Trinity Exploration & Production plc, the independent E&P company focused on Trinidad and Tobago, provides an update on its operations for the three-month period ended 30 September 2021 ("Q3 2021" or "the period").
Q3 2021 Summary
The Company maintained production during the period, with increased automation, a low-cost base and the upward trend in the oil price underpinning higher levels of cash generation. As a result, the Company remains well placed to accelerate investment. The focus remains on monetising and broadening the production portfolio whilst utilising partnerships to target new acreage. Additionally the Company continues to explore ways to increase its focus on sustainability and transition fuels.
Production volumes averaged 3,018 bopd (Q2 2021: 3,047), yielding a YTD 2021 average of 2,995 bopd. The Group's unaudited cash balances increased over the period to US$20.4 million as at 30 September 2021 (US$19.0 million (unaudited) as at 30 June 2021) as a result of strong operating cash generation over the quarter.
The focus during the period was on progressing various production-led opportunities, with the new 25 year Galeota licence and move to 100% Working Interest (together delivering a significant improvement in commercial terms) marking the next phase of development for the Block.
Onshore, the Company expects to finalise a drilling programme during Q4 2021 to commence early in 2022. The drilling inventory continues to build, supported by the 3D seismic evaluations, with 16 drill ready candidates being developed including conventional, high angle and horizontal infill targets. The Company also expects the PS4 acquisition, which is adjacent to its core onshore producing fields (WD2 and WD5/6), to complete, expanding the opportunity to complete further recompletions ("RCPs") and infill wells to increase production.
Offshore, the Company's focus during Q4 2021 will be on working with its advisor to commence the formal marketing process as part of farming down the Galeota Asset Development opportunity which includes the current Trintes Field production, the Echo Field Development and the Foxtrot and Golf appraisal areas. The process is expected to take approximately 6 to 9 months and we will keep the market updated on progress as appropriate.
With a significant asset base of reserves and resources exceeding 50 mmbbls, Trinity's portfolio offers full cycle exposure, consisting of:
· current producing assets (both onshore and offshore)
· existing brownfield development potential (i.e. an extensive onshore RCP and drilling inventory)
· greenfield developments (e.g. Echo, Foxtrot and Golf)
· exploration potential both onshore (e.g. North West District ("NWD") deeper cretaceous to the shallower Pliocene with 3D seismic lens) and offshore (i.e. deeper under-explored, near shore heavier oil)
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 wider environment remains positive for the Company - not only the positive trend in oil prices, but also the growing focus on sustainability and transition fuels in Trinidad.
The Company remains well positioned to act as a consolidator in the region and the Government's continued focus on stimulating investment will offer Trinity opportunities to broaden its portfolio with bolt-on acquisitions and new licence awards.
Jeremy Bridglalsingh, Chief Executive Officer, commented: "We continued to develop our business during the period, maintaining existing assets, laying the foundations for longer-term production growth from our existing portfolio while also pursuing new growth opportunities. The Government's focus on stimulating the sector could provide significant opportunities for Trinity and we look forward participating in the new bid rounds to be launched.
"It goes without saying that this was an extremely difficult period for the Company, with the passing of Bruce Dingwall affecting everyone in the business, and the operational challenges posed by COVID-19 continuing. The strong performance reported today is a testament to Bruce's legacy, and means that we are able to look forward with confidence as we seek to develop the numerous opportunities available to us, building on our growing reputation in the region which has been further enhanced by Derek Hudson's recent appointment to the Board."
Q3 2021 Operational Highlights
· Broadly flat quarter-on-quarter production with Group average production volumes of 3,018 bopd for the period (Q2 2021: 3,047 bopd) without any new wells being drilled and despite constrained operational conditions owing to COVID restrictions
· YTD 2021 (Q1-Q3) average production volumes of 2,995 bopd represent a year-on-year decrease of 7% (YTD 2020: 3,232 bopd)
· 2 RCPs (Q2 2021: 2) and 18 workovers (Q2 2021: 21) were completed during the period, with swabbing continuing across all onshore assets and extended to the west coast assets
· 25 year Galeota Licence, increase to 100% Working Interest and significant improvement in commercial terms
· Production volumes for the remainder of 2021 will be dependent on several factors including general market conditions and the impact of COVID restrictions. However, even without a resumption of drilling in the near term, net average production for 2021 is still expected to be in the range of 2,900 - 3,100 bopd (2020: 3,226 bopd), in line with our previous guidance
Q3 2021 Financial Highlights
· Average realisations of US$62.6/bbl for Q3 (Q2 2021: US$59.4/bbl) yielding a YTD 2021 average of US$58.1/bbl (YTD Q3 2020: US$37.3/bbl)
· Cash balance increased to US$20.4 million (unaudited) as at 30 September 2021 (30 June 2021: US$19.0 million, unaudited) as a result of strong operating cash generation during the period and despite a further increase in the VAT receivable due
· Strong production levels combined with strict cost controls helped maintain an operating break-even of US$28.2/bbl (unaudited) year-to-date, despite additional Covid related costs. The Company remains on track to meet its target for average operating break-even (inclusive of hedging) of below US$30.0/bbl for FY 2021.
The Echo development project on the Galeota Block continued to advance with the final Field Development Plan due to be approved during Q4 2021. A farm-down process is also due to commence imminently as a crucial next step towards a Final Investment Decision during H1 2022, with first oil targeted for 2023. Once on production, the Echo development is currently expected to deliver peak production in excess of 4,000 bopd (100%).
Results from the onshore 3D seismic interpretation continue to be very encouraging with several, potentially meaningful, new plays and leads identified. Several high angle well ("HAW") drilling leads have already been identified, as we aim to transition from drilling conventional vertical wells to HAWs, and ultimately full horizontal wells. Drilling is currently targeted to recommence early in 2022.
In conjunction with its partner, Trinity was short-listed and has been evaluating two new opportunities; the Jubilee field redevelopment opportunity offshore and NWD opportunity onshore. Following a thorough review process of the available data at Jubilee the partnership decided not to proceed to the bid stage. With regard to NWD, the partnership teams have been encouraged, based on evaluations to date, and are progressing in the process with bids due during December 2021.
As part of the recent 2022 Budget Statement the Government of Trinidad and Tobago announced there will be three new bid rounds and Trinity looks forward to evaluating these in conjunction with partner(s) where appropriate:
· the first bid round will be for deep water and will comprise 11 deep water blocks;
· the second bid round will be for onshore activity and will comprise 12 blocks; and
· the third bid round will be for the offshore shallow water where there are 25 open shallow water blocks for consideration (13 of these blocks having been the source of recent natural gas discoveries).
Trinidad & Tobago Budget
The Company notes the Government of Trinidad and Tobago's continued focus on further stimulating investment and increasing incentives for the energy sector included in the 2022 Budget Statement delivered earlier this month.
Encouragingly, the statement included a proposal to issue new VAT Bonds in the new financial year, numerous statements highlighting the need for, and intent to, further reform the taxation regime and facilitate companies to bid for blocks and engage in exploration and production. Of key note, The Ministry of Finance will very shortly conduct a comprehensive review of its oil and gas taxation regime (including Petroleum Profits Tax, Supplementary Petroleum Tax and Royalties) to ensure that Trinidad and Tobago remains an internationally competitive hydrocarbon province.