We would love to hear your thoughts about our site and services, please take our survey here.
London South East prides itself on its community spirit, and in order to keep the chat section problem free, we ask all members to follow these simple rules. In these rules, we refer to ourselves as "we", "us", "our". The user of the website is referred to as "you" and "your".
By posting on our share chat boards you are agreeing to the following:
The IP address of all posts is recorded to aid in enforcing these conditions. As a user you agree to any information you have entered being stored in a database. You agree that we have the right to remove, edit, move or close any topic or board at any time should we see fit. You agree that we have the right to remove any post without notice. You agree that we have the right to suspend your account without notice.
Please note some users may not behave properly and may post content that is misleading, untrue or offensive.
It is not possible for us to fully monitor all content all of the time but where we have actually received notice of any content that is potentially misleading, untrue, offensive, unlawful, infringes third party rights or is potentially in breach of these terms and conditions, then we will review such content, decide whether to remove it from this website and act accordingly.
Premium Members are members that have a premium subscription with London South East. You can subscribe here.
London South East does not endorse such members, and posts should not be construed as advice and represent the opinions of the authors, not those of London South East Ltd, or its affiliates.
Ab76
So where do you think Cenkos got that from?
Did JM actually say “like an appraisal instead of exploratory”?
ATB
Ross
When did Trinity say that the deep wells only have a 33% prospect of success? As far as I’m aware that was an opinion expressed by Cenkos.
In the May 2022, when Trinity first provided details of their deep well programme, they said that the deep wells identified typically had a 55% chance of finding 1 to 5 mmbls in place. Yesterday James Menzies told us that Hummingbird looks like the best of the nine Hummingbird prospects, which presumably accounts for the slightly higher than typical chance. He’s clearly optimistic - he made the point yesterday that a 50% chance is usually as good as it gets and to have a 63% chance almost makes the drill like an appraisal instead of exploratory, but he also know that nothing is certain (he said yesterday that “seismic can be deceptive”). He’s also very optimistic about Buenos Ayres and explained in great deal why (it’s largely unexplored as it had been considered non-prolific due to the basin shape, but Trinity have discovered through careful analysis of the seismic various fault lines that mirror the prolific production areas of their other licence and which they hope will also be very prolific).
As I wrote before, investors and potential investors will struggle to find another company Trinity’s size that is taking a more rigorous approach to drilling. It’s a nuisance that not much has happened over the past couple of years whilst they been carefully analysing all of the data they have, but hopefully it will be worth it. We’re about to start finding out.
Ab76
A genuine 63% CoS below 5500 feet probably translates into a near 100% chance of finding oil below 5500 feet. So why even contemplate the possibility of a duster?
Why does the Jacobin CoS keep changing? We have had 50% then 33% and we now have 63%.
Do you know enough about the migration of oil from source rock to reservoir rock to say that “the presence or absence of oil in any one reservoir is unlikely to meaningfully increase or decrease the prospect of it being in another”?
ATB
Ross
The Jacobin well is drilling to a total depth of 9,800 feet and is the deepest well drilled in the area for over a decade.
For the first 5,500 feet or so it will go through some of the most prolific oil producing land in Trinidad. As a consequence, James Menzies was able to say yesterday that the well will find oil, but Trinity isn’t targeting oil in the first 5,500 feet (they’re already producing oil at that level from other wells).
Rather they’re targeting three deeper levels. The first target reservoir, T6, is just over 6,500 feet deep. The second target, T7, is almost 7,500 feet deep. The third, T8, is about 9,000 feet deep.
In other words, there’s almost a quarter of a mile in distance between the existing producing oil reservoir and T6, and then almost another quarter of a mile to T7, and then another quarter of a mile to T8. These reservoirs have developed and, hopefully, filled with oil over millions of years. The presence or absence of oil in any one reservoir is unlikely to meaningfully increase or decrease the prospect of it being in another. Were it otherwise the chance of success in T6 would likely be much higher given that it sits under a known oil reservoir.
Rather Trinity has assessed and published the chances of success of finding oil at each of the three levels they’re exploring, and then using quite proper probability calculations provided an estimate of the chances of at least one of the three reservoirs containing oil. Those assertions have been backed up by the competent person and are in turn backed up by a Technical Committee that consists of Mr Menzies (a geologist, non-executive director of Trinity, and the founder/former CEO of Salamander Energy), Derek Hudson (a geologist, non-executive director of Trinity, and Shell’s former Vice President and Country Chairman of it’s operations in Trinidad) and “three other independent experts who bring complementary and relevant expertise” to the deliberations (see page 36 of https://trinityexploration.com/wp-content/uploads/2023/06/Trinity-EP-2022-Annual-Report.pdf). It’s unlikely that any other smallish energy company has more rigorous oversight of its drilling plans and it’s an approach that has led to considerable refinement of Trinity’s drilling plans.
It’s also worth remembering that Jacobin is about more than finding oil on this occasion. It’s the first of nine deep wells and, if no oil is found, it will likely provide useful information that will assist the rest of the campaign.
In any event, it’s not long to wait now until we find out what Jacobin has discovered - the report is due by about mid-July (although Mr Menzies cautioned yesterday that “God laughs at oil drillers timescales”).
I remember that from The Curious Incident of the Dog in the Night-Time. I guess this is more observational than mathematical - the CoS for exploratory drilling, stacked targets or not, is typically no more than 30% or 1 in 3. It is like they are telling us we are getting three exploratory drills for the price of one. I just won’t buy that until an independent geologist, who can give us chapter and verse on oil migration, for example, tells us otherwise, namely that they can multiply up the probabilities like that.
Could the Monty Hall problem apply to this?
Ab76
That does not answer my question, which is whether it is correct to say that what is actually found at one level in a given well makes NO difference to the CoS at any other level in that particular well. Unless that statement is correct, TRIN would appear to me to be using misleading methodology.
As I said before, if there is a geologist out there your answer to my question would be most welcome.
ATB
Ross
The probability of Trinity finding oil in at least one of the three levels is almost 63%. There are two ways of working out the probability of at least one of three events occurring.
First the manual method, which involves the following steps:
1. As a fraction deduct the chance of each event occurring from 1, which in this case gives us 0.66 (K6 has a 1 in 3 chance, 1 minus 0.33 = 0.66), 0.75 (K7 has a 1 in 4 chance, 1 minus 0.25 = 0.75) and 0.75 (K8 also has a 1 in 4 chance, 1 minus 0.25 = 0.75).
2. Multiply the deductions, which in this case gives us 0.3712.
3. Deduct the multiplied amount from 1, which in this case gives us 0.6287.
4. Convert the above into a percentage, which in this case gives us 62.87%.
Second the automatic method, which involves using this website: https://www.omnicalculator.com/statistics/probability-three-events
Using 33.33333%, 25% and 25% as the inputs, that website says that the prospect of at least one event with those prospects occurring is 62.5% (unfortunately the prospect of all three occurring is just 2%).
Ab76
Let’s see how it all stacks up in hindsight when we have the Jacobin result.
ATB
Ross
This morning’s presentation is now on InvestorMeetCompany’s website. James Menzies’ part of the presentation is particularly valuable. The slides from his presentation are available at https://trinityexploration.com/wp-content/uploads/2023/06/Investor-Technical-Presentation-June-2023-Hummingbird-Buenos-Ayres-vF.pdf, but most of us probably need to hear the presentation to make sense of them.
Ab76
I would like to hear from a geophysicist entirely independent of TRIN that the methodology they are using to calculate the CoS figure of 63% they are now putting before retail investors actually holds water. Most recently Cenkos were clear that the CoS was 33%. 63% is certainly new. TRIN need to get their Jacobin story straight and stick to it.
ATB
Ross
Whenever rossannan is presented with some information he doesn’t like he calls it a lie, but for anyone who wants to “kick the tyres” Trinity have just finished giving a very detailed presentation via InvestorMeetCompany that will be viewable on their website shortly. During that presentation James McKenzies - one of Trinity’s non-executive directors, a geophysicist and the Chair of the company’s Technical Committee (which has been set up to provide expertise to oversea the company’s drilling plans) - spent about 30 minutes going through the seismic data so that he could explain, amongst other things, why he believes that Jacobin has such good prospects of success (he repeated the assertion that there is a 63% chance of finding oil in at least one of three levels).
Ab76
Not interested in addressing the point that I am making about the figure of 63% and how TRIN came up with it? Does experience not show that you need to kick the tyres of what TRIN comes out with rather than assume that you can take it to the bank?
ATB
Ross
According to the presentation (page 20) we can expect a drilling update on Jacobin in mid-July. Drilling is scheduled to end at the weekend, so that’s about a month of testing and analysis. They should have drilled through the T6 and 7 levels by now.
Ab76
To me that seems like a misleading way of representing the CoS, implying as it does that what is actually found at one level in a given well makes no difference to the CoS at any other level in that particular well. If there is a geologist out there with an interest in probability, your take on all this would be most welcome - until you tell me otherwise, this particular bit of maths feels to me like a new low for TRIN.
ATB
Ross
The dividend may get better. As the presentation makes clear (see also the more detailed annual report), the new capital allocation policy requires them to return 15% of operating cash flow (20% if oil prices are above $80) to shareholders. If operating cash flow comes in at $12 million (the top end of the range predicted in the presentation), $1.8 million will be available for dividends, which is about £1.4 million. That’s enough to fund a dividend of 3.6p
Thanks for the link - a 1.5p Q3 divi is a nice surprise
The clue rossannan was in the words “it’s encouraging to see from the new presentation”.
The new presentation, which was the subject of an RNS this morning, is available at https://trinityexploration.com/wp-content/uploads/2023/06/TRIN-Investor-Presentation-June-2023-vF-2023-06-13.pdf (see page 17, left hand side, about half way down).
Ab76
Cenkos said it was a 33% CoS. Where did you get 63%?
ATB
Ross
TRIN has been long on promises over the years but short on results. Lets hope the drilling roulette has a better result this time. I suspect the dividend might depend on it. GLA.
They are nearly a month into a deep well though PipeDragger: a well with a 63% chance of success and one that could, according to Cenkos, quickly add 400bopd to production.
Flat production reconfirmed this morning. How many years must we wait for them to consistently break 3000 bopd?
It’s encouraging to see from the new presentation that Jacobin is targeting three levels and that it’s estimated that there’s a 63% chance of success with at least one of them.
The results of the Onshore Bid round also appear to be in the process of being announced as TXP have announced their success with one licence (Challenger, who like Trinity are also reported to have won a new licence, haven’t announced anything yet).
Simon Thompson tipped Trinity again today: see https://www.investorschronicle.co.uk/ideas/2023/06/12/an-oil-price-play-with-huge-recovery-potential/
In summary he points out that, due to lower SPT, lack of hedging and lack of provisions, 2023 should see Trinity’s profit increase to $9 million despite lower oil prices than in 2022.
He then points out the three near term share price catalysts: Jacobin and the Hummingbird deep wells; Buenos Ayers; and Galeota.
He concludes with: “Potential for positive newsflow is certainly not being factored into the current price…That’s because the £30mn market capitalisation company is priced on less than four times Cenkos’ post-tax profit estimate for the current year. Moreover, based on its 18mn barrels of 2P reserves alone, Trinity's is valued at $2.10 per barrel, a huge discount to sector peers, and $0.57 per barrel once you include 2C reserves. Recovery buy.”
Whether the shares have bottomed absolutely depends on whether their one in three (according to Cenkos) Jacobin gamble comes off. I am not even sure that the excitement of getting closer to the Jacobin result will lift them, given those odds.