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When did Trinity say that the deep wells only have a 33% prospect of success? As far as I’m aware that was an opinion expressed by Cenkos.
In the May 2022, when Trinity first provided details of their deep well programme, they said that the deep wells identified typically had a 55% chance of finding 1 to 5 mmbls in place. Yesterday James Menzies told us that Hummingbird looks like the best of the nine Hummingbird prospects, which presumably accounts for the slightly higher than typical chance. He’s clearly optimistic - he made the point yesterday that a 50% chance is usually as good as it gets and to have a 63% chance almost makes the drill like an appraisal instead of exploratory, but he also know that nothing is certain (he said yesterday that “seismic can be deceptive”). He’s also very optimistic about Buenos Ayres and explained in great deal why (it’s largely unexplored as it had been considered non-prolific due to the basin shape, but Trinity have discovered through careful analysis of the seismic various fault lines that mirror the prolific production areas of their other licence and which they hope will also be very prolific).
As I wrote before, investors and potential investors will struggle to find another company Trinity’s size that is taking a more rigorous approach to drilling. It’s a nuisance that not much has happened over the past couple of years whilst they been carefully analysing all of the data they have, but hopefully it will be worth it. We’re about to start finding out.
The Jacobin well is drilling to a total depth of 9,800 feet and is the deepest well drilled in the area for over a decade.
For the first 5,500 feet or so it will go through some of the most prolific oil producing land in Trinidad. As a consequence, James Menzies was able to say yesterday that the well will find oil, but Trinity isn’t targeting oil in the first 5,500 feet (they’re already producing oil at that level from other wells).
Rather they’re targeting three deeper levels. The first target reservoir, T6, is just over 6,500 feet deep. The second target, T7, is almost 7,500 feet deep. The third, T8, is about 9,000 feet deep.
In other words, there’s almost a quarter of a mile in distance between the existing producing oil reservoir and T6, and then almost another quarter of a mile to T7, and then another quarter of a mile to T8. These reservoirs have developed and, hopefully, filled with oil over millions of years. The presence or absence of oil in any one reservoir is unlikely to meaningfully increase or decrease the prospect of it being in another. Were it otherwise the chance of success in T6 would likely be much higher given that it sits under a known oil reservoir.
Rather Trinity has assessed and published the chances of success of finding oil at each of the three levels they’re exploring, and then using quite proper probability calculations provided an estimate of the chances of at least one of the three reservoirs containing oil. Those assertions have been backed up by the competent person and are in turn backed up by a Technical Committee that consists of Mr Menzies (a geologist, non-executive director of Trinity, and the founder/former CEO of Salamander Energy), Derek Hudson (a geologist, non-executive director of Trinity, and Shell’s former Vice President and Country Chairman of it’s operations in Trinidad) and “three other independent experts who bring complementary and relevant expertise” to the deliberations (see page 36 of https://trinityexploration.com/wp-content/uploads/2023/06/Trinity-EP-2022-Annual-Report.pdf). It’s unlikely that any other smallish energy company has more rigorous oversight of its drilling plans and it’s an approach that has led to considerable refinement of Trinity’s drilling plans.
It’s also worth remembering that Jacobin is about more than finding oil on this occasion. It’s the first of nine deep wells and, if no oil is found, it will likely provide useful information that will assist the rest of the campaign.
In any event, it’s not long to wait now until we find out what Jacobin has discovered - the report is due by about mid-July (although Mr Menzies cautioned yesterday that “God laughs at oil drillers timescales”).
With gas now at 118p for July we’re now looking at revenues of almost £2.5 million for that month. With gas now at 160p for December, it’s going to be much higher in the winter.
The gas price has now more than doubled since the beginning of the month, but Angus’ share price has barely risen. The market will catch up before too long.
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%).
Angus recently told us that when gas prices are 124p they make £2.5 million per month from gas sales (see https://polaris.brighterir.com/public/angus_energy/news/rns/story/xel8qzr ).
Over the next six months, using the prices available at https://www.ice.com/products/910/UK-NBP-Natural-Gas-Futures/data?marketId=5419492&span=2 , the gas price now averages 133.7p per month (lower in July, higher in December). Therefore at the moment, it looks as though Angus is going, on average, to receive more than £2.5 million per month over the next six months. With low running costs (between £2.5 million and £3.5 million per year according the valuation reports), that’s a lot of profit and cash.
ICE provide more detail (primarily by attaching a particular month to the prices), but their prices appear to be delayed by an hour. The BBC https://www.bbc.co.uk/news/topics/cxwdwz5d8gxt/natural-gas only delays prices by 15 minutes, but doesn’t make clear that the price it’s quoting is for July. Does anyone know what market price Angus receives for gas sold today (I appreciate that it doesn’t matter for the half of production that’s hedged)? Is that price published? Is it increasing (obviously it will in July, but it would be nice if we’re benefiting this week)?
I haven’t owned and don’t own any Challenger shares, but I’m familiar with the onshore licensing round in Trinidad as I have investments in other companies that participated.
In order to bid on a licence Challenger had to pay a fee of $30,000. It’s a requirement of this bidding round that successful parties give Heritage (the state oil company) a carried interest in the new licence and the rules provide for the possibility of a signature bonus. Touchstone had to give Heritage 20%, whereas Trinity only had to give 15%. In Trinity’s case the carried interest covers the seismic and the first four drills. Neither have announced the payment of a signature bonus. The percentage amount of the interest, what is carried and whether a signature bonus is paid appears to negotiable. There are some details in this presentation: https://www.energy.gov.tt/wp-content/uploads/2022/07/Onshore-and-Nearshore-Competitive-Bid-Round-presentation.pdf
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.
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).
It’s undoubtedly true that the gas market remains on a knife edge, but prices usually tend to recover this time of year having reached a year low at the beginning of June. Moreover, gas prices were already high for the winter. This spike is affecting next month’s prices and brings with it an almost immediate cash boost.
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.
I’m not sure that the actual amount has been publicised, but quite a lot of money (they’ve been acquiring seismic, preparing reports, working with landowners etc)) and time has gone into geothermal. I hope therefore that it doesn’t simply get abandoned. Geothermal also requires the drilling skills that a company such as Angus possess. There might be some sense in spinning geothermal off (with some sort of contract for Angus to provide drilling assistance). President Energy, now Molecular Energy, has had some success in spinning off alternative energy companies.
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
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).