Results for the year ended 31 December 2012

RNS Number : 1825E

Trinity Exploration & Production

08 May 2013

 



Trinity Exploration & Production plc

(the "Company", the "Enlarged Group" or "Trinity"; AIM:TRIN)

Results for the year ended 31 December 2012

8 May 2013

Trinity (formerly known as Bayfield Energy Holdings plc), the leading independent E&P company focused on Trinidad and Tobago, announces its results for the year ended 2012.

Corporate

·    Bayfield Energy Holdings plc ("Bayfield") announced that it was to be acquired by Trinity Exploration & Production Limited ("TEPL") on 15 October 2012

·    The transaction was completed on 14 February 2013 and Bayfield was renamed Trinity Exploration & Production plc (the "Enlarged Group")

·    The Enlarged Group successfully completed a placing of new shares in February 2013 raising £57 million (before expenses) to accelerate delivery of a combination of development and high impact exploration drilling

·    A new Board and management team was put in place in conjunction with the acquisition led by Bruce Dingwall CBE as Executive Chairman and Joel "Monty" Pemberton as Chief Executive Officer

·    The Enlarged Group is the largest independent exploration and production company in Trinidad & Tobago with net current production of c. 3,900 bopd and 36 mmbbl in net 2P reserves at the end of 2012 (includes an un-audited upgrade to onshore reserves of over 4 mmbbl)

·    The Enlarged Group is targeting a 2013 exit rate production of 5,000 bopd

Financial Highlights

The financials below reflect results of the Company prior to the transaction with TEPL.  These are the historical numbers for 2012 and do not impact any statements made in the Admission Document dated 14 February 2013.

·    Revenue of US$36.2 million (2011: US$22 million)

·    Loss before tax of US$23.9 million (2011: US$17.2 million) after write off for unsuccessful exploration costs of US$21.9 million

·    Loss after tax of US$13.0 million (2011: US$14.3 million)

·    Capital expenditure for the year was US$69.8 million (2011: US$41.3 million) comprising Trintes field development costs (US$22.9 million) and exploration costs (US$46.9 million)

·    Cash and cash equivalents at year end were US$9.7 million (2011: US$59.4 million)

Operating Highlights

·    Average gross production from the Trintes field increased by 43% to 1,715 bopd (2011: 1,202 bopd)

·    Net 2P reserves at Trintes increased by 25% from 19.3mmbbl at December 31, 2010 to 24.1mmbbl at June 30, 2012 (audited by Gaffney Cline Associates)

·    EG-8 exploration well suspended as an oil and gas discovery in March 2012 with estimated gross recoverable resources of 32 mmbbl and 69 Bcf of gas

Post period-end highlights

·    Six onshore development wells drilled to date.  Four wells have been brought onstream with average initial production rates of 150 bopd per well (versus budget of 50 bopd) 

·    New operating team installed at Trintes and infill drilling programme commenced

·    The exploration campaign on the Galeota Block is expected to commence in Q3 2013 using the Rowan Gorilla III (RG III) drilling rig.  A Rig Sharing Agreement has been signed by Trinity, Repsol, EOG and Centrica with Trinity committing to take one rig slot using the RG III after EOG's 2013 drilling campaign is completed

·    Discussions underway with holders of the adjacent block on appraisal plans for the EG-8 discovery.  These discussions should result in a Unitisation Agreement across the discovery with the expectation that an appraisal well will be drilled in the near future

Combined results of the Enlarged Group

Maiden results of the Enlarged Group for the six month period to 30 June 2013 will be released to the market at the end of September 2013. Copies of the 31 December 2012 audited financial statements for both Trinity Exploration & Production plc (formerly Bayfield Energy Holdings plc) and Trinity Exploration & Production (UK) Limited (formerly Trinity Exploration & Production Limited) can be found on the Company's website www.trinityexploration.com.

Monty Pemberton, Chief Executive Officer of Trinity, commented:

"The combination of Bayfield and TEPL to form Trinity Exploration & Production plc has created a robust business with a diversified asset portfolio generating surplus operating cash from its production operations on the East Coast, West Coast and Onshore Trinidad. 

Our 2013 onshore drilling campaign has been successful thus far with six wells now drilled, all under budget.  Four of these wells have been completed and brought into production at rates surpassing our expectations, a further two wells will be brought into production within the next few days and the seventh well will spud within the next week.  Remedial work is ongoing at our East Coast operations and infill drilling operations recommenced in April 2013 on the B11 well.  Furthermore, we will be drilling our first exploration well on the Galeota license in Q3 2013 which will expose shareholders to material upside later on this year. 

Trinity continues to be a fundamentally strong and adequately capitalised business with a diversified production portfolio and exploration upside on the East and West Coast of Trinidad & Tobago." 

Enquiries

Trinity Exploration & Production Monty Pemberton, Chief Executive Officer Robert Gair, Corporate Development Manager	Tel: [phone]
RBC Capital Markets (NOMAD & Joint Broker) Tim Chapman Matthew Coakes Daniel Conti	Tel: [phone]
Jefferies (Joint Broker) Chris Zeal Graham Hertrich	Tel: [phone]
Brunswick Group LLP (PR Adviser) Patrick Handley Catriona McDermott	Tel: [phone]

About Trinity

Trinity is the largest independent E&P company focused on Trinidad and Tobago.  Trinity operates assets onshore and offshore on both the West and East coasts. Trinity's portfolio includes current production, significant near-term production growth opportunities from low risk developments and multiple exploration prospects with the potential to deliver meaningful reserves/resources growth.  The Company operates all of its licences and has 2P reserves of 36 mmbbl and current production of c. 3,900 bopd.  Trinity is listed on the AIM market of the London Stock Exchange under the ticker TRIN.LN.

Chairman's Statement

2012 was a year of great change for Trinity Exploration & Production plc (formerly known as Bayfield Energy Holdings plc) and its subsidiaries (the "Group").  Significant operational progress was made with gross production growing 108% from 1,198 bopd to 2,496 bopd at the Trintes field and exploration success at the EG-8 well in March 2012 which identified development potential of 32.0 mmbbl of oil and 69.0 Bcf of gas.  Following the successful infill drilling programme, the Group announced in December 2012 that net 2P reserves at the Trintes field had grown by 25% from 19.3mmbbl at 31 December 2010 to 24.1mmbbl at 30 June 30 2012. 

However, growth in production and cash flow was slower than expected due to operational issues on Trintes and by May 2012 the Group recognised the need for additional funding.  The Group sought to raise equity financing but despite a measure of institutional support was unable to secure sufficient funds.  Consequently, the Group commenced a review of its strategic alternatives which culminated in the announcement on 15 October 2012 that the Group had agreed to be acquired by Trinity Exploration & Production Limited (now Trinity Exploration & Production (UK) Limited) ("TEPL").

TEPL is a private independent oil & gas company registered in Scotland with onshore and offshore assets in Trinidad. As at 30 June 2012, TEPL had 2P reserves of 7.1 mmbbl as per its reserve auditors, RPS Energy with 2012 production of 2,289 bopd (net). TEPL operates ten licenses in Trinidad, including two licenses in the Gulf of Paria, offshore Trinidad's West coast, and eight onshore licenses.  TEPL's audited financial statements will be available from 8 May 2013 on the Company's website www.trinityexploration.com.

The acquisition was concluded on 14 February 2013 and Bayfield Energy Holdings plc was renamed Trinity Exploration & Production plc ("the Company").  Concurrent with the acquisition the Company raised gross proceeds of £57 million via a placing of new shares in order to fund a programme of development and exploration activities.  Funding was raised from a wide range of UK, European and Asian institutional investors.

Following the acquisition, Trinity Exploration & Production plc and its subsidiaries (the "Enlarged Group") is the largest independent exploration and production company focused on Trinidad, a prolific hydrocarbon province that has been under-exploited and offers significant growth opportunities.  As of 30 June 2012 the Enlarged Group had net reserves and contingent resources, on a net working interest basis, summarised as follows:

Reserves:

	1P			2P			3P
	Oil	Gas	Total	Oil	Gas	Total	Oil	Gas	Total
	mmbbl	Bcf	mmboe	mmbbl	Bcf	mmboe	mmbbl	Bcf	mmboe
TEPL	3.4	0.0	3.4	7.1	0.0	7.1	12.7	0.0	12.7
Company	7.0	0.0	7.0	24.1	0.0	24.1	33.6	0.0	33.6
Total	10.4	0.0	10.4	31.2	0.0	31.2	46.3	0.0	46.3

Contingent Resources:

	1C			2C			3C
	Oil	Gas	Total	Oil	Gas	Total	Oil	Gas	Total
	mmbbl	Bcf	mmboe	mmbbl	Bcf	mmboe	mmbbl	Bcf	mmboe
TEPL	3.6	0.0	3.6	8.8	0.0	8.8	19.6	0.0	19.6
Company	14.1	15.1	29.2	24.9	26.0	50.9	39.1	41.0	80.1
Total	17.7	15.1	32.8	33.7	26.0	59.7	58.7	41.0	99.7

Note: TEPL data as of 1 July 2012 as audited by RPS Energy Consultants Ltd, Company data as of 30 June 2012 as audited by Gaffney Cline & Associates Ltd.  Natural gas volumes have been converted to boe at a ratio of 6,000 cubic feet of gas to one boe. Net reserves and contingent  resources shown above account for working interest shares of reserves and contingent resources before the deduction of government royalty and Petrotrin over-riding royalty.

Following additional technical work by management done subsequently on the Enlarged Group's onshore assets, the Enlarged Group increased its 2P reserve estimates from 31.2 mmboe to 35.6 mmboe. The 2012 financial statements of Trinity Exploration & Production (UK) Limited have been affected by these changes and further information will be found in the notes to the financial statements of Trinity Exploration & Production (UK) Limited. The specific fields that have been affected are outlined below. These increased reserves have not been independently audited.

Total Reserves (mbbl)	RPS Estimate	Trinity Interim Estimate
Licence	2P	2P
FZ-2	74	526
WD-2	415	876
WD-16	1	1
WD-5/6	1,330	3,539
GU1	94	598
WD 13	77	452
WD 14	55	455
Tabaquite	39	55
Total	2,085	6,502

The Enlarged Group exited 2012 producing approximately 3,965 bopd.

The Enlarged Group is now led by Bruce Dingwall CBE as Executive Chairman and Joel "Monty" Pemberton as Chief Executive Officer.  Concurrent with closing of the transaction the Enlarged Group also welcomed Anthony Brash, Jon Murphy and Ronald Harford to the Board of Directors while Hywel John, Andrey Pannikov and Jonathan Cooke stood down from their positions.  The Enlarged Group extends thanks to the former directors for their contribution.

Outlook

The Enlarged Group plans an active work programme in 2013 and has made good progress in the first few months since the transaction closed with integration of the two businesses well advanced.

In total the Enlarged Group plans to drill 12 onshore wells this year as well as eight infill development wells at the Trintes field.  Additionally, infrastructure upgrades have begun at the Brighton field ahead of a heavy workover programme that will commence in the summer of 2013.

The Enlarged Group also plans to drill up to four exploration and appraisal wells in 2013 with three prospects planned to be drilled on the Galeota licence offshore the East Coast and the El Dorado prospect offshore the West Coast. 

The Board is encouraged by the outlook for 2013.  The Enlarged Group has a balanced portfolio of existing production, near-term production growth from infill drilling and exploration upside.  In addition, Trinidad's upstream industry continues to evolve which may present opportunities for the Enlarged Group to grow the business beyond its current portfolio.

Finally, I want to thank our employees for their hard work and dedication throughout 2012 and wish them every success in their endeavours for 2013.

Bruce Dingwall

Executive Chairman

Review of Operations

Trinidad

Significant commercial progress was made during 2012 with the oil pricing agreement at Trintes re-negotiated in August 2012 from a 17.5% discount to WTI to a 9.5% discount to Brent.  The Company also successfully assigned its interest in the rig contract with Rowan for the Gorilla III jack-up drilling unit, thereby removing significant financial commitments. The operating expenditure carry with the Petroleum Company of Trinidad and Tobago (Petrotrin) also expires in late April 2013, at which point Petrotrin will begin paying its 35% share of operating expenditure, further improving the Enlarged Group's cash flow.

Trintes Field

Gross production from the Trintes field grew by 108% during 2012 from 1,198 bopd (net 779 bopd) to 2,496 bopd (net 1,622 bopd). During the year 28 workovers and 9 sidetrack operations were completed.

Although important progress has been made on the Trintes field major repairs were required on Rig-2 causing a three month delay in the drilling program resulting in below par production levels. 

The Company continues to address infrastructure issues to improve reliability. Major work was completed to improve power generation reliability on the active platforms, including installation of synchronisation equipment that eliminated down time during planned maintenance and switching of generators.

East Galeota

In 2012 the Company drilled the EG-8 and EG-7 exploration wells in the northeast of the block. The first exploration well in the Galeota Licence, EG8, was suspended as an oil and gas discovery having reached a total depth of 8,133ft (2,479m).  Management believe that EG-8 has demonstrated development potential of 32 mmbbl of oil and 69 Bcf of gas in the EG2/EG5/EG8 Central and East fault blocks.  EG-7 was unsuccessful as it was predominantly water bearing.  Evaluation of EG-7 and its sidetrack EG-7ST1 has ruled out the viability of the EG-1 discovery and consequently the costs capitalised in relation to the well of $21.9 million have been written off in the year.

South Africa

In April 2012 the Company announced execution of formal documentation for the exploration rights over the Pletmos Inshore Block in South Africa.  The block offers a relatively low cost entry into an exciting exploration province that is attracting interest from a range of larger companies.

The Company is currently re-processing legacy 2D seismic data from this area and reviewing strategies to acquire new data on the block in line with the license commitments and accepted environmental strategy for the area.

Financial Review

Income statement

The Company's loss before tax was US$23.9 million (2011: US$17.2 million), and loss after tax was US$13.0 million (2011: US$14.3 million).

Revenue of US$36.2 million (2011: US$22 million) resulted from net production of 407,939 bbls (2011: 285,293 bbls) and a higher realised sales price of US$88.85 (2011: US$77.14).  The higher realised sales price is due to the more favourable commercial terms of the revised crude oil sales agreement with Petrotrin.

The Company's cost of sales of US$32.0 million (2011: US$24.8 million) includes operating costs of US$24.2 million (2011: US$18.4 million), depreciation, depletion and amortisation of US$1.7 million (2011: US$1.9 million) and Supplementary Petroleum Tax and Royalties of US$6.1 million (2011: US$4.5 million). Exploration expenses of US$21.9 million (2011: US$3.3 million) result from the write-down of EG7 as the well was abandoned as a dry hole and the associated costs written off.

Administrative expenses of US$4.7 million (2011: US$5.7 million) decreased during the year mainly due to decreases in the share based payment charge as the old options fully vested in 2011.  Merger transaction costs of US$1.4 million (2011: US$ nil) represent professional fees arising from the merger with TEPL. 

Balance sheet

Capital expenditure for the year was US$69.8 million (2011: US$41.3 million) comprising Trintes field development costs (US$22.9 million) and exploration costs (US$46.9 million).  US$21.9 million of the exploration cost was written off in the year due to the unsuccessful EG-7 well.

Inventories at US$8.4million (2011: US$9.8 million) are lower as a proportion of the casing was used up in the drilling of two exploration wells in 2012.

Trade and other receivables at year end were US$10.9 million (2011: US$10.6 million). Cash and cash equivalents at year end were US$9.7 million (2011: US$59.4 million). 

Trade and other payables of US$19.2 million (2011: US$10.9 million) are higher resulting from an increase in drilling activities. 

In December 2012 Bayfield Energy (Galeota) Limited, a subsidiary of the Company, entered into a US$10 million loan agreement with Trinity Exploration and Production (Trinidad and Tobago) Limited to bridge working capital requirements prior to completion of the transaction in February 2013.

The Company's tax credit for the year of US$10.9 million (2011: US$3 million) is due to the increase in the deferred tax asset arising from accelerated depreciation over capital allowance and losses carried forward. 

The decommissioning provision of US$5.3 million (2011: US$6.7 million) decreased as a consequence of a change in accounting estimation technique applied.  There was a change in the inflation and risk free rate used in estimating the decommissioning provision to align its policy with that of TEPL.  This resulted in a change in estimation amount of US$1.3 million which has been included as reduction to oil and gas non-current assets.

Income Statement

			31 December 2012		31 December  2011
			US$000's		US$000's
Revenue			36,244		22,007
Cost of sales			(31,953)		(24,804)
Gross profit / (loss)			4,291		(2,797)
Exploration expense			(21,900)		(3,324)
Administrative expenses			(4,647)		(5,719)
Listing expenses			-		(3,467)
Merger transaction costs			(1,389)		-
Operating loss			(23,645)		(15,307)
Finance income			52		32
Finance costs			(347)		(1,951)
Loss before tax			(23,940)		(17,226)
Taxation			10,934		2,970
Loss for the year			(13,006)		(14,256)
Attributable to:
Owners of the Company			(12,929)		(13,333)
Non-controlling interest			(77)		(923)
Loss for the year			(13,006)		(14,256)
Basic and diluted loss per share (US$)			(0.06)		(0.09)

			31 December 2012		31 December  2011
			US$000's		US$000's
Loss for the year			(13,006)		(14,256)
Exchange differences on translation of Group subsidiaries			(72)		29
Other comprehensive (loss) / income			(72)		29
Total comprehensive loss for the year			(13,078)		(14,227)
Attributable to:
Owners of the Company			(13,001)		(13,304)
Non-controlling interest			(77)		(923)
Loss for the year			(13,078)		(14,227)

Balance Sheet

			31 December 2012		31 December 2011
			US$000's		US$000's
Assets
Non-current assets
Intangibles: exploration and evaluation assets			36,332		11,358
Property, plant and equipment			56,870		37,414
Deferred tax			18,527		7,593
			111,729		56,365
Current assets
Inventories			8,380		9,822
Trade and other receivables			10,848		10,647
Cash and cash equivalents			9,686		59,444
			28,914		79,913
Total assets			140,643		136,278
Liabilities
Current liabilities
Trade and other payables			(19,193)		(10,931)
Borrowings			(10,000)		-
			(29,193)		(10,931)
Net current (liabilities) / assets			(279)		68,982
Non-current liabilities
Decommissioning provision			(5,254)		(6,693)
Total liabilities			(34,447)		(17,624)
Net assets			106,196		118,654
Equity
Share capital			21,648		21,498
Share premium			80,817		80,586
Merger reserve			35,046		35,046
Share based payment reserve			2,486		2,247
Translation reserve			(125)		(53)
Accumulated losses			(32,676)		(19,747)
Equity attributable to the owners of the Company			107,196		119,577
Non-controlling interests			(1,000)		(923)
Total equity			106,196		118,654

Cash Flow Statement

				31 December 2012		31 December 2011
				US$000's		US$000's
Cash flow from operating activities
Operating loss				(23,645)		(15,307)
Adjustments for:
Share based payments				245		1,633
Depreciation on property, plant and equipment				2,076		2,190
Exploration write-off				21,900		3,324
Profit on disposal of property, plant and equipment				(43)		-
Operating cash flow before movements in working capital				533		(8,160)
Decrease / (Increase) in inventory				1,442		(7,185)
Increase in trade and other receivables				(201)		(7,238)
Increase in trade and other payables				2,753		2,142
Net cash generated from / (used in) operating activities				4,527		(20,441)
Cash flow from investing activities
Interest received				52		32
Disposal of property, plant and equipment				43		-
Additions of exploration and evaluation assets				(43,543)		(2,209)
Additions of property, plant and equipment				(21,372)		(30,432)
Net cash used in investing activities				(64,820)		(32,609)
Cash flow from financing activities
Interest paid				(10)		(20)
Proceeds from issue of convertible loan				-		4,250
Borrowings (net of costs)				9,921		-
Share capital issued (net of costs) *				375		86,549
Net cash generated from financing activities				10,286		90,779
Net (decrease) / increase in cash and cash equivalents				(50,007)		37,729
Cash and cash equivalents at beginning of year				59,444		23,255
Foreign exchange differences				249		(1,540)
Cash and cash equivalents at end of year				9,686		59,444

Notes to the preliminary accounts

1.    The financial information set out above does not constitute the Company's financial statements for the years ended 31 December 2012 or 2011. The financial information is derived from the financial statements for 2012 prepared in accordance with IFRS. The auditors have reported on the 2012 financial statements and their report was unqualified.

2.    The Report and Accounts for the period ended 31 December 2012 will shortly be available on the Company's website and will be sent to registered shareholders who have elected to receive paper communications by post in due course.

 

END

 

 

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