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[mark10101] 17/9/2019 17:35

Yes, very solid day with some great coverage. Some people may wait until the HAW results but if they come in anything like modelled people will start working out the implication going forward.

[spellbrook] 17/9/2019 17:29

Trinity E&P
@Trinity_PLC
@Trinity_PLC
#TRIN Trinity Exploration: Growing, cash generative producer capable of operating at US$30 oil - the company has gone from “survival mode, to hold steady and now growth”

[spellbrook] 17/9/2019 17:27

PR is RELENTLESS




more on twitter just now go TRIN

[spellbrook] 17/9/2019 16:41

nice volume, nice balanced day


we go again tomorrow

[nocents] 17/9/2019 16:07

Very much to be expected.
What else are Saudi likely to say??
“ Oh dear...sorry world. This is going to take ages to sort out.”
And who trusts what they say? This facile dumass market. I despair at the lack of realistic depth of thought in the markets.

[nocents] 17/9/2019 13:03

Sorry . Iphone typos as usual.

[nocents] 17/9/2019 13:02

Great analysis by Michael Spellbrook. Thanks.
Having spoken directly to CEO at last week’s vonference regarding dividends or buybacks I can confirm it is at least considred and on the table.
I prrsonally tgink this analysis is the best I have read yet.
In addition let us not forget November conferences as well as October Q3 results and HAW update at some close stage..perhaps with the update.
This was at 21p a year ago !! The company is in far better shape and oil is now more ‘real’ in that geo political factors are now being factored in. Trin should be at the very very least 16-18p without the Saudi outage. Over 21p with it. And that is pre-HAW.

[spellbrook] 17/9/2019 10:12

There has been a lot lot lot more pr after results and Investor roadshows this time around

PLUS

We have October Results and OCTOBER INVESTOR ROADSHOWS


Going to be a busy second half of the year

[spellbrook] 17/9/2019 09:33

Trinity Exploration -Update
Published on September 16, 2019
Michael C.
Michael C.Follow
Private Investor
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September 16th 2019

The investor presentation held by Trinity (AIM: TRIN) on September 10th was a valuable exercise covering H1 2019 and allowed investors to catch up with the progress of the company. So I thought that it an appropriate time to produce an update.

Strong Cash Generation And A Focus On Costs

It's stated goal is to keep its break-even point (Gross sales less: Royalties, operating and cash administrative costs) below US$30 per barrel. It currently stands at US$26.3 (H1 2018: US$28.5). Its cash operating costs have fallen by 9% to US$14.9 per barrel. This focus on reducing costs (Its operating expenses fell by 3.7%), coupled with a 9% rise in production to 3,008 BOPD increased adjusted EBITDA by 20% to US$6.5 million (After Supplemental Petroleum Tax [SPT] and Property Taxes). Revenues increased by 7% to US$32.2 million against a backdrop of a slightly less favourable oil price with an average price received in H1 2019 of US$59.1 per barrel (H1 2018: US$60).

Even including its investment expenditure, it's now cash accretive. At the end of H1 2019, its cash balance was US$17.8 million - unlike some AIM-listed resource stocks, this figure appears quite accurate and does not include window dressing. It's also worth mentioning that it has an ongoing programme of workovers. However, the costs are not capitalised, they are expensed in the year in which they occur. The focus appears to be on FCF rather than production for the sake of it.

Depending on how we view it, the break-even point is even lower when we remove its non-core West Coast offshore assets. Although these only produce 185 BOPD (H1 2018: 195 BOPD). The break-even cost has risen by 37% to US$33.5 per barrel. This seems to be the result of a lack of investment. The assets are still up for sale but there seems to be no action on the horizon.

New Technology Could Push Costs Even Lower

Through a partnership with Weatherford, the company has introduced a Supervisory Control and Data Acquisition (SCADA) system for its onshore production. In broad terms, this seeks to automate complex manual tasks and to optimise production from each well with data collected every 10 seconds and sent to the Cloud every 12 minutes. Should this pilot (It's currently being tested on two wells) prove to be successful, it plans on rolling out the system across all its wells, tanks and other relevant processes. The upside could be significant with a reduction in overheads and increased reserves. But it's obviously on a learning curve and has sought the advice of a major user of the same type of system (Diversified Gas and Oil). Although new to Trinidad, it's widely used across the world.

Again, new to Trinidad but not elsewhere is the company's adoption of High Angle Wells (HAWs). It recently drilled its first HAW (FR 1807) with the assistance of Baker Hughes. This is now in production. However, the company will not reveal just how much it's producing at the moment, apparently, it's "On prognosis", whatever that means I am unsure. That said, it did reveal that the gross pay was 850 feet rather than the 600 feet expected with a conventional well. It also revealed that the drilling went better than expected. But I was given the very firm impression that the well needed to be nurtured for about two months before the company could reveal just how successful (Or presumably unsuccessful it has been). Not only does this have implications for further drilling but if it delivers in a way it anticipates, then it also changes its financial model. It will boost the early years of production from new wells - these also benefit from lower Overriding royalties in years one (0%) and two (10%). And the cost is only around US$400,000-US$500,000 more than a traditional vertical well (Vertical well - around US$1million - US$1.2 million). The latter typically producing some 50 BOPD.

With an angle of 47 degrees, the HAW approach yields some 35% more pay. However, the company appears to be ultimately aiming to drill horizontal wells. Again, not new for the rest of the world but certainly new for Trinidad. That said, these are early days and this requires a rethink in its approach to subsurface work. As with SCADA, it appears to be on a technological learning curve.

Its headcount has remained stable over the past two years. The technical innovation seems to be doing what is claimed and the company appears to be in a position to benefit from operational gearing. On enquiry, I was informed that the company's offices are reasonably modest and its rent well below what could be paid in a more expensive location - that may seem a trivial point but I would suggest that it gives a broader understanding of a company's priorities. That focus on costs is largely reflected in its consolidated General and Administrative costs remaining stable at US$5 per barrel (That's around 55% lower than it was in 2014 when production was only 20% higher).

Supplemental Petroleum Tax Reform - Don't Hold Your Breath

It could happen but I suspect that it may simply be reform of the current system rather than its removal. In the meantime, the company is operating on the basis that it will not change. To that end, it has put in place scenario planning based upon an oil price of US$50.01 per barrel and remaining at that level for five years. That's to say, the worst possible oil price in terms of how it's impacted by SPT and that price staying there for a very long time. Its modelling demonstrates that it will still be profitable. It seems to have accepted that SPT is simply the cost of doing business in Trinidad and has adopted the necessary hedges to mitigate its impact.

By the way, should the HAW approach prove successful not only will it mitigate the company's royalty payments but the higher cost per well will also reduce the company's SPT bill - 20% of all applicable capital can be offset against SPT.

Offshore Development Is The Real Prize

The company already produces some 1,200 BOPD from its Trintes field in an operation that appears to run very smoothly. But the development of its TGAL assets is the project that will, if successful, take the company to another level. However, this is around three to five years from production. Incidentally, the company points to "Excellent continuity" with the Trintes field. And it appears likely that the development of TGAL will create synergies for the already established Trintes field.

The Field Development Plan for TGAL was submitted in November 2018 while the Front End Engineering and Design studies are ongoing. My understanding is that the first phase will cost some US$50-US$100 million, obviously depending on the approach taken. But the initial phase is targeting around 5,000 BOPD with further expansion, using a replicable format, substantially increasing this amount (It's worth reminding ourselves that it's sitting on US$240 million of tax losses in respect to Petroleum Profits Tax). When I pressed the management on how this would be funded, no definite solutions were presented. However, it was made very clear that it would not be conducted in a way that would disadvantage current investors.

As with its onshore operations, the company is focusing on cost and using technological innovation to reduce those costs. Firstly, it aims to power the development from onshore using subsea cables. It also plans on using thermoplastic subsea pipelines instead of steel - reducing cost and giving it greater operational flexibility. Trinidad also offers a very low-cost electricity supply at US$0.05 kWh (Regional average of US$0.33 kWh, while in the US, it's US$0.21 kWh). It's also seeking to use lightweight platforms at a cost ranging from US$3.5 million to US$5.5 million. And automating as much as possible to reduce labour costs.

The company appears to be working reasonably closely with Heritage Petroleum, the state oil company, concerning the development of its Galeota assets - not surprising considering the former's 35% stake in the field. For example, Trinity appears to be sharing its technical knowledge. It's also worth bearing in mind that the new interim CEO of Heritage is a former BP Executive responsible for heading up the sub-surface team dealing with BP's Teak, Samaan and Poui fields. That's to say, the fields neighbouring Trinity's Galeota assets - the Galeota anticline reaches the Samaan field. So I would suggest that it's a fair assumption that she is in a good position to facilitate the field's development, especially bearing in mind that the project will be of national interest.

Onshore Drilling Continues

Its stated goal for 2019 is the drilling of up to eight wells to increase year on year production by 10%. With three already drilled, this is quite possible. But, obviously, that's "Up to". I suspect that much depends on the success or otherwise of its HAW strategy. The overall policy remains of protecting and enhancing its production. Consolidating its gains but also developing its assets through what it described as "People, processes and technology". It's worth remembering that Trinidad produces far more gas than oil and it appears to be a national objective to have more balance.

With onshore 2P reserves of 7.3 MMBO, at current production levels of around 1,600 BOPD, it has much mileage. To that could be added an upside from its HAW campaign, should it prove successful. And, some way down the line, the introduction of horizontal drilling. And let's not forget that this is in the same geological neighbourhood as Venezuela and where recovery factors have been low (Around 12.5% - 15%). Basically, Trinidad still has a lot of oil left in the ground. And Trinity's reserve base could be substantially remapped as it employs technical innovations and moves away from a pure vertical well approach. But realistically speaking, it seems very unlikely to make a major discovery and its onshore growth is likely to be incremental. But it's low-cost and low-risk and operates across multiple reservoirs.

Emphasis On Organic Growth

Unsurprisingly, given the size of its acreage, the company has no immediate plans for expansion through acquisition. However, over the longer-term, it pointed to the possibility of the oil majors divesting their assets in the region and the obvious opportunity to buy up some of those assets. However, this seems in the very long-term indeed.

It's Making The Right Noises But Will It Deliver?

To a large degree, this is a very different company from what it has been in the recent past. It's debt-free, cash-accretive as well as cash-rich, and has a solid low-cost production base to use as a platform for growth. It even has ample acreage without resorting to acquisitions. And appears able to survive a major collapse in oil prices. It has even managed to work around Trinidad's SPT regime.

The one issue I have is this. Even if its HAW strategy is successful and, incidentally, I think it will be, then that points to a reasonable lift in both production and reserves. But it will probably not be huge. The real prize lies offshore and that's a very expensive investment that will require substantial external funding and not a placing. If we assume that the company ticks over for the next, say, four years before production from TGAL kicks in. What should it do with its cash pile? I would suggest that paying a modest and sustainable dividend makes sense. If it's not prepared to do it now, then when should it pay a dividend? Presumably, any sale of the business will be at least four years away and will coincide with the development of TGAL. Sure, it could increase onshore drilling but the rewards will be fairly minor. The real potential money-spinner is with TGAL. It has the finance to fund all the necessary planning to develop TGAL. But it will require external funding to bring the project to fruition. Paying a dividend and rewarding investors will not impede its ability to go ahead with TGAL. But, in my view, it will position the company as a successful and serious resource company and also widen its shareholder base.

[spellbrook] 17/9/2019 09:23

Mike
@Micrilstocks
#TRIN Trinity oil is growing its onshore oil production & adopting innovative approaches to developing its assets. But the real prize is with its offshore TGAL field. This update examines its recent progress & where it's heading.

[imjustdandy] 17/9/2019 07:09

Hopefully break 13 today

[spellbrook] 17/9/2019 06:54

Trinity’s offshore potential
By Andrew Hore - 16/09/2019

[spellbrook] 16/9/2019 21:21

Investor @Robin25461631 attended the Oil Capital Conference last week & gives his view on #TRIN #TRP #IOG #TETY #SENX #BPC who attended.

@AndrewScottTV & @proactive_UK also filmed the presentations

A fee was donated to @olivercurdtrust for this article

[nocents] 16/9/2019 20:50

Robin? Which review is this?

[spellbrook] 16/9/2019 20:09

A very good review if I may say so Robin and getting to the point admirably in a few short words. And curiously I also conclude that Trinity @Trinity_PLC offers the most upside and the management is first rate

[nocents] 16/9/2019 18:58

52% net long today. Long time since seen that. Expect Saudi placatory assessment this week and Trump “releasingR21; a few million. However...geopolitical reality has finally started to be factored in. Let’s see how long it lasts!!!

[mark10101] 16/9/2019 18:32

$63 WTI, looks like the big guys got out of their short positions and oil is finally reacting to the gravity of the situation. $63 is pretty cheap oil over the last 15 years.

[nocents] 16/9/2019 17:54

Oil up nearly 14% to $62.3
Seems that market is taking disruption seriously so far.
Trump tweets being rightly ignored

[wwick] 16/9/2019 17:21

Honouring the prince

[spellbrook] 16/9/2019 17:12

Chinese Oil Futures Rally On Saudi Attacks

[spellbrook] 16/9/2019 16:36

210k buys on the bell

[spellbrook] 16/9/2019 16:35

We go again tomorrow

Trinity is solid

[nocents] 16/9/2019 16:18

$61.4
And that is before any retaliation.

[spellbrook] 16/9/2019 16:12

Oil up 11%

[nocents] 16/9/2019 16:03

My bad really. Guess they are only responding to the numpties selling.