Source - RNS
RNS Number : 6199B
Trinity Exploration & Production
24 September 2018
 

 

 

Dissemination of a Regulatory Announcement that contains inside information according to

REGULATION (EU) No 596/2014 (MAR).

 

Trinity Exploration & Production plc

 ("Trinity" or "the Company" or "the Group")

 

Interim Results
Profitable growth and debt free

 

Trinity, the independent E&P company focused on Trinidad & Tobago ("T&T"), announces its unaudited interim results for the six month period ended 30th June 2018 ("H1 2018" or "the period").

 

This was a transformative period for the Company, including the recommencement of drilling activity and continued production growth delivering an uplift in cash generation.  In addition, the post period-end saw the Company raise gross proceeds of USD 20.0 million ("the Fundraising") which has significantly strengthened the balance sheet, leaving it debt free and with the cash resources available to continue to profitably grow production and returns.

 

H1 2018 Highlights                                                            

 


H1 2018

H1 2017

% Change





Average realised oil price (USD/ bbl)1

60.0

          46.3

            30

Average net production (bopd)

2,771

     2,397

                 16





Revenues (USD million)

30.1

20.2

                 49

Adjusted EBITDA (USD million)2

9.3

5.9

58

Adjusted EBITDA (USD/bbl)2

18.6

13.6

 37

Group operating break-even (USD/bbl)3

28.5

28.2

                    1





Operating cash flow (USD million)

5.0

1.7

194

Capital expenditure (USD million)

4.4

0.7

529

Cash balance (USD million)

9.1

11.5

(21)

Pro Forma net cash / (debt) (USD million)4

19.0

(1.2)

N/A


Notes:

1.     Realised price: Actual price received for crude oil sales per barrel ("bbl")

2.     Adjusted EBITDA: See Note 18 for the calculation of Adjusted EBITDA. Per bbl figures refer to production over the period.

3.     Group operating break-even: The realised price/bbl for which the Adjusted EBITDA/bbl for the Group is equal to zero. See Appendix 1 - Trading Summary Table

4.     Pro Forma net cash/ (debt): See Post Funding Pro Forma Balance Sheet Extract

 

H1 2018 Highlights

 

Operational

·     H1 2018 average production of 2,771 bopd (H1 2017: 2,397 bopd), representing a 16% increase over the corresponding period last year, underpinned by:

Drilling of 2 new onshore wells. Both drilled efficiently and cost effectively on a turnkey basis.

7 recompletions ("RCPs") (H1 2017: 5).

Base production maintenance through a continuous campaign of 62 workovers ("WO") and reactivations (H1 2017: 44).

 

Financial

·     Balance sheet significantly strengthened from a net debt position (USD 1.2 million) at 30th June 2017 to a pro-forma net cash position of USD 19.0 million at 30th June 2018 (adjusted for the post period end Fundraise and debt repayments).

·     Adjusted EBITDA increased 58% to USD 9.3 million (H1 2017: USD 5.9 million) and Adjusted EBITDA/bbl improved to USD 18.6/bbl (H1 2017: USD 13.6/bbl), with the increased oil price and production growth leveraging off a relatively fixed operating cost base.

·     Maintained a group operating break-even price below USD 30.0/bbl (H1 2018: USD 28.5/bbl).

·     Operating cash flow increased to USD 5.0 million (H1 2017: USD 1.7 million).

·     Capital expenditure for the period amounted to USD 4.4 million (H1 2017: USD 0.7 million), comprising mainly of new wells, RCPs and continued infrastructure investment.

·     Accelerated the repayment of outstanding debt to the Board of Inland Revenue ("BIR") and Ministry of Energy and Energy Industries ("MEEI") (together, "the T&T State Creditors") with total payment over the period of USD 3.3 million.  All remaining amounts were repaid in July 2018.

 

Post Period End Highlights

 

Corporate

Funded and Debt Free

·     In July 2018 the Company raised gross proceeds of USD 20.0 million through the Fundraising:

USD 6.4 million of the Fundraising comprised non-cash rollover by holders of 88% of the Convertible Loan Notes ("CLNs") electing to convert the value of their CLNs into new ordinary shares at the issue price.

The Company has subsequently repaid, in full, the outstanding debt of USD 2.6 million to the T&T State Creditors as well as the remaining USD 0.9 million of CLNs which were outstanding.

The Fundraising will enable the Company to accelerate its onshore drilling programme and production, with a planned 8-10 wells per year.  The free cash flow which the Company expects to generate will enable it to self-fund new onshore drilling activity from 2020 onward while continuing double-digit annual production growth as it develops its low risk onshore assets.

 

East Coast Asset Development

·     The Company has continued to revise the Trintes drilling plan and rework the TGAL Field Development Plan ("FDP"), which offers a significant opportunity to deliver a step-change in production levels in the medium term.

 

·     The Petroleum Company of Trinidad and Tobago ("Petrotrin") Restructuring Update

·     On 28th August 2018 Petrotrin announced its intention to discontinue refining operations to focus on its upstream exploration and production activities. The Company does not expect this decision to impact the ongoing Sales Agreements with Petrotrin for Trinity's crude oil production, which it anticipates will be consolidated with Petrotrin and others' output and exported as it has been on previous occasions when the refinery had been shut down. 

 

Operational Look Ahead

Recommencement of drilling activity

·     Signed a turnkey agreement with external drilling contractor for a 6 well onshore campaign, bringing the total for 2018 to at least 8 wells. The first well was spudded in August 2018.

·     The production impact of this drilling programme will be realised towards the end of Q4 2018 into Q1 2019.

Routine production activity

·     H2 2018 work programme will continue with; RCPs, routine WOs, reactivations and swabbing.

·     An offshore RCP will be undertaken in the Trintes field, which will be the first offshore RCP that Trinity will be doing since assuming operatorship in 2013. 

 

Bruce A. I. Dingwall CBE, Executive Chairman of Trinity, commented:

 

"With a return to new infill drilling in H1 2018 alongside a continuing programme of RCPs, WOs, swabbing and reactivation activities, Trinity was able to reset its base production at a higher level. In H2 2018, post the fundraise and the settlement of all outstanding debt, we have established a stable, well-funded platform with significant reserves and resources and an established growth trajectory which is ideally positioned to continue growing production, cash flow and shareholder value. With peer leading break-evens and plans to increase production we can grow profitability in the short-term whilst working up a further step-change from future developments.

 

"The acceleration of our onshore drilling programme has allowed Trinity to position itself to deliver double digit production growth year-on-year, generate significant cash flow and will facilitate self-funded new onshore drilling activity from 2020 onwards whilst selectively pursuing other value accretive opportunities.

 

"On behalf of the Board I must thank all our staff and our key suppliers in Trinidad for their hard work and support which has allowed Trinity to focus on profitable growth whilst maintaining a safe working environment. 2018 has been pivotal to Trinity thus far and the Board would additionally like to take this opportunity to thank existing shareholders and other stakeholders for their support and welcome new shareholders as we move forward debt free and strongly positioned to take advantage of future opportunities in the changing environment in Trinidad & Tobago"

The Interim Results report is available for download on the Group's website www.trinityexploration.com.

 

Enquiries

 

Trinity Exploration & Production

Bruce Dingwall, Executive Chairman

Jeremy Bridglalsingh, Chief Financial Officer

Tracy Mackenzie, Corporate Development Manager

 

 

+44 (0)131 240 3860

 

SPARK Advisory Partners Limited (NOMAD & Financial Adviser)

Mark Brady

Miriam Greenwood

Andrew Emmott

 

+44 (0)20 3368 3550

Cenkos Securities PLC (Broker)

Joe Nally (Corporate Broking)

Neil McDonald

Beth McKiernan

Derrick Lee

Pete Lynch

+44 (0)20 7397 8900

+44 (0)131 220 6939



Whitman Howard Limited (Equity Adviser)

Nick Lovering

Hugh Rich

 

+44 (0)20 7659 1234

Walbrook PR Limited

Nick Rome

[email protected] +44 (0)20 7933 8780

 

Competent Person's Statement

 

All reserves and resources related information contained in this announcement has been reviewed and approved by Graham Stuart, Trinity's Technical Adviser, who has 36 years of relevant global experience in the oil industry.  Mr. Stuart holds a BSC (Hons) in Geology.

 

About Trinity (www.trinityexploration.com) 

 

Trinity is an independent oil and gas exploration and production company focused solely on Trinidad & Tobago.  Trinity operates producing and development assets both onshore and offshore, in the shallow waters off the West and East Coasts of Trinidad. 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.  Trinity operates all of its 9 licences and, across all of the Group's assets, management's estimate of 2P reserves as at the end of 2017 was 23.2 mmbbls. Group 2C contingent resources are estimated to be 24.0 mmbbls. The Group's overall 2P plus 2C volumes are therefore 47.2 mmbbls.

 

Trinity is listed on the AIM market of the London Stock Exchange under the ticker TRIN.

 

 

Disclaimer

This document contains certain forward-looking statements that are subject to the usual risk factors and uncertainties associated with the oil exploration and production business. Whilst the Group believes the expectation reflected herein to be reasonable in light of the information available to it at this time, the actual outcome may be materially different owing to macroeconomic factors either beyond the Group's control or otherwise within the Group's control.



 

OPERATIONAL REVIEW

 

During H1 2018, the Company continued to build on the momentum achieved in 2017 through the continuation of the RCP programme and drilling of 2 onshore wells, thereby delivering 16% year-on-year production growth. The H2 2018 activity set of low cost, high return activities will include; RCPs, WOs, reactivations and swabbing activities and the addition of a 6-well onshore drilling programme. 

 

Onshore operations

·     H1 2018 average net production was 1,530 bopd (H1 2017: 1,278 bopd). The 20% increase was as a result of the 2 Infill wells drilled and continued performance from the ongoing RCP (7) and base maintenance WOs and reactivations (45) (H1 2017: 5 RCPs, 34 WOs and 4 reactivations).

·     H2 2018 planned work programme anticipates:

6 infill wells which will allow a rebasing of production levels

Continued RCPs and ongoing base management via; WOs, reactivations and swabbing across all fields. 

 

East Coast operations

·     H1 2018 average production was 1,046 bopd (H1 2017: 909 bopd).  The 15% increase in production was due to a WO and reactivation campaign which commenced in 2017 and continued with 13 WOs during H1 2018 (H1 2017 5).

·     H2 2018 work programme will include the first RCP offshore since the restructuring in addition to the programme of routine WOs and reactivations. 

·     Trinity continues to invest in maintaining production levels via better generator maintenance strategies, continued pump optimisation and review of alternative artificial lift technologies to augment production rates.

 

West Coast operations

·     H1 2018 average net production was 195 bopd (H1 2017: 210 bopd). The 7% decrease in production was largely the result of natural production decline. 

·     H2 2018 planned work programme will include WOs on key wells to maintain production levels along with the continuation of asset integrity related projects.

 

FINANCIAL REVIEW

 

Income Statement Analysis

 


H1 2018

H1 2017

Change

Production




Average realised oil price (USD/ bbl)

60.0

46.3

13.7

Average net production (bopd)

2,771

2,397

374





Statement of Comprehensive Income

USD'000

USD'000

USD'000

Operating revenues

30,098

         20,180

              9,918

Operating expenses (excluding DD&A)

  (22,741)

      (14,695)

           (8,046)

Operating profit before DD&A

       7,357

           5,485

             1,872

DD&A

    (4,746)

         (3,551)

           (1,195)

Operating profit before exceptional items

       2,611

           1,934

                 677

Exceptional items

    11,616

         25,123

         (13,521)

Operating profit after exceptional items

    14,227

         27,057

         (12,844)

Supplemental petroleum taxes

     (3,650)

                     -  

            (3,650)

Other taxes

           884

                     -  

                  884

Operating profit/(loss) after exceptional items, SPT and other taxes

 

11,461

           

27,057

         

(15,610)

Finance cost

    (1,279)

         (1,177)

              (102)

Profit before income tax

    10,182

         25,880

         (15,712)

Taxation credit/ (charge)

       5,726

         (2,452)

             8,178

Profit after income tax

    15,908

         23,428

           (7,534)

Currency translation

          (19)

               352

              (371)

Total comprehensive income

    15,889

         23,780

           (7,905)

 

Operating Revenues

Operating revenues of USD 30.1 million (H1 2017: USD 20.2 million). The USD 9.9 million increase was as a result of an increase in average realised crude prices and increased production.

 

Operating Expenses

Operating expenses of USD (27.5) million (H1 2017: USD (18.2) million) comprised of the following:

·     Royalties of USD (10.0) million (H1 2017: USD (5.9) million)

·     Production costs ("OPEX") of USD (8.3) million (H1 2017: USD (6.7) million)

·     DD&A charges of USD (4.7) million (H1 2017: USD (3.6) million)

·     G&A expenditure of USD (2.9) million (H1 2017: USD (1.6) million), including USD (0.3) million non-cash share option expenses (H1 2017: nil)

·     Other expenses of USD (1.6) million (H1 2017: 0.4) relate to fair value adjustment on the oil price derivative. During H1 2018 the Group paid USD 0.6 million in relation to the oil price derivative, with the fair value adjustment also allowing for the ongoing exposure for the remainder of 2018.

 

Operating Profit before Exceptional Items

The operating profit (before exceptional items) for the period amounted to USD 2.6 million (H1 2016: USD 1.9 million) and was mainly driven by an increase in crude oil prices and increased production. 

 

Exceptional items

Exceptional items of USD 11.6 million (H1 2017: USD 25.1 million) relate to a revaluation of the embedded call option associated with the CLNs, which is a non cash gain. The embedded call option associated with the CLN was revalued as at 30th June 2018 which resulted in a fair value gain arising on the financial instrument.  This gain was eliminated when the CLNs were converted or repaid subsequent to the period end, and as such will not occur in the 2018 full year results.

 

Supplementary Petroleum Tax ("SPT") and Property Tax

The Group incurred SPT of USD 3.7 million in H1 2018 (H1 2017: nil), on account of the realised oil price exceeding USD 50.0/bbl throughout the six month period.  The 2016 and 2017 property taxes which had been accrued in the 2017 financial results were reversed in H1 2018 following the assent to the Property Tax Amendment Act 2018 by the Government of Trinidad and Tobago on 8th June 2018, resulting in a USD 0.9 million reduction in the accrual for other taxes in the period.

 

Net Finance Cost

Finance costs for the period totalled USD (1.3) million (H1 2017: USD (1.2) million), made up of:

·     Unwinding of the discount rate on the decommissioning provision of USD (0.8) million (H1 2017: USD (0.8) million)

·     Accrued interest on CLN USD (0.4) million (H1 2017: USD (0.3) million)

·     Interest on loan - nil (H1 2017: USD (0.1) million)

·     Interest unwind on the liabilities at fair value USD (0.1) million (H1 2017:  USD (0.0) million)

 

Taxation

Taxation credit for the period was USD 5.7 million (H1 2017: USD (2.5) million charge) which is mainly made up of:

·     Recognition of deferred tax assets of USD 5.8 million (H1 2017: de-recognition USD (2.8) million)

·     Decrease in deferred tax liability of USD (0.0) million (H1 2017: USD 0.4 million)

·     Unemployment Levy of USD (0.1) million (H1 2017: USD (0.1) million)

 

As at 30th June 2018, the Group had unrecognised tax losses of USD 213.0 million which have no expiry date.

 

Total Comprehensive Income

Total Comprehensive Income for the period was USD 15.9 million (H1 2017: 23.8 million)

 

Cash Flow Analysis

 

Opening Cash Balance

Trinity began the year with an initial cash balance of USD 11.8 million (2017: USD 7.6 million).

 

Summary of Statement of Cash Flows





H1 2018

H1 2017

FY 2017


USD'000

USD'000

USD'000

Opening cash balance

11,792

7,615

7,615

Cash movement




Net cash inflow from operating activities

4,996

1,704

9,554

Net cash outflow from Unsecured and T&T State Creditor payments

(3,254)

(7,162)

(12,632)

Net cash outflow from investing activities

(4,403)

(650)

(3,118)

Net cash inflow from financing activities

-

10,025

10,373

(Decrease)/ increase in cash and cash equivalents

(2,661)

3,917

4,177

Closing cash balance

9,131

11,532

11,792

 

 

Net cash inflow from operating activities

Cash inflow from operating activities was USD 5.0 million (H1 2017: USD 1.7 million). H1 2018 included:

·     Operating activities resulting in an adjusted profit before tax of USD 5.7 million (H1 2017:  USD 4.2 million)

·     Changes in working capital comprising of a net decrease of USD (0.7) million (H1 2017:  USD (2.5) million) excluding changes in working capital relating to the Restructuring of USD (3.3) million (H1 2017:  USD (7.2) million)

·     Taxation paid USD (0.1) million (H1 2017: nil)

 

Cash outflow; change in working capital relating to the Restructuring

Working capital cash outflows relating to the Restructuring amounted to USD (3.3) million (H1 2017: USD (7.2) million) comprising:

·     USD (3.3) million (H1 2017: USD (3.3) million) in quarterly payments to T&T State Creditors

·     No payments to Unsecured Creditors were incurred in H1 2018 (H1 2017: USD (3.9) million)

 

Cash outflow from investing activities

Trinity incurred capital expenditures mainly on production related capex on its onshore assets and infrastructure capex on its East Coast assets totaling USD (4.4) million in aggregate (H1 2017: USD (0.7) million) 

 

Net cash inflow from financing activities

No financing activities occurred in H1 2018 (H1 2017: USD 10.0 million)

 

Closing Cash Balance

Trinity's cash balance at 30th June 2018 was USD 9.1 million (H1 2017: USD 11.5 million)

 

Post Funding Pro Forma Balance Sheet Extract

 

Incorporating the post period end net proceeds from the Fundraising and subsequent debt repayments the like-for-like pro forma would be a net cash position of USD 19.0 million (2017: USD 1.2 million net debt position) based on Management's view. The turnaround from the net debt position on a year-on-year basis to a net cash position was a result of the July 2018 USD 20.0 million Fundraising and settlement of all remaining debts owed to T&T State Creditors and CLN holders which strengthened the Group's Statement of Financial Position as follows:

i.     Increase in cash and cash equivalents from USD 9.1 million to USD 18.0 million.  This took into consideration the following cash movements post the period end:

·     USD 13.6 million cash proceeds from issue of new ordinary shares

·     USD (2.6) million repayment to T&T State Creditors

·     USD (1.2) million cost of raising equity

·     USD (0.9) million paid to CLN holders

ii.    Expunged the Derivative Financial Asset of USD 11.6 million.  Following redemption of the CLN the early call option was extinguished and so the Derivative Financial Asset has been expunged from the Pro Forma Balance Sheet.

iii.   CLN redemption and repayment - USD 6.4 million of the principal and interest were converted into new ordinary shares (this USD 6.4 million is the non-cash component of the USD 20.0 million Fundraising).  The remaining USD 0.9 million of CLNs were redeemed via a cash payment in August 2018.

iv.   Full and final repayment to T&T State Creditors of USD 2.6 million which occurred in July 2018.

 

Balance Sheet Extract


H1 2018

H1 2018

H1 2017

FY 2017



Unaudited

Unaudited

Unaudited

Unaudited

All amounts in USD million


Pro forma1

Mgmt. View2

Mgmt. View2

Mgmt. View2

A: Current assets






Cash and cash equivalents

i

18.0

9.1

11.5

11.8

Trade and other receivables


6.3

6.3

3.7

5.2

Inventories


3.9

3.9

3.7

3.8

Derivative financial asset

ii

-

11.6

0.2

-

Total current assets


28.2

30.9

19.1

20.8







B: Liabilities






Non-current liabilities






Trade and other payables


-

-

1.8

1.0

Taxation payable


-

-

3.6

-

Convertible loan note

iii

-

7.3

6.8

7.0

Total non-current liabilities3


-

7.3

12.2

8.0







Current liabilities






Trade and other payables

iv

7.3

9.9

4.3

10.2

Taxation payable


0.2

0.2

3.8

1.7

Derivative financial instrument


1.7

1.7

-

0.8

Total current liabilities4


9.2

11.8

8.1

12.7

Total liabilities


9.2

19.1

20.3

20.7







(A-B): Net cash/(debt) position


19.0

11.8

(1.2)

0.1

 

Notes:

1.             Shows half year pro forma balance sheet position post Fundraise and debt repayment

2.             States the Face Value of the CLN and MEEI liabilities as opposed to amortised cost stated in the Financials

3.             Non-Current Liabilities excludes Deferred Tax Liability & Provision for other liabilities

4.             Current Liabilities excludes Provision for other liabilities

 

APPENDIX 1: TRADING SUMMARY

 

A summary of realised price, production, operating break-evens, Opex and G&A expenditure metrics is set out below:

 

Trading Summary Table

               

Details

H1 2018

H1 2017

% Change





Realised price (USD/bbl)

60.0

46.3

30

 

Production (bopd)




Onshore

1,530

1,278

20

West Coast

195

210

 (7)

East Coast

1,046

909

15

Group

2,771

2,397

16





Operating break-even (USD/bbl)




Onshore

15.7

16.1

(3)

West Coast

24.4

29.0

(16)

East Coast

27.8

23.2

20

Group

28.5

28.2

1





Metrics (USD/bbl)




Opex/bbl - Onshore

11.4

10.8

6

Opex/bbl - West Coast

20.3

24.0

(15)

Opex/bbl - East Coast

21.5

17.6

22

G&A/bbl

5.0

3.8

32

 

STATEMENT OF DIRECTORS' RESPONSIBILITY

 

The Directors confirm that this condensed consolidated interim financial information has been prepared in accordance with International Accounting Standards ("IAS") 34 as adopted by the European Union and that the interim management report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:

 

·     an indication of important events that have occurred during the first six months and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

·     the management report, which is incorporated into the directors' report, includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and

·     material related party transactions in the first six months and any material changes in the related-party transactions described in the last annual report.

 

A list of the current Directors is maintained on the Trinity Exploration & Production plc website www.trinityexploration.com.

 

By order of the Board

 

Bruce A. I. Dingwall, CBE

Executive Chairman



 

Trinity Exploration & Production plc

 

Condensed Consolidated Statement of Comprehensive Income

for the period ended 30th June 2018

(Expressed in United States Dollars)

 


Notes

6 months to 30th June 2018


6 months to 30th June 2017


Year ended  December 2017

 



$'000


$'000


$'000



(unaudited)


(unaudited)


(audited)

Operating Revenues







Crude oil sales


30,085


20,120


44,957

Other income


13


60


210



30,098


20,180


45,167








Operating Expenses







Royalties


(10,013)


(5,906)


(13,755)

Production costs


(8,259)


(6,759)


(14,737)

Depreciation, depletion and amortisation

8

(4,746)


(3,551)


(7,055)

General and administrative expenses


(2,883)


(1,630)


(4,326)

Other operating expenses

2

(1,586)


(400)


(1,362)



(27,487)


(18,246)


 

(41,235)








Operating Profit before Supplemental Petroleum Taxes and Other Taxes


2,611


1,934


3,932








Supplemental petroleum taxes


(3,650)


--


(1,533)

Other taxes

5

884


--


(497)








Operating (Loss)/Profit Before Exceptional Items


(155)


1,934


1,902








Exceptional items

4

11,616


25,123


25,718








Finance cost

7

(1,279)


(1,177)


(2,300)








Profit Before Taxation


10,182


25,880


25,320








Taxation credit/(charge)

6

5,726


(2,452)


28








Profit for the period


15,908


23,428


25,348








Other Comprehensive (Expense)/Income







Currency translation


(19)


352


76








Total Comprehensive Income for the Period


15,889


23,780


25,424








 

 

Earnings per share (expressed in dollars per share)














Basic

19

0.06


0.09


0.09

Diluted

19

0.04


0.07


0.06
















Trinity Exploration & Production plc

 

Condensed Consolidated Statement of Financial Position

for the period ended 30th June 2018

(Expressed in United States Dollars)

 


Notes

As at 30th June 2018

As at 30th June 2017

As at 31st December 2017

ASSETS


$'000

$'000

$'000



(unaudited)

(unaudited)

(audited)

Non-current Assets 





Property, plant and equipment

8

52,552

48,202

52,450

Intangible assets

9

25,708

25,362

25,591

Abandonment fund


2,185

1,135

1,650

Performance bond


253

253

253

Deferred tax asset

13

9,948

2,665

4,179



90,646

77,617

84,123

Current Assets





Inventories


3,940

3,730

3,766

Trade and other receivables

10

6,254

3,658

5,155

Derivative financial assets

11

11,616

200

--

Cash and cash equivalents


9,131

11,532

11,792



30,941

19,120

20,713

      Assets held-for-sale


--

7,696

--



30,941

26,816

20,713

Total Assets


121,587

104,433

104,836






Equity





Capital and Reserves Attributable to Equity Holders





Share capital

12

96,676

96,676

96,676

Share premium

12

125,362

125,362

125,362

Share warrants


--

71

--

Other equity

14

590

590

590

Share based payment reserve


12,922

12,247

12,553

Reverse acquisition reserve


(89,268)

(89,268)

(89,268)

Merger reserves


75,467

75,467

75,467

Translation reserve


(1,532)

(1,645)

(1,678)

Accumulated deficit


(155,204)

(172,429)

(171,112)

Total Equity


65,013

47,071

48,590






Non-current Liabilities





Trade and other payables

16

--

2,544

881

Taxation payable

6

--

2,730

--

Convertible loan note

14

3,378

2,729

3,019

Deferred tax liability

13

2,508

2,503

2,538

Provision for other liabilities

15

38,772

26,348

37,151



44,658

36,854

43,589

Current Liabilities





Trade and other payables

16

9,862

7,918

10,092

Taxation payable

6

198

86

1,688

Derivative financial liabilities

17

1,703

--

762

Provision for other liabilities

15

153

106

115



11,916

8,110

12,657

      Liabilities held-for-sale


--

12,398

--



11,916

20,508

12,657

Total Liabilities


56,574

57,362

56,246

Total Shareholders' Equity and Liabilities


121,587

104,433

104,836


Trinity Exploration & Production plc

 

Condensed Consolidated Statement of Changes in Equity

for the period ended 30th June 2018

(Expressed in United States Dollars)

 


Share Capital

Share Premium

Share Warrant

Other Equity

Share Based Payment Reserve

Reverse Acquisition Reserve

Merger Reserve

Translation Reserve

Accumulated Deficit

Total


$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000












Balance at 1st January 2017

 

94,800

 

116,395

 

71

 

--

 

12,244

 

(89,268)

 

75,467

 

(1,997)

 

(195,857)

 

11,855

Share based payment charge

--

--

--

--

3

--

--

--

--

3

Other equity net of transaction cost

--

--

--

590

--

--

--

--

--

590

Issue of ordinary shares

1,876

8,967

--

--

--

--

--

--

--

10,843

Total comprehensive income for the period

--

--

--

--

--

--

--

352

23,428

23,780

Balance at 30th June 2017 (unaudited)

96,676

125,362

71

590

12,247

(89,268)

75,467

(1,645)

(172,429)

47,071












Balance at 1st January 2018

 

96,676

 

125,362

 

--

 

590

 

12,553

 

(89,268)

 

75,467

 

(1,678)

 

(171,112)

 

48,590

Share based payment charge

--

--

--

--

369

--

--

--

--

369

Translation difference

--

--

--

--

--

--

--

146

--

146

Total comprehensive income for the period

--

--

--

--

--

--

--

--

15,908

15,908

Balance at 30th June 2018 (unaudited)

96,676

125,362

--

590

12,922

(89,268)

75,467

(1,532)

(155,204)

65,013


Trinity Exploration & Production plc

 

Condensed Consolidated Cashflow Statement

for the period ended 30th June 2018

(Expressed in United States Dollars)

 


Notes

6 months to 30th June 2018

6 months

to 30th June 2017

Year ended 31st December 2017



$'000

$'000

$'000



(unaudited)

(unaudited)

(audited)

Operating Activities





Profit before taxation


10,182

25,880

25,320

Adjustments for:





Translation difference


(675)

(735)

(663)

Finance Income


31

--

--

Finance cost

7

359

348

579

Share option expense


368

3

235

Finance cost - decommissioning provision

7

778

829

1,643

Depreciation, depletion and amortisation

8

4,746

3,551

7,055

Loss on disposal of assets

8

(6)

--

--

Impairment of property, plant and equipment

8

--

732

--

Impairment of inventory


--

--

264

Impairment of receivables


--

348

348

Gain on extinguishment of financial liabilities


--

(210)

(210)

Gain recognised on embedded derivative


(11,616)

--

--

Fair value zero cost collar

17

1,586

--

762

Compromised creditor balances


(18)

(26,568)

(26,672)



5,735

4,178

8,661






Changes In Working Capital





(Increase)/Decrease in Inventory


(163)

57

(243)

(Increase)/Decrease in Trade and other receivables


(843)

451

(887)

Increase/(Decrease) in Trade and other payables


395

(2,982)

2,023



5,124

1,704

9,554






Taxation paid


(128)

--

--

Net Cash Inflow From Operating Activities


4,996

 1,704

 

9,554






Restructuring related payments





Unsecured creditors


--

      (3,850)

(3,857)

T&T State creditors


(3,254)

(3,312)

(8,775)



(3,254)

(7,162)

(12,632)

Investing Activities





Purchase of computer software


--

--

(250)

Evaluation and exploration assets

9

(46)

--

--

Purchase of  property, plant & equipment

8

(4,357)

(650)

(2,868)

Net Cash Outflow From Investing Activities


(4,403)

(650)

 

(3,118)






Financing Activities





Finance cost


--

(348)

--

Issue of shares (net of costs)


--

10,843

10,843

Issue of convertible notes (net of costs)


--

3,030

3,030

Repayments of borrowings


--

(3,500)

(3,500)

 

Net Cash Inflow From Financing Activities


--

10,025

10,373






(Decrease)/Increase in Cash and Cash Equivalents


(2,661)

3,917

4,177

Cash And Cash Equivalents





At beginning of period


11,792

7,615

7,615

(Decrease)/Increase


(2,661)

3,917

4,177

At end of period


9,131

11,532

11,792


Trinity Exploration & Production plc

 

Notes to the Condensed Consolidated Financial Statements for the period ended 30th June 2018

 

1    Background and Accounting Policies

 

      Background

 

Trinity Exploration & Production plc ("Trinity") is incorporated and registered in England and trades on the Alternative Investment Market ("AIM"), a market operated by London Stock Exchange plc.  Trinity ("the Company") and its subsidiaries (together "the Group") are involved in the exploration, development and production of oil reserves in Trinidad.

 

Basis of Preparation

These condensed interim financial statements for the six months ended 30th June 2018 have been prepared in accordance with IAS 34, 'Interim financial reporting', as adopted by the European Union ("EU"), on a going concern basis. The condensed interim financial statements should be read in conjunction with the annual financial statements for the year ended 31st December 2017, which have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the EU.

 

The results for the six months ended 30th June 2018, and as at 30th June 2017 are unaudited and do not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 31st December 2017 were approved by the Board of Directors and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified.

 

Going Concern

 

In making their going concern assessment, the Board of Directors have considered the Group's budget and cash flow forecasts taken together with the announcement on 25th June 2018, whereby the Group announced its intention to raise $20.0 million to accelerate growth and fully repay all outstanding debt to the T&T State Creditors and the CLNs.

 

Subsequent to the period end, the Fundraising completed and the proceeds were used to repay in full the outstanding debt to the Board of Inland Revenue of Trinidad and Tobago ("BIR") and the Ministry of Energy and Energy Industries of Trinidad & Tobago ("MEEI"), as well as all outstanding amounts under the CLNs. The proceeds will also enable the Group to rapidly accelerate its onshore drilling programme and production, with a planned 8-10 wells per year and to allow revision of the Trintes drilling plan and the TGAL Field Development Plan with the Company's East Coast Assets offering a significant opportunity to deliver a step-change in production levels in the medium term.

 

Following completion of the fundraising in July, the Group repaid the remaining outstanding debt to the BIR and the MEEI amounting to $2.6 million in aggregate. In addition on 15th August 2018, payment was made to settle the remaining debt to holders of the CLNs, amounting to $0.9 million. The holders of CLNs with a value (including accrued interest) of approximately $6.4 million had agreed to convert the value of their CLNs into new ordinary shares pursuant to the Subscription. The Group has thereby completed the full repayment of all outstanding debt and has sufficient capital resources to progress its accelerated drilling programme. For these reasons, the Board of Directors have a reasonable expectation that the Group has adequate resources to continue operational existence for the foreseeable future and the Group therefore continues to adopt the going concern basis of preparing the financial statements. 

 

Accounting policies 

 

The accounting policies adopted are consistent with those of the previous financial year, as set out in the consolidated financial statements for the year ended 31st December 2017, except for income taxes in the interim periods which are accrued using the tax rate that would be applicable to the expected total annual profit and loss and the other policies outlined below.  The business is not affected by seasonality.

 

      There are no IFRS or IFRS Interpretations Committee ("IFRIC") interpretations that are effective for the first time for the financial year beginning on or after 1st January 2018 that would be expected to have a material impact on the Group.   The Company has adopted IFRS 15 Revenue from Contracts with Customers and IFRS 9 Financial Instruments effective 1st January 2018. Adoption of these standards has not materially affected the way the Group accounts for its revenues or financial instruments. However, the Company will be including the new disclosures required by IFRS 15 from the 2018 year end onwards.

 

Estimates 

 

The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates.

In preparing these condensed interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the Condensed Consolidated Financial Statements for the year ended 31st December 2017.

Non-current assets (or disposal Groups) held for sale

Non-current assets (or disposal Groups) classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell. Non-current assets and disposal Groups are classified as held for sale if their carrying amount will be recovered through a sale transaction rather than through continued use. This condition is regarded as met only when the sale is highly probable and the asset (or disposal Group) is available for immediate sale in its present condition. Management must be committed to the sale which should be expected to qualify for recognition as a completed sale within one year from the date of classification.

Compound Financial Instruments

      Compound financial instruments issued by the Group comprise CLNs that can be converted to share capital at the option of the holder, and the number of shares to be issued does not vary with changes in their fair value.  Under the terms of the CLNs each holder could after the second anniversary of the issue date serve a Conversion Notice whereby the principal amount plus the outstanding interest could be converted into new fully paid ordinary shares at a Conversion Price of $0.08125. However, the Company had the option to redeem the CLNs in certain circumstances within two years of their issue ("the Two Year Call Option") as described in note 14.

 

Trinity engaged a specialist valuation team to value the derivative relating to the CLN. The embedded derivative was described as the difference between:

-        The actual bond issued

-        A hypothetical bond without the Group having the option to call the bond early.

 

The main driver of the valuation compares the redemption value of the bond to the projected conversion value in January 2019.  The calculation anticipates that without the early call option Trinity would call the bond on the earliest date, which would in turn trigger investors to convert the bond at this date.

    

     The liability component of a compound financial instrument is recognised initially at the fair value of a similar liability that does not have an equity conversion option.  The equity component is recognised initially at the difference between the fair value of the compound financial instrument as a whole and the fair value of the liability component.  Any directly attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts.  Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortised cost using the effective interest rate method.  The equity component of a compound financial instrument is not re-measured subsequent to initial recognition except on conversion or expiry.

      Derivative financial Instruments and hedging activities

 

The Company has not applied hedge accounting and all derivatives are measured at fair value through profit and loss.

 

      Financial assets at fair value through profit or loss financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term. Derivatives are also categorised as held for trading unless they are designated as hedges. Assets in this category are classified as current assets if expected to be settled within 12 months, otherwise they are classified as non-current.

 

In June 2018 a third party was engaged to conduct a valuation of the derivative financial instruments held namely the embedded derivative relating to the Two Year Call Option within the CLN and the Zero cost collar oil derivative.  The valuation methodology used were as follows:

 

Embedded derivative:  In order to estimate the value of the Two Year Call Option at the valuation date, the settlement price of the Note (cash and equity settlement combined) was compared with the value of the CLN with the original terms (i.e. if the two year restriction until January 2019 existed for the whole Note). In estimating the value of the CLNs, an income approach framework and a binomial lattice model was utilised. This model is an implementation by MATLAB of the Tsiveriotis and Fernandes convertible bond model.

 

Zero cost collar:  The oil derivative was modelled as a combination of a Call leg and a Put leg. The Put leg was based on a long position on a strip of oil put options while the Call leg was a short position on a strip of oil call options, all expiring on each month end until the termination date of the instrument. Market data included futures prices and implied volatilities from Bloomberg and interest rates from S&P Capital IQ. The two legs of Asian options utilised a modified Black-76 formula with Turnbull and Wakeman approximation (1991).

 

2    Financial risk management 

 

      Financial risk factors

      The Group's activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk. The Group's overall risk management program seeks to minimise potential adverse effects on the Group's financial performance

      The condensed interim financial statements do not include all financial risk management information and disclosures required in the annual financial statements; they should be read in conjunction with the Group's annual financial statements for 2017, which can be found at www.trinityexploration.com

 

Zero Collar oil derivative:

      On 6th November 2017 a Zero Cost Collar was entered into effective 1st January 2018. The derivative is a combination of a long position on a strip of oil put options and a short position on a strip of oil call options (from Management's perspective). The key terms are summarized below:

·  Trade Date - 6th November 2017

·  Effective Date  - 1st January 2018

·  Notional quantity - 25,000 US barrels per month

·  Option Type and Style  - Monthly Asian Put (Arithmetic average of all settlement prices in a month)

·  Strike Price per unit - $45 per US barrel for the put options and $59.8 per US barrel for the call options

·  Commodity-OIL WTI

·  Exercise Dates - End of each month until 31st December 2018

 

     The introduction of the collar is one of management's tool used to mitigate risks. There is no other change in the risk management department or in any risk management policies since the year end.   

Liquidity risk

      Compared to year end, there were changes in the contractual undiscounted cash out flows for certain financial liabilities as follows:

 

Zero cost collar put in place - Effective January 2018 the zero cost collar oil derivative was effective. The strike price per unit was $45.0 per US barrel for the put options and $59.8 per US barrel for the call options.

 

Fair value estimation

 

The table below analyses financial instruments carried at fair value, by valuation method.

The different levels have been defined as follows:

Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1).

Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (Level 2).

Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (Level 3).

 

The following table presents the Group's financial assets and liabilities that are measured at fair value at 30th June 2018.

 


Level 1

Level 2

Level 3

Total


$'000

$'000

$'000

$'000

Liabilities





Zero cost collar

--

1,703

--

1,703

Total liabilities

--

1,703

--

1,703






 

Fair value measurements using observable inputs (Level 2)

 

For measuring the zero cost collar at fair value through the profit or loss, an assessment of oil price movement and volatility at 30th June 2018 was performed valuing the instrument at $1.7 million which was determined as follows:

 

 


Zero cost collar


$'000

1st January 2018

(762)

Payments

645

Losses recognised

(1,586)

30th June 2018

(1,703)

 

      Group's valuation processes

 

The Group's finance department includes a team that performs the valuations of financial assets required for financial reporting purposes, including Level 3 fair values. This team reports directly to the Chief Financial Officer ("CFO") who in turn reports to the Audit Committee ("AC"). Discussions of valuation processes and results are held between the CFO, AC and the valuation team at least twice per year, in line with the Group's interim reporting dates. The Group has engaged an external valuation specialist in conducting the valuations on the embedded derivative and zero cost collar.

 

3    Operating segment information

 

      Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker.  The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the steering committee that makes strategic decisions.  Management have considered the requirements of IFRS 8, in regard to the determination of operating segments, and concluded that the Group has only one significant operating segment being the production, development and exploration and extraction of hydrocarbons in Trinidad.

 

      All revenue is generated from sales to one customer in Trinidad & Tobago: The Petroleum Company of Trinidad & Tobago ("Petrotrin").  All non-current assets of the Group are located in Trinidad & Tobago.

 

4    Exceptional Items

 

Items that are material either because of their size, their nature, or that are non-recurring are considered as exceptional items and are presented within the line items to which they best relate.  During the current period, exceptional items as detailed below have been included in the Condensed Consolidated Statement of Comprehensive Income. An analysis of the amounts presented as exceptional items in these financial statements are highlighted below.

 


30th June 2018

30th June 2017

31st December 2017


$'000

$'000

$'000

Impairment of property, plant & equipment - FZ 2

--

 732

--

Secured creditor compromise

--

 (6,450)

(6,472)

Interest on tax compromise

--

 (5,249)

(5,247)

Unsecured creditors' compromise

--

 (15,532)

(15,639)

Foreign exchange loss on compromised balance

--

663

687

Impairment of receivable

--

 348

234

Impairment on inventory

--

--

264

Restructuring

--

 577

532

Gain on extinguishment of financial liabilities

--

 (210)

(210)

Gain on fair value of financial instrument

11,616

--

--

Impairment on recompletions

--

  --

135

Translation difference

--

 (2)

(2)






11,616

(25,123)

(25,718)

 

Exceptional items during the current year:

 

Fair Value Gain on the valuation of the early call option associated with the CLN - ($11.6 million): In June 2018 a valuation of the embedded Two Year Call Option associated with the CLN was completed. The valuation resulted in a gain of $11.6 million for the Two Year Call Option as at the valuation date of 30th June 2018. See additional details in note 11.

 

5    Other Taxes

 

 


30th June 2018

30th June 2017

31st December 2017


$'000

$'000

$'000

Property tax charges

(216)

--

(497)

Property tax reversal 2016 and 2017

1,100

--

--






 

884

 

--

 

(497)

 

The Property Tax Amendment Act 2018 was assented to on 8th June 2018 by the Government of Trinidad and Tobago. The Act effectively waived the obligation to pay Property Tax ("PT") up to December 2017. PT accrued for the years 2016 and 2017 of $1.1 million, has been reversed at the end of June 2018.

 

6    Taxation Charge/ (Credit)

a.     Taxation Charge

30th June 2018

30th June 2017

31st December 2017

Current tax

$'000

$'000

$'000

- Current period




Petroleum Profits Tax

--

44

(926)

Corporation Tax ("CT")

--

--

--

Unemployment Levy

(62)

--

(26)





Deferred tax




- Current period




Movement in asset due to tax losses

5,750

2,822

1,317

Movement in liability due to accelerated tax depreciation

5

(392)

(389)

Unwinding deferred tax on fair value uplift

33

(27)

--

Translation differences

--

5

(4)

Tax charge/(credit)

5,726

2,452

(28)

     

The Group has a deferred tax asset of $9.9 million on its Condensed Consolidated Statement of Financial Position which it expects to recover in more than 12 months based on the expected taxable profits generated by Group companies.

 

    

30th June 2018

30th June 2017

31st December 2017


$'000

$'000

$'000

b.     Taxation payable current




Petroleum Profits Tax ("PPT")/Unemployment Levy ("UL")

--

86

66

Due to BIR (PPT,CT and UL)

198

--

1,622

Taxation payable

198

86

1,688

c.     Taxation payable non-current




Petroleum Profits Tax/ Unemployment Levy

--

2,222

--

Corporation Tax

--

508

--

Taxation payable

--

2,730

--

 

The Taxation payable has been split between current and non-current and represents the principal balance owed to the BIR. 

 

7    Finance Cost

 


30th June 2018

30th June 2017

31st December 2017


$'000

$'000

$'000

Decommissioning

778

829

1,643

Interest accrued on Citibank loan

--

84

44

Interest unwind on liabilities

142

16

34

Interest on Convertible loan note

359

248

579


 

1,279

 

1,177

 

2,300

 

 

 

8    Property, Plant and Equipment

 


Plant & Equipment

Land & Buildings

Oil & Gas Property

Other

Total


$'000

$'000

$'000

$'000

$'000

Opening net book amount at 1st January 2018

3,767

1,726

46,957

--

52,450

Additions

205

2

4,434

--

4,641

Disposal

--

(6)

--

--

(6)

Reclassification of assets between categories

(2,470)

--

2,470


--

Depreciation, depletion and amortisation charge for period

(784)

(70)

(3,892)

--

(4,746)

Transferred to disposal group held for sale






Translation difference

--

(1)

214

--

213

Closing net book amount 30th June 2018

718

1,651

50,183

--

52,552







Period ended 30th June 2018






Cost

10,643

3,111

279,353

336

293,443

Accumulated depreciation, depletion, amortisation and impairment

(9,925)

(1,459)

(229,384)

(336)

(241,104)

Translation difference


(1)

214


213

Closing net book amount 30th June 2018

718

1,651

50,183

--

52,552

 


Plant & Equipment

Land & Buildings

Oil & Gas Property

Other

Total


$'000

$'000

$'000

$'000

$'000

Opening net book amount at 1st January 2017

4,201

1,890

53,541

--

59,632

Additions

27

1

622

--

650

Disposal

--

(9)

--

--

(9)

Impairment

--

--

(732)

--

(732)

Depreciation, depletion and amortisation charge for period

(305)

(76)

(3,170)

--

(3,551)

Transferred to disposal group held for sale

(187)

(108)

(7,401)

--

(7,696)

Translation difference

(7)

(1)

(84)

--

(92)

Closing net book amount 30th June 2017

3,729

1,697

42,776

--

48,202







Period ended 30th June 2017






Cost

     12,884

      3,125

273,230

336

289,575

Accumulated depreciation, depletion, amortisation and impairment

      (9,148)

     (1,427)

     (230,370)

      (336)

 (241,281)

Translation difference

        (7)

         (1)

(84)

        --

     (92)

Closing net book amount 30th June 2017

3,729

1,697

42,776

--

48,202

 

 


Plant & Equipment

Land & Buildings

Oil & Gas Assets

Other

Total


$'000

$'000

$'000

$'000

Year ended 31st December 2017






Opening net book amount at 1st January 2017

4,201

1,890

53,541

--

59,632

Additions

42

2

2,824

--

2,868

Disposal

--

(9)

--

--

(9)

Adjustment to decommissioning estimate

--

--

(2,868)

--

(2,868)

Depreciation, depletion and amortisation charge for year

(483)

(147)

(6,425)

--

(7,055)

Translation difference

7

(10)

(115)

--

(118)

Closing net book amount 31st December 2017

3,767

1,726

46,957

--

52,450

 

At 31st December 2017






Cost

12,901

3,126

272,565

336

288,928

Accumulated depreciation, depletion, amortisation and impairment

(9,141)

(1,390)

(225,493)

(336)

(236,360)

Translation difference

7

(10)

(115)

--

(118)

Closing net book amount

3,767

1,726

46,957

--

52,450







 

9    Intangible Assets    

 


Computer Software

Exploration and evaluation assets

Total


$'000

$'000

$'000

At 1st January 2018

250

25,341

25,591

Additions

--

46

46

Translation difference

--

71

71

At 30th June 2018

250

25,458

25,708





At 1st January 2017

--

25,406

25,406

Translation difference

--

(44)

(44)

At 30th June 2017

--

25,362

25,362





At 1st January 2017

--

25,406

25,406

Computer software

250

--

250

Translation difference

--

(65)

(65)

At 31st December 2017

250

25,341

25,591

 

Computer Software: New accounting software purchased in 2017.

Exploration and evaluation assets: Costs related to the TGAL exploration well and field development plan.

 

10  Trade and Other Receivables

 


30th June 2018

30th June 2017

31st December 2017

Due within one year

$'000

$'000

$'000

Trade receivables

3,264

1,967

3,272

Prepayments

1,217

1,001

631

VAT recoverable

1,372

506

807

Other receivables

401

184

445


6,254

3,658

5,155

       

The fair value of trade and other receivables approximate their carrying amounts.

 

11  Derivative financial assets

 


30th June 2018

30th June 2017

31st December 2017


$'000

$'000

$'000


Assets

Assets

Assets

Put Option-commodity price hedge

--

200

--

Embedded derivative (Two Year Call Option)

11,616

--

--


11,616

200

--

 

A valuation of the embedded derivative associated with the Two Year Call option within the CLN was undertaken as at 30th June 2018. The embedded derivative was fair valued and the gain attributed to:

 

·     The high probability of the Company exercising the Two Year Call option

·     Reduction in the Company's estimated cost of borrowing

·     Increase in market price of the Company's shares over the CLN's exercise price  

 

Following the redemption of the CLN post 30th June 2018, the gain on the Two Year Call option will be extinguished.

 

In 2017 a put option was implemented effective 1st April 2017 which hedged a portion of the Group's monthly production against downside movements in crude oil price below $40.0/barrel until 31st March 2018.

 

Share capital

 



Number of shares

Ordinary shares

$'000

Share premium

$'000

Total

 

$'000

As at 1st January 2018


282,399,986

96,676

125,362

222,038

As at 30th June 2018


282,399,986

96,676

125,362

222,038

 

 

12  Deferred Income Taxation

 

The analysis of deferred tax assets is as follows:


30th June 2018

30th June 2017

31st December 2017


$'000

$'000

$'000

Deferred tax assets:




-Deferred tax assets to be recovered in more than 12 months

 

(9,948)

 

(2,665)

 

(4,179)

Deferred tax liabilities:




-Deferred tax liabilities to be settled in more than 12 months

 

2,508

 

2,503

 

2,538

Net deferred tax (assets)/liability

(7,440)

(162)

(1,641)

 

The movement on the deferred income tax is as follows:


30th June 2018

30th June 2017

31st December 2017


$'000

$'000

$'000

At beginning of year

(1,641)

(2,569)

(2,569)

Movement for the year

(5,799)

2,407

928

Translation difference

--

--

--

Net deferred tax (asset)/liability

(7,440)

(162)

(1,641)

 

Deferred tax assets and liabilities are only offset where there is a legally enforceable right of offset and there is an intention to settle the balances net. The deferred tax balances are analyzed below:

 


1st  January 2017

Movement

30th June 2017

Movement

31st December 2017

Movement

30th June 2018

$'000

$'000

$'000

$'000

$'000

$'000

$'000

Deferred tax assets








Acquisition

(33,436)

--

(33,436)

--

(33,436)

--

(33,436)

Tax losses recognised

 

(34,293)

 

--

 

(34,293)

 

--

 

(34,293)

 

(5,760)

 

(40,053)

Tax losses derecognised

 

62,233

 

2,831

 

65,064

 

(1,514)

 

63,550

 

(9)

 

63,541


(5,496)

2,831

(2,665)

(1,514)

(4,179)

(5,769)

(9,948)

Deferred tax liabilities

1st January 2017

Movement

30th June 2017

Movement

31st December 2017

Movement

30th June 2018

Accelerated tax depreciation

 

14,374

 

(395)

 

13,979

 

64

 

14,043

 

--

 

14,043

 

Non-current asset impairment

 

 

(33,214)


 

 

(33,214)

 

 

--

 

 

(33,214)

 

 

--

 

 

(33,214)

Acquisitions

19,580

--

19,580

--

19,580


19,580

Fair value uplift

2,187

(29)

2,158

(29)

2,129

(30)

2,099


2,927

(424)

2,503

35

2,538

(30)

2,508

 

 

Deferred income tax assets are recognised for tax loss carry-forwards to the extent that the realisation of the related tax benefit through future taxable profits is probable.  Deferred tax assets of $5.8 million have been recognised (2017: $1.3 million was derecognised) as recoverability is now considered probable. Deferred tax liabilities have reduced by $0.03 million (2017: $0.4 million) as the carrying values of property, plant and equipment and intangible assets which gave rise to the temporary  differences have been written down to their recoverable amount.  The Group has unrecognised tax losses amounting to $213.0 million which have no expiry date (2017:  $218.5 million).

 

 

13  Convertible Loan Note ("CLN")

 

      On 11th January 2017 the Company issued at a 50% discount 6,550,000 one dollar, unsecured CLNs.  The notes mature 7 years from the issue date at their nominal value of $6.55 million plus quarterly accrued, aggregated and compounded interest.  Repayments or conversion prior to the maturity date can be made in certain circumstances:

 

•    Early Redemption

      Subject to the settlement of the debts owed to the BIR and the MEEI the Company can before the second anniversary of the CLN's issue date, redeem all or a portion of the CLN giving 5 business days' written notice to the Noteholder. The Noteholders do not have the option to convert under this arrangement.

 

•    Redemption

      The Company can, after satisfying the debts owed to the BIR and the MEEI or after two years from the issue dates (whichever is the latter), elect to redeem all the CLN before the maturity date. The redemption date in this scenario must not be less than 20 days from the Early Redemption Notice. The Noteholders can serve a Conversion Notice.

 

•    Conversion

      Each Noteholder can after the second anniversary of the issue date serve a Conversion Notice. The principal amount plus the outstanding interest shall be converted into new fully paid ordinary shares at a Conversion Price of $0.08125.

 

      The fair values of the CLN's liability and equity component were determined at the issuance of the note.  The CLN recognised in the Statement of Financial Position was calculated as follows:

 


Total


$'000

6 months ended 30th June 2018


Opening amount as at 1st January 2018

3,019

Nominal value of CLN issued

--

Interest accrued2

359

Closing balance as at 30th June 2018

3,378



6 months ended 30th June 2017


Opening amount as at 1st January 2017

--

Nominal value of CLN issued1

6,550

Issued at a 50% discount

(3,275)

Fair value of CLN

3,275

Expenses incurred

(245)

Fair value of CLN (net of costs)

3,030

Equity component

(590)

Liability component at initial recognition

2,440

Interest accrued2

289

Closing balance at 30th June 2017

2,729



 

Year ended 31st December 2017


Opening amount as at 1st January 2017

--

Nominal value of CLN issued1

6,550

Issued at a 50% discount

(3,275)

Fair value of CLN

3,275

Expenses incurred

(245)

Fair value of CLN (net of costs)

3,030

Equity component

(590)

Liability component at initial recognition

2,440

Effective interest

105

Interest accrued2

474

Closing balance at 31st  December 2017

3,019

 

 

Notes:

      1The amount repayable on the CLN is the nominal value of $6.6 million plus accrued interest.

2 Interest is calculated by applying the effective interest rate of 23.7 % to the liability component.

 

The CLN was initially recognised and measured at its fair value of $3.3 million.  The fair value of the liability component was determined using a market interest rate of 22.4% for an equivalent non-convertible bond at the issue date.  The liability is subsequently recognised on an amortised cost basis until extinguished on conversion or maturity of the notes. The remainder of the proceeds is allocated to the conversion option and recognised in shareholders' equity net of transaction cost, and not subsequently re-measured.  See note 21 for post period update on the CLN.

 

 

14   Provisions and Other Liabilities

 

Non-Current:

Decommissioning cost

Employee Retirement Benefit

Total


$'000

$'000

$'000

6 months ended 30th June 2018




Opening amount as at 1st January 2018

37,151

--

37,151

Unwinding of discount

778

--

778

Decommissioning provision

739

--

739

Translation differences

104

--

104

Closing balance as at 30th June 2018

38,772

--

38,772





6 months ended 30th June 2017




Opening amount as at 1st January 2017

37,970

348

38,318

Unwinding of discount

829

--

829

Transferred to disposal groups held for sale

(12,398)

--

(12,398)

Unwind of employee retirement provision

--

(348)

(348)

Translation differences

(53)

--

(53)

Closing balance as at 30th June 2017

26,348

--

26,348





Year ended 31st December 2017




Opening amount as at 1st January 2017

37,970

348

38,318

Restructuring provision settled

--

(348)

(348)

Unwinding of discount

1,643

--

1,643

Revision to estimates

(2,868)

--

(2,868)

Decommissioning provision

497

--

497

Translation differences

(91)

--

(91)

Closing balance at 31st December 2017

37,151

 

 

 

--

37,151

 

 

 

 

Current:

 

Litigation claims

 

Other Provisions

 

Total

$'000

$'000

$'000

6 months ended 30th June 2018




Opening amount as at 1st January 2018

115

--

115

Provision for litigation claims

6

--

6

Litigation claims settled

(38)

--

(38)

Provision for drill pit closure

--

70

70

Closing balance as at 30th June 2018

83

 

70

153





6 months ended 30th June 2017




Opening amount as at 1st January 2017

470

--

470

Litigation claims compromised

(364)

--

(364)

Closing balance as at 30th June 2017

106

--

106





Year ended 31st December 2017




Opening amount as at 1st January 2017

470

--

470

Litigation claims compromised

(355)

--

(355)

Closing balance at 31st December 2017

115

--

115

 

 

15  Trade and Other Payables

 


30th June 2018

30th June 2017

31st December 2017


$'000

$'000

$'000

Non-current:




Due to BIR Interest on taxes

--

970

417

Due to MEEI

--

670

231

Other Payables

--

904

233


--

2,544

881





Current:




Trade payables

1,085

419

555

Accruals

3,009

1,503

2,547

VAT payable

170

129

272

Other payables

783

903

701

Supplemental Petroleum Tax and Property Tax

2,436

3,708

2,626

Due to BIR Interest on taxes

1,749

775

2,865

Due to MEEI

630

481

526


9,862

7,918

10,092

 

 

16  Derivative financial Liabilities

 

Derivatives are classified as held for trading and accounted for at fair value through profit or loss unless they are designated as hedges. They are presented as current assets or liabilities if they are expected to be settled within 12 months after the end of the reporting period. (See note 2)

 

Zero Cost Collar

Total


$'000

6 months ended 30th June 2018


Opening balance

762

Loss on Fair value of derivative  instrument

1,586

Payment

(645)

Closing balance as at 30th June 2018

1,703

 

 

 

 

 

 

 

 

 

17  Adjusted EBITDA

 

 

Adjusted EBITDA is a non-IFRS measure used by the Group to measure business performance. It is calculated as Operating Profit before Supplemental Petroleum Taxes and Other Taxes for the period, adjusted for depreciation, depletion and amortisation, share option expenses and other expenses (including the impact of derivative hedge instruments).

 

The Group presents adjusted EBITDA as it is used in assessing the Group's growth and operational efficiencies as it illustrates the underlying performance of the Group's business by excluding items not considered by management to reflect the underlying performance of the Group.

 

Adjusted EBITDA is calculated as follows:

 


6 months to 30th June 2018

6 months to 30th June 2017

Year ended  December 2017


$'000

$'000

$'000

Operating Profit Before Supplemental Petroleum Taxes and Other Taxes

2,611

1,934

3,932





Depreciation, depletion and amortisation

4,746

3,551

7,055

Share option expenses

368

3

239

Loss on oil derivative hedge instruments

1,586

400

1,362





Adjusted EBITDA

9,311

5,888

12,588






$'000

$'000

$'000

Weighted average ordinary shares outstanding - basic

282,400

270,936

276,746

Weighted average ordinary shares outstanding - diluted

400,708

363,828

395,054


$

$

$

Adjusted EBITDA per share - basic

0.03

0.02

0.05

Adjusted EBITDA per share - diluted

0.02

0.02

0.03

 

 

 

18  Earnings per Share

 

Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period. Diluted earnings per share is calculated using the weighted average number of ordinary shares adjusted to assume the conversion of all dilutive potential ordinary shares.

 


Earnings - Total Comprehensive Income/(Loss) For The Period $'000

Weighted Average Number Of Shares '000

Earnings Per Share $

Period ended 30th June 2018




Basic

15,889

282,400

0.06

Diluted

15,889

400,708

0.04





Period ended 30th June 2017




Basic

23,780

270,936 

0.09 

Diluted

23,780

363,828 

0.07 





Year ended 31st December 2017




Basic

25,424

276,746

0.09

Diluted

25,424

395,054

0.06

 

 

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares.  The Company has two categories of dilutive potential ordinary shares:  CLNs and share options.  The CLNs are considered to be potential ordinary shares and have been included in the determination of diluted earnings per share. This is calculated as the CLN nominal value $6.55 million plus accrued interest to the second anniversary of $1.0 million divided by the conversion price of $0.08125.  Long term incentives of 25,415,998 are also considered potential ordinary shares and have been included in the determination of the diluted earnings per share.  Share options of 1,975,084 are considered potential ordinary shares but have not been included as the exercise hurdle would not have been met.

 

 

19  Contingent Liabilities

 

§ The farm-out agreement for the Tabaquite Block (held by Coastline International Inc.) has expired. There may be additional liabilities arising when a new agreement is finalised, but these cannot be presently quantified until a new agreement is available.

 

§ A Letter of Guarantee has been established over the PGB Block where a subsidiary of Trinity is obliged to carry out a Minimum Work Programme to the value of $8.4 million.  The guarantee shall be reduced at the end of each twelve month period upon presentation of all technical data and results of the Minimum Work Programme performed. 

§ The Group is party to various claims and actions.  Management have considered the matters and where appropriate has obtained external legal advice.  No material additional liabilities are expected to arise in connection with these matters, other than those already provided for in these financial statements.

 

20  Events after the Reporting Period

 

i)      On 12th July 2018 the Company completed the Fundraising, raising gross proceeds of $20.0 million through the following:

§ Firm Placing to existing and new institutional investors which raised approximately $11.1 million;

§ Subscription which raised approximately $6.9 million, comprising:

$ 0.5 million of subscriptions by Trinity Directors and Executive Management; and

$ 6.4 million in relation to the holders of CLNs who opted to convert the value of their CLNs inclusive of accrued interest at the Issue Price; and

§ Offer to Qualifying Participants which raised approximately $2.0 million.

 

The Fundraising allowed the Group to repay all outstanding debt to its T&T State Creditors which amounted to $2.6 million in aggregate. Following this final repayment, on 15th August 2018 Trinity settled the remaining outstanding debt to holders of the CLNs who did not elect to convert their CLNs pursuant to the Subscription which amounted to $0.9 million. 

 

ii)     On 28th August 2018 Petrotrin announced it is to discontinue refining operations and undergo a companywide restructuring in order to focus on its upstream exploration and production activities. The Company expects that this decision will have no impact on the ongoing Sales Agreements with Petrotrin for Trinity's crude oil production and that the crude oil will be consolidated and exported as it has been previously.

 

 


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