Cash-strapped Trinity Exploration & Production PLC (LON:TRIN) has been encouraged by early expressions of interest from potential backers after appointing two specialist refinancing advisers.
The company has enlisted the aid of Imperial Capital of New York and Cantor Fitzgerald to seek out supportive institutions after the proposed sale of various assets to Touchstone Exploration fell through, which means that $2.08mln being held in escrow pending closure of the deal will be handed back to Touchstone.
Trinity's cash constraints have been well documented, with its debt repayments having been suspended for almost a year now, but the assets the company has are attractive, even at current oil prices, particularly after the company's Herculean effort to reduce operating and general & administration costs.
“As a result of this effort, the board and management believe that Trinity's core portfolio offers an attractive investment opportunity on the resolution of the current balance sheet constraints,” the company told investors on Monday.
The near-term objective of the company is to conclude a complete refinancing structure that will enable the company to retire its senior debt facilities; reduce other outstanding payables; and provide sufficient capital to maintain its assets and grow production, which will generate cash flow.
Longer-term, upon receipt of financing, the plan is to eventually accelerate and expand its drilling programme across its asset base from a large inventory of existing drilling locations.
“This deep inventory of work-over, re completion and new drilling locations can be targeted on the availability of growth capital,” the Trinidad & Tobago-focused company said.
Trinity was at pains to point out that these drilling locations are all targeting existing proven and probable (2P) reserves and are not subject to the sub-surface risks attached to exploration and appraisal activities, thereby providing a key point of differentiation from a significant percentage of its peer group, many of which are also under-capitalised.
Management said the end-2014 estimate of 2P reserves was 25.3mln barrels of oil equivalent (boe) with group 2C contingent resources of 21.7mln boe.
The company is well positioned for growth with an inventory of high quality drilling locations across its onshore, east coast and west coast acreage and continues its work on completing the development plan for the up-dip development project TGAL, in which it has a 65% interest.
In Monday's update, the group revealed that average net production volumes for 2015 clocked in at 2,896 boe per day, down from 3,603 boepd in 2014, with the decline due to natural depletion, and reflecting the lack of cash available to invest in replacing reserves.
For the first two months of 2016 daily production averaged 2,598 boepd, which was also due to reduced levels of investment as was experienced in 2015.
Contingent upon the availability of funding during the coming year, 2016 net average production is expected to be in the range of 2,500 - 2,800 boepd, with the upper end of the scale reflecting possible improvements should the refinancing materialise.
The company's cash balance at the end of December was $8.3 million; trade and other receivables amounted to $10.6 million; inventories were valued at $4.0 million while it had debt of $13.0 million, trade and other payables of $27.8 million and taxation payable of $23.5 million.
During the year, pre-tax operating expenditures reduced by 33% to $22.0 million from $32.9 million in 2014, while general and administrative (G&A) costs came down by 30% to $10.5 million (2014: $15.0 million).
Further reductions to G&A are in the pipeline with a steady state annual run-rate of $3.7 million being targeted by the year end 2016, which is equivalent to $3.60 a barrel at current production levels.
The group is targeting operating break-even across all fields of below $30/bbl by the end of 2016. Taking just the onshore fields the company owns, break-even levels of less than $15 a barrel by the end of the year are being targeted.