be worth almost three times as much as some of our barrels in Egypt when and this is on production which is the key factor there. So we are going to shift over Q&A period right now as the operator would pick it up and we will open it to some questions.

[Operator:]

Thank you. We will now take questions from the telephone lines. [Operator Instructions]. The first question is from Shahin Amini of TD Securities. Please go ahead.

[Shahin Amini:]

Hi. Good morning, gentlemen. Two questions. First, could you elaborate further on your West Gharib well stimulation program and for Q3? How effective was it? How much of the production for the quarter can be contributed to that program? And the second question I see that your long-term debt has increased by $23.6 million, what was the rationale behind that?

[Lloyd Herrick:]

Okay, Lloyd here, I’ll answer the first question related to the West Gharib frac program. The well that we did frac during the quarter was about 13 wells that got stimulated. The average initial production from those was a bit lower than the previous tight curve and we have been used to it because lot of these wells were drilled among the edge so instead of 182-200 barrels a day initial production that would typically coming in the 140 to 160 barrel a day range on initial production. I haven’t actually backed out the incremental contribution within the quarter but if you assume half of the wells at around 150 barrels a day, that’s about 600 to 800 barrels a day average would have been contributed to the quarter. So when you consider that we have a decline ratio in the 20% range typically depending on the field on a 12,000 barrel day base we didn’t get enough hooked up to offset the natural declines.

[Randy Neely:]

And Shahin, it’s Randy. For the second question, maybe a little bit counterintuitive but if you recall we amended our facility in late June of this year. And that amendment included bringing in new lender IFC but as well part of that amendment was that the more we borrow the lower our cost got so as we sat in early July with a certain level out, and we have to include in that borrowing at least from the calculation perspective of what’s utilized there as a credit. So there was a really an incentive for us to borrow little bit more money because we really didn’t have to expand any material amount of cost to do that. If you look now at the end of the year our expectation is that debt level would be down to zero because we will have letters of credit out to EGPC for the work commitments on the new blocks. I hope that answers your questions.

[Shahin Amini:]

Yes it does. Thank you.

[Operator:]

Thank you. The following question is from David Popowich at Macquarie. Please go ahead.

[David Popowich:]

Yes, thanks guys. I just had a question with respect to a line in your press release about initiating a modest dividend program or share buyback. I know that you guys were talking about business development activities in the past whether it’s farm-ins in your acquisitions. I was just wondering if you’re talking about returning capital to shareholders if maybe that we shouldn’t read into the acquisition is less likely or do you still look to diversify out of Egypt and Yemen?

[Randy Neely:]

I will take it David that first, David, it’s Randy. I think what we’ve looked at is given the magnitude of the differential between what we expect the fund flow and what we expect to spend in Egypt over the next several years. We expect to continue to build fairly large cash balance and our view is today that we could probably balance that approach. And that we could begin to give some funds back to our shareholders either through a share buyback or dividend program which we’re analyzing at this time. We haven’t concluded either way on that. But we think we can handle both providing some capital back to our shareholders while at the same time continuing to pursue other acquisition opportunities. And I hope Ross want to add anything to that.

[Ross Clarkson:]

Yeah, we’re continuing to look at a lot of things, I mean we’ve looked at nine deals this year and got reasonably close on two of those. But we’re pretty I’d say very disciplined, I mean very, very disciplined on what we look at on an M&A front and some of – most of those have been outside of Egypt just because of where things came along. We are still looking at deals inside of Egypt actually quite a bit of stuff in Egypt. But we don’t see a relatively small dividend, it will be significant but it won’t be like a giant lump sum it would be continuous thing. We don’t see that impacting our growth plans or even our acquisition plans because of the surplus cash that the project generate beyond our spending plans in the country.

[David Popowich:]

Okay, thanks guys.

[Operator:]

Thank you. The following question is from Al Stanton of RBC. Please go ahead

[Al Stanton:]

Yes, good morning. It’s just a quick question on spending in 2014. I appreciate on the development size the attention will turn from old blocks to new blocks to some extent but what guidance can you give us in terms of absolute spent both on development thing for exploration. And any guidance from phasing whether we should think it’s mainly loaded to the second half of next year?

[Ross Clarkson:]

This is Ross here Al. Yeah, we’re still finalizing budget with partners on couple of blocks. But I think if you look out even for the next five years we are probably looking at about $100 million a year spend would be on average where we’re going. And the way it’s going to work next year is, it’s still going to be 70% development 30% exploration because the exploration component really relates more to the seismic acquisition. And as we move into the beginning of the year it’s going to be still very much development focused on the existing assets. And then as we move into the year the rigs will shift over to the new blocks specifically Northwest Gharib. And then the two blocks to the south of Gharib, the exploration blocks and the one in the Western Desert, those are going to get seismic but we won’t really be in a position to start drilling those until 2015 simply because of the timing to get the seismic and interpret it and have the locations ready. So the 2015 budget is going to shift probably more into a 70

[Al Stanton:]

Yeah, it certainly does. And then just a follow-up, will be there be any plans to fast track development given this sort of cost oil balance, would there be preference to new licenses and so when it comes to new developments?

[Ross Clarkson:]

Well, yeah, we’ll be fast tracking development certainly on Northwest Gharib, because it’s right in the middle of everything. And we’re pretty confident there. Yeah, everything that we have is fairly close to facilities so I don’t think anything is going to take, certainly at the outset with the current outside estimates would be 12 months of sort of getting on production, most of it will be probably less than that.

[Al Stanton:]

Okay and then just one final question for Randy as to how we should include the acquisition of the exploration licenses in our earnings forecast. Is it seen as an acquisition also working capital adjustments, so you net out to zero?

[Randy Neely:]

Yeah from accounting perspective it is, it didn’t add to our, basically our properly find equipment or in this case exploration expenditures, won’t be depleted in the near-term from the standpoint of the offset to accounts receivable. Yes it’s essentially we would have, under normal circumstances would have had to pay that $40 million in cash. But we, I guess negotiated with EGPC to offset that against our receivables given the magnitude what was outstanding. So it is a collection of receivable.

[Al Stanton:]

Thank you.

[Operator:]

Thank you. [Operator Instructions]. The following question is from Aminul Haque of MGI Securities. Please go ahead.

[Aminul Haque:]

Amin Haque. Good morning everyone, just one question about account receivables, it went up again this quarter. So my question is how do you see the country receivables being converted in the coming quarters. And are you – saying that you can only offset it against signature bonuses only so many times?

[Randy Neely:]

Well it’s Randy speaking. No we’re not we’re regularly collecting on that receivable, in fact we’ve collected almost $150 million over the first three quarters, which has nothing to do with offsetting against the signature bonus. The signature bonus is in a sense a bonus to [indiscernible] receivable balance. And in this quarter we’ve already collected some amount of cash, but most recently our scheduled listing for a full listing, which we don’t have the details on quite yet but generally they’re in the magnitude of about 500,000 barrels. So about $50 million we expect to collect in the next 30 days. And we have another partial listing to grow later this month, and we are expecting additional offsets against amounts that we owe to the government for diesel, specifically. And as well as some minor cash collection to the rest of the year, so in total we’re expecting to collect $250 million to $270 million, either through the offsets, including the offset against the signature bonus. But also straight cash collections from EGPC.

[Aminul Haque:]

Okay, alright thanks.

[Operator:]

Thank you. The following question is from [indiscernible] of Cruiser Capital. Please go ahead.

[Unidentified Analyst:]

Great thanks, thanks everyone. I just had a question about if you’ve given any estimation or forecast or how you’re going to get to your 40,000 barrels a day over the next four years. Have you given any guidance on where you expect kind of for 2014-15 in terms of the progression?

[Randy Neely:]

We haven’t put out the 2014 guidance numbers yet for production, but it really hasn’t changed a lot from the previous charts that we’ve had in some of our investor presentations. Where some of it comes from the new lands, with the growth and some to the Northwest Gharib block essentially keeps that northern part of the Eastern Desert flat in the 22,000-24,000 range. And then the new gains come from the Western Deserts, specifically South Alamein and some of the drilling there. And some of us this assume that Yemen will be on production too, but it really hasn’t changed from what we’ve been presenting over the last, I guess, almost two years, yeah. It just, more of the land is now in our possession and we’re able to execute.

[Unidentified Analyst:]

Okay, great thanks.

[Operator:]

Thank you. The following question is from Will Woodrich of Woodrich [ph] & Company. Please go ahead.

[Unidentified Analyst:]

Hi, just to make sure I understood the number that was said earlier, I think you said over the next four years capital spending with average about $100 million, is that correct?

[Randy Neely:]

Yeah, the – we’re talking about the current properties we have right now. The development program there, to grow the company up through 30,000 to 40,000 range is on average, in our five year plan about $100 million a year spend. And so that’s realistically what we can physically do on the ground every year.

[Unidentified Analyst:]

So again $100 million on average per year to get your from let’s call it 19,000 barrels to 40,000 barrels?

[Randy Neely:]

Yeah up in that range, that’s right.

[Unidentified Analyst:]

Thank you.

[Operator:]

Thank you. The following question is from Kevin O’Malley, Private Investor. [ph] Please go ahead.

[Unidentified Analyst:]

Hi, good morning gentlemen could you please give me a little information in what you are expect in regard to reserves, I know you got three new pulls, the West Bakr and the two new Lower Nukhul pulls in West Gharib. And I was wondering what you could tell me about reserves for next year?

[Ross Clarkson:]

Year end this year is I think you mean?

[Unidentified Analyst:]

Yeah but it—

[Lloyd Herrick:]

Kevin it’s Lloyd here, yeah we really haven’t looked, yet the numbers from the consultants yet but I think realistically, we’re going to be pretty close to flat on reserves from last year, a lot of our plans to add reserves particularly on the South Alamein block, we just couldn’t get out of this year. So we’ve had some discoveries in the West Bakr but, West Gharib, most of the drilling that was done out there this year was stuff that was defined on largely on the books from last year. So as an overall guidance, yeah we’re probably going to be close to flat on reserves.

[Ross Clarkson:]

Year end this year is what we’re talking about because of the deferral of South Alamein into next year, so those reserves are not on the books yet. And that’s part of the equation we’re producing almost seven million barrels a year that we have to replace so most of the drilling in, up in the eastern desert really was replacement of production.

[Unidentified Analyst:]

And then you all indicated at one point that the Lower Nukhul discovery on West Gharib in your September presentation said you all thought you had 10 million to 40 million barrels. And then that was taken out in the October presentation, I was wondering do you all no longer think that’s accurate description?

[Ross Clarkson:]

No that’s still there, but remember that’s most of that seating out on the North West Gharib block on the new lands. And you cannot book reserves on those pulls on the new lands until you have an approved development plan. So they haven’t changed it’s just because we’re sitting on new lands without the development permit approved. You cannot bring us into the reserve statement so we found them but we haven’t noticed there but we got to get a little more work done on and get into development plan approved before we are fallen into the reserves. So that’s part of the stuff against deferred into 2014 reserves gains.

[Unidentified Analyst:]

Thank you very much.

[Operator:]

Thank you. The following question is from David Dudlyke of Dundee Capital Markets. Please go ahead.

[David Dudlyke:]

Good morning everyone. Two questions both from receivable. Firstly could you just clarify I believe I heard you said that you expect to do some 200 million by year end this year. And secondly and more generally to the future if we look at the receivables in terms of days of net after royalty revenues where do you think you could drive the receivables down to given the likely improvements in terms of payments from EGPC going forward?

[Randy Neely:]

Hi David its Randy.

[David Dudlyke:]

Yeah.

[Randy Neely:]

I guess first part yes the answer is we do expect receivables to be down sub 200 million by the end of the year. And maybe down to 180 we’ll see in addition when we look out that should take our receivables down into the range of seven months outstanding of revenues net of royalties and taxes. But when you look out into the new year we’re not going to project that number is going to drop significantly in terms of seven months or $180 million during 2014. We’re working on it, we’re with EGPC all the feedback we get from them is positive. But we know that they have their own issues, they have to deal with so I think for the time being we’ll just tell you that our expectation is it won’t, we don’t expect it to get larger than that in the future.

[David Dudlyke:]

Okay so six months would be you’d be uncomfortable with six months as a number.

[Randy Neely:]

Well we’re working there we think we can work down to that overtime ultimately down to four months over time but maybe by the end of 2014 we’ll be down to six months and maybe by 250 in four months but we’ll see. One quarter at time on collections.

[David Dudlyke:]

Okay that was great. Thank you very much.

[Operator:]

Thank you. There are no further questions registered at this time. I would like to turn the meeting back over to Mr. Clarkson.

[Ross Clarkson:]

Well thank you, everyone. One thing I’d like to say is TransGlobe is in a very strong position now with a huge inventory of development and exploration opportunities. More cash flow and cash on hand and we can reasonably spend every year. So that’s a nice position to be in. And it’s really a very experienced and energized team of professionals to carry through on our growth times. In addition we’re very encouraged by the progress Egypt is making towards the stability and the focus the Egyptian government has on ensuring the oil industry continues to investing and growing in the country. Our next update will be a mid-quarter operations report and 2014 budget in a few weeks. Thank you all for participating in our Q3 conference call.

[Operator:]

Thank you. The conference has now ended. Please disconnect your lines at this time. We thank you for your participation.