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• Trinity Exploration and Production (LON:TRIN – SUSP) – A Real Shame: There are a number of options that could leave the Company intact, minus the management, and apart from a trade transaction, there is also a possibility of an angel investor group taking a stake, but here again, we do not see reason for valuations to be generous. Whatever happens from here on in, it is clear it will be without generating a return for TRIN’s shareholders.
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Trinity Exploration and Production (LON:TRIN – SUSP) – A Real Shame
Let's be perfectly clear, banks don't want to exercise their rights under a security pledge, they would rather see the monies they are owed repaid, especially on operating oil and gas assets. This is exacerbated in this instance by the tax position, which means that pushing it in to administration will see the government taking the lion’s share of the monies generated. The net outcome is that Citi is unlikely end up with the full principle they are owed, let along the returns they are owed from lending it.
In this instance, it is better for the government and Citi to seek a vend in solution with another operator, and given the thorny problems ahead, a perfect solution would be with an entity already in country.
We wouldn't expect to see the likes of Shell (BG), BP, BHP take these assets on as they are not worth their time, which leaves the smaller independents. We believe that a "zero cost" transaction with one of LGO Energy, Range Resources, Touchstone, etc., makes the best sense, where the overwhelming majority of the free cash flow goes to the main two creditors until such times as they are satisfied, in return for one of the three taking on the asset.
Of the three mentioned above, only two have demonstrated sufficient technical capability to execute such a plan, and potentially, two have the financial capability, and only one is in both camps.
There are a number of options that could leave the Company intact, minus the executive management, and apart from a trade transaction, there is also a possibility of an angel investor group taking a stake, but here again, we do not see reason for valuations to be generous. Whatever happens from here on in, it is clear it will be without generating a return for TRIN’s shareholders.
We may provide a further update on one, or all, of the stories above later today. However, if there is anything that you would like to discuss, please feel free to contact us.