Oil price, Trinity E&P, Sundry- Kuwait Energy-Velocys-Bowleven-Hunting-Plexus-And finally…

WTI $52.61 -$1.22, Brent $55.08 -$1.28, Diff -$2.47 -6c, NG $2.80 n/c

Oil price

Not a good day for the oil price as the bears took command although probably temporarily. A strong dollar didnt help as thoughts of a rate rise swirled around the market but the real culprit was Russia. The news that their production in February was 11.11m b/d in February, unchanged on January and only a third of the way to the promised quota reduction was seen as bad news, lets see what the CFTC numbers look like later. News had been better about Opec adherence so it’s only a matter of time before happier days are here again.

Trinity Exploration & Production

It has been a long hard journey for Trinity recently and as a long term fan of the company, its current management and of Trinidad as a prolific oil and gas province I was very pleased to see its Lazarus like recovery. I was even more pleased to be asked in for a run through of the company early in their process of getting back on the road.

Trinity itself has been around for a long time and indeed was able to start up as an operator of assets both onshore and offshore and from East to West coasts of the island. It is not wrong to suggest that as an early mover it managed to secure some of the best acreage in the province and that it was this that meant that when things went so wrong it was able to rely on its production to keep it going. The problems arose in February 2013 when it acquired Bayfield Energy with its main asset the Galeota block which contained the Trintes field that was to cause so much grief. Trinity faced a perfect storm of problems at that time, operational problems at Trintes, cost overruns on the well offshore, difficult to manage debt and of course the oil price plunging around them and it did indeed look like the end was nigh. There was little choice but to enter the Strategic Review and Formal Sales Process in April 2015. The good news is that Trinidad has its own type of Chapter 11 and in August TRIN entered into a proposal scheme under that umbrella. Without this it would have been impossible to fend off Citi and other creditors and gave the company some six months of breathing space, indeed it appears that the court system and the Ministry of Finance were of significant help.

The good news was that as mentioned above TRIN has a formidable bunch of assets that are described as ‘nothing but robust’ and were able to be kept running with virtually no spending but with the help of what seems like a fantastic team of dedicated field workers. Indeed it was the fact that the assets remained the same but the balance sheet that was dreadful that meant that the dream lived on. Senior management was pared brutally although to some not before time, and costs were cut across the board although operational staff tended to be kept.

With six months clear space the management was able to put together proposals to creditors, senior lenders and trade creditors and of course a way of paying back the Government was also found. Once all this was sorted out with a two year convertible and a $15m fundraising the shares re-listed in January and have already started to perform well. It is also worth noting that as a result of this process the management now have a holding of 26.2%, a genuinely large amount of skin in the game and with serious participation in the most recent round.

Trinity looks to be set very soundly indeed, with the existing cash balances, proceeds from the placing and internal cash generation enabling a return to drilling I can see considerable upside. Production should increase both onshore and offshore and with costs a fraction of what they were these will be very profitable barrels. The 2P reserves plus 2C contingent resources are of the order of 41 mmboe (21 mmboe and 20 mmboe) and there is considerable potential upside in the Galeota anticline where there is a ┬áSTOIIP of 700 mmstbbls to be further appraised and developed. As I have mentioned above, the company will start a modest drilling programme, firstly onshore, which should add at least 400 b/d and also offshore which is expected to add another 400 b/d. I could write more but not now, Trinity looks like it has come through its troubles and with its high quality, high value barrels and plenty of scope to grow the company through efficiency gains and economies of scale, Bruce and his team have done a great job, I hope that they remain independent long enough for all shareholders to benefit. You never know, the bucket list may beckon…

Sundry

Kuwait Energy is scheduling an IPO in London and has apparently already appointed BAML and Numis to act for them…

Velocys has confirmed its agreement with Morimatsu to be supplier of modular design, engineering and fabrication services to the company.

Bowleven has said that Glass Lewis and Co, an independent corporate governance firm has also advised voting against the COC resolutions at the upcoming meeting.

Hunting results yesterday were in line with expectations, whilst I like the Exxon tie-up and the scope onshore I was quite surprised hoe bearish Dennis was about offshore which isnt profitable anywhere in the world at $50…

Plexus gained a new contract in the North Sea, a new customer this time in Nexen.

And finally…

The big game in the Prem this weekend is at Anfield where the HubCap Stealers take on the Gooners, elsewhere its Spurs v the Toffees and the Cherries go to the Theatre of Dreams. Chelski go to the London stadium to play the Hammers on Monday. With Mike Ashley having bought a stake in Agent Provocateur it brings a whole new meaning in the Newcastle dressing room when he says get all your kit on boys…

A huge night of boxing tomorrow as David Hay is 1-5 to beat Tony Bellew, too short even though he undoubtedly has the power.

And its the UFC 209 in Las Vegas, Nevada at the weekend as well…

Finally in one of the longest tie breaks in recent history Muzza managed to win his second set 20-18…

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