In this Quarterly Report on Form 10-Q, references to "we," "our," "us" or the "Company," refer to TransAtlantic Petroleum Ltd. and its subsidiaries on a consolidated basis unless the context requires otherwise. Unless stated otherwise, all sums of money stated in this Quarterly Report on Form 10-Q are expressed in U.S. Dollars.

Executive Overview

We are an international oil and natural gas company engaged in acquisition, exploration, development and production. We have focused our operations in countries that are net importers of petroleum, have an existing petroleum transportation infrastructure and provide favorable commodity pricing, royalty and tax rates to exploration and production companies. We hold interests in developed and undeveloped oil and natural gas properties in Turkey, Bulgaria and Romania. As of March 31, 2012, approximately 40% of our outstanding common shares were beneficially owned by N. Malone Mitchell, 3rd, the chairman of our board of directors and chief executive officer.

Financial and Operational Performance Highlights. Highlights of our financial performance and operational performance for the first quarter of 2012 include:

• During the quarter ended March 31, 2012, we derived 69.5% of our revenues from the production of oil and 29.7% of our revenues from the production of natural gas.

• Total oil and natural gas revenues increased 20.9% to $34.7 million for the quarter ended March 31, 2012 from $28.7 million realized in the same period in 2011. The increase was the result of an increase in production volumes, offset by a decline in our average sales price.

• Production increased to approximately 224 net thousand barrels (Mbbls) of oil and approximately 1,367 net million cubic feet (Mmcf) of natural gas for the first quarter of 2012, compared to approximately 219 net Mbbls of oil and 803 net Mmcf of natural gas for the same period in 2011.

• As of March 31, 2012, we produced an aggregate of approximately 2,337 net barrels (Bbls) oil per day and approximately 13.2 net Mmcf of natural gas per day.

• For the quarter ended March 31, 2012, we incurred $14.2 million in capital expenditures, compared to capital expenditures of $17.8 million for the quarter ended March 31, 2011. The decrease in capital expenditures was primarily due to the acquisition of Direct Petroleum Morocco, Inc. ("Direct Morocco"), Anschutz Morocco Corporation ("Anschutz") and Direct Petroleum Bulgaria EOOD ("Direct Bulgaria") in the first quarter of 2011.

• As of March 31, 2012, our short-term borrowings were $88.5 million, compared to short-term borrowings of $80.7 million as of December 31, 2011.

Recent Developments

Sale of Viking International and Viking Geophysical. On March 15, 2012, we signed a stock purchase agreement to sell our oilfield services business, which is substantially comprised of our wholly owned subsidiaries Viking International Limited ("Viking International") and Viking Geophysical Services, Ltd. ("Viking Geophysical" and collectively, "Viking"), to Dalea Partners, LP ("Dalea", an affiliate of Mr. Mitchell) for an aggregate purchase price of $164.0 million, consisting of $152.5 million in cash, subject to a net working capital adjustment, and a $11.5 million promissory note from Dalea. The promissory note will be payable five years from the date of issuance or earlier upon the occurrence of certain specified events, will bear interest at a rate of 3.0% per annum and will be guaranteed by Mr. Mitchell. Contractually, the effective date of the sale of Viking will be April 1, 2012, regardless of when the actual closing occurs. The closing is anticipated to occur during the second quarter of 2012. The sale of Viking is subject to the approval of regulatory authorities, the receipt of equity financing by Dalea and other customary closing conditions. For additional information concerning the stock purchase agreement, see "Part I, Item 1. Business-Divestiture of Our Oilfield Services Business" in our Annual Report on Form 10-K for the year ended December 31, 2011.

Dalea Credit Facility. On March 15, 2012, we entered into a $15.0 million credit facility with Dalea to provide us with additional liquidity for general corporate purposes until we complete the sale of Viking. Loans under the credit facility accrue interest at a rate of three-month London Interbank Offered Rate ("LIBOR") plus 5.5% per annum. Any proceeds received by us or any subsidiary from any debt financings (subject to certain specified exceptions) or from the sale of Viking, net of reasonable transaction and financing costs, must be used to repay amounts outstanding under the credit facility. Any outstanding borrowings under the credit facility must be repaid upon the earlier of
(i) July 1, 2012 or (ii) the sale of Viking. As of March 31, 2012, we had borrowed $11.0 million under the Dalea credit facility.

Ban on Fracture Stimulation in Bulgaria. On January 18, 2012, the Bulgarian Parliament enacted legislation that was intended to ban fracture stimulation in the Republic of Bulgaria. As long as this legislation remains in effect, our exploration, development and production activities in Bulgaria will be significantly constrained.

Changes in Executive Management. On January 5, 2012, our board of directors appointed Mustafa Yavuz as our chief operating officer.

First Quarter 2012 Operational Update

During the first quarter of 2012, we continued to develop our Selmo and Arpatepe oil fields in southeastern Turkey and our Thrace Basin natural gas fields in northwestern Turkey, including the natural gas fields acquired in the acquisition of Thrace Basin Natural Gas (Turkiye) Corporation ("TBNG"). In addition, we continued to expand our inventory of exploration opportunities with new prospects identified on recently completed 3D seismic surveys. We achieved positive results on recent fracture stimulation ("frac") jobs in the Thrace Basin and produced approximately 99 Mmcf of gross incremental production as a result of the frac jobs performed during the first quarter of 2012. As of March 31, 2012, the gross incremental production rate from these frac jobs was approximately 2.2 Mmcf of natural gas per day.

Production. For the quarter ended March 31, 2012, we produced an average of approximately 2,462 net Bbls of oil per day and approximately 15.0 net Mmcf of natural gas per day.

Turkey-Thrace Basin. Following the acquisition of TBNG in June 2011, we accelerated plans for exploration and development of TBNG's acreage. Our immediate emphasis was on identifying low-cost, high-yield conventional potential in existing wellbores. In the first quarter of 2012, we recompleted six existing wellbores on our TBNG acreage, adding production of approximately 1.4 net Mmcf of natural gas per day. This program has been the primary contributor in offsetting normal field decline rates.

As of March 31, 2012, we had $7.0 million of exploratory well costs capitalized for the Pancarkoy-1 well, which we began drilling in the fourth quarter of 2010. After the second fracture stimulation, commercial natural gas production could not be sustained due to the high amount of water production when the well was placed on production. A third fracture stimulation was performed in April 2012, but commercial production could not be sustained due to high water production. We have identified at least two more sands within the Mezardere formation that we expect to test initially by conventional means. These sands possess different, more favorable reservoir properties than the previous targets and have strong indicators of natural gas. We expect to commence testing late in the second quarter of 2012, and further fracture stimulation will depend on the outcome of the conventional test results.

We continue to identify and prioritize existing TBNG wellbores for fracture stimulation. Furthermore, we have begun evaluating existing wellbores to select our first set of multi-stage fracture stimulation candidates. We will continue our fracture stimulation campaign in the Thrace Basin by stimulating both existing wellbores and newly drilled wells, which target unconventional horizons identified by integrating our geological and engineering studies with our knowledge gained through stimulating existing wellbores in our previous re-entry campaigns.

Southeastern Turkey.

• Selmo. We completed two wells and began drilling four additional wells during the first quarter of 2012.

• Arpatepe. In the first quarter of 2012, we spud one new well and continued drilling a well spud in December 2011. The Arpatepe-6 well was drilled in January 2012, and we expect to complete both the Arpatepe-5 and Arpatepe-6 wells in the second quarter of 2012.

• Molla. We completed the Goksu-2 appraisal well in February 2012 with an initial flow rate of approximately 400 Bbls per day. We commenced drilling the Bahar-1 well in March 2012, with plans to test both the Mardin and Bedinan formations as well as the Dadas shale. Following the drilling of the Bahar-1 well, we plan to drill the Goksu-3H well in the second quarter of 2012. We believe this well will be the first horizontal well to test the fractured Mardin carbonate formations found in this region.

Central Basins. We have substantial exploration acreage in central Turkey. In February 2012, we entered into an agreement with Shell Upstream Turkey BV ("Shell") pursuant to which Shell agreed to co-fund the acquisition of 1,000 kilometers of 2D seismic data and approximately 8,000 kilometers of airborne gravity gradiometry and magnetic data in Turkey's Sivas Basin, where we hold exploration licenses covering approximately 1.6 million acres. The agreement provides an option for Shell to farm-in to the exploration licenses after it assesses the data collected. Up to two initial exploration wells may be drilled in 2013 in accordance with the underlying work commitments for the Sivas Basin exploration licenses.

Bulgaria. As a result of the legislation that was intended to ban fracture stimulation in the Republic of Bulgaria, we have temporarily suspended drilling and completion operations for the Deventci-R2 and Peshtene-R11 wells. Although we expect the Bulgarian government to clarify the legislation to allow for conventional drilling and to institute a set of procedures regulating the fracture stimulation of wells, we cannot be certain when or if this will occur. In the meantime, we and our partner, LNG Energy, Ltd. ("LNG"), are evaluating core data gathered while drilling the Peshtene-R11 well and developing a conventional completion program for the well.

Romania. We and the operator of the Sud Craiova license, Sterling Resources, Ltd. ("Sterling"), have committed to participate in a 200-kilometer 2D seismic survey on the Sud Craiova license, which we plan to complete by the end of 2012.

Planned Operations

We continue to actively explore and develop our existing oil and natural gas properties in Turkey and evaluate opportunities for further activities in Bulgaria and Romania. Our success will depend in part on discovering additional hydrocarbons in commercial quantities and then bringing these discoveries into production. For the remainder of 2012, we are focused on accomplishing the following objectives:

• Expand Fracture Stimulation Program. In the fourth quarter of 2011, our Thrace Basin fracture simulation program brought positive results and provided important lessons regarding fracture stimulation design. We plan to expand our application of fracture stimulation techniques to additional properties in the Thrace Basin. We plan to continue our exploration of the deep, unconventional opportunities in the Thrace Basin, and we plan to drill and test the Dadas shale formation underlying several of our licenses in southeastern Turkey. We anticipate that employing fracture stimulation techniques will result in the development of production and reserves that would have not been commercial otherwise.

• Reduce Exploration Risk Through Partnerships. In an effort to increase the pace of exploration activity, share exploration risk, and reduce our share of the capital commitments necessary to carry forward the exploration of our extensive acreage position, we are currently seeking joint venture partners for our exploration acreage in Bulgaria, Romania and Turkey and plan to continue this effort during the remainder of 2012.

• Complete the Sale of Viking. We expect to complete the sale of Viking in the second quarter of 2012.

Capital expenditures for the remainder of 2012 are expected to range between $100.0 million and $110.0 million. Approximately 55% of these anticipated expenditures will occur in the Thrace Basin in Turkey, devoted to developing conventional and unconventional natural gas production, building infrastructure and acquiring seismic data. Most of the remaining 45% of these anticipated expenditures will occur in southeastern Turkey, devoted to drilling developmental and exploratory oil wells at Selmo, Arpatepe, Molla and Bakuk. If cash on hand, borrowings from our amended and restated senior credit facility (the "Amended and Restated Credit Facility") with Standard Bank Plc ("Standard Bank") and BNP Paribas (Suisse) SA ("BNP Paribas"), our credit facility with Dalea and cash flow from operations are not sufficient to fund our capital expenditures, then we will either curtail our discretionary capital expenditures or seek other funding sources. If we successfully complete the sale of our oilfield services business, we may use a portion of the net proceeds to pay down our Amended and Restated Credit Facility, thereby increasing our capacity to fund capital expenditures. Our projected 2012 capital expenditure budget is subject to change and could be reduced if we do not raise additional funds.

We currently plan to execute the following drilling and exploration activities in the remainder of 2012:

Turkey. We plan to drill approximately 65 gross wells during the remainder of 2012, of which 21 will be fracture stimulated. In addition, we plan to fracture stimulate another 16 existing wellbores and perform conventional uphole recompletions in 25 existing wellbores on our Thrace Basin properties. We also plan to construct the infrastructure necessary to produce and sell oil and natural gas from the productive wells we drill.

Bulgaria. We plan to complete our evaluation of the Peshtene-R11 exploration well core data and develop a conventional completion program for the well.

Romania. We plan to complete a 200-kilometer 2D seismic survey on the Sud Craiova license by the end of 2012.

Discontinued Operations in Morocco

On June 27, 2011, we decided to discontinue our Moroccan operations. We are in the process of winding down our operations in Morocco. We have presented the Moroccan segment operating results as discontinued operations for all periods presented, and they are not included in results from continuing operations.

Discontinued Operations of Oilfield Services Business

On March 15, 2012, we signed a stock purchase agreement to sell Viking for an aggregate purchase price of $164.0 million, consisting of $152.5 million in cash, subject to a net working capital adjustment, and a $11.5 million promissory note from Dalea. We intend to use approximately $3.7 million of the cash consideration to repay (i) the outstanding balance on our amended and restated note payable from Viking International to Viking Drilling, LLC ("Viking Drilling") and (ii) the outstanding balance of a secured credit agreement entered into by Viking International to fund the purchase of vehicles. In addition, we intend to use a portion of the remaining cash proceeds to repay our credit agreement with Dalea and our credit facility with Dalea, and we may use the remaining cash proceeds along with existing cash to repay some or all of the outstanding indebtedness under our Amended and Restated Credit Facility.

Pursuant to the stock purchase agreement, the Company, Viking International and Viking Geophysical will enter into a five-year master services agreement that would provide us with continued access to Viking's equipment and services. After the consummation of the sale of these operations, we will no longer own drilling rigs and oilfield services equipment, which will increase our costs and expenses, but will reduce our depreciation and amortization expense and our general and administrative expense. We could also be subject to greater risks related to the availability and cost of drilling rigs and third party oilfield services.

There is no assurance that we will complete the sale of Viking as contemplated or at all. The sale of Viking is subject to the approval of regulatory authorities, the receipt of equity financing by Dalea and other customary closing conditions. The closing is anticipated to occur during the second quarter of 2012. We have presented the oilfield services segment operating results as discontinued operations for all periods presented, and they are not included in results from continuing operations.

Significant Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States ("U.S. GAAP"). The preparation of these consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosures. Our significant accounting policies are described in "Note 3. Significant Accounting Policies" to our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2011 and are of particular importance to the portrayal of our financial position and results of operations and require the application of significant judgment by management. These estimates are based on historical experience, information received from third parties, and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. There have been no changes to the significant accounting policies disclosed in our Annual Report on Form 10-K for the year ended December 31, 2011.

Recent Accounting Pronouncements

In May 2011, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs ("ASU 2011-04"). ASU 2011-04 amends Accounting Standards Codification ("ASC") 820 Fair Value Measurements and Disclosures ("ASC 820"), providing a consistent definition and measurement of fair value, as well as similar disclosure requirements between U.S. GAAP and International Financial Reporting Standards. ASU 2011-04 changes certain fair value measurement principles, clarifies the application of existing fair value measurement and expands the ASC 820 disclosure requirements, particularly for Level 3 fair value measurements. ASU 2011-04 is effective for interim and annual periods beginning after December 15, 2011. We adopted ASU 2011-04 on January 1, 2012. The adoption did not have a material effect on our financial statements.

In June 2011, FASB issued ASU 2011-05, Presentation of Comprehensive Income ("ASU 2011-05"). ASU 2011-05 requires the presentation of comprehensive income in either (1) a continuous statement of comprehensive income or (2) two separate but consecutive statements. In December 2011, FASB issued ASU 2011-12, Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in ASU 2011-05 ("ASU 2011-12"). ASU 2011-12 deferred the specific requirement to present items that are reclassified from accumulated other comprehensive income to net income separately with their respective components of net income and other comprehensive income. The amendments will be effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. We adopted ASU 2011-05 on January 1, 2012. The adoption did not have a material effect on our financial statements.

In September 2011, FASB issued ASU 2011-08, Intangibles-Goodwill and Other (Topic 350): Testing Goodwill for Impairment ("ASU 2011-08"). ASU 2011-08 allows both public and nonpublic entities an option to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. An entity would no longer be required to calculate the fair value of a reporting unit unless the entity determines, based on that qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. ASU 2011-08 allows early adoption and will be effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. We adopted ASU 2011-08 on January 1, 2012. The adoption did not have a material effect on our financial statements.

In December 2011, FASB issued ASU No. 2011-11, Balance Sheet (Topic 210), Disclosures about Offsetting Assets and Liabilities ("ASU 2011-11"). ASU 2011-11 will require entities to disclose both gross information and net information about both instruments and transactions eligible for offset in the statement of financial position and instruments and transactions subject to an agreement similar to a master netting arrangement. Application of ASU 2011-11 is required for annual reporting periods beginning on or after January 1, 2013 and interim periods within those annual periods. We are currently evaluating the effects of adopting ASU 2011-11.

We have reviewed other recently issued, but not yet adopted, accounting standards in order to determine their effects, if any, on our consolidated results of operations, financial position and cash flows. Based on that review, we believe that none of these pronouncements will have a significant effect on our current or future earnings or operations.

Results of Operations-Three Months Ended March 31, 2012 Compared to Three Months
Ended March 31, 2011



                                                          Three Months Ended March 31,                                        Change
                                                 2012                                      2011                             2012-2011
                                                  (in thousands of U.S. dollars, except per unit prices and production  volumes)
                                                                                  (as adjusted)
Production:
Oil (Mbbl)                                                   224                                      219                                 5
Natural gas (Mmcf)                                         1,367                                      803                               564
Total production (Mboe)                                      452                                      353                                99
Average prices:
Oil (per Bbl)                          $                  108.38                  $                108.17              $               0.21
Natural gas (per Mcf)                  $                    7.60                  $                  7.29              $               0.31
Oil equivalent (per Boe)               $                   76.68                  $                 81.23              $              (4.55 )
Revenues:
Oil and natural gas sales              $                  34,661                  $                28,676              $              5,985
Other                                                        274                                      403                               129

Total revenues                                            34,935                                   29,079                             5,856
Costs and expenses:
Production                                                 3,635                                    4,102                              (467 )
Exploration, abandonment and
impairment                                                 2,796                                    7,232                            (4,436 )
Seismic and other exploration                                664                                    2,252                            (1,588 )
General and administrative                                 9,748                                    9,085                               663
Depreciation, depletion and
amortization                                               9,169                                    4,630                             4,539
Interest and other expense                                 3,259                                    3,597                              (338 )
Loss on commodity derivative
contracts:
Cash settlements on commodity
derivative contracts                                      (1,474 )                                   (704 )                            (770 )
Non-cash change in fair value
on commodity derivative
contracts                                                (10,961 )                                 (8,607 )                          (2,354 )

Total loss on commodity
derivative contracts                                     (12,435 )                                 (9,311 )                          (3,124 )

Oil and Natural Gas Sales. Total oil and natural gas revenues increased $6.0 million to $34.7 million for the three months ended March 31, 2012 from $28.7 million realized in the same period in 2011. Of this increase, $8.0 million was due to an increase in our total production volumes of 99 Mboe to 452 Mboe for the three months ended March 31, 2012 compared to 353 Mboe in the same period in 2011. Production volumes increased primarily due to the acquisition of TBNG in June 2011, which contributed approximately 111 Mboe. This was partially offset by a decrease in production due to the natural decline of our reserve base. A decrease in our average sales price also partially offset the increase by approximately $2.0 million. For the three months ended March 31, 2012, our average price received was $76.68 per Boe, compared to $81.23 per Boe for the same period in 2011.

Production. Production expenses for the three months ended March 31, 2012 decreased to $3.6 million from $4.1 million for the same period in 2011. The decrease was primarily attributable to an increase in the utilization of our oilfield services business to provide these services.

Exploration, Abandonment and Impairment. Exploration, abandonment and impairment costs for the three months ended March 31, 2012 decreased approximately $4.4 million to $2.8 million for the three months ended March 31, 2012, from $7.2 million for the same period in 2011. For the three months ended March 31, 2012, we wrote off two wells, compared to three wells written off for the three months ended March 31, 2011.

Seismic and Other Exploration. Seismic and other exploration costs decreased to $0.7 million for the three months ended March 31, 2012, compared to $2.3 million for the same period in 2011. This decrease was due primarily to a decrease in the utilization of third parties to provide our seismic services.

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