Trinity Exploration & Pr... Share Discussion Threads

[marvelman] 26/9/2018 13:28

Didn't bail out in panic, rather in disillusionment,rollthedice as I believe many others must have…. but have got back in and feeling much better about my fortunes on this share having made the right decision to sell when I did and buying back in the 17's...HOWEVER...not fully confident the share price will not drift down further.

[che7win] 26/9/2018 13:26

MT, I3E looks best risk/reward out there IMHO.

[whiskeyinthejar] 26/9/2018 13:22

Tipped by IC today

In Simon Thompson’s column today, he makes a compelling case why a cash rich independent oil and gas exploration and production company focused on Trinidad and Tobago is set to move from operating break-even in the first half of this year to potentially making net profits close to £10m in 2019. Our small-cap stock picking expert also notes that the shares are rated on an anomalous looking discount to net asset value, and are priced on single digit forward earnings multiple.



Trinity Exploration & Production (TRIN:17.45p) had been on my watch list for over a year when I decided the time and price was right to recommend buying the shares in this month’s Alpha Report at the current price (‘Resurrection points to a strong recovery’, 3 Sep 2018).

[rollthedice] 26/9/2018 13:16

Looking a bit more promising. If those who bailed in panic jump back onboard it could move pretty quickly... go on I know you want to :)

[dunderheed] 26/9/2018 13:14

Starting to creep up again (hopefully?!)

[nafafa] 26/9/2018 13:13

MV, TXP not looking so good and ouch that debt. I’ll stick with Trin and continue to mop, I may even sell you some back above 20p!!

[mount teide] 26/9/2018 12:51

archie61 - no remorse - still holding 400k.

On reading the TRIN results, believe that the early stage story at Jadestone Energy offers a better risk/reward over a 3-5 year outlook and so have sold down 50% here to add significantly to a holding in JSE.

Believe that JSE has the potential to be my best portfolio performer over a 3-5 year outlook, unless that is TXP prove up that 1 trillion cubic feet gas prospect they will be drilling on Ortoire next year. One of a similar size discovered off Shetland by Total SA this week was valued at £3bn.

[archie61] 26/9/2018 12:49

i'm loving the sellers still coming on here posting,sellers remorse i reckon.

[spellbrook] 26/9/2018 12:48

Summer fundraise a game changer

Up until the company’s 2013 reverse takeover of Aim-traded Bayfield Energy, another operator in the country, Trinity had a successful track record under the leadership of Bruce Dingwall, the founder and former chief executive of Venture Production, a UK oil and gas company that was acquired by Centrica for £1.3bn in 2009. Mr Dingwall led a management buyout of Venture’s Trinidad and Tobago assets, and built up a business producing 1,500 barrels of oil per day (bopd) by the time of the takeover. However, a major shortfall in Bayfield’s production coupled with increased costs forced Trinity to seek a settlement with its creditors two years ago after oil prices plunged to their lowest level since the 2008 global financial crisis.

Not surprisingly investors have been cautious since then. However, a $20m (£15.5m) equity raise at 15p a share over the summer was a real game changer, wiping out liabilities to the convertible loan note (CLN) holders and other creditors who backed Trinity’s rescue plan in December 2016. Holders of 88 per cent of the CLNs opted to convert into equity at the placing price, a resounding vote of confidence. Trinity’s senior management team purchased almost 15m shares and own 24 per cent of the share capital, so they have skin in the game.

As a result of the equity raise, Trinity is freed of financial constraints and a cash pile of $19m (£14.6m) means it has the funds to embark on a high-margin, low operating expenditure programme to boost onshore production at a time when the price of black gold is surging. The plan is to target between 8 and 10 new wells each year, and at a cost of $12m, in order to grow annual production by 10 per cent. Boasting an onshore operating break-even point sub-$16 per barrel, and with 80 per cent of the cost base fixed, then rising production combined with higher oil prices will have a significant operational gearing effect on future profitability.

Interestingly, there is no problem finding oil in Trinity and Tobago as the geology is characterised by large oil in place volumes, but low recovery factors and well productivity resulting from low reservoir energy. Importantly, the geology doesn’t require complex completion techniques or fracking, rather efficient execution and use of pumps. Initial production rates from wells tend to range between 50 and 100 bopd, with decline rates of around 10 per cent each year. If all goes according to plan then Trinity should be able to lift production by a quarter to 3,500 bopd by 2020 from its accelerated onshore drilling activities. The financial returns are eye-catching with the pay-back period only 10 months on a new well based on a $60 per barrel oil price. Trinity is also unhedged for next year’s output so will benefit from the surging oil price whereas it was previously forced to lock into hedging arrangements to guarantee cash flow for its creditors.

As investors cotton onto the transformation in Trinity’s finances and operational prospects, and the company delivers the step change in profitability I am anticipating, I can see the share price make headway towards my 28p target price as the discount to risked NAV narrows. The short-term profit taking post results represents a buying opportunity well worth exploiting. Buy.

[spellbrook] 26/9/2018 12:46

Trinity Exploration & Production (TRIN:17.45p) had been on my watch list for over a year when I decided the time and price was right to recommend buying the shares in this month’s Alpha Report at the current price (‘Resurrection points to a strong recovery’, 3 Sep 2018).

Trinity is an independent oil and gas exploration and production company focused solely on Trinidad and Tobago, the wealthiest country in the Caribbean. It operates producing and development assets both onshore and offshore, in the shallow water West and East Coasts of Trinidad where it has nine licences encompassing 1,165 wells of which 140 are active onshore, and 40 active offshore.

The operating environment is favourable. Trinidad and Tobago has the third-lowest business tax rates amongst Latin America and Caribbean countries, is the eighth-largest producer of liquified natural gas (LNG) in the world, and boasts significant proven energy reserves of petroleum and natural gas. The economy is heavily reliant upon the energy sector, which makes up 45 per cent of GDP and 83 per cent of exports. Trinity accounts for 4.3 per cent of Trinidad and Tobago’s total annual oil production. It is also one of the lowest cost producers as first-half results this week highlight.

Trinity’s onshore production increased by 20 per cent to account for 1,530 of its 2,771 barrels of oil per day (bopd) output in the first half this year, and at an operating break-even cost of just $15.70 per barrel. Offshore production was up 15 per cent to 1,046 bopd, all of which comes from a 100 per cent interest in the Trintes field (2P reserves of 14.78m barrels). Trintes has a relatively benign reservoir to produce from, and benefits from high API of oil (an industry measure to quantify how heavy or light a petroleum liquid is compared with water), low formation temperatures and effective sand control, all of which are supportive of an offshore operating cost of only $27.80 per barrel.

So, with the average realised oil price rising by 30 per cent to $60 a barrel, and net production up by 16 per cent to 2,771 bopd including a contribution from its small West Coast operations, Trinity’s revenues surged by half to $30m to lift operating profits by 35 per cent to $2.6m in the six-month trading period. After tax charges – mainly Supplemental Petroleum Tax (SPT) which is charged at a rate of 18 per cent and 26 per cent on net revenues (gross revenue less royalties less incentives) on onshore and offshore asset, respectively, when realised oil prices are higher than $50 a barrel – Trinity more or less hit break-even if you ignore exceptional gains. Operating cash flow of $5m covered capital expenditure of $4.4m.

I was expecting as much, but what prompted me to recommend buying the shares are prospects from this point onwards, and a very attractive valuation. Indeed, far more informative are the fresh forecasts from house broker Cenkos Securities, which point towards 2019 pre-tax and post-tax profits of $12.4m, which factors in an operating profit of $20m less SPT of $7.4m and nil corporation tax charge to reflect the benefit of past tax losses. This forecast assumes annual revenues of $72.2m and is based on a conservative-looking average oil price of $63.32 a barrel. If achieved then a net cash inflow north of $16m from operating activities will cover $14.3m of capital expenditure next year.

On this basis, expect EPS of 3.2¢ which implies the shares are rated on a forward PE ratio of only 7. They are also priced on less than half risked net asset value (NAV) of 38p a share based on 2P proven reserves of 23.18m barrels and cash in the bank. Risked NAV is even higher at 47.2p a share if you factor in almost 24m barrels of Trinity’s 2C resources.

It’s important, though, to understand why a £67m market capitalised company that has just hit break even could be making net profits close to £10m next year.

[nafafa] 26/9/2018 12:37

The SPT is around $9/barrel and I believe they get a proportion of that back on investment. SPT reform would be more icing on the cake

[mark10101] 26/9/2018 12:27

I am loving the moaners selling up and leaving. Just what we needed.

[archie61] 26/9/2018 12:21

MT, for someone who preaches the value of long term investing i'm surprised you've sold now? a bit hasty.

[diseasex] 26/9/2018 11:58

nafafa whats the point of that money if they dont generate profits even if oil is surging? everything gets eaten by "investments" and SPT

[mount teide] 26/9/2018 11:50

naf - made up my mind on the morning of results day what I intended to do with the remainder of my holding - so there was no point in attending.

Your and my understanding of 'cheap' has enough space between them for a coach and horses to drive through.

[nafafa] 26/9/2018 11:50

Ross, as I recall they entered 2017 with roundly $18m of debt and CLNs. Over 20 months they have repaid the debt and cleared the CLNs, via the placing. They are now left with a clean balance sheet and a $10m plus cash pile. What’s not to like?

[marvelman] 26/9/2018 11:48

Thanks Ros, agree. No corporate pressure requirement to do so caused by loans or overdrafts and a cash buffer if needed.

[deanroberthunt] 26/9/2018 11:24

to put some context to this, PMO recently sold 4kboepd for $250m.

[nafafa] 26/9/2018 11:13

MT, so it’s your stock I’m mopping up cheap! Shame you didn’t attend and ask a question about the placing. In conversation with Bruce after the presentation he outlined the process and external factors which came into play that determined issue price and allocation. Made sense to me. Bruce was surprised that nobody asked about it in the open forum questions, there was at least one pi there who had previously posted extensively on LSE his dissatisfaction around the placing.

[marvelman] 26/9/2018 10:54

Was expecting that MT based on your previous posts. I now believe this is looking more like a takeover target than a genuine mid term growth story. The cash filled balance sheet is tempting and economies of scale would certainly improve the ROI....just don't know who would fit the bill.

Ros

Is it your opinion that TRIN would still need to take out a safety net derivative. Oil prices look to be going one way at the moment but we have seen that could change. Also at todays prices they would get a better deal than the last one.

[deanroberthunt] 26/9/2018 10:52

you're making the mistake of applying current and/or historical figures/performance on what is a forward looking system....

[diseasex] 26/9/2018 10:48

the laughable part is "we are operational costs breakeven at 28 , 30$ for oil" implying that everything above 30$ oil is profit. 5m "investments" probably patching holes rather than increasing profits. annnnd the tax.