Trinity Exploration & Production : Our Annual Report & Accounts for Year Ended 31 December 2023

Annual Report & Accounts

for the year ended 31 December 2023

Company Number: 07535869

Stock Code: TRIN

Contents 

 

Strategic Report		Financial Accounts
1	Highlights of 2023	54	Consolidated Statement of Comprehensive Income
55	Consolidated Statement of Financial Position
3	Chair & CEO Statement
56	Company Statement of Financial Position
4	Operations Review
57	Consolidated Statement of Changes in Equity
7	Financial Review
58	Company Statement of Changes in Equity
14	Environmental and Social Governance
59	Consolidated Statement of Cash Flows
16	Risk Management and Internal Controls
60	Company Statement of Cash Flows
		61	Notes to the Consolidated Financial Statements
Our Governance
19	Directors' Statement s172		Glossary of Terms
21	Corporate Governance Statement
102	Glossary of Terms
22	QCA Principles
25	Board of Directors
27	Executive Management Team		Company Information
28	Board Activities
105	Company Information
29	Audit Committee Report

1. Technical Committee Report
2. Remuneration Committee Report

1. Directors' Remuneration Report

1. Directors' Report

1. Statement of Directors' Responsibilities
2. Independent Auditor's Report

For more information on

Trinity Exploration & Production visit trinityexploration.com

Annual Report & Financial Statements 2023	1

Highlights of 2023 	Governance
	Strategic Report
Financial Accounts
	Glossary
	Company Information

	Operating Profit Before SPT,
Sales (bopd)	Impairments and Exceptional Items (USD)
2,790	$9.6m
2022 2,975 bopd	2022 19.0 USD million1
Adjusted EBITDA before hedge	Adjusted EBITDA after hedge
costs (APM Result) (USD)	costs (APM Result) (USD)
$19.2m	$19.2m
2022 35.1 USD million	2022 24.7 USD million

Adjusted EBIDA after Current Taxes	Cash generated from continuing
(APM Result) (USD)	operations (USD)
$12.9m	$13.2m
2022 12.3 USD million	2022 12.0 USD million

Cash flow used in investing activities Total year-end cash

(USD)	(USD)
$15.4m	$9.8m2
2022 15.6 USD million	2022 12.1 USD million

Note:

1. Covid 19 expenses in prior year reclassified as operating expenses.
2. Includes overdraft balance of USD 4.0m (2022: USD 2.7m)

Note:

Refer to the Financial Review Section 7 to 13 for additional information.

2	Trinity Exploration & Production plc

Highlights of 2023 (continued)

2P Reserves + 2C Resources*

Total Year End

	2023	2022
	mmstb	mmstb
2p	12.91	17.96
2C	38.68	48.88
Total	51.58	66.84

• 2023 Management estimates for reserves and resources.

Onshore

	2023	2022
	mmstb	mmstb
2p	4.26	6.53
2C	3.74	8.62
Total	8.00	15.15
East Coast
	2023	2022
	mmstb	mmstb
2p	7.78	9.26
2C	31.31	36.81
Total	39.09	46.07
West Coast
	2023	2022
	mmstb	mmstb
2p	0.86	2.17
2C	3.63	3.45
Total	4.48	5.62

Annual Report & Financial Statements 2023		3
Chair & CEO Statement				Strategic Report
			Governance
				Financial Accounts
			Glossary
				Company Information
Dear shareholders,	and ended on 27 June 2023, having repurchased
2023 was an important year for Trinity with key	1,549,000 shares on the open market for a total cost of
USD 2.1 million. These shares are held in treasury and
developments in our ambitious growth programme
are used to settle options exercised. Trinity paid its first
being progressed. The Company drilled the Jacobin well
interim dividend of 0.5 pence per ordinary share on
in the year to test deeper prospectivity in the Lower
26 October 2023.
Cruse horizons in our core Palo Seco acreage. While the
well discovered oil in those deeper horizons, flow rates	Angus Winther, having joined the Board in 2017 and
were disappointing, and drilling complexities resulted	completed two full terms as a Non-Executive Director
in significant cost overruns. The results from the well	and Chair of the Audit Committee, retired from the Board
are being incorporated into further understanding the	by rotation in June. In August, we welcomed Jon Cooper
"Hummingbird" play with independent features still	as an Independent Non-Executive Director, and the new
offering future potential as well as the prospectivity of the	Chair of the Audit Committee, and Julian Kennedy as an
exploration block, Buenos Ayres. In June, the Company was	Executive Director, taking on the role of Chief Financial
advised by the Ministry of Energy and Energy Industries	Officer, to the Board. James Menzies has decided not to
("MEEI") that it had been successful in its bid for the	stand for re-election at this forthcoming Annual General
Buenos Ayres block in the 2022 Onshore and Nearshore	Meeting which coincides with James taking on greater
Competitive Bid Round, immediately to the west of our	levels of responsibility in other roles outside of Trinity. We
core Palo Seco acreage. Buenos Ayres is undrilled and	want to express our thanks and that of our fellow Directors
offers considerable potential.	for his contribution to the Board since joining in 2017. The
The ABM-151 well in the Brighton Marine block, offshore	management team was strengthened by the addition in
April 2023 of Mark Kingsley as Chief Operating Officer and
the West Coast of Trinidad, was returned to production
in November 2023 of Aida Shafina Abu Bakar as Executive
on 21 March 2023 following an extensive refurbishment of
Manager, Subsurface.
surface facilities and the installation of remote surveillance
technology. Between restart and the end of the year the	It became clear during 2023 that the Group would
well flowed at an average rate of 122 bopd, exceeding	require new capital to fund its portfolio of development
expectations.	opportunities. In October 2023, the Company engaged
Group net sales for 2023 were 2,790 bopd (2022: 2,975	a financial adviser, Houlihan Lokey, to assist in exploring
strategic and financing alternatives for the Company.
bopd). Trinity managed to substantially mitigate natural
production decline through a programme including six well	On 23 November 2023, Trinity received an unsolicited,
recompletions ("RCPs"), 98 workovers and swabbing across	conditional non-binding proposal to acquire the issued
its asset base. The fire on the Bravo platform in the Trintes	and to be issued share capital of Trinity from Touchstone
field, represented a significant event for the company with	Exploration Inc ("Touchstone") and following the execution
valuable lessons learned arising from a comprehensive	of a confidentiality agreement, Touchstone was provided
investigation with an associated corrective actions register.	access to due diligence information.
A number of safety improvements have been implemented	On 1 May 2024, following a period of due diligence
to date, including those that mitigate the root cause for the
and negotiation, the boards of directors of Trinity and
fire and improved fire-fighting capabilities in the event of a
Touchstone announced the terms of the recommended
similar incident.
all share offer (the "Acquisition"). The Acquisition is to be
At Galeota, following an extensive Concept-Screening	effected by means of a scheme of arrangement under
study completed by Petrofac in Q3 2023, Trinity identified	Part 26 of the Companies Act. Under the terms of the
a revised infrastructure-led development solution which	Acquisition, Trinity Shareholders shall be entitled to receive
includes an initial phase of development drilling from	1.5 New Touchstone Shares for each Trinity share. Should
existing platforms. Whilst Trinity believes the revised	the Scheme be approved by Shareholders and sanctioned
development solution will significantly reduce capital	by the Court, we believe Trinity has an exciting future as
requirement prior to first oil compared to the Echo Field	part of the enlarged Touchstone organisation.
Development Plan, Trinity would need to secure third party	During what has been an exciting but also challenging
financing to take a final investment decision and fund the
period, we would like to thank our staff, the Board and our
development.
advisors for their continuing hard work during a particularly
In parallel to progressing the Galeota asset development	busy time for the Company.
plan project, Trinity assembled a pipeline of investment
projects including brownfield development opportunities
at the West Coast and onshore assets and a portfolio of
exploration prospects across Trinity's Palo Seco assets.
Trinity believes that significant capital investment, both
debt and equity, will be required to realise the potential of	Nicholas Clayton	Jeremy Bridglalsingh
the Company's portfolio.
Non-Executive Chair	Chief Executive Officer

Our 2023 financial results demonstrate the Company's resilience. Adjusted EBITDA for the year was

USD 19.2 million (2022: USD 24.7 million) and cash

resources were USD 9.8 million (2022: USD 12.1 million) at year-end. The Company completed a share buyback programme which commenced on 24 October 2022

4	Trinity Exploration & Production plc

Operations Review



The Group achieved net sales of 2,790 bopd in 2023 (2022: 2,975 bopd) despite no development drilling (2022 three development wells) and six RCPs, (2022 17 RCPs) combined with operational challenges in the East Coast Asset. Investments into production-related activities, such

Table 1: 2023 vs 2022 Annual Sales Breakdown

as RCPs, ABM 151 reactivation, production maintenance workovers and swabbing enabled the Company to deliver annual production decline of 6%, below the expected natural field decline range of 7% to 10%.

	Sales 2022				Sales 2023
	(Net WI bopd)				(Net WI bopd)
Assets	Annual	Annual	H1	H2	Q1	Q2	Q3	Q4
WD13	109	91	92	89	97	88	78	99
WD14	100	93	97	88	99	96	87	88
WD2	258	208	224	193	241	206	196	191
WD5/6	1,004	941	935	946	940	930	974	918
PS4	62	56	54	59	60	48	49	69
FZ2	118	106	110	103	111	109	109	97
TAB	4
Onshore	1,655	1,495	1,512	1,478	1,548	1,477	1,493	1,462
TRINTES	1,051	943	1,011	876	1,038	985	843	908
East Coast	1,051	943	1,011	876	1,038	985	843	908
BRIGHTON	158	246	230	263	204	255	268	258
PGB	111	107	108	105	110	107	102	107
West Coast	269	353	338	368	314	362	370	365
TOTAL	2,975	2,790	2,861	2,721	2,899	2,824	2,705	2,736

Note TAB* was relinquished on 29 September 2023

Onshore Assets

Trinity's onshore assets comprise the lease operatorship ("LO") blocks: WD-5/6,WD-2 and PS-4 (together "Palo Seco") and FZ-2,WD-13,WD-14 (together "Forest Reserve").

Onshore average net sales for 2023 were 1,495 bopd (2022: 1,654 bopd) accounting for approximately 54% of the Group's total annual sales.

Average sales declined by approximately 10% between 2022 and 2023 due to wells drilled in H2 2022 accentuating the decline. Trinity successfully completed six RCPs (2022: 17) and ninety-eight workovers (2022: 87), which contributed to the maintenance of the industry standard decline of between 7-10% for brownfields. In WD-2, the asset experienced a higher-than-expected decline due

to increased water production in one well (PS 570) and declining production in the naturally flowing well (PS 571).

In 2024, Trinity intends to manage its base production through further RCP activity, implementation of recommendations from the re-evaluation of the inactive well hopper, and swabbing. Trinity's use of automation to optimise production and costs continues to meet our objectives.

The Jacobin well, 1PS 1524ST3, was drilled to a total depth of 10,021 ft. Geologically, the well intersected stacked pay potential across the PS4 block in both the development

and exploration sections of the well. However, reservoir properties in the exploration section were poorer than predicted and, as such, post-drill volumes for the exploration section were below the lower end of the predicted ranges. The rapid decline in reservoir pressures suggests reservoir boundaries are much closer than pre-drill estimates.

The total well cost was USD 9.6 million. An impairment assessment was done on this well, triggered by poorer than expected results and higher costs incurred, the entire Jacobin costs was written off.

Data acquired from the well will be incorporated into our regional model to de-risk and re-prioritise future drilling candidates across our Palo Seco LOs and Buenos Ayres.

Trinity has embarked on an idle well study, with the initial phase including technical reviews of circa 250 wells, with field investigations having commenced on the first 30 of these, which as a result has added more wells to the swabbing program.

East Coast Assets

Current East Coast production is generated from the Alpha, Bravo and Delta platforms in the Trintes field located in the Galeota block.

Average net sales for 2023 from the East Coast were 943 bopd (2022: 1,051 bopd) which accounts for

Annual Report & Financial Statements 2023	5

Strategic Report

Governance

Financial Accounts

Glossary

Company Information

approximately 34% of Group sales for the year. A total of 22 workovers in 2023 (2022: 23) were conducted across the assets focusing on optimising and stabilising production from all wells via a data-driven strategy utilising automation. Chemical injection initiatives were also deployed to counteract increased solids deposition in mature wells.

Average sales declined by approximately 10% between 2022 and 2023 due to two main events: the Bravo platform fire in April; and the lower performance of the D9 well, the largest producer in the Trintes field.

The Galeota licence has significant growth potential from undeveloped reserves and resources in the Trintes field and broader development of the Galeota block, including exploration potential.

In July 2023, Trinity initiated a review of the approved Field Development Plan ("FDP") for the TGAL Echo development to reduce capital expenditure, reduce time to first oil and improve financial returns; a new development strategy- concept being created envisaging the use of a mobile operation and production unit ("MOPU").

Trinity appointed Petrofac to undertake a Concept- Screening study for the development of further reserves. This study created a more holistic approach to block development whereby Phase 1 involved drilling horizontal infill wells in Trintes to demonstrate that such wells can be successfully drilled and produced as to date they have not been attempted. Phase 2 then took the learnings from Trintes infill drilling to drill and produce horizontal wells in the TGAL area from a lightweight structure tied back to a leased MOPU. This concept replaces CAPEX with OPEX in the form of lease rate payments and appears - based on screening cost estimates to date - to improve the overall economics of the project materially. This work is progressing with the revision and update of the subsurface studies in 2024.

West Coast Assets

West Coast production is generated from the Point Ligoure-GuapoBay-Brighton Marine ("PGB") and Brighton Marine ("BM") licence areas.

West Coast net sales averaged 353 bopd in 2023

(2022: 269 bopd) which accounted for approximately 13% of the Group's total annual average sales. This was a 31% year on year increase on the 2022 average. The increase was mainly due to the successful execution of the ABM 151 reactivation project. After placing the well on production, ABM 151 produced at a higher initial rate than expected and maintained a lower decline rate than predicted. A total of five workovers in 2023 (2022: 10) were conducted across the assets. There was increased focus on swabbing both on land as well as the introduction of an additional offshore swabbing unit which also assisted in increasing production volumes.

Facilities Management

and Infrastructure

In 2023, the Facilities team focused on asset integrity, welfare initiatives and projects supporting production.

On Trintes, the Company continued replacing and installing planks and gratings on offshore platform production decks and improved key electrical equipment on the Alpha, Bravo

and Delta platforms, for better use of the available space. Automated Tank controls were also introduced.

The construction of a new 10,000 bbl sales tank to accommodate production from the Trintes field was completed in 2023. In 2024 the tank was certified and put into service.

Remedial work following the Trintes Bravo generator fire was completed and upgrades to the safety systems were implemented. This includes upgraded fire suppression systems, replacement of all six generator units (Q1 2024 completed) and introduction of emergency escape systems and advanced fire-fighting training. The automated systems on all of the Trintes platforms were also upgraded with additional redundancy.

Onshore and West Coast operations focused on upgrading welfare facilities, electrical systems as well as oil storage tanks.

The project and maintenance team was reorganised with the introduction of a dedicated maintenance team. This team will focus on fabric maintenance and rotating equipment. In total, the team progressed 22 projects of which 18 were completed by end of 2023 and four rolled over into 2024.

Facilities Management and Infrastructure capex in 2023 was USD 4.1 million (2022 USD 4.5 million).

During 2023 a review of the decommissioning methodology and cost estimates were undertaken. This led to a reduction in well abandonment cost estimates and the overall decommissioning provision to USD 44.4 million (2022: 51.9 million).

Reserves and Resources

A comprehensive reserves and resources review of all assets has been completed by Management and the technical work underpinning this management estimate was reviewed by Netherland, Sewell & Associates, Inc which estimates Trinity's current 2P reserves to be 12.91 mmstb at the end of 2023, compared to the year-end 2022 reserve estimate of 17.96 mmstb. This represents a 28% year- on-year decrease. The largest reduction in 2P Reserves

at Year-End 2023 is from wells that were categorised as economic 2P Reserves at Year-End 2022 which have been reclassified to 2C Resources due to individual opportunities being considered uneconomic at the date of review. Additional reductions are due to the impact of earlier economic limit truncations and revisions to the Trintes Infill well programme.

The 2C Resources at the end of 2023 are estimated at

38.68 mmstb compared to the end of 2022 resource estimate of 48.88 mmstb. The reduction in 2C Resources is attributed largely to the East Coast block based on the latest interpretation and mapping of reprocessed seismic data which resulted in a view that the field structure is more steeply dipping than in previous interpretations. The Year-End 2023 total 2C for East Coast is 31.3 mmstb (compared to 36.8 mmstb previously). While the

2C Resource estimate for East Coast has been reduced, the impact on the development and exploration plans for the field is minimal.

6	Trinity Exploration & Production plc

Operations Review (continued)

Management considers the reserves presented in the table below to be its best estimate as at 31 December 2023

of the quantity of reserves that can be recovered from Trinity's current assets. It includes forecast production, which is commercially recoverable, either to licence/ relevant permitted extension end or earlier via the application of the economic limit test. The subsurface review has defined investment programmes and constituent drilling targets to commercialise these reserves as detailed by asset area shown in the table.

2023 2P Reserves

	31-Dec-22 Production	Revisions 31-Dec-23
Net Oil Reserves	mmstb	mmstb	mmstb	mmstb
Asset
Onshore	6.53	(0.55)‌	(1.72)‌	4.26
West Coast	2.17	(0.13)‌	(1.18)‌	0.86
East Coast	9.26	(0.34)‌	(1.14)‌	7.78
Total	17.96	(1.02)‌	(4.03)‌	12.91
2023 2C Resources
	31-Dec-22 Production	Revisions 31-Dec-23
Net Oil Resources	mmstb	mmstb	mmstb	mmstb
Asset
Onshore	8.62	N/A	(4.88)‌	3.74
West Coast	3.45	N/A	0.18	3.63
East Coast	36.81	N/A	(5.50)‌	31.31
Total	48.88	N/A	(10.20)‌	38.68
2023 Reserves and Resources
	31-Dec-2022			31-Dec-2023
	2P Reserves			2P Reserves
	and 2C	Production		and 2C
	Resources		Revisions	Resources
	mmstb	mmstb	mmstb	mmstb
Asset
Onshore	15.15	(0.55)‌	(6.60)‌	8.00
West Coast	5.62	(0.13)‌	(1.00)‌	4.49
East Coast	46.07	(0.34)‌	(6.64)‌	39.09
Total	66.84	(1.02)‌	(14.24)‌	51.58

2P Reserves Note:

The 2023 produced volume of 1.02 mmstb accounts for 20% of the overall 2P decrease in 2023 compared to 2022. Other revisions contributing to the overall decrease are:

• (0.38) mmstb from PS4 and Tabaquite Revision
• (1.1) mmstb from Base Revisions
• (0.22) mmstb from RCP Revisions
• (2.34) mmstb from Infill Well Revisions

2C Resources Note:

Revisions contributing to the overall decrease are:

• (4.90) mmstb from Appraisal Wells Revisions (Onshore)
• (8.33) mmstb from TGAL Revision and 2.83 mmstb (Trintes) from re-categorisation and ELT

Annual Report & Financial Statements 2023	7

Financial Review	Governance
	Strategic Report
Financial Accounts
	Glossary
	Company Information

KPIs

During 2023 the Group saw lower realised oil prices compared with 2022. A combination of lower oil price, a six percent reduction in net production and an increase operating break-even resulted in Adjusted EBITDA (before hedge costs) decreasing by USD 15.9 million to USD 19.2 million (2022: USD 35.1 million). The Group delivered a resilient operating performance as shown by its positive Adjusted EBITDA margin (after hedge costs) of 28.1% (2022: 26.8%) and IFRS Operating Profit before SPT of USD 9.6 million (2022: USD 19.0 million) despite a 19% decrease in realised oil price.

A summary of the year-on-year operational and financial highlights are set out below:

		FY 2023	FY 2022	Change %
Average realised oil price1	USD/bbl	68.6	84.9	(19)‌
Average net production2	bopd	2,790	2,975	(6)‌
Revenues	USD million	69.8	92.2	(24)‌
Cash balance	USD million	9.8	12.1	(19)‌
IFRS Results
Operating Profit before SPT	USD million	9.6	19.0	(49)‌
Total Comprehensive (loss)‌/income for the year	USD million	(6.8)‌	0.1	(7,415)‌
Earnings Per Share - Diluted	USD cents	0.0	0.0	(100)‌
APM Results
Adjusted EBITDA (before hedge costs)‌ 3	USD million	19.2	35.1	(45)‌
Adjusted EBITDA (after hedge costs)‌ 4	USD million	19.2	24.7	(22)‌
Adjusted EBITDA (after hedge costs)‌ 5	USD/bbl	18.9	22.7	(17)‌
Adjusted EBITDA margin (after hedge costs)‌ 6	%	27.5	26.8	3
Adjusted EBIDA after Current Taxes7	USD million	12.9	12.3	5
Adjusted EBIDA after Current Taxes Per Share - Diluted	US cents	32.3	30.6	5
Consolidated operating break-even8	USD/bbl	38.3	32.1	19
Net cash plus working capital surplus9	USD million	8.6	14.2	(39)‌

Notes:

1. Average realised price (USD/bbl): Actual price received for crude oil sales per barrel ("bbl").
2. Average net production (bopd): Production sold in barrels per day in a given year.
3. Adjusted EBITDA (before hedge) (USD MM): Adjusted EBITDA for the period, before Derivative expense.
4. Adjusted EBITDA (USD MM): Operating Profit before Taxes for the period, adjusted for non-cash DD&A, SOE, ILFA, FX gain/(loss) and Fair Value Gains/Losses on Derivative Financial Instruments.
5. Adjusted EBITDA (USD/bbl): Adjusted EBITDA/Annual sales volume.
6. Adjusted EBITDA margin (%): Adjusted EBITDA/Revenues.
7. Adjusted EBIDA after Current Taxes: Adjusted EBIDA less Supplemental Petroleum Taxes ("SPT"), Petroleum Profits Tax ("PPT") and Unemployment Levy ("UL").
8. Consolidated operating break-even: The realised price/bbl where the Adjusted EBITDA/bbl for the Group is equal to zero.
9. Net cash plus working capital surplus: Current Assets less Current Liabilities (other than Derivative financial asset / liability and Provision for other liabilities).

See Note 27 to Consolidated Financial Statements - Adjusted EBITDA for further details on page 95.

8	Trinity Exploration & Production plc

Financial Review (continued)

2023 Trading Summary

A five-year historical summary of realised price, sales, operating break-even, Royalties, Production Costs ("Opex") and General & Administrative ("G&A") expenditure metrics is set out below.

		2019	2020	2021	2022	2023
Realised Price	USD/bbl	58.1	37.7	60.4	84. 9	68.6
Sales
Onshore	bopd	1,616	1,793	1,644	1,655	1,495
West Coast	bopd	185	245	255	269	353
East Coast	bopd	1,208	1,188	1,107	1,051	943
Consolidated	bopd	3,007	3,226	3,006	2,975	2,790
Metrics
Royalties/bbl - Onshore	USD/bbl	22.3	11.5	22.6	35.9	26.8
Royalties/bbl - West Coast	USD/bbl	10.0	6.1	11.1	15.8	12.7
Royalties/bbl - East Coast	USD/bbl	14.1	8.3	13.0	17.9	13.3
Royalties/bbl - Consolidated	USD/bbl	10.7	9.9	18.1	27.7	20.5
Opex/bbl - Onshore	USD/bbl	12.1	12.2	14.4	17.0	20.6
Opex/bbl - West Coast	USD/bbl	26.9	20.3	26.2	30.7	30.1
Opex/bbl - East Coast	USD/bbl	17.1	16.5	18.3	23.2	30.1
Opex/bbl - Consolidated	USD/bbl	14.9	14.0	16.0	17.7	22.0
G&A/bbl - Consolidated1	USD/bbl	5.1	4.3	6.3	6.6	7.2
Operating Break-Even2
Onshore	USD/bbl	16.4	16.5	19.0	19.2	23.9
West Coast	USD/bbl	32.4	24.6	32.2	31.8	31.8
East Coast	USD/bbl	21.9	21.0	23.2	24.4	31.7
Consolidated3	USD/bbl	26.4	20.1	29.2	32.1	38.3

Notes

1. G&A/bbl - Consolidated: Excludes SOE, ILFA, Derivative FV gain/loss and FX gain/loss.
2. Operating break-even: The realised price where Adjusted EBITDA ([before hedge]) for the respective asset or the entire Group (Consolidated) is equal to zero.
3. Consolidated operating break-even: Includes G&A but excludes SOE, ILFA, Derivative FV gain/loss and FX gain/loss.