Trinity Exploration confident amid low oil price environment

Trinidad and Tobago-focussed Trinity Exploration & Production updated the market on its first quarter of operations on Monday, reporting that it had responded “rapidly and comprehensively” to the impact of the Covid-19 coronavirus pandemic and the OPEC+ standoff.

The AIM-traded firm said together, those events had prompted a significant decline in oil prices, with its benchmark West Texas Intermediate crude falling from around $60 per barrel to about $20 during the three month period ended 31 March.

Despite that extremely challenging backdrop, the company said it maintained production levels, increased its cash position and took steps to ensure its “core strengths” of a low cost base, financial prudence and operating excellence would enable it to weather a prolonged period of even lower oil prices if required.

Production volumes over the first quarter averaged 3,291 barrels of oil per day, and its unaudited cash balances increased to $14.2m at period end on 31 March, from $13.8m on 31 December.

The company said it maintained an operating breakeven, being revenues less royalties, operational expenditure, and general and administrative costs, of $26.70 per barrel during the quarter.

It said it was now targeting an average operating break-even, inclusive of hedging income, of $20.50 per barrel for the 2020 financial year.

Trinity said no new drilling took place in the first quarter, but three recompletions and 39 workovers were completed during the period, with swabbing continuing across all of its onshore assets.

It reported the continued deployment of Weatherford's Supervisory, Control and Data Acquisition (SCADA) platforms, with further roll-out to be implemented throughout 2020.

Production volumes for the rest of the year would depend on oil prices, and general market conditions supporting the economic case for the resumption of new drilling activity.

It said that, even if the prevailing oil price environment did not support the case for a resumption of drilling in the near term, net average production for 2020 was expected to increase to between 3,100 and 3,300 barrels of oil per day, from 3,007 barrels per day in 2019.

On the financial front, Trinity reported an average realisation of $46.30 per barrel for the first quarter, and as a result, no supplemental petroleum taxes would be payable with respect to first quarter production.

It said its cash balance of $14.2m as at 31 March reflected outflows for fourth quarter taxes, including supplemental petroleum taxes, of around $1.9m, as well as annual payments such as insurance, and capital expenditure of $2.2m.

Available cash and financial flexibility was further enhanced on 2 April, with the full drawdown of the firm’s $2.7m working capital facility with CIBC First Caribbean.

Operational and general and administrative cost reductions had been enacted, Trinity reported, with further measures and contingency plans being put in place for the rest of the year.

Looking at its response to the Covid-19 pandemic, Trinity said remote working practices for all but essential field operators had been in place for some time, and were working well.

All international travel had now been suspended, and local travel kept to the minimum needed to maintain well operations in the fields, with appropriate physical distancing measures being adhered to.

It said its field operations had not to date been negatively impacted from the pandemic, but the board was monitoring the evolving situation, and would put further appropriate measures in place as and when required.

“Our performance during the period, given the extremely challenging backdrop, was pleasing as we grew production and cash while reducing our already low operating breakeven,” said executive chairman Bruce Dingwall.

“The strength of our operations and balance sheet ensure that we remain well placed despite the current oil price environment.

“Whilst we take some encouragement from the recent OPEC+ agreed production cuts, the ongoing Covid-19 situation means there is considerable uncertainty as to when oil prices will recover.”

Dingwall said that the company was continuing to prudently manage its operations, remained highly resilient to low oil prices, and was open to capturing new business opportunities in a new era where attractive opportunities existed for more robust and lower cost operators.

“I must thank all of our staff for their unstinting dedication to their jobs and responsibilities and to the supply chain and their employees for supporting our operations through this extraordinary period.”

At 0907 BST, shares in Trinity Exploration & Production were up 2.71% at 6.06p.