TAT TransAtlantic Petroleum Ltd New

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): March 11, 2016

 

 

 

 

 

Registrant’s telephone number, including area code: (214) 220-4323

 

(Former name or former address, if changed since last report)

 

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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

 

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Item 2.02 Results of Operations and Financial Condition.

On March 11, 2016, TransAtlantic Petroleum Ltd. (the “Company”) issued a press release reporting certain preliminary, estimated financial results of the Company for the twelve months ended December 31, 2015 and announcing its intent to file a Form 12b-25 to provide for an additional fifteen days to file its Annual Report on Form 10-K for the twelve months ended December 31, 2015 (the “Form 10-K”). The press release also contains information relating to items that will be reported in the Company’s Form 12b-25 when filed.  A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K.

In addition, as described further in Item 7.01, the slides to be used in a presentation by the Company at the 28^th Annual Roth Conference contain certain preliminary, estimated financial results for the Company for the twelve months ended December 31, 2015.  A copy of the slides are attached hereto as Exhibit 99.2

The information in Item 2.02 of this Current Report on Form 8-K, including Exhibits 99.1 and 99.2 attached hereto, is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), nor shall it be deemed incorporated by reference in any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date hereof, except as shall be expressly set forth by specific reference to Item 2.02 of this Current Report in such filing.

Item 7.01 Regulation FD Disclosure.

As disclosed in Item 2.02 above, on March 11, 2016, the Company issued a press release reporting certain preliminary, estimated financial results of the Company for the twelve months ended December 31, 2015 and announcing its intent to file a Form 12b-25. Due to the steep decline in oil prices during 2015, the classification of the Company’s Albanian segment as discontinued operations and the Company’s ongoing processes to sell assets and restructure its debt, the Company requires additional time to complete its 2015 financial statements, particularly its deferred income tax accounting and consideration of its asset impairment analysis as it relates to the Company’s Albanian segment. The Company intends to file its Form 10-K within the 15-day extension period afforded by Rule 12b-25 under the Exchange Act.

In addition, on March 11, 2016, the Company announced that it would be presenting at the 28^th Annual Roth Conference on March 14, 2016.  A copy of the slides to be presented in such presentation are attached hereto as Exhibit 99.2 and a copy of such presentation will be posted to our website www.transatlanticpetroleum.com.

The information in Item 7.01 of this Current Report on Form 8-K, including Exhibits 99.1 and 99.2 attached hereto, is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Exchange Act, nor shall it be deemed incorporated by reference in any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date hereof, except as shall be expressly set forth by specific reference to Item 7.01 of this Current Report in such filing.

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Item 9.01 Financial Statements and Exhibits.

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

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EXHIBIT INDEX

 

 

 

 

 

 

Exhibit 99.1

 

TransAtlantic Petroleum Announces Delay in Filing Annual Report on Form 10-K and Participation in the 28^th Annual Roth Conference

Hamilton, Bermuda (March 11, 2016) – TransAtlantic Petroleum Ltd. (NYSE-MKT: TAT) (TSX: TNP) (the “Company” or “TransAtlantic”) today announces the Company’s intent to file a Form 12b-25 to provide an additional fifteen days to file its Annual Report on Form 10-K for the twelve months ended December 31, 2015 (the “Form 10-K”).

The Company will be unable to file its Form 10-K within the prescribed time period without unreasonable effort and expense.  Due to the steep decline in oil prices during 2015, the classification of the Company’s Albanian segment as discontinued operations and the Company’s ongoing processes to sell assets and restructure its debt, the Company requires additional time to complete its 2015 financial statements, specifically as it relates to the Company’s Albanian segment. In addition, the Company is in the process of finalizing its deferred income tax calculation and the impact on the consolidated financial statements. The Company is also completing its evaluation of internal control over financial reporting.

Due to the precipitous decline in Brent crude oil prices during 2015, the borrowing base under the Company’s senior credit facility (the “Senior Credit Facility”) with BNP Paribas (Suisse) SA (“BNP Paribas”) and the International Finance Corporation (“IFC”) was decreased to $16.6 million effective December 30, 2015. The decline in the borrowing base resulted in a $15.5 million borrowing base deficiency under the Senior Credit Facility as of December 31, 2015.  As of December 31, 2015, the Company had $32.1 million outstanding under the Senior Credit Facility and no availability.

On December 30, 2015, the Company entered into a waiver with the lenders under the Senior Credit Facility with respect to certain defaults that existed as of December 30, 2015, including, among other things, the borrowing base deficiency which the waiver requires to be repaid by March 31, 2016.

The Company expects to seek a waiver or extension from its lenders of the requirement to repay the borrowing base deficiency.  There is no assurance that the Company will be able to obtain the waiver or an extension of the requirement to repay the borrowing base deficiency.

If the Company is unable to repay the borrowing base deficiency or obtain a waiver or extension by March 31, 2016, the Company will be in default under the Senior Credit Facility and cross-default under its outstanding convertible notes.  If the Company is in default under the Senior Credit Facility, the lenders could declare all outstanding principal and interest to be immediately due and payable.

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In addition, due to the substantial drop in oil prices, the amount and maturity dates of its current debt obligations, uncertainty regarding the availability of alternative financing, uncertainty regarding the Company’s asset sale processes and its ongoing debt restructuring process, as well as other potential factors not within the Company’s control, the Company expects that its auditor’s opinion to be issued in connection with the Company’s 2015 financial statements will include a going concern explanatory paragraph.

The Company intends to file its Form 10-K within the 15-day extension period afforded by Rule 12b-25 under the Securities Exchange Act of 1934, as amended.

Preliminary Financial Results

The Company anticipates that its Form 10-K will contain results of operations that reflect a significant change from the year ended December 31, 2014.  The Company is unable to quantify the amount of its 2015 net loss at this time because it is still evaluating its deferred income tax accounting and consideration of its asset impairment analysis as it relates to the Company’s Albanian segment for 2015, each of which will affect the Company’s 2015 net loss.  In 2015, the Company expects to report a net loss from continuing operations of $20 million to $30 million and a net loss from discontinued operations of $70 million to $80 million primarily due to the impairment of its Albanian segment.  The Company generated approximately $85.1 million of revenue in 2015 as compared to $138.8 million of revenue in 2014.

Participation in the 28^th Annual Roth Conference

On March 14, 2016, the Company will present at the 28^th Annual Roth Conference. A copy of the slides to be presented at the conference is attached as an exhibit to the Company’s Form 8-K filed on March 11, 2016, and a copy of such presentation will be posted to the Company’s website www.transatlanticpetroleum.com.

About TransAtlantic Petroleum Ltd.

TransAtlantic Petroleum Ltd. is an international oil and natural gas company engaged in the acquisition, exploration, development and production of oil and natural gas. The Company holds interests in developed and undeveloped properties in Turkey and Bulgaria.

(NO STOCK EXCHANGE, SECURITIES COMMISSION OR OTHER REGULATORY AUTHORITY HAS APPROVED OR DISAPPROVED THE INFORMATION CONTAINED HEREIN.)

Forward-Looking Statements

This news release contains statements concerning the Company’s preliminary financial results for the year ended December 31, 2015, the Company’s ability to file its Form 10-K within the 15-day extension period, planned asset sales, liquidity concerns and ability to continue as a going concern, as well as other expectations, plans, goals,

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objectives, assumptions or information about future events, conditions, results of operations or performance that may constitute forward-looking statements or information under applicable securities legislation. Such forward-looking statements or information are based on a number of assumptions, which may prove to be incorrect.

Although the Company believes that the expectations reflected in such forward-looking statements or information are reasonable, undue reliance should not be placed on forward-looking statements because the Company can give no assurance that such expectations will prove to be correct. Forward-looking statements or information are based on current expectations, estimates and projections that involve a number of risks and uncertainties which could cause actual results to differ materially from those anticipated by the Company and described in the forward-looking statements or information. These risks and uncertainties include, but are not limited to, adjustments resulting from the completion by the Company of its review of the Company’s financial statements for the year ended December 31, 2015, unexpected delays which the Company may incur in connection with the preparation of the Form 10-K, uncertainty regarding the Company’s ability to sell assets, repay its borrowing base deficiency or continue as a going concern; the Company’s ability to access sufficient capital, market prices for natural gas, natural gas liquids and oil products; estimates of reserves and economic assumptions; the ability to produce and transport natural gas, natural gas liquids and oil; the results of exploration and development drilling and related activities; economic conditions in the countries and provinces in which the Company carries on business, especially economic slowdowns; actions by governmental authorities, receipt of required approvals, increases in taxes, legislative and regulatory initiatives relating to fracture stimulation activities, changes in environmental and other regulations, and renegotiations of contracts; political uncertainty, including actions by insurgent groups or other conflict; outcomes of litigation; the negotiation and closing of material contracts; and other risks described in our filings with the SEC.

The forward-looking statements or information contained in this news release are made as of the date hereof and the Company undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

Contact:

Wil Saqueton

Chief Financial Officer

(214) 265-4743

 

TransAtlantic Petroleum Ltd.

16803 Dallas Parkway

Addison, Texas 75001

(214) 220-4323

28th annual Roth conference Value investing during a period of Market overreaction

The Company has not completed its audit of its 2015 financial results. As a result, the Company’s 2015 results of operations, Adjusted EBITDA and Adjusted EBITDAX presented herein are preliminary estimates and are subject to change, possibly materially. Investors should not place undue reliance on these preliminary, estimated financial results. Outlooks, projections, estimates, targets and business plans in this presentation or any related subsequent discussions are forward-looking statements. Actual future results, including TransAtlantic Petroleum Ltd.’s own production growth and mix; financial results; the amount and mix of capital expenditures; resource additions and recoveries; finding and development costs; project and drilling plans, timing, costs, and capacities; revenue enhancements and cost efficiencies; industry margins; margin enhancements and integration benefits; and the impact of technology could differ materially due to a number of factors. These include adjustments resulting from the completion by the Company of its review of the Company’s financial statements for the year ended December 31, 2015, our ability to access sufficient capital to fund our operations, sell assets, repay our borrowing base deficiency and restructure our debt; fluctuations in and volatility of the market prices for oil and natural gas products; the ability to produce and transport oil and natural gas; the results of exploration and development drilling and related activities; global economic conditions, particularly in the countries in which we carry on business, especially economic slowdowns; actions by governmental authorities including increases in taxes, legislative and regulatory initiatives related to fracture stimulation activities, changes in environmental and other regulations, and renegotiations of contracts; political uncertainty, including actions by insurgent groups or other conflicts; the negotiation and closing of material contracts or sale of assets; future capital requirements and the availability of financing; estimates and economic assumptions used in connection with our acquisitions; risks associated with drilling, operating and decommissioning wells; actions of third-party co-owners of interests in properties in which we also own an interest; our ability to effectively integrate companies and properties that we acquire; and other factors discussed here and under the heading “Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2014, which is available on our website at www.transatlanticpetroleum.com and on www.sec.gov. See also TransAtlantic’s audited financial statements and the accompanying management discussion and analysis. Forward-looking statements are based on management’s knowledge and reasonable expectations on the date hereof, and we assume no duty to update these statements as of any future date. The information set forth in this presentation does not constitute an offer, solicitation or recommendation to sell or an offer to buy any securities of the Company. The information published herein is provided for informational purposes only. The Company makes no representation that the information and opinions expressed herein are accurate, complete or current. The information contained herein is current as of the date hereof, but may become outdated or subsequently may change. Nothing contained herein constitutes financial, legal, tax, or other advice. The SEC has generally permitted oil and gas companies, in their filing with the SEC, to disclose proved, probable and possible reserves. We may use descriptions of volumes of resources or reserves potentially recoverable through additional drilling or recovery techniques that the SEC’s guidelines may prohibit us from including in filings with the SEC. These estimates are by their nature more speculative that estimates of proved, probable and possible reserves and accordingly are subject to substantially greater risk of actually being realized by the Company. There is no certainty that any portion of estimated prospective resources will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the estimated prospective resources. Possible reserves are those additional reserves that are less certain to be recovered than probable reserves. There is a 10% probability that the quantities actually recovered will equal or exceed the sum of proved plus probable plus possible reserves. Note on Adjusted EBITDAX and EBITDA: Adjusted EBITDAX is a non-GAAP financial measure that represents earnings from continuing operations before income taxes, interest, depreciation, depletion, amortization, impairment, abandonment, and exploration expenses, unrealized derivative gains and losses, foreign exchange gains and losses, non-cash share-based compensation expense and significant non-recurring expenses. The Company believes Adjusted EBITDAX and EBITDA assists management and investors in comparing the Company’s performance on a consistent basis without regard to depreciation, depletion and amortization and impairment of oil and natural gas properties and exploration expenses, which can vary significantly from period to period. In addition, management uses Adjusted EBITDAX as a financial measure to evaluate the Company’s operating performance. Adjusted EBITDAX and EBITDA is also widely used by investors and rating agencies.  Adjusted EBITDAX and EBITDA is not a measure of financial performance under GAAP. Accordingly, it should not be considered as a substitute for net income, or income from operations prepared in accordance with GAAP. Net income, and income from operations may vary materially from Adjusted EBITDAX. Investors should carefully consider the specific items included in the computation of Adjusted EBITDAX. The Company has disclosed Adjusted EBITDAX to permit a comparative analysis of its operating performance relative to other companies. Note on Internally Generated Reserve Estimates: We have included in this presentation internally generated estimates of non-proved or P3 reserves, potential resources or potential reserves, potential well locations for non-proved or P3 reserves and production potential. These estimates are inherently more speculative than our estimates of proved reserves or the estimates included in our December 31, 2015 reserve reports, which were prepared by DeGolyer and MacNaughton. There is no assurance that we will drill these wells, recover the estimated quantities of oil and gas or reach certain levels of production. Our ultimate performance and recovery will be dependent upon numerous factors, including actual geological conditions, oil and gas prices, exploration and drilling costs, and our future drilling decisions and budgets based on our future evaluation of risk, returns and the availability of capital. Note on BOE: BOE (barrel of oil equivalent) is derived by converting natural gas to oil in the ratio of six thousand cubic feet (MCF) of natural gas to one barrel (bbl) of oil. BOE may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 Mcf:1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Forward looking statements/Non-GAAP Financial measures

On March 3rd, 2016, TransAtlantic announced completion of the Albania divestiture. Due to the discontinued nature of the Albania business, the materials in this presentation do not contain financial or operational information regarding our former Albania operations. Please see appendix for more details regarding the sale of the Albania business. Discontinued operations Albania

Returns driven capital expenditure decision making Have not drilled an oil well <$50 Brent (<50% IRR, base case) Build balance sheet strength Conservative debt levels: Net Debt / TTM EBITDAX at 12/31/15 = 1.5x Increasing liquidity through portfolio rationalization: Albania sold, continue to negotiate additional non-core asset sales Production hedging: 2015 net hedge proceeds = $52.4MM Current put position at $50 Brent Alignment of fixed cost structure with future crude strip Annual cash G&A per BOE reduction of 23% YoY 2014-2015 Targeting 33% G&A reduction YOY 2015-2016 Goal: reduce G&A from $31MM in 2014 to $13MM annualized by end of 2016 Persistent production optimization Oil production was up 8% YoY 2014-2015 without additional wells completed Prospect generation and execution In excess of 20 new field prospects interpreted from 2012-14 vintage 3D seismic First Dadas shale oil well (Bahar 6) IP’d ~800bopd artesian (38° API gravity); produced ~185,000bo in first year Value creation and preservation Imperatives Note: TransAtlantic’s 2015 financial figures are unaudited See appendix for EBITDAX and EBITDA reconciliation

TransAtlantic’s 2015 Opex / Boe is 28% less than peer average Value comparison: Operator efficiency TRANSATLANTIC’S January 2016 Opex / Boe was $4.46 and netback / boe was $26.13 TransAtlantic’s 2015 Operating Netback / Boe is 6.6X greater than peer average Source: Seaport Global Note: TransAtlantic’s 2015 financial figures are unaudited Operating Expenses / BOE Operating Netback / BOE

TransAtlantic’s current Enterprise Value / 2015 EBITDA is 70% lower than its peer average Value comparison: Market capital structure Value, not junk: you must be present to win TransAtlantic’s 2015 Total Debt / EBITDA is 60% lower than its peer average Source: Seaport Global Note: TransAtlantic’s 2015 financial figures are unaudited Enterprise Value calculated as Net Debt plus Market Capitalization on March 2, 2016 Enterprise Value / EBITDA Total Debt / EBITDA

TransAtlantic’s insider ownership is 93% greater than its peer average. TransAtlantic’s management and board of directors also own approximately 25% of the company’s long term debt. Value comparison: Insider ownership Bet on the jockey, not the horse Source: Seaport Global Note: TransAtlantic’s 2015 financial figures are unaudited

TransAtlantic’s Enterprise Value as a percent of Proved Reserves present value has decreased 37% from 98% to an estimated 61% over the past 5 years, with 2014 and 2015 seeing the greatest trailing two year dislocation. In contrast, TransAtlantic’s peer average Enterprise Value as a percent of Proved Reserves present value has increased 70% from 110% to 180% over the past 3 years. Value comparison: proved reserves (intrinsic) “We’re seeing greater dispersion” - Dan Chamby, $85bn AUM at BLK Source: Seaport Global Note: not all peer data available. Note: TransAtlantic’s 2015 financial figures are unaudited

TransAtlantic’s 2015 realized oil price per bbl was 11% greater than its peer average. Value comparison: realized vs benchmark price Turkey is a good market for oil Source: Seaport GlobalNote: TransAtlantic’s 2015 financial figures are unaudited

Long term well economics $50-70 Brent ≈ 34-100% IRR and 1.4-3.2x ROI Note: Bahar type curve economics are generated using a $2.7MM well cost, and 120-134MBO EUR Note: Selmo type curve economics are generated using a $5MM well cost, and 324-366MBO EUR Well economics are based on third party engineered type curves, which are based on risked production rates, estimated ultimate recovery, operating expenses, and capital expenses. TransAtlantic has only completed 2 Bahar wells and zero Selmo wells in the past year. The company was able to drill and complete the latest Bahar wells under the type curve capital expense estimate. The company expects future well economics to be substantially improved, due to enhanced geophysical evaluation and service cost reduction.

Economics built on conservative case Selmo and bahar fields provide over 80% of Transatlantic’s production Note: Bahar and Selmo type curves are generated by the companies independent reserve consultants using information provided by the company Bahar well averages trend to 251,000 BO over the first 3 years of production, which is 54% higher than the type curve. Over 10 years, the average Bahar well is expected to produce 384,000 BO, which is 44% higher than the type curve. Selmo well averages trend to 92,000 BO over the first 2 years of production, which is 40% higher that the type curve. Over 10 years, the average Selmo well is expected to produce 171,000 BO, which is 31% higher than the type curve.

Significant unreserved potential in molla Reserved areas: Only 3.6 MMBOE Proved Note: Proved reserve estimates are for proved developed and proved undeveloped reserves. TransAtlantic lease outline Reserves TransAtlantic lease outline Reserve area Prospect: Conventional TransAtlantic lease outline Reserve area Prospect: Conventional Prospect: Dadaş sands TransAtlantic lease outline Reserve area Prospect: Conventional Prospect: Dadaş sands Prospect: Unconventional Dadaş shale, T1 Prospect: Unconventional Dadaş shale, T2 Kastel Field (15 MMBOE) Molla Bahar Goksu Arpatepe

Southeast turkey petrophysical evaluation log * Internal estimates. Refer to Note on Internally Generated Reserve Estimates Çatak #1 Hazro 0.5 MMBOE Proved Bedinan Reserves (including Hazro): 3.1 MMBOE Proved Reserves 15.3 MMBOE 3P Reserves 200 MMBO unreserved potential* Dadaş Shale Dadaş Shale Reserves: No reserves on balance sheet Undefined unreserved potential Dadaş Sand No reserves on balance sheet 107 MMBO unreserved potential*

Geopolitics has not disrupted production Geopolitics have not adversely effected production in Southeast turkey: “don’t believe everything you read in the paper” Note: 2015 production history is unaudited

Appendix

In the summer of 2014, TransAtlantic began corporate acquisition discussions with Stream Oil and Gas. The anchor for TransAtlantic’s investment case in Stream was the large reserve potential (150MMBO and 1TCFG internal estimate), good credit market availability, and significant surplus operating cash flow from Turkey. TransAtlantic was also marketing a corporate bond during the summer of 2014, but was delayed in placing due to the materiality of a potential acquisition of Stream. By the fall of 2014, TransAtlantic went firm on the acquisition of Stream in an all stock transaction. From the time TransAtlantic initiated conversations with Stream, until the time TransAtlantic closed the acquisition of Stream, oil prices had fallen roughly 40%, and the corporate bond market was effectively closed to small cap E&P companies. TransAtlantic acquired Stream on November 18, 2014 for a total consideration of $94MM: $24MM in stock (3.2MM shares) and $70MM in the assumption of net debt on the balance sheet. The acquisition of Stream added 13.9MMBOE of proved developed reserves to TransAtlantic, roughly doubling the company’s consolidated proved developed reserves. Deloitte, the firm who provided TransAtlantic with Stream’s 2014 independent reserve report, calculated the present value of proved producing reserves for Stream at year end 2014 to be $210MM. Due to the continued fall in oil prices, TransAtlantic resorted to the issuance of a $55MM convertible debenture to fund the operating and capital expenses of Stream. Discontinued operations Albania

By the fall of 2015, TransAtlantic realized that the prospects of refinancing its Albanian business were slim, and so the company chose to place the Albania business up for sale. On February 29, 2016, TransAtlantic entered into and closed a Share Purchase Agreement with GBC Oil for all of the equity interests in Stream. For consideration of the equity interest in Stream, GBC will assume the term loan facility to Raifeisen Bank, and assumed $29.2MM of other liabilities owed by Stream. In addition, GBC issued a warrant to TransAtlantic to acquire up to 25% of the equity interest in Stream for nominal consideration at any time on or before March 1, 2019. In accordance with the Share Purchase Agreement with GBC, and upon obtaining government approval, TransAtlantic will be assigned the Delvina gas assets and approximately $12.9mm of associated liabilities. The company is currently negotiating a joint venture with another third party for the purchase of a portion of the Delvina gas assets. There is no assurance that either of these events will occur. Discontinued operations Albania

Adjusted ebitdax and ebitda reconciliations The Company is in the process of finalizing its deferred income tax calculation and the impact on its consolidated financial statements. The Company currently estimates that its 2015 current and deferred income tax expense will range from $10.0 million to $20.0 million and its net loss from continuing operations will range from $20.0 million to $30.0 million. These estimates are preliminary and are subject to change, possibly materially. Investors should not place undue reliance on these preliminary, estimated numbers. For purposes of the EBITDAX and EBITDA reconciliations, the Company has used a Net loss from continuing operations amount of ($20,726) and a Current and deferred income tax expense figure of $10,668.

Investor Relations +1 972 590 9936 IR@tapcor.com Contact www.TransAtlanticPetroleum.com