Trinity Regulatory News (TRIN)

This announcement contains inside information as stipulated under the UK version of the Market Abuse

Regulation No 596/2014 which is part of English Law by virtue of the European (Withdrawal) Act 2018, as

amended. On publication of this announcement via a Regulatory Information Service, this information is

in the public domain.

28 September 2023

Trinity Exploration & Production plc

("Trinity" or "the Company" or "the Group")

Interim Results

Resilient base business supporting transformation catalysts

Trinity Exploration & Production plc (AIM: TRIN), the independent E&P company focused on Trinidad and Tobago ("T&T"), announces its unaudited interim results for the six-month period ended 30 June 2023 ("H1 2023" or "the Period"). 

Strategic Highlights

· Jacobin-1 was confirmed as an oil discovery on 7 August 2023. Subsequently, the Well Services Limited Rig 60 drilling rig rigged down and a heavy-duty workover rig, Rigtech Rig #9, mobilised to the wellsite to run the completion, perforate and tie the well into production facilities. Final testing of equipment is currently in progress and initial production is anticipated within days.  Oil produced will immediately be sold to the state oil company, Heritage.

· Trinity was successful in its bid for the onshore Buenos Ayres block, further leveraging our competitive advantage in the Palo Seco area, onshore Trinidad subject to receiving the licence from the Ministry of Energy.

· The Company is progressing, with Petrofac, a Concept Screening study for the development of further reserves and resources in its Galeota Block. Initial findings from Petrofac's study are encouraging. These concepts are now being economically assessed and ranked and, together with development studies on the existing Trintes field, will form part of an integrated approach to unlock further value from Trinity's East Coast Asset.

· Gas sampling and analyses that will underpin the Company's evaluation of its Scope 1 emissions was completed during the period. In H2 2023 analysis of gas rate quantification will be undertaken to enable the Company to quantify its Scope 1 emissions by the end of the year.

H1 2023 Operational Highlights

H1 2023 saw production levels broadly maintained against H1 2022 with a programme of recompletions and workovers. 

· H1 2023 average net sales volume was 2,861 bopd (H1 2022: 2,974 bopd).

Sales volumes were supported by three recompletions ("RCPs") (H1 2022: 11) and 62 workovers and reactivations ("WOs") (H1 2022: 61) undertaken during the Period including 7 workovers started at the end of 2022 completed in 2023, with swabbing continuing across the onshore and West Coast assets. Four additional RCPs are being worked up for execution in H2 2023. 

· The ABM-151 well in the Brighton Marine block, offshore the West Coast of Trinidad, was returned to production on 21 March 2023 following an extensive refurbishment of surface facilities and the installation of remote surveillance technology. Between restart and the end of the period the well flowed at an average rate of 175 bopd. The well produced on average 130 bopd during H1 2023 and Trinity continues to monitor the well closely.

H1 2023 Financial Highlights

· Average oil price realisation of USD 65.2/bbl for H1 2023 (H1 2022: USD 90.1/bbl). During the Period, the realised price that the Company received for Onshore and West Coast oil sales was an average discount of 20.6% to Brent; wider than the standard discount of approximately 15%. East Coast oil sales are made under a fixed arrangement that is a 15% discount to Brent. 

The Company remains unhedged.

· Cash balance of USD 11.3 million as at 30 June 2023 (YE 2022: USD 12.1 million) reflecting a combination of strong operating cash generation, no hedging or hedging losses incurred and limited investment in capex, including only the initial cost to support the drilling of Jacobin-1. The Jacobin-1 drilling and completion costs are anticipated to exceed initial estimates due to additional drilling days as a result of drilling challenges encountered and additional testing and data acquisition scope than originally considered. While the impact of the increased well costs will result in lower than anticipated cash balances, we remain on track to continue to invest in our growth options and commence our maiden interim dividend.

· Strong net cashflows generated from operating activities as at H1 2023 USD 6.3 million (H1 2022: USD 2.9 million).

· Revenues were reduced 30% to USD 33.8 million (H1 2022: USD 48.5 million) driven by lower oil prices and, to a lesser extent, lower volumes.

· Cash operating costs of USD 20.1/bbl (H1 2022: USD 17.6/bbl) driven by supply chain increases, increased maintenance activities across the assets, including supporting labour to complete these activities, and the overall impact of lower sales production (2,861 in H1 2023 vs 2,974 in H1 2022) contributed to the higher cash operating costs (per bbl) in H1 2023 vs H1 2022.  This excludes the initial cost incurred on the Trintes Bravo fire incident in H1 2023 of USD 0.1 million. Remediation work is expected to continue into H2 2023.

· General and administrative costs of USD 6.3/bbl (H1 2022: USD 6.6/bbl) mainly due to lower consultancy fees incurred and levies driven by lower oil prices.

· Average operating break-even for H1 2023 was moderately increased at USD 34.5/bbl (unaudited) (H1 2022: USD 32.4/bbl) resulting from a higher operating cost and slightly lower sales volume.

· The Group had drawn borrowings (overdraft) of USD 2.0 million at 30 June 2023 (YE 2022: USD 2.7 million).

Corporate Highlights  

Inaugural Dividend

As announced in the Company's 2022 Full Year Results on 1 June 2023, the Group will pay its first interim dividend of 0.5 pence per ordinary share to be paid on 26 October 2023 to all shareholders on the register on 6 October 2023 (the "Record Date").

The Dividend will be paid by electronic transfer. The Company's Registrar will provide an option for non-UK shareholders to receive payments in another currency. 

Increased Overdraft Facility from USD 5.0 million to USD 8.0 million

Trinity agreed to an upsized credit facility with FirstCaribbean International Bank (Trinidad & Tobago) Limited ("CIBC FirstCaribbean") on 25 August 2023, providing for an increase of the facility from USD 5 million to USD 8 million. 

The increased facility will provide Trinity with the flexibility to follow-up on the play-opening Jacobin-1 well, targeting further onshore activity and to progress development planning for the Company's material Galeota East Coast offshore asset.

Jeremy Bridglalsingh, Chief Executive Officer of Trinity, commented:

"The first six months of 2023 saw Trinity progressing important catalysts within our refreshed strategy.

First, our Jacobin-1 well successfully intersected multiple oil-bearing sands. Success with Jacobin increases our confidence in the portfolio of Hummingbird prospects that forms a cornerstone of our revitalised onshore strategy.

Second, in June we were successful in our bid for the Buenos Ayres block which lies immediately to the west of our existing Palo Seco licences. We have started the acquisition of the Buenos Ayres EIA ahead of the formal award of the licence to progress this strategic option with pace.

Third, we appointed Petrofac to undertake a Concept Screening study for the development of further reserves and resources on our Galeota East Coast asset, using a low cost, more flexible approach than originally envisaged.

Lastly, our maiden interim dividend will be paid in October, representing an important aspect of our capital allocation policy that was designed to provide our shareholders with a cash return, in addition to the growth options currently being pursued.

I look forward to continuing to update shareholders on our further progress at a very busy and exciting time for Trinity".

Enquiries

About Trinity (www.trinityexploration.com)

Trinity is an independent oil production company focused solely on Trinidad and Tobago. Trinity operates producing and development assets both onshore and offshore, in the shallow water West and East Coasts of Trinidad. Trinity's portfolio includes current production, significant near-term production growth opportunities from low-risk developments and multiple exploration prospects with the potential to deliver meaningful reserves/resources growth. The Company operates all of its ten licences and, across all of the Group's assets, management's estimate of the Group's 2P reserves as at the end of 2022 was 17.96 mmbbls. Group 2C contingent resources are estimated to be 48.88 mmbbls. The Group's overall 2P plus 2C volumes are therefore 66.84 mmbbls.

Trinity is quoted on AIM, a market operated and regulated by the London Stock Exchange Plc, under the ticker TRIN.

Qualified Person's Statement

The technical information contained in the announcement has been reviewed and approved by Mark Kingsley, Trinity's Chief Operating Officer. Mark Kingsley (BSc (Hons) Chemical Engineering, Birmingham University) has over 35 years of experience in international oil and gas exploration, development and production and is a Chartered Engineer.

Disclaimer

This document contains certain forward-looking statements that are subject to the usual risk factors and uncertainties associated with the oil exploration and production business. Whilst the Group believes the expectation reflected herein to be reasonable in light of the information available to it at this time, the actual outcome may be materially different owing to macroeconomic factors either beyond the Group's control or otherwise within the Group's control.

Summary of 2023 half-year performance

OPERATIONAL REVIEW

The Group achieved net sales of 2,861 bopd in H1 2023 (H1 2022: 2,974 bopd). Investment into production related activities such as RCPs, workovers and swabbing, together with the already automated wells enabled the Company to maintain a half year production rate broadly in line with H1 2022.

Annual and Half Year Sales by Region

Onshore operations

· H1 2023 average net sales were 1,512 bopd, a 10.4% decrease on 2022 (H1 2022 1,688 bopd). This movement is attributed to expected natural decline coupled with deferral in volumes due to an unplanned electrical interruption, which caused temporary shut in for certain key wells in Q2 2023. Trinity continues to progress its automation initiative to minimise the effects of electrical shutdowns. A total of 54 WOs and reactivations were completed in H1 2023 (H1 2022: 43) in conjunction with 3 RCPs completed in H1 2023 (H1 2022: 11).

The H2 2023 work programme involves the progression of 4 RCPs and ongoing base management via WOs, reactivations and swabbing across all onshore fields.

East Coast operations

· H1 2023 average net sales was 1,011 bopd (H1 2022: 1,037 bopd) an 2.5% decrease. The decrease in sales levels was as a result of a combination of the impact of the Trintes Bravo generator fire, mechanical failures of downhole pumps requiring workovers, and delays to planned remedial platform topside work which impacted the timing of returning the wells to production. A total of 7 WOs were undertaken during H1 2023 (H1 2022: 13 WOs).

H2 2023 work programme will include routine WOs and reactivations.

West Coast operations

· H1 2023 average net sales were 338 bopd (H1 2022: 249 bopd). The 35.7% increase in sales was the result of the successful reactivation of ABM-151 and the continued stabilization of swabbing production and stabilisation of the field's production. There was 1 WO conducted during this period (H1 2022: three WOs), and the reactivation of ABM-151 produced at an average rate of 130 bopd over the entire period.

H2 2023 work programme is expected to include continued stabilisation of ABM-151, ongoing base management via WOs, and swabbing operations.

H1 2023 Key Performance Indicators

The Group was profitable in H1 2023 under Alternative Performance Measures ("APM") and IFRS basis. Lower oil price realisations and relatively stable net sales volumes resulted in a 30% decrease in Revenues to USD 33.8 million (H1 2022: USD 48.5 million) and a 19% decrease in Adjusted EBITDA Note 20 in the financial statements to USD 10.4 million (H1 2022: USD 12.8 million). The Period-end cash balance was USD 11.3 million (H1 2022: USD 15.0 million) marginally lower from the opening position at the start of the period of $12.1 million. A summary of the period-on-period operational and financial highlights are set out below:

Notes:

1. Realised price: Actual price received for crude oil sales per barrel ("bbl").

2. Average net sales: This refers to average sales attributable to Trinity per day for all operations; lease operatorships, farm-out operations and joint ventures.

3. Adjusted EBITDA: Operating Profit before Taxes for the period, adjusted for Depreciation, Depletion & Amortisation ("DD&A") and other non-cash expenses, namely Share Option Expenses, Impairment of Financial Assets, FX Gains/Losses and Fair Value Gains/Losses on Derivative financial instruments. Adjusted EBITDA for 2021 updated to include Covid-19 Expense

4. Adjusted EBITDA (USD/bbl): Adjusted EBITDA/sales volume over the Period.

5. Adjusted EBITDA Margin (%): Adjusted EBITDA/Revenues.

6. Adjusted EBIDA after Current Taxes: Adjusted EBITDA less Supplemental Petroleum Taxes ("SPT"), Petroleum Profits Tax ("PPT") and Unemployment Levy ("UL").

7. Group operating break-even: The realised price/bbl where the Adjusted EBITDA/bbl for the Group is equal to zero.

8. Net cash plus working capital surplus: Current Assets less Current Liabilities (other than Derivative financial asset / liability and Provision for other liabilities).

FINANCIAL REVIEW

Income Statement Analysis

Operating Revenues

Operating revenues of USD 33.8 million (H1 2022: USD 48.5 million) decreased due to lower realised oil prices and marginally declining production volumes sold in the Period.

Operating expenses (excluding Non-cash items)

Operating expenses (excluding non-cash items) of USD (23.4) million (H1 2022: USD (35.7) million) comprised:

· Royalties of USD (9.7) million (H1 2022: USD (16.2) million), mainly due to lower average oil prices and marginal decrease in sales volume.

· Production costs ("Opex") of USD (10.4) million (H1 2022: USD (9.5) million), increased driven by supply chain increases, increased repairs and maintenance activities across the Group's assets including supporting labour to complete these activities.

· G&A expenditure of USD (3.3) million (H1 2022: USD (3.6) million), mainly due to lower consultancy fees incurred and levies driven by lower oil prices.

· Realised derivative expense of nil. The Group is unhedged, all hedging instruments expired on 31 December 2022 (H1 2022: (6.0) million on account of effective hedging instruments during that period and high oil prices).

· COVID-19 related costs nil (H1 2022: USD (0.4) million).

Non-cash operating expenses

Non-cash operating expenses comprised:

· Depreciation, Depletion and Amortisation ("DD&A") charges of USD (4.5) million (H1 2022: USD (3.9) million).

· Unrealised derivative (expenses)/income nil (H1 2022: USD (3.2) million comprising the movement in the fair valuation of effective crude oil derivatives during the period). There are no hedging instruments effective for 2023.

· Share option expense USD (0.3) million (H1 2022: USD (0.3) million).

· Foreign exchange gain USD 0.1 million (H1 2022: USD 0.0 million).

Operating Profit Before Supplemental Petroleum Taxes ("SPT")

The operating profit before SPT for the Period amounted to USD 5.8 million (H1 2022: USD 5.4 million). The increase is mainly due to a combination of lower revenues, no derivative expenses in 2023, lower taxes and levies due to lower oil prices in 2023 and effective cost management.

SPT

The Group incurred SPT charges in relation to its offshore assets in H1 2023 of USD (3.3) million (H1 2022: (5.0) million), on account of the realised oil price being higher than USD 50.0/bbl throughout the Period. The onshore assets did not incur any SPT liability as the realised price was below the SPT threshold of USD 75.0/bbl and there is an amount of unused Investment Tax Credit ("ITC") of USD 1.8 million which will be carried forward for future use, limited to a one-year period. SPT is classified as "operating expenses" rather than "income taxation" under IFRS.

Exceptional items

Exceptional items charge of USD (0.4) million (H1 2022: USD (0.0) million) relates to:

· USD (0.3) million incidental one-off costs due to the Cyber incident which occurred in December 2022.

· USD (0.1) million costs were incurred in the Period due to the Trintes Bravo fire incident which occurred in H1 2023.

Net Finance Cost

Net finance costs for the period of USD (1.1) million (H1 2022: USD (0.6) million), comprising:

· Unwinding of the discount on the decommissioning provision of USD (1.1) million (H1 2022: USD (0.6) million) mainly due to the increase in the decommission provision from H1 2022.

Income Taxation

Taxation charge for the period was USD (0.4) million (H1 2022: USD (0.1) million), comprising:

· Petroleum Profits Tax ("PPT") of USD (0.3) million (H1 2022: USD (2.1) million).

· Unemployment Levy ("UL") of USD (0.1) million (H1 2022: (0.8) million).

· Deferred tax assets of nil (H1 2022: USD 2.8 million credit), refer to note 16.

As at 30 June 2023, the Group had unrecognised tax losses of USD 199.3 million (H1 2022: 207.4 million) which have no expiry date.

Total Comprehensive Income/(Loss)

Total Comprehensive Income for the Period was USD 0.7 million (H1 2022: USD (0.7) million loss). 

Cash Flow Analysis

Opening Cash Balance

Trinity began the year with an initial cash balance of USD 12.1 million (2022: USD 18.3 million).

Net cash inflow from operating activities

Net cash inflow from operating activities was USD 6.3 million (H1 2022: USD 2.9 million):

· Operating activities for H1 2023 generated an operating cash flow before changes in working capital and income taxes of USD 6.8 million (H1 2022: USD 7.7 million).

· Changes in working capital resulted in a net decrease of USD 0.0 million (H1 2022: net decrease of USD (1.9) million).

· Income Taxation - PPT and UL paid USD (0.5) million (H1 2022: USD (2.9) million) resulting from lower taxable profits resulting from lower oil price.

Cash outflow from investing activities

Investing cash outflows for H1 2023 was USD (5.6) million (H1 2022: USD (5.7) million) which included infrastructure investments across Trinity's assets, production capex including RCPs in H1 2023, ABM-151 reactivation, drilling planning and long lead investment for Jacobin-1 exploration well, subsurface capex and exploration and evaluation capex.

Net cash outflow from financing activities

The financing cash outflow for H1 2023 was USD (1.6) million, comprising USD (0.7) million repayment of bank overdraft, USD (0.3) million cash payment on leases and USD (0.6) million in purchase of treasury shares.

Closing Cash Balance

Trinity's cash balance at 30 June 2023 was USD 11.3 million (31 December 2022: USD 12.1 million).

Statement of Financial Position Analysis

Non-current Assets

Non-current assets increased by USD 4.4 million to USD 101.3 million at H1 2023 from USD 96.9 million at YE 2022:

· Property, plant and equipment USD 44.1 million (YE 2022: USD 45.0 million) decrease of USD 0.9 million mainly relates to USD 3.2 million additions less DDA of USD 4.1 million.

· Intangible assets USD 38.8 million (YE 2022: USD 33.5 million) increase of USD 5.3 million mainly relates to accrued additions for Jacobin-1 Well less amortization of USD 0.1 million (YE 2022: USD 0.2 million).

· Deferred tax asset of USD 12.5 million (YE 2022: USD 12.5 million).

· Abandonment fund and performance bond of USD 5.3 million (YE 2022: USD 5.1 million).

· Right of use asset of USD 0.6 million (YE 2022: USD 0.8 million) relating to motor vehicles, office building, staff house and office equipment leases that met the recognition criteria of a lease under IFRS 16.

Current Assets

Current assets decreased by USD 1.2 million to USD 26.2 million at H1 2023 from USD 27.4 million at YE 2022:

· Cash and cash equivalents of USD 11.3 million (YE 2022: USD 12.1 million). Reduction of USD 0.8 million mainly due to repayment of overdraft facility (USD 0.7 million) and a combination of strong operating cash generation being impacted by increased capex, including the initial cost to support the drilling of Jacobin-1.

· Trade and other receivables of USD 9.8 million (YE 2022: USD 10.7 million).

o  Trade and other receivables (less impairment) of USD 4.1 million (YE 2022: USD 4.6 million)

o  VAT recoverable of USD 4.2 million (YE 2022: USD 4.5 million).

o  Prepayments and other receivables (less impairment) of USD 1.5 million (YE 2022: USD 1.6 million).

· Inventories USD 5.1 million (YE 2022: USD 4.6 million). The increase is mainly due to added inventories to support the Jacobin-1 well.

Non-current Liabilities

Non-current liabilities increased to USD 55.6 million at H1 2023 from USD 54.7 million at YE 2022, primarily due to:

· Provision for other liabilities (predominantly decommissioning costs) of USD 53.5 million (YE 2022: USD 52.5 million). The increase is mainly due to unwinding of the discount rate at H1 2023.

· Deferred tax liability USD 1.9 million (YE 2022: USD 1.9 million).

· Lease liability of USD 0.2 million (YE 2022: USD 0.3 million).

Current Liabilities

Current liabilities increased to USD 15.4 million at H1 2023 (YE 2022: USD 13.5 million) primarily due to:

· Trade and other payables of USD 12.8 million (YE 2022: USD 9.9 million).

o  Trade payables of USD 3.7 million (YE 2022: USD 2.6 million).

o  Accruals and other payables of USD 7.6 million (YE 2022: USD 5.1 million) mainly increased due to the Jacobin-1 Well costs accrued.

o  SPT payable of USD 1.5 million (YE 2022: USD 2.2 million).

· CIBC FirstCaribbean bank overdraft facility USD 2.0 million (YE 2022: USD 2.7 million). The reduction is mainly due to partial repayment of overdraft facility.

· Lease liability of USD 0.4 million (YE 2022: USD 0.6 million).

Cash plus Working Capital Surplus

Cash plus working capital surplus calculated as Current Assets less Current Liabilities (excluding Provisions for other liabilities and Derivative assets/(liabilities)) decreased by 23% to USD 10.9 million (YE 2022: USD 14.2 million).

Reconciliation between Adjusted EBIDA after Current Taxes and Cash Inflow from Operating Activities

APPENDIX 1: TRADING SUMMARY

A summary of realised price, production, royalties, Opex, G&A and operating break-evens expenditure metrics is set out below:

Trading Summary Table

Notes: Group consolidated operating break-even: The realised price/bbl for which the adjusted EBITDA/bbl exclusive of net derivative expense/income for the Group is equal to zero.

STATEMENT OF DIRECTORS' RESPONSIBILITY

The Directors confirm that this condensed consolidated interim financial information has been prepared in accordance with International Accounting Standards ("IAS") and that the interim management report includes:

· an indication of important events that have occurred during the first six (6) months and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six (6) months of the financial year; and

· the management report, which is incorporated into the directors' report, includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and

· material related party transactions in the first six (6) months and any material changes in the related-party transactions described in the last annual report.

A list of the current Directors is maintained on the Trinity Exploration & Production plc website www.trinityexploration.com.

By order of the Board

Jeremy Bridglalsingh

Chief Executive Officer

27 September 2023

INDEPENDENT REVIEW REPORT TO TRINITY EXPLORATION & PRODUCTION plc

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2023 is not prepared, in all material respects, in accordance with UK adopted International Accounting Standard 34 and the London Stock Exchange AIM Rules for Companies.

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2023 which comprises of Condensed Consolidated Statement of Comprehensive Income, Condensed Consolidated Statement of Financial Position, Condensed Consolidated Statement of Changes in Equity and Condensed Consolidated Cash Flow Statements and notes to the Condensed Consolidated Interim Financial Statements.

Basis for conclusion

We conducted our review in accordance with International Standard on Review Engagements (UK) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" ("ISRE (UK) 2410"). A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with UK adopted international accounting standards. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with UK adopted International Accounting Standard 34, "Interim Financial Reporting".

Conclusions relating to going concern

Based on our review procedures, which are less extensive than those performed in an audit as described in the Basis for conclusion section of this report, nothing has come to our attention to suggest that the directors have inappropriately adopted the going concern basis of accounting or that the directors have identified material uncertainties relating to going concern that are not appropriately disclosed.

This conclusion is based on the review procedures performed in accordance with ISRE (UK) 2410, however future events or conditions may cause the group to cease to continue as a going concern.

Responsibilities of directors

The directors are responsible for preparing the half-yearly financial report in accordance with the London Stock Exchange AIM Rules for Companies which require that the half-yearly report be presented and prepared in a form consistent with that which will be adopted in the Company's annual accounts having regard to the accounting standards applicable to such annual accounts.

In preparing the half-yearly financial report, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

Auditor's responsibilities for the review of the financial information

In reviewing the half-yearly report, we are responsible for expressing to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report. Our conclusion, including our Conclusions Relating to Going Concern, are based on procedures that are less extensive than audit procedures, as described in the Basis for Conclusion paragraph of this report.

Use of our report

Our report has been prepared in accordance with the terms of our engagement to assist the Company in meeting the requirements of the rules of the London Stock Exchange AIM Rules for Companies for no other purpose. No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability.

Matt Crane (Senior Statutory Auditor)

For and on behalf of BDO LLP, Statutory Auditor

Chartered Accountants

London, UK

27 September 2023

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).

Trinity Exploration & Production plc

Condensed Consolidated Statement of Changes in Equity

for the period ended 30 June 2023

Trinity Exploration & Production plc

Notes to the Condensed Consolidated Financial Statements for the period ended 30 June 2023

1 Background, Accounting Policies and Estimates

Background

Trinity Exploration & Production plc ("Trinity") is incorporated and registered in England and trades on the Alternative Investment Market ("AIM"), a market operated by London Stock Exchange plc. Trinity ("the Company") and its subsidiaries (together "the Group") are involved in the exploration, development and production of oil reserves in Trinidad and Tobago (T&T).

Basis of Preparation

These condensed consolidated interim financial statements for the six months ended 30 June 2023 have been prepared in accordance with international accounting standards as adopted in the United Kingdom. The condensed consolidated interim financial statements should be read in conjunction with the annual financial statements for the year ended 31 December 2022, which have also been prepared in accordance with IFRS.

The results for the six months ended 30 June 2023 and 30 June 2022 have been reviewed, not audited, and do not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2022 were approved by the board of directors and delivered to the Registrar of Companies. The report of the independent auditors on those accounts was unqualified. The interim report has been reviewed by the auditor.

Going Concern

The Board has adopted the going concern basis in preparing the condensed consolidated interim financial statements.

In making their going concern assessment, the Board have considered the Group's current financial position, budget and cash flow forecast. The base case cashflow forecast at a minimum contemplated a 12-month outlook illustrating the ability of the Group to operate on a going concern basis one year post completion of the interim review. The base cashflow forecast demonstrated that the Group will remain with a positive cash flow position, and as such being able to meet its liabilities as they fall due.

The base case cashflow forecast was prepared considering the follow:

· Future oil prices assumed to be in line with the forward curve prevailing at 1 September 2023, with an average Brent oil price of USD 87.15/bbl in the period September to December 2023. The Brent forward price curve applied in the cash flow forecast starts at USD 88.20/bbl in September 2023, and fluctuates to USD 86.12/bbl in December 2023 through to USD 80.72/bbl in December 2024.

· Average forecast production for the period 1 September 2023 to December 2023 of 2,809 bopd and for the 12 months to December 2024 of 2,719 bopd with production being maintained by RCPs, WOs and swabbing activities and Jacobin-1 well a modest annualised average 80 bopd in 2024.

· SPT not being incurred on the onshore assets in H2 2023 and 2024 due to lower realised oil prices than the SPT threshold for small onshore operators USD 75.0/bbl.

· Maintained overdraft at USD 2.0 million.

· Trinity continuing to progress planned growth and business development opportunities.

Management considered a separate stressed scenario including:

· the effect of reductions in Brent oil prices at $60.0/bbl being sustained across the forecast period, noting that the base case pricing is in line with market prices; and

· the compounded impact of a reduction in production by 10%.

The stressed case cash flow forecast allows for the impact of mitigating actions that are within the Group's control which include:

· Reducing non-core and discretionary opex and administrative costs across the forecast period.

· Reducing discretionary capital expenditure and capital returns over the forecast period.

The stressed case cashflow forecasts demonstrate that the Group's cash balances are maintained under such scenarios and as such are sufficient to meet the Group's obligations as they fall due.

As a result, at the date of approval of the interim financial statements, the Board have a reasonable expectation that the Group has sufficient and adequate resources to continue in existence for at least twelve months post approval of these financial statements and is poised for continued growth. For this reason, the Board have concluded it is appropriate to continue to adopt the going concern basis of accounting in the preparation of the condensed consolidated interim financial statements.

Accounting policies

The accounting policies adopted are consistent with those of the previous financial year 31 December 2022 and corresponding interim reporting period, except for those set out in the standards below:

- New standards and amendments effective for periods beginning on 1 January 2023 and therefore relevant to these condensed consolidated interim financial statements

· IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2 (Amendment - Disclosure of Accounting Policies)

· IAS 8 Accounting policies, Changes in Accounting Estimates and Errors (Amendment - Definition of Accounting Estimates)

· IAS 12 Income Taxes (Amendment - Deferred Tax related to Assets and Liabilities arising from a Single Transaction)

Cash and cash equivalents

For the purpose of presentation in the condensed consolidated statement of cash flows, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, and other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash.

Trade receivables

Trade receivables are amounts due from the Group's sole customer for crude oil sold in the ordinary course of business. They are generally due for settlement within 30 days and therefore are all classified as current. Trade receivables are recognised initially at the amount of consideration that is unconditional unless they contain significant financing components, when they are recognised at fair value.

Impairment of financial assets

The Group applied the simplified approach to determine impairment of its trade and other receivables. The simplified approach requires expected lifetime losses to be recognised from initial recognition of the receivables. This involves determining the expected loss rates using a provision matrix that is based on the Group's historical default rates observed over the expected life of the receivables and adjusted for forward looking estimates. This is then applied to the gross carrying amount of the receivables to arrive at the loss allowance for the period.

Financial assets recognition of impairment provisions under IFRS 9 is based on the expected credit losses ("ECL") model. The ECL model is applicable to financial assets classified at amortised cost and contract assets under IFRS 15: Revenue from Contracts with Customers. The measurement of ECL reflects an unbiased and probability weighted amount that is available without undue cost or effort at the reporting date, about past events, current conditions and forecasts of future economic conditions.

Trade and other payables

Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest rate method.

Segment Information

Management have considered the requirements of IFRS 8 Operating Segments, in regard to the determination of operating segments, and concluded that the Group has only one significant operating segment being the exploration and development, production and extraction of hydrocarbons.

All revenue is generated from crude oil sales in Trinidad and Tobago ("T&T") to one customer, Heritage Petroleum Company Limited ("Heritage"). All non-current assets of the Group are located in T&T.

Derivative financial instruments and hedging activities

The Company has not applied hedge accounting and all derivatives are measured at fair value through profit and loss.

Estimates

The preparation of condensed consolidated interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates.

In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 December 2022. Reference can be made note 3 (Critical Accounting Estimates and Judgements), in the Annual Report December 2022.

2 Financial risk management

Financial risk factors

The Group's activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk. The Group's overall risk management program seeks to minimise potential adverse effects on the Group's financial performance.

The condensed consolidated interim financial statements do not include all financial risk management information and disclosures required in the annual financial statements; they should be read in conjunction with the Group's annual financial statements for 2022, which can be found at www.trinityexploration.com. 

Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and short-term funds and the availability of funding through an adequate amount of committed credit facilities. Management monitors rolling forecasts of the Group's liquidity and cash and cash equivalents on the basis of expected cash flow. As at 30 June 2023, the Group held cash at bank of $11.3 million (2022: $12.1 million).

Credit risk

Credit risk arises from Cash and Cash equivalents, deposits with banks and financial institutions, as well as credit exposures to customers, including outstanding receivables. For banks and financial institutions, management determines the placement of funds based on its judgement and experience to minimise risk.

All sales are made to a state-owned entity -Heritage.

3 Derivative expense  

All derivative instruments expired at 31 December 2022. The Group does not have any derivative instruments in place for 2023.

4 Impairment

Management performed an indicator of impairment assessment at 30 June 2023. Crude oil price forecast were noted to be depressed at 30 June 2023 which showed a potential impairment of USD 1.6 million. However, oil prices recovered post 30 June 2023. Sensitivity analysis on revised oil price forecast carried out using 1 September 2023 pricing curve showed there were no material impairment charges to the Group's assets. Subsequent to 1 September 2023, oil prices continue to trend upwards and as such no impairment indicators were identified at H1 2023. Another impairment assessment will be performed at the year-end.

5 Exceptional Items

Items that are material either because of their size, their nature, or that are non-recurring are considered as exceptional items and are presented within the line items to which they best relate. During the current period, exceptional items as detailed below have been included in the condensed consolidated statement of comprehensive income. An analysis of the amounts presented as exceptional items in these condensed interim financial statements are highlighted below.

· ICT incident cost captures expenditures related to the response on the cyber incident which occurred in December 2022.

· Bravo Fire incident costs related to initial costs incurred in responding to the incident in H1 2023.

6 Income taxation expense

Current tax: The Group's effective tax rate varies based on jurisdiction.

Deferred tax:

The Group has a deferred tax asset of $12.5 million on its condensed consolidated statement of financial position which is the amount it expects to recover within 3 years based on the expected taxable profits generated by Group companies over that period. 

7 Finance income

Finance costs

8 Property, Plant and Equipment

9 Leases

(i) Amounts recognised in the condensed consolidated statement of financial position.

The condensed consolidated statement of financial position shows the following amounts relating to leases:

The ROU assets relate to motor vehicles, office building, staff house and office equipment leases that met the recognition criteria of a Lease under IFRS 16.

(ii) Amounts recognised in the condensed consolidated statement of comprehensive income.

The condensed consolidated statement of comprehensive income shows the following amounts relating to leases: