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Trinity Exploration & Production PLC: THE INVESTMENT CASE

Trinity Exploration & Production tipped to rise 130% as it emerges from tough period

Cantor Fitzgerald starts off its coverage of the junior oil firm with a ‘buy’ recommendation.
oil well onshore
A new investment programme can see production rise to 3,000 bopd, the broker says

Trinity Exploration & Production PLC (LON:TRIN) shares could rise more than 130%, according to Cantor Fitzgerald, which says the “shackles are off” for now off.

It has starting coverage of the junior oil firm with a ‘buy’ recommendation.

The broker’s upbeat assessment comes after what analyst Sam Wahab describes as a “protracted and difficult period” as its indebtedness had inhibited the company’s ability to execute its operational strategy.

That situation was resolved with a refinancing at the turn of this year. The restructuring reduced the group’s debt position to US$9.2mln from US$35.5mln, and left Trinity with a net cash position of around US$4.5mln.

“Trinity has successfully emerged with a cleaner balance sheet providing necessary financial base to underpin its high-margin production growth strategy in Trinidad,” Wahab said in a note.

He added: “Trinity’s balance sheet is now significantly de-leveraged having significantly reduced its longer-term liabilities and creditors which previously weighed heavily on the company’s financial position.

“We believe Trinity is now sufficiently positioned to target material production growth through its current selection of high quality drilling locations across its core onshore and east coast acreage.”

Looking towards new growth, the analyst says that even a constrained investment programme, just re-initiating onshore drilling strategies, would see production rise to 3,000 barrels of oil per day - from the current level of 2,500 bopd - within a 12 month period.

Restarting offshore development, however, can add a further 400 bopd in the next year, according to Wahab.

“Trinity should be generating sufficient free cash flows to reinvest capital for further production growth in the medium term,” he said in a note.

“Longer term, the company could opportunistically build out its asset portfolio through self-funded acquisitions in country where a plethora of smaller private operators and independents are operating.”

The analyst concludes that Trinity offers investors exposure to a high margin cash generative story, which comes with considerable exploration upside potential.

“In the current low oil price environment, and following a successful balance sheet restructuring, the company has prioritised the allocation of its capital to production and development assets to generate material cash flows and compelling economic returns, focusing on extracting value from the ‘low hanging fruit’ in its portfolio,” Wahab said.

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