TIDMTRIN
RNS Number : 5124F
Trinity Exploration & Production
10 March 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")
Current Low Oil Price Environment
Financially Strong By Design, with operating break-even below
US$30/bbl
Trinity, the independent E&P company focused on Trinidad and
Tobago, today provides an update to illustrate its financial
strength in an environment of lower oil prices. Over the past six
years the Company has evolved its operating and financial position
to enable the business to deal with a lower oil price environment
and other global economic uncertainties.
Since the beginning of 2020, the Covid-19 virus and more recent
OPEC stand-off has prompted a rapid decline in oil prices with WTI
(Trinity's benchmark crude) currently trading below US$35.0/barrel.
Trinity, through operational initiatives and prudent financial
planning, now benefits from a series of mitigants that help to
protect the business in the current environment, including:
-- no Supplemental Petroleum Tax ("SPT") is payable if oil price
realisations remain below an average of US$50.01/bbl in any
calendar quarter
o January realisation was US$58.2/bbl and February US$51.6/bbl
with a March realisation of US$40.2/bbl or less required for a Q1
average below US$50.01/bbl
-- a sustained reduction in operating break-even levels in recent years
o H1 2019: US$26.3/bbl
o sub US$30/bbl operating break-even continued through 2019 and
into 2020
o follows established trend; 2015: US$47.2/bbl, 2016:
US$29.2/bbl, 2017: US$28.4/bbl, 2018: US$29.0/bbl
o increased production levels and relatively fixed cost base
underscores this industry leading break-even and low oil price
resilience
-- Overriding Royalties (ORR) payable reduce with lower oil prices
o Onshore: from 33% to 25% and 20% respectively when
realisations average below US$50.0/bbl and US$40.0/bbl
respectively
o Offshore East Coast: from 13% to 12% and 11% respectively when
realisations average below US$50.0/bbl and US$40.0/bbl
respectively
o Offshore West Coast: from 11% to 10% when realisations average
below US$50.0/bbl
-- a strong oil price hedge position has been put in place to
protect the Company's revenues for a large part of 2020; and
-- only a small proportion of the Company's profits are subject
to Petroleum Profits Tax ("PPT") due to capital allowances on
current capital expenditures and shelter from past tax losses
Financial Strength/Hedging
-- Cash balance of US$13.8 million (unaudited) as at 31 December
2019 and undrawn working capital facility of US$2.7 million in
place with CIBC First Caribbean providing further financial
flexibility
-- Low cost base: OPEX/bbl was US$14.9/bbl in H1 2019 and G&A costs US$5.0/bbl
-- Flexibility on timings and extent of deployment of any investment capital
-- Trinity took advantage of the oil price strength in July and
October 2019 and again in January 2020 to put in place layers of
hedging designed to partially offset the impact of SPT when WTI is
between US$50.0/bbl and US$56.0/bbl, whilst retaining exposure to
rising oil prices over the majority of production
-- The Company currently has hedges in place covering 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 Company will
therefore receive US$6.0 for each hedged barrel if WTI continues to
trade below US$50.0/bbl
-- Trinity also benefits from a large tax loss position of
US$244.1 million (unaudited, as at 31 December 2019) which
effectively means that around 75% of taxable profits are sheltered
from PPT
Operational Hedging
-- Higher 2020 base production established with year to date
average reported production of over 3,300 bopd (up 10% on 2019 FY
average)
-- Multiple options to maintain and grow production including
low cost recompletions, workovers and new infill wells onshore
-- Operationally geared towards reducing cost structures and
optimising production following better than expected results from
the initial two well trial of Weatherford's Supervisory, Control
and Data Acquisition ("SCADA") platforms;
o SCADA is currently in place on 6 wells with a further roll out
being carried out during 2020
o first time this technology has been deployed for oil
production onshore in Trinidad
o provides a low-cost means of protecting and enhancing base
production levels
o full production benefits and operating cost savings will
become more apparent during the next 1-2 years
-- Moving towards High Angle Wells ("HAWs"), increasing initial
production rates and well economics/returns
Outcomes
The combination of operating and financial initiatives
implemented by management means that Trinity can be Free Cash Flow
("FCF") positive across a broad range of oil prices. Trinity's
operating break-even has consistently been below US$30.0/bbl in all
periods since the new management's measures took effect in
2016.
Outlook
With a low operating break-even and increasing production from
new infill wells, the Company will prioritise bottom-line free cash
generation and maintaining a strong balance sheet during 2020. The
hedging programme that has been put in place, as well as partially
mitigating the impact of SPT when oil prices are in a
US$50.0-US$56.0 range, also provide s the Company with a degree of
protection against a sustained period of lower oil prices.
Operationally, the extent and timing of the resumption of the
onshore drilling programme in 2020 will be dependent on the
prevailing economic environment . In the meantime, the sub-surface
team has been tasked to prioritise the identification of HAW
drilling locations and t he Company will continue to roll out
further SCADA platforms on selected existing wells and on any new
wells.
On the Company's east coast Galeota licence, positive dialogue
continues with both Heritage Petroleum Company Limited (Trinity's
partner) and The Ministry of Energy and Energy Industries
(Trinity's regulator) in moving both the Trintes Field area and the
TGAL field development forward.
The Company will announce its audited preliminary results for
the year to 31 December 2019 in April 2020. 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.
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.
The Company is prioritising returns on investment and maintaining a
strong balance sheet. We have established strong and sustainable
foundations from which to provide upside across a broad range of
oil price scenarios and are focused on driving value for investors.
The fact that the Company continues to accrue cash at lower oil
prices is testament to our financial discipline and our lean
business model putting us in a highly resilient position. We are
confident that our operating break-even will stay in the vicinity
of the last reported US$26.3/bbl as we continue to manage the
business with this as an important KPI. Our preliminary results in
April will provide full details around our cost base and measures
in place to respond to any sustained period of low oil prices."
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
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.
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information, please contact rns@lseg.com or visit www.rns.com.
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