TIDMTRIN
RNS Number : 8425F
Trinity Exploration & Production
30 April 2014
Trinity Exploration & Production plc
(the "Company" or "Trinity"; AIM:TRIN)
Preliminary 2013 Results
30 April 2014
Trinity, the leading independent E&P company focused on
Trinidad and Tobago, is pleased to present its preliminary
financial results for year ended 31 December 2013.
Financial highlights
-- Closed acquisition and re-admission process in February 2013, concurrently raising USD 90 million of equity
-- Revenues of USD 123.8 million (2012: USD 77.7 million)
-- EBITDA of USD 34.8 million (2012: USD 24.1 million)
-- Cash inflow from operating activities of USD 17.0 million (2012: USD 3.7 million)
-- Operating profit before exceptional items of USD 21.6 million (2012: USD 16.4 million). Operating profit
after exceptional items of USD 50.4 million (2012: USD 1.0
million loss)
-- Cash balances of USD 25.1 million at 31 December 2013 (2012: USD 22.7 million)
-- Secured USD 25.0 million additional debt facility to fund the Company's future growth
-- Led fiscal lobbying to secure increased capital allowances
Operating highlights
-- Exited 2013 with average Q4 production of 4,200 boepd
-- Delivered production growth of 23% since taking operational control on 14 February 2013
-- Delivered and reserves growth of 34% versus year end 2012 (excluding TGAL-1 discovery)
-- Third most active driller in Trinidad during 2013 completing
nine onshore development wells, one offshore development well and
two offshore exploration wells
-- Drilled the successful TGAL--1 exploration well offshore the
East Coast with estimated original oil in place ("OOIP") of 50--115
million barrels ("mmbbl")
-- Converted Petrotrin's working interest at Trintes to an
overriding royalty in order to increase operating flexibility
-- Successfully integrated two businesses and delivered all operations safely
Outlook
-- 2014 net average production rate expected to be 3,800 - 4,500 boepd
-- Production growth through infill drilling and recompletions
-- Pilot new "J" type well design at Trintes field to improve
initial production rates and recoverable volumes per well
-- Targeting FDP submission for TGAL-1 discovery by Q1 2015 to
deliver first oil as rapidly as possible
-- Accelerate high grading of exploration prospects along the
Galeota Ridge. On success, these prospects will form part of a
phased Galeota Ridge development
-- Actively review business development opportunities in
Trinidad consistent with the Company's stated strategy
Joel "Monty" Pemberton, Chief Executive Officer of Trinity,
commented:
"2013 was an exciting and transformational year for Trinity.
Having successfully raised USD 90 million in February, the focus
has been on drilling activities to grow our production and
reserves. In 2013 Trinity was the third most active driller in
Trinidad and our TGAL discovery was the only successful exploration
well in Trinidad during the year. This discovery reaffirms our
confidence in the Galeota block and the key priority is to develop
a cost efficient development plan within the shortest possible time
frame. Our continued focus on improving drilling performance is
beginning to yield positive results and we expect to see further
benefits over time.
The Trinidad upstream industry continues to evolve and Trinity
is pursuing various business development opportunities to further
growth the Company in line with the existing business model."
Trinity will be hosting a conference call at 8.30am for analysts
and investors to discuss the results. Dial-in details are
below:
Dial-In: +44 (0) 1452 555 566
Conference ID: 30340154
Competent Person's Statement:
The information contained in this announcement has been reviewed
and approved by Clive Deokie, Subsurface Manager for Trinity
Exploration & Production plc, who has over 25 years of relevant
experience in the oil and gas industry. Mr Deokie holds a BSc Hons
in Geology from the University of the West Indies and is a member
of the Geological Society of Trinidad & Tobago.
Enquiries
Trinity Exploration & Production Tel: +44 (0)20 7404
Joel "Monty" Pemberton, Chief Executive 5959
Officer
Robert Gair, Corporate Development Manager
RBC Capital Markets (NOMAD & Joint Broker) Tel: +44 (0) 20 7653
Tim Chapman 4000
Matthew Coakes
Daniel Conti
Jefferies (Joint Broker) Tel: +44 (0) 20 7029
Chris Zeal 8000
Graham Hertrich
Brunswick Group LLP (PR Adviser) Tel: +44 (0) 20 7404
Patrick Handley 5959
Pip Green
Executive Chairman's & Chief Executive Officer's Review
Onshore operations
Average 2013 net production for onshore was 2,088 bopd.
In 2013, Trinity drilled nine new onshore wells (5 in WD-5/6, 3
in WD-2 and 1 in Guapo) and brought 10 wells onto production
(including 2 drilled in 2012) and drilled nine onshore
developments. This programme was very successful with actual
initial production rates averaging c. 100 bopd per well versus
budget of 50 bopd. Since year end, Trinity has suspended drilling
operations while discussions are ongoing with Petrotrin regarding
upgrading the Company's onshore licenses to improve efficiency,
reduce operating costs and assess enhanced oil recovery
opportunities on the combined acreage.
Trinity also completed various modifications and infrastructure
upgrades including relocation of the Fyzabad office and upgrading
of the fire suppressant system at its FZ-2 lease operatorship
battery station.
West Coast operations
Average 2013 net production for West Coast was 596 boepd.
During 2013 Trinity completed a major workover programme at its
Brighton Marine field. This project involved the commissioning and
replacement of a new deck at the MP-8 platform to facilitate heavy
workovers at seven wells. These recompleted wells declined more
rapidly than expected due to gas management issues. Following gas
lift optimisation in the Brighton field and workovers and
recompletions at various PGB wells during early 2014, West Coast
production has stabilised at c. 600 boepd. Workover and
recompletion work is also planned for the ABM-151 and ABM-150
wells. Incremental production associated with this project is
estimated at up to 200 bopd and Trinity is currently working to
secure a jackup workover barge to complete these operations.
In 2013, Trinity also successful commissioned a Lease Automatic
Custody Transfer (LACT) metering facility on the onshore Brighton
Marine facilities.
East Coast operations
Average 2013 net production for East Coast was 1,114 bopd.
The Trintes field provided some challenges during the course of
the year and several steps were taken to improve operating
efficiency. Generator and pump issues significantly impacted
production in January 2013 and Trinity's planned infill drilling
programme was delayed by ongoing challenges with its drilling rig.
Drilling activities were suspended from September to early December
2013 as the rig was demobilised for upgrades. Drilling resumed in
December 2013 on the B9X well. Trinity also leased two new surfer
boats from Turbine Transfers in the United Kingdom in order to
provide a safer and more efficient personnel transfer system.
The B11XX sidetrack was successfully drilled and was brought on
production at an initial production rate of 265 bopd in September
2013. The B5X sidetrack was suspended in February 2013 due to
drilling difficulties; the cost for this well has been impaired in
2013. During 2013, 18 workovers were performed on the Trintes
field, restoring in excess of 550 bopd.
In 2013 the Galeota tank farm was modified and upgraded. These
upgrades are intended to facilitate the pumping of fiscalized crude
directly into the Petrotrin sales line.
Exploration update
Trinity drilled two exploration wells during 2013.
East Coast: TGAL-1 Exploration Well
The Trinity operated TGAL-1 exploration well (Trinity 65%
working interest) was spudded on 28 October 2013 to target an updip
extension of the producing Trintes field. Drilling operations were
undertaken utilising the Rowan Gorilla III jackup rig.
The TGAL-1 well was drilled to 5,694 feet measured depth and
intersected five targets all containing good quality oil bearing
reservoir sands. TGAL-1 well encountered a total of 547 feet net
oil sands containing high quality 28-30 degree API oil. Original
Oil In Place ("OOIP") volumes are estimated to be in the range of
50 - 115 mmbbl of oil (gross).
Under the terms of the license minimum work obligations, Trinity
paid 100% of the TGAL-1 well costs.
West Coast: El Dorado Exploration Well
The Trinity operated El Dorado-1 exploration well (Trinity 70%
working interest) was spudded on 7th December 2013 and completed on
3 February 2014, utilising the WS-152 jackup rig. The primary
objective of the well was to test an undrilled fault block on the
west flank of the Trinity operated Brighton field.
The well was drilled to a total depth of 6,174 feet measured
depth ("MD") and intersected a shallow gas sand in the Pliocene
section and marginal thin bedded oil pay in the Miocene section. In
aggregate approximately 13 feet of net oil sands and 32 feet of net
gas sands were encountered, however these were not deemed
commercial and the well was plugged and abandoned.
Under the terms of the license minimum work obligations, Trinity
paid 100% of the El Dorado-1 well costs.
South Africa: Pletmos Inshore Block
Trinity has initiated a farmout process to find a partner for
the next exploration phase on this license.
Financial review
Statement of Comprehensive Income
Trinity's financial results for 2013 showed a Total
Comprehensive Income of USD 38.8 million (2012: USD 15.2 million
loss) on gross revenues of USD 123.8 million.
Operating Revenues
2013 revenues were USD 123.8 million (2012: USD 77.7 million).
This increase was mainly attributable to (i) increased onshore
production and (ii) the revenues generated by the Galeota Asset,
which was acquired in February 2013.
-- Production
- Production for 2013 was 1.4 mmbbls (2012: 0.8 mmbbls)
- Average production was 3,798 boepd, with 55.0% (2,088 bopd)
sold onshore, 15.7% (596 boepd) attributable to the west coast and
29.3% (1,114 bopd) from the east coast
-- Oil prices
- Realised oil price for 2013 averaged USD 91.6/ bbl (2012: 92.5/ bbl)
Operating Expenses
-- Operating expenses were USD 102.2 million (2012: USD 61.4
million) which are made up as follows:
- Royalties of USD 37.3 million (2012: USD 29.2 million)
- Production costs of USD 33.1 million (2012: USD 12.2 million)
- Depreciation, depletion and amortisation amounted to USD 13.2 million (2012: USD 7.7 million)
- General and administrative expenses of USD 18.5 million (2012: USD 12.3 million)
Operating Profit before Exceptional Items
Operating profit before exceptional items amounted to USD 21.6
million (2012: USD 16.4 million)
Exceptional items
Exceptional items amounted to USD 28.8 million (2012: USD 17.4
million loss) comprising mainly of the following:
-- Negative goodwill of USD 52.1 million, which is a gain on
purchase and was recognised in respect of the reverse acquisition
of Bayfield Energy Holdings plc by Trinity Exploration &
Production (UK) Limited, as the fair value of net assets acquired
was in excess of the fair value of consideration exchanged
-- Other exceptional items combined to a total expense of USD 23.3 million
Operating Profit after Exceptional Items
Operating profit after exceptional items amounted to USD 50.4
million (2012: USD 1.0 million loss)
Net Finance Costs
In 2013 finance costs amounted to USD 2.4 million (2012: USD 1.8
million), which is made up of the unwinding of the decommissioning
liability USD 1.2 million (2012: USD 0.5 million) and interest on
the fully drawn (USD 20.0 million) Citibank loan of USD 1.2 million
(2012: USD 1.3 million).
Taxation
The tax charge for 2013 was USD 9.4 million (2012: USD 12.5
million), and its components are described below.
-- Supplemental Petroleum Tax (SPT): USD 10.4 million (2012: 8.4 USD million).
-- Petroleum Profits Tax (PPT):USD 5.8 million (2012: USD 5.5 million)
-- Corporation Tax: The CT for the year amounted to USD 0.9 million (2012: nil).
-- Deferred Tax: The combined movement of the deferred tax asset
and liability accounts was a net credit of USD 7.7 million (2012:
USD 1.3 million). There was an increase in the deferred tax asset
of USD 17.9 million (2012: USD 0.9 million), due to increases in
tax losses carried forward.
Total Comprehensive Income
Trinity's financial results for 2013 showed a Total
Comprehensive Income of USD 38.8 million (2012: USD 15.2 million
loss) on gross revenues of USD 123.8 million (2012: USD 77.7
million). Adjusted for exceptional items Trinity showed Total
Comprehensive Income of USD 10.1 million (2012: USD 2.1
million)
Statement of Cash Flows
The opening cash balance as at 1 January 2013 was USD 22.7
million and the ending cash balance at 31 December 2013 was USD
25.1 million.
Changes in Working Capital
During the year Trinity experienced working capital outflows of
USD 15.0 million. Significant changes are outlined in the table
below:
Uses of Cash Sources of
(USD '000) Cash
(USD '000)
----------------------------- ------------- ------------
Inventory 472
----------------------------- ------------- ------------
Trade and other receivables 2,922
----------------------------- ------------- ------------
Trade and other payables 13,842
----------------------------- ------------- ------------
Taxation Paid 25,430
----------------------------- ------------- ------------
Change in Working
Capital (14,982)
----------------------------- ---------------------------
The Company paid taxes of USD 25.4 million in 2013 (2012: USD
10.1 million) of which USD 11.8 million were related to production
taxes for 2012.
Operating activities
Cash inflow from operating activities was USD 17.0 million
(2012: USD 3.7 million), being the net effect of:
-- Adjusted profit inflow of USD 32.0 million (2012: 23.0 million)
-- Changes in working capital inflow of USD 10.5 million (2012: outflow of USD 9.3 million)
- VAT refunds due at year-end totalled USD 20.7 million with the
majority relating to VAT due from the T&T tax authority.
Notably, VAT refunds of USD 3.2 million were received in Q4
2013
Investing activities
Cash outflow from investing activities was USD 85.6 million
(2012: USD 13.5 million), and is made up of capital expenditure and
cash acquired in acquisition:
Capital expenditure during 2013 totalled USD 92.1 million (2012:
USD 13.6 million) with spend occurring across all of the Group's
assets;
-- Exploration and evaluation assets: The majority of spend here
relates to the two exploration wells, TGAL-1 and El Dorado-1.
TGAL-1 (USD 23.7 million) was drilled during 2013 and El Dorado-1
(USD 9.4 million), started in December 2013 but completed in
February 2014. The remainder of spend
relates to Exploration Geological and Geophysical studies
-- Expenditure on property, plant and equipment for the year was
USD 56.7 million (2012: USD 13.6 million). This included
development wells drilled (USD 31.4 million), infrastructure
upgrades (USD 18.2 million)
Cash inflow from financing activities
Cash inflow from financing activities was USD 71.1 million
(2012: USD 5.7 million), being the net effect of:
Net equity raise proceeds: USD 84.9 million (2012: Nil) of
equity raised in February, net proceeds
Debt proceeds/ repayment and finance costs:
-- Repayment of convertible shareholder loan to Centrica notes
of USD 6.4 million (2012: USD 0.5 million)
-- Repayment of borrowings of USD 6.2 million (2012: USD 7.4
million inflow) includes; repayment of Segel debt facilities (USD
2.1 million) and principal repayments of the Citibank loan (USD 4.1
million)
-- Payment of loan finance costs of USD 1.2 million (2012: USD 1.3 million)
Additional debt facility: In August 2013, Trinity secured an
additional USD 25.0 million debt facility with Citibank to fund
future growth. As at 31 December 2013 this facility remained
undrawn.
Closing Cash Balance
Trinity's cash balance at 31 December 2013 was USD 25.1 million
inclusive of cash acquired on acquisition of USD 6.5 million.
Trinity Exploration & Production plc
(Formerly Bayfield Energy Holdings plc)
Consolidated and Company Financial Statements
(Expressed in United States Dollars)
31 December 2013
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2013
(Expressed in United States Dollars)
--------------------------------------------------------------------------------------
Notes 2013 2012
$'000 $'000
Operating Revenues
Crude oil sales 123,585 77,285
Other income 234 427
------------ ------------
123,819 77,712
Operating Expenses
Royalties (37,343) (29,154)
Production costs (33,099) (12,200)
Depreciation, depletion and amortisation 5 (13,211) (7,690)
General and administrative expenses (18,539) (12,308)
------------ ------------
(102,192) (61,352)
------------ ------------
Operating Profit Before Exceptional
Items 21,627 16,360
Exceptional Items 29 28,766 (17,357)
Operating Profit/(Loss) After Exceptional
Items 19 50,393 (997)
Finance Income -- 65
Finance Costs 20 (2,357) (1,764)
Profit /(Loss) Before Income Tax 48,036 (2,696)
Income Tax Expense 21 (9,481) (12,532)
------------ ------------
Profit /(Loss) For The Year 38,555 (15,228)
Other Comprehensive Income:
Items that may be subsequently reclassified
to profit or loss
Currency Translation 277 7
------------ ------------
Total Comprehensive Income /(Loss)
For The Year 38,832 (15,221)
============ ============
Total Comprehensive Income/(Loss)
attributed to:
Owners of the parent 38,832 (15,221)
Non-controlling interest -- --
============ ============
Earnings per share (expressed in
dollars per share)
Basic 30 0.45 (0.59)
Diluted 30 0.43 (0.59)
------------ ------------
Consolidated Statement of Financial Position
as at 31 December 2013
(Expressed in United States Dollars)
-----------------------------------------------------------------------------
Notes 2013 2012
ASSETS $'000 $'000
Non-current Assets
Property, plant and equipment 5 177,592 64,720
Intangible assets 6 59,002 7,856
Deferred tax assets 17 64,693 13,787
---------- ----------
301,287 86,363
---------- ----------
Current Assets
Inventories 8 12,029 3,333
Trade and other receivables 7 36,803 23,203
Taxation recoverable 9 528 471
Cash and cash equivalents 10 25,145 22,655
---------- ----------
74,505 49,662
---------- ----------
Total Assets 375,792 136,025
========== ==========
Equity and liabilities
Equity Attributable to Owners of the Parent
Share capital 11 94,800 34
Share premium 11 116,395 17,550
Share warrants 12 71 71
Share based payment reserve 28 11,523 7,295
Merger reserves 13 74,808 52,853
Reverse acquisition reserve 13 (89,268) --
Translation reserve 567 290
Accumulated surplus/(deficit) 10,375 (27,180)
---------- ----------
Total Equity 219,271 50,913
---------- ----------
Non-current Liabilities
Convertible loan notes 14 -- 6,355
Borrowings 15 11,910 18,104
Provision for other liabilities 16 29,027 10,576
Deferred tax liabilities 17 46,387 19,054
---------- ----------
87,324 54,089
---------- ----------
Current Liabilities
Trade and other payables 18 61,117 15,695
Borrowings 15 3,989 4,012
Taxation payable 9 4,091 11,316
---------- ----------
69,197 31,023
---------- ----------
Total Liabilities 156,521 85,112
---------- ----------
Total Equity and Liabilities 375,792 136,025
========== ==========
Company Statement of Financial Position
as at 31 December 2013
(Expressed in United States Dollars)
------------------------------------------------------------------------------
Notes 2013 2012
ASSETS $'000 $'000
Non-current Assets
Investment in subsidiaries 22 94,401 46,085
Trade and other receivables 7 160,760 84,664
----------- ----------
255,161 130,749
----------- ----------
Current Assets
Trade and other receivables 7 1,007 1,384
Cash and cash equivalents 10 4,189 154
----------- ----------
5,196 1,538
----------- ----------
Total Assets 260,357 132,287
=========== ==========
Equity and liabilities
Equity Attributable to Owners of the Parent
Share capital 11 94,800 21,648
Share premium 11 116,395 80,817
Share based payment reserve 28 1,127 1,117
Merger reserves 13 56,652 34,228
Accumulated deficit (9,991) (7,296)
----------- ----------
Total Equity 258,983 130,514
----------- ----------
Current Liabilities
Trade and other payables 18 1,374 1,773
-----------
1,374 1,773
----------- ----------
Total Liabilities 1,374 1,773
----------- ----------
Total Equity and Liabilities 260,357 132,287
=========== ==========
Consolidated Statement of Changes in Equity
For the period ended 31 December 2013
(Expressed in United States Dollars)
----------------------------------------------------------------------------------------------------------------------
Year ended 31
December 2012
Share Share Share Share Merger Translation Accumulated Total
Capital Premium Warrant Based Reserve Reserve Deficit
Payment
Reserve
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
At 1 January
2012 33 13,751 71 -- 53,172 283 (11,952) 55,358
Financial
liability
converted
to shares 1 3,870 -- -- -- -- -- 3,871
Share options
granted -- -- -- 7,295 -- -- -- 7,295
Translation
difference -- (71) -- -- (319) 7 -- (383)
Comprehensive
loss for the
year -- -- -- -- -- -- (15,228) (15,228)
------------- ----------- ---------- --------- --------- ------------- ------------- ---------
At 31 December
2012 34 17,550 71 7,295 52,853 290 (27,180) 50,913
============= =========== ========== ========= ========= ============= ============= =========
Year ended 31 Share Share Share Share Reverse Merger Translation Accumulated Total
December Capital Premium Warrant Based Acquisition Reserve Reserve Deficit
2013 Payment Reserve
Reserve
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
At 1 January
2013 34 17,550 71 7,295 -- 52,853 290 (27,180) 50,913
Acceleration of
share
options -- -- -- 4,708 -- -- -- -- 4,708
Placing shares
issued 47,500 41,523 -- -- -- -- -- -- 89,023
Share options
exercised -- -- -- (411) -- -- -- -- (411)
Shares issued to
previous
equity holders
of TEPL 25,618 (17,550) -- -- (30,421) 22,353 -- -- --
Legacy Trinity
share capital 21,648 80,817 -- -- (58,800) -- -- -- 43,665
Cost of raising
equity -- (5,945) -- -- -- -- -- -- (5,945)
Share options
granted -- -- -- 187 -- -- -- -- 187
LTIP's granted -- -- -- 88 -- -- -- -- 88
Legacy share
options -- -- -- (262) -- -- -- -- (262)
Non-controlling
interest -- -- -- -- -- -- -- (1,000) (1,000)
Translation
difference -- -- -- (82) (47) (398) -- -- (527)
Comprehensive
income for
the year -- -- -- -- -- -- 277 38,555 38,832
-------- --------- -------- -------- ------------ -------- ------------ ------------ --------
At 31 December
2013 94,800 116,395 71 11,523 (89,268) 74,808 567 10,375 219,271
======== ========= ======== ======== ============ ======== ============ ============ ========
Company Statement of Changes in Equity
for the year ended 31 December 2013
(Expressed in United States Dollars)
--------------------------------------------------------------------------------------------------------------------
Share Capital Share Premium Share Based Merger Accumulated Total
Payment Reserve Deficit
Reserve
$'000 $'000 $'000 $'000 $'000 $'000
Year ended 31 December 2012
At 1 January 2012 21,498 80,586 872 34,228 (4,252) 132,932
Loss for the year -- -- -- -- (3,044) (3,044)
Issue of share capital (net of
share issue cost) 150 225 -- -- -- 375
Share based payments -- -- 245 -- -- 245
Translation difference -- 6 -- -- -- 6
At 31 December 2012 21,648 80,817 1,117 34,228 (7,296) 130,514
============== ============== ============ ========= ============ ========
Year ended 31 December 2013
At 1 January 2013 21,648 80,817 1,117 34,228 (7,296) 130,514
Shares issued to previous holders
of TEPL 25,652 -- -- 22,424 -- 48,076
Placing shares issued 47,500 41,523 -- -- -- 89,023
Cost of raising equity -- (5,945) -- -- -- (5,945)
Legacy share option adjustment -- -- (262) -- -- (262)
Share options granted -- -- 226 -- -- 226
LTIP granted -- -- 53 -- -- 53
Translation difference -- -- (7) -- -- (7)
Comprehensive loss for the year -- -- -- -- (2,695) (2,695)
At 31 December 2013 94,800 116,395 1,127 56,652 (9,991) 258,983
============== ============== ============ ========= ============ ========
Consolidated Statement of Cash Flows
for the year ended 31 December 2013
(Expressed in United States Dollars)
--------------------------------------------------------------------------------
Notes 2013 2012
$'000 $'000
Operating Activities
Profit /(Loss) before taxation 48,036 (2,696)
Adjustments for:
Translation difference 79 134
Profit on disposal of property, plant
and equipment 5 -- (57)
Finance cost - loans 20 1,179 1,256
Share options granted 29 4,721 7,295
Finance cost - decommissioning provision 16 1,178 508
Finance income -- (66)
Depreciation, depletion and amortisation 5 13,211 7,690
Goodwill 29 2,746 --
Negative goodwill 29 (52,070) --
Abandonment 5 1,624 --
Impairment of property, plant and equipment 5 3,468 --
Impairment of intangibles 6 7,786 8,963
31,958 23,027
--------- ---------
Changes In Working Capital
Inventories 8 (472) (1,834)
Trade and other receivables 7 (2,922) (12,310)
Trade and other payables 18 13,842 4,839
42,406 13,722
Taxation paid (25,430) (10,061)
--------- ---------
Net Cash Inflow From Operating Activities 16,976 3,661
--------- ---------
Investing Activities
Purchase of exploration and evaluation
assets 6 (35,396) --
Purchase of property, plant and equipment 5 (56,736) (13,591)
Disposal of property, plant and equipment -- 64
Cash and cash equivalent acquired in
acquisition 6,529 --
--------- ---------
Net Cash Outflow From Investing Activities (85,603) (13,527)
--------- ---------
Financing Activities
Finance income -- 66
Issue of shares (net of costs) 84,868 --
Repayment of convertible shareholder
loan notes 14 (6,355) (500)
Finance cost - loans 20 (1,179) (1,256)
Repayment of borrowings 15 (6,217) (14,711)
Proceeds from new borrowings 15 -- 22,116
--------- ---------
Net Cash Inflow From Financing Activities 71,117 5,715
--------- ---------
Increase/(decrease) in Cash and Cash
Equivalents 2,490 (4,151)
========= =========
Cash And Cash Equivalents 10
At beginning of year 22,655 26,806
Increase/(decrease) in cash and cash
equivalents 2,490 (4,151)
--------- ---------
At end of year 25,145 22,655
========= =========
Company Statement of Cash Flows
for the year ended 31 December 2013
(Expressed in United States Dollars)
---------------------------------------------------------------------------
Notes 2013 2012
$'000 $'000
Operating Activities
Loss before taxation (2,695) (5,577)
Adjustments for:
Finance income (1,311) --
Share based payments (224) 245
Impairment of receivables from Group
companies -- 2,617
---------
(4,230) (2,715)
Changes In Working Capital
Trade and other receivables 7 (75,719) (33,143)
Trade and other payables 18 (407) 1,683
--------- ---------
Net Cash (Outflow) from Operating
Activities (80,356) (34,175)
--------- ---------
Financing Activities
Finance income 1,311 (2)
Share capital issued (net of costs) 11 83,078 375
---------
Net Cash Inflow from Financing Activities 84,389 373
--------- ---------
Increase/(Decrease) In Cash And Cash
Equivalents 4,033 (33,802)
========= =========
Cash And Cash Equivalents 10
At beginning of period 154 33,952
Increase/(Decrease) in cash and cash
equivalents 4,033 (33,802)
Exchange rate differences 2 4
--------- ---------
At end of year 4,189 154
========= =========
Notes to the Consolidated Financial Statements
31 December 2013
1 Background and Accounting Policies
The principal accounting policies applied in the preparation of
this consolidated financial information are set out below. These
policies have been consistently applied to all the years presented,
unless otherwise stated.
Background
Trinity Exploration & Production plc ("Trinity") previously
Bayfield Energy Holdings plc ("Bayfield") was incorporated and
registered in England and Wales on 21 February 2011 and traded on
the Alternative Investment Market ("AIM"), a market operated by
London Stock Exchange plc. On 14 February 2013, Bayfield was
acquired by Trinity Exploration & Production (UK) Limited
("TEPL"), a company incorporated in Scotland, through a reverse
acquisition. On the 14 February 2013, the enlarged group was
re-admitted to trading on AIM and Bayfield changed its name to
Trinity Exploration & Production plc. Trinity ("the Company")
and its subsidiaries (together "the Group") are involved in the
exploration, development and production of oil and gas reserves in
Trinidad and South Africa.
Basis of Preparation
This consolidated financial information has been prepared on a
going concern basis, in accordance with International Financial
Reporting Standards as adopted by the European Union (IFRS as
adopted by the EU) and those parts of the Companies Act 2006 as
applicable to companies reporting under IFRS. This consolidated
financial information has been prepared under the historical cost
convention, modified for fair values under IFRS.
The preparation of the consolidated financial information in
conformity with IFRS requires the use of certain critical
accounting estimates. It also requires management to exercise its
judgement in the process of applying the Group's accounting
policies. The areas involving a higher degree of judgment or
complexity, or areas where assumptions and estimates are
significant to the consolidated financial information are disclosed
in note 3.
The Company has taken advantage of the exemption in Section 408
of the Companies Act 2006 not to present its own income statement
or statement of comprehensive income. The loss for the Company for
the period was $2.7 million (2012 $3.0 million loss).
New and amended standards adopted by the Group
There are no IFRSs or IFRIC interpretations that are effective
for the first time for the financial year beginning on or after 1
January 2013 that would be expected to have a material impact on
the group.
New standards, amendments and interpretations issued but not
effective for the financial year beginning 1 January 2013 and not
early adopted
The Group is yet to assess the full impact of these new
standards and amendments but does not expect them to have a
material impact on the financial statements.
Basis of consolidation
The consolidated financial information incorporates the
financial information of the Company and entities controlled by the
Company (its subsidiaries) made up to 31 December each year.
Control is achieved where the Company has the power to govern the
financial and operating policies of an entity so as to obtain
benefits from its activities.
The results of subsidiaries acquired or disposed of during the
year are included in the consolidated statement of comprehensive
income from the effective date of acquisition and up to the
effective date of disposal, as appropriate.
The acquisition method of accounting is used to account for the
acquisition of subsidiaries by the Group. The cost of an
acquisition is measured as the fair value of the assets given,
equity instruments issued and liabilities incurred or assumed at
the date of exchange. Identifiable assets acquired and liabilities
and contingent liabilities assumed in a business combination are
measured initially at their fair values at the acquisition date,
irrespective of the extent of any non-controlling interest. The
excess of the cost of acquisition over the fair value of the
Group's share of the identifiable net assets acquired is recorded
as goodwill. If the cost of acquisition is less than the fair value
of the net assets of the subsidiary acquired, the difference is
recognised directly in the statement of comprehensive income. Costs
related to an acquisition are expenses as incurred.
Uniform accounting policies have been adopted across the Group.
All intra-Group transactions, balances, income and expenses are
eliminated on consolidation.
Business combination
The acquisition of subsidiaries is accounted for using the
acquisition method.
Identifying the acquirer in a business combination is based on
the concept of 'control'. However in certain circumstances the
positions may be reversed and it is the legal subsidiary entity's
shareholders who effectively control the combined group even though
the other party is the legal parent. IFRS 3 requires, in a business
combination effected through an exchange of equity interests, all
relevant facts and circumstances be considered to determine which
of the combining entities has the power to govern the financial and
operating policies of the other entity. These combinations are
commonly referred to as 'reverse acquisitions'. A detailed summary
of the business combination and financial implication of this is
provided within note 27.
For each business combination, the cost of the acquisition is
measured at the aggregate of the fair values, at the date of
exchange, of assets given, liabilities incurred or assumed, and
equity instruments issued by the Group in exchange for control of
the acquiree. Transaction costs are expensed directly to the Income
Statement. The acquiree's identifiable assets, liabilities and
contingent liabilities that meet the conditions for recognition
under IFRS 3 are recognised at their fair value at the acquisition
date. Where the Group has acquired assets held in a subsidiary
undertaking that do not meet the definition of a business
combination, purchase consideration is allocated to the net assets
acquired and the interests of non-controlling shareholders are
initially measured at their proportionate share of the acquiree's
net assets.
Revenue recognition
Revenue is measured at the fair value of the consideration
received or receivable and represents amounts receivable for the
sale of crude oil and services provided in the ordinary course of
business, net of discounts and sales related taxes. Revenue is
recognised when goods are delivered and title has passed when the
oil is transferred to Petrotrin's pipelines, at which point revenue
will be recognised.
Interest income is accrued on a time basis, by reference to the
principal outstanding and the interest rate applicable, unless
collectability is in doubt.
Share-based payments
The Group operates a number of equity-settled, share-based
compensation plans (warrants/options/long term incentive plans
'LTIP') as consideration for services rendered by the Group's
employees.. The fair value of the services received in exchange for
the grant of share-based payment is recognised as an expense. The
total amount to be expensed is determined by reference to the fair
value of the options granted:
- including any market performance conditions (for example, an entity's share price);
- excluding the impact of any service and non-market performance vesting conditions and
- including the impact of any non-vesting conditions
Non-market performance and service conditions are included in
assumptions about the number of share-based payments that are
expected to vest. The total expense is recognised over the vesting
period, which is the period over which all of the specified vesting
conditions are to be satisfied.
At the end of each reporting period, the Group revises its
estimates of the number of options that are expected to vest based
on the non-market vesting conditions. It recognises the impact of
the revision to original estimates, if any, in the statement of
comprehensive income, with a corresponding adjustment to equity.
When the options are exercised, the Group issues new shares. The
proceeds received net of any directly attributable transaction
costs are credited to share capital (nominal value) and share
premium.
Where the services provided relate solely to the issue of share
capital, the expense will be charged to equity within the share
premium account.
The grant by the company of options and LTIPs over its equity
instruments to the employees of subsidiary undertakings in the
group is treated as a capital contribution. The fair value of
employee services received, measured by reference to the grant date
fair value, is recognised over the vesting period as an increase to
investment in subsidiary undertakings, with a corresponding credit
to equity.
Foreign currency translation
(a) Functional and presentation currency
The functional currency of the Group operating entity is
Trinidad and Tobago dollars as this is the currency of the primary
economic environment in which the entities operate. The
presentation currency is United State Dollars which better reflects
the Group's business activities and improves ability of users of
the financial statements to compare financial results with others
in the International Oil and Gas industry. The Statement of
Financial Position is translated at the closing rate and Statement
of Comprehensive Income is translated at the average rate. The
following exchange rates have been used in the preparation of these
accounts:
2013 2012
--------------------------- ---------------------------
USD GBP USD GBP
Average rate TTD= USD/GBP 6.416 10.009 6.403 10.121
Closing rate TTD= USD/GBP 6.436 10.580 6.381 10.340
(b) Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at
year-end exchange rates of monetary assets and liabilities
denominated in foreign currencies, and recognised in the statement
of comprehensive income.
Intangible assets
(a) Exploration and evaluation assets
Capitalisation
Exploration and Evaluation assets are initially classified as
intangible assets. Such costs include costs directly associated
with an exploration area. Upon discovery of commercial reserves
capitalisation is recognised within Property, Plant &
Equipment.
Oil and natural gas exploration and evaluation expenditures are
accounted for using the successful efforts method of accounting.
Under this method, costs are accumulated on a prospect-by-prospect
basis and capitalised upon discovery of commercially viable mineral
reserves. If the commercial viability is not achieved or
achievable, such costs are charged to expense.
Costs incurred in the exploration and evaluation of assets
includes:
(i) License and property acquisition costs
Exploration and property leasehold acquisition costs are
capitalised within exploration and evaluation assets.
(ii) Exploration and evaluation expenditure
Costs directly associated with an exploration well are
capitalised until the determination of reserves is evaluated. Such
costs include topographical, geological, geochemical, and
geophysical studies, exploratory drilling costs, trenching,
sampling and activities in relation to evaluating the technical
feasibility and commercial viability of extracting mineral
resources. Capitalisation is made within property, plant and
equipment or intangible assets according to its nature however a
majority of such expenditure is capitalised as an intangible asset.
If commercial reserves are found, the costs continue to be carried
as an asset. If commercial reserves are not found, exploration and
evaluation expenditures are written off as a dry hole when that
determination is made.
Once commercial reserves are found, exploration and evaluation
assets are tested for impairment and transferred to development
tangible and intangible assets as applicable. No depreciation
and/or amortisation are charged during the exploration and
evaluation phase.
Impairment
Exploration and evaluation assets are tested for impairment (in
accordance with the criteria set out in IFRS 6: Exploration for and
Evaluation of Mineral Resources) whenever facts and circumstances
indicate impairment. An impairment loss is recognised for the
amount by which the exploration and evaluation assets' carrying
amount exceed their recoverable amount. The recoverable amount is
the higher of the exploration and evaluations assets' fair value
less costs to sell and their value in use. For the purposes of
assessing impairment, the exploration and evaluation assets subject
to testing are grouped with existing cash generating units (CGUs)
of related production fields located in the same geographical
region. The geographical region is the same as that used for
reserves reporting purposes.
The following indicators are evaluated to determine whether
these assets should be tested for impairment:
-- The period for which the Group has the right to explore in the specific area.
-- Whether substantive expenditure on further exploration and
evaluation in the specific area is budgeted or planned.
-- Whether exploration and evaluation in the specific area have
not led to the discovery of commercially viable quantities and the
Company has decided to discontinue such activities in the specific
area.
-- Whether sufficient data exist to indicate that, although a
development in the specific area is likely to proceed, the carrying
amount of the exploration and evaluation asset is unlikely to be
recovered in full from successful development or by sale.
(b) Goodwill
Goodwill is initially measured at cost, being the excess of the
aggregate of the consideration transferred and the amount
recognised for non-controlling interest over the net identifiable
assets acquired and liabilities assumed. If this consideration is
lower than the fair value of the net assets of the subsidiary
acquired, the difference is recognised in profit or loss.
After initial recognition, goodwill is measured at cost less any
accumulated impairment losses. For the purpose of impairment
testing, goodwill acquired in a business combination is, from the
acquisition date, allocated to each of the Company's
cash-generating units that are expected to benefit from the
combination, irrespective of whether other assets or liabilities of
the acquiree are assigned to those units.
Property, plant and equipment
(a) Oil and gas assets
Development and Producing Assets - Capitalisation
Acquisitions of oil and gas properties are accounted for under
the purchase method where the transaction meets the definition of a
business combination.
Transactions involving the purchases of an individual field
interest, or a group of field interests, that do not qualify as a
business combination are treated as asset purchases, irrespective
of whether the specific transactions involve the transfer of the
field interests directly, or the transfer of an incorporated
entity. Accordingly, the consideration is allocated to the assets
and liabilities purchased on a relative fair value basis.
Proceeds on disposal are applied to the carrying amount of the
specific asset or development and production assets disposed of.
Any excess is recorded as a gain on disposal in the statement of
comprehensive income and any shortfall between the proceeds and the
carrying amount is recorded as a loss on disposal in the statement
of comprehensive income.
Expenditure on the construction, installation or completion of
infrastructure facilities such as platforms, pipelines and the
drilling of development commercially proven wells is capitalised
according to its nature. When development is completed on a
specific field it is transferred to Production Assets. No
depreciation and/or amortisation are charged during the development
phase.
Expenditure on Geological and Geophysical (G&G) surveys used
to locate and identify properties with the potential to produce
commercial quantities of oil and gas as well as to determine the
optimal location for development wells are capitalised.
Development and Producing Assets - Impairment
An impairment test is performed whenever events and
circumstances arising during the development or production phase
indicate that the carrying value of a development or production
asset may exceed its recoverable amount.
The carrying value is compared against the expected recoverable
amount. The recoverable amount is the higher of an asset's fair
value less costs to sell and the value in use. For the purposes of
assessing impairment, assets are grouped at the lowest levels (its
cash generating unit) for which there are separately identifiable
cash flows. The cash generating unit applied for impairment test
purposes is generally the field. These fields are the same as that
used for reserves reporting purposes.
Producing Assets - Depreciation, depletion and amortisation
The provision for depreciation, depletion and amortisation of
developed and producing oil and gas assets are calculated using the
unit-of-production method.
Oil and gas assets are depreciated generally on a field-by-field
basis using the unit-of-production method which is the ratio of oil
and gas production in the period to the estimated quantities of
commercial reserves at the end of the period plus the production in
the period. Costs used in the unit of production calculation
comprise the net book value of capitalised costs plus the estimated
future development costs. Changes in the estimates of commercial
reserves or future development costs are dealt with
prospectively.
Decommissioning
Provision for decommissioning is recognised in full at the
commencement of oil and gas production. The amount recognised is
the net present value of the estimated cost of decommissioning at
the end of the economic producing lives of the wells and the end of
the useful lives of refinery and storage units. Such costs include
removal of equipment, restoration of land or seabed. The unwinding
of the discount on the provision is included in the statement of
comprehensive income within finance costs.
A corresponding asset is also created at an amount equal to the
provision. This is subsequently depleted as part of the capital
costs of the production assets. Any change in the present value of
the estimated expenditure or discount rates are reflected as an
adjustment to the provision and the asset and dealt with
prospectively.
(b) Non-oil and gas assets
All property, plant and equipment are recorded at historical
cost less accumulated depreciation and any impairment losses.
Historical cost includes the original purchase price of the asset
and expenditure that is directly attributable to bringing the asset
to its working condition for its intended use. Subsequent costs are
included in the asset's carrying amount or recognised as a separate
asset, as appropriate, only when it is probable that future
economic benefits associated with the item will flow to the Group
and the cost of the item can be measured reliably.
The provision for depreciation with respect to operations other
than oil and gas producing activities is computed using the
straight-line method based on estimated useful lives as
follows:
Buildings - 20 years
Plant and equipment - 4 years
Other - 4 years
The assets' residual values and useful lives are reviewed, and
adjusted if appropriate at each statement of financial position
date. An asset's carrying amount is written down immediately to its
recoverable amount if the asset's carrying amount is greater than
its estimated recoverable amount.
Gains and losses on disposals are determined by comparing
proceeds with carrying amounts and are included in the statement of
comprehensive income.
Repairs and maintenance are charged to the statement of
comprehensive income during the financial period in which they are
incurred. The cost of major renovations is included in the carrying
amount of the asset when it is probable that future economic
benefits in excess of the originally assessed standard of
performance of the existing assets will flow to the Group. Major
renovations are depreciated over the remaining useful life of the
related asset.
Impairment of non-financial assets
At each reporting date, assets that have an indefinite useful
life, for example, goodwill, are not subject to amortisation and
are tested for impairment. Assets that are subject to amortisation
are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognised for the amount by
which the asset's carrying amount exceeds its recoverable amount.
The recoverable amount is the higher of an asset's fair value less
costs to sell and value in use. For the purposes of assessing
impairment, assets are grouped at the lowest levels for which there
are separately identifiable cash flows (cash generating units).
Non-financial assets other than goodwill that suffered impairment
are reviewed for possible reversal of the impairment at each
reporting date.
Inventories
Crude oil is stated at the lower of cost and net realisable
value. Cost is determined by the first in first out (FIFO) method.
Net realisable value is the estimated selling price in the ordinary
course of business, less applicable variable selling expenses.
Materials and supplies are stated at lower of cost and net
realisable value. Cost is determined using the average cost
method.
Cash and cash equivalents
Cash and cash equivalents comprises cash in hand, deposits held
at call with banks and other short-term highly liquid investments
with original maturities of three months or less.
Trade receivables
Trade receivables are amounts due from customers for crude oil
sold in the ordinary course of business. If collection is expected
in one year or less (or in the normal operating cycle of the
business if longer), they are classified as current assets. If not,
they are presented as non-current assets.
Trade receivables are recognised initially at fair value less
provision for impairment. Appropriate provisions for estimated
irrecoverable amounts are recognised in the statement of
comprehensive income when there is objective evidence that the
Group will not be able to collect all amounts due according to the
original terms of sale.
Trade payables
Trade payables are initially recognised at fair value.
Current and deferred income taxes
The tax expense for the period comprises current and deferred
tax. Tax is recognised in the statement of comprehensive income,
except to the extent that it relates to items recognised in equity.
In this case the tax is also recognised directly in equity.
The current income tax charge is calculated on the basis of the
tax laws enacted or substantively enacted at the statement of
financial position date in the countries where the Company's
subsidiaries and associates operate and generate taxable income.
Management periodically evaluates positions taken in tax returns
with respect to situations in which applicable tax regulation is
subject to interpretation. It establishes provisions where
appropriate on the basis of amounts expected to be paid to the tax
authorities.
Deferred income tax is recognised, using the liability method,
on temporary differences arising between the tax bases of assets
and liabilities and their carrying amounts in the consolidated
financial information. However, the deferred income tax is not
accounted for if it arises from initial recognition of an asset or
liability in a transaction other than a business combination that
at the time of the transaction affects neither accounting nor
taxable profit or loss. Deferred income tax is determined using tax
rates (and laws) that have been enacted or substantially enacted by
the statement of financial position date and are expected to apply
when the related deferred income tax asset is realised or the
deferred income tax liability is settled.
Deferred income tax assets are recognised only to the extent
that it is probable that future taxable profit will be available
against which the temporary differences can be utilised.
Deferred income tax assets and liabilities are offset when there
is a legally enforceable right to offset current tax assets against
current tax liabilities and when the deferred income taxes assets
and liabilities relate to income taxes levied by the same taxation
authority and the Company intends to settle the balances on a net
basis.
Borrowings
Borrowings are recognised initially at fair value net of
transaction costs incurred. Borrowings are subsequently stated at
amortised cost; any differences between proceeds (net of
transaction costs) and the redemption value is recognised in the
statement of comprehensive income over the period of the borrowings
using the effective interest method.
Borrowings are classified as current liabilities unless the
Group has an unconditional right to defer settlement of the
liability for at least 12 months after the statement of financial
position date.
General and specific borrowing costs directly attributable to
the acquisition, construction or production of qualifying assets,
which are assets that necessarily take a substantial period of time
to get ready for their intended use or sale, are added to the cost
of those assets, until such time as the assets are substantially
ready for their intended use or sale.
All other borrowing costs are recognised in comprehensive income
in the period in which they are incurred.
Provisions
Provisions are recognised when the Group has a present legal or
constructive obligation as a result of past events, where it is
probable that an outflow of resources will be required to settle
the obligation, and a reliable estimate of the amount of the
obligation can be made. Provisions are not recognised for future
operating losses.
Where there are a number of similar obligations, the likelihood
that an outflow will be required in settlement is determined by
considering the class of obligations as a whole. A provision is
recognised even if the likelihood of an outflow with respect to any
one item included in the same class of obligations may be
small.
Provisions are measured at the present value of the expenditures
expected to be required to settle the obligation using a pre-tax
rate that reflects current market assessments of the time value of
money and the risks specific to the obligation. The increase in the
provision due to passage of time is recognised as a finance
cost.
Employee retirement benefits
The Group provides retirement benefits for certain employees in
the form of individual annuity policies. These are defined
contribution arrangements.
For defined contribution plans, the Group pays contributions to
publicly or privately administered pension insurance plans on a
mandatory, contractual or voluntary basis. The Group has no further
payment obligations once contributions have been paid. The
contributions are recognised as employee benefit expenses when they
are due.
In respect of the employees of a subsidiary, retirement benefits
were provided for in accordance with the terms of a Union Agreement
which in the current year has been renegotiated and the existing
liabilities extinguished.
Convertible loan note
Convertible loan notes are accounted for as borrowings (see note
14) in accordance with contractual terms. If loan notes are
converted to shares the carrying amount is reduced with a
corresponding increase in equity. Convertible loan notes are
classified as a liability except where the settlement of the loan
will be in shares and the number of shares to be issued upon
conversion is fixed, in which case the loan notes will be
classified within equity.
Leases
Leases in which a significant portion of the risks and rewards
of ownership are retained by the lessor are classified as operating
leases. Payments made under operating leases (net of any incentives
received from the lessor) are charged to the income statement on a
straight-line basis over the period of the lease.
Share capital
Ordinary shares are classified as equity. The nominal value of
any shares issued is recognised in share capital with the excess
above the nominal amount paid being shown within share premium.
Incremental costs directly attributable to the issue of new
ordinary shares are shown in equity. Where, on issuing shares,
share premium has been recognised, the expenses of issuing those
shares and any commission paid on the issue of those shares have
been written off against the share premium account.
Operating segment information
The steering committee is the Group's chief operating
decision-maker. Management has determined the operating segments
reported in a manner consistent with the internal reporting
provided to the chief operating decision maker. The chief operating
decision maker is responsible for making strategic decisions
inclusive of; allocating resources and assessing performance of the
operating segments. The chief operating decision - maker has been
identified as the steering committee of Management which comprises;
the Chief Executive Officer, Chief Operating Officer and Chief
Financial Officer, that makes strategic decisions in accordance
with Board policy.
Exceptional Items
Exceptional items are disclosed separately in the financial
statements where it is necessary to do so to provide further
understanding of the financial performance of the group. They are
material items of income or expense that have been shown separately
due to the non-recurring nature and the significance of their
nature or amount.
2 Financial Risk Management
Financial risk factors
The Group's activities expose it to a variety of financial
risks. The Group's overall risk management programme seeks to
minimise potential adverse effects on the Group's financial
performance.
Risk management is carried out by management. Management
identifies and evaluates financial risks.
(a) Market risk
(i) Foreign exchange risk
The Group is exposed to foreign exchange risk primarily with
respect to the United States dollar. Foreign exchange risk arises
from future commercial transactions and recognized assets and
liabilities which are denominated in a currency that is not the
entity's functional currency.
At 31 December 2013, if the functional currency had
weakened/strengthened by 10% against the US dollar with all other
variables held constant, post- tax(loss)/profit for the year would
have been $3.2 million (2012: $2.0 million) lower/higher, mainly as
a result of foreign exchange gain/losses on translation of US
dollar-denominated borrowings and sales.
(ii) Price risk
The Group is exposed to commodity price risk regarding its sales
of crude oil which is an internationally traded commodity.
At 31 December 2013, if commodity prices had been 1%
higher/lower with all other variables held constant, post-tax
(loss)/profit for the year would have been $1.2 million (2012: $0.8
million) lower/higher.
(iii) Interest rate risk
The Group's interest rate risk arises from borrowings.
Borrowings issued at variable rates expose the Group to cash flow
interest rate risk.
At 31 December 2013, if interest rates on foreign
currency-denominated borrowings had been 1% higher/lower with all
other variables held constant, post-tax (loss)/profit for the year
would have been $0.2 million (2012: $0.4 million) lower/higher,
mainly as a result of higher/lower interest expense on floating
rate borrowings.
(b) Credit risk
Credit risk arises from cash and cash equivalents, deposits with
banks and financial institutions, as well as credit exposures to
customers, including outstanding receivables and committed
transactions. For banks and financial institutions, management
determines the placement of funds based on its judgement and
experience.
All sales are made to a state-owned entity - Petrotrin. As
Petrotrin is state owned, credit risk is considered to be low.
(c) Liquidity risk
Prudent liquidity risk management implies maintaining sufficient
cash and short-term funds and the availability of funding through
an adequate amount of committed credit facilities. Management
maintains flexibility in funding.
The table below analyses the Group's financial liabilities into
relevant maturity Groupings based on the remaining period at the
statement of financial position to the contractual maturity date.
The amounts disclosed are the contractual undiscounted cash
flows.
Less than Between 2
1 year and 5 years
$'000 $'000
---------- -------------
At 31 December 2013
Borrowings (including interest) (note
15) 5,197 18,137
Accounts payable and accruals (note 61,117 --
18)
At 31 December 2012
Borrowings (note 15) 5,423 20,299
Accounts payable and accruals (note 15,695 --
18)
(d) Capital risk management
The Group's objectives when managing capital are to safeguard
the Group's ability to continue as a going concern in order to
provide returns for shareholders and benefits for other
stakeholders and to maintain an optimal capital structure to reduce
the cost of capital. Trinity has complied with all banking
covenants during the period.
In order to maintain or adjust the capital structure, the Group
may adjust the amount of dividends paid to shareholders, issue new
shares or sell assets to reduce debt.
Consistent with others in the industry, the Group monitors
capital on the basis of the gearing ratio. This ratio is calculated
as net debt divided by total capital. Net debt is calculated as
total borrowings (including 'current and non-current borrowings' as
shown in the consolidated statement of financial position) less
cash and cash equivalents. Total capital is calculated as 'equity'
as shown in the consolidated statement of financial position plus
net debt.
2013 2012
$'000 $'000
--------- ---------
Total borrowings (including convertible
loan notes) 15,899 28,471
Less: cash and cash equivalents (25,145) (22,655)
--------- ---------
(Funds)/net debt (9,246) 5,816
Total equity 219,271 50,913
--------- ---------
Total capital 210,025 56,729
--------- ---------
Gearing ratio (0.04)% 10.25%
Fair value estimation
The carrying values of trade receivables (less impairment
provision) and payables are assumed to approximate their fair
values. The fair value of financial liabilities for disclosure
purposes is estimated by discounting the future contractual cash
flows at the current market interest rate that is available to the
Group for similar financial instruments.
3 Critical Accounting Estimates and Judgments
Estimates and judgments are continually evaluated and are based
on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the
circumstances.
Management makes estimates and assumptions concerning the
future. The resulting accounting estimates will, by definition,
seldom equal the related actual results. The estimates and
assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within
the next financial year are discussed below:
(a) Income taxes
Some judgement is required in determining the provision for
income taxes. There are many transactions and calculations for
which the ultimate tax determination is uncertain. Management
recognises liabilities for anticipated tax audit issues based on
estimates of whether additional taxes will be due. Where the final
tax outcome of these matters is different from the amounts that
were initially recorded, such differences will impact the income
tax and deferred tax provisions in the period in which such
determination is made.
(b) Recoverability of deferred tax assets
Deferred tax assets are recognised only to the extent it is
considered probable that those assets will be recoverable. This
involves an assessment of when those deferred tax assets are likely
to reverse, and a judgement as to whether or not there will be
sufficient taxable profits available to offset the tax assets when
they do reverse. This requires assumptions regarding future
profitability and is therefore inherently uncertain. To the extent
assumptions regarding future profitability change, there can be an
increase or decrease in the level of deferred tax assets recognised
which can result in a charge or credit in which the change
occurs.
(c) Provision for decommissioning costs
This provision is significantly affected by changes in
technology, laws and regulations which may affect the actual cost
of decommissioning to be incurred at a future date. The estimate is
also impacted by the discount rates used in the provisioning
calculations. The discount rates used are the Group's risk-free
rate and the core inflation rate applicable to the local oil and
gas industry. The provision has been estimated using a discount
rate of 3.9% (2012: 4.50%) and a core inflation rate of 3% (2012:
3%). The impact in 2013 of a 1% change in these variables is as
follows:
Statement of Statement of
Financial Position Comprehensive
Obligation Income/Expense
2013 2013
$'000 $'000
-------------------- ----------------
Discount rate
1% increase in assumed rate (4,632) 20
1% decrease in assumed rate 5,621 (71)
Inflation rate
1% increase in assumed rate 5,617 229
1% decrease in assumed rate (4,712) (190)
(d) Estimation of reserves
All reserve estimates involve some degree of uncertainty, which
depends chiefly on the amount of reliable geological and
engineering data available at the time of the estimate. Generally,
reserve estimates are revised as additional data become available.
The Group estimates its own commercial reserves based on
information compiled by appropriately qualified persons relating to
the geological and technical data on the size, depth, shape and
grade of the hydrocarbon body and suitable production techniques
and recovery rates. The Group's reserve estimates are also
evaluated periodically by independent external reserve
evaluators.
As the economic assumptions used may change and as additional
geological information is obtained during the operation of a field,
estimates of recoverable reserves may also change. Such changes may
impact the Group's reported financial position and results, which
include:
- The carrying value of exploration and evaluation assets, oil
and gas properties, property, plant and
equipment, and goodwill may be affected due to changes in estimated future cash flows.
- Depreciation and amortisation charges in profit or loss may
change where such charges are determined using
the unit of production method, or where the useful life of the related assets change.
- Provisions for decommissioning may change - where changes to
the reserve estimates affect expectations
about when such activities will occur and the associated cost of these activities.
- The recognition and carrying value of deferred tax assets may
change due to changes in the judgements regarding the existence of
such assets and in estimates of the likely recovery of such
assets.
All subsidiaries onshore and offshore reserve estimates were
evaluated at 1 July 2012 by an independent external reserve
auditor, RPS Energy Consultants Limited ("RPS Energy") and Gaffney
Cline and Associates, with a report dated 12 November 2012.
Management has subsequently at the end of 2013 re-evaluated the
reserve estimates for all assets as a result of new information
being available in respect of planned drilling and development
activity. Accordingly the final reserve estimates incorporated into
these financial statements have been arrived at using management's
estimates for all offshore and onshore assets respectively.
Effective 1 October 2013, Trinity's joint venture partner
Petrotrin agreed to convert its 35% working interest in the Trintes
field to an Overriding Royalty Agreement 'ORR'. No other financial
consideration is payable beyond the ORR. The net effect of the
conversion is to increase Trinity's working interest in the field
to 100% and adds an additional 13 mmbl in 2P reserves. This ORR
agreement only covers the Trintes field (which excludes the recent
TGAL--1 discovery) and Petrotrin retains a 35% working interest in
the remainder of the Galeota License.
(e) Farm outs and lease operatorship agreements
The Group accounts for its farmout and lease operatorship
agreements on the basis that they will be renewed upon expiry. If
any of these farmout or lease operatorship agreements are not
renewed or renewed on disadvantageous terms this may severely
impact the profitability and ongoing operations of the Group.
(f) Estimated impairment of goodwill
The Group tests annually whether goodwill has suffered any
impairment, in accordance with the policy stated in note 1. The
recoverable amounts of cash-generating units have been determined
based on value-in-use calculations. Should the actual amounts
recovered differ significantly from these estimates the carrying
value of the goodwill may be impaired.
An impairment charge on goodwill of $7.8 million arose in the
CGU, of Oilbelt Services Limited, at the end of 2013, resulting in
the entire carrying amount of goodwill attributable to the CGU
being written down to nil. If the price used in the value-in-use
calculation had been 10% lower than management's estimates at 31
December 2013 the resulting goodwill impairment would be
unchanged.
If the estimated cost of capital used in determining the
post-tax discount rate for the CGU in Oilbelt Services Limited had
been 1% higher than management's estimates the resulting goodwill
impairment would be unchanged.
(g) Share-based payments
Management is required to make assumptions in respect of the
inputs used to calculate the fair values of share-based payment
arrangements which include expected volatility, risk free interest
rate and current share price.
(h) Carrying value of property, plant and equipment
Management performs impairment assessments on the Group's
property, plant and equipment once there are indicators of
impairment with reference to IAS 36: Impairment of Assets. In order
to test for impairment, values in use calculations are prepared
which require an estimate of the timing and amount of cash flows
expected to arise from the cash generating unit.
At the end of the 2013 year An impairment charge on property,
plant and equipment of $2.6 million arose in the CGU of Oilbelt
Services Limited and $0.2 million in the CGU of Coastline
International Inc., resulting in the carrying amount of the
respective CGUs being written down to their recoverable amount. If
the price used in the value-in-use calculation had been 10% lower
than management's estimates at 31 December 2013, the group would
have recognised a further impairment of Oil and Gas assets by $3.0
million reducing the carrying value of property, plant and
equipment.
If the estimated cost of capital used in determining the
post-tax discount rate for the CGU in Oilbelt Services Limited and
Coastline International Inc. had been 1% higher than management's
estimates the group would have recognised a further impairment of
$0.6 million against Oil and Gas assets within property, plant and
equipment.
4 Segment Information
Management have considered the requirements of IFRS 8, in regard
to the determination of operating segments, and concluded that the
Group has only one significant operating segment being the
production, development and exploration and extraction of
hydrocarbons.
All revenue is generated from sales to one customer in Trinidad
and Tobago The Petroleum Company of Trinidad and Tobago
(PETROTRIN). All non-current assets of the Group are located in
Trinidad and Tobago except for $1.2 million, (2012: nil) located in
South Africa.
5 Property, Plant and Equipment
Plant & Land & Oil &
Equipment Buildings Gas Assets Other Total
$'000 $'000 $'000 $'000 $'000
----------- ----------- ------------ ------ ---------
Year ended 31 December 2013
Opening net book amount at 1
January 2013 2,071 1,541 61,102 6 64,720
Acquisition (note 27) 911 197 70,525 -- 71,633
Additions 4,203 1,185 51,348 -- 56,736
Abandonment -- -- (1,624) -- (1,624)
Impairment (note 29) -- -- (3,468) -- (3,468)
Adjustment to decommissioning
estimate (note 16) -- -- 3,179 -- 3,179
Depreciation, depletion and
amortisation charge for year (944) (342) (11,919) (6) (13,211)
Translation difference (108) (23) (242) -- (373)
----------- ----------- ------------ ------ ---------
Closing net book amount at 31
December 2013 6,133 2,558 168,901 -- 177,592
=========== =========== ============ ====== =========
At 31 December 2013
Cost 12,220 3,231 255,793 336 271,580
Accumulated depreciation, depletion,
amortisation and impairment (5,979) (650) (86,650) (336) (93,615)
Translation difference (108) (23) (242) -- (373)
----------- ----------- ------------ ------ ---------
Closing net book amount 6,133 2,558 168,901 -- 177,592
=========== =========== ============ ====== =========
Year ended 31 December 2012
Opening net book amount at 1
January 2012 897 1,158 54,012 181 56,248
Additions 1,660 612 11,478 (159) 13,591
Adjustment to decommissioning
estimate (note 16) -- -- 3,018 -- 3,018
Depreciation, depletion and
amortisation charge for year (472) (218) (6,984) (16) (7,690)
Translation difference (14) (11) (422) -- (447)
Closing net book amount at 31
December 2012 2,071 1,541 61,102 6 64,720
At 31 December 2012
Cost 7,120 1,860 133,440 336 142,756
Accumulated depreciation, depletion,
amortisation and impairment (5,035) (308) (71,916) (330) (77,589)
Translation difference (14) (11) (422) -- (447)
----------- ----------- ------------ ------ ---------
Closing net book amount 2,071 1,541 61,102 6 64,720
=========== =========== ============ ====== =========
6 Intangible Assets
The carrying amounts and changes in the year are as follows:
Exploration Goodwill Total
and evaluation $'000 $'000
assets
$'000
At 1 January 2013 -- 7,856 7,856
Acquisition (note 27) 23,606 -- 23,606
Additions 35,396 -- 35,396
Impairment (note 29) -- (7,786) (7,786)
Translation difference -- (70) (70)
---------------------- ---------------
At 31 December 2013 59,002 -- 59,002
====================== =============== ==============
At 1 January 2012 -- 16,952 16,952
Impairment charge -- (8,963) (8,963)
Translation difference -- (133) (133)
---- -------- --------
At 31 December 2012 -- 7,856 7,856
==== ======== ========
Goodwill arose on the business combination with Oilbelt Holdings
Limited and represents the excess of the purchase price over the
fair value of the net assets. The acquisition of Oilbelt was
effected by the amalgamation of Oilbelt Holdings Limited with a
Trinity subsidiary. Oilbelt Services Limited was a subsidiary of
Oilbelt Holdings Limited prior to the amalgamation, and afterwards
it became a subsidiary in the Group.
After initial recognition, goodwill on acquisition is measured
at cost less any accumulated impairment losses. For the purpose of
impairment testing, goodwill acquired in a business combination is,
from the acquisition date, allocated to each of the Group's
cash-generating units that are expected to benefit from the
combination, irrespective of whether other assets or liabilities of
the acquiree are assigned to those units. The entire goodwill
balance has been allocated to the WD 5/6 block which is considered
to be one cash generating unit (CGU), the recoverable amount of the
CGU has been determined based on value-in-use calculations. These
calculations use after tax cash flow projections based on financial
budgets approved by management covering a thirteen year period.
Cash flows beyond the first year assume a growth rate of 3%. The
discount rate used was 10%.
Management re-evaluated the reserve estimate for all assets at
the end of 2013 as a result of new information being available. The
results of this report indicated a downward revision in the
reserves estimate of the WD 5/6 onshore block which triggered an
impairment assessment. This assessment resulted in the WD 5/6 block
having an impairment loss of $10.4 million. The impairment loss was
taken against the full amount of goodwill with the remaining $2.6
million charge attributable to Oil & Gas assets within the
overall property, plant & equipment impairment (note 5).
Additions:
Exploration well TGAL 1 was drilled in the offshore Galeota
block at a cost of $23.7 million and El Dorado in the offshore
Point Ligoure-Guapo Bay-Brighton Block was in progress at a cost of
$9.4 million at the end of 2013. Subsequent to the year ended 2013
the El Dorado well was not deemed to be commercial and was
permanently plugged and abandoned with the full amount of $17.4
million written off during the 2014 financial year (note 31).
7 Trade and Other Receivables
Group Company
---------------- -----------------
2013 2012 2013 2012
$'000 $'000 $'000 $'000
------- ------- -------- -------
Due after more than one year
Amounts due from Group companies -- -- 160,760 84,664
Due within one year
Trade receivables 12,637 6,527 -- --
Less: provision for impairment of
trade receivables -- -- -- --
------- ------- -------- -------
Trade receivables - net 12,637 6,527 --
Prepayments 1,906 1,287 134 136
VAT recoverable 20,653 4,923 873 61
Other receivables 1,529 357 -- --
Short term loan receivable -- 10,029 -- --
Receivables from related parties
(note 23 (d)) 78 80 -- 1,187
36,803 23,203 1,007 1,384
======= ======= ======== =======
The Company provides funding to other Group companies.
The fair value of trade and other receivables approximate their
carrying amounts.
As at 31 December 2013, trade receivables of $12.6 million
(2012: $6.5 million) were fully performing. Trade receivables that
are less than three months past due are not considered impaired. As
at 31 December 2013, no trade receivables (2012: nil) were impaired
and provided for.
The uncommitted term loan of $10.0 million to the borrower
(Bayfield Energy (Galeota) Limited) has been fully repaid in the
year.
Ageing analysis of these trade receivables is as follows:
2013 2012
$'000 $'000
-------- --------
Up to 3 months 12,637 6,527
-------- --------
12,637 6,527
======== ========
The carrying amount of the Group's trade and other receivables
are denominated in the following currencies:
2013 2012
$'000 $'000
-------- --------
US Dollar 6,548 11,248
GBP 873 --
Trinidad & Tobago Dollar 29,382 11,955
-------- --------
36,803 23,203
======== ========
The maximum exposure to credit risk at the reporting date is the
value of each class of receivable as shown above. The group does
not hold any collateral as security.
The credit quality of the financial assets that are neither past
due nor impaired can be assessed by reference to historical
information about the counterparty default rates:
Group Company
----------------- ----------------
2013 2012 2013 2012
$'000 $'000 $'000 $'000
-------- ------- ------- -------
Trade receivables
Counterparties without external
credit rating:
Existing customers (more than 6
months) with no defaults in the
past 12,637 6,527 -- --
======== ======= ======= =======
All trade receivables are with the Group's only customer, Petrotrin.
8 Inventories
2013 2012
$'000 $'000
------- ------
Crude oil 435 104
Materials and supplies 11,594 3,229
------- ------
12,029 3,333
======= ======
The cost of inventories recognised as an expense and included in
operating expenses amounted to $ 1.2 million (2012: $0.2
million).
9 Taxation Recoverable/(Payable)
2013 2012
$'000 $'000
-------- ---------
Taxation recoverable
Production Petroleum tax (PPT)/Unemployment
Levy (UL) 528 471
-------- ---------
Taxation payable
Production Petroleum tax (PPT)/Unemployment
Levy (UL) (313) (4,889)
Supplemental petroleum tax (SPT) (3,778) (6,427)
-------- ---------
(4,091) (11,316)
======== =========
10 Cash and Cash Equivalents
Group Company
2013 2012 2013 2012
$'000 $'000 $'000 $'000
------- ------- ------ ------
Cash and cash equivalents 25,145 22,655 4,189 154
25,145 22,655 4,189 154
======= ======= ====== ======
11 Share Capital and Share Premium
Number of Ordinary Share premium Total
shares shares
No. $'000
$'000 $'000
As at 1 January 2013 34,182 34 17,550 17,584
Shares issued to previous
equity holders of TEPL 25,617,859 25,618 (17,550) 8,068
Legacy Bayfield share
capital 21,647,945 21,648 80,817 102,465
Share placing 47,500,000 47,500 41,523 89,023
Cost of equity -- -- (5,945) (5,945)
As at 31 December 2013 94,799,986 94,800 116,395 211,195
=========== ========= ============== ========
On 14 February 2013 TEPL acquired Bayfield through a reverse
acquisition. Bayfield issued 25,652,041 ordinary shares to the
shareholders of TEPL which gave a 55% controlling interest in the
combined entity. Bayfield changed its name to Trinity. On the same
date a total of 47,500,000 shares were issued at GBP 1.20 and the
Company was readmitted to AIM (note 27). The associated cost of the
share placing was $5.9 million.
12 Share Warrants
The Group's policy with respect to equity-settled share-based
payment transactions is to measure the value of the good or service
received with the corresponding increase in equity at the fair
value of the services received. If the Group cannot estimate
reliably the fair value of the good or services received it then
shall measure their value and the corresponding increase in equity
indirectly by reference to the fair value of the equity
instrument.
2013 2012
$'000 $'000
Issued
Oriel Securities Limited 71 71
------ ---------------------------
71 71
====== ===========================
Oriel Securities Limited warrants
Oriel Securities Limited ('Oriel') was appointed to assist TEPL
in introducing potential subscribers for private placing of new
ordinary shares in 2011 (the 'Placing'). In consideration for the
services under the engagement, and subject to receipt of the gross
proceeds as a result of the Placing, Trinity and Oriel agreed a fee
in cash to the value of $150,000.
In addition to the fees above, Oriel was granted an option by
TEPL over shares equivalent in value to 0.25% (one quarter of one
per cent) of the value of TEPL following the Placing, such option
to be exercisable at the share price at which the new funds were
raised in the Placing. The option can be exercised between the
1(st) and 5(th) anniversary of the option being granted or if later
on the 1(st) anniversary of any flotation.
The Group recognised the warrants in the financial year by
estimating the services received at fair value at the date of the
transaction. In arriving at the fair value of the services received
an estimate was received from Oriel indicating that the cost of the
service had no warrant been included would have been 1.5% of the
Placing. As the cost is associated with the raising of capital,
this expense has been recognised as a deduction from share
premium.
Following the acquisition on 14 February 2013 Oriel has
confirmed that it does not intend to exercise its 83 Trinity
Warrants; Oriel shall hold warrants over 62,027 shares with an
exercise price of $5.60 per share (based on the same conversion
ratio of 747.8 new shares).
13 Merger and Reverse Acquisition Reserves
Reverse Acquisition Merger Reserve Total
Reserve
$'000 $'000 $'000
-------------------- --------------- ---------
At 1 January 2013 -- 52,853 52,853
Acquisition (note 27) -- 22,353 22,353
Movement (89,221) -- (89,221)
Translation differences (47) (398) (445)
-------------------- --------------- ---------
At 31 December 2013 (89,268) 74,808 (14,460)
==================== =============== =========
The issue of shares by the Company as part of the reverse
acquisition met the criteria for merger relief such that no share
premium was recorded. As allowed under the UK Companies Act 2006
and required by IAS 27 ('Consolidated and separate financial
statements'), a merger reserve equal to the difference between the
fair value of the shares acquired by the Company and the
aggregation of the nominal value of the shares issued by the
Company has been recorded.
The insertion of the Company as the new parent to the Group has
been accounted for using business combination accounting as
described in note 1. The reverse acquisition difference recorded in
the consolidated financial statements represents the difference in
accounting for reverse acquisition transactions. A detailed summary
of the business combination and financial implication of this is
provided within note 27.
14 Convertible Loan Notes
Group and Company
--------------------
2013 2012
$'000 $'000
----------- -------
At 1 January 2013 6,355 6,837
Payments (6,355) (500)
Translation differences -- 18
At 31 December 2013 -- 6,355
=========== =======
Trinity Exploration and Production (Trinidad and Tobago) Limited
a subsidiary of the Group (formerly known as Ten(0) North Energy
Limited) created $15.0 million of Unsecured Convertible
Subordinated Loan Notes due 2010-2014 by virtue of a Converted Loan
Note instrument dated 16 December 2005. Trinity Exploration and
Production (Trinidad and Tobago) Limited (formerly known as Ten(0)
North Energy Limited) issued $10.0 million of Unsecured Convertible
Subordinated Loan Notes 2010 - 2014 created by that loan note
instrument (the 'Original Notes') to Venture Production plc (now
Venture Production Limited) on 16 December 2005 which were
transferred to Centrica Upstream Investment Limited (formerly named
Venture Investment Holdings Limited ('Centrica')) by way of a Deed
of Transfer dated 26 June 2007.
During 2010, Trinity Exploration and Production (Trinidad and
Tobago) Limited (formerly known as Ten(0) North Energy Limited)
repaid $1.5 million of the Original Notes issued to Centrica
leaving $8.5million in principal amount of the Original Notes
outstanding.
The Original Notes were transferred and novated to the Company
by way of a deed of novation so that Trinity became liable to
Centrica for the repayment of the amount outstanding under the
Original Notes. Trinity entered into a new restated and amended
loan converted loan note instrument on 8 December 2011 (the
'Restated and Amended Loan Note Instrument') which replaced the
original loan note instrument issued in 2005 and issued $9,337,246
of new unsecured convertible subordinated loan notes thereunder
(the $8.5 million principal plus a further $837,246 of interest) to
Centrica in replacement of the Original Notes (the 'Convertible
Loan Notes').
$2.5 million of the Convertible Loan Notes were repaid after the
Amalgamations in 2011 in accordance with the Restated and Amended
Loan Note Instrument and a further $0.5 million of the Convertible
Loan Notes were repaid at the end of 2012 resulting in $6,337,246
of principal outstanding under the Convertible Loan Notes to
Centrica as at 31 December 2012. The full amount outstanding under
the Convertible Loan Notes (the principal plus accrued interest)
was repaid on 6 March 2013 shortly after the completion of the
merger of with Trinity Exploration & Production plc.
15 Borrowings
2013 2012
$'000 $'000
Non-current portion:
Citibank (Trinidad & Tobago) Limited 11,910 16,047
David & Christina Segel Living Trust loan
note (see note 23(e)) -- 2,057
------- -------
Total 11,910 18,104
======= =======
Current portion:
Citibank (Trinidad & Tobago) Limited 3,989 4,012
Total 3,989 4,012
======= =======
Drawn Loan Facilities
Citibank (Trinidad & Tobago) Limited Loan 1
The key terms of the loan are as follows:
-- Principal amount $20.0 million
-- Maturity date 20 December 2017 Interest rate three month US
Libor plus 600 basis points per annum
-- Debenture over the fixed and floating assets of Trinity
Exploration and Production (Trinidad and Tobago) Limited and its
subsidiaries.
-- Principal Repayment in equal quarterly instalments commencing
on 20 March 2013 and ending on 20 December 2017
-- Interest payable monthly in arrears commencing on 20 March 2013
Financial covenants:
-- The Group/Company was in compliance with its covenants throughout the year
-- Minimum debt service coverage 1.4:1
-- Maximum total debt to EBITDA 2.75:1
-- Minimum EBITDA to Interest Expense 1.5:1
The comparative current portion was due to Citibank (Trinidad
& Tobago) Limited and was repaid in the financial year ended 31
December 2013. The carrying value is not materially different from
the fair value.
Undrawn Loan Facilities
Citibank (Trinidad & Tobago) Limited Loan 2
The Group has on 17 August 2013 negotiated a floating rate
medium term facility of $25.0 million with Citi Bank (Trinidad and
Tobago) Limited which at 31 December 2013 remains undrawn.
The key terms of the loan are as follows:
-- Tenor four years from closing date.
-- Interest rate is set at US LIBOR for a period of three months plus 575 bps per annum.
-- Principal repayment is quarterly in amounts to be determined
beginning three months after the end of the availability period (20
August 2014).
-- Multiple drawdowns permitted within the availability period.
Financial covenants:
-- Minimum debt service coverage 1.4:1
-- Maximum total debt to EBITDA-Operating taxes 3.0:1
-- Minimum EBITDA-Operating taxes to Interest Expense 1.5:1
David & Christina Segel Living TrustPromissory note
Key terms of the loan note are as follows:
-- Issue Date - 1 October 2012
-- Interest Rate - Fixed 10% per annum (30/360 day basis)
-- Principal sum - $2,051,111.11
-- Maturity Date - 30 September 2014
-- Interest and principal will be repaid on the Maturity Date
-- Rollover Provision - The Issuer may request that some or the
entire outstanding principal of the note be rolled-over following
conditions disclosed in the agreement
On 1 July 2012, Oilbelt Services Limited a subsidiary of the
Group borrowed $2.0 million from David & Christina Segel Living
Trust. This has been fully repaid on 6 March 2013.
Analysis of net debt
At 31 December
Cashflow 2013
At 1 January
2013 $'000 $'000 $'000
------------- --------- ---------------
Cash and cash equivalents 22,655 2,490 25,145
Financial liabilities - borrowings
current (4,012) 23 (3,989)
Financial liabilities - borrowings
non-current (18,104) 6,194 (11,910)
Convertible loan note (note 13) (6,355) 6,355 --
------------- --------- ---------------
(5,816) 15,062 9,246
------------- --------- ---------------
16 Provisions and Other Liabilities
Decommissioning Employee retirement Total
cost benefit
$'000 $'000 $'000
Year ended 31 December 2013
Opening amount as at 1 January
2013 9,891 685 10,576
Acquisition (note 27) 14,869 -- 14,869
Adjustment to estimates (note
5) 3,179 -- 3,179
Unwinding of discount (note
20) 1,178 -- 1,178
Decrease in the provision (90) (685) (775)
------------------ -------------------- --------
Closing balance at 31 December
2013 29,027 -- 29,027
================== ==================== ========
Year ended 31 December 2012
Opening amount as at 1 January
2012 6,402 728 7,130
Adjustment to estimates (note
5) 3,018 -- 3,018
Unwinding of discount (note
20) 508 -- 508
Decrease in the provision (37) (43) (80)
-------------- -------------------- --------
Closing balance at 31 December
2012 9,891 685 10,576
============== ==================== ========
Decommissioning cost
This represents an estimate of the amounts required for
abandonment of the Group's wells and facilities. The amounts are
calculated based on the provisions of existing contractual
agreements with Petrotrin. Furthermore, liabilities for
decommissioning costs are recognised when the Group has an
obligation to dismantle and remove a facility or an item of plant
and to restore the site on which it is located, and when a
reasonable estimate of that liability can be made. An obligation
for decommissioning may also crystallise during the period of
operation of a facility through a change in legislation or through
a decision to terminate operations.
The amount recognised is the present value of the estimated
future expenditure determined in accordance with local conditions
and requirements. A corresponding item of property, plant and
equipment of an amount equivalent to the provision is also created.
This is subsequently depreciated as part of the capital costs of
the facility or item of plant. Any change in the present value of
the estimated expenditure is reflected as an adjustment to the
provision and the corresponding property, plant and equipment. Some
of the key assumptions made in the present value decommissioning
calculation include the following:
a. Core inflation rate - 3% (2012: 3%)
b. Risk free rate - 3.9% (2012: 4.5%)
c. Estimated market value/decommissioning cost
d. Estimated life of each asset
See note 3(b) for the rates used and sensitivity analysis.
Adjustment to estimates
The Group makes provision for the cost of decommissioning its
producing wells at the completion of their useful lives.
Decommissioning is estimated to be required in various fields
during 2024-2036. In the current year there was an increase in the
provision mainly due to a revision of assumptions used in
determining the estimated cost to decommission the Group's oil and
gas facilities. There has been a corresponding increase in the
carrying amount of property plant and equipment (note 5).
Employee Retirement Benefit
Upon the acquisition of Oilbelt Services Limited, the Group
assumed a legal obligation based on an agreement between Oilbelt
Services Limited and the Oilfield Workers Trade Union which
entitles members to certain service benefits. This arrangement is a
defined contribution scheme. The final level of benefit is not
defined and can vary based upon certain criteria, such as the
length of service. During 2013 this liability was extinguished
under the new collective bargaining agreement.
17 Deferred Income Taxation
2013 2012
$'000 $'000
--------- --------
At beginning of year 5,267 6,622
Deferred tax assumed on acquisition (18,606) --
Deferred tax on fair value uplift arising 2,746 --
from acquisition
Movement for the year (5,412) (10)
Unwinding of deferred tax on fair value
uplift (2,247) (1,345)
Translation differences (54) --
--------- --------
Net deferred tax (liability)/asset (18,306) 5,267
========= ========
Deferred tax assets and liabilities are only offset where there
is a legally enforceable right of offset and there is an intention
to settle the balances net. The deferred tax balances are analysed
below:
2011 Movement 2012 Movement 2013
$'000 $'000 $'000 $'000 $'000
--------- --------- --------- --------- ---------
Deferred tax assets
Acquisition (410) -- (410) (33,026) (33,436)
Tax losses recognised (12,472) (905) (13,377) (17,880) (31,257)
--------- --------- --------- --------- ---------
(12,882) (905) (13,787) (50,906) (64,693)
========= ========= ========= ========= =========
Deferred tax liabilities
Accelerated tax depreciation 1,469 895 2,364 12,414 14,778
Acquisitions 5,160 -- 5,160 14,420 19,580
Fair value uplift 12,875 (1,345) 11,530 499 12,029
--------- --------- --------- --------- ---------
19,504 (450) 19,054 27,333 46,387
========= ========= ========= ========= =========
Tax losses were recognised. These losses relate to Ten(0) North
Operating Company. Pioneer Petroleum Company Limited and Trinity
Exploration and Production (Galeota) Limited. It is expected that
the losses will be recovered within the next five years.
18 Trade and Other Payables
Group Company
---------------- ----------------
2013 2012 2013 2012
$'000 $'000 $'000 $'000
------- ------- ------- -------
Trade payables 19,224 4,857 36 765
Accruals 37,170 9,149 92 1,008
VAT payable 2,289 536 -- --
Other payables 1,393 669 -- --
Amounts due to related parties (note
23 (d)) 1,041 484 1,246 --
61,117 15,695 1,374 1,773
======= ======= ======= =======
19 Operating Profit Before Exceptional Items
2013 2012
$'000 $'000
------- -------
Operating profit before exceptional items
is stated after taking the following items
into account:
Depreciation, depletion and amortisation
(note 5) 13,198 7,690
Profit on disposal of property, plant
and equipment -- (57)
Employee costs (note 26) 21,598 15,777
Abandonment (note 5) 1,624 --
Operating lease rentals 1,374 1,432
Inventory recognised as expense, charged
to operating expenses 1,235 216
Auditor's remuneration
During the year the Group (including its overseas subsidiaries)
obtained the following services from the Company's auditor as
detailed below:
2013 2012
$'000 $'000
------- -------
- Fees payable to the Company's auditors'
and its associates for the audit of the
parent company and consolidated financial
statements 73 53
- Fees payable to the Company's auditors'
and its associates for other services:
- The audit of company's subsidiaries 167 117
- Audit related assurance services - interim
review 50 29
- Reporting accountant in respect of the
merger and admission to trading on AIM 318 852
------- -------
Total assurance 608 1,051
- Tax advisory 26 --
- Other advisory 216 17
------- -------
Total auditors' remuneration 850 1,068
All fees are in respect of services provided by PwC with the
majority relating to reporting accountants work during the merger
of Trinity and Bayfield. Following the merger, Trinity have
completed a competitive tender for audit services and have selected
PwC as the external auditor of the enlarged group. The independence
and objectivity of the external auditors is considered on a regular
basis by the Audit Committee, with particular regard to the level
of non-audit fees incurred.
20 Finance Costs
2013 2012
$'000 $'000
------ ------
Decommissioning (note 16) 1,178 508
Interest on loans 1,179 1,256
2,357 1,764
====== ======
21 Income Tax Expense
2013 2012
$'000 $'000
Current tax
- Current year
Petroleum profits tax 5,821 5,452
Corporation tax 926 --
Supplemental petroleum tax 10,393 8,391
Deferred tax
- Current year
Movement in asset due to tax losses (note
17) (17,880) (905)
Movement in liability due to accelerated
tax depreciation 12,414 895
Unwinding of deferred tax on fair value
uplift (2,247) (1,345)
Translation difference 54 44
Income tax expense 9,481 12,532
========= ========
The Group's effective tax rate varies from the statutory rate
for UK companies of 23.25% as a result of the differences shown
below:
2013 2012
$'000 $'000
---------------- --------
Profit/(loss) before taxation 48,036 (2,696)
Tax charge at expected rate of 23.25%
(2012: 24.5%) 11,048 (661)
Effects of:
Higher overseas tax rate 15,372 836
Profits not subject to tax (32,276) --
Disallowable expenses 11,772 8,275
Deferred tax asset not recognised 20 179
Tax loss generated not recognised 915 554
Tax losses utilised but not previously
recognised (626) (1,310)
Supplemental petroleum tax 3,110 3,755
Green fund levy 178 148
Other differences (32) 756
---------------- --------
Tax charge 9,481 12,532
================ ========
Taxation losses as at 31 December 2013 available for set off
against future taxable profits amount to approximately $127.0
million (2012: $36.0 million), with tax losses recognised as a
deferred tax asset of $ 118.0 million.
22 Investment In Subsidiaries
Company
2013 2012
$'000 $'000
------ ------
Opening balance 46,085 46,979
Additions 48,076 --
Capital contribution relating to share based
payment 240 (894)
Closing balance 94,401 46,085
====== ======
The investment in group undertakings is recorded at cost which
is the fair value of the consideration paid.The capital
contribution relating to share based payments granted by the
Company to employees of subsidiary undertakings in the Group. Refer
to note 28 for further details of the group's share based
schemes.
Astrakhanskaya Gas and Oil Company (AGOC), a subsidiary of
Trinity Exploration & Production plc which held an interest in
the Karalatsky licence which was in an exploration phase was wound
up The winding up of this entity was completed on 5 September
2013.
Listing of Subsidiaries
The Group's principal subsidiaries at 31 December 2013 are
listed below:
Name Country of Nature of Business Proportion
Incorporation of ordinary
shares held
by the group
(%)
---------------------------------- ---------------- -------------------- --------------
Bayfield Energy Limited UK Holding Company 100%
---------------------------------- ---------------- -------------------- --------------
Trinity Exploration and
Production Services (UK)
Ltd UK Service company 100%
---------------------------------- ---------------- -------------------- --------------
Bayfield Energy (Alpha)
Limited UK Holding Company 100%
---------------------------------- ---------------- -------------------- --------------
Trinity Exploration and
Production (Pletmos) Limited UK Oil and Gas 100%
---------------------------------- ---------------- -------------------- --------------
Bayfield Energy do Brasil
Ltda Brazil Dormant 100%
---------------------------------- ---------------- -------------------- --------------
Bayfield Energy New Ventures
Limited UK Holding Company 100%
---------------------------------- ---------------- -------------------- --------------
Bayfield Energy (St Lucia)
Limited St Lucia Holding Company 100%
---------------------------------- ---------------- -------------------- --------------
Trinity Exploration & Production
(Barbados) Limited Barbados Holding Company 100%
---------------------------------- ---------------- -------------------- --------------
Trinity Exploration and
Production (Trinidad and Trinidad &
Tobago) Limited Tobago Holding Company 100%
---------------------------------- ---------------- -------------------- --------------
Galeota Oilfield Services Trinidad &
Limited Tobago Oil and Gas 100%
---------------------------------- ---------------- -------------------- --------------
Trinity Exploration and Trinidad &
Production (Galeota) Limited Tobago Oil and Gas 100%
---------------------------------- ---------------- -------------------- --------------
Ten(0) North Operating Company Trinidad &
Limited Tobago Holding Company 100%
---------------------------------- ---------------- -------------------- --------------
Trinidad &
NAKT Company Limited Tobago Oil and Gas 100%
---------------------------------- ---------------- -------------------- --------------
Trinidad &
Antilles Resources Limited Tobago Oil and Gas 100%
---------------------------------- ---------------- -------------------- --------------
Lennox Production Services Trinidad &
Limited Tobago Oil and Gas 100%
---------------------------------- ---------------- -------------------- --------------
Pioneer Petroleum Company Trinidad &
Limited Tobago Oil and Gas 100%
---------------------------------- ---------------- -------------------- --------------
Trinidad &
Oilbelt Services Limited Tobago Oil and Gas 100%
---------------------------------- ---------------- -------------------- --------------
Coastline International Trinidad &
Inc. Tobago Oil and Gas 100%
---------------------------------- ---------------- -------------------- --------------
Trinidad &
Ligo Ven Resources Limited Tobago Oil and Gas 100%
---------------------------------- ---------------- -------------------- --------------
Trinity Exploration and Trinidad &
Production Services Limited Tobago Service company 100%
---------------------------------- ---------------- -------------------- --------------
Tabaquite Exploration & Trinidad &
Production Company Limited Tobago Oil and Gas 100%
---------------------------------- ---------------- -------------------- --------------
23 Related Party Transactions
Group
The following transactions were carried out with the Group's
subsidiaries. These transactions comprise sales and purchases of
goods and services and funding provided in the ordinary course of
business. The following are the major transactions and balances
with related parties:
(a) Sales of services and loans issued to subsidiaries
Group Company
----------------- ----------------
2013 2012 2013 2012
$'000 $'000 $'000 $'000
-------- ------- ------- -------
Well Services Petroleum Company Limited -- 159 -- --
Bayfield Energy Limited - loan -- -- -- 531
Trinity Exploration and Production Services -- -- 9,513 --
(UK) Limited - loan
Trinity Exploration and Production (Galeota)
Limited - loan -- -- 65,400 656
-- 159 74,913 1,187
======================================================= ======= ======= =======
Related party sales transactions and loans issued to
subsidiaries are exchanged at arm's length and are comparable to
terms that would be available to third parties.
(b) Purchases of services
Group Company
---------------- ----------------------------------------------------------
2013 2012 2013 2012
$'000 $'000 $'000 $'000
------- ------- -------------------------- ------------------------------
Purchases of services:
Blanket Securities Limited -- 760 -- --
Rigtech Services Limited 996 940 -- --
Well Services Petroleum Company
Limited 9,875 1,250 -- --
Dingwall Energy Advisors Limited -- 365 -- --
Trinity Infrastructure Construction
Limited -- 91 -- --
Bayfield Energy Limited -- -- 5 --
------- ------- -------------------------- ------------------------------
10,871 3,406 5 --
======= ======= ========================== ==============================
Goods and services are bought from entities controlled by
certain Directors' on normal commercial terms and conditions, with
the majority coming from the Well Services Group, which includes;
Blanket Securities Limited, Rigtech Services Limited, Well Services
Petroleum Company Limited and Trinity Infrastructure Construction
Limited.
(c) Key management and directors' compensation
Key management includes Directors' (executive and
non-executive), the Chief Operating Officer and Chief Financial
Officer. The compensation paid or payable to key management for
employee services is shown below:
Group
------------------
2013 2012
$'000 $'000
------- ---------
Short-term employee benefits 2,469 2,833
Post-employment benefits 53 7
Share-based payment (note 28) 2,590 4,454
------- ---------
5,112 7,294
======= =========
(d) Year-end balances arising from sales/purchases of
services
Group Company
---------------- -----------------
2013 2012 2013 2012
$'000 $'000 $'000 $'000
------- ------- -------- -------
Receivables from related parties:
Well Services Petroleum Company Limited 78 80 -- --
Bayfield Energy Limited - loan -- -- 84,659 84,664
Trinity Exploration and Production Services
(UK) Limited - loan -- -- 9,513 --
Bayfield Energy Alpha - loan -- -- 531 531
Trinity Exploration and Production (Galeota)
Limited - loan -- -- 66,057 656
78 80 160,760 85,851
======= ======= ======== =======
Payables to related parties:
Blanket Securities Limited 164 21 -- --
Rigtech Services Limited 238 372 -- --
Well Services Petroleum Company Limited 639 -- -- --
Trinity Exploration and Production Services
(UK) Limited -- -- 4 --
Trinity Exploration & Production (UK)
Limited -- -- 1,242 --
Trinity Infrastructure Construction
Limited -- 91 -- --
1,041 484 1,246 --
======= ======= ======== =======
Loans to subsidiaries
Loans receivable from Bayfield Energy Limited and Trinity
Exploration and Production (Galeota) Limited carry interest of
LIBOR + 3% per annum.
Loans receivable from Trinity Exploration and Production
Services (UK) Limited carry interest of 1.5% per annum.
The receivables from related parties arise mainly from sale
transactions and are due two months after the date of sales. The
receivables are unsecured and bear no interest. No provisions are
held against receivables from related parties (2012: nil).
The payables to related parties arise mainly from purchase
transactions and are due two months after the date of purchase. The
payables bear no interest. This loan was repaid in 2013.
(e) Loans from related parties
Group
-----------------
2013 2012
$'000 $'000
-------- -------
David & Christina Segel Living Trust loan note (note
15) -- 2,057
-- 2,057
=============================================================== =======
24 Financial Instruments By Category
The accounting policies for financial instruments have been
applied to the line items below:
Group Company
------------------ -------------------
2013 2012 2013 2012
$'000 $'000 $'000 $'000
------- --------- -------- ---------
Trade and other receivables - non
current -- -- 160,760 84,664
Trade and other receivables - current 36,803 23,203 1,007 1,384
Cash and cash equivalents 25,145 22,655 4,189 154
61,948 45,858 165,956 86,202
======= ========= ======== =========
The only category of financial assets held by the Group is loans
and receivables. There are no assets held at fair value through
profit or loss, derivatives used for hedging and available-for-sale
financial instruments.
Group Company
------------------ --------------
2013 2012 2013 2012
$'000 $'000 $'000 $'000
------- --------- ------ ------
Borrowings 15,899 28,471 -- --
Amounts due to related party -- -- 1,246 --
Accounts payable and accruals 61,117 15,695 128 1,773
77,016 44,166 1,374 1,773
======= ========= ====== ======
The only category of financial liabilities held by the Group is
liabilities at amortised cost. There are no liabilities held at
fair value through profit or loss and derivatives used for
hedging.
25 Commitments and Contingencies
Commitments
There are commitments for decommissioning costs of the wells and
facilities under the Group's agreements with Petrotrin, which have
been provided for as described in note 16.
The group leases vehicles, offices and copiers under cancellable
operating lease agreements. The lease terms are between 1 and 5
years, and the majority of lease agreements are renewable at the
end of the lease period. The lease expenditure charged to the
income statement during the year is as follows:
Group
2013 2012
$'000 $'000
Not later than 1 year 442 330
Later than 1 year and no later than 5 years 932 1,102
------ ------
1,374 1,432
====== ======
Contingent Liabilities
i) One of the subsidiaries has received an assessment from the
tax authority of Trinidad and Tobago namely, the Board of Inland
Revenue (BIR), in respect of Petroleum Profits Tax. The subsidiary
has filed a notice of objection with the BIR and until the matters
are determined, the assessments raised are not considered final. No
material unrecorded liabilities are expected to crystallise and
accordingly no provision has been made in these financial
statements.
ii) A subsidiary Company is a defendant in certain legal
proceedings. A claim was made against the subsidiary by Mora Ven
Holdings limited. The claim being made was that the subsidiary
bought the shares of Ligo Ven Resources Limited, a fellow
subsidiary, at gross under-value. Management, after taking
appropriate professional advice, is of the view that no material
liabilities will crystallise and accordingly no provision has been
made in the financial statements for any potential liabilities.
iii) The farmout agreement for the Tabaquite block (held by
Coastline International Inc.) has expired. There may be additional
liabilities arising when a new agreement is finalised, but these
cannot be presently quantified as a new agreement has not yet been
finalised by both parties which would agree any terms or conditions
inherent the financial statements do not include any estimates of
such liabilities.
iv) Parent company guarantees:
a) A Letter of Guarantee has been established over the Point
Ligoure-Guapo Bay-Brighton Block where a subsidiary of Trinity is
obliged to carry out a Minimum Work Programme to the value of $8.4
million.
b) A letter of Guarantee is in place with Citi Bank (Trinidad
and Tobago) Limited for the full $25.0 million loan facility should
there be a default.
v) The Group has certain liabilities in respect of entering a
rig share agreement for the Rowan Gorilla III which it used to
drill the TGAL-1 well. The agreement was made amongst four parties
and the liabilities are joint and several. The liabilities cannot
be presently quantified and no estimates have been included in the
financial statements. The Group does not expect that these
liabilities will be material.
26 Employee Costs
Employee costs for the Group during the year 2013 2012
$'000 $'000
-------- --------
Wages and salaries 16,484 8,426
Other pension costs 393 56
Share based payment expense (note 28) 4,721 7,295
-------- --------
21,598 15,777
======== ========
Average monthly number of people 2013 2012
(including executive Directors') employed by the number number
Group
-------- --------
Executive Directors 7 6
Administrative staff 138 67
Operational staff 140 152
285 225
======== ========
27 Business Combination
a) Summary of acquisition
On 14 February 2013, Trinity Exploration & Production (UK)
Limited (formerly Trinity Exploration & Production Limited)
("TEPL") acquired Bayfield Energy Holdings plc ("Bayfield") by way
of a reverse acquisition.
Whilst Bayfield became the legal parent of the group on that
date, the shareholders of TEPL obtained control of Bayfield and the
transaction was deemed a reverse acquisition. In order to execute
the transaction Bayfield issued 25,652,041 ordinary shares,
representing 55% of its share capital, to the shareholders of TEPL
in exchange for 100% (34,182 shares) of the share capital of TEPL.
Bayfield changed its name to Trinity Exploration & Production
plc and was readmitted to trading on AIM on 14 February 2013.
The acquisition represented a strategic fit for TEPL as it has
allowed TEPL to acquire production and reserves in a hydrocarbon
basin which it previously had no exposure to whilst simultaneously
providing an opportunity to recapitalize the company through the
issue of new shares.
Details of the fair value of the assets and liabilities acquired
are as follows:
$'000
================================================ =========
Purchase consideration (refer to b) 40,525
================================================ =========
Fair value of net identifiable assets acquired
(refer to c) 92,595
================================================ =========
Negative goodwill (refer to c) (52,070)
================================================ =========
b) Purchase consideration
The purchase consideration is calculated as the fair value of
all equity instruments of Bayfield (21,647,945 ordinary shares)
prior to the acquisition, based on a share price of GBP 1.20 which
was the value of placing shares traded on the day of the admission
and the acquisition being unconditional. An exchange rate of USD:
GBP is used, being $1.56 on the date of the acquisition.
c) Assets and liabilities acquired
Recognised amounts of identified assets acquired and liabilities
assumed:
$'000
============================================ =========
Cash and cash equivalents 6,529
============================================ =========
Trade and other receivables (note 7) 10,735
============================================ =========
Inventories (note 8) 8,224
============================================ =========
Deferred tax asset (note 17) 18,606
============================================ =========
Exploration and evaluation assets (note 6) 23,606
============================================ =========
Property, plant and equipment (note 5) 71,633
============================================ =========
Trade and other payables (note 18) (31,869)
============================================ =========
Decommissioning liability (note 16) (14,869)
============================================ ---------
Fair Value of Net assets 92,595
At the acquisition date, all contractual cash flows are expected
to be collected. The decommissioning liability was increased by
$8.9 million and is in respect of decommissioning of wells and
platform which is expected at the end of the field life when
production ceases. An impairment loss of $11.1 million was
recognised on exploration and evaluation assets in respect of costs
which did not relate to exploration and evaluation activity with a
further reallocation of $1.9 million to property, plant and
equipment. There was an impairment of $1.0 million within property,
plant and equipment for a rig which was in a state of disrepair and
unuseable at the acquisition date.
In undertaking the acquisition, costs of $2.3 million were
incurred and have been expensed to the consolidated statement of
comprehensive income as an exceptional item (note 29).
The acquisition of Bayfield by TEPL resulted in a gain or
bargain purchase as defined within IFRS 3, specifically paragraphs
32 and 34. The reason that the net assets acquired was greater than
the consideration transferred was due to the Bayfield group
experiencing liquidity issues and from a going concern perspective
the group was distressed. This was the result of lower than
expected cash flows as the underlying production growth was slower
than expected and an inability to secure any additional funding.
This eventually led to the Bayfield group agreeing to be acquired
by TEPL. The negative goodwill recognised represents that gain
where the aggregate fair value of the identifiable assets and
liabilities at the acquisition date exceeded the fair value of the
consideration transferred. In accordance with IFRS, the gain has
been recognised immediately within the consolidated statement of
comprehensive income as an exceptional item (note 29).
Since the acquisition date, revenue of $34.9 million and loss of
$1.2 million have been included in the consolidated statement of
comprehensive income in respect of Bayfield Energy Holdings plc. If
the acquisition had occurred on 1 January 2013, the combined group
would report additional revenue of $4.5 million and loss of $15.8
million for the period.
28 Share Based Payments
During 2013 the Group had in place two share-based payment
arrangements for its employees and directors, the Share Option Plan
and the Long Term Incentive Plan ('LTIP'). The charge in relation
to these arrangements is shown below, with further details of each
scheme following:
2013 2012
$'000 $'000
Share based payment expense:
Accelerated share option charge 4,708 7,295
Share option expense 187 --
Legacy share options adjustment (262) --
Long term incentive plan 88 --
------------
4,721 7,295
============ ============
Share Option Plan
Share options are granted to Directors and to selected
employees. The exercise price of the granted option is equal to
management's best estimate of the market price of the shares at the
time of the award of the options. The Group has no legal or
constructive obligation to repurchase or settle the options in
cash.
At 31 December 2012 TEPL had 3,638 share options outstanding. On
14 February 2013 following the completion of the acquisition 120 of
the 3,638 share options were exercised the remaining 3,518 share
options were surrendered in return for the grant by Trinity of new
options over 747.8 new ordinary shares for each TEPL share over
which TEPL options were held. These options were treated as a
modification to the original share option scheme. The modification
did not increase the fair value of the equity instruments granted,
measured immediately before and after the modification, as a result
there was no incremental fair value. At the point of
acquisitionBayfield had 4,447,546 share options, following
completion of the acquisition and share consolidation, the newly
combined group share options outstanding of:
(a) Legacy Bayfield - 444,754 share options
(b) Legacy TEPL - 2,630,759 share options
On 29 May 2013 the Group issued 1,275,660 options at an exercise
price of GBP 1.20 per option to certain employees. These options
were valued at grant date using a Black-Scholes option pricing
model.
Movement in the number of options outstanding and their related
weighted average exercise prices are as follows:
31 December 2013 31 December 2012
Average exercise Number of Average exercise Number of
price per Options price per Options
share share
At 1 January USD 1,394 3,638 -- --
Acquired 14 February GBP 2.25 444,754 -- --
Granted 14 February GBP 0.99 2,630,759 USD 1,394 3,638
Granted 29 May GBP 1.20 1,275,660
Exercised 14 February USD (1,000) (120) -- --
Surrendered USD (1,407) (3,518) -- --
Lapsed GBP (2.57) (94,754) -- --
------------------ ---------- ------------------ ----------
At 31 December GBP 1.14 4,256,419 USD 1,394 3,638
================== ========== ================== ==========
Share Options outstanding at the end of the year have the
following expiry date and exercise prices:
31 December 2013 31 December 2012
Grant-Vest Expiry Exercise Number Exercise Number of
Date price per of Options price per Options
share options share options
2011-15 2015 GBP 1.61 350,000 -- --
2012-15 2022 GBP 0.86 2,294,249 USD 1,000 3,188
2012-15 2022 GBP 0.86 336,510 USD 4,185 450
2013-16 2023 GBP 1.20 1,275,660 -- --
4,256,419 3,638
============= ==========
The inputs into the Black-Scholes model for options granted
during the period are as follows:
29 May 2013 14 February
2013
Share price GBP 1.19 GBP 1.20
Average Exercise price GBP 1.20 GBP 0.89
Expected volatility 55% 78%
Risk-free rates 4.5% 4.5%
Expected dividend yields 0% 0%
Vesting period 3 years 3 years
Long Term Incentive Plan
On 14 February 2013 following the completion of the acquisition
108,712 Bayfield LTIP's were outstanding. These LTIP Awards are
conditional awards of Existing Unconsolidated Ordinary Shares and
vest three years from the date of grant, subject to the
satisfaction of certain performance conditions (based on the growth
in the Company's total shareholder return). No payment is required
on vesting and there is no accelerated vesting arising as a result
of the Merger.
On 1 July 2013 739,440 LTIP Awards were granted by the Company
to Senior Management group (including the Executive Directors). The
LTIP awards will be tested against two performance targets:
stretching reserves growth and absolute returns targets (share
price). Performance against these measures will be assessed based
on performance to the end of the 2015 financial year and following
announcement of the Company's audited financial results. Subject to
the achievement of the performance targets all Options will be
subject to a further holding period whereby Options will not vest
until 1 January 2017.
The measurement of growth in 2P Reserves is the aggregated total
of all fields included in the Trinity Exploration & Production
plc (formerly Bayfield Energy Holdings plc) and Trinity Exploration
& Production (UK) Limited Group as recorded at financial year
end 2012 which is 35.6 mmboe. Share price growth will be calculated
from the price at which equity was raised at the point of the
merger which was GBP1.20.
The conditions of the scheme are market and non-market based,
and therefore the scheme is valued on the date of grant and
amortised over the vesting period. The grants have been valued
using a Monte Carlo simulation model.
Movements in the number of LTIPs outstanding and their related
weighted average exercise prices are as follows:
31 December 2013 31 December 2012
Average Number Average Number of
exercise of Options exercise Options
price per price per
share share
At 1 January -- -- -- --
Acquired GBP 0.00 108,712 -- --
Granted GBP 0.00 739,440 -- --
At 31 December -- 848,152 -- --
=========== ============ =========== ==========
Inputs into the Monte Carlo Simulation Model for LTIPs granted
during the period are as follows:
1 July 2013
Share price GBP 1.06
Exercise price GBP 0.00
Expected volatility 55%
Risk-free rates 4.5%
Expected dividend yields 0%
Vesting period 3.5 years
29 Exceptional Items
Items that are material either because of their size or their
nature, or that are non-recurring are considered as exceptional
items and are presented within the line items to which they best
relate. During the current period, exceptional items as detailed
below have been included as exceptional expenses below operating
profit in the Income Statement. An analysis of the amounts
presented as exceptional items in these financial statements are
highlighted below.
31 December 31 December
2013 2012
$'000 $'000
Negative goodwill (note 27) (52,070) --
Goodwill 2,746 --
Business combination cost 2,254 --
Unrealised forex loss 2,342 --
Arbitration settlement with Petrotrin -- 1,099
Impairment of property, plant and
equipment (note 5) 3,468
Impairment of intangibles (note
6) 7,786 8,963
Share based payment expense (note
28) 4,708 7,295
(28,766) 17,357
================ ==============
Negative goodwill - A gain on purchase was recognised in the
reverse acquisition of Bayfield by TEPL as the fair value of net
assets acquired was in excess of the fair value of consideration
exchanged.
Goodwill -A deferred tax liability has been realised on the
acquired Oil and Gas properties acquired, this has resulted in in
the recognition of goodwill.
Business combination costs - These are advisor and other legal
costs specifically associated with the acquisition of Bayfield
Unrealised forex loss - Unrealised foreign exchange loss
recorded on the translation of share placing receipts.
Impairment of property plant and equipment - On the Trintes
field a development well was suspended and will not be completed as
a result this has been impaired $0.7 million. A downward revision
in the reserves estimate led to an impairment loss recognised in
Oilbelt Services Limited $2.6 million and Coastline International
Inc. $0.2 million.
Impairment of intangibles - Goodwill fully attributable to the
Oilbelt Services Limited CGU has been fully impaired.
Share based payment expense - During 2012 share options were
granted to certain Directors and employees. The exceptional charge
represents the acceleration of the share option charge in 2013 as
the vesting period was accelerated due to the announcement of the
acquisition of Bayfield.
30 Earnings Per Share
Basic earnings per share is calculated by dividing the earnings
attributable to ordinary shareholders by the weighted average
number of ordinary shares outstanding during the period. Diluted
earnings per share is calculated using the weighted average number
of ordinary shares adjusted to assume the conversion of all
dilutive potential ordinary shares.
Earnings Weighted Average Earnings
Number Of Per Share
Shares $'000 $
$'000
Year ended 31 December 2012
Basic (15,221) 25,652 (0.59)
Impact of dilutive ordinary
shares:
As net losses from continuing operations were recorded in 2012,
the dilutive potential shares are anti-dilutive and both basic
and diluted earnings per share are the same.
Diluted (15,221) 25,652 (0.59)
Year ended 31 December 2013
Basic 38,832 86,275 0.45
Impact of dilutive ordinary
shares:
Assumed conversion of warrants -- 54 --
Long term incentive plan -- 96 --
Share options - Legacy Trinity -- 390 --
Share options - Legacy TEPL -- 2,306 --
Share options granted 29 May -- 790 --
2013
Long term incentive plan granted -- 371 --
1 July 2013
Diluted 38,832 90,282 0.43
The earnings per share figures for the year ended 31 December
2013 are presented based upon the Group and capital structure
following the reverse acquisition of Bayfield. As a result, the
comparative figures are based upon the TEPL's historic weighted
average number of ordinary shares that were outstanding multiplied
by the exchange ratio established by the business combination.
31 Events after the Reporting Period
On 17 January 2014 $5.0 million of the $25.0 million debt
facility signed by Trinity and Citibank on 21 August 2013 was
drawn.
On 6 February 2014 the El Dorado exploration well was completed
at a cost of $17.4 million to a total depth of 6,174 feet measured
depth ("MD") and intersected shallow gas sand in the Pliocene
section and marginal thin bedded oil pay in the Miocene section. In
aggregate approximately 13 ft of net oil sands and 32 ft. of net
gas sands were encountered, however these are not deemed commercial
and the well was permanently plugged and abandoned with the full
amount of $17.4 million written off during the 2014 financial
year.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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