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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Trinity Exploration & Production Plc | LSE:TRIN | London | Ordinary Share | GB00BN7CJ686 | ORD USD0.01 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| -3.00 | -7.69% | 36.00 | 35.00 | 37.00 | 37.00 | 34.50 | 37.00 | 195,958 | 08:27:12 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMTRIN
RNS Number : 1954Z
Trinity Exploration & Production
25 May 2016
Trinity Exploration & Production Plc
(the "Company" or "Trinity"; AIM:TRIN)
Preliminary Results
25 May 2016
Trinity, an independent E&P company focused on Trinidad and Tobago, announces its preliminary results for the twelve months ended 31 December 2015.
Financial highlights
-- Average realised oil price of USD 45.5/bbl for 2015 (2014: USD 85.8/bbl) -- Revenues of USD 48.2 million (2014: USD 113.5 million)
-- Pre-tax operating expenditures ("OPEX") reduced by 33% to USD 22.0 million (2014: USD 32.9 million)
-- General and Administrative ("G&A") costs reduced by 30% to USD 10.5 million (2014: USD 15.0 million)
-- EBITDA (before exceptional items/ exploration costs written off) of USD 1.2 million (2014: USD 28.5 million)
-- Operating loss (before exceptional items/ exploration costs write off) of USD 7.0 million (2014 : USD 12.2 million profit)
-- Net loss after tax and exceptional items of USD 58.5 million (2014: USD 141.2 million) -- Cash inflow from operating activities USD 2.5 million (2014: USD 11.8 million inflow) -- Cash balance at period end of USD 8.2 million (2014: 33.1 million)
Operating highlights
Hot Features
Premium
-- Total average net production for 2015 was 2,896 bopd (2014: 3,603 bopd)
-- Continued success in establishing a leaner, more efficient operating cost base
-- Continued progress made towards TGAL Field Development Plan ("FDP")
-- Development and exploration activities remain suspended, 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 bopd (lower case: managed decline, uppercase: refinancing)
Strategic highlights
-- Trinity is currently conducting a strategic review of its business in order to maximise value for shareholders. The Company is subject to The City Code on Takeovers and Mergers and has opted to conduct discussions with parties interested in making a proposal to the Company under the framework of a Formal Sales Process ("FSP") of its assets
-- Consistent with the objectives of the strategic review and FSP, our near term objective is to conclude a complete refinancing with a structure that will enable the Company to retire its existing senior debt facilities, significantly reduce trade creditors and provide sufficient additional capital to maximise returns from its assets by growing production and cash flow
-- The Company is in detailed discussions with a number of interested parties about refinancing the Group
-- As drilling and service costs continue to adjust downward, the combination of a profoundly reduced cost base with rising commodity prices transforms the economic potential of the reserve base
-- Subject to the availability of appropriate financing and dependent upon drilling costs and prevailing commodity prices, the Company's objective is to resume its drilling programme across its asset base from a large inventory of drilling locations
Loan Update
Current moratorium on principal repayments relating to Trinity's outstanding debt is in place until 27 May 2016.
Disposal Update
On 21 October 2015, Trinity announced that it entered into an agreement (the "Touchstone SPA") to sell its interests in the WD-2, WD-5/6, WD-13, WD-14 and FZ-2 licenses and related fixed assets (the "Blocks") to Touchstone Exploration Inc. ("Touchstone") for a cash consideration of USD 20.8 million. The Touchstone SPA was subject to various conditions precedent and had a backstop date of 13 March 2016. The backstop date expired without all of the conditions precedent being satisfied. As a result, the sale of the Blocks to Touchstone did not complete with the deposit of USD 2.08 million, which had been held in escrow, being subsequently released to Touchstone from the escrow account (this was not included in Trinity's cash balances).
These particular onshore assets have the lowest production costs within the Trinity portfolio resulting in positive operating cash flows even in the current low oil price environment and before the full financial benefit of ongoing cost efficiencies are realised. Breakeven levels of below USD 15/bbl realised price (2015: c. USD 24/bbl) are being targeted for the onshore portfolio by the end of 2016. Retaining these assets enhances Trinity's portfolio for attracting the funding required to implement the forward strategy of the Group.
The sale of the Group's 100% interest in the Guapo-1 block ("Block GU-1") to New Horizon Exploration Trinidad and Tobago Unlimited ("New Horizon") for a cash consideration of USD 2.8 million (the "Guapo Transaction") has been completed. All the conditions precedent for the Guapo Transaction have been satisfied including standard regulatory approvals, which were granted on 15 April 2016. The transaction was subsequently finalised with the closure of the cash settlement on 25 May 2016. The cash proceeds will be used predominantly by Trinity for working capital purposes.
Outlook
Key priorities for the Company are to:
-- Achieve significant further reductions in OPEX and G&A during 2016
-- Subject to capital availability, targeting an operating breakeven level across the onshore fields of below USD 15/bbl and all other fields of below USD30/bbl by the year end 2016
-- Continue developing a leaner, more efficient cost base to realise further economies of scale and leverage from increased realisations and/or production
-- Finalise financing to fund the Company's future developments
Further to the refinancing initiative announced in March 2016, Trinity is in detailed discussions with a number of parties. Trinity Shareholders are advised that, whilst Management is encouraged with progress to date, there can be no certainty that any offer or other transaction will result from these discussions or as to the terms on which any offer or other transaction may be made.
Bruce A. I. Dingwall CBE, Executive Chairman of Trinity, commented:
"Trinity has exceeded its target to reduce our operating costs by 20% during 2015 year with the like-for-like reduction in pre-tax operating costs being 33%. The hard work of the team has and continues to bring about strong cost efficiencies post the period end. These efforts have enabled our business to maintain a positive cash flow at an operating level despite the backdrop of a dramatically reduced oil price and production levels.
Our current production rates and drastically reduced cost base provides strong testimony to not only the quality of the asset base but also to the resilience, operational expertise and organisational efficiency in coping with a radically reduced budget. This new operating mantra provides a basis for confidence and allows us to continue to explore all financing options to take the Company forward. Across the Onshore, West Coast and East Coast we have an inventory of drilling locations that could enhance production levels on the deployment of capital.
On behalf of the Board, I would like to express our thanks to our various stakeholders and to Trinity's staff for their continued commitment and hard work to sustain and maximise the portfolio's value."
Competent Person's Statement
The information contained in this announcement has been reviewed and approved by Graham Stuart, the Company's Technical Advisor, who has 34 years of relevant global experience in the oil industry. Mr Stuart holds a BSC (Hons) in Geology.
Enquiries
Trinity Exploration & Production Tel: +44 (0)13 Bruce Dingwall, Executive Chairman 1240 3860 Tracy Mackenzie, Head of Corporate Development RBC Capital Markets (NOMAD & Tel: +44 (0) Broker) 20 7653 4000 Matthew Coakes Daniel Conti Oil & Gas Advisory Tel: +44 (0) Jakub Brogowski 20 7653 4000 Roland Symonds
About Trinity
Trinity is an independent E&P company focused solely on Trinidad and Tobago. Trinity operates producing and development assets both onshore and offshore, in the shallow water West and East Coasts of Trinidad. Trinity's portfolio includes current production, significant near-term production growth opportunities from low risk developments and multiple exploration prospects with the potential to deliver meaningful reserves/resources growth. The Company operates all of its licences and has 2P reserves of 21.8 mmbbls according to management estimates. Trinity is listed on the AIM market of the London Stock Exchange under the ticker TRIN.
Executive Chairman's Statement
Our Strategy
Trinity's vision and strategy have remained unchanged since 2005, ensuring that we remain a unique industry player. The Company continues to focus on retaining the integrity of our producing asset base and in adopting better operational practices and efficiencies despite the limited cash resources posed by the macroeconomic environment both locally and internationally.
The Company is seeking funding that will put the Company into a more robust position in order to ensure that we maximise returns from the current asset base. This will be realised by leveraging the benefits from maintaining and growing production in the context of a significantly reduced cost base with break-even levels of below USD 30.0/barrel (realised price) being targeted for the higher cost offshore by the end of 2016. Without such a funding event or refinancing, the Company would be unlikely to be able to continue as a going concern.
The Industry Context
The global oil and gas industry has continued to be negatively impacted by not only dramatically lower oil prices but also the extent of price volatility that has prevailed throughout 2015 and continues into 2016. We have seen costs falling in certain areas of the service sector as suppliers re-adjust prices to remain competitive in a challenging environment. This is expected to help drive down break-even levels across the portfolio.
Conventional equity and debt capital markets have significantly withdrawn liquidity from the sector, leading the industry to be more creative in funding solutions for growth and conserving balance sheets. In support of this, the industry must see greater collaboration. The new commodity price environment has created an opportunity to revise operating practices across the industry. With a clear vision, we can ensure that all players benefit together.
Where we are today and plans for the future
The Company announced on 8 April 2015 that, in light of the receipt of a number of conditional proposals and expressions of interest in relation to certain of the Company's assets, it was launching a Formal Sales Process ("FSP") and strategic review of options available to the Company to maximise value for shareholders. These options may include, but are not limited to, a farm-out or sale of one or more of the Company's existing assets, a corporate transaction such as a merger or sale of the Company to a third party or a subscription for the Company's securities by one or more third parties.
In response to falling oil prices, Trinity has focused on sustaining its liquidity position by securing ongoing moratorium extensions on the principal of its senior secured credit facility, disposing of non-core assets and reducing its operational expenditure ("Opex") and general and administrative ("G&A") costs in order to reduce breakeven levels. Several initiatives have been made and are underway with further significant cash cost reductions expected to be fully realised during 2016. The Group's revenues have decreased, due to a fall in production and predominantly as a result of a sharp decline in oil prices impacting the main source of revenue generation. Management has suspended investment in appraisal and development activities, and is continuing to manage its relationships with all stakeholders in an effort to sustain liquidity.
Consistent with the objectives of the strategic review and FSP, our near term objective is to conclude a complete refinancing with a structure that will enable the Company to retire its existing senior debt facilities, significantly reduce trade creditors and provide sufficient additional capital to maximise returns from its assets by growing production and cash flow. The Company is in detailed discussions with a number of interested parties about refinancing the Group and has appointed two specialist refinancing advisors to assist with this process. As drilling and service costs continue to adjust downward, the combination of a profoundly reduced cost base with falling commodity prices transforms the economic potential of the Group's reserve base.
Subject to the availability of appropriate financing and dependent upon drilling costs and prevailing commodity prices, the Company's objective is to resume its drilling programme across its asset base from a large inventory of drilling locations.
It is important to stress that these drilling locations are all targeting existing proven and probable ("2P") reserves and are not subject to the subsurface risks attached to exploration and appraisal activities. Trinity believes this offers a key point of differentiation from a significant percentage of its peer group.
Our objective remains to deliver value to shareholders and wider stakeholders by sourcing a funding solution to monetise the assets via the strategic review and FSP. However, Trinity shareholders are advised that there can be no certainty that any offers will be made as a result of the FSP, that any sale or other transaction will be concluded, nor as to the terms on which any offer or other transaction may be made.
OPERATIONS REVIEW
During 2015 Trinity's net production averaged 2,896 bopd.
Onshore operations
Average 2015 net production from the Onshore was 1,600 bopd which made up 55% of total production for the year. There was a 20% reduction in production from 2014 average levels of 2,006 bopd. Current onshore production is derived from the WD-5/6, FZ-2, WD-2, GU-1, WD-13 and WD-14 blocks in southern and south-western Trinidad.
The reduction in production came as a result of swabbing being suspended and significantly reduced capital expenditure on maintenance work. Whilst the focus during 2015 continued to be on arresting base declines and increasing production via workovers and RCPs, although, eight RCPs were budgeted, only one RCP on ER48 was conducted. However, ninety one rate restoring workovers (i.e. COPUs and reactivations) were conducted on the onshore assets in 2015 utilising Trinity owned production Rigs 2 and 6.
East Coast operations
Average 2015 net production from the East Coast was 983 bopd which equated to 34% of total production for the year. There was an 11% reduction in production from 2014 average levels of 1,106 bopd. Current east coast production is derived from the Alpha, Bravo and Delta platforms on the Trintes Field. Despite the cessation of investment, on-going steps to improve operating efficiency have been effective in sustaining production with currently levels ranging between 1,000 - 1,100 bopd. The retention of such stable production levels, at a time when no capital has been deployed towards new drilling, testifies to the technical capability and the knowledge of the operations within Trinity's team.
The 2015 budgeted production profile consisted of a plan to execute eight workovers as part of base management but only two workovers were conducted during Q4 of 2015; D16 in November and B10X in December. Despite the financial constraints and subsequent reduced workover activity, production remains robust as a result of improved well production management. Trinity continues to look at alternative low cost means of executing workovers. Moving forward, new drilling could further arrest base declines, with a significant inventory of new well locations in place and drill ready.
West Coast operations
Average 2015 net production from the West Coast was 313 bopd which equated to 11% of total production for the year. There was a 36% reduction in production from 2014 average levels of 491 bopd. Currently production is derived from the PGB and BM fields. The 2015 budgeted production profile for BM consisted of a plan to execute two workovers (ABM 150 & ABM 151) to both manage base production and grow overall production from the West Coast. However, due to funding restrictions, neither of the workovers were conducted. These workovers continue to represent opportunities for improving production in the future.
Over and above base declines, production was negatively impacted by compressor issues leading to outages on gas availability for re-injection to support lifting, resulting in periods of intermittent production at the BM field. Production levels were also impacted by the ABM 151 well having been temporarily shut-in during the year and the loss of the associated gas for lifting during that period.
Reserves and Resources
A comprehensive management review of all assets has been concluded and has estimated the current 2P reserves to be 21.8 mmstb at the end of 2015, compared to the year-end 2014 reserve estimate of 25.3 mmstb. This indicated a 3.5 mmstb (14%) decrease versus 2014 which was due to a combination of 2015 production of 1.1 mmstb and year end revisions of 2.4 mmstb. This 2.4 mmstb was not deemed as a downgrade to realisable volumes but rather a reallocation of 2P to the best estimate of contingent resources ("2C") due to the current economic environment, with the major factor being the application of a significantly reduced crude oil price deck. Subsequent to the reserves review the crude oil price futures price deck is markedly higher.
The subsurface review has defined investment programmes and constituent drilling targets to commercialise the reserves as detailed, by asset area, in the table below. The 2P reserve estimate is based on a fully funded programme under the assumption that management will secure the funding required to deliver this programme.
2015 2P Reserves Actual
Asset 31-Dec-14 Production Revisions 31-Dec-15
Net Oil Production mmstb mmstb mmstb mmstb
Onshore 6.8 (0.6) (1.8) 4.5
East Coast 14.5 (0.4) 1.2 15.4
West Coast 3.9 (0.1) (1.9) 2.0
Total 25.3 (1.1) (2.4) 21.8
The year-end 2015 net 2C Resource estimate is 19.9 mmstb.
Asset 2P Reserves 2C Resources Net Total 2P+2C
Reserves and
Resources
mmstb mmstb mmstb
Onshore 4.5 3.0 7.5
East Coast 15.4 15.4 30.8
West Coast 2.0 1.5 3.5
Total 21.8 19.9 41.8
TGAL Development
Management resource estimates on the TGAL discovery were upgraded to STOIIP of 150-210 mmbbls (best estimate 186 mmbbls). The existing 3D seismic dataset over the TGAL and Trintes areas was reprocessed to improve data quality using Common Reflection Surface ("CRS") technology. The results from the application of a leading edge processing technology were transformative in allowing Trinity to use the seismic to better image the subsurface structures of the Trintes and TGAL fields, which included integration of seafloor and shallow seismic data.
After working up the well designs (for drilling and completion) and the topside solution, a draft Field Development Plan ("FDP") was completed and submitted to the Ministry of Energy and Energy Industries ("MEEI") in Trinidad at the end of October 2015 for review and comments.
FINANCIAL REVIEW
2015 Results Overview
In 2015 Trinity incurred a USD 7.0 million operating loss and USD 57.9 million loss after tax including USD 17.2 million in exceptional items, USD 6.7 million in finance costs and USD 27.0 million with respect to taxation charges. The following summarises the 2015 financial results:
Financial Results Summary
2015 2014 <DELTA>
Net production
Production (bopd) 2,896 3,603 (707)
YTD production (mmbbls) 1.1 1.3 (0.2)
Average realised oil price (USD/ bbl) 45.5 85.8 (40.3)
USD MM USD MM USD MM
Statement of Comprehensive Income
Revenues 48.2 113.5 (65.3)
Operating expenses 55.3 101.3 (46.0)
EBITDA 1.2 28.5 (27.3)
Operating (loss) profit before exceptional items (7.0) 12.2 (19.2)
Exceptional items (17.2) (120.9) 103.7
Exploration costs written off -- (14.9) 14.9
Operating loss after exceptional items (24.3) (123.7) 99.4
Loss before income tax (30.9) (128.8) 97.9
Currency translation (0.6) 0.2 (0.9)
Total Comprehensive loss for the year (58.5) (141.2) 82.7
USD MM USD MM USD MM
Statement of Cash Flows
Cash inflow from operating activities 2.5 11.8 (9.3)
Net cash outflow from investing activities (2.2) (16.9) 14.7
Net cash inflow from financing activities (25.2) 13.0 (38.2)
Closing cash balance 8.2 33.1 (24.9)
Statement of Comprehensive Income Analysis
Revenues
2015 revenues were USD 48.2 million (2014: USD 113.5 million). This decrease is mainly attributable to a combination of: (i) the decline in average realised oil price of USD 45.5/bbl (2014: USD 85.8/bbl); and (ii) lower production
Operating expenses
Operating expenses were USD 55.3 million (2014: USD 101.3 million) which are made up as follows:
-- Royalties of USD 14.6 million (2014: USD 37.0 million) -- Production costs of USD 22.0 million (2014: USD 32.9 million)
-- Depreciation, depletion and amortisation amounted to USD 8.2 million (2014: USD 16.4 million)
-- General and administrative expense of USD 10.5 million (2014: USD 15.0 million)
Exceptional items (includes asset impairment)
Exceptional items were USD (17.2) million (2014: USD (135.9) million) inclusive of USD 6.4 million written off costs in relation to Blocks 1(a) & 1(b), USD 6.2 million relating to impairment of property, plant and equipment, receivables and inventory, USD 1.9 million relating to provision for restructuring and USD 2.7 million relating to loss on certain disposals and fees relating to the FSP.
See Note. 28 to Consolidated Financial Statements - Exceptional items for further details.
The Group's operating loss after exceptional items was USD 24.3 million (2014: USD 123.7 million).
Net Finance Costs
In 2015, finance costs amounted to USD 6.7 million (2014: USD 5.2 million), which is made up of the unwinding of the decommissioning liability USD 1.5 million (2014: USD 1.2 million) and combined interest related to the fully drawn (USD 20.0 million & USD 25.0 million) Citibank loans and interest accrued on outstanding taxes of USD 5.2 million (2014: USD 4.0 million).
Taxation Charge
The tax charge for 2015 was USD 27.0 million (2014: USD 12.7 million), and its components are described below.
-- Supplemental Petroleum Tax (SPT): The SPT charge for 2015 amounted to USD 1.8 million which is still payable (2014: USD 14.9 million).
-- Petroleum Profits Tax (PPT): The PPT charge for the year ended in a credit of USD 0.2 million (2014: USD 1.1 million).
-- Corporation tax (CT): The CT for the year amounted to USD 0.6 million (2014: USD 2.2 million)
-- Deferred tax (DT): The DT for the year as a result of the derecognising of a large portion of the Group's deferred tax asset from the Statement of Financial Positions at the end of 2015, amounted to a charge of USD 24.7 million (2014: USD 5.5 million).
Consolidated Statement of Cash Flows Analysis
Cash inflow from operating activities
Cash inflow from operating activities was USD 2.5 million (2014: USD 11.8 million), following adjustments for:
-- Operating activities of USD 1.1 million inflow (2014: USD 28.5 million inflow) -- Changes in working capital outflow of USD 0.2 million (2014: outflow of USD 12.6 million) -- Taxation paid of USD 0.1 million (2014: USD 3.8 million).
Cash outflow from investing activities
Cash outflow from investing activities was USD 2.2 million (2014: USD 16.9 million), and is made up of the following:
-- Exploration and evaluation assets: The majority of expenditure of USD 1.2 million in 2015 relates to the TGAL field development.
-- Property plant and equipment: expenditure on property, plant and equipment for the year was USD 1.0 million (2014: USD 11.9 million). This includes mainly infrastructure upgrades.
Cash outflow from financing activities
Cash outflow from financing activities was USD 25.1 million (2014: USD 13.0 million) as a result of debt repayment and finance costs:
-- Repayment of borrowings of USD 20.0 million (2014: USD 8.0 million) includes principal repayment toward the Citibank USD 25.0 million loan
-- Payment of loan finance costs of USD 5.2 million (2014: USD 4.0 million)
See Note15 to the Consolidated Financial Statements- Borrowings for further details.
Accounting Policies
AIM listed companies are required to comply with the European regulation to report consolidated statements that conform to International Financial Reporting Standards ("IFRS"). The Group's significant accounting policies and details of the significant accounting judgements and critical accounting estimates are disclosed within the notes to the financial statements. The Group has not made any changes to its accounting policies in the year ended 31 December 2015.
Citibank Loan Repayment
Trinity continues to have pro-active discussions with Citibank to manage the repayment of the combined USD 13.0 million debt balance with ongoing moratoriums.
Events Since Year End
-- Asset Sale Activity
On 21 October 2015, Trinity announced that it entered into an agreement (the "Touchstone SPA") to sell its interests in the WD-2, WD-5/6, WD-13, WD-14 and FZ-2 licenses and related fixed assets (the "Blocks") to Touchstone Exploration Inc. ("Touchstone") for a cash consideration of USD 20.8 million. The Touchstone SPA was subject to various conditions precedent and had a backstop date of 13 March 2016. The backstop date expired without all of the conditions precedent being satisfied. As a result, the sale of the Blocks to Touchstone did not complete with the deposit of USD 2.08 million, which had been held in escrow, being subsequently released to Touchstone (this was not included in Trinity's cash balances).
The sale of the Group's 100% interest in the Guapo-1 block ("Block GU-1") to New Horizon Exploration Trinidad and Tobago Unlimited ("New Horizon") for a cash consideration of USD 2.8 million (the "Guapo Transaction") has been completed. All the conditions precedent for the Guapo Transaction have been satisfied including standard regulatory approvals, which were granted on 15 April 2016. The transaction was subsequently finalised with the closure of the cash settlement on 25 May 2016. The cash proceeds will be used predominantly by Trinity for working capital purposes.
-- Funding and Refinancing
On 14 March 2015 Trinity announced that the Company had engaged two specialist refinancing advisers, Imperial Capital of New York and Cantor Fitzgerald of London. Management is encouraged by the interest levels from several potential investors. Trinity's near term objective is to conclude a complete refinancing structure that will enable the Company to retire its existing senior debt facilities, reduce other outstanding payables and provide sufficient additional capital to retain the integrity of its assets and grow production and cash flow. As part of the refinancing deal it is expected that there would have to be significant discounts agreed on the outstanding senior debt and with its creditors. Without such a refinancing, the Group and Company would be unlikely to be able to continue as a going concern.
Trinity Exploration & Production Plc
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2015
(Expressed in United States Dollars)
Note 2015 2014
$'000 $'000
Operating Revenues
Crude oil sales 48,180 113,319
Other income 30 144
------------ -------------
48,210 113,463
Operating Expenses
Royalties (14,571) (36,980)
Production costs (21,966) (32,931)
Depreciation, depletion and
amortisation 5 (8,219) (16,335)
General and administrative
expenses (10,497) (15,019)
------------ -------------
(55,253) (101,265)
------------ -------------
Operating (Loss)/Profit Before
Exceptional Items (7,043) 12,198
Exceptional Items 28 (17,229) (120,939)
Exploration cost write off -- (14,929)
Operating Loss After Exceptional
Items 19 (24,272) (123,670)
Finance Income -- 33
Finance Costs 20 (6,675) (5,151)
Loss Before Income Tax (30,947) (128,788)
Income Tax Expense 21 (26,976) (12,657)
------------ -------------
Loss For The Year (57,923) (141,445)
Other Comprehensive (Expense)/Income:
Items that may be subsequently
reclassified to profit or
loss
Currency Translation (597) 263
------------ -------------
Total Comprehensive Loss For
The Year (58,520) (141,182)
============ =============
Earnings per share (expressed
in dollars per share)
Basic 29 (0.62) (1.49)
Diluted 29 (0.62) (1.49)
------------ --------------
Trinity Exploration & Production Plc
Consolidated Statement of Financial Position
at 31 December 2015
(Expressed in United States Dollars)
Note 2015 2014
ASSETS $'000 $'000
Non-current Assets
Property, plant and equipment 5 46,143 85,655
Intangible assets 6 26,751 25,676
Deferred tax assets 17 2,460 27,630
---------- ----------
75,354 138,961
---------- ----------
Current Assets
Inventories 8 3,962 11,909
Trade and other receivables 7 10,593 21,990
Non-current asset held-for-sale 14 30,491 672
Taxation recoverable 9 192 548
Cash and cash equivalents 10 8,200 33,084
---------- ----------
53,438 68,203
---------- ----------
Total Assets 128,792 207,164
========== ==========
Equity and liabilities
Equity Attributable to Owners
of the Parent
Share capital 11 94,800 94,800
Share premium 11 116,395 116,395
Share warrants 12 71 71
Share based payment reserve 27 12,178 11,834
Merger reserves 13 75,467 75,467
Reverse acquisition reserve 13 (89,268) (89,268)
Translation reserve (557) 527
Accumulated losses (188,993) (131,070)
---------- ----------
Total Equity 20,093 78,756
---------- ----------
Non-current Liabilities
Provision for other liabilities 16 19,831 39,775
Deferred tax liabilities 17 3,308 3,778
---------- ----------
23,139 43,553
---------- ----------
Current Liabilities
Trade and other payables 18 25,274 33,374
Provision for other liabilities 16 1,930 --
Liabilities held for sale 14 21,927 --
Borrowings 15 13,000 33,000
Taxation payable 9 23,429 18,481
---------- ----------
85,560 84,855
---------- ----------
Total Liabilities 108,699 128,408
---------- ----------
Total Equity and Liabilities 128,792 207,164
========== ==========
The financial statements were authorised for issue by the Board of Directors on 25 May 2016 and were signed on its behalf by:
___________________________________
Bruce A. I. Dingwall CBE
Executive Chairman
25 May 2016
Trinity Exploration & Production Plc
Company Statement of Financial Position
at 31 December 2015
(Expressed in United States Dollars)
Note 2015 2014
ASSETS $'000 $'000
Non-current Assets
Investment in subsidiaries 22 44,775 44,513
Trade and other receivables 7 10,813 10,106
---------- ----------
55,588 54,619
---------- ----------
Current Assets
Trade and other receivables 7 1,176 1,106
Cash and cash equivalents 10 -- 10
---------- ----------
1,176 1,116
---------- ----------
Total Assets 56,764 55,735
========== ==========
Equity and liabilities
Equity Attributable to Owners
of the Parent
Share capital 11 94,800 94,800
Share premium 11 116,395 116,395
Share based payment reserve 1,505 1,419
Merger reserves 56,652 56,652
Accumulated losses (218,234) (215,838)
---------- ----------
Total Equity 51,118 53,428
---------- ----------
Current Liabilities
Trade and other payables 18 859 1,147
Tax payable 9 1,614 1,160
Intercompany 3,173 --
---------- ----------
5,646 2,307
---------- ----------
Total Liabilities 5,646 2,307
---------- ----------
Total Equity and Liabilities 56,764 55,735
========== ==========
The financial statements were authorised for issue by the Board of Directors on 25 May 2016 and were signed on its behalf by:
____________________________________
Bruce A. I. Dingwall CBE
Executive Chairman
25 May 2016
Trinity Exploration & Production plc
Registered Number: 07535869
Trinity Exploration & Production Plc
Consolidated Statement of Changes in Equity
for the year ended 31 December 2015
(Expressed in United States Dollars)
Year ended 31 Share Share Share Share Reverse Merger Translation Accumulated Total
December Capital Premium Warrants Based Acquisition Reserves Reserve (Losses)/ Equity
2014 Payment Reserve Profits
Reserve
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
At 1 January
2014 94,800 116,395 71 11,523 (89,268) 74,808 567 10,375 219,271
Share based
payment
charge (note
27) -- -- -- 163 -- -- -- -- 163
Translation
difference -- -- -- 148 -- 659 (303) -- 504
Total
comprehensive
loss for the
year -- -- -- -- -- -- 263 (141,445) (141,182)
At 31 December
2014 94,800 116,395 71 11,834 (89,268) 75,467 527 (131,070) 78,756
======== ========= ========= ========= ============ ========= ============ ============ ===========
At 1 January
2015 94,800 116,395 71 11,834 (89,268) 75,467 527 (131,070) 78,756
Share based
payment
charge (note
27) -- -- -- 344 -- -- -- -- 344
Translation
difference -- -- -- -- -- -- (487) -- (487)
Total
comprehensive
loss for the
year -- -- -- -- -- -- (597) (57,923) (58,520)
-------- --------- --------- --------- ------------ --------- ------------ ------------ -----------
At 31 December
2015 94,800 116,395 71 12,178 (89,268) 75,467 (557) (188,993) 20,093
======== ========= ========= ========= ============ ========= ============ ============ ===========
Trinity Exploration & Production Plc
Company Statement of Changes in Equity
for the year ended 31 December 2015
(Expressed in United States Dollars)
Share Share Share Based Merger Accumulated Total
Capital Premium Payment Reserves Losses Equity
Reserve
$'000 $'000 $'000 $'000 $'000 $'000
Year ended 31 December
2014
At 1 January 2014 94,800 116,395 1,127 56,652 (9,991) 258,983
Share based payment charge -- -- 292 -- -- 292
Total comprehensive loss
for the year -- -- -- -- (205,847) (205,847)
At 31 December 2014 94,800 116,395 1,419 56,652 (215,838) 53,428
========= ========= ============ ========== ============ ==========
At 1 January 2015 94,800 116,395 1,419 56,652 (215,838) 53,428
Share based payment charge -- -- 86 -- -- 86
Total comprehensive loss
for the year -- -- -- -- (2,396) (2,396)
At 31 December 2015 94,800 116,395 1,505 56,652 (218,234) 51,118
========= ========= ============ ========== ============ ==========
Trinity Exploration & Production Plc
Consolidated Statement of Cash Flows
for the year ended 31 December 2015
(Expressed in United States Dollars)
Note 2015 2014
$'000 $'000
Operating Activities
Loss before taxation (30,947) (128,788)
Adjustments for:
Translation difference 841 (232)
Finance cost - loans and interest 20 5,151 3,985
Share based payment charge 27 344 163
Finance cost - decommissioning
provision 16 1,524 1,167
Finance income -- (33)
Depreciation, depletion and
amortisation 5 8,219 16,335
Loss on disposal of inventory 1,302 --
Loss on disposal of assets 108 --
Write off of 1(a) & 1 (b) 6,385 --
Potential claim 28 -- 1,270
Exploration cost write off 6 -- 14,929
Impairment of property, plant
and equipment 5 2,559 96,242
Impairment of intangibles 6 131 23,430
Provision for restructuring 1,943 --
Impairment of receivables 1,036 --
Impairment of inventory 2,483 --
1,079 28,468
--------- ----------
Changes In Working Capital
Inventories 8 5,541 121
Held for sale assets 104 --
Trade and other receivables 7 2,785 14,792
Trade and other payables 18 (6,910) (27,742)
2,599 15,639
Taxation paid (114) (3,837)
--------- ----------
Net Cash Inflow From Operating
Activities 2,485 11,802
--------- ----------
Investing Activities
Purchase of exploration and
evaluation assets 6 (1,206) (4,970)
Purchase of property, plant
and equipment 5 (1,012) (11,941)
Net Cash Outflow From Investing
Activities (2,218) (16,911)
--------- ----------
Financing Activities
Finance income -- 33
Finance cost - loans 20 (5,151) (3,985)
Repayment of borrowings 15 (20,000) (8,000)
Proceeds from new borrowings 15 -- 25,000
--------- ----------
Net Cash (Outflow)/ Inflow
From Financing Activities (25,151) 13,048
--------- ----------
(Decrease)/Increase in Cash
and Cash Equivalents (24,884) 7,939
========= ==========
Cash And Cash Equivalents
At beginning of year 33,084 25,145
(Decrease)/Increase in cash
and cash equivalents (24,884) 7,939
--------- ----------
At end of year 10 8,200 33,084
========= ==========
Trinity Exploration & Production Plc
Company Statement of Cash Flows
for the year ended 31 December 2015
(Expressed in United States Dollars)
Note 2015 2014
$'000 $'000
Operating Activities
Loss before taxation (2,159) (204,690)
Adjustments for:
Exchange differences 70 --
Finance income - intragroup
loans (314) (8,420)
Finance cost - interest on
taxes 129 3
Share based payment charge 86 79
Impairment of investment
in subsidiaries 22 -- 50,100
Impairment of intragroup
loans -- 161,569
--------
(2,188) (1,359)
Changes In Working Capital
Trade and other receivables 7 (893) (11,013)
Trade and other payables 18 2,886 (224)
-------- ----------
Net Cash Outflow from Operating
Activities (195) (12,596)
-------- ----------
Financing Activities
Finance income - intragroup
loans 314 8,420
Finance cost - interest on
taxes (129) (3)
Net Cash Inflow from Financing
Activities 185 8,417
-------- ----------
Decrease In Cash And Cash
Equivalents (10) (4,179)
======== ==========
Cash And Cash Equivalents
At beginning of year 10 4,189
Decrease in cash and cash
equivalents (10) (4,179)
At end of year 10 -- 10
======== ==========
Trinity Exploration & Production Plc
Notes to the Consolidated Financial Statements
31 December 2015
(Expressed in United States Dollars)
1 Background and Accounting Policies
The principal accounting policies applied in the preparation of this consolidated financial information are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.
Background
Trinity Exploration & Production plc ("Trinity") previously Bayfield Energy Holdings plc ("Bayfield") was incorporated and registered in England and Wales on 21 February 2011 and traded on the Alternative Investment Market ("AIM"), a market operated by the London Stock Exchange plc. On 14 February 2013, Bayfield was acquired by Trinity Exploration & Production (UK) Limited ("TEPL"), a Company incorporated in Scotland, through a reverse acquisition. On the 14 February 2013, the enlarged Group was re-admitted to trading on AIM and Bayfield changed its name to Trinity Exploration & Production plc. Trinity ("the Company") and its subsidiaries (together "the Group") are involved in the exploration, development and production of oil and gas reserves in Trinidad.
Basis of Preparation
This consolidated financial information has been prepared on a going concern basis, in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union ("EU"), IFRS Interpretations Committee ("IFRS IC") interpretations as adopted by the EU and those parts of the Companies Act 2006 as applicable to companies reporting under IFRS. This consolidated financial information has been prepared under the historical cost convention, modified for fair values under IFRS.
The preparation of the consolidated financial information in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial information are disclosed in note 3.
The Company has taken advantage of the exemption in Section 408 of the Companies Act 2006 not to present its own income statement or statement of comprehensive income. The loss for the Company for the year was $2.4 million (2014 $205.8 million loss).
Going Concern
In making their going concern assessment, the Directors have considered the Group's budget and cash flow forecasts. The Group is incurring expenditure in order to continue operations from its existing fields but is faced with the challenge of lower revenues due to current global oil prices. The Group is making limited payments to its creditors and bankers pending discussions with potential new investors to refinance the Group. Discussions with the Group's creditors and bankers are ongoing and it is expected that the current moratorium agreement with its bankers will be extended further. Creditors continue to delay repayment requests and the bank has continued to provide extensions as required on a weekly or bi-monthly basis since the Group breached the loan covenants at the end of 2014 with the next expiration due on 27 May 2016.
The Group is in discussions with a number of interested parties about a refinancing of the Group. Such a refinancing is required in order for the Group and Company to continue as a going concern. As part of the refinancing deal it is expected that there would have to be significant discounts agreed on the outstanding senior debt and with its creditors. Without such a refinancing, the Group and Company would be unlikely to be able to continue as a going concern.
The Board of Directors has carefully considered and formed a reasonable judgement that, at the time of approving these financial statements, there is a reasonable expectation that the Group and Company will be able to complete the refinancing and obtain the funding required to continue operations for the foreseeable future. For this reason, the Board of Directors continues to adopt the going concern basis of preparing the financial statements. However, the need for additional funding indicates the existence of a material uncertainty which may cast significant doubt on the Company and the Group's ability to continue as a going concern and, therefore the Group and Company may be unable to fully realise their assets and discharge their liabilities in the normal course of business. The financial statements do not include the adjustments that would be necessary if the Group and Company were unable to continue as a going concern.
New and amended standards adopted by the Group:
There have been no amendments with effect from 1 January 2015 adopted by the Group. The following standards have been published and are effective for periods beginning after 1 January, 2015 but had no significant impact on the Group:
IFRS 10 Consolidated Financial This is a new standard that replaces Periods beginning on / after 1
Statements existing guidance on this area and January2013
introduces new criteria
for determining whether an entity
should be consolidated within the
results of the Group,
with the key determinant now being
whether the Group controls the entity
(i.e. has the power
to direct the level of returns the
entity makes, and whether the Group
receives variable returns
from the Group.
-------------------------------------- -------------------------------------- --------------------------------------
IFRS 11 Joint Arrangements As with the above, this is a new Periods beginning on / after 1
standard, which reduces the number of January 2013
categories of and therefore
options for accounting for joint
arrangements. Joint ventures are
accounted for using the
equity method, and a joint operator
in a joint operation will recognise
its share of assets,
liabilities, revenues and expenses in
its own financial statements. The
previous accounting
policy choice has been removed.
====================================== ====================================== ======================================
IFRS 12 Disclosure of This new standard sets out the Periods beginning on / after 1
Interests in Other Entities disclosure requirements in the January 2013
financial statements in respect
of IFRS 10 and IFRS 11 The key
additional disclosure above those
already required under existing
standards, is that additional
information is required on the
nature, risks and financial effects
of the Company's interests in other
entities.
====================================== ====================================== ======================================
IAS 19 Employee Benefits A further amendment to IAS 19R is Periods beginning on / after 1 July
designed to clarify the application 2014
of the standard to plans
that require employees or third
parties to contribute towards the
cost of benefits. Contributions
that are linked to service, but do
not vary with the length of the
employee service are to
be deducted from the cost of benefits
earned in the period that the service
is provided. However,
contributions that vary according to
the length of service must be spread
over the service
period. Contributions not linked to
service are reflected in the
measurement of the balance
sheet liability.
-------------------------------------- -------------------------------------- --------------------------------------
IAS 36 Impairment of Assets Some narrow scope amendments have Periods beginning on / after 1
been made to the Standard, which will January 2014
impact entities who
recognise or reverse an impairment
loss on non-financial assets by
altering some of the associated
disclosure requirements.
-------------------------------------- -------------------------------------- --------------------------------------
IAS 39 Financial Instruments: The amendment clarifies the Periods beginning on / after 1
recognition and measurement accounting impact on hedge accounting January 2014
when entities novate derivative
contracts to central counterparties
to reduce counterparty risk.
-------------------------------------- -------------------------------------- --------------------------------------
New and amended standards not yet adopted by the Group:
The following standards and amendments to existing standards have been published and are effective for periods beginning after 1 January 2015 and have not been applied in preparing these consolidated financial statement. None of these is expected to have a significant effect on the Group:
IFRS 15 Revenue from Contracts with The new standard for revenue replaces Periods beginning on / after 1
Customers IAS 18, and will have a significant January 2017
impact on some entities.
The changes could have an impact on
the timing of when revenue is
recognised and the period
over which it is recognised as well
as on the financial statement
disclosures.
-------------------------------------- -------------------------------------- --------------------------------------
IFRS 9 Financial Instruments This is a new accounting standard Periods beginning on / after 1
that introduces a new classification January 2018
approach for financial
assets and liabilities. The previous
four categories for financial assets
will be reduced
to three, being fair value through
profit and loss, fair value through
other comprehensive
income and amortised cost, and
financial liabilities will be
measured at amortised cost or
fair value through profit and loss.
This may result in additional gains
or losses being recognised
in the Income.
-------------------------------------- -------------------------------------- --------------------------------------
IFRS 16 Leases This is a new accounting standard Periods beginning on / after 1 Jan
which requires lessees to recognise 2019
nearly all leases on
the balance sheet which will reflect
their right to use an asset for a
period of time and
the associated liability for
payments.
Basis of consolidation
The consolidated financial information incorporates the financial information of the Company and entities controlled by the Company (its subsidiaries) made up to 31 December each year. Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the effective date of acquisition and up to the effective date of disposal, as appropriate.
The acquisition method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any non-controlling interest. The excess of the cost of acquisition over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the statement of comprehensive income. Costs related to an acquisition are expensed as incurred.
Uniform accounting policies have been adopted across the Group. All intra-Group transactions, balances, income and expenses are eliminated on consolidation.
Business combination
The acquisition of subsidiaries is accounted for using the acquisition method. Identifying the acquirer in a business combination is based on the concept of 'control'. However in certain circumstances the positions may be reversed and it is the legal subsidiary entity's shareholders who effectively control the combined Group even though the other party is the legal parent. IFRS 3 requires, in a business combination effected through an exchange of equity interests, all relevant facts and circumstances be considered to determine which of the combining entities has the power to govern the financial and operating policies of the other entity. These combinations are commonly referred to as 'reverse acquisitions'.
For each business combination, the cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree. Transaction costs are expensed directly to the Statement of Comprehensive Income. The acquiree's identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 are recognised at their fair value at the acquisition date. Where the Group has acquired assets held in a subsidiary undertaking that do not meet the definition of a business combination, purchase consideration is allocated to the net assets acquired and the interests of non-controlling shareholders are initially measured at their proportionate share of the acquiree's net assets.
Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for the sale of crude oil and services provided in the ordinary course of business, net of discounts and sales related taxes. Revenue is recognised when goods are delivered and title has passed when the oil is transferred to the Petroleum Company of Trinidad & Tobago ("Petrotrin") pipelines, at which point revenue will be recognised. Petrotrin are the group's only customer.
Interest income is accrued on a time basis, by reference to the principal outstanding and the interest rate applicable, unless collectability is in doubt.
Share-based payments
The Group operates a number of equity-settled, share-based compensation plans comprised of warrants, options and long term incentive plans ("LTIP") as consideration for services rendered by the Group's employees. The fair value of the services received in exchange for the grant of share-based payment is recognised as an expense.
The total amount to be expensed is determined by reference to the fair value of the options granted:
- including any market performance conditions (for example, an entity's share price); - excluding the impact of any service and non-market performance vesting conditions and - including the impact of any non-vesting conditions
Non-market performance and service conditions are included in assumptions about the number of share-based payments that are expected to vest. The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied.
At the end of each reporting period, the Group revises its estimates of the number of options that are expected to vest based on the non-market vesting conditions. It recognises the impact of the revision to original estimates, if any, in the statement of comprehensive income, with a corresponding adjustment to equity. When the options are exercised, the Group issues new shares. The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium.
Where the services provided relate solely to the issue of share capital, the expense will be charged to equity within the share premium account.
The Company granted employees options and LTIPs over its equity instruments to the employees of subsidiary undertakings in the Group is treated as a capital contribution. The fair value of employee services received, measured by reference to the grant date fair value, is recognised over the vesting period as an increase to investment in subsidiary undertakings, with a corresponding credit to equity.
Foreign currency translation
(a) Functional and presentation currency
The functional currency of the Group operating entity is Trinidad & Tobago Dollars ("TTD") as this is the currency of the primary economic environment in which the entities operate. The presentation currency is United States Dollars ("USD") which better reflects the Group's business activities and improves ability of users of the financial statements to compare financial results with others in the International Oil and Gas industry. The Statement of Financial Position is translated at the closing rate and Statement of Comprehensive Income is translated at the average rate for the period. The following exchange rates have been used in the preparation of these financial statements:
2015 2014
-------------------------- ---------------------------
USD GBP USD GBP
Average rate TTD= USD/GBP* 6.354 9.784 6.385 10.523
Closing rate TTD= USD/GBP 6.420 9.594 6.359 9.934
(*): GBP means Great
British Pound ("GBP")
(b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of comprehensive income.
Intangible assets
(a) Exploration and evaluation assets i) Capitalisation
Exploration and Evaluation assets are initially classified as intangible assets. Such costs include those directly associated with an exploration area. Upon discovery of commercial reserves capitalisation is recognised within Property, Plant and Equipment.
Oil and natural gas exploration and evaluation expenditures are accounted for using the successful efforts method of accounting. Under this method, costs are accumulated on a prospect-by-prospect basis and capitalised upon discovery of commercially viable mineral reserves. If the commercial viability is not achieved or achievable, such costs are charged to expense.
Costs incurred in the exploration and evaluation of assets includes:
ii) License and property acquisition costs
Exploration and property leasehold acquisition costs are capitalised within exploration and evaluation assets.
iii) Exploration and evaluation expenditure
Costs directly associated with an exploration well are capitalised until the determination of reserves is evaluated. Such costs include topographical, geological, geochemical, and geophysical studies, exploratory drilling costs, trenching, sampling and activities in relation to evaluating the technical feasibility and commercial viability of extracting mineral resources. Capitalisation is made within property, plant and equipment or intangible assets according to its nature, however the majority of such expenditure is capitalised as an intangible asset. If commercial reserves are found, the costs continue to be carried as an asset. If commercial reserves are not found, exploration and evaluation expenditures are written off as a dry hole when that determination is made.
Once commercial reserves are found, exploration and evaluation assets are tested for impairment and transferred to development tangible and intangible assets as applicable. No depreciation and/or amortisation are charged during the exploration and evaluation phase.
iv) Impairment
Exploration and evaluation assets are tested for impairment (in accordance with the criteria set out in IFRS 6: Exploration for and Evaluation of Mineral Resources) whenever facts and circumstances indicate impairment. An impairment loss is recognised for the amount by which the exploration and evaluation assets' carrying amount exceed their recoverable amount. The recoverable amount is the higher of the exploration and evaluation assets' fair value less costs to sell and their value in use. For the purposes of assessing impairment, the exploration and evaluation assets subject to testing are grouped with existing cash generating units ("CGU") of related production fields located in the same geographical region. The geographical region is the same as that used for reserves reporting purposes.
The following indicators are evaluated to determine whether these assets should be tested for impairment:
-- The period for which the Group has the right to explore in the specific area.
-- Whether substantive expenditure on further exploration and evaluation in the specific area is budgeted or planned.
-- Whether exploration and evaluation in the specific area have not led to the discovery of commercially viable quantities and the Company has decided to discontinue such activities in the specific area.
-- Whether sufficient data exist to indicate that, although a development in the specific area is likely to proceed, the carrying amount of the exploration and evaluation asset is unlikely to be recovered in full from successful development or by sale.
(b) Goodwill
Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interest over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognised in profit or loss.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Company's cash-generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.
Property, plant and equipment
(a) Oil and gas assets i) Development and Producing Assets - Capitalisation
Acquisitions of oil and gas properties are accounted for under the purchase method where the transaction meets the definition of a business combination.
Transactions involving the purchase of an individual field interest, or a Group of field interests, that do not qualify as a business combination are treated as asset purchase, irrespective of whether the specific transactions involve the transfer of the field interests directly, or the transfer of an incorporated entity. Accordingly, the consideration is allocated to the assets and liabilities purchased on a relative fair value basis.
Proceeds on disposal are applied to the carrying amount of the specific asset or development and production assets disposed of. Any excess is recorded as a gain on disposal in the statement of comprehensive income and any shortfall between the proceeds and the carrying amount is recorded as a loss on disposal in the statement of comprehensive income.
Expenditure on the construction, installation or completion of infrastructure facilities such as platforms, pipelines and the drilling of development commercially proven wells is capitalised according to its nature. When development is completed on a specific field it is transferred to Production Assets. No depreciation and/or amortisation are charged during the development phase.
Expenditure on Geological and Geophysical (G&G) surveys used to locate and identify properties with the potential to produce commercial quantities of oil and gas as well as to determine the optimal location for development wells are capitalised.
ii) Development and Producing Assets - Impairment
An impairment test is performed whenever events and circumstances arising during the development or production phase indicate that the carrying value of a development or production asset may exceed its recoverable amount. Impairment triggers include but are not limited to, declining long term market prices for oil and gas, significant downward reserve revisions, increased regulations or fiscal changes, deteriorating local conditions such that it becomes obsolete and unsafe to continue operations.
The carrying value is compared against the expected recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and the value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels (its cash generating unit) for which there are separately identifiable cash flows. The cash generating unit applied for impairment test purposes is generally the field. These fields are the same as that used for reserves reporting purposes.
iii) Producing Assets - Depreciation, depletion and amortisation
The provision for depreciation, depletion and amortisation of developed and producing oil and gas assets are calculated using the unit of production method.
Oil and gas assets are depreciated generally on a field-by-field basis using the unit-of-production method which is the ratio of oil and gas production in the period to the estimated quantities of commercial reserves at the end of the period plus the production in the period. Costs used in the unit of production calculation comprise the net book value of capitalised costs plus the estimated future development costs. Changes in the estimates of commercial reserves or future development costs are dealt with prospectively.
iv) Decommissioning
Provision for decommissioning is recognised in full at the commencement of oil and gas production. The amount recognised is the net present value of the estimated cost of decommissioning at the end of the economic producing lives of the wells and the end of the useful lives of refinery and storage units. Such costs include removal of equipment and restoration of land or seabed. The unwinding of the discount on the provision is included in the statement of comprehensive income within finance costs.
A corresponding asset is also created at an amount equal to the provision. This is subsequently depleted as part of the capital costs of the production assets. Any change in the present value of the estimated expenditure or discount rates are reflected as an adjustment to the provision and the asset and dealt with prospectively.
(b) Non-oil and gas assets
All property, plant and equipment are recorded at historical cost less accumulated depreciation and any impairment losses. Historical cost includes the original purchase price of the asset and expenditure that is directly attributable to bringing the asset to its working condition for its intended use. Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably.
The provision for depreciation with respect to operations other than oil and gas producing activities is computed using the straight-line method based on estimated useful lives as follows:
Buildings - 20 years Plant and equipment - 4 years Other - 4 years
The assets' residual values and useful lives are reviewed, and adjusted if appropriate at each statement of financial position date. An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with carrying amounts and are included in the statement of comprehensive income.
Repairs and maintenance are charged to the statement of comprehensive income during the financial period in which they are incurred. The cost of major renovations is included in the carrying amount of the asset when it is probable that future economic benefits in excess of the originally assessed standard of performance of the existing assets will flow to the Group. Major renovations are depreciated over the remaining useful life of the related asset.
Impairment of non-financial assets
At each reporting date, assets that have an indefinite useful life, for example, goodwill, are not subject to amortisation and are tested for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units). Non-financial assets other than goodwill which suffer impairment are reviewed for possible reversal of the impairment at each reporting date.
Inventories
Crude oil is stated at the lower of cost and net realisable value. Cost is determined by the average cost (AVCO) method. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses.
Materials and supplies are stated at lower of cost and net realisable value. Cost is determined using the average cost method.
Cash and cash equivalents
Cash and cash equivalents comprises cash in hand, deposits held at call with banks and other short-term highly liquid investments with original maturities of three months or less.
Trade receivables
Trade receivables are amounts due from customers for crude oil sold in the ordinary course of business. If collection is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets.
Trade receivables are recognised initially at fair value less provision for impairment. Appropriate provisions for estimated irrecoverable amounts are recognised in the statement of comprehensive income when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of sale.
Trade payables
Trade payables are initially recognised at fair value.
Current and deferred income taxes
The taxation expense for the period comprises current and deferred tax. Tax is recognised in the statement of comprehensive income, except to the extent that it relates to items recognised in equity. In this case the tax is also recognised directly in equity.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the statement of financial position date in the countries where the Company's subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial information. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit/loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the statement of financial position date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority and the Company intends to settle the balances on a net basis.
Borrowings
Borrowings are recognised initially at fair value net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any differences between proceeds (net of transaction costs) and the redemption value is recognised in the statement of comprehensive income over the period of the borrowings using the effective interest method.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the statement of financial position date.
General and specific borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
All other borrowing costs are recognised in comprehensive income in the period in which they are incurred.
Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, where it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made. Provisions are not recognised for future operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.
Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as a finance cost.
Employee retirement benefits
The Group provides retirement benefits for certain employees in the form of individual annuity policies. These are defined contribution plans.
For defined contribution plans, the Group pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The Group has no further payment obligations once contributions have been paid. The contributions are recognised as employee benefit expenses when they are due.
Non-current assets (or disposal Groups) held for sale
Non-current assets (or disposal Groups) classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell. Non-current assets and disposal Groups are classified as held for sale if their carrying amount will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset (or disposal Group) is available for immediate sale in its present condition. Management must be committed to the sale which should be expected to qualify for recognition as a completed sale within one year from the date of classification.
Leases
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease.
Share capital
Ordinary shares are classified as equity. The nominal value of any shares issued is recognised in share capital with the excess above the nominal amount paid being shown within share premium.
Incremental costs directly attributable to the issue of new ordinary shares are shown in equity. Where, on issuing shares, share premium has been recognised, the expenses of issuing those shares and any commission paid on the issue of those shares have been written off against the share premium account.
Operating segment information
The steering committee is the Group's chief operating decision-maker. Management has determined the operating segments reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision maker is responsible for making strategic decisions inclusive of; allocating resources and assessing performance of the operating segments. The chief operating decision-maker has been identified as the steering committee of Management which comprises; the Chief Executive Officer/ Country Manager, Chief Operating Officer and Chief Financial Officer, that makes strategic decisions in accordance with Board policy.
Exceptional Items
Exceptional items are disclosed separately in the financial statements where it is necessary to do so to provide further understanding of the financial performance of the Group. They are material items of income or expense that have been shown separately due to the non-recurring nature and the significance of their nature or amount.
2 Financial Risk Management
(a) Financial risk factors
The Group's activities expose it to a variety of financial risks. The Group's overall risk management programme seeks to minimise potential adverse effects on the Group's financial performance.
Risk management is carried out by management. Management identifies and evaluates financial risks.
(b) Market risk
(i) Foreign exchange risk
The Group is exposed to foreign exchange risk primarily with respect to the United States dollar. Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities which are denominated in a currency that is not the entity's functional currency.
At 31 December 2015, if the functional currency had weakened/strengthened by 10 per cent against the US dollar with all other variables held constant, post- tax(loss)/profit for the year would have been $1.0 million (2014: $1.8 million) lower/higher, mainly as a result of foreign exchange gain/losses on translation of US dollar-denominated borrowings and sales.
(ii) Price risk
The Group is exposed to commodity price risk regarding its sales of crude oil which is an internationally traded commodity.
At 31 December 2015, if commodity prices had been 20 per cent higher/lower with all other variables held constant, post-tax (loss)/profit for the year would have been $10.0 million (2014: $12.0 million) lower/higher.
(iii) Interest rate risk
The Group's interest rate risk arises from borrowings. Borrowings issued at variable rates expose the Group to cash flow interest rate risk.
At 31 December 2015, if interest rates on foreign currency-denominated borrowings had been 1 per cent higher/lower with all other variables held constant, post-tax (loss)/profit for the year would have been $0.1 million (2014: $0.3 million) lower/higher, mainly as a result of higher/lower interest expense on floating rate borrowings.
(c) Credit risk
Credit risk arises from cash and cash equivalents, deposits with banks and financial institutions, as well as credit exposures to customers, including outstanding receivables and committed transactions. For banks and financial institutions, management determines the placement of funds based on its judgement and experience.
All sales are made to a state-owned entity - Petrotrin. As Petrotrin is state owned, credit risk is considered to be low.
(d) Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and short-term funds and the availability of funding through an adequate amount of committed credit facilities. Management monitors rolling forecasts of the Group's liquidity and cash and cash equivalents on the basis of expected cash flow. At the end of the year the Group is facing liquidity issues over its current liabilities which include borrowings, accounts payable, accruals and taxes. The Groups' revenues have decreased considerably as a result of a continued decline in oil prices impacting the main source of revenue generation. In addition, the Group's credit facility arrangement remains in default with Citibank Trinidad & Tobago Limited who has provided a moratorium on principal repayments of the $13.0 million outstanding until 27 May 2016, until the Group formalises its plan to repay. The Group has a working capital deficit of $34.6 million (2014: deficit $16.7 million). Management has suspended investment in appraisal and development activities and is continuing to manage its relationships with the Bank and Suppliers in an effort to handle the liquidity issue.
Management refers to the disclosures of note 1 "Going Concern" for more information regarding the factors considered by the Company in managing liquidity risk. The table below analyses the Group's financial liabilities into relevant maturity groupings based on the remaining period at the statement of financial position to the contractual maturity date. The amounts disclosed are the contractual undiscounted cash flows.
Less than Between 2
1 year and 5 years
$'000 $'000
---------- -------------
At 31 December 2015
Borrowings (including interest) 13,900 --
(note 15)
Accounts payable, other provision, 48,703 --
accruals and taxes (note 18,9)
At 31 December 2014
Borrowings (including interest) 33,414 --
(note 15)
Accounts payable, accruals and 51,855 --
taxes (note 18,9)
(e) Capital risk management
The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. At the end of 2015 the Citibank debt covenants were in default (note 15).
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, issue new shares or sell assets to reduce debt.
Consistent with others in the industry, the Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including 'current and non-current borrowings' as shown in the consolidated statement of financial position) less cash and cash equivalents. Total capital is calculated as 'equity' as shown in the consolidated statement of financial position plus net debt.
2015 2014
$'000 $'000
-------- ---------
Total borrowings 13,000 33,000
Less: cash and cash equivalents (8,200) (33,084)
-------- ---------
Net debt/(Funds) 4,800 (84)
Total equity 17,609 78,756
-------- ---------
Total capital 22,409 78,672
-------- ---------
Gearing ratio 21.42% (0.11)%
Fair value estimation
The carrying values of trade receivables (less impairment provision) and payables are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments.
3 Critical Accounting Estimates and Assumptions
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
Management makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:
(a) Income taxes
Some judgement is required in determining the provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain. Management recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.
(b) Recoverability of deferred tax assets
Deferred tax assets are recognised only to the extent it is considered probable that those assets will be recoverable. This involves an assessment of when those deferred tax assets are likely to reverse, and a judgement as to whether or not there will be sufficient taxable profits available to offset the tax assets when they do reverse. This requires assumptions regarding future profitability and is therefore inherently uncertain. To the extent assumptions regarding future profitability change, there can be an increase or decrease in the level of deferred tax assets recognised which can result in a charge or credit in which the change occurs.
(c) Provision for decommissioning costs
This provision is significantly affected by changes in technology, laws and regulations which may affect the actual cost of decommissioning to be incurred at a future date. The estimate is also impacted by the discount rates used in the provisioning calculations. The discount rates used are the Group's risk-free rate and the core inflation rate applicable to the local oil and gas industry. The provision has been estimated using a discount rate of 3.9 per cent (2014: 3.9 per cent) and a core inflation rate of 3 per cent (2014: 3 per cent). The impact in 2015 of a 1 per cent change in these variables is as follows:
Statement Statement
of Financial of Comprehensive
Position Obligation Income/Expense
2015 2015
$'000 $'000
--------------------- ------------------
Discount rate
1 per cent increase in assumed
rate (6,111) 76
1 per cent decrease in assumed
rate 7,350 (173)
Inflation rate
1 per cent increase in assumed
rate 8,156 299
1 per cent decrease in assumed
rate (6,797) (262)
(d) Estimation of reserves
All reserve estimates involve some degree of uncertainty, which depends chiefly on the amount of reliable geological and engineering data available at the time of the estimate. Generally, reserve estimates are revised as additional data become available. The Group estimated its own commercial reserves in 2014 and 2015 based on information compiled by appropriately qualified persons relating to the geological and technical data on the size, depth, shape and grade of the hydrocarbon body and suitable production techniques and recovery rates. The Group's reserve estimates are also evaluated periodically by independent external reserve evaluators, the last independent external reserve valuation was done in 2012.
As the economic assumptions used may change and as additional geological information is obtained during the operation of a field, estimates of recoverable reserves may also change. Such changes may impact the Group's reported financial position and results, which include:
- The carrying value of exploration and evaluation assets, oil and gas properties, property, plant and equipment, and goodwill may be affected due to changes in estimated future cash flows.
- Depreciation and amortisation charges in profit or loss may change where such charges are determined using the unit of production method, or where the useful life of the related assets change. - Provisions for decommissioning may change - where changes to the reserve estimates affect expectations about when such activities will occur and the associated cost of these activities. - The recognition and carrying value of deferred tax assets may change due to changes in the judgements regarding the existence of such assets and in estimates of the likely recovery of such assets.
During 2015 all subsidiaries onshore and offshore 2P reserve estimates were re-evaluated by management and approved by the Board of Directors. In 2014 management re-evaluated the reserve estimates for all assets.
(e) Farm outs and lease operatorship agreements
The Group financial statements for its farmout and lease operatorship agreements on the basis that they will be renewed upon expiry. If any of these farmout or lease operatorship agreements are not renewed or renewed on disadvantageous terms this may severely impact the profitability and ongoing operations of the Group.
(f) Share-based payments
Management is required to make assumptions in respect of the inputs used to calculate the fair values of share-based payment arrangements which include expected volatility, risk free interest rate and current share price.
(g) Impairment of property, plant and equipment
Management performs impairment assessments on the Group's property, plant and equipment once there are indicators of impairment with reference to IAS 36: Impairment of Assets and in accordance with the accounting policy stated in note 1. In order to test for impairment, the higher of fair value less costs to sell and values in use calculations are prepared which require arm's length offers and an estimate of the timing and amount of cash flows expected respectively to arise from the CGU, cash generating unit. A CGU represents an individual field held by Trinity.
During 2015 an impairment charge was recognised on the Group's property, plant and equipment of $ 2.6 million (2014: $96.2 million) see note 5, resulting in the carrying amount of the respective CGUs being written down to their recoverable amount.
As part of this assessment, management has carried out an impairment test on the oil and gas assets classified as property, plant and equipment. This test compares the carrying value of the assets at the reporting date with the recoverable amount for each CGU. The recoverable amount is the higher of the Fair Value Less Costs to Sell ("FVLCTS") and value in use ("VIU"). The FVLCTS is the amount that a market participant would pay for the CGU less the cost to sell. . The FVLCTS approach utilised signed sale and purchase agreements as well as formal offer letter for the sale of certain CGU's of the Group. For the VIU calculations, the period over which management has projected its cash flow forecast, ranges between a 9-16 year economic life based on the production profile. For the discounted cash flows to be calculated, management has used a production profile based on its best estimate of proven and probable reserves of each CGU and a range of assumptions, including an external oil and gas price profile and a discount rate which, taking into account other assumptions used in the calculation, management considers to be reflective of the risks.
The value in use assessment involves judgement as to the likely commerciality of the asset; its proven and probable ('2P') reserves which are estimated using standard recognised evaluation techniques on a fully funded basis; future revenues and estimated development costs pertaining to the CGU's; and a discount rate utilised for the purposes of deriving a recoverable value.
If the price deck used in the impairment calculation had been 10 per cent lower than management's estimates at 31 December 2015, the Group would have no changes in impairment of Oil and Gas assets (2014: $ 17.4 million). If the price deck used in the impairment calculation had been 10 per cent higher than management's estimates at 31 December 2014, the Group would have no change in impairment of Oil and Gas assets in 2015 (2014: $20.4 million).
Price 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E Strip Bloomberg 42.7 47.1 50.2 52.7 54.2 55.2 55.9 56.3 56.7
If the estimated cost of capital of 10 per cent (2014: 10 per cent) used in determining the post-tax discount rate for the CGU's had been 1 per cent lower than management's estimates the Group would have no change in its impairment for 2015 (2014: $3.1 million) against Oil and Gas assets within property, plant and equipment. If the estimated cost of capital had been 1 per cent higher than management's estimates the Group would have recognised no change in 2015 (2014: $2.9 million).
(h) Impairment of intangible exploration and evaluation assets
The Group reviews the carrying values of intangible exploration and evaluation assets when there are impairment indicators which would tell whether an exploration and evaluation asset has suffered any impairment, in accordance with the accounting policy stated in note 1. The amounts of intangible exploration and evaluation assets represent the costs of active projects the commerciality of which is unevaluated until reserves can be appraised.
In 2015 an impairment review was carried out and an impairment loss recognised of $0.1 million, there were no further impairments losses realised against the carrying values of the Group's exploration and evaluation assets.
In 2014 the Group has utilised internal management expertise in determining that the exploration well EG-8 and the exploration costs accumulated in South Africa were impaired (note 6). An impairment charge of $23.5 million arose in the Trintes and in the South Africa CGU's during 2014, resulting in the full impairment of the Trintes EG-8 exploration well of $22.6 million and South Africa exploration costs of $0.9 million.
(i) Provision for restructuring
Management is required to make assumptions in respect of the assessment used to arrive at the restructuring costs. The provision for restructuring includes the cost of severance and redundancies in accordance with the laws of Trinidad and Tobago where the restructuring is expected to take place.
4 Segment Information
Management have considered the requirements of IFRS 8, in regard to the determination of operating segments, and concluded that the Group has only one significant operating segment being the production, development and exploration and extraction of hydrocarbons.
All revenue is generated from sales to one customer in Petrotrin. All non-current assets of the Group are located in Trinidad & Tobago.
5 Property, Plant and Equipment
Oil
Plant Land & Gas
& Equipment & Buildings Assets Other Total
$'000 $'000 $'000 $'000 $'000
------------- ------------- ---------- ------ ----------
Year ended 31 December
2015
Opening net book amount
at 1st January 2015 4,974 2,334 78,347 -- 85,655
Additions 528 (46) 530 -- 1,012
Impairment (1) (note 28) -- -- (2,559) -- (2,559)
Transferred to available
for sale (note 14) (877) (416) (29,306) -- (30,599)
Adjustment to decommissioning
estimate (note 16) -- -- 853 -- 853
Depreciation, depletion
and amortisation charge
for year (659) (243) (7,317) -- (8,219)
Closing net book amount
at 31 December 2015 3,966 1,629 40,548 -- 46,143
============= ============= ========== ====== ==========
At 31 December 2014
Cost 11,982 2,696 248,473 336 263,487
Accumulated depreciation,
depletion, amortisation
and impairment (8,016) (1,067) (207,925) (336) (217,344)
Closing net book amount 3,966 1,629 40,548 -- 46,143
============= ============= ========== ====== ==========
Note ((1) ): An impairment loss of $2.6 million was recognised in respect of one CGU, (see note 3 (g), (2014: $96.2 million) as a result of the carrying value being higher than the recoverable amount. The recoverable amount was determined by utilising its fair value less costs to sell. For the 2014 impairment, management utilised the VIU approach which included a production profile based on proven and probable reserves estimates and a range of assumptions, including third party oil price assumptions and a discount rate assumption of 10 per cent.
Oil
Plant Land & Gas
& Equipment & Buildings Assets Other Total
$'000 $'000 $'000 $'000 $'000
------------- ------------- ---------- ------ ----------
Year ended 31 December
2014
Opening net book amount
at 1st January 2014 6,133 2,558 168,901 -- 177,592
Additions 40 (106) 12,007 -- 11,941
Impairment (note 28) -- -- (96,242) -- (96,242)
Transferred to available
for sale -- -- (672) -- (672)
Adjustment to decommissioning
estimate (note 16) -- -- 8,156 -- 8,156
Depreciation, depletion
and amortisation charge
for year (1,270) (151) (14,914) -- (16,335)
Translation difference 71 33 1,111 -- 1,215
------------- ------------- ---------- ------ ----------
Closing net book amount
at 31 December 2014 4,974 2,334 78,347 -- 85,655
============= ============= ========== ====== ==========
At 31 December 2014
Cost 12,260 3,125 275,284 336 291,005
Accumulated depreciation,
depletion, amortisation
and impairment (7,357) (824) (198,048) (336) (206,565)
Translation difference 71 33 1,111 -- 1,215
------------- ------------- ---------- ------ ----------
Closing net book amount 4,974 2,334 78,347 -- 85,655
============= ============= ========== ====== ==========
6 Intangible Assets
The carrying amounts and changes in the year are as follows:
Exploration Total
and evaluation $'000
assets
$'000
At 1 January 2015 25,676 25,676
Additions 1,206 1,206
Impairment (note 28) (131) (131)
At 31 December 2015 26,751 26,751
====================== ===============
At 1 January 2014 59,002 59,002
Additions 4,970 4,970
Exploration cost write-off (14,929) (14,929)
Impairment (note 28) (23,430) (23,430)
Translation difference 167 167
----------------------
At 31 December 2014 25,676 25,676
====================== ===============
Notes: In 2015 an impairment loss of $0.1 million was recognised in relation to certain costs within Intangible assets following an impairment review on intangible assets. In 2014 the El Dorado exploration well costing $ 14.9 million was written off as a dry hole. The EG-8 exploration well costing $22.6 million and South Africa exploration costs of $0.9 million, were impaired following an impairment review.
7 Trade and Other Receivables
Group Company
---------------- -----------------
2015 2014 2015 2014
$'000 $'000 $'000 $'000
Due after more than one
year
Amounts due from Group companies -- -- 10,813 10,106
------- ------- -------- -------
Due within one year
Trade receivables 1,709 3,882 -- --
Less: provision for impairment
of trade receivables -- -- -- --
------- ------- -------- -------
Trade receivables - net 1,709 3,882 -- --
Prepayments 852 3,986 63 79
VAT recoverable 7,805 12,144 1,113 1,027
Other receivables 227 1,978 -- --
10,593 21,990 1,176 1,106
======= ======= ======== =======
The Company provides funding to other Group companies.
The fair value of trade and other receivables approximate their carrying amounts.
At 31 December 2015, trade receivables of $1.7 million (2014: $3.9 million) were fully performing. Trade receivables that are less than three months past due are not considered impaired. At 31 December 2015, no trade receivables (2014: nil) were impaired and provided for. At the end of 2015 and impairment loss of $1.0 million was recognised against other receivables from relating NIKO Resources Limited who have ceased operations in Trinidad and Tobago (note 28)
Ageing analysis of these trade receivables is as follows:
2015 2014
$'000 $'000
----------------- ------------
Up to 3 months 1,709 3,882
----------------- ------------
1,709 3,882
================= ============
The carrying amount of the Group's trade and other receivables are denominated in the following currencies:
2015 2014
$'000 $'000
-------- --------
USD 1,358 3,606
GBP 1,730 1,562
Trinidad & Tobago Dollar ("TTD") 7,505 16,822
-------- --------
10,593 21,990
======== ========
The maximum exposure to credit risk at the reporting date is the value of each class of receivable as shown above. The Group does not hold any collateral as security.
The credit quality of the financial assets that are neither past due nor impaired can be assessed by reference to historical information about the counterparty default rates:
Group Company
-------------- --------------
2015 2014 2015 2014
$'000 $'000 $'000 $'000
------ ------ ------ ------
Trade receivables
Counterparties without external
credit rating:
Existing customers (more
than 6 months) with no defaults
in the past 1,709 3,882 -- --
====== ====== ====== ======
All trade receivables are with the Group's only
customer, Petrotrin.
8 Inventories
Crude Materials Total
oil and supplies
$'000 $'000 $'000
At 1 January 2015 346 11,563 11,909
Inventory movement (186) (5,278) (5,464)
Impairment (note 28) -- (2,483) (2,483)
------------ -------------- -------------
At 31 December 2015 160 3,802 3,962
============ ============== =============
At 1st January 2014 435 11,594 12,029
Inventory movement (89) (31) (120)
------------ -------------- -------------
At 31 December 2014 346 11,563 11,909
============ ============== =============
The cost of inventories recognised as an expense and included in operating expenses amounted to $0.1 million (2014: $0.3 million). At the end of 2015 an impairment loss of $2.5 million (2014: nil) was recognised against the materials and supplies inventory.
9 Taxation Recoverable/(Payable)
Group Company
2015 2014 2015 2014
$'000 $'000 $'000 $'000
--------- --------- -------- --------
Taxation recoverable
Production Petroleum Tax
("PPT")/ Unemployment Levy
("UL") 192 548 -- --
--------- --------- -------- --------
Taxation payable
PPT/ UL (1,561) (1,596) -- --
Corporation Tax (2,228) (1,883) (1,614) (1,160)
Supplemental Petroleum
Tax ("SPT") (19,640) (15,002) -- --
--------- --------- -------- --------
(23,429) (18,481) (1,614) (1,160)
========= ========= ======== ========
10 Cash and Cash Equivalents
Group Company
2015 2014 2015 2014
$'000 $'000 $'000 $'000
------ ------- ------ ------
Cash and cash equivalents 8,200 33,084 -- 10
8,200 33,084 -- 10
====== ======= ====== ======
Included within cash and cash equivalents are $ 3.1 million restricted cash which have been put aside in escrow for abandonment and environmental purposes in accordance with contractual obligations to be used any time during the existence of the contract.
11 Share Capital and Share Premium
Number Ordinary Share Total
of shares shares premium
No.
$'000 $'000 $'000
----------- --------- --------- --------
As at 1 January
2015 94,799,986 94,800 116,395 211,195
Movement -- -- -- --
As at 31 December
2015 94,799,986 94,800 116,395 211,195
=========== ========= ========= ========
As at 1 January
2014 94,799,986 94,800 116,395 211,195
Movement -- -- -- --
As at 31 December
2014 94,799,986 94,800 116,395 211,195
=========== ========= ========= ========
12 Share Warrants
The Group's policy with respect to equity-settled share-based payment transactions is to measure the value of the good or service received with the corresponding increase in equity at the fair value of the services received. If the Group cannot estimate reliably the fair value of the good or services received it then shall measure their value and the corresponding increase in equity indirectly by reference to the fair value of the equity instrument.
2015 2014
$'000 $'000
------ -----------
Issued
Oriel Securities Limited 71 71
------ -----------
71 71
====== ===========
Oriel Securities Limited warrants
Oriel Securities Limited ('Oriel') was appointed to assist TEPL in introducing potential subscribers for private placing of new ordinary shares in 2011 (the 'Placing'). In consideration for the services under the engagement, and subject to receipt of the gross proceeds as a result of the Placing, Trinity and Oriel agreed a fee in cash to the value of $150,000.
In addition to the fees above, Oriel was granted an option by TEPL over shares equivalent in value to 0.25 per cent (one quarter of one per cent) of the value of TEPL following the Placing, such option to be exercisable at the share price at which the new funds were raised in the Placing. The option can be exercised between the 1(st) and 5(th) anniversary of the option being granted or if later on the 1(st) anniversary of any flotation.
The Group recognised the warrants by estimating the services received at fair value at the date of the transaction. In arriving at the fair value of the services received an estimate was received from Oriel indicating that the cost of the service had no warrant been included would have been 1.5 per cent of the Placing. As the cost is associated with the raising of capital, this expense has been recognised as a deduction from share premium.
Following the acquisition on 14 February 2013 Oriel has confirmed that it does not intend to exercise its 83 Trinity Warrants; Oriel shall hold warrants over 62,027 shares with an exercise price of $5.60 per share (based on the same conversion ratio of 747.8 new shares).
13 Merger and Reverse Acquisition Reserves
Reverse Merger Total
Acquisition Reserve
Reserve
$'000 $'000 $'000
------------- --------- ---------
At 1 January 2015 (89,268) 75,467 (13,801)
Movement -- -- --
Translation differences -- -- --
------------- --------- ---------
At 31 December 2015 (89,268) 75,467 (13,801)
============= ========= =========
At 1st January 2014 (89,268) 74,808 (14,460)
Movement -- -- --
Translation differences -- 659 659
------------- --------- ---------
At 31 December 2014 (89,268) 75,467 (13,801)
============= ========= =========
The issue of shares by the Company as part of the reverse acquisition met the criteria for merger relief such that no share premium was recorded. As allowed under the UK Companies Act 2006 and required by IAS 27 ('Consolidated and separate financial statements'), a merger reserve equal to the difference between the fair value of the shares acquired by the Company and the aggregation of the nominal value of the shares issued by the Company has been recorded.
The insertion of the Company as the new parent to the Group has been accounted for using business combination accounting as described in note 1. The reverse acquisition difference recorded in the consolidated financial statements represents the difference in accounting for reverse acquisition transactions.
14 Non-current assets held for sale
Certain assets and liabilities relating to Trinity's oil and gas fields owned and operated by its indirect subsidiary Trinity Exploration and Production (Trinidad and Tobago) Limited ("TEPTTL") have been presented as held for sale following approval by management and Board of Directors by way of a Formal Sales Process ("FSP") on 8 April 2015. On 1 February 2015 The WD-16 block was sold and the carrying value of $0.1 million has been removed from the assets held-for-sale. The sale and purchase agreement for Tabaquite was terminated during 2015 with Leni Gas and Oil. The assets held for sale at 31 December 2015 relate to the onshore and west coast assets of the Group.
(a) Assets of the disposal Group classified as held for sale
2015 2014
Property, plant & equipment $'000 $'000
------- ------
Net Book Value at 1 January 672 --
Movement (780) --
Transferred from property, plant
& equipment 30,599 672
------- ------
Net Book Value 30,491 672
======= ======
(b) Liabilities of the disposal group classified as held for sale
2015 2014
Other provisions $'000 $'000
------- ------
Decommissioning provision 21,927 --
======= ======
In accordance with IFRS 5, the assets and liabilities held for sale criteria were met between the statement of financial position date and the date that the consolidated financial statements were authorised.
15 Borrowings
2015 2014
$'000 $'000
Non-current portion:
Citibank (Trinidad & Tobago) Limited -- --
Total -- --
======= =======
Current portion:
Citibank (Trinidad & Tobago) Limited 13,000 33,000
Total 13,000 33,000
======= =======
Drawn Loan Facilities
Citibank (Trinidad & Tobago) Limited Loan 1
Joint Lenders: Citibank (Trinidad & Tobago) Limited and Citicorp Merchant Bank Limited
Borrower: Trinity Exploration and Production (Trinidad & Tobago) Limited
The key terms of the loan are as follows:
-- Principal amount $20.0 million
-- Interest rate is set at three month US LIBOR plus 600 basis points per annum. Interest payable monthly in arrears commenced 20 March 2013
-- Quarterly Interest payment are up to date and were paid during the year: March, June, September and December 2015
-- Debenture over the fixed and floating assets of Trinity Exploration and Production (Trinidad and Tobago) Limited and its subsidiaries.
-- Principal repayment in equal quarterly instalments commencing on 20 March 2013 and ending on 20 December 2017
-- Principal repayments: 2015: nil (2014: $4.0 million). In 2015, the closing outstanding balance was $12.0 million.
Citibank (Trinidad & Tobago) Limited Loan 2
Lender: Citibank N.A. (acting through its international banking facility) Citibank (Trinidad & Tobago) Limited
Joint Borrowers: Trinity Exploration and Production (Trinidad and Tobago) Limited and Trinity Exploration and Production (Galeota) Limited
The Group negotiated a floating rate medium term facility on 17 August 2013 of $25.0 million with Citibank (Trinidad & Tobago) Limited 'Citibank' which at 31 December 2014 was fully drawdown.
The key terms of the loan are as follows:
-- Principal amount $25.0 million. Initial drawdown on 22 January 2014 of $5.0 million and a second drawdown of $20.0 million on 4 August 2014
-- Interest rate is set at three month US LIBOR plus 575 basis points per annum. The negotiated principal repayments in two initial quarterly instalments of 16.0 per cent following 6.5 per cent to 7.0 per cent quarterly instalments commencing on 21 November 2014 and ending on 21 August 2017
-- Quarterly Interest payment are up to date and were paid during the year: February, May, August and November 2015
-- Debenture over the fixed and floating assets of Trinity Exploration and Production (Trinidad & Tobago) Limited and its subsidiaries.
-- Principal repayments: 2015: $20.0 million (2014: $4.0 million). In 2015, the closing outstanding balance was $1.0 million.
Financial covenants applicable to each of the above facilities are:
-- Minimum debt service coverage 1.4:1 -- Maximum total debt to EBITDA-Operating taxes 2.75:1 -- Minimum EBITDA-Operating taxes to Interest Expense 1.5:1
The carrying value of borrowings is not materially different from their fair value. The entire borrowings since 2014 have been classified as current due to the default in the debt service coverage. At the end of 2015 all three financial covenants were in default. Citibank is aware of the default and has continued to support the Company whilst the FSP is in progress with a moratorium on repayment of the remaining principal agreed until 27 May 2016.
Analysis of net debt
Cash At 31 December
flow 2015
At 1 January
2015 $'000 $'000 $'000
------------- --------- ---------------
Cash and cash equivalents 33,084 24,884 8,200
Financial liabilities - borrowings
current and non-current (33,000) (20,000) (13,000)
84 4,884 (4,800)
------------- --------- ---------------
16 Provision and Other Liabilities
Non-Current:
Potential Decommissioning Total
Claim cost
$'000 $'000 $'000
Year ended 31 December
2015
Opening amount as at
1 January 2015 1,270 38,505 39,775
Adjustment to estimates
(note 5) -- 853 853
Transferred to liabilities
held for sale -- (21,927) (21,927)
Unwinding of discount
(note 20) -- 1,524 1,524
Translation differences -- (394) (394)
---------- ---------------- ---------
Closing balance at 31
December 2015 1,270 18,561 19,831
========== ================ =========
Year ended 31 December
2014
Opening amount as at
1 January 2014 -- 29,027 29,027
Adjustment to estimates
(note 5) -- 8,156 8,156
Record potential claim 1,270 -- 1,270
Unwinding of discount
(note 20) -- 1,167 1,167
Translation differences -- 155 155
---------- ---------------- ---------
Closing balance at 31
December 2014 1,270 38,505 39,775
========== ================ =========
Current:
Restructuring Total
Costs
$'000 $'000
Year ended 31 December 2015
Opening amount as at 1 January - -
2015
Provision for restructuring (note
28) 1,930 1,930
-------------- ------
Closing balance at 31 December
2015 1,930 1,930
============== ======
Potential claim
The amounts represent a provision for a potential claim against a subsidiary of the Group by a supplier of services in the oil and gas industry. The charge is recognised in the statement of comprehensive income within 'exceptional items'. In management's opinion these claims will not give rise to any significant losses beyond the amounts provided at 31 December 2014. The potential claim is anticipated to be settled no later than September 2016.
Decommissioning cost
The Group operates Oil and Gas fields and this cost represents an estimate of the amounts required for abandonment of the Group's wells, platforms and pipeline infrastructures. The amounts are calculated based on the provisions of existing contractual agreements with Petrotrin. Furthermore, liabilities for decommissioning costs are recognised when the Group has an obligation to dismantle and remove a facility or an item of plant and to restore the site on which it is located, and when a reasonable estimate of that liability can be made. An obligation for decommissioning may also crystallise during the period of operation of a facility through a change in legislation or through a decision to terminate operations.
The amount recognised is the present value of the estimated future expenditure determined in accordance with local conditions and requirements. A corresponding item of property, plant and equipment of an amount equivalent to the provision is also created. This is subsequently depreciated as part of the capital costs of the facility or item of plant. Any change in the present value of the estimated expenditure is reflected as an adjustment to the provision and the corresponding property, plant and equipment. Some of the key assumptions made in the present value decommissioning calculation include the following:
a. Core inflation rate - 3 per cent (2014: 3 per cent) b. Risk free rate - 3.9 per cent (2014 3.9 per cent) c. Estimated market value/decommissioning cost d. Estimated life of each asset
See note 3(c) for the rates used and sensitivity analysis.
Adjustment to estimates
The Group makes provision for the cost of decommissioning its oil and gas infrastructure at the completion of their useful lives. Decommissioning is estimated to be required in various fields during 2024-2036. In the current year there was an increase in the provision mainly due to a revision of assumptions used in determining the estimated cost to decommission the Group's tank farm facilities of $0.9. There has been a corresponding increase in the carrying amount of property plant and equipment (note 5).
17 Deferred Income Taxation
Group
The analysis of deferred tax assets is as follows:
2015 2014
$'000 $'000
-------- ---------
Deferred tax assets:
To be recovered in more than 12
months (2,460) (27,630)
To be recovered in less than 12 -- --
months
Deferred tax liabilities:
To be settled in more than 12 3,308 --
months
To be settled in less than 12
months -- 3,778
-------- ---------
Net deferred tax liability/(assets) 848 (23,852)
======== =========
The movement on the deferred income tax is as follows:
2015 2014
$'000 $'000
--------- ---------
At beginning of year (23,852) (18,306)
Movement for the year 24,766 3,849
Unwinding of deferred tax on fair
value uplift (66) (9,395)
Net deferred tax liability/(assets) 848 (23,852)
========= =========
Deferred tax assets and liabilities are only offset where there is a legally enforceable right of offset and there is an intention to settle the balances net. The deferred tax balances are analysed below:
2013 Movement 2014 Movement 2015
$'000 $'000 $'000 $'000 $'000
--------- --------- --------- --------- ---------
Deferred tax assets
Acquisition (33,436) -- (33,436) -- (33,436)
Tax losses recognised (31,257) -- (31,257) -- (31,257)
Tax losses derecognised -- 37,063 37,063 25,170 62,233
--------- --------- --------- --------- ---------
(64,693) 37,063 (27,630) 25,170 (2,460)
========= ========= ========= ========= =========
Deferred tax liabilities
Accelerated tax
depreciation 14,778 -- 14,778 (404) 14,374
Non-current asset
impairment -- (33,214) (33,214) -- (33,214)
Acquisitions 19,580 -- 19,580 -- 19,580
Fair value uplift 12,029 (9,395) 2,634 (66) 2,568
--------- --------- --------- --------- ---------
46,387 (42,609) 3,778 (470) 3,308
========= ========= ========= ========= =========
Deferred income tax assets are recognised for tax loss carry-forwards to the extent that the realisation of the related tax benefit through future taxable profits is probable. Deferred tax assets of $25.2 million have been derecognised as recoverability is now considered less than probable, these continue to be available for realisation whenever future taxable profits are probable. The Group has unrecognised tax losses amounting to $200.6 million which have no expiry date. Deferred tax liabilities have reduced by $0.5 million as the carrying values of property, plant and equipment and intangible assets which gave rise to the temporary differences have been written down to their recoverable amount.
18 Trade and Other Payables
Group Company
---------------- --------------------
2015 2014 2015 2014
$'000 $'000 $'000 $'000
------- ------- ------- -----------
Trade payables 15,900 16,712 411 26
Accruals 5,008 8,888 183 142
VAT payable 230 433 -- --
Other payables 2,150 1,778 265 --
Amounts due to related parties
(note 23 (d)) 1,986 5,563 -- 979
25,274 33,374 859 1,147
======= ======= ======= ===========
19 Operating (Loss)/ Profit After Exceptional Items
2015 2014
$'000 $'000
------- -------
Operating (loss)/ profit before exceptional
items is stated after taking the following
items into account:
Depreciation, depletion and amortisation
(note 5) 8,219 16,335
Employee costs (note 26) 13,673 12,781
Operating lease rentals 2,315 3,122
Inventory recognised as expense, charged
to operating expenses 116 262
------- -------
Auditors' remuneration
During the year the Group (including its overseas subsidiaries) obtained the following services from the Company's Auditors as detailed below:
2015 2014
$'000 $'000
------- -------
Fees payable to the Company's auditors'
and its associates:
For Audit of the parent Company and
consolidated financial statements 73 73
For other services:
Audit of Company's subsidiaries 162 173
Audit related assurance services
- interim review 50 52
Total assurance 285 298
Tax advisory 75 --
Other advisory 5 48
------- -------
Total auditors' remuneration 365 346
All fees are in respect of services provided by PricewaterhouseCoopers LLP ("PwC"). The independence and objectivity of the external auditors is considered on a regular basis by the Audit Committee, with particular regard to the level of non-audit fees incurred.
20 Finance Costs
2015 2014
$'000 $'000
------ ------
Decommissioning (note 16) 1,524 1,167
Interest on taxes 4,079 2,134
Interest on loans 1,072 1,850
6,675 5,151
====== ======
Interest on taxes $4.0 million (2014; 2.1 million) relate to interest accrued on late payment of corporation tax, supplemental petroleum taxes and petroleum profits taxes for 2015 and 2014.
21 Income Tax Expense
Current year: 2015 2014
$'000 $'000
Current tax
Petroleum profits tax (167) 1,075
Corporation tax 586 2,182
Supplemental petroleum tax 1,830 14,931
Deferred tax
Movement in asset due to tax losses
(note 17) 25,170 37,063
Movement in liability due to accelerated
tax depreciation (note 17) (470) (33,214)
Unwinding of deferred tax on fair
value uplift -- (9,396)
Translation difference 27 16
Income tax expense 26,976 12,657
================ ==================
The Group's effective tax rate varies from the statutory rate for UK companies of 20.25 per cent as a result of the differences shown below:
2015 2014
$'000 $'000
--------- ---------------
(Loss) /Profit before taxation (33,457) (128,788)
Tax charge at expected rate of 20.25
per cent (2014: 21.50 per cent) (6,775) (27,677)
Effects of:
Higher overseas tax rate (11,626) (43,157)
Profits not subject to tax -- --
Disallowable expenses 39,524 123,498
Deferred tax asset not recognised 6,950 5,517
Tax loss generated not recognised 20,359 3,562
Tax losses utilised 4,400 8,111
Tax losses previously recognised (25,170) (66,693)
Supplemental petroleum tax (1,146) 7,508
Green fund levy 180 83
Other differences 280 (95)
--------- ---------------
Tax charge 26,976 12,657
========= ===============
Taxation losses at 31 December 2015 available for set off against future taxable profits amount to approximately $205.0 million (2014: $171.3 million), with tax losses recognised of $4.4 million.
22 Investment In Subsidiaries
Company
2015 2014
$'000 $'000
------ --------
Opening balance 44,513 94,401
Capital contribution relating to share
based payment 262 212
Impairment -- (50,100)
------ --------
Closing balance 44,775 44,513
====== ========
The investment in Group undertakings is recorded at cost which is the fair value of the consideration paid. In 2014 an impairment loss of $50.1 million was recognised on the investment in subsidiary as a result of property plant and equipment impairments recognised in the operating subsidiaries of the Group due to a sharp fall in oil prices and a downgrade in reserve estimates of certain fields (see note 5).
During 2015, 2 entities from the Trinity Group were wound up; Trinity Exploration and Production (Pletmos) Limited, a subsidiary of Trinity Exploration & Production (UK) Limited and Bayfield Energy Alpha Limited, a
subsidiary of Bayfield Energy Limited .
In December 2014 the Group restructured its Trinidadian subsidiaries with the aim of reducing the administrative costs associated with the operations of several individual subsidiaries. On 15th December 2014 a vertical amalgamation was done with Antilles Resources Limited, NAKT Company Limited, Pioneer Petroleum Company Limited, Lennox Production Services Limited and Ten Degrees North Operating Company Limited ("TDNOCL"). The surviving entity following the vertical amalgamation was TDNOCL.
On 31 December 2014 a horizontal amalgamation was done between TDNOCL and Oilbelt Service Limited ("OSL") and the surviving entity following the restructuring was OSL, which holds the Group's onshore and west coast fields.
On 20 November 2014 Bayfield Energy (St Lucia) Limited was dissolved.
Listing of Subsidiaries
The Group's principal subsidiaries at 31 December 2015 are listed below:
Name Country Nature of Proportion of
of Incorporation Business ordinary shares
held by the
Group (per cent)
---------------------- ------------------ ---------------- ------------------
Bayfield Energy
Limited UK Holding Company 100 per cent
---------------------- ------------------ ---------------- ------------------
Trinity Exploration
and Production
(UK) Limited UK Holding Company 100 per cent
---------------------- ------------------ ---------------- ------------------
Trinity Exploration
and Production
Services (UK)
Limited UK Service Company 100 per cent
---------------------- ------------------ ---------------- ------------------
Bayfield Energy
do Brasil Ltda Brazil Dormant 100 per cent
---------------------- ------------------ ---------------- ------------------
Trinity Exploration
& Production
(Barbados) Limited Barbados Holding Company 100 per cent
---------------------- ------------------ ---------------- ------------------
Trinity Exploration
and Production
(Trinidad and Trinidad
Tobago) Limited & Tobago Holding Company 100 per cent
---------------------- ------------------ ---------------- ------------------
Galeota Oilfield Trinidad
Services Limited & Tobago Oil and Gas 100 per cent
---------------------- ------------------ ---------------- ------------------
Trinity Exploration
and Production Trinidad
(Galeota) Limited & Tobago Oil and Gas 100 per cent
---------------------- ------------------ ---------------- ------------------
Oilbelt Services Trinidad
Limited & Tobago Oil and Gas 100 per cent
---------------------- ------------------ ---------------- ------------------
Ligo Ven Resources Trinidad
Limited & Tobago Oil and Gas 100 per cent
---------------------- ------------------ ---------------- ------------------
Trinity Exploration
and Production Trinidad
Services Limited & Tobago Service Company 100 per cent
---------------------- ------------------ ---------------- ------------------
Tabaquite Exploration
& Production Trinidad
Company Limited & Tobago Oil and Gas 100 per cent
---------------------- ------------------ ---------------- ------------------
Trinity Exploration
and Production Trinidad
(GOP) Limited & Tobago Oil and Gas 100 per cent
---------------------- ------------------ ---------------- ------------------
Trinity Exploration
and Production Trinidad
(GOP-1B) Limited & Tobago Oil and Gas 100 per cent
---------------------- ------------------ ---------------- ------------------
23 Related Party Transactions
Group
The following transactions were carried out with the Group's subsidiaries and related parties. These transactions comprise sales and purchases of goods and services and funding provided in the ordinary course of business. The following are the major transactions and balances with related parties:
(a) Sales of services and loans issued to subsidiaries
Group Company
---------------- ------------------------
2015 2014 2015 2014
$'000 $'000 $'000 $'000
------- ------- ------------ ----------
Related party:
Well Services Petroleum Company
Limited 1,407 142 -- --
Blanket Securities Limited 1,069 -- -- --
Blanket Securities Limited 1,075 -- -- --
Group subsidiaries:
Bayfield Energy Limited - loan -- -- -- (89,840)
Bayfield Energy Alpha - loan -- -- -- (535)
Trinity Exploration and Production
Services (UK) Limited - loan -- -- (328) (62)
Trinity Exploration and Production
(Galeota) Limited - loan -- -- 337 (71,194)
Trinity Exploration and Production
Services Limited -- -- 698 --
3,551 142 707 (161,631)
======= ======= ============ ==========
Related party sales transactions and loans issued to subsidiaries are exchanged at arm's length and are comparable to terms that would be available to third parties.
(b) Purchases of services
Group Company
---------------- ----------------
2015 2014 2015 2014
$'000 $'000 $'000 $'000
------- ------- ------- -------
Purchases of services:
Related party:
Bayfield Energy Limited -- -- -- --
Blanket Security Limited 906 794 -- --
Rigtech Services Limited -- 589 -- --
Well Services Petroleum Company
Limited 291 9,265 -- --
Trinity Lift Boat Services Limited -- 52 -- --
Group subsidiaries:
Trinity Exploration and Production
Services (UK) Limited -- -- -- (267)
1,197 10,700 -- (267)
======= ======= ======= =======
Goods and services are bought from related entities on normal commercial terms and conditions, with the majority coming from the Well Services Group, which includes; Blanket Securities Limited, Rigtech Services Limited, Well Services Petroleum Company Limited, Trinity Lift Boat Services Limited and Trinity Infrastructure Construction Limited.
(c) Key management and Directors' compensation
Key management includes Directors' (executive and non-executive), the Chief Operating Officer and Chief Financial Officer. The compensation paid or payable to key management for employee services is shown below:
Group
----------------
2015 2014
$'000 $'000
------- -------
Salaries and short-term employee benefits 1,114 1,958
Post-employment benefits 76 137
Share-based payment (note 27) 150 217
------- -------
1,340 2,312
======= =======
(d) Year-end balances arising from sales/purchases of services
Group Company
---------------- ----------------
2015 2014 2015 2014
$'000 $'000 $'000 $'000
------- ------- ------- -------
Receivables from related parties:
Trinity Exploration and Production
Services Limited -- -- 698 --
Trinity Exploration and Production
(Galeota) Limited -- -- 992 655
Trinity Exploration and Production
Services (UK) Limited -- -- 9,123 9,451
-- -- 10,813 10,106
======= ======= ======= =======
Payables to related parties:
Blanket Securities Limited 144 431 -- --
Rigtech Services Limited (62) 328 -- --
Well Services Petroleum Company
Limited 1,904 4,804 -- --
Trinity Infrastructure Construction
Limited -- -- -- 4
Trinity Exploration & Production
(UK) Limited -- -- -- 975
1,986 5,563 -- 979
======= ======= ======= =======
During 2015 the Group has endeavoured to reduce the payables due to related parties through an exchange of casing and tubing. An agreement has been established with the related party Well Services Petroleum Company Limited where the amount is being repaid over an eight month period ending May 2016.
Company Loans to subsidiaries
There were no impairments to Loan to subsidiaries in 2015. In 2014 an impairment review on the Company's loan receivables were carried out by comparing the carrying value of the loans to subsidiaries against their recoverable amount. From the borrowers perspective the subsidiaries have been forgiven by Trinity and the obligation extinguished. The following are the loan receivable debt forgiven by Trinity:
Company
------------------
2015 2014
$'000 $'000
-------- --------
Trinity Exploration and Production (Galeota)
Limited -- 71,194
Bayfield Energy Limited -- 89,840
Bayfield Energy Alpha Limited -- 535
-------- --------
-- 161,569
======================================================= ========
Group and Company
The receivables from related parties arise mainly from sale transactions and are due two months after the date of sales. The receivables are unsecured and bear no interest. No provisions are held against receivables from related parties (2014: nil). The payables to related parties arise mainly from purchase transactions and are due two months after the date of purchase. The payables bear no interest.
(e) Loans from related parties: There are no loans from related parties
24 Financial Instruments by Category
The accounting policies for financial instruments have been applied to the line items below:
Group Company
---------------- ----------------
2015 2014 2015 2014
$'000 $'000 $'000 $'000
------- ------- ------- -------
Trade and other receivables
- non current -- -- 10,813 10,106
Trade and other receivables
- current 10,593 21,990 1,176 1,106
Cash and cash equivalents 8,200 33,084 -- 10
18,793 55,074 11,989 11,222
======= ======= ======= =======
The only category of financial assets held by the Group are loans and receivables. There are no assets held at fair value through profit or loss, derivatives used for hedging and available-for-sale financial instruments.
Group Company
---------------- --------------
2015 2014 2015 2014
$'000 $'000 $'000 $'000
------- ------- ------ ------
Borrowings 13,000 33,000 -- --
Amounts due to related party -- -- -- 979
Accounts payable and accruals 25,274 33,374 859 168
38,274 66,374 859 1,147
======= ======= ====== ======
The only category of financial liabilities held by the Group is liabilities at amortised cost. There are no liabilities held at fair value through profit or loss and derivatives used for hedging.
25 Commitments and Contingencies a) Commitments
There are commitments for decommissioning costs of the wells and facilities under the Group's agreements with Petrotrin, which have been provided for as described in note 16.
The Group leases vehicles, offices and photocopiers under cancellable operating lease agreements. The lease terms are between 1 and 5 years, and the majority of lease agreements are renewable at the end of the lease period. The lease expenditure charged to the income statement during the year is as follows:
Group
2015 2014
$'000 $'000
Not later than 1 year 1,969 529
Later than 1 year and no later than
5 years 346 2,593
------ ------
2,315 3,122
====== ======
b) Contingent Liabilities
i. One of the subsidiaries has received an assessment from the tax authority of Trinidad & Tobago namely, the Board of Inland Revenue ("BIR"), in respect of Supplemental Profits Tax. The subsidiary has filed a notice of objection with the BIR and until the matters are determined, the assessments raised are not considered final. No material unrecorded liabilities are expected to crystallise and accordingly no provision has been made in these financial statements.
ii. A subsidiary Company is a defendant in certain legal proceedings. A claim was made against the subsidiary by Mora Ven Holdings limited. The claim being made was that the subsidiary bought the shares of Ligo Ven Resources Limited, a fellow subsidiary, at gross under-value. Management, after taking appropriate professional advice, is of the view that no material liabilities will crystallise and accordingly no provision has been made in the financial statements for any potential liabilities.
iii. The farmout agreement for the Tabaquite block (held by Coastline International Inc.) has expired. There may be additional liabilities arising when a new agreement is finalised, but these cannot be presently quantified as a new agreement has not yet been finalised by both parties which would agree any terms or conditions inherent the financial statements do not include any estimates of such liabilities.
iv. Parent company guarantees:
(a) A Letter of Guarantee has been established over the Point Ligoure-Guapo Bay-Brighton Block where a subsidiary of Trinity is obliged to carry out a Minimum Work Programme to the value of $8.4 million. The guarantee shall be reduced at the end of each twelve month period upon presentation of all technical data and results of the Minimum Work Programme performed. Trinity has submitted the technical data for reducing the performance guarantee at the end of 2015 and are awaiting a response.
(b) A letter of Guarantee is in place with Citibank (Trinidad & Tobago) Limited for the full $25.0 million loan facility should there be a default.
v. The Group has certain liabilities in respect of entering a rig share agreement for the Rowan Gorilla III which it used to drill the TGAL-1 well. The agreement was made amongst four parties and the liabilities are joint and several. The liabilities cannot be presently quantified and no estimates have been included in the financial statements. For 2015 the Group has recorded $0.06 million in cost and does not expect that these liabilities will be material.
vi. The Group has certain decommissioning obligations in respect of the tank farm infrastructure in its Brighton Marine and Trintes fields; these have been provided for in the 2015 decommissioning obligation.
vii. The group is party to various claims and actions. Management have considered the matters and where appropriate has obtained external legal advice. No material additional liabilities are expected to arise in connection with these matters, other than those already provided for.
viii. The UK subsidiaries have received an assessment from the tax authority of the United Kingdom namely, the Her Majesty's Revenue and Customs (HMRC), in respect of Value Added Tax claims. The subsidiaries have requested an independent reconsideration of the matters with the HMRC, the assessments raised are not considered final. No material unrecorded liabilities are expected to crystallise and accordingly no provision has been made in these financial statements
26 Employee Costs
Employee costs for the Group during 2015 2014
the year
$'000 $'000
------- -------
Wages and salaries 12,785 11,982
Other pension costs 544 636
Share based payment expense (note 27) 344 163
------- -------
13,673 12,781
======= =======
Average monthly number of people 2015 2014
(including executive and non-executive number number
Directors') employed by the Group
-------- --------
Executive and non-executive Directors 3 7
Administrative staff 117 179
Operational staff 113 120
233 306
======== ========
27 Share Based Payments
2015 2014
$'000 $'000
------- -------
At 1 January 11,834 11,523
Movement 344 163
Translation differences -- 148
------- -------
At 31 December 12,178 11,834
======= =======
During 2015 the Group had in place two share-based payment arrangements for its employees and Directors, the Share Option Plan and the Long Term Incentive Plan ('LTIP'). The charge in relation to these arrangements is shown below, with further details of each scheme following:
2015 2014
$'000 $'000
Share based payment expense:
Share option expense 187 21
Legacy share options adjustment -- --
Long term incentive plan 157 142
----------
344 163
========== ==========
Share Option Plan
Share options are granted to Directors and to selected employees. The exercise price of the granted option is equal to management's best estimate of the market price of the shares at the time of the award of the options. The Group has no legal or constructive obligation to repurchase or settle the options in cash.
At 31 December 2012, TEPL had 3,638 share options outstanding. On 14 February 2013 following the completion of the acquisition, 120 of the 3,638 share options were exercised. The remaining 3,518 share options were surrendered in return for the grant by Trinity of new options. 747.8 new ordinary shares were issued for each TEPL share over which TEPL options were held. These options were treated as a modification to the original share option scheme. The modification did not increase the fair value of the equity instruments granted, measured immediately before and after the modification, as a result there was no incremental fair value. At the point of acquisition Bayfield had 4,447,546 share options, following completion of the acquisition and share consolidation, the newly combined Group share options outstanding of:
(a) Legacy Bayfield - 444,754 share options
(b) Legacy TEPL - 2,630,759 share options
On 29 May, 2013 the Group issued 1,275,660 options at an exercise price of GBP1.20 per option to certain employees. These options were valued at grant date using a Black-Scholes option pricing model. During 2014 certain employees who had share options departed forfeiting their options.
Movement in the number of options outstanding and their related weighted average exercise prices are as follows:
2015 2014
Average Number Average Number
exercise of Options exercise of Options
price per price
share per share
At 1 January GBP1.01 3,871,419 GBP1.14 4,256,419
Lapsed GBP(1.12) (1,896,335) -- --
Forfeited -- -- GBP(1.15) (385,000)
------------- ---------------- ------------ ----------------
At 31 December GBP0.82 1,975,084 GBP1.01 3,871,419
============= ================ ============ ================
Share Options outstanding at the end of the year have the following expiry date and exercise prices:
2015 2014
Grant-Vest Expiry Exercise Number Exercise Number
Date price per of Options price per of Options
share options share options
2011-15 2015 -- -- GBP1.61 350,000
2012-15 2022 GBP0.86 1,685,540 GBP0.86 2,574,674
2013-16 2023 GBP1.20 289,544 GBP1.20 946,745
1,975,084 3,871,419
============= =============
The inputs into the Black-Scholes model for options granted during the period are as follows:
29 May 14 February
2013 2013
Share price GBP 1.19 GBP 1.20
Average Exercise price GBP 1.20 GBP 0.89
Expected volatility 55% 78%
Risk-free rates 4.5% 4.5%
Expected dividend yields 0% 0%
Vesting period 3 years 3 years
Long Term Incentive Plan
On 14 February 2013, following the completion of the acquisition, 108,712 Bayfield LTIP's were outstanding. These LTIP Awards are conditional awards of Existing Unconsolidated Ordinary Shares and vest three years from the date of grant, subject to the satisfaction of certain performance conditions (based on the growth in the Company's total shareholder return). No payment is required on vesting and there is no accelerated vesting arising as a result of the Merger.
On 1 July 2013, 739,440 LTIP Awards were granted by the Company to Senior Management Group (including the Executive Directors). The LTIP awards will be tested against two performance targets: stretching reserves growth and absolute returns targets (share price). Performance against these measures will be assessed based on performance to the end of the 2015 financial year and following announcement of the Company's audited financial results. Subject to the achievement of the performance targets all Options will be subject to a further holding period whereby Options will not vest until 1 January 2017.
The measurement of growth in 2P Reserves is the aggregated total of all fields included in the Trinity Exploration & Production plc (formerly Bayfield Energy Holdings plc) and Trinity Exploration & Production (UK) Limited Group as recorded at financial year end 2012 which is 35.6 mmboe. Share price growth will be calculated from the price at which equity was raised at the point of the merger which was GBP 1.20.
The conditions of the scheme are market and non-market based, and therefore the scheme is valued on the date of grant and amortised over the vesting period. The grants have been valued using a Monte Carlo simulation model.
Movements in the number of LTIPs outstanding and their related weighted average exercise prices are as follows:
2015 2014
Average Number Average exercise Number
exercise of Options price per of Options
price per share
share
At 1 January GBP0.00 772,312 GBP0.00 848,152
Lapsed GBP0.00 (582,712) -- --
Forfeited -- -- GBP0.00 (75,840)
------------- ------------ ----------------- ------------
At 31 December GBP0.00 189,600 GBP0.00 772,312
============= ============ ================= ============
Inputs into the Monte Carlo Simulation Model for LTIPs granted during the period are as follows:
1 July
2013
Share price GBP1.06
Exercise price GBP0.00
Expected volatility 55%
Risk-free rates 4.5%
Expected dividend yields 0%
Vesting period 3.5 years
28 Exceptional Items
Items that are material either because of their size or their nature, or that are non-recurring are considered as exceptional items and are presented within the line items to which they best relate. During the current period, exceptional items as detailed below have been included as exceptional expenses below operating profit in the Income Statement. An analysis of the amounts presented as exceptional items in these financial statements are highlighted below
2015 2014
$'000 $'000
Loss on disposal of WD 16 block 108 --
Loss on disposal of casing 1,302 --
Loss on winding up of subsidiaries 214
Fees relating to Formal Sale Process
'FSP' 1,086 --
Potential claim (note 16) -- 1,270
Impairment of property, plant and
equipment (note 5) 2,559 96,242
Impairment of intangibles (note 6) 131 23,484
Impairment of receivables 1,036 --
Impairment of inventory 2,483 --
Written off 1(a) & 1(b) pre-acquisition
cost 6,385 --
Provision for restructuring 1,943 --
Translation difference (18) (57)
-------
17,229 120,939
======= ========
Exceptional items 2015:
Loss on disposal -- a loss of $0.1 million was recognised on the disposal of the WD 16 block as there were certain operating costs incurred by Trinity whilst the awaiting on regulatory approvals. The $1.3 million loss on disposal of casing and tubing to the related party the Well Services Petroleum Company Limited group was a result of fall in the casing and tubing market internationally.
Loss on winding up of subsidiaries - $0.2 million related to the write off of carrying values of non-current asset balances following the winding up Trinity Exploration and Production (Pletmos) Limited.
Formal Sales Process - Fees relating to the FSP included data room fees incurred for 2015
Impairments - In 2015 impairment reviews were carried out over the non-current and current assets on the Statement of Financial Position with impairment losses being recognised on property, plant and equipment, intangible assets, inventories and receivables.
Write off of 1a and 1b pre acquisition cost - On 27 July 2015 Trinity, announced that it has been unable to extend the term of its agreement to complete the purchase of 80% interests in Blocks 1a & 1b from Centrica. Consequently the Sale and Purchase Agreement between Trinity and the two subsidiaries of Centrica has been terminated. The cost incurred relating to pre-acquisition cost of these blocks of $ 6.4 million was written off in 2015.
Provision for restructuring - a provision was created based on the restructuring of the Group in 2015 as approved by management and the board of directors, and includes the cost of severance and redundancy payments.
Exceptional items 2014:
Potential claim - In 2014 a claim has been made by a supplier for an amount of $1.3 million, relating to a matter pre-merger with the Bayfield Group. Management has provided for this claim in 2014 (see note 16)
Impairment of property, plant and equipment - A sharp fall in oil prices combined with a downgrade in reserve estimates triggered an impairment review of the Group's carrying values within property, plant and equipment. Impairment losses were incurred relating to the CGU's which were written down to their recoverable amount (see note 3 (h)).
Impairment of intangibles - An impairment loss was taken on the exploration well EG-8 ($ 22.6 million) and exploration
29 Earnings Per Share
Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year. Diluted earnings per share is calculated using the weighted average number of ordinary shares adjusted to assume the conversion of all dilutive potential ordinary shares.
Earnings Weighted Average Earnings
Number Of Shares Per Share
$'000 $
Year ended 31 December
2015
Basic (58,520) 94,800 (0.62)
Diluted (58,520) 94,800 (0.62)
Impact of dilutive ordinary shares: As net losses
from continuing operations were recorded in 2015,
the dilutive potential shares are anti-dilutive
and both basic and diluted earnings per share
are the same.
Year ended 31 December
2014
Basic (141,182) 94,800 (1.49)
Diluted (141,182) 94,800 (1.49)
Impact of dilutive ordinary shares: As net losses
from continuing operations were recorded in 2014,
the dilutive potential shares are anti-dilutive
and both basic and diluted earnings per share
are the same.
30 Events after the Reporting Year
i. On 21 October 2015, Trinity announced that it entered into an agreement (the "Touchstone SPA") to sell its interests in the WD-2, WD-5/6, WD-13, WD-14 and FZ-2 licenses and related fixed assets (the "Blocks") to Touchstone Exploration Inc. ("Touchstone") for a cash consideration of $20.8 million. This sale was subject to various conditions precedent, with a backstop date of 13 March 2016 and expired without all of the required consents having been received. The Group has sent a termination notice in respect of the Touchstone Sale and Purchase Agreement (SPA) to Touchstone.
As a result, the sale of the Blocks to Touchstone will not be completed and the deposit of $2.08 million, currently held in escrow, is expected to be released to Touchstone under the terms of the Touchstone SPA and a related escrow agreement.
ii. On 14 March 2015 Trinity announced that the company has engaged two specialist refinancing advisers, Imperial Capital of New York and Cantor Fitzgerald of London. Whilst at an early stage in discussions, Management is encouraged by the interest levels from several institutions. Trinity's near term objective is to conclude a complete refinancing structure that will enable the Company to retire its existing senior debt facilities, reduce other outstanding payables and provide sufficient additional capital to retain the integrity of its assets and grow production and cash flow.
iii. The sale of the Group's 100% interest in the Guapo-1 block ("Block GU-1") to New Horizon Exploration Trinidad and Tobago Unlimited ("New Horizon") for a cash consideration of USD 2.8 million (the "Guapo Transaction") has been completed. All the conditions precedent for the Guapo Transaction has been satisfied including standard regulatory approvals, which were granted on 15 April 2016. The transaction was subsequently finalised with the closure of the cash settlement on 25 May 2016. The cash proceeds will be used predominantly by Trinity for working capital purposes.
iv. The Group has received further extensions on the moratorium until 27 May 2016 on principal repayments relating to Trinity's outstanding debt of $13.0 million with Citibank as discussions continue.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SELFALFMSELI
(END) Dow Jones Newswires
May 25, 2016 02:01 ET (06:01 GMT)
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