NEWS RELEASE TRANSMITTED BY Marketwire



FOR: TRANSGLOBE ENERGY CORPORATION

TSX SYMBOL:
 TGL
NASDAQ SYMBOL:
 TGA

TransGlobe Energy Corporation Announces Second Quarter 2010 Financial and Operating Results

Aug 05, 2010 - 07 00 ET

CALGARY, ALBERTA--(Marketwire - Aug. 5, 2010) - TransGlobe Energy Corporation ("TransGlobe" or the "Company") (TSX:TGL) (NASDAQ:TGA) is pleased to announce its financial and operating results for the three and six month periods ended June 30, 2010. 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.

HIGHLIGHTS

- Second quarter production 9,206 Bopd (Egypt 6,631 Bopd, Yemen 2,575 Bopd);

- Second quarter funds flow of $17.0 million ($0.25/share), a 21% increase over second quarter 2009;

- Second quarter net income of $9.4 million ($0.14/share), compared to a $4.4 million loss in the second quarter 2009;

- Drilled eight wells in second quarter resulting in seven oil wells (five at West Gharib, one at East Ghazalat and one at Block S-1);

- Expanded fracture stimulation program at Arta, first multi-staged horizontal frac in Egypt and two additional vertical fracs during the second quarter;

- Expanded the Nukhul play at West Gharib with multiple fields to delineate and develop with fracture stimulations (Arta, Hoshia, North Hoshia, East Arta, South Rahmi);

- New pool Nukhul oil discovery at East Arta #4;

- Entered into a new five-year $100.0 million Borrowing Base Facility; and

- Increased the capital budget for 2010 from $63.0 million to $71.0 million, which represents a 100% increase over 2009 and is powered by new production, higher realized oil prices and the continued success in Egypt.

Corporate Summary

The West Gharib project area of Arab Republic of Egypt ("Egypt") continues to be a star performer in the Company's portfolio and is expected to remain the focus for continued production and reserves growth. The Company continued its development of the Arta field during the second quarter of 2010, with one horizontal and two vertical wells frac'd. The Nukhul Formation play in the northern portion of the West Gharib concession has expanded to six structures that have tested oil. There are several other structural closures that will be tested over the next 12 months. The focus of drilling in West Gharib for 2010 will be to define the size of these discoveries. Full development of the fields is expected to continue through 2011 and 2012.

In the Western Desert area, the follow-up well in the Safwa field was positive and up to three additional wells are planned for the remainder of the year. In the Nuqra Block in Egypt, the Company has firmed up its drilling plans and anticipates it will drill two exploratory wells in the latter part of 2010. The drilling program in the Republic of Yemen ("Yemen") was restarted in the second quarter with one development well on production in early July. 2010 is expected to be most active drilling year in the Company's history.

A conference call to discuss TransGlobe's second quarter results presented in this report will be held on Thursday, August 5, 2010 at 2:30 p.m. Mountain Time (4:30 p.m. Eastern Time) and is accessible to all interested parties by dialing (416) 340-8018 or toll-free 1-866-223-7781 (see also TransGlobe's news release dated July 29, 2010). Online, the web cast may be accessed at http://events.digitalmedia.telus.com/transglobe/080510/index.php.

/T/

FINANCIAL AND OPERATING RESULTS
(US$000s, except per share, price, volume amounts and % change)
                       
                   Three Months Ended June 30      Six Months Ended June 30
                  ----------------------------------------------------------
Financial             2010     2009  % Change      2010      2009  % Change
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Oil revenue         61,540   42,557        45   123,191    70,936        74
Oil revenue, net
 of royalties
 and other          35,638   26,462        35    73,042    45,522        60
Derivative gain
 (loss) on commodity
 contracts             311   (3,481)      109       289    (3,681)      108
Operating expense    6,247    5,201        20    12,034    10,407        16
General and
 administrative
 expense             3,034    2,363        28     6,419     4,869        32
Depletion,
 depreciation and
 accretion expense   7,338   14,415       (49)   14,681    26,432       (44)
Income taxes         9,214    5,631        64    17,834     8,805       103
Funds flow from
 operations (1)     17,027   14,117        21    36,100    22,758        59
 Basic per share      0.26     0.22                0.55      0.36
 Diluted per share    0.25     0.22                0.54      0.36
Net income (loss)    9,438   (4,361)      316    21,036    (9,315)      326
 Basic per share      0.14    (0.07)               0.32     (0.15)
 Diluted per share    0.14    (0.07)               0.31     (0.15)
Capital
 expenditures       14,486    8,480        71    27,933    17,406        61
Long-term debt,
 including current
 portion            49,977   52,551       (5)    49,977    52,551        (5)
Common shares
 outstanding
 Basic (weighted
  -average)         66,031   65,328         1    65,733    63,529         3
 Diluted (weighted
  -average)         68,522   65,328         5    67,880    63,529         7
Total assets       263,345  229,658        15   263,345   229,658        15
----------------------------------------------------------------------------

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

Operating
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Average production
 volumes (Bopd)      9,206    9,619        (4)    9,449     9,206         3
Average price 
 ($ per Bbl)         73.46    48.62        51     72.03     42.57        69
Operating expense
 ($ per Boe)          7.46     5.94        26      7.04      6.25        13
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/T/

OPERATIONS UPDATE

ARAB REPUBLIC OF EGYPT

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

Operations and Exploration

Drilling

Five oil wells were drilled during the second quarter at Hana #22, Arta #13, Arta #14, East Arta #2 and Hana West #9. Subsequent to quarter-end, East Arta #3 and Hana #23 were drilled and cased as potential oil wells.

The Hana #22 well was drilled at the south end of the Hana field (offset to Hana #20) to a total depth of 5,503 feet. The well was placed on production as a Kareem oil well at an initial rate of 150 Bopd in mid-April.

The Arta #13 well was drilled as a western extension to the Arta Nukhul pool. The well was initially completed as a 10-15 Bopd Nukhul oil well. The Arta #13 well was fracture stimulated ("frac'd") as part of the June frac program at Arta and was producing approximately 120 Bopd in late July.

The Arta #14 well was drilled, cased and completed as a producing Nukhul oil well, extending the Arta pool to the southeast. The well was frac'd in late July and is producing at an initial rate of 600 Bopd.

The East Arta #2 well was drilled as a down dip eastern extension to the Arta Nukhul pool. The well encountered oil in the Nukhul formation approximately 1,000 feet structurally lower than Arta #13 and was cased as a Nukhul oil well. In addition to extending the pool to the east, the well encountered a thicker Nukhul including a new oil pool in the lower Nukhul sand. The well was completed in the lower Nukhul and placed on initial production at 120 Bopd prior to stimulation. The planned frac in the upper Nukhul has been deferred due to the encouraging performance of the un-stimulated lower Nukhul which is currently producing 85 Bopd.

Based on preliminary in-house deterministic volumetric estimates, the Petroleum Initially in Place ("PIIP") for the Arta pool has increased from 28 million barrels ("MMBbl") to 36 MMBbl. Additional drilling to the east and north will be required to determine the extent of the pool.

A second drilling rig was contracted initially to focus on exploration/appraisal projects in the southern development leases (Hana, Hoshia, West Hoshia and Fadl) which are typically deeper tests. The first well with the new rig, Hana West #9, was drilled to a total depth of 6,910 feet and cased as dual zone oil well. The well encountered oil pay in the Kareem and Lower Rudeis sands. The well was completed in the Lower Rudeis formation placed on production at an initial rate of 800+ Bopd in early July.

The East Arta #3 exploration well was drilled, cased and completed as a Nukhul oil well in July. East Arta #3 encountered a thin sand section in the Nukhul on a separate structure approximately 2.4 kilometers northeast of East Arta #2. The well is being evaluated for frac stimulation.

The East Arta #4 exploration well is drilling below the Nukhul formation and is targeting to reach total depth in the Nubia formation next week. The well was drilled through the Nukhul formation, logged and cased prior to drilling the deep section of the well. It is thick Nukhul formation with an estimated 32 feet of net pay. An oil sample (20 degree API) was recovered on wireline. Following East Arta #4 the drilling rig will move back to the Arta field to drill step-out appraisals.

The Hana #23 well was drilled to a total depth of 7,127 feet and cased as a Kareem formation oil well. The well will be completed as a Kareem producer in August. Following Hana #23, the rig will move to Hoshia #9 to drill a dual target (Rudeis/Nukhul).

Fracture stimulations

During the first quarter, the Company successfully fracture stimulated the Nukhul formation in Arta #9 during February, followed by three additional fracs in mid-March at Arta #2, #4 and #8. The wells have been placed on production and the early production rates indicate they will stabilize in the 100-300 Bopd range per well which represents a more than tenfold increase over the pre-frac rates.

In June, TransGlobe successfully completed the first, multi-stage, horizontal ("Hz") well stimulation in the Arab Republic of Egypt ("Egypt") at Arta #12. The final stage of the 600,000 pound multi-stage frac was completed on June 17. The well was placed on production on June 23 at a rate of 300-400 Bopd. Based on continued high pumping fluid levels, the well is scheduled for a larger pump installation in Q3 following the current frac program. Arta #12 Hz was producing approximately 15 Bopd prior to the fracture stimulation. Following the Arta #12 Hz frac, the Arta #13 and Arta #1 vertical wells were frac'd and placed on production in late June.

Subsequent to the quarter, the Nukhul formation was frac'd in vertical wells at Arta #6, Arta #7 and Arta #14 during July with additional fracs planned for Hoshia #8, South Rahmi #3 and East Arta wells in August.

Total Arta field production has increased from an average of 130 Bopd in January 2010 to approximately 722 Bopd in the second quarter and 969 Bopd in July. The recent drilling and fracing program has now identified at least five Nukhul oil pools. The development of these pools as well as additional Nukhul exploration tests is expected to be the focus of future reserve additions in West Gharib.

Production

Production from West Gharib averaged 6,631 Bopd to TransGlobe during the second quarter, a 3% (217 Bopd) decrease from the previous quarter. Production was curtailed in June to 6,254 Bopd due to scheduled workovers and liner installations associated with the Arta frac program. Production averaged 7,255 Bopd to TransGlobe during July with the addition of the Arta wells and Hana West #9.

/T/

Quarterly West Gharib Production (Bopd)

                                         2010                2009
----------------------------------------------------------------------------
                                          Q-2       Q-1       Q-4       Q-3
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Gross production rate                   6,631     6,848     5,815     5,747
TransGlobe working interest             6,631     6,848     5,815     5,747
TransGlobe net (after royalties)        4,040     4,250     3,775     3,732
TransGlobe net (after royalties and
 tax)(1)                                3,009     3,222     2,951     2,918
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Under the terms of the West Gharib Production Sharing Concession,
    royalties and taxes are paid out of the Government's share of production
    sharing oil.

/T/

East Ghazalat Block, Arab Republic of Egypt (50% working interest)

Operations and Exploration

Two wells were drilled during the quarter resulting in one oil well (Safwa NW #1) and one dry hole (Sahab #1).

The Sahab #1 well was drilled to a total depth of 8,638 feet and abandoned in late April.

The Safwa NW-1 well was drilled to a total depth of 4,440 feet and completed as a Bahariya oil well. A 30 foot net pay section was encountered in the Bahariya sandstones. A 14 foot interval was perforated and tested at a rate of 250 barrels of light, 34ยบ API oil per day.

The Safwa NW-1 well is located 2.5 kilometers to the northwest of the Safwa #1 discovery well which tested 300 Bopd from the same formation. Safwa NW-1 was the fourth well and the second discovery in the exploration drilling program conducted by operator Vegas Oil & Gas SA ("Vegas") in partnership with TransGlobe.

Subsequent to the quarter, the partners have discussed a new drilling program which could commence in August. Potentially two appraisal/exploration wells are planned for the Safwa structure which has Petroleum Initially in Place ("PIIP") of 20.6 MMBbl. The third well is targeting the Nakhil prospect which has an estimated PIIP of 10.4 MMBbl could be added to the program. The Nakhil prospect is located approximately 8 kilometers southwest of Safwa #1. The PIIP numbers are based on in-house estimates using the respective probabilistic P-mean cases.

The East Ghazalat Concession is located in the prolific Abu Gharadiq basin of Egypt's Western Desert, approximately 250 kilometers west of Cairo. East Ghazalat was awarded to Vegas Oil and Gas SA (Operator) on June 5, 2007 and reached the end of the first, three-year exploration period on June 5, 2010. Pursuant to the terms of the Concession agreement, 25% of the 858 km2 original concession was relinquished prior to entering the first, two-year extension period on June 6, 2010. All work commitments have been met for the first exploration period and the two extension periods.

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

Operations and Exploration

TransGlobe plans to drill two exploration wells commencing in the fourth quarter, subject to rig availability and government approvals. The first two wells will test the Diwan and Selsella prospects.

The Company has mapped five prospects in the eastern extension of the Kom Ombo sub-basin where the Al Baraka oil field was discovered by Dana Gas. The following table is a summary of the current Nuqra prospects:

/T/

                                                               Gross PIIP(1)
Name                                                  Status         (MMBbl)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Diwan                                               Prospect           46.0
Selsella                                            Prospect           13.6
Raghama                                             Prospect          162.0
Dabud                                                   Lead           37.2
W. Diwan                                                Lead           22.4
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Internally estimated PIIP using the probabilistic P-mean case.

/T/

YEMEN EAST- Masila Basin

Block 32, Republic of Yemen (13.81% working interest)

Operations and Exploration

No wells were drilled during the second quarter.

The joint venture partners approved two development wells for the Godah pool in 2010. Godah #11 commenced drilling on August 2, 2010. Godah #12 is scheduled for the fourth quarter.

Production

Production from Block 32 averaged 4,461 Bopd (616 Bopd to TransGlobe) during the quarter, representing a 10% decrease from the previous quarter primarily due to natural declines and down time for pump replacements at Tasour.

Production averaged approximately 4,388 Bopd (606 Bopd to TransGlobe) during July.

/T/

Quarterly Block 32 Production (Bopd)

                                         2010                2009
----------------------------------------------------------------------------
                                          Q-2       Q-1      Q -4       Q-3
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Gross production rate                   4,464     4,948     5,174     5,501
TransGlobe working interest               616       683       715       760
TransGlobe net (after royalties)          315       472       437       467
TransGlobe net (after royalties and
 tax)(1)                                  215       400       346       370
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Under the terms of the Block 32 Production Sharing Agreement ("PSA"),
    royalties and taxes are paid out of the government's share of production
    sharing oil.

/T/

Block 72, Republic of Yemen (20% working interest)

Operations and Exploration

The Block 72 joint venture partnership entered the second, 30-month exploration period in January 2009 which carries a commitment of one exploration well.

The Block 72 joint venture partnership has entered into a farm-out agreement with TOTAL E&P Yemen who is the Operator of Block 10 in the Masila Basin, subject to approval by the Ministry of Oil and Minerals. Under the terms of the agreement, the Company will reduce its working interest from 33% to 20%. An exploration well targeting a fractured basement prospect on the northern portion of Block 72 is planned for the fourth quarter of 2010.

YEMEN WEST- Marib Basin

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

Operations and Exploration

An Nagyah #25 was drilled and completed as a producing Lam A oil well during the quarter. Subsequent to the quarter, drilling commenced at An Nagyah #4. An Nagyah #25 and #4 are re-entries of existing vertical wells to drill short radius horizontal laterals in the Lam A pool to improve production and reserve recoveries. The An Nagyah #25 Hz well was placed on production at an initial flowing rate of approximately 1,300 Bopd in mid-July.

Following An Nagyah #4, the rig is scheduled to drill a new development horizontal well at An Nagyah #29. In total six to eight horizontal wells are planned for the An Nagyah pool. In addition to An Nagyah development drilling program, two exploration wells (one on Block S-1 and one on Block 75) and a horizontal appraisal well in the Osaylan pool are planned.

It is expected that the Block S-1 exploration well (An Nagyah Basement) will be drilled late in the third quarter following An Nagyah #29. The An Nagyah Basement exploration well is targeting a separate Lam terrace adjacent to the producing An Nagyah field and a fractured Basement prospect under the main field. The well will be drilled vertically through the Lam formation and then directionally drilled at a high angle into the Basement structure. The well is targeting a gross PIIP of 21.2 MMBbl in the Lam prospect and 73.1 MMBbl in the fractured Basement prospect, based on internally generated estimates using the respective probabilistic P-mean case.

Production

Production from Block S-1 averaged 7,836 Bopd (1,959 Bopd to TransGlobe) during the second quarter, representing a 9% decline from the previous quarter, primarily due to increased associated gas production and gas injection capacity. Concurrent with the horizontal development drilling program, the operator is installing additional compression to increase gas injection capacity. It is expected the additional compression will be installed by the fourth quarter.

Production averaged approximately 6,136 Bopd (1,534 Bopd to TransGlobe) during July, due to compressor overhauls at the An Nagyah central production facility.

/T/

Quarterly Block S-1 Production (Bopd)

                                         2010                2009
----------------------------------------------------------------------------
                                           Q2        Q1       Q-4       Q-3
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Gross field production rate             7,836     8,652     8,504     9,428
TransGlobe working interest             1,959     2,163     2,126     2,357
TransGlobe net (after royalties)          995     1,169       867     1,254
TransGlobe net (after royalties and
 tax)(1)                                  744       906       585       985
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Under the terms of the Block S-1 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. The first, three year exploration phase has a work commitment of 3-D seismic and one exploration well. The 3-D seismic was acquired in 2009. One exploration well is planned as part of the Block S-1/75 drilling program. The Block 75 exploration well is currently scheduled for the first quarter of 2011.

MANAGEMENT'S DISCUSSION AND ANALYSIS

August 5, 2010

Management's discussion and analysis ("MD&A") should be read in conjunction with the unaudited interim financial statements for the three months and six months ended June 30, 2010 and 2009 and the audited financial statements and MD&A for the year ended December 31, 2009 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 on SEDAR at www.sedar.com. The Company's annual report and Form 40-F may be found on EDGAR at www.sec.gov.

READER ADVISORIES

Forward-Looking Statements

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, other than as required by law, 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

Funds Flow from Operations

This document contains the term "funds flow from 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"). Funds flow from operations is a non-GAAP measure that represents 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. Funds flow from operations may not be comparable to similar measures used by other companies.

/T/

Reconciliation of Funds Flow from Operations

                                     Three Months Ended    Six Months Ended
                                                June 30             June 30
----------------------------------------------------------------------------
($000s)                                  2010      2009      2010      2009
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cash flow from operating activities    15,627    15,052    19,881    22,941
Changes in non-cash working capital     1,400      (935)   16,219      (183)
----------------------------------------------------------------------------
Funds flow from operations             17,027    14,117    36,100    22,758
----------------------------------------------------------------------------
----------------------------------------------------------------------------

/T/

Debt-to-funds flow ratio

Debt-to-funds flow is a non-GAAP measure that is used to set the amount of capital in proportion to risk. The Company's debt-to-funds flow ratio is computed as long-term debt, including the current portion, over funds flow from operations for the trailing twelve months. Debt-to-funds flow may not be comparable to similar measures used by other companies.

Netback

Netback is a non-GAAP measure that represents sales net of royalties (all government interests, net of income taxes), 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.

TRANSGLOBE'S BUSINESS

TransGlobe is a Canadian-based, publicly traded, oil exploration and production company whose activities are concentrated in two main geographic areas, the Arab Republic of Egypt ("Egypt") and the Republic of Yemen ("Yemen"). Egypt and Yemen include the Company's exploration, development and production of crude oil. TransGlobe disposed of its Canadian oil and gas operations in 2008 to reposition itself as a 100% oil, Middle East/North Africa growth company.

/T/

SELECTED QUARTERLY FINANCIAL INFORMATION
                                       2010                            2009
----------------------------------------------------------------------------
($000s, except per share, price
 and volume amounts)            Q-2     Q-1     Q-4     Q-3     Q-2     Q-1
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Average sales volumes (Bopd)  9,206   9,694   8,656   8,864   9,619   8,788
Average price ($/Bbl)         73.46   70.66   62.84   57.41   48.62   35.88
Oil sales                    61,540  61,651  50,044  46,818  42,557  28,379
Oil sales, net of royalties
and other                    35,638  37,404  28,788  28,495  26,462  19,060
Cash flow from operating
 activities                  15,627   4,254  12,594   1,264  15,052   7,889
Funds flow from
 operations (1)              17,027  19,073   9,703  12,603  14,117   8,641
Funds flow from operations
 per share
 - Basic                       0.26    0.29    0.15    0.19    0.22    0.14
 - Diluted                     0.25    0.29    0.15    0.19    0.22    0.14
Net income (loss)             9,438  11,598   2,516  (1,618) (4,361) (4,954)
Net income (loss) per share
 - Basic                       0.14    0.18    0.04   (0.02)  (0.07)  (0.08)
 - Diluted                     0.14    0.17    0.04   (0.02)  (0.07)  (0.08)

----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total assets                263,345 248,446 228,882 228,964 229,658 238,145
Cash and cash equivalents    21,437  18,845  16,177  14,804  23,952  22,041
Total long-term debt,
 including current portion   49,977  49,888  49,799  52,686  52,551  57,347
Debt-to-funds flow ratio (2)    0.9     0.9     1.1     1.3     1.2     1.1
----------------------------------------------------------------------------
----------------------------------------------------------------------------


                                                                       2008
----------------------------------------------------------------------------
($000s, except per share, price and
volume amounts)                                                 Q-4     Q-3
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Average sales volumes (Bopd)                                  6,893   6,935
Average price ($/Bbl)                                         46.18  104.55
Oil sales                                                    29,285  66,707
Oil sales, net of royalties
and other                                                    18,272  36,577
Cash flow from operating activities                          11,252  20,652
Funds flow from operations (1)                                6,134  16,775
Funds flow from operations per
 share
 - Basic                                                       0.10    0.28
 - Diluted                                                     0.10    0.27
Net income (loss)                                             7,640  24,790
Net income (loss) per share
 - Basic                                                       0.14    0.41
 - Diluted                                                     0.13    0.41
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total assets                                                228,238 234,501
Cash and cash equivalents                                     7,634   8,593
Total long-term debt, including
 current portion                                             57,230  57,127
Debt-to-funds flow ratio (2)                                    1.0     0.9
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Funds flow from operations is a non-GAAP measure that represents cash
    generated from operating activities before changes in non-cash working
    capital.
(2) Debt-to-funds flow ratio is a non-GAAP measure that represents total
    current and long-term debt over funds flow from operations for the
    trailing 12 months.

/T/

During the second quarter of 2010, TransGlobe has:

- Maintained a strong financial position, reporting a debt-to-funds flow ratio of 0.9 at June 30, 2010 (June 30, 2009 - 1.2);

- Funded capital programs entirely with funds flow from operations;

- Reported a 21% increase in funds flow from operations due to a 51% increase in commodity prices along with a 4% decrease in sales volumes compared to Q2-2009; and

- Reported net income in Q2-2010 of $9.4 million (Q2-2009 - $4.4 million net loss) mainly due to higher commodity prices in the quarter compared with the same period in 2009, along with lower depletion and depreciation expense.

/T/

2010 VARIANCES

                                                 $ Per Share
                                        $000s        Diluted     % Variance
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Q2-2009 net loss                       (4,361)         (0.07)
----------------------------------------------------------------------------
Cash items
Volume variance                        (2,599)         (0.01)           (60)
Price variance                         21,582           0.31            495
Royalties                              (9,807)         (0.14)          (225)
Expenses:
 Operating                             (1,046)         (0.02)           (24)
 Realized derivative loss                  52              -              1
 Cash general and administrative         (627)         (0.01)           (14)
 Current income taxes                  (3,583)         (0.05)           (82)
 Realized foreign exchange gain        (1,125)         (0.02)           (26)
Interest on long-term debt                 88              -              2
Other income                              (25)             -             (1)
----------------------------------------------------------------------------
Total cash items variance               2,910           0.06             66
----------------------------------------------------------------------------
Non-cash items
Unrealized derivative gain              3,740           0.05             86
Depletion and depreciation              7,077           0.10            162
Stock-based compensation                  (44)             -             (1)
Amortization of deferred financing
 costs                                    116              -              3
----------------------------------------------------------------------------
Total non-cash items variance          10,889           0.15            250
----------------------------------------------------------------------------
Q2-2010 net income                      9,438           0.14            316
----------------------------------------------------------------------------
----------------------------------------------------------------------------

/T/

Net income increased to $9.4 million in Q2-2010 compared to a loss of $4.4 million in Q2-2009, which was mostly due to a significant increase in commodity prices and an increased unrealized gain on derivative commodity contracts along with a decrease in depletion and depreciation, which was partially offset by higher royalties and income taxes.

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/

                                         2010                          2009
----------------------------------------------------------------------------
                                Q-2       Q-1       Q-4       Q-3       Q-2
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Dated Brent average oil price
 ($/Bbl)                      78.30     76.10     74.56     68.27     58.79
U.S./Canadian Dollar average
 exchange rate                1.028     1.016     1.056     1.098     1.167
----------------------------------------------------------------------------
----------------------------------------------------------------------------

/T/

The price of Dated Brent oil averaged 33% higher in Q2-2010 compared with Q2-2009. Global markets are currently in a period of economic recovery with improved liquidity and access to capital, in addition to strengthening oil prices. TransGlobe's management believes the Company is well positioned to take advantage of the improving economy due to its increasing production, manageable debt levels, positive cash generation from operations and the availability of cash and cash equivalents.

The Company designed its 2010 budget to be flexible, allowing spending to be adjusted as commodity prices change and forecasts are reviewed.

/T/

OPERATING RESULTS AND NETBACK

Daily Volumes, Working Interest Before Royalties and Other (Bopd)

                                     Three Months Ended    Six Months Ended
                                                June 30             June 30
----------------------------------------------------------------------------
                                         2010      2009      2010      2009
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Egypt - Oil sales                       6,631     6,384     6,739     5,877
Yemen - Oil sales                       2,575     3,235     2,710     3,329
----------------------------------------------------------------------------
Total Company - daily sales
 volumes                                9,206     9,619     9,449     9,206
----------------------------------------------------------------------------
----------------------------------------------------------------------------


Netback

Consolidated

                                                   Six Months Ended June 30
----------------------------------------------------------------------------
                                                    2010               2009
----------------------------------------------------------------------------
(000s, except per Bbl amounts)              $      $/Bbl        $     $/Bbl
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Oil sales                             123,191      72.03   70,936     42.57
Royalties and other                    50,149      29.32   25,414     15.25
Current taxes                          17,834      10.43    8,805      5.28
Operating expenses                     12,034       7.04   10,407      6.25
----------------------------------------------------------------------------
Netback                                43,174      25.24   26,310     15.79
----------------------------------------------------------------------------
----------------------------------------------------------------------------


                                                 Three Months Ended June 30
                                                   2010                2009
----------------------------------------------------------------------------
(000s, except per Bbl amounts)              $     $/Bbl         $     $/Bbl
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Oil sales                              61,540     73.46    42,557     48.62
Royalties and other                    25,902     30.92    16,095     18.39
Current taxes                           9,214     11.00     5,631      6.43
Operating expenses                      6,247      7.46     5,201      5.94
----------------------------------------------------------------------------
Netback                                20,177     24.08    15,630     17.86
----------------------------------------------------------------------------
----------------------------------------------------------------------------


Egypt

                                                   Six Months Ended June 30
----------------------------------------------------------------------------
                                                   2010                2009
----------------------------------------------------------------------------
(000s, except per Bbl amounts)              $     $/Bbl         $     $/Bbl
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Oil sales                              85,125     69.79    40,926     38.47
Royalties and other                    32,783     26.88    14,385     13.52
Current taxes                          13,014     10.67     5,784      5.44
Operating expenses                      7,487      6.14     5,454      5.13
----------------------------------------------------------------------------
Netback                                31,841     26.10    15,303     14.38
----------------------------------------------------------------------------
----------------------------------------------------------------------------


                                                 Three Months Ended June 30
----------------------------------------------------------------------------
                                                   2010                2009
----------------------------------------------------------------------------
(000s, except per Bbl amounts)              $     $/Bbl         $     $/Bbl
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Oil sales                              43,094     71.42    25,531     43.95
Royalties and other                    16,839     27.91     9,009     15.51
Current taxes                           6,701     11.11     3,588      6.18
Operating expenses                      3,845      6.37     2,667      4.59
----------------------------------------------------------------------------
Netback                                15,709     26.03    10,267     17.67
----------------------------------------------------------------------------
----------------------------------------------------------------------------

/T/

The netback per Bbl in Egypt increased 47% and 82% in the three and six months ended June 30, 2010, respectively, compared with the same periods of 2009, mainly as a result of oil prices increasing by 63% and 81%, respectively, partially offset by higher royalty and tax rates. The average selling price during the three months ended June 30, 2010 was $71.42/Bbl, which represents a gravity/quality adjustment of approximately $6.88/Bbl to the average Dated Brent oil price for the period of $78.30/Bbl.

Royalties and taxes as a percentage of revenue increased to 54% in the three and six months ended June 30, 2010, compared with 49% in the same period of 2009. Royalty and tax rates fluctuate in Egypt due to changes in the cost oil whereby the Production Sharing Contract ("PSC") allows for recovery of operating and capital costs through a reduction in government take.

Operating expenses on a per Bbl basis for the three and six months ended June 30, 2010 increased 39% and 20%, respectively, compared with the same periods of 2009. This is mainly due to higher well service costs, fuel costs and labor costs in Egypt during the three and six month periods ended June 30, 2010 compared with the same periods in 2009.

/T/

Yemen

                                                   Six Months Ended June 30
----------------------------------------------------------------------------
                                                   2010                2009
----------------------------------------------------------------------------
(000s, except per Bbl amounts)              $     $/Bbl         $     $/Bbl
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Oil sales                              38,066     77.60    30,010     49.81
Royalties and other                    17,366     35.40    11,029     18.30
Current taxes                           4,820      9.83     3,021      5.01
Operating expenses                      4,547      9.27     4,953      8.22
----------------------------------------------------------------------------
Netback                                11,333     23.10    11,007     18.28
----------------------------------------------------------------------------
----------------------------------------------------------------------------


                                                 Three Months Ended June 30
----------------------------------------------------------------------------
                                                   2010                2009
----------------------------------------------------------------------------
(000s, except per Bbl amounts)              $     $/Bbl         $     $/Bbl
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Oil sales                              18,446     78.72    17,026     57.84
Royalties and other                     9,063     38.68     7,086     24.07
Current taxes                           2,513     10.72     2,043      6.94
Operating expenses                      2,402     10.25     2,534      8.61
----------------------------------------------------------------------------
Netback                                 4,468     19.07     5,363     18.22
----------------------------------------------------------------------------
----------------------------------------------------------------------------

/T/

In Yemen, the netback per Bbl increased 5% and 26% in the three and six months ended June 30, 2010, respectively, compared with the same periods in 2009 primarily as a result of oil prices increasing by 36% and 56%, respectively, partially offset by higher royalty and tax rates.

Royalties and taxes as a percentage of revenue increased to 63% and 58% in the three and six months ended June 30, 2010, respectively, compared with 54% and 47%, respectively, in 2009. 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 Production Sharing Agreements ("PSAs") allow for the recovery of operating and capital costs through a reduction in Ministry of Oil and Minerals' take of oil production.

Operating expenses on a per Bbl basis for the three and six months ended June 30, 2010 increased 19% and 13%, respectively, mostly due to lower volumes compared to the same periods in 2009.

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 remained unchanged in Q2-2010, with no new hedging arrangements being entered into.

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.

The realized loss on commodity contracts in the first six months of 2010 relates mostly to the purchase of a new financial floor derivative commodity contract for $0.4 million, compared with $0.7 million in realized gains for the same period in 2009 as a result of depressed oil prices in the first six months of last year. The mark-to-market valuation of TransGlobe's future derivative commodity contracts increased in value from a $0.5 million liability at December 31, 2009 to a $0.2 million asset at June 30, 2010, thus resulting in a $0.7 million unrealized gain on future derivative commodity contracts being recorded in the period.

/T/

                                     Three Months Ended    Six Months Ended
                                                June 30             June 30
----------------------------------------------------------------------------
($000s)                                  2010      2009      2010      2009
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Realized cash (loss) gain on commodity
 contracts (1)                            (51)     (103)     (417)      668
Unrealized gain (loss) on commodity
 contracts (2)                            362    (3,378)      706    (4,349)
----------------------------------------------------------------------------
Total derivative gain (loss) on
 commodity contracts                      311    (3,481)      289    (3,681)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

(1) Realized cash gain (loss) represents actual cash settlements, receipts
    and premiums paid under the respective contracts.
(2) The unrealized loss on derivative commodity contracts represents the
    change in fair value of the contracts during the period.

/T/

If the Dated Brent oil price remains at the level experienced at the end of Q2-2010, the derivative asset will be realized over the next year. However, a 10% decrease in Dated Brent oil prices would result in a $0.3 million increase in the derivative commodity contract asset, thus increasing the unrealized gain by the same amount. Conversely, a 10% increase in Dated Brent oil prices would decrease the unrealized gain on commodity contracts by $0.2 million. The following commodity contracts are outstanding at June 30, 2010:

/T/

                                                                Dated Brent
                                                                    Pricing
Period                    Volume                Type               Put-Call
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Crude Oil
July 1, 2010-
 August 31,
 2010          12,000 Bbls/month    Financial Collar         $60.00- $84.25
July 1, 2010-
 August 31,
 2010           9,000 Bbls/month    Financial Collar         $40.00- $80.00
July 1, 2010-
 December 31,
 2010          10,000 Bbls/month     Financial Floor                 $60.00
July 1, 2010-
 December 31,
 2010          20,000 Bbls/month     Financial Floor                 $65.00
----------------------------------------------------------------------------
----------------------------------------------------------------------------


As at June 30, 2010, the total volumes hedged for the balance of 2010 are:

                                                                 Six months
                                                                       2010
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Bbls                                                                222,000
Bopd                                                                  1,207
----------------------------------------------------------------------------
----------------------------------------------------------------------------

/T/

At June 30, 2010, all of the derivative commodity contracts were classified as current assets.

Subsequent to June 30, 2010, TransGlobe bought out both financial collar derivative commodity contracts. Immediately subsequent to the buy-out, the following commodity contracts are outstanding:

/T/

                                                                Dated Brent
Period                           Volume            Type    Pricing Put-Call
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Crude Oil
July 1, 2010-     
 December 31, 2010    10,000 Bbls/month Financial Floor            $  60.00
July 1, 2010-     
 December 31, 2010    20,000 Bbls/month Financial Floor            $  65.00
----------------------------------------------------------------------------
----------------------------------------------------------------------------


Immediately subsequent to the buy-out, the total volumes hedged for the
balance of 2010 are:

                                                                 Six months
                                                                       2010
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Bbls                                                                180,000
Bopd                                                                    978
----------------------------------------------------------------------------
----------------------------------------------------------------------------


GENERAL AND ADMINISTRATIVE EXPENSES ("G&A")

                                                   Six Months Ended June 30
----------------------------------------------------------------------------
                                                   2010                2009
----------------------------------------------------------------------------
(000s, except per Bbl amounts)              $     $/Bbl         $     $/Bbl
----------------------------------------------------------------------------
----------------------------------------------------------------------------
G&A (gross)                             6,733      3.94     5,317      3.19
Stock-based compensation                  911      0.53       970      0.58
Capitalized G&A and overhead
 recoveries                            (1,225)    (0.72)   (1,418)    (0.85)
----------------------------------------------------------------------------
G&A (net)                               6,419      3.75     4,869      2.92
----------------------------------------------------------------------------
----------------------------------------------------------------------------


                                                 Three Months Ended June 30
----------------------------------------------------------------------------
                                                   2010                2009
----------------------------------------------------------------------------
(000s, except per Bbl amounts)              $     $/Bbl         $     $/Bbl
----------------------------------------------------------------------------
----------------------------------------------------------------------------
G&A (gross)                             3,297      3.94     2,418      2.76
Stock-based compensation                  524      0.63       480      0.55
Capitalized G&A and overhead recoveries  (787)    (0.94)     (535)    (0.61)
----------------------------------------------------------------------------
G&A (net)                               3,034      3.63     2,363      2.70
----------------------------------------------------------------------------
----------------------------------------------------------------------------

/T/

G&A expenses (net) increased 28% (34% on a per Bbl basis) and 32% (28% on a per Bbl basis) in the three and six months ended June 30, 2010, respectively, compared with the same periods in 2009 partly due to a strengthening Canadian dollar which accounted for approximately 48% and 52% of the increases, respectively, as the majority of TransGlobe's G&A costs are incurred in Canadian dollars. The remainder of the increase was due to increased insurance, staffing and office costs.

INTEREST ON LONG-TERM DEBT

Interest expense for the three and six months ended June 30, 2010 decreased to $0.5 million and $1.0 million, respectively (2009 - $0.7 million and $1.3 million, respectively). Interest expense includes interest on long-term debt and amortization of transaction costs associated with long-term debt. In the three months ended June 30, 2010, the Company expensed $0.1 million of transaction costs (2009 - $0.2 million). The Company had $50.0 million of debt outstanding at June 30, 2010 (June 30, 2009 - $53.0 million). The long-term debt that was outstanding at June 30, 2010 bore interest at the Eurodollar rate plus three percent. The new Borrowing Base Facility, which was entered into subsequent to June 30, 2010 and replaces the long-term debt that was outstanding at June 30, 2010, will bear interest at LIBOR plus an applicable margin that varies from 3.75% to 4.75% depending on the amount drawn under the facility.

/T/

DEPLETION AND DEPRECIATION ("DD&A")

                                                   Six Months Ended June 30
----------------------------------------------------------------------------
                                                   2010                2009
----------------------------------------------------------------------------
(000s, except per Bbl amounts)              $     $/Bbl         $     $/Bbl
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Egypt                                  10,718      8.79    21,403     20.12
Yemen                                   3,859      7.87     4,937      8.19
Corporate                                 104         -        92         -
----------------------------------------------------------------------------
                                       14,681      8.58    26,432     15.86
----------------------------------------------------------------------------
----------------------------------------------------------------------------


----------------------------------------------------------------------------
                                                 Three Months Ended June 30
----------------------------------------------------------------------------
                                                   2010                2009
----------------------------------------------------------------------------
(000s, except per Bbl amounts)              $     $/Bbl         $     $/Bbl
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Egypt                                   5,440      9.02    11,930     20.53
Yemen                                   1,845      7.87     2,436      8.28
Corporate                                  53         -        49         -
----------------------------------------------------------------------------
                                        7,338      8.76    14,415     16.47
----------------------------------------------------------------------------
----------------------------------------------------------------------------

/T/

In Egypt, DD&A decreased 56% on a per Bbl basis for both the three and six month periods ended June 30, 2010, due to significant increases to Proved reserves at year-end 2009.

In Yemen, DD&A decreased 5% and 4% on a per Bbl basis for the three and six months ended June 30, 2010, respectively, due to Proved reserve additions at year-end 2009.

In Egypt, unproven properties of $16.6 million (2009 - $9.7 million) relating to Nuqra ($8.1 million), West Gharib ($1.8 million) and East Ghazalat ($6.7 million) were excluded from the costs subject to DD&A in the quarter. In Yemen, unproven property costs of $11.8 million (2009 - $9.1 million) relating to Block 72 and Block 75 were excluded from the costs, subject to DD&A in the quarter.

/T/

CAPITAL EXPENDITURES

                                                   Six Months Ended June 30
----------------------------------------------------------------------------
($000s)                                                      2010      2009
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Egypt                                                      26,197    12,932
Yemen                                                       1,662     4,316
Corporate                                                      74       158
----------------------------------------------------------------------------
Total                                                      27,933    17,406
----------------------------------------------------------------------------
----------------------------------------------------------------------------

/T/

In Egypt, total capital expenditures in the first six months of 2010 were $26.2 million (2009 - $12.9 million). The Company drilled 13 wells, resulting in 11 oil wells (three at Hana, two at Arta, one at each of Hana West, Hoshia, North Hoshia, East Arta, and two at East Ghazalat), in addition to two dry holes at East Ghazalat.

In Yemen, total capital expenditures in 2010 were $1.7 million (2009 - $4.3 million). One oil development well was drilled in the first six months of 2010 at Block S-1.

OUTSTANDING SHARE DATA

As at June 30, 2010, the Company had 66,592,335 common shares issued and outstanding.

The Company received regulatory approval to purchase, from time-to-time, as it considers advisable, up to 6,116,905 common shares under a Normal Course Issuer Bid which commenced September 7, 2009 and will terminate September 6, 2010. During the six months ended June 30, 2010 and during the year ended December 31, 2009, the Company did not repurchase any common shares.

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 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 evaluate the Company's overall financial strength is debt-to-funds flow from operating activities (calculated on a 12-month trailing basis). TransGlobe's debt-to-funds flow from operating activities ratio, a key short-term leverage measure, remained strong at 0.9 times at June 30, 2010. 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 periods ended June 30, 2010 and 2009:

/T/

Sources and Uses of Cash

                                                   Six Months Ended June 30
----------------------------------------------------------------------------
($000s)                                                      2010      2009
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cash sourced
 Funds flow from operations (1)                            36,100    22,758
 Exercise of options                                        5,744        80
 Issuance of common shares, net of share issuance costs         -    15,127
----------------------------------------------------------------------------
                                                           41,844    37,965
Cash used
 Capital expenditures                                      27,933    17,406
 Deferred financing costs                                     699         -
 Repayment of long-term debt                                    -     5,000
----------------------------------------------------------------------------
                                                           28,632    22,406
----------------------------------------------------------------------------
Net cash from operations                                   13,212    15,559
Changes in non-cash working capital                        (7,952)      759
----------------------------------------------------------------------------
Increase in cash and cash equivalents                       5,260    16,318
Cash and cash equivalents - beginning of period            16,177     7,634
----------------------------------------------------------------------------
Cash and cash equivalents - end of period                  21,437    23,952
----------------------------------------------------------------------------
----------------------------------------------------------------------------

(1) Funds flow from 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 was provided by funds flow from operations. The Company expects to fund its 2010 exploration and development program of $71.0 million ($43.0 million remaining) and contractual commitments through the use of working capital and cash generated by operating activities. The use of new financing during 2010 may also be utilized to finance new opportunities. Fluctuations in commodity prices, product demand, foreign exchange rates, interest rates and various other risks may impact capital resources.

Working capital is the amount by which current assets exceed current liabilities. At June 30, 2010, the Company had working capital of $51.9 million (December 31, 2009 - deficiency of $11.8 million). The working capital deficiency as at December 31, 2009 was primarily the result of the reclassification of long-term debt as a current liability. On July 22, 2010, the Company entered into a new Borrowing Base Facility. Therefore, as at June 30, 2010 the credit facility was classified as long-term which eliminated the working capital deficiency. While the reclassification of bank debt accounts for the majority of the increase in working capital, other increases to working capital in 2010 are the result of cash and cash equivalents increasing due to the collection of certain accounts receivable, and increased accounts receivable due to higher oil prices and higher sales volumes. These receivables are not considered to be impaired; however, to mitigate this risk, the Company entered into an insurance program on a portion of the receivable balance.

At June 30, 2010, TransGlobe had a $60.0 million Revolving Credit Agreement of which $50.0 million was drawn. Amounts drawn under the Revolving Credit Agreement were set to become due September 25, 2010. Subsequent to June 30, 2010, the Company entered into a new five-year $100 million Borrowing Base Facility and paid out the original Revolving Credit Agreement. As repayments on the new Borrowing Base Facility are not expected to commence until 2012, the entire balance is presented as a long-term liability on the consolidated balance sheets. Repayments will be made on a semi-annual basis according to the scheduled reduction of the facility. As of June 30, 2010, the Company has incurred financing costs related to the new Borrowing Base Facility in the amount of $0.7 million.

/T/

                                                                December 31,
($000s)                                        June 30, 2010           2009
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Revolving Credit Agreement                            50,000         53,000
Deferred financing costs                                 (23)          (201)
----------------------------------------------------------------------------
                                                      49,977         49,799
----------------------------------------------------------------------------
Current portion of long-term debt (net of
 deferred financing costs)                                 -         49,799
----------------------------------------------------------------------------
Long-term debt (net of deferred financing costs)      49,977              -
----------------------------------------------------------------------------
----------------------------------------------------------------------------

/T/

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(1,2)
----------------------------------------------------------------------------
                                            Less                       More
                   Recognized               than                       than
                 in Financial Contractual      1       1-3       4-5      5
                   Statements  Cash Flows   year     years     years  years
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Accounts    
 payable and
 accrued
 liabilities    Yes-Liability      22,017 22,017         -         -      -
Long-term debt:
 Borrowing Base 
  Facility      Yes-Liability      50,000      -    29,557    20,443      -
Office and
 equipment
 leases                    No      10,954  1,509     2,880     1,872  4,693
Minimum work
 commitments(3)            No       7,876  2,923     4,953         -      -
----------------------------------------------------------------------------
Total                              90,847 26,449    37,390    22,315  4,693
----------------------------------------------------------------------------
----------------------------------------------------------------------------

(1) Payments exclude ongoing operating costs related to certain leases,
    interest on long-term debt and payments made to settle derivatives.
(2) Payments denominated in foreign currencies have been translated at June
    30, 2010 exchange rates.
(3) Minimum work commitments include contracts awarded for capital projects
    and those commitments related to exploration and drilling obligations.

/T/

TransGlobe entered into a farm-out agreement and committed to pay 100% of three exploration wells to a maximum of $9.0 million to earn a 50% working interest in the East Ghazalat Concession in the Western Desert of Egypt, subject to the approval of the Egyptian Government. The Company completed drilling all three exploration wells during the six month period ended June 30, 2010. The Contractor (Joint Venture Partners) has entered the first, 24-month extension period. The financial and work commitments for the extension period were met in the prior period.

Pursuant to the Concession agreement for Nuqra Block 1 in Egypt, the Contractor (Joint Venture Partners) has a minimum financial commitment of $5.0 million ($4.4 million to TransGlobe) and a work commitment for two exploration wells in the second exploration extension. The second, 36-month extension period commenced on July 18, 2009. The Contractor has met the second extension financial commitment of $5.0 million in the prior periods. At the request of the Government, the Company provided a $4.0 million production guarantee from the West Gharib Concession prior to entering the second extension period.

Pursuant to the PSA for Block 72 in Yemen, the Contractor (Joint Venture Partners) has a minimum financial commitment of $2.0 million ($0.1 million to TransGlobe) to drill one exploration well during the second exploration period. The second, 30-month exploration period commenced on January 12, 2009. The Contractor has accepted a farm-in proposal from TOTAL E&P Yemen. Subject to government approval, the Company will reduce its interest in the concession to 20%.

Pursuant to the PSA for Block 75 in Yemen, the Contractor (Joint Venture Partners) has a remaining minimum financial commitment of $3.0 million ($0.8 million to TransGlobe) for 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 August 18, 2008 asset purchase agreement for a 25% financial 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, to be evaluated annually. As at December 31, 2009, no additional fees are due in 2010.

In the normal course of its operations, the Company may be subject to litigations and claims. Although it is not possible to estimate the extent of potential costs, if any, management believes that the ultimate resolution of such contingencies would not have a material adverse impact on the results of operations, financial position or liquidity of the Company.

MANAGEMENT STRATEGY AND OUTLOOK FOR 2010

The 2010 outlook provides information as to management's expectation for results of operations for 2010. Readers are cautioned that the 2010 outlook 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 outlook contains forward-looking statements that should be read in conjunction with the Company's disclosure under "Forward-Looking Statements", outlined on the first page of this MD&A.

2010 Outlook Highlights

- Production is expected to average between 10,000 and 10,500 Bopd (mid-point: 10,250), a 14% increase over the 2009 average production;

- Exploration and development capital budget increased to $71.0 million from $63.0 (allocated 84% to Egypt, 14% to Yemen and 2% to other) funded from funds flow from operations and cash on hand; and

- Using the mid-point of production expectations and an average oil price assumption for the remainder of the year of $65.00/Bbl, funds flow from operations is expected to be $72.0 million for the year.

2010 Production Outlook

TransGlobe's production guidance for 2010 is expected to average between 10,000 and 10,500 Bopd, representing a 14% increase over the 2009 average production of 8,980 Bopd. This target includes increased production from Hana, Hana West, Hoshia, Arta and East Arta in Egypt, and production from the development drilling program on Block S-1 in Yemen. Production from Egypt is expected to average approximately 7,550 Bopd during 2010, with the balance of approximately 2,700 Bopd coming from the Yemen properties.

/T/

Production Forecast
                                2010 Guidance    2009 Actual    % Change (1)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Barrels of oil per day        10,000 - 10,500          8,980             14
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) % growth based on mid-point of outlook.

/T/

2010 Funds Flow From Operations Outlook

This outlook was developed using the above production forecast and an average Dated Brent oil price of $65.00/Bbl for the remainder of the year.

/T/

2010 Funds Flow From
 Operations Outlook
($ million, except % change)    2010 Guidance    2009 Actual       % Change
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Funds flow from operations (1)           72.0           45.1             60
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Funds flow from operations is a non-GAAP measure that represents cash
    generated from operating activities before changes in non-cash working
    capital.

/T/

Due in part to higher expected prices and higher production, funds flow from operations is expected to increase by 60% in 2010. One of the key factors in the increased funds flow in 2010 is due to a better expected oil price differential to average Dated Brent benchmark price in Egypt. Price differentials to average Dated Brent in Egypt narrowed from 24% in 2009 to 10% in 2010. Variations in production and commodity prices during 2010 could significantly change this outlook. An increase in the Dated Brent oil price of $10.00/Bbl for the remainder of the year would increase anticipated funds flow by approximately $6.0 million to $78.0 million for the year, while a $10.00/Bbl decrease in the Dated Brent oil price would result in anticipated funds flow decreasing by approximately $4.0 million to $68.0 million for the year.

/T/

2010 Capital Budget                         Six Months Ended
                                               June 30, 2010           2010
($ million)                                           Actual  Annual Budget
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Egypt                                                   26.2           60.0
Yemen                                                    1.7           10.0
Corporate                                                0.1            1.0
----------------------------------------------------------------------------
Total                                                   28.0           71.0
----------------------------------------------------------------------------
----------------------------------------------------------------------------

/T/

The 2010 capital program is split 64:36 between development and exploration, respectively. The Company plans to participate in 42 wells in 2010. It is anticipated the Company will fund its entire 2010 capital budget from funds flow and working capital. The Company designed its 2010 budget to be flexible, allowing spending to be adjusted as commodity prices change and forecasts are reviewed. In Q2-2010, the Company increased its capital budget by $8.0 million with most of the increase coming in Egypt, which is partially offset by reduced spending in Yemen. The Company plans to increase its investment in Nuqra, East Ghazalat and West Gharib.

CHANGES IN ACCOUNTING POLICIES

New Accounting Policies

The Company adopted a share appreciation rights plan in March 2010. Under the share appreciation rights plan, all liabilities must be settled in cash and, consequently, are classified as liability instruments and measured at their intrinsic value less any unvested portion. Unvested share appreciation rights accrue evenly over the vesting period. The intrinsic value is determined as the difference between the market value of the Company's common shares and the exercise price of the share appreciation rights. This obligation is revalued each reporting period and the change in the obligation is recognized as stock-based compensation expense (recovery).

New Accounting Standards

a) Business Combinations

In December 2008, the CICA issued Section 1582, Business Combinations, which will replace CICA Section 1581 of the same name. Section 1582 establishes principles and requirements of the acquisition method for business combinations and related disclosures. This statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after January 2011 with earlier application permitted. The Company is currently evaluating the impact of this change on its Consolidated Financial Statements.

b) Non-Controlling Interests

In December 2008, the CICA issued Sections 1601, Consolidated Financial Statements, and 1602, Non-Controlling Interests. Section 1601 establishes standards for the preparation of consolidated financial statements. Section 1602 provides guidance on accounting for a non-controlling interest in a subsidiary in consolidated financial statements subsequent to a business combination. These standards are effective on or after the beginning of the first annual reporting period beginning on or after January 2011 with earlier application permitted. These standards currently do not impact the Company as it has full controlling interest of all of its subsidiaries.

c) International Financial Reporting Standards ("IFRS")

On February 13, 2008 the Canadian Accounting Standards Board confirmed that effective for interim and annual financial statements related to fiscal years beginning on or after January 1, 2011, IFRS will replace Canada's current GAAP for all publicly accountable profit-oriented enterprises.

The Company commenced its IFRS transition project in 2008 and has completed the project awareness and engagement phase of the IFRS transition project. Corporate governance over the project was established and a steering committee and project team formed. The steering committee is comprised of members of management and executive and is responsible for final approval of project recommendations and deliverables to the Audit Committee and Board of Directors. Communication, training and education are an important aspect of the Company's IFRS conversion project. Internal and external training and education sessions have been carried out and will continue throughout each phase of the project.

The Company completed the diagnostic assessment phase by performing comparisons of the differences between Canadian GAAP and IFRS and is currently assessing the effects of adoption and finalizing its conversion plan. The Company determined that the most significant impact of IFRS conversion is to property and equipment. IFRS does not prescribe specific oil and gas accounting guidance other than for costs associated with the exploration and evaluation phase. The Company currently follows full cost accounting as prescribed in Accounting Guideline 16, Oil and Gas Accounting - Full Cost. Conversion to IFRS may have a significant impact on how the Company accounts for costs pertaining to oil and gas activities, in particular those related to the pre-exploration and development phases. In addition, the level at which impairment tests are performed and the impairment testing methodology will differ under IFRS. IFRS conversion will also result in other impacts, some of which may be significant in nature. The Company continues to focus on analyzing and developing implementation strategies and processes for the key IFRS transition issues identified. Where applicable, key IFRS transition alternatives are being considered and evaluated. The Company continues to perform preliminary accounting assessments on less critical IFRS transition issues and has commenced analysis of IFRS financial statement presentation and disclosure requirements. These assessments will need to be further analyzed and evaluated throughout the implementation phase of the Company's project. At this time, the impact on the Company's financial position and results of operations is not reliably determinable or estimable.

In July 2009, the International Accounting Standards Board ("IASB") approved additional exemptions that will allow entities to allocate their oil and gas asset balance as determined under full cost accounting to the IFRS categories of exploration and evaluation assets and development and producing properties. Under the exemption, exploration and evaluation assets are measured at the amount determined under an entity's previous GAAP. For assets in the development or production phases, the amount is also measured at the amount determined under an entity's previous GAAP; however, such values must be allocated to the underlying IFRS transitional assets on a pro-rata basis using either reserve values or reserve volumes as of the entity's IFRS transition date. This exemption will relieve entities from significant adjustments resulting from retrospective adoption of IFRS. The Company intends to utilize this exemption. The Company is also evaluating other first-time adoption exemptions and elections available upon initial transition that provide relief from retrospective application of IFRS.

Concurrently, the project team is working on the design, planning and solution development phase. In this phase, the focus is on determining the specific qualitative and quantitative impact the application of IFRS requirement has on the Company. The project team members continue to work with representatives from the various operational areas to develop recommendations including first-time adoption exemptions available upon initial transition to IFRS. The results from the consultations with the various operational areas are used to draft accounting policies. One of the sections in each of the draft accounting policies is the disclosure section which includes the financial statement disclosure as required by IFRS. First-time adoption exemptions were analyzed by the project team and a schedule is being drafted for the steering committee to review and evaluate the exemptions. A detailed implementation plan and timeline has been developed, which also includes the development of a training plan. Furthermore, in the second half of 2010 the Company will continue to work on the development of processes and systems to ensure that IFRS comparative data is captured, and to position it for reporting under IFRS in 2011.

Additionally, the Company is monitoring the IASB's active projects and all changes to IFRS prior to January 1, 2011 and will be incorporated as required.

INTERNAL CONTROLS OVER FINANCIAL REPORTING

TransGlobe's management designed and implemented internal controls over financial reporting, as defined under National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings, of the Canadian Securities Administrators. Internal controls over financial reporting is a process designed under the supervision of the Chief Executive Officer and the Chief Financial Officer and effected by the Board of Directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with Canadian generally accepted accounting principles, including a reconciliation to U.S. generally accepted accounting principles, focusing in particular on controls over information contained in the annual and interim financial statements. Due to its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements on a timely basis. A system of internal controls over financial reporting, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the internal controls over financial reporting are met. Also, projections of any evaluation of the effectiveness of internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate.

As at the date of this report, management is not aware of any change in the Company's internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

/T/

CONSOLIDATED FINANCIAL STATEMENTS

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

                                     Three Months Ended    Six Months Ended
                                                June 30             June 30
                                         2010      2009      2010      2009
----------------------------------------------------------------------------
----------------------------------------------------------------------------
REVENUE
 Oil sales, net of royalties and
  other                              $ 35,638  $ 26,462  $ 73,042  $ 45,522
 Derivative gain (loss) on commodity
  contracts (Note 12)                     311    (3,481)      289    (3,681)
 Other income                               7        32         7        32
----------------------------------------------------------------------------
                                       35,956    23,013    73,338    41,873
----------------------------------------------------------------------------

EXPENSES
 Operating                              6,247     5,201    12,034    10,407
 General and administrative             3,034     2,363     6,419     4,869
 Foreign exchange loss (gain)             167      (958)      331      (654)
 Interest on long-term debt               518       722     1,003     1,329
 Depletion and depreciation (Note 3)    7,338    14,415    14,681    26,432
----------------------------------------------------------------------------
                                       17,304    21,743    34,468    42,383
----------------------------------------------------------------------------
Income (loss) before income taxes      18,652     1,270    38,870      (510)

Income taxes - current                  9,214     5,631    17,834     8,805
----------------------------------------------------------------------------

NET INCOME (LOSS)                       9,438    (4,361)   21,036    (9,315)
Retained earnings, beginning of
 period                                91,611    83,476    80,013    88,430
----------------------------------------------------------------------------
RETAINED EARNINGS, END OF PERIOD    $ 101,049  $ 79,115  $101,049  $ 79,115
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net income (loss) per share
 (Note 10)
 Basic                              $    0.14  $  (0.07) $   0.32  $  (0.15)
 Diluted                            $    0.14  $  (0.07) $   0.31  $  (0.15)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
See accompanying notes to the consolidated financial statements.


Consolidated Statements of Comprehensive Income (Loss)

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

                                     Three Months Ended    Six Months Ended
                                                June 30             June 30
                                         2010      2009      2010      2009
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net income (loss)                     $ 9,438 $  (4,361)  $21,036 $  (9,315)
Other comprehensive income                  -         -         -         -
----------------------------------------------------------------------------
COMPREHENSIVE INCOME (LOSS)           $ 9,438 $  (4,361)  $21,036 $  (9,315)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
See accompanying notes to the consolidated financial statements.


Consolidated Balance Sheets

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

                                                       As at          As at
                                                     June 30,   December 31,
                                                        2010           2009
----------------------------------------------------------------------------
----------------------------------------------------------------------------
ASSETS
Current
 Cash and cash equivalents                         $  21,437      $  16,177
 Accounts receivable                                  50,167         35,319
 Derivative commodity contracts (Note 12)                193              -
 Prepaids and other                                    2,120          1,909
----------------------------------------------------------------------------
                                                      73,917         53,405
Deferred financing costs (Note 5)                        699              -
Goodwill (Note 4)                                      8,180          8,180
Property and equipment (Note 3)                      180,549        167,297
----------------------------------------------------------------------------
                                                   $ 263,345      $ 228,882
----------------------------------------------------------------------------
----------------------------------------------------------------------------
LIABILITIES
Current
 Accounts payable and accrued liabilities          $  22,017      $  14,879
 Derivative commodity contracts (Note 12)                  -            514
 Current portion of long-term debt (Note 5)                -         49,799
----------------------------------------------------------------------------
                                                      22,017         65,192

Long-term debt (Note 5)                               49,977              -
----------------------------------------------------------------------------
                                                      71,994         65,192

Commitments and contingencies (Note 13)

SHAREHOLDERS' EQUITY
Share capital (Note 6)                                74,266         66,106
Contributed surplus (Note 8)                           5,156          6,691
Accumulated other comprehensive income (Note 9)       10,880         10,880
Retained earnings                                    101,049         80,013
----------------------------------------------------------------------------
                                                     191,351        163,690
----------------------------------------------------------------------------
                                                   $ 263,345      $ 228,882
----------------------------------------------------------------------------
----------------------------------------------------------------------------
See accompanying notes to the consolidated financial statements.

Approved on behalf of the Board:

Signed by:

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


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

                                     Three Months Ended    Six Months Ended
                                                June 30             June 30
                                         2010      2009      2010      2009
----------------------------------------------------------------------------
----------------------------------------------------------------------------
CASH FLOWS RELATED TO THE FOLLOWING
 ACTIVITIES:

OPERATING
 Net income (loss)                    $ 9,438 $  (4,361) $ 21,036  $ (9,315)
 Adjustments for:
  Depletion and depreciation            7,338    14,415    14,681    26,432
  Amortization of deferred financing
   costs                                   89       205       178       322
  Stock-based compensation (Note 7)       524       480       911       970
  Unrealized (gain) loss on commodity
   contracts                             (362)    3,378      (706)    4,349
 Changes in non-cash working capital   (1,400)      935   (16,219)      183
----------------------------------------------------------------------------
                                       15,627    15,052    19,881    22,941
----------------------------------------------------------------------------

FINANCING
 Repayments of long-term debt               -    (5,000)        -    (5,000)
 Issue of common shares for cash
  (Note 6)                              5,614         -     5,744    16,392
 Issue costs for common shares
  (Note 6)                                  -       (19)        -    (1,185)
 Deferred financing costs                (699)        -      (699)        -
 Changes in non-cash working capital        -       207         -      (879)
----------------------------------------------------------------------------
                                        4,915    (4,812)    5,045     9,328
----------------------------------------------------------------------------

INVESTING
 Exploration and development
  expenditures                        (14,486)   (8,480)  (27,933)  (17,406)
 Changes in non-cash working capital   (3,464)      151     8,267     1,455
----------------------------------------------------------------------------
                                      (17,950)   (8,329)  (19,666)  (15,951)
----------------------------------------------------------------------------
NET INCREASE IN CASH AND CASH
 EQUIVALENTS                            2,592     1,911     5,260    16,318
CASH AND CASH EQUIVALENTS, BEGINNING
 OF PERIOD                             18,845    22,041    16,177     7,634
----------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF
 PERIOD                              $ 21,437 $  23,952  $ 21,437  $ 23,952
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Supplemental Disclosure of Cash Flow
 Information
 Cash interest paid                  $    429 $     517  $    825  $  1,007
 Cash taxes paid                        9,214     5,631    17,834     8,805
 Cash is comprised of cash on hand
  and balances with banks              21,437    23,952    21,437    23,952
 Cash equivalents                           -         -         -         -
----------------------------------------------------------------------------
----------------------------------------------------------------------------
See accompanying notes to the consolidated financial statements.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As at June 30, 2010 and December 31, 2009 and for the periods ended June 30,
2010 and 2009
(Unaudited - Expressed in U.S. Dollars)

/T/

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 June 30, 2010 and December 31, 2009 and for the three and six month periods ended June 30, 2010 and 2009, are presented in accordance with Canadian generally accepted accounting principles ("Canadian GAAP" or "Cdn. GAAP") on the same basis as the audited consolidated financial statements as at and for the year ended December 31, 2009 except as outlined in Note 2. These interim consolidated 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, 2009. In these interim consolidated financial statements, unless otherwise indicated, all dollars are in United States (U.S.) dollars. All references to US$ or to $ are to United States dollars and references to C$ are to Canadian dollars. 

2. CHANGES IN ACCOUNTING POLICIES

New Accounting Policies

The Company adopted a share appreciation rights plan in March 2010, which is described in Note 7. Under the share appreciation rights plan, all liabilities must be settled in cash and, consequently, are classified as liability instruments and measured at their intrinsic value less any unvested portion. Unvested share appreciation rights accrue evenly over the vesting period. The intrinsic value is determined as the difference between the market value of the Company's common shares and the exercise price of the share appreciation rights. This obligation is revalued each reporting period and the change in the obligation is recognized as stock-based compensation expense (recovery).

3. PROPERTY AND EQUIPMENT

The Company capitalized general and administrative costs relating to exploration and development activities during the three and six months ended June 30, 2010 of $0.6 million and $1.0 million, respectively, in Egypt (2009 - $0.4 million and $1.2 million, respectively) and $0.1 million and $0.2 million, respectively, in Yemen (2009 - $0.1 million and $0.2 million, respectively). 

Unproven property costs for the three months ended June 30, 2010 in the amount of $16.6 million in Egypt (2009 - $9.7 million) and $11.8 million in Yemen (2009 - $9.1 million) were excluded from costs subject to depletion and depreciation. 

Future development costs for Proved reserves included in the depletion calculations for the three months ended June 30, 2010 totaled $2.1 million in Egypt (2009 - $1.9 million) and $11.5 million in Yemen (2009 - $11.0 million).

/T/

4. GOODWILL

Changes in the carrying amount of the Company's goodwill, arising from
acquisitions, are as follows:

                                       Six Months Ended          Year Ended
(000s)                                    June 30, 2010   December 31, 2009
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Balance, beginning of period                    $ 8,180             $ 8,180
Changes during the period                             -                   -
----------------------------------------------------------------------------

Balance, end of period                          $ 8,180             $ 8,180
----------------------------------------------------------------------------
----------------------------------------------------------------------------

5. LONG-TERM DEBT

                                                  As at               As at
(000s)                                    June 30, 2010   December 31, 2009
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Revolving Credit Agreement                     $ 50,000            $ 50,000
Deferred financing costs                            (23)               (201)
----------------------------------------------------------------------------

                                                 49,977              49,799
----------------------------------------------------------------------------

Current portion of long-term debt (net of
 deferred financing costs)                            -              49,799
----------------------------------------------------------------------------

                                               $ 49,977            $      -
----------------------------------------------------------------------------
----------------------------------------------------------------------------

/T/

As at June 30, 2010, the Company had a $60.0 million Revolving Credit Agreement of which $50.0 million was drawn. The Revolving Credit Agreement was set to expire on September 25, 2010 and was 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 bore interest at the Eurodollar Rate plus three percent. In the three and six months ended June 30, 2010, the average effective interest rate was 3.4% and 3.3% respectively (2009 - 4.6% and 4.4%, respectively).

Subsequent to June 30, 2010, the Company entered into a new five-year $100.0 million Borrowing Base Facility and paid out the original Revolving Credit Agreement. The new Borrowing Base Facility is secured by a pledge over certain bank accounts, a pledge over the Company's subsidiaries, and a fixed and floating charge over certain assets. The new credit facility bears interest at the LIBOR rate plus an applicable margin, which ranges from 3.75% to 4.75% and is dependent on the amount drawn. As of June 30, 2010, the Company has incurred financing costs related to the new Borrowing Base Facility in the amount of $0.7 million. As repayments on the new Borrowing Base Facility are not expected to commence until 2012, the entire balance has been presented as a long-term liability on the consolidated balance sheets. Repayments will be made on a semi-annual basis in order to reduce the amount borrowed to an amount no greater than the Borrowing Base. The amount of the Borrowing Base may fluctuate over time and is determined principally by the net present value of borrowing base assets as defined in the Borrowing Base Facility Agreement over the term of the facility as well as pre-determined semi-annual reductions. Accordingly, for each balance sheet date, the timing of repayment is estimated based on the most recent redetermination of the Borrowing Base and repayment schedules may change in future periods.  

/T/

The estimated future debt payments on long-term debt, as of June 30, 2010,
are as follows:

(000s)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
2010                                                                      -
2011                                                                      -
2012                                                              $  10,876
2013                                                                 18,681
2014                                                                 14,626
Thereafter                                                            5,817
----------------------------------------------------------------------------
----------------------------------------------------------------------------

6. SHARE CAPITAL

Authorized

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

Issued

                                       Six Months Ended          Year Ended
                                          June 30, 2010   December 31, 2009
----------------------------------------------------------------------------
(000s)                                 Shares    Amount    Shares    Amount
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Balance, beginning of period           65,399 $  66,106    59,500  $ 50,532
Share issuance                              -         -     5,798    16,312
Stock options exercised                 1,194     5,744       101       266
Stock options surrendered for cash
 payments                                   -         -         -       (13)
Stock-based compensation on exercise        -     2,416         -       213
Share issue costs                           -         -         -    (1,204)
----------------------------------------------------------------------------

Balance, end of period                 66,593 $  74,266    65,399  $ 66,106
----------------------------------------------------------------------------
----------------------------------------------------------------------------

/T/

The Company has received regulatory approval to purchase, from time to time, as it considers advisable, up to 6,116,905 common shares under a Normal Course Issuer Bid which commenced September 7, 2009 and will terminate September 6, 2010. During the three and six month period ended June 30, 2010, the Company did not repurchase any common shares. During the year-ended December 31, 2009, the Company did not repurchase and cancel any common shares.

7. STOCK OPTION PLAN

Stock option plan

The Company adopted a stock option plan in May 2007 (the "Plan") and reapproved unallocated options issuable pursuant to the Plan in May 2010. The number of Common Shares that may be issued pursuant to the exercise of options awarded under the Plan and all other Security Based Compensation Arrangements of the Company is 10% of the common shares outstanding from time to time. All incentive stock options granted under the Plan have a per-share exercise price not less than the trading market value of the common shares at the date of grant. Stock options vest one-third on each of the first, second and third anniversaries of the grant date. Options granted expire five years after the grant date.

/T/

The following table summarizes information about the stock options
outstanding and exercisable at the dates indicated:

                                       Six Months Ended          Year Ended
                                          June 30, 2010   December 31, 2009
----------------------------------------------------------------------------
                                              Weighted-           Weighted-
                                                Average             Average
                                       Number  Exercise    Number  Exercise
                                           of     Price        of     Price
(000s, except per share amounts)      Options       (C$)  Options       (C$)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Options outstanding, beginning of
 period                                 5,478      4.12     5,600      4.20
 Granted                                1,220      6.78       815      3.45
 Exercised                             (1,194)     4.95      (101)     2.92
 Exercised for cash                         -         -       (80)     3.26
 Forfeited                               (575)     4.04      (756)     3.91
----------------------------------------------------------------------------

Options outstanding, end of period      4,929      4.59     5,478      4.12
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Options exercisable, end of period      1,503      4.54     2,335      4.72
----------------------------------------------------------------------------
----------------------------------------------------------------------------

/T/

Stock-based compensation

Compensation expense of $0.5 million and $0.9 million has been recorded in general and administrative expenses in the Consolidated Statements of Income (Loss) and Retained Earnings for the three and six months ended June 30, 2010 (June 30, 2009 - $0.5 million and $1.0 million, respectively). 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 options granted during 2010 and the assumptions used in their determination are as follows:

/T/

                                                                       2010
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Weighted-average fair market value per option (C$)                     2.86
Risk free interest rate (%)                                            2.77
Expected life (years)                                                     5
Expected volatility (%)                                               48.43
Dividend per share                                                     0.00
Expected forfeiture rate (non-executive employees) (%)                   12
Early exercise (Year 1/Year 2/Year 3/Year 4/Year 5)       0%/10%/20%/30%/40%
----------------------------------------------------------------------------
----------------------------------------------------------------------------

/T/

Share appreciation rights plan

In addition to the Company's stock option plan, the Company also issues share appreciation rights under the share appreciation rights plan, which was adopted in March 2010. Share appreciation rights are similar to stock options except that the holder does not have the right to purchase the underlying share of the Company and instead the units are settled in cash. Units granted under the share appreciation rights plan vest one-third on each of the first, second and third anniversaries of the grant date. Share appreciation rights granted expire five years after the grant date.

/T/

                                                    Six Months Ended
                                                      June 30, 2010
                                                ----------------------------
                                                                  Weighted-
                                                 Number             Average
                                                     of            Exercise
(000s, except per share amounts)                  Units           Price (C$)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Outstanding, beginning of period                      -                   -
 Granted                                            150                6.61
 Exercised                                            -                   -
 Forfeited                                            -                   -
----------------------------------------------------------------------------

Outstanding, end of period                          150                6.61
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Exercisable, end of period                            -                   -
----------------------------------------------------------------------------
----------------------------------------------------------------------------

/T/

The mark-to-market liability for the share appreciation rights plan as at June 30, 2010 was included in accounts payable and accrued liabilities on the Consolidated Balance Sheets.

/T/

8. CONTRIBUTED SURPLUS

                                       Six Months Ended          Year Ended
(000s)                                    June 30, 2010   December 31, 2009
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Contributed surplus, beginning of
 period                                         $ 6,691             $ 4,893
Stock-based compensation expense                    881               2,011
Transfer to common shares on exercise
 of options                                      (2,416)               (213)
----------------------------------------------------------------------------

Contributed surplus, end of period              $ 5,156             $ 6,691
----------------------------------------------------------------------------
----------------------------------------------------------------------------

9. ACCUMULATED OTHER COMPREHENSIVE INCOME

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

                                       Six Months Ended          Year Ended
(000s)                                    June 30, 2010   December 31, 2009
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Accumulated other comprehensive
 income, beginning of period                   $ 10,880            $ 10,880
Other comprehensive income                            -                   -
----------------------------------------------------------------------------

Accumulated other comprehensive
 income, end of period                         $ 10,880            $ 10,880
----------------------------------------------------------------------------
----------------------------------------------------------------------------

10. PER SHARE AMOUNTS

In calculating the net income (loss) per share, basic and diluted, the
following weighted-average shares were used:

                                     Three Months Ended    Six Months Ended
                                                June 30             June 30
----------------------------------------------------------------------------
(000s)                                   2010      2009      2010      2009
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Weighted-average number of shares
 outstanding                           66,031    65,328    65,733    63,259
Dilutive effect of stock options        2,491         -     2,147         -
----------------------------------------------------------------------------

Weighted-average number of diluted
 shares outstanding                    68,522    65,328    67,880    63,529
----------------------------------------------------------------------------
----------------------------------------------------------------------------

/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 six month periods ended June 30, 2010, the Company excluded 144,000 and 1,166,400 options, respectively, as their exercise price was greater than the average common share market price in this period. In calculating the weighted-average number of diluted common shares outstanding for the three and six month periods ended June 30, 2009, the Company excluded all stock options outstanding because there was a net loss in these periods.

11. 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 funds flow from operations for the trailing twelve months. For the purposes of measuring the Company's ability to meet the above-stated criteria, funds flow from operations is defined as the net income or loss before any deduction for depletion, depreciation and accretion, amortization of deferred financing charges, non-cash stock-based compensation, and non-cash derivative (gain) loss on commodity contracts. Funds flow from operations is a non-GAAP measure and may not be comparable to similar measures used by other companies.

/T/

The Company defines and computes its capital as follows:

                                                  As at               As at
(000s)                                    June 30, 2010   December 31, 2009
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Shareholders' equity                          $ 191,351           $ 163,690
Long-term debt, including the current
 portion (net of unamortized transaction
 costs)                                          49,977              49,799
Cash and cash equivalents                       (21,437)            (16,177)
----------------------------------------------------------------------------

Total capital                                 $ 219,891           $ 197,312
----------------------------------------------------------------------------
----------------------------------------------------------------------------

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

                                                   12 Months Trailing
----------------------------------------------------------------------------
(000s)                                    June 30, 2010   December 31, 2009
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Long-term debt, including the current
 portion (net of unamortized transaction
 costs)                                        $ 49,977            $ 49,799
----------------------------------------------------------------------------

Cash flow from operating activities            $ 33,739            $ 36,799
Changes in non-cash working capital              24,667               8,265
----------------------------------------------------------------------------
Funds flow from operations                     $ 58,406            $ 45,064
----------------------------------------------------------------------------

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 the Revolving Credit Agreement that existed as at June 30, 2010. The key financial covenants 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 derivative losses on commodity contracts and stock based compensation expense.

- Indebtedness to EBITDAX is 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 June 30, 2010.

The new Borrowing Base Facility entered into subsequent to June 30, 2010 (see Note 5) will also subject the Company to certain financial covenants. The key financial covenants on the new Borrowing Base Facility are as follows:

- Consolidated Financial Indebtedness to EBITDAX will not exceed 3.0 to 1.0. For the purposes of this calculation, Consolidated Financial Indebtedness shall mean the aggregate of all Financial Indebtedness of the Company. EBITDAX shall be defined as Consolidated Net Income before interest, income taxes, depreciation, depletion, amortization, accretion of abandonment liability, unrealized hedging losses and other similar non-cash charges (including expenses related to stock options), minus unrealized hedging gains and all non-cash income added to Consolidated Net Income.

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

12. 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 assets held for trading and its derivative commodity contracts as financial assets or 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, and long-term debt are classified as other liabilities, all of which are measured at amortized cost.

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

/T/

(000s)                                                June 30, 2010
----------------------------------------------------------------------------
Classification                                Carrying Value     Fair Value
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Financial assets held-for-trading                   $ 21,630       $ 21,630
Loans and receivables                                 50,167         50,167
Other liabilities                                     71,994         72,017
----------------------------------------------------------------------------
----------------------------------------------------------------------------

/T/

Assets and liabilities at June 30, 2010 that are measured at fair value are classified into levels reflecting the method used to make the measurements. Fair values of assets and liabilities included in Level 1 are determined by reference to quoted prices in active markets for identical assets and liabilities. Assets and liabilities in Level 2 include valuations using inputs other than quoted prices for which all significant inputs are observable, either directly or indirectly. Level 3 valuations are based on inputs that are unobservable and significant to the overall fair value measurement.

The Company's cash and cash equivalents and risk management contracts are assessed on the fair value hierarchy described above. TransGlobe's cash and cash equivalents are classified as Level 1 and risk management contracts as Level 2. Assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the placement within the fair value hierarchy level.

Credit Risk

Credit risk is the risk of loss if the counter parties do not fulfill their contractual obligations. The Company's exposure to credit risk primarily relates to accounts receivable, the majority of which are in respect of oil operations, and derivative commodity contracts. The Company generally extends unsecured credit to these parties and therefore the collection of these amounts 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 they extend credit and an insurance program on a portion of the receivable balance. The Company has not experienced any material credit loss in the collection of accounts receivable to date.

Trade and other receivables 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 June 30, 2010
----------------------------------------------------------------------------
Neither impaired nor past due                                      $ 19,301
Impaired (net of valuation allowance)                                     -
Not impaired and past due in the following period:
 Within 30 days                                                       7,629
 31-60 days                                                           7,258
 61-90 days                                                           6,598
 Over 90 days                                                         9,381
----------------------------------------------------------------------------
----------------------------------------------------------------------------

/T/

In Egypt, the Company sold all of its 2010 production to one purchaser. In Yemen, the Company sold all of its 2010 Block 32 production to one purchaser and all of its 2010 Block S-1 production to one purchaser. Management considers such transactions normal for the Company and the international oil industry in which it operates. 

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 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 production. Commodity prices have fluctuated significantly during recent years.

Any movement in commodity prices would have an 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 contracts are outstanding at June 30, 2010: 

/T/

                                                                Dated Brent
                                                                    Pricing
Period                                     Volume       Type       Put-Call
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Crude Oil
----------
 July 1, 2010-August 31, 2010   12,000 Bbls/month  Financial  $60.00-$84.25
                                                      Collar
 July 1, 2010-August 31, 2010    9,000 Bbls/month  Financial  $40.00-$80.00
                                                      Collar
 July 1, 2010-December 31, 2010 10,000 Bbls/month  Financial         $60.00
                                                       Floor
 July 1, 2010-December 31, 2010 20,000 Bbls/month  Financial         $65.00
                                                       Floor
----------------------------------------------------------------------------
----------------------------------------------------------------------------

/T/

The estimated fair value of unrealized commodity contracts is reported on the Consolidated Balance Sheet, with any change in the unrealized positions recorded to income. The Company assessed these instruments on the fair value hierarchy and has classified the determination of fair value of these instruments as Level 2, as 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 the net income by $0.2 million for the three and six months ended June 30, 2010. The effect of a 10% decrease in commodity prices on the derivative commodity contracts would increase the net income, for the three and six months ended June 30, 2010, by $0.3 million.

Subsequent to June 30, 2010, TransGlobe bought out both financial collar derivative commodity contracts. Immediately subsequent to the buy-out, the following commodity contracts are outstanding:

/T/

                                                                Dated Brent
                                                                    Pricing
Period                                     Volume       Type       Put-Call
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Crude Oil
----------
 July 1, 2010-December 31, 2010 10,000 Bbls/month  Financial         $60.00
                                                       Floor
 July 1, 2010-December 31, 2010 20,000 Bbls/month  Financial         $65.00
                                                       Floor
----------------------------------------------------------------------------

/T/

b) Foreign Currency Exchange Risk

As the Company's business is conducted primarily in U.S. dollars and its financial instruments are primarily denominated in U.S. dollars, the Company's exposure to foreign currency exchange risk relates to certain cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities denominated in Canadian dollars. When assessing the potential impact of foreign currency exchange risk, the Company believes 10% volatility is a reasonable measure. The Company estimates that a 10% increase in the value of the Canadian dollar against the U.S. dollar would result in an increase in the net income for the three and six months ended June 30, 2010 of approximately $0.3 million and conversely a 10% decrease in the value of the Canadian dollar against the U.S. dollar would decrease the net income by said amount for the same periods. The Company does not utilize derivative instruments to manage this risk.

c) Interest Rate Risk

Fluctuations in interest rates could result in a significant change in the amount the Company pays to service variable-interest, U.S.-dollar-denominated debt. No derivative contracts were entered into during 2010 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 six months ended June 30, 2010, by $0.1 million and $0.3 million, respectively. The effect of interest rates decreasing by 1% would increase the Company's net income, for the three and six months ended June 30, 2010, by $0.1 million and $0.3 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 June 30, 2010:

/T/

(000s)                             Payment Due by Period(1,2)
----------------------------------------------------------------------------
                     Recognized                Less                    More
                   in Financial Contractual    than     1-3     4-5    than
                     Statements  Cash Flows  1 year   years   years 5 years
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Accounts payable
 and accrued
 liabilities      Yes-Liability    $ 22,017 $22,017     $ - $     - $     -
Long-term debt:
 Borrowing Base
  Facility        Yes-Liability      50,000       -  29,557  20,443       -
Office and
 equipment leases            No      10,954   1,509   2,880   1,872   4,693
Minimum work
 commitments(3)              No       7,876   2,923   4,953       -       -
----------------------------------------------------------------------------

Total                              $ 90,847 $26,449 $37,390 $22,315 $ 4,693

----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Payments exclude ongoing operating costs related to certain leases,
    interest on long-term debt and payments made to settle derivatives.
(2) Payments denominated in foreign currencies have been translated at
    June 30, 2010 exchange rates.
(3) Minimum work commitments include contracts awarded for capital projects
    and those commitments related to exploration and drilling obligations.

/T/

The Company actively monitors its liquidity to ensure that its cash flows, credit facilities and working capital are adequate to support these financial liabilities, in addition to the Company's capital programs. 

The existing banking arrangement at June 30, 2010 consists of a Revolving Credit Facility of $60.0 million of which $50.0 million was drawn. Subsequent to June 30, 2010, the Company entered into a new five-year $100.0 million Borrowing Base Facility and paid out the existing credit facility (see Note 5). 

13. COMMITMENTS AND CONTINGENCIES

The Company is subject to certain office and equipment leases (Note 12).

TransGlobe entered into a farm-out agreement and committed to pay 100% of three exploration wells to a maximum of $9.0 million to earn a 50% working interest in the East Ghazalat Concession in the Western Desert of Egypt, subject to the approval of the Egyptian Government. The Company completed drilling all three exploration wells during the six month period ended June 30, 2010. The Contractor (Joint Venture Partners) has entered the first, 24-month extension period. These financial and work commitments for the extension period were met in the prior period. 

Pursuant to the Concession agreement for Nuqra Block 1 in Egypt, the Contractor (Joint Venture Partners) has a minimum financial commitment of $5.0 million ($4.4 million to TransGlobe) and a work commitment for two exploration wells in the second exploration extension. The second, 36-month extension period commenced on July 18, 2009. The Contractor has met the second extension financial commitment of $5.0 million in the prior periods. At the request of the Government, the Company provided a $4.0 million production guarantee from the West Gharib Concession prior to entering the second extension period. 

Pursuant to the PSA for Block 72 in Yemen, the Contractor (Joint Venture Partners) has a minimum financial commitment of $2.0 million ($0.1 million to TransGlobe) to drill one exploration well during the second exploration period. The second, 30-month exploration period commenced on January 12, 2009. The Contractor has accepted a farm-in proposal from TOTAL E&P Yemen. Subject to government approval, the Company will reduce its interest in the concession to 20%. 

Pursuant to the PSA for Block 75 in Yemen, the Contractor (Joint Venture Partners) has a remaining minimum financial commitment of $3.0 million ($0.8 million to TransGlobe) for 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 August 18, 2008 asset purchase agreement for a 25% financial 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, to be evaluated annually. As at December 31, 2009, no additional fees are due in 2010.

In the normal course of its operations, the Company may be subject to litigations and claims. Although it is not possible to estimate the extent of potential costs, if any, management believes that the ultimate resolution of such contingencies would not have a material adverse impact on the results of operations, financial position or liquidity of the Company.

/T/

14. SEGMENTED INFORMATION

                         Egypt              Yemen                Total
----------------------------------------------------------------------------
                                  Six Months Ended June 30
(000s)              2010      2009      2010      2009       2010      2009
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Revenue
 Oil sales, net
  of royalties
  and other     $ 52,342  $ 26,541  $ 20,700  $ 18,981  $  73,042  $ 45,522

Segmented
 expenses
 Operating         7,487     5,454     4,547     4,953     12,034    10,407
 Depletion and
  depreciation    10,718    21,403     3,859     4,937     14,577    26,340
 Income taxes     13,014     5,784     4,820     3,021     17,834     8,805
----------------------------------------------------------------------------

Total segmented
 expenses         31,219    32,641    13,226    12,911     44,445    45,552

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

Segmented income
 (loss)         $ 21,123  $ (6,100) $  7,474  $  6,070  $  28,597     $ (30)
----------------------------------------------------------------------------

Non-segmented
 expenses
 Derivative loss
  (gain) on
  commodity
  contracts
  (Note 12a)                                                 (289)    3,681
 General and
  administrative                                            6,419     4,869
 Interest on
  long-term debt                                            1,003     1,329
 Depreciation                                                 104        92
 Foreign exchange
  loss (gain)                                                 331      (654)
 Other income                                                  (7)      (32)
----------------------------------------------------------------------------

Total
 non-segmented
 expenses                                                   7,561     9,285

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

Net income
 (loss)                                                 $  21,036  $ (9,315)

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

Capital
 expenditures
 Exploration and
  development   $ 26,197  $ 12,932  $  1,662  $  4,316  $  27,859  $ 17,248
 Corporate                                                     74       158
----------------------------------------------------------------------------

Total capital
 expenditures                                           $  27,933  $ 17,406

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


                          Egypt               Yemen               Total
----------------------------------------------------------------------------
                                    Three Months Ended June 30
(000s)               2010      2009      2010      2009      2010      2009
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Revenue
 Oil sales, net
  of royalties
  and other      $ 26,255  $ 16,522  $  9,383  $  9,940  $ 35,638  $ 26,462

Segmented
 expenses
 Operating          3,845     2,667     2,402     2,534     6,247     5,201
 Depletion and
  depreciation      5,440    11,930     1,845     2,436     7,285    14,366
 Income taxes       6,701     3,588     2,513     2,043     9,214     5,631
----------------------------------------------------------------------------

Total segmented
 expenses          15,986    18,185     6,760     7,013    22,746    25,198

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

Segmented income
 (loss)          $ 10,269  $ (1,663) $  2,623  $  2,927  $ 12,892  $  1,264

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

Non-segmented
 expenses
 Derivative loss
  (gain) on
  commodity
  contracts
  (Note 12a)                                                 (311)    3,481
 General and
  administrative                                            3,034     2,363
 Interest on
  long-term debt                                              518       722
 Depreciation                                                  53        49
 Foreign exchange
  loss (gain)                                                 167      (958)
 Other income                                                  (7)      (32)
----------------------------------------------------------------------------

Total
 non-segmented
 expenses                                                   3,454     5,625

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

Net income
 (loss)                                                  $  9,438  $ (4,361)

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

Capital
 expenditures
 Exploration and
  development    $ 13,483  $  5,623     $ 983  $  2,771  $ 14,466  $  8,394
 Corporate                                                     20        86
----------------------------------------------------------------------------

Total capital
 expenditures                                            $ 14,486  $  8,480

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


                  June 30   Dec. 31   June 30   Dec. 31   June 30   Dec. 31
                     2010      2009      2010      2009      2010      2009
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Property and
 equipment       $134,548  $119,079  $ 45,298  $ 47,486  $179,846  $166,565
Goodwill            8,180     8,180         -         -     8,180     8,180
Other              51,007    41,347    11,096     5,877    62,103    47,224
----------------------------------------------------------------------------
Segmented assets $193,735  $168,606  $ 56,394  $ 53,363   250,129   221,969
Non-segmented
 assets                                                    13,216     6,913
----------------------------------------------------------------------------

Total assets                                             $263,345  $228,882

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

/T/

Cautionary Statement to Investors:

This news release 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, other than as required by law, 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/edgar.shtml for further, more detailed information concerning these matters.


FOR FURTHER INFORMATION PLEASE CONTACT:

TransGlobe Energy Corporation
Investor Relations
Scott Koyich
403.264.9888
investor.relations@trans-globe.com
www.trans-globe.com