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LONDON (Alliance News) - Trinity Exploration & Production PLC shares dropped by almost a third on Monday after it said it has terminated the deal that was set to lead to the sale of a string of producing assets in Trinidad, because they offer the lowest cost of production from the company's portfolio.
Trinity has decided to retain the assets after experiencing a steep drop in production during 2015, with production falling even further since the start of 2016, but has to find another source of funding as it remains reliant on its lender granting numerous extensions to its loan repayments.
Trinity shares were down 30% to 1.83 pence per share on Monday morning.
The company said average net production in 2015 fell to 2,896 barrels of oil equivalent per day from 3,603 barrels a day in 2014, but Trinity said the natural decline was "modest" against a backdrop of reduced levels of investment during the year.
Production has fallen further since the start of this year as a result of that reduced investment, averaging 2,598 barrels a day in January and February.
Trinity said it expects net production to be in the range of 2,500 to 2,800 barrels of oil equivalent per day in 2016. Whether the company hits the lower or higher end of that range is dependent on funding, it said.
The company reported a cash balance of USD8.3 million at the end of 2015, trade and other receivables of USD10.6 million and inventories of USD4.0 million. On the other side, debt stood at USD13.0 million, trade and other payables amounted to USD27.8 million and it owed USD23.5 million in tax at the end of the year.
Trinity has managed to scale back its costs, reducing its pretax operating expenditures by a third to USD22.0 million in 2015 from USD32.9 million a year earlier, whilst general and administrative costs were cut by 30% to USD10.5 million from USD15.0 million.
Trinity said it continues to lower general and administrative costs and is aiming to reduce them by a further USD3.7 million by the end of 2016.
Trinity said it aims to have a total operating breakeven cost of USD30 per barrel of oil by the end of 2016, with its onshore operations targeting a breakeven cost of USD15 a barrel.
"As a result of the significant reduction in operating and general and administration costs that the company has put in place and the resultant increased margins, the forward plan on the asset base, even at low oil prices is attractive. As a result of this effort, the board and management believe that Trinity's core portfolio offers an attractive investment opportunity on the resolution of the current balance sheet constraints," said Trinity.
Trinity's lender, Citibank, has provided 22 extensions to the company's moratorium on repayments due under its USD13.0 million facility as it continues to try to source some cash.
Trinity had struck a deal to sell its interests in a string of assets to Touchstone Exploration Inc in the hope of raising USD20.8 million, but said it has now terminated that deal after the conditions needed to advance the deal were not fulfilled before the deadline date.
Trinity has decided to retain the assets despite the need for cash as they have "the lowest production costs" within its portfolio which are generating positive operating cash flows even in the current low oil price environment.
Trinity said it is aiming to bring down the breakeven price at those assets, which are onshore assets, so it can make a margin of at least USD15 per barrel in 2016, it said.
"Retaining these assets enhances Trinity's portfolio for attracting the funding required to implement the forward strategy of the group," it said.
Back in August, those assets in Trinidad were producing around 1,574 barrels of oil per day, but made a USD2.3 million loss in the first eight months of 2015.
The USD2.0 million deposit paid by Touchstone which was being held in an escrow account will now be returned following the termination of the deal.
Trinity will now have to search to another funding solution, and said it has engaged two specialist refinancing advisers, Imperial Capital of New York and Cantor Fitzgerald of London, to boost its chances.
"Our near-term objective is to conclude a complete refinancing structure that will enable the company to retire its existing senior debt facilities, reduce other outstanding payables and provide sufficient additional capital to retain the integrity of its assets and grow production and cash flow," said Trinity.
"The combination of a dramatically reduced cost base with drilling and service costs that continue to adjust downward with falling commodity prices, transforms the economic potential of the group's reserve base," the company added.
Trinity said the sale of the Guapo-1 block to New Horizon Exploration Trinidad and Tobago Unlimited for USD2.8 million is proceeding, with the deal awaiting ministerial consent.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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