TIDMTRIN
RNS Number : 9247R
Trinity Exploration & Production
14 March 2016
Trinity Exploration & Production Plc
(the "Company" or "Trinity"; AIM: TRIN)
Operational, Strategic and Loan Update
14 March 2016
Trinity, an independent E&P company focused on Trinidad and
Tobago, today provides an update on its operations and financials
for the year to December 2015 as well as details on its asset
disposals, loan moratorium and forward strategy and portfolio.
Operating Update
-- Group average net production volumes of 2,896 boepd for the
year to 31 December 2015 (2014: 3,603 boepd)
-- Production volumes continue to reflect the robust nature of
the asset base with declines due to natural depletion being modest
against a backdrop of reduced levels of investment for 2015
-- High quality reservoirs, low natural decline rates and
successful low-cost workovers maintaining production levels
-- Operational expenditure of US$0.2m on the East Coast B10 and
D-16 well workovers yielded a stabilised production rate of c. 70
bopd (annualised revenues of c.US$0.9m at US$35/bbl realised)
-- For the first two months of 2016 daily production averaged
2,598 boepd again due to reduced levels of investment as was
experienced in 2015
-- Contingent upon the availability of funding during the coming
year, 2016 net average production is expected to be in the range of
2,500 - 2,800 boepd (lower case: managed decline, uppercase:
refinancing)
Financial Update*
-- Cash balance at end of December of US$8.3 million, trade and
other receivables of US$10.6 million, inventories of US$4.0
million, debt of US$13.0 million, trade and other payables of
US$27.8 million and taxation payable of US$23.5 million
-- Pre-tax operating expenditures ("opex") reduced by 33% to
US$22.0 million (2014: US$32.9 million)
-- General and Administrative ("G&A") costs reduced by 30%
to US$10.5 million (2014: US$15.0 million)
-- Further reductions to G&A are ongoing with a steady state
annual run-rate of US$3.7 million being targeted by the year end
2016 (equivalent to US$3.6/bbl at current production levels)
-- Targeting operating breakeven across all fields of below US$30/bbl by the year end 2016
-- Onshore (lower cost environment) breakeven levels of below
US$15/bbl targeted by the year end 2016
-- Continued success in establishing a leaner, more efficient
cost base to realise further economies of scale and leverage from
increased realisations and/or production
*All figures for the financial year 2015 are unaudited
Loan Update
Current moratorium on principal repayments relating to Trinity's
outstanding debt extended for a two week period to 25 March
2016.
Disposal Update
On 21 October 2015, Trinity announced that it entered into an
agreement (the "Touchstone SPA") to sell its interests in the WD-2,
WD-5/6, WD-13, WD-14 and FZ-2 licenses and related fixed assets
(the "Blocks") to Touchstone Exploration Inc. ("Touchstone") for a
cash consideration of US$20.8 million. This sale was subject to
various conditions precedent, however by the back stop date, one of
these remains outstanding.
The Touchstone SPA relating to this disposal had a backstop date
of 13 March 2016 and this has now expired without all of the
required consents having been received, entitling either party to
terminate the Touchstone SPA. The Group has now sent a termination
notice in respect of the Touchstone SPA to Touchstone.
As a result, the sale of the Blocks to Touchstone will not
complete and the deposit of US$2.08 million, currently held in
escrow, is expected to be released to Touchstone under the terms of
the Touchstone SPA and a related escrow agreement.
These particular onshore assets have the lowest production costs
within the Trinity portfolio resulting in positive operating cash
flows even in the current low oil price environment and before the
full financial benefit of ongoing cost efficiencies are realised.
Breakeven levels of below US$15/bbl realised price (2015 unaudited:
c.US$24/bbl) are being targeted for the onshore portfolio by the
end of 2016. Retaining these assets enhances Trinity's portfolio
for attracting the funding required to implement the forward
strategy of the Group.
The sale of the Group's 100% interest in the Guapo-1 block
("Block GU-1") to New Horizon Exploration Trinidad and Tobago
Unlimited ("New Horizon") for a cash consideration of US$2.8
million (the "Guapo Transaction") is proceeding. The Guapo
Transaction is subject to standard regulatory approvals, including
approval from Petrotrin and approval by Trinity's shareholders. The
Guapo Transaction was approved by Trinity's shareholders in October
2015 and conditionally approved by Petrotrin in December 2015 with
final approval from Petrotrin being dependent on Ministerial
consent which is being pursued.
Strategic & Portfolio Update
As a result of the significant reduction in operating and
G&A costs that the Company has put in place and the resultant
increased margins, the forward plan on the asset base, even at low
oil prices is attractive. As a result of this effort, the Board and
Management believe that Trinity's core portfolio offers an
attractive investment opportunity on the resolution of the current
balance sheet constraints.
To this end Trinity has engaged two specialist refinancing
advisers, Imperial Capital of New York and Cantor Fitzgerald of
London. Whilst at an early stage in discussions, Management is
encouraged by the interest levels from several institutions.
Consistent with the objectives of the strategic review and FSP,
our near term objective is to conclude a complete refinancing
structure that will enable the Company to retire its existing
senior debt facilities, reduce other outstanding payables and
provide sufficient additional capital to retain the integrity of
its assets and grow production and cash flow. The combination of a
dramatically reduced cost base with drilling and service costs that
continue to adjust downward with falling commodity prices,
transforms the economic potential of the Group's reserve base.
Trinity retains a close and regular dialogue with its senior
debt lender, the government and wider creditors to communicate its
strategy to deliver a funding solution to the best benefit to all
stakeholders.
Subject to the availability of appropriate financing and
dependent upon drilling costs and prevailing commodity prices, the
Company's objective upon receipt of financing is to eventually
accelerate and expand its drilling programme across its asset base
from a large inventory of existing drilling locations. This deep
inventory of workover, recompletion and new drilling locations can
be targeted on the availability of growth capital. Management
believes that it is important to stress that these drilling
locations are all targeting existing proven and probable (2P)
reserves and are not subject to the subsurface risks attached to
exploration and appraisal activities. Trinity believes this offers
a key point of differentiation from a significant percentage of its
peer group.
Latest Management estimate Group total 2P reserves are 25.3
MMboe with Group 2C contingent resources of 21.7 MMboe (year end
2014). Subject to capital availability and a higher oil price
environment, the Company is well positioned for growth with an
inventory of high quality drilling locations across its onshore,
East Coast and West Coast acreage and continues its work on
completing the development plan for the updip development project
TGAL (TRIN: 65% WI), which includes the Galeota Ridge to the north
east.
Trinity expects 2016 net average production to be in the range
of 2,500 - 2,800 boepd with the higher end being contingent on
available funding during the year. Capital expenditure will be
prioritised to maintain and grow production through recompletions
and well workovers before any new drilling takes place.
Across Trinity's ongoing asset base there are identified
pathways for value and production growth. Until such time as these
can be funded the Company aims to continue to reduce operating
breakeven levels whilst warehousing and retaining the integrity of
a significant volume of reserves and resources.
While the company is progressing a funding solution and is
encouraged by interest levels there is no certainty that any such
transaction or refinancing will be concluded on acceptable
terms.
The Company remains in a formal sale process ("FSP") as it
continues with its strategic review.
Competent Person's Statement
The information contained in this announcement has been reviewed
and approved by Graham Stuart, the Company's Technical Advisor who
has 34 years of relevant global experience in the oil industry. Mr
Stuart holds a BSC (Hons) in Geology.
Enquiries:
Trinity Exploration & Tel: +44 (0)13
Production 1240 3860
Bruce Dingwall, Executive
Chairman
Tracy Mackenzie, Head
of Investor Relations
RBC Capital Markets Tel: +44 (0)
Nomad & Broker 20 7653 4000
Matthew Coakes
Daniel Conti
Oil & Gas Advisory Tel: +44 (0)
Jakub Brogowski 20 7653 4000
Roland Symonds
Notes to Editors
About Trinity
Trinity is one of the largest independent E&P company
focused on Trinidad and Tobago. Trinity currently operates assets
onshore and offshore on both the West and East coasts. Trinity's
portfolio includes current production, significant near-term
production growth opportunities from low risk developments and
multiple exploration prospects. The Company operates all of its
licences. Trinity is listed on the AIM market of the London Stock
Exchange under the ticker TRIN.LN.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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