Given the energy crisis gripping Europe currently, as the Russian war in Ukraine continues to impact supplies, the South Akcakoca Sub-Basin (SSAB) gas field, offshore Turkey, has become a critical domestic source of natural gas.
Trillion Energy International Inc. (CSE:TCF, OTCQB:TRLEF), a Canada and US-listed oil and gas producer is 49% owner of the SASB field, one of the Black Sea’s first and largest scale natural gas development projects, with a total license area of 12,385 hectares in a water depth of less than 100 metres.
Trillion also has a 19.6% (except three wells with 9.8%) interest in the Cendere oil field in the Black Sea; as well as a 100% interest in 42,833 hectares oil exploration block covering the northern extension of the prolific Iraq/ Zagros Basin; and in Bulgaria, owns the Vranino 1-11 block, a prospective unconventional natural gas property.
Trillion came to own an interest in the SASB project through the acquisition in 2017 of Park Place Energy Turkey (PPETL), which had a 36.75% stake. Trillion Energy acquired a further 12.25% working interest in the project in January 2018 to increase its total working interest to 49%. Türkiye Petrolleri Anonim Ortaklığı (TPAO) owns the remaining 51% stake in the field which is licensed until 2032, and renewable until 2042.
PPETL commenced production from phases one and two of the SASB between 2007 and 2011, and the field has produced more than 42 billion cubic feet of gas (BCF) since initial development.
Development of the first two phases of the SASB gas project involved an investment of $608 million. Trillion Energy plans to develop the third and fourth phases of the field.
All the SASB well platforms are connected to shared processing facilities at the Cayagzi gas plant through a 25 kilometre-long pipeline. The plant can process up to 75 million cubic feet (MCF) of gas a day. The processed gas is transported via an 18.6 kilometre-long onshore pipeline, which is tied-back to the national gas transmission network operated by state-owned BOTAS Petroleum Pipeline Corporation.
News flow for Trillion has been productive so far in 2023, with new wells drilled, others flow-tested, and a funding completed.
Earlier this month, Trillion Energy announced that drilling at the Bayhanli 2 well had reached 3,425 metres total measured depth and a true vertical debt of 1,231 metres, while discovering an “abundance” of gas pay. Trillion spudded Bayhanli-2, its fifth well at the SASB field, in early April.
The company said initial petrophysical analysis had indicated about total 43 metres of gas pay in six Sand Units of Akcakoca Member. Completion and flow testing will occur once the well is perforated, and Bayhanli 2 is expected to start generating revenue at the end of May 2023, Trillion said.
“The Bayhanli 2 well gives Trillion Energy 5 wells for 5 activities now at SASB,” CEO Arthur Halleran said in a statement. “We are in the process of evaluating how to maximize the gas production from each well as more wells are brought into production."
At the end of March, Trillion said flow testing of the Guluc-2 natural gas well at SASB demonstrated flow rates peaking at a rate of 16.35 MCF of natural gas per day and shut-in pressure of 2,000 pounds per square inch (PSI). The company said 5.5 metres of the lower natural gas sands in the Guluc-2 well were perforated and tested on March 28. The well - the company’s fourth successful gas well - will now enter long-term production with an initial production rate of 6 MCF per day, it added.
Also in March, Trillion announced positive flow test results for the West Akcakoca-1 natural gas well at SASB. The company said the West Akcakoca well two lower 'D' sands, with a combined total of 7 metres of natural gas pay, were perforated on March 24, 2023. These two zones were flow tested at a rate of 5.9 MCF per day and shut-in pressure was 1620 psi. The well will now enter long-term production. Roughly 48 metres of gas pay remains to be perforated in the future and will ensure a long-term production horizon for the well, it noted.
And at the end of January, Trillion kicked off its 3D seismic reprocessing project for the SASB gas field. The company is hoping to create a superior model of the field’s complex geology by reprocessing with advanced pre-stack depth migration (PSDM) and incorporating time-depth data from newer wells.
Trillion told investors that there have been “vast improvements” in seismic data processing algorithms since 2004, when the last 3D seismic data was shot by WesternGeco. The existing 3D seismic data covers 223 square kilometres and includes the SASB block. The latest data reprocessing was scheduled to commence early March 2023 and should take five to six months to complete.
On the reserves front, at the start of April, Trillion announced the results of its January reserve report update for the SASB gas field which revealed a significant increase due to additional discoveries. Trillion’s share of proved and probable conventional natural gas reserves (P2) in the field increased to 63.3 BCF up from 48.6 BCF at the end of 2022, an increase of 30%.
A third-party December 31, 2022, year-end reserve report, released in March, also showed very substantial increases in reserves and values during the year. The net present value of proved and probable (P2) natural gas reserves (NPV10%) increased to US$432 million net to Trillion, up from US$82 million at the end of 2021, a 426% year-over-year (Y-o-Y) increase. The US$432 million net NPV 10 value represents US$1.12 per common share; Proved and probable conventional natural gas reserves (P2) increased to 48.6 BCF up from 20.1 BCF in 2021, an increase of 141% Y-o-Y.
Funding-wise, in April, Trillion closed a previously announced $15 million offering under an agreement with Eight Capital, which consisted of convertible debenture units, each containing a convertible debenture worth $1,000 and 1,667 common share purchase warrants.
Trillion said it planned to use the net proceeds to fund working capital and capital expenditures related to the development of assets in Turkey, as well as for general corporate purposes.
Announcing the fundraise, Halleran said: “Securing this financing from a small group of strategic long-term shareholders is a strong vote of confidence in Trillion’s ability to grow production and cash flow for the benefit of all shareholders.”
Unsurprisingly, analysts at Eight Capital are bullish on the company and in a note to clients on March 23, following a visit to see the company’s marketing tour in person where they came away impressed, they reiterated a ’Buy’ rating and C$1.50 price target on Trillion shares.
“Investors are largely keen to see an acceleration of growth,” analysts said of the tour. “[Trillion] was able to demonstrate the optionality that comes with the free cash flow generation from its current portfolio of reserves and resources that can be put towards on-block and offblock exploration.”
Trillion stock currently change hands for C$0.40 on the Canadian Stock Exchange, giving the company a market capitalisation of around C$152 million, so the analysts clearly see some strong upside.
Contact the author at jon.hopkins@proactiveinvestors.com