Shares in Trin­ity could ‘triple in value’ says bro­ker

Pro­duc­tion, profit and cash flow are head­ing in the right di­rec­tion

Shares - - CONTENTS -

Tight con­trol on costs and in­creas­ing pro­duc­tion could im­prove prof­itabil­ity and cash flow at Trinidad oil pro­ducer Trin­ity Ex­plo­ration & Pro­duc­tion (TRIN:AIM) and pro­vide a cat­a­lyst for the share price.

Trin­ity com­pleted a $15m re­struc­tur­ing ear­lier this year which has re­duced net debt from $34.3m to just $1.2m. The com­pany’s cash bal­ance has also im­proved by 125% to $11.5m as of

30 June.

The share price en­joyed a rally ear­lier in 2017 but has stalled over the past six months. We think now is a good time to buy as Trin­ity is tar­get­ing the ‘low hang­ing fruit’ in its port­fo­lio, ac­cord­ing to bro­ker Can­tor Fitzger­ald.

An in­crease in oper­at­ing ac­tiv­i­ties across its core as­sets dur­ing July and Au­gust has re­stored pro­duc­tion lev­els to 2,600 bar­rels of oil per day (bopd). That puts it on track to hit year-end guid­ance of be­tween 2,600 and 2,800 bopd and a 12-month tar­get of 3,000 bopd.

The tar­get should mainly be achieved by low-cost work on ex­ist­ing wells and drilling some ad­di­tional pro­duc­tion wells on the on­shore port­fo­lio. Ex­ec­u­tive chair­man Bruce Ding­wall tells Shares the com­pany may drill on its off­shore Trintes field in 2018.

At cur­rent oil prices of around $56 per bar­rel Trin­ity should be able to de­liver de­cent profit as the com­pany be­lieves it can make money above an oil price of $32.8 per bar­rel.

MA­TURE OIL AND GAS IN­DUS­TRY Trinidad has a ma­ture oil and gas in­dus­try. The first oil de­posits were dis­cov­ered in 1866 and the first well was drilled in 1867 with con­tin­u­ous pro­duc­tion be­gin­ning as early as 1908.

Trin­ity is a ma­te­rial player in this in­dus­try – ac­count­ing for more than 3% of the is­land’s to­tal oil pro­duc­tion.

Ding­wall says al­though the reg­u­la­tory sys­tem can take time to nav­i­gate, ‘it is also very process-driven, so you know where you stand’.

The is­land has plenty of in­fra­struc­ture in­clud­ing roads and equip­ment. The sub-sur­face is also very well un­der­stood be­cause there has been so much drilling. This re­duces the risk of pro­duc­tion wells underperforming.

Ding­wall may al­ready be fa­mil­iar to in­vestors in the UK oil and gas sec­tor. He founded North Seafo­cused Ven­ture Pro­duc­tion in 1997. The com­pany was floated on the stock mar­ket at 170p in 2002 and sub­se­quently ac­quired by Cen­trica in Au­gust 2009 for 845p per share. Ding­wall in­sists his cur­rent com­pany is ‘not an idea; it is a well-es­tab­lished prof­itable busi­ness’.

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