The latest Investing Matters Podcast with Jean Roche, Co-Manager of Schroder UK Mid Cap Investment Trust has just been released. Listen here.
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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.
Less shares to service with Div.......hopefully buy backs will look clever soon........seems shares may have bottomed.
20 days in now drilling Jacobin well.
Will they hit the jackpot or a duster?
Allways exciting times to own shares in these types of companies.
We shall see..
Cheers
Looks like we might get a dividend later this year (RNS 1st June). (Shame they splurged all that cash on buy backs).
Will it be a new dawn or a new dud? I hope to sell this one at a profit before I retire (7 years time). I would settle for a steady dividend but no sign of that.
Alans55
“Sorry, wrong board”
Astute commentary on TRIN, perhaps.