signature=54b48285ba0d6821bc24c6ceb3a1e3f7,Filed by sedaredgar.com - TransGlobe Energy Corporation -...-CSDN博客

Filed by sedaredgar.com - TransGlobe Energy Corporation - Exhibit 99.1

TRANSGLOBE ENERGY CORPORATION

FORM 51-102F4

BUSINESS ACQUISITION REPORT

IDENTITY OF COMPANY

1.1

NAME AND ADDRESS OF THE COMPANY

TransGlobe Energy Corporation ("TransGlobe" or the

"Corporation")

2500, 605 5th Avenue S.W.

Calgary, AB

T2P 3H5

1.2

EXECUTIVE OFFICER

The name of the executive officer of TransGlobe who is

knowledgeable about the significant acquisition and this report

is:

David Ferguson

Vice President, Finance, Chief Financial Officer and

Secretary

TransGlobe Energy Corporation

P:(403) 264-9888

F:(403) 264-9898

www.trans-globe.com

DETAILS OF ACQUISITION

2.1

NATURE OF BUSINESS ACQUIRED

On February 5, 2008, TransGlobe announced that it had

closed the acquisition (the Acquisition) of privately-held GHP

Exploration (West Gharib) Ltd. ("GHP") which holds a 30% interest in the

West Gharib Concession area in the Arab Republic of Egypt.

TransGlobe funded the Acquisition through an increase to

its term loan and working capital. Working capital adjustments of

approximately US$5.6 million bring the total cost of the acquisition to

US$45.6 million, net of cash acquired. The Acquisition increased total

debt to US$98.0 million.

The eight West Gharib development leases encompass 178

square kilometers (approximately 44,015 acres) and are valid for 20 years.

Modern 3-D seismic covers the majority of the development

leases.

As at February 5, 2008, TransGlobes working interest

share of production acquired in the acquisition of GHP is approximately

900 Bopd. Independent reserve engineers have assessed GHP's working

interest share of the eight leases to contain 1.5 MMBbls proved reserves

and 2.8 MMBbls of proved plus probable reserves.

2.2

DATE OF ACQUISITION

The closing date of the acquisition was February 5,

2008.

2.3

CONSIDERATION

On February 5, 2008 the consideration for the

Acquisition, subject to final closing adjustments was approximately

US$45.6 million.

TransGlobe funded the Acquisition with an increase to its

term loan from US$8.0 million to US$48.0 million and existing cash on

hand.

2.4

EFFECT ON FINANCIAL POSITION

The Acquisition was primarily funded with the expanded

credit facilities and existing cash on hand. The Acquisition is expected

to be accretive to TransGlobes cash flow per share.

A more detailed description of the effect of the

Acquisition on the operations of TransGlobe can be found in the unaudited

pro forma consolidated financial statements of the Corporation as at and

for the year ended December 31, 2007, attached as Schedule "A" to this

report.

2.5

PRIOR VALUATIONS

N/A

2.6

PARTIES TO TRANSACTION

The transaction was not with an informed person,

associate or affiliate of the Corporation.

2.7

DATE OF REPORT

May 1, 2008

FINANCIAL STATEMENTS

TransGlobe's December 31, 2007 and 2006 audited year-end

consolidated financial statements are available on SEDAR at www.sedar.comand are hereby incorporated by

reference.

The unaudited pro-forma consolidated statement of income

of TransGlobe for the year ended December 31, 2007 and the unaudited

pro-forma consolidated balance sheet as at December 31, 2007 are attached

as Schedule "A" to this report.

The audited financial statements of GHP for the year

ended December 31, 2007, as well as the unaudited financial statements of

GHP for the year ended Decmber 31, 2006 are attached as Schedule B to

this report.

SUPPLEMENTARY INFORMATION

None

SCHEDULE A

TransGlobe Energy Corporation

Pro Forma Consolidated

Balance Sheet

As at December 31, 2007(Unaudited - Expressed in

thousands of U.S. Dollars)

Pro Forma

TransGlobe

GHP

Adjustments

Notes

Pro Forma

ASSETS

Current:

Cash and cash equivalents

12,729

(4,621

)

3(a,e)

8,108

Accounts

receivable

17,902

6,349

(2,043

)

3(e)

22,208

Prepaid expenses

1,126

31,757

6,349

(6,664

)

31,442

Property and equipment

166,286

6,582

30,488

3(a)

203,356

Future income tax asset

1,863

Goodwill

4,313

3,785

3(a)

8,098

204,219

12,931

27,609

244,759

LIABILITIES AND

SHAREHOLDERS' EQUITY

Current:

Accounts

payable and accrued liabilities

14,438

1,149

255

3(a)

15,842

Income taxes payable

136

Derivative commodity contracts

7,098

Current portion of

long-term debt

4,727

14,473

3(c)

19,200

Amounts due to related parties

255

(255

)

3(a)

26,263

1,540

14,473

42,276

Long-term debt

51,958

24,527

3(c)

76,485

Asset retirement obligations

2,755

80,976

1,540

39,000

121,516

Shareholders' equity

Share capital

50,128

(12

)

3(a)

50,128

Contributed surplus

3,562

2,574

(2,574

)

3(a)

3,562

Accumulated comprehensive

loss

11,766

Retained earnings

57,787

8,805

(8,805

)

3(a)

57,787

123,243

11,391

(11,391

)

123,243

204,219

12,931

27,609

244,759

See accompanying notes.

TransGlobe Energy CorporationPro Forma

Consolidated Statement of Income

For the year ended December 31, 2007(Unaudited - Expressed in thousands of U.S. Dollars)

Pro Forma

TransGlobe

GHP

Adjustments

Notes

Pro Forma

REVENUE

Oil and gas sales, net

of royalties and other

87,911

10,517

98,428

Unrealized loss on commodity contracts

(7,979

)

(7,979

)

Other income

183

80,115

10,517

90,632

EXPENSES

Operating

15,268

1,140

16,408

General and administrative

6,743

6,774

Foreign exchange loss

Interest

1,450

4,312

3(c)

5,762

Depletion, depreciation and accretion

31,172

1,632

4,447

3(b)

37,251

54,638

2,803

8,759

66,200

Income before income taxes

25,477

7,714

(8,759

)

24,432

INCOME TAXES

Current

12,630

2,814

15,444

Future

12,675

2,814

15,489

NET INCOME

12,802

4,900

(8,759

)

8,943

Net income per share

Basic

0.23

3(d)

0.15

Diluted

0.22

3(d)

0.15

See accompanying notes.

TransGlobe Energy CorporationNotes to the Pro

Forma Consolidated Financial Statements

As at and for the year ended

December 31, 2007

(Unaudited)

All tabular amounts are expressed in thousands of U.S. Dollars,

except per share amounts or as otherwise noted.

Basis of Presentation

The accompanying unaudited pro forma consolidated

financial statements of TransGlobe Energy Corporation (TransGlobe) as at

and for the year ended December 31, 2007 (collectively, the Pro Forma

Financial Statements) have been prepared by management to give effect to

the purchase of GHP Exploration (West Gharib) Ltd. (GHP).

The Pro Forma Financial Statements have been prepared

from and should be read in conjunction with:

(a)

The audited consolidated financial statements of

TransGlobe as at for the year ended December 31, 2007.

(b)

The audited financial statements of GHP as at and for the

year ended December 31, 2007.

In the opinion of the management of TransGlobe, the Pro

Forma Financial Statements include all the adjustments necessary for fair

presentation in accordance with generally accepted accounting principles

in Canada. Accounting policies used in the preparation of the Pro Forma

Financial Statements are in accordance with those disclosed in

TransGlobes audited consolidated financial statements as at and for the

year ended December 31, 2007. The unaudited pro forma consolidated balance

sheet gives effect to the transaction described herein as if it had

occurred on December 31, 2007. The unaudited pro forma consolidated

statement of income gives effect to the transaction and assumptions

described herein as if they had occurred on January 1, 2007.

The Pro Forma Financial Statements may not be indicative

of the operations of TransGlobe which will be obtained upon completion of

the acquisition. In preparing the pro forma financial statements, no

adjustments have been made to reflect any operating or administrative cost

savings that may have been achieved prior to the acquisition dates that

may result from the operations of the combined assets.

Acquisition of GHP

On February 5, 2008, TransGlobe acquired all of the

common shares of GHP, for cash consideration of $45.6 million. GHP holds a

30% interest in the West Gharib Concession area in the Arab Republic of

Egypt (TransGlobe is the operator of this Concession). TransGlobe funded

the acquisition from cash on hand and bank debt of $40.0

million.

The acquisition has been accounted for using the purchase

method with TransGlobe as the acquirer and the purchase price was

allocated to the fair value of the assets acquired and the liabilities

assumed as follows:

Cost of

acquisitions

Cash paid

45,571

Transaction costs

45,664

Allocation of purchase price

Property and equipment

37,070

Goodwill

3,785

Working capital

4,809

45,664

The above allocation of the purchase price is preliminary

and based on the best available information at this time and is subject to

a customary working capital price adjustment clause.

Pro Forma Adjustments and Assumptions

(a)

The Pro Forma Financial Statements have been prepared to

reflect the business combination with GHP as described in Note

(b)

Depletion, depreciation, and accretion has been adjusted

to reflect the incremental cost of the GHP acquisition, as if the

acquisition has occurred at January 1, 2007.

(c)

The pro forma consolidated statement of income has been

prepared as if TransGlobe has increased its Term Loan Agreement by $40.0

million (net of $1.0 million of financing costs) on January 1, 2007 and

that the facility is fully drawn up to December 31, 2007. Interest expense

on the facilities has been calculated using an interest rate of 10.47% and

includes accretion expense related to financing costs.

(d)

For the year ended December 31, 2007, the pro forma basic

and diluted net income per share was $0.15. The pro forma basic and

diluted net income per share calculations were based on 59,595,000 and

60,525,000 weighted average shares outstanding, respectively.

(e)

Cash and cash equivalents have been adjusted to reflect a

cash call receivable of $2.0 million in GHPs balance sheet, due from

TransGlobe.

SCHEDULE B

GHP Exploration (West

Gharib) Ltd.

Financial Statements

December 31,

2007Expressed in U.S. dollars

GHP Exploration (West Gharib) Ltd.

Balance Sheet

As at December

(Expressed in thousands of U.S. Dollars)

2007

2006

(Unaudited)

ASSETS

Current

Accounts receivable

6,349

4,000

6,349

4,000

Property and equipment (Note 3)

6,582

3,954

12,931

7,954

LIABILITIES

Current

Accounts payable and accrued liabilities

1,149

1,327

Income taxes payable

136

Advances from related party

255

126

1,540

1,463

Commitments and guarantees (Note 7)

SHAREHOLDERS EQUITY

Share capital (Note 4)

Contributed surplus

2,574

Retained earnings

8,805

3,905

11,391

6,491

12,931

7,954

See accompanying notes.

Approved by the Board

Ross G. Clarkson

GHP Exploration (West Gharib) Ltd.

Statement of Income, Comprehensive Income and Retained

Earnings

For the year

ended December 31

(Expressed in thousands of U.S. Dollars)

2007

2006

(Unaudited)

REVENUE

Oil sales, net of royalties

10,517

8,133

EXPENSES

Operating

1,140

1,403

General and administration

Depletion

1,632

3,023

2,803

4,435

Income before income taxes

7,714

3,698

Current income taxes (Note 6)

2,814

1,793

NET INCOME AND COMPREHENSIVE INCOME

4,900

1,905

Retained earnings, beginning of year

3,905

2,000

RETAINED EARNINGS, END OF YEAR

8,805

3,905

See accompanying notes.

GHP Exploration (West Gharib) Ltd.

Statement of Cash Flows

For the year

ended December 31

(Expressed in thousands of U.S. Dollars)

2007

2006

(Unaudited)

CASH FLOWS RELATED TO THE FOLLOWING

ACTIVITIES:

OPERATING

Net income

4,900

1,905

Adjustment for:

Depletion

1,632

3,023

Changes in

non-cash working capital items (Note 9)

(2,060

)

(1,292

)

4,472

3,636

FINANCING

Advances from related party

129

353

129

353

INVESTING

Exploration and development expenditures

(4,260

)

(4,458

)

Changes in non-cash working capital items (Note 9)

(341

)

469

(4,601

)

(3,989

)

NET CHANGE IN CASH

CASH, BEGINNING OF

YEAR

CASH, END OF

YEAR

Supplemental Disclosure of Cash Flow

Information

Cash interest paid

Cash taxes paid

2,688

1,783

See accompanying notes.

GHP Exploration (West Gharib) Ltd.

Notes to Financial Statements

As at and for the year ended December 31, 2007

(All figures as

at for the year ended December 31, 2006 are unaudited)

(Expressed in thousands of U.S. Dollars)

Summary of Accounting

Policies

Nature of Business

These financial statements include the accounts of GHP

Exploration (West Gharib) Ltd. (GHP or the Company"), and are presented

in accordance with Canadian generally accepted accounting principles. GHP

was originally incorporated in Bermuda on July 13, 1998 and was continued

in Barbados on June 23, 2005 and licensed as an International Business

Company under the International Business Companies Act. GHP is

wholly-owned subsidiary of Centurion Red Sea Corporation (Barbados) (the

parent company), which is subsidiary of Dana Gas LNG Ventures Ltd. (a

British Virgin Island company). The Company is primarily engaged in the

exploration, development and operation of oil and gas interests in the

West Gharib Block in the Arab Republic of Egypt.

Petroleum and Natural Gas Properties and Related

Depletion

The Company follows the full cost method of accounting,

whereby all costs incurred in exploring for and developing oil reserves

are capitalized. Such expenditures include land acquisition costs,

geological and geophysical expenses, carrying charges for unproved

properties, costs of drilling both productive and non- productive wells,

gathering and production facilities and general and administrative costs

directly related to exploration and development activities. Capitalized

costs are depleted using the unit of production method based upon

estimated proved reserves as determined by independent reserve evaluators.

Costs directly associated with the acquisition and evaluation of unproved

properties are initially excluded from the computation of depletion until

it is determined whether or not proved reserves can be assigned to such

properties. These unproved properties are assessed periodically to

ascertain whether impairment has occurred. When proved reserves are

assigned or the property is considered impaired, the cost of the property

or the amount of the impairment is added to all other capitalized costs

subject to depreciation and depletion.

The Company calculates a ceiling test whereby the net

capitalized costs of properties cannot exceed the sum of the undiscounted

cash flows expected to result from the Companys proved reserves. Cash

flows are calculated based on third party quoted forward prices and

adjusted for the Companys contract prices and quality differentials. If

there is impairment, the magnitude of it would be calculated by comparing

the carrying amount of net capitalized costs to the estimated net present

value of future cash flows from proved plus risked probable

reserves.

Sales of oil and gas properties are accounted for as

adjustments of capitalized costs, with no gain or loss recognized unless

such adjustments would alter the rate of depletion by more than twenty

percent.

Asset Retirement Obligation

The fair value of the statutory, contractual or legal

liability associated with the retirement and reclamation of tangible

long-lived assets is recognized when incurred. The asset retirement cost,

equal to the estimated fair value of the asset retirement obligation, is

capitalized as part of the cost of the related long-lived asset. Asset

retirement costs for crude oil assets are amortized using the unit of

production method. Based on the terms of the West Gharib Production

Sharing Concession (PSC), title to the fixed assets transfers to the

Egyptian General Petroleum Corporation (EGPC) when its total cost has

been recovered or at the termination of the PSC and GHP does not have a

legal obligation to abandon the assets. No asset retirement costs have

been recorded at December 31, 2007.

GHP Exploration (West Gharib) Ltd.

Notes to Financial Statements

As at and for the year ended December 31, 2007

(All figures as

at for the year ended December 31, 2006 are unaudited)

(Expressed in thousands of U.S. Dollars)

Revenue Recognition

Revenues from the sale of oil is recorded when title

passes to the customer.

International operations conducted pursuant to the

production sharing concession (PSC) are reflected in the financial

statements based on the Companys working interest in such operations.

Under the PSC, the Company and other non-governmental partners pay all

operating and capital costs for exploring and developing the concessions.

Each PSC establishes specific terms for the Company to recover these costs

(Cost Recovery Oil) and to share in the production sharing oil. Cost

Recovery Oil is determined in accordance with a formula that is generally

limited to a specified percentage of production during each fiscal year.

Production sharing oil is that portion of production remaining after Cost

Recovery Oil and is shared between the joint venture partners and the

government of each country, varying with the level of production.

Production sharing oil that is attributable to the government includes an

amount in respect of all income taxes payable by the Company under the

laws of the respective country. Revenue represents the Companys share and

is recorded net of royalty payments to government and other mineral

interest owners. For our operations, all government interests, except for

income taxes, are considered royalty payments. Our revenue also includes

the recovery of costs paid on behalf of foreign governments.

Measurement Uncertainty

Timely preparation of the financial statements in

conformity with Canadian generally accepted accounting principles requires

that Management make estimates and assumptions and use judgment regarding

assets, liabilities, revenues and expenses. Such estimates primarily

relate to unsettled transactions and events as of the date of the

financial statements. Accordingly, actual results may differ from

estimated amounts as future confirming events occur.

Amounts recorded for depletion, depreciation and

amortization, asset retirement costs and obligations, future income taxes,

and amounts used for ceiling test and impairment calculations are based on

estimates of oil reserves and future costs required to develop those

reserves. By their nature, these estimates of reserves and the related

future cash flows are subject to measurement uncertainty, and the impact

on the financial statements of future periods could be material.

Income Taxes

The Company uses the liability method to account for

income taxes. Under this method, future income taxes are based on the

difference between assets and liabilities reported for financial

accounting purposes from those reported for income tax. Future income tax

assets and liabilities are measured using the substantively enacted tax

rates expected to apply to taxable income in the years in which the

temporary differences are expected to be recovered or settled. The

Companys contractual arrangements in foreign jurisdictions stipulate that

income taxes are paid by the respective national oil company out of its

entitlement share of production sharing oil. Such amounts are included in

income tax expense at the statutory rate in effect at the time of

production.

Joint Interests

The Companys activities in Egypt under the concession

agreement with the Egyptian government are conducted jointly with others.

The parties share all revenues and costs associated with the concession

agreement. These financial statements reflect only the Companys

proportionate share of these revenues and

costs.

GHP Exploration (West Gharib) Ltd.

Notes to Financial Statements

As at and for the year ended December 31, 2007

(All figures as

at for the year ended December 31, 2006 are unaudited)

(Expressed in thousands of U.S. Dollars)

Foreign Currency Translation

The Company translates foreign currency denominated

monetary assets and liabilities at the exchange rate in effect at the

balance sheet date and nonmonetary assets and liabilities are translated

at historical exchange rates. Revenues and expenses are translated at

transaction date exchange rates except depletion and depreciation expense,

which is translated at the same historical exchange rates as the related

assets.

Changes in Accounting Policies

Financial Instruments, Comprehensive Income, Hedges

and Equity

Effective January 1, 2007, the Company adopted the new

recommendations of the Canadian Institute of Chartered Accountants (CICA)

under CICA Handbook Section 1530, Comprehensive Income, Section

1651, Foreign Currency Translation, Section 3251, Equity,

Section 3855, Financial Instruments Recognition and Measurement,

Section 3861, Financial Instruments Disclosure and Presentationand

Section 3865, Hedges. These new Handbook Sections provide

requirements for the recognition and measurement of financial instruments

in the balance sheet, reporting gains or losses in the financial

statements and the use of hedge accounting.

Under Section 3855, all financial instruments are

initially measured in the balance sheet at fair value. Subsequent

measurement of the financial instruments is based on their classification.

The Company has classified each financial instrument into one of these

five categories: held-for-trading, held-to-maturity investments, loans and

receivables, available-for-sale financial assets or other financial

liabilities. Loans and receivables, held-to-maturity investments and other

financial liabilities are measured at amortized cost using the effective

interest rate method. For all financial assets and financial liabilities

that are not classified as held-for-trading, the transaction costs that

are directly attributable to the acquisition or issue of a financial asset

or financial liability are adjusted to the fair value initially recognized

for that financial instrument. These costs are expensed using the

effective interest rate method and are recorded within interest expense.

Held-for-trading financial assets are measured at fair value and changes

in fair value are recognized in net income. Available-for-sale financial

instruments are measured at fair value with changes in fair value recorded

in other comprehensive income until the instrument is derecognized or

impaired. All derivative instruments are recorded in the balance sheet at

fair value unless they qualify for the expected purchase, sale and usage

exemption. All changes in their fair value are recorded in income unless

cash flow hedge accounting is used, in which case the effective potion of

changes in fair value are recorded in other comprehensive

income.

As a result of the adoption of these new standards, the

Company has classified accounts receivable as loans and receivables; and

accounts payable and accrued liabilities, income taxes payable and

advances from related party, as other liabilities, all of which are

measured at amortized cost. The classification of all financial

instruments is the same at inception and at January 31, 2007. All

derivatives and embedded derivatives as held-for trading, which are

measured at fair value with changes being recognized in net income. The

implementation did not have significant impact on the Companys financial

position.

GHP Exploration (West Gharib) Ltd.

Notes to Financial Statements

As at and for the year ended December 31, 2007

(All figures as

at for the year ended December 31, 2006 are unaudited)

(Expressed in thousands of U.S. Dollars)

Carrying value and fair value of

financial assets and liabilities as at December 31, 2007 are summarized as

follows:

Classification

(000s)

Carrying Value

Fair Value

Held-for-trading

Loans and receivables

6,349

Held-to-maturity

Available-for-sale

Other liabilities

1,540

Section 1530 establishes standards for

reporting and presenting comprehensive income which is defined as the change in

equity from transactions and other events from non-owner sources. Other

comprehensive income refers to items recognized in comprehensive income but that

are excluded from net income calculated in accordance with generally accepted

accounting principles. Due to the issuance of Section 1530, Section 1650 has

been replaced by Section 1651 which establishes new standards for presentation

of exchange gains and losses arising from the translation of self-sustaining

foreign operation in Other Comprehensive Income. There was no effect upon

adoption of these accounting standards.

Section 3251, Equity, which

replaces Section 3250, Surplus, establishes standards for the

presentation of equity and changes in equity during the reporting period. The

main feature of this section is a requirement for an entity to present

separately each of the changes in equity during the period, including

comprehensive income, as well as components of equity at the end of the

period.

Recent accounting pronouncements

Capital Disclosures

The Accounting Standards Board (AcSB)

issued CICA Section 1535, Capital Disclosures. The main features of this

section are to establish requirements for an entity to disclose qualitative

information about its objectives, policies and processes for managing

capital,quantitative data about what it regards as capital, andwhether it has complied with any externally imposed capital requirements

and, if not, the consequences of such non-compliance. The new requirements are

effective for annual and interim periods beginning on or after October 1, 2007,

and, upon adoption, the only effect on the Company will be incremental

disclosures in the financial statements.

Accounting Changes

Effective January 1, 2007, the Company

adopted the revised recommendations of Section 1506, Accounting Changes.The new recommendations permit voluntary changes in accounting policy only

if they result in financial statements which provide more reliable and relevant

information. Accounting policy changes are applied retrospectively unless it is

impractical to determine the period or cumulative impact of the change.

Corrections of prior period errors are applied retrospectively and changes in

accounting estimates are applied prospectively by including these changes in

earnings. The guidance was effective for all changes in accounting policies,

changes in accounting estimates and corrections of prior period errors initiated

in periods beginning on or after January 1, 2007.

GHP Exploration (West Gharib) Ltd.

Notes to Financial Statements

As at and for the year ended December 31, 2007

(All figures as

at for the year ended December 31, 2006 are unaudited)

(Expressed in thousands of U.S. Dollars)

The only impact of adopting this section is to provide

disclosure of when an entity has not applied a new source of GAAP that has

been issued but is not yet effective. This is the case with Section 3862,

Financial Instruments Disclosures, and Section 3863, Financial

Instruments Presentations,which are required to be adopted for fiscal

years beginning on or after October 1, 2007. The Company will adopt these

standards on January 1, 2008 and it is expected the only effect on the

Company will be incremental disclosures regarding the significance of

financial instruments for the entitys financial position and performance;

and the nature, extent and management of risks arising from financial

instruments to which the entity is exposed.

Goodwill and intangible assets

In February 2008, the CICA issued Section 3064,

Goodwill and intangible assets, replacing Section 3062, Goodwill

and other intangible assetsand Section 3450, Research and

development costs. Various changes have been made to other sections of

the CICA Handbook for consistency purposes. The new Section will be

applicable to financial statements relating to fiscal years beginning on

or after October 1, 2008. Accordingly, the Company will adopt the new

standards for its fiscal year beginning January 1, 2009. It establishes

standards for the recognition, measurement, presentation and disclosure of

goodwill subsequent to its initial recognition and of intangible assets by

profit-oriented enterprises. Standards concerning goodwill are unchanged

from the standards included in the previous Section 3062. The adoption of

this new Section is not expected to materially impact the financial

statements.

International Financial Reporting

Standards

In January 2006, the AcSB adopted a strategic plan for

the direction of accounting standards in Canada. On February 13, 2008, the

AcSB has confirmed that effective for interim and annual financial

statements related to fiscal years beginning on or after January 1, 2011,

International Financial Reporting Standards will replace Canadas current

generally accepted accounting principles (GAAP) for all publicly

accountable profit-oriented enterprises. The Company is currently

evaluating the impact of this changeover on its financial

statements.

Property and Equipment

(000s)

2007

2006

Cost

16,421

12,161

Accumulated

Depletion

(9,839

)

(8,207

)

Net

6,582

3,954

During the year, the Company

capitalized overhead costs of $0.1 million (2006 - $nil) relating to exploration

and development activities. Unproven property costs in the amount of $nil in

2007 (2006 - $nil) were excluded in the costs subject to depletion.

GHP Exploration (West Gharib) Ltd.

Notes to Financial Statements

As at and for the year ended December 31, 2007

(All figures as

at for the year ended December 31, 2006 are unaudited)

(Expressed in thousands of U.S. Dollars)

Ceiling Test

An impairment test calculation was

performed on property and equipment at December 31, 2007 in which the estimated

undiscounted future net cash flows based on estimated future prices associated

with the proved reserves exceed the carrying amount of oil and gas property and

equipment for each cost centre.

The following table outlines prices

used in the impairment test at December 31, 2007:

Year

Oil Price

2008

$ 64.86

2009

62.29

2010

61.08

2011

59.93

2012

59.53

Thereafter(1)

(1)

Represents the percentage change in each year after 2012

to the end of the reserve life.

Share Capital

Authorized

The Company is authorized to issue an unlimited number of

common shares with no par value.

Issued

2007

2006

No. of

(000s)

Amount

Balance, beginning of year

Balance, end of year

Accumulated other

comprehensive income

The balance of accumulated other

comprehensive income consists of the following:

(000s)

2007

2006

Accumulated other comprehensive income, beginning of year

Accumulated other comprehensive income, end of year

Financial Instruments and Risk

Management

Carrying Values and Estimated Fair Values of Financial

Assets and Liabilities

Carrying values of financial instruments, which include

accounts receivable, accounts payable and advances from related parties,

approximate their fair value due to the short-term nature of these

amounts.

GHP Exploration (West Gharib) Ltd.

Notes to Financial Statements

As at and for the year ended December 31, 2007

(All figures as

at for the year ended December 31, 2006 are unaudited)

(Expressed in thousands of U.S. Dollars)

Credit Risk

The majority of the accounts receivable are in respect of

oil operations. Accounts receivable consists primarily of trade receivable

balances from the operator of the West Gharib PSC in respect of the

production and delivery of oil, and cash call receivable from the operator

of the West Gharib PSC. These receivables are unsecured and therefore the

collection of accounts receivable may be affected by changes in economic

or other conditions.

Management does not believe that this concentration of

credit risk will result in any loss to the Company based on past payment

experience. The Company sold all of its 2007 and 2006 production to one

purchaser.

Commodity Price Risk Management

The Company has commodity price risk associated with its

sale of crude oil. No actions have been taken to mitigate this

risk.

Foreign currency exchange and interest rate

risk

The Companys operations have minimal exposure to foreign

currency exchange rates, as a majority of the Companys expenditures and

revenues are denominated in US dollars.

As the Company has no interest bearing debt, fluctuations

in interest rates would not have a direct impact on the Companys

operations.

Income Taxes

An income tax rate reconciliation was not disclosed as

the Company has no reconciling items. Current income taxes in the amount

of $2,814 (2006 $1,793) represents income taxes incurred and paid of

$2,688 (2006 -- $1,783) under the laws of Egypt pursuant to the PSC on the

West Gharib Concession and current income taxes incurred and payable of

$126 (2006 -- $10) in based on statutory tax rates in Barbados.

Commitments and guarantees

Pursuant to the East Hoshia Development Lease in Egypt,

the Company and its partners have committed to drilling three exploration

wells and submitted a letter of production guarantee for $4,000 as

security (expiring June 1, 2009).

The Company provides indemnifications, in the course of

normal operations, that are often standard contractual terms to

counterparties in certain transactions such as purchase and sale

agreements. The terms of these indemnifications will vary based upon the

contract, the nature of which prevents the Company from making a

reasonable estimate of the maximum potential amounts that may be required

to be paid. The Companys management is of the opinion that any resulting

settlements relating to its indemnifications would not materially affect

the financial position of the Company.

Related Party Transactions

At December 31, 2007, the Company had an advance from

related parties of $255 (2006 -- $126) for general and administrative

expenses incurred on behalf of the Company by the related parties. These

transactions were in the normal course of operations and were measured at

the exchange amount, which is the amount of consideration established and

agreed to by the related parties.

GHP Exploration (West Gharib) Ltd.

Notes to Financial Statements

As at and for the year ended December 31, 2007

(All figures as

at for the year ended December 31, 2006 are unaudited)

(Expressed in thousands of U.S. Dollars)

Supplemental cash flow information

Changes in operating non-cash working capital consisted

of the following:

(000s)

2007

2006

Operating activities

Increase in current asset:

Accounts

receivable

(2,349

)

(1,441

)

Increase in current liabilities:

Accounts

payable and accrued liabilities

163

139

Income taxes payable

126

(2,060

)

(1,292

)

Investing activities

Decrease (increase) in current

liabilities:

Accounts payable and accrued liabilities

(341

)

469

(341

)

469

10.

Subsequent Event

On February 5, 2008, all the shares of the Company were

acquired by TransGlobe Petroleum International Inc., a wholly owned

subsidiary of TransGlobe Energy Corporation pursuant to an agreement for

the sale and purchase of shares.