TIDMTRIN
RNS Number : 2352A
Trinity Exploration & Production
20 January 2020
RNS ANNOUNCEMENT: The information communicated in this
announcement contains inside information for the purposes of
Article 7 of Regulation 596/2014.
Trinity Exploration & Production plc
("Trinity" or "the Group" or "the Company")
Q4 2019 Operational Update
Strong Financial Performance Underpinned by Production
Growth
Trinity, the independent E&P company focused on Trinidad and
Tobago, today provides an update on its operations for the
three-month period ended 31 December 2019 ("Q4 2019" or "the
period"). During the period, Trinity continued to focus on growing
production, generating free cash flow and protecting the business
from downside risk.
The continued growth in production achieved during the period
was underpinned by optimising production from existing wells and by
the drilling of six new wells in the second half of 2019. The full
impact of this drilling campaign has generated a strong start to Q1
2020 with all six wells now on stream and contributing to an exit
production rate of almost 3,400 bopd during December 2019.
The Company ended Q4 with a year on year increase in cash
balances, no debt, a new undrawn working capital facility in place
and further hedges implemented to partially mitigate the impact of
SPT.
Q4 Operational Highlights
-- 13% quarter on quarter increase in Group average production
volumes to 3,196 bopd for Q4 2019 (Q3 2019: 2,816 bopd)
-- 5% year on year increase in Group average production volumes
to 3,007 bopd for the full year 2019 (2018: 2,871 bopd)
-- Increase in annualised production resulting from the six new
onshore development wells coming on stream during H2 2019, and the
Company's ongoing low-cost work programme of recompletions
("RCPs"), workovers, reactivations and swabbing
-- The six well drilling campaign commenced during H2 2019, so
the full impact on production only began to be realised during Q4
2019
-- The exit production rate for 2019 was almost 3,400 bopd, in
line with expectations, with production levels above 3,400 bopd for
much of December
Drilling Highlights
-- The six well onshore drilling programme delivered:
o an increase of 20% in Estimated Ultimate Recoverable Reserves
(EUR) above pre-drill prognosis (602 mbo vs 500 mbo)
o an increase of 47% in estimated Net Oil Sand (NOS) encountered
over pre-drill prognosis (1653' vs 1125')
o an increase of 54% in Initial Production rates (IP's) over
pre-drill prognosis (cumulative 650 bopd vs 421 bopd)
-- The strong performance of the 2019 drilling campaign results
from more robust sub-surface mapping, and a more rigorous approach
to examining reservoir performance which enabled more precise
risking and ranking of potential reservoir targets.
-- The drilling programme lasted 125 days and there were no Lost
Time Injuries (LTI's) over the period, a significant positive
result for the drilling team and lead contractors
-- The drilling programme included our first High Angle Well
("HAW") FR 1807, which has continued to perform satisfactorily:
o The well had an IP of over 80 bopd vs the 50 bopd typically
expected from a conventional vertical well.
o It attained a maximum daily production rate of 118 bopd prior
to the planned implementation of a gravel pack, a completion
technique to arrest sand production.
o Following the gravel pack implantation, the well is currently
producing 40-50 bopd (no water production). A well pump
optimisation is currently being run with production expected to be
resumed at 80 bopd ahead of further optimisation.
Ongoing Operations
-- 7 RCPs (Q3 2019: 10) and 26 workovers (Q3 2019: 25) were
completed during Q4 2019, with swabbing operations continued across
all land assets
-- Better than expected results from the initial two well trial
of Weatherford's Supervisory, Control and Data Acquisition
("SCADA") production optimising platform, with a meaningful
increase in production from the two pilot wells
-- SCADA roll out continued with the platform currently on 6
wells with a further roll out expected to be carried out during
2020
-- With further roll out over a longer period the full
production benefits and operating cost savings will become more
apparent
Financial Highlights
-- Cash balance of US$13.8 million (unaudited) as at 31 December
2019 versus US$10.2 million (audited) as at 31 December 2018 and
US$15.6 million (unaudited) as at 30 September 2019. The year on
year increase in cash has been achieved despite the cost of the six
well drilling programme having been incurred from which the
commensurate benefits are only starting to be realised
-- Working capital facility put in place (currently undrawn)
with CIBC First Caribbean for US$2.7 million, providing further
financial flexibility
-- The Company has continued to implement its hedging strategy
which is designed to protect the Group's free cash flows by
partially mitigating the impact of Supplemental Petroleum Taxes
("SPT") whilst retaining upside exposure to rising oil prices over
the majority of production
-- Three further hedges were put in place, at attractive terms,
during the short period when oil prices spiked as a result of
escalating tensions between the US and Iran around the year end. As
a result, the Company now has hedges in place over 47,500
bbls/month for the first six months of 2020 (equating to
approximately 46% of its 2019 exit production) and 28,333
bbls/month for the second six months of 2020 (equating to
approximately 28% of its 2019 exit production). The put spread
range (where the Company receives benefit) is an average of
US$50.00 to 56.00 and the call options granted (where the Company
cedes benefit) apply to 35,000bbls at an average call strike of
US$65.50/bbl
The Company will announce its audited preliminary results for
the year to 31 December 2019, in early April. This will provide
full details on production, margins, operating break-even, costs
and profitability - highlighting the growing value of the Company's
assets and continued strong financial performance.
Outlook
With a low operating break-even due to tight control over costs
(H1 2019 EBITDA margin of 35%) combined with increased production
from new infill wells, the Company intends to prioritise
bottom-line free cash generation and maintaining a strong balance
sheet during 2020. The hedging programme we have implemented will
help to mitigate the impact of SPT in 2020 which should allow
Trinity to generate bottom line free cash flow under most credible
oil price scenarios.
Operationally, the drilling programme will continue in 2020 with
the sub-surface team being challenged to prioritise the
identification of HAW drilling locations. The Company will also
continue to roll out further SCADA platforms on selected existing
wells and on all new wells.
Importantly, the SCADA technology enables real time analysis of
well performance, and the ability to change and review flowrates
remotely, plan more efficiently and ultimately reduce operating
costs. Given the benefits shown to date, the Company believes that
by a wider-scale roll out of this technology it has the ability to
increase production from existing wells, reduce natural declines in
individual wells and create meaningful operating cost savings.
On our east coast Galeota licence, the Company continues to have
a positive dialogue with both Heritage (our partner) and The
Ministry of Energy and Energy Industries (our regulator) in moving
both the Trintes Field area and the TGAL field development
forward.
Bruce Dingwall, CBE, Executive Chairman of Trinity,
commented:
"We continue with our strategy of delivering returns for our
shareholders by growing production and margins as well as
maximising free cash flow from our attractive portfolio of assets.
As such, the positive results from our H2 2019 drilling programme -
incorporating our first High Angle Well (HAW) - are particularly
pleasing.
"Furthermore, we are pleased with the SCADA platform's results
to date. Real-time data management and the associated increases in
efficiencies and production are clear to see and we are excited
about the potential impact of rolling this technology out across
our portfolio.
"I'd like to take this opportunity to directly thank our fellow
shareholders for their support and patience during what has been a
volatile quarter in the global markets. Please be reassured that
all of our plans are focused on ensuring that we have the best
platform in place to grow the value of our Company over the short,
medium and longer term."
Enquiries
For further information please visit www.trinityexploration.com
or contact:
Trinity Exploration & Production plc +44 (0)131 240 3860
Bruce Dingwall CBE, Executive Chairman
Jeremy Bridglalsingh, Chief Financial Officer
Tracy Mackenzie, Corporate Development
Manager
SPARK Advisory Partners Limited (Nominated
Adviser and Financial Adviser) +44 (0)20 3368 3550
Mark Brady
Miriam Greenwood
Andrew Emmott
Cenkos Securities PLC (Broker)
Joe Nally (Corporate Broking)
Neil McDonald
Derrick Lee +44 (0)20 7397 8900
Pete Lynch +44 (0)131 220 6939
Whitman Howard Limited (Equity Adviser) +44 (0)20 7659 1234
Nick Lovering
Hugh Rich
Walbrook PR Limited +44 (0)20 7933 8780
Nick Rome trinityexploration@walbrookpr.com
About Trinity (www.trinityexploration.com)
Trinity is an independent oil and gas exploration and 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 nine
licences and, across all of the Group's assets, management's
estimate of 2P reserves as at the end of 2018 was 24.5 mmbbls.
Group 2C contingent resources are estimated to be 18.8 mmbbls. The
Group's overall 2P plus 2C volumes are therefore 43.3 mmbbls.
Trinity is quoted on the AIM market of the London Stock Exchange
under the ticker TRIN.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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