---







TRANSGLOBE ENERGY CORPORATION



AMENDED ANNUAL INFORMATION FORM

Year Ended December 31, 2005











August 9, 2006

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TABLE OF CONTENTS

|                                                                   | Page
|------------------------------------------------------------------ | ----
|                                                                   |     
|CURRENCY AND EXCHANGE
      RATES                                  | 1   
|ABBREVIATIONS                                                      | 2   
|CONVERSIONS                                                        | 2   
|FORWARD LOOKING STATEMENTS                                         | 3   
|CERTAIN DEFINITIONS                                                | 4   
|TRANSGLOBE ENERGY CORPORATION                                      | 6   
|GENERAL DEVELOPMENT OF
      THE BUSINESS                          | 6   
|DESCRIPTION OF THE BUSINESS AND PRINCIPAL
      PROPERTIES         | 8   
|STATEMENT OF RESERVES
      DATA AND OTHER OIL AND GAS INFORMATION | 19  
|DIVIDEND POLICY                                                    | 40  
|DESCRIPTION OF SHARE
      CAPITAL                                 | 40  
|MARKET FOR SECURITIES                                              | 41  
|ESCROWED SECURITIES                                                | 41  
|DIRECTORS AND OFFICERS                                             | 42  
|HUMAN RESOURCES                                                    | 43  
|INTEREST OF EXPERTS                                                | 44  
|LEGAL PROCEEDINGS                                                  | 44  
|INTERESTS OF MANAGEMENT AND OTHERS IN
      MATERIAL TRANSACTIONS  | 44  
|AUDITORS, TRANSFER AGENT
      AND REGISTRAR                       | 44  
|MATERIAL CONTRACTS                                                 | 44  
|AUDIT COMMITTEE
      INFORMATION                                  | 44  
|RISK FACTORS                                                       | 46  
|INDUSTRY CONDITIONS                                                | 49  
|ADDITIONAL INFORMATION                                             | 53  

|SCHEDULE "A" | Report on Reserves Data                                                        
|------------ | -------------------------------------------------------------------------------
|SCHEDULE "B" | Report of Management and Directors
      on Reserves Data and Other Information
|SCHEDULE "C" | Charter of Audit Committee                                                     

CURRENCY AND EXCHANGE RATES

All dollar amounts in this Annual Information Form, unless otherwise
  indicated, are stated in United States currency. The Company has adopted the
  U.S. dollar as the functional currency for its consolidated financial statements.
  The exchange rates for the period average and end of period for the U.S. dollar
  in terms of Canadian dollars as reported by the Bank of Canada were as follows
  for each of the years ended December 31, 2005, 2004 and 2003.

|               | Year
      Ended December 31, 2005 |  | Year
      Ended December 31, 2004 |  | Year
      Ended December 31, 2003 | 
|-------------- | ---------------------------------- |  | ---------------------------------- |  | ---------------------------------- | 
|               |                                    |  |                                    |  |                                    | 
|End of Period  | Cdn$1.1630                         |  | Cdn$1.2020                         |  | Cdn$1.2965                         | 
|               |                                    |  |                                    |  |                                    | 
|Period Average | Cdn$1.2114                         |  | Cdn$1.3015                         |  | Cdn$1.4009                         | 

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2

ABBREVIATIONS

|Oil and Natural Gas Liquids | Natural Gas              |       
|--------------------------- | ------------------------ | ------
|                            |                          |       
|Bbl                         | Barrel                   | Mcf   
|Bbls                        | Barrels                  | MMcf  
|Mbbls                       | thousand barrels         | Mcf/d 
|MMbbls                      | million barrels          | MMcf/d
|Mstb                        | 1,000 stock tank barrels | MMbtu 
|bbls/d                      | barrels per day          | Bcf   
|bopd                        | barrels of oil per day   | Tcf   
|NGLs                        | natural gas liquids      | GJ    
|STB                         | standard tank barrels    |       

|Other      |                                                                                                                                                                                                                                         
|---------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|           |                                                                                                                                                                                                                                         
|AECO       | EnCana Corp.'s natural gas storage facility
      located at Suffield, Alberta.                                                                                                                                                         
|API        | American Petroleum Institute                                                                                                                                                                                                            
|°API       | an indication of the specific gravity of crude oil
      measured on the API gravity scale. Liquid petroleum with a specified
      gravity of 28° API or higher is generally referred to as light crude oil.                           
|ARTC       | Alberta royalty tax credit                                                                                                                                                                                                              
|BOE or boe | barrel of oil equivalent of natural gas and crude oil on
      the basis of 1 BOE for 6 Mcf of natural gas (this conversion factor is an
      industry accepted norm and is not based on either energy content or
      current prices)
|m3         | cubic meters                                                                                                                                                                                                                            
|MBOE       | 1,000 barrels of oil equivalent                                                                                                                                                                                                         
|Mstboe     | 1,000 stock tank barrels of oil equivalent                                                                                                                                                                                              
|$M         | thousands of dollars                                                                                                                                                                                                                    
|$MM        | millions of dollars                                                                                                                                                                                                                     
|WTI        | West Texas Intermediate, the reference price paid in U.S.
      dollars at Cushing, Oklahoma for crude oil of standard grade                                                                                                            
|psi        | pounds per square inch                                                                                                                                                                                                                  

The following table sets forth certain conversions between
Standard Imperial Units and the International System of Units (or metric units).

CONVERSIONS

|To Convert From | To           | Multiply By
|--------------- | ------------ | -----------
|                |              |            
|Mcf             | cubic meters | 0.28174    
|cubic meters    | cubic feet   | 35.494     
|bbls            | cubic meters | 0.159      
|cubic meters    | bbls oil     | 6.293      
|feet            | meters       | 0.305      
|meters          | feet         | 3.281      
|miles           | kilometers   | 1.609      
|kilometers      | miles        | 0.621      
|acres           | hectares     | 0.405      
|hectares        | acres        | 2.471      
|gigajoules      | Mmbtu        | 0.950      

A boe conversion ratio of 6 Mcf = 1 bbl has been used. Boe's
may be misleading, particularly if used in isolation. A boe conversion ratio of
6 Mcf to 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.

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3

FORWARD LOOKING STATEMENTS

Certain statements contained in this annual information form
(the "Annual Information Form") and in certain documents incorporated by
reference into this Annual Information Form, constitute forward-looking
statements. These statements relate to future events or the Company's future
performance. 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.
Actual operational and financial results may differ materially from TransGlobe's
expectations contained in the 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 fields, changes in the 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 Canadian, Egyptian, Yemen or American tax, energy or
other laws or regulations, changes in significant capital expenditures, delays
in production starting up due to an industry shortage of skilled manpower,
equipment or materials, and the cost of inflation.

In particular, this Annual Information Form and the documents
incorporated by reference herein contain forward-looking statements pertaining
to the following:

- the quantity of reserves;
- oil and natural gas production levels;
- capital expenditure programs;
- projections of market prices and costs;
- supply and demand for oil and natural gas;
- expectations regarding the Company's ability to raise capital and to
  continually add to reserves through exploration, acquisitions and development;
  and
- treatment under government regulatory and taxation regimes.

The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of the risk factors
set forth below and elsewhere in this Annual Information Form:

- volatility in market prices for oil and natural gas;
- liabilities and risks inherent in oil and natural gas operations;
- uncertainties associated with estimating reserves;
- competition for, among other things, capital, acquisitions of reserves,
  undeveloped lands, equipment and skilled personnel;
- incorrect assessments of the value of acquisition; and
- geological, technical, drilling and processing problems.

The Company believes that the expectations reflected in those
forward looking statements are reasonable but no assurance can be given that
these expectations will prove to be correct and such forward-looking statements
included in, or incorporated by reference into, this Annual Information Form
should not be unduly relied upon. These statements speak only as of the date of
this Annual Information Form, as the case may be. The Company does not intend,
and does not assume any obligation, to update these forward-looking statements,
except as required by securities law.

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4

CERTAIN DEFINITIONS

In this Annual Information Form, the following words and
phrases have the following meanings, unless the context otherwise requires:

"AMEX" means the American Stock Exchange;

Arsenalmeans Arsenal Energy Inc. and its
subsidiaries;

"Block 32 Joint Venture Group" means TG Holdings Yemen
Inc. (a wholly-owned subsidiary of TransGlobe Energy Corporation) with a
13.81087% working interest and partners Ansan Wikfs (Hadramaut) Ltd. and DNO ASA
holding the balance;

"Block 72 Partnership" means the joint venture group
comprised of DNO ASA (34%), TG Holdings Yemen Inc. (33%) and Ansan Wikfs
(Hadramaut) Ltd. (33%);

"Block S-1 Joint Venture Group" means a joint venture
arrangement for Block S-1 with a subsidiary of Vintage Petroleum Inc.;

"Brent" means the reference price paid in US dollars,
for a barrel of light sweet crude oil produced from the Brent field in the UK
sector of the North Sea;

"Cdn" means Canadian;

"COGE Handbook" means the Canadian Oil and Gas
Evaluation Handbook prepared jointly by the Society of Petroleum Evaluation
Engineers (Calgary chapter) and the Canadian Institute of Mining, Metallurgy
& Petroleum;

"CPF" means central production facility;

"DeGolyer" means DeGolyer and MacNaughton Canada
Limited, independent petroleum consultants;

"DeGolyer Report" means the report of DeGolyer dated
March 16, 2006 evaluating the Yemen crude oil and Canadian crude oil, natural
gas liquids and natural gas reserves of the Company as at December 31, 2005;

"Dry Hole"or"Dry Well"or"Non-Productive Well" means a well found to be incapable of
producing either oil or natural gas in sufficient quantities to justify
completion as an oil or natural gas well;

"Exploratory Well" means a well drilled either in search
of a new, as-yet undiscovered oil or natural gas reservoir or to greatly extend
the known limits of a previously discovered reservoir;

"Egypt" means the Arab Republic of Egypt;

"GAAP" means Generally Accepted Accounting Principles;

"Gross" or "gross" means:

|(a) | in relation to the Company's interest in production and
      reserves, its "Company gross reserves", which are the Company's interest
      (operating and non-operating) share before deduction of royalties and
      without including any royalty interest of the Company;
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                
|(b) | in relation to wells, the total number of wells in which
      the Company has an interest; and                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                
|(c) | in relation to properties, the total area of properties
      in which the Company has an interest;                                                                                                                                                                            

"MOM" means Ministry of Oil and Minerals, Republic of
Yemen, formerly MOMR, the Ministry of Oil and Mineral Resources;

---

5

"NEB" means National Energy Board of Canada;

"Net" or "net" means:

|(a) | in relation to the Company's interest in production and
      reserves, the Company's interest (operating and non- operating) share
      after deduction of royalties obligations, plus the Company's royalty
      interest in production or reserves.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                         
|(b) | in relation to wells, the number of wells obtained by
      aggregating the Company's working interest in each of its gross wells;
      and                                                                                                            
|    |                                                                                                                                                                                                                                                         
|(c) | in relation to the Company's interest in a property, the
      total area in which the Company has an interest multiplied by the working
      interest owned by the Company;                                                                           

"NI 51-101" means National Instrument 51-101 Standards
of Disclosure for Oil and Gas Activities;

"NI 51-102" means National Instrument 51-102 Continuous
Disclosure Obligations;

OXYmeans Occidental Petroleum Corporation and its
subsidiaries;

"PSA" means Production Sharing Agreement;

"QEL" means Quadra Egypt Limited, a subsidiary of
Arsenal Resources Inc., a corporation headquartered in Calgary, Alberta;

"Rampex" means Rampex Petroleum International, a
corporation headquartered in Cairo, Egypt;

"TransGlobe" or the "Company" means TransGlobe
Energy Corporation, a corporation organized and registered under the laws of
Alberta, Canada and its subsidiary companies;

"TransGlobe Egypt" means TransGlobe Petroleum Egypt
Inc., a wholly-owned subsidiary of TransGlobe;

"TG Holdings" means TG Holdings Yemen Inc., a
wholly-owned subsidiary of TransGlobe;

"TSX" means the Toronto Stock Exchange;

"U.S." means United States;

"Vintage" means Vintage Petroleum, Inc. and its
subsidiaries; now a subsidiary of Occidental Petroleum Corporation and

"YOC" means Yemen Oil Company.

Certain other terms used herein but not defined herein are
defined in NI 51-101 and, unless the context otherwise requires, shall have the
same meanings herein as in NI 51-101.

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6

TRANSGLOBE ENERGY CORPORATION

General

TransGlobe Energy Corporation ("TransGlobe" or the
"Company") was incorporated on August 6, 1968 and was organized under
variations of the name "Dusty Mac" as a mineral exploration and extraction
venture under The Company Act (British Columbia). In 1992, the Company
entered into the oil and gas exploration and development field in the United
States and later in the Republic of Yemen and Canada, ceasing operations as a
mining company. The U.S. oil and gas properties were sold in 2000 to fund
opportunities in Yemen. The Company changed its name to TransGlobe Energy
Corporation on April 2, 1996 and on June 9, 2004, the Company continued from the
Province of British Columbia to the Province of Alberta.

TransGlobe, through its wholly-owned subsidiaries, is primarily
engaged in the exploration for, and the development and production of, oil and
gas in Canada, in the Arab Republic of Egypt and in the Republic of Yemen.

The Company has been listed on the TSX under the symbol TGL
since November 7, 1997 and on the AMEX under the symbol TGA since November 2003.

The Company's principal office is located at 2500, 605  5th
Avenue S.W., Calgary, Alberta, T2P 3H5. The Company's registered office is
located at 1400, 350  7th Avenue S.W., Calgary, Alberta, T2P 3N9.

Intercorporate Relationships

The following table sets out the name and jurisdiction of
incorporation of the Company's subsidiaries and the Company's ownership interest
therein:

|Name of Subsidiary                      |  | Jurisdiction of Incorporation        |  | Ownership
|--------------------------------------- |  | ------------------------------------ |  | ---------
|TransGlobe Oil & Gas Corporation        |  | Washington State, United States      |  | 100%     
|TransGlobe Petroleum International Inc. |  | Turks & Caicos Islands,
      B.W.I. |  | 100%     
|TG Holdings Yemen Inc.(1)               |  | Turks & Caicos Islands,
      B.W.I. |  | 100%     
|TransGlobe Petroleum Egypt Inc.(1)      |  | Turks & Caicos Islands,
      B.W.I. |  | 100%     

Note:

|(1) | TransGlobe is the indirect holder of TG Holdings Yemen
      Inc. and TransGlobe Petroleum Egypt Inc., which are 100% owned directly by
      TransGlobe Petroleum International Inc.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

TG Holdings Yemen Inc. owns TransGlobe's interests in the
Republic of Yemen in Block 32, in Block S-1 and in Block 72. TransGlobe
Petroleum Egypt Inc. owns TransGlobe's interest in the Nuqra Area Block 1, Arab
Republic of Egypt.

Unless the context otherwise requires, reference in this
Annual Information Form to the"Company"includes the Company and
its direct and indirect wholly-owned subsidiaries.

GENERAL DEVELOPMENT OF THE BUSINESS

TransGlobe is an independent, Canadian-based, international
upstream oil and gas company whose main business activities include exploration,
development and production of crude oil, natural gas liquids and natural gas.
The Company has exploration and production operations in Canada and in the
Republic of Yemen and an exploration project in the Arab Republic of Egypt.

During the past three years, TransGlobe has developed its
business interests through a combination of exploration and development and to a
lesser extent, acquisitions and dispositions, primarily focusing on three
Production Sharing Agreements ("PSAs") in Yemen (a 13.81087% working
interest in Block 32, a 25% working interest in Block S-1 and a 33% working
interest in Block 72), in central Alberta, Canada and a Concession Agreement in
the Arab Republic of Egypt (a 50% working interest in Nuqra Block 1).

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7

In 2003, the Company's primary focus was on Block S-1 in the
Republic of Yemen and an expanded exploration drilling program in Canada. On
Block S-1, the An Nagyah light oil discovery was appraised with two wells that
led to the Declaration of Commerciality and the filing of a Development Plan on
October 14, 2003. On October 15, 2003, the Ministry of Oil and Minerals
("MOM") approved the Development Plan and a 20 year Development Area of
approximately 285,000 acres for Block S-1. On Block 32, also in Yemen, the
Company participated in five wells, resulting in four oil wells for an 80%
success ratio. In Canada, the Company drilled nine wells, resulting in six gas
wells, two oil wells and one cased potential gas well for an 88% success ratio.

In November 2003, the Company listed on the American Stock
Exchange ("AMEX") under the symbol TGA, which replaced the Company's
previous listing on the NASDAQ bulletin board under the symbol TGLEF.

In 2004, the primary exploration and production focus was on
Blocks S-1 and 32 in Yemen and central Alberta in Canada. On Block S-1, the An
Nagyah light oil development resulted in eight new producing oil wells due to an
active development and appraisal drilling program. The Company also participated
in one appraisal oil well (Harmel #2) and one exploration dry hole at Al Hareth
on Block S-1. On Block 32, the Company participated in the acquisition of 3-D
seismic and the drilling of three producing oil wells in the Tasour field. In
western Canada, the Company drilled 15 wells, resulting in 10 gas wells, two oil
wells and three dry wells.

In addition to the 2004 exploration and production activities,
the Company participated in the Yemen International Bid Round for Exploration
and Production of Hydrocarbons with the successful award of Block 72. The Block
72 PSA was ratified by the Yemen Parliament on June 18, 2005 and became law
following the Presidential decree on July 12, 2005.

In July 2004, the Company announced the addition of an
exploration concession in the Arab Republic of Egypt, representing a new country
of operation for TransGlobe. The Company entered into a farm-out agreement to
incur $6.0 million of expenditures in the Period One and Period Two work
programs over the next five years to earn a 50% working interest in the Nuqra
Block 1, located in the Upper Nile region of Egypt. TransGlobe is the operator
of the Nuqra Block.

In November 2004, TransGlobe Petroleum International Inc.
obtained a credit facility of up to an aggregate amount of $7.0 million that are
guaranteed by each of TransGlobe, TG Holdings Yemen Inc. and TransGlobe
Petroleum Egypt Inc. The Company also completed a public offering on November
24, 2004 for 2,530,000 common shares at a price of Cdn$4.35 per share for gross
proceeds of approximately Cdn$11,000,000. The underwriters exercised their
over-allotment option in connection with the financing on December 7, 2004
resulting in additional gross proceeds of approximately Cdn$1,650,825.

In 2005, the primary exploration and production focus was on
Blocks S-1, 32 and 72 in Yemen; Nuqra Block #1 in Egypt and central Alberta in
Canada. On Block S-1, the Company participated in reprocessing the An Naeem 3-D
seismic, the development of the An Nagyah light oil pool and the drilling eight
wells (5 An Nagyah oil wells and 3 exploration dry holes). The pipeline
connecting the An Nagyah field with the Jannah Hunt operated Halewah production
facility and export pipeline was completed in July 2005. The pipeline has an
ultimate capacity of 80,000 barrels of oil per day so that future discoveries
can be placed on stream quickly. The central production facility was expanded to
10,000 Bopd, with an additional expansion to 15,000 Bopd scheduled for mid 2006.
On Block 32, the Company participated in the acquisition of 2-D seismic, the
drilling of seven wells (2 oil producers, 2 water injection wells, 1 cased
potential oil well and 2 dry holes) and upgrades to the Tasour CPF. On Block 72,
the Company participated in the acquisition of 255 km of 2-D seismic. In Egypt,
on Nuqra Block 1, the Company conducted geological field studies, reprocessed
3,190 km of existing 2-D seismic data and prepared a new 800 km 2-D seismic
acquisition program for 2006. In western Canada, the Company drilled 31 wells,
resulting in 21 gas wells, 7 oil wells and 3 dry wells.

Anticipated Changes in the Business

As at the date hereof, the Company does not anticipate any
material change in its business during the balance of the 2006 financial year.

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8

Significant Acquisitions and Significant Dispositions

The Company did not complete any significant dispositions or
significant acquisitions for which disclosure is required under Part 8 of NI
51-102 within or since the completion of the most recently completed financial
year.

DESCRIPTION OF THE BUSINESS AND PRINCIPAL PROPERTIES

TransGlobe is engaged in the exploration for, and the
development and production of, crude oil and natural gas primarily in the
Republic of Yemen, the Arab Republic of Egypt and in central Alberta, Canada.
The Company also reviews potential acquisitions and new international
exploration blocks to supplement its exploration and development activities.

TransGlobe's major operations and principal activities are in
the oil and gas exploration and production business. The Company has operated in
the Republic of Yemen, Canada and Egypt during the past eight, six and two
years, respectively. In the Republic of Yemen, the Company has interests in
three PSAs: Block 32, Block S-1 and Block 72. In the Arab Republic of Egypt,
the Company has an interest in one Concession Agreement, Nuqra Block 1. In
Canada, all of the Company's interests are located in the Province of Alberta,
primarily in central Alberta.

Republic of Yemen:



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9

Block 32, Republic of Yemen

Background

TransGlobe entered into its first international project in
January 1997 through a farmout agreement and joint venture on Block 32. The
Company has since participated in acquisition of seismic data, drilling of
twenty-six wells and construction of production facilities. The Tasour field
commenced production in November, 2000. The joint venture currently consists of
TG Holdings Yemen Inc. (a wholly-owned subsidiary of TransGlobe Energy
Corporation) with a 13.81087% working interest and partners Ansan Wikfs
Hadramaut Ltd. and DNO ASA holding the balance (the Block 32 Joint Venture
Group). DNO ASA (an independent Norwegian oil company) is the operator of Block
32. The Yemen Oil Company (YOC - a Yemen government oil company) has a 5%
interest in the Block 32 Joint Venture Groups production sharing oil.

The Block 32 development area covers 591 square kilometers
(146,070 acres). The development area encompasses all of the Tasour structure
and several additional prospects. The approved development/production period
extends until the year 2020, with an optional five-year extension to 2025.

PSA Summary (13.81087% working interest)

TransGlobe commenced production on Block 32 in November, 2000.
Production from the block is shared between the Block 32 Joint Venture Group and
the Ministry of Oil and Minerals, Republic of Yemen (MOM) pursuant to a
Production Sharing Agreement (PSA). The PSA provides for MOM to receive a 3%
royalty of gross production. The balance of production is split between cost
recovery oil and production sharing oil. Cost recovery oil is up to a maximum of
60% of the production after deducting the 3% royalty. Cost recovery oil allows
the Block 32 Joint Venture Group to recover operating costs and exploration and
development expenditures as outlined in the PSA. The remaining oil is allocated
to production sharing oil shared 65% by MOM, 33.25% by the Block 32 Joint
Venture Group and 1.75% to YOC. The Block 32 Joint Venture Groups Yemen
royalties and income taxes are paid out of MOMs share of production sharing
oil. These terms remain in place until gross proved recoverable reserves exceed
30 million barrels of oil (assessed every two years) or until gross production
exceeds 25,000 Bopd at which time the terms would revert to the original PSA
terms in place prior to the 1999 PSA amendment. The original PSA terms provided
for a 10% royalty on gross production with the remaining 90% of production split
between cost recovery oil and production sharing oil. Cost recovery oil would be
to a maximum of 25%, with the remaining oil allocated to production sharing oil
shared 77% by MOM and 23% by the Block 32 Joint Venture Group. The proved
recoverable reserve determination is conducted every two years from the
anniversary of first oil production. At November 4, 2004, the proved recoverable
reserves recognized by an independent third party audit were less than 10
million barrels. This audit was approved by MOM. The next Block 32 MOM audit
will be conducted effective November 4, 2006.

2005 Activities and Results

During 2005, the Block 32 Joint Venture Group work program
consisted of a 70 km 2-D seismic program north and west of the Tasour field and
the drilling of seven wells. In the Tasour area three development wells (2 oil
wells and 1 suspended), two dedicated water injectors and one dry hole
(appraisal of an eastern extension to Tasour) were drilled. The Balan #1
exploration well was drilled and abandoned after failing to test hydrocarbons
from the Saar or Basement zones. The well was located approximately 11 km
northwest of the Tasour field.

2005 Drilling Results

Initial ProductionWell
    Well Type
    Status
    Test (Bopd  gross)
    FormationTasour #15
    Injector
    Water Injector
    N/A
    QishnTasour #16
    Development
    Suspended
    N/A
    QishnTasour #17
    Appraisal
    D&A
    N/A
    QishnTasour #18
    Development
    Oil Producer
    3,000
    Qishn 1-CTasour #19
    Development
    Oil Producer
    1,300
    Qishn 1-ATasour #20
    Injector
    Water Injector
    N/A
    QishnBalan #1
    Exploration
    D&A
    N/A
    Sarr/Basement


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10

ProductionThe Tasour field averaged 13,946 Bopd
(1,926 Bopd to TransGlobe) during 2005. With the boundaries of the Tasour field
defined and production maturing, two facility optimization projects were
constructed at the central production facility (CPF) during 2005. The first
project, a diesel topping plant, was installed to reduce operation costs by
manufacturing diesel from produced crude oil. The diesel topping plant was
commissioned in December 2005 and is currently producing 380 Bpd of diesel which
is used to generate electricity to run all the pumps and facilities on the
Block. The second project, to expand CPF fluid handling and water injection
capacity, will be completed in April 2006. Several dedicated water injectors
were drilled to handle increased volumes associated with the expansion. It is
expected that production from the Tasour field will average approximately 8,000
Bopd during 2006 assuming the CPF expansion is operational in April.

2005 Tasour Production by Quarter (Bopd)

Q-1
    Q-2
    Q-3
    Q-4Gross field production rate
    16,167
    13,838
    14,302
    11,527TransGlobe working interest
    2,233
    1,911
    1,975
    1,592TransGlobe net (after royalties)
    1,567
    1,060
    1,100
    834TransGlobe net
      (after royalties and tax)
    1,357
    775
    809
    573


Under the terms of the Block 32 PSA royalties and taxes are
paid out of the governments share of production sharing oil.

TASOUR FIELD



2006 OutlookThe Block 32 Joint Venture Group
approved a six well drilling program (firm and contingent) for 2006 focused
primarily on exploration (five exploration wells and one development well).

The first exploration well of 2006 at Godah #1 (side track)
tested 1,839 Bopd from the Qishn formation. A second well, Godah #2 will be
drilled approximately 1,100 meters northeast of Godah #1 to appraise the new oil
pool. It is expected that Godah #2 will commence drilling in April. Additional
drilling on the Godah structure will be dependent upon the results of Godah #2.
The operator is currently evaluating production options, however it is expected
that the Godah discovery could be connected to the Tasour CPF with a 23 km
pipeline in the latter half of 2006.

In addition to the appraisal/potential development of Godah, a
second drilling rig will commence drilling Tasour #21 in late March. Tasour #21
will be drillied on the south eastern flank of the Tasour field to evaluate a
deeper Sarr prospect. An exploration well, Tasour #22, will be drilled south of
the Tasour field to evaluate a fractured basement prospect.

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11

Block 72, Republic Of Yemen

BackgroundBlock 72 was acquired in a bid round in
2004 by a joint venture group comprised of DNO ASA (34%), TG Holdings Yemen Inc.
(33%) and Ansan Wikfs (Hadramaut) Limited (33%) (Block 72 Joint Venture
Group). TG Holdings Yemen Inc. is a wholly owned subsidiary of TransGlobe
Energy Corporation. The YOC has a 10% interest in the Block 72 Joint Venture
Groups production sharing oil. The Block 72 PSA was ratified by the Yemen
parliament on June 18, 2005 and became law following the Presidential decree on
July 12, 2005. Block 72 encompasses 1,822 square kilometers (approximately
450,234 acres) located in the western Masila Basin adjacent to the billion
barrel Nexen Masila Block. The Block 72 Joint Venture Group committed to a
seismic acquisition program and the drilling of two exploration wells during the
first exploration period of thirty months.

PSA Summary (33% working interest)

Production from the Block will be shared between the Block 72
Joint Venture Group and MOM pursuant to a PSA. The PSA provides for MOM to
receive a 3% royalty of gross production up to 25,000 Bopd in a month
(escalating thereafter), with the remaining 97% of production split between cost
sharing oil and production sharing oil. Cost sharing oil is up to a maximum of
50% of the production after deducting the 3% royalty. The remaining oil
allocated to production sharing oil is shared 64% MOM, 32.4% Block 72 Joint
Venture Group and 3.6% to YOC (increasing share to the government on incremental
production more than 25,000 Bopd).

2005 Activities and ResultsA 255 km 2-D seismic
acquisition program commenced in the fourth quarter of 2005 and was completed in
January 2006.

2006 OutlookThe new seismic data is currently being
processed along with 500 km of existing 2-D seismic data. Interpretation and
mapping is expected to be completed during the second quarter of 2006. A two
well exploration program is scheduled to commence drilling in the fourth quarter
of 2006.

Block S-1, Republic of Yemen

BackgroundTransGlobe entered into its second
international exploration venture in 1997 by signing a PSA for the Damis S-1
Block (Block S-1) with MOM. TG Holdings Yemen Inc. (a wholly owned subsidiary
of TransGlobe Energy Corporation) entered into a joint venture arrangement for
Block S-1 with a subsidiary of Vintage Petroleum Inc. (Vintage), a U.S.
independent exploration and production company (Block S-1 Joint Venture
Group). During 2000 Vintage earned a 75% working interest in Block S-1 by
funding 100% of the work commitments for the first exploration period of the
Block S-1 PSA and by spending a minimum of $20 million. TransGlobe has retained
a 25% working interest in Block S-1. In September 2005 Occidental Petroleum
Corporation (OXY) announced the acquisition of Vintage. The acquisition closed
on January 30, 2006. OXY through its wholly owned subsidiary (Vintage) is now
the operator of Block S-1. The YOC has a 17.5% interest in the Block S-1 Joint
Venture Groups share of production sharing oil.

Block S-1 originally encompassed an area of 4,484 square
kilometers (approximately 1.1 million acres). Upon declaring commerciality in
October 2003, a final relinquishment reduced the block to a Development Area of
1,152 square kilometers (284,700 acres). The Development Area is now valid until
October 2023 with an additional five year extension available.

To date, the Company has participated in two 3-D seismic
surveys, drilling of 27 wells, the construction of production facilities and
commencement of production in March 2004.

---

12

PSA Summary (25% working interest)

TransGlobe commenced production on Block S-1 on March 31, 2004.
Production from the block is shared between the Block S-1 Joint Venture Group
and MOM pursuant to a PSA. The PSA provides for MOM to receive a 3% royalty of
gross production up to 12,500 Bopd (4% royalty from 12,500 to 25,000 Bopd) with
the remaining 97% of production split between cost recovery oil and production
sharing oil. Cost recovery oil is up to a maximum of 50% of the production after
deducting the 3% royalty. Cost recovery oil allows the Block S-1 Joint Venture
Group to recover operating costs and exploration and development expenditures as
outlined in the PSA. The remaining oil allocated to production sharing oil is
shared 65% by MOM, 28.875% by the Block S-1 Joint Venture Group and 6.125% to
YOC up to 12,500 Bopd (70% by MOM, 24.75% by the Block S-1 Joint Venture Group
and 5.25% to YOC from 12,500 Bopd to 25,000 Bopd). The Block S-1 Joint Venture
Groups Yemen royalties and income taxes are paid out of MOMs share of
production sharing oil.

2005 Activities and ResultsDuring 2005, the Block
S-1 Joint Venture Group reprocessed the 1999 An Naeem 3-D seismic program and
drilled eight wells resulting in five oil wells and three dry holes. The main
focus in 2005 was the use of horizontal drilling to develop the An Nagyah Lam A
pool (3 wells in 2005) and to evaluate the potential of the Lam B pool (1 well
in 2005). In addition to the Lam A and B drilling, oil was tested from the Lam B
formation south of the main bounding fault, which may be appraised in the
future.

2005 Drilling Results

Initial ProductionWell
    Well Type
    Status
    Test (Bopd  gross)
    FormationAn Nagyah #14
    Appraisal
    Oil
    80
    Lam BAn Nagyah #15Hz
    Development
    Oil
    2,625
    Lam AAn Nagyah #16Hz
    Development
    Oil
    2,520
    Lam AAn Nagyah #17Hz
    Development
    Oil
    3,250
    Lam AAn Nagyah #18Hz
    Appraisal
    Oil
    1,300
    Lam BMalaki #1
    Exploration
    D&A
    N/A
    Alif/LamMarkhah #1
    Exploration
    D&A
    Non-commercial oil
    Shuqra and BasementHatat #1
    Exploration
    D&A
    N/A
    Basement


AN NAGYAH FIELD

Lam A Reservoir(only Lam A wells shown)



---

13

Lam B Reservoir (150 meters below Lam A Reservoir)

(Only Lam B wells shown)



Production

Production from Block S-1 averaged 8,792 Bopd (2,198 Bopd to
TransGlobe) during 2005. Production increased throughout the year with the
addition of wells and facilities. Production during 2005 was partially
constrained, initially by the early production trucking operations and later by
insufficient capacity at the processing facility. A 30 km (18 mile) 10 inch
pipeline connecting the An Nagyah field with the Jannah Hunt operated Halewah
production facility and export pipeline was constructed during the first half of
2005. The pipeline has an ultimate capacity of 80,000 Bopd to provide expansion
capabilities for future developments. The pipeline became operational in early
July and the trucking operations ceased, thereby reducing operating costs. The
CPF was expanded throughout 2005 to handle 10,000 Bopd and re-injection of
associated gas production. Production increased during 2005 to a level of 12,300
Bopd (3,075 Bopd to TransGlobe) in early December. Facility constraints
associated with cooler temperatures in late December and in January restricted
production to approximately 9,300 Bopd (2,325 Bopd to TransGlobe). Field
production increased to 12,000 Bopd, following the installation of additional
treating capacity at the CPF in late February 2006. Additional equipment was
ordered to increase the CPF capacity to 15,000 Bopd in the third quarter 2006.

2005 Production by Quarter (Bopd)

Q-1
    Q-2
    Q-3
    Q-4Gross field production rate
    7,332
    8,164
    8,939
    10,704TransGlobe working interest
    1,833
    2,041
    2,235
    2,676TransGlobe net (after royalties)
    1,284
    1,421
    1,558
    1,472TransGlobe net
      (after royalties and tax)
    1,146
    1,247
    1,389
    1,258


Production equipment was installed at Harmel #1 and Harmel #2
in March 2005. The initial Harmel #1 production rate of approximately 100 Bopd
has declined to a rate of less than 15 Bopd. The Harmel #2 well encountered a
poorer quality reservoir and has less productive capacity than the Harmel #1
well. Although the production rates are disappointing, it is expected that new
wells may be drilled targeting deeper prospects (Alif and Basement) on the
Harmel structure. Future wells could provide additional reservoir information on
the shallow medium gravity oil (22 degree API) pool. The Harmel pool (500 to 800
meters in depth) encompasses 15 square miles as defined by 3-D

---

14

seismic and represents a potentially significant accumulation
of oil in place. The shallow zones require several more wells (vertical and/or
horizontal) to fully evaluate the economic viability of the oil accumulation.
For 2006 the partnership plans to focus on developing the light oil discovery at
An Nagyah as well as other potential leads. Therefore no additional work on
Harmel is currently planned for 2006.

2006 Outlook

The Block S-1 Joint Venture Group approved a capital budget of
$48 million ($12 million to TransGlobe) for 2006 projects (firm and contingent).
The program includes additional 3-D seismic acquisition over the southern
portion of Block S-1, a continuous drilling program (a mixture of development
horizontal wells and exploration wells) and expansion of the production
facilities. Vintage (the operator of Block S-1) was acquired by and merged into
OXY effective January 30, 2006. OXY is currently reviewing the Block S-1
prospects and approved 2006 work program. It is expected that the Joint Venture
Group will meet in the next few months to discuss the 2006 work program.
TransGlobe is very pleased to have OXY as a new partner in Block S-1. In
addition to being a very successful international oil and gas exploration
company, OXY also brings a vast regional knowledge of Yemen from their ownership
in two producing blocks in the prolific Masila Basin (Block 14 and Block 10) and
more recently, their drilling in Block 20 immediately north west of Block S-1.
OXY was also awarded Block 75 in 2005, which bounds Block S-1 to the south.

During the first quarter of 2006, two horizontal development
wells (An Nagyah #19 and #20) targeting the Lam A pool have been drilled and
tested at rates of 3,226 Bopd and 2,992 Bopd, respectively. The drilling rig is
currently drilling the An Nagyah #21 Lam B development well. Following An Nagyah
#21 the rig will drill another development well at Wadi Bayhan. The Wadi Bayhan
prospect is an Alif/Lam prospect. It is expected that up to ten wells will be
drilled on Block S-1 during 2006.

The approved 2006 work program included funds to evaluate the
feasibility of producing additional stabilized condensate from the An Nagyah
solution gas and possible make-up gas from the An Naeem gas condensate pool. An
Naeem gas (make-up gas) could be used to maintain reservoir pressure and improve
oil recoveries from the An Nagyah pool. A gas cycling scheme to recover
additional condensate from the An Naeem gas condensate pool may also be studied.

Block S-1 Prospects



---

15

Nuqra Block 1, Arab Republic of Egypt



BackgroundIn July 2004, TransGlobe Petroleum Egypt
Inc. ("TransGlobe Egypt"), a wholly owned subsidiary of TransGlobe Energy
Corporation, entered into a Farmout Agreement with Quadra Egypt Limited ("QEL"),
a subsidiary of Quadra Resources Corp. headquartered in Calgary, and Rampex
Petroleum International ("Rampex") headquartered in Cairo, Egypt (Nuqra Block 1
Joint Venture Group). Quadra Resources was subsequently acquired by Arsenal
Energy Inc. (Arsenal) of Calgary in 2005 and the Rampex interest was assigned
to Petrosina Limited and Wantapex Limited in 2004. QEL is a wholly owned
subsidiary of Arsenal.

Under the terms of this agreement TransGlobe Egypt earns a 50%
interest in the Nuqra Concession by paying 100% of the initial $6.0 million of
expenditures in the Period One and the Period Two work programs. After the
initial $6.0 million has been spent, costs will be shared 60% TransGlobe Egypt
and 40% Arsenal. Petrosina and Wantapex will be carried until first production.
The cost of the Petrosina and Wantapex carry will be recovered by TransGlobe
Egypt and Arsenal from 100% of the Petrosina and Wantapex cost oil and 50% of
the Rampex production sharing oil. TransGlobe Egypt is the Operator of the Nuqra
Block.

The Nuqra Concession Agreement Period One work program requires
expenditure of $2.0 million to reprocess existing seismic and to acquire new
seismic within the first two years. Upon expiry of the Period One term, there is
an option to proceed to the Period Two work program. Period Two requires
completion of a two well drilling program, with a minimum expenditure of $4.0
million over a period of three years. Upon expiry of the Period Two term there
is an option to proceed to the Period Three work program. Period Three requires
completion of a two well drilling program, with a minimum expenditure of $5.0
million over a final three year term. Exploitation of discovered commercial
fields will continue under a Development Lease for a further 20 years.

The Nuqra Concession is located in Upper Egypt near of the city
of Luxor on the east bank of the Nile River. The concession encompasses over
two-thirds of the Kom Ombo/Nuqra Basin. The Nuqra Concession contains more than
30,000 square kilometers or 7,500,000 acres of exploration lands with eight
seismically defined leads identified

---

16

from over 4,000 km of existing 2-D seismic. Seismic and well
data have confirmed the existence of Jurassic and Cretaceous sediments and the
presence of a petroleum system which could potentially hold significant oil
reserves.

Nuqra Sub Basin2006 2-D Seismic Program, 800 km



Concession Agreement Summary (50% working interest)

Production from the Block will be shared between the Nuqra
Block 1 Joint Venture Group and the government pursuant to a Concession
Agreement. The Concession Agreement terms allow for the recovery of costs up to
a maximum of 40% of gross production. The remaining balance of production is
then shared on a 70:30 basis between the government and the Nuqra Block 1 Joint
Venture Group, respectively, for the first 25,000 Bopd. Production sharing above
25,000 Bopd is shared on an 80:20 basis.

2005 Activities

TransGlobe completed the reprocessing of 3,190 km of existing
2-D seismic data on the Nuqra Block 1 in the summer of 2005. The reprocessed
seismic data has been mapped and interpreted, resulting in eight identified
leads in the central area of the basin.

2006 Outlook

An 800 km 2-D seismic acquisition program commenced in early
January 2006 and is expected to be completed by the end of March. To save on
mobilization and demobilization costs the seismic acquisition program was bid
jointly with Centurion Energy who holds the exploration concession adjacent to
the Nuqra Block. TransGlobe is preparing for a two well exploration drilling
program to commence in late 2006. Tenders for long lead items and a drilling rig
are out for bid. It is expected that the availability of a suitable drilling rig
will determine when drilling commences.

The Company has already exceeded the Period One work
commitments of $2.0 million and plans to commit to Period Two at the end of
Period One on July 18, 2006. There is a mandatory relinquishment of 25% of the
Block at the end of Period One.

---

17

Canada



BackgroundTransGlobe acquired its Canadian
operations in April 1999. TransGlobe operates most of the wells which are
located almost entirely in the southern/central part of the Province of Alberta.
Until 2003, investment in Canadian operations was limited to development and
exploitation of producing areas with minimal investment in land or exploration
opportunities. Since 2003 Canadian operations have been successfully expanded
providing increased cash flow and asset value. The Company plans to continue
expanding the Canadian operations to capitalize on the North American gas
market.

2005 Activities and Results

In early 2005 the Canadian budget and work program was
increased from 10-15 wells to 30-35 wells due to increased corporate cash flow
associated with record commodity prices. The Company participated in a total of
31 wells resulting in 21 gas, 7 oil and 3 dry for an overall success rate of
90%. The majority of the wells were drilled in the Nevis, Gadsby and Morningside
areas of central Alberta. Of the 31 wells drilled, TransGlobe had an average
working interest of 79% in 26 wells and a carried interest after payout in five
wells which were farmed out to a third party. Included in the 31 wells were
eight successful coal bed methane (CBM) wells targeting the Horseshoe Canyon
coals in the Nevis (1 well) and Morningside (7 wells) areas.

The Company acquired 15,100 net acres of exploration land in
2005, bringing the Companys total net undeveloped land to 33,300 acres at year
end.

---

18

2005 Drilling Results

Oil
    Gas
    Dry
    TotalArea
    Gross
    (Net)
    Gross
    (Net)
    Gross
    (Net)
    Gross
    (Net)Nevis
    5
    (4.7)
    8
    (6.6)
    1
    (1.0)
    14
    (12.3)Gadsby*
    1
    (1.0)
    4*
    (2.0)
    1
    (1.0)
    6*
    (4.0)Morningside**
    1
    (0.8)
    7**
    (1.4)
    -
    -
    8**
    (2.2)Other
    -
    -
    2
    (1.6)
    1
    (0.5)
    3
    (2.1)Total
    7
    (6.5)
    21
    (11.6)
    3
    (2.5)
    31
    (20.6)


* Includes 2 farm out wells. ** Includes 3 farm out wells.

The Canadian drilling budget was increased from 10-15 wells to
30-35 wells in the second quarter of 2005, resulting in the majority of the
wells being drilled in the fourth quarter.

2005 Wells (excluding farm outs)
    Q-1
    Q-2
    Q-3
    Q-4
    TotalTotal drilled
    0
    7
    4
    20
    26Successful drilled
    0
    6
    3
    18
    23Pipeline connected
    0
    2
    1
    4
    7


Production

In Canada, production increased 28% from an average of 677
Boepd in 2004 to 867 Boepd (75% natural gas) in 2005. In December, production
averaged 889 Boepd. Several wells were connected during late December and
January which increased Canadian production to approximately 1,100 Boepd in
February. There are an additional 14 (11 net) wells, representing 400 Boepd to
the Company, still requiring pipeline connections. This work is anticipated to
be carried out during the first half of 2006.

2005 Canadian Production by Quarter (Boepd)

Q-1
    Q-2
    Q-3
    Q-4TransGlobe working interest
    821
    706
    1,075
    864TransGlobe net
      (after royalties)
    673
    600
    887
    691


2006 Outlook

The approved 2006 Canadian budget of $20.4 million is primarily
focused on development drilling, completions and facilities. It is expected that
25-30 wells will be drilled during 2006 including 12-16 wells targeting the
Horseshoe Canyon coals in the Nevis and Morningside areas. Approximately 20% of
the budget is dedicated to exploration drilling and land acquisitions.

Up to mid-March of 2006 the Company participated in drilling 4
(2.0 net) potential gas wells. To ensure the 2006 program can be carried out the
Company has secured access to drilling rigs in central Alberta with several
other companies. The Company commenced drilling in the Nevis area in March, and
expects to drill 8-10 wells in central Alberta during the next two to three
months depending on surface access conditions associated with spring breakup. In
addition, the Company has filed applications to drill four CBM wells per section
in the Nevis area. It is expected that the CBM Nevis drilling program (10-12
wells) will commence in the second or third quarter.

---

19

STATEMENT OF RESERVES DATA AND OTHER OIL AND GAS INFORMATION

The report of management and the directors on oil and gas
disclosure in Form 51-101F3 and the report on reserves data in Form 51-101F2 are
attached as Schedules "B" and "A", respectively to this Annual Information Form,
which forms are incorporated herein by reference.

The statement of reserves data and other oil and gas
information set forth below (the "Statement") is dated March 16, 2006 with the
effective date of the Statement being December 31, 2005.

Disclosure of Reserves Data

All of the Company's reserves herein reported were evaluated by
independent evaluators in accordance with NI 51-101 for the year ended December
31, 2005. In 2005, DeGolyer and MacNaughton Canada Limited ("DeGolyer"),
independent petroleum engineering consultants based in Calgary, Alberta and part
of the DeGolyer and MacNaughton Worldwide Petroleum Consulting group
headquartered in Dallas, Texas, were retained by the Company's Reserve
Committee, to independently evaluate 100% of TransGlobe's reserves as at
December 31, 2005.

The reserves data set forth below (the "Reserves
Data") was prepared by DeGolyer with an effective date of December 31,
2005. The Reserves Data summarizes the oil, liquids and natural gas reserves of
the Company and the net present values of future net revenue for these reserves
using constant prices and costs and forecast prices and costs. The Company
reports in U.S. currency and therefore the reports have been converted to U.S.
$'s at the prevailing conversion rate at December 31 of the respective years.

The Reserves Data conforms with the requirements of NI 51-101.
Additional information not required by NI 51-101 has been presented to provide
continuity and additional information which the Company believes is important to
the readers of this information.

Disclosure provided herein in respect of BOEs 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.

All evaluations and reviews of future net cash flow are
stated prior to any provision for interest costs or general and administrative
costs and after the deduction of estimated future capital expenditures for wells
to which reserves have been assigned. It should not be assumed that the
estimated future net cash flow shown below is representative of the fair market
value of the Company's properties. There is no assurance that such price and
cost assumptions will be attained and variances could be material. The recovery
and reserve estimates of crude oil, NGLs and natural gas reserves provided
herein are estimates only and there is no guarantee that the estimated reserves
will be recovered. Actual crude oil, NGLs and natural gas reserves may be
greater than or less than the estimates provided herein.

---

20

Reserves Data (Constant Prices and Costs)

SUMMARY OF OIL AND GAS RESERVES TOTAL COMPANYAS AT DECEMBER 31, 2005 (CONSTANT PRICES AND COSTS)

Light & Medium CrudeOil
      
      Natural Gas
      
      Natural Gas Liquids
      
      Total boe'sGross(1)
    
    Net(2)
    
    Gross(1)
    
    Net(2)
    
    Gross(1)
    
    Net(2)
    
    Gross(1)
    
    Net(2)By Category
    
    (Mbbls)
    
    (Mbbls)
    
    (MMcf)
    
    (MMcf)
    
    (Mbbls)
    
    (Mbbls)
    
    (MBoe)
    
    (MBoe)ProvedProducing
    
    3,117
    
    1,809
    
    5,832
    
    4,542
    
    193
    
    140
    
    4,282
    
    2,706Non-Producing
    
    953
    
    557
    
    2,480
    
    1,873
    
    42
    
    28
    
    1,408
    
    898Undeveloped
    
    1,638
    
    846
    
    2,879
    
    2,358
    
    20
    
    14
    
    2,138
    
    1,253Total Proved
    
    5,708
    
    3,211
    
    11,191
    
    8,773
    
    255
    
    183
    
    7,828
    
    4,856Probable
    
    1,561
    
    831
    
    5,783
    
    4,464
    
    129
    
    90
    
    2,654
    
    1,664Proved Plus Probable
    
    7,269
    
    4,042
    
    16,974
    
    13,237
    
    384
    
    272
    
    10,482
    
    6,520


SUMMARY OF OIL AND GAS RESERVES YEMENAS AT
DECEMBER 31, 2005 (CONSTANT PRICES AND COSTS)

Light & Medium CrudeOil
      
      Natural Gas
      
      Natural Gas Liquids
      
      Total boe'sGross(1)
    
    Net(2)
    
    Gross(1)
    
    Net(2)
    
    Gross(1)
    
    Net(2)
    
    Gross(1)
    
    Net(2)By Category
    
    (Mbbls)
    
    (Mbbls)
    
    (MMcf)
    
    (MMcf)
    
    (Mbbls)
    
    (Mbbls)
    
    (MBoe)
    
    (MBoe)ProvedProducing
    
    3,014
    
    1,716
    
    
    
    
    
    
    
    
    
    3,014
    
    1,716Non-Producing
    
    837
    
    452
    
    
    
    
    
    
    
    
    
    837
    
    452Undeveloped
    
    1,491
    
    719
    
    
    
    
    
    
    
    
    
    1,491
    
    719Total Proved
    
    5,342
    
    2,887
    
    
    
    
    
    
    
    
    
    5,342
    
    2,887Probable
    
    1,472
    
    749
    
    
    
    
    
    
    
    
    
    1,472
    
    749Proved Plus Probable
    
    6,814
    
    3,636
    
    
    
    
    
    
    
    
    
    6,814
    
    3,636


---

21

SUMMARY OF OIL AND GAS RESERVESCANADAAS AT
DECEMBER 31, 2005 (CONSTANT PRICES AND COSTS)

Light & Medium CrudeOil
      
      Natural Gas
      
      Natural Gas Liquids
      
      Total boe'sGross(1)
    
    Net(2)
    
    Gross(1)
    
    Net(2)
    
    Gross(1)
    
    Net(2)
    
    Gross(1)
    
    Net(2)By Category
    
    (Mbbls)
    
    (Mbbls)
    
    (MMcf)
    
    (MMcf)
    
    (Mbbls)
    
    (Mbbls)
    
    (MBoe)
    
    (MBoe)ProvedProducing
    
    104
    
    93
    
    5,832
    
    4,542
    
    193
    
    140
    
    1,269
    
    990Non-Producing
    
    115
    
    104
    
    2,480
    
    1,873
    
    42
    
    28
    
    570
    
    444Undeveloped
    
    147
    
    127
    
    2,879
    
    2,358
    
    20
    
    14
    
    647
    
    534Total Proved
    
    366
    
    325
    
    11,191
    
    8,773
    
    255
    
    182
    
    2,486
    
    1,969Probable
    
    89
    
    82
    
    5,783
    
    4,464
    
    129
    
    90
    
    1,181
    
    916Proved Plus Probable
    
    455
    
    406
    
    16,974
    
    13,237
    
    384
    
    272
    
    3,668
    
    2,885


Notes:

|(1) | Gross reserves are the Company's working interest share
      before the deduction of royalties.                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Net reserves are the Company's working interest share
      after the deduction of royalties. Net reserves in Yemen include our share
      of future cost recovery and production sharing oil after the Government's
      royalty interest but before reserves relating to income taxes payable.
      Under this method, a portion of the reported reserves will increase as oil
      prices decrease (and vice versa) as the barrels necessary to achieve cost
      recovery change with prevailing oil prices.

Estimated Future Net Revenues

The estimated future net revenues presented do not represent
fair market value. The estimated future net revenues presented below are
calculated using the average price received on December 31st of the
respective reporting periods. The prices were held constant and costs were not
inflated for the life of the reserves, as summarized in the Notes to Reserves
Data Tables (Note 4).

NET PRESENT VALUES OF FUTURE NET REVENUES TOTAL COMPANYAS AT DECEMBER 31, 2005 (CONSTANT PRICES AND COSTS)

|                           |  | Before Income Tax(1)(2) |  | After Income Tax(1)(2)
|-------------------------- |  | ----------------------- |  | ----------------------
|US$'s                      |  | Discounted at %/yr      |  | Discounted at %/yr    
|$MM                        |  | 0%                      |  | 5%                    
|                           |  |                         |  |                       
|Proved                     |  |                         |  |                       
|                           |  |                         |  |                       
|Developed producing        |  | 88.2                    |  | 78.2                  
|Developed non-producing    |  | 25.5                    |  | 24.1                  
|Undeveloped                |  | 34.7                    |  | 28.3                  
|Total Proved               |  | 148.4                   |  | 130.6                 
|                           |  |                         |  |                       
|Probable                   |  | 65.7                    |  | 52.9                  
|                           |  |                         |  |                       
|Total Proved Plus Probable |  | 214.1                   |  | 183.5                 

Notes:

|(1) | In Yemen, under the terms of the Production Sharing
      Agreements, income tax is current and assessed on all production sharing
      oil, therefore all Yemen Future Net Revenues are after Yemen income
      tax. 
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Canadian values converted to US dollars at the December
      31, 2005 exchange rates of $1.1630 US $'s/Cdn $'s and include the
      Alberta Royalty Tax Credit (ARTC) in the Before and After Income Tax
      values.

---

22

NET PRESENT VALUES OF FUTURE NET REVENUES YEMENAS AT DECEMBER 31, 2005 (CONSTANT PRICES AND COSTS)

|                           |  | Before Income Tax(1) |  | After Income Tax(1)
|-------------------------- |  | -------------------- |  | -------------------
|US$'s                      |  | Discounted at %/yr   |  | Discounted at %/yr 
|$MM                        |  | 0%                   |  | 5%                 
|                           |  |                      |  |                    
|Proved                     |  |                      |  |                    
|                           |  |                      |  |                    
|Developed producing        |  | 47.1                 |  | 44.0               
|Developed non-producing    |  | 10.3                 |  | 9.3                
|Undeveloped                |  | 21.1                 |  | 17.7               
|Total Proved               |  | 78.5                 |  | 71.0               
|                           |  |                      |  |                    
|Probable                   |  | 29.5                 |  | 25.0               
|                           |  |                      |  |                    
|Total Proved Plus Probable |  | 108.0                |  | 96.0               

Notes:

|(1) | In Yemen, under the terms of the Production Sharing
      Agreements, income tax is current and assessed on all production sharing
      oil, therefore all Yemen Future Net Revenues are after Yemen income
      tax. 
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Canadian values converted to US dollars at the December
      31, 2005 exchange rates of $1.1630 US $'s/Cdn $'s and include the
      Alberta Royalty Tax Credit (ARTC) in the Before and After Income Tax
      values.

NET PRESENT VALUES OF FUTURE NET REVENUES CANADAAS AT DECEMBER 31, 2005 (CONSTANT PRICES AND COSTS)

|                           | Before Income Tax(2) |  | After Income Tax(2)
|-------------------------- | -------------------- |  | -------------------
|US$'s                      | Discounted at %/yr   |  | Discounted at %/yr 
|$MM                        | 0%                   |  | 5%                 
|                           |                      |  |                    
|Proved                     |                      |  |                    
|                           |                      |  |                    
|Developed producing        | 41.1                 |  | 34.2               
|Developed non-producing    | 15.2                 |  | 14.8               
|Undeveloped                | 13.6                 |  | 10.5               
|Total Proved               | 69.9                 |  | 59.6               
|                           |                      |  |                    
|Probable                   | 36.3                 |  | 27.9               
|                           |                      |  |                    
|Total Proved Plus Probable | 106.2                |  | 87.5               

Notes:

|(1) | In Yemen, under the terms of the Production Sharing
      Agreements, income tax is current and assessed on all production sharing
      oil, therefore all Yemen Future Net Revenues are after Yemen income
      tax. 
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Canadian values converted to US dollars at the December
      31, 2005 exchange rates of $1.1630 US $'s/Cdn $'s and include the
      Alberta Royalty Tax Credit (ARTC) in the Before and After Income Tax
      values.

---

23

NET PRESENT VALUE OF ALBERTA ROYALTY TAX CREDITS CANADAAS AT DECEMBER 31, 2005 (CONSTANT PRICES AND COSTS)

US$'s
      Future Cash Flow as of December 31, 2005$M
      Discounted at %/yrReserve Category
    0%
    
    5%
    
    10%
    
    15%
    
    20%Proved DevelopedProducing
    1.8
    
    1.6
    
    1.4
    
    1.2
    
    1.1Non-Producing
    0.3
    
    0.3
    
    0.3
    
    0.2
    
    0.2Proved Undeveloped
    0.3
    
    0.2
    
    0.2
    
    0.1
    
    0.1Total Proved
    2.4
    
    2.0
    
    1.8
    
    1.5
    
    1.4Probable
    1.0
    
    0.7
    
    0.5
    
    0.4
    
    0.3Total Proved + Probable
    3.4
    
    2.7
    
    2.3
    
    1.9
    
    1.7


TOTAL FUTURE NET REVENUES (UNDISCOUNTED) AS AT
DECEMBER 31, 2005 (CONSTANT PRICES AND COSTS)

Future Net
      
      
      
      Future NetRevenue
      
      
      
      RevenueWell
      
      Before
      
      
      
      AfterOperating
      
      Development
      
      Abandonment
      
      Income
      
      Income
      
      IncomeRevenue
      
      Royalties
      
      Costs
      
      Costs
      
      Costs
      
      Taxes
      
      Taxes
      
      TaxesReserves Category
      
      ($MM)
      
      ($MM)
      
      ($MM)
      
      ($MM)
      
      ($MM)
      
      ($MM)
      
      ($MM)
      
      ($MM)Proved ReservesYemen(1)
      
      302
      
      179
      
      34
      
      10
      
      -
      
      79
      
      -
      
      79Canada(2)
      
      119
      
      21
      
      17
      
      9
      
      1
      
      70
      
      13
      
      57Total Company
      
      421
      
      200
      
      51
      
      20
      
      1
      
      149
      
      13
      
      136Proved PlusProbable ReservesYemen(1)
      
      385
      
      228
      
      38
      
      11
      
      -
      
      108
      
      -
      
      108Canada(2)
      
      175
      
      32
      
      24
      
      11
      
      1
      
      106
      
      24
      
      82Total Company
      
      560
      
      260
      
      63
      
      22
      
      1
      
      214
      
      24
      
      190


Notes:

|(1) | In Yemen, under the terms of the Production Sharing
      Agreements, income tax is current and assessed on all production sharing
      oil, therefore all Yemen Future Net Revenues are after Yemen income tax.
      Income taxes payable in Yemen have been recorded as a Royalty for
      reporting purposes.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Canadian values converted to US dollars at the December
      31, 2005 exchange rates of 1.1630 US $'s/Cdn $'s and include the Alberta
      Royalty Tax Credit (ARTC) in the Before and After Income Tax
  values.                                                                                                

---

24

FUTURE NET REVENUE BY PRODUCTION GROUP AS AT DECEMBER
31, 2005 (CONSTANT PRICES AND COSTS)

Yemen
    
    CanadaFuture net Revenue
    
    Future net Revenue
    
    Total CompanyBefore Income
    
    Before Income
    
    Future net RevenueTaxes(1)
    
    Taxes(2)
    
    Before Income Taxes(discounted at
    
    (discounted at
    
    (discounted at10%/year)
    
    10%/year)
    
    10%/year)Reserves
      Category
    
    Product Group
    
    (US$MM)
    
    (US$MM)
    
    (US$MM)Proved Reserves
    
    Light and Medium
      Crude Oil (including solution gas and other by-products)
    
    64.6
    
    8.4
    
    73.0Natural Gas
      (including by-products but excluding solution gas)
    
    -
    
    41.3
    
    41.3Proved Plus Probable Reserves
    
    Light and Medium
      Crude Oil (including solution gas and other by-products)
    
    86.0
    
    12.3
    
    98.3Natural Gas
      (including by-products but excluding solution gas)
    
    -
    
    59.1
    
    59.1


Notes:

|(1) | In Yemen, under the terms of the Production Sharing
      Agreements, income tax is current and assessed on all production sharing
      oil, therefore all Yemen Future Net Revenues are after Yemen income
      tax.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Canadian values converted to US dollars at the December
      31, 2005 exchange rates of 1.1630 US $'s/Cdn $'s and do notinclude
      the Alberta Royalty Tax Credit (ARTC) in the Before Income Tax
    values.      

Reserves Data (Forecast Prices and Costs)

SUMMARY OF OIL AND GAS RESERVES TOTAL COMPANYAS OF DECEMBER 31, 2005 (FORECAST PRICES AND COSTS)

Light & Medium CrudeOil
    
    Natural Gas
    
    Natural Gas Liquids
    
    Total boe'sGross(1)
    
    Net(2)
    
    Gross(1)
    
    Net(2)
    
    Gross(1)
    
    Net(2)
    
    Gross(1)
    
    Net(2)By Category
    (Mbbls)
    
    (Mbbls)
    
    (MMcf)
    
    (MMcf)
    
    (Mbbls)
    
    (Mbbls)
    
    (MBoe)
    
    (MBoe)ProvedProducing
    3,117
    
    1,834
    
    5,835
    
    4,700
    
    193
    
    141
    
    4,283
    
    2,758Non-Producing
    870
    
    520
    
    2,485
    
    1,978
    
    42
    
    29
    
    1,326
    
    879Undeveloped
    1,721
    
    898
    
    2,869
    
    2,427
    
    20
    
    14
    
    2,219
    
    1,316Total Proved
    5,708
    
    3,252
    
    11,189
    
    9,105
    
    255
    
    183
    
    7,828
    
    4,953Probable
    1,561
    
    790
    
    5,786
    
    4,649
    
    129
    
    90
    
    2,654
    
    1,655Proved Plus Probable
    7,269
    
    4,042
    
    16,975
    
    13,754
    
    384
    
    273
    
    10,482
    
    6,608


Notes:

|(1) | Gross reserves are the Company's working interest share
      before the deduction of royalties.                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Net reserves are the Company's working interest share
      after the deduction of royalties. Net reserves in Yemen include our share
      of future cost recovery and production sharing oil after the Government's
      royalty interest but before reserves relating to income taxes payable.
      Under this method, a portion of the reported reserves will increase as oil
      prices decrease (and vice versa) as the barrels necessary to achieve cost
      recovery change with prevailing oil prices.

---

25

SUMMARY OF OIL AND GAS RESERVES YEMENAS OF
DECEMBER 31, 2005 (FORECAST PRICES AND COSTS)

Light & Medium CrudeOil
    
    Natural Gas
    
    Natural Gas Liquids
    
    Total boe'sGross(1)
    
    Net(2)
    
    Gross(1)
    
    Net(2)
    
    Gross(1)
    
    Net(2)
    
    Gross(1)
    
    Net(2)By Category
    (Mbbls)
    
    (Mbbls)
    
    (MMcf)
    
    (MMcf)
    
    (Mbbls)
    
    (Mbbls)
    
    (MBoe)
    
    (MBoe)ProvedProducing
    3,014
    
    1,741
    
    
    
    
    
    
    
    
    
    3,014
    
    1,741Non-Producing
    755
    
    416
    
    
    
    
    
    
    
    
    
    755
    
    416Undeveloped
    1,574
    
    770
    
    
    
    
    
    
    
    
    
    1,574
    
    770Total Proved
    5,342
    
    2,927
    
    
    
    
    
    
    
    
    
    5,342
    
    2,927Probable
    1,472
    
    708
    
    
    
    
    
    
    
    
    
    1,472
    
    708Proved Plus Probable
    6,814
    
    3,636
    
    
    
    
    
    
    
    
    
    6,814
    
    3,636


Notes:

|(1) | Gross reserves are the Company's working interest share
      before the deduction of royalties.                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Net reserves are the Company's working interest share
      after the deduction of royalties. Net reserves in Yemen include our share
      of future cost recovery and production sharing oil after the Government's
      royalty interest but before reserves relating to income taxes payable.
      Under this method, a portion of the reported reserves will increase as oil
      prices decrease (and vice versa) as the barrels necessary to achieve cost
      recovery change with prevailing oil prices.

SUMMARY OF OIL AND GAS RESERVES CANADAAS OF
DECEMBER 31, 2005(FORECAST PRICES AND COSTS)

Light & Medium CrudeOil
    
    Natural Gas
    
    Natural Gas Liquids
    
    Total boe'sGross(1)
    
    Net(2)
    
    Gross(1)
    
    Net(2)
    
    Gross(1)
    
    Net(2)
    
    Gross(1)
    
    Net(2)By Category
    (Mbbls)
    
    (Mbbls)
    
    (MMcf)
    
    (MMcf)
    
    (Mbbls)
    
    (Mbbls)
    
    (MBoe)
    
    (MBoe)ProvedProducing
    104
    
    93
    
    5,835
    
    4,700
    
    193
    
    141
    
    1,269
    
    1,017Non-Producing
    115
    
    104
    
    2,485
    
    1,978
    
    42
    
    29
    
    572
    
    463Undeveloped
    147
    
    127
    
    2,869
    
    2,427
    
    20
    
    14
    
    645
    
    546Total Proved
    366
    
    325
    
    11,189
    
    9,105
    
    255
    
    183
    
    2,486
    
    2,025Probable
    89
    
    82
    
    5,786
    
    4,649
    
    129
    
    90
    
    1,182
    
    946Proved Plus Probable
    455
    
    407
    
    16,975
    
    13,754
    
    384
    
    273
    
    3,668
    
    2,972


Notes:

|(1) | Gross reserves are the Company's working interest share
      before the deduction of royalties.
|--- | ------------------------------------------------------------------------------------------------
|(2) | Net reserves are the Company's working interest share
      after the deduction of royalties.   

---

26

NET PRESENT VALUES OF FUTURE NET REVENUES TOTAL COMPANYAS OF DECEMBER 31, 2005(FORECAST PRICES AND COSTS)

The estimated future net revenues presented do not represent
fair market value. The estimated future net revenues presented below are
calculated using the respective Consultant price forecasts and inflation rates
as summarized in the Notes to Reserves Data Tables (Note 3).

Before Income Tax(1)(2)
    
    
    
    
    
    After Income Tax(1)(2)US$'s
    
    
    Discounted at %/yr
    
    
    
    
    
    Discounted at %/yr$MM
    0%
    
    5%
    
    10%
    
    15%
    
    20%
    
    0%
    
    5%
    
    10%
    
    15%
    
    20%ProvedDeveloped producing
    87.5
    
    78.4
    
    71.4
    
    65.7
    
    61.0
    
    85.1
    
    76.4
    
    69.8
    
    64.4
    
    59.8Developed non-producing
    27.2
    
    25.9
    
    23.7
    
    22.4
    
    20.7
    
    21.0
    
    20.2
    
    18.5
    
    17.6
    
    16.3Undeveloped
    31.3
    
    25.7
    
    21.7
    
    17.6
    
    14.7
    
    27.1
    
    22.2
    
    18.6
    
    15.0
    
    12.3Total Proved
    146.0
    
    130.0
    
    116.8
    
    105.8
    
    96.4
    
    133.2
    
    118.8
    
    106.9
    
    96.9
    
    88.4Probable
    54.6
    
    44.2
    
    36.7
    
    30.9
    
    26.5
    
    43.9
    
    35.7
    
    29.6
    
    25.1
    
    21.5Total Proved Plus Probable
    200.6
    
    174.3
    
    153.5
    
    136.7
    
    122.9
    
    177.1
    
    154.5
    
    136.6
    
    122.0
    
    109.9


Notes:

|(1) | In Yemen, under the terms of the Production Sharing
      Agreements, income tax is current and assessed on all production sharing
      oil, therefore all Yemen Future Net Revenues are after Yemen income
      tax.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Canadian values converted to US dollars at the December
      31, 2005 exchange rates of 1.1630 US $'s/Cdn $'s and include the Alberta
      Royalty Tax Credit (ARTC) in the Before and After Income Tax
  values.    

NET PRESENT VALUES OF FUTURE NET REVENUES YEMENAS OF DECEMBER 31, 2005(FORECAST PRICES AND COSTS)

Before Income Tax(1)
    
    After Income Tax(1)US$'s
    Discounted at %/yr
    
    Discounted at %/yr$MM
    0%
    
    5%
    
    10%
    
    15%
    
    20%
    
    0%
    
    5%
    
    10%
    
    15%
    
    20%ProvedDeveloped producing
    46.8
    
    43.8
    
    41.1
    
    38.7
    
    36.5
    
    46.8
    
    43.8
    
    41.1
    
    38.7
    
    36.5Developed non-producing
    10.8
    
    9.7
    
    8.2
    
    7.9
    
    7.1
    
    10.8
    
    9.7
    
    8.2
    
    7.9
    
    7.1Undeveloped
    18.0
    
    15.2
    
    13.4
    
    11.0
    
    9.4
    
    18.0
    
    15.2
    
    13.4
    
    11.0
    
    9.4Total Proved
    75.6
    
    68.7
    
    62.8
    
    57.6
    
    53.0
    
    75.6
    
    68.7
    
    62.8
    
    57.6
    
    53.0Probable
    21.0
    
    17.9
    
    15.3
    
    13.3
    
    11.6
    
    21.0
    
    17.9
    
    15.3
    
    13.3
    
    11.6Total Proved Plus Probable
    96.6
    
    86.6
    
    78.1
    
    70.8
    
    64.6
    
    96.6
    
    86.6
    
    78.1
    
    70.8
    
    64.6


Notes:

|(1) | In Yemen, under the terms of the Production Sharing
      Agreements, income tax is current and assessed on all production sharing
      oil, therefore all Yemen Future Net Revenues are after Yemen income
      tax.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

27

NET PRESENT VALUES OF FUTURE NET REVENUESCANADAAS OF DECEMBER 31, 2005 (FORECAST PRICES AND COSTS)

Before Income Tax(1)
    
    After Income Tax(1)US$'s
    Discounted at %/yr
    
    Discounted at %/yr$MM
    0%
    
    5%
    
    10%
    
    15%
    
    20%
    
    0%
    
    5%
    
    10%
    
    15%
    
    20%ProvedDeveloped producing
    40.7
    
    34.6
    
    30.3
    
    27.0
    
    24.5
    
    38.3
    
    32.6
    
    28.6
    
    25.7
    
    23.3Developed non-producing
    16.4
    
    16.3
    
    15.5
    
    14.5
    
    13.6
    
    10.2
    
    10.6
    
    10.3
    
    9.7
    
    9.2Undeveloped
    13.2
    
    10.5
    
    8.3
    
    6.6
    
    5.3
    
    9.1
    
    6.9
    
    5.3
    
    4.0
    
    2.9Total Proved
    70.4
    
    61.3
    
    54.1
    
    48.2
    
    43.4
    
    57.6
    
    50.1
    
    44.2
    
    39.4
    
    35.4Probable
    33.6
    
    26.4
    
    21.3
    
    17.7
    
    14.9
    
    22.9
    
    17.8
    
    14.3
    
    11.8
    
    9.9Total Proved Plus Probable
    104.0
    
    87.7
    
    75.4
    
    65.9
    
    58.3
    
    80.5
    
    67.9
    
    58.5
    
    51.2
    
    45.4


Notes:

|(1) | Canadian values converted to US dollars at the December
      31, 2005 exchange rates of 1.1630 US $'s/Cdn $'s and include the Alberta
      Royalty Tax Credit (ARTC) in the Before and After Income Tax
  values.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

NET PRESENT VALUE OF ALBERTA ROYALTY TAX CREDITS CANADAAS AT DECEMBER 31, 2005 (FORECAST PRICE CASE)

US$'s
      
      Future Cash Flow as of December 31, 2005$M
      
      Discounted at %/yrReserve Category
      
      0%
      
      5%
      
      10%
      
      15%
      
      20%Proved DevelopedProducing
      
      1.5
      
      1.3
      
      1.2
      
      1.0
      
      0.9Non-Producing
      
      0.3
      
      0.3
      
      0.3
      
      0.2
      
      0.2Proved Undeveloped
      
      0.2
      
      0.2
      
      0.2
      
      0.1
      
      0.1Total Proved
      
      2.0
      
      1.8
      
      1.6
      
      1.4
      
      1.3Probable
      
      0.8
      
      0.6
      
      0.4
      
      0.3
      
      0.2Total Proved plus Probable
      
      2.8
      
      2.4
      
      2.0
      
      1.7
      
      1.5


---

28

TOTAL FUTURE NET REVENUES
  (UNDISCOUNTED) 
  AS AT DECEMBER 31, 2005
  (FORECAST PRICES AND COSTS)

Future
    
    
    
    FutureNet
    
    
    
    NetRevenue
    
    
    
    RevenueWell
    
    Before
    
    
    
    AfterOperating
    
    Development
    
    Abandonment
    
    Income
    
    Income
    
    IncomeRevenue
    
    Royalties
    
    Costs
    
    Costs
    
    Costs
    
    Taxes
    
    Taxes
    
    TaxesReserves
      Category
    
    (US$MM)
    
    (US$MM)
    
    (US$MM)
    
    (US$MM)
    
    (US$MM)
    
    (US$MM)
    
    (US$MM)
    
    (US$MM)Proved ReservesYemen(1)
    
    290
    
    168
    
    36
    
    10
    
    -
    
    76
    
    -
    
    76Canada(2)
    
    118
    
    19
    
    18
    
    9
    
    1
    
    70
    
    13
    
    58Total Company
    
    408
    
    187
    
    54
    
    20
    
    1
    
    146
    
    13
    
    133Proved Plus ProbableReservesYemen(1)
    
    368
    
    219
    
    41
    
    11
    
    -
    
    97
    
    -
    
    97Canada(2)
    
    170
    
    28
    
    27
    
    11
    
    1
    
    104
    
    24
    
    81Total Company
    
    538
    
    247
    
    67
    
    22
    
    1
    
    201
    
    24
    
    177


Notes:

|(1) | In Yemen, under the terms of the Production Sharing
      Agreements, income tax is current and assessed on all production sharing
      oil, therefore all Yemen Future Net Revenues are after Yemen income tax.
      Income taxes payable in Yemen have been recorded as a Royalty for
      reporting purposes.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Canadian values converted to US dollars at the December
      31, 2005 exchange rates of 1.1630 US $'s/Cdn $'s and include the Alberta
      Royalty Tax Credit (ARTC) in the Before and After Income Tax
  values.                                                                                                

TOTAL FUTURE NET REVENUES BY PRODUCTION
GROUPAS AT DECEMBER 31, 2005 (FORECAST PRICES AND COSTS)

Yemen
    
    Canada
    
    Total CompanyFuture net
    
    Future net
    
    Future netRevenue Before
    
    Revenue Before
    
    Revenue BeforeIncome Taxes(1)
    
    Income Taxes(2)
    
    Income Taxes(1)(discounted at
    
    (discounted at
    
    (discounted atReserves
    
    
    
    15%/year)
    
    15%/year)
    
    15%/year)Category
    
    Product Group
    
    (US$MM)
    
    (US$MM)
    
    (US$MM)Proved Reserves
    
    Light and Medium Crude Oil
      (including solution gas and other by-products)
    
    57.6
    
    6.8
    
    64.4Natural Gas (including
      by-products but excluding solution gas)
    
    -
    
    40.0
    
    40.0Proved Plus Probable Reserves
    
    Light and Medium Crude Oil
      (including solution gas and other by-products)
    
    70.8
    
    9.2
    
    80.0Natural Gas (including
      by-products but excluding solution gas)
    
    -
    
    55.0
    
    55.0


Notes:

|(1) | In Yemen, under the terms of the Production Sharing
      Agreements, income tax is current and assessed on all production sharing
      oil, therefore all Yemen Future Net Revenues are after Yemen income
      tax.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Canadian values converted to US dollars at the December
      31, 2005 exchange rates of 1.1630 US $'s/Cdn $'s and do notinclude
      the Alberta Royalty Tax Credit (ARTC) in the Before Income Tax
    values.      

---

29

Notes to Reserves Data Tables:

|1. | Columns may not add due to rounding.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|2. | The crude oil, natural gas liquids and natural gas
      reserve estimates presented in the DeGolyer Reports are based on the
      definitions and guidelines contained in the COGE Handbook. A summary of
      those definitions are set forth below.                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | "Development costs" means costs incurred to obtain
      access to reserves and to provide facilities for extracting, treating,
      gathering and storing the oil and gas from reserves. More specifically,
      development costs, including applicable operating costs of support
      equipment and facilities and other costs of development activities, are
      costs incurred to:                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | (b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | (c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | (d)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | "Exploration costs" means costs incurred in
      identifying areas that may warrant examination and in examining specific
      areas that are considered to have prospects that may contain oil and gas
      reserves, including costs of drilling exploratory wells and exploratory
      type stratigraphic test wells. Exploration costs may be incurred both
      before acquiring the related property and after acquiring the property.
      Exploration costs, which include applicable operating costs of support
      equipment and facilities and other costs of exploration activities,
      are:
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | (b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | (c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | (d)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | (e)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

---

30

| | Reserve Categories
      Reserves are estimated remaining
        quantities of oil and natural gas and related substances anticipated to
        be recoverable from known accumulations, from a given date forward, based
        on
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                       
| | analysis of drilling, geological, geophysical and engineering data;the use of established technology; and
        specified economic conditions which are generally accepted as being
          reasonable.                           
| |                                                                                                                                                                                                                                       

|    | Reserves are classified according to the degree of
      certainty associated with the estimates.                                                                                                                                                                                                                                                                                                                                                                                                               
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(a) | Proved reservesare those reserves that can be
      estimated with a high degree of certainty to be recoverable. It is likely
      that the actual remaining quantities recovered will exceed the estimated
      proved reserves.                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(b) | Probable reservesare those additional reserves
      that are less certain to be recovered than proved reserves. It is equally
      likely that the actual remaining quantities recovered will be greater or
      less than the sum of the estimated proved plus probable
reserves.                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | Other criteria that must also be met for the
      categorization of reserves are provided in the COGE Handbook.                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | Each of the reserve categories (proved and probable) may
      be divided into developed and undeveloped categories:                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(c) | Developed reservesare those reserves that are
      expected to be recovered from existing wells and installed facilities or,
      if facilities have not been installed, that would involve a low
      expenditure (for example, when compared to the cost of drilling a well) to
      put the reserves on production. The developed category may be subdivided
      into producing and non-producing.                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | (i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | (ii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(d) | Undeveloped reservesare those reserves expected
      to be recovered from known accumulations where a significant expenditure
      (for example, when compared to the cost of drilling a well) is required to
      render them capable of production. They must fully meet the requirements
      of the reserves classification (proved, probable) to which they are
      assigned.                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | In multi-well pools it may be appropriate to allocate
      total pool reserves between the developed and undeveloped categories or to
      subdivide the developed reserves for the pool between developed producing
      and developed non-producing. This allocation should be based on the
      estimator's assessment as to the reserves that will be recovered from
      specific wells, facilities and completion intervals in the pool and their
      respective development and production status.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | Levels of Certainty for Reported
      Reserves                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | The qualitative certainty levels referred to in the
      definitions above are applicable to individual reserve entities (which
      refers to the lowest level at which reserves calculations are performed)
      and to reported reserves (which refers to the highest level sum of
      individual entity estimates for which reserves are presented). Reported
      reserves should target the following levels of certainty under a specific
      set of economic conditions:                        

---

31

| | (a) | at least a 90 percent probability that the quantities
      actually recovered will equal or exceed the estimated proved reserves;
      and                     
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                  
| | (b) | at least a 50 percent probability that the quantities
      actually recovered will equal or exceed the sum of the estimated proved
      plus probable reserves.

|   | A qualitative measure of the certainty levels pertaining
      to estimates prepared for the various reserves categories is desirable to
      provide a clearer understanding of the associated risks and uncertainties.
      However, the majority of reserves estimates will be prepared using
      deterministic methods that do not provide a mathematically derived
      quantitative measure of probability. In principle, there should be no
      difference between estimates prepared using probabilistic or deterministic
      methods.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | Additional clarification of certainty levels associated
      with reserves estimates and the effect of aggregation is provided in the
      COGE Handbook.                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|3. | Forecast Prices and Costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | The forecast cost and price assumptions assume changes in
      wellhead selling prices and take into account inflation with respect to
      future operating and capital costs.                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | For the Reserves, crude oil and natural gas benchmark
      reference pricing, as at December 31, 2005, inflation and exchange rates
      utilized by DeGolyer in the DeGolyer Report, which were DeGolyer's then
      current forecasts at the date of the DeGolyer Report, were as
    follows:                                                                                                                                                                                                                                                    

|           |  | Crude Oil   |  |               |  |                     |  |                     |  |          
|---------- |  | ----------- |  | ------------- |  | ------------------- |  | ------------------- |  | ---------
|           |  | WTI Cushing |  | Edmonton Par  |  | Natural Gas AECO    |  | Natural Gas Liquids |  | Inflation
|           |  | Oklahoma    |  | Price 40° API |  | Spot Gas Price      |  | FOB Edmonton        |  | Rates(1) 
|Year       |  | (US$/bbl)   |  | (Cdn$/bbl)    |  | (Cdn$/Mcf)          |  | (Cdn$/bbl)          |  | % Year   
|           |  |             |  |               |  |                     |  | Condensate          |  | Butane   
|Forecast   |  |             |  |               |  |                     |  |                     |  |          
|2006       |  | 58.00       |  | 67.16         |  | 10.37               |  | 68.50               |  | 49.02    
|2007       |  | 56.38       |  | 65.26         |  | 9.65                |  | 66.57               |  | 47.64    
|2008       |  | 52.53       |  | 60.78         |  | 8.53                |  | 62.00               |  | 44.37    
|2009       |  | 51.69       |  | 59.80         |  | 7.86                |  | 60.99               |  | 43.65    
|2010       |  | 52.72       |  | 60.99         |  | 7.12                |  | 62.21               |  | 44.53    
|2011       |  | 53.78       |  | 62.21         |  | 6.89                |  | 63.46               |  | 45.42    
|Thereafter |  | +2%/year    |  | +2%/year      |  | + 1.8%/yr to 17     |  | +2%/year            |  | +2%/year 
|           |  |             |  |               |  | +2.0%/yr thereafter |  |                     |  |          

Notes:

| | (1) | Inflation rates for forecasting expenditure prices and
      costs.                
| | --- | -----------------------------------------------------------------------------------
| | (2) | Exchange rates used to generate the benchmark reference
      prices in this table.

|   | The weighted average historical price in U.S. $'s
      realized by the Company in Yemen, for the year ended December 31, 2005 for
      crude oil was $51.09/bbl.                                                                                                                                        
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                           
|   | The weighted average historical prices in Cdn $'s
      realized by the Company in Canada, for the year ended December 31, 2005,
      were $8.80/mcf for natural gas, $63.04/bbl for crude oil and $49.01/bbl
      for natural gas liquids.                                                             
|   |                                                                                                                                                                                                                                                                                                           
|4. | Constant Prices and Costs                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                           
|   | In Yemen, a constant price of $56.42/bbl (December 31,
      2005 actual prices) was utilized in the constant price case.                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                           
|   | In Canada, constant prices of $52.49/bbl of oil and
      $8.08/Mcf of natural gas (December 31, 2005 actual prices converted to
      U.S. $'s at the December 31, 2005 currency rate of 1.1630 US$/Cdn$,
      adjusted for quality and energy content), were utilized in the constant
      price case.

---

32

|5. | Future Development Costs
|-- | ------------------------

FUTURE DEVELOPMENT COSTS TOTAL COMPANY(1)AS AT DECEMBER 31, 2005

(US$ millions)
    Constant Prices and Costs
    
    Forecast Prices and CostsProved Plus
    
    
    
    Proved PlusProved
    
    Probable
    
    Proved
    
    ProbableYear
    Reserves
    
    Reserves
    
    Reserves
    
    Reserves2006
    18.9
    
    20.5
    
    18.9
    
    20.52007
    0.2
    
    0.3
    
    0.2
    
    0.32008
    0.2
    
    0.2
    
    0.2
    
    0.22009
    0.1
    
    0.2
    
    0.1
    
    0.2Total Undiscounted
    20.2
    
    21.9
    
    19.8
    
    22.0Total Discounted at 10%
    18.4
    
    20.2
    
    18.4
    
    20.3


Note:

| | (1) | Cdn$'s converted at the December 31, 2005 year end rate
      of 1.1630 US$/Cdn$.
| | --- | ---------------------------------------------------------------------------------

FUTURE DEVELOPMENT COSTS YEMENAS AT DECEMBER
31, 2005

(US$ millions)
    Constant Prices and Costs
    
    Forecast Prices and CostsProved Plus
    
    
    
    Proved PlusProved
    
    Probable
    
    Proved
    
    ProbableYear
    Reserves
    
    Reserves
    
    Reserves
    
    Reserves2006
    9.6
    
    10.1
    
    9.6
    
    10.12007
    0.2
    
    0.2
    
    0.2
    
    0.22008
    0.2
    
    0.2
    
    0.2
    
    0.22009
    0.1
    
    0.2
    
    0.1
    
    0.2Total Undiscounted
    10.4
    
    11.1
    
    10.4
    
    11.2Total Discounted at 10%
    9.5
    
    10.1
    
    9.5
    
    10.1


FUTURE DEVELOPMENT COSTS CANADA(1)AS AT DECEMBER 31, 2005

(US$ millions)
    Constant Prices and Costs
    
    Forecast Prices and CostsProved Plus
    
    
    
    Proved PlusProved
    
    Probable
    
    Proved
    
    ProbableYear
    Reserves
    
    Reserves
    
    Reserves
    
    Reserves2006
    9.4
    
    10.4
    
    9.4
    
    10.42007
    -
    
    0.1
    
    -
    
    0.12008
    -
    
    -
    
    -
    
    -2009
    -
    
    -
    
    -
    
    -Total Undiscounted
    9.8
    
    10.8
    
    9.4
    
    10.8Total Discounted at 10%
    8.9
    
    10.1
    
    8.9
    
    10.2


Note:

| | (1) | Cdn$'s converted at the December 31, 2005 year-end rate
      of 1.1630 US$/Cdn$.
| | --- | ---------------------------------------------------------------------------------

The Company expects to fund the future
development costs noted above through the use of working capital, cash flow,
debt and equity financing as required.

---

33

|6. | The Alberta royalty tax credit ("ARTC") is included in
      the cumulative cash flow amounts. ARTC is based on the program announced
      November 1989 by the Alberta government with modifications effective
      January 1, 1995. The estimated Net Present Value of the Alberta Royalty
      Tax Credit for both the Constant Price and Forecast Price cases, is
      presented as a separate table for the respective price cases.                                                  
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|7. | In Yemen, estimated future abandonment and reclamations
      costs related to properties evaluated have not been taken into account by
      DeGolyer in determining the aggregate future net revenue therefrom. Under
      the terms of the production sharing agreements, ownership in the
      facilities and wells is transferred to the Government of Yemen through
      cost recovery. Therefore the future abandonment and reclamation costs have
      been assessed a zero value.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   | In Canada, estimated future abandonment and reclamation
      costs related to a property have been taken into account by DeGolyer in
      determining reserves that should be attributed to a property and in
      determining the aggregate future net revenue therefrom, there was deducted
      the reasonable estimated future well abandonment costs. No allowance was
      made, however, for reclamation of wellsites or the abandonment and
      reclamation of any facilities. 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|8. | Both the constant and forecast price and cost assumptions
      assume the continuance of current laws and regulations.                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|9. | The extent and character of all factual data supplied to
      DeGolyer was accepted by DeGolyer as represented. No field inspections
      were conducted by DeGolyer.                                                                                                                                                                                                                                                                                                                       

Reconciliations of Changes in Reserves and Future Net
Revenue

RECONCILIATION OF NET RESERVES (AFTER ROYALTIES/BEFORE
TAXES) BY PRINCIPAL PRODUCT TYPECOMPANY AS AT DECEMBER 31,
2005 (FORECAST PRICES AND COSTS)

|                    |  |                    |   |                |   |                     |   | ASSOCIATED & NON- |   |          |   |          |   |        |  
|------------------- |  | ------------------ | - | -------------- | - | ------------------- | - | ----------------- | - | -------- | - | -------- | - | ------ | -
|                    |  | LIGHT & MEDIUM OIL |   | ASSOCIATED GAS |   | NATURAL GAS LIQUIDS |  
|                    |  |                    |   |                |   | Net                 |   |                   |   |          |   | Net      |   |        |  
|                    |  |                    |   |                |   | Proved              |   |                   |   |          |   | Proved   |   |        |  
|                    |  | Net                |   | Net            |   | Plus                |   | Net               |   | Net      |   | Plus     |   | Net    |  
|                    |  | Proved             |   | Probable       |   | Probable            |   | Proved            |   | Probable |   | Probable |   | Proved |  
|FACTORS             |  | (MBbl)             |   | (MBbl)         |   | (MBbl)              |   | (MMcf)            |   | (MMcf)   |   | (MMcf)   |   | (MBbl) |  
|December 31, 2004   |  | 2,962              |   | 1,582          |   | 4,545               |   | 8,525             |   | 3,713    |   | 12,239   |   | 245    |  
|Extensions          |  |                    |   |                |   |                     |   |                   |   |          |   |          |   |        |  
|Improved recovery   |  |                    |   |                |   |                     |   |                   |   |          |   |          |   |        |  
|Technical Revisions |  | 287                |   | (900           | ) | (613                | ) | (3,728            |   | (323     | ) | (4,051   | ) | (115   | )
|Discoveries         |  | 1066               |   | 175            |   | 1,241               |   | 5,437             |   | 1,273    |   | 6,710    |   | 87     |  
|Acquisitions        |  |                    |   |                |   |                     |   |                   |   |          |   |          |   |        |  
|Dispositions        |  |                    |   |                |   |                     |   |                   |   |          |   |          |   |        |  
|Economic Factors    |  | (95                | ) | (68            | ) | (163                | ) | (23               | ) | (14      | ) | (37      | ) | (1     | )
|Production          |  | (968               | ) | -              |   | (968                | ) | (1,106            | ) | -        |   | (1,106   | ) | (33    | )
|December 31, 2005   |  | 3,252              |   | 789            |   | 4,042               |   | 9,105             |   | 4,649    |   | 13,754   |   | 183    |  

---

34

RECONCILIATION OF NET RESERVES (AFTER ROYALTIES/BEFORE
TAXES) BY PRINCIPAL PRODUCT TYPEYEMENAS AT DECEMBER
31, 2005 (FORECAST PRICES AND COSTS)

|                    |  |                    |   |                |   |                     |   | ASSOCIATED & NON- |  |          |  |          |  |        | 
|------------------- |  | ------------------ | - | -------------- | - | ------------------- | - | ----------------- |  | -------- |  | -------- |  | ------ | 
|                    |  | LIGHT & MEDIUM OIL |   | ASSOCIATED GAS |   | NATURAL GAS LIQUIDS |  
|                    |  |                    |   |                |   | Net                 |   |                   |  |          |  | Net      |  |        | 
|                    |  |                    |   |                |   | Proved              |   |                   |  |          |  | Proved   |  |        | 
|                    |  | Net                |   | Net            |   | Plus                |   | Net               |  | Net      |  | Plus     |  | Net    | 
|                    |  | Proved             |   | Probable       |   | Probable            |   | Proved            |  | Probable |  | Probable |  | Proved | 
|FACTORS             |  | (MBbl)             |   | (MBbl)         |   | (MBbl)              |   | (MMcf)            |  | (MMcf)   |  | (MMcf)   |  | (MBbl) | 
|December 31, 2004   |  | 2,884              |   | 1,557          |   | 4,441               |   | -                 |  | -        |  | -        |  | -      | 
|Extensions          |  |                    |   |                |   |                     |   |                   |  |          |  |          |  |        | 
|Improved recovery   |  |                    |   |                |   |                     |   |                   |  |          |  |          |  |        | 
|Technical Revisions |  | 238                |   | (918           | ) | (680                | ) |                   |  |          |  |          |  |        | 
|Discoveries         |  | 836                |   | 137            |   | 973                 |   |                   |  |          |  |          |  |        | 
|Acquisitions        |  |                    |   |                |   |                     |   |                   |  |          |  |          |  |        | 
|Dispositions        |  |                    |   |                |   |                     |   |                   |  |          |  |          |  |        | 
|Economic Factors    |  | (95                | ) | (68            | ) | (163                | ) |                   |  |          |  |          |  |        | 
|Production          |  | (935               | ) | -              |   | (935                | ) |                   |  |          |  |          |  |        | 
|December 31, 2005   |  | 2,927              |   | 709            |   | 3,636               |   | -                 |  | -        |  | -        |  | -      | 

RECONCILIATION OF NET RESERVES (AFTER ROYALTIES/BEFORE
TAXES) BY PRINCIPAL PRODUCT TYPECANADAAS AT DECEMBER
31, 2005 (FORECAST PRICES AND COST)

|                    |                    |   |                |  |                     |   | ASSOCIATED & NON- |   |          |   |          |   |        |  
|------------------- | ------------------ | - | -------------- |  | ------------------- | - | ----------------- | - | -------- | - | -------- | - | ------ | -
|                    | LIGHT & MEDIUM OIL |   | ASSOCIATED GAS |  | NATURAL GAS LIQUIDS |  
|                    |                    |   |                |  | Net                 |   |                   |   |          |   | Net      |   |        |  
|                    |                    |   |                |  | Proved              |   |                   |   |          |   | Proved   |   |        |  
|                    | Net                |   | Net            |  | Plus                |   | Net               |   | Net      |   | Plus     |   | Net    |  
|                    | Proved             |   | Probable       |  | Probable            |   | Proved            |   | Probable |   | Probable |   | Proved |  
|FACTORS             | (MBbl)             |   | (MBbl)         |  | (MBbl)              |   | (MMcf)            |   | (MMcf)   |   | (MMcf)   |   | (MBbl) |  
|December 31, 2004   | 79                 |   | 25             |  | 104                 |   | 8,525             |   | 3,713    |   | 12,239   |   | 245    |  
|Extensions          |                    |   |                |  |                     |   |                   |   |          |   |          |   |        |  
|Improved recovery   |                    |   |                |  |                     |   |                   |   |          |   |          |   |        |  
|Technical Revisions | 49                 |   | 19             |  | 68                  |   | (3,728            | ) | (323     | ) | (4,051   | ) | (115   | )
|Discoveries         | 230                |   | 38             |  | 268                 |   | 5,437             |   | 1,273    |   | 6,710    |   | 87     |  
|Acquisitions        |                    |   |                |  |                     |   |                   |   |          |   |          |   |        |  
|Dispositions        |                    |   |                |  |                     |   |                   |   |          |   |          |   |        |  
|Economic Factors    | -                  |   | -              |  | -                   |   | (23               | ) | (14      | ) | (37      | ) | (1     | )
|Production          | (33                | ) | -              |  | (33                 | ) | (1,106            | ) | -        |   | (1,106   | ) | (33    | )
|December 31, 2005   | 325                |   | 82             |  | 407                 |   | 9,105             |   | (4,649   | ) | 13,754   |   | 183    |  

---

35

RECONCILIATION OF CHANGES INNET PRESENT VALUES OF
FUTURE NET REVENUE AFTER TAX DISCOUNTED AT 10% PER YEARPROVED
RESERVES (CONSTANT PRICES AND COSTS)

|                                                                                 |  | Canada(1) |   |  | Yemen   |   |  | Total(1) |  
|-------------------------------------------------------------------------------- |  | --------- | - |  | ------- | - |  | -------- | -
|                                                                                 |  | 2005      |   |  | 2005    |   |  | 2005     |  
|US$'s                                                                            |  | ($M)      |   |  | ($M)    |   |  | ($M)     |  
|Estimated Future Net Revenue at beginning
      of year                          |  | 31,207    |   |  | 41,644  |   |  | 72,851   |  
|Sales and transfers of oil and gas produced, net of
      production costs and   |  | (9,493    | ) |  | (31,284 | ) |  | (40,777  | )
|royalties                                                                        |  |           |   |  |         |   |  |          |  
|Net change in prices, production costs and royalties
      related to future     |  | 12,961    |   |  | 24,578  |   |  | 37,539   |  
|production                                                                       |  |           |   |  |         |   |  |          |  
|Changes in previously estimated development costs incurred
      during the      |  | 11,144    |   |  | (13,684 | ) |  | (2,540   | )
|period                                                                           |  |           |   |  |         |   |  |          |  
|Changes in estimated future development costs                                    |  | (11,423   | ) |  | 10,016  |   |  | (1,407   | )
|Extensions and improved recovery                                                 |  | -         |   |  |         |   |  | -        |  
|Discoveries                                                                      |  | 26,724    |   |  | 19,582  |   |  | 46,306   |  
|Acquisitions of reserves                                                         |  | -         |   |  | -       |   |  | -        |  
|Dispositions of reserves                                                         |  | -         |   |  | -       |   |  | -        |  
|Net change resulting from revisions in
      quantity estimates                  |  | (19,820   | ) |  | 8,897   |   |  | (10,923  | )
|Accretion of discount                                                            |  | 3,206     |   |  | 3,586   |   |  | 6,792    |  
|Net change in income taxes                                                       |  | (3,143    | ) |  | -       |   |  | (3,143   | )
|Other (value of production in disposed and acquired
      properties, changes in |  |           |   |  |         |   |  |          |  
|timing of future production)                                                     |  | 1,071     |   |  | 1,231   |   |  | 2,302    |  
|                                                                                 |  |           |   |  |         |   |  |          |  
|Estimated Future Net Revenue at end of year                                      |  | 42,434    |   |  | 64,566  |   |  | 107,000  |  

Note:

|(1) | In Canada values were converted to US currency using the
      following currency exchange rates: December 31, 2004 at 1.2020 $US/$Cdn,
      December 31, 2005 at 1.1630 $US/$Cdn. Sale and transfers of oil and gas
      produced, net of production costs and royalties at Booked values for the
      year end at the 2005 year average exchange rate of 1.2117 $US/$Cdn for all
      other changes. The estimated Future Net Revenues include
  ARTC.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Additional Information Relating to Reserves Data

Undeveloped Reserves

The following tables set forth the gross proved undeveloped
reserves and the gross probable undeveloped reserves, each by product type,
attributed to the Company in the most recent five financial years and, in the
aggregate, before that time, as applicable.

Proved Undeveloped Reserves

Light and Medium Oil
    
    Natural Gas
    
    Natural Gas
      LiquidsYear
    
    
    
    (MBbl)
    
    (MMcf)
    
    (MBbl)First
    
    Cumulative at
    
    First
    
    Cumulative
    
    First
    
    CumulativeAttributed
    
    Year
      End
    
    Attributed
    
    at
      Year End
    
    Attributed
    
    at
      Year End2003(1)
    
    
    
    
    
    1,422
    
    1,422
    
    58
    
    582004(2)
    
    1,554
    
    1,554
    
    1,758
    
    2,949
    
    51
    
    1002005(3)
    
    1,655
    
    1,655(4)
    
    2,570
    
    2,869
    
    7
    
    20


Notes:

|(1) | Prior to 2003, the Company did not have any proved
      undeveloped reserves. All the Proved Undeveloped reserves assigned in 2003
      were in Canada, and relate to the Wabamum formation in the Nevis area.
      Proved reserves were assigned to 320 acres of the 640 acres gas spacing
      unit/ well. The remaining 320 acres/well were assigned Proved Undeveloped
      reserves.                                                                                                                                                 
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | In 2004, all the Proved Undeveloped light oil was
      assigned to Yemen, with four horizontal development wells in the An Nagyah
      field in Block S-1 and one development vertical well in the Tasour field
      in Block 32. All the Proved Undeveloped gas and liquid reserves were
      assigned to Canada. In the Nevis area, proved undeveloped reserves were
      assigned to one additional Wabamum down space (320 acres/well) and one
      well to accelerate production from a well which encountered four gas
      zones.
|(3) | In 2005, 91% of the Proved Undeveloped light oil was
      assigned to Yemen with five horizontal development wells planned in the An
      Nagyah field (3 wells in Lam A and 2 wells in Lam B), the balance was
      assigned to un-drilled Wabamum oil spacing units at Nevis in Canada. All
      the Proved Undeveloped gas and liquids reserves were assigned to Canada.
      The majority of the gas was assigned to Horseshoe Canyon coal bed methane
      wells in the Nevis and Morningside areas, assuming 160
  acres/well.     

---

36

|(4) | The difference between the gross proved undeveloped light
      and medium oil reserves shown here and those which are shown in summary
      table Summary of Oil and Gas Reserves, Total Company on page 24, is due
      to changing terms of the PSA with the increased reserves and production
      rate in the proved undeveloped category. Under the terms of the agreement,
      when production is increased for the total proved reserves category, the
      terms change and are then applied to all production, including proved
      producing and proved developed reserves. As such, a discrepancy exists
      between the actual proved undeveloped reserves and the difference between
      total proved and total proved developed, which is reported as proved
      undeveloped, by convention.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Probable Undeveloped Reserves

Light and Medium Oil
    
    Natural Gas
    
    Natural Gas
      LiquidsYear
    
    
    
    (MBbl)
    
    (MMcf)
    
    (MBbl)First
    
    Cumulative
    
    First
    
    Cumulative
    
    First
    
    Cumulative atAttributed
    
    at Year End
    
    Attributed
    
    at
      Year End
    
    Attributed
    
    Year
      End2001
    
    
    
    
    
    
    
    271
    
    
    
    2002
    
    
    
    
    
    
    
    224
    
    
    
    2003(1)
    
    2,342
    
    2,342
    
    1,328
    
    1,629
    
    55
    
    552004(2)
    
    1,111
    
    1,111
    
    256
    
    577
    
    
    
    132005
    
    365
    
    365
    
    593
    
    698
    
    1
    
    5


Notes:

|(1) | In 2003, Probable Undeveloped Reserves were assigned in
      Yemen and Canada. The light oil reserves were assigned to a portion of the
      mapped An Nagyah light oil discovery on Block S-1 in Yemen. The Natural
      Gas reserves and associated liquids were assigned in Canada, and generally
      related to the Wabamum formation in the Nevis area. Proved reserves were
      assigned to 320 acres of the 640 acres gas spacing unit/ well. The
      remaining 320 acres/well were assigned Proved Undeveloped
  reserves.                                                                               
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(2) | In 2004, Probable Undeveloped reserves were assigned in
      Yemen and Canada. All the light oil reserves were assigned in Yemen,
      relating to; 2 planned wells in the Tasour field on Block 32 and
      performance associated with Proved Undeveloped wells planned in the Tasour
      field (1 well) and the An Nagyah field (4 horizontal wells). All the
      Probable Undeveloped natural gas and natural gas liquids were assigned in
      Canada and relate to additional performance from planned Proved
      Undeveloped wells in the Nevis area (4 Wabamum gas wells and 1 Manville
      gas well).
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(3) | In 2005, 97% of Probable Undeveloped light oil reserves
      were assigned to Yemen consisting of one vertical well at Tasour and a
      probable component assigned to the 5 Horizontal (Proved Undeveloped) wells
      planned for An Nagyah. All the Probable Undeveloped gas and liquids
      reserves were assigned to Canada and primarily relate to additional
      performance from planned coal bed methane wells ( Proved Undeveloped) in
      the Nevis and Morningside areas.                                                                                                                           

Other Oil and Gas Information

Oil and Gas Wells

The following table sets forth the number and status of wells
in which the Company has a working interest as at December 31, 2005. All of the
Company's wells are located onshore.

Oil Wells
    
    Natural Gas WellsProducing
    
    Non-Producing
    
    Producing
    
    Non-ProducingGross
    
    Net
    
    Gross
    
    Net
    
    Gross
    
    Net
    
    Gross
    
    NetYemen
    25
    
    5.0
    
    3
    
    0.6
    
    0
    
    0
    
    3
    
    0.8Canada, Alberta
    10
    
    7.4
    
    9
    
    7.4
    
    19
    
    13.6
    
    27
    
    19.9Total
    35
    
    12.4
    
    12
    
    8.0
    
    19
    
    13.6
    
    30
    
    20.7


Properties with no Attributable Reserves

The following table sets out the Company's developed and
undeveloped land holdings as at December 31, 2005.

Developed Acres
    
    Undeveloped Acres
    
    Total AcresGross
    
    Net
    
    Gross
    
    Net
    
    Gross
    
    NetYemen
    20,580
    
    4,419
    
    860,424
    
    237,277
    
    881,004
    
    241,426Canada, Alberta
    24,109
    
    15,620
    
    51,625
    
    33,306
    
    75,734
    
    48,926Egypt
    -
    
    -
    
    7,500,000
    
    3,750,000
    
    7,500,000
    
    3,750,000Total
    44,689
    
    19,770
    
    8,412,049
    
    4,020,583
    
    8,456,738
    
    4,040,353


---

37

Of the Company's undeveloped land, the rights to explore,
develop and exploit 3,262gross (1,737 net) acres may expire in Canada by
December 31, 2006. The Company does not have any work commitments associated
with its undeveloped lands in Blocks 32 and S-1in Yemen or Canada. In Yemen, the
Company has a work commitment of $4 million in Phase 1 (30 months expiring
January 12th, 2008) In Egypt, the Company has work commitments of $2
million in period 1 (two years expiring July 16, 2006) and $4 million in period
2 (three years expiring July 16, 2009). The Company has exceeded the period 1
work commitment in Egypt and will elect to enter perod 2 during 2006. At the end
of period 1, the Company is required to relinquish 25% of the Block to the
government, representing approximately 1,875,000 gross (937,500 net) acres of
undeveloped land.

Forward Contracts

The Company's contracts to sell crude oil or natural gas are
  at prevailing market pricing, except as follows: •           In
  September 2005, the Company entered into a crude oil costless collar for 15,000
  barrels per month from January 1, 2006 to December 31, 2006. The transaction
  consisted of the purchase of a $50.00 per barrel dated Brent put (floor) and
  a $77.93 per barrel dated Brent call (ceiling).

Additional Information Concerning Abandonment and
Reclamation Costs

In Canada, future well abandonment costs net of salvage were
  included in the DeGolyer reserves evaluation presented herein. Cost in US $'s
  to abandon approximately 58 (42.4 net) wells totalled $1,237 thousand undiscounted,
  or $631 thousand discounted at 10%, are included in the estimate of future net
  revenue from total proved plus probable reserves using constant pricing and
  cost. Approximately $434 thousand undiscounted, or $389 thousand discounted
  at 10%, are scheduled during the next three years (2006-2008).

Tax Horizon

In 2005, the Company did not pay any income taxes in Canada.

TransGlobe does not expect to pay income taxes in Canada in
2006 assuming the Company incurs further Canadian exploration expense and
Canadian development expense and utilizes such tax pools and carry forward tax
pools of Cdn $39.8 million available to protect future revenue. TransGlobe
expects to be taxable in Canada in 2007.

Capital Expenditures

The following table summarizes capital expenditures (net of
incentives and net of certain proceeds and including capitalized general and
administrative expenses) related to the Company's activities for the year ended
December 31, 2005:

Yemen
    
    Egypt
    
    Canada
    
    Total($ thousands)Property acquisition costsProved properties
    -
    
    -
    
    149
    
    149Undeveloped
      properties
    495
    
    -
    
    1,524
    
    2,019Exploration costs
    4,758
    
    474
    
    5,249
    
    10,481Development costs
    11,856
    
    -
    
    5,798
    
    17,654Corporate and other
    830
    
    1,052
    
    469
    
    2,351Total
    17,939
    
    1,526
    
    13,189
    
    32,654


---

38

Production Estimates

The following table sets out the volume of the Company's daily
production (working interest before royalties) estimated for the year ending
December 31, 2006 which is reflected in the estimate of future net revenue
disclosed in the Forecast Prices and Costs and Constant Prices and Costs tables
contained under " - Disclosure of Reserves Data".

Yemen
    
    YemenBlock 32
    
    Block S-1
    
    Canada
    
    
    
    Canada
    
    TotalLight and
    
    Light and
    
    Light and
    
    Canada
    
    Natural Gas
    
    CompanyMedium Oil
    
    Medium Oil
    
    Medium Oil
    
    Natural Gas
    
    Liquids
    
    BOEGross
    
    Gross
    
    Gross
    
    Gross
    
    Gross
    
    Gross(bbls/d)
    
    (bbls/d)
    
    (bbls/d)
    
    (Mcf/d)
    
    (bbls/d)
    
    (BOE/d)Proved Producing
    
    1,082
    
    2,775
    
    68
    
    3,770
    
    111
    
    4,665Proved DevelopedNon-Producing
    
    312
    
    74
    
    63
    
    2,786
    
    72
    
    986Proved Undeveloped
    
    0
    
    88
    
    24
    
    721
    
    8
    
    240Total Proved
    
    1,395
    
    2,937
    
    155
    
    7,277
    
    191
    
    5,890Total Probable
    
    68
    
    63
    
    11
    
    1,452
    
    28
    
    413Total Proved Plus Probable
    
    1,463
    
    3,000
    
    166
    
    8,729
    
    219
    
    6,303


Exploration and Development Activities

The following tables set forth the gross and net exploratory
and development wells which TransGlobe drilled during the year ended December
31, 2005:

Yemen:
      Gross
      
      NetExploration
    
      Development
    
      Total
    
      Exploration
    
      Development
    
      TotalNatural Gas
      -
    
      -
    
      -
    
      -
    
      -
    
      -Crude Oil
      1
    
      6
    
      7
    
      0.3
    
      1.2
    
      1.5Dry and
      Abandoned(1)
      5
    
      1
    
      6
    
      1.0
    
      0.1
    
      1.1Total
      6
    
      7
    
      13
    
      1.3
    
      1.3
    
      2.6Canada:
      Gross
    
      NetExploration
    
      Development
    
      Total
    
      Exploration
    
      Development
    
      TotalNatural Gas
      6
    
      10
    
      16
    
      6.0
    
      5.6
    
      11.6Crude Oil
      3
    
      4
    
      7
    
      3.0
    
      3.5
    
      6.5Dry and
      Abandoned(1)
      3
    
      -
    
      3
    
      2.5
    
      -
    
      2.5Total
      12
    
      14
    
      26
    
      11.5
    
      9.1
    
      20.6


Note:

|(1) | "Dry well" means a well which is not a productive well
      or a service well. A productive well is a well which is capable of
      producing oil and gas in commercial quantities or in quantities considered
      by the operator to be sufficient to justify the costs required to
      complete, equip and produce the well. A service well means a well such as
      a water or gas-injection, water-source or water-disposal well. Such wells
      do not have marketable reserves of crude oil or natural gas attributed to
      them but are essential to the production of the crude oil and natural gas
      reserves.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

39

Production History

The following table summarizes certain information in respect
  of sales volumes, product prices received and operating expenses made by the
  Company (and its subsidiaries) for the periods indicated below:

2005Quarter EndedMar.
      31
    
    Jun.
      30
    
    Sep.
      30
    
    Dec.
      31Average Daily Sales
      VolumesYemenLight and Medium
      Crude Oil (bbls/d)
    4,165
    
    3,669
    
    4,458
    
    4,071CanadaLight and Medium
      Crude Oil (bbls/d)
    105
    
    91
    
    108
    
    94Gas (Mcf/d)
    3,748
    
    3,243
    
    4,749
    
    3,769NGL (bbls/d)
    91
    
    75
    
    176
    
    141Combined(BOE/d)
    4,985
    
    4,375
    
    5,533
    
    4,985Average Price ReceivedYemenLight and Medium Crude Oil
      ($/bbl)
    43.21
    
    46.17
    
    59.32
    
    54.37CanadaLight and Medium Crude Oil
      ($/bbl)
    44.83
    
    48.53
    
    59.38
    
    54.82Gas ($/Mcf)
    5.79
    
    6.22
    
    7.35
    
    9.49NGL ($/bbl)
    33.53
    
    37.31
    
    39.78
    
    47.28Combined($/BOE)
    42.04
    
    44.99
    
    56.57
    
    54.58RoyaltiesYemenLight and Medium
      Crude Oil ($/bbl)
    12.91
    
    17.24
    
    21.62
    
    25.24CanadaLight and Medium
      Crude Oil ($/bbl)
    3.29
    
    3.55
    
    4.75
    
    3.98Gas ($/Mcf)
    1.17
    
    0.97
    
    1.43
    
    1.95NGL ($/bbl)
    6.57
    
    8.94
    
    6.97
    
    13.37Combined($/BOE)
    11.85
    
    15.41
    
    18.96
    
    22.77Operating ExpensesYemenLight and Medium Crude Oil
      ($/bbls)
    5.47
    
    5.70
    
    5.15
    
    5.75CanadaLight and Medium Crude Oil
      ($/bbls)
    13.32
    
    13.84
    
    13.97
    
    15.88Gas ($/Mcf)
    0.81
    
    1.20
    
    1.22
    
    1.02NGL ($/bbls)
    -
    
    -
    
    -
    
    -Combined($/BOE)
    5.46
    
    5.96
    
    5.47
    
    5.83Netback
      ReceivedYemenLight and Medium
      Crude Oil ($/bbl)
    24.82
    
    23.22
    
    32.55
    
    23.38CanadaLight and Medium
      Crude Oil ($/bbl)
    28.22
    
    31.14
    
    40.66
    
    34.96Gas ($/Mcf)
    3.81
    
    4.05
    
    4.70
    
    6.52NGL ($/bbl)
    26.96
    
    28.37
    
    32.81
    
    33.91Combined($/boe)
    24.73
    
    23.62
    
    32.14
    
    25.98


---

40

The following table indicates the Company's average daily sales
volumes from its important fields for the year ended December 31, 2005.

Light and Medium Crude
    
    Gas
    
    NGL's
    
    boe(bbls/d)
    
    (Mcf/d)
    
    (bbls/d)
    
    (boe/d)YemenBlock 32
    1,926
    
    -
    
    -
    
    1,926Block S-1
    2,166
    
    -
    
    -
    
    2,166Block 72
    -
    
    -
    
    -
    
    -Egypt
    -
    
    -
    
    -
    
    -Canada
    99
    
    3,880
    
    121
    
    867Total
    4,191
    
    3,880
    
    121
    
    4,959


DIVIDEND POLICY

The Company has not paid any dividends to date on its Common
Shares. The board of directors of the Company will determine the timing, payment
and amount of dividends, if any, that may be paid by the Company from time to
time based upon, among other things, the cash flow, results of operations and
financial condition of the Company, the need for funds to finance ongoing
operations and other business considerations as the board of directors considers
relevant.

DESCRIPTION OF SHARE CAPITAL

We are authorized to issue an unlimited number of common shares
("Common Shares")and an unlimited number of preferred shares
("Preferred Shares"). As at March 8, 2006, there were 58,522,439
Common Shares issued and outstanding. In addition, as at such date, there were
an aggregate of 5,852,244 Common Shares reserved for issuance upon the exercise
of the Company's options.

The following is a summary of the rights, privileges,
restrictions and conditions attaching to each class of shares of the Company.
Documents affecting the rights of securityholders, including the Company's
articles, have been filed in accordance with NI 51-102 and are available on the
Company's SEDAR profile at www.sedar.com.

Common Shares

Each Common Share entitles its holder to receive notice of and
to attend all meetings of the shareholders of the Company and to one vote at
such meetings. The holders of Common Shares are, at the discretion of the Board
of Directors of the Company and subject to applicable legal restrictions,
entitled to receive any dividends declared by the Board of Directors on the
Common Shares, subject to prior satisfaction of all preferential rights
attributed to shares of any class ranking in priority to the Common Shares. The
holders of Common Shares are entitled to share equally in any distribution of
the assets of the Company upon the liquidation, dissolution, bankruptcy or
winding-up of the Company or other distribution of its assets among its
shareholders for the purpose of winding-up its affairs.

Preferred Shares

In addition to the Common Shares, the Articles of Arrangement
of the Company authorize the issuance of an unlimited number of Preferred
Shares, issuable in series. Subject to the provisions of the Alberta Business
Corporations Act, the Board is authorized to fix, before the issue thereof, the
designation, rights, privileges, restrictions and condition attaching thereto.

---

41

Rights Plan

On April 16, 2003, the Company entered into a shareholder
protection rights plan agreement (the "Rights Plan") with Computershare Trust
Company of Canada, as rights agent, which was approved by TransGlobe's
shareholders on May 29, 2003 at the 2003 annual general and special meeting of
shareholders. The Rights Plan generally provides that upon any person or entity
acquiring 20% or more of the issued and outstanding Common Shares (except
pursuant to certain permitted or excepted transactions) and upon the occurrence
of certain other events, each holder of Common Shares, other than such person or
entity, shall be entitled to acquire Common Shares at a discounted price. The
Rights Plan is similar to other shareholder or unitholder rights plans adopted
in the energy sector.

MARKET FOR SECURITIES

TransGlobe's Common Shares are listed and posted on the TSX and
the AMEX under the trading symbols "TGL" and "TGA", respectively.

The following table sets out the monthly high and low closing
prices and the total monthly trading volumes on the TSX for the indicated
periods:

(Cdn dollars, except volumes)
    High
    
    Low
    
    Volume2005January
    8.15
    
    5.60
    
    2,578,684February
    12.04
    
    7.60
    
    4,310,305March
    9.95
    
    6.60
    
    4,277,842April
    8.14
    
    5.91
    
    1,807,037May
    7.03
    
    5.40
    
    1,106,193June
    9.09
    
    6.55
    
    1,954,774July
    8.94
    
    7.12
    
    1,498,474August
    8.25
    
    7.06
    
    1,674,197September
    7.95
    
    6.96
    
    1,219,616October
    7.40
    
    5.20
    
    1,400,034November
    6.83
    
    5.80
    
    1,033,674December
    6.76
    
    5.73
    
    1,824,280


The following table sets out the monthly high and low closing
prices and the total monthly trading volumes on the AMEX for the indicated
periods:

(U.S. dollars, except volumes)
    High
    
    Low
    
    Volume2005January
    6.48
    
    4.50
    
    9,782,400February
    9.88
    
    6.18
    
    16,004,000March
    7.98
    
    5.30
    
    18,823,100April
    6.72
    
    4.75
    
    11,542,100May
    5.72
    
    4.22
    
    7,171,900June
    7.35
    
    5.15
    
    10,414,300July
    7.15
    
    5.85
    
    8,235,600August
    6.93
    
    5.85
    
    8,688,600September
    6.95
    
    5.88
    
    7,629,500October
    6.33
    
    3.88
    
    8,415,300November
    5.79
    
    4.85
    
    6,185,900December
    5.89
    
    4.98
    
    6,862,100


ESCROWED SECURITIES

As at the date hereof, none of the Company's securities are
subject to escrow.

---

42

DIRECTORS AND OFFICERS

The name and place of residence of each director and officer,
  the offices held by each in the Company, the principal occupation of each director
  and officer, the period served as director or officer and the number of securities
  of the Company owned by such individuals as at March 8, 2006 is as follows:

|                                                             |  |                                                                             |  |             |  | Number of            |  |                                                                                                                                                                                                                                                                                                                                        
|------------------------------------------------------------ |  | --------------------------------------------------------------------------- |  | ----------- |  | -------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                             |  |                                                                             |  |             |  | Common Shares        |  |                                                                                                                                                                                                                                                                                                                                        
|                                                             |  |                                                                             |  | Year Became |  | Beneficially         |  |                                                                                                                                                                                                                                                                                                                                        
|Name and Place of                                            |  |                                                                             |  | Director or |  | Owned or             |  | Principal Occupation and Positions                                                                                                                                                                                                                                                                                                     
|Residence                                                    |  | Position Held                                                               |  | Officer     |  | Controlled           |  | for
      the Past Five Years                                                                                                                                                                                                                                                                                                          
|                                                             |  |                                                                             |  |             |  |                      |  |                                                                                                                                                                                                                                                                                                                                        
|Robert A. Halpin(1)(2)(4)
      Alberta, Canada              |  | Chairman of the 
      Board and Director                                   |  | 1997        |  | 514,000 (5)(0.88%)   |  | Retired Petroleum Engineer, President and owner, Halpin
      Energy Resources Ltd., which provides consulting services on international
      energy projects.                                                                                                                                                                        
|                                                             |  |                                                                             |  |             |  |                      |  |                                                                                                                                                                                                                                                                                                                                        
|Ross G. Clarkson 
      Alberta, Canada                      |  | President, Chief 
      Executive Officer and
      Director                |  | 1995        |  | 2,078,772 (6)(3.55%) |  | President and Chief Executive Officer of the Company
      since December 4, 1996, with over 30 years' oil and gas industry
      experience as a senior geological advisor.                                                                                                                                                           
|                                                             |  |                                                                             |  |             |  |                      |  |                                                                                                                                                                                                                                                                                                                                        
|Lloyd W. Herrick 
      Alberta, Canada                      |  | Vice-President, 
      Chief Operating Officer
      and Director           |  | 1999        |  | 563,100 (7)(0.96%)   |  | Vice-President and Chief Operating officer of the Company
      since April 28, 1999, with over 30 years' experience in both domestic and
      international oil and gas exploration and development.                                                                                                                                 
|                                                             |  |                                                                             |  |             |  |                      |  |                                                                                                                                                                                                                                                                                                                                        
|Erwin L. Noyes(2)(3)(4)
      British Columbia,
      Canada |  | Director                                                                    |  | 1995        |  | 318,347 (8)(0.54%)   |  | Retired since July 31, 2000; formerly Vice- President,
      International Operations of the Company, with over 30 years' experience in
      the oil and gas industry.                                                                                                                                                                
|                                                             |  |                                                                             |  |             |  |                      |  |                                                                                                                                                                                                                                                                                                                                        
|Geoffrey C. Chase(1)(3)(4)
      Alberta, Canada             |  | Director                                                                    |  | 2000        |  | 135,000 (9)(0.23%)   |  | Retired Senior Vice-President, Business Development, with
      Ranger Oil, with over 35 years' experience in the oil and gas industry.                                                                                                                                                                                                
|                                                             |  |                                                                             |  |             |  |                      |  |                                                                                                                                                                                                                                                                                                                                        
|Fred J. Dyment(1)(2)(3)
      Alberta, Canada                |  | Director                                                                    |  | 2004        |  | nil (10)             |  | Chartered accountant with over 30 years' experience in
      the oil and gas industry. Previously President and Chief Executive
      Officer, Maxx Petroleum Company (2000- 2001). Prior thereto Controller,
      Vice- President, Finance and then President and Chief Executive Officer of
      Ranger Oil Limited from 1978-2000.
|                                                             |  |                                                                             |  |             |  |                      |  |                                                                                                                                                                                                                                                                                                                                        
|David C. Ferguson 
      Alberta, Canada                     |  | Vice-President, 
      Finance, Chief
      Financial Officer and Secretary |  | 2001        |  | 219,000(11)(0.37%)   |  | Chartered accountant with over 22 years' experience in
      the oil and gas industry. Previously Chief Financial Officer with
      Northstar Drilling Systems Inc. (1999-2000), Chief Financial Officer and a
      director of Myriad Energy Corporation (1998-1999).                                                               
|                                                             |  |                                                                             |  |             |  |                      |  |                                                                                                                                                                                                                                                                                                                                        
|Edward Bell 
      Alberta, Canada                           |  | Vice-President, 
      Exploration                                          |  | 2004        |  | 36,000 (12) (0.06%)  |  | Professional Geoscientist with 36 years of experience in
      the petroleum industry. Prior positions with Nexen as General Manager
      Business Development and Occidental Petroleum as Technical Advisor.                                                                                                                         

---

43

Notes:

|(1)  | Members of the Company's Audit Committee.                                                                                                                                                                                                                                                                                                                                                      
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2)  | Members of the Company's Compensation
Committee.                                                                                                                                                                                                                                                                                                                                               
|(3)  | Members of the Company's Governance and Nominating
      Committee.                                                                                                                                                                                                                                                                                                                            
|(4)  | Members of the Company's Reserves Committee.                                                                                                                                                                                                                                                                                                                                                   
|(5)  | Mr. Halpin also holds incentive stock options to purchase
      254,000 Common Shares consisting of: options to purchase 120,000 Common
      Shares at Cdn$0.50 per share expiring April 16, 2007, to purchase 80,000
      Common Shares at Cdn$3.26 per share expiring March 15, 2009 and to
      purchase 54,000 Common Shares at Cdn$6.03 per share expiring December 5,
      2010.     
|(6)  | Mr. Clarkson also holds incentive stock options to
      purchase 436,000 Common Shares consisting of: options to purchase 250,000
      Common Shares at Cdn$0.50 per share expiring April 16, 2007, to purchase
      120,000 Common Shares at Cdn$3.26 per share expiring March 15, 2009 and to
      purchase 66,000 Common Shares at Cdn$6.03 per share expiring December 5,
      2010.  
|(7)  | Mr. Herrick also holds incentive stock options to
      purchase 416,000 Common Shares consisting of: options to purchase 250,000
      Common Shares at Cdn$0.50 per share expiring April 16, 2007, to purchase
      100,000 Common Shares at Cdn$3.26 per share expiring March 15, 2009 and to
      purchase 66,000 Common Shares at Cdn$6.03 per share expiring December 5,
      2010.   
|(8)  | Mr. Noyes also holds incentive stock options to purchase
      114,000 Common Shares consisting of: options to purchase 60,000 Common
      Shares at Cdn$3.26 per share expiring March 15, 2009 and to purchase
      54,000 Common Shares at Cdn$6.03 per share expiring December 5,
    2010.                                                                                               
|(9)  | Mr. Chase also holds incentive stock options to purchase
      234,000 Common Shares consisting of: options to purchase 120,000 Common
      Shares at Cdn$0.50 per share expiring April 16, 2007, to purchase 60,000
      Common Shares at Cdn$3.26 per share expiring March 15, 2009 and to
      purchase 54,000 Common Shares at Cdn$6.03 per share expiring December 5,
      2010.      
|(10) | Mr. Dyment holds incentive stock options to purchase
      144,000 Common Shares consisting of: options to purchase 90,000 Common
      Shares at Cdn$3.26 per share expiring March 15, 2009 and to purchase
      54,000 Common Shares at Cdn$6.03 per share expiring December 5,
    2010.                                                                                                   
|(11) | Mr. Ferguson also holds incentive stock options to
      purchase 356,000 Common Shares consisting of: options to purchase 200,000
      Common Shares at Cdn$0.50 per share expiring April 16, 2007 and to
      purchase 90,000 Common Shares at Cdn$3.26 per share expiring March 15,
      2009 and to purchase 66,000 Common Shares at Cdn$6.03 per share expiring
      December 5, 2010.
|(12) | Mr. Bell also holds incentive stock options to purchase
      246,000 Common Shares consisting of: options to purchase 150,000 Common
      Shares at Cdn$3.40 per share expiring January 12, 2009, to purchase 30,000
      Common Shares at Cdn$7.74 per share expiring March 17, 2010 and to
      purchase 66,000 Common Shares at Cdn$6.03 per share expiring December 5,
      2010.     

Cease Trade Orders, Bankruptcies, Penalties or Sanctions

No director or executive officer of the Company, or a
shareholder holding a sufficient number of securities to materially affect
control of the Company has, within the last ten years prior to the date of this
document, been a director or executive officer of any company that, while such
person was acting in that capacity, (i) was the subject of a cease trade or
similar order or an order that denied the company access to any exemption under
securities legislation for a period of more than 30 consecutive days; or (ii)
was subject to an event that resulted, after the director or executive officer
ceased to be a director or executive officer, in the company being the subject
of a cease trade or similar order or an order that denied the relevant company
access to any exemption under securities legislation, for a period of more than
30 consecutive days; or (iii) within a year of that person ceasing to act in
that capacity, became bankrupt, made a proposal under any legislation relating
to bankruptcy or insolvency or was subject to or instituted any proceedings,
arrangement or compromise with creditors or had a receiver, receiver-manager or
trustee appointed to hold its assets.

No director or executive officer of the Company, or a
shareholder holding a sufficient number of securities to materially affect
control of the Company has, within the 10 years before the date of this
document, become bankrupt, made a proposal under any legislation relating to
bankruptcy or insolvency, or become subject to or instituted any proceedings,
arrangement or compromise with creditors, or had a receiver, receiver-manager or
trustee appointed to hold its assets.

Conflicts of Interest

Directors and officers of the Company may, from time to time,
be involved with the business and operations of other oil and gas issuers, in
which case a conflict may arise. See "Risk Factors".

HUMAN RESOURCES

The Company currently employs 26 full-time employees and 9 part-time
  consultants. The Company intends to add additional professional and administrative
  staff as the needs arise.

---

44

INTEREST OF EXPERTS

There is no person or company whose profession or business
gives authority to a statement made by such person or company and who is named
as having prepared or certified a statement, report or valuation described or
included in a filing, or referred to in a filing, made under National Instrument
51-102 by the Company during, or related to, the Company's most recently
completed financial year other than DeGolyer and MacNaughton Canada Limited, the
Company's independent engineering evaluator and Deloitte & Touche LLP, the
Company's auditors. As at the date hereof, to the knowledge of management of the
Company, none of the aforementioned persons or companies, or principals thereof,
had any registered or beneficial interests, direct or indirect, in any
securities or other property of the Corporation or of our associates or
affiliates either at the time they prepared the statement, report or valuation
prepared by it, at any time thereafter or to be received by them.

In addition, none of the aforementioned persons or companies,
nor any director, officer or employee of any of the aforementioned persons or
companies, is or is expected to be elected, appointed or employed as a director,
officer or employee of the Company or any associates or affiliates of the
Company.

LEGAL PROCEEDINGS

There are no outstanding legal proceedings material to the
Company to which the Company is a party or in respect of which any of its
respective properties are subject, nor are there any such proceedings known to
be contemplated.

INTERESTS OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS

There were no material interests, direct or indirect, of any
directors or executive officers of the Company, any shareholder who beneficially
owns more than 10% of the outstanding Common Shares or who exercises control or
direction over more than 10% of the outstanding Common Shares, or any known
associate or affiliate of such persons, in any transaction within the three most
recently completed financial years or during the current financial year that has
materially affected or will materially affect the Company.

AUDITORS, TRANSFER AGENT AND REGISTRAR

The auditors of the Company are Deloitte & Touche LLP,
Chartered Accountants, Suite 3000, 700  2nd Street SW, Calgary, Alberta T2P
0S7.

Computershare Trust Company of Canada, at its principal offices
in Calgary, Alberta and Toronto, Ontario is the transfer agent and registrar of
the Common Shares of the Company.

MATERIAL CONTRACTS

Other than discussed herein, there are no material contracts,
other than the contracts entered into in the ordinary course of business, that
are material to the Company that were entered into within the most recently
completed financial year, or before the most recently completed financial year
but are still in effect.

AUDIT COMMITTEE INFORMATION

Composition of the Audit Committee

The audit committee of the Company (the "Audit Committee") is
comprised of Messrs. Robert Halpin, Geoffrey Chase and Fred Dyment. The
following chart sets out the assessment of each Audit Committee member's
independence, financial literacy and relevant educational background and
experience supporting such financial literacy.

---

45

|                                         |  |             |  | Financially |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|---------------------------------------- |  | ----------- |  | ----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Name and Place
      of Residence        |  | Independent |  | Literate    |  | Relevant Education and Experience                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                         |  |             |  |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                         |  |             |  |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Robert A. Halpin 
      Alberta, Canada  |  | Yes         |  | Yes         |  | Mr. Halpin received a B.Sc.
        from Queen's University, Ontario in 1957 and is a P.Eng. in the Province
        of Alberta. He has over 45 years of business, executive, international
        management and director experience at several major and independent international
        corporations where he has been involved in various aspects of financial
        planning, budgeting and operations.                                                                  
|                                         |  |             |  |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Geoffrey C. Chase 
      Alberta, Canada |  | Yes         |  | Yes         |  | Mr. Chase received a B.Sc.
        in Applied Sc.ience from Queen's University, Ontario and is a P.Eng. in
        the Province of Alberta. He has over 35 years of business, executive and
        international management experience with a major and later a mid-size
        public petroleum corporation. His activities have involved various aspects
        of financial planning, budgeting and operations.                                                              
|                                         |  |             |  |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Fred J. Dyment 
      Alberta, Canada    |  | Yes         |  | Yes         |  | Mr. Dyment received a Chartered
        Accountant designation from the Province of Ontario in 1972 and is a member
        of the Alberta Institute of Chartered Accountants. He has over 30 years
        of financial, business, executive, international management experience
        at several mid-size public corporations where he served as President,
        CEO, CFO and director. Currently, Mr. Dyment sits as a director on several
        other public companies.

Pre-Approval of Policies and Procedures

All non-audit services with our auditors, Deloitte & Touche
LLP, require pre-approval by the audit committee.

Audit Committee Charter

The full text of the Company's audit committee charter is
included in Appendix C to this Annual Information Form.

Audit Service Fees

The following table sets forth the audit service fees paid by
us to Deloitte & Touche LLP for the periods indicated:

|                     |  | Fiscal Year |  |                   |  |                                                                                                         
|-------------------- |  | ----------- |  | ----------------- |  | --------------------------------------------------------------------------------------------------------
|                     |  | Ended       |  | Aggregate         |  |                                                                                                         
|Type of Fees         |  | December 31 |  | Fees
      Billed |  | Nature of Services Performed                                                                            
|                     |  |             |  |                   |  |                                                                                                         
|                     |  |             |  |                   |  |                                                                                                         
|Audit Fees           |  | 2005        |  | Cdn$74,360        |  | 2005 corporate
      year-end audit and SOX audit planning                                              
|                     |  | 2004        |  | Cdn$73,435        |  | 2004 corporate year-end audit                                                                           
|                     |  |             |  |                   |  |                                                                                                         
|Audit  Related Fees |  | 2005        |  | Cdn$29,537        |  | 2005 Quarterly reviews and review
      of SEC letter                                                   
|                     |  | 2004        |  | Cdn$19,080        |  | 2004 Quarterly
      reviews, S-8 consent letters and review of Alberta Security Commission
      letter
|                     |  |             |  |                   |  |                                                                                                         
|Tax Fees             |  | 2005        |  | Cdn$5,622         |  | 2004 corporate
      tax returns and tax compliance                                                     
|                     |  | 2004        |  | Cdn$10,282        |  | 2003 corporate tax returns and
      tax compliance                                                     
|                     |  |             |  |                   |  |                                                                                                         
|All other fees       |  | 2005        |  | Cdn$    -         |  | -                                                                                                       
|                     |  | 2004        |  | Cdn$30,210        |  | Prospectus                                                                                              

---

46

RISK FACTORS

General Conditions Relating to Oil and Gas Exploration and
Production Operations

The Company's operations are subject to all the risks normally
incident to the exploration for and production of oil and natural gas including
geological risks, operating risks, political risks, development risks, marketing
risks, and logistical risks of operating in Canada, Yemen and Egypt.

Industry Risks

The Company is subject to normal industry risks due to the
relatively small size of the Company, its level of cash flow, and the nature of
the Company's involvement in the exploration for, and the acquisition,
development and production of, oil and natural gas. Exploration for oil and
natural gas involves many risks, which even a combination of experience,
knowledge and careful evaluation may not be able to overcome. There is no
assurance that further commercial quantities of oil and natural gas will be
discovered by the Company.

The Company's operations are subject to the risks normally
incident to the operation and development of oil and natural gas properties and
the drilling of oil and natural gas wells, including encountering unexpected
formations or pressures, premature decline of reservoirs, invasion of water into
producing formations, blow-outs, cratering, fires and oil spills, all of which
could result in personal injuries, loss of life and damage to the property of
the Company and others. Although the Company maintains insurance, in amounts and
coverages which it considers adequate, in accordance with customary industry
practice, the Company is not fully insured against all of these risks, nor are
all such risks insurable, and, as a result, liability of the Company arising
from these risks could have a material adverse effect upon its financial
condition.

The operations and earnings of the Company may be affected from
time to time in varying degrees by political developments and laws and
regulations, such as forced divestiture of assets, restrictions on production,
imports and exports; price controls, tax increases and retroactive tax claims,
expropriations of property; and cancellation of contract rights. Both the
likelihood of such occurrences and their overall effect upon the Company can
vary greatly and are not predictable.

The marketability and price of oil and natural gas which may be
acquired or discovered by the Company may be affected by numerous factors beyond
the control of the Company. The Company may be affected by the differential
between the price paid by refiners for light, quality oil and various grades of
oil produced by the Company. The Company is subject to market fluctuations in
the prices of oil and natural gas, deliverability uncertainties related to the
proximity of its reserves to pipeline and processing facilities and extensive
government regulation relating to prices, taxes, royalties, land tenure,
allowable production, the export of oil and natural gas and many other aspects
of the oil and natural gas business. The Company's operations will be further
affected by the remoteness of, and restrictions on access to, certain properties
as well as climatic conditions. The Company is also subject to compliance with
federal, state and local laws and regulations controlling the discharge of
materials into the environment or otherwise relating to the protection of the
environment. The Company is not aware of present material liability related to
environmental matters. However, it may, in the future, be subject to liability
for environmental offences of which it is presently unaware. Additionally, the
potential impact on the Company's operations and business of the Kyoto Protocol
which has now been ratified by Canada, with respect to instituting reductions of
greenhouse gases is difficult to quantify at this time as specific measures for
meeting Canada's commitments have not been developed.

Exploration and Development

The Company's participation in Block 32, Block 72 and Block S-1
in Yemen and the Nuqra Block 1 in Egypt represent major undertakings. The
exploration programs in Yemen and Egypt are high-risk ventures with uncertain
prospects for ongoing success.

The operations and earnings of the Company and its subsidiaries
are also affected by local, regional and global events or conditions that affect
supply and demand for oil and natural gas. These events or conditions are
generally not predictable and include, among other things, the development of
new supply sources; supply disruptions;

---

47

weather; international political events; technological
advances; and the competitiveness of alternative energy sources or product
substitutes.

Competition

The Company encounters strong competition from other
independent operators and from major oil companies in acquiring properties
suitable for development, in contracting for drilling equipment, production
equipment and in securing trained personnel. Many of these competitors have
financial resources and staffs substantially larger than those available to the
Company. The availability of a ready market for oil and gas discovered by the
Company depends on numerous factors beyond its control, including the extent of
production and imports of oil and gas, the demand for its products, the
proximity and capacity of natural gas pipelines and the effect of provincial,
state or federal regulations.

Title to Properties

The Company's interests in the Canadian producing properties
and non-producing properties are in the form of direct or indirect interests in
leases. Such properties are subject to customary royalty interests generally
contracted for in connection with the acquisition of properties, liens incident
to operating agreements, liens for current taxes and other burdens and mineral
encumbrances and restrictions. The Company believes that none of these burdens
materially interferes with the use of such properties in the operation of the
Company's business.

Interests in Properties

The Company participates, in Canada, Egypt and Yemen, with
industry partners with access to greater resources from which to meet their
joint venture capital commitments. Should the Company be unable to meet its
commitments, the joint venture partners may assume some or all of the Company's
deficiency and thereby assume a pro-rata portion of the Company's interest in
production from the joint venture lands. The Company is not a majority interest
owner in all of its properties and does not have sole control over the future
course of development in those properties.

Government Regulation

In the areas where the Company conducts activities there are
statutory laws and regulations governing the activities of oil and gas
companies. These laws and regulations allow administrative agencies to govern
the activities of oil companies in the development, production and sale of both
oil and gas. Changes in these laws and regulations may substantially increase or
decrease the costs of conducting any exploration or development project. The
Company believes that its operations comply with all applicable legislation and
regulations and that the existence of such regulations have no more restrictive
effect on the Company's method of operations than on similar companies in the
industry.

Political Risks Relating to Yemen and Egypt

Beyond the risks inherent in the oil and gas industry, the
Company is subject to additional risks resulting from doing business in Yemen
and Egypt. While the Company has attempted to reduce many of these risks through
agreements with the Governments of Yemen, Egypt and others, no assurance can be
given that such risks have been mitigated. These risks can involve matters
arising out of the evolving laws and policies of Yemen or Egypt, the imposition
of special taxes or similar charges, oil export or pipeline restrictions,
foreign exchange fluctuations and currency controls, the unenforceability of
contractual rights or the taking of property without fair compensation,
restrictions on the use of expatriates in the operations and other matters.

There can be no assurance that the agreements entered into with
the Government of Yemen and the Government of Egypt and others are enforceable
or binding in accordance with TransGlobe's understanding of their terms or that
if breached, the Company would be able to find a remedy. The Company bears the
risk that a change of government could occur and a new government may void the
agreements, laws and regulations that the Company is relying on. Operations in
Yemen and Egypt are subject to risks due to the harsh climate, difficult
topography and the potential for social, political, economic, legal and
financial instability.

---

48

Reliance Upon Officers

The Company is largely dependent upon the personal efforts and
abilities of its corporate officers. The loss or unavailability to the Company
of these individuals may have a material adverse effect upon the Company's
business, especially in Yemen and Egypt.

Multi-jurisdictional Legal Risks

The Company is incorporated under the laws of the Province of
Alberta, Canada, and all of the Company's directors and all of its officers are
residents of Canada. Consequently, it may be difficult for United States
investors to effect service of process within the United States upon the Company
or upon those directors or officers, who are not residents of the United States,
or to realize in the United States upon judgements of United States courts
predicated upon civil liabilities under the Securities Exchange Act of 1934, as
amended (United States). Furthermore, it may be difficult for investors to
enforce judgements of the U.S. courts based on civil liability provisions of the
U.S. federal securities laws in a Canadian court against the Company or any of
the Company's non-U.S. resident executive officers or directors. There is
substantial doubt whether an original lawsuit could be brought successfully in
Canada against any of such persons or the Company predicated solely upon such
civil liabilities.

Reserve Information

The reserve and recovery information contained in the DeGolyer
Report are only estimates and the actual production and ultimate reserves from
the Company's properties may be greater or less than the estimates prepared in
such report. The DeGolyer Report has been prepared using certain commodity price
assumptions which are described in the notes to the reserve tables. If lower
prices for crude oil, natural gas liquids and natural gas are realized by the
Company and substituted for the price assumptions utilized in the report, the
present value of estimated future net cash flows for the Company's reserves
would be reduced and the reduction could be significant, particularly based on
the constant price case assumptions. Exploration for oil and natural gas
involves many risks, which even a combination of experience and careful
evaluation may not be able to overcome. There is no assurance that further
commercial quantities of oil and natural gas will be discovered by the Company.

Additional Financing Requirements

The future development of the Company's oil and natural gas
properties may require additional financing and there are no assurances that
such financing will be available or, if available, will be available upon
acceptable terms.

Canadian Tax Considerations

As the Company is engaged in the oil and natural gas business
its operations are subject to certain unique provisions of the Income Tax
Act (Canada) and applicable provincial income tax legislation relating to
characterization of costs incurred in their businesses which effects whether
such costs are deductible and, if deductible, the rate at which they may be
deducted for the purposes of calculating taxable income. The Company has
reviewed its historical income tax returns with respect to the characterization
of the costs incurred in the oil and natural gas business as well as other
matters generally applicable to all corporations including the ability to offset
future income against prior year losses. The Company has filed or will file all
required income tax returns and believes that it is full compliance with the
provisions of the Income Tax Act (Canada) and applicable provincial
income tax legislation, but such returns are subject to reassessment. In the
event of a successful reassessment of the Company it may be subject to a higher
than expected past or future income tax liability as well as potentially
interest and penalties and such amount could be material.

Exchange Rate Risks

The Canadian to U.S. dollar exchange rate has strengthened
during 2005 and may fluctuate over time. As product prices are generally U.S.
dollar based, the Company's exposure to currency exchange rate risks are
primarily limited to Canadian capital expenditures, Canadian operating costs and
the majority of the Company's general and administrative expenses which are paid
for in Canadian dollars.

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49

Dividends

The Company does not anticipate paying any dividends on its
outstanding shares in the foreseeable future.

Conflicts of Interest

The directors of the Company may be engaged and may continue to
be engaged in the search for oil and gas interests on their own behalf and on
behalf of other companies, and situations may arise where the directors may be
in direct competition with the Company. Conflicts of interest, if any, which
arise will be subject to and governed by procedures prescribed by the
corporation's governing corporate law statute which require a director of a
corporation who is a party to, or is a director or an officer of, or has some
material interest in any person who is a party to, a material contract or
proposed material contract with the Company, disclose his or her interest and,
in the case of directors, to refrain from voting on any matter in respect of
such contract unless otherwise permitted under such legislation.

Reliance on Key Personnel

Holders of Common Shares of the Company must rely upon the
experience and expertise of the management of the Company. The continued success
of the Company is largely dependant on the performance of its key employees.
Failure to retain or to attract and retain additional key employees with
necessary skills could have a materially adverse impact upon the Company's
growth and profitability.

Dilutive Effect of Financings and Acquisitions

TransGlobe may make future acquisitions or enter into financing
or other transactions involving the issuance of securities of TransGlobe which
may be dilutive.

INDUSTRY CONDITIONS

Government Regulation Generally

The oil and gas industry is subject to extensive controls and
regulations governing its operations (including land tenure, exploration,
development, production, refining, transportation and marketing) imposed by
legislation enacted by the various levels of government in Canada, Yemen and
Egypt and with respect to pricing and taxation of oil and natural gas by
agreements among the governments of Canada, Alberta, Yemen and Egypt, all of
which should be carefully considered by investors in the oil and gas industry.
It is not expected that any of these controls or regulations will affect the
Company's operations in a manner materially different than they would affect
other oil and gas companies of similar size. All current legislation is a matter
of public record and the Company is unable to predict what additional
legislation or amendments may be enacted. Outlined below are some of the
principal aspects of legislation, regulations and agreements governing the oil
and gas industry.

Pricing and Marketing  Oil and Natural Gas

In Canada, the producers of oil are entitled to negotiate sales
contracts directly with oil purchasers, with the result that the market
determines the price of oil. Oil prices are primarily based on worldwide supply
and demand. The specific price depends in part on oil quality, prices of
competing fuels, distance to market, the value of refined products, the
supply/demand balance and other contractual terms. Oil exporters are also
entitled to enter into export contracts with terms not exceeding one year in the
case of light crude oil and two years in the case of heavy crude oil, provided
that an order approving such export has been obtained from the National Energy
Board of Canada (the "NEB"). Any oil export to be made pursuant to a
contract of longer duration (to a maximum of 25 years) requires an exporter to
obtain an export license from the NEB and the issuance of such license requires
the approval of the Governor in Council.

In Yemen, producers of oil negotiate sales contracts directly
with oil purchasers, with the result that the market determines the price of
oil. The price depends in part on oil quality, prices of competing fuels,
distance to market, the value of refined products and the supply/demand balance.
Yemen is not currently a member of OPEC.

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50

Pricing and Marketing - Natural Gas

In Canada, the price of natural gas is determined by
negotiation between buyers and sellers. Natural gas exported from Canada is
subject to regulation by the NEB and the Government of Canada. Exporters are
free to negotiate prices and other terms with purchasers, provided that the
export contracts must continue to meet certain other criteria prescribed by the
NEB and the Government of Canada. Natural gas exports for a term of less than 2
years or for a term of 2 to 20 years (in quantities of not more than 30,000
m3/day) must be made pursuant to an NEB order. Any natural gas export
to be made pursuant to a contract of longer duration (to a maximum of 25 years)
or a larger quantity requires an exporter to obtain an export license from the
NEB and the issuance of such license requires the approval of the Governor in
Council.

The Company's principal oil and gas operations in Canada are
located in the Province of Alberta. The government of Alberta also regulates the
volume of natural gas that may be removed from those provinces for consumption
elsewhere based on such factors as reserve availability, transportation
arrangements and market considerations.

Pipeline Capacity

In Canada, although pipeline expansions are ongoing, the lack
of firm pipeline capacity continues to affect the oil and natural gas industry
and limit the ability to produce and to market natural gas production. In
addition, the prorationing of capacity on the inter-provincial pipeline systems
also continues to affect the ability to export oil and natural gas.

In Yemen, export oil pipelines are owned by the government of
Yemen through cost recovery. Access to the export pipelines is negotiated with
the government. Sufficient export capacity currently exists, however, industry
and market conditions may affect export capacity in the future.

The North American Free Trade Agreement

The North American Free Trade Agreement ("NAFTA") among
the governments of Canada, United States of America and Mexico became effective
on January 1, 1994. NAFTA carries forward most of the material energy terms
contained in the Canada-U.S. Free Trade Agreement. In the context of energy
resources, Canada continues to remain free to determine whether exports of
energy resources to the United States or Mexico will be allowed, provided that
any export restrictions do not: (i) reduce the proportion of energy resources
exported relative to domestic use (based upon the proportion prevailing in the
most recent 36 month period), (ii) impose an export price higher than the
domestic price subject to an exception with respect to certain measures which
only restrict the volume of exports, and (iii) disrupt normal channels of
supply. All three countries are prohibited from imposing minimum or maximum
export or import price requirements, provided, in the case of export-price
requirements, prohibition in any circumstances in which any other form of
quantitative restriction is prohibited, and in the case of import-price
requirements, such requirements do not apply with respect to enforcement of
countervailing and anti-dumping orders and undertakings.

NAFTA contemplates the reduction of Mexican restrictive trade
practices in the energy sector and prohibits discriminatory border restrictions
and export taxes. The agreement also contemplates clearer disciplines on
regulators to ensure fair implementation of any regulatory changes and to
minimize disruption of contractual arrangements and avoid undue interference
with pricing, marketing and distribution arrangements, which is important for
Canadian natural gas exports.

Royalties and Incentives

Canada

In addition to federal regulation in Canada, each province has
legislation and regulations that govern land tenure, royalties, production
rates, environmental protection and other matters. The royalty regime is a
significant factor in the profitability of crude oil, natural gas liquids,
sulphur and natural gas production. Royalties payable on production from lands
other than Crown lands are determined by negotiations between the mineral owner
and the lessee, although production from such lands is subject to certain
provincial taxes and royalties. Crown royalties are determined by government
regulation and are generally calculated as a percentage of the value of the
gross

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51

production. The rate of royalties payable generally depends in
part on prescribed reference prices, well productivity, geographical location,
field discovery date, method of recovery and the type or quality of the
petroleum product produced. Other royalties and royalty-like interests are from
time to time carved out of the working interest owner's interest through
non-public transactions. These are often referred to as overriding royalties,
gross overriding royalties, net profits interests or net carried interests.

From time to time the governments of the western Canadian
provinces create incentive programs for exploration and development. Such
programs often provide for royalty rate reductions, royalty holidays and tax
credits, and are generally introduced when commodity prices are low. The
programs are designed to encourage exploration and development activity by
improving earnings and cash flow within the industry. Royalty holidays and
reductions would reduce the amount of Crown royalties paid by oil and gas
producers to the provincial governments and would increase the net income and
funds from operations of such producers. However, the trend in recent years has
been for provincial governments to allow such incentive programs to expire
without renewal, and consequently few such incentive programs are currently
operative.

On March 3, 2003 the Department of Finance (Canada) released a
technical paper entitled "Improving the Income Taxation of the Resource Sector
in Canada". In November, 2003 the Tax Act was amended to provide the following
initiatives applicable to the oil and gas industry (to a maximum of $2,000,000)
to be phased in over a five year period: (i) a reduction of the federal
statutory corporate income tax rate on income earned from resource activities
from 28% to 21%, beginning with a one percentage point reduction effective
January 1, 2003, and (ii) a deduction for federal income tax purposes of actual
provincial and other Crown royalties and mining taxes paid and the elimination
of the 25% resource allowance. In addition, the percentage of Alberta royalty
tax credit ("ARTC") that the Company will be required to include in
federal taxable income will be 32.5% in 2006; 50% in 2007; 60% in 2008; 70% in
2009; 80% in 2010; 90% in 2011, and 100% in 2012 and beyond.

Alberta

Regulations made pursuant to the Mines and Minerals Act
(Alberta) provide various incentives for exploring and developing oil reserves
in Alberta. Oil produced from horizontal extensions commenced at least 5 years
after the well was originally spudded may also qualify for a royalty reduction.
A 24-month, 8,000 m3 exemption is available to production from a
reactivated well that has not produced for: (i) a 12-month period, if resuming
production in October, November or December of 1992 or January, 1993; or (ii) a
24 month period, if resuming production in February 1993 or later. As well, oil
production from eligible new field and new pool wildcat wells and deeper pool
test wells spudded or deepened after September 30, 1992 is entitled to a
12-month royalty exemption (to a maximum of $1 million). Oil produced from low
productivity wells, enhanced recovery schemes (such as injection wells) and
experimental projects is also subject to royalty reductions.

The Alberta government has also introduced a Third Tier Royalty
with a base rate of 10% and a rate cap of 25% for oil pools discovered after
September 30, 1992. The new oil royalty reserved to the Crown has a base rate of
10% and a rate cap of 30%. The old oil royalty reserved to the Crown has a base
rate of 10% and a rate cap of 35%.

In Alberta, the royalty reserved to the Crown in respect of natural
  gas production, subject to various incentives, varies between 15% and 30%, in
  the case of new natural gas, and between 15% and 35%, in the case of old natural
  gas, depending upon a prescribed or corporate average reference price. Natural
  gas produced from qualifying intervals in eligible gas wells spudded or deepened
  to a depth below 2,500 meters is also subject to a royalty exemption, the amount
  of which depends on the depth of the well.

Oil sands projects are subject to a specific regulation made
effective July 1, 1997 and expiring June 30, 2007, which, among other things,
determines the Crown's share of crude and processed oil sands products.

In Alberta, a producer of oil or natural gas is entitled to a
credit on qualified oil and natural gas production against the royalties payable
to the Crown by virtue of the ARTC program. The ARTC rate is based on a price
sensitive formula and the ARTC rate varies between 75% at prices at and below
$100 per m3 and 25% at prices at and above $210 per m3. In
general, the ARTC program provides a rebate on Alberta Crown royalties paid in
respect of eligible producing properties. The ARTC rate is applied to a maximum
of $2 million of Alberta Crown royalties payable for each producer or associated
group of producers. Crown royalties on production from producing properties
acquired from a corporation claiming maximum entitlement to ARTC will generally
not be eligible for ARTC. The rate is

---

52

established quarterly based on the average "par price", as
determined by the Alberta Department of Energy for the previous quarterly
period.

On December 22, 1997, the Alberta government announced that it
was conducting a review of the ARTC program with the objective of setting out
better targeted objectives for a smaller program and to deal with administrative
difficulties. On August 30, 1999, the Alberta government announced that it would
not be reducing the size of the program but that it would introduce new rules to
reduce the number of persons who qualify for the program. The new rules will
preclude companies that pay less than $10,000 in royalties per year and
non-corporate entities from qualifying for the program. Such rules will not
presently preclude the Company from being eligible for the ARTC program.

Yemen

In Yemen, the respective Production Sharing Agreements
determine the production sharing splits for the oil produced within the
respective areas. The Company's share of royalties and taxes are paid out of the
government's share of production sharing oil.

Land Tenure

Crude oil and natural gas located in the western Canadian
provinces is owned predominantly by the respective provincial governments.
Provincial governments grant rights to explore for and produce oil and natural
gas pursuant to leases, licenses and permits for varying terms from two years
and on conditions set forth in provincial legislation including requirements to
perform specific work or make payments. Oil and natural gas located in such
provinces can also be privately owned and rights to explore for and produce such
oil and natural gas are granted by lease on such terms and conditions as may be
negotiated.

Environmental Regulation

The oil and natural gas industry is currently subject to
environmental regulations pursuant to a variety of provincial and federal
legislation. Such legislation provides for restrictions and prohibitions on the
release or emission of various substances produced in association with certain
oil and gas industry operations. In addition, such legislation requires that
well and facility sites be abandoned and reclaimed to the satisfaction of
provincial authorities. Compliance with such legislation can require significant
expenditures and a breach of such requirements may result in suspension or
revocation of necessary licenses and authorizations, civil liability for
pollution damage and the imposition of material fines and penalties.

Environmental legislation in the Province of Alberta has been
consolidated into the Environmental Protection and Enhancement Act (Alberta)
(the "APEA"), which came into force on September 1, 1993 and the Oil and
Gas Conservation Act (Alberta) (the "OGCA"). The APEA and OGCA impose
stricter environmental standards, require more stringent compliance, reporting
and monitoring obligations and significantly increase penalties. The Company is
committed to meeting its responsibilities to protect the environment wherever it
operates and anticipates making increased expenditures of both a capital and an
expense nature as a result of the increasingly stringent laws relating to the
protection of the environment and will be taking such steps as required to
ensure compliance with the APEA and similar legislation in other jurisdictions
in which it operates. The Company believes that it is in material compliance
with applicable environmental laws and regulations. The Company also believes
that it is reasonably likely that the trend towards stricter standards in
environmental legislation and regulation will continue.

In December 2002, the Government of Canada ratified the Kyoto
Protocol ("Protocol"). The Protocol calls for Canada to reduce its
greenhouse gas emissions, during the period between 2008 and 2012. When the
Government of Canada implements the Protocol, it is expected to affect the
operation of all industries in Canada, including the oil and natural gas
industry. As details of implementation of this Protocol have yet to be
announced, the affect on our operations cannot be determined at this time. The
Government of Canada has put forward a Climate Change Plan for Canada which
suggests further legislation will set greenhouse gases emission reduction
requirements for various industrial activities, including oil and gas
exploration and production. Future federal legislation may require reductions of
emissions or emissions intensity produced by our operations and facilities.
Provincial legislation currently requires energy industries to follow a
mandatory emissions reporting scheme, in advance of further

---

53

regulations targeting emissions output and improving energy
efficiency standards of our operations. The direct or indirect costs of these
enactments and proposals may adversely affect our business.

ADDITIONAL INFORMATION

Additional information, including directors' and officers'
remuneration and indebtedness, principal holders of the Company's securities and
options to purchase securities, if applicable, is contained in the Company's
Information Circular for the most recent annual meeting of shareholders that
involved the election of directors. Additional financial information is provided
for in our financial statements and the management's discussion and analysis for
the year ended December 31, 2005. These documents, along with other documents
affecting the rights of securityholders and other information relating to the
Company, may be found on SEDAR at www.sedar.com.

---

SCHEDULE "A" REPORT ON RESERVES DATA

To the board of directors of TransGlobe Energy Corporation (the
"Company"):

|1. | We have evaluated the Company's reserves data as at
      December 31, 2005. The reserves data consist of the
  following:
|-- | --------------------------------------------------------------------------------------------------------------------------

|(a) | (i) proved, proved plus probable and proved plus probable
      plus possible oil and gas reserves estimated as at December 31, 2005 using
      forecast prices and costs; and
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                
|    | (ii)                                                                                                                                                                           
|    |                                                                                                                                                                                
|(b) | (i) proved, proved plus probable and proved plus probable
      plus possible oil and gas reserves estimated as at December 31, 2005 using
      constant prices and costs; and
|    |                                                                                                                                                                                
|    | (ii)                                                                                                                                                                           

|2. | The reserves data are the responsibility of the Company's
      management. Our responsibility is to express an opinion on the reserves
      data based on our evaluation.                                                                                                                                                                                                                                                                                                                                                                
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | We carried out our evaluation in accordance with
      standards set out in the Canadian Oil and Gas Evaluation Handbook (the
      "COGE Handbook") prepared jointly by the Society of Petroleum Evaluation
      Engineers (Calgary Chapter) and the Canadian Institute of Mining,
      Metallurgy & Petroleum (Petroleum Society).                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|3. | Those standards require that we plan and perform an
      evaluation to obtain reasonable assurance as to whether the reserves data
      are free of material misstatement. An evaluation also includes assessing
      whether the reserves data are in accordance with principles and
      definitions presented in the COGE Handbook.                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|4. | The following table sets forth the estimated future net
      revenue (before deduction of income taxes) attributed to proved plus
      probable reserves, estimated using forecast prices and costs and
      calculated using a discount rate of 10 percent, included in the reserves
      data of the Company evaluated by us for the year ended December 31, 2005,
      and identifies the respective portions thereof that we have audited,
      evaluated and reviewed and reported on to the Company's board of
      directors.

|                         |  |                        |  | Location of |  | Net Present Value of Future Net
      Revenue 
|------------------------ |  | ---------------------- |  | ----------- |  | ----------------------------------------------
|                         |  |                        |  | Reserves    |  | (before income taxes, 10% discount
      rate)
|                         |  |                        |  | (County or  |  |                                               
|Independent Qualified    |  | Description and        |  | Foreign     |  |                                               
|Reserves Evaluator or    |  | Preparation Date of    |  | Geographic  |  |                                               
|Auditor                  |  | Evaluation Report      |  | Area)       |  | Audited                                       
|                         |  |                        |  |             |  | U.S. M$                                       
|                         |  |                        |  |             |  |                                               
|DeGolyer and MacNaughton |  | Appraisal Report as of |  | Canada      |  | -                                             
|Canada Limited           |  | December 31, 2005 on   |  | Yemen       |  | -                                             
|                         |  | Certain Properties     |  |             |  |                                               
|                         |  | owned by TransGlobe    |  | Total       |  | -                                             
|                         |  | Energy Corporation     |  |             |  |                                               
|                         |  | dated March 16, 2006   |  |             |  |                                               

|5. | In our opinion, the reserves data respectively evaluated
      by us have, in all material respects, been determined and are in
      accordance with the COGE Handbook. We express no opinion on the reserves
      data that we reviewed but did not audit or evaluate.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                          
|6. | We have no responsibility to update our reports referred
      to in paragraph 4 for events and circumstances occurring after their
      respective preparation dates.                                                                                                  
|   |                                                                                                                                                                                                                                                                          
|7. | Because the reserves data are based on judgements
      regarding future events, actual results will vary and the variations may
      be material                                                                                                                       

---

A-2

Executed as to our report referred to above:

DeGolyer and MacNaughton Canada Limited, Calgary, Alberta,
dated March 16, 2006.

| | DEGOLYER and MACNAUGHTON
      **CANADA**
| | -----------------------------------------
| | LIMITED                                  
| |                                          
| |                                          
| | (signed) "Colin P. Outtrim"              
| | Colin P. Outtrim , P. Eng.               

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SCHEDULE "B"

REPORT OF MANAGEMENT AND DIRECTORS ON RESERVES DATA AND
OTHER INFORMATION

Management of TransGlobe Energy Corporation (the "Company") are
responsible for the preparation and disclosure of information with respect to
the Company's oil and gas activities in accordance with securities regulatory
requirements. This information includes reserves data, which consist of the
following:

|(a) | (i)  | proved and proved plus probable oil and gas reserves
      estimated as at December 31, 2005 using forecast prices and costs; and
|--- | ---- | ---------------------------------------------------------------------------------------------------------------------------------
|    |      |                                                                                                                                  
|    | (ii) | the related estimated future net revenue; and                                                                                    
|    |      |                                                                                                                                  
|(b) | (i)  | proved and proved plus probable oil and gas reserves
      estimated as at December 31, 2005 using constant prices and costs; and
|    |      |                                                                                                                                  
|    | (ii) | the related estimated future net revenue.                                                                                        

Independent qualified reserves evaluators have evaluated the
Company's reserves data. The report of the independent qualified reserves
evaluator is summarized in this Annual Information Form.

The Reserves Committee of the board of directors of the Company
has

|(a) | reviewed the Company's procedures for providing
      information to the independent qualified reserves evaluators;                                                                                                         
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                             
|(b) | met with the independent qualified reserves evaluators to
      determine whether any restrictions affected the ability of each such
      independent qualified reserves evaluator to report without reservation;
      and
|    |                                                                                                                                                                                                                             
|(c) | reviewed the reserves data with management and the
      independent qualified reserves evaluator.                                                                                                                          

The Reserves Committee of the board of directors has reviewed
the Company's procedures for assembling and reporting other information
associated with oil and gas activities and has reviewed that information with
management. The board of directors has, on the recommendation of the Reserves
Committee, approved

|(a) | the content and filing with securities regulatory
      authorities of the reserves data and other oil and gas
  information;
|--- | -----------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                              
|(b) | the filing of the report of the independent qualified
      reserves evaluator on the reserves data; and                     
|    |                                                                                                                              
|(c) | the content and filing of this
report.                                                                                       

Because the reserves data are based on judgments regarding
future events, actual results will vary and the variations may be material.

|(signed) "Ross Clarkson"                             | (signed) "Geoffrey Chase"                   
|---------------------------------------------------- | --------------------------------------------
|Ross Clarkson                                        | Geoffrey Chase                              
|President, Chief Executive Officer and Director      | Director and Chair of the Reserves Committee
|                                                     |                                             
|(signed) "Lloyd Herrick"                             | (signed) "Robert Halpin"                    
|Lloyd Herrick                                        | Robert Halpin                               
|Vice-President, Chief Operating Officer and Director | Director and Chairman of the Board          

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SCHEDULE "C"

CHARTER OF AUDIT COMMITTEE

Our Audit Committee Charter outlines the specific roles and
duties of the Committees members.

GENERAL FUNCTIONS, AUTHORITY, AND ROLE

The Audit Committee is a committee of the Board of Directors
appointed to assist the Board in monitoring (1) the integrity of the financial
statements of the Company, (2) compliance by the Company with legal and
regulatory requirements related to financial reporting, (3) qualifications,
independence and performance of the Company's independent auditors, and (4)
performance of the Companys internal controls and financial reporting process.
The Audit Committees annual report is included in the annual management
information circular.

The Audit Committee has the power to conduct or authorize
investigations into any matters within its scope of responsibilities, with full
access to all books, records, facilities and personnel of the Company, its
auditors and its legal advisors. In connection with such investigations or
otherwise in the course of fulfilling its responsibilities under this charter,
the Audit Committee has the authority to independently retain special legal,
accounting, or other consultants to advise it, and may request any officer or
employee of the Company, its independent legal counsel or independent auditor to
attend a meeting of the Audit Committee or to meet with any members of, or
consultants to, the Audit Committee. The Audit Committee also has the power to
create specific sub-committees with all of the investigative powers described
above.

The Company's independent auditor is ultimately accountable to
the Board of Directors and to the Audit Committee; and the Board of Directors
and Audit Committee, as representatives of the Company's shareholders, have the
ultimate authority and responsibility to evaluate the independent auditor, and
to nominate annually the independent auditor to be proposed for shareholder
approval, and to determine appropriate compensation for the independent auditor.
In the course of fulfilling its specific responsibilities hereunder, the Audit
Committee must maintain free and open communication between the Company's
independent auditors, Board of Directors and Company management. The
responsibilities of a member of the Audit Committee are in addition to such
member's duties as a member of the Board of Directors.

While the Audit Committee has the responsibilities and powers
set forth in this charter, it is not the duty of the Audit Committee to plan or
conduct audits or to determine that the Company's financial statements are
complete, accurate, and in accordance with generally accepted accounting
principles. This is the responsibility of management and the independent
auditor. Nor is it the duty of the Audit Committee to conduct investigations, to
resolve disagreements, if any, between management and the independent auditor
(other than disagreements regarding financial reporting), or to assure
compliance with laws and regulations or the Company's own policies.

MEMBERSHIP

The membership of the Audit Committee will be as follows:

- The Committee will consist of a minimum of three members of the Board of
  Directors, appointed annually, each of whom is affirmatively confirmed as
  independent by the Board of Directors, with such affirmation disclosed in the
  Companys annual circular.
- The Committee will also consist of all members that meet the definition of
  Financially Literate as defined in Multilateral Instrument 52-110 Part
  1(1.5) and is able to read and understand fundamental financial statements,
  including the Companys balance sheet, income statement and cash flow
  statement, as required by Section 121B(2)(a)(ii) of the AMEX Company Guide
  which also requires one member to be financially sophisticated.
- The Board will elect, by a majority vote, one member as chairperson
- A member of the Audit Committee may not, other than in his or her capacity
  as a member of the Audit Committee, the Board of Directors, or any other Board
  committee, accept any consulting, advisory, or other compensatory fee from the
  Company, and may not be an affiliated person of the Company or any subsidiary
  thereof.

---

C-2

RESPONSIBILITIES

The responsibilities of the Audit Committee shall be as
follows:

Frequency of Meetings

- Meet quarterly or as often as may be deemed necessary or appropriate in its
  judgment, either in person or telephonically.
- Meet with the independent auditor at least quarterly, either in person or
  telephonically.

Reporting Responsibilities

- Provide to the Board of Directors proper Committee minutes.
- Report Committee actions to the Board of Directors with such
  recommendations as the Committee may deem appropriate.
- Provide a report for the Companys Annual Information Circular.

Charter Evaluation

- Annually review and reassess the adequacy of this Charter and recommend
  any proposed changes to the Board of Directors for approval.

Whistleblower Mechanisms

- Adopt and review annually a mechanism through which employees and others
  can directly and anonymously contact the Audit Committee with concerns about
  accounting and auditing matters. The mechanism must include procedures for
  responding to, and keeping of records of, any such expressions of concern.

Independent Auditor

| | Nominate annually the independent auditor
        to be proposed for shareholder approval.                                                                                                                                                      
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                 
| | Approve the compensation of the independent
        auditor, and evaluate the performance of the independent auditor.                                                                                                                           
| |                                                                                                                                                                                                                                                 
| | Establish policies and procedures for the
        engagement of the independent auditor to provide non-audit services.                                                                                                                          
| |                                                                                                                                                                                                                                                 
| | Insure that the independent auditor is not
        engaged for any activities not allowed by any of the Canadian provincial
        securities commissions, the SEC or any securities exchange on which the
        Companys shares are traded.
| |                                                                                                                                                                                                                                                 
| | Insure that the independent auditors are not
        engaged for any of the following nine types of non-audit services contemporaneous
        with the audit:                                                                                  
| |                                                                                                                                                                                                                                                 
| | o                                                                                                                                                                                                                                               
| | o                                                                                                                                                                                                                                               
| | o                                                                                                                                                                                                                                               
| | o                                                                                                                                                                                                                                               
| | o                                                                                                                                                                                                                                               
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C-3

| | o                                                                                                                                                                                                                                                                                          | Legal services; and                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------------
| | o                                                                                                                                                                                                                                                                                          | Expert services related to the auditing service.
| |                                                                                                                                                                                                                                                                                            |                                                 
| | Insure that the independent auditor is compliant
        with the SEC, any security exchange on which the Companys shares
        are traded and the Institute of Chartered Accountants of Alberta (Rules
        of Professional Conduct) regarding Audit Partner Rotation requirements.

Hiring Practices

| | Insure that no senior officer or employee who is,
        or in the past full year has been, affiliated with or employed by a present
        or former auditor of the Company or an affiliate, is hired by the Company
        until at least one full year after the end of either the affiliation or
        the auditing relationship.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Independence Test

| | Take reasonable steps to confirm the independence
        of the independent auditor, which shall include:
| | ----------------------------------------------------------------------------------------------------------
| |                                                                                                           
| | o                                                                                                         
| | o                                                                                                         
| | o                                                                                                         

Audit Committee Meetings

- The Audit Committee may request the presence of the independent auditor at
  any Audit Committee meeting.
- At the request of the independent auditor, convene a meeting of the Audit
  Committee to consider matters the auditor believes should be brought to the
  attention of the directors or shareholders.
- Keep minutes of its meetings and report to the Board for approval of any
  actions taken or recommendations made.

Restrictions

- Insure no restrictions are placed by management on the scope of the
  auditors review and examination of the Companys accounts.
- Insure that no Officer or Director attempts to fraudulently influence,
  coerce, manipulate or mislead any accountant engaged in auditing of the
  Companys financial statements.

AUDIT AND REVIEW PROCESS AND RESULTS

Scope

- Consider, in consultation with the independent auditor, the audit scope
  and plan of the independent auditor.

Review Process and Results

- Consider and review with the independent auditor the matters required to
  be discussed by Statement on Auditing Standards No. 61, as the same may be
  modified or supplemented from time to time.

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C-4

| | Review and discuss with management and the
        independent auditor at the completion of the annual examination:                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | o                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | o                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | o                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | o                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | o                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | o                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | o                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | Review, discuss with management and the independent
        auditors and approve annual and interim quarterly financial statements
        prior to public disclosure.                                                                                                                                                                                                                                                                                                                                                                                                       
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | Review and discuss with management and the
        independent auditor the adequacy of the Company's internal controls that
        management and the Board of Directors have established and the effectiveness
        of those systems, and inquire of management and the independent auditor
        about significant financial risks or exposures and the steps management
        has taken to minimize such risks to the Company.                                                                                                                                    
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | Meet separately with the independent auditor,
        management and the CFO as necessary or appropriate, to discuss any matters
        that the Audit Committee or any of these groups believe should be discussed
        privately with the Audit Committee.                                                                                                                                                                                                                                                                                                             
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | Review and discuss with management and the
        independent auditor the accounting policies which may be viewed as critical,
        including all alternative treatments for financial information within
        generally accepted accounting principles that have been discussed with
        management, and review and discuss any significant changes in the accounting
        policies of the Company and industry accounting and regulatory financial
        reporting proposals that may have a significant impact on the Company's
        financial reports.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | Review with management and the independent
        auditor the effect of regulatory and accounting initiatives as well as
        off-balance sheet structures, if any, on the Company's financial statements.                                                                                                                                                                                                                                                                                                                                                               
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | Review with management and the independent
        auditor any correspondence with regulators or governmental agencies and
        any employee complaints or published reports which raise material issues
        regarding the Company's financial statements or accounting policies.                                                                                                                                                                                                                                                                                     
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | Review with the Company's General Counsel
        legal matters that may have a material impact on the financial statements,
        the Company's financial compliance policies and any material reports or
        inquiries received from regulators or governmental agencies related to
        financial matters.                                                                                                                                                                                                                                                       

SECURITIES REGULATORY FILINGS

- Review filings with the Canadian provincial securities commissions and the
  SEC and other published documents containing the Company's financial
  statements.
- Review, with management and the independent auditor, prior to filing with
  regulatory bodies, the interim quarterly financial reports (including related
  notes and MD&A) at the completion of any review engagement or other
  examination. The designated financial expert of the Audit Committee may
  represent the entire Audit Committee for purposes of this review.

RISK ASSESSMENT

- Meet periodically with management to review the Company's major financial
  risk exposures and the steps management has taken to monitor and control such
  exposures.

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C-5

- Assess risk areas and policies to manage risk including, without
  limitation, environmental risk, insurance coverage and other areas as
  determined by the Board of Directors from time to time.

AMENDMENTS TO AUDIT COMMITTEE
CHARTER

- Annually review this Charter and propose amendments to be ratified by a
  simple majority of the Board of Directors.

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