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TRANSGLOBE ENERGY CORPORATION



ANNUAL INFORMATION FORM

Year Ended December 31, 2006



March 27, 2007

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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 | 23
|CONTINGENT
      RESOURCES                                         | 44
|DIVIDEND
      POLICY                                              | 45
|DESCRIPTION
      OF SHARE CAPITAL                                 | 45
|MARKET
      FOR SECURITIES                                        | 46
|ESCROWED
      SECURITIES                                          | 46
|DIRECTORS
      AND OFFICERS                                       | 46
|HUMAN
      RESOURCES                                              | 49
|INTEREST
      OF EXPERTS                                          | 49
|LEGAL
      PROCEEDINGS AND REGULATORY ACTIONS                     | 49
|INTERESTS
      OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS  | 49
|TRANSFER
      AGENT AND REGISTRAR                                 | 49
|MATERIAL
      CONTRACTS                                           | 49
|AUDIT
      COMMITTEE INFORMATION                                  | 50
|RISK
      FACTORS                                                 | 51
|INDUSTRY
      CONDITIONS                                          | 55
|ADDITIONAL
      INFORMATION                                       | 59

|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, 2006, 2005
and 2004.

|               | Year
      Ended December 31, 2006 | Year
      Ended December 31, 2005 | Year
      Ended December 31, 2004
|-------------- | ---------------------------------- | ---------------------------------- | ----------------------------------
|End of Period  | Cdn$1.1654                         | Cdn$1.1630                         | Cdn$1.2020                        
|Period Average | Cdn$1.1343                         | Cdn$1.2114                         | Cdn$1.3015                        

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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      
|kilometres      | miles        | 0.621      
|acres           | hectares     | 0.405      
|hectares        | acres        | 2.471      
|gigajoules      | Mmbtu        | 0.950      

In this document, 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 84 Partnership" means the joint venture group
comprised of DNO ASA (34%), TG Holdings Yemen Inc. (33%) and Ansan Wikfs
(Hadramaut) Ltd. (33%);

"Block 75 Joint Venture Group" means a joint venture
arrangement for Block 75 with a subsidiary of Occidental Petroleum
Corporation;

"Block S-1 Joint Venture Group" means a joint venture
arrangement for Block S-1 with a subsidiary of Occidental Petroleum
Corporation;

"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
February 16, 2007 evaluating the Yemen crude oil and Canadian crude oil, natural
gas liquids and natural gas reserves of the Company as at December 31, 2006;

"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;
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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5

| | (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;

"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, Block 72, Block 75, Block 84 and Block S-1.
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 five
production sharing agreements ("PSAs") in Yemen (a 13.81087% working
interest in Block 32, a 25% working interest in Block S-1, a 33% working
interest in Block 72, a 33% working interest in Block 84 and a 25% working
interest in Block 75), in

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7

central Alberta, Canada and a concession agreement
("Concession Agreement") in the Arab Republic of Egypt (a 50% working
interest in Nuqra Block 1).

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.

In 2006, the primary exploration and production focus was on
Blocks S-1, 32, 72, 84 and 75 in Yemen; Nuqra Block #1 in Egypt and central
Alberta in Canada. On Block S-1, the Company participated in the drilling seven
wells resulting in two new discoveries (oil at Osaylan #2 and gas/condensate at
Wadi Bayhan #2), one exploration dry hole (Al Qurain), two Lam A oil producers
at An Nagyah (#20 and #21), and two Lam B wells at An Nagyah (#22 is a suspended
well and #23 is a water injector). In addition, work continued on the central
production facility expansion, which is expected to be operational by mid 2007.
On Block 32, the Company participated in the acquisition of 275 km of 3-D
seismic over the Godah discovery and the eastern portion of the Block, the
drilling of eight wells resulting in two new discoveries (Godah #1 and Tasour
#23 deep), 3 appraisal wells at Godah (two oil wells and one water injector), 3
wells at Tasour (two oil wells and one injector), upgrades to the Tasour CPF and
construction/start-up of the Godah production facility. On Block 72, the Company
participated in the processing and mapping of the 255 km of 2-D seismic (2005)
and selected drilling locations for the first explorations well (Nasim #1) which
commenced drilling in January 2007. The Company also successfully bid on Block
84 at the Third International bid round in Yemen and acquired a 33 % working
interest in the Block, subject to final approval and ratification of the PSA
which is expected in late 2007. In addition the Company also acquired a 25%
working interest in Block 75 (announced in January 2007), subject to final
approval and ratification of the PSA, which is expected in 2007. In Egypt, on
Nuqra Block 1, the Company acquired 834 km of 2-D

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8

seismic data, selected three exploration wells (two firm and
one contingent) and prepared for the 3 well drilling program, which commenced in
February of 2007. In western Canada, the Company drilled 26 wells, resulting in
19 gas wells, five oil wells and two 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 2007 financial
year.

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 nine, seven and three
years, respectively. In the Republic of Yemen, the Company has interests in five
PSAs: Block 32, Block 72, Block 75, Block 84 and Block S-1. 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.




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9

INTERNATIONAL ACTIVITY

TransGlobe's first International property was acquired in the
Republic of Yemen ("Yemen") in January 1997, through a farmout and joint venture
agreement on Block 32. During the past 10 years, TransGlobe has consistently
grown its international portfolio in the Middle East North African region
("MENA") to an impressive 6.8 million acres (3.1 million net acres) in Yemen and
the Arab Republic of Egypt ("Egypt").

Through TransGlobe's wholly owned subsidiaries, TG Holdings
Yemen Inc. and TransGlobe Petroleum Egypt Inc., the Company has interests in six
production sharing agreements (five in Yemen and one in Egypt).

With the expanded number of exploration and development blocks
in Yemen, the blocks have been grouped into East and West Yemen.

In Eastern Yemen, the Company has interests in three Blocks
located in the prolific Masila Basin which are operated by DNO ASA (an
independent Norwegian oil company). The Masila basin was originally discovered
and developed by Nexen (formerly Canadian Occidental) and has ultimate reserves
in excess of 1 billion barrels of oil, discovered to date. Current producers in
the Masila basin are Nexen, Total, DNO, Dove and Calvalley.

In Western Yemen, the Company has interests in two Blocks
located in the prolific Marib Basin, which are operated by Occidental Petroleum
("OXY"). The Marib basin was originally discovered and developed by Hunt Oil and
has ultimate reserves in excess of 900 million barrels of oil and 16 trillion
cubic feet of natural gas discovered to date. Current producers in the Marib
basin are Safer, Hunt, OXY and OMV.

The following table summarizes the Companys current
international land holdings:

International (Yemen and Egypt)Summary of Production Sharing Agreements ("PSA")

|                   | Country     
|------------------ | ------------
|                   | Yemen (East)
|Block              | 32          
|                   |             
|Basin              | Masila      
|                   |             
|Year acquired      | 1997        
|                   |             
|Status             | Development 
|                   |             
|Operator           | DNO         
|                   |             
|TransGlobe WI (%)  | 13.81087%   
|                   |             
|Block Area (Km2)   | 519         
|                   |             
|Block Area (acres) | 146,070     
|                   |             
|Expiry date        | Nov. 2020   
|                   |             
|Extensions:        |             
|Exploration        | N/A         
|                   |             
|                   |             
|                   |             
|                   |             
|Development        | 5 yr        

|*  | PSAs awaiting final government approval and
      ratification. First exploration term commences on the ratification
      date.    
|-- | -------------------------------------------------------------------------------------------------------------------------------------
|** | TransGlobe pays 60% of costs to first oil production.
      TransGlobe recovers carried costs from partners share of
    production.

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10

YEMEN EAST- Masila Basin



BLOCK 32, REPUBLIC OF YEMEN

Highlights

- Two new pools discovered (Godah #1 and Tasour #23ST).
- Successful appraisal drilling (Tasour #21, #22ST, Godah #2, #3 and #4).
- Godah field on production Q4.
- Acquired 275 km2of 3-D Seismic (Godah/East and Tasour
  NW).

2006 Activities and Results

During 2006, the Block 32 joint venture group drilled eight
wells (two exploration, three appraisal and three development) resulting in: two
new discoveries at Godah #1 and Tasour #23ST; preliminary appraisal of the Godah
field (Godah #2, #3 and #4) and increased reserves and production performance at
Tasour (#21, #22 and #24).

The Qishn sandstone Godah pool was discovered in February 2006.
Subsequently, the focus in 2006 was the appraisal and development of the Godah
pool. After Godah #1 three appraisal wells were drilled resulting in two oil
producers (Godah #2 and #3) and one water injection well (Godah #4). This
defined the gas/oil and oil/water contacts of the Godah pool which facilitates
reserve definition.

A new 275 km23-D seismic program was acquired over
the Godah field, the eastern portion of Block 32 and the area northwest of
Tasour. The new 3-D seismic will be utilized to select the planned 2007
appraisal and development drilling locations on the Godah structure.

The Tasour #23ST exploration well was drilled to a total depth
of 3,139 meters and suspended as a potential upper Naifa oil well. Approximately
200 barrels of 27 API oil and 457 barrels of drilling fluids were recovered from
a 10.5 meter perforated interval in the upper Naifa carbonate. The production
test was terminated early due to mechanical

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11

issues. Well stimulation and horizontal drilling have led to
the successful exploitation of the upper Naifa carbonates on other adjacent
blocks in Yemen. Therefore the initial result on Tasour #23ST is very
encouraging. To evaluate the new discovery the Operator is preparing to
stimulate the zone with acid, and place the well on a long-term production test.
It is expected that the production test will commence during the second quarter
of 2007, with oil trucked to the Tasour facility for treatment and export. With
successful development wells at Tasour #21 and #22ST, the mature Tasour field
has continued to exceed our expectations for both production and reserves.
However, Tasour is a mature field and we expect the field production to
decline.

2006 Drilling Results

|             |             |                             | Initial Production Test |                 
|------------ | ----------- | --------------------------- | ----------------------- | ----------------
|Well         | Well Type   | Status                      | (Bopd  gross)          | Formation       
|Tasour #21   | Development | Oil producer                | 785                     | Qishn S-1A      
|Tasour #22ST | Development | Oil producer                | 6,440                   | Qishn S-1A      
|Tasour #23ST | Exploration | Shut in Oil                 | 200 bbls                | Naifa           
|Tasour #24   | Development | Water Injector              | -                       | Qishn S-1A      
|Godah #1     | Exploration | Shut in Oil                 | 1,839                   | Qishn S-1A      
|Godah #2     | Appraisal   | Oil producer                | 1,160                   | Qishn S-1A      
|Godah #3     | Appraisal   | Oil producer                | 1,511                   | Qishn S-1A      
|Godah #4     | Appraisal   | Cased,
      Water Injector | -                       | Qishn
      S-1A

Production

Block 32 production averaged 10,345 Bopd (1,429 Bopd to
TransGlobe) during 2006, which exceeded our original 2006 guidance of
approximately 8,000 Bopd (1,100 Bopd to TransGlobe) by 29%. The successful
development drilling program (Tasour #21 and #22ST) and continued excellent
reservoir performance were the primary reasons for the 2006 production results.
The Tasour field accounted for 97% of the 2006 average production from Block 32.
Facility expansion at the Tasour Central Production Facility ("CPF") was ongoing
and finalized in early 2007 increasing capacity from 120,000 to 200,000 barrels
of fluid per day.

A new, initial production facility was constructed at Godah
during 2006. Godah #2 and #3 were placed on production (October 27 and November
5, respectively). Godah contributed an average 1,219 Bopd (168 Bopd to
TransGlobe) during the fourth quarter of 2006, or 307 Bopd (42 Bopd to
TransGlobe) on an annualized basis. Together, the Godah #2 and #3 wells produced
approximately 1,500 barrels of oil per day (207 Bopd to TransGlobe) in
January/February 2007.

The initial Godah production facility is pipeline connected to
the Block 32 oil sales export line which passes through the Godah Field.
Produced water was initially trucked to the Tasour CPF for treatment and
disposal. A 23 km pipeline connecting the Godah production facility to the
Tasour CPF was completed in December 2006. The new pipeline became operational
in January 2007 and Godah production is now processed at the Tasour CPF.
Trucking of produced water has been discontinued. It is expected that the Godah
field will be fully developed over the next two years.

2006 Production by Quarter (Bopd)

|                                                      | Q-1   | Q-2   | Q-3    | Q-4   
|----------------------------------------------------- | ----- | ----- | ------ | ------
|Gross field production rate                           | 9,427 | 8,522 | 10,673 | 12,718
|TransGlobe working interest                           | 1,302 | 1,177 | 1,474  | 1,756 
|TransGlobe net (after royalties and other)            | 982   | 675   | 766    | 973   
|TransGlobe net
      (after royalties, other and tax) | 874   | 508   | 532    | 708   

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

---

12

TASOUR FIELD



2007 Outlook

The Block 32 joint venture group has approved an aggressive
capital budget for 2007, which includes appraisal/ development drilling at Godah
(four to six wells), extended production testing at Tasour #23ST, new
exploration drilling (two wells) and production facilities expansion for
processing the increasing Godah production.

The Godah field could extend a significant distance to the east
as indicated on the map below. The extension is dependant upon sand deposition.
The next well, Godah #5, is planned to begin testing the eastern extension of
the Godah pool. Godah #5 is located approximately two kilometers east of the
Godah #2 oil well. If successful, it is expected that an additional appraisal
well approximately one kilometer east of Godah #5 will be drilled, and the
step-out process repeated until the eastern limit of the field has been defined.
There are three to four development locations currently defined in the Godah
pool. Each successful appraisal/step-out well (e.g. Godah #5) will set up two to
three follow-up development locations. The approved 2007 budget has four to six
wells allocated to the Godah appraisal/development program. It is anticipated
that the Godah #5 appraisal well will commence drilling by late March/early
April 2007.

GODAH FIELD



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13

BLOCK 72, REPUBLIC OF YEMEN

Highlights

- Processed and mapped 255 km of new 2-D seismic (acquired December 2005).
- Drilled the first exploration well, Nasim #1 in Q-1 2007 (D&A).

2006 Activities and Results

The 255 km new 2-D seismic and approximately 500 km of
reprocessed, older 2-D seismic was interpreted and mapped resulting in several
prospects and leads on the north-western side of the Block.

2007 Outlook

The first exploration well, Nasim #1, was drilled to a depth of
2,305 meters and subsequently plugged and abandoned in the first quarter of
2007. The Nasim #1 well tested Qishn and Naifa prospects defined by 2-D seismic.
Nasim #1 was the first of a two-well commitment in the first exploration period
on Block 72. A 250 km2 3-D seismic program is planned for the fourth
quarter of 2007 to reduce exploration risk on future exploration wells. A second
commitment well is scheduled to commence during the fourth quarter of 2007 or
early 2008.

BLOCK 84, REPUBLIC OF YEMEN

Highlights

- Awarded Block 84 in the Third International Bid Round.

2006 Activities and Results

During the fourth quarter of 2006, the Ministry of Oil and
Minerals ("MOM") selected the joint venture group comprised of DNO ASA (operator
at 34%), TG Holdings Yemen Inc. (33%) and Ansan Wikfs (Hadramaut) Limited (33%)
as the successful bidder for Block 84 in the Third International Bid Round for
Exploration and Production of Hydrocarbons. TG Holdings Yemen Inc is a wholly
owned subsidiary of TransGlobe Energy Corporation. The award is subject to
government approval and ratification of a PSA.

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

2007 Outlook

A 300 km2 3-D seismic program is planned for late
2007/early 2008 with exploration drilling to commence in late 2008. The timing
of the 3-D seismic acquisition program is contingent upon receiving final
approval and ratification of the Block 84 PSA.

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14

YEMEN WEST- Marib Basin




BLOCK S-1, REPUBLIC OF YEMEN

Highlights

- New operator, January 2006 (Occidental acquired Vintage).
- Two new discoveries (Osaylan and Wadi Bayhan).
- Horizontal development drilling at An Nagyah.
- Increased reserves at An Nagyah due to drilling and performance.
- New reserves at Osaylan and a portion of An Naeem.

2006 Activities and Results

During 2006, the Block S-1 joint venture group drilled 7 wells
(3 exploration, 2 appraisal and 2 development) resulting in: two new discoveries
(Osaylan #2 and Wadi Bayhan #2), two oil wells (An Nagyah #19 and #20), one
water injection well (An Nagyah #22), one suspended well (An Nagyah #21) and one
dry hole (Al Qurain). A 610 square kilometer 3-D seismic program was designed
and approved by the joint venture group in early 2006. Field work was scheduled
to commence in the third quarter with planned completion date of mid 2007. The
program was subsequently suspended and the seismic contractor was released due
to a local labor dispute. The seismic acquisition is now planned to recommence
in association with a 3-D seismic acquisition program on Block 75.

---

15

2006 Drilling Results

|                   |                |                 | Initial Production Test |           
|------------------ | -------------- | --------------- | ----------------------- | ----------
|Well               | Well Type      | Status          | (Bopd  gross)          | Formation 
|An Nagyah #19      | Hz Development | Oil producer    | 3,226                   | Lam A     
|An Nagyah #20      | Hz Development | Oil producer    | 2,992                   | Lam A     
|An Nagyah #21      | Hz Appraisal   | Suspended       | -                       | Lam B     
|An Nagyah #22      | Hz Appraisal   | Water Injector  | -                       | Lam B     
|Wadi Bayhan #2     | Exploration    | Shut in Gaswell | 3.5 Mmcfd               | Lam A     
|Osaylan #2         | Exploration    | Oil producer    | 1,307                   | Alif/Lam A
|Al
      Qurain #1 | Exploration    | D & A           | -                       | Alif/Lam  

AN NAGYAH FIELD




Production

Production from Block S-1 averaged 10,369 Bopd (2,592 Bopd to
TransGlobe) during 2006, representing the first full year of production with the
10 inch sales pipeline operational. Production was increased to approximately
12,000 Bopd in the second quarter with the addition of new producers (An Nagyah
#19 and #20) and facility modifications. In mid 2006 the An Nagyah field
production was choked back to the 10,000 Bopd level in response to an increase
in water production in several horizontal wells located in the western portion
of the field. This increase in water production has been attributed in part to
localized pressure draw-down in the western portion of the field. The choked
back wells have responded favorably, with water cut stabilizing. To improve
production rates and field recoveries the joint venture group has approved a
project to utilize natural gas from the An Naeem pool to maintain reservoir
pressure and enhance recovery in the An Nagyah pool. The proposed project
(subject to Ministry approval), includes the extraction of stabilized condensate
from both the An Naeem gas and the An Nagyah solution gas currently being
injected. It is expected that condensate extracted from the injection gas will
be mixed with oil production for export and sale in late 2007/early 2008.

---

16

OSAYLAN FIELD



The Osaylan #2 well was placed on production on January 23,
2007 at an initial rate of 750 to 800 Bopd utilizing a newly constructed well
test facility. Production from the Osaylan #2 well is trucked to the Halewah
truck terminal, which was constructed for early production from the An Nagyah
field.

The operator is evaluating a cycling scheme to produce
additional condensate from the An Naeem pool in conjunction with the neighboring
Block 20. If the cycling project is recommended and approved, it is expected
that production could commence in late 2009.

2006 Production by Quarter (Bopd)

|                                                      | Q-1    | Q-2    | Q-3    | Q-4  
|----------------------------------------------------- | ------ | ------ | ------ | -----
|Gross field production rate                           | 11,000 | 10,636 | 10,048 | 9,806
|TransGlobe working interest                           | 2,750  | 2,659  | 2,512  | 2,452
|TransGlobe net (after royalties and other)            | 1,631  | 1,467  | 1,735  | 1,634
|TransGlobe net
      (after royalties, other and tax) | 1,423  | 1,266  | 1,546  | 1,428

Under the terms of the Block S-1 PSA, royalties and taxes are
paid out of the government's share of production sharing oil.

2007 Outlook

The Block S-1 joint venture group has approved a capital budget
for 2007 which includes horizontal development wells (Lam A and Lam B) at An
Nagyah, appraisal drilling (Osaylan and Wadi Bayhan), exploration drilling, 3-D
seismic acquisition, facility expansions at An Nagyah and a project to connect
An Naeem gas to An Nagyah for pressure maintenance and condensate
production.

The An Nagyah #23 well commenced drilling on December 25, 2006
and was drilled to a total depth of 2,327 meters. An Nagyah #23 was completed as
a Lam B producing oil well in January 2007, after flowing at a stabilized rate
of 651 barrels of light (43 degree API) oil per day and 337 thousand cubic feet
of gas per day at a flowing pressure of 220 psi on a 30/64 inch choke. The well
was completed in a 916 meter horizontal section in the Lam B sandstone
reservoir. The well is on production through a pipeline connected to the An
Nagyah facilities.

Subsequent to An Nagyah #23, Osaylan #1, which encountered oil
shows in the Lam formation (October 25, 2002 Press Release), was re-entered and
tested. The test was suspended early due to low inflow rates of 42 API oil and

---

17

drilling/completion fluid. The low inflow rates were attributed
to formation damage associated with the drilling of Osaylan #1 in 2002. The
operator is evaluating stimulation/testing options which would be conducted
using a work-over rig, during the second or third quarter of 2007.

In March 2007 a Lam A horizontal development well was drilling
at An Nagyah #24.



BLOCK 75, REPUBLIC OF YEMEN

2007 Outlook

Subsequent to year end, TG Holdings Yemen Inc., a wholly owned
subsidiary of TransGlobe Energy Corporation, agreed to participate at a 25%
working interest with OXY in Block 75. OXY is the operator of Block 75 with a
75% working interest. Block 75 was awarded to OXY in the Second International
Bid Round for Exploration and Production of Hydrocarbons. The PSA was initialled
on January 28, 2007 and is now in the process of final government approval and
ratification by parliament.

Block 75 encompasses 1,050 km2(approximately
262,500 acres) and is located in the Marib Basin adjacent to Block S-1 where OXY
and TransGlobe are engaged in exploration and production operations. The Block
75 joint venture group plans to carry out a 3-D seismic acquisition program and
the drilling of one exploration well during the First Exploration Period of 36
months.

---

18

A 3-D seismic acquisition program is planned for late 2007 (in
conjunction with a 3-D seismic program on Block S-1) with drilling to commence
in 2008. The timing of the 3-D seismic acquisition program is contingent upon
receiving final approval and ratification of the Block 75 PSA.

ARAB REPUBLIC OF EGYPT




NUQRA BLOCK 1

Highlights

- Acquired 834 km of new 2-D seismic.
- Processed, interpreted and mapped prospects.
- Entered first three-year extension to the exploration period, July 18
  2006.
- Selected and approved three well exploration program (two firm, one
  contingent).
- Designed drilling programs, ordered long lead items (casing, wellheads).
- Established Aswan office and constructed logistics/operations base in
  Upper Egypt.
- Fulfilled the $6.0 million farm-in commitment, Q3-2006.

2006 Activities

The Company moved the Nuqra project ahead to the drilling stage
during 2006 by completing seismic, identifying locations and carrying out
extensive drilling preparation work. A three well exploration program consisting
of two firm wells (Set #1 and Narmer #1) and one contingent well (West Narmer
#1) was approved by the joint venture partners and the Government.

---

19

The Company acquired 834 km of new 2-D seismic during the first
quarter of 2006 to infill and supplement the 3,400 kilometers of reprocessed
older 2-D seismic data. The seismic data was processed, interpreted and mapped
during the second quarter resulting in a number of prospects and leads,
primarily in the Nuqra sub basin of the Block.

The Company elected to proceed with the first three-year
extension to the exploration period, effective July 18, 2006. The extension
requires a mandatory relinquishment of 25% of the Block and completion of a two
well drilling program, with a minimum expenditure of $4.0 million over a period
of three years. The area relinquished was considered non-prospective by the
Company. The total area of the Nuqra Block 1 concession is approximately 5.5
million acres following the relinquishment. TransGlobe fulfilled the original $6
million farm-in commitment in 2006 and will pay 60% of future program
expenditures until first production.

An operations team was assembled in Cairo in early 2006 to
prepare for the upcoming drilling program. A regional office in Aswan was opened
mid year and a logistics/operations base on the Block was constructed in the
third quarter of 2006. The required services and contracts were finalized and
approved and the long lead items such as casing and wellheads were imported and
transported to the logistics base.

2007 Outlook

In early February the ECDC rig #2 was trucked approximately
1,100 kilometers from the Nile delta to the Set #1 location in Upper Egypt.
Drilling commenced February 18, 2007 on the first exploration well Set #1,
targeting a 30 million barrel gross unrisked prospect. The Set #1 well was
drilled to a total depth of 1,372 meters and was plugged and abandoned after
failing to encounter any hydrocarbons. Set #1 was the first exploration well
drilled in Upper Egypt, since 1995.

Following Set #1 the drilling rig was moved during March 2007
to the second exploration commitment well at Narmer #1, located approximately 30
kilometers east of Set #1. The Narmer #1 well is targeting an unrisked gross 10
million barrel Jurassic prospect at approximately 2,400 meters. Contingent upon
the results of Narmer #1, a third well at West Narmer #1 is planned.

The two well, exploration program will fulfill the work
commitments of the first three-year exploration extension period approved July
18, 2006. Upon expiry of the first three-year extension on July 17, 2009 there
is an option to proceed with a second three-year extension and work program. The
second exploration extension requires a mandatory relinquishment of 25% of the
original Block and completion of a two-well drilling program. Exploitation of
any discovered commercial fields will continue under a development lease for a
further 20 years.



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20

SUMMARY OF INTERNATIONAL PSA TERMS

All of the Companys international Blocks are production
sharing contracts between the host government and the Contractor (Joint venture
partners). The government and the Contractors take their share of production
based on the terms and conditions of the respective contracts. The Contractors
share of all taxes and royalties are paid out of the Governments share of
production.

The PSAs provide for the Government to receive a percentage
gross royalty on the gross production. The remaining oil production, after
deducting the gross royalty, is split between cost sharing oil and production
sharing oil. Cost sharing oil is up to a maximum percentage as defined in the
specific PSA. Cost Oil is assigned to recover approved operating and capital
costs spent on the specific project. Each PSA is ring fenced for cost recovery
and production sharing purposes. The remaining production sharing oil (total
production, less gross royalty, less cost oil) is shared between the Government
and the Contractor as defined in the specific PSAs.

The following table summarizes the Companys international PSA
terms for the first 25,000 Bopd for each Block. All the PSAs have different
terms for production levels above 25,000 Bopd, which are unique to each PSA. The
Governments share of production increases and the Contractors share of
production decreases as the production volumes go to the next production tranche
(25,000 to 50,000 Bopd; 50,000 Bopd to 100,000 Bopd; 100,000 +Bopd).

PSA Terms  Yemen and Egypt (Oil Production: 0 to 25,000
Bopd)

|                 | Country             
|---------------- | --------------------
|                 | Yemen (East)        
|Block            | 32*
      (original)
|                 |                     
|First Production | 0-25,000            
|Tranche          | Bopd                
|                 |                     
|Gross Royalty %  | 3%/(10%)            
|                 |                     
|Max. Cost Oil %  | 60%/(25%)           
|                 |                     
|Depreciation per |                     
|Quarter          |                     
|Operating        | 100%                
|Capital          | 12.5%               
|                 |                     
|Production       |                     
|Sharing Oil:     |                     
|Contractor       | 33.25%/(23%)        
|MOM              | 65%/(77%)           
|Yemen Oil Co.    | 1.75%/(0%)          

|*  | Block 32 terms will revert to original PSA terms if
      production exceeds 25,000 Bopd or Proved reserves exceed 30 million
      barrels. Reserves are audited every two years by an independent evaluator.
      At November 2006, Proved reserves were less than 5 million barrels. The
      next reserve audit is November 2008.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|** | Block S-1 terms for second tranche of production from
      12,500 to 25,000 Bopd.                                                                                                                                                                                                                                                     

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21

CANADA

Highlights

- 2006 production averaged 1,072 Boepd, up 24% from 2005.
- Drilled 26 wells (20.8 net) during 2006 - 19 gas, 5 oil and 2 dry.
- Pipeline connected 20 wells - 15 gas and 5 oil.
- Installed compression/dehydration facilities at Nevis and Twining.
- Acquired 16,100 net acres.

2006 Activities and Results

In western Canada, the first half of 2006 was a very
challenging operating environment for the Company due increased demand for
services, equipment and personnel. In addition to the significant pressure on
the cost structure, it was a very challenging year to gain access to third party
operated facilities, pipelines, compressors and gas plants due to overall
pressure on the industry. By mid year, larger companies reduced their natural
gas/CBM projects in response to lower natural prices and high gas storage
numbers in North America. The Company completed its 2006 drilling program in the
fourth quarter at a much improved cost structure. Considerable gains have been
made in the past three months to tie-in production which was stranded for up to
two years waiting on third party approvals for transportation and
processing.

During 2006, the Company drilled 26 wells (20.8 net wells)
resulting in 19 gas, 5 oil and 2 dry. Approximately 53% of the 2006 program (14
wells) targeted proved undeveloped reserves which had been assigned to the
Wabamun formation in Nevis (2 oil and 1 gas) and the Horseshoe Canyon Coal Bed
formation in Nevis (10 gas wells) and Morningside (one gas well).

The majority of the Companys acreage is located in central
Alberta, which is the focus of extensive Horseshoe Canyon CBM development and,
more recently, the focus of Mannville CBM development utilizing horizontal
wells. TransGlobe commissioned an independent third party evaluation of the
Companys CBM properties to evaluate the resource potential of the undeveloped
Horseshoe Canyon CBM and the emerging Mannville CBM play. The findings of the
report are summarized in the Contingent Resources section.

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22

The Company acquired 16,100 net acres of exploration land in
2006, bringing the Companys total net undeveloped land to 46,100 acres at year
end.



2006 Drilling Results

|                                                | Oil   | Gas   | Dry     | Total
|----------------------------------------------- | ----- | ----- | ------- | -----
|Area                                            | Gross | (Net) | Gross   | (Net)
|Nevis                                           | 3     | 2.3   | 13      | 11.8 
|Morningside                                     | 1     | 1.0   | 2**     | 1.2  
|Thorsby                                         | 1     | 0.5   | 1       | 0.5  
|Other                                           | -     | -     | 3       | 2.0  
|                                                |       |       |         |      
|Total                                           | 5     | 3.8   | 19      | 15.5 
|                                                |       |       |         |      
|* Includes 10 (9.1 net) CBM wells               |       |       |         |      
|** Includes 1 (0.4 net) CBM wells               |       |       |         |      
|                                                |       |       |         |      
|2006
      Wells                                |       |       | **Q-1** | Q-2  
|Total drilled                                   |       |       | 7       | 9    
|Successfully drilled                            |       |       | 6       | 8    
|Pipeline
      connected (including 2005 wells) |       | 2     | 1       | 3    

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23

Production

Canadian production increased 24% to 1,072 Boepd (69% natural
gas) in 2006 from an average of 867 Boepd in 2005. Production averaged 1,267
Boepd during the fourth quarter of 2006, with an average December rate of 1,414
Boepd. Approximately 450 Boepd of Nevis gas production was shut-in from mid
September to mid October in response to very low spot gas prices, which
strengthened in late October. Canadian production reached approximately 1,600
Boepd during the final week of December with the addition of the Nevis CBM gas
wells.

During January and February 2007 production averaged 1,300
Boepd. Production was lower due to production restrictions on the new CBM wells
and the loss of approximately 160 Boepd from a new gas producer in Morningside,
which watered out. The Nevis CBM wells were selectively shut-in during
January/February to conduct mandatory pressure segregation build up tests, which
were completed. It is expected that the Nevis CBM program will contribute an
additional 300+ Boepd when additional compression is installed and facility
de-bottlenecking is completed in the second quarter of 2007.

2006 Canadian Production by Quarter (Boepd)

|                                       | Q-1 | Q-2   | Q-3 | Q-4  
|-------------------------------------- | --- | ----- | --- | -----
|TransGlobe working interest            | 975 | 1,079 | 966 | 1,267
|TransGlobe net
      (after royalties) | 798 | 910   | 808 | 1,016

2007 Outlook

During 2007 the Company will focus its Canadian efforts towards
higher impact opportunities and towards optimizing our production. In addition
to the Nevis area facility work which will add 300 Boepd in the second quarter,
there are also plans to tie in another 10 to 15 existing wells over the balance
of the year. In 2007 the Company has drilled three wells to date, resulting in
gas wells at Nevis, Morningside and Thorsby (CBM).

TransGlobe recently released the best estimate of contingent
resources for CBM underlying the Companys Canadian lands. Central Alberta is
the focus area for CBM development where several thousand wells have been
drilled by other operators for Horseshoe Canyon gas. The Horseshoe Canyon
formation coals are unique in that they frequently produce dry gas immediately
and do not require dewatering. TransGlobe has drilled 20 Horseshoe Canyon gas
wells in the Nevis and Morningside areas and recently completed another gas well
in the Thorsby area. This is a proven resource play.

The Mannville coals are a recent development for CBM
development. Some operators are drilling long reach horizontal wells in the
Nevis area which appear to be producing dry gas. TransGlobe is monitoring this
developing play closely. The Company has a large contingent resource underlying
its lands in the Mannville coals. In 2007 the Company is working on a plan to
drill one horizontal Mannville coal well to test this play.

This year the Canadian budget has been scaled back somewhat to
accommodate the increased spending overseas. The Canadian budget of
approximately $15 million is weighted 65% to development projects. The Company
plans to drill 10 to 12 wells in Canada during 2007.

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 February 16, 2007
with the effective date of the Statement being December 31, 2006.

---

24

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, 2006. In 2006, 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, 2006.

The reserves data set forth below (the "Reserves Data")
was prepared by DeGolyer with an effective date of December 31, 2006. 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.

Reserves Data (Constant Prices and Costs)

Summary of Oil and Gas Reserves Total Company As at
December 31, 2006 (Constant Prices and Costs)

|                     | Light & Medium Crude Oil | Natural Gas | Natural Gas Liquids | Total boe's
|-------------------- | ------------------------ | ----------- | ------------------- | -----------
|                     | Gross(1)                 | Net(2)      | Gross(1)            | Net(2)     
|By Category          | (Mbbls)                  | (Mbbls)     | (MMcf)              | (MMcf)     
|Proved               |                          |             |                     |            
|Producing            | 4,700                    | 2,673       | 6,476               | 5,056      
|Non-Producing        | 454                      | 275         | 3,278               | 2,621      
|Undeveloped          | 2,294                    | 1,245       | 224                 | 183        
|Total Proved         | 7,447                    | 4,194       | 9,978               | 7,860      
|                     |                          |             |                     |            
|Probable             | 1,105                    | 622         | 6,079               | 4,633      
|                     |                          |             |                     |            
|Proved Plus Probable | 8,552                    | 4,815       | 16,056              | 12,493     

---

25

Summary of Oil and Gas Reserves Yemen As at December
31, 2006(Constant Prices and Costs)

|                     | Light & Medium Crude Oil | Natural Gas | Natural Gas Liquids | Total boe's
|-------------------- | ------------------------ | ----------- | ------------------- | -----------
|                     | Gross(1)                 | Net(2)      | Gross(1)            | Net(2)     
|By Category          | (Mbbls)                  | (Mbbls)     | (MMcf)              | (MMcf)     
|Proved               |                          |             |                     |            
|Producing            | 4,418                    | 2,428       | -                   | -          
|Non-Producing        | 357                      | 188         | -                   | -          
|Undeveloped          | 2,274                    | 1,227       | -                   | -          
|Total Proved         | 7,049                    | 3,842       | -                   | -          
|                     |                          |             |                     |            
|Probable             | 950                      | 483         | -                   | -          
|                     |                          |             |                     |            
|Proved Plus Probable | 7,999                    | 4,325       | -                   | -          

Summary of Oil and Gas Reserves Canada As at December
31, 2006 (Constant Prices and Costs)

|                     | Light & Medium Crude Oil | Natural Gas | Natural Gas Liquids | Total boe's
|-------------------- | ------------------------ | ----------- | ------------------- | -----------
|                     | Gross(1)                 | Net(2)      | Gross(1)            | Net(2)     
|By Category          | (Mbbls)                  | (Mbbls)     | (MMcf)              | (MMcf)     
|Proved               |                          |             |                     |            
|Producing            | 281                      | 245         | 6,476               | 5,056      
|Non-Producing        | 97                       | 88          | 3,278               | 2,621      
|Undeveloped          | 20                       | 19          | 224                 | 183        
|Total Proved         | 398                      | 351         | 9,978               | 7,860      
|                     |                          |             |                     |            
|Probable             | 155                      | 139         | 6,079               | 4,633      
|                     |                          |             |                     |            
|Proved Plus Probable | 553                      | 490         | 16,056              | 12,493     

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).

---

26

Net Present Values of Future Net Revenues Total Company
As at December 31, 2006 (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        | 102.7                   | 92.5                  
|Developed non-producing    | 17.1                    | 14.4                  
|Undeveloped                | 23.2                    | 15.9                  
|Total Proved               | 143.1                   | 122.7                 
|                           |                         |                       
|Probable                   | 38.7                    | 29.0                  
|                           |                         |                       
|Total Proved Plus Probable | 181.8                   | 151.7                 

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, 2006 exchange rate of $1.1654 US $'s/Cdn $'s.                                                                                                        

Net Present Values Of Future Net Revenues Yemen As at
December 31, 2006 (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        | 66.5                 | 60.5               
|Developed non-producing    | 4.7                  | 4.0                
|Undeveloped                | 23.1                 | 15.9               
|Total Proved               | 94.3                 | 80.4               
|                           |                      |                    
|Probable                   | 11.2                 | 8.7                
|                           |                      |                    
|Total Proved Plus Probable | 105.5                | 89.1               

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, 2006 exchange rates of $1.1654 US $'s/Cdn
$'s.                                                                                                       

---

27

Net Present Values of Future Net Revenues Canada As
at December 31, 2006 (Constant Prices and Costs)

|                           |      | Before Income Tax(2) |      |      | After Income Tax(2) |     
|-------------------------- | ---- | -------------------- | ---- | ---- | ------------------- | ----
|US$'s                      |      | Discounted at %/yr   |      |      | Discounted at %/yr  |     
|$MM                        | 0%   | 5%                   | 10%  | 15%  | 20%                 | 0%  
|Proved                     |      |                      |      |      |                     |     
|Developed producing        | 36.3 | 32.0                 | 28.5 | 25.8 | 23.5                | 36.3
|Developed non-producing    | 12.5 | 10.4                 | 8.8  | 7.5  | 6.5                 | 10.6
|Undeveloped                | 0.1  | 0.0                  | -0.1 | -0.2 | -0.3                | 0.0 
|Total Proved               | 48.8 | 42.3                 | 37.2 | 33.1 | 29.7                | 46.9
|                           |      |                      |      |      |                     |     
|Probable                   | 27.5 | 20.3                 | 15.5 | 12.2 | 9.8                 | 19.3
|                           |      |                      |      |      |                     |     
|Total Proved Plus Probable | 76.3 | 62.6                 | 52.7 | 45.3 | 39.5                | 66.2

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, 2006 exchange rates of $1.1654 US $'s/Cdn $'s.                                                                                                       

Total Future Net Revenues (Undiscounted) As at
December 31, 2006 (Constant Prices and Costs)

|                  |         |           |           |             |             | Future Net |        | Future Net
|----------------- | ------- | --------- | --------- | ----------- | ----------- | ---------- | ------ | ----------
|                  |         |           |           |             |             | Revenue    |        | Revenue   
|                  |         |           |           |             | Well        | Before     |        | After     
|                  |         |           | Operating | Development | Abandonment | Income     | Income | Income    
|                  | Revenue | Royalties | Costs     | Costs       | Costs       | Taxes      | Taxes  | Taxes     
|Reserves Category | ($MM)   | ($MM)     | ($MM)     | ($MM)       | ($MM)       | ($MM)      | ($MM)  | ($MM)     
|                  |         |           |           |             |             |            |        |           
|Proved Reserves   |         |           |           |             |             |            |        |           
|Yemen(1)          | 424     | 193       | 121       | 16          | -           | 94         | -      | 94        
|Canada(2)         | 86      | 16        | 16        | 4           | 2           | 49         | 2      | 47        
|Total Company     | 510     | 209       | 137       | 20          | 2           | 143        | 2      | 141       
|                  |         |           |           |             |             |            |        |           
|Proved Plus       |         |           |           |             |             |            |        |           
|Probable Reserves |         |           |           |             |             |            |        |           
|Yemen(1)          | 481     | 221       | 134       | 20          | -           | 105        | -      | 105       
|Canada(2)         | 136     | 26        | 25        | 7           | 2           | 76         | 10     | 66        
|Total Company     | 617     | 247       | 159       | 27          | 2           | 182        | 10     | 172       

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, 2006 exchange rates of 1.1654 US $'s/Cdn
$'s.                                                                                                                                                                                                    

---

28

Future Net Revenue By Production Group As at December
31, 2006 (Constant Prices and Costs)

|                              |                                                                                 | Yemen                  | Canada                 | Total Company      
|----------------------------- | ------------------------------------------------------------------------------- | ---------------------- | ---------------------- | -------------------
|                              |                                                                                 | Future net Revenue     | Future net Revenue     | Future net Revenue 
|                              |                                                                                 | Before Income Taxes(1) | Before Income Taxes(2) | Before Income Taxes
|                              |                                                                                 | (discounted at         | (discounted at         | (discounted at     
|                              |                                                                                 | 10%/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) | 69.8                   | 10.2                   | 80.0               
|                              | Natural Gas (including by-products but excluding
      solution gas)            | -                      | 27.0                   | 27.0               
|                              |                                                                                 |                        |                        |                    
|Proved Plus Probable Reserves | Light and Medium Crude Oil (including solution
      gas and other by-products) | 76.7                   | 14.8                   | 91.5               
|                              | Natural Gas (including by-products
      but excluding solution gas)            | -                      | 37.9                   | 37.9               

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, 2006 exchange rates of 1.1654 US $'s/Cdn $'s.                                                                                                        

Reserves Data (Forecast Prices and Costs)

SUMMARY OF OIL AND GAS RESERVES TOTAL
COMPANYAS OF DECEMBER 31, 2006 (FORECAST PRICES AND
COSTS)

|                     | Light & Medium Crude Oil | Natural Gas | Natural Gas Liquids | Total boe's
|-------------------- | ------------------------ | ----------- | ------------------- | -----------
|                     | Gross(1)                 | Net(2)      | Gross(1)            | Net(2)     
|By Category          | (Mbbls)                  | (Mbbls)     | (MMcf)              | (MMcf)     
|Proved               |                          |             |                     |            
|Producing            | 4,699                    | 2,697       | 6,493               | 5,249      
|Non-Producing        | 454                      | 251         | 3,288               | 2,737      
|Undeveloped          | 2,293                    | 1,289       | 224                 | 190        
|Total Proved         | 7,445                    | 4,238       | 10,005              | 8,176      
|                     |                          |             |                     |            
|Probable             | 1,107                    | 639         | 6,091               | 4,854      
|                     |                          |             |                     |            
|Proved Plus Probable | 8,552                    | 4,876       | 16,095              | 13,029     

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.

---

29

SUMMARY OF OIL AND GAS RESERVES YEMENAS OF
DECEMBER 31, 2006 (FORECAST PRICES AND COSTS)

|                     | Light & Medium Crude Oil | Natural Gas | Natural Gas Liquids | Total boe's
|-------------------- | ------------------------ | ----------- | ------------------- | -----------
|                     | Gross(1)                 | Net(2)      | Gross(1)            | Net(2)     
|By Category          | (Mbbls)                  | (Mbbls)     | (MMcf)              | (MMcf)     
|Proved               |                          |             |                     |            
|Producing            | 4,418                    | 2,453       | -                   | -          
|Non-Producing        | 357                      | 163         | -                   | -          
|Undeveloped          | 2,273                    | 1,271       | -                   | -          
|Total Proved         | 7,048                    | 3,887       |                     |            
|                     |                          |             |                     |            
|Probable             | 951                      | 500         | -                   | -          
|                     |                          |             |                     |            
|Proved Plus Probable | 7,999                    | 4,387       | -                   | -          

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.

---

30

SUMMARY OF OIL AND GAS RESERVES CANADAAS OF
DECEMBER 31, 2006 (FORECAST PRICES AND COSTS)

|                     | Light & Medium Crude |             |                     |             |          |         |         
|-------------------- | -------------------- | ----------- | ------------------- | ----------- | -------- | ------- | --------
|                     | Oil                  | Natural Gas | Natural Gas Liquids | Total boe's
|                     | Gross(1)             | Net(2)      | Gross(1)            | Net(2)      | Gross(1) | Net(2)  | Gross(1)
|By Category          | (Mbbls)              | (Mbbls)     | (MMcf)              | (MMcf)      | (Mbbls)  | (Mbbls) | (MBoe)  
|Proved               |                      |             |                     |             |          |         |         
|Producing            | 280                  | 244         | 6,493               | 5,249       | 176      | 128     | 1,538   
|Non-Producing        | 97                   | 88          | 3,288               | 2,737       | 49       | 33      | 694     
|Undeveloped          | 20                   | 19          | 224                 | 190         | 2        | 1       | 59      
|Total Proved         | 397                  | 350         | 10,005              | 8,176       | 227      | 161     | 2,292   
|                     |                      |             |                     |             |          |         |         
|Probable             | 156                  | 139         | 6,091               | 4,854       | 189      | 130     | 1,360   
|                     |                      |             |                     |             |          |         |         
|Proved Plus Probable | 553                  | 490         | 16,095              | 13,029      | 416      | 291     | 3,652   

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 PRESENT VALUES OF FUTURE NET REVENUES TOTAL
COMPANYAS OF DECEMBER 31, 2006 (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%   
|                           |       |                         |       |       |                        |      
|Proved                     |       |                         |       |       |                        |      
|                           |       |                         |       |       |                        |      
|Developed producing        | 113.6 | 102.6                   | 93.4  | 85.7  | 79.2                   | 112.7
|Developed non-producing    | 20.6  | 17.5                    | 15.2  | 13.3  | 11.7                   | 15.1 
|Undeveloped                | 23.7  | 16.2                    | 11.0  | 7.3   | 4.6                    | 23.5 
|Total Proved               | 157.8 | 136.4                   | 119.7 | 106.3 | 95.5                   | 151.4
|                           |       |                         |       |       |                        |      
|Probable                   | 49.5  | 36.7                    | 28.3  | 22.5  | 18.2                   | 38.0 
|                           |       |                         |       |       |                        |      
|Total Proved Plus Probable | 207.3 | 173.1                   | 148.0 | 128.8 | 113.8                  | 189.3

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, 2006 exchange rates of 1.1654 US $'s/Cdn
$'s.                                                                                                        

---

31

NET PRESENT VALUES OF FUTURE NET REVENUES
YEMENAS OF DECEMBER 31, 2006 (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%   
|                           |       |                      |      |      |                     |      
|Proved                     |       |                      |      |      |                     |      
|                           |       |                      |      |      |                     |      
|Developed producing        | 67.6  | 62.0                 | 57.1 | 53.0 | 49.3                | 67.6 
|Developed non-producing    | 3.4   | 3.1                  | 2.9  | 2.7  | 2.5                 | 3.4  
|Undeveloped                | 23.3  | 16.0                 | 10.9 | 7.3  | 4.7                 | 23.3 
|Total Proved               | 94.2  | 81.1                 | 71.0 | 63.0 | 56.5                | 94.2 
|                           |       |                      |      |      |                     |      
|Probable                   | 12.3  | 9.5                  | 7.5  | 6.1  | 5.0                 | 12.3 
|                           |       |                      |      |      |                     |      
|Total Proved Plus Probable | 106.5 | 90.6                 | 78.5 | 69.1 | 61.5                | 106.5

Note:

|(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.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

NET PRESENT VALUES OF FUTURE NET REVENUES
CANADAAS OF DECEMBER 31, 2006 (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%  
|Proved                     |       |                      |      |      |                     |     
|Developed producing        | 46.0  | 40.6                 | 36.3 | 32.8 | 29.9                | 45.1
|Developed non-producing    | 17.2  | 14.4                 | 12.3 | 10.6 | 9.2                 | 11.8
|Undeveloped                | 0.4   | 0.2                  | 0.1  | 0.0  | -0.1                | 0.3 
|Total Proved               | 63.6  | 55.3                 | 48.7 | 43.4 | 39.0                | 57.1
|                           |       |                      |      |      |                     |     
|Probable                   | 37.2  | 27.2                 | 20.8 | 16.4 | 13.3                | 25.7
|                           |       |                      |      |      |                     |     
|Total Proved Plus Probable | 100.8 | 82.5                 | 69.5 | 59.8 | 52.3                | 82.8

Note:

|(1) | Canadian values converted to US dollars at the December
      31, 2006 exchange rates of 1.1654 US $'s/Cdn
$'s.
|--- | ---------------------------------------------------------------------------------------------------------------

---

32

TOTAL FUTURE NET REVENUES (UNDISCOUNTED) AS AT
DECEMBER 31, 2006 (FORECAST PRICES AND COSTS)

|                        |         |           |           |             |             | Future Net |         | Future Net
|----------------------- | ------- | --------- | --------- | ----------- | ----------- | ---------- | ------- | ----------
|                        |         |           |           |             |             | Revenue    |         | Revenue   
|                        |         |           |           |             | Well        | Before     |         | After     
|                        |         |           | Operating | Development | Abandonment | Income     | Income  | Income    
|                        | Revenue | Royalties | Costs     | Costs       | Costs       | Taxes      | Taxes   | Taxes     
|Reserves
      Category | (US$MM) | (US$MM)   | (US$MM)   | (US$MM)     | (US$MM)     | (US$MM)    | (US$MM) | (US$MM)   
|                        |         |           |           |             |             |            |         |           
|Proved Reserves         |         |           |           |             |             |            |         |           
|Yemen(1)                | 438     | 196       | 131       | 16          | -           | 94         | -       | 94        
|Canada(2)               | 105     | 18        | 18        | 4           | 2           | 64         | 6       | 57        
|Total Company           | 543     | 214       | 149       | 21          | 2           | 158        | 6       | 151       
|                        |         |           |           |             |             |            |         |           
|Proved Plus Probable    |         |           |           |             |             |            |         |           
|Reserves                |         |           |           |             |             |            |         |           
|Yemen(1)                | 496     | 224       | 145       | 21          | -           | 107        | -       | 107       
|Canada(2)               | 169     | 29        | 29        | 8           | 3           | 101        | 18      | 83        
|Total Company           | 665     | 253       | 174       | 28          | 3           | 207        | 18      | 189       

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, 2006 exchange rates of 1.1654 US $'s/Cdn $'s.                                                                                                                                                                                                    

TOTAL FUTURE NET REVENUES BY PRODUCTION
GROUPAS AT DECEMBER 31, 2006 (FORECAST PRICES AND COSTS)

|                              |                                                                                 | Yemen           | Canada          | Total Company  
|----------------------------- | ------------------------------------------------------------------------------- | --------------- | --------------- | ---------------
|                              |                                                                                 | Future net      | Future net      | Future net     
|                              |                                                                                 | Revenue Before  | Revenue Before  | Revenue Before 
|                              |                                                                                 | Income Taxes(1) | Income Taxes(2) | Income Taxes(1)
|                              |                                                                                 | (discounted at  | (discounted at  | (discounted at 
|Reserves                      |                                                                                 | 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) | 63.0            | 10.2            | 73.2           
|                              | Natural Gas (including
      by-products but excluding solution gas)            | -               | 33.2            | 33.2           
|                              |                                                                                 |                 |                 |                
|Proved Plus Probable Reserves | Light and Medium Crude Oil
      (including solution gas and other by-products) | 69.1            | 14.5            | 83.5           
|                              | Natural Gas
      (including by-products but excluding solution gas)            | -               | 45.3            | 45.3           

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, 2006 exchange rates of 1.1654 US $'s/Cdn
$'s.                                                                                                        

---

33

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)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

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
| | ---------------------------------------------------------------------------------------------------------

---

34

| | 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:                        
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     | (i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

---

35

| | (ii) | 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, 2006, 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 | Exchange  
|           | Oklahoma    | Price 40° API | Spot Gas Price                             | FOB Edmonton        | Rates(1)  | Rate(2)   
|Year       | (US$/bbl)   | (Cdn$/bbl)    | (Cdn$/Mcf)                                 | (Cdn$/bbl)          | % Year    | (Cdn$/US$)
|           |             |               |                                            | Condensate          | Butane    | Propane    |         
|Forecast   |             |               |                                            |                     |           |            |         
|2007       | 65.00       | 75.12         | 7.32                                       | 76.62               | 54.84     | 46.57      |         
|2008       | 65.52       | 75.71         | 7.91                                       | 77.23               | 55.27     | 46.94      | 4.0     
|2009       | 64.27       | 74.26         | 7.72                                       | 75.74               | 54.21     | 46.04      | 3.0     
|2010       | 61.73       | 71.30         | 7.48                                       | 72.73               | 52.05     | 44.21      | 2.0     
|2011       | 59.07       | 68.20         | 7.68                                       | 69.57               | 49.79     | 42.29      | 2.0     
|2012       | 59.11       | 68.25         | 7.77                                       | 69.62               | 49.82     | 42.32      | 2.0     
|Thereafter | +2%/year    | +2%/year      | + 1.9%/yr to 17 
      +2.0%/yr thereafter | +2%/year            | +2%/year  | +2%/year   | +2%/year

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, 2006 for
      crude oil was $63.10/bbl.                                                                                                                                        
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                           
|   | The weighted average historical prices in Cdn $'s
      realized by the Company in Canada, for the year ended December 31, 2006,
      were $7.01/mcf for natural gas, $66.30/bbl for crude oil and $55.85/bbl
      for natural gas liquids.                                                             
|   |                                                                                                                                                                                                                                                                                                           
|4. | Constant Prices and Costs                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                           
|   | In Yemen, a constant price of $59.76/bbl (December 31,
      2006 actual prices) was utilized in the constant price case.                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                           
|   | In Canada, constant prices of $54.26/bbl of oil and
      $5.58/Mcf of natural gas (December 31, 2006 actual prices converted to
      U.S. $'s at the December 31, 2006 currency rate of 1.1654 US$/Cdn$,
      adjusted for quality and energy content), were utilized in the constant
      price case.

---

36

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

FUTURE DEVELOPMENT COSTS TOTAL COMPANY(1)AS AT DECEMBER 31, 2006

(US$ millions)
    Constant Prices and Costs
    Forecast Prices and CostsProved Plus
    
    Proved PlusProved
    Probable
    Proved
    ProbableYear
    Reserves
    Reserves
    Reserves
    Reserves2007
    16.6
    21.2
    17.1
    21.72008
    3.3
    5.5
    3.4
    5.82009
    -
    0.2
    -
    0.22010
    -
    0.1
    -
    0.1Total Undiscounted
    20.0
    27.3
    20.7
    28.2Total Discounted at 10%
    18.7
    25.4
    19.3
    26.1


Note:

|(1) | Cdn$'s converted at the December 31, 2006 year end rate of 1.1654 US$/Cdn$.
|--- | ---------------------------------------------------------------------------

FUTURE DEVELOPMENT COSTS YEMENAS AT DECEMBER
31, 2006

(US$ millions)
    Constant Prices and Costs
    Forecast Prices and CostsProved Plus
    
    Proved PlusProved
    Probable
    Proved
    ProbableYear
    Reserves
    Reserves
    Reserves
    Reserves2007
    13.4
    17.6
    13.7
    18.02008
    2.5
    2.5
    2.6
    2.62009
    -
    -
    -
    -2010
    -
    -
    -
    -Total Undiscounted
    15.9
    20.1
    16.3
    20.6Total Discounted at 10%
    14.9
    18.9
    15.3
    19.4


FUTURE DEVELOPMENT COSTS CANADA(1)AS AT DECEMBER 31, 2006

(US$ millions)
    Constant Prices and Costs
    Forecast Prices and CostsProved Plus
    
    Proved PlusProved
    Probable
    Proved
    ProbableYear
    Reserves
    Reserves
    Reserves
    Reserves2007
    3.2
    3.6
    3.3
    3.72008
    0.8
    3.0
    0.8
    3.22009
    -
    0.2
    -
    0.22010
    -
    0.1
    -
    0.1Total Undiscounted
    4.2
    7.2
    4.3
    7.6Total Discounted at 10%
    3.8
    6.6
    4.0
    6.7


Note:

|(1) | Cdn$'s converted at the December 31, 2006 year-end rate
      of 1.1654 US$/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.                                                                                                                                                                                       
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                              
|6. | 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

---

37

|   | 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.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|7. | Both the constant and forecast price and cost assumptions
      assume the continuance of current laws and regulations.                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|8. | 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 TYPECOMPANYAS AT DECEMBER
31, 2006 (FORECAST PRICES AND COSTS)

|                    |                    |                |                     | ASSOCIATED & NON- |          |            |       
|------------------- | ------------------ | -------------- | ------------------- | ----------------- | -------- | ---------- | ------
|                    | LIGHT & MEDIUM OIL | ASSOCIATED GAS | NATURAL GAS LIQUIDS
|                    |                    |                | Net                 |                   |          |            |       
|                    |                    |                | Proved              |                   |          | Net 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, 2005   | 3,252              | 790            | 4,042               | 9,105             | 4,649    | 13,754     | 183   
|Extensions          | 422                | 45             | 467                 | 3,594             | 1,389    | 4,983      | 39    
|Improved recovery   | -                  | -              | -                   | -                 | -        | -          | -     
|Technical Revisions | 1,362              | (393)          | 969                 | (2,661)           | (1,257)  | (3,918)    | 4     
|Discoveries         | 422                | 231            | 652                 | -                 | -        | -          | -     
|Acquisitions        | -                  | -              | -                   | -                 | -        | -          | -     
|Dispositions        | -                  | -              | -                   | -                 | -        | -          | -     
|Economic Factors    | (276)              | (34)           | (311)               | (584)             | 73       | (511)      | (15)  
|Production          | (944)              | -              | (944)               | (1,279)           | -        | (1,279)    | (50)  
|December 31, 2006   | 4,238              | 639            | 4,876               | 8,175             | 4,854    | 13,029     | 161   

---

38

RECONCILIATION OF NET RESERVES (AFTER ROYALTIES/BEFORE
TAXES) BY PRINCIPAL PRODUCT TYPEYEMENAS AT DECEMBER
31, 2006 (FORECAST PRICES AND COSTS)

|                    |                    |                |                     | ASSOCIATED & NON- |          |            |       
|------------------- | ------------------ | -------------- | ------------------- | ----------------- | -------- | ---------- | ------
|                    | LIGHT & MEDIUM OIL | ASSOCIATED GAS | NATURAL GAS LIQUIDS
|                    |                    |                | Net                 |                   |          |            |       
|                    |                    |                | Proved              |                   |          | Net 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, 2005   | 2,927              | 708            | 3,636               | -                 | -        | -          | -     
|Extensions          | 265                | 1              | 266                 | -                 | -        | -          | -     
|Improved recovery   | -                  | -              | -                   | -                 | -        | -          | -     
|Technical Revisions | 1,441              | (406)          | 1,035               | -                 | -        | -          | -     
|Discoveries         | 422                | 231            | 652                 | -                 | -        | -          | -     
|Acquisitions        | -                  | -              | -                   | -                 | -        | -          | -     
|Dispositions        | -                  | -              | -                   | -                 | -        | -          | -     
|Economic Factors    | (272)              | (35)           | (307)               | -                 | -        | -          | -     
|Production          | (895)              | -              | (895)               | -                 | -        | -          | -     
|December 31, 2006   | 3,887              | 500            | 4,387               | -                 | -        | -          | -     

RECONCILIATION OF NET RESERVES (AFTER ROYALTIES/BEFORE
TAXES) BY PRINCIPAL PRODUCT TYPECANADAAS AT DECEMBER
31, 2006 (FORECAST PRICES AND COST)

|                    |                    |                |                     | ASSOCIATED & NON- |          |            |       
|------------------- | ------------------ | -------------- | ------------------- | ----------------- | -------- | ---------- | ------
|                    | LIGHT & MEDIUM OIL | ASSOCIATED GAS | NATURAL GAS LIQUIDS
|                    |                    |                | Net                 |                   |          |            |       
|                    |                    |                | Proved              |                   |          | Net 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, 2005   | 325                | 82             | 407                 | 9,105             | 4,649    | 13,754     | 183   
|Extensions          | 158                | 44             | 201                 | 3,594             | 1,389    | 4,983      | 39    
|Improved recovery   | -                  | -              | -                   | -                 | -        | -          | -     
|Technical Revisions | (79)               | 13             | (66)                | (2,661)           | (1,257)  | (3,918)    | 4     
|Discoveries         | -                  | -              | -                   | -                 | -        | -          | -     
|Acquisitions        | -                  | -              | -                   | -                 | -        | -          | -     
|Dispositions        | -                  | -              | -                   | -                 | -        | -          | -     
|Economic Factors    | (4)                | 1              | (4)                 | (584)             | 73       | (511)      | (15)  
|Production          | (48)               | -              | (48)                | (1,279)           | -        | (1,279)    | (50)  
|December 31, 2006   | 350                | 139            | 490                 | 8,175             | 4,854    | 13,029     | 161   

---

39

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)
|---------------------------------------------------------------------------------------- | --------- | -------- | --------
|                                                                                         | 2006      | 2006     | 2006    
|US$'s                                                                                    | ($M)      | ($M)     | ($M)    
|Estimated Future Net Revenue at beginning
      of year                                  | 38,250    | 64,566   | 102,816 
|Sales and transfers of oil and gas produced, net of
      production costs and royalties | (10,630)  | (48,616) | (59,246)
|Net change in prices, production costs and
      royalties related to future production  | (27,963)  | (1,341)  | (29,305)
|Changes in previously estimated development costs incurred
      during the period       | 12,160    | 2,629    | 14,789  
|Changes in estimated future development
      costs                                      | (11,967)  | (14,192) | (26,159)
|Extensions and improved recovery                                                         | -         | -        | -       
|Discoveries                                                                              | 22,849    | 17,358   | 40,207  
|Acquisitions of reserves                                                                 | -         | -        | -       
|Dispositions of reserves                                                                 | -         | -        | -       
|Net change resulting from revisions in quantity estimates                                | (4,240)   | 42,326   | 38,087  
|Accretion of discount                                                                    | 3,978     | 5,914    | 9,892   
|Net change in income taxes                                                               | 9,767     | -        | 9,767   
|Other (value of production in disposed and
      acquired properties, changes in         |           |          |         
|timing of future production)                                                             | 3,825     | 1,137    | 4,961   
|                                                                                         |           |          |         
|Estimated Future Net Revenue at end of year                                              | 36,029    | 69,781   | 105,810 

Note:

|(1) | In Canada values were converted to US currency using the
      following currency exchange rates: December 31, 2005 at 1.1630 $US/$Cdn,
      December 31, 2006 at 1.1654 $US/$Cdn. Sale and transfers of oil and gas
      produced, net of production costs and royalties at Booked values for the
      year end at the 2006 year average exchange rate of 1.1343 $US/$Cdn for all
      other changes.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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 Liquids
|------- | -------------------------- | ------------- | -------------------
|Year    | (MBbl)                     | (MMcf)        | (MBbl)             
|        |                            | Cumulative at | First              
|        | First Attributed           | Year End      | Attributed         
|        |                            |               |                    
|2003(1) | -                          | -             | 1,422              
|2004(2) | 1,554                      | 1,554         | 1,758              
|2005(3) | 1,655                      | 1,655         | 2,570              
|2006(4) | 917                        | 2,293         | 42                 

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                                                                                                                                                                                                                                                                                     

---

40

|    | 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.                                                                                                                                                                                                                                                                                                       
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(4) | In 2006, 99% of the Proved Undeveloped light oil was
        assigned to Yemen with two horizontal development wells planned in the
        An Nagyah field along with gas cycling for liquids recovery at An Nagyah,
        liquids recovery from the An Naeem gas pool and a re-entry well at Osaylan.
        The remainder is for a Wabamun oil development well at Nevis. All the
        Proved Undeveloped gas and liquid reserves were assigned to Canada at
        Morningside for Horseshoe Canyon coal bed methane development and at Nevis
        for Wabamun solution gas.

Probable Undeveloped Reserves

|        | Light and Medium Oil | Natural Gas   | Natural Gas Liquids
|------- | -------------------- | ------------- | -------------------
|Year    | (MBbl)               | (MMcf)        | (MBbl)             
|        | First                | Cumulative at | First              
|        | Attributed           | Year End      | Attributed         
|        |                      |               |                    
|2002    |                     |              |                   
|2003(1) | 2,342                | 2,342         | 1,328              
|2004(2) | 1,111                | 1,111         | 256                
|2005(3) | 365                  | 365           | 593                
|2006(4) | 590                  | 991           | 93                 

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.                                                                                                                                            
|(4) | In 2006, 96% of Probable Undeveloped light oil reserves
      were assigned to Yemen consisting of one vertical well at Tasour, one
      vertical well at Godah and probable components assigned to the proved
      undeveloped projects including two horizontal An Nagyah wells, gas cycling
      for liquids recovery at An Nagyah, liquids recovery from the An Naeem gas
      pool and the re- entry well at Osaylan. The remainder is assigned to two
      Wabamun oil wells at Nevis. All the Probable Undeveloped gas and liquids
      reserves were assigned to Canada, specifically, two Wabamun gas wells at
      Nevis.

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, 2006. All of the
Company's wells are located onshore.

|                | Oil Wells |               | Natural Gas Wells |              
|--------------- | --------- | ------------- | ----------------- | -------------
|                | Producing | Non-Producing | Producing         | Non-Producing
|                | Gross     | Net           | Gross             | Net          
|                |           |               |                   |              
|Yemen           | 31        | 6.1           | 7                 | 1.4          
|Canada, Alberta | 11        | 7.7           | 6                 | 5.5          
|Total           | 42        | 13.8          | 13                | 6.9          

---

41

Properties with no Attributable Reserves

The following table sets out the Company's developed and
undeveloped land holdings as at December 31, 2006.

|                | Developed Acres | Undeveloped Acres | Total Acres
|--------------- | --------------- | ----------------- | -----------
|                | Gross           | Net               | Gross      
|Yemen*          | 30,080          | 6,016             | 1,296,424  
|Canada, Alberta | 27,266          | 17,620            | 62,823     
|Egypt           | -               | -                 | 5,500,000  
|Total           | 57,346          | 23,636            | 6,859,247  

*Note that Yemen undeveloped land includes 445,500 gross
(126,015 net) acres on Blocks 75 and 84 that still requires final government
approval and ratification which is expected in 2007.

Of the Company's undeveloped land, the rights to explore,
develop and exploit 3,490 gross (800 net) acres may expire in Canada by December
31, 2007.

The Company does not have any work commitments associated with
its undeveloped lands in Blocks 32 and S-1in Yemen or in Canada.

In Yemen, the Company has a work commitment of $4 million gross
($1.32 million net) in Phase 1 (30 months expiring January 12th,
2008) on Block 72. Pursuant to the bid awarded for Block 75, Yemen, the
Contractor (Joint Venture Partners) has a commitment of $7 million gross ($1.75
million to TransGlobe) for the signature bonus and first exploration period work
period (36 months). The commitment will commence when the PSA has been approved
and ratified by the government of Yemen, anticipated to occur during 2007.
Pursuant to the bid awarded for Block 84, Yemen, the Contractor (Joint Venture
Partners) has a minimum commitment of $20.1 million gross ($6.63 million to
TransGlobe) for the signature bonus and first exploration work period (42
months). The commitment will commence when the PSA has been approved and
ratified by the government of Yemen, anticipated to occur in 2007.

In Egypt, the Company has work commitments of $4 million gross
($2.4 million net) in the first extension period (three years expiring July 16,
2009) for Nuqra Block #1.

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).
- In January 2007, the Company entered into a physical contract to sell 2,500
    GJ per day of natural gas in Canada from April 1, 2007 to October 31, 2007
    for C$6.97/GJ.

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 82 (58.8 net) wells totalled $1,996 thousand undiscounted,
or $903 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 $303 thousand undiscounted, or $270 thousand discounted at
10%, are scheduled during the next three years (2007-2009).

Tax Horizon

In 2006, the Company did not pay any income taxes in
Canada.

---

42

TransGlobe does not expect to pay income taxes in Canada in the
near future, assuming the Company incurs further Canadian exploration expense
and Canadian development expense and utilizes such tax pools and carry forward
tax pools of Cdn $53 million available to protect future revenue.

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, 2006:

|                           | Canada  | Yemen          | Egypt         | Total         
|-------------------------- | ------- | -------------- | ------------- | --------------
|($ thousands)              |         |                |               |               
|Property acquisition costs |         |                |               |               
|Proved properties          | $ -     | $ -            | $ -           | $ -           
|Undeveloped properties     | 2,015   | 250            | -             | 2,265         
|Exploration costs          | 1,721   | 8,492          | 4,294         | 14,507        
|Development costs          | 15,137  | 17,224         | -             | 32,361        
|Corporate and other        | 666     | 688            | 1,034         | 2,388         
|Total                      | $19,605 | $
      26,654 | $
      5,328 | $
      51,587

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, 2007 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      | Yemen      |            |             |             |        
|-------------------------- | ---------- | ---------- | ---------- | ----------- | ----------- | -------
|                           | Block 32   | Block S-1  | Canada     |             | Canada      | Total  
|                           | Light and  | Light and  | Light and  | Canada      | Natural Gas | Company
|                           | Medium Oil | Medium Oil | Medium Oil | Natural Gas | Liquids     | BOE    
|                           | Gross      | Gross      | Gross      | Gross       | Gross       | Gross  
|                           | (bbls/d)   | (bbls/d)   | (bbls/d)   | (Mcf/d)     | (bbls/d)    | (BOE/d)
|Proved Producing           | 975        | 2,501      | 208        | 5,537       | 130         | 4,737  
|Proved Developed           |            |            |            |             |             |        
|Non-Producing              | 0          | 121        | 18         | 1,649       | 27          | 441    
|Proved Undeveloped         | 0          | 121        | 14         | 27          | 1           | 140    
|Total Proved               | 975        | 2,742      | 240        | 7,214       | 158         | 5,318  
|Total Probable             | 44         | 101        | 20         | 953         | 14          | 339    
|Total Proved Plus Probable | 1,019      | 2,844      | 260        | 8,167       | 173         | 5,657  

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, 2006:

|Yemen:               |             | Gross       |       |             | Net         |      
|-------------------- | ----------- | ----------- | ----- | ----------- | ----------- | -----
|                     | Exploration | Development | Total | Exploration | Development | Total
|Natural Gas          | 1           | -           | 1     | 0.3         | -           | 0.3  
|Crude Oil            | 3           | 7           | 10    | 0.5         | 1.3         | 1.8  
|Dry and Abandoned(1) | 1           | -           | 1     | 0.3         | -           | 0.3  
|Total                | 5           | 7           | 12    | 1.1         | 1.3         | 2.4  
|                     |             |             |       |             |             |      
|                     |             |             |       |             |             |      
|Canada:              |             | Gross       |       |             | Net         |      
|                     | Exploration | Development | Total | Exploration | Development | Total
|Natural Gas          | 3           | 16          | 19    | 1.5         | 14.0        | 15.5 
|Crude Oil            | 1           | 4           | 5     | 0.5         | 3.3         | 3.8  
|Dry and Abandoned(1) | 1           | 1           | 2     | 0.5         | 1.0         | 1.5  
|Total                | 5           | 21          | 26    | 2.5         | 18.3        | 20.8 

---

43

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.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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:

|                                          |         | 2006          |        
|----------------------------------------- | ------- | ------------- | -------
|                                          |         | Quarter Ended |        
|                                          | Mar. 31 | Jun. 30       | Sep. 30
|Average Daily Sales Volumes               |         |               |        
|Yemen                                     |         |               |        
|Light and Medium Crude
      Oil (bbls/d) | 3,541   | 4,443         | 3,986  
|Canada                                    |         |               |        
|Light and Medium Crude
      Oil (bbls/d) | 116     | 137           | 136    
|Gas (Mcf/d)                               | 4,260   | 4,408         | 3,975  
|NGL (bbls/d)                              | 149     | 207           | 168    
|Combined(BOE/d)                           | 4,515   | 5,522         | 4,952  
|                                          |         |               |        
|Average Price Received                    |         |               |        
|Yemen                                     |         |               |        
|Light and Medium Crude Oil ($/bbl)        | 59.64   | 67.05         | 66.88  
|Canada                                    |         |               |        
|Light and Medium Crude Oil ($/bbl)        | 53.00   | 64.35         | 65.66  
|Gas ($/Mcf)                               | 6.63    | 5.83          | 5.38   
|NGL ($/bbl)                               | 45.37   | 51.54         | 55.66  
|Combined($/BOE)                           | 55.93   | 62.17         | 61.88  
|                                          |         |               |        
|Royalties                                 |         |               |        
|Yemen                                     |         |               |        
|Light and Medium Crude
      Oil ($/bbl)  | 21.17   | 29.65         | 24.68  
|Canada                                    |         |               |        
|Light and Medium Crude
      Oil ($/bbl)  | 4.65    | 7.95          | 8.11   
|Gas ($/Mcf)                               | 1.23    | 0.76          | 0.70   
|NGL ($/bbl)                               | 11.70   | 13.01         | 15.40  
|Combined($/BOE)                           | 18.27   | 25.15         | 21.17  
|                                          |         |               |        
|Operating Expenses                        |         |               |        
|Yemen                                     |         |               |        
|Light and Medium Crude Oil ($/bbls)       | 3.81    | 4.85          | 5.67   
|Canada                                    |         |               |        
|Light and Medium Crude Oil ($/bbls)       | 15.08   | 20.93         | 19.11  
|Gas ($/Mcf)                               | 1.21    | 1.42          | 1.22   
|NGL ($/bbls)                              | -       | -             | -      
|Combined($/BOE)                           | 4.51    | 5.56          | 6.06   
|                                          |         |               |        
|Netback Received                          |         |               |        
|Yemen                                     |         |               |        
|Light and Medium Crude
      Oil ($/bbl)  | 34.66   | 32.55         | 36.53  
|Canada                                    |         |               |        
|Light and Medium Crude
      Oil ($/bbl)  | 33.27   | 35.47         | 38.45  
|Gas ($/Mcf)                               | 4.19    | 3.64          | 3.46   
|NGL ($/bbl)                               | 33.67   | 38.54         | 40.27  
|Combined($/boe)                           | 33.15   | 32.46         | 34.64  

---

44

The following table indicates the Company's average daily sales
volumes from its important fields for the year ended December 31, 2006.

|          | Light and    |         |          |        
|--------- | ------------ | ------- | -------- | -------
|          | Medium Crude | Gas     | NGL's    | boe    
|          | (bbls/d)     | (Mcf/d) | (bbls/d) | (boe/d)
|          |              |         |          |        
|Yemen     |              |         |          |        
|Block 32  | 1,429        | -       | -        | 1,429  
|Block S-1 | 2,617        | -       | -        | 2,617  
|Block 72  | -            | -       | -        | -      
|Egypt     | -            | -       | -        | -      
|Canada    | 149          | 4,204   | 182      | 1,031  
|          |              |         |          |        
|Total     | 4,149        | 4,204   | 182      | 5,077  

CONTINGENT RESOURCES

DeGolyer MacNaughton Canada Limited ("DeGolyer") was retained
by TransGlobe to complete an independent estimate of CBM resource potential on
Company owned lands in Canada, effective December 31, 2006.

The contingent resources were evaluated using probabilistic
analysis of certain parameters related to the quantity of petroleum present
and recoverable in discovered accumulations. The discovered accumulations
may be developed in the future depending on economic and market conditions,
additional well data, or seismic information.

Working Interest Share of Contingent Resources*
Potentially Recoverable from known Accumulations Central Alberta,
Canada

Formation
    Low Estimate
    Median Estimate
    High Estimate
    Best EstimateHorseshoe Canyon
    
    
    
    20.7 BcfMannville
    
    
    
    139.1 BcfTotal
    105.7 Bcf
    154.0 Bcf
    224.3 Bcf
    160.8 Bcf


* The definitions of contingent resources applied are in
agreement with the petroleum resources definitions approved in February 2000 by
the Society of Petroleum Engineers, the World Petroleum Congresses and the
American Association of Petroleum geologists. Because of the uncertainty of
commerciality,the contingent resources estimated cannot be classified
as reserves.The contingent resource estimates in the report are
provided as a means of comparison to other contingent resources and do not
provide a means of direct comparison to the reserves.

The estimates of potentially recoverable petroleum resources
in the report are expressed using the terms low estimate, median estimate, best
estimate, and high estimate to reflect the range of uncertainty.

- The "low estimate" reported is the P90 quantity derived from the probabilistic
    analysis. This means that there is at least a 90 percent probability
    that, assuming the accumulation is discovered and developed, the quantities
    actually recovered will equal or exceed the low estimate.
- The "median estimates" is the P50 quantity derived from probabilistic
    analysis. This means that there is at least a 50 percent probability
    that, assuming the accumulation is discovered and developed, the quantities
    actually recovered will equal or exceed the median estimate.
- The "high estimate is the P10 quantity derived from the probabilistic
    analysis. This means that there is at least a 10 percent probability
    that, assuming the accumulation is discovered and developed, the quantities
    actually recovered will equal or exceed the high estimate.
- The "best estimate" is the expected value, an outcome of the probabilistic
    analysis.

---

45

The contingent resource estimated in the report, is defined
as that quantity of gas estimated on a given date to be potentially recoverable
from known accumulations but is not currently economic. There is no certainty
that it will be economically viable or technically feasible to produce any
portion of the resource.

These resources are categorized by DeGolyer as contingent
resources which are defined in the COGE Handbook. This definition states that
contingent resources are not currently economic or lack a market. TransGlobe
believes that there is a market for these resources however, the economics of
the resources have not been determined at this time.

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 15, 2007, there were 59,542,439 Common
Shares issued and outstanding. In addition, as at such date, there were an
aggregate of 5,954,244 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 Business
Corporations Act (Alberta), the Board is authorized to fix, before the issue
thereof, the designation, rights, privileges, restrictions and condition
attaching thereto.

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.

---

46

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
    Volume2006January
    6.95
    5.80
      97,900February
    7.35
    6.0
      70,100March
    7.11
    6.0
      35,200April
    7.10
    6.10
      49,200May
    6.79
    5.34
      25,300June
    5.90
    4.50
      17,800July
    5.73
    4.95
      21,400August
    5.66
    5.12
      18,900September
    5.83
    5.02
      9,200October
    5.60
    4.65
      20,600November
    6.20
    5.15
      23,200December
    6.36
    5.62
      28,500


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
    Volume2006January
    6.12
    4.97
    332,000February
    6.35
    5.15
    424,700March
    6.22
    5.23
    265,600April
    6.20
    5.21
    285,300May
    6.08
    4.75
    201,800June
    5.39
    4.13
    157,100July
    5.30
    4.50
    118,600August
    5.05
    4.54
    141,700September
    5.20
    4.50
    150,500October
    4.93
    4.20
    161,800November
    5.30
    4.52
    182,400December
    5.59
    4.85
    175,100


ESCROWED SECURITIES

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

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 21, 2007 is as
follows:

---

47

|                                                              |                                                                                     |             | 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        | 634,000 (5)
      (1.06%)   | 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        | 2,328,772 (6)
      (3.90%) | 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        | 763,100 (7) (1.28%)         | 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) (0.53%)         | 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        | 195,000 (9)
      (0.33%)   | 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        | 350,000(11)
      (0.59%)   | Chartered accountant with over 24 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.                                                                                                                         

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.                     

---

48

|(5)  | Mr. Halpin also holds incentive stock options to purchase
      134,000 Common Shares consisting of: options 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 186,000 Common Shares consisting of: options 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 166,000 Common Shares consisting of: options 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
      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.                                                                                          
|(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 156,000 Common Shares consisting of: options to purchase 90,000
      Common Shares at Cdn$3.26 per share expiring March 15, 2009 and to
      purchase 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 is as at the date hereof, or has been, within 10
years of the date hereof, a director or executive officer of any company,
including the Corporation, that while that person was acting in that
capacity:

| | (a) | was 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;                                                                                                                                                         
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                             
| | (b) | 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 within a year of that person ceasing to act in that
capacity,

| | (c) | became bankrupt, made a proposal under any legislation
      relating to bankruptcy or insolvency or was subject to or instituted any
      proceedings, arrangement or comprise with creditors, or had a receiver,
      receiver manager or trustee appointed to hold its assets; or                                                                                                                            
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (d) | has, within the 10 years before the date of this
      Information Circular, become bankrupt, made a proposal under any
      legislation relating to bankruptcy or insolvency, or become subject to or
      instituted any proceeding, arrangement or compromise with creditors or had
      a receiver, receiver manager or trustee appointed to hold the assets of
      the director, officer or shareholder.

In addition, no director has had any penalties or sanctions
imposed against him or entered into any settlement agreement in respect of any
penalties or sanctions imposed by a court relating to securities legislation or
by a securities regulatory authority, including a settlement agreement with a
securities regulatory authority, or any other penalties or sanctions imposed by
a court or regulatory body.

---

49

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 24 full-time employees and 15
part-time consultants. The Company intends to add additional professional and
administrative staff as the needs arise.

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. 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 Company 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, Deloitte & Touche LLP, Chartered Accountants,
  are the Company's auditors and as such have prepared an opinion with respect
  to the Company's consolidated financial statements as at and for the fiscal
  year ended December 31, 2006. Deloitte & Touche LLP is independent in accordance
  with the Rules of Professional Conduct of the Institute of Chartered Accountants
  of Alberta.

LEGAL PROCEEDINGS AND REGULATORY ACTIONS

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. In addition there were no penalties or sanctions imposed
against the Company by a court relating to securities legislation or by a
securities regulatory authority during the 2006 financial year, no other
penalties or sanctions imposed by a court or regulatory body against the Company
that would likely be considered important to a reasonable investor in making an
investment decision, and no settlement agreements entered into by the Company
with a court relating to securities legislation or with a securities regulatory
authority during the 2006 financial year.

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.

TRANSFER AGENT AND REGISTRAR

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.

---

50

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.

|                                         |             | Financially |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|---------------------------------------- | ----------- | ----------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Name and
      Place of Residence        | Independent | Literate    | Relevant Education
      and Experience                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                         |             |             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|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.
|                                         |             |             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|Geoffrey C. Chase 
      Alberta, Canada | Yes         | Yes         | Mr. Chase received a B.Sc. in Applied Science 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.                                                             
|                                         |             |             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|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.                                                                

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           | 2006        | Cdn$177,844       | 2006 corporate year-end and SOX testing             
|                     | 2005        | Cdn$74,360        | 2005 corporate year-end audit and SOX audit planning
|                     |             |                   |                                                     
|Audit  Related Fees | 2006        | Cdn$30,330        | 2006 quarterly reviews                              
|                     | 2005        | Cdn$29,537        | 2005 Quarterly reviews and review of SEC letter     

---

51

|               | Fiscal Year |                   |                                                                                          
|-------------- | ----------- | ----------------- | -----------------------------------------------------------------------------------------
|               | Ended       | Aggregate         |                                                                                          
|Type of Fees   | December 31 | Fees
      Billed | Nature of Services
      Performed                                                       
|               |             |                   |                                                                                          
|               |             |                   |                                                                                          
|Tax Fees       | 2006        | Cdn$5,937         | 2005 corporate tax returns and tax compliance                                            
|               | 2005        | Cdn$5,622         | 2004 corporate tax returns and tax compliance                                            
|               |             |                   |                                                                                          
|All other fees | 2006        | Cdn$38,877        | Annual subscription to Petroview, a software program for oil
      and gas reconnaissance
|               | 2005        | Cdn$ -            | -                                                                                        

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

---

52

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; 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.

---

53

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.

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.

---

54

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.

Kyoto Protocol

In December 2002, the Government of Canada ratified and signed
the Kyoto Protocol (see "Industry Conditions Environmental Regulation"). As a
result of the ratification of the Kyoto Protocol and the adoption of legislation
or other regulatory initiatives designed to implement its objectives by the
federal or provincial governments, reductions in greenhouse gases from crude oil
and natural gas producers may be required which could result in, among other
things, increased operating and capital expenditures for producers (including
the Company) which may make certain production of crude oil and natural gas by
those producers uneconomic, resulting in reductions in such production. Until
such legislation or other regulatory initiatives are finalized, the impact of
the Kyoto Protocol and any such legislation adopted as a result of its
ratification remains uncertain. The direct or indirect costs of such legislation
or regulatory initiatives may adversely affect the business of the Company.

Exchange Rate Risks

The Canadian to U.S. dollar exchange rate has strengthened 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.

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.

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55

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.

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 pro-rationing 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.

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56

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 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.

The Canadian federal corporate income tax rate levied on
taxable income is 22.1% effective January 1, 2007 for active business income
including resource income. With the elimination of the corporate surtax
effective January 1, 2008 and other rate reductions introduced in the 2006
Federal Budget, the federal corporate income tax rate will decrease to 19% in
three steps: 20.5% on January 1, 2008, 20% on January 1, 2009 and 19% on January
1, 2010.

Alberta

In Alberta, companies are granted the right to explore, produce
and develop petroleum and natural gas resources in exchange for royalties, bonus
bid payments and rents. Currently, the amount of royalties that are payable is
influenced by the oil production, density of the oil, and the vintage of the
oil. Originally, the vintage classified oil in "new oil" and

---

57

"old oil" depending on when the oil pools were discovered. If
discovered prior to March 31, 1974 it is considered "old oil", if discovered
after March 31, 1974 and before September 1, 1992, it is considered "new oil".
The Alberta government introduced in 1992 a Third Tier Royalty with a base rate
of 10% and a rate cap of 25% for oil pools discovered after September 1, 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%.

The royalty reserved to the Crown in respect of natural gas
production, subject to various incentives, is 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 metres 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.

Regulations made pursuant to the Mines and Minerals Act
(Alberta) provided various incentives for exploring and developing oil reserves
in Alberta. However, the Alberta Government announced in August of 2006 that
four royalty programs were to be amended, a new program was to be introduced and
the Alberta Royalty Tax Credit Program ("ARTC") was to be eliminated,
effective January 1, 2007. The programs affected by this announcement are: (i)
Deep Gas Royalty Holiday; (ii) Low Productivity Well Royalty Reduction; (iii)
Reactivated Well Royalty Exemption; and (iv) Horizontal Re-Entry Royalty
Reduction. The program being introduced is the Innovative Energy Technologies
Program (the "IETP"), which is intended to promote the producers'
investment in research, technology and innovation for the purposes of improving
environmental performance while creating commercial value. The IETP provides
royalty reductions which are presumed to reduce financial risk. Alberta Energy
will be the one to decide which projects qualify and the level of support that
will be provided. The deadline for the IETP's third round of applications is May
31, 2007.

On February 16, 2007, the Alberta Government announced that a
review of the province's royalty and tax regime (including income tax and
freehold mineral rights tax) pertaining to oil, gas and oil sands will be
conducted by a panel of experts, with the assistance of individual Albertans and
key stakeholders. The purpose of this process is to ensure that Albertans are
receiving a fair share from energy development through royalties, taxes and
fees. The issues to be reviewed during this examination process are: (i)
undertaking a comparison of Alberta's royalty system to other oil and gas
producing jurisdictions, taking into account investment economics and industry
returns and risks in Alberta; (ii) whether Alberta's royalty system is
sufficiently sensitive to market conditions; (iii) whether the current revenue
minus cost system for oil sands royalties is optimal; (iv) which programs built
into the existing royalty system should be retained or strengthened, and which
should be adapted or eliminated; (v) how the tax treatment of the oil and gas
sector compares to other sectors and jurisdictions; (vi) the economic and fiscal
impacts of any possible changes to the royalty and corporate tax structures; and
(vii) how existing resource development should be treated if changes are to be
made to the fiscal regime. The review panel is to produce a final report that
will be presented to the Minister of Finance by August, 31, 2007.

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.

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58

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 to 6% below 1990 "business-as-usual" levels between
2008 and 2012. Given revised estimates of Canada's normal emissions levels, this
target translates into an approximately 40% gross reduction in Canada's current
emissions. It remains uncertain whether the Kyoto target of 6% below 1990
emission levels will be enforced in Canada. The Federal Government has
introduced legislation aimed at reducing greenhouse gas emissions using a
"intensity based" approach, the specifics of which have yet to be determined.
Bill C-288, which is intended to ensure that Canada meets its global climate
change obligations under the Kyoto Protocol, was passed by the House of Commons
on February 14, 2007. As details of the implementation of this legislation have
not yet been announced, the effect of 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 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.

Trends

Certain trends that have been developing in the oil and gas
industry during the past several years appear to be shaping the near future of
the business.

One of the trends is the volatility of commodity prices.
Natural gas is a commodity influenced by factors within North America. A tight
supply-demand balance for natural gas causes significant elasticity in pricing,
whereas higher than average storage levels tend to depress natural gas pricing.
Drilling activity, weather, fuel switching and demand for electrical generation
are all factors that affect the supply-demand balance. Changes to any of these
or other factors create price volatility.

Crude oil is influenced by the world economy and OPEC's ability
to adjust supply to world demand. Recently crude oil prices have been kept high
by political events causing disruptions in the supply of oil, and concern over
potential supply disruptions triggered by unrest in the Middle East. Political
events trigger large fluctuations in price levels.

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59

The impact on the oil and gas industry from commodity price
volatility is significant. During periods of high prices, producers generate
sufficient cash flows to conduct active exploration programs without external
capital. Increased commodity prices frequently translate into very busy periods
for service suppliers triggering premium costs for their services. Purchasing
land and properties similarly increase in price during these periods. During low
commodity price periods, acquisition costs drop, as do internally generated
funds to spend on exploration and development activities. With decreased demand,
the prices charged by the various service suppliers also decline.

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, 2006. 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

.

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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, 2006. The reserves data consist of the following:                                                                                                                                                                                                                                                                                                                                                                                                                   
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | (b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|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, 2006,
      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 | Evaluated                                      | Reviewed
|                      |                          |             | U.S. M$ | U.S. M$                                        | U.S. M$ 
|                      |                          |             |         |                                                |         
|DeGolyer and          | Appraisal Report as of   | Canada      | -       | 69,481                                         |         
|MacNaughton Canada    | December 31, 2006 on     | Yemen       | -       | 78,514                                         |         
|Limited               | Certain Properties owned |             |         |                                                |         
|                      | by TransGlobe Energy     | Total       | -       | 147,995                                        |         
|                      | Corporation dated        |             |         |                                                |         
|                      | February 16, 2007        |             |         |                                                |         

|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.                                                                                                  

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A-2

|7. | Because the reserves data are based on judgements
      regarding future events, actual results will vary and the variations may
      be material
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------

Executed as to our report referred to above:

DeGolyer and MacNaughton Canada Limited, Calgary, Alberta,
dated February 16, 2007.

| | 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, 2006 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, 2006 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          
|                                                     |                                             
|March 27, 2007                                       |                                             

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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 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. In its capacity as a committee of the Board
of Directors, the Audit Committee has the power to determine the amount of
Company funds that are appropriate for payment of (1) compensation to the
Companys independent auditor engaged for the purpose of preparing audit reports
and performing other audit and non-audit services, (2) independent counsel and
other advisers as it determines necessary to carry out its duties and (3)
ordinary administrative expenses as it determines necessary to carry out its
duties. 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 retain and evaluate the independent
auditor, 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 by
    the Board of Directors as having satisfied the independence standards specified
    in all applicable rules of the Canadian provincial securities commissions,
    the U.S. Securities and Exchange Commission (the "SEC") and any securities
    exchange on which the Companys shares are traded, with such affirmation
    disclosed in the Companys Annual Information 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 are able to read and understand fundamental financial statements,
    including the Companys balance sheet, income statement and cash flow
    statement, as required

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C-2

- 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.

RESPONSIBILITIES

The responsibilities of the Audit Committee shall be as
follows:

Frequency of Meetings

- Meet on at least a quarterly basis, either in person or telephonically.
- Meet with the independent auditor on at least a quarterly basis, 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.

Charter Review

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

Advise of Counsel

- The Committee shall receive and review any reports from counsel to the
  Company concerning evidence of any material violation of law by the Company.

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, internal accounting controls and auditing matters. The mechanism
  must include procedures for receiving, 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.

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C-3

- 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 auditor is not engaged for any of the following
    nine types of non-audit services contemporaneous with the audit: 
     
    Bookkeeping or other services related to accounting records or financial
        statements of the Company;
      Financial information systems design and implementation;
      Appraisal or valuation services, fairness opinions, or contributions-in-kind
        reports;
      Actuarial services; o Internal audit outsourcing services;
      Any management or human resources function;
      Broker, dealer, investment advisor, or investment banking services;
      Legal services; and
      Expert services related to the auditing service.
- Bookkeeping or other services related to accounting records or financial
        statements of the Company;
- Financial information systems design and implementation;
- Appraisal or valuation services, fairness opinions, or contributions-in-kind
        reports;
- Actuarial services; o Internal audit outsourcing services;
- Any management or human resources function;
- Broker, dealer, investment advisor, or investment banking services;
- Legal services; and
- 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: 
     
    insuring receipt from the independent auditor of a formal written statement
        delineating all relationships between the independent auditor and the
        Company, consistent with the Independence Standards Board Standard No.
        1 and related Canadian regulatory body standards;
      considering and discussing with the independent auditor any relationships
        or services, including non-audit services, that may impact the objectivity
        and independence of the independent auditor; and
      as necessary, taking, or recommending that the Board of Directors take,
        appropriate action to oversee the independence of the independent auditor.
- insuring receipt from the independent auditor of a formal written statement
        delineating all relationships between the independent auditor and the
        Company, consistent with the Independence Standards Board Standard No.
        1 and related Canadian regulatory body standards;
- considering and discussing with the independent auditor any relationships
        or services, including non-audit services, that may impact the objectivity
        and independence of the independent auditor; and
- as necessary, taking, or recommending that the Board of Directors take,
        appropriate action to oversee the independence of the independent auditor.

Audit Committee Meetings

- The Audit Committee may request the presence of the independent auditor at
  any Audit Committee meeting.

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C-4

- 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.
- Review and discuss with management and the independent auditor at the completion
    of the annual examination: 
     
    the Company's audited financial statements and related notes;
      the Companys MD&A and news releases related to financial results;
      the independent auditor's audit of the financial statements and its
        report thereon;
      any significant changes required in the independent auditor's audit
        plan;
      any non-GAAP related financial information;
      any serious difficulties or disputes with management encountered during
        the course of the audit; and
      other matters related to the conduct of the audit, which are to be
        communicated to the Audit Committee under generally accepted auditing
        standards.
- the Company's audited financial statements and related notes;
- the Companys MD&A and news releases related to financial results;
- the independent auditor's audit of the financial statements and its
        report thereon;
- any significant changes required in the independent auditor's audit
        plan;
- any non-GAAP related financial information;
- any serious difficulties or disputes with management encountered during
        the course of the audit; and
- other matters related to the conduct of the audit, which are to be
        communicated to the Audit Committee under generally accepted auditing
        standards.
- Review, discuss with management and the independent auditor and approve
    annual and interim quarterly financial statements (including related notes
    and MD&A) at the completion of any review engagement or other examination
    and prior to public disclosure. The designated financial expert of the Audit
    Committee may represent the entire Audit Committee for purposes of this review.
- Review and discuss with management and the independent auditor the adequacy
    of the Company's internal control over financial reporting that management
    and the Board of Directors have established and the effectiveness of those
    systems, including, but not limited to, review and discussion of (1) managements
    report on its assessment of the effectiveness of internal control over financial
    reporting as of the end of each fiscal year and the independent auditors
    report on managements assessment and the effectiveness of

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C-5

- 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, prior to filing with regulatory bodies, annual and periodic
  filings with the Canadian provincial securities commissions and the SEC and
  other published documents containing the Company's financial statements.

RISK ASSESSMENT

- Review the Companys policies with respect to risk assessment and risk
  management including, without limitation, environmental risk, insurance
  coverage and the risk of fraud. The Committee also shall discuss the Companys
  major risk exposures and the steps management has taken to monitor and control
  them.

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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