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TransGlobe Energy Corporation (NASDAQ:TGA)

Q2 2012 Earnings Call

August 9, 2012 11:00 AM ET

Executives

Ross Clarkson – President and CEO

Randy Neely – VP-Finance and CFO

Lloyd Herrick – VP and COO

Albert Gress – VP, Business Development

Analysts

Fredrick Kozak [ph] – Independent Gas Oil

David Frisbie – First Energy Capital

Al Stanton – RBC

Gerry Donnelly – First Energy Capital

Gavin Wylie of Deutsche Bank

Operator

All participants thank you for standing by your conference is ready to begin. 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 US Private Securities Litigation Reform Act of 1995. All statements in this webcasts other than statements of historical facts that address future production, 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 forward-looking statements include oil and gas prices, world production performance, exploitation and exploration successes, continued availability of capital and financing and general 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 second quarter 2012 conference call. This is Ross Clarkson, President and CEO and with me I have Mr. Lloyd Herrick, Vice President and COO; Mr. Randy Neely, Vice President of Finance and CFO; and Mr. Albert Gress, Vice President of Business Development.

We’re going to start out with a summary of the financial and operating highlights and then we will move in to a discussion of some of the drilling results from Q2 and our plans of for the future and then we’ll follow that by a Q&A session.

Randy Neely will review the financial and highlights of the quarter starting on the next slide.

Randy Neely

Thanks Ross, good morning? First let’s note that all dollar figures that we speak of in this presentation are in US dollars. Gross revenues for the quarter were $148 million representing an increase of 30% over Q2 2011 and for the first six months of 2012, revenues were $307.5 million, a 45% increase over 2011.

Revenues were up principally due to our increased production which averaged 16,978 barrels a day for the quarter and 16,850 barrels a day for the first six months of 2012. These production levels represent a 44% and 46% over the same periods in 2011. Q2 funds-flow from operations were strong at $35.2 million with the first six months at $71.3 million. These figures represent a 15% and a 28% increase over the same periods in 2011. Growth in funds-flow were lower than revenue growth principally due to the majority of our production growth coming from the West Bakr PSC which has a lower profit sharing arrangement than our West Gharib PSC.

Q2 net earnings were $30.1 million but were again impacted materially by the accounting for the convertible debenture which on mark-to-market basis resulted in an $8.8 million gain in the quarter versus a $7.8 million loss in Q1. This occurred as a result of the market prices of the convertible debenture falling from $1.08 at the beginning of the quarter to $0.99 at the end of the quarter and while these fair value adjustments are made in accordance with IFRS, they do not represent a cash expense or an increase in the future cash outlay required to repay the convertible debentures.

Earnings for the first six months of the year were $41.1 million. On a diluted basis the company posted a second quarter and six months earnings per share of $0.25 and $0.50 respectively. The average price received for all our sales in Q2 is $95.84 a barrel, that’s down 9% from Q2 2011 and the average price received for oil sales in the first six months was $100.28 which is essentially unchanged from the same period in 2011 which is $101.46. As a percentage of Brent, the oil prices fees was approximately 88% thus far in 2012 versus 90% in 2011. This is principally due to a lower price being received for West Bakr crude and lower Yemen production which received near Brent pricing. We continue to achieve very strong after tax operating netbacks of $26.49 in the quarter and $27.02 for the first six months ended June 30th. These figures are down fromQ2 2011 at $31.82 and for the first six months of 2011 at $30.32. This is chiefly as a result of 80% of our traction [ph] growth in Egypt coming from West Bakr which achieved a lower price and has a lower sharing profit oil than the West Gharib PSC and also due to the fact that S-1 production was shut in for the entire first half of 2012.

During the quarter we collected $41.4 million in accounts receivable bringing our year, our first six months total to $56.9 million, $29.5 million of that amount was collected through a half tanker listing which was done in March and collected in April. We now have a full tanker listing schedule for the fourth quarter and subsequent to the end of the second quarter we’ve collected an additional $12.2 million. During the quarter we spent $37.5 million on capital expenditures which include the acquisitions of the subsidiary holding companies that own the interest in the South Alamein and South Mariut PSCs.

From a balance sheet perspective the company continues to maintain a very strong position with working capital of $240 million including cash of $72 million at the end of the quarter. Debt to trailing 12 months fund flow is one times which is including the convertible debentures and our debt position. And from this standpoint all future planned capital expenditures will be funded out of cash and working capital. Given our working capital position, we effectively have a zero debt position with working capital exceeding long-term debt and convertible debentures by $107 million.

I’ll now turn it over to Mr. Herrick.

Lloyd Herrick

Q2 production increased to 16,978 barrels up 2% from Q1. In Egypt, West Bakr averaged 4,230 a day approximately 3% lower than Q1. The production increases from new wells and recompletions during the quarter were significantly impacted by a number of work-overs and pump changes associated with poor quality pump parts which were in operation. We have changed the supplier of the pump parts and expect to achieve improved performance somewhat to our West Gharib operation as we move towards the end of 2012. West Gharib averaged 12,365 barrels a day during the quarter which is a 291 barrel a day increase or 2% over the previous quarter.

Increase in sales in West Gharib is primarily due to the reduction of water and the oil being trucked to GPC for processing and sale. A new multi-well battery was commissioned at Hoshia in late May and a heater/treater facility was installed at West Hana which started up in late June. In Yemen, production sales averaged 392 from Block 32 in Q2. Block S-1 was shut in during the entire quarter. In July, production averaged 17,965 barrels a day representing a 989 barrel a day or 6% increase over Q2. We had growth in all three areas really. West Bakr was up to 4,818 with the addition of a new well in each field some recompletions and improved pump performance but are just putting on a new well in the K Fields from production this week, which we expect to be adding somewhere in the range of 300 to 500 barrels a day from that well.

At West Gharib, production was up to 12,577 due to continued improved in field water separation. Alamein was up to 570 barrels a day due to the partial startup at Block S-1 which contributed about 213 barrels a day to the July average. S-1 is expected to ramp up the pre shut-in levels of around $22.50 a day during the month of August providing the export pipeline remains operational. It’s expected that the total production will exceed 20,000 barrels a day in late August/September with the addition of new wells at West Bakr, our first production in East Ghazalat and continued production at S-1 in Yemen.

This slide shows our daily production by major property for the past 12 months and there’s a few trends I’d like to highlight. First, the continued growth at West Gharib shown in red with July averaging 12,577 barrels a day. We are continuing to improve our water processing in the field and are targeting West Gharib sales of $12,800 to 13,000 barrels a day later this year. Growth at West Bakr is shown in yellow with the impact of our first new well in the program from the H Field making a contribution in July. With the current eight-well drilling program for West Bakr we expect to see significant growth in the yellow portion of the graph through the end of the year.

First well in the K Field is starting production this week and the second well in H Field should be on for production later this month. The return of Block S-1 shown in light green will push the total production to the 20,000 barrel (inaudible) range when the Hana (inaudible) field returns to the pre-shut in levels shown in August/September of 2011. We are also waiting for the addition of a new color for the East Ghazalat project which is expected to be on production around a positive [ph] and barrels a day of 500 to TransGlobe in September. East Ghazalat represents our first production in the western desert.

We have updated our guidance for 2012. Our initial production guidance for 2012 was a broad range of 16,000 to 20,000 barrels a day with a mid-point of 18,500. We have tightened up the guidance for 2012 to arrange if 17,000 to 18,600 barrels a day which provides a mid-point of 17,800 barrels a day. The significance variance that we have in the new forward (inaudible) is associated with the sustainability of Block S-1 production. Block S-1 stays on production for the balance of the year. We will be at the upper end of guidance for 2012.

Using the first half actual and the mid-point of the revised production guidance we are forecasting a funds flow of $145 million or $1.92 a share and $100 Brent for the balance of the year. A $10 change in Brent for the balance of the year will increase or decrease funds flow approximately $7 million or $0.10 a share. Just as side note, if we achieve the upper end of guidance in the 18,600 barrel a day range, that assumes that this ones on for the rest of the year, that the funds flow would be approximately $155 million for the year.

Excluding acquisitions, we have a capital program of $78 million planned for 2012. Egypt continues to be the company’s primary focus with 93% of the capital program or $73 million dedicated to our Egypt projects. To date the company has spent an additional $28 million in 2012 on acquisitions al in Egypt.

I’ll turn it over to Ross.

Ross Clarkson

Okay we are on slide 10 now which is a locator map of TransGlobe’s Egypt position, our land position there. There’s a few changes here you can see we let the Nuqra Block expire in July and we’ve also picked up a significant land position in the western desert over the past year. And I’m going to start talking about the eastern desert on slide 11 and then we’ll move over to the western desert properties after that.

So we are on slide 11 here which is West Gharib and West Bakr. We really consider this all one major asset now. It’s our main producing group of fields and really the focus of the majority of the 2012 capital budget. The combined production is approximately 17,400 barrels a day or so of medium gravity oil and that sells for Brent minus an average of 12% going out through an export terminal on the coast all of it going for export. We have two drilling rigs working here primarily on development drilling at this stage.

There is a large focus on integrating facilities and reducing production bottlenecks this year to allow all the new oil wells we’ve drilled to be placed on production. And that work will be ongoing over the next year. Jumping over to the next slide it just shows the 2012 drilling results to date in the eastern desert area. We’ve drilled quite a few wells here to date, 21 wells only two dry holes so far. In the second half we are going to be drilling with those two rigs more into the step-out and exploration tests on some new fault blocks really focusing a little more on adding some new reserves. A lot of the drilling so far this year has been development of existing reserves.

And I’ll turn it over now to Al just to talk a little bit about our western desert assets and some of the recent acquisitions we’ve done.

Albert Gress

Yes thanks Ross. On slide 13 that is kind of focused on our western desert properties. TransGlobe has successfully added near –term development in high impact exploration to our portfolio with the recent closing of the El Paso and Cepsa Egypt acquisitions. Our expansion in the western desert provides value added running room to our 2010 farm in on the vegas operated East Ghazalat block which will get on production here shortly. TransGlobe now operates a new oil development project in South Alamein along with operatorship in the high impact exploration South Mariut concession with our new partner RWE.

Going forward, our immediate aim is to integrate our new staff from the two acquisitions and kick off our South Alamein appraisal and exploration program during quarter four of this year and spot [ph] well in South Mariut in the same period. So it’s a bit of a game changer for us in Egypt due to potentially larger reward sizes in Egypt’s western desert where many majors and large independents operate. And thanks to continuing investments made in the western desert as you can see on the slide there are numerous pipelines crisscrossing our concession areas, so our ability to move oil to market is made that much easier.

Now Ross we’ll get into a little bit more detail on the assets in the western desert.

Ross Clarkson

On slide 14 you’ll see a summary map of East Ghazalat and that’s the only non-operated property TransGlobe has in Egypt. The operator is moving forward with bringing the Safwa field into production. They’ve completed over the last couple of months three of the original four oil wells. They are getting them ready for production they will soon be moving on to the fourth and they are indicating that production should commence in September at roughly 1,000 barrels a day gross and then they’ll need to drill additional development wells and secure additional facility capacity in the facilities to (inaudible) to increased production.

This is like crude it’s going to sell close to Brent and we’re quite excited to see this as our first producing asset in the western desert. But the more exciting stuff is the stuff that we operate and we’ll start on slide 15 where we have the South Alamein project. As Al mentioned we closed two transactions in June and July to bring this project to 100% ownership. Our Cairo team is now getting well license approvals so we can start drilling appraisal and exploration wells this fall. We see a lot of exploration potential on this block beyond the Boraq development.

So we expect to keep our rig busy here for a while. We expect this will be our second producing are in the western desert with production hopefully starting off in the mid-point of next year and that will be coming from Boraq. Just to give you an idea of the potential, if you look at slide 16, this shows what a single development project at the Boraq discovery could look like. The western desert wells are very productive so we expect a significant production boost from this project.

And if we make some additional discoveries on some of the other prospects then there could be multiples of this production wedge [ph]. So it is very high impact stuff in the western desert. And then if we move on to slide 17, it shows South Mariut which I personally consider to be the sexiest of our exploration project. We are planning to spud the Al Azayem well in September which is a 14,500 foot, $9.6 million well and that will test multiple horizons over six horizons as we go down through various zones starting at about 7,000 feet. This is the biggest prospect TransGlobe has ever participated in and at the highest working interest for a wildcard exploration well for the company. If the drilling proceeds smoothly, we should see results in January, so it is a longer well.

Slide 18 gives you really a modest example of what the impact of a discovery at Mariut could mean for the company and this is just an estimate of what that kind of a project could bring but it’s really showing that it could take us well over 30,000 barrels a day as a mark for a few years out and it’s not going to be overnight but certainly a very significant impact to the company.

I’m going to turn it over to Al which his going to talk about the next wedge of opportunities for us.

Albert Gress

Yes that’s right. On slide 19, that shows kind of the areas that we bet on on the 2011 EGPC bid round which we are eagerly awaiting the results which we do expect EGPC to announce later this month or perhaps early September after the holiday following the holy month of Ramadan. TransGlobe placed four onshore bids with three bids for land areas immediately surrounding our West Gharib and West Bakr production and to the south as shown on the slide. Clearly the Northwest Gharib onshore area, that’s that green one on the top, is of the most importance to us and to Egypt as we can immediately chase new reserves and get them to production in an expedited manner due to our existing operations and infrastructure in the area.

Further, any of the land additions expand our exploration opportunities in a region that we know very well and get to know better and better by the day. Thanks to our success in West Gharib and West Bakr, there is competition for these blocks especially for the northern two blocks. The other one, the other one, the other bid we place was in the western desert it’s not shown on the slide where we hope to further expand our footprint if you will in the western desert and chase some new opportunities so we are looking forward to this.

So slide 20 I brought back the Yemen slide. Brought it out of the back closet because we are now back on production on Block S-1. The Yemen government worked out a solution with the tribal groups and repaired the export line to the Red Sea. And this has allowed (inaudible) to get back in the field and start the process of restoring production. They are getting the wells back on production and the gas reinjection compressors restarted and we hope to see full production restored in a few weeks’ time and this could mean another 2,200 barrels a day so this is going to hit our target of 20 by ‘12.

And that brings me to slide 21, the road to 40,000 and there are many pieces to this chart and some luck involved from exploration drilling and in obtaining the bid round lands. But the key message of the slide is that the TransGlobe team continues to execute in the field and corporately. The growth from the assets in Egypt has been phenomenal and the recent acquisitions have provided a large land base with near-term development projects and a list of exploration prospects that make this target a possibility. The interesting thing about this chart is that we are not projecting a growth rate that differs from our historical success rate. We have done it before and we hope to continue to do it.

With that I’m going to turn it over to the Q&A session, I hope somebody’s got some questions for us we’d love to answer them.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions)

Our first question is from Fredrick Kozak [ph] of Independent Gas Oil. Please go ahead.

Fredrick Kozak [ph] – Independent Gas Oil

Yes good morning Ross. Thanks very much. So I just wanted to follow up on the East Ghazalat. I know you guys were having a conversation with the operator in terms of the sale process. Can you update any thoughts on whether they are going to sell it, when you might find out about that etc.?

Ross Clarkson

My understanding is the sale process has basically been terminated. I don’t believe they got what they were looking for so they are continuing on in developing their assets.

Fredrick Kozak [ph] – Independent Gas Oil

Okay, so that will be the one block in the western desert then that you guys aren’t operating.

Ross Clarkson

That’s correct.

Fredrick Kozak [ph] – Independent Gas Oil

Okay, thank you that was all, my question.

Operator

Thank you. Our next question is from David Frisbie of First Energy Capital. Please go ahead.

David Frisbie – First Energy Capital

Hi, good morning Ross. I got two questions. The first one is about your accounts with (inaudible) which appears to be stabilizing which is great. How do you intend to manage your accounts with (inaudible) with increasing production levels and also possibly increasing the commodity prices? And my second question is what are the key milestones that needs to be achieved to produce (inaudible) from West Bakr and are we still expecting an 18 months’ timeline for West Bakr? Thank you.

Randy Neely

Hey David it’s Randy. On the accounts receivable, at this point in time I think we’ve been working with EGPC pretty carefully and closely over the past six to eight months. We continue to have discussions with them. They continue to recognize that making payments to us is critically important and we have made arrangements with them to pay us on a schedule over the next six months which will keep us pretty much in check with our receivable bills. So it’s going to go up and down a bit from here but as we look forward over the next six months we expect it to be kind of at the same place at the end of the year so we are catching up if you look at it from that perspective, the receivable.

Overall, receivables have built up over the past year but principally that’s a result of our production and they are now starting to catch up to that. That’s the way it looks as we sit here today.

David Frisbie – First Energy Capital

Okay thank you and then –

Lloyd Herrick

David your second question related to production growth at West Bakr and how we do get that to market?

David Frisbie – First Energy Capital

Yes, what are the key milestones that need to be achieved to meet are you talking about (inaudible) timeline which I was I think two years or one year’s

Lloyd Herrick

Yeah we’re looking at that. Currently we believe the capacity that we have to export into the GPC system is probably in the 5,500 barrel a day range. Possibly giving even as high as 6,000. My understanding from GPC is if we want to get beyond those numbers they are going to have to do some facility optimization and some upgrades. We are in discussion with them actively, not just on the West Bakr but also to handle our West Gharib increases. We are working with them and EGPC to find solutions.

We are targeting to have those processes sorted out in the next six to 18 months. So we expect to have all that capacity and shape up certainly by mid next year where we could get West Bakr ramped up into that 8,000 barrel a day range.

David Frisbie – First Energy Capital

Okay, thank you very much.

Operator

Thank you. Our next question is from Al Stanton of RBC. Please go ahead.

Al Stanton – RBC

Yes, good morning folks. It’s always a question for me on the receivables so I’m not to disappoint you. The guidance you gave us to what you’ve received in the past quarter or the past month, I see throws me rather than helps me. So I was wondering just in sort of simple terms, if you look at the revenue number that you had for Q2 of $74 million, I was wondering how much of that you actually received in cash? And then likewise, the guidance for the full year of, I think its $145 million for post-tax operating cash flow. How much of that do you actually receive as cash?

Ross Clarkson

Well, all of the amount that we talked about in terms of receiving have been in cash. To date we’ve received over $60 million. In the first half of the year we received approximately $56 million, all of that has always been in cash. I’d say there’s a couple percentage of that offsets amounts that we owe EGPC but those are very small.

Al Stanton – RBC

Right but in terms of if you didn’t come out one quarter with we’ve received past payments. What portion of a typical quarter’s revenue would you get paid for?

Lloyd Herrick

That’s a little tougher to project. We are targeting to recover essentially around $160 million this year which would match our, kind of cash flow projections.

Ross Clarkson

Yes that’s right.

Al Stanton – RBC

Right because I’m sometimes thinking that actually I would be better using Q3s revenue number to drive my production figure then also my cash flow figure rather than the current quarter because of the arrears and as you said, it’s catching up, arrears will grow as your overall volumes will grow.

Ross Clarkson

Well what we are seeing now as Lloyd said, we’re expecting that we’ll probably receive somewhere in the neighborhood of $160 million this year and of course our revenues will exceed that. But if it does appear that they are sort of holding steady at this point at about nine months in arrears and we expect it to grow a little bit here into the fall until we get the listing and then it will come back down below nine and then it will build and we are working with EGPC to maintain that schedule both through regular payments and through listings.

Al Stanton – RBC

Thank you, that’s exactly what I wanted. Thank you.

Operator

Thank you. Our next question is from Gerry Donnelly of First Energy Capital. Please go ahead.

Gerry Donnelly – First Energy Capital

Good morning gents. Just three questions actually. On East Ghazalat, you mentioned some operational issues you are having there that might explain the delays to reaching kind of the 1,000 barrels of oil per day. But really are those the only – are there factors at play? Are there other factors at play that may account for the series of delays because we were expecting this to be online quite some time ago? That’s my first question.

Second one is, thanks for the guidance on the awards when the awards might be made by EGPC but what is the subsequent period for signoff for the Ministry of Petroleum in Egypt given the new regime? And lastly, can you give us some guidance on the target size and likely chance success on Azayem prospect? Thanks.

Lloyd Herrick

I’ll deal with the first question Jerry, the – Ghazalat. The actual delays are, there’s a number of factors and I don’t think the – not the least of them was the fact we were running a sales process during this period. I think that caused some of the delays. They did have some issues in issues in sourcing a completion rate which is in the field this month and we have three of the four wells. I think they moved on to the fourth well this month. They had a few delays in getting access into their tie-in point and getting the receiving facilities installed. That’s probably the final piece of the puzzle for them to actually getting on production, understanding it as all the field equipment is pretty much in place. Three of the four wells are completed so once they get these receiving facilities in place down at HBS as a joint venture to the south, they’ll start brining that production on by our truck. So all just a number of factors but it look like we are getting very close to having that going here in, probably in September.

Ross Clarkson

And Jerry on the bid round, the awards would be made probably – let’s assume they are made in September. The next step after that is they have to be ratified by parliament and as you’ve seen in the press, they’ve really just formed a parliament so they’ve got a few things to deal with but we’re really targeting a probably, a 12 month approval process to get that through parliament so we really wouldn’t expect to be spending much money on the bid around lands until late 2013 and it really will ramp up in 2014 and you can see that on the wedge of production there on that 40,000 plan.

So that is a longer term, certainly a longer term process. On the size of Azayem, we put some numbers in there. I think we’ve got $236 million p mean sort of in place, kind of probabilistic numbers. This is a very large closure so that the range on that is quite significant. That’s assuming about five out of the nine or ten zones that we’ve identified would work. So you are looking at sort of $50 million barrels in place per zone on an average range. So it is a big prospect. It is one of the bigger four way debt closures out in the western desert that has not been drilled so we are quite excited about it.

Gerry Donnelly – First Energy Capital

Okay thanks Ross.

Operator

Thank you. (Operator Instructions)

Our next question is from Gavin Wylie of Deutsche Bank. Please go ahead.

Gavin Wylie of Deutsche Bank

Thanks. Okay just a few follow up questions I suppose. One, just on the 3,000 barrels that are 2,500 that you kind of have shut in at West Gharib, I was just wondering, is that related kind of back to I guess the question that was asked on the West Bakr production ramp up as there’s similar issues facing getting that online and maybe just talk about some of the milestones there to getting that back.

And then on the Safwa production can you give me a sense of how many wells you need to complete to get up to about 5,000 to 7,000 barrels a day gross on that field and if there’s a revised expectation for when you might be able to achieve that peak production.

Lloyd Herrick

Okay. The first question Gavin on the West Gharib production, there is a couple of factors. One, we currently have the ability to truck about 14,500 barrels a day of fluid into the GPC receiving terminal. The more of that we can truck in that’s oil the better. So we’ve been focused on improving our in-field processing and getting the water or the oil that we truck over there. That’s our first priority is to get that to a higher percentage of oil. We are hoping to get that up into the 13,000 barrel a day range.

The bigger question on GPC is how do we move more than that down the system as we ramp up West Bakr and future plans at West Gharib? Those are the longer term issues we are working with GPC, both in their receiving terminal, their pipeline, down to their processing facility and some optimization of the processing facility. That will take a bit longer so the short term is we are targeting to get about up into the 13,000 barrel a day range of the oil from the West Gharib facilities.

Gavin Wylie of Deutsche Bank

In Ghazalat what is going to take?

Lloyd Herrick

Ghazalat, those wells we’ve been planning somewhere in the 450 to 700 barrel a day range for a well. We don’ t have production histories on these zones yet so we need to get them on and producing to see what kind of declines we’ll get but we’d probably need ten to 15 wells out there to get up into that range.

Gavin Wylie of Deutsche Bank

And is there any kind of big – additional guidance that you can give on when you might be able to achieve that peak production?

Lloyd Herrick

That’s a bit difficult, so far the operator once has focused on the issue of getting them on, they want to put these wells on production before we grow and start doing some development drawings. So as of today we have not set a budget to go do a bunch of development drilling. Certainly (inaudible) has proposed that but we are waiting on the operator and also to switch a rig. That will probably be a 2013 event.

Gavin Wylie of Deutsche Bank

Perfect, thank you.

Operator

Thank you. And we have no further questions registered at this time. I would to return the meeting back to Mr. Clarkson.

Ross Clarkson

Okay thank you everyone. This is a conclusion of our Q2 2012 conference call. The next update will be a mid-quarter q3 report coming out in mid-September and where we’ll update some of the production numbers for, well July is already out but we’ll have production numbers for August and some more drilling results. Thank you everyone for participating in our Q2 conference call.

Operator

Thank you. The conference is now ended. Please disconnect your lines at this time and we thank you for your participation.

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