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For a variety of reasons I have not had the time to research Trinity's asset base and worth but, based on the performance of TXP's sp, it is not being perceived as adding wealth. I note the comments of other posters but would appreciate a summary from the technical professionals among our shareholders. Simply put, is the value accretion or value diminution?
I think the market doesn't know what to make of it. Certainly the shareholder debate I've seen supports this, with some positive, some negative and the rest unsure. Shareholders shocked at more dilution at such a low SP when it's hoped that with Cas 2 and 3 coming on production in Q3 that production, free cashflow, confidence in TXP's future growth potential and then the SP could increase substantially. It's difficult to value the upside as TXP can't spell it out too clearly (particularly how they can use the huge tax losses), but the estimated value of TRIN's assets if they had funding to develop them and benefit from the tax losses was multiples higher than the current equity based value of the acquisition. TXP should have the capital required. However, the further difficulty is in assessing how quickly can realise this value and whether the time to do so and scale of the value accretion justifies the dilution of TXP's value and seemingly likely shorter term significant upside. In my view, I think it holds back the shorter term potential of TXP, but could be very value accretive later in 2025 and on.
@holdandhope, Many thanks for the summary.
My take on this is that the deal appears to make long terms sense but its timing (acknowledging that there is never a right time), from a market perspective is too early, the point being that TXP still has much to do to prove its own reserves through production and cashflow. As you say, one of the questions is how quickly TXP can maximise not just its own production but that of Trinity as well and how quickly the tax losses can be value accretive.
At the bottom line, I still think this is an good buy at ca 38p but don't now see £1 or anywhere near Malcy's £2 this year or well into 2025, if not 2026.
@aligator. The trajectory and timing of the SP movement is clearly linked to the success and pace of Cascadura production growth now (as the cashflow it generates fuels the flywheel of potentially value-adding activity), so it will depend if TXP bring forward the drilling of Cas 4 and/or 5 to this year or not, which I think they must now do instead of drilling at Coho. If they do, and they're successful we could still see £1 this year, or it may take until the reserves update in Q1 2025 when additional reserves at Cas and the acquired reserves from TRIN, as well as the significant increase in production rates at Cas should see a large increase to the size of the reserves and value (not just because of the size, but because the value of reserves increase if they can be extracted more quickly via a higher production rate). If they then drill all 4 wells at Cas B next year, which you would expect, and these wells bring another significant increase in production and cashflow (which should be the plan and very realistic) that really gets the momentum going on production, cashflow and the additional activities that funds in development and exploration drilling on Ortoire, hopefully Rio and TRIN's assets. The SP then becomes a factor of production and sentiment (from lots of newsflow). Assuming substantial progress at Cas (at least 8 good wells on production by y/e 2025) and some positive news on other activities which will be funded by the Cas cashflow I can still see £1.50 by the end of 2025 or by the reserves update in March 2026. However, really not easy to predict until we see how the market values the combined production and assets of TXP and TRIN when the deal completes and we get confidence on the Cascadura production growth profile. And there are curveballs that could add value more quickly, such as the JV/farm-out or sale of TRIN's offshore assets which are supposedly ripe for development, or the odd explo drill (such as Kokanee). SP short term driven by the lack of imminent confirmation of Casca production growth (i.e. Cas 2 and 3 online) and sentiment that is assuming that Cas production growth will not happen.
Many thanks again for such a in-depth response. I will be only too pleased to be proven wrong on my sp prediction, so long as the price is moving north and not south!
People who think this is a brilliant acquisition might want to read up on e.g. Valeura. Now there's a management who understands how to buy assets! > 10 x in two years and still cheap.
Horrible timing and all-share gift shop makes me wonder if they know the 2 new cascadura wells are dry (then we're all f..ked) or if T&T bureaucrats told them to eat the Trinity bullet or suffer from endless red tape....
When you buy a near-dead asset, share price isn't supposed to drop.... unless you've f.cked up.
Conclusion: The board f.cked up. Having a huge board makes them bored and they begin to get bad ideas and lose patience. They had one job: Bring cascadura to 200 mmcf, then throw a party and only then consider the size of the empire.
@Sturm. Get that you don't like the acquisition. I too hate the timing and the dilution to pay for it and I'd suggest that in the absence of a detailed explanation on the value to TXP versus the cost of dilution, and confirmation that the deal will actually go ahead, the market can't really decide how to take it. It seems like the institutional investors are not unsupportive otherwise I think you'd see a big well-off. As for your conclusions to support your dislike, they're quite a stretch. What would T&T govt benefit by forcing TXP to buy a failed business with no potential. If very much doubt they'd force them to do anything, but I could imagine them encouraging bidders to take on assets/licences so that their potential is developed to produce much needed hydrocarbons for the country rather than remain stuck in limbo due to no development cash. You may by chance be right, I hope you're wrong.
Sturm you've changed your tune a lot lately, lol? I actually wrote a response over on ADV to an earlier post of yours here, as couldnae find my password. Wouldn't it be funny if Galeota became the "new" Casca? Why don't you post over on ADV as well as here?
ADV imo has the worst UI so I cba posting there. That says a lot, considering how poor LSE is, all IMHO. I prefer discord though. Pretty tired of the lack of focus on ramping production here and the inevitable delay to the infamous wall of cash.
At least I have a nice chunk in both #PTAL and #VLE, both reporting tomorrow so that will likely improve my mood!
Strange thing to post Sturm regarding Cas 2 and 3?? Did they invent the high pressure gas kicks and did they just side track the wells for the fun of it???
Ah ok Sturm I don't post on Discord anymore for other reasons (or many other free bbs as there are more important things to do with my time so will not reply again here) but still pop in occasionally to Discord as it is a good data repository and hadnae seen any of your posts lately - but probably just simply missed them among the other "chat" ahem. I do like your "out of the box views" and absolutely could be pertinent however, perhaps the timelines would be indicative of more, on the lines of, utilisation of tax losses, Galeota "optimisation" or whatever the latest references are now (LOL) plus "better quality" staff to be the main motivation back then - which admittedly also could be turned 100% (ie for survival rather than growth if Casca does not come in?). I am still a "fan" of Casca and would be surprised if it turned out to be a "write-off" (these things do happen though?) but there is always self perpetuated nervousness where Clown is involved - due to his own historic exuberance setting expectations too high - but obviously can appreciate the perceived risk profile is now significantly higher than before the Chinook and Rosyton debacles and the waste of cash that could have been directed much better elsewhere at the time. As ever all IMHO and DYOR of course.
How much do we really know about the reservoir yet? It's difficult to drill and decline rates might be worse than expected? TXP is not super keen to get the wells tested for sure.
I'm just saying that the timing for this deal is SO BAD! that you (if you're a logical man ofc) have to ask yourself: Why and why now?
Why the dilution now if you're about to double own production (and hence more than double SP)?
TXP can spend a billion dollars and not be done with all the targets on the plate now, so there's certainly no need for more acreage.
I like the tax asset, but it's not going anywhere. I don't like the fact they're mainly oil in an awful tax regime for oil. And I think the synergies could be better (how much can costs really be reduced).
I'd rather keep +150.000 of my shares instead of handing them over to random Trinity shareholders in a combined company.
That was a response to Johnoxxx btw - crossing posts - would be nice with a 1 minut edit window on new posts :D
Dunder, I read your post on ADVFN and I agree. (But) it's too time consuming to keep up with all the BBs :D