Trinity Exploration & Production PLC LON:TRIN Q&A
Trinity Exploration, an independent E&P company focused solely on Trinidad and Tobago, has rejoining the junior AIM market after gaining approval from its creditors.
The company applied to the London Stock Exchange for 187.6m new ordinary shares, which form the placing and subscription, and were admitted to the junior market on the 11 January 2017. New Ordinary Shares at a Placing Price of 4.98 pence per New Ordinary Share.
It has been a long and bumpy road for Trinity Exploration & Production PLC over these past six months to reach this point today. Share Talk contacted the management team and today we publish an exclusive Q&A with questions submitted from share holders.
The Trinity Story
The Trinity story began in 1996, when Trinidadian born Bruce A. I. Dingwall founded Venture Production plc, which subsequently became one of Britain’s leading independent oil and gas companies. Bruce resigned as Venture’s Chief Executive Officer in 2004 and was joined by Joel ‘Monty’ Pemberton to lead a management buyout of Venture’s Trinidad and Tobago assets, forming Ten Degrees North Energy Limited (Ten Degrees). From there, Bruce, and Monty as Chief Financial Officer, grew the Company through acquisitions and mergers. In 2009, Monty was appointed to his current role as Chief Executive Officer, leading the Company’s recapitalisation and increasing production from approximately 1,000 boepd to 4,000 boepd.
The initial asset base of Ten Degrees comprised of three lease operatorship blocks (WD-13, Block WD-14, GU-1), two Joint ventures (Guapo Bay/Brighton Marine and Point Ligoure Marine Area) and the Tabaquite Farm Out block. In 2007, Ten Degrees continued to expand its portfolio with the acquisition of Lennox Petroleum Services Limited and Pioneer Petroleum Company Limited, which together provided the FZ-2, WD-2 and WD-16 lease operatorship blocks. In 2011, the buyout of Oilbelt Services Limited further enhanced the Company’s asset-base as blocks WD5/6 were added and increased total production by 1,500 bopd.
As the Company’s asset portfolio grew, so too did its vision and motivation to become the region’s first independent oil and gas company of scale. In 2011, a corporate reorganisation gave birth to Trinity Exploration and Production Limited, and later in 2012, the renewal of the Point Ligoure Marine Area joint venture brought with it additional nearshore Gulf of Paria blocks (Point Ligoure/Guapo/Brighton Outer Marine (PGB) licence). The reverse takeover of AIM listed Bayfield Energy Holdings plc in 2013 paved the way for Trinity to become a publically listed Company of the London Stock Exchange on 14 February 2013. The Company was re-admitted under the ticker TRIN as Trinity Exploration & Production Plc.
In July 2016 Citibank put restricted access on Trinity’s Citibank accounts making the Company unable to fund its working capital position. Following cessation of the moratorium, the amounts owed from the Company to Citibank was in the reign of $13 million balance (£11m) debt payable.
After numerous extensions, Citibank froze its accounts and asked for payments on all debt balances due. Trinity had no option but to suspended its shares on 13 July 2016 after Citibank asked for repayments and subsequently froze its accounts.
“Despite the company’s positive attempts at pursuing specific wider restructuring initiatives, the Company has now been unable to agree suitable terms with Citibank with regard to the existing and potential future moratorium terms and as such the Company finds itself no longer in a moratorium,” Trinity Exploration said in a statement.
On 14 July the company announced a Formal Sale Process and restructuring update formal sale process (“FSP”) pursuant to the City Code on Takeovers and Mergers in the light of its announcement yesterday in relation to its ongoing discussions with Citibank.
On 9 December the company announced End of Offer Period and Proposed Fundraising
Raise approximately US$15.0 million (approximately £11.9 million), by way of a Placing and Subscription of, in aggregate, 187,600,000 New Ordinary Shares at a Placing Price of 4.98 pence per New Ordinary Share expected to raise gross proceeds of approximately US$11.725 million (approximately £9.3 million) and a proposed issuance of Convertible Loan Notes expected to raise gross proceeds of US$3.275 million (approximately £2.6 million).
The hearing of the application for the approval of the Creditors Proposal by the Trinidad and Tobago Court, which was approved by the Trinidad and Tobago Creditors on 19 December 2016, was held on Friday 6 January 2017. The Company is pleased to announce that the Court approved the Creditors Proposal and this will now be implemented in full.
Trinidad to unveil new oil and gas fiscal regime petroleum tax
PORT OF SPAIN, January 16, 2017 – Acting Ministry of Energy and Energy Industries Colm Imbert on Monday signalled an overhaul of Trinidad’s oil and gas fiscal regime in an effort to increase investment in the industry.
The new regime, which is scheduled to be finalised in the first quarter of 2017, will serve two purposes. According to Imbert, it is designed to “motivate investors companies to get involved in exploration and development” as well as “maximise” Trinidad’s returns from its oil and gas industry.
“We [presently] have the standard exploration production license where taxation is based on petroleum profits tax, supplementary profits tax oil levy and then there is the production-sharing license,” the minister said, adding that the supplementary petroleum tax would be revised too.
The latter move comes as a response to small and medium-sized companies complaining that the measure affects their profit margin in light of increasing oil prices.
“We are going to address the way in which the SPT kicks in to make it a profit based tax rather than a volume or revenue based tax so that there would be a more equitable increase in the equity,” Imbert was quoted as saying by local media, adding that this should encourage “some of our local companies to engage in greater production and in exploration.”
TRIN: We welcome the interest and the opportunity to answer shareholder and potential investor questions. Hopefully this is done clearly in the attached but please let people know that we are happy to receive any follow-on questions.
1/ BOE – $15pb onshore & $30pb offshore, averaging an output of 2659boepd for H1 2016. Development was suspended awaiting funding.. Will TRIN now be able to start work overs on the Wells, increase production & when can holders expect an update on production figures? ……….
Yes, as announced in December 2016 Trinity will now recommence development activities. This will include workovers both onshore and offshore as well as recompletions and swabbing activities onshore. The drilling of new wells is expected to commence in H2 2017. As with any activity there is a lead time to actual results in regards to increased production. An update on production will be given alongside the full year 2016 results in April 2017.
2/ What are the short-term goals, road map that TRIM now funded will follow? ……..
To recommence development activities (as outlined above) and deliver steady and sustainable growth whilst managing costs to maximise cash flows.
3/ TRIN is not exploration nor appraisal drilling, you are in production, what are your thoughts on the current market Cap compared to other market E&G
Given the recent history of a distressed balance sheet and the company’s relatively low profile amongst its peers it may take time for a valuation reflective of the asset base and the balance sheet as it now stands to prevail. Being a cash positive producer is a strong differentiator in itself without adding that our cost base (opex/bbl and G&A/bbl) are amongst the lowest for our comparable peer group. The new Board is now in place and we will shortly be able to go to investors with a new presentation and a clear outline of the assets and forward strategy to help raise the company’s profile.
4/You say your target is 3,000bopd. Having looked into the history of Trinity it once produced upwards of 4.000bopd. While in administration for the past 6 months i assume onshore production wells declined with zero workovers could we expect you to exceed the stated target ?
You correctly state that production declined due to little to no development activity in recent times. With capital now in place and a strong pipeline of development inventory (workovers/RCPs/new wells) production can be increased but this takes time and doesn’t happen overnight. Getting to a run-rate of 3,000 bopd and beyond is attainable as we ramp up these activities and should be achievable over a 12 month period.
5/I note Trinity is still significantly undervalued compared to its peers in Trinidad, in one case nearly 10% on fundamental grounds with the debt issue significantly reduced. However will Trinity close this gap?
The market and investors need to be made aware of where Trinity stands today in regards to the balance sheet, asset base and management structure to make a strong differentiation from the past. This should help educate the market to enable a fair valuation to be had.
It is not for us to provide peer valuations but if investors look at metrics such as enterprise value (EV)/2P reserves and EV/production (bopd) the relative valuation gap and thus opportunity should be clear.
6/What is the capex costs onshore and how much cash productions will you be aiming to generate around $50?
Trinity receives a discount to the WTI oil price of c. 8-10% typically (this is the case for all operators in Trinidad). Based on onshore production levels of c.1,400 bopd operating costs (opex) are c.$12/bbl. This gave an operating breakeven (revenues – overriding royalties – production royalties –opex) of c.$18/bbl for the 9-month period to end September 2016. As we increase production the opex/bbl should fall given that the majority of opex costs are fixed.
In order to increase production capital will be expended (capex) on workovers, RCPs, swabbing activities and in due course new wells. Onshore workovers typically cost between $10,000 to $12,000 whilst new wells can cost over $1.0m. Offshore workovers would typically cost c.$170,000.
7/Can you tell us more about the Offshore oil assets with significant oil discovered reserves which you aim to drill in late 2018.
The offshore assets are contained within the Galeota Block off the East Coast of Trinidad. The assets within the block offer full cycle opportunities with:
- 2P reserves of c. 14 MMbbls across the producing Trintes field. Production from Trintes has remained very stable at c.1,000 bopd for the last 18 months despite minimal investment. This reflects Trinity’s knowledge of the asset after a detailed review post acquisition and internal production management expertise. Production has the potential to be significantly higher from the Trintes field from workovers as well as new wells being drilled. There are 31 identified infill drilling locations. It is from this inventory that new wells could be drilled from during 2018. This is the quickest and most economic way to increase production offshore as the infrastructure is in place and the new wells likely to be from existing slots.
- Contingent resources (2C) of c. 22 MMbbls gross (c.14 MMbbls net to TRIN’s 65% interest) from the TGAL discovery well updip of the Trintes field. These additional barrels provide a substantial inventory to backfill Trintes production in due course and/or provide a step-change in production once they are developed in their own right. Phase one of any development would likely involve a tie-in to the Trintes production infrastructure.
- Additional significant prospects with STOIIP of c.270 MMstb having been defined by several historic wells in the Galeota anticline to be further appraised and developed.
We believe that an analogous field further offshore, next to the Galeota block, has been bought by one of the world’s most effective private oil companies from Repsol. This points to recent activity in the area.
8/What the company’s plans are for it’s South African gas assets.
The company relinquished the South African acreage some time ago. This was a high risk exploration block that was inherited as part of the merger with Bayfield and never a core focus for Trinity with a clear focus on Trinidad and Tobago.
9/Tell management to try and market the company better. Let them carry interviews with investment news sites like companies such as LGO and others do. This is the best way to get punters interested. “Simply proactive PR”
10/I would like to know if they have any plans to raise their profile to attract new investors/ more interest in general for the company. Compared to the interest shown in other Trinidad oilies Trin does not seem to be in the limelight.
Questions 9 & 10 are effectively making the same well-made point. Since April 2015 the company was highly constrained on what it could say to the market as it was in a formal sales process. On completion of the restructuring and with the resumption of trading these constraints have now been lifted. Trinity can now focus on moving forward after a period of extreme uncertainty for investors and wider stakeholders.
Trinity has commenced engaging with analysts and the financial press and will ramp this activity up further with all market participants whenever possible/appropriate. This will be with a view to raising Trinity’s profile with retail investors, institutional investors and the financial media in Q1 20017.
In regards to announcements, Trinity retains the view that only ‘real’ news ought to be formally announced to the market in order 1) not to mislead investors and 2) provide confidence that when we do make an announcement it can be relied upon and deemed ‘news worthy’.
Credit Share Talk LTD.
• Trinidad has been producing hydrocarbons for over 100 years. Prolific hydrocarbon basin with significant energy infrastructure to monetise both oil and gas. Commercial production since 1910 and 3.5 billion bbls of oil (1.6 billion bbls onshore) and 23 tcf of gas recovered to date. 31% of BP’s and 15% of BG’s 2013 gas production came from Trinidad.
• 6th largest exporter of LNG in the world. Gas primarily delivered to South America, the USA, Europe and Asia.
• A ready market for crude oil. The Petroleum Company of Trinidad & Tobago (Petrotrin) refinery has a capacity to refine 160,000 bopd, however, it currently has to import circa 80 kbopd to supplement indigenous production in order to maintain optimal processing levels.
• A stable and progressive fiscal and legal regime. A supportive and energy knowledgeable government that respects the sanctity of contracts and subscribes to international arbitration. State has never expropriated any assets. No foreign exchange controls; no restrictions on repatriation of profits. The government is re-focused on maximizing indigenous crude flows by ensuring that the upstream petroleum fiscal regime remains globally competitive.
• Educated, skilled, experienced and competitive labour force
• Steady flow of acreage. Additional acreage created via periodic bid rounds (onshore, offshore and deepwater) and merger/acquisition opportunities.
• Strategically located at the gateway to South America. Access to regional and international emerging and developed markets through various trade agreements. Trinidad is now also exporting energy services to Suriname, Canada and Africa.
• Trinidad has extensive energy infrastructure and is the largest global exporter of methanol and ammonia:
— 4 LNG Trains
— 1 NGL Processing Facility
— 11 Ammonia Plants
— 7 Methanol Plants
— 160,000 bopd Refinery
— 4 Power Generation Sites
— 4 Iron and Steel Plants
— 1 Cement Plant
— 4 Deep Water Ports
1 Review of the Economy 2013. The Ministry of Finance and the Economy, Government of the Republic of Trinidad & Tobago
2 3 RBC Caribbean Economic Report, March 2014
4 5 6 7 8 Central Bank of Trinidad & Tobago
*Information last updated April, 2014
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