Trinity Exploration & Production plc (TRIN), the independent E&P company focused on Trinidad and Tobago, provides an update on its operations for the three-month period ended 31 December 2021 ("Q4 2021").
Q4 2021 Summary
With production levels maintained and continuing strong operating cash generation demonstrating the strength of its core producing asset base, Trinity made good progress on a number of key initiatives to achieve a step change in scale.
Production volumes averaged 3,103 bopd (Q3 2021: 3,018), yielding a full year 2021 average of 3,069 bopd, in-line with guidance provided at the beginning of the year. The Group's unaudited cash balance was US$18.3 million as at 31 December 2021 (US$20.4 million (unaudited) as at 30 September 2021) with continuing strong operating cash generation over the quarter offset by the payment due on completion of the PS-4 acquisition.
The completion of the PS-4 acquisition, which is contiguous to Trinity's largest and most prolific onshore Block, WD-5/6, significantly enhances the Group's onshore acreage. In addition, approval of the Field Development Plan ("FDP") for the Galeota Asset Development ("GAD") Project, which provides a suitably matured development concept for review by potential funding partners, has enabled the farm-down process to commence.
Onshore, Trinity continues to be well placed to deliver growth with the recommencement of onshore drilling now targeted for H2 2022. This is likely, initially, to comprise two infill wells at the under-exploited PS-4 Block, and Trinity is also working up a potential appraisal well targeting deeper horizons identified by the ongoing seismic interpretation. Trinity is also well funded to further grow its onshore portfolio as it bids for new blocks that are being made available as part of the Government of Trinidad & Tobago's ("GORTT's") onshore licensing round, designed to stimulate onshore activity. To this end, Trinity has submitted an Expression of Interest ("EOI") for six onshore blocks being made available as part of this process; and has made a further EOI to enter into additional sub-licences with a focus on improved / enhanced oil recovery ("IOR / EOR") in certain Heritage onshore acreage. Trinity is also continuing to work with its partner, Capricorn Energy PLC, to evaluate the North West District ("NWD") opportunity with bids due at the end of Q1 2022.
Offshore, the focus will be on continuing to progress the GAD Project and the farm-down process. Trinity is encouraged by the interest being shown in the farm-down process at this early stage, and will provide further updates as progress is made. Trinity also intends to review the opportunities becoming available as part of the upcoming shallow water bid round.
Trinity now has c.50% of its expected 2022 production hedged, ensuring it can execute its investment plans under a wide range of oil price environments. Confidence in the future is further enhanced by the GORTT's intention, stated in Q4 2021, to stimulate higher levels of activity and investment in the energy sector, with a comprehensive review of Trinidad and Tobago's taxation regime underway with outcomes expected during H1 2022.
Jeremy Bridglalsingh, Chief Executive Officer, commented:
"Trinity's robust performance during 2021, particularly against the backdrop of the continuing COVID-19 pandemic, highlights the strength and resilience of our business. As well as delivering a strong operating performance, we have completed the PS-4 acquisition and commenced the search for a partner at Galeota, a potentially significant near term value catalyst, with initial interest levels being encouraging. The relationship with Capricorn Energy PLC continues to develop, and we are working together on the evaluation of opportunities within the T&T jurisdiction, with the most advanced of these being the NWD opportunity. We have also registered our interest in six onshore blocks and expect further opportunities to be presented by the shallow water bid round commencing shortly. Finally, the anticipated reform of the taxation regime should create a more attractive environment in which to deploy investment capital. We believe the strong foundation we have created over the past few years positions us well to participate in the growing opportunity set which is ahead of us."
Investor Presentation: 16:00, Thursday 3rd February
The Company will be hosting a presentation through the digital platform Investor Meet Company at 16.00 (GMT) on 3 February 2022. Chairman Nicholas Clayton, and Chief Executive Officer Jeremy Bridglalsingh, will provide an overview of performance and its plans for the future. Investors can sign up to Investor Meet Company for free and add to meet Trinity Exploration via the following link https: https://www.investormeetcompany.com/trinity-exploration-production-plc/register-investor.
Q4 2021 Operational Highlights
- Robust COVID-19 protocols put in place to limit the impact of the pandemic on our operations and production
- Quarter-on-quarter Group average production volumes increased 3% to 3,103 bopd for Q4 2021 (Q3 2021: 3,018 bopd)
- Full year 2021 average production of 3,069 bopd represents a year-on-year decrease of 5% (2020: 3,232 bopd)
- Full year 2021 sales volumes totalled 3,006 bopd (2020: 3,226 bopd)
- The relatively modest decline in year-on-year production, despite no new drilling, is the result of the Group's rigorous approach to managing every aspect of our base production
- During Q4, 2 recompletions ("RCPs") (Q3 2021: 2) and 35 workovers (Q3 2021: 18) were completed, with swabbing operations continuing across onshore and West Coast assets
- A total of 7 RCPs and 96 workovers were completed during 2021
- 31 Tier 1 onshore wells are now fully automated resulting in increased cost savings from reduced manual interventions and workover preventions
Q4 2021 Financial Highlights
- Average realisation of US$67.0/bbl for Q4 2021 (Q3 2021: US$62.6/bbl) yielding a full year 2021 average of US$60.3/bbl (FY 2020: US$37.4/bbl)
- Low operating break-even, pre-hedging, maintained at US$29.2/bbl (unaudited) for the full year 2021 (2020: US$24.0/bbl), in line with guidance provided at the beginning of the year
- Although no SPT was payable in respect of the Group's onshore operations during the year, SPT of US$5.1 million (unaudited) was incurred in respect of the Group's offshore operations for FY 2021, of which US$3.6 million was paid during the year
- Cash balance of US$18.3 million (unaudited) as at 31 December 2021 versus US$20.2 million (audited) as at 31 December 2020 and US$20.4 million (unaudited) as at 30 September 2021
- Continued strong operating cash generation during Q4 2021 was offset by the PS-4 acquisition payment (c.US$3.1 million was paid in Q4 2021), Taxes including Q3 SPT, Q4 Petroleum Profits Taxes and Unemployment Levies (c.US$1.8 million), net hedging expenses as crude oil prices increased from when the Group's hedges were put in place (c.US$1.0 million) and continuing capex investment in the business (c.US$0.5 million)
- Net cash (cash minus US$2.7 million drawn working capital facility) of US$15.6 million as at 31 December 2021 (unaudited), versus US$17.5 million as at 31 December 2020 (audited)
GAD Project Update
Trinity has now commenced a formal marketing process for a farm-down of the GAD Project and has appointed Stellar Energy Advisors as its advisor for the divestment.
There is potential for the GAD Project, which encompasses the Trintes Field's current production, the Echo Field Development and the Foxtrot and Golf appraisal areas, to significantly change the scale of Trinity's operations. As previously announced, the combined 2P reserves and 2C/2U resources from these fields exceeds 50 mmbbls, with dynamic modelling indicating peak annualised production of circa 7,000 bopd from Echo alone.
An Independent Competent Person's Report on these assets was completed in Q4 2021 by Netherland, Sewell & Associates, Inc., which offers significant support to Trinity's own internal volumetric assessment of the Galeota Block.
As previously highlighted, a large proportion of Trinity's total tax loss position (c.US$ 165 million of the US$ 237 million available at the Corporate level as at YE 2020) can be applied to the Galeota field and its future development, which further underpins its economics.
Trinity is increasingly confident that SPT reforms will be implemented in the near term which will improve the economics of the GAD Project, with a material positive impact on cash flows and returns.
With a significant asset base of reserves and resources exceeding 50 mmbbls, Trinity's portfolio offers full cycle exposure. The Company's overarching objective is to target growth in revenues and cash flows from existing producing reserves, to advance near-term development projects and to mature other identified prospects from both within the portfolio and via external processes. Independents often drive later stage growth in mature basins, but Trinidad has not yet opened up in the same way that other jurisdictions have. However, the Company expects that the increased Government focus on ensuring that the sector can compete for capital investment in an international context will create new opportunities. The portfolio approach is aimed at spreading risk and leveraging the Company's strong standing in the region, putting it in an advantageous position to benefit from the Government's focus on further stimulating the sector.