Trinity, an independent E&P company focused on Trinidad and Tobago, today provides an update on its Q2 2015 operations, its half year-end financial position and its near-term strategic focus.
Operating Highlights
- Group average net production levels of 3,085 boepd for H1 2015
- Net Q2 production averaged 2,939 boepd
- Continued progress made towards TGAL FDP
- 45% reduction in G&A costs year-on-year to US$5.7 million for H1 2015
Financial Highlights
- Trinity benefited from not being subject to Supplemental Petroleum Taxes (“SPT”) when the WTI oil price is below US$50/bbl
- H1 financials: Cash balance US$8.2 million, receivables of US$19.5 million (including VAT receivables of US$10.2 million), inventories of US$6.7 million, debt of US$13.0 million, trade & other payables of US$28.5 million and taxation payable of US$22.9 million
- Current extension for moratorium on debt repayment in place until 21st August
2015 Strategic Priorities
Achieve a c.20% reduction in full year production operating expenditure to US$26.0 million
- Submission of the TGAL draft FDP
- Identify and arrange financing to fund the Company’s future developments
Further to the strategic review and formal sales process (“FSP”) announced in April, Trinity is in discussions with a number of parties. Trinity Shareholders are advised that there can be no certainty that any offer or other transaction will result from the formal sales process or as to the terms on which any offer or other transaction may be made.
Joel “Monty” Pemberton, Chief Executive Officer of Trinity, commented:
“The current oil price environment and country specific fiscal regime has been difficult for companies in Trinidad to weather. However, at oil prices below US$50/bbl we do not pay SPT and we welcome the recent indications by the Trinidadian Energy Minister that the price under which SPT becomes zero percent may be raised to as high as US$80/bbl. In conjunction with an inventory of works this provides Trinity with a portfolio of highly attractive, producing assets with good visibility on the upside potential which could be delivered when new capital can be re-deployed.
We have continued a programme of cost cutting, reducing G&A by 45% year-on-year. However, in spite of these actions Trinity is unable to develop and capitalize on its portfolio organically and hence on 8 April announced a strategic review and formal sales process. This process has led to detailed discussions with a number of interested parties and we are encouraged by the progress made to date.“
OPERATIONS UPDATE
During the second quarter, Trinity’s net production averaged 2,939 boepd, an average of 3,085 boepd for the first half of 2015.
Group production levels continue to reflect the robust nature of the asset base, with declines being modest against a backdrop of significantly reduced levels of capital expenditure, on-going investment would be required to meet current guidance for the full year of 3,000 – 3,400 boepd. Trinity’s ability to fund re-investment from internally generated cash flow has been impacted by further weakness in the oil price. With no further capital investment beyond maintenance spend in 2015 we would anticipate full year 2015 average production of between 2,700 – 3,000 boepd.
Across the Onshore, West Coast and the East Coast we have an inventory of drilling locations, recompletions (“RCP”) and workovers that could significantly enhance production levels on the deployment of capital. Decline rates within Trinity’s portfolio are typically relatively low, the main issue is the level of drilling, investment and pump control, with decline rates heavily influenced by pump reliability which is a core area of focus for Trinity.
Onshore operations
Average H1 2015 net production for Onshore was 1,691 boepd (H1 2014: 2,088 boepd). The decrease in production volumes resulted from natural decline rates coupled with minimal workover activity. There were 43 workovers conducted in H1, with the rate of workovers limited by having only two rigs operational on the fields (versus the three previously operational for the same period last year). Due to lower oil prices new drilling operations have been suspended since the close of H1 2014 and this has remained in effect. One RCP was completed in H1 2015 yielding an initial production rate of 104 boepd partially offsetting the decline in production.
West Coast operations
Average H1 2015 net production from the West Coast assets was 384 boepd (H1 2014: 580 boepd). No drilling or RCPs were carried out in H1 2015 and there were minimal workover activities. The shortfall in West Coast production levels was largely due to the temporary shut-in of the ABM-151 well (now back in production) and compressor work at Brighton. At the Guapo Marine block chemical treatment of some of the more viscous wells has been deferred.
East Coast operations
Average H1 2015 net production from the Trintes field was 1,010 boepd (H1 2014: 1,127 boepd). The modest reduction in production was due to natural decline rates coupled with no workover activity.
At TGAL (TRIN: 65% WI), where management resource estimates on Trinity’s TGAL-1 discovery are 150.0 – 210.0 mmbbls (best estimate 186.0 mmbbls), work continues on the Field Development Plan with submission expected during H2 2015. 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 and putting it through a Trintes facility to shore. Seventeen candidate drilling locations have been identified with the potential to develop 22.0 mmbbls following development. The initial revenues generated would then allow for reinvestment in other facilities and pipeline.
FINANCIAL REVIEW
Whilst revenues were adversely affected from low oil prices during the first half of 2015, with an average WTI realised price of US$49.5/bbl (H1 2014: US$93.0/bbl), the impact at an operating level was somewhat negated due to the SPT structure which is charged against top-line revenues. At WTI oil prices below US$50.0/bbl no SPT is payable.
Cost Reductions
Trinity has and continues to re-align its cost base with G&A having been reduced further to US$5.7 million versus US$10.4 million for H1 2014 (US$15.0 million for the full year 2014). At an operating level, the company remains on target to reduce production operating costs to US$26.0 million for the full financial year 2015 (versus US$33.0 million for 2014).
Capital Budget
Trinity’s capital spending for 2015 is still on track to be in the range of US$2.5 million and will be focused on minimising declines in base production levels and maintaining operations.
The purpose of this programme is to protect all of the Company’s assets, whilst maintaining its future development programme and ensuring positive operational cashflow at low oil prices.
Liquidity
The company ended H1 2015 with cash and cash equivalents of US$8.2 million, receivables of US$19.5 million (including VAT receivables of US$10.2 million), inventories of US$6.7 million, debt of US$13.0 million, trade & other payables of US$28.5 million and taxation payable of US$22.9 million.
The Tabaquite block, is currently classified as ‘held-for-sale’ with no proceeds as yet having been received from LGO Energy plc (“LGO”) despite signature of a binding Sale and Purchase Agreement (“SPA”) to acquire 100% of the issued shares of Tabaquite Exploration & Production Company Limited (“TEPCL”) from Trinity for a total consideration of US$2.0 million. LGO is in breach of the SPA and Trinity is considering all options including legal remedies.
A moratorium on principal repayments, relating to the outstanding debt balance of US$13.0 million with its lender, is currently in place until the 21st of August 2015. The on-going extension of Trinity’s credit facilities by its senior lender represents their continued support of the company and the FSP.
Working capital management and a focus on cost efficiencies remain the key driver for the company as it goes through the FSP.
CORPORATE UPDATE
Organisational changes
The continued reduction in G&A in H1 2015 compared to H1 2014 is in part a result of reduced head office charges following organisational restructuring. Post the period end there has been further changes with staff reductions.
David Macfarlane is stepping down as a non-executive director of the company effective 19th of August. The Board wishes to thank David for his contribution to date and wishes him well in his future endeavours.
Notes:
All figures referenced are unaudited numbers and subject to change. The Company’s interim results are expected to be released by the end of September.
Competent Person’s Statement:
The information contained in this announcement has been reviewed and approved by Craig McCallum, Chief Operating Officer and Director for Trinity Exploration and Production plc, who has over 25 years of relevant experience in the oil industry. Mr. McCallum holds a Master degree in Petroleum Engineering.