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Transatlantic Petroleum Ltd. Reports Operating Results (10-Q)

May 10, 2010 | About:
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10qk

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Transatlantic Petroleum Ltd. (TAT) filed Quarterly Report for the period ended 2010-03-31.

Transatlantic Petroleum Ltd. has a market cap of $1.11 billion; its shares were traded at around $3.66 with and P/S ratio of 37.92. TAT is in the portfolios of T Boone Pickens of BP Capital, George Soros of Soros Fund Management LLC.

Highlight of Business Operations:

Under the terms of the MOU, Zorlu would have the right to purchase 100% of the natural gas that we develop on the acquired licenses and would receive a 5% net profits interest in new wells drilled on the licenses. Zorlu would purchase all of our natural gas production from the licenses at a price equal to a 15% discount to the Industrial Interruptible Tariff benchmark set by BOTAS Petroleum Pipeline Corporation (BOTAS), the state-owned crude oil and natural gas pipelines and trading company in Turkey. For each new well drilled on the licenses, Zorlu would have the right at logging point to convert its 5% net profits interest into a 25% participatory working interest, on a well-by-well basis. We plan to finance the purchase price for the Zorlu transaction primarily through an unsecured, short-term line of credit to be entered into with an affiliate of Mr. Mitchell. The line of credit would also be available for general corporate purposes to the extent it is not used to fund the Zorlu acquisition. The line of credit, which is subject to the negotiation of a definitive agreement, the approval of disinterested members of our board of directors as well as the approval of the Toronto Stock Exchange, would bear interest at LIBOR plus 2.5%. In addition, for each $1 million drawn on the line of credit, we would issue 100,000 common share purchase warrants to the lender. The common share purchase warrants would be exercisable for three years from the date of issuance and would entitle the holder to purchase one common share for each warrant at an exercise price of $6.00 per share. The line of credit would have a term of one year.

Revenue. Total revenue increased to $12.4 million in the quarter ended March 31, 2010 from $1.4 million realized in the same period in 2009. The increase was the result of the acquisition of Incremental in March 2009, as most of our revenue in the first quarter of 2010 was derived from the sale of crude oil from the Selmo oil field in Turkey. In addition, we recorded $1.1 million in oilfield services revenue during the first quarter of 2010. We had no oilfield services revenue during the same period in 2009.

Comprehensive Loss. The comprehensive loss for the quarter ended March 31, 2010 was $13.3 million, or $0.04 per share (basic and diluted), compared to a comprehensive loss of $13.4 million, or $0.09 per share (basic and diluted), for the quarter ended March 31, 2009. The comprehensive loss for the first quarter of 2010 is primarily composed of production expenses of $4.2 million, exploration, abandonment and impairment expense of $4.5 million, general and administrative expense of $6.0 million, and depreciation, depletion and amortization expenses of $4.0 million.

At March 31, 2010, we had cash and cash equivalents of $37.7 million, $6.1 million in short-term debt, $6.9 million in long-term debt and working capital of $36.6 million compared to cash and cash equivalents of $90.5 million, $7.5 million in short-term debt, no long-term debt, and working capital of $80.9 million at December 31, 2009. Cash used in operating activities during the first quarter of 2010 increased to $16.1 million compared to cash used in operating activities of $10.8 million in the first quarter of 2009, primarily as a result of increased drilling and exploration activity.

Viking Term Loan. On July 27, 2009, our wholly-owned subsidiary, Viking International Limited (Viking International), purchased the I-13 drilling rig and associated equipment from Viking. On February 19, 2010, Viking International purchased the I-14 drilling rig and associated equipment from Viking and entered into an amended and restated note payable to Viking in the amount of $11.8 million, which is comprised of $5.9 million related to the I-14 drilling rig and $5.9 million related to the purchase of the I-13 drilling rig. Under the terms of the amended and restated note, interest is payable monthly at a floating rate of LIBOR plus 6.25%, and the amended and restated note is due and payable August 1, 2012. The amended and restated note is secured by the I-13 and I-14 drilling rigs and associated equipment.

TEMI Credit Agreement. TEMI is a party to unsecured non-interest bearing stand-by credit agreements with a local bank. At March 31, 2010, there were outstanding borrowings of 150,000 Turkish Lira (approximately $98,000), bank guarantees totaling 535,000 Turkish Lira (approximately $350,000) and a $324,000 bank guarantee issued in September 2009 related to TEMIs Istanbul office lease under these lines.

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