Condensed Consolidated Interim Statements of Earnings (Loss) and Comprehensive Income (Loss)

(Unaudited – Expressed in thousands of U.S. Dollars, except per share amounts)

		Three Months Ended						Nine Months Ended
		September 30						September 30
	Notes	2015			2014			2015			2014
REVENUE
Oil sales, net of royalties	4	$	24,700		$	67,848		$	88,233		$	222,254
Finance revenue	5	184			92			460			274
Other revenue		—			—			—			9,250
		24,884			67,940			88,693			231,778
EXPENSES
Production and operating		16,380			18,245			46,033			56,848
Selling costs	6	660			—			4,557			—
General and administrative		3,492			7,715			17,429			21,567
Foreign exchange (gain) loss		(5,543		)	(4,160		)	(9,427		)	(4,149		)
Finance costs	5	1,552			1,973			4,807			5,723
Exploration		—			39			27			704
Depletion, depreciation and amortization		13,439			11,666			37,360			37,064
Realized derivative loss on commodity contracts		—			—			688			—
Unrealized (gain) loss on financial instruments	13	(3,820		)	(1,420		)	6,333			106
Impairment loss	10, 11	63,101			—			63,101			—
		89,261			34,058			170,908			117,863
Earnings (loss) before income taxes		(64,377		)	33,882			(82,215		)	113,915
Income tax expense (recovery) - current		6,543			14,750			20,965			52,747
- deferred		(24,352		)	(30		)	(32,835		)	(885		)
		(17,809		)	14,720			(11,870		)	51,862
NET EARNINGS (LOSS) AND COMPREHENSIVE
INCOME (LOSS) FOR THE PERIOD		$	(46,568	)	$	19,162		$	(70,345	)	$	62,053
Earnings (loss) per share	17
Basic		$	(0.64	)	$	0.26		$	(0.95	)	$	0.83
Diluted		$	(0.68	)	$	0.18		$	(0.95	)	$	0.75

See accompanying notes to the Condensed Consolidated Interim Financial Statements.

Q3-2015 1

Condensed Consolidated Interim Balance Sheets

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

		As at		As at
	Notes	September 30, 2015		December 31, 2014
ASSETS
Current
Cash and cash equivalents	7	$	126,874	$	140,390
Accounts receivable		48,418		117,575
Prepaids and other		4,979		16,872
Product inventory	8	6,847		—
		187,118		274,837
Non-Current
Restricted cash		1,550		1,548
Deferred financing costs	12	910		1,572
Intangible exploration and evaluation assets	9	120,931		100,594
Property and equipment
Petroleum properties	10	186,058		261,737
Other assets	10	5,241		5,590
Goodwill	11	—		8,180
		$	501,808	$	654,058
LIABILITIES
Current
Accounts payable and accrued liabilities		$	20,901	$	45,150
		20,901		45,150
Non-Current
Convertible debentures	13	65,682		69,093
Deferred taxes		6,215		39,050
Other long-term liabilities		498		665
		93,296		153,958
SHAREHOLDERS' EQUITY
Share capital	15	152,084		164,006
Contributed surplus		21,166		19,427
Retained earnings		235,262		316,667
		408,512		500,100
		$	501,808	$	654,058

See accompanying notes to the Condensed Consolidated Interim Financial Statements.

Approved on behalf of the Board:

Signed by:

“Ross G. Clarkson”	“Fred J. Dyment”
Ross G. Clarkson	Fred J. Dyment
Director	Director

2 Q3-2015

Condensed Consolidated Interim Statements of Changes in Shareholders’ Equity

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

		Three Months Ended						Nine Months Ended
		September 30						September 30
	Notes	2015			2014			2015			2014
Share Capital
Balance, beginning of period	15	$	155,274		$	162,723		$	164,006		$	160,561
Purchase of common shares	15	(3,190		)	—			(12,221		)	—
Stock options exercised	15	—			873			208			2,479
Transfer from contributed surplus on exercise of options	15	—			288			91			844
Balance, end of period		$	152,084		$	163,884		$	152,084		$	163,884
Contributed Surplus
Balance, beginning of period		$	20,652		$	17,202		$	19,427		$	15,692
Stock-based compensation expense	16	514			869			1,830			2,935
Transfer to share capital on exercise of options		—			(288		)	(91		)	(844		)
Balance, end of period		$	21,166		$	17,783		$	21,166		$	17,783
Retained Earnings
Balance, beginning of period		$	285,424		$	355,599		$	316,667		$	323,937
Net earnings (loss) and total comprehensive income (loss)		(46,568		)	19,162			(70,345		)	62,053
Dividends	18	(3,594		)	(3,761		)	(11,060		)	(14,990		)
Balance, end of period		$	235,262		$	371,000		$	235,262		$	371,000

See accompanying notes to the Condensed Consolidated Interim Financial Statements.

Q3-2015 3

Condensed Consolidated Interim Statements of Cash Flows

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

		Three Months Ended						Nine Months Ended
		September 30						September 30
	Notes	2015			2014			2015			2014
CASH FLOWS RELATED TO THE FOLLOWING
ACTIVITIES:
OPERATING
Net earnings (loss) for the period		$	(46,568	)	$	19,162		$	(70,345	)	$	62,053
Adjustments for:
Depletion, depreciation and amortization		13,439			11,666			37,360			37,064
Deferred lease inducement		(27		)	113			(79		)	331
Impairment loss	10, 11	63,101			—			63,101			—
Stock-based compensation		249			1,580			2,822			4,308
Finance costs	5	1,552			1,973			4,807			5,723
Income tax expense		(17,809		)	14,720			(11,870		)	51,862
Unrealized (gain) loss on financial instruments	13	(3,820		)	(1,420		)	6,333			106
Unrealized (gain) loss on foreign currency translation		(5,071		)	(4,159		)	(8,958		)	(4,143		)
Income taxes paid		(6,543		)	(14,750		)	(20,965		)	(52,747		)
Changes in non-cash working capital	20	30,238			(32,008		)	68,906			(71,002		)
Net cash generated by (used in) operating activities		28,741			(3,123		)	71,112			33,555
INVESTING
Additions to intangible exploration and evaluation assets	9	(195		)	(5,453		)	(20,337		)	(9,155		)
Additions to petroleum properties	10	(3,361		)	(20,004		)	(19,141		)	(47,267		)
Additions to other assets	10	(31		)	(555		)	(547		)	(1,445		)
Changes in restricted cash		(1		)	(1		)	(2		)	(2		)
Changes in non-cash working capital	20	(11,300		)	2,205			(14,509		)	(334		)
Net cash generated by (used in) investing activities		(14,888		)	(23,808		)	(54,536		)	(58,203		)
FINANCING
Issue of common shares for cash	15	—			873			208			2,479
Purchase of common shares	15	(3,190		)	—			(12,221		)	—
Interest paid		(2,700		)	(1,955		)	(5,438		)	(6,011		)
Dividends paid	18	(3,594		)	(3,761		)	(11,060		)	(14,990		)
Increase (decrease) in other long-term liabilities		—			(139		)	—			(409		)
Net cash generated by (used in) financing activities		(9,484		)	(4,982		)	(28,511		)	(18,931		)
Currency translation differences relating to cash and cash equivalents		(456		)	(205		)	(1,581		)	(574		)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		3,913			(32,118		)	(13,516		)	(44,153		)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		122,961			110,057			140,390			122,092
CASH AND CASH EQUIVALENTS, END OF PERIOD		$	126,874		$	77,939		$	126,874		$	77,939

See accompanying notes to the Condensed Consolidated Interim Financial Statements.

4 Q3-2015

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

As at September 30, 2015 and December 31, 2014 and for the periods ended September 30, 2015 and 2014

(Unaudited - Expressed in U.S. Dollars)

1. CORPORATE INFORMATION

TransGlobe Energy Corporation is a publicly listed company incorporated in Alberta, Canada and its shares are listed on the Toronto Stock Exchange (“TSX”) and NASDAQ Exchange (“NASDAQ”). The address of its registered office is 2300, 250 – 5th Street SW, Calgary, Alberta, Canada, T2P 0R4. TransGlobe Energy Corporation together with its subsidiaries (“TransGlobe” or the “Company”) is engaged primarily in oil exploration, development and production and the acquisition of properties.

2. BASIS OF PREPARATION

Statement of compliance

These Condensed Consolidated Interim Financial Statements have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting using accounting policies consistent with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) effective as of September 30, 2015. These Condensed Consolidated Interim Financial Statements do not contain all the disclosures required for full annual financial statements and should be read in conjunction with the December 31, 2014 Consolidated Financial Statements.

These Condensed Consolidated Interim Financial Statements were authorized for issue by the Board of Directors on November 10, 2015.

Basis of measurement

The accounting policies used in the preparation of these Condensed Consolidated Interim Financial Statements were the same as those used in the preparation of the most recent Annual Financial Statements for the year ended December 31, 2014.

The Company prepared these Condensed Consolidated Interim Financial Statements on a going concern basis, which contemplates the realization of assets and liabilities in the normal course of business as they become due. Accordingly, these Condensed Consolidated Interim Financial Statements have been prepared on a historical cost basis, except for cash and cash equivalents and convertible debentures that have been measured at fair value.

Functional and presentation currency

In these Condensed Consolidated Interim Financial Statements, unless otherwise indicated, all dollar amounts are presented and expressed in United States (U.S.) dollars, which is the Company’s functional currency. All references to $ are to United States dollars and references to C$ are to Canadian dollars and all values are rounded to the nearest thousand except when otherwise indicated.

3. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

Fair Values of Financial Instruments

The Company has classified its cash and cash equivalents as assets at fair value through profit or loss and its convertible debentures as financial liabilities at fair value through profit or loss, which are both measured at fair value with changes being recognized through earnings. Accounts receivable and restricted cash 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 initially at fair value, then at amortized cost after initial recognition.

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

	September 30, 2015				December 31, 2014
	Carrying		Fair		Carrying		Fair
Classification (000s)	Value		Value		Value		Value
Financial assets at fair value through profit or loss	$	126,874	$	126,874	$	140,390	$	140,390
Loans and receivables	49,968		49,968		119,123		119,123
Financial liabilities at fair value through profit or loss	65,682		65,682		69,093		69,093
Other liabilities	20,901		20,901		45,150		45,150

Assets and liabilities at September 30, 2015 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 convertible debentures are assessed on the fair value hierarchy described above. TransGlobe’s cash and cash equivalents and convertible debentures are classified as Level 1. 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. There were no transfers between levels in the fair value hierarchy in the period.

Q3-2015 5

Credit risk

Credit risk is the risk of loss if the counterparties do not fulfill their contractual obligations. The Company’s exposure to credit risk primarily relates to cash equivalents and accounts receivable, the majority of which are in respect of oil operations. 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. The Company has not experienced any material credit losses in the collection of accounts receivable to date.

Trade and other receivables are analyzed in the table below. The past due receivables are due from the Egyptian General Petroleum Corporation ("EGPC"). The political transition and resultant economic malaise in the country that began in 2011 resulted in irregular collection of accounts receivable from EGPC for a period of time. During the first nine months of 2015, EGPC made regular payments to TransGlobe against the outstanding receivable, resulting in a significant reduction in the receivable balance. The reduction in the receivable balance due from EGPC has decreased TransGlobe's credit risk. The Company expects to collect in full all outstanding receivables.

In January 2015, TransGlobe began direct sales of Eastern Desert entitlement production to international buyers. The Company completed three separate direct crude sale shipments to third party buyers during the first nine months of 2015. Going forward, the Company anticipates that direct sales will continue to reduce outstanding accounts receivable and credit risk in future periods.

(000s)
Trade receivables at September 30, 2015
Neither impaired nor past due	$	18,919
Impaired (net of valuation allowance)	—
Not impaired and past due in the following period:
Within 30 days	296
31-60 days	315
61-90 days	—
Over 90 days	28,888

The Company manages its credit risk on cash equivalents by investing only in term deposits with reputable Canadian and international banking institutions.

4. OIL REVENUE

	Three Months Ended September 30				Nine Months Ended September 30
(000s)	2015		2014		2015		2014
Oil sales	$	49,307	$	123,317	$	166,205	$	420,665
Less: Royalties	24,607		55,469		77,972		198,411
Oil sales, net of royalties	$	24,700	$	67,848	$	88,233	$	222,254

In January 2015, TransGlobe began direct sales of Eastern Desert entitlement production to international buyers. The Company completed its third direct crude sale to a third party buyer during the third quarter of 2015. Going forward, the Company anticipates that direct sales will continue to reduce outstanding accounts receivable and credit risk in future periods.

5. FINANCE REVENUE AND COSTS

Finance revenue relates to interest earned on the Company’s bank account balances and term deposits.

Finance costs recognized in earnings were as follows:

	Three Months Ended September 30				Nine Months Ended September 30
(000s)	2015		2014		2015		2014
Interest expense	$	1,353	$	1,691	$	4,146	$	4,886
Amortization of deferred financing costs	199		282		661		837
Finance costs	$	1,552	$	1,973	$	4,807	$	5,723

6. SELLING COSTS

Selling costs include transportation and marketing costs associated with the direct sale of the Company's Egyptian crude oil production to third party buyers. The Company completed its third direct crude sale to a third party buyer during the third quarter of 2015.

6 Q3-2015

7. CASH AND CASH EQUIVALENTS

(000s)	September 30, 2015		December 31, 2014
Cash	$	106,874	$	140,390
Cash equivalents	20,000		—
	$	126,874	$	140,390

8. PRODUCT INVENTORY

Product inventory consists of crude oil held in storage, which is valued at the lower of cost or net realizable value. Cost includes operating expenses and depletion associated with the crude oil that is held in storage as determined on a concession by concession basis.

9. INTANGIBLE EXPLORATION AND EVALUATION ASSETS

(000s)
Balance at December 31, 2014	$	100,594
Additions	20,337
Balance at September 30, 2015	$	120,931

10. PROPERTY AND EQUIPMENT

(000s)	Petroleum Properties		Other Assets		Total
Balance at December 31, 2014	$	523,833	$	13,204	$	537,037
Additions	19,141		547		19,688
Balance at September 30, 2015	$	542,974	$	13,751	$	556,725
Accumulated depletion, depreciation, amortization and impairment losses at	$	262,096	$	7,614	$	269,710
December 31, 2014
Depletion, depreciation and amortization for the period	39,899		896		40,795
Impairment loss	54,921		—		54,921
Balance at September 30, 2015	$	356,916	$	8,510	$	365,426
Net Book Value
At December 31, 2014	$	261,737	$	5,590	$	267,327
At September 30, 2015	$	186,058	$	5,241	$	191,299

The Company recorded an impairment loss of $54.9 million on its petroleum properties during the third quarter of 2015. The impairment loss was split between the West Gharib concession ($28.6 million), the West Bakr concession ($23.1 million) and the East Ghazalat concession ($3.2 million). The impairment losses on the West Gharib and West Bakr concessions were recorded to reduce the carrying value of the assets to their recoverable amounts, which were estimated as the net present value of proved plus probable reserves, discounted at 15%. The recoverable amounts of the assets declined from prior year due to the continued decline in oil prices throughout 2015. The East Ghazalat concession was sold subsequent to the end of the third quarter, and the recoverable amount of the East Ghazalat concession was determined to be equal to the consideration received in the sale transaction.

11. GOODWILL

Goodwill was assessed for impairment as at September 30, 2015, and an impairment loss of $8.2 million was recognized as a result of this assessment. This impairment loss reduces the carrying value of goodwill to zero. The after-tax cash flows used to determine the recoverable amount of the cash-generating unit to which goodwill was assigned were discounted using an estimated weighted average cost of capital of 15%.

12. LONG-TERM DEBT

The Company’s interest-bearing loans and borrowings are measured at amortized cost. As at September 30, 2015, the only significant interest-bearing loans and borrowings is related to the Borrowing Base Facility, under which the Company has borrowing capacity of $39.3 million. The Borrowing Base Facility has a term that extends to December 31, 2017, and 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 credit facility bears interest at the LIBOR rate plus an applicable margin, which ranges from 5.0% to 5.5% and is dependent on the amount drawn. The Company incurs standby interest charges on amounts available but not drawn under the Borrowing Base Facility, which significantly impacts the effective interest rate in periods when there are small or no borrowings under the facility. The amount of the Borrowing Base may fluctuate over time and is determined principally by the net present value of the Company’s Proved and Probable reserves over the term of the Borrowing Base Facility, up to a pre-defined commitment amount which is subject to pre-determined semi-annual reductions in accordance with the terms of the Borrowing Base Facility. Accordingly, for each balance sheet

Q3-2015 7

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.

Deferred financing costs related to the Borrowing Base Facility have been presented as an asset on the Company's Condensed Consolidated Interim Balance Sheets as at September 30, 2015 and December 31, 2014 since there were no amounts drawn on the Borrowing Base Facility as at these dates. Deferred financing costs are amortized based on the borrowing capacity available in the Borrowing Base Facility.

13. CONVERTIBLE DEBENTURES

(000s)
Balance at December 31, 2014	$	69,093
Fair value adjustment	6,333
Foreign exchange adjustment	(9,744		)
Balance at September 30, 2015	$	65,682

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$13.80 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$17.25 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.

The convertible debentures are classified as financial instruments at fair value through profit or loss, and as such are measured at fair value with changes in fair value included in earnings. Fair value is determined based on market price quotes from the exchange on which the convertible debentures are traded as at the period end date. As at September 30, 2015 the convertible debentures were trading at a price of C$90.00 for a C$100.00 par value debenture. This represents an increase of $8.00 since December 31, 2014, and as a result the Company has recognized a net expense of $6.3 million for the nine months ended September 30, 2015.

14. COMMITMENTS AND CONTINGENCIES

The Company is subject to certain office and equipment leases.

Pursuant to the PSC for North West Gharib in Egypt, the Company had a minimum financial commitment of $35.0 million ($9.5 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 September 30, 2015, the Company had expended $25.5 million towards meeting that commitment.

Pursuant to the PSC for South East Gharib in Egypt, the Company had a minimum financial commitment of $7.5 million ($2.3 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 September 30, 2015, the Company had expended $5.2 million towards meeting that commitment.

Pursuant to the PSC for South West Gharib in Egypt, the Company had 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 September 30, 2015, the Company had expended $4.9 million towards meeting that commitment.

Pursuant to the PSC for South Ghazalat in Egypt, the Company had a minimum financial commitment of $8.0 million 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 September 30, 2015, the Company had met its financial commitment.

Pursuant to the PSC for North West Sitra in Egypt, the Company had 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 September 30, 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 September 30, 2015.

15. SHARE CAPITAL

Authorized

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

8 Q3-2015

Issued

	Nine Months Ended					Year Ended
	September 30, 2015					December 31, 2014
000’s	Shares		Amount			Shares	Amount
Balance, beginning of period	75,240		$	164,006		74,600	$	160,561
Purchase of common shares	(3,104	)	(12,221		)	—	—
Stock options exercised	70		208			640	2,562
Share-based compensation on exercise	—		91			—	883
Balance, end of period	72,206		$	152,084		75,240	$	164,006

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.

During the three months ended September 30, 2015, the Company repurchased 833,802 common shares. During the nine months ended September 30, 2015, the Company repurchased a total of 3,103,792 common shares. All common shares acquired were cancelled and the cost of shares repurchased (including transaction costs) was applied directly against share capital.

16. SHARE-BASED PAYMENTS

Stock option plan

The Company operates a stock option plan to provide equity-settled share-based remuneration to directors, officers and employees. The number of common shares that may be issued pursuant to the exercise of options awarded under the stock option 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 stock option plan have a per-share exercise price equal to the weighted average trading price of the common shares for the five trading days prior to the date of grant. Each tranche of an award with different vesting dates is considered a separate grant for the calculation of fair value and the resulting fair value is amortized over the vesting period of the respective tranches.

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

	Nine Months Ended			Year Ended
	September 30, 2015			December 31, 2014
			Weighted-			Weighted-
	Number		Average	Number		Average
	of		Exercise	of		Exercise
(000s except per share amounts)	Options		Price (C$)	Options		Price (C$)
Options outstanding, beginning of period	6,027		9.58	5,871		9.51
Granted	1,024		4.99	1,208		7.34
Exercised	(70	)	3.64	(640	)	4.48
Forfeited	(572	)	9.66	(412	)	10.92
Expired	(677	)	7.72	—		—
Options outstanding, end of period	5,732		9.13	6,027		9.58
Options exercisable, end of period	3,325		10.75	3,193		10.35

Compensation expense of $1.8 million was recorded in general and administrative expenses in the Condensed Consolidated Interim Statements of Earnings and Comprehensive Income and Changes in Shareholders’ Equity during the nine month period ended September 30, 2015 (2014 - $2.9 million) in respect of equity-settled share-based payment transactions. The fair value of all common stock options granted is estimated on the date of grant using the lattice-based trinomial option pricing model.

All options granted vest annually over a three-year period and expire five years after the grant date. During the nine month period ended September 30, 2015, employees exercised 70,000 (2014 – 619,000) stock options. The fair value related to these options was $0.1 million, (2014 - $0.8 million) at time of grant and has been transferred from contributed surplus to share capital. As at September 30, 2015 and December 31, 2014, the entire balance in contributed surplus was related to previously recognized share-based compensation expense on equity-settled stock options.

Restricted share unit, performance share unit and deferred share unit plans

In May 2014, the Company implemented a restricted share unit ("RSU") plan, a performance share unit ("PSU") plan and a deferred share unit ("DSU") plan. RSUs may be issued to directors, officers and employees of the Company, and each RSU entitles the holder to a cash payment equal to the fair market value of a TransGlobe common share on the vesting date of the RSU. All RSUs granted vest annually over a three-year period, and all must be settled within 30 days of their respective vesting dates.

PSUs are similar to RSUs, except that the number of PSUs that ultimately vest is dependent on achieving certain performance targets and objectives as set by the board of directors. Depending on performance, vested PSUs can range between 50% and 150% of the original PSU grant. All PSUs granted vest on the third anniversary of their grant date, and all must be settled within 60 days of their vesting dates.

Q3-2015 9

DSUs are similar to RSUs, except that they become fully vested on the date of grant and may only be issued to directors of the Company. Distributions under the DSU plan do not occur until the retirement of the DSU holder from the Company's board of directors.

The number of RSUs, PSUs and DSUs outstanding as at September 30, 2015 is as follows:

	Restricted		Performance		Deferred
	Share		Share		Share
(000s, except per share amounts)	Units		Units		Units
Units outstanding, beginning of period	367		294		149
Granted	430		445		107
Exercised	(116	)	—		—
Forfeited	(16	)	(29	)	—
Reinvested	27		27		11
Units outstanding, end of period	692		737		267

Compensation expense of $1.0 million was recorded in general and administrative expenses in the Condensed Consolidated Interim Statements of Earnings and Comprehensive Income and Changes in Shareholders' Equity during the nine month period ended September 30, 2015 (2014 - $1.4 million) in respect of share units granted under the three plans described above. The expense related to the share units granted under these plans is measured at fair value using the lattice-based trinomial pricing model and is recognized over the vesting period, with a corresponding liability recognized on the Condensed Consolidated Interim Balance Sheet. Until the liability is ultimately settled, it is re-measured at each reporting date with changes to fair value recognized in earnings.

17. PER SHARE AMOUNTS

The earnings used in the calculation of basic and diluted earnings per share are as follows:

	Three Months Ended						Nine months ended
	September 30						September 30
(000s)	2015			2014			2015			2014
Net earnings (loss)	$	(46,568	)	$	19,162		$	(70,345	)	$	62,053
Dilutive effect of convertible debentures	(7,591		)	(4,228		)	—			(307		)
Diluted net earnings (loss)	$	(54,159	)	$	14,934		$	(70,345	)	$	61,746

In calculating the earnings per share, basic and diluted, the following weighted average shares were used:

	Three Months Ended		Nine Months Ended
	September 30		September 30
(000s)	2015	2014	2015	2014
Weighted average number of shares outstanding	72,302	75,068	73,923	74,799
Dilutive effect of stock options	—	671	—	817
Dilutive effect of convertible debentures	7,083	6,663	—	6,663
Weighted-average number of diluted shares outstanding	79,385	82,402	73,923	82,279

In determining diluted earnings per share, the Company assumes that the proceeds received from the exercise of “in-the-money” stock options are used to repurchase common shares at the average market price. In calculating the weighted average number of diluted common shares outstanding for the three and nine month periods ended September 30, 2015, the Company excluded 5,731,400 stock options (2014 – 6,023,500 and 4,433,100, respectively) as their exercise price was greater than the average common share market price in the respective periods.

The convertible debentures are dilutive in any period in which earnings per share is reduced (or loss per share is increased) by the effect of adjusting net earnings for the impact of the convertible debentures, and adjusting the weighted-average number of shares outstanding for the potential shares issuable on conversion of the convertible debentures.

18. DIVIDENDS

During the nine months ended September 30, 2015, TransGlobe paid cash dividends as follows:

Ex-dividend date	Record Date	Payment Date	Per Share Amount
March 12, 2015	March 16, 2015	March 31, 2015		$0.05
June 11, 2015	June 15, 2015	June 30, 2015		$0.05
September 11, 2015	September 15, 2015	September 30, 2015		$0.05

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.

10 Q3-2015

19. SEGMENTED INFORMATION

The Company has two reportable operating segments: the Arab Republic of Egypt and the Republic of Yemen. The Company, through its operating segments, is engaged primarily in oil exploration, development and production and the acquisition of properties.

In presenting information on the basis of operating segments, segmented revenue and segmented assets are based on the geographical location of the assets. There are no inter-segment sales.

The accounting policies of the operating segments are the same as the Company’s accounting policies.

	Egypt						Yemen						Total
	Nine Months Ended						Nine Months Ended						Nine Months Ended
	September 30						September 30						September 30
(000s)	2015			2014			2015			2014			2015			2014
Revenue
Oil sales, net of royalties	$	87,254		$	211,570		$	979		$	10,684		$	88,233		$	222,254
Finance revenue	235			7			2			1			237			8
Total segmented revenue	87,489			211,577			981			10,685			88,470			222,262
Segmented expenses
Production and operating	41,275			47,904			4,758			8,944			46,033			56,848
Selling costs	4,557			—			—			—			4,557			—
Depletion, depreciation and amortization	37,041			35,401			—			1,321			37,041			36,722
Realized derivative loss on commodity contracts	688			—			—			—			688			—
Income taxes – current	20,923			51,749			42			998			20,965			52,747
Income taxes – deferred	(32,835		)	(1,786		)	—			901			(32,835		)	(885		)
Impairment loss	63,101			—			—			—			63,101			—
Total segmented expenses	134,750			133,268			4,800			12,164			139,550			145,432
Segmented earnings (loss)	$	(47,261	)	$	78,309		$	(3,819	)	$	(1,479	)	(51,080		)	76,830
Non-segmented expenses(income)
Total non-segmented expenses													19,265			14,777
Net earnings (loss) for the period													$	(70,345	)	$	62,053
Capital expenditures
Exploration and development	$	39,880		$	55,851		$	—		$	1,384		$	39,880		$	57,235
Corporate													145			632
Total capital expenditures													$	40,025		$	57,867

Q3-2015 11

	Egypt					Yemen						Total
	Three Months Ended					Three Months Ended						Three Months Ended
	September 30					September 30						September 30
(000s)	2015			2014		2015			2014			2015			2014
Revenue
Oil sales, net of royalties	$	24,700		$	65,328	$	—		$	2,520		$	24,700		$	67,848
Finance revenue	103			2		1			1			104			3
Total segmented revenue	24,803			65,330		1			2,521			24,804			67,851
Segmented expenses
Production and operating	15,497			15,612		883			2,633			16,380			18,245
Selling costs	660			—		—			—			660			—
Depletion, depreciation and amortization	13,337			11,371		—			171			13,337			11,542
Income taxes – current	6,543			14,596		—			154			6,543			14,750
Income taxes – deferred	(24,352		)	127		—			(157		)	(24,352		)	(30		)
Impairment loss	63,101			—		—			—			63,101			—
Total segmented expenses	74,786			41,706		883			2,801			75,669			44,507
Segmented earnings (loss)	$	(49,983	)	$	23,624	$	(882	)	$	(280	)	(50,865		)	23,344
Non-segmented expenses(income)
Total non-segmented expenses												(4,297		)	4,182
Net earnings (loss) for the period												$	(46,568	)	$	19,162
Capital expenditures
Exploration and development	$	3,578		$	25,406	$	—		$	400		$	3,578		$	25,806
Corporate												9			206
Total capital expenditures												$	3,587		$	26,012

12 Q3-2015

The carrying amounts of reportable segment assets and liabilities are as follows:

September 30, 2015
(000s)	Egypt		Yemen		Total
Assets
Segmented assets	$	403,111	$	2,991	$	406,102
Non-segmented assets					95,706
Total assets					$	501,808
Liabilities
Segmented liabilities	$	19,353	$	2,310	$	21,663
Non-segmented liabilities					71,633
Total liabilities					$	93,296
December 31, 2014
(000s)	Egypt		Yemen		Total
Assets
Segmented assets	$	597,475	$	3,493	$	600,968
Non-segmented assets					53,090
Total assets					$	654,058
Liabilities
Segmented liabilities	$	74,277	$	3,940	$	78,217
Non-segmented liabilities					75,741
Total liabilities					$	153,958

Q3-2015 13

20. SUPPLEMENTAL CASH FLOW INFORMATION

Changes in non-cash working capital consisted of the following:

	Three Months Ended						Nine Months Ended
	September 30						September 30
(000s)	2015			2014			2015			2014
Operating activities
(Increase) decrease in current assets
Accounts receivable	$	24,395		$	(33,601	)	$	69,157		$	(68,041	)
Prepaids and other	5,546			1,633			12,599			(915		)
Product inventory	(671		)	61			(3,412		)	560
Increase (decrease) in current liabilities
Accounts payable and accrued liabilities	968			(101		)	(9,438		)	(2,606		)
	$	30,238		$	(32,008	)	$	68,906		$	(71,002	)
Investing Activities
(Increase) decrease in current assets
Prepaids and other	$	689		$	(427	)	$	689		$	(33	)
Increase (decrease) in current liabilities
Accounts payable and accrued liabilities	(11,989		)	2,632			(15,198		)	(301		)
	$	(11,300	)	$	2,205		$	(14,509	)	$	(334	)

21. EVENTS AFTER THE REPORTING PERIOD

On October 13, 2015 the Company completed a share purchase agreement whereby a wholly-owned subsidiary of TransGlobe disposed of 100% of the common shares of TransGlobe GOS Inc., which holds a 50% non-operated working interest in the East Ghazalat concession in Egypt. Total consideration received for TransGlobe GOS Inc. was $3.5 million, which has been satisfied by cash consideration of $1.0 million and the issuance of a $2.5 million note. The note bears interest at 10% per annum, payable on a semi-annual basis, and the principal is payable to TransGlobe on or before the second anniversary of the completion date. The cash consideration of $1.0 million was received immediately upon completion of the transaction.

On October 29, 2015 the Company completed a share purchase agreement whereby a wholly-owned subsidiary of TransGlobe disposed of 100% of the common shares of TG West Yemen Inc., which holds a 25% non-operated working interest in the Block S-1 and Block 75 concessions in Yemen. The Company received nominal cash consideration upon closing of the transaction.

14 Q3-2015