Why TransGlobe Energy Shares Dropped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of TransGlobe Energy  fell 10% today after the oil and gas explorer issued an operations update.

So what: Gross proved oil reserves (1P) fell 3% from a year ago to 31.6 million barrels as of Dec. 31, while proved plus probable plus possible (3P) gross reserves fell 11% to 55.3 million barrels. The present value of 1P reserves fell from $782 million a year ago to $663 million and 3P value dropped from $1.30 billion to $1.05 billion.  

Now what: Oil producers strive to replace the oil they produce in a year and TransGlobe Energy clearly didn't do that in 2013. Shares appear to be a valued at just slightly more than seven times this year's earnings, but with reserves falling this could be a value trap for investors. I'm not buying into this stock even with the discount, particularly with oil prices trending lower recently.

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The article Why TransGlobe Energy Shares Dropped originally appeared on Fool.com.

Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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