(Alliance News) - Shares in Trinity Exploration & Production PLC were higher on Tuesday as it announced a number of measures to help mitigate falling oil prices.
Trinity's shares were up 19% at 7.02 pence in London shortly after midday.
Exploration and production company Trinity, which focuses on Trinidad & Tobago, noted the rapid decline in oil prices due to "the covid-19 virus and more recent OPEC stand-off".
The Organization of the Petroleum Exporting Countries and its allies failed to clinch a deal to cut production, prompting oil prices to fall.
WTI, Trinity's benchmark crude oil price, is currently trading at USD33.64 a barrel.
However, Trinity noted "a strong oil price hedge position has been put in place to protect the company's revenue for a large part of 2020".
Hedges currently cover 47,500 barrels per month, or 46% of 2019 exit-rate production, for the first half of 2020, and then 28,33 barrels per month for the second half, around 28% of 2019 exit-rate production.
Additionally, Trinity will not have to pay any supplemental petroleum tax should the oil price stay below USD50.01 a barrel on average in a quarter. It also has hedges in places partially offsetting supplemental petroleum tax at a WTI of between USD50.0 per barrel and USD56.0 per barrel.
Given its January realisation was USD58.2 per barrel and February USD51.6 per barrel, a realisation of USD40.2 per barrel or below is required to give a first quarter average of less than USD50.01 a barrel.
Trinity also noted the break-even oil price in its recent years has been falling, with the operating break-even level at USD26.3 per barrel in the first half of 2019 and maintained at below USD30 per barrel throughout 2019 and into 2020.
Further, Trinity pointed out its payable overriding royalties reduce when oil prices are lower. Onshore overriding royalties drop to 25% when realisations average below USD50.0 a barrel and to 20% at USD40 a barrel, having been at 33% when the average was above USD50.0.
Offshore east coast royalties fall to 12% at below USD50.0 a barrel and to 11% at below USD40 a barrel from 13% above the USD50.0 mark. Offshore west cost royalties fall to 10% at realisations under USD50.0 per barrel from 11% above.
Trinity also mentioned just a "small proportion" of profit is subject to tax thanks to "capital allowances on current capital expenditures and shelter from past tax losses".
Executive Chair Bruce Dingwall said: "We continue with our strategy of delivering returns for our shareholders by growing production and margins as well as maximising free cash flow from our attractive portfolio of assets.
"The company is prioritising returns on investment and maintaining a strong balance sheet. We have established strong and sustainable foundations from which to provide upside across a broad range of oil price scenarios and are focused on driving value for investors."
"The fact the company continues to accrue cash at lower oil prices is testament to our financial discipline and our lean business model putting us in a highly resilient position," Dingwall continued.
"We are confident our operating break-even will stay in the vicinity of the last reported USD26.3 per barrel as we continue to manage the business with this as an important key performance indicator. Our preliminary results in April will provide full details around our cost base and measures in place to respond to any sustained period of low oil prices."
By Anna Farley; annafarley@alliancenews.com
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Trinity (TRIN)