NEWS RELEASE TRANSMITTED BY Marketwire



FOR: TRANSGLOBE ENERGY CORPORATION

TSX SYMBOL:
 TGL
NASDAQ SYMBOL:
 TGA

TransGlobe Energy Corporation 2008 Third Quarter Interim Report and News Release

Nov 05, 2008 - 07 01 ET

CALGARY, ALBERTA--(Marketwire - Nov. 5, 2008) - TransGlobe Energy Corporation (TSX:TGL) (NASDAQ:TGA) ("TransGlobe" or the "Company") is pleased to announce its financial and operating results for the three and nine-month periods ended September 30, 2008. All dollar values are expressed in United States dollars unless otherwise stated. The conversion to barrels of oil equivalent ("Boe") of natural gas to oil is made on the basis of six thousand cubic feet of natural gas being equivalent to one barrel ("Bbl") of crude oil. With the sale of TransGlobe's Canadian assets on April 30, the results from the Canadian segment of operations are presented as "discontinued operations" in this document.

HIGHLIGHTS

- Cash flow from continuing operations totaled $16.8 million ($0.28/share), 81 percent higher than in the prior-year quarter;

- Net income of $24.8 million ($0.41/share), significantly higher as a result of unrealized gains on derivative contracts;

- Current debt-to-cash-flow ratio of 0.9 times (trailing 12 months);

- 300,000 shares repurchased at an average price of C$3.87 per share under the Normal Course Issuer Bid;

- Acquired additional 25 percent interest in certain West Gharib leases for $18.0 million; 

- Average production from continuing operations of 6,935 Bopd in the third quarter; and

- Potential new oil discovery at Hana West.

Corporate Summary

TransGlobe's cash flow from continuing operations in the third quarter amounted to $16.8 million. Cash flows for the first nine months of 2008 total $53.1 million. TransGlobe anticipates total cash flow from operations for all of 2008 to be approximately $61.0 million, assuming an average Dated Brent oil price of $60/Bbl for the fourth quarter. TransGlobe's debt was $58.0 million at the end of the third quarter. The debt-to-cash-flow ratio currently stands at 0.9:1 (trailing 12 months).

TransGlobe's ongoing derivative contracts were marked to significantly lower future oil prices at the end of the third quarter compared with the second quarter - $98.13/Bbl for Dated Brent oil at September 30 versus $138.86/Bbl at June 30. The Company recorded unrealized derivative gains for the reporting period of $17.5 million. This resulted in third-quarter net income of $24.8 million or $0.41 per share. TransGlobe recorded a realized cash loss on its commodity contracts of $2.6 million for the third quarter. At October 31, 2008, Dated Brent oil closed at $65.32/Bbl.

TransGlobe announced a Normal Course Issuer Bid ("NCIB") on July 30 and bought back 300,000 shares at an average price of C$3.87 per share during the third quarter.

The Company increased its position in Egypt by acquiring an additional 25 percent interest in certain West Gharib leases for total consideration of $18.0 million and an additional interest in the Nuqra Block at no cost due to the departure of a partner company. The acquisition at West Gharib was funded from TransGlobe's credit facility and working capital.

Production from continuing operations in the third quarter averaged 6,935 barrels of oil per day ("Bopd"), approximately five percent lower than in the second quarter. The lower production levels are mainly due to equipment shortages and workovers in West Gharib that occurred during the reporting period. The Company continues to make good progress on resolving these issues and remains on target to achieve its production guidance of 7,450 Boepd for the year 2008.

During these turbulent times in the financial markets it is important to note several strengths that set TransGlobe apart and assure its continued existence as a growth-oriented, successful going concern:

- TransGlobe has sufficient cash flow and working capital to finance ongoing operations and possesses great flexibility with respect to its drilling program.

- All of TransGlobe's capital expenditures are funded from cash flow; there is no requirement for the Company to raise additional funds in the market.

- The Company's debt is carried by a syndicate of four world-renowned financial institutions none of which have reported a negative effect on their business from the current crisis in the banking world.

Companies such as TransGlobe that have low debt levels, strong cash generation from operations and access to cash and cash equivalents will be well positioned to manage through the current financial crisis. Consequently, TransGlobe is continuing on its path to achieve the mid-term objective of production levels of 10,000 Bopd by 2010.

A conference call to discuss TransGlobe's third quarter results presented in this report will be held November 5, 2008 at 2:30 PM Mountain Time (4:30 PM Eastern Time) and is accessible to all interested parties by dialing 1-416-641-6108 or toll-free 1-866-226-1792 (see also TransGlobe's news release dated October 29, 2008). The webcast may be accessed at http://events.onlinebroadcasting.com/transglobe/110508/index.php.

/T/

FINANCIAL AND OPERATING RESULTS
($000s, except per share, price, volume amounts and % change)

                            Three Months Ended            Nine Months Ended 
                                  September 30                 September 30
                       -----------------------------------------------------
Financial               2008     2007   Change       2008     2007  Change
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Oil and gas revenue   66,707   32,240      107%   204,410   89,009     130%
Oil and gas revenue,
 net of royalties
 and other            36,577   20,764       76%   114,121   58,568      95%
Derivative gain 
 (loss) on commodity
 contracts            14,890   (1,033)   1,541%    (9,455)  (1,187)   (697)%
Operating expense      5,088    3,345       52%    15,778    9,942      59%
General and 
 administrative 
 expense               2,066    1,449       43%     7,203    3,981      81%
Depletion, 
 depreciation and 
 accretion expense     8,962    6,837       31%    28,811   22,549      28%
Income taxes           9,751    2,815      246%    28,475    7,383     286%
Cash flow from 
 operations(i)        16,775   13,373       25%    53,133   38,197      39%
 Basic per share        0.28     0.22                0.89     0.64
 Diluted per share      0.27     0.22                0.88     0.63
Net income            24,790    5,198      377%    23,883   13,521      77%
 Basic per share        0.41     0.09                0.39     0.23
 Diluted per share      0.41     0.08                0.39     0.22
Capital expenditures  18,755    6,212      202%    30,547   26,469      15%
Acquisitions          17,552   68,030      (74)%   62,011   68,030      (9)%
Long-term debt        57,127   58,109       (2)%   57,127   58,109      (2)%
Common shares 
 outstanding        
 Basic (weighted 
  average)            59,784   59,554        0%    59,757   59,584       0%
 Diluted (weighted 
  average)            60,771   60,421        1%    60,624   60,576       0%
Total assets         234,501  202,718       16%   234,501  202,718      16%
----------------------------------------------------------------------------
(i) Cash flow from operations is a non-GAAP measure that represents cash
    generated from operating activities before changes in non-cash working
    capital.

Operating
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total production 
 (Boepd) (6:1)(i)      6,935    5,227       33%     7,493    5,252      43%
Total sales (Boepd) 
 (6:1)(i)              6,935    5,227       33%     7,493    5,306      41%
 Oil and liquids 
  (Bopd)               6,935    4,216       64%     7,001    4,306      63%
  Average price 
   ($ per Bbl)        104.55    74.02       41%    102.79    66.20      55%
 Gas (Mcfpd)               -    6,067        -      2,955    6,003     (51)%
  Average price 
   ($ per Mcf)             -     6.19        -       8.78     6.62      33%
Operating expense 
 ($ per Boe)            7.97     6.96       15%      7.68     6.86      12%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(i) The differences in production and sales volumes result from inventory
    changes.

Financial from Continuing Operations (excludes Canadian Operations)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Oil and gas revenue 
 from continuing
 operations           66,707   26,326      153%   193,387   71,382     171%
Oil and gas revenue, 
 net of royalties and
 other, from 
 continuing 
 operations           36,577   15,793      132%   105,466   44,028     140%
Operating expense 
 from continuing
 operations            5,088    2,490      104%    13,476    6,863      96%
Depletion, 
 depreciation and 
 accretion expense 
 from continuing 
 operations            8,962    3,739      140%    26,133   13,982      87%
Cash flow from 
 continuing 
 operations(i)        16,775    9,257       81%    46,780   26,736      75%
 Basic per share        0.28     0.16                0.78     0.45
 Diluted per share      0.27     0.15                0.77     0.44
Net income from 
 continuing 
 operations           24,787    4,166      495%    15,691   10,685      47%
 Basic per share        0.41     0.07                0.26     0.18
 Diluted per share      0.41     0.07                0.26     0.18
Capital expenditures  18,755    3,036      518%    29,933   17,589      70%
----------------------------------------------------------------------------
(i) Cash flow from continuing operations is a non-GAAP measure that 
    represents cash generated from continuing operating activities before
    changes in non-cash working capital.

Operating from Continuing Operations (excludes Canadian Operations)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total production 
 from continuing
 operations (Bopd) 
 (6:1)                 6,935    3,830       81%     6,847    3,895      76%
Total sales (Bopd) 
 (6:1)                 6,935    3,830       81%     6,847    3,895      76%
 Oil and liquids 
  (Bopd)               6,935    3,830       81%     6,847    3,895      76%
  Average price 
   ($ per Bbl)        104.55    74.71       40%    103.08    66.89      54%
Operating expense 
 ($ per Bbl)            7.97     7.07       13%      7.18     6.43      12%
----------------------------------------------------------------------------
----------------------------------------------------------------------------

/T/

OPERATIONS UPDATE

West Gharib, Arab Republic of Egypt (100% working interest, TransGlobe operated)

Operations and Exploration

On August 18, 2008 TransGlobe acquired the remaining partner's 25 percent financial interest in the non-Hana development leases. TransGlobe now holds 100% working interest in the West Gharib PSC, which consists of nine development leases. This includes the East Hoshia development lease, which was approved in January 2008.

Four wells were drilled during the third quarter, resulting in three oil wells (at Arta, Hana and South Rahmi) and one dry exploration well on the West Hoshia development lease. The deep exploration well at Hana did not encounter any hydrocarbons below the main Hana field. The well was completed as an oil well in the Kareem formation. Two wells were drilling at the end of the quarter, which resulted in two additional oil wells (Hana and South Rahmi).

The Company expanded the exploration and development drilling program by adding a second drilling rig in July. Both rigs are currently active, with one rig completing a new exploration prospect at Hana and the second rig currently drilling an exploration well at East Hoshia. The Hana 18 exploration well was targeting a potential new pool to the west of the Hana field. The well was drilled to a total depth of 6,440 feet and will be cased as a potential multi-zone new pool (Hana West) discovery later this week. Hana 18 has encountered up to 260+ feet of potential oil pay in the Miocene sandstones, based on drilling samples, open-hole logs and down-hole pressure tests. The well will be production tested over the next three to four weeks. It is expected that an additional four to six wells will be required to delineate the potential new pool. The drilling rig will move to a development location in the Hana main field prior to returning to Hana West for additional delineation drilling. The East Hoshia exploration well is targeting a deeper (9,000 feet) multi-zone prospect with potential reserves of six to 10 million barrels. This second well is scheduled to reach total depth near the end of November.

In addition to the expanded drilling program, the Company commenced a large new 362 km2 3-D seismic acquisition program in the third quarter. Field acquisition was completed on October 10, and processing is underway. The new 3-D seismic program extends northwest from the East Hoshia development lease to the East Arta development lease, covering five development leases. Preliminary mapping has generated several additional new leads and prospects. It is expected that the processed 3-D will be available for interpretation and mapping in late December. The new 3-D area is expected to be a primary focus area for new exploration and development locations in the 2009 and 2010 drilling programs.

The Company identified the Hana and Hoshia fields as waterflood/enhanced recovery projects with extended injection tests scheduled to commence mid-2008. Initial water injection commenced at Hana in late July and at Hoshia in early September. A decision on the full-field enhanced recovery project could be reached by year-end, assuming the test injection projects support the reservoir simulation work. These projects could significantly increase the recoverable reserves assigned to the respective pools.

Production

Production from West Gharib averaged 3,278 Bopd (3,096 Bopd to TransGlobe) during the quarter, representing a 13% decrease in total field production over the previous quarter. These production decreases are primarily due to a number of pump changes and access to workover rigs, which deferred oil production during the quarter. A second workover rig was contracted in late August to support the increased drilling and well optimization activity at West Gharib.

Production averaged 3,123 Bopd during October (100% TransGlobe), which is lower due to a number of pump-related issues primarily in the Hoshia field. Good progress has been made on resolving these issues in October and it is expected that production will be restored to the 3,400+ Bopd level later this week.

/T/

Quarterly West Gharib Production (Bopd)

----------------------------------------------------------------------------
                                                     2008              2007
----------------------------------------------------------------------------
                                             Q-3      Q-2      Q-1      Q-4
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Gross field production rate                3,278    3,758    3,160    2,932
----------------------------------------------------------------------------
TransGlobe effective working interest      3,096    3,352    2,432    1,594
----------------------------------------------------------------------------
TransGlobe net (after royalties)           1,872    1,907    1,389      971
----------------------------------------------------------------------------
TransGlobe net (after royalties and tax)
 (i)                                       1,367    1,311      958      714
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(i) Under the terms of the West Gharib PSC, royalties and taxes are paid 
    out of the government's share of production sharing oil.

/T/  

Nuqra Block 1, Arab Republic of Egypt (71.43% working interest, TransGlobe operated)

Operations and Exploration

TransGlobe Petroleum Egypt Inc. (a wholly-owned subsidiary) increased its working interest in the Nuqra #1 joint venture to 71.43% from 50% effective June 30, 2008, subject to government approval. The increased working interest represents the Company's proportionate share of a departing joint venture partner's interest. Effective June 30, 2008, the Company will pay 88.57% of costs up to first oil production at which time the Company will pay 71.43% of costs going forward. Prior to June 30, the Company had paid 60% of the costs to first oil production with a 50% working interest. The Company will recover carried costs from the remaining partners' share of any future production.

TransGlobe has identified a prospect that appears to be similar to the oil discovery announced by a competitor at Al Baraka #1 & #2 on the Kom Ombo Concession, located immediately west of the Nuqra Concession. One exploration well was budgeted for 2008 on a contingency basis and has now been deferred until 2009. The Company has discussed rig sharing possibilities with the adjacent operators to facilitate a potential 2009 drilling program.

YEMEN EAST- Masila Basin

Block 32, Republic of Yemen (13.81087% working interest)

Operations and Exploration

Two new wells were drilled during the third quarter. An exploration well located approximately three kilometers east of Tasour was abandoned and an oil well was drilled on the eastern boundary of the Godah field.

A six-inch gas pipeline connecting the Godah production facility to the Tasour Central Production Facility ("CPF") was constructed to supply associated gas production from the Godah pool to the Tasour CPF for fuel gas. It is expected that up to 60% of diesel being consumed for power generation can be replaced with natural gas, resulting in lower operating costs. The fuel-gas project became partially operational in July and will be completed by November with burner conversion of the diesel topping plant in October.

Production

Production from Block 32 averaged 7,275 Bopd (1,005 Bopd to TransGlobe) during the quarter, essentially flat with the previous quarter. Production averaged approximately 6,835 Bopd (944 Bopd to TransGlobe) during October.

/T/

Quarterly Block 32 Production (Bopd)

----------------------------------------------------------------------------
                                                     2008              2007
----------------------------------------------------------------------------
                                             Q-3      Q-2      Q-1      Q-4
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Gross production rate                      7,275    7,511    7,482    7,582
----------------------------------------------------------------------------
TransGlobe working interest                1,005    1,037    1,033    1,047
----------------------------------------------------------------------------
TransGlobe net (after royalties)             514      521      579      620
----------------------------------------------------------------------------
TransGlobe net (after royalties and tax)(i)  378      377      455      478
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(i) Under the terms of the Block 32 PSA, royalties and taxes are paid out 
    of the government's share of production sharing oil.

/T/

Block 72, Republic of Yemen (33% working interest)

Operations and Exploration

Field acquisition of 410 km2 of 3-D seismic and 100 km of 2-D seismic was completed at the end of March 2008. The seismic data was processed and interpreted in the third quarter. The first exploration well on the new 3-D seismic, Seer #1, is targeting a 20 million barrel (gross recoverable, unrisked) Qishn prospect. The drilling rig has been mobilized to the location, with drilling expected to commence in the next few days.

The Seer #1 exploration well will satisfy the remaining commitment of one exploration well during the first exploration period, which was extended to January 2009. The Block 72 joint venture partnership has agreed to enter the second exploration period and has budgeted two additional exploration wells for 2009, which would also satisfy the second exploration period commitments. Under the terms of the Block 72 PSA, there are no scheduled relinquishments at the end of the first exploration period.

Block 84, Republic of Yemen (33% working interest)

Operations and Exploration

The Production Sharing Agreement ("PSA") for Block 84 was signed with the Ministry of Oil and Minerals ("MOM") on April 13, 2008. The PSA is now before Parliament for final approval and ratification, which is expected to occur later this year. A 400+ km2 3-D seismic acquisition program is planned for Block 84 following ratification of the PSA.

Block 84 encompasses 731 km2 (approximately 183,000 acres) and is located in the Masila Basin adjacent to Nexen Inc.'s Masila Block where more than one billion barrels of oil have been produced to date. The Block 84 joint venture group has committed to a 3-D seismic acquisition program and the drilling of four exploration wells during the first exploration period of 42 months.

YEMEN WEST- Marib Basin

Block S-1, Republic of Yemen (25% working interest)

Operations and Exploration

The operator is currently finalizing contracts for a drilling rig and services for Block S-1. Drilling is expected to commence in November/December starting with three horizontal sidetracks in the An Nagyah field. The 2009 development and exploration drilling program for Block S-1 and Block 75 will be finalized during final budget discussions later this fall.

Gas injection commenced in the western portion of the An Nagyah field during the first quarter to improve production performance and increase recoverable reserves. In addition, the operator of the Block S-1 joint venture group has initiated discussions with the MOM regarding a potential development project to produce and sell known deposits of gas at the An Naeem discovery on Block S-1. At present, TransGlobe has not booked the significant gas reserves associated with the An Naeem discovery. An approved gas development plan is required to proceed with recognizing the reserves and with development.

A combined 3-D seismic program is planned to commence in late 2008 to define additional exploration drilling locations on the northwest portion of Block S-1 and the north portion of Block 75.

Production

Production from Block S-1 averaged 11,336 Bopd (2,834 Bopd to TransGlobe) during the third quarter, essentially flat with the previous quarter. Production averaged approximately 11,328 Bopd (2,832 Bopd to TransGlobe) during October.

/T/

Quarterly Block S-1 Production (Bopd)

----------------------------------------------------------------------------
                                                     2008              2007
----------------------------------------------------------------------------
                                             Q-3      Q-2      Q-1      Q-4
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Gross field production rate               11,336   11,573   11,378   10,768
----------------------------------------------------------------------------
TransGlobe working interest                2,834    2,894    2,844    2,692
----------------------------------------------------------------------------
TransGlobe net (after royalties)           1,450    1,453    1,593    1,469
----------------------------------------------------------------------------
TransGlobe net (after royalties and tax)
 (i)                                       1,067    1,051    1,253    1,153
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(i) Under the terms of the Block 32 PSA, royalties and taxes are paid out 
    of the government's share of production sharing oil.

/T/

Block 75, Republic of Yemen (25% working interest)

Operations and Exploration

The PSA for Block 75 was ratified and signed into law effective March 8, 2008. A combined 3-D seismic program (Block S-1 and Block 75) is planned to commence in late 2008.

Block 75 encompasses 1,050 km2 (approximately 262,500 acres) and is located in the Marib Basin adjacent to Block S-1. The Block 75 joint venture group has committed to carry out a 3-D seismic acquisition program and the drilling of one exploration well during the first exploration period of 36 months.

CANADA

Operations and Exploration

The Canadian assets were sold on April 30, 2008. The Canadian segment of operations is presented as "discontinued operations".

/T/

Quarterly Canadian Production (Boepd)

----------------------------------------------------------------------------
                                                     2008              2007
----------------------------------------------------------------------------
                                             Q-3      Q-2      Q-1      Q-4
----------------------------------------------------------------------------
----------------------------------------------------------------------------
TransGlobe working interest                    -      423    1,523    1,504
----------------------------------------------------------------------------
TransGlobe net (after royalties)               -      331    1,197    1,250
----------------------------------------------------------------------------
----------------------------------------------------------------------------

/T/

MANAGEMENT'S DISCUSSION AND ANALYSIS

November 4, 2008

Management's Discussion and Analysis ("MD&A") should be read in conjunction with the unaudited interim consolidated financial statements for the three and nine months ended September 30, 2008 and 2007 and the audited consolidated financial statements and MD&A for the year ended December 31, 2007 included in the Company's annual report. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in Canada in the currency of the United States (except where otherwise noted). Additional information relating to the Company, including the Company's Annual Information Form, is available on SEDAR at www.sedar.com. The Company's annual report on Form 40-F can be found in the Electronic Data Gathering, Analysis and Retrieval ("EDGAR") database at www.sec.gov.

Forward-looking Information

This MD&A may include certain statements that may be deemed to be "forward-looking statements" within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Such statements relate to possible future events. All statements other than statements of historical fact may be forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as "seek", "anticipate", "plan", "continue", "estimate", "expect", "may", "will", "project", "predict", "potential", "targeting", "intend", "could", "might", "should", "believe" and similar expressions. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. Although TransGlobe's forward-looking statements are based on the beliefs, expectations, opinions and assumptions of the Company's management on the date the statements are made, such statements are inherently uncertain and provide no guarantee of future performance. Actual results may differ materially from TransGlobe's expectations as reflected in such forward-looking statements as a result of various factors, many of which are beyond the control of the Company. These factors include, but are not limited to, unforeseen changes in the rate of production from TransGlobe's oil and gas properties, changes in price of crude oil and natural gas, adverse technical factors associated with exploration, development, production or transportation of TransGlobe's crude oil and natural gas reserves, changes or disruptions in the political or fiscal regimes in TransGlobe's areas of activity, changes in tax, energy or other laws or regulations, changes in significant capital expenditures, delays or disruptions in production due to shortages of skilled manpower, equipment or materials, economic fluctuations, and other factors beyond the Company's control. TransGlobe does not assume any obligation to update forward-looking statements if circumstances or management's beliefs, expectations or opinions should change, and investors should not attribute undue certainty to, or place undue reliance on, any forward-looking statements. Please consult TransGlobe's public filings at www.sedar.com and www.sec.gov for further, more detailed information concerning these matters.

Use of Barrel of Oil Equivalents

The calculation of barrels of oil equivalent ("Boe") is based on a conversion rate of six thousand cubic feet of natural gas ("Mcf") to one barrel ("Bbl") of crude oil. Boe's 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.

Non-GAAP Measures

Cash Flow from Operations

This document contains the term "cash flow from operations" and "cash flow from continuing operations", which should not be considered an alternative to, or more meaningful than "cash flow from operating activities" as determined in accordance with Generally Accepted Accounting Principles ("GAAP"). Cash flow from operations and cash flow from continuing operations are non-GAAP measures that represent cash generated from operating activities before changes in non-cash working capital. Management considers this a key measure as it demonstrates TransGlobe's ability to generate the cash flow necessary to fund future growth through capital investment. Cash flow from operations and cash flow from continuing operations may not be comparable to similar measures used by other companies.

/T/

Reconciliation of Cash Flow from Operations and Cash Flow from Continuing
Operations

                            Three Months Ended            Nine Months Ended 
                                  September 30                 September 30
                       -----------------------------------------------------
($000s)                       2008        2007            2008         2007 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cash flow from operating 
 activities                 20,652       8,046          46,541       30,835
Changes in non-cash 
 working capital from
 continuing operations      (3,708)      3,719           6,700        6,445
Changes in non-cash working 
 capital from discontinued 
 operations                   (169)      1,608            (108)         917
----------------------------------------------------------------------------
Cash flow from operations   16,775      13,373          53,133       38,197
Less: Cash flow from 
 discontinued operations         -       4,116           6,353       11,461
----------------------------------------------------------------------------
Cash flow from continuing 
 operations                 16,775       9,257          46,780       26,736
----------------------------------------------------------------------------
----------------------------------------------------------------------------

/T/

Netback

Netback is a non-GAAP measure that represents revenue net of royalties, operating expenses and current taxes. Management believes that netback is a useful supplemental measure to analyze operating performance and provide an indication of the results generated by the Company's principal business activities prior to the consideration of other income and expenses. Netback may not be comparable to similar measures used by other companies.

/T/

SELECTED QUARTERLY FINANCIAL INFORMATION

                                             2008                  2007
----------------------------------------------------------------------------
----------------------------------------------------------------------------
($000s, except per share, 
 price and volume amounts)          Q-3      Q-2      Q-1      Q-4      Q-3
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total Operations
 Average sales volumes (Boepd)    6,935    7,706    7,845    6,837    5,227
 Average price ($/Boe)           104.55   110.21    84.63    75.83    67.04
 Oil and gas sales               66,707   77,283   60,420   47,699   32,240
 Oil and gas sales, net of 
  royalties and other            36,577   41,629   35,915   29,343   20,764
 Cash flow from operations(i)    16,775   18,485   17,873   13,944   13,373
 Cash flow from operations per 
  share                          
  - Basic                          0.28     0.31     0.30     0.23     0.22
  - Diluted                        0.27     0.31     0.30     0.23     0.22
 
 Net income (loss)               24,790   (5,365)   4,458     (719)   5,198
 Net income (loss) per share  
  - Basic                          0.41    (0.09)    0.07    (0.02)    0.09
  - Diluted                        0.41    (0.09)    0.07    (0.01)    0.08
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Continuing Operations
 Average sales volumes (Bopd)     6,935     7,283   6,322    5,333    3,830
 Average price from continuing 
  operations ($/Bbl)             104.55    112.59   90.49    83.14    74.71
 Oil and gas sales               66,707    74,616  52,064   40,788   26,326
 Oil and gas sales, net of 
  royalties and other            36,577    39,541  29,348   23,600   15,793
 Cash flow from continuing 
  operations(i)                  16,775    16,841  13,164    9,334    9,257
 Cash flow from continuing 
  operations per share
  - Basic                          0.28      0.28    0.22     0.16     0.16
  - Diluted                        0.27      0.28    0.22     0.15     0.15

 Net income (loss)               24,787   (11,449)  2,353   (2,319)   4,166
 Net income (loss) per share    
  - Basic                          0.41     (0.19)   0.04    (0.04)    0.07
  - Diluted                        0.41     (0.19)   0.04    (0.04)    0.07
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Total assets                    234,501   205,535 249,401  204,219  202,718
Cash and cash equivalents         8,593    11,673  11,935   12,729   10,547
Total long-term debt, including 
 current portion                 57,127    42,197  95,601   56,685   61,654
Debt-to-cash flow ratio(ii)         0.9       0.7     1.6      1.1      1.3
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(i) Cash flow from operations and cash flow from continuing operations are 
    non-GAAP measures that represent cash generated from operating 
    activities and continuing operating activities, respectively, before 
    changes in non-cash working capital.
(ii) Calculated on a 12-month rolling basis ending on the quarter shown.

/T/

- The Company's financial position remains strong, with the ability to finance capital programs with cash flow from continuing operations.

- Record net income per share from operations and continuing operations, mainly as a result of a $14.9 million gain on derivative contracts.

- Strong commodity prices in the quarter.

- Production from operations remains consistent with 2008 guidance. Production from continuing operations has decreased from Q2-2008 due to an increased number of workovers in the quarter in Egypt and natural declines in Yemen.

BUSINESS ENVIRONMENT

The Company's financial results are significantly influenced by fluctuations in commodity prices, including price differentials. The following table shows select market benchmark prices and foreign exchange rates:

/T/

                                             2008                  2007
                                    Q-3      Q-2      Q-1      Q-4      Q-3
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Dated Brent average oil price 
 ($/Bbl)                         114.78   121.38    96.90     89.03   74.87
U.S./Canadian Dollar average 
 exchange rate                    1.042    1.010    1.004     0.982   1.045
----------------------------------------------------------------------------
----------------------------------------------------------------------------

/T/

The price of Dated Brent oil averaged $114.78/Bbl in Q3-2008, an increase of 53% from the Q3-2007 price of $74.87/Bbl. The price of Dated Brent oil reached a record high in July 2008. However, financial market instability and a potential worldwide recession resulted in a steep decline in the price of Dated Brent oil in August, September, and into October, 2008. The closing price of Dated Brent oil at October 31, 2008 was $65.32/Bbl and the closing exchange rate was 1.205.

The current global financial crisis has reduced liquidity in financial markets, restricted access to financing and caused significant volatility in commodity prices. These will impact the performance of the economy going forward. Companies, such as TransGlobe, with low debt levels, strong cash generation from operations, and availability of cash and cash equivalents will be well positioned to manage through the crisis.

/T/

GUIDANCE

                           Nine Months Ended            Twelve Months Ended
                          September 30, 2008              December 31, 2008
----------------------------------------------------------------------------
                           Actual     Actual 
                            total continuing 
                       operations operations          Guidance
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Production (Boepd)          7,493      6,847             7,450

Capital expenditures 
 ($millions)(i)              30.7       29.9              38.0
----------------------------------------------------------------------------

Dated Brent oil prices 
 ($/Bbl)                   111.02     111.02  100.00(ii) 80.00(ii) 60.00(ii)
----------------------------------------------------------------------------
Cash flow from operations 
 ($millions)                 53.1       46.8    69.0      66.0      61.0
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(i) Excluding acquisitions.
(ii) Dated Brent oil price for Q4-2008.

/T/

The production and cash flow in the 2008 guidance includes four months of production from Canadian operations (sold effective April 30, 2008).

Due to the extreme volatility in the oil prices this year and especially since the end of Q3-2008, management has provided readers with various price scenarios and their potential impact on the Company's cash flow from operations for the year. Despite significantly lower commodity prices since the end of Q3-2008, management still expects record cash flow from operations for the twelve months ended December 31, 2008.

The 2008 Guidance provides information as to management's expectation for results of operations for 2008. Readers are cautioned that the 2008 Guidance may not be appropriate for other purposes. The Company's expected results are sensitive to fluctuations in the business environment and may vary accordingly. This guidance contains forward-looking statements that should be read in conjunction with the Company's disclosure under "Forward-Looking Statements" included on the first page of the MD&A.

CORPORATE ACQUISITION

In the first quarter of 2008, the Company acquired all the shares of GHP Exploration (West Gharib) Ltd. ("GHP") for total consideration of $40.2 million, plus transaction costs and working capital adjustments, effective September 30, 2007. This acquisition was funded by bank debt and cash on hand. GHP holds a 30% working interest in the West Gharib Concession area in the Arab Republic of Egypt ("Egypt"). With the acquisition of GHP, the Company holds a 100% working interest in the West Gharib Production Sharing Concession ("PSC"), with a working interest of 100% in the Hana development lease and an effective working interest of 75% in the eight non-Hana development leases. TransGlobe is the operator of the West Gharib Concession.

The adjustment date of the acquisition is September 30, 2007, with all changes in working capital to February 5, 2008 (the closing date), including oil production from September 30, 2007 to February 5, 2008, recorded as a purchase price adjustment. Oil produced after February 5, 2008 is recorded as TransGlobe production.

PROPERTY ACQUISITION

On August 18, 2008, TransGlobe completed an oil and gas property acquisition in Egypt for the 25% financial interest in the eight non-Hana development leases. The total cost of the acquisition was $18.0 million, subject to closing adjustments to the effective date of June 1, 2008. In addition, the Company could pay up to $7.0 million if incremental reserve thresholds are reached in the East Hoshia (up to $5.0 million) and in the South Rhami (up to $2.0 million) development leases. As a result of this acquisition, TransGlobe now holds a 100% working interest in the West Gharib Concession in Egypt. Production from this acquisition since August 18, 2008 has been included in the quarterly production for the Company.

DISCONTINUED OPERATIONS

TransGlobe entered into an agreement with a third party for the sale of its Canadian segment of operations to allow the Company to focus on the development of its Middle East/North Africa assets. The sale price of the assets was $56.7 million, subject to normal closing adjustments. The sale closed on April 30, 2008. Accordingly, the Canadian segment has been reclassified as discontinued operations in the Consolidated Financial Statements. This is further discussed in the MD&A section entitled "Operating Results From Discontinued Operations".

/T/

Q3-2008 TO Q3-2007 NET INCOME VARIANCES

                                                                $ Per Share
                                                       $000s        Diluted
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Q3-2007 net income                                     5,198           0.08
----------------------------------------------------------------------------
Cash items
Volume variance                                       29,847           0.49
Price variance                                        10,534           0.17
Royalties                                            (19,596)         (0.32)
Expenses:
 Operating                                            (2,599)         (0.04)
 Realized derivative loss                             (2,649)         (0.04)
 Cash general and administrative                        (437)         (0.01)
 Current income taxes                                 (6,923)         (0.11)
 Realized foreign exchange loss                          (11)             -
Interest on long-term debt                              (646)         (0.01)
Settlement of asset retirement obligations                21              -
Other income                                             (23)             -
Cash flow from discontinued operations                (4,112)         (0.07)
----------------------------------------------------------------------------
Total cash items variance                              3,406           0.06
----------------------------------------------------------------------------
Non-cash items
Unrealized derivative gain                            18,572           0.31
Depletion, depreciation and accretion                 (5,225)         (0.09)
Stock-based compensation                                (180)             -
Settlement of asset retirement obligations               (21)             -
Amortization of deferred financing costs                 (45)             -
Non-cash income from discontinued operations           3,085           0.05
----------------------------------------------------------------------------
Total non-cash items variance                         16,186           0.27
----------------------------------------------------------------------------

Q3-2008 net income                                    24,790           0.41
----------------------------------------------------------------------------
----------------------------------------------------------------------------

/T/

Net income increased $19.6 million in Q3-2008 compared with Q3-2007 mainly as a result of higher volumes, higher prices and a change in the unrealized derivative gain of $18.6 million in the quarter ended September 30, 2008.

/T/

OPERATING RESULTS AND NETBACK

Daily Volumes, Working Interest Before Royalties and Other

                                     Three Months Ended   Nine Months Ended
                                           September 30        September 30
----------------------------------------------------------------------------
                                         2008      2007      2008      2007
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Egypt   - Oil sales(i)        Bopd      3,096       118     2,960        40
Yemen   - Oil sales           Bopd      3,839     3,712     3,887     3,855
----------------------------------------------------------------------------
Total continuing operations
        - daily sales volumes Bopd      6,935     3,830     6,847     3,895
----------------------------------------------------------------------------
Canada  - Oil and liquids
           sales(ii)          Bopd          -       386       154       411
        - Gas sales(ii)       Mcfpd         -     6,067     2,955     6,003
----------------------------------------------------------------------------
Canada                        Boepd         -     1,397       646     1,411
----------------------------------------------------------------------------
Total Company
        - daily sales volumes Boepd     6,935     5,227     7,493     5,306
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(i) Egypt includes the operating results of GHP for the period February 5,
    2008 to September 30, 2008 and the property acquisition for the period
    from August 18, 2008 to September 30, 2008. In that period, production
    averaged 1,044 Bopd and 382 Bopd, respectively, for a year-to-date
    average of 910 Bopd and 61 Bopd, respectively.
(ii) Canada includes the operating results for the period January 1, 2008 to
     April 30, 2008. In that period, production from the Canadian assets
     averaged 1,463 Boepd.


Netback from Continuing Operations

Consolidated


                                                Nine Months Ended
----------------------------------------------------------------------------
                                     September 30, 2008  September 30, 2007
(000s, except per Bbl amounts)              $     $/Bbl         $     $/Bbl
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Oil sales                             193,387    103.08    71,382     66.89
Royalties and other                    87,921     46.86    27,354     25.63
Current taxes                          28,557     15.22     7,325      6.86
Operating expenses                     13,476      7.18     6,863      6.43
----------------------------------------------------------------------------

Netback                                63,433     33.82    29,840     27.97

----------------------------------------------------------------------------
----------------------------------------------------------------------------


Consolidated
                                               Three Months Ended
----------------------------------------------------------------------------
                                     September 30, 2008  September 30, 2007
(000s, except per Bbl amounts)              $     $/Bbl         $     $/Bbl
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Oil sales                              66,707    104.55    26,326     74.71
Royalties and other                    30,130     47.22    10,533     29.89
Current taxes                           9,751     15.28     2,828      8.03
Operating expenses                      5,088      7.97     2,490      7.07
----------------------------------------------------------------------------

Netback                                21,738     34.08    10,475     29.72

----------------------------------------------------------------------------
----------------------------------------------------------------------------

/T/

Segmented Net Operating Results

In Q3-2008, the Company had continuing operations in two geographic areas, segmented into the Arab Republic of Egypt and the Republic of Yemen ("Yemen"), and discontinued operations in Canada. The MD&A for the continuing operations will follow. Please refer to "Operating Results from Discontinued Operations" for the MD&A on the Canadian segment.

/T/

Egypt
                                               Nine Months Ended
----------------------------------------------------------------------------
                                    September 30, 2008 September 30, 2007(i)
----------------------------------------------------------------------------
(000s, except per Bbl amounts)             $     $/Bbl         $      $/Bbl
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Oil sales                             74,886     92.33       617      56.73
Royalties and other                   31,300     38.59       237      21.84
Current taxes                         12,929     15.94       113      10.41
Operating expenses                     3,951      4.87        25       2.33
----------------------------------------------------------------------------

Netback                               26,706     32.93       242      22.15

----------------------------------------------------------------------------
----------------------------------------------------------------------------
(i) Represents five days of production.


                                              Three Months Ended
----------------------------------------------------------------------------
                                    September 30, 2008 September 30, 2007(i)
----------------------------------------------------------------------------
(000s, except per Bbl amounts)             $     $/Bbl         $      $/Bbl
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Oil sales                             26,275     92.25       617      56.73
Royalties and other                   10,386     36.46       237      21.84
Current taxes                          4,290     15.06       113      10.41
Operating expenses                     1,914      6.72        25       2.33
----------------------------------------------------------------------------

Netback                                9,685     34.01       242      22.15

----------------------------------------------------------------------------
----------------------------------------------------------------------------
(i) Represents five days of production.

/T/

The netback for Egypt for Q3-2008 includes average quarterly production of 183 Bopd from the property acquisition that closed on August 18, 2008, and 983 Bopd from the GHP acquisition that closed on February 5, 2008. The average selling price during the quarter for this production was $92.25/Bbl, which represents a gravity/quality adjustment of approximately $22.53/Bbl to an average Dated Brent oil price for the period of $114.78/Bbl.

- Royalties and taxes as a percentage of revenue increased to 59% in the first nine months of 2008, compared to 57% in the same period of 2007. Royalty and tax rates fluctuate in Egypt due to changes in the excess cost oil whereby the PSC allows for recovery of operating and capital costs through a reduction in government take.

- Operating costs for the three and nine months ended September 30, 2008 have increased to $6.72/Bbl and $4.87/Bbl, respectively (2007 - $2.33/Bbl and $2.33/Bbl, respectively). The increased operating costs are due to a high number of workovers on the West Gharib PSC, higher diesel costs and increased staffing.

/T/

Yemen
                                                Nine Months Ended
----------------------------------------------------------------------------
                                     September 30, 2008  September 30, 2007
----------------------------------------------------------------------------
(000s, except per Bbl amounts)              $     $/Bbl         $     $/Bbl
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Oil sales                             118,501    111.26    70,765     67.24
Royalties and other                    56,621     53.16    27,117     25.77
Current taxes                          15,628     14.67     7,212      6.85
Operating expenses                      9,525      8.94     6,838      6.50
----------------------------------------------------------------------------

Netback                                36,727     34.49    29,598     28.12

----------------------------------------------------------------------------
----------------------------------------------------------------------------


                                               Three Months Ended
----------------------------------------------------------------------------
                                     September 30, 2008  September 30, 2007
----------------------------------------------------------------------------
(000s, except per Bbl amounts)              $     $/Bbl         $     $/Bbl
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Oil sales                              40,432    114.48    25,709     75.29
Royalties and other                    19,744     55.90    10,296     30.15
Current taxes                           5,461     15.46     2,715      7.95
Operating expenses                      3,174      8.99     2,465      7.22
----------------------------------------------------------------------------

Netback                                12,053     34.13    10,233     29.97

----------------------------------------------------------------------------
----------------------------------------------------------------------------

/T/

In Yemen, netback increased 18% and 24% in the three and nine month periods ending September 30, 2008, respectively, compared with the same periods of 2007, primarily as a result of oil sales increasing by 57% and 67%, respectively. The increase in sales was mainly due to oil prices increasing in the three and nine month periods ending September 30, 2008 by 52% and 65%, respectively, over 2007. Sales volumes remained constant in Q3-2008 compared with Q3-2007.

- Royalties and taxes as a percentage of revenue increased to 61% in the first nine months of 2008 compared with 49% in 2007. Royalty and tax rates fluctuate in Yemen due to changes in the amount of cost sharing oil, whereby the Block 32 and Block S-1 PSAs allow for the recovery of operating and capital costs through a reduction in government take of oil production.

- Operating expenses on a per barrel basis for the three and nine months ended September 30, 2008 increased 25% and 38%, respectively, mainly due to declining production in the Tasour field, increased diesel costs and well workovers.

DERIVATIVE COMMODITY CONTRACTS

TransGlobe uses hedging arrangements as part of its risk management strategy to manage commodity price fluctuations and stabilize cash flows for future exploration and development programs. The hedging program was expanded significantly in September 2007 to protect the cash flows from the added risk of commodity price exposure following a marked increase in TransGlobe's debt levels resulting from the Dublin and Drucker acquisitions.

The estimated fair value of unrealized commodity contracts is reported on the Consolidated Balance Sheets, with any change in the unrealized positions recorded to income. The fair values of these transactions are based on an approximation of the amounts that would have been paid to, or received from, counter-parties to settle the transactions outstanding as at the Consolidated Balance Sheet date with reference to forward prices and market values provided by independent sources. The actual amounts realized may differ from these estimates.

From a corporate perspective, the high commodity prices in the quarter had a positive impact on the Company's revenue. However, these strong prices resulted in realized losses recorded on the derivative commodity contracts which were closed out during the quarter, based on a weighted average Dated Brent oil price of $114.78/Bbl. The forward curve prices based on Dated Brent oil of $98.13/Bbl at September 30, 2008, compared with $138.86/Bbl at June 30, 2008, resulted in the recording of unrealized gains on the future derivative commodity contracts for the three months ended September 30, 2008. As a result of the difference between the forward curve prices at December 31, 2007 based on Dated Brent oil of $96.02/Bbl and the price at September 30, 2008 narrowing from June 30, 2008, much of the unrealized loss recorded in Q2-2008 was reversed and a smaller unrealized loss was recorded for the nine months ended September 30, 2008.

/T/

                                     Three Months Ended   Nine Months Ended
                                         September 30        September 30
----------------------------------------------------------------------------
($000s)                                  2008      2007      2008      2007
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Realized cash loss on commodity
 contracts                             (2,649)        -    (7,526)        -
Unrealized gain (loss) on remaining
 commodity contracts                   17,539    (1,033)   (1,929)   (1,187)
----------------------------------------------------------------------------

Total derivative gain (loss) on
 commodity contracts                   14,890    (1,033)   (9,455)   (1,187)

----------------------------------------------------------------------------
----------------------------------------------------------------------------

/T/

If the Dated Brent oil price remains at the level experienced at the end of Q3-2008, the derivative liability will be realized over the next two years. However, a 10% decrease in Dated Brent oil prices would result in a $3.2 million reduction in the derivative commodity contract liability, thus reducing the unrealized loss by the same amount. Conversely, a 10% increase in Dated Brent oil prices would increase the unrealized loss on commodity contracts by $3.4 million. The following commodity contracts are outstanding at September 30, 2008:

/T/

                                                                Dated Brent
                                                                    Pricing
Period                              Volume              Type       Put-Call
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Crude Oil
----------
 January 1, 2008
  -December 31, 2008     12,000 Bbls/month  Financial Collar  $60.00-$81.20
 January 1, 2009
  -December 31, 2009     12,000 Bbls/month  Financial Collar  $60.00-$82.10
 September 1, 2008
  -January 31, 2009      11,000 Bbls/month  Financial Collar  $60.00-$88.80
 February 1, 2009
  -December 31, 2009      6,000 Bbls/month  Financial Collar  $60.00-$86.10
 January 1, 2010
  -August 31, 2010       12,000 Bbls/month  Financial Collar  $60.00-$84.25
----------------------------------------------------------------------------
----------------------------------------------------------------------------


The total volumes hedged for the balance of 2008 and the following years
are:

                                     3 Months
                                         2008           2009           2010
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Bbls                                   69,000        221,000         96,000
Bopd                                      750            605            395
----------------------------------------------------------------------------
----------------------------------------------------------------------------

/T/

As a result of the re-evaluation of management's intent in Q2-2008 for the derivative commodity contracts, the contracts were classified as both current and long-term liabilities on the Balance Sheet as there is no intent to settle these derivative instruments early. At September 30, 2008, $5.0 million of the derivative commodity contracts were classified as current liabilities and $4.0 million of the derivative commodity contracts were classified as long-term liabilities.

/T/

GENERAL AND ADMINISTRATIVE EXPENSES
                                                  Nine Months Ended
----------------------------------------------------------------------------
                                     September 30, 2008  September 30, 2007
----------------------------------------------------------------------------
(000s, except per Bbl amounts)              $     $/Bbl         $     $/Bbl
----------------------------------------------------------------------------
----------------------------------------------------------------------------
G&A (gross)                             7,360      3.58     4,455      3.08
Stock-based compensation                1,246      0.61       885      0.61
Capitalized G&A                        (1,357)    (0.66)   (1,166)    (0.80)
Overhead recoveries                       (46)    (0.02)     (193)    (0.13)
----------------------------------------------------------------------------

G&A (net)                               7,203      3.51     3,981      2.76

----------------------------------------------------------------------------
----------------------------------------------------------------------------

                                              Three Months Ended
----------------------------------------------------------------------------
                                     September 30, 2008  September 30, 2007
----------------------------------------------------------------------------
(000s, except per Bbl amounts)              $     $/Bbl         $     $/Bbl
----------------------------------------------------------------------------
----------------------------------------------------------------------------
G&A (gross)                             2,101      3.29     1,531      3.18
Stock-based compensation                  480      0.75       300      0.62
Capitalized G&A                          (515)    (0.81)     (303)    (0.63)
Overhead recoveries                         -         -       (79)    (0.16)
----------------------------------------------------------------------------

G&A (net)                               2,066      3.23     1,449      3.01

----------------------------------------------------------------------------
----------------------------------------------------------------------------

/T/

In the three and nine months ended September 30, 2008, G&A increased 43% and 81%, respectively (7% and 27% increase, respectively, on a sales Bbl basis), compared with the same periods in 2007. The G&A per Bbl is higher mainly as a result of the West Gharib acquisitions, a new operated area for the Company, which required higher staffing levels and increased travel costs. Higher professional fees resulting from the acquisitions and increased compliance, as well as one-time charges relating to the disposition of the Canadian operations also contributed to the rise in total G&A costs.

INTEREST ON LONG-TERM DEBT

Interest expense in the three and nine months ended September 30, 2008 increased to $0.8 million and $5.1 million, respectively (2007 - $0.1 million and $0.1 million, respectively). Interest expense for the three and nine months ended September 30, 2008 includes interest on long-term debt and amortization of transaction costs associated with long-term debt. In the three and nine months ended September 30, 2008, the Company expensed $0.1 million and $1.8 million, respectively, of transaction costs. The Company had $58.0 million of debt outstanding on September 30, 2008 (September 30, 2007 - $63.0 million). The long-term debt bears interest at the Eurodollar Rate plus three percent.

/T/

DEPLETION AND DEPRECIATION
                                                     Nine Months Ended
----------------------------------------------------------------------------
                                     September 30, 2008  September 30, 2007
----------------------------------------------------------------------------
(000s, except per Bbl amounts)              $     $/Bbl         $   $/Bbl(i)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Egypt                                  16,444     20.28     4,329     20.09
Yemen                                   9,394      8.82     9,544      9.07
Corporate                                 295         -       109         -
----------------------------------------------------------------------------

                                       26,133     13.93    13,982     13.10

----------------------------------------------------------------------------
----------------------------------------------------------------------------
(i) Egypt depletion and depreciation $/Bbl for the nine months ended
    September 30, 2007 excludes $4.1 million in dry hole costs on the Nuqra
    block written-off prior to the West Gharib PSC acquisition.


                                               Three Months Ended
----------------------------------------------------------------------------
                                     September 30, 2008  September 30, 2007
----------------------------------------------------------------------------
(000s, except per Bbl amounts)              $     $/Bbl         $   $/Bbl(i)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Egypt                                   5,523     19.39       425     17.86
Yemen                                   3,221      9.12     3,276      9.59
Corporate                                 218         -        38         -
----------------------------------------------------------------------------

                                        8,962     13.70     3,739     10.61

----------------------------------------------------------------------------
----------------------------------------------------------------------------
(i) Egypt depletion and depreciation $/Bbl for the three months ended
    September 30, 2007 excludes $0.2 million in dry hole costs on the Nuqra
    block written-off prior to the West Gharib PSC acquisition.

/T/

In Egypt, depletion and depreciation ("DD&A") in the three and nine months ended September 30, 2008 increased to $5.5 million and $16.4 million, respectively, due to DD&A charges from the West Gharib acquisitions in Egypt. The high DD&A costs per Bbl result from the fact that DD&A is depleted on proved reserves, while the purchase price for the Egypt acquisitions were based on proved plus probable reserves. This DD&A rate per Bbl are expected to decrease as the probable reserves are converted to proved reserves.

In Yemen, DD&A on a Bbl basis remained consistent for the three and nine months ended September 30, 2008.

In Egypt, unproven property costs of $9.9 million relating to $7.9 million in Nuqra and $2.0 million in West Gharib were excluded from costs subject to depletion and depreciation. In Yemen, unproven property costs of $6.8 million relating to Block 72, Block 75 and Block 84 were excluded from costs subject to depletion and depreciation.

/T/

CAPITAL EXPENDITURES/DISPOSITIONS
                                                     Nine Months Ended
----------------------------------------------------------------------------
                                                September 30,  September 30,
                                                        2008           2007
----------------------------------------------------------------------------
(000s)                                                     $              $
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Egypt                                                 23,157          3,737
Yemen                                                  6,624         13,831
Corporate                                                152             21
----------------------------------------------------------------------------
                                                      29,933         17,589
Acquisitions                                          62,011         68,030
----------------------------------------------------------------------------

Total                                                 91,944         85,619

----------------------------------------------------------------------------
----------------------------------------------------------------------------

/T/

In Egypt, the Company drilled nine wells in the nine months ended September 30, 2008, including three oil wells at Hana, two oil wells at South Rahmi, one oil well at each of Arta and Hoshia, a water injection well at Hoshia and a dry hole at West Hoshia in the West Gharib area. TransGlobe also completed a 3-D seismic program on the West Gharib Block. In February 2008, the Company acquired the shares of GHP that holds a 30% working interest in the West Gharib PSC and valued the property, plant and equipment of GHP at $36.6 million. Goodwill of $3.6 million was recorded on this acquisition. TransGlobe further increased its ownership in the remaining eight non-Hana leases on the West Gharib PSC by 25% to 100% in August, 2008 through an $18.0 million property acquisition.

In Yemen, the Company drilled four wells on Block 32, completed construction of a six-inch gas pipeline connecting the Godah production facility to the Tasour Central Production Facility and completed a 3-D seismic program on Block 72 during the nine months ended September 30, 2008.

OUTSTANDING SHARE DATA

As at September 30, 2008, the Company had 59,551,839 common shares issued and outstanding.

In August 2008, the Company renewed its Normal Course Issuer Bid ("NCIB") with the Toronto Stock Exchange ("TSX"). Pursuant to the NCIB, the Company may repurchase, from time to time, as it considers advisable, up to 5,558,322 common shares during the 12-month period commencing August 1, 2008 and ending July 31, 2009. During Q3-2008, the Company repurchased 300,000 common shares at an average price of C$3.87 per share. As at September 30, 2008, 248,000 of these shares had been cancelled. The remaining 52,000 shares were cancelled in October, 2008. During the nine months ended September 30, 2007, the Company purchased 115,900 common shares at an average price of C$4.07 per share.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity describes a company's ability to access cash. Companies operating in the upstream oil and gas industry require sufficient cash in order to fund capital programs necessary to maintain and increase production and proved reserves, to acquire strategic oil and gas assets and to repay debt. TransGlobe's capital programs are funded principally by cash provided from operating activities. A key measure that TransGlobe uses to measure the Company's overall financial strength is debt-to-cash flow from operating activities (calculated on a 12-month rolling basis). TransGlobe's debt-to-cash flow from operating activities ratio, a key short-term leverage measure, remained strong at 0.9 times at September 30, 2008. This was within the Company's target range of no more than 2.0 times.

The following table illustrates TransGlobe's sources and uses of cash during the nine month periods ended September 30, 2008 and 2007:

/T/

Sources and Uses of Cash
                                             Nine Months Ended September 30
----------------------------------------------------------------------------
($000s)                                                2008            2007
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cash sourced
 Cash flow from continuing operations(i)             46,780          26,736
 Increase in long-term debt                          55,000          63,000
 Exercise of options                                    514             605
----------------------------------------------------------------------------
                                                    102,294          90,341
Cash used
 Exploration and development expenditures            29,933          17,589
 Acquisitions                                        62,011          68,030
 Repayment of long-term debt                         55,000               -
 Bank financing costs                                 1,339           1,346
 Options surrendered for cash payments                  256               -
 Repurchase of common shares                          1,135             471
 Other                                                   62            (228)
----------------------------------------------------------------------------
                                                    149,736          87,208
----------------------------------------------------------------------------
Net cash from continuing operations                 (47,442)          3,133
Net cash from discontinued operations                53,588           1,523
Changes in non-cash working capital                 (10,282)         (2,945)
----------------------------------------------------------------------------
Increase (decrease) in cash and cash
 equivalents                                         (4,136)          1,711
Cash and cash equivalents - beginning of
 period                                              12,729           8,836
----------------------------------------------------------------------------

Cash and cash equivalents - end of period             8,593          10,547

----------------------------------------------------------------------------
----------------------------------------------------------------------------
(i) Cash flow from continuing operations is a non-GAAP measure that
    represents cash generated from operating activities before changes in
    non-cash working capital.

/T/

Funding for the Company's capital expenditures, the acquisition of GHP, and asset purchase in the first nine months of 2008 was provided by cash flow from operations, working capital, long-term debt, and the sale of the Canadian oil and gas assets.

Working capital is the amount by which current assets exceed current liabilities. At September 30, 2008 the Company had working capital of $24.8 million (December 31, 2007 - $5.5 million) including discontinued operations. Accounts receivable increased primarily as a result of increased working interest in the West Gharib concession in Egypt. These receivables are not considered to be impaired. Accounts payable increased due to the GHP acquisition and increased drilling activity in Egypt.

The Company anticipates funding its remaining approved 2008 exploration and development program of $38.0 million ($29.9 million incurred to September 30, 2008) and contractual commitments through the use of working capital and cash generated by operating activities. TransGlobe possesses flexibility with respect to its drilling program and is well positioned to manage through the current financial crisis. Fluctuations in commodity prices, product demand, foreign exchange rates, interest rates and various other risks may impact capital resources.

At the end of the third quarter of 2008, the Company had drawn $58.0 million against its Revolving Credit Agreement of $60.0 million.

/T/

($000s)                              September 30, 2008   December 31, 2007
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Revolving Credit Agreement                       58,000              50,000
Term Loan Agreement                                   -               8,000
----------------------------------------------------------------------------
                                                 58,000              58,000
Unamortized transaction costs                      (873)             (1,315)
----------------------------------------------------------------------------
                                                 57,127              56,685
----------------------------------------------------------------------------
Current portion of long-term debt                     -               4,727
----------------------------------------------------------------------------
Long-term debt                                   57,127              51,958
----------------------------------------------------------------------------
----------------------------------------------------------------------------

/T/

The Company is subject to financial covenants in its Revolving Credit Agreement. The key financial covenants for the quarter are as follows:

- Interest coverage ratio of greater than 3.5 to 1.0, calculated as EBITDAX to interest expense, for the immediately preceding four consecutive fiscal quarters. For the purposes of the financial covenant calculations EBITDAX shall mean Consolidated Net Income before interest, income taxes, depreciation, depletion, amortization, and accretion, unrealized hedging losses and stock-based compensation expense.

- Indebtedness to EBITDAX of less than 2.0 to 1.0. For the purposes of the financial covenant calculation, indebtedness shall mean the balance of the Revolving Credit Facility, letters of credit, and any amounts payable in connection with a realized derivative loss.

- Current ratio (current assets to current liabilities, excluding the current portion of long-term debt) of greater than 1.0 to 1.0.

The Company is in compliance with all financial covenants at September 30, 2008.

COMMITMENTS AND CONTINGENCIES

As part of its normal business, the Company entered into arrangements and incurred obligations that will impact the Company's future operations and liquidity. The principal commitments of the Company are as follows:

/T/

($000s)                           Payment Due by Period(i,ii)
----------------------------------------------------------------------------
                Recognized in Contractual
                    Financial        Cash Less than    1-3   4-5  More than 
                   Statements       Flows    1 year  years years    5 years 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Accounts payable 
 and accrued 
 liabilities    Yes-Liability      21,837    21,837      -     -          -
Long-term debt:
 Revolving Credit 
  Agreement     Yes-Liability      58,000         - 58,000     -          -
Office and 
 equipment leases          No         840       374    466     -          -
Minimum work 
 commitments(iii)          No      12,900       500  5,800 6,600          -
----------------------------------------------------------------------------
Total                              93,577    22,711 64,266 6,600          -
----------------------------------------------------------------------------
----------------------------------------------------------------------------
i.   Payments exclude ongoing operating costs related to certain leases,
     interest on long-term debt and payments made to settle derivatives.
ii.  Payments denominated in foreign currencies have been translated at 
     September 30, 2008 exchange rates.
iii. Minimum work commitments include contracts awarded for capital projects
     and those commitments related to exploration and drilling obligations.

/T/

Pursuant to the East Hoshia Development Lease in Egypt, the Company has committed to drilling three exploration wells and submitted a letter of production guarantee for $4.0 million as security (expiring June 1, 2009).

Pursuant to the PSA for Block 72, Yemen, the Contractor (joint venture partners) has a minimum financial commitment of $4.0 million ($1.3 million to TransGlobe) during the first exploration period. The remaining commitment to TransGlobe is $0.5 million. This period has been extended to January 12, 2009 and applies to exploration work consisting of seismic acquisition (completed) and one remaining exploration well.

Pursuant to the PSA for Block 75, Yemen, the Contractor (joint venture partners) has a minimum financial commitment of $7.0 million ($1.8 million to TransGlobe) for the signature bonus and first exploration period work program consisting of seismic acquisition and one exploration well. The first 36-month exploration period commenced March 8, 2008. The Company issued a $1.5 million letter of credit (expiring November 15, 2011) to guarantee the Company's performance under the first exploration period. The letter is secured by a guarantee granted by Export Development Canada.

Pursuant to the bid awarded for Block 84, Yemen, the Contractor (joint venture partners) has a minimum financial commitment of $20.1 million ($6.6 million to TransGlobe) for the signature bonus and first exploration period work program consisting of seismic acquisition and four exploration wells. The first 42-month exploration period will commence when the PSA has been approved and ratified by the government of Yemen, anticipated to occur in 2008.

Pursuant to the August 18, 2008 asset purchase agreement for a 25% interest in eight development leases on the West Gharib concession in Egypt, the Company has committed to paying the vendor a success fee to a maximum of $7.0 million if incremental reserve thresholds are reached in the East Hoshia (up to $5.0 million) and South Rahmi (up to $2.0 million) development leases.

OPERATING RESULTS FROM DISCONTINUED OPERATIONS

The following applies to the Canadian operations only. The sale of the Canadian operations closed April 30, 2008. Year-to-date 2008 figures include four months of operational and financial results. Comparative 2007 Q3 and year-to-date figures are for full periods. The Canadian operations and results have been accounted for as discontinued operations.

/T/

Net Operating Results

Canada

                                              Nine Months Ended
----------------------------------------------------------------------------
                                  September 30, 2008     September 30, 2007
----------------------------------------------------------------------------
(000s, except per Boe amounts)         $       $/Boe          $       $/Boe
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Oil sales                          2,189       96.36      3,683       62.19
Gas sales ($ per Mcf)              7,113        8.78     10,849        6.62
NGL sales                          1,606       82.73      2,758       52.06
Other sales                          115           -        337           -
----------------------------------------------------------------------------
                                  11,023       62.25     17,627       45.75
Royalties and other                2,368       13.37      3,087        8.01
Operating expenses                 2,302       13.00      3,079        7.99
----------------------------------------------------------------------------
Netback                            6,353       35.88     11,461       29.75
----------------------------------------------------------------------------
----------------------------------------------------------------------------

                                             Three Months Ended
----------------------------------------------------------------------------
                                  September 30, 2008     September 30, 2007
----------------------------------------------------------------------------
(000s, except per Boe amounts)         $       $/Boe          $       $/Boe
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Oil sales                              -           -      1,458       74.05
Gas sales ($ per Mcf)                  -           -      3,454        6.19
NGL sales                              -           -        926       58.43
Other sales                            -           -         76           -
----------------------------------------------------------------------------
                                                          5,914       46.00
Royalties and other                    -           -        943        7.33
Operating expenses                     -           -        855        6.65
----------------------------------------------------------------------------
Netback                                -           -      4,116       32.02
----------------------------------------------------------------------------
----------------------------------------------------------------------------


Depreciation, Depletion and Accretion ("DD&A")

                                              Nine Months Ended
----------------------------------------------------------------------------
                                  September 30, 2008     September 30, 2007
----------------------------------------------------------------------------
(000s, except per Boe amounts)         $       $/Boe          $       $/Boe
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Canada                             2,678       15.12      8,567       22.16
----------------------------------------------------------------------------
----------------------------------------------------------------------------

                                             Three Months Ended
----------------------------------------------------------------------------
                                  September 30, 2008     September 30, 2007
----------------------------------------------------------------------------
(000s, except per Boe amounts)         $       $/Boe          $       $/Boe
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Canada                                 -           -      3,097       24.10
----------------------------------------------------------------------------
----------------------------------------------------------------------------

/T/

In Canada, DD&A decreased 33% per Boe to $15.12/Boe in the nine months ended September 30, 2008 compared with $22.52/Boe in the same period in 2007. DD&A was not recognized on the Canadian assets after the held-for-sale criterion had been met.

Future Income Taxes

The future income recovery included in net income from discontinued operations for the nine months ended September 30, 2008 was $0.08 million (2007 expense of $0.06 million). This cost relates to a non-cash expense for taxes to be paid in the future as Canadian tax pools reverse.

/T/

Capital expenditures

                                              Nine Months Ended 
----------------------------------------------------------------------------
($000s)                           September 30, 2008     September 30, 2007
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Canada                                           749                  8,880
----------------------------------------------------------------------------
----------------------------------------------------------------------------

/T/

CHANGES IN ACCOUNTING POLICIES

Effective January 1, 2008, the Company adopted the Canadian Institute of Chartered Accountants ("CICA") Section 1535, Capital Disclosures as issued by the Accounting Standards Board ("AcSB"). 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, and whether it has complied with any externally imposed capital requirements and, if not, the consequences of such non-compliance.

Effective January 1, 2008, the Company adopted CICA Section 3862, Financial Instruments Disclosures, and CICA Section 3863, Financial Instruments Presentations, which require incremental disclosures regarding the significance of financial instruments for the entity's financial position and performance; and the nature, extent and management of risks arising from financial instruments to which the entity is exposed.

Foreign currency translation  

In the second quarter of 2008, as a result of the sale of the Canadian oil and natural gas interests, the Company reviewed its foreign currency translation policy for its Canadian operations and determined that such operations are now integrated. The accounts of integrated foreign operations are translated using the temporal method, whereby monetary assets and liabilities are translated at the period-end exchange rates, non-monetary assets and liabilities at the historical rates, and revenues and expenses at the rates for the period, except for the depreciation, depletion and accretion expense, which is translated on the same basis as the related assets. Translation gains and losses related to the operations are included in net income. Previously, operations in Canada were considered to be self-sustaining and translated using the current rate method. Under the current rate method, assets and liabilities are translated at the period-end exchange rates, while revenues and expense are translated using rates for the period and gains and losses are included as a separate component of shareholders' equity. This change in practice was adopted prospectively beginning May 1, 2008.

New accounting standards

In February 2008, the CICA issued Section 3064, Goodwill and intangible assets, replacing Section 3062, Goodwill and other intangible assets and 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 Company is currently evaluating the impact of the adoption of this new Section on its Consolidated Financial Statements.

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 Canada's current Generally Accepted Accounting Principles ("GAAP") for all publicly accountable profit-oriented enterprises. The Company is currently evaluating the impact of this change on its Consolidated Financial Statements.

INTERNAL CONTROLS OVER FINANCIAL REPORTING & DISCLOSURE AND PROCEDURES

TransGlobe is required to comply with Multilateral Instrument 52-109 "Certification of Disclosure in Issuers' Annual and Interim Filings", otherwise referred to as Canadian SOX. The 2008 certificate requires that the Company disclose in the interim MD&A any changes in the Company's internal control over financial reporting that occurred during the period that has materially affected, or is reasonable likely to materially affect, the Company's internal control over financial reporting. The Company confirms that no such changes were made to the internal controls over financial reporting during the first nine months of 2008.

/T/

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statements of Income and Retained Earnings 
(Unaudited - Expressed in thousands of U.S. Dollars, except per share
 amounts)

                                     Three Months Ended   Nine Months Ended
                                           September 30        September 30
                                         2008      2007      2008      2007
----------------------------------------------------------------------------
----------------------------------------------------------------------------

REVENUE
 Oil and gas sales, net of royalties
  and other                          $ 36,577  $ 15,793  $105,466  $ 44,028
 Derivative gain (loss) on commodity
  contracts (Note 14a)                 14,890    (1,033)   (9,455)   (1,187)
 Other income                              11        34       145        74
----------------------------------------------------------------------------
                                       51,478    14,794    96,156    42,915
----------------------------------------------------------------------------

EXPENSES
 Operating                              5,088     2,490    13,476     6,863
 General and administrative             2,066     1,449     7,203     3,981
 Interest on long-term debt               783        92     5,068        92
 Foreign exchange (gain) loss              41        30        28       (13)
 Depletion and depreciation (Note 6)    8,962     3,739    26,133    13,982
----------------------------------------------------------------------------
                                       16,940     7,800    51,908    24,905
----------------------------------------------------------------------------

Income before income taxes             34,538     6,994    44,248    18,010
----------------------------------------------------------------------------

Income taxes - current                  9,751     2,828    28,557     7,325
----------------------------------------------------------------------------

NET INCOME FROM CONTINUING
 OPERATIONS                            24,787     4,166    15,691    10,685
NET INCOME FROM DISCONTINUED
 OPERATIONS (Note 4)                        3     1,032     8,192     2,836
----------------------------------------------------------------------------
NET INCOME                             24,790     5,198    23,883    13,521

Retained earnings, beginning of
 period                                56,880    53,308    57,787    45,360
Repurchase of common shares (Note 8)     (756)        -      (756)     (375)
----------------------------------------------------------------------------

RETAINED EARNINGS, END OF PERIOD     $ 80,914  $ 58,506  $ 80,914  $ 58,506
----------------------------------------------------------------------------

Net income from continuing
 operations per share (Note 12)
  - Basic                            $   0.41  $   0.07  $   0.26  $   0.18
  - Diluted                          $   0.41  $   0.07  $   0.26  $   0.18
----------------------------------------------------------------------------

Net income from discontinued
 operations per share (Note 12)
 - Basic                             $     -   $   0.02  $   0.13  $   0.05
 - Diluted                           $     -   $   0.01  $   0.13  $   0.04
----------------------------------------------------------------------------

Net income per share (Note 12)
 - Basic                             $   0.41  $   0.09  $   0.39  $   0.23
 - Diluted                           $   0.41  $   0.08  $   0.39  $   0.22
----------------------------------------------------------------------------
----------------------------------------------------------------------------
See accompanying notes to the consolidated financial statements.


Consolidated Statements of Comprehensive Income 
(Unaudited - Expressed in thousands of U.S. Dollars)

                                      Three Months Ended  Nine Months Ended
                                            September 30       September 30
                                            2008    2007     2008      2007
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Net income                              $ 24,790 $ 5,198 $ 23,883  $ 13,521
Other comprehensive income (loss):
 Foreign currency translation
  adjustment                                   -   3,767     (886)    8,323
----------------------------------------------------------------------------

COMPREHENSIVE INCOME                    $ 24,790 $ 8,965 $ 22,997  $ 21,844
----------------------------------------------------------------------------
----------------------------------------------------------------------------
See accompanying notes to the consolidated financial statements.



Consolidated Balance Sheets
(Unaudited - Expressed in thousands of U.S. Dollars)


                                                       As at          As at
                                                September 30,   December 31,
                                                        2008           2007
----------------------------------------------------------------------------
----------------------------------------------------------------------------

ASSETS
Current
 Cash and cash equivalents                    $        8,593 $       12,729
 Accounts receivable                                  41,517         14,408
 Prepaid expenses                                        574            320
 Discontinued operations (Note 4)                        986          4,300
----------------------------------------------------------------------------
                                                      51,670         31,757
----------------------------------------------------------------------------

Goodwill (Note 5)                                      8,180          4,313
Property and equipment (Notes 6 and 16)              174,651        116,288
Discontinued operations (Note 4)                           -         51,861
----------------------------------------------------------------------------
                                              $      234,501 $      204,219
----------------------------------------------------------------------------
----------------------------------------------------------------------------

LIABILITIES
Current
 Accounts payable and accrued
  liabilities                                 $       21,122 $        7,790
 Income taxes payable                                     79              -
 Derivative commodity contracts (Note 14a)             4,991          7,098
 Current portion of long-term debt (Note 7)                -          4,727
 Liabilities of discontinued operations
  (Note 4)                                               636          6,648
----------------------------------------------------------------------------
                                                      26,828         26,263
----------------------------------------------------------------------------

Derivative commodity contracts (Note 14a)              4,036              -
Long-term debt (Note 7)                               57,127         51,958
Discontinued operations (Note 4)                           -          2,755
----------------------------------------------------------------------------
                                                      87,991         80,976
----------------------------------------------------------------------------
Commitments and contingencies (Note 15)

SHAREHOLDERS' EQUITY
Share capital (Note 8)                                50,408         50,128
Contributed surplus (Note 10)                          4,308          3,562
Accumulated other comprehensive income
 (Note 11)                                            10,880         11,766
Retained earnings                                     80,914         57,787
----------------------------------------------------------------------------
                                                     146,510        123,243
----------------------------------------------------------------------------
                                              $      234,501 $      204,219
----------------------------------------------------------------------------
----------------------------------------------------------------------------
See accompanying notes to the consolidated financial statements.


Approved on behalf of the Board:

Ross G. Clarkson, Director                    Fred J. Dyment, Director


Consolidated Statements of Cash Flows 
(Unaudited - Expressed in thousands of U.S. Dollars)


                                     Three Months Ended    Nine Months Ended
                                           September 30         September 30
                                         2008      2007      2008       2007
----------------------------------------------------------------------------
----------------------------------------------------------------------------

CASH FLOWS RELATED TO THE FOLLOWING
 ACTIVITIES:

OPERATING
 Net income                         $  24,790  $  5,198  $ 23,883  $ 13,521
 Net income from discontinued
  operations                                3     1,032     8,192     2,836
----------------------------------------------------------------------------
 Net income from continuing
  operations                           24,787     4,166    15,691    10,685
 Adjustments for items not affecting
  cash:
  Depletion and depreciation            8,962     3,739    26,133    13,982
  Stock-based compensation (Note 9)       480       300     1,246       885
  Amortization of deferred financing
   costs                                   85        40     1,781       113
  Unrealized derivative (gain) loss
   on commodity contracts             (17,539)    1,033     1,929     1,187
 Settlement of asset retirement
  obligations                               -       (21)        -      (116)
 Changes in non-cash working capital    3,708    (3,719)   (6,700)   (6,445)
----------------------------------------------------------------------------
 Cash provided by continuing
  operations                           20,483     5,538    40,080    20,291
 Cash provided by discontinued
  operations                              169     2,508     6,461    10,544
----------------------------------------------------------------------------
                                       20,652     8,046    46,541    30,835
----------------------------------------------------------------------------

FINANCING
 Increase in long-term debt (Note 7)   15,000    63,000    55,000    63,000
 Repayments of long-term debt (Note 7)      -         -   (55,000)        -
 Deferred financing costs                (155)   (1,346)   (1,339)   (1,346)
 Issue of common shares for cash
  (Note 8)                                  -       272       514       605
 Options surrendered for cash
  payments (Note 8)                         -         -      (256)        -
 Repurchase of common shares (Note 8)  (1,135)        -    (1,135)     (471)
 Changes in non-cash working capital      108       211       704       211
----------------------------------------------------------------------------
                                       13,818    62,137    (1,512)   61,999
----------------------------------------------------------------------------

INVESTING
 Exploration and development
  expenditures                        (18,755)   (3,036)  (29,933)  (17,589)
 Acquisitions (Note 3)                (17,552)  (68,030)  (62,011)  (68,030)
 Changes in non-cash working capital   (1,202)    5,651    (4,178)    2,372
----------------------------------------------------------------------------
 Cash used by continuing operations   (37,509)  (65,415)  (96,122)  (83,247)
 Cash provided (used) by
  discontinued operations                   -    (3,176)   47,019    (8,104)
----------------------------------------------------------------------------
                                      (37,509)  (68,591)  (49,103)  (91,351)
----------------------------------------------------------------------------

Effect of exchange rate changes on
 cash and cash equivalents                (41)       99       (62)      228
----------------------------------------------------------------------------

NET (DECREASE) INCREASE IN CASH AND
 CASH EQUIVALENTS                      (3,080)    1,691    (4,136)    1,711

CASH AND CASH EQUIVALENTS,
 BEGINNING OF PERIOD                   11,673     8,856    12,729     8,836
----------------------------------------------------------------------------

CASH AND CASH EQUIVALENTS, END OF
 PERIOD                             $   8,593  $ 10,547  $  8,593  $ 10,547
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Supplemental Disclosure of Cash
 Flow Information
 Cash interest paid                 $     783  $     92  $  5,068  $     92
 Cash taxes paid                    $   9,751  $  2,828  $ 28,557  $  7,325
 Cash is comprised of cash on hand
  and balances with banks           $   8,593  $ 10,547  $  8,593  $ 10,547
 Cash equivalents                           -         -         -         -
----------------------------------------------------------------------------
----------------------------------------------------------------------------
See accompanying notes to the consolidated financial statements.

/T/

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited - Expressed in U.S. Dollars)

1. Basis of presentation

The interim consolidated financial statements include the accounts of TransGlobe Energy Corporation and its subsidiaries ("TransGlobe" or the "Company") as at September 30, 2008 and December 31, 2007 and for the three and nine month periods ended September 30, 2008 and 2007 and are presented in accordance with Canadian generally accepted accounting principles on the same basis as the audited consolidated financial statements as at and for the year ended December 31, 2007, except as outlined in Note 2. These interim financial statements do not contain all the disclosures required for annual financial statements. Accordingly, these interim consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto in TransGlobe's annual report for the year ended December 31, 2007. In these interim consolidated financial statements, unless otherwise indicated, all dollars are expressed in United States (U.S.) dollars. All references to US$ or to $ are U.S. dollars and references to C$ are to Canadian dollars.

2. Changes in accounting policies

Effective January 1, 2008, the Company adopted the Canadian Institute of Chartered Accountants ("CICA") Section 1535, Capital Disclosures as issued by the Accounting Standards Board ("AcSB"). 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, and whether it has complied with any externally imposed capital requirements and, if not, the consequences of such non-compliance.

Effective January 1, 2008, the Company adopted CICA Section 3862, Financial Instruments Disclosures, and CICA Section 3863, Financial Instruments Presentations, which require incremental disclosures regarding the significance of financial instruments for the entity's financial position and performance; and the nature, extent and management of risks arising from financial instruments to which the entity is exposed.

The Company has applied these new standards prospectively in Note 13 - Capital disclosures for Section 1535 Capital Disclosures and in Note 14 - Financial instruments and risk management for Sections 3862 Financial Instruments Disclosures and 3863 Financial Instruments Presentations.

Foreign currency translation

In the second quarter of 2008, as a result of the sale of the Canadian oil and natural gas interests, the Company reviewed its foreign currency translation policy for its Canadian operations and determined that such operations are now integrated. The accounts of integrated operations are translated using the temporal method, whereby monetary assets and liabilities are translated at the period-end exchange rates, non-monetary assets and liabilities at the historical rates and revenues and expenses at the rates for the period, except for the depreciation, depletion and accretion expense, which is translated on the same basis as the related assets. Translation gains and losses related to the operations are included in net income. Previously, operations in Canada were considered to be self-sustaining and translated using the current rate method. Under the current rate method, assets and liabilities are translated at the period-end exchange rates, while revenues and expense are translated using rates for the period and gains and losses are included as a separate component of shareholders' equity. This change in practice was adopted prospectively beginning May 1, 2008.

New accounting standards

In February 2008, the CICA issued Section 3064, Goodwill and intangible assets, replacing Section 3062, Goodwill and other intangible assets and 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 Company is currently evaluating the impact of the adoption of this new Section on its Consolidated Financial Statements.

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 Canada's current Generally Accepted Accounting Principles ("GAAP") for all publicly accountable profit-oriented enterprises. The Company is currently evaluating the impact of this change on its Consolidated Financial Statements.

3. Acquisitions

Corporate acquisitions

a) GHP Exploration (West Gharib) Ltd.

On February 5, 2008, TransGlobe acquired all of the common shares of GHP Exploration (West Gharib) Ltd. ("GHP") for cash consideration of $44.1 million, net of cash acquired. The results of GHP's operations have been included in the consolidated financial statements since that date. GHP holds a 30% interest in the West Gharib Concession area in Egypt. TransGlobe funded the acquisition from bank debt of $40.0 million and cash on hand.

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:

/T/

Cost of acquisition (000s)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cash paid, net of cash acquired                                    $ 44,095
Transaction costs                                                        99
----------------------------------------------------------------------------

                                                                   $ 44,194
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Allocation of purchase price (000s)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Property and equipment                                             $ 36,602
Goodwill                                                              3,602
Working capital, net of cash acquired                                 3,990
----------------------------------------------------------------------------

                                                                   $ 44,194
----------------------------------------------------------------------------
----------------------------------------------------------------------------
/T/

b) Dublin International Petroleum (Egypt) Limited and Drucker Petroleum Inc.

On September 25, 2007, TransGlobe acquired all of the common shares of two private companies, Dublin International Petroleum (Egypt) Limited ("Dublin") and Drucker Petroleum Inc., ("Drucker") for cash consideration of $67.7 million, net of cash acquired. The results of Dublin's and Drucker's operations have been included in the consolidated financial statements since that date. Dublin and Drucker hold interests in eight development leases and associated infrastructure in the West Gharib Concession area in Egypt (Dublin is the operator of this Concession). TransGlobe funded the acquisition from cash on hand and bank debt of $63.0 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:

/T/

Cost of acquisition (000s)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cash paid, net of cash acquired                                    $ 67,949
Transaction costs                                                       317
----------------------------------------------------------------------------

                                                                   $ 68,266
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Allocation of purchase price (000s)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Property and equipment                                             $ 54,823
Goodwill                                                              4,578
Working capital, net of cash acquired                                 8,865
----------------------------------------------------------------------------

                                                                   $ 68,266
----------------------------------------------------------------------------
----------------------------------------------------------------------------

/T/

Property acquisition

On August 18, 2008, TransGlobe completed an oil and gas property acquisition in Egypt for the 25% financial interest in the eight non-Hana development leases. The total cost of the acquisition was $18.0 million, subject to closing adjustments to the effective date of June 1, 2008. In addition, the Company could pay up to an additional $7.0 million if incremental reserve thresholds are reached in the East Hoshia (up to $5.0 million) and in South Rahmi (up to $2.0 million) development leases. The value of the net assets acquired has been assigned to property and equipment. As a result of this property acquisition, TransGlobe now holds a 100% working interest in the West Gharib Concession in Egypt.

4. Discontinued operations

On April 15, 2008, the Company entered into an agreement with a third party for the sale of its Canadian oil and natural gas interests. The sale price of the assets was $56.7 million, subject to normal closing adjustments. The sale closed on April 30, 2008. The Canadian operations have been accounted for as discontinued operations in accordance with Canadian GAAP. Results of the Canadian operations have been included in the financial statements up to the closing date of the sale (the date control was transferred to the purchaser). The Company used the cash proceeds from the sale and cash on hand to repay $55.0 million of debt.

The Company recorded a gain on disposition of $4.4 million, net of tax, in the nine months ended September 30, 2008. The total gain booked is an estimate based on the proceeds expected to be received per the final closing statement of adjustments. The final closing statement of adjustments is expected to be completed in the fourth quarter of 2008.

Discontinued operations as at December 31, 2007 included current assets of $4.3 million, property and equipment of $50.0 million, and a future income tax asset of $1.9 million. Discontinued operations also included current liabilities of $6.6 million and asset retirement obligations of $2.8 million. Discontinued operations at September 30, 2008 included current assets of $0.7 million, property and equipment of $0.3 million, and current liabilities of $0.6 million.

/T/

                                     Three Months Ended   Nine Months Ended
                                           September 30        September 30
----------------------------------------------------------------------------
(000s)                                   2008      2007      2008      2007
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Revenue
 Oil and gas sales, net of royalties  $     -  $  4,971  $  8,655  $ 14,540

Expenses
 Operating                                  -       855     2,302     3,079
 Depletion, depreciation and
  accretion                                 -     3,097     2,678     8,567
----------------------------------------------------------------------------
                                            -     3,952     4,980    11,646
Gain on disposition, net of tax             3         -     4,435         -
----------------------------------------------------------------------------
Income from discontinued operations
 before taxes                               3     1,019     8,110     2,894
Future income tax recovery
 (expense)                                  -        13        82       (58)
----------------------------------------------------------------------------
Net income from discontinued
 operations                           $     3  $  1,032  $  8,192  $  2,836
----------------------------------------------------------------------------
----------------------------------------------------------------------------

/T/

In Canada, the Company capitalized overhead costs relating to exploration and development activities during the nine months ended September 30, 2008 of $0.4 million (2007 - $0.4 million). Unproven property costs of $1.8 million were excluded from the costs subject to depletion and depreciation for 2008 (2007 - $Nil). Future development costs for proved reserves of $0.3 million (2007 - $4.5 million) were included in the depletion and depreciation calculations. Depletion, depreciation and accretion was not recorded while the assets were classified as held for sale.

/T/

5. Goodwill

Changes in the carrying amount of the Company's goodwill are as follows:

                                                 Nine Months  Twelve Months
                                                       Ended          Ended
                                                September 30,   December 31,
(000s)                                                  2008           2007
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Opening balance                                 $      4,313   $          -
Acquired during period                                 3,867          4,313
----------------------------------------------------------------------------
Closing balance                                 $      8,180   $      4,313
----------------------------------------------------------------------------
----------------------------------------------------------------------------

/T/

6. Property and equipment

The Company capitalized overhead costs relating to exploration and development activities during the three and nine months ended September 30, 2008 of $0.4 million and $0.8 million, respectively, in Egypt (2007 - $0.1 million and $0.4 million, respectively) and $0.2 million and $0.2 million, respectively, in Yemen (2007 - $0.1 million and $0.5 million, respectively).

Unproven property costs excluded from the costs subject to depletion and depreciation for the three months ended September 30, 2008 totalled $9.9 million in Egypt (2007 - $9.0 million) and $6.8 million in Yemen (2007 - $2.8 million).

Future development costs for proved reserves included in the depletion calculations for the three months ended September 30, 2008 totalled $1.9 million in Egypt (2007 - $4.4 million) and $6.9 million in Yemen (2007 - $9.1 million).

/T/

7. Long-term debt

                                                September 30,   December 31,
(000s)                                                  2008           2007
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Revolving Credit Agreement                      $     58,000   $     50,000
Term Loan Agreement                                        -          8,000
----------------------------------------------------------------------------
                                                      58,000         58,000
Unamortized transaction costs                           (873)        (1,315)
----------------------------------------------------------------------------
                                                      57,127         56,685
----------------------------------------------------------------------------
Current portion of long-term debt                          -          4,727
----------------------------------------------------------------------------
                                                $     57,127   $     51,958
----------------------------------------------------------------------------
----------------------------------------------------------------------------

/T/

As at September 30, 2008, the Company has a $60.0 million Revolving Credit Agreement of which $58.0 million is drawn. In February 2008, the Company increased its Term Loan Agreement from $8.0 million to $48.0 million. The entire amount of the Term Loan was repaid in April 2008. The Revolving Credit Agreement expires on September 19, 2010 and is secured by a first floating charge debenture over all assets of the Company, a general assignment of book debts, security pledge of the Company's subsidiaries and certain covenants. The Revolving Credit Agreement bears interest at the Eurodollar Rate plus three percent. During the three and nine months ended September 30, 2008, the average effective interest rate was 6.3% and 7.2%, respectively (September 25 - 30, 2007 - 10.1%). In the three and nine months ended September 30, 2008, the Company incurred $0.2 million and $1.3 million, respectively, (2007 - $1.1 million and $1.1 million, respectively) in fees to draw on its Revolving Credit Agreement and Term Loan Agreement.

/T/

The future debt payments on long-term debt as of September 30, 2008 are as
follows:

(000s)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
2008                                                                      -
2009                                                                      -
2010                                                               $ 58,000
----------------------------------------------------------------------------
----------------------------------------------------------------------------


8. Share capital

Authorized

The Company is authorized to issue an unlimited number of common shares with
no par value.

Issued
                                      Nine Months Ended          Year Ended
                                           September 30,        December 31,
                                                   2008                2007
----------------------------------------------------------------------------
(000s)                                 Shares    Amount    Shares    Amount
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Common shares, beginning of period     59,627  $ 50,128    58,883  $ 49,360
Stock options exercised                   173       514       860       605
Stock options surrendered for cash
 payments                                   -      (256)        -         -
Stock-based compensation on exercise        -       403         -       260
Repurchase of common shares              (248)     (381)     (116)      (97)
----------------------------------------------------------------------------
Common shares, end of period           59,552  $ 50,408    59,627  $ 50,128
----------------------------------------------------------------------------
----------------------------------------------------------------------------

/T/

The Company has received regulatory approval to purchase, from time to time, as it considers advisable, up to 5,558,322 common shares under a Normal Course Issuer Bid which commenced August 1, 2008 and will terminate July 31, 2009. During the three months ended September 30, 2008, the Company purchased 300,000 common shares at an average price of C$3.87 per share. At September 30, 2008, 248,000 of these shares had been cancelled. The remaining 52,000 shares were cancelled in October, 2008. The excess of the purchase price over the book value in the amount of $0.8 million was charged to retained earnings during the quarter. During the nine months ended September 30, 2007, the Company purchased 115,990 common shares at an average price of C$4.07 per share, with $0.4 million charged to retained earnings.

/T/

9. Stock option plan

Stock Options
                                      Nine Months Ended          Year Ended
                                           September 30,        December 31,
                                                   2008                2007
----------------------------------------------------------------------------
                                               Weighted            Weighted
                                                Average             Average
                                     No. of    Exercise  No. of    Exercise
(000s, except per share amounts)    Options       Price Options       Price
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Options outstanding, beginning of
 period                               2,936  $     4.11   3,110  $     3.12
Granted                               1,551        4.86   1,091        4.44
Exercised for common shares            (173)       2.25    (860)       0.53
Surrendered for cash payments          (150)       2.66       -           -
Forfeited                              (386)       4.97    (405)       5.01
----------------------------------------------------------------------------
Options outstanding, end of period    3,778  $     4.47   2,936  $     4.11
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Options exercisable, end of period    1,402  $     3.94   1,602  $     3.69
----------------------------------------------------------------------------
----------------------------------------------------------------------------

/T/

Stock-based compensation

Stock-based compensation expense in the three and nine months ended September 30, 2008 of $0.5 million and $1.2 million, respectively, has been recorded in the Consolidated Statements of Income and Retained Earnings (2007 - $0.3 million and $0.9 million). The fair value of all common stock options granted is estimated on the date of grant using the lattice-based binomial option pricing model. The weighted average fair value of the options granted during 2008 and the assumptions used in their determination are noted below:

/T/

----------------------------------------------------------------------------
----------------------------------------------------------------------------
Weighted average fair market value per option (C$)                    1.77
Risk-free interest rate (percent)                                      3.3
Expected volatility (percent)                                        44.16
Expected dividend yield (percent)                                        0
Expected forfeiture rate (non-executive employees)
 (percent)                                                              12
Early exercise (Year 1/Year 2/Year 3/Year 4/Year 5)     (0%/10%/20%/30%/40%)
----------------------------------------------------------------------------
----------------------------------------------------------------------------


Options granted vest annually over a three-year period and expire five years
after the grant date.

10. Contributed surplus

                                           Nine Months Ended     Year Ended
                                                September 30,   December 31,
(000s)                                                  2008           2007
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Contributed surplus, beginning of period      $        3,562  $       2,863
Stock-based compensation expense                       1,149            959
Transfer to common shares on exercise of
 options                                                (403)          (260)
----------------------------------------------------------------------------
Contributed surplus, end of period            $        4,308  $       3,562
----------------------------------------------------------------------------
----------------------------------------------------------------------------


11. Accumulated other comprehensive income

The balance of accumulated other comprehensive income consists of the
following:

                                           Nine Months Ended     Year Ended
                                                September 30,   December 31,
(000s)                                                  2008           2007
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Accumulated other comprehensive income,
 beginning of period                          $       11,766  $       3,212
Other comprehensive income (loss):
Foreign currency translation adjustment                 (886)         8,554
----------------------------------------------------------------------------
Accumulated other comprehensive income, end
 of period                                    $       10,880  $      11,766
----------------------------------------------------------------------------
----------------------------------------------------------------------------

/T/

12. Per share amounts

In calculating the net income per share, net income from continuing operations per share and net income from discontinued operations per share, basic and diluted, the following weighted average shares were used:

/T/

                                     Three Months Ended   Nine Months Ended
                                           September 30        September 30
(000s)                                   2008      2007      2008      2007
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Weighted average number of shares
 outstanding                           59,784    59,554    59,757    59,584
Dilution effect stock options             987       867       867       992
----------------------------------------------------------------------------
Weighted average number of diluted
 shares outstanding                    60,771    60,421    60,624    60,576
----------------------------------------------------------------------------
----------------------------------------------------------------------------

/T/

The treasury stock method assumes that the proceeds received from the exercise of "in-the-money" stock options are used to repurchase common shares at the average market price. In calculating the weighted average number of diluted common shares outstanding for the three and nine month periods ended September 30, 2008, the Company excluded 3,247,000 and 2,556,700 options, respectively (September 30, 2007 - 1,205,000 and 1,181,000) because their exercise price was greater than the period average common share market price in the period.

13. Capital disclosures

The Company's objectives when managing capital are to ensure the Company will have the financial capacity, liquidity and flexibility to fund the ongoing exploration and development of its oil and gas assets. The Company relies on cash flow to fund its capital investments. However, due to long lead cycles of some of its developments and corporate acquisitions, the Company's capital requirements may exceed its cash flow generated in any one period. This requires the Company to maintain financial flexibility and liquidity. The Company sets the amount of capital in proportion to risk and manages to ensure that the total of the long-term debt is not greater than two times the Company's cash flow from operations for the trailing twelve months. For the purposes of measuring the Company's ability to meet the above stated criteria, cash flow from operations is defined as the net income (including net income from discontinued operations) before any deduction for depletion, depreciation and accretion, amortization of deferred financing charges, non-cash stock based compensation, and non-cash derivative loss on commodity contracts.

/T/

The Company defines and computes its capital as follows:

                                                September 30,   December 31,
(000s)                                                  2008           2007
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Shareholders' equity                            $    146,510    $   123,243
Long-term debt, including the current portion         57,127         56,685
Cash                                                  (8,593)       (12,729)
----------------------------------------------------------------------------
Total capital                                   $    195,044    $   167,199
----------------------------------------------------------------------------
----------------------------------------------------------------------------


The Company's debt to cash flow ratio is computed as follows:

                                                    12 Months Trailing
----------------------------------------------------------------------------
                                                September 30,   December 31,
(000s)                                                  2008           2007
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Long-term debt, including the current portion   $     57,127    $    56,685
----------------------------------------------------------------------------

Cash flow from operating activities             $     69,324    $    53,618
Changes in non-cash working capital                   (2,247)        (1,477)
----------------------------------------------------------------------------
Cash flow from operations                       $     67,077    $    52,141
----------------------------------------------------------------------------
Ratio                                                    0.9            1.1
----------------------------------------------------------------------------
----------------------------------------------------------------------------

/T/

The Company's financial objectives and strategy as described above have remained substantially unchanged over the last two completed fiscal years. These objectives and strategy are reviewed on an annual basis. The Company believes that its ratios are within reasonable limits, in light of the relative size of the Company and its capital management objectives.

The Company is also subject to financial covenants in its revolving credit agreement. The key financial covenants for the quarter are as follows:

- Interest coverage ratio of greater than 3.5 to 1.0, calculated as EBITDAX to interest expense, for the immediately preceding four consecutive fiscal quarters. For the purposes of the financial covenant calculations EBITDAX shall mean Consolidated Net Income before interest, income taxes, depreciation, depletion, amortization, and accretion, unrealized hedging losses and stock-based compensation expense.

- Indebtedness to EBITDAX of less than 2.0 to 1.0. For the purposes of the financial covenant calculation, indebtedness shall mean the balance of the Revolving Credit Facility, letters of credit, and any amounts payable in connection with a realized derivative loss.

- Current ratio (current assets to current liabilities, excluding the current portion of long-term debt) of greater than 1.0 to 1.0.

The Company is in compliance with all financial covenants at September 30, 2008.

14. Financial instruments and risk management

Carrying Values and Estimated Fair Values of Financial Assets and Liabilities

The Company has classified its cash and cash equivalents as financial assets held for trading and its derivative commodity contracts as financial liabilities held for trading, which are both measured at fair value with changes being recognized in net income. Accounts receivable are classified as loans and receivables; accounts payable and accrued liabilities, income taxes payable, liabilities of discontinued operations, and long-term debt are classified as other liabilities, all of which are measured at amortized cost.

/T/

Carrying value and fair value of financial assets and liabilities are
summarized as follows:

                                                  September 30, 2008
----------------------------------------------------------------------------
Classification (000s)                         Carrying Value     Fair Value
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Financial assets held-for-trading                $     8,593    $     8,593
Loans and receivables                                 41,517         41,517
Financial liabilities held-for-trading                 9,027          9,027
Other liabilities                                     78,964         79,837
----------------------------------------------------------------------------
----------------------------------------------------------------------------

/T/

Credit Risk

Credit risk is the risk of loss if counterparties do not fulfill their contractual obligations. The majority of the accounts receivable are in respect of oil and gas operations. The Company generally extends unsecured credit to these customers and therefore the collection of accounts receivable may be affected by changes in economic or other conditions. Management believes the risk is mitigated by the size and reputation of the companies to which the Company extends credit. The Company has not experienced any material credit loss in the collection of accounts receivable to date.

Trade and other receivables from continuing operations are analyzed in the table below. With respect to the trade and other receivables that are not impaired and past due, there are no indications as of the reporting date that the debtors will not meet their payment obligations.

/T/

(000s)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Trade and other receivables at September 30, 2008
----------------------------------------------------------------------------
Neither impaired nor past due                                      $ 13,127
Impaired (net of valuation allowance)                                     -
Not impaired and past due in the following period:
 Within 30 days                                                       5,545
 31-60 days                                                           6,301
 61-90 days                                                           6,254
 Over 90 days                                                        10,290
----------------------------------------------------------------------------
----------------------------------------------------------------------------

/T/

In Egypt, the Company sold all of its 2008 production to one purchaser. In Yemen, the Company sold all of its 2008 Block 32 production to one purchaser and all of its 2008 Block S-1 production to one purchaser. In Canada, the Company sold primarily all of its 2008 gas production to one purchaser and primarily all of its 2008 oil production to another single purchaser.

Market Risk

Market risk is the risk or uncertainty arising from possible market price movements and their impact on the future performance of a business. The market price movements that the Company is exposed to include oil and natural gas prices (commodity price risk), foreign currency exchange rates and interest rates, all of which could adversely affect the value of the Company's financial assets, liabilities and financial results.

a) Commodity Price Risk

The Company's operational results and financial condition are partially dependent on the commodity prices received for its oil and natural gas production. Commodity prices have fluctuated significantly this year.

Any movement in commodity prices would have a significant effect on the Company's financial condition. Therefore, the Company has entered into various financial derivative contracts to manage fluctuations in commodity prices in the normal course of operations. The following are the contracts outstanding at September 30, 2008:

/T/

                                                             Dated Brent
                                                             Pricing
Period                Volume              Type               Put-Call
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Crude Oil
 January 1, 2008-
  December 31, 2008   12,000 Bbls/month   Financial Collar   $ 60.00-$81.20
 January 1, 2009-
  December 31, 2009   12,000 Bbls/month   Financial Collar   $ 60.00-$82.10
 September 1, 2008-
  January 31, 2009    11,000 Bbls/month   Financial Collar   $ 60.00-$88.80
 February 1, 2009-
  December 31, 2009    6,000 Bbls/month   Financial Collar   $ 60.00-$86.10
 January 1, 2010-
  August 31, 2010     12,000 Bbls/month   Financial Collar   $ 60.00-$84.25
----------------------------------------------------------------------------
----------------------------------------------------------------------------

/T/

The estimated fair value of unrealized commodity contracts is reported on the Consolidated Balance Sheets, with any change in the unrealized positions recorded to income. The fair values of these transactions are based on an approximation of the amounts that would have been paid to, or received from, counter-parties to settle the transactions outstanding as at the Consolidated Balance Sheet date with reference to forward prices and market values provided by independent sources. The actual amounts realized may differ from these estimates.

When assessing the potential impact of commodity price changes on its financial derivative commodity contracts, the Company believes 10% volatility is a reasonable measure. The effect of a 10% increase in commodity prices on the derivative commodity contracts would decrease net income, for the three and nine months ended September 30, 2008, by $3.4 million. The effect of a 10% decrease in commodity prices on the derivative commodity contracts would increase net income, for the three and nine months ended September 30, 2008, by $3.2 million.

b) Foreign Currency Exchange Risk

The Company's Canadian operations are exposed to fluctuations in foreign currency exchange rates. The Company manages its foreign currency exchange risk by maintaining foreign currency bank accounts and receivable accounts to offset foreign currency payables and planned expenditures.

As the Company's business is conducted primarily in U.S. dollars and its financial instruments are primarily denominated in U.S. dollars, the potential impact of fluctuations in foreign exchange rates on the Company's financial instruments would have a minimal impact on net income and other comprehensive income for the three and nine months ended September 30, 2008.

c) Interest Rate Risk

Fluctuations in interest rates could result in a change in the amount the Company pays to service variable-interest, U.S.-dollar-denominated debt. No derivative contracts were entered into during 2008 to mitigate this risk. When assessing interest rate risk applicable to the Company's variable-interest, U.S.-dollar-denominated debt, the Company believes 1% volatility is a reasonable measure. The effect of interest rates increasing by 1% would decrease the Company's net income, for the three and nine months ended September 30, 2008, by $0.1 million and $0.5 million, respectively. The effect of interest rates decreasing by 1% would increase the Company's net income, for the three and nine months ended September 30, 2008, by $0.1 million and $0.5 million, respectively.

Liquidity Risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. Liquidity describes a company's ability to access cash. Companies operating in the upstream oil and gas industry require sufficient cash in order to fund capital programs necessary to maintain and increase production and proved reserves, to acquire strategic oil and gas assets and to repay debt.

The Company actively maintains credit facilities to ensure it has sufficient available funds to meet current and foreseeable financial requirements at a reasonable cost. The following are the contractual maturities of financial liabilities at September 30, 2008:

/T/

(000s)                           Payment Due by Period(i,ii)
----------------------------------------------------------------------------
                 Recognized in                Less                     More
                     Financial Contractual    than     1-3      4-5    than
                    Statements  Cash Flows  1 year   years    years 5 years
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Accounts
 payable and
 accrued
 liabilities     Yes-Liability   $ 21,837 $ 21,837 $     -  $     - $     -
Long-term
 debt:
 Revolving
  Credit
  Agreement      Yes-Liability     58,000        -  58,000        -       -
Office and
 equipment
 leases                     No        840      374     466        -       -
Minimum work
 commitments(iii)           No     12,900      500    5,800   6,600       -
----------------------------------------------------------------------------
Total                            $ 93,577 $ 22,711 $ 64,266 $ 6,600 $     -
----------------------------------------------------------------------------
----------------------------------------------------------------------------

i.   Payments exclude ongoing operating costs related to certain leases,
     interest on long-term debt and payments made to settle derivatives.
ii.  Payments denominated in foreign currencies have been translated at
     September 30, 2008 exchange rates.
iii. Minimum work commitments include contracts awarded for capital projects
     and those commitments related to exploration and drilling obligations.

/T/

Management believes that future cash flows from operations, working capital and availability under existing banking arrangements will be adequate to support these financial liabilities, as well as its capital programs. The existing banking arrangements at September 30, 2008 consist of a Revolving Credit Facility of $60.0 million of which $58.0 million is drawn.

The table below shows cash outflows for financial derivative instruments based on forward curve prices for Dated Brent oil of $98.13/Bbl at September 30, 2008:

/T/

----------------------------------------------------------------------------
----------------------------------------------------------------------------
Less than 1 year                                                    $ 4,991
1-3 years                                                             4,036
----------------------------------------------------------------------------
----------------------------------------------------------------------------

/T/

As a result of the re-evaluation of management's intent for the derivative commodity contracts, the derivative commodity contracts were classified as both current and long-term liabilities on the Balance Sheet as at September 30, 2008 as there is no intent to early settle these derivative instruments.

15. Commitments and Contingencies

Pursuant to the East Hoshia Development Lease in Egypt, the Company has committed to drilling three exploration wells and submitted a letter of production guarantee for $4.0 million as security (expiring June 1, 2009).

Pursuant to the PSA for Block 72 in Yemen, the Contractor (joint venture partners) has a minimum financial commitment of $4.0 million ($1.3 million to TransGlobe) during the first exploration period. The remaining amount to be spent by TransGlobe is $0.5 million. This period has been extended to January 12, 2009 and applies to exploration work consisting of seismic acquisition (completed) and one remaining exploration well.

Pursuant to the PSA for Block 75 in Yemen, the Contractor (joint venture partners) has a minimum financial commitment of $7.0 million ($1.8 million to TransGlobe) for the signature bonus and first exploration period work program consisting of seismic acquisition and one exploration well. The first 36-month exploration period commenced March 8, 2008. The Company issued a $1.5 million letter of credit (expiring November 15, 2011) to guarantee the Company's performance under the first exploration period. The letter is secured by a guarantee granted by Export Development Canada.

Pursuant to the bid awarded for Block 84 in Yemen, the Contractor (joint venture partners) has a minimum financial commitment of $20.1 million ($6.6 million to TransGlobe) for the signature bonus and first exploration period work program consisting of seismic acquisition and four exploration wells. The first 42-month exploration period will commence when the PSA has been approved and ratified by the government of Yemen, anticipated to occur in 2008.

Pursuant to the August 18, 2008 asset purchase agreement for a 25% interest in eight development leases on the West Gharib concession in Egypt, the Company has committed to paying the vendor a success fee to a maximum of $7.0 million if incremental reserve thresholds are reached in the East Hoshia (up to $5.0 million) and South Rahmi (up to $2.0 million) development leases.

/T/

16. Segmented information
----------------------------------------------------------------------------
                         Egypt                Yemen              Total
----------------------------------------------------------------------------
                                   Nine Months Ended September 30
----------------------------------------------------------------------------
                     2008      2007      2008      2007      2008      2007
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Revenue
Oil and gas
 sales,net of
 royalties
 and other       $ 43,586     $ 380  $ 61,880  $ 43,648  $105,466  $ 44,028
 Other income          33         -         -         -        33         -
----------------------------------------------------------------------------
Total revenue      43,619       380    61,880    43,648   105,499    44,028
----------------------------------------------------------------------------

Segmented expenses
 Operating          3,951        25     9,525     6,838    13,476     6,863
 Depletion and
  depreciation     16,444     4,329     9,394     9,544    25,838    13,873
 Income taxes      12,929       113    15,628     7,212    28,557     7,325
----------------------------------------------------------------------------
Total segmented
 expenses          33,324     4,467    34,547    23,594    67,871    28,061
----------------------------------------------------------------------------
Segmented income $ 10,295   $(4,087) $ 27,333  $ 20,054    37,628    15,967
----------------------------------------------------------------------------

Non-segmented
 expenses
  Derivative loss
   on commodity
   contracts                                                9,455     1,187
  General and
   administrative                                           7,203     3,981
  Interest on
   long-term debt                                           5,068        92
  Foreign exchange
   gain                                                        28       (13)
  Depreciation                                                295       109
  Other income                                               (112)      (74)
----------------------------------------------------------------------------
Total non-
 segmented expenses                                        21,937     5,282
----------------------------------------------------------------------------
Net income from
 continuing
 operations                                                15,691    10,685
Net income from
 discontinued
 operations (Note 4)                                        8,192     2,836
----------------------------------------------------------------------------
Net income                                               $ 23,883  $ 13,521
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Capital
 expenditures
  Exploration
   and
   development   $ 23,157   $ 3,737   $ 6,624  $ 13,831  $ 29,781  $ 17,568
  Property
   acquisitions    18,000         -         -        -     18,000         -
----------------------------------------------------------------------------
                 $ 41,157   $ 3,737   $ 6,624  $ 13,831    47,781    17,568
  Corporate                                                   152        21
  Corporate
   acquisitions                                            36,602    54,637
----------------------------------------------------------------------------
Net capital
 expenditures                                            $ 84,535  $ 72,226
----------------------------------------------------------------------------
----------------------------------------------------------------------------


----------------------------------------------------------------------------
                          Egypt              Yemen               Total
----------------------------------------------------------------------------
                                  Three Months Ended September 30
----------------------------------------------------------------------------
                     2008      2007      2008      2007      2008      2007
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Revenue
 Oil and gas
  sales, net
  of royalties
  and other      $ 15,889     $ 380  $ 20,688  $ 15,413  $ 36,577  $ 15,793
 Other income           -         -         -         -         -         -
----------------------------------------------------------------------------
Total revenue      15,889       380    20,688    15,413    36,577    15,793
----------------------------------------------------------------------------

Segmented
 expenses
  Operating         1,914        25     3,174     2,465     5,088     2,490
  Depletion and
   depreciation     5,523       425     3,221     3,276     8,744     3,701
  Income taxes      4,290       113     5,461     2,715     9,751     2,828
----------------------------------------------------------------------------
Total segmented
 expenses          11,727       563    11,856     8,456    23,583     9,019
----------------------------------------------------------------------------
Segmented income  $ 4,162    $ (183)  $ 8,832   $ 6,957    12,994     6,774
----------------------------------------------------------------------------

Non-segmented
 expenses
  Derivative
   loss on
   commodity
   contracts                                              (14,890)    1,033
  General and
   administrative                                           2,066     1,449
  Interest on
   long-term debt                                             783        92
  Foreign
   exchange gain                                               41        30
  Depreciation                                                218        38
  Other income                                                (11)      (34)
----------------------------------------------------------------------------
Total non-segmented
 expenses                                                 (11,793)    2,608
----------------------------------------------------------------------------

Net income from
 continuing
 operations                                                24,787     4,166
Net income from
 discontinued
 operations (Note 4)                                            3     1,032
----------------------------------------------------------------------------
Net income                                               $ 24,790   $ 5,198
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Capital
 expenditures
  Exploration and
   development   $ 16,644     $ 116   $ 2,043   $ 2,919  $ 18,687   $ 3,035
  Property
   acquisitions    18,000         -         -         -    18,000         -
----------------------------------------------------------------------------
                 $ 34,644     $ 116   $ 2,043   $ 2,919    36,687     3,035
 Corporate                                                     68         1
 Corporate
  acquisitions                                                  -    54,637
----------------------------------------------------------------------------
Net capital
 expenditures                                            $ 36,755  $ 57,673
----------------------------------------------------------------------------
----------------------------------------------------------------------------

                 Sept. 30   Dec. 31  Sept. 30   Dec. 31  Sept. 30   Dec. 31
                     2008      2007      2008      2007      2008      2007
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Property and
 equipment       $123,640   $62,316   $50,312   $53,163  $173,952  $115,479
Goodwill            8,180     4,313         -         -     8,180     4,313
Other              37,478    13,464     8,927     5,906    46,405    19,370
----------------------------------------------------------------------------
Segmented
 assets          $169,298   $80,093   $59,239   $59,069   228,537   139,162
Non-segmented
 assets                                                     4,978     8,896
Discontinued
 operations                                                   986    56,161
----------------------------------------------------------------------------
Total assets                                             $234,501  $204,219
----------------------------------------------------------------------------
----------------------------------------------------------------------------

17. Comparative figures

Certain comparative figures have been reclassified to conform with current
period presentation.


CORPORATE INFORMATION

DIRECTORS AND OFFICERS              TRANSFER AGENT AND REGISTRAR

Robert A. Halpin(1,2,3)             Olympia Trust Company
Director, Chairman of the Board     Calgary, Alberta

Ross G. Clarkson
Director, President & CEO           LEGAL COUNSEL

Lloyd W. Herrick                    Burnet, Duckworth & Palmer, LLP
Director, Vice President & COO      Calgary, Alberta

Erwin L. Noyes(2,3,4)
Director                            BANKER

Geoffrey C. Chase(1,2,4)            Standard Bank Plc
Director                            London, England

Fred J. Dyment(1,3,4)
Director                            AUDITOR

David C. Ferguson                   Deloitte & Touche, LLP
Vice President, Finance, CFO &      Calgary, Alberta
 Corporate Secretary

1. Audit Committee                  EVALUATION ENGINEERS
2. Reserves Committee
3. Compensation Committee           DeGolyer and MacNaughton
4. Governance and                   Canada Limited
   Nominating Committee             Calgary, Alberta

STOCK EXCHANGE LISTINGS             HEAD OFFICE

TSX:            TGL                 2500, 605 -- 5(th) Avenue S.W.
NASDAQ:         TGA                 Calgary, Alberta, Canada, T2P 3H5

                                    Telephone: (403) 264-9888
INVESTOR RELATIONS                  Facsimile: (403) 264-9898

Anne-Marie Buchmuller
Manager, Investor Relations &       EGYPT OFFICE
 Assistant Corporate Secretary
Telephone: (403) 268-9868
Email:                              8, Abd El-Hamid Hassan Street
investor.relations@trans-globe.com  8(th) District
Web site:  www.trans-globe.com      Nasr City, Cairo, Egypt


                                       Nine Months Ended Three Months Ended
                                            September 30       September 30
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Share Information                        2008      2007      2008      2007
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TSX: Price per share - TSX (C$)
 High                                     5.70      6.09     5.20       5.68
 Low                                      2.85      3.50     2.85       3.69
 Close                                    3.35      5.03     3.35       5.03
Average daily trading volume            56,742    40,272   48,801     45,468

NASDAQ: Price per share - NASDAQ
 (US$)(1)
 High                                     5.80      5.45     5.15       5.45
 Low                                      2.70      3.45     2.70       3.45
 Close                                    3.07      5.03     3.07       5.03
Average daily trading volume(1)        180,939   234,995  181,142    317,863
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(1) Figures before January 18, 2008 represent share information from the
    American Stock Exchange.

/T/



FOR FURTHER INFORMATION PLEASE CONTACT:

TransGlobe Energy Corporation
Ross G. Clarkson
President & C.E.O.
(403) 264-9888
(403) 264-9898  (FAX)
or
TransGlobe Energy Corporation
Lloyd W. Herrick
Vice President & C.O.O.
(403) 264-9888
(403) 264-9898  (FAX)
Email: trglobe@trans-globe.com
Website: www.trans-globe.com
or
Executive Offices
#2500, 605 - 5th Avenue, S.W.,
Calgary, AB T2P 3H5