MANAGEMENT'S DISCUSSION AND ANALYSIS

May 5, 2015

The following discussion and analysis is management’s opinion of TransGlobe’s historical financial and operating results and should be read in conjunction with the unaudited Condensed Consolidated Interim Financial Statements of the Company for the three months ended March 31, 2015 and 2014 and the audited Consolidated Financial Statements and Management's Discussion and Analysis ("MD&A") for the year ended December 31, 2014 included in the Company's annual report. The Condensed Consolidated Interim Financial Statements are prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board 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 on Form 40-F may be found on EDGAR at www.sec.gov.

READER ADVISORIES

Forward-Looking Statements

Certain statements or information contained herein may constitute forward-looking statements or information under applicable securities laws, including, but not limited to, management’s assessment of future plans and operations, the anticipated amount and timing of future dividend payments, the sustainability of future dividend payments, anticipated increases to the Company's reserves and production, collection of accounts receivable from the Egyptian Government, drilling plans and the timing thereof, commodity price risk management strategies, adapting to the current political situations in Egypt and Yemen, reserve estimates, management’s expectation for results of operations for 2015, including expected 2015 average production, the 2015 capital program for exploration and development, the timing and method of financing thereof, method of funding drilling commitments, and commodity prices and expected volatility thereof. Statements relating to "reserves" are deemed to be forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions, that the reserves described can be profitably produced in the future.

Forward-looking statements or information relate to the Company’s future events or performance. All statements other than statements of historical fact may be forward-looking statements or information. Such statements or information 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.

Forward-looking statements or information necessarily involve risks including, without limitation, risks associated with oil and gas exploration, development, exploitation, production, marketing and transportation, loss of markets, economic and political instability, volatility of commodity prices, currency fluctuations, imprecision of reserve estimates, environmental risks, competition from other producers, inability to retain drilling rigs and other services, incorrect assessment of the value of acquisitions, failure to realize the anticipated benefits of acquisitions, delays resulting from or inability to obtain required regulatory approvals and ability to access sufficient capital from internal and external sources. The recovery and reserve estimates of the Company's reserves provided herein are estimates only and there is no guarantee that the estimated reserves will be recovered. Events or circumstances may cause actual results to differ materially from those predicted, as a result of the risk factors set out and other known and unknown risks, uncertainties, and other factors, many of which are beyond the control of the Company.

In addition, forward-looking statements or information are based on a number of factors and assumptions which have been used to develop such statements and information in order to provide shareholders with a more complete perspective on the Company's future operations. Such statements and information may prove to be incorrect and readers are cautioned that such statements and information may not be appropriate for other purposes. Although the Company believes that the expectations reflected in such forward-looking statements or information are reasonable, undue reliance should not be placed on forward-looking statements or information because the Company can give no assurance that such expectations will prove to be correct. In addition to other factors and assumptions which may be identified herein, assumptions have been made regarding, among other things: the impact of increasing competition; the general stability of the economic and political environment in which the Company operates; the timely receipt of any required regulatory approvals; the ability of the Company to obtain qualified staff, equipment and services in a timely and cost efficient manner; drilling results; the ability of the operator of the projects which the Company has an interest in to operate the field in a safe, efficient and effective manner; the ability of the Company to obtain financing on acceptable terms; field production rates and decline rates; the ability to replace and expand oil and natural gas reserves through acquisition, development and exploration; the timing and costs of pipeline, storage and facility construction and expansion and the ability of the Company to secure adequate product transportation; future commodity prices; currency, exchange and interest rates; the regulatory framework regarding royalties, taxes and environmental matters in the jurisdictions in which the Company operates; and the ability of the Company to successfully market and receive payment for its oil and natural gas products.

Readers are cautioned that the foregoing list is not exhaustive of all factors and assumptions which have been used. As a consequence, actual results may differ materially from those anticipated in the forward-looking statements. Additional information on these and other factors that could affect the Company's operations and financial results are included in reports on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com), EDGAR website (www.sec.gov) and at the Company's website (www.trans-globe.com). Furthermore, the forward-looking statements or information contained herein are made as at the date hereof and the Company does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.

The reader is further cautioned that the preparation of financial statements in accordance with IFRS requires management to make certain judgments and estimates that affect the reported amounts of assets, liabilities, revenues and expenses. Estimating reserves is also critical to several accounting estimates and requires judgments and decisions based upon available geological, geophysical, engineering and economic data. These estimates may change, having either a negative or positive effect on net earnings as further information becomes available, and as the economic environment changes.

DIVIDENDS

On March 3, 2015, TransGlobe's Board of Directors approved and declared a quarterly dividend of $0.05 per share ($3.8 million in total), paid in cash as follows:

Ex-dividend date	Record date	Payment date	Per share amount
March 12, 2015	March 16, 2015	March 31, 2015		$0.05

The initiation of a quarterly dividend payment program in the second quarter of 2014 is a key component of TransGlobe's objective to create value for its shareholders. The actual amount of future quarterly dividends will be proposed by management and subject to the approval and discretion of the Board. The Board reviews proposed dividend payments in conjunction with their review of quarterly financial and operating results. Future dividend levels will be dependent upon economic factors including commodity prices, capital expenditure programs and production volumes, and will be evaluated regularly to ensure that dividend payments do not compromise the strong financial position or the growth of the Company.

The quarterly dividend declared on March 3, 2015 has been designated as an eligible dividend under the Income Tax Act (Canada).

MANAGEMENT STRATEGY AND OUTLOOK

The Q2-2015 outlook provides information as to management’s expectation for results of operations for Q2-2015. Readers are cautioned that the Q2-2015 outlook may not be appropriate for other purposes. The Company’s expected results are sensitive to commodity prices and fluctuations in the business environment, including disruptions caused by the ongoing political changes and civil unrest occurring in the jurisdictions that the Company operates in, 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.

Q2-2015 Outlook

It is expected that Q2-2015 production will average approximately 13,800 Bopd (increased from previous guidance of 13,300 Bopd).  The Company now markets its own crude, therefore future funds flow will be dependent upon the timing of crude oil tanker liftings and the pricing that the Company is able to negotiate for its crude. Because these factors are difficult to accurately predict, the Company has not provided funds flow guidance for 2015. Funds flow and crude oil inventory levels are expected to fluctuate significantly from quarter to quarter due to the timing of liftings.

On January 24^th TransGlobe lifted its first directly marketed crude oil shipment.  That cargo was exclusively West Gharib entitlement production.  The total amount lifted was 544,638 barrels and TransGlobe’s entitlement production from West Gharib in Q1-2015 was 418,245 barrels.  The over-lift portion of the marketed cargo or 126,393 barrels was applied against outstanding receivables at the end of Q1-2015.  West Bakr was in an under-lift (unsold) position of 179,730 entitlement barrels at the end of the quarter. The shipment that was lifted on April 4, 2015 is attributable to the Company’s West Bakr entitlement production for Q1-2015 and Q2-2015, with the balance being attributed to West Gharib entitlement production. We currently expect inventory barrels (under-lift) at the end of Q2-2015 to be in the range of 215,000 to 235,000 barrels.

2015 Capital Budget
($ millions)
Egypt	37.0
Yemen	0.5
Total	37.5

The 2015 capital program is split 49:51 between development and exploration, respectively. The focus for 2015 will be on building the exploration prospect inventory from the recently acquired seismic in the Eastern Desert region of Egypt, completing the planned 400 km² 3-D seismic program on the South Ghazalat concession in the Western Desert and preparing the three new North West Gharib oil discoveries for development. The Company drilled five wells in Q1-2015, and has no plans for any further drilling activities for the remainder of the year. However, drilling activities can be adjusted should oil prices improve during 2015. It is anticipated that the Company will fund its 2015 capital budget from funds flow from operations and working capital.

As a result of the recent strengthening in Brent oil prices the Company has begun to examine its development portfolio to prioritize projects that could be initiated in the second half of 2015.  It is anticipated that the Company could increase the 2015 capital development budget for projects such as the NW Gharib development and the West Bakr south K-field drilling project, if Brent pricing demonstrates strength in the $65/Bbl to $75/Bbl range.

ADDITIONAL 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 IFRS. Funds flow from operations is a 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.

2 Q1- 2015

Reconciliation of Funds Flow from Operations

	Three months ended March 31
($000s)	2015		2014
Cash flow from operating activities	18,048		3,211
Changes in non-cash working capital	(21,336	)	29,276
Funds flow from operations*	(3,288	)	32,487
* Funds flow from operations does not include interest costs. Interest expense is included in financing costs on the Condensed Consolidated Interim Statements of Earnings and Comprehensive Income. Cash interest paid is reported as a financing activity on the Condensed Consolidated Interim Statements of Cash Flows.

Debt-to-funds flow ratio

Debt-to-funds flow is a 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, plus convertible debentures 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 measure that represents sales net of royalties (all government interests, net of income taxes), operating expenses, current taxes and selling costs. 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 the Arab Republic of Egypt (“Egypt”), with additional legacy non-operated assets in the Republic of Yemen (“Yemen”).

Q1-2015 3

SELECTED QUARTERLY FINANCIAL INFORMATION

	2015		2014						2013
($000s, except per share,
price and volume amounts)	Q-1		Q-4		Q-3		Q-2	Q-1	Q-4	Q-3	Q-2
Average production volumes (Bopd)	14,886		15,172		15,109		16,112	18,067	18,519	18,197	18,417
Inventory volumes (Bbl)	179,730		—		13,025		4,500	49,103	37,326	9,510	—
Average sales volumes (Bopd)	12,876		15,139		15,132		16,485	17,932	18,213	18,109	18,539
Average price ($/Bbl)	46.82		66.41		88.59		96.14	94.89	96.10	97.18	90.48
Oil sales	54,251		92,488		123,317		144,208	153,140	161,035	161,900	152,646
Oil sales, net of royalties	29,573		52,340		67,848		76,040	78,366	81,196	78,531	76,223
Cash flow from operating activities	18,048		113,422		(3,123	)	33,467	3,211	109,226	22,035	16,347
Funds flow from operations*	(3,288	)	15,932		28,885		43,185	32,487	36,743	33,483	32,887
Funds flow from operations per       share
- Basic	(0.04	)	0.21		0.38		0.58	0.44	0.49	0.45	0.45
- Diluted	(0.04	)	0.19		0.35		0.57	0.43	0.49	0.44	0.40
Net earnings	(11,197	)	(50,571	)	19,162		26,199	16,692	6,893	16,344	10,397
Net earnings - diluted	(13,577	)	(63,384	)	14,934		26,199	16,692	6,893	16,344	(183	)
Net earnings per share
- Basic	(0.15	)	(0.67	)	0.26		0.35	0.22	0.09	0.22	0.14
- Diluted	(0.17	)	(0.77	)	0.18		0.35	0.22	0.09	0.22	—
Dividends paid	3,763		3,762		3,761		11,229	—	—	—	—
Dividends paid per share	0.05		0.05		0.05		0.15	—	—	—	—
Total assets	614,345		654,058		720,306		705,859	692,341	675,800	723,708	670,996
Cash and cash equivalents	126,101		140,390		77,939		110,057	107,607	122,092	128,162	101,435
Convertible debentures	65,511		69,093		83,229		88,814	87,765	87,539	85,300	81,830
Total long-term debt, including      current portion	—		—		—		—	—	—	39,040	15,224
Debt-to-funds flow ratio**	0.8		0.6		0.6		0.6	0.6	0.6	0.8	0.6
* Funds flow from operations is a measure that represents cash generated from operating activities before changes in non-cash working capital and may not be comparable to measures used by other companies.
** Debt-to-funds flow ratio is measure that represents total long-term debt (including the current portion) plus convertible debentures over funds flow from operations from the trailing 12 months and may not be comparable to measures used by other companies.

During the first quarter of 2015, TransGlobe has:

• Maintained a strong financial position, reporting a trailing 12 months debt-to-funds flow ratio of 0.8 at March 31, 2015;

• Paid a quarterly dividend of $3.8 million ($0.05/share);

• Reported a net loss of $11.2 million, which includes a $2.4 million unrealized non-cash loss on convertible debentures;

• Experienced a decrease in oil sales compared to Q1-2014, which was principally due to decreased sales volumes combined with lower oil prices;

• Recorded negative funds flow from operations of $3.3 million. The Company now directly sells the majority of its entitlement oil production in Egypt, and the timing of cargo liftings has a direct impact on funds flow in any given period. The Company did not sell its West Bakr entitlement oil in Q1-2015; had the West Bakr entitlement oil been sold in the quarter at Q1-2015 realized pricing, funds flow for the quarter would have been positive $2.8 million;

• Experienced a decrease in cash flow from operating activities as compared to Q4-2014, which was almost entirely due to higher collections on accounts receivable balances in Q4-2014. TransGlobe collected a substantial amount on overdue receivables in Q4-2014 ($140.1 million), whereas collections from EGPC in Q1-2015 were $27.1 million; and

• Spent $14.1 million on capital programs, which was funded entirely with cash on hand.

4 Q1- 2015

2015 TO 2014 NET EARNINGS VARIANCES

			$ Per Share
	$000s		Diluted		% Variance
Q1-2014 net earnings	16,692		0.22
Cash items
Volume variance	(21,306	)	(0.29	)	(126	)
Price variance	(77,583	)	(0.94	)	(465	)
Royalties	50,096		0.61		300
Expenses:
Production and operating	4,113		0.05		25
Selling costs	(3,091	)	(0.04	)	(19	)
Cash general and administrative	(795	)	(0.01	)	(5	)
Exploration	417		0.01		2
Current income taxes	13,019		0.16		78
Realized foreign exchange gain (loss)	(3	)	—		—
Realized derivative gain (loss)	(688	)	(0.01	)	(4	)
Interest on long-term debt	177		—		1
Other income	46		—		—
Total cash items variance	(35,598	)	(0.46	)	(213	)
Non-cash items
Unrealized foreign exchange gain	1,950		0.02		12
Depletion and depreciation	1,641		0.02		10
Unrealized gain (loss) on financial instruments	1,120		0.01		7
Stock-based compensation	(119	)	—		(1	)
Deferred income taxes	3,073		0.04		18
Deferred lease inducement	4		—		—
Amortization of deferred financing costs	40		—		—
Total non-cash items variance	7,709		0.09		46
Q1-2015 net earnings	(11,197	)	(0.15	)	(167	)
Other items affecting diluted earnings per share
Convertible debentures			(0.02	)	(10	)
Q1-2015 net earnings per share - diluted			(0.17	)	(177	)

TransGlobe recorded a net loss of $11.2 million in Q1-2015 compared to earnings of $16.7 million in Q1-2014. The negative earnings impact of reduced sales volumes and lower oil prices totaled $98.9 million in aggregate compared to Q1-2014, which was partially offset by decreased royalties and current income taxes of $63.1 million. Reduced production and operating expenses and a deferred tax recovery had a significant positive impact on earnings in Q1-2015 compared to Q1-2014. The Company completed its first direct sale of crude oil to a third party buyer in Q1-2015, which resulted in selling costs (mainly transportation and marketing fees) that had not been incurred in historical reporting periods.

BUSINESS ENVIRONMENT

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

	2015	2014
	Q-1	Q-4	Q-3	Q-2	Q-1
Dated Brent average oil price ($/Bbl)	53.92	76.40	101.82	108.95	108.18
U.S./Canadian Dollar average exchange rate	1.241	1.136	1.089	1.091	1.103

The price of Dated Brent oil averaged 29.4% lower in Q1-2015 compared with Q4-2014. All of the Company’s production is priced based on Dated Brent and shared with the respective governments through PSCs. When the price of oil increases, it takes fewer barrels to recover costs (cost recovery barrels) which are assigned 100% to the Company. The contracts provide for cost recovery per quarter up to a maximum percentage of total revenue. Timing differences often exist between the Company's recognition of costs and their recovery as the Company accounts for costs on an accrual basis, whereas cost recovery is determined on a cash basis. If the eligible cost recovery is less than the maximum defined cost recovery, the difference is defined as "excess". In Egypt, depending on the PSC, the Contractor's share of excess ranges between 0% and 30%. In Yemen, under the Production Sharing Agreements, the excess is treated as production sharing oil. If the eligible cost recovery exceeds the maximum allowed percentage, the unclaimed cost recovery is carried forward to the next quarter. Typically maximum cost recovery or cost oil ranges from 25% to 30% in Egypt and 50% to 60% in Yemen. The balance of the production after maximum cost recovery is shared with the respective governments (production sharing oil). In Egypt, depending on the contract, the government receives 70% to 86% of the production sharing oil or profit oil. In Yemen, the government receives 65% of the production sharing oil or profit oil. Production sharing splits are set in each contract for the life of the contract. Typically the government’s share of production sharing oil increases when production exceeds pre-set production

Q1-2015 5

levels in the respective contracts. During times of increased oil prices, the Company receives less cost oil and may receive more production sharing oil. During times of lower oil prices, the Company receives more cost oil and may receive less profit oil. For reporting purposes, the Company records the respective government’s share of production as royalties and taxes (all taxes are paid out of the government’s share of production) which will increase during times of rising oil prices and will decrease in times of declining oil prices.

Egypt has been experiencing significant political changes over the past four years and while this has had an impact on the efficient operations of the government in general, business processes and the Company’s operations have generally proceeded as normal. While exploration and development activities have generally been uninterrupted, the Company has experienced delays in the collection of accounts receivable from the Egyptian government. The Company collected a substantial amount on overdue receivables in 2014 ($233.5 million), which reduced the accounts receivable balance to $117.6 million as at December 31, 2014. The trend of accounts receivable reductions continued in Q1-2015, in which the Company collected $27.1 million, bringing the receivable balance down to $91.4 million. In December 2014, the Company negotiated an arrangement with EGPC to begin marketing its entitlement barrels from the Eastern Desert on a go-forward basis. The first oil shipment was lifted on January 24, 2015 and was delivered to the buyer in late February. The cash payment for this lifting was received from the buyer on March 27, 2015. The second shipment was lifted on April 4, 2015, and funds are expected to be received in early May. TransGlobe anticipates that this marketing process will reduce or eliminate future issues regarding receivables for oil sales.

In Yemen, the continued and deteriorating risk profile caused TransGlobe to write its Yemen assets down to nil on the 2014 year-end Consolidated Balance Sheet. The Company provided notice in January 2015 to relinquish its interests in Block 32 (13.81% working interest) and Block 72 (20% working interest), effective March 31, 2015 and February 28, 2015, respectively. Block 32 was a very mature asset which had become uneconomic due to declining production and high fixed costs. Based on an internal review, based on the current production rate Block 32 would remain uneconomic even if oil prices rebounded to the $108 per barrel level received over the past several years. On Block 72, the Company has been waiting over three years to drill the Gabdain #3 exploration well due to security issues which, in the Company's assessment, are unlikely to improve in the near to medium term. The Company has retained its 25% working interest in Block S-1 and Block 75 and reclassified the Block S-1 reserves to Contingent Resources. Block S-1 remains shut-in since January 2014 due to continued attacks on the oil sales pipeline primarily related to ongoing labor disputes. Block S-1 represents approximately 1,200 to 1,600 Bopd of shut-in production to TransGlobe's working interest. Block S-1 could be placed back on production if the pipeline is repaired and remains operational.

OPERATING RESULTS AND NETBACK

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

Production Volumes

	Three months ended March 31
	2015	2014
Egypt	14,703	17,291
Yemen	183	776
Total Company	14,886	18,067

Sales Volumes (excludes volumes held as inventory)

	Three months ended March 31
	2015	2014
Egypt	12,707	17,291
Yemen	169	641
Total Company	12,876	17,932

Netback

Actual netback(1)
	Three months ended March 31
	2015				2014
(000s, except per Bbl amounts)	$		$/Bbl		$	$/Bbl
Egypt	5,468		4.78		38,179	24.54
Yemen	(1,326	)	(87.17	)	715	12.39
Consolidated	4,142		3.57		38,894	24.10
1. The Company achieved the netbacks above on sold barrels of oil in the three months ended March 31, 2015 and March 31, 2014 (these figures do not include TransGlobe entitlement barrels at West Bakr for Q1-2015, which were held as inventory at quarter end and sold in April 2015).

6 Q1- 2015

Notional netback *
	Three months ended March 31
	2015				2014
(000s, except per Bbl amounts)	$		$/Bbl		$	$/Bbl
Egypt	11,542		8.72		38,179	24.54
Yemen	(1,326	)	(87.17	)	715	12.39
Consolidated	10,216		7.63		38,894	24.10
* It is estimated that the Company would have achieved the netbacks noted above if the Company’s West Bakr entitlement oil had been sold during Q1-2015 at the average realized selling price.

Egypt - actual netback
	Three months ended March 31
	2015		2014
(000s, except per Bbl amounts)	$	$/Bbl	$	$/Bbl
Oil sales	53,416	46.71	146,944	94.43
Royalties	25,040	21.90	73,023	46.92
Current taxes	6,817	5.96	19,435	12.49
Production and operating expenses	13,000	11.37	16,307	10.48
Selling costs	3,091	2.70	—	—
Netback	5,468	4.78	38,179	24.54

The netback per Bbl in Egypt decreased 83% in Q1-2015 compared with Q1-2014. The decreased netback was principally the result of a 51% reduction in realized oil prices and reduced sales volumes. Production and operating expenses decreased by $3.3 million from Q1-2014 to Q1-2015, however, the per Bbl cost was driven upward as a result of a 27% decrease in sales volumes. Also contributing to the reduction in netback per Bbl were the selling costs (mainly transportation and marketing fees) incurred on the direct sale of the Company's crude oil. The Company completed its first direct crude sale to a third party buyer during the first quarter of 2015, which consisted entirely of West Gharib crude. The Company did not sell its entitlement share of West Bakr production in the first quarter; if TransGlobe's West Bakr entitlement crude had been sold at realized Q1-2015 pricing, the total netback for Egypt would have been approximately $11.5 million, or $8.72 per Bbl.

Royalties and taxes as a percentage of revenue decreased from 63% in Q1-2014 to 60% in Q1-2015 as a result of lower oil prices. If Q1-2015 inventory had been sold in the quarter at realized prices, the Q1-2015 royalties and taxes as a percentage of revenue would have been 53%. When oil prices fall it takes more barrels to recover costs, thereby reducing (or eliminating) excess cost oil barrels, the majority of which are allocated to the government.

In Egypt, the average selling price in Q1-2015 was $46.71/Bbl, which was $7.21/Bbl lower than the average Dated Brent oil price of $53.92/Bbl for the period (Q1-2014 - $108.18/Bbl). This difference represents a gravity/quality adjustment and the timing of the direct sale.

Egypt - notional netback *
	Three months ended March 31
	2015		2014
(000s, except per Bbl amounts)	$	$/Bbl	$	$/Bbl
Oil sales	61,812	46.71	146,944	94.43
Royalties	25,040	18.93	73,023	46.92
Current taxes	6,817	5.15	19,435	12.49
Production and operating expenses	14,837	11.21	16,307	10.48
Selling costs	3,576	2.70	—	—
Netback	11,542	8.72	38,179	24.54
* It is estimated that the Company would have achieved the netbacks noted above if the Company’s West Bakr entitlement oil had been sold during Q1-2015 at the average realized selling price.

Yemen

In January 2015, the Company provided notice of its relinquishment of its interests in Block 32 and Block 72 in Yemen due to project economics and security issues. The relinquishment of Blocks 32 and 72 were effective March 31, 2015 and February 28, 2015, respectively. The Company has retained its 25% interest in Blocks S-1 and 75.

Although TransGlobe’s Yemen properties contributed minimal sales volumes during the quarter, the Company continued to incur the majority of the operating costs associated with the blocks. These factors resulted in a negative netback per Bbl of $87.17 in Yemen for the three months ended March 31, 2015.

Q1-2015 7

GENERAL AND ADMINISTRATIVE EXPENSES (“G&A”)

	Three months ended March 31
	2015				2014
(000s, except Bbl amounts)	$		$/Bbl		$		$/Bbl
G&A (gross)	8,318		7.18		7,810		4.84
Stock-based compensation	953		0.82		834		0.52
Capitalized G&A and overhead recoveries	(1,353	)	(1.17	)	(1,636	)	(1.01	)
G&A (net)	7,918		6.83		7,008		4.35

G&A expenses (net) increased 13% in Q1-2015 compared with Q1-2014 (57% on a per bbl basis). G&A (gross) was elevated in Q1-2015 mostly due to staffing alignment expenditures and increased stock-based compensation in Q1-2015 as compared to Q1-2014. The majority of the per Bbl amount increases are due to reduced sales volumes and entitlement in Q1-2015 as compared to Q1-2014. If Q1-2015 inventory had been sold in the quarter, G&A (gross) per bbl would have been $6.21.

FINANCE COSTS

Finance costs for the three-month period ended March 31, 2015 decreased to $1.7 million compared with $1.9 million in the same period in 2014. Interest expense on the convertible debentures for the three-month period ended March 31, 2015 was $1.2 million (Q1-2014 - $1.3 million). The decrease in this portion of the interest expense is due to foreign exchange fluctuations, as the interest on the convertible debentures is paid in Canadian dollars. The remaining decrease in interest expense is due to a lower utilization of the Company's Borrowing Base Facility as at March 31, 2015 compared to March 31, 2014.

	Three months ended March 31
(000s)	2015		2014
Interest expense	$	1,439	$	1,616
Amortization of deferred financing costs	236		276
Finance costs	$	1,675	$	1,892

The Company had no long-term debt outstanding under the Borrowing Base Facility as at March 31, 2015 (March 31, 2014 - $nil). The borrowing base was reduced from $100.0 million to $85.5 million on December 31, 2014 as a result of a scheduled reduction to the facility. The Borrowing Base Facility bears interest at LIBOR plus an applicable margin that varies from 5.0% to 5.5% depending on the amount drawn under the facility, and the term of the facility extends to December 31, 2017.

In February 2012, the Company sold, on a bought-deal basis, C$97.8 million ($97.9 million) aggregate principal amount of convertible unsecured subordinated debentures with a maturity date of March 31, 2017. The debentures are convertible at any time and from time to time into common shares of the Company at a price of C$14.21 per common share. The debentures are not redeemable by the Company on or before March 31, 2015 other than in limited circumstances in connection with a change of control of TransGlobe. After March 31, 2015 and prior to March 31, 2017, the debentures may be redeemed by the Company at a redemption price equal to the principal amount plus accrued and unpaid interest, provided that the weighted-average trading price of the common shares for the 20 consecutive trading days ending five trading days prior to the date on which notice of redemption is provided is not less than 125 percent of the conversion price (or C$17.76 per common share). The conversion price of the convertible debentures will adjust for any amounts paid out as dividends on the common shares of the Company, provided that the dividend payment causes the conversion price to change by 1% or more. Interest of 6% is payable semi-annually in arrears on March 31 and September 30. At maturity or redemption, the Company has the option to settle all or any portion of principal obligations by delivering to the debenture holders sufficient common shares to satisfy these obligations.

DEPLETION AND DEPRECIATION (“DD&A”)

	Three months ended March 31
	2015		2014
(000s, except per Bbl amounts)	$	$/Bbl	$	$/Bbl
Egypt	11,416	9.98	12,370	7.95
Yemen	—	—	702	12.17
Corporate	108	—	93	—
	11,524	9.94	13,165	8.16

In Egypt, DD&A increased 26% on a per Bbl basis in the three months ended March 31, 2015 compared to 2014. This increase is mostly due to a lower reserve base over which to deplete costs in Egypt.

In Yemen, no DD&A expense was recorded in the three months ended March 31, 2015 due to the fact that the Company wrote its Yemen assets down to nil on the 2014 year-end Consolidated Balance Sheet. In January 2015, the Company relinquished its interests in Block 32 (13.81% working interest) and Block 72 (20% working interest) in Yemen (effective March 31, 2015 and February 28, 2015, respectively) due to ongoing political and tribal turmoil in the vicinity of the blocks. The Company has retained its 25% working interest in Block S-1 and Block 75 and reclassified the Block S-1 reserves to contingent resources.

8 Q1- 2015

CAPITAL EXPENDITURES

	Three months ended March 31
($000s)	2015	2014
Egypt	14,033	13,916
Yemen	—	434
Corporate	68	15
Total	14,101	14,365

In Egypt, total capital expenditures in 2015 were $14.0 million (2014 - $13.9 million). During Q1-2015, the Company drilled five wells in Egypt (three at NWG, one at West Bakr and one at West Gharib).

The Company paid a signing bonus in the amount of $2.0 million upon ratification of the NW Sitra concession agreement, which has been capitalized as an intangible exploration and evaluation asset.

OUTSTANDING SHARE DATA

As at March 31, 2015, the Company had 75,309,161 common shares issued and outstanding and 5,426,300 stock options issued and outstanding, which are exercisable in accordance with their terms into a maximum of 5,426,300 common shares of the Company.

NORMAL COURSE ISSUER BID

On March 25, 2015, the Toronto Stock Exchange ("TSX") accepted the Company's notice of intention to make a Normal Course Issuer Bid ("NCIB") for its common shares. Under the NCIB, the Company may acquire up to 6,207,585 common shares, which is equal to 10% of the public float. The NCIB commenced on March 31, 2015, and will terminate on March 30, 2016 or such earlier date on which TransGlobe completes its purchases of common shares under the NCIB or terminates the NCIB at its option. The maximum number of common shares that may be acquired by the Company during the same trading day is 89,289, which is equal to 25% of the Company's average daily trading volume of 357,159 for the previous six completed calendar months, subject to the Company's ability to make one block purchase of common shares per calendar week that exceeds such limit. All shares acquired will be cancelled.

The Company has entered into an automatic share purchase plan with a broker in order to facilitate the repurchase of its common shares. Under the Company's automatic share purchase plan, the Company's broker may repurchase shares under the NCIB during the Company's self-imposed blackout periods. The automatic share purchase plan has been approved by the TSX and will be implemented for a six month term effective March 31, 2015.

As at May 4, 2015, the Company had repurchased 607,489 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 operations (calculated on a 12-month trailing basis). TransGlobe’s debt-to-funds flow from operations ratio, a key short-term leverage measure, remained strong at 0.8 times at March 31, 2015 (December 31, 2014 - 0.6). This was within the Company’s internal guideline of no more than 2.0 times.

Q1-2015 9

The following table illustrates TransGlobe’s sources and uses of cash during the periods ended March 31, 2015 and 2014:

Sources and Uses of Cash
	Three months ended March 31
($000s)	2015		2014
Cash sourced
Funds flow from operations*	(3,288	)	32,487
Exercise of options	208		716
	(3,080	)	33,203
Cash used
Capital expenditures	14,101		14,365
Dividends paid	3,763		—
Transfer to restricted cash	1		1
Finance costs	2,578		3,847
Other	1,254		514
	21,697		18,727
	(24,777	)	14,476
Changes in non-cash working capital	10,488		(28,961	)
Increase (decrease) in cash and cash equivalents	(14,289	)	(14,485	)
Cash and cash equivalents – beginning of period	140,390		122,092
Cash and cash equivalents – end of period	126,101		107,607
* Funds flow from operations is a measure that represents cash generated from operating activities before changes in non-cash working capital, and may not be comparable to measures used by other companies.

Funding for the Company’s capital expenditures was provided by cash on hand. The Company expects to fund its 2015 exploration and development program of $37.5 million including contractual commitments through the use of working capital and cash generated by operating activities. Fluctuations in commodity prices, product demand, foreign exchange rates, interest rates and various other risks including timely collections of accounts receivable from the Egyptian Government may impact capital resources.

Working capital is the amount by which current assets exceed current liabilities. At March 31, 2015, the Company had working capital of $207.7 million (December 31, 2014 - $229.7 million). The decrease to working capital in Q1-2015 is principally due to reduced oil prices. The majority of the Company’s accounts receivable are due from EGPC, and the economic challenges in the country increased EGPC's credit risk, which in turn increased the Company’s credit risk. The Company expects to recover the entire accounts receivable balance in full. The Company collected a total of $27.1 million from EGPC during the three months ended March 31, 2015, which reduced the receivable balance to $91.4 million at quarter-end. In December 2014, the Company negotiated an arrangement with EGPC to begin marketing its entitlement barrels from the Eastern Desert on a go-forward basis. The Company completed its first direct sale of crude oil to a third party buyer during the first quarter of 2015. The Company anticipates that this direct marketing will reduce or eliminate any future issues regarding collections on receivables for oil sales, and will significantly reduce the Company's credit risk on a go-forward basis.

To date, the Company has experienced no difficulties with transferring funds abroad.

At March 31, 2015, TransGlobe had $85.5 million available under a Borrowing Base Facility of which no amounts were drawn, however, the Company was utilizing $60.1 million in the form of letters of credit. The next scheduled reduction in the facility will occur on June 30, 2015 and will reduce the borrowing base to $71.0 million.

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:

($000s)		Payment Due by Period 1 2
	Recognized
	in Financial	Contractual	Less than			More than
	Statements	Cash Flows	1 year	1-3 years	4-5 years	5 years
Accounts payable and accrued   liabilities	Yes - Liability	26,781	26,781	—	—	—
Convertible debentures	Yes - Liability	65,511	—	65,511	—	—
Office and equipment leases 3	No	5,600	1,148	2,589	1,656	207
Minimum work commitments 4	No	36,050	750	35,300	—	—
Total		133,942	28,679	103,400	1,656	207
1 Payments exclude ongoing operating costs, finance costs and payments made to settle derivatives.
2 Payments denominated in foreign currencies have been translated at March 31, 2015 exchange rates.
3 Office and equipment leases includes all drilling rig contracts.
4 Minimum work commitments include contracts awarded for capital projects and those commitments related to exploration and drilling obligations.

10 Q1- 2015

The Company is subject to certain office and equipment leases.

Pursuant to the PSC for North West Gharib in Egypt, the Company has a minimum financial commitment of $35.0 million ($10.3 million remaining) and a work commitment for 30 wells and 200 square kilometers of 3-D seismic during the initial-three year exploration period, which commenced on November 7, 2013. As at March 31, 2015, the Company had expended $24.7 million towards meeting that commitment.

Pursuant to the PSC for South East Gharib in Egypt, the Company has a minimum financial commitment of $7.5 million ($2.4 million remaining)and a work commitment for two wells, 200 square kilometers of 3-D seismic and 300 kilometers of 2-D seismic during the initial three-year exploration period, which commenced on November 7, 2013. As at March 31, 2015, the Company had expended $5.1 million towards meeting that commitment.

Pursuant to the PSC for South West Gharib in Egypt, the Company has a minimum financial commitment of $10.0 million ($5.1 million remaining)and a work commitment for four wells and 200 square kilometers of 3-D seismic during the initial three-year exploration period, which commenced on November 7, 2013. As at March 31, 2015, the Company had expended $4.9 million towards meeting that commitment.

Pursuant to the PSC for South Ghazalat in Egypt, the Company has a minimum financial commitment of $8.0 million ($7.6 million remaining) and a work commitment for two wells and 400 square kilometers of 3-D seismic during the initial three-year exploration period, which commenced on November 7, 2013. As at March 31, 2015, the Company had expended $0.4 million towards meeting that commitment.

Pursuant to the PSC for North West Sitra in Egypt, the Company has a minimum financial commitment of $10.0 million ($9.9 million remaining) and a work commitment for two wells and 300 square kilometers of 3-D seismic during the initial three and a half year exploration period, which commencedon January 8, 2015. As at March 31, 2015, the Company had expended $0.1 million towards meeting that commitment.

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.

The Company is not aware of any material provisions or other contingent liabilities as at March 31, 2015.

DERIVATIVE COMMODITY CONTRACTS

The Company’s operational results and financial condition are dependent on the commodity prices received for its oil production. TransGlobe uses hedging arrangements from time to time as part of its risk management strategy to manage commodity price fluctuations and stabilize cash flows for future exploration and development programs.

In Q1-2015, the Company purchased a financial floor derivative commodity contract at a cost of $0.7 million to protect the pricing received on its first direct crude sale to a third party buyer. The cost of this contract has been presented as a realized loss on derivative commodity contracts in this interim report. As there were no outstanding derivative commodity contracts at March 31, 2015 or December 31, 2014, no assets or liabilities have been recognized on the Consolidated Balance Sheets for the respective periods.

The use of derivative instruments is governed under formal policies and is subject to limits established by the Board of Directors.

Q1-2015 11

INTERNAL CONTROLS OVER FINANCIALREPORTING

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 and as defined in Rule 13a-15 under the US Securities Exchange Act of 1934. 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 IFRS, 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.

No changes were made to the Company's internal control over financial reporting during the period ended March 31, 2015 that have materially affected, or are reasonably likely to materially affect, the internal controls over financial reporting.

12 Q1- 2015