Trinity in strategic option review

Trinity Exploration & Production, a company with assets offshore and onshore Trinidad & Tobago and South Africa, has announced that it is launching a strategic review of options open to the company in order to “maximise value for shareholders”.

The company has received a number of conditional proposals and expressions of interest in relation to certain of the company’s assets.

In light of these approaches, the company has decided to conduct a review of its options which may include, but are not limited to, a farm-out or sale of one or more of the company’s existing assets, a corporate transaction such as a merger with or sale of the company to a third party or a subscription for the company’s securities by one or more third parties.

The company is subject to The City Code on Takeovers and Mergers and has opted to conduct discussions with parties interested in making a proposal to the company under the framework of a “formal sale process” as set out in the Code in order to enable discussions relating to a merger or sale of the company, in particular, to take place on a confidential basis.

Operational Update

During the first quarter, Trinity’s net production averaged 3,433 boepd. These production levels reflect the robust nature of the asset base with declines being modest against a backdrop of reduced levels of investment.

At Trintes (100% WI) and TGAL (65% WI), located off the south-east coast of Trinidad, a rigorous subsurface review is well advanced. Initial management best estimate STOIIP for Trintes is 249 MMbbls. 2P reserves are currently estimated to be 6.0 MMbbls with 14.0 MMbbls having been re-classified as 2C contingent resources. Presently 31 candidate drilling locations have been identified to potentially develop these contingent resources.

At TGAL, initial STOIIP estimates of 50 MMbbls – 115 MMbbls have increased significantly with management unrisked best estimates currently 186 MMbbls and 17 candidate drilling locations having been identified with the potential to develop 2C contingent resources of 22.1 MMbbls (gross).

The joint Trintes-TGAL development plan review is on-going. With Trinity’s high working interests across its East Coast assets, the opportunity to bring in partners following this review is being considered, the company said.

Across all of the company’s assets management’s estimate of 2P reserves (inclusive of revisions, disposals and production) has moved from 47.7 MMbbls at the end of 2013 to 16.4 MMbbls at the end of 2014. Group 2C contingent resources are estimated to be 28.4 MMbbls. The company’s overall 2P plus 2C volumes are therefore 44.8 MMbbls. These volumes exclude 39.1 MMboe relating to the previously announced agreement to acquire an 80% interest in Blocks 1a and 1b, offshore the West Coast of Trinidad, from Centrica, which Trinity will book upon completion of that transaction.

In regards to Blocks 1a and 1b, the technical work on the draft Field Development Plan (FDP) is largely complete and a Gas Sales Agreement (GSA) is at an advanced stage with a potential off-taker. However, submission of the FDP and signature of the GSA cannot be formally undertaken until the acquisition is completed, Trinity notes.

Financial and Corporate Update

Trinity ended the first quarter of 2015 with cash and cash equivalents of US$7.5 million, receivables of US$27.3 million (including US$11.2 million VAT receivables owed to the company), inventories of US$8.1 million, debt of US$13.1 million, trade & other payables of US$33.0 million and taxation payable of US$17.3 million.

According to the company, the significantly lower oil price at the end of 2014 (and lower forecasted prices) has triggered an impairment review and Trinity expects to recognise a non-cash impairment charge in its audited 2014 financial statements.

The company and its lenders have agreed on a moratorium on principal repayments relating to Trinity’s outstanding debt balance until June 15, 2015. Completion of the previously announced acquisition of an 80% working interest in Blocks 1a and 1b remains subject to the payment of US$22.5 million to Centrica. Through the strategic review process, Trinity will be seeking solutions to enable the company to fund this consideration.

Management have undertaken a number of initiatives to actively manage the company’s liquidity position including, but not limited to, the implementation of operational and overhead cost reduction programmes and the sale of certain non-core assets.

As part of these initiatives, Bruce Dingwall’s role will change from Executive Chairman to Non-Executive Chairman, and all Board members have agreed to a suspension of all fees relating to their roles as Directors.

Bruce Dingwall, Non-Executive Chairman of Trinity, commented:

“The opportunity set in Trinidad, in which Trinity shares, is of enduring appeal throughout the commodity price cycle. Trinity has received several proposals for different assets, and the task for the Board must now be to conduct the most comprehensive review to secure the best value for shareholders.”