Trinity, the independent E&P company focused on Trinidad and Tobago, announces that it has entered into a binding sale and purchase agreement (“SPA”) to sell its interests in the Brighton Marine and the Point Ligoure – Guapo Bay – Brighton Marine Exploration and Production Licences and related fixed assets (the “West Coast Assets”) to a subsidiary of AIM quoted Range Resources Limited (“Range”) for a cash consideration of US$4.55 million (the “Transaction”). Together, the West Coast Assets constitute all of Trinity’s West Coast licence portfolio.
The Transaction supports Trinity‘s strategy to grow reserves, production and cash flow from its core Onshore and Offshore East Coast assets where the bulk of current reserves and production reside. Whilst there is significant remaining potential across the West Coast Assets, the Directors believe that this is best extracted by an operator with the resources required to continue to invest in these assets. In particular the Transaction:
· crystallises the significant value of the West Coast Assets;
· further strengthens the Company’s balance sheet and working capital position; and
· enables both financial and human resources to be focused on core growth opportunities across the Company’s Onshore and East Coast assets.
The sale is subject to customary regulatory approvals, including approval from the Petroleum Company of Trinidad and Tobago Limited (“Petrotrin”) and the Ministry of Energy and Energy Industries (“MEEI”).
Under the terms of the Transaction, Range has agreed to deposit the full consideration of US$4.55 million into escrow to be released on completion. The Transaction is expected to complete in the fourth quarter of 2017. The funds received will be used for general corporate purposes.
In aggregate, the West Coast Assets produced at an average net rate of 190 bopd for the twelve months to 31 December 2016, contain management estimate 2P reserves of 2.6 mmbbls and contingent resources of 0.52 mmbbls. The Transaction consideration equates to US$1.75/bbl (2P) and US$23,947 on a US$/flowing barrel basis. Both metrics are higher than the current market value ascribed to Trinity’s portfolio as a whole.
Further announcements will be made as appropriate.
Following completion of the Transaction, Trinity will continue to be one of the largest independent oil and gas companies in Trinidad with a portfolio of assets spanning the Onshore and Offshore East Coast acreage. These remaining assets include management estimate net 2P reserves of 18.7 mmbbls and 20.6 mmbbls of contingent resources.
Trinity has a clear strategic focus going forward, which is to grow reserves and production to maximise the cash flow from our core assets while achieving a market value that is more reflective of our underlying assets. This will be delivered through financial discipline, the efficient deployment of capital and by delivering on the potential of our diverse and deep portfolio of low-cost production and development assets. The Company is well positioned for growth with an inventory of high quality drilling locations across its Onshore and Offshore East Coast acreage.
Bruce Dingwall, CBE, Executive Chairman of Trinity, commented:
“Trinity’s West Coast portfolio played a significant role in the early evolution of the Company. However, greater shareholder value can now be delivered by focusing our financial and management resources on driving forward a focused onshore and offshore portfolio with a robust reserve base, substantial production growth opportunities and significant further resource potential.”
Additional Required Information
The (audited) carrying book value of the assets as at 31 December 2016 is made up of property plant and equipment totalling US$1.6 million, and a net decommissioning liability (using a decommissioning methodology specific to Trinity) of US$3.5 million that combine to reflect a net negative carrying value of US$1.9 million. The carrying value of the West Coast Assets have been impaired by US$24.2 million over the three financial years that ended on 31 December 2016, mainly due to a reduction in 2P reserves following the significant oil price decline.
Losses (before taxes and any extraordinary items) attributable to the West Coast Assets for the twelve month period ended 31 December 2016 were US$2.1 million.
Competent Person’s Statement
The information contained in this announcement has been reviewed and approved by Graham Stuart, the Company’s Technical Advisor who has 34 years of relevant global experience in the oil industry. Mr. Stuart holds a BSC (Hons) in Geology. Reserves and resources in this announcement are based on internal management estimates in accordance with SPE PRMS guidelines (Petroleum Resources Management System 2007 & Revisions).
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