TIDMTRIN
RNS Number : 4731I
Trinity Exploration & Production
19 April 2022
This announcement contains inside information as stipulated
under the UK version of the Market Abuse Regulation No 596/2014
which is part of English Law by virtue of the European (Withdrawal)
Act 2018, as amended. On publication of this announcement via a
Regulatory Information Service, this information is considered to
be in the public domain.
Trinity Exploration & Production plc
("Trinity" or "the Group" or "the Company")
Q1 2022 Operational Update
Good production and operational cash flow
More targeted strategy for accelerated growth to be executed in
H2
Trinity Exploration & Production plc (AIM: TRIN), the
independent E&P company focused on Trinidad and Tobago,
provides an update on operations for the three-month period ended
31 March 2022 ("Q1 2022" or "the Period"), which delivered good
production and operational cash generation, and an update on the
development of a more targeted strategy for accelerated growth,
initially prioritising the resumption of onshore drilling in H2
which has the potential to significantly enhance production
volumes.
Q1 2022 Operational Highlights
-- Refreshed growth strategy focused on prioritising deliverable
opportunities with a mitigated risk profile, targeting a meaningful
step-change in production volumes
-- Stable underlying business:
- Q1 2022 Production volumes averaged 3,013 bopd (Q4 2021: 3,103 bopd; Q1 2021: 3,107 bopd)
- Production sold averaged 2,929 bopd ( Q4 2021: 3,039 bopd; Q1 2021: 3,051 bopd)
-- Total of five recompletions ("RCPs") (Q4 2021: 2) and 24
workovers (Q4 2021: 35) completed, with swabbing continuing across
the Onshore and West Coast assets
-- Recently acquired PS-4 asset smoothly transitioned into the
Onshore portfolio, with RCPs to enhance production on the asset
continuing into Q2, followed by two new wells in H2
-- Installation of the 31 Supervisory, Control and Data
Acquisition ("SCADA") units on our Tier 1 wells in WD-5/6 now
complete (covering 50% of land production), with initial
indications of lower volatility from these wells through better
performance optimisation and quicker response times to well
issues
-- Solid operational performance despite impact of COVID-19 on
human resource capabilities and resultant equipment uptime
Q1 2022 Financial Highlights
-- Average realisation of US$ 83.1/bbl (Q1 2021: US$52.3/bbl)
-- Gross quarterly revenues (unaudited) increased 52%
year-on-year to US$21.9m (Q1 2021: US$14.4m)
-- Owing to higher realised prices, Supplemental Petroleum Taxes
("SPT") of US$2.0m (equivalent to 9% of gross revenues) will be
payable in April 2022 with respect to onshore and offshore
production during Q1 2022
-- Cash balance of US$17.5m (unaudited) as at 31 March 2022,
reflecting strong operating cash generated in Q1 2022 of US$5.5m
(Q4 2021: US$3.9m, Q1 2021: US$2.7m) offset by the following
material cash outflows:
- Hedge payments of US$1.8m, as a result of the unexpectedly higher oil price
- Capital expenditure of c.US$1.7m
- Tax payments of US$2.5m including Q4 2021 SPT, Q1 2022
Petroleum Profits Taxes and Unemployment Levy
- Annual prepayments of US$0.5m (such as insurance) which arise in Q1 of the financial year
-- Average operating break-even for Q1 2022 was c. US$31.1/bbl
(unaudited) compared to US$25.8/bbl for Q1 2021. While this was
expected, lower sales volumes created upward pressure on the
breakeven
-- The Company forecasts an increase on the usual operating
breakeven to c.US$31.5/bbl for FY 2022 - as planned, to support
medium term growth through increased technical and intellectual
capacity
-- Base production for 2022 - before execution of the growth
strategy - is expected to be 2,900-3,100 bopd (2021: 3,006 bopd).
However, the Company believes that successful execution of the
growth strategy via the planned drilling programme, acquisitions
and other initiatives, are likely to significantly enhance
production volumes and cash generation in the medium term.
Growth Strategy and Onshore Drilling Programme
Management is focused on refining its growth strategy, geared
towards increasing scale and returns as it builds on its existing
solid production and cashflow base. The recently established
Technical Committee, comprising two board members and three
high-quality independent experts, have helped management refine and
prioritise its existing opportunity set to focus on risk-mitigated
prospects capable of being delivered with the Company's existing
financial and operational resources to increase scale and optimise
returns. It has set ambitious but deliverable growth targets, and
the resumption of onshore drilling is the first part of this
scaling up process. The decision not to participate further in the
NWD process (detailed further below) reflects management's focus on
profiling opportunities to determine whether they fit into this
risk-mitigated framework. The Galeota opportunity continues to
provide the potential for a step change in scale, and to
cornerstone long-term growth plans. Management will continue to
look to enhance scale and returns through acquisitions,
participating in new licencing rounds and further developing
existing properties.
Additional details of the growth strategy will be provided in
the full year results announcement (year ended 31 December 2021)
which will be published in May 2022.
Resumption of Drilling
The Company has committed to resuming onshore drilling, which is
expected to commence early in H2 2022, with the precise timing
subject to receipt of regulatory approvals and long lead items for
more complex wells. This drilling campaign will be carried out in
the areas defined by Trinity's Lease Operatorship Agreements and
will initially comprise at least five wells, inclusive of low angle
(traditional) wells, high angle to horizontal wells and testing of
deeper structures with the aim of significantly increasing initial
production rates and cash returns. The Company will provide further
details regarding the resumption of drilling during May 2022.
Galeota Asset Farm Down Process
The farm down process for the offshore Galeota Asset continues,
with the bid deadline in late Q2 2022. The marketing process is
being conducted by Stellar Energy Advisors. The Company expects to
provide a further update early in H2 2022.
North West District ("NWD") Request For Proposals ("RFP")
Update
Following the purchase and subsequent ongoing interpretation of
the 37km2 subset of the onshore 3D seismic data over Trinity's
Lease blocks, a Trinity and Capricorn Energy PLC consortium gained
access to the entire 287km2 3D seismic data set through
participation in the NWD RFP process operated by Heritage Petroleum
Company Limited ("Heritage"), focusing particularly on the
potential offered by the Cretaceous stratigraphy (which lies below
the formations which have previously been targeted by the Company).
Following full review of the data, the consortium decided not to
participate further in the process due to the high technical and
operational risks, which the consortium concluded significantly
challenge the commercial attractiveness of the opportunity. This
decision is aligned between the Board, as guided by the Technical
Committee, and Management whose focus is on refining and
prioritising deliverable and risk-mitigated options that best suit
the Company's growth strategy.
Technical evaluation by the consortium did however highlight
multiple play-types and identified leads in the deeper
underexplored stratigraphy of both the Middle-Lower Miocene and the
Cretaceous - facilitating a better understanding of the Southern
Basin geology and prospectivity. Furthermore, this process has
enabled the Trinity team to develop basin-wide geological models
and the multi-disciplined technical competency required for it to
participate in the upcoming onshore bid rounds.
Trinity currently intends to drill at least one well which
targets a deeper Miocene structure as part of its onshore drilling
programme, believing that this could offer significantly enhanced
IP rates and cash returns. This deeper well remains within the
existing depth allowances for the respective sub licence area, and
is subject to finalising the technical evaluation as well as
agreeing the appropriate commercial terms from Heritage.
Notice of Results
The Company will announce full year results for the year ended
31 December 2021 in May 2022.
Jeremy Bridglalsingh, Chief Executive Officer, commented:
"Trinity's core business remains robust - our reservoirs are
performing in line with expectations, and once we are able to
deploy human resource with less COVID-related restrictions we
anticipate returning to usual production capacity.
"We look forward to the resumption of drilling which will
include high angle, horizontal and deeper wells. While more
complex, with higher risk, these wells will have the potential to
increase the cumulative number of barrels recovered per dollar of
capex invested, and could change the economic paradigm of onshore
drilling very positively.
"Furthermore, we remain excited by the prospect of farming down
Galeota, allowing this asset to become a more meaningful
contributor to production and cash flow in the medium to long
term.
"We remain confident that the Government understands the
requirement for fiscal reform, despite the near-term outlook for
crude oil prices, in order to accelerate the country-wide
development of oil and gas resources and to stimulate development
of a more robust independent sector in Trinidad. We understand that
the Government's deliberations over tax reform, specifically in
relation to SPT, are ongoing, and we look forward to news on this
matter in the near term with keen interest.
"We have a resilient, growing business, and are focused on
optimising returns from our assets. We are determined to build on
the strong foundations in place as we execute against our plans for
the next stage of Trinity's development, and we look forward to
updating the market across all activities in due course."
Enquiries
For further information please visit www.trinityexploration.com
or contact:
Trinity Exploration & Production Via Walbrook PR
plc
Jeremy Bridglalsingh, Chief https://trinityexploration.com/investors
Executive Officer
Nick Clayton, Non-Executive
Chairman
SPARK Advisory Partners Limited (Nominated Adviser
and Financial Adviser) +44 (0)20 3368 3550
Mark Brady / James Keeshan
Cenkos Securities PLC (Broker)
Leif Powis / Neil McDonald +44 (0)20 7397 8900 / +44 (0)131 220
6939
Walbrook PR Limited +44 (0)20 7933 8780 or trinityexploration@walbrookpr.com
Nick Rome/Tom Cooper +44 (0)7748 325 236 / +44 (0)7980 541
893
About Trinity ( www.trinityexploration.com )
Trinity is an independent oil production company focused solely
on Trinidad and Tobago. Trinity operates producing and development
assets both onshore and offshore, in the shallow water West and
East Coasts of Trinidad. Trinity's portfolio includes current
production, significant near-term production growth opportunities
from low risk developments and multiple exploration prospects with
the potential to deliver meaningful reserves/resources growth. The
Company operates all of its ten licences and, across all of the
Group's assets, management's estimate of the Group's 2P reserves as
at the end of 2020 was 19.55 mmbbls. Group 2C contingent resources
are estimated to be 31.06 mmbbls. The Group's overall 2P plus 2C
volumes are therefore 50.61 mmbbls.
Trinity is quoted on the AIM market of the London Stock Exchange
under the ticker TRIN.
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