Trinity Exploration & Production Limited (TRIN) Earnings Call Transcript & Summary

Good afternoon, and welcome to the Trinity Exploration and Production plc investor presentation. [Operator Instructions] The company may not be in a position to answer every question it receives in the meeting itself. However the company will review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to Jeremy Bridglalsingh, CEO. Good afternoon, sir.

Thank you, Alessandro. Good afternoon, everyone. Thank you for joining us for this latest investor presentation and update. The focus this afternoon will be on the Jacobin update and then I'll wind up Palo Seco view and Julian, who is presenting with me, our CFO, will take you through where we are with Galeota currently. Thank you. So a summary to start with in terms of where we are. The immediate growth catalysts that we focus on is Jacobin, the 10,000-foot well that we would have drilled and completed in August of this year, and we then do well testing where we went into the Lower Cruse 3 zone. We encountered a sand plug there, and then now we can go up to the Lower Cruse 1 zone, which I'll describe shortly. It's the first well in the Hummingbird Play, which looks at a deeper play within the Palo Seco where we have 3 operating assets already. And it's adjacent to our recently -- well, soon to be acquired Buenos Ayres block, which again, I'll explain full later on in the presentation. Galeota, Julian will take you through what we are looking there in terms of a phased lower risk, lower capital better economic return strategy to move forward with the substantial reserves and resources within that block. Within the West Coast, I remind everyone that we brought the ABM-151 well onto production in April of this year, and the well continues to produce above 100 barrels of oil per day. So it's very much performing in its -- in the higher rates amount that we anticipated prior to bringing it on to production. From a capital allocation standpoint, you will hear both myself and Julian speak. So looking at projects that have shorter working capital cycles. That means shorter payback periods, cash and cash returns are strong and that, therefore, competes for the organic cash flow that we generate through the existing production that we have. And earlier this year, in fact, last month, we paid our first interim dividend and the plan is to complete the payment of that dividend post the publishing of results for 2023, which will be in half 1 of 2024. I will just remind those of those who are new to us, just a quick touch on to who we are. Trinity is focused entirely on Trinidad and Tobago. The barrels that we produce, which are on 2,800 barrels per day right now represents between 5% to 6% of the country's black oil production. We've got a strong balance sheet based on underlying operating cash flow and that balance sheet at the end of September show cash on balance sheet of $8.4 million which included $2 million of drawn net to match our VAT working capital receivable and undrawn debt of $6 million of working capital. The Board and management team are experienced across a range of jurisdictions and across a number of disciplines. So we have the capability to both look at and assess projects as well as deliver them, such as we have done with Jacobin and in the [indiscernible] catalysts that we have are within the Palo Seco in the next year. And then as Julian will come on to describe in 2025, looking at moving Galeota forward. So the hot topic at hand is Jacobin. So we have, as you may know, we drill this exploration while we discovered 3 oil bearing zones. The deepest was the Lower Cruse 3. We brought that into production with significant pressures and rates. However, the well sanded up. We then removed that sand blockage both developed that on to production, but that zone, the pressure quickly died off and suggests that this zone itself that we encountered. Whilst it looked quite promising, was perhaps quite small. We then moved upward and yesterday, perforated -- yesterday evening, we perforated Lower Cruse 1 zones. And those have -- we are now bringing those on to production, and commencing the well testing. In terms of well testing, we're not in a position today to say what the results are yet, but we anticipate that within the next 1 to 2 weeks, whilst when -- well cleans up, we'll get a better idea of what the flow, the pressure rates are and the size of the reservoir and we'll come back and give you updates at those various milestones. We hope to be with you by mid December to guide on what the Lower Cruse 1 zones, what the potential is there. So just putting Jacobin in into context, the Jacobin well is our operation well in a number of years. It's the first into the Palo Seco area, and it comes on the back of acquiring seismic in 2021. Looking at that seismic coming up with a range of opportunities and then identifying the Jacobin prospect into [indiscernible] prospect, drilling that well, bringing it on to production. We fiscalize oil from that on that entire cycle, has taken us 35 months to do so. In the graphic on the right-hand side, you can see the Jacobin well. The target sits within the WD-5/6 block. But actually, the surface location is in the PS-4 block, which we acquired in late 2021. So that well, what it has done for us is that helped us improve the geological model of hydrocarbon bearing sands within the deeper horizons that are relatively undrilled. So that's been quite successful from that standpoint. And what it has done as well to is the outlying area to the left-hand side of the Jacobin well represents Buenos Ayres and you can see Buenos Ayres, there is some geological map there. And right next the WD-5/6 filed with Jacobin well as you can see, we have 4 fault panels label A, B, C and D. And these are within a few hundred meters away from blocks that actually have produced tens of millions of barrels, and this block of Buenos Ayres is entirely undrilled. So it's all exploration. So drilling Jacobin well has helped us derisk the Hummingbird drill prospects but has also helped us to calibrate the geological model as it relates to Buenos Ayres. Buenos Ayres where we are on, we've been successful in our bid. We understand that from the initial NG that we may be getting the block awarded within the next couple of months. So we look forward to doing that. But in any case, we've commenced an environmental impact assessment, which allows us to capture the wet season later this year and then dry season later next year, which gives us the best opportunity of getting the environmental care assistant drill, which can set us up for drilling in late 2024, early 2025. I'll hand over to Julian, who will take you through to Galeota.

Yes. Galeota is our largest single asset and represents approximately 70%, 69% of our reserves and resources. It is a mature field. But with that, it gives us some opportunity to build around that existing infrastructure. and look to infill and step-out opportunities within the field and beyond the Trintes field. It's probably worth reiterating a point that in the recent reading of the budget for next year. The Trinidad budget, the Finance Minister announced a benefit to shallow-water offshore production, which is meaningful for us. It moves the SPT threshold, which augments our economics, particularly at lower prices, but it has a meaningful impact on our cash flow moving forward. We have been working on a refreshed concept for further development on Galeota. Moving beyond single platform, new platform with multiple wells before we see first oil touching on Jeremy's point around capital efficiency and getting to first oil faster, getting to pay back faster. And what we're looking at is a phased development, and we've mentioned this in presentations in the recent past. But starting with drilling from some of our existing platforms using our existing infrastructure to achieve production as quickly as possible. So we're focused on that schedule and returns. We have, as you know, had a study completed by Petrofac. That, for us, highlighted and confirmed a number of the developed scenarios to exploit the wider Galeota block moving beyond the assisting Trintes field. And our plan is now to build out that detailed development engineering so that we have a field development plan for sending to their initial phase that links to subsequent phases, so that we could take a final investment decision next year in 2024 that could provide for the drilling of wells in 2025. We'll show you a little schematic, which hopefully puts some of that face development in a little bit more context. So it's worth reiterating this is infrastructure led. This infrastructure is already in existence, which minimizes the risk, the project risk and the capital risk. The initial development would target the use of our Delta platform as a drill center using our existing Trinity SK2 rig, which is a slant drilling rig because the original wells drilled on Trintes, the reservoir is very shallow. They were drilled with a slant rig and slanted conductors, very similar to what happened on the Morgan field in the RSA in the U.K. Looking at the sort of cartoon that we've put together, the -- on the lower right-hand side, what was highlighted as Phase 1, that shows a jack-up next to the Delta platform acting as a tender assist. That's to provide support for the drilling package, taking and essentially providing the services rather than putting it on the platform itself, the rig would be on the platform, but a lot of the services would be provided on a jack-up or a lift boat. And our thinking is to try and create a solution here that would also be useful in subsequent development phases that in what we described in Phase 2, which is shown in the top right hand of this page. The Petrofac screening study highlighted a number of concepts, including what we've illustrated here with that probably the same jack-up moved some way away from the existing Trintes platforms to access more remote reserves and resources and probably with a small wellhead tower in place. Now that's -- that could possibly export crude to shuttle tanker, but maybe also that there's a concept around a flow line to the existing platforms and using our existing pipeline to shore. So that very much is what our engineering teams are focused on maturing so that we have something which we can then sanction. It's fully worked up and take a final investment decision ahead of committee to the project. When we last spoke to you just over a month ago. We committed to more frequent communication with shareholders. I think -- we think it's fair to say that we have delivered on that communication. We've had a number of releases around the progress on the LC3 reservoir. And I think we all on this call would wish that the news that we had from the reservoir was better. But when it became clear that we needed to move up hole we communicated that to the market. We have firmed up today's date and for an investor meeting, today also in London, and we're hosting that this afternoon, and we hope to see many of you there in a few hours of time. Moving forward, as Jeremy has alluded to, we will issue further updates on Jacobin specifically when we -- when the well is cleaned up and when we have a meaningful data on the stabilized [indiscernible]. And that will take us through December. And then in sort of mid- to late January, we have our regular Q4 operational update release that were perhaps the market. But be assured, we will carry on talking to you. We'll carry on social media, and we will carry on releasing information to the market when we have it.

Thanks, Julian. So to wrap up what was a pretty brief presentation, really aimed at focusing on facing us where we are at Jacobin but also explain what is happening with Galeota, which is coming along in the background. So Palo Seco remains the near-term strategic option that we are developing and building. Jacobin has been very encouraging for us in helping to prove the geological model for the deeper play derisking the Hummingbird prospects within that area and even more widely to the west Buenos Ayres block that we are soon to be ordered. The operations in terms of the Jacobin well once we are clear, and we have some clarity to sort of guide you as to what the potential of the Lower Cruse 1 zones are, we will be announcing that and as you know. And we progress in the macro or getting the environmental impact assessment completed from Buenos Ayres. On Galeota, as Julian has described, it's taken the screening study results tooling that from what is the more concept into more of a detail plan. It's continuing to work up the some sub surface and quality assure the targets that we're going for, the supplemental on petroleum tax regime change, that relief, we are looking forward to that being enacted on the first of January 2024. So we're looking forward to that. It will impact Galeota most materially for us but also impact the West Coast assets in Brighton and the PGB assets that we have. And again, Galeota as Julian has mentioned is our single largest asset. So being able to put those resources from reserves and resources into cash flow is very important for us. And the rates of production there are going to be quite significant from an offshore field versus the changes that we can get from a single Jacobin. In terms of the outlook, we are continuing to focus on keeping the decline rates as low as we can, staying as close to natural decline as is possible. So continuous and focus on production management, looking at the cost structure, making sure that even with inflation, then the cost structure is optimized so that we can get the best operating cash flow from the existing assets and then take that cash flow and then allocated it across the sustaining CapEx, but then also in terms of growth and returns to shareholders, we've paid all in dividend, interim dividend. The intent is to follow that up and complete that once we release the 2022 results in half 1 of 2024. And once we can get the environmental clearance to drill the intent is to try and drill towards back and drill the first exploration in Buenos Ayres towards the back end of 2024 or very early in 2025. Whilst we do all that, it's looking across all of our assets making sure that we operate in them in a fruitful and purposeful way to make sure we're maximizing and getting more support of these assets on behalf of shareholders. So I'd like to thank you for your time and taking in listening to us today. As Julian mentioned, we are having in use meeting with shareholders, where we will go through this presentation and then take some further questions from you. But let me hand back to Alessandro before we get into the Q&A session.

Perfect. Jeremy, Julian. What I'd do is I'll just bring your cameras back up at this point. [Operator Instructions] But just well the company take a few minutes to review the questions being submitted today, I'd like to remind you that recording of this presentation along with copy of the slides and the published Q&A can be accessed via your investor dashboard. As you know, we received a number of questions pre this event, and we've received questions throughout today's presentation as well. And if I could just ask you just to read out those questions and could response to where it's appropriate to do so. I'll pick up from you both at the end.

Thanks, Alexander. Shall I start going through some of these questions?

Yes, that would be great.

Okay. Great. The first question that we have pre-submitted actually relates to a couple of the questions that have been posted just this morning during the meeting. And it asks for guidance based on your oil price next year. At this point in time, I mean, as usual practice for Trinity to provide guidance in quarter 2 of the year in which we are currently producing. So for example, in this year, we provided guidance on CapEx, operating cash flow and production in quarter 2. The intent is to continue in that vein and provide the guidance in or around that time. As you'd appreciate, we are currently dealing with the Jacobin well, which has the ability to impact production. But I mean, outside of the Jacobin well, we are not contemplating drilling for the remaining of this year and not within half 1 of next year. So you'd expect to see base production on its natural decline, but then what would Jacobin -- or what impact to Jacobin have, we are yet to see, and we'll guide the market accordingly on that. So no guidance as at this point in time. There's a related question from Colin L. It says, when will the next Hummingbird drill likely take place? Be it as late 2024, early 2025, do you expect to drill before then? It's a good question, Colin. I think understanding where we are with our Jacobin, then moving forward with the environmental clearance for Buenos Ayres, I think certainly a well in Palo Seco, whether it is Hummingbird repeats whether there's a follow-up to Jacobin or an exploration well in Buenos Ayres. These are the discussions that we are having currently. So there's no full plan as to which 1 but I expect that we will be drilling a well in the Palo Seco area in late '24, early 2025. There was a pretty submissive question which asks to what extent is the 5-foot well parameter, in restrictive elements in the long-term productivity of the deep well. Well, for this particular well, it means that we had to abandon producing from that zone and then move a hole. But in terms of the deeper play concept, it contemplates at least 3 different sands in the Lower Cruse 1, Lower Cruse 2 and Lower Cruse 3, all of which we encountered the Lower cruse 2 was wet though in this particular well. So that didn't -- that was from an exploration standpoint, that didn't come in. But in terms of those 3 sands and whether they will have hydrocarbon bearing, whether will be commercial, I think there's still opportunity out there. There are other prospects that we have to look at we are hybrid in those. And again, to the original question of where will we drill. It's looking across Buenos Ayres, those Hummingbird prospects and Jacobin to the side, what is our next step in terms of our access and deeper play within the Palo Seco existing producing fields. Julian, maybe I'll hand this 1 over to you. It's dividends are welcome, especially for long-term investors. I believe we allocate to 1.5p for 2023. Is this right? And when would the ex dividend and payments be?

Yes. That is correct. I think we announced the -- we put that out in June. We confirmed that we were paying the interim -- first interim dividend in September, that was paid in October. The process for the final dividend is after we declare the full year results, annual report. The Board then sanctions of our final dividend. So we anticipate that, that is paid. After that, the announcement of our full year results, that's in -- would be in Q2 next year. And that will take us up to the 1.5p total for that year. And clearly, that also sits within the broader commitment of capital allocation and the Board's discretion further shareholder I would [indiscernible].