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Rossassan: “The authorities have after all still not even deigned to signal any reforms. They have not even reassured us that the current temporary onshore SPT reforms won’t simply be allowed to lapse!”
Stuart Young, Minister for Energy, addressing the House of Representative on the 10th December 2021: “With respect to the fiscal terms, Trinidad and Tobago is very aware that we have to stay competitive globally. We have to attract that global money, that global capital expenditure by the big multinational oil companies to Trinidad and Tobago, and that is exactly what we are doing. We are working with the Ministry of Finance to look at and to reform the fiscal terms on the oil side. We will be coming with an SPT fiscal regime that will be reformed. I have already told the Minister of Finance; he has agreed. We are looking at it now and they are working the numbers to be able to do that. That will assist us in staying competitive.” From http://www.ttparliament.org/hansards/hh20211210.pdf
LuckCounts
Not undervalued, arguably fairly valued on the basis of the current fiscal regime. The authorities have after all still not even deigned to signal any reforms. They have not even reassured us that the current temporary onshore SPT reforms won’t simply be allowed to lapse!
This is the problem with TRIN: the fiscal regime makes it neither as profitable nor as able to grow production as folk seem to think. And then of course there is the likelihood of that fiscal regime changing in a meaningful way - again not as high as folk seem to think. The market gets it though, sadly. Limited downside from here at least.
I wish it was that profitable!
And without reform they continue as now and pay a handsome regular dividend of 20 -25% for a good number of years. The short sighted taxman looses big time.
If TRIN had a pound for every time one of its officers has said something like this, it could pay us a cracking dividend…
I think it all comes down to the regime pulling the trigger on meaningful tax reform. If that happens Galeota and everything else will fall into place and £3+ will very much be on the cards. But I think the market is sceptical about the regime actually following through on their business friendly rhetoric.
Good question - I’ve been following Trin since it was about 6p in 2017 and the major factors for me are slow YoY growth, no dividend and SPT weighing on profitability whenever the oil price is high
I guess until larger investors can see material change in the bopd output then the share price will be perceivably below par
Very broad reasons but I’ve read plenty of coverage in the past 4-5 years with analysts saying Trin should be 30p+ (pre consolidation) and it’s nowhere near, something’s keeping it down!
mhow
If it was a simple as that, would the share price not reflect this?
Excerpt below from recent article in Investors' Chronicle - TRIN's b/e is very low $29.2 - The upside on the current price is ridiculous
It’s worth noting, too, that although housebroker Cenkos Securities predicts Trinity’s reported operating profit will soar from $2.9mn to $7.4mn in 2022 based on 21 per cent higher revenue of $81.8mn, these estimates only factor in an average realised oil price of $74.3 a barrel. WTI hit a high of $113 a barrel this week, so even allowing for a 10 per cent discount on the spot rate, Trinity is still realising $102 a barrel. Furthermore, the company has only hedged 50 per cent of its 3,116 bopd budgeted production for 2022. If current prices hold for the rest of the year, then Trinity’s operating profit could be heading for double Cenkos’s current estimate even after factoring in higher Supplemental Petroleum Tax charges.
You can see how the SPT rate gets progressively higher set out on page 11 of this:
https://assets.ey.com/content/dam/ey-sites/ey-com/en_tt/article/ey-tt-budget-2021-20201005.pdf?download
In the meantime TRIN could be looking at the higher rate of SPT rate for next quarter if their average realised price exceeds $90 per barrel.
PD
Seems fair enough until they see the whites of the fiscal regime’s eyes.
Why has TRIN suspended drilling for six months? Even the Caribbean needs to do its part in this war. They should RNS to explain why they are against producing oil.
Stockable
These are reserves with limited potential profitability under the current fiscal regime - we do not know if and when the fiscal regime is going to be significantly reformed, in fact the current onshore SPT reform measures could still be allowed to lapse, in theory.
At the same time inflation will be showing up in TRIN’s costs and eroding the benefit of higher WTI. The market gets all this, hence the very limited ST effect this morning.
Simon Thompson points out that the company’s 2P reserves are valued at US$1.72 per barrel. However, in my opinion, that’s using a conservative estimate of its actual reserves. For example, Trinity calculates its reserves based on the immediate geographic area around each onshore well. However, the 3D seismic purchased from Heritage at the end of 2020 will probably change that estimate. As will the drilling of high angle and horizontal wells that it plans for H2 2022. While Trinity's East Coast offshore resources also look set for a major revaluation when it makes a final investment decision on its TGAL project (It also expects dynamic modelling to have an impact on its 2P assets). For now, it estimates that the group’s net 2C contingent resources are some 31.06 mmbbls. In my view, it seems quite likely that a substantial proportion of this will be converted to 2P reserves before the year-end. So, investors are paying far less than US$1.72 per barrel for the company’s 2P reserves.
reapz234
The ST effect is increasingly short lived here, although sometimes there can be a second bite at the cherry on the Monday.
ST giving a solid summary of trinity this evening, can see the SP going alot higher tomorrow
https://www.investorschronicle.co.uk/ideas/2022/03/03/two-slick-oil-and-gas-plays/
comeonvog
I think it is a mistake to blame the management. They are simply waiting for fiscal reform from the regime. There is not much else they can do until they know (a) whether existing onshore SPT reforms are being extended for a significant time period (or, better still, made permanent or, even better still, superseded by root and branch reforms) and (b) whether anything is going to be done about offshore SPT.
If the regime lets TRIN down I would like to see them doing only what is most profitable in T&T (despite what you read on BBs, even with WTI where it is some of TRIN’s operations are a bit marginal under the current fiscal regime) and starting to deploy capital more profitably outwith T&T.
Like i said, the management are comatose.
Put Spread
Put Spread
Put Spread
2-Way Cost Collar 3-Way Cost Collar
WTI
WTI
Dated Brent ICE Brent ICE Brent
Monthly USD/bbl USD/bbl USD/bbl Barrels
20.0 30.0 - 15,000 20.0 30.0 - 15,000
31-Dec-21 31-Dec-21 30-Jun-21 31-Dec-21 30-Jun-22
21-Jul-20 0.36 17-Nov-20 0.25 25-Nov-20 0.19 5-Feb-21 - 4-Mar-21
Active hedging perhaps explains inertia in shares? However I have bought some but much patience gonna be required imho. Maybe 2022 will give them some exposure to rising oil?
Yes, time is undoubtedly of the essence. But is there the political will to make such a business friendly move before they absolutely have to (i.e. in the Budget)?
My suggestion is that the reform or scrapping of the SPT regime is likely to be announced in H1 2022. Why? An uncertain fiscal environment will deter prospective bidders. As we can see from Trinity, the fiscal regime determines the pace as well as the type of drilling. Incidentally, the raised threshold before SPT kicks in will cease at the end of the revenue year 2022. So, presumably, a decision will need to be made on what to do with SPT. Why wait until the end of the year?
Incidentally, I have yet to come across anyone who views SPT as a positive for Trinidad’s oil industry. My only concern is whether politics may get in the way of this reform.
So, just to be clear, you are deducing from this that the reform or even scrapping of the SPT regime will be announced within the next month or so?
Guyana’s Kaieteur News has just published an article covering Guyana’s International Energy Conference and Expo 2022. According to this, an attending geologist from Trinidad's MEEI suggested that Trinidad’s next onshore bid round would commence “In the next month or so”. Why point this out? In the latest presentation given by Trinity, it was made clear that the success, or failure, of this round, was largely dependent on reforming the fiscal regime faced by onshore operators. Presumably, reform or even scrapping the SPT regime will be announced before the start of bidding?