Trinity today announces that it has entered into an agreement to sell its interests in the WD-2, WD-5/6, WD-13, WD-14 and FZ-2 licences and related fixed assets (the “Blocks”) to Touchstone Exploration Inc. (“Touchstone”) for cash consideration of US$20.8 million (the “Transaction”). Together, the Blocks constitute substantially all of Trinity’s onshore licence portfolio.
Transaction Rationale
The Transaction follows the announcement on 8th April 2015 that the Company had undertaken to launch a strategic review in order to maximise value for shareholders. In particular the sale:
- Demonstrates and crystallises the significant value created by Trinity through its historic investment in the licences
- Enables the Company to repay in full its senior secured debt facility
- Facilitates the paying down of outstanding creditor payables
- Strengthens the Company’s balance sheet and working capital position
Under the terms of the Transaction, Touchstone has agreed to deposit an initial payment of US$2.08 million into escrow to be released, along with the remaining US$18.72 million payable, on completion. The Transaction is expected to complete in the fourth quarter of 2015 and will be effective as at the completion date.
In aggregate, the Blocks have produced at an average rate of 1,574 bopd to 31st August, 2015. The carried book value of the assets as at 31st August 2015 was US$17.17 million. Losses attributable to the Blocks for the 8 month period to 31st August 2015 was US$2.33 million.
The sale is subject to standard regulatory approvals, including final approval from the Petroleum Company of Trinidad and Tobago Limited (“Petrotrin”) and approval by Trinity’s shareholders. A circular, together with a notice to convene a general meeting of the Company, will be posted to Trinity’s shareholders in due course.
Following the Transaction, Trinity remains one of the largest independent offshore oil and gas companies in Trinidad with a portfolio of assets spanning the East and West Coasts. The Company’s remaining assets contain management estimate net 2P reserves of 18.5 mmboe and 21.7 mmboe of contingent resources and produced at an average rate of 1,333 boepd to 30th June 2015.
Forward Strategy
Trinity continues to focus on increasing operational efficiencies by optimising well performance and cost efficiencies to ensure the business remains sustainable in a low oil price environment. Subject to capital availability, the Company is well positioned for growth with an inventory of high quality drilling locations across its East Coast and West Coast acreage, and an economically attractive development project at TGAL.
East Coast
The Company is focusing on the TGAL Field Development Plan (TRIN: 65% WI) which is expected to be finalised by the year end. The subsurface evaluation has been completed, the topside facility concept has been narrowed down to two options and it seems practical to adopt a phased approach to developing the field by bringing onto production the reserves nearer to the Trintes field (TRIN: 100%) and putting it through a Trintes facility to shore. Management estimates of Stock Tank Oil Initially in Place (“STOIIP”) on Trinity’s TGAL-1 discovery are 150 – 210 mmbbls (best technical estimate 186 mmbbls). Seventeen candidate drilling locations have been identified in the first phase, with the potential to develop 22 mmbbls of recoverable resources. The initial revenues generated would then allow for reinvestment in other facilities and pipeline.
Therefore, notwithstanding further, identified potential in the Galeota block, estimated combined 2P and 2C management estimate resources from the Trintes-TGAL area totals over 36 mmbbls net to Trinity (based on a conservative 12% recovery factor at TGAL).
Significant further development potential exists along the Galeota anticline to the North East where almost 270 mmbbls of STOIIP has been mapped and estimated by management through the integration of reprocessed 3D Seismic data and the EG-3 and EG-4 wells that define and tie the dataset to the North East.
West Coast
Growth potential from the Brighton Marine (TRIN: 100% WI) and Pt. Ligoure, Guapo Marine, Brighton Marine Outer (PGB, TRIN: 70% WI) blocks could be targeted via the re-initiation of infill drilling, recompletions and greenfield development programmes. These activities have the potential to significantly increase production levels.
Trinity has invested in maturing two field development programmes that include both near and medium term growth opportunities through infill drilling across both licences in the areas of Brighton Marine Outer and Guapo Marine. These areas remain relatively undrilled and demonstrate good oil recovery per well and the west flank of Brighton is less structurally complex than the crest of the field.
There are further opportunities that comprise a potential greenfield development in Pt. Ligoure, secondary recovery and enhanced oil recovery (EOR) options and exploration prospects from the prolific Forest and Manzanilla reservoirs.
Exploration potential in the area has been evidenced by Petrotrin’s Jubilee field discovery in 2012, South East of Cluster 6-ALM 22 well and contiguous to the Pt. Ligoure licence area. The field was stated to have preliminary estimated resources of 48 mmbbls.
Furthermore, there are significant opportunities from enhanced oil recovery, with recovery rates to date estimated at between 0 – 6% across key fault components. It is believed that the application of secondary recovery (steam flood) and EOR techniques (CO2 injection etc) could materially increase production and reserves.
Across Trinity’s ongoing asset base there are identified pathways for value and production growth. Until such time as these can be fully evaluated the Company aims to continue to reduce operating breakeven levels whilst warehousing and retaining the integrity of a significant volume of reserves and resources.
More detail on forward plans will be included in the Circular to be sent to shareholders.
Joel “Monty” Pemberton, Chief Executive Officer of Trinity, commented:
“Trinity’s onshore portfolio has played a significant role in the early evolution of the Company. However, greatest shareholder value can now be delivered by relieving balance sheet pressures and providing the financial flexibility to drive forward a focused offshore portfolio with a defined reserves base and significant further resource potential. Trinity is also seeking to high grade its inventory of works within its offshore portfolio in Trinidad and Tobago and is continuing to reduce its overhead costs.
“On behalf of the Board, I would like to thank all our colleagues, shareholders, creditors, contractors, service providers, partners, Petrotrin and the Ministry of Energy and Energy Industries for their commitment, support and collaboration during these difficult times for our industry.”
RBC Capital Markets acted as Financial Adviser to Trinity with respect to the Transaction.
Competent Person’s Statement
The information contained in this announcement has been reviewed and approved by Dr Ryan Ramsook, the Company’s Head of Sub Surface, who has 10 years of relevant experience in the oil industry. Dr Ramsook holds a PhD in Geology.