Trinity Exploration & Production plc
Annual Report & Accounts
For the year ended 31 December 2020
2020
Prolific Deltaic Reservoirs
(Galeota Equivalent),
outcropping at Mayaro Beach,
East Coast, Trinidad.
Company Number: 07535869
Stock Code: TRIN
Contents
For more information on
Trinity Exploration & Production visit
trinityexploration.com
Introduction
Financial Accounts
Core Values
1
2 Our Operating Environment
Trinidad & Tobago Facts
3
Strategic Report
How we performed in 2020
4
5 Our Business
6
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10 Our Energy Marketplace
14 Our Strategic Objectives
A strong investment case
Executive Chairman’s Report
& Priorities
17 Managing Director’s Statement
24 COVID-19 Statement
27 Our Business Model
28 Operational Review
38 Sustainability Review
42 Financial Review
50 Risk Management and
Internal Controls
93 Consolidated Statement of
Comprehensive Income
94 Consolidated Statement
of Financial Position
95 Company Statement of
Financial Position
96 Consolidated Statement of
Changes in Equity
97 Company Statement of
Changes in Equity
98 Consolidated Statement of
Cash Flows
99 Company Statement of
Cash Flows
100 Notes to the Consolidated
Financial Statements
Glossary of Terms
139 Glossary of Terms
Company Information
Governance
Company Information
58 Directors' Statement
under S 172(1) CA 2006
62 Corporate Governance Statement
63 QCA Principles
68 Board of Directors
70 Executive Management Team
71 Board Activities
72 Audit Committee Report
74 Remuneration Committee Report
76 Directors’ Remuneration Report
83 Directors’ Report
86 Statement of Directors’
Responsibilities
Independent Auditors’ Report
87
The Three Sisters,
Columbus Bay, Trinidad
© Zaheer Mohammed
Annual Report & Financial Statements 2020
Introduction
1
01
INTRODUCTION
Our Core Values
Behaviour
that mirrors
professionalism,
respect and
fairness
Rigour
initiate thought
before action
Purpose
fit for delivering
our business goals
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Trinity Exploration & Production plc
Introduction
Our Operating
Environment
TOBAGO
West Coast
Assets
TRINIDAD
Onshore
Assets
East Coast
Assets
About Trinidad & Tobago
(“T&T”)
Small Island,
Big Energy Industry
T&T is officially referred to as the Republic
of Trinidad and Tobago and is the southern-
most island country in the Caribbean.
Trinidad is located 11 km off the northeast
coast of Venezuela, South America. Trinidad
is well known for its wealth of hydrocarbon
resources, carnival, musical styles, rich
landscape of flora and fauna whilst Tobago
is best known for its beautiful landscape and
beaches. T&T is also part of the West Indies
which is surrounded by the North Atlantic
Ocean and the Caribbean Sea and are
a sub-region of North America. T&T is
associated with the Lesser Antilles which
is one of the three major archipelagos with
the other two being the Greater Antilles
and the Lucayan Archipelago.
T&T is one of the oldest hydrocarbon
producers in the world, with commercial
production dating as early as 1908. The
country is also a major petrochemical hub
and is the one of the world's largest
exporters of ammonia, ethanol and
liquefied natural gas.
T&T is ideally placed geographically to
access and develop opportunities across
the wider Caribbean and Latin America.
Annual Report & Financial Statements 2020
Introduction
T&T Facts
An Eco-Adventurer’s Paradise with
over 470 species of birds, over 600
tropical butterflies, hundreds of rivers
and waterfalls.
The Greatest Show in the World- T&T’s
Carnival is a celebration of history, culture,
fashion and art all fused together to produce
sensational music, sweet sounds of steel pan
drums and vibrant, colourful costumes.
T&T is the birthplace of the steel pan drum
and has the biggest celebration of Divali in
the Western Hemisphere.
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Tobago hosts the World’s oldest legally
protected rainforest.
Maracas Bay is a bay with sandy
beach on the island of Trinidad. It is
located on the north side of the island,
an hour's mountainous drive from the
capital city of Port of Spain via the
North Coast Road. Unlike many of the
northern beaches of Trinidad, Maracas
Bay is protected by a deep bay.
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Trinity Exploration & Production plc
Strategic Report
02
STRATEGIC
REPORT
How we performed
in 2020
2020 was a successful year for Trinity, notwithstanding the
challenging circumstances brought about by the COVID-19
pandemic, as we continued to consistently deliver safely on our
operational and financial targets. Our success in delivering these
results, despite the unprecedented backdrop, reflects the quality
of our assets, the strength of our team, and our unrelenting focus
on Health, Safety, Security and Environment (“HSSE”), operational
efficiencies and innovation. This is complemented by maintaining
a strong balance sheet, which is essential as we develop strategic
options to meaningfully scale the business.
Outlook
l Our asset base continues to generate positive cash flow despite the
ongoing pandemic supported by a low operating break-even.
l Continued focus on pursuing profitable scale by advancing current
developments both onshore and offshore, by acquisitions and via the
strategic partnerships we have recently entered into.
l
This strategy is aimed at pursuing further low-cost appraisal and
exploration targets alongside the development of transitional energy
projects such as micro Liquified Natural Gas (“LNG”), wind and solar power.
l We proved the strength of our model during the most difficult of
circumstances in 2020 and have ambitious plans to build on this during
the current year and beyond.
Total YE 2020
2C Reserves + 2P Resources*
2P
2C
Total
* 2020 Management estimates for reserves and resources
l West Coast
mmstb
l Onshore
mmstb
l East Coast
2P
2C
Total
2.45
3.30
2P
2C
5.75
Total
5.44
4.01
2P
2C
9.45
Total
mmstb
19.55
23.25
42.80
mmstb
11.66
15.94
27.60
Note (*): Effective 1 December 2018 Heritage Petroleum Company Limited (“Heritage”), a T&T state-owned, oil
and gas company took over ownership and rights for the Crude Oil Sales Agreements which The Petroleum
Company of Trinidad and Tobago Limited (“Petrotrin”) previously held with Trinity for the purchase of its crude oil
production.
Production
3,226
bopd
2019: 3,007 bopd
Adjusted EBITDA
12.3
USD million
2019: USD 21.8 million
Operating Profit
Before SPT, PT,
Impairments and
Exceptional Items
3.0
USD million
2019: USD 10.3 million
Cash generated from
continuing operations
10.3
USD million
2019: USD 15.6 million
Cash flow used in
investing activities
6.0
USD million
2019: USD 11.5 million
Total year-end cash
20.2
USD million
2019: USD 13.8 million
Note: Refer to the Financial Review
Section 42 to 49 for additional
information.
Annual Report & Financial Statements 2020
Strategic Report
Our Business
Trinity is an independent
energy producer focused
on Trinidad & Tobago
5
TOBAGO
TRINIDAD
Tabaquite
PGB
Guapo Bay
Brighton
Marine
Outer
Brighton
Marine
Inner
Point
Ligoure
WD-5/6
WD-2
WD-13
WD-14
FZ-2
Trintes
Field
Galeota
Echo
development
Asset Agreement Trinity Heritage Production 2P 2C Exploration
l West Coast
PGB (Point Ligoure, Guapo Marine, 70% 30%
Brighton Marine - Outer)
BM (Brighton Marine - Inner) 100%
l Onshore
FZ-2, WD-2, WD-5/6 100%
WD-13 & WD-14
Tabaquite 100%
l East Coast
Galeota - Trintes 100%
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Galeota - Other (i.e.: TGAL/Echo) 65% 35%
v
Crude oil production
Drilling, Recompletions (“RCPs”) & Workovers (“WOs”)
Farmout Agreement (“FOA”)
Field Development Plan (“FDP”)
Joint Venture Agreement (“JOA”)
Land Infrastructure
Lease Operatorship Agreement (“LOA”)
Offshore Exploration
Offshore Infrastructure
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Trinity Exploration & Production plc
Strategic Report
A strong investment case
With almost two decades of
experience in T&T, we not only
understand the country, its
history and its commercial and
regulatory environment but we
are also hugely excited by its
potential to lead the energy
transition journey across the
wider Caribbean region. Trinity
is committed to continuing to
responsibly deliver energy from
the vast resources in the region
for the benefit of all stakeholders.
Very simply, we don’t just want to
be part of T&T’s energy future;
we want to help drive it in the
right direction.
We are a forward-thinking
company focused on deploying
new technologies and innovative
approaches to generate
increasing scale and returns
from our existing assets whilst
pursuing new development
opportunities through
acquisitions and partnerships.
Our current opportunity set offers
the potential to significantly scale
our future production, revenue,
profitability and cash flow profile
for the benefit of our shareholders
and other stakeholders.
Our Key Characteristics/Who we are
We are ideally located & local
We are lean & innovative
We are diversified and aligned
Strategically located between Latin
America and the wider Caribbean
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in a world class hydrocarbon basin.
l with a large reserves & resources base.
spread across the onshore, offshore
West Coast & offshore East Coast.
operated by a local team– 99% staff
based at core operations in T&T.
to deliver a local oil producer of scale:
6% of total country oil production.
having good working relationships
with the Government, the National
Energy Companies & the University of
West Indies (“UWI” or “Regional
University”).
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A low cost operator, with a low operating
break-even
l with increasing impact from pioneering
the digitalisation of our production
operations.
alongside pioneering new artificial lift
techniques.
and spearheading the deployment of
high angle wells.
as we move towards full horizontal wells
onshore.
aided by the recent acquisition of 3D
data across our onshore acreage.
offering transformational potential for
our onshore operations.
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l making us natural leaders in the local
energy landscape.
l whilst being the only operators to work
in partnership with the National Gas
Company and the regional university
via Memorandum of Understanding
(“MoU”) to develop renewable energy
projects.
Our strategy for delivery...
Partner for growth
As a team we partner on a regular
basis with our local communities, the
Government of the Republic of Trinidad
& Tobago (“GORTT”), the National Oil
Company (“Heritage”), the National Gas
Company (“NGC“), the regional
university and both local & international
contractors and suppliers. In addition,
we are partnering with a number of
strategic players alongside whom we
are bidding for new opportunities which
have the potential to meaningfully scale
our business.
Be part of the future
Our team are working to more cleanly
produce our existing conventional
asset base via enhanced efficiency
drives whilst also progressing new
energy projects. Recent examples
include the MoU with the NGC to
pursue micro LNG and Renewables
projects, and the recently signed
MoU with the regional university to
identify and advance Renewables
projects.
A full cycle, revenue generating operator
not reliant on a single reservoir or field
l with parallel activity sets (reduces
l
production delivery risk) to increase
production.
and multiple growth pathways from
within our current portfolio and from
identified new opportunities.
l Our extensive use of analytics,
transition technologies and
automation provides a multi-pronged
and scalable foundation for continued
growth.
l With a partnership approach that
l
facilitates scaling opportunities and
energy transition projects underway.
all with interests closely aligned with
shareholders – the Board of Directors
(“Board”) and the Executive
Management Team ("EMT") (together
Management) ownership 22%.
Shareholder Returns
The key to optimising shareholder
returns is to invest our capital resources
in the right growth initiatives, alongside
the right partners. Returns can be
measured both in terms of share price
appreciation, and cash returns in the
form of dividends and share buybacks.
...creates a meaningful and sustainable growth pathway.
Annual Report & Financial Statements 2020
Strategic Report
Executive Chairman’s
Report
“Trinity is the only oil operator in Trinidad to have
actually grown production during 2020. This was
despite no new drilling and the unprecedented
challenges brought about by the COVID-19
pandemic. Why am I highlighting this? Because
it is the clearest example of our culture and our
Team’s grit, innovative spirit and willingness to
embrace the road less travelled. It hasn’t always
been smooth but we are a battle-tested company
that has overcome many challenges to establish
a strong foundation with a clear focus, and now
road-map, on scaling the business. Our mission
is to safely deliver meaningful and sustainable
value for all our stakeholders.”
Bruce Dingwall, CBE
Executive Chairman
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ICACOS, Trinidad
© Aliyah Francis
Icacos Point is the southwestern most point in
Trinidad and Tobago. It is at the end of a long
peninsula that forms Saint Patrick County.
A channel called the Serpent's Mouth separates
Icacos Point from the coast of Venezuela,
only 11 kilometers away.
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Trinity Exploration & Production plc
Strategic Report
Executive Chairman’s Letter
to Shareholders
Dear Fellow Shareholders,
Stronger than when we started
We are writing to you about your
company’s 2020 activities and
performance well into 2021, with
the benefit of some hindsight
and indeed some light at, what
we hope proves to be, near the
end of a tumultuous period for
everyone across the world. The
COVID-19 pandemic resulted in
a global health crisis with sharp
economic consequences
including a shock fall in oil prices
during the first half of 2020.
However, your team is battle-
tested and responded with
meticulous planning and
innovative flair to safely deliver
our operating and financial
objectives, ending 2020 as
an even stronger company.
This was a year of both strong
performance and wider
development as the Group
positioned itself to achieve
a step change in scale –
establishing a broader
opportunity set from which
to grow.
Being able to come out of 2020
as a stronger, more innovative and
strategically focused company is a
testament to the mutual trust and hard
work of our team of women and men
in the fields and offices alike. So as we
review and report on our achievements
during 2020 we have to begin by
acknowledging and thanking the
entire Trinity team and their families
for adapting incredibly quickly to the
challenging conditions in which we
found ourselves, and their above and
beyond efforts to not only deliver but
thrive in such adverse circumstances.
Health, well-being & safety
The health, well-being and safety of
our team will always be our paramount
priority and we moved quickly to put
measures in place to protect them, the
wider community and those suppliers
and contractors with whom we engage.
I am proud to tell you that our response
to the Pandemic was acknowledged by
The American Chamber of Commerce
of Trinidad and Tobago in their Business
Continuity and Surviving the Pandemic
2020 awards, giving us an honourable
mention among SMEs operating in the
Energy and Manufacturing Sector. But
we are not complacent. The ultimate
reward for us will be the continued
well-being of our team and the safe
delivery of our operations, generating
sustainable value for our shareholders
and other stakeholders.
Against the grain production growth
Production for 2020 averaged 3,226
bopd (2019: 3,007 bopd) in line with
market guidance. This represents a
7% increase over the prior year despite
the challenges presented by COVID-19
and no new drilling activity taking
place during the year. This is the
third consecutive year of delivering
production growth and meeting
our stipulated production targets.
Whilst keeping focus on the
bottom-line
As a business we pride ourselves on
our cost efficient operations and we’re
delighted to have further driven down
our FY2020 operating break-even to
USD 20.1/bbl, meeting the challenging
target set in response to the COVID-19
pandemic and being the fifth
consecutive year of maintaining a sub-
USD 30.0/bbl operating break-even.
While the depressed oil price impacted
revenues and profits, the Group
proved its resilience, with cash flows
remaining strong during the period and
the Group's cash balances at the year-
end 2020 increasing 46% to USD 20.2
million (USD 13.8 million as at 31
December 2019).
The Group remains conscious of wider
market instability, and to that end we
continue to implement our hedging
strategy with a view to protecting
future cash flows from the prevailing
macro and fiscal regimes. Importantly,
the recent changes to Supplemental
Petroleum Tax (“SPT”) are a significant
improvement for the Group and
will enhance returns from our
onshore operations.
Becoming a technological leader
We continued to roll out our wellsite
automation via Supervisory, Control
and Data Acquisition (“SCADA”) using
Weatherford's ForeSite® Production
Optimization Platform 4.0 which
provides software and optimisation
technology for real time pump
monitoring and optimisation. Not only
is this helping drive efficiencies and
increase recovery rates, it also means
that we are able to reduce carbon
emissions through focused logistics
and managing field operations
remotely.
We see technology and data as key
enablers in enhancing productivity and
analysis techniques and believe that
we are ahead of the curve locally,
setting ourselves apart from our peers.
Our focus moving forward will be to
build on the proven benefits of this
model.
Annual Report & Financial Statements 2020
Strategic Report
9
Transforming the growth potential of
our Onshore assets
Creating scale by becoming the
partner of choice in the region
ESG focus at the core of our
forward planning
Following the recent acquisition of a
2D & 3D seismic package from
Heritage, the 3D data (37km2)
integration has commenced, and the
subsurface team has been bolstered to
accelerate the data integration and
mapping process. This is the first time
3D seismic has been utilised by a lease
operator in this area and offers the
potential to high grade existing infill
development candidates, assist in
identifying high angle and horizontal
well opportunities and explore the
possibilities for enhanced oil recovery
opportunities. The redefinition of basin
fill and deformation (stratigraphy
and structure) could enable the
development of new plays on both a
local and regional level providing the
potential to build an onshore appraisal
and exploration prospect inventory of
scale in the near term. Given the need
to complete the data integration and
mapping process, we are not expecting
to drill any new onshore wells during
H1 2021. Decisions regarding the timing
and scale of any H2 2021 drilling
campaign will be taken in light of the
prevailing oil price and results from
analysis of the 3D data.
Our desire to further enhance Trinity’s
standing in the region and drive the
business forward is highlighted
by the steps we took to establish
partnerships with significant operators,
grow our portfolio and to leverage data
sets and relationships - to create a
roadmap for significantly increased
production over the medium term.
We believe that there are excellent
opportunities for us to scale up
production from our existing licences
by utilising new technologies, and these
organic opportunities alone underpin
our ambitious growth plans. However,
we also want to remain well-placed
and funded to pursue acquisitions
and joint ventures to further scale
the business.
We have established and developed
relationships with a number of top-tier
companies during the latest period with
a view to developing existing licences
and establishing a broader production
and development portfolio. The fact
that we are now working alongside a
FTSE 250 oil & gas operator, the NGC
and Heritage, reflects both our ability
to attract partners of choice and
to further strengthen our standing
in the region.
Partnerships will be a key part of
our development strategy moving
forward, providing a low cost, low risk
mechanism for us to build on existing
projects and pursue new opportunities.
We are passionate about sustainability
and reducing emissions and measure
our performance not only in terms of
our financial and production delivery,
but also in terms of our environmental
and social impact. We are committed
to continuing to operate all of our
assets in a safe and responsible
manner, to ensure the safety of
employees and to minimise the
potential risk to the environment.
While we have been working hard
across our existing operations (notably
via increasing automation), we aim to
go further via our partnership with the
NGC to explore and develop new
energy projects. Of particular focus as
part of this MoU will be the pursuit of
lower carbon micro LNG production
and supply. We are also excited to
have recently signed an MoU with
the Regional University, rated amongst
the top 3% of universities globally, to
work together to advance renewable
projects in T&T and the wider
Caribbean region.
Why invest in Trinity: 2021 & beyond
Very simply, we don’t just want to be
part of T&T’s energy future, we want
to help drive it in the right direction.
We are a forward-looking company
focused on deploying new technologies
and innovative approaches to
generate increasing scale and
returns from our existing assets
whilst pursuing new development
opportunities through acquisitions
and partnerships. We believe that we
have established a strong path for a
step change in production, revenue,
profitability and cash flow, and
consequent re-rating opportunities,
as the Company leverages
relationships and development
strategies to generate scale.
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Trinity Exploration & Production plc
Strategic Report
Our Energy Marketplace
Why Trinidad & Tobago?
T&T provides us with extensive growth opportunities, has established
energy infrastructure and is also ideally placed geographically to
allow us to pursue opportunities across the wider Caribbean
and Latin America.
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20 years of natural gas focus, eyes off liquids,
giant reserve potential remains,
playing catch-up on transition fuels & renewables.
Trinidad is one of the world’s largest natural gas producers, but also
has significant remaining proven, probable, possible and yet to be
discovered oil reserves & resources alongside significant untapped
renewables potential.
Location Overview
Conventional Energy
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Crude Oil: 220 million proven
barrels (2018) with another 235
million plus probable & possible
barrels
A study indicated the presence of
3 billion barrels of heavy oil in the
country’s previously explored
onshore and offshore acreage
BUT, in-line with global trends, the
larger Independent Oil Company’s
(“IOC’s”) focus is on the larger
existing gas fields as they continue
to rationalise their conventional
portfolios globally and look to
expand the energy mix within
portfolios
The Larger IOC’s focus on giant gas
reserves therefore offers a significant
opportunity for a mid-cap operator
to get after stranded oil reserves.
Trinity is poised to fill the mid-cap
independent gap that it believes
exists in T&T. With 94% of oil and gas
production undertaken by 4 IOCs and
the NOCs the environment is ripe for
smaller sized independents to monetise
reserves stranded by the IOCs.
Trinity is ideally placed to become
the 3rd largest crude oil producer with
the rejuvenation of the Galeota asset,
a new approach to its onshore
operations and its pursuit of new
development and exploration
opportunities.
Bahamas
ATLANTIC
OCEAN
Cuba
Dominican
Republic
Haiti
Puerto Rico
CARIBBEAN
SEA
Trinidad & Tobago
Venezuela
Established Basin & Infrastructure Hub
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Majors in Trinidad include
BP, BHP, CNOOC, ENI, Repsol
and Shell.
Independents include privates
such as Perenco and listed
operators such as EOG, Star
Phoenix, Touchstone and
Bahamas Petroleum.
Sophisticated local and
international oilfield
supply chain.
Mature infrastructure for oil
and gas operations.
~570,000 boepd1
(90% natural gas).
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6th largest LNG exporter in
the world2.
3rd largest exporter of
ammonia and urea in the
world3.
Highly educated workforce.
Most established infrastructure
network in the Caribbean.
Ideally located to accelerate
renewable energy
infrastucture/ operations and
supply throughout the
Caribbean & Latin America.
Source:
1.
2.
3.
Ministry of Energy and Energy Industries of Trinidad & Tobago (“MEEI”) (2020): www.energy.gov.tt
LNG exporting countries (2019): www.statista.com
Ammonia exporting countries (2018). www.oec.world
Annual Report & Financial Statements 2020
Strategic Report
11
T&T Oil and Gas Landscape
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erminal
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12
Trinity Exploration & Production plc
Strategic Report
Our Energy Marketplace (continued)
Renewable Energy
With the growing popularity of small
scale generation and clean energy, the
opportunities in the renewable energy
industry have never been better. The
Trinidad & Tobago renewable energy
market is expected to grow from less
than 1% renewable power production
currently to 20% by 2030.
The Global Scene
The growth of the renewables industry
globally over the past two decades
has been unprecedented, mainly due
to an efficient collaboration between
governments and the private sector.
The result of this collaboration
is a steep fall in the cost of renewable
energy technologies, thereby making
it affordable for even domestic
application. The increasing concern
worldwide, regarding climate change
and pollution has led to various
legislations and agreements, which
are helping drive the growth of the
renewables industry. The other major
factor that is promoting the growth
of renewables is the increasing need
for power with population increases,
alongside growing industrialisation
and urbanisation, meaning the world’s
energy needs remain on a growth
trajectory. The growing energy need
cannot be fully satisfied by
conventional power generation
methods, and this will further facilitate
the need for the renewable industry
to grow.
The T&T/Regional Scene
Trinidad and Tobago’s, like much of
the wider region’s, electricity generation
is completely fired by fossil fuel, with
c.8% (c. 237 MMcfd/c.39,500 boepd) of
its substantial natural gas production
being channeled to electricity
generation. In addition to this, large
amounts of natural gas is flared and
vented across Trinidad’s brownfield
operations.
Directing this gas to its power stations
deprives the country of much larger
potential revenues that could be
gained from exporting liquefied natural
gas (LNG) especially as one of only two
Latin American countries to export LNG,
or as feedstock for the production
of petrochemicals such as ammonia
and urea.
In many parts of the world, renewable energy
(“RE”) has been integrated in some way into local
electricity grids. This has been done in several
Caribbean countries, including Suriname and
Jamaica. The increased utilisation of renewable
energy is consistent with countries’ commitment to
the Paris Agreement, but also is being used as a
strategy to bolster energy security and diversify
sources of energy. Because of this global push,
renewables share in electricity has increased from
18% in 2000 to 25% in 2018. The greatest source
of renewable energy globally comes from
hydropower. Note that in countries like Germany
and the United Kingdom (“UK”), installed RE
capacity accounted for 42% and 33% of generation
capacity respectively in 2018. Costa Rica and
Uruguay have systems which are close to 100%
powered by renewables. (Costa Rica for over 250
days in 2016 ran entirely on renewable energy and
in 2015, 98.1% of its energy came from renewables).
To this end, there has been pressure
locally to reduce the amount of low
priced (subsidised) gas directed
towards power generation by up to
50%. In order to optimise energy
efficiency it is proposed that more
transition fuels and renewables could
be brought into the mix, leaving more
gas to be channelled to higher-value
petrochemicals or LNG export.
Furthermore, T&T’s relatively high CO
emissions from gas-fired electricity
generation highlight the country’s
need to adopt more efficient transition
fuels and renewable energy, such as
photovoltaic solar and wind power,
which would also address the issue
of gas shortages.
What’s Next
The discussion surrounding T&T’s
transition towards renewable energy
and the acknowledgement that it is a
necessary step has gained traction in
recent years. In June 2017 T&T hosted
a two-day conference on energy
efficiency and renewable energy
that set out to determine the next
moves to be taken by policymakers.
Following the conference, the
Sustainable Energy Roadmap and
Implementation Plan 2021-30 was
drawn up, financed by the EU, and
presented to the MEEI in September
2017. The plan concluded that, from all
the evidence gathered, the timing was
ideal for T&T to transition towards clean
energy. Adopting renewable energy
would place the country among a
cohort of other oil and gas-producing
nations that are gradually shifting
towards clean energy in hopes of
utilising and maintaining their natural
resources in high-value processes for
the benefit of future generations. The
country is now looking at implementing
the necessary legislation and
regulatory framework to facilitate
that transition.
Trinity’s Renewables
Aspirations/Progress to Date
Our team are working to more cleanly
produce our existing conventional
asset base through enhanced
efficiency drives whilst identifying
new energy projects.
The MoU with the NGC is to explore
and develop new projects to enable
energy transition in T&T and, potentially,
in the wider Caribbean and Latin
America. This is to specifically pursue
defined micro LNG projects and a
range of potential renewables projects.
Another example is the recently signed
MoU with the Regional University to
identify and advance Renewables
projects.
Annual Report & Financial Statements 2020
Strategic Report
13
To enhance renewable energy output, the Trinidad
and Tobago Electricity Commission (T&TEC) Act,
Chapter 54:70 and Regulated Industries
Commission Act, Chapter 54:73 would have to be
amended as these currently do not make any
provisions for renewable energy production by
independent power producers (IPPs). In this
regard, the government of Trinidad and Tobago is
seeking to provide a legislative framework for the
generation of electricity based on renewable
energy sources. This legislative framework would
involve an amendment of the Acts which govern
the Regulated Industries Commission, T&TEC and
the Electrical Inspectorate Division (EID). To help
inform this review, The Ministry of Energy and
Energy Industries of Trinidad & Tobago (“MEEI”) has
collaborated with the United Nations Environment
Programme (UNEP) to develop a framework for
policy and legislation to govern feed-in tariffs.
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Avocat Falls, Trinidad
© Zaheer Mohammed
14
Trinity Exploration & Production plc
Strategic Report
Our Strategic Objectives & Priorities
Our objective is to position Trinity
as a leading independent energy
producer to create meaningful
and sustainable growth and
enhance shareholder value whilst
working closely and respectfully
with all stakeholders in a safe,
ethical and transparent manner.
Trinity believes its partnership ethos
and initiatives to be part of the energy
transition journey will optimise
shareholder returns and indeed benefit
all stakeholders. To achieve this, our
four core strategic priorities are:
3.
4.
to Monetise our resources
responsibly; and
to Scale our operations and
thereby increase cash flows
and returns.
1.
2.
to retain corporate & asset
Integrity;
to focus on Efficiency &
Sustainability;
Strategic Priority
Strategic Priority
e Retain Integrity
Key targets 2021
l
l
Retain corporate & asset integrity.
Positive relationships with regulators.
l QCA Corporate Governance Code followed.
l
Behaviours, Business Ethics & Transparency.
Strong HSSE culture & focus.
Zero fatalities.
l
l
r Efficiency & Sustainability
t Monetise our Resources
Key targets 2021
l Maintain production and positive cash flow generation.
l Maintain safe and responsible operations.
l Maintain focus on margins to keep operating BE below
l
USD 30.0/bbl.
Allocate investment capital towards growth projects
generating attractive returns.
Performance to date
Governance Measures
2018 2019 2020
Regulatory 0 0 0
enforcement
actions
Non-compliance 0 0 0
on behaviours,
business ethics
& transparency
Performance to date
Reportable
Environmental and
Lost Time Incidents
Production & Operating
Break-even
EBITDA/bbl &
Net Cash/Share
15
12
9
6
3
3300
3200
3100
3000
2900
2800
2700
35
30
25
20
15
10
5
25
20
15
10
5
0.05
0.04
0.03
0.02
0.01
18
19
20
18
19
20
18
19
20
l RE
l LTI
l Average production
l Operating break-even
l EBITDA/bbl
l Net Cash/Share
Associated principal risks
(detail on pages 50 to 57)
l Health, Safety, Security & Environment
l Major breach of business, ethical,
or compliance standards
Associated principal risks
(detail on pages 50 to 57)
l Commercial Risk – Oil Price Risk
Production & Reserves Risk
l
l Development Risk
l
Regulatory/Fiscal Risk
l Cash Flow & Financing Risk
Annual Report & Financial Statements 2020
Strategic Report
15
Associated principal risks
(detail on pages 50 to 57)
l Commercial Risk – Oil Price Risk.
l Development Risk.
l
Regulatory/Fiscal Risk.
l Cash Flow & Financing Risk.
Q1 2021
Q2 2021
Q3 2021
Q4 2021
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Strategic Priority
u Scale & Relevance
Key targets 2021
l
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Progress delivery of meaningful scale in operations
across the energy spectrum.
Allocate investment capital towards growth projects
generating attractive returns.
Review, allocate and if attractive execute value
adding acquisitions.
Identify and advance new growth projects.
l Maintain a regular and active dialogue with key
l
l
stakeholders.
Value Catalysts
Jubilee
(in Evaluation
Stage)
Competitive bid process
– offshore west coast
Currently 2,800 bopd,14
mmbbls Proven, 1 billion
bbls STOIIP
Production, re-
development and
greenfield
Evaluation alongside a
FTSE 250 oil & gas
operator
Synergies; Echo
Short-listed for RFP
stage, now in the data
room
North West
District (“NWD”)
(Evaluation
to start Q2)
Competitive bid process
– onshore
Lower Tertiary and
Cretaceous targets, low
risk exploration
Evaluation alongside a
FTSE 250 oil & gas
operator
Strong local knowledge
Short-listed for RFP
stage, awaiting data
room access
New
Geological
Plays
Internally generated
Early stage
3D Seismic driven
Local partnership
(International?)
Strong local knowledge
Transition Fuels,
Automation
Internally generated
Fuels (i.e. Micro LNG) &
Power (i.e. wind)
Efficiencies
International and local
partnership
Local relationships &
knowledge
MoUs in place with NGC
& UWI to partner
Pre-feasibility onshore
wind study
Acquisitions
Ongoing evaluations in
traditional areas and
new entry areas
Local relationships and
knowledge
Acquisition of onshore
PS-4 Block
16
Trinity Exploration & Production plc
Strategic Report
Our Strategic Objectives & Priorities (continued)
Our view is that the demand for energy,
including lower emission oil, will remain strong
for quite some time whilst supply will become
increasingly challenged. As the Majors divert
capital expenditure towards diversifying their
revenue streams this is creating a supply
gap that needs to be filled and presents
a great opportunity for ambitious smaller
independents to fill that gap.
The three pillars of Trinity’s strategic approach to deliver
on its strategy objectives are as follows:
Columbus Bay, Trinidad
© Zaheer Mohammed
1
2
3
To deliver value to
shareholders through
share price appreciation
and, in time, through
dividends and/or share
buy backs.
To deploy a partnership
approach to de-risk and
simultaneously deliver
multiple growth
pathways.
To develop alternative
energy sources for
power generation
(for internal &/or
external consumption).
(i.e. partnership with a
FTSE 250 oil & gas
operator in relation to
Jubilee and North West
District opportunities).
(i.e. pre-feasibility
onshore wind power
study completed)
and be part of the
transition fuel supply
chain
(i.e. MoU in place with
NGC to explore micro
LNG).
As the world continues its energy
transition journey, we believe this
approach and these value-added
initiatives will contribute towards
maximising the benefits from Trinidad
and Tobago's natural resources.
Furthermore, this supports Trinidad
and Tobago's ambitions towards
lowering Green House Gas (“GHG”)
emissions in line with best practice
and the Paris Accord.
In delivering on our strategy, it is critical
to ensure that we maintain both the
quality of our asset base and our
capability to monetise it. The successful
execution of our strategy will deliver
sustainable cash generation
throughout reasonable oil price cycles
and preserve and optimise value for
shareholders in the short, medium and
longer term. The Board believes Trinity
now has a robust business model upon
which to scale production growth
and free cash flow accretion.
The execution of our business plan
during 2020 has ensured that we are
strategically well positioned to continue
monetising our assets (42.8 mmbbls of
2P reserves & 2C resources with exit
production c. 3,200 bopd) whilst
maintaining financial strength and
flexibility with USD 17.5 million in net
cash balances (USD 21.7 million in cash
plus working capital surplus) at 31
December 2020. This affords Trinity the
opportunity to focus on investing for
growth at a time when the Majors are
changing focus and the energy
landscape in T&T remains subject
to reform and is evolving quickly.
Annual Report & Financial Statements 2020
Strategic Report
17
Managing Director’s
Statement
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“2020 was a successful year for Trinity,
notwithstanding the challenging circumstances,
as we continued to consistently deliver on our
operational and financial targets. We not only met
our production targets safely but also delivered an
operating break-even below USD 30.0/bbl for the
fifth consecutive year. To put this in context, over
the past five years, Trinity has increased production
by 27% whilst simultaneously reducing the
operating break-even by 30%, resulting in a
business with a robust production base and a
strong and resilient margin. Our success in
delivering these results, despite the unprecedented
backdrop, reflects the quality of our assets, the
strength of our team, and our unrelenting focus on
operational efficiencies and innovation. This is
complemented by maintaining a strong balance
sheet, which is essential as we develop strategic
options to meaningfully scale the business.
"Looking at the growth initiatives in front of us,
we see opportunity in two areas. Firstly, in
advancing current developments both onshore
and offshore, and secondly, via the strategic
partnerships we have recently entered into. This
strategy is aimed at pursuing further low-cost
appraisal and exploration targets alongside the
development of transitional energy projects such
as micro LNG, wind and solar power.
"We proved the strength of our model during
the most difficult of circumstances in 2020 and
have ambitious plans to build on this during the
current year and beyond.”
Jeremy Bridglalsingh
Managing Director (MD)
18
Trinity Exploration & Production plc
Strategic Report
Managing Director’s Statement (continued)
COVID-19 response protocols
and impact
Our principal priority at all times is the
safety and health of our people. So
early in 2020 we put in place a full suite
of measures to achieve this including
regular and updated advisories,
enhanced hygiene practices, a series
of practise drills and full contingency
plans should any team member be
exposed to the virus. Following the first
confirmed case in T&T in 12 March 2020,
Trinity implemented Work From Home
(“WFH”) practices for all but essential
field operators and these are
continuing to work well. All international
travel has been suspended and
minimal local travel to maintain well
operations in the fields is being
undertaken under the strict proviso
of appropriate physical distancing
measures being adhered to.
The Group’s activities have not, during
2020, been negatively impacted by
COVID-19 and have, by law, been
classified an essential business and
therefore we have been able to
continue operations. We will continue to
monitor the evolving situation and put
further appropriate measures in place
as and when required. Refer to the Risk
Management and Internal Controls
Section on page 50 to 57 for further
details.
In Q2 2020, oil prices fell significantly
(with WTI turning briefly negative during
April) due to fears of the spread of
COVID-19 and its continuing potential
impact on the global demand for oil.
The WTI oil price subsequently
stabilised around USD 40.0/bbl before
breaking upwards in the latter part of
Q4 2020 and, at the time of writing, is
back above USD 65.0/bbl.
The volatile macro-environment serves
to highlight the importance of Trinity's
operating break-even being
consistently below USD 30.0/bbl
in all periods since the current
Management's measures took effect
in 2016. The fact that the Group
continued to accrete cash at lower
oil prices during 2020 is testament to
our financial discipline and our lean
business model putting us in a highly
resilient position. That said, a
protracted period of 'low oil price'
realisations would start to erode cash
balances. We have therefore created
financial plans for the business at
various oil price scenarios such that any
necessary changes to the operating
cost structure (Opex and G&A) would
be able to be implemented quickly to
preserve the integrity of the balance
sheet while maintaining safe
operations. We took immediate actions
to manage Opex and G&A costs during
2020. This, in conjunction with only
incurring essential capex focused on
asset integrity, RCPs and keeping our
Galeota project moving towards FDP
and FID, meant the Group ended the
year stronger than it began and
confident it can maintain sufficient
liquidity and cash through 2021 and
beyond. Refer to the Financial Review -
Events since the year end on page 49
and the Directors’ Report - Going
Concern on pages 83 for further details.
Strong operational and
financial performance despite
unprecedented backdrop
2020 was a year in which Trinity clearly
evidenced the strength of its operating
model, proving its resilience and ability
to adapt quickly due to the virus
protocols, and that a strong foundation
is firmly in place to support our growth
aspirations. We built on our progress in
2019 when we adopted new operating
practices, along with new technologies
and techniques, with a view to better
securing, and growing, our base
production levels. The aim remains to
protect against the downside, whilst
yielding better and more repeatable
and scalable returns on investment in
the future.
Revenue Breakdown
Expenditure Breakdown
5.1m
16.2m
USD
44.1m
24.5m
6.2m
USD
33.3m
16.5m
3.4m
5.5m
(cid:79)
(cid:3)
Onshore
(cid:79) West Coast
(cid:3)
(cid:79)
(cid:3)
East Coast
Production: 1,793 Bopd
Revenue: USD 24.5m
Production: 245 Bopd
Revenue: USD 3.4m
Production: 1,188 Bopd
Revenue: USD 16.2m
(cid:79)
(cid:3)
Opex
USD 16.5m
USD 13.9/bbl
Production
Royalties
USD 5.5m
USD 4.7/bbl
(cid:79)
(cid:3)
(cid:79)
(cid:3)
Overriding
Royalties
(cid:79)
(cid:3)
G&A:
USD 6.2m
USD 5.2/bbl
USD 5.1m
USD 4.3/bbl
Annual Report & Financial Statements 2020
Strategic Report
19
But, it’s not scale for scale’s sake - with
the focus remaining on growing the
bottom-line
Whilst increasing top-line production/
revenues is an engine for growth, it is
only effective growth if we are able to
sustain and leverage the cash returns.
Despite a significantly lower average
realised oil price during 2020, we
maintained operating profitability and
cash generation by adapting quickly
to the severe environment and
successfully bringing our operating
break-even down to its lowest ever
level of USD 20.1/bbl. This further
secures our position as among the
lowest cost operators in the sector.
We work hard to control what we can
control
Trinity has to adapt and respond to
a number of key variables which are
beyond Management’s control, most
notably the oil price, the regressive
nature of the T&T fiscal regime (SPT
specifically) and, most recently, the
impact of the COVID-19 global
pandemic. Trinity employs a number
of operational and financial levers to
mitigate against these, with a view
to ensuring our operations remain
sustainably and significantly free
cash flow generative even in low oil
price environments.
The operating levers we are able
to deploy include:
l
l
l
l
Reducing Production Costs,
Opex/bbl and G&A/bbl, by
increasing production
(preserving base production
levels and higher EUR reserves
from new wells) and reducing
costs (economies of scale and
well optimisations).
Increasing new well economics
by reducing capex per well
and seeking higher EUR
reserves from new wells.
Increasing initial production
(“IP”) rates from new wells due
to an increased focus on
automating wells and drilling
HAWs.
Ensuring that the commercial
terms, applying across the
various assets, that we
operate allow us to receive
an appropriate return on
investment and thereby
protect and grow shareholder
value, in divergent oil price
scenarios.
Current LOA Terms
Oil Price USD/bbl Base Enhanced
≤10.00 20.00% 17.50%
10.01 - 20.00 20.00% 17.50%
20.01 - 30.00 20.00% 17.50%
30.01 - 40.00 20.00% 17.50%
40.01 - 50.00 25.00% 17.50%
50.01 - 70.00 33.00% 17.50%
70.01 - 90.00 33.00% 17.50%
90.01 - 200.00 35.00% 22.50%
New Well Drilling Incentive Current Terms:
1st Year 0%
2nd Year 10%
The above chart outlines the current LOA terms, however these are expected to change with the imminent renewal of the
licences on revised terms.
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Trinity Exploration & Production plc
Strategic Report
Managing Director’s Statement (continued)
The financial levers we are able to
deploy include maintaining a
strong balance sheet, an active
programme of financial hedging
and our substantial tax losses.
Whilst SPT is not payable if oil price
realisations remain below an
average of USD 50.01/bbl in any
calendar quarter, as was the case
during 2020, we had layers of
hedging in place to mitigate the
impact of SPT when realisations
are in its most impactful price
range (USD 50.0/bbl to 56.0/bbl).
Trinity took advantage of the oil
price movements in January, June,
July and November 2020, and
again in February and March 2021,
to put layers of hedging in place
which were designed to protect
a portion of Group cash flows
between USD 50.0 to USD
56.0/bbl, thereby partially
offsetting the impact of SPT, and
also to provide a degree of
protection against a period of
lower oil prices. As a result, the
Group currently has crude
derivatives in place of 45,000
bbls/month for 2021 (equating to
c. 45% of its 2020 exit production)
and will start to receive derivatives
income if Brent Crude Prices trades
below USD 42.50/bbl during 2021
and USD 60.00/bbl in H1 2022.
Trinity also benefits from a large
tax loss position of USD 237.2 million
(YE 2020) which effectively means,
from 2020 onwards, 75% of taxable
profits would be sheltered from
Petroleum Profits Taxes (“PPT”) by
brought forward losses, with any
remaining tax losses continuing to
be carried forward indefinitely.
The financial hedging supports
our effective operational hedging
strategy, centered on preserving base
production and retaining flexibility with
multiple options to sustain and grow
production including low cost RCPs,
WOs and drilling new infill wells
Onshore.
We ended the period in a stronger
position than what we started it with
2020 year end net cash (cash minus
USD 2.7 million drawn working capital
facility) of USD 17.5 million as at 31
December 2020, versus USD 13.8 million
as at 31 December 2019. The 27%
increase in net cash balances during
the year was driven by strong operating
cash flow generation and achieved
despite a 35% reduction in average oil
price realisations versus 2019. Refer to
the Financial Review on pages 42 to 49
for further details.
Long pursued SPT reforms
commenced
A revised threshold for SPT for small
onshore producers was announced on
5 October 2020 and implemented via
The Finance Act, 2020 which became
law on 4 January 2021.
As a result, the threshold at which SPT
becomes due for individual producers
producing less than 2,000 bopd
onshore has now increased from
USD 50.0/bbl to USD 75.0/bbl for
the financial years 2021 and 2022.
Therefore, Trinity expects to be exempt
from SPT across all of its onshore
licences below USD 75.0/bbl, which
will have a significant positive impact
on future cash flows.
l
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Based on current onshore
production levels, Trinity estimates
that SPT of c.USD 3.5 million per
annum or more would previously
have been payable if realisations
were above USD 50.01/bbl
(although this could be partially
mitigated by the investment tax
credits shelter).
The confirmation of these
reforms therefore represents a
considerable boost to potential
cash generation from Trinity's
onshore licences should
realisations average above
USD50.01/bbl for any calendar
quarter during 2021 and 2022.
We have long championed SPT reform
and believe that this first step is good
news for all smaller producers in
Trinidad & Tobago, demonstrating
clearly that the GORTT recognises that
SPT is an outdated and regressive tax
in need of reform. This initial change
should begin to provide a greater
stimulus to investment activity in the
country, enabling the Group to
generate increased returns and further
leverage its low cost production model.
The Group continues to lobby at
the highest levels for further reform,
with a view to obtaining a longer
duration relief period and for this to
apply to both onshore and mature
offshore fields, thereby further enabling
all smaller producers in Trinidad &
Tobago to invest and grow production,
for the long term benefit of all
stakeholders.
Licence updates
Onshore, the Company extended
the term of its Lease Operatorship
Agreements ("LOAs") with Heritage for its
WD-2, WD-5/6, WD-13 and WD-14
blocks to 31 May 2021 with renewal
expected during Q2 2021. The LOAs
were originally set to expire on 31
December 2020 and have been
extended under existing terms and
conditions while Heritage finalise the
regulatory approvals necessary for the
longer term extensions and renewals for
its LOA properties.
Offshore the East Coast, a more robust
legal and commercial framework is
also being established for Galeota,
to include a new 25-year Licence,
Joint Operation Agreement (“JOA”),
Commercial Terms and Sales
Agreement (“COSA”), each of which
are expected to be finalised during Q2
2021. These new agreements will better
enable future developments to be
brought into production by offering
potential partners and funders the
appropriate visibility and comfort on
the legal and commercial framework.
Internal Growth Pathways
Trinity is ideally placed amongst the
top five largest T&T crude oil producers
and is focused on developing its
reserves and resources with the medium
term objective of increasing its onshore
and offshore production from 2020
average production levels of 3,226
bopd to over 7,500 bopd.
Offshore East Coast
Production from the Group’s east coast
assets (Galeota) continued to meet
expectations during 2020. As well as
the current production from the Trintes
field, the Galeota asset also includes
a series of development opportunities
(Echo, Foxtrot and Golf) which are
being progressed.
The Phase 1 offshore development
on the Galeota licence has the
potential to add additional peak
production of at least 4,000 bopd on
the current development concept. Work
is currently ongoing on pre-Front End
Engineering Design (“FEED”) studies and
environmental approvals as we move
towards a Final Investment Decision
(“FID”) at the earliest opportunity. The
First Phase currently contemplates the
installation of a low cost eight well
Annual Report & Financial Statements 2020
Strategic Report
21
conductor supported platform (“Echo”),
a new pipeline from Echo to shore, with
the existing Trintes platforms tied in,
and “T” sections installed for the
potential development of TGAL NE
(Foxtrot) and Trintes SW (Golf) areas
in the future. It is expected that Echo
would be powered from shore (offshoot
of offshore wind power cable
technologies) with tiebacks to the
Trintes platforms. Combined with there
being no offshore power generation (i.e.
no diesel and no generators) and being
unmanned, the development would
have a nominal carbon footprint when
compared to standard offshore
developments.
It is also worth noting that a large
proportion of Trinity’s tax loss position
of USD 237.2 million (YE 2020) can
be applied to the Galeota field
development, which further underpins
the attractive economics of the
development.
Offshore West Coast
Production from the Group’s west
coast assets performed ahead of
expectations during 2020 facilitated
by WOs and upgrades. The Group has
also focused on maturing reactivation
opportunities, with ABM 151 having the
potential to add c.175 bopd, and
development options for existing
discoveries, notably ALM 22 with 2C
resources of c.3.1 mmstb and is an
extension of the Jubilee/Cluster 6
developments currently on production,
operated by Heritage.
Onshore: Well automation roll-out &
wider technology drive continues
Our innovative approach to operations
is at the heart of our business and as
we ramp up our efficiency drives, we
expect to see the real benefits come
to fruition. We have established an
enhanced operational management
system that builds repeatability
and scalability as we grow while
simultaneously driving further
efficiencies in terms of well uptime
resulting in reduced WOs and the
better allocation of human resources.
We are on track to meet our target
of having 31 wells automated at our
largest onshore field, WD-5/6, during
H2 2021. This is expected to facilitate
an increase in revenues from the field
by allowing production levels to be
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optimised and downtimes to be
minimised. Automation is also expected
to improve margins and free cash
flow generation by reducing well
intervention works (including workovers).
This is the first time this technology
has been deployed in our Onshore
fields and provides a low-cost means
of protecting and enhancing base
production levels with the full
production benefits and operating
cost savings expected to become
more apparent as our top-tier onshore
wells are automated. By becoming
more data driven, we have a vision to
digitalise the business so that we can
develop analytics for our 1000+ wells
(across various reservoirs which have
been producing for decades) and by
applying a methodical approach to
better reservoir management that
minimises production volatility,
increases recovery factors and thereby
maximises reserves extraction, further
securing the business for the future.
Onshore: Acquisition & Integration
of Seismic
The acquisition of the onshore 3D
& 2D seismic package is potentially
transformative for our onshore licences.
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The Onshore seismic is of good
quality and initial first pass
screening shows interesting
prospective features
not previously mapped.
The development, appraisal and
exploration pipeline is to be
augmented following 3D onshore
seismic interpretation (now
underway).
The ability to accurately locate
HAWs, and ultimately fully horizontal
wells, is greatly enhanced by
the use of 3D seismic data.
l
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HAWs could be expected to yield IP
rates and reserves of over 2x those
from conventional vertical wells,
whilst fully horizontal wells
commonly deployed globally can
yield rates 4x to 6x higher than
vertical wells.
New Growth Pathways
Asset acquisitions and partnerships
offer the potential to increase scale,
share risk and drive returns to
shareholders.
Pursuing New Projects alongside
NGC and the Regional University
A Memorandum of understating ("MOU")
was signed with the NGC, to explore
and develop new projects to enable
energy transition in T&T and, potentially,
in the wider Caribbean and Latin
America, including;
l
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A Micro Liquefied Natural Gas
(“micro LNG”) business;
Renewable energy opportunities,
inclusive of a wind power
generation project;
Pursuit of stranded gas assets and
associated opportunities in existing
Trinity assets; and
Pursuit of other mutually beneficial
business opportunities.
A MOU was also more recently signed
with the Regional University, to
collaborate across a range of business
initiatives to explore and potentially
develop new projects in areas of
mutual interest and for the benefit of
Trinidad, the wider Caribbean and
beyond, including;
Renewable energy opportunities,
inclusive of a wind power
generation project; and
Pursuit of any other opportunities,
renewables or otherwise, which
may be mutually beneficial.
Pursuing New Projects alongside a
larger international operator
A partnership has been formed with a
FTSE 250 oil & gas operator to evaluate
two potential new projects:
1)
2)
a material offshore Gulf of Paria
production and development asset
(Jubilee).
a potentially high impact onshore
exploration play (North West
District).
22
Trinity Exploration & Production plc
Strategic Report
The Common Black Hawk
© Zaheer Mohammed
An aptly-named entirely black hawk with broad
wings and short tail with a distinct white band.
Typically found in woodlands near water where it
hunts; shows an affinity for cottonwood trees at
the northern end of its range. These are native to
Central America and to the northern region of
South America. These birds have migrated and
also inhabit Trinidad & Tabago and Barbados.
Annual Report & Financial Statements 2020
Strategic Report
23
Managing Director’s Statement (continued)
Jubilee Process
Acquisitions
Stakeholder Statement
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The consortium have been granted
access to the data room for the
Jubilee Field evaluation which forms
the next stage of the bid process.
Trinity and its partner are one of
only a limited number of groups to
have been granted access to the
data room in order to evaluate and
potentially prepare and submit a
development proposal.
Trinity is hopeful that a successful
bid on Jubilee would add
significant value to the Company.
Jubilee is a rare example of a
sizeable producing field with
significant undeveloped reserves.
l Current production from the area
subject to the bid is c. 2,800 bopd
from 26 wells but the field has
approximately 1 billion bbls of
estimated oil in place and 14 million
barrels of proven heavy oil reserves.
l
The bid area is part of the giant
Trinmar group of fields that has
produced over 750 million barrels of
oil to date and is located adjacent
to the Group’s West Coast assets in
the shallow water area between
Trinidad and Eastern Venezuela.
NWD Expression of Interest (EOI)
Trinity and Cairn Energy have submitted
a joint EOI for the potentially high
impact onshore exploration play in the
NWD of Trinidad. The NWD is located
to the southwest of Trinidad within the
western segment of the Southern Basin
geologic province with stratigraphy
ranges from the Cretaceous through
to recent deposits. The NWD contains
a number of low-risk Tertiary and
Cretaceous targets and is situated
on trend with the giant turbidite and
basin-floor fan oil discoveries offshore
Guyana and Suriname.
The consortium have been short-listed
for the next stage of the bid process
and are expecting to access the data
room during Q2 2021.
Our robust financial strength compared
to many of our peers, where operating
break-evens are higher and finances
are potentially more constrained,
means that Trinity is well placed to take
advantage of commercial opportunities
as and when they arise. The recent
acquisition of the PS-4 Block Lease
Operatorship Sub-Licence, onshore
Trinidad, demonstrates our ability to
bolt on assets when we foresee upside
potential alongside significant
technical, operational and financial
synergies to leverage value.
Approach to ESG
Our approach to good Environmental,
Social and Governance (“ESG”)
practices is more than just ‘box ticking’.
Very simply, we firmly believe that
doing the right things for the right
environmental ‘and’ commercial
reasons leads to the best outcome
for shareholders and the holistic
ecosystem that contributes to this
outcome. What does that mean
from a practical standpoint?
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Pursuing more sustainable
environmental/lower carbon
alternative energy sources for
power generation, i.e. renewable
power, transition fuels, to generate
more energy with a low carbon
footprint;
Proactive adoption of social
solutions (i.e. WFH, protocols,
healthcare provision, wellness
programmes, community
engagement);
l Whilst simultaneously aiming to
reduce our costs and appeal to
a wider shareholder and partner
base; and
l
To help reduce our cost of capital
and provide a sustainable growth
trajectory.
See ESG discussion on pages 38 to 40
for more details.
The Board remains confident that the
successful execution of our strategy
can deliver sustained operations
throughout oil price cycles and thus
preserve and optimise value for
shareholders in 2021 and beyond.
In 2020, we continued to build a
robust business capable of delivering
sustainable growth in shareholder
value.
On behalf of the Board, we must thank
all our staff and suppliers for their
diligence, commitment and support
which has allowed Trinity to focus
on growth whilst maintaining a safe
working environment. The Board would
additionally like to take this opportunity
to thank shareholders and other
stakeholders, notably Heritage, the
MEEI and the Board of Inland Revenue
(“BIR”), for their support as we move
forward strongly positioned to add
value from future opportunities in the
changing environment in T&T.
Bruce Dingwall, CBE
Executive Chairman
Jeremy Bridglalsingh
Managing Director
17 May 2021
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Trinity Exploration & Production plc
Strategic Report
COVID-19 Statement
Kevin Singh
HSSE Team Leader
Nicholas Ali
Production Unit Leader - Land
Denva Seepersad
Financial Controller
Q How did Trinity respond to
Q How did Trinity manage to grow
Q How did COVID-19 impact Trinity’s
COVID-19?
production despite COVID-19?
capital allocation?
A We quickly put in place a full suite
of measures including regular and
updated advisories, enhanced
hygiene practices, practice drills
and full contingency plans should
any team member be exposed to
the virus.
A As a team we have had to adapt to
extreme challenges in the past and
I’m proud to report that they not
only adapted but stepped up
during the current adversity to
deliver on our base management
plan.
In March 2020 we also put in place
WFH practices for all but essential
field operators, all international travel
has been suspended and minimal
local travel to maintain well
operations is being undertaken under
the strict proviso of appropriate
physical distancing measures.
We are very fortunate to have strong
relationships with our partners and
suppliers whose safety was at the
core of our contingency planning.
A As a precautionary measure we
drew down on our small working
capital facility early in the
pandemic. However, given other
measures (including undertaking
only essential capex, managing
Opex and G&A spend), and by
actually growing production we
ended the year in a stronger
position than which we started it.
Rhisha Heeralal
Human Resources Team Leader
Kalifa Campbell
Production Unit Leader - East Coast
Makesi Jones
Supply Chain Team Leader
Q How has Trinity supported
employees and local communities
throughout the pandemic?
Q How have operations been
impacted by COVID-19?
Q Will this impact Trinity’s future
strategy and has it presented
opportunities for the Company?
A Alongside the WFH protocols we
have healthcare provision, initiated a
Teams Steps Challenge, a Wellness
Programme and regular online social
sessions. We delivered food parcels
to local communities, provided
school supplies to 75 students in the
Galeota community and sponsor
local school programmes.
A The Group’s active operations have
not, during 2020 been negatively
impacted with operations
continuing. We will continue to
monitor the evolving situation and
put further appropriate measures in
place as and when required.
A It has compounded our confidence
in being able to pursue growth
whilst retaining our strong core
cash generative operations.
Whilst we have been fortunate in
our preparedness for the pandemic
and oil price volatility others may
not have been. We could therefore
see acquisition opportunities arising.
Read more about the effect of COVID-19 in our operational performance on pages 28 to 37.
Read more about the effect of COVID-19 on our financial performance on pages 42 to 49.
Annual Report & Financial Statements 2020
Strategic Report
25
Operations
Local Community
Rigorous approach to health protocols,
appropriate distancing, regular testing
and only essential travel.
We not only operate amongst the
community, this is our home, we live here and
will continue to support our fellow citizens.
Read more about our response to COVID-19
on page 18.
Read more about our response to COVID-19
on pages 18 to 25.
New Project Delivery
Markets
2020 WTI Crude Prices
USD/bbl
80
60
40
20
0
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Whilst COVID-19 presented challenges and
some delays we successfully progressed
existing and established new projects.
Despite a very volatile oil price market
backdrop during 2020 our performance
operationally and financially remained robust.
Read more about our general approach on page 21.
Read more on page 18.
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Trinity Exploration & Production plc
Strategic Report
The La Brea Pitch Lake, Trinidad
© Zaheer Mohammed
A destination of amazement and mystery, the
T&T Pitch Lake is the largest natural deposit of
asphalt in the in the world. It is the largest
commercial deposit of natural asphalt in the
world – one of only three in known existence –
and holds approximately 10 million tonnes of
asphalt.
In 1857 the first historic oil well in the world was
drilled in south-west Trinidad in the vicinity of the
Pitch Lake by the American Merrimac Company.
Trinity’s West Coast Assets (PGB & BM) are
located c. 2km from this wonder of the world
based in south-western Trinidad.
Annual Report & Financial Statements 2020
Strategic Report
Our Business Model
Our Business Model is designed to enable Trinity
to deliver our strategy whilst working closely
and respectfully with all stakeholders in an ethical
and transparent manner.
We strive to ensure our business can endure
uncertainties and grow value throughout oil price
cycles and changes to the macro-environment
by Operating Safely & Responsibly, Preserving
& Innovating and focusing on Financial &
Capital Efficiency.
2021: Outlook & Roadmap to Delivery
01
02
03
Operate Safely and
Responsibly
HSSE at forefront
Preserving integrity of asset base
Protecting our people, our
community and the environment
Earn the social and legal rights to
operate
Strive to have the “Leading”
Operating Model
Automation and Data Analytics
Persevere
& Innovate
Active portfolio management,
commercial innovation and
potential corporate opportunities
Targeting a balance of short-term
growth via monetising 2P reserves,
medium-term growth via
developments (2C to 2P) and
longer-term growth by adding
acreage, assets and opportunities
to portfolio
Aiming to optimise commercial
terms across the portfolio
Maintaining strong local
knowledge and relationships
ESG focus and Transition
Technologies
Strategic Partnerships and
Relationships approach
Continuous growth and learning
through evolutionary techniques
Financial &
Capital Efficiency
Ensure access to internal and
external capital
Maintaining a strong balance
sheet gives optionality
Ability to make the right corporate
growth decisions
Focusing on financial discipline
and retaining a lower operating
break-even to protect the business
during downturns and maximise
leverage when the market
backdrop is favourable
Maintaining a close dialogue with
shareholders and other potential
capital providers
Deliver value through share price
performance and cash returns to
shareholders
27
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Trinity Exploration & Production plc
Strategic Report
Operational Review
Production
“Our Teams’ drive for continuous
improvement was central to
dealing with the unprecedented
challenges during 2020,
implementing timely measures
to safely navigate and deliver
on our targets within budget.”
Rajesh Rajpaulsingh
Chief Operations Officer (COO)
In 2020 average net production was 3,226 bopd (2019:
3,007 bopd), an increase of 7%. The Group managed
to grow production despite no new drilling taking
place during the year, the challenges resulting from
a suppressed oil price and the COVID-19 pandemic.
In addition, production increased during Q4 providing
a strong start to 2021.
2020 vs 2019 Annual Production and 2020 Half Year & Quarterly Breakdown (bopd)
3500
3000
2500
2000
1500
1000
500
3,226
W7%
245
+30%
3,007
189
3,283
242
3,170
249
U3%
+3%
3,291
228
3,275
0%
255
+12%
3,133
246
U4%
-4%
3,206
251
W2%
+2%
1,205
1,188
-1%
1,226
1,151
-6%
1,230
1,222
-1%
1,175
-4%
1,127
-4%
1,613
1,793
+11%
1,815
1,770
-2%
1,833
1,798
-2%
1,713
-5%
1,827
+7%
0
12m
2019
12m
2020
H1
2020
H2
2020
Q1
2020
Q2
2020
Q3
2020
Q4
2020
l Onshore
l
East Coast
l West Coast
Annual Report & Financial Statements 2020
Strategic Report
29
The 2020 daily production volume chart below illustrates the stability across each of the assets by location.
Reported Production 2020 (bopd)
4000
3500
3000
2500
2000
1500
1000
500
0
Jan
2020
Feb
2020
Mar
2020
Apr
2020
May
2020
Jun
2020
Jul
2020
Aug
2020
Sept
2020
Oct
2020
Nov
2020
Dec
2020
l Onshore
l
East Coast
l West Coast
Onshore Assets
G U L F O F
P A R I A
Guaracara
Refinery
Tabaquite
WD 13/14
FZ 2
Atlantic LNG
WD 5/6
WD 2
Current onshore production is
from Lease Operatorship Blocks:
FZ-2, WD-2, WD-5/6, WD-13,
WD-14 and Farmout Block,
Tabaquite.
Average 2020 net production from the
onshore assets was 1,793 bopd (an 11%
increase from 2019: 1,613 bopd), which
accounted for 56% of the total annual
average production. This significant
growth in the year on year production
is a direct result of the performance
of the 2020 RCP campaign, reduced
downtimes facilitated by more-active
well management, improved swabbing,
reactivations and numerous other
production initiatives undertaken
in the year.
In 2020, production continued to benefit
from the contribution of the 2018/19 infill
drilling programme. Furthermore, Trinity
has developed a tactical multi-
disciplinary team to manage the
delivery of these development wells,
using best in class models, which in turn
helps to ensure they deliver the best
economic returns. As such, best in class
models were developed to economically
maximise well deliverability. This would
have pointed to the execution of two
RCPs which yielded positive results,
enhancing the team’s confidence in the
productivity of the Lower Forest sands.
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Trinity Exploration & Production plc
Strategic Report
Operational Review (continued)
Trinity executed 16 RCPs Onshore for
the period (2019: 22) as well as 94
WOs (2019: 104). This intensive work
campaign successfully maintained
base production and provides a stable
platform for future production growth.
The continued reduction in WO
frequency is a testament to the teams
drive to reduce pump failure frequency
and optimise operating efficiency.
Over the period the team particularly
targeted the stabilisation and
optimisation of its largest onshore
field, WD-5/6 Block. Focus teams were
established to ensure quicker responses
to offline wells and drive the redesign
of operating thresholds to combat
declines.
In 2021, the team intends to explore
further cost-effective means of
production maintenance through the
expansion of the active well stock via
RCPs, reactivations and swabbing.
Furthermore, the automation roll-out is
moving ahead at pace and we remain
on target to have 31 new Tier-1 well
systems in place by H2 2021.
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Automation: A key aspect of our well
management system
The positive results recorded to date
provides confidence in being able to
deliver our objectives for the WD-5/6
Block:
to stabilise 85% of the Block’s
production via increased well
uptimes.
wells, with the timings and location
selection dependent on the findings of
the on-going 3D seismic data review
across our onshore acreage.
New sub-surface models – building low
risk exploration & development
inventory with best in class
partnerships
to reduce the number of WOs
by employing 24/7 remote well
surveillance.
With the 3D seismic data (37km2) now
acquired we have accelerated its
integration and interpretation to:
to build capacity through
increased operational field
efficiencies and productivity.
to reduce the carbon footprint with
less workovers and wellsite visits.
to manage well performance with
the use of real time data.
The use of Weatherford’s Foresite Well
Optimization platform will support our
well management system to manage
wells by exception, remotely optimise
well performance, and to alert teams
for earlier well responses and avert
possible premature well failures.
Preparations for the execution of our
next infill development campaign
are underway. We expect to drill a
combination of vertical and horizontal
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high grade current drilling locations
(HAW/horizontal candidates/well
trajectories =>higher IP’s and
reserves/well).
to look at enhanced oil recovery
projects.
to generate new appraisal/
exploration prospects.
This is the first time high quality 3D
seismic data has been utilised by a
lease operator in this area. The analysis
will enable Trinity to redefine basin fill &
deformation (stratigraphy & structure)
as well as assisting the development of
new plays at a local and regional level.
As well as targeting deeper (traditional)
targets, two teams are working to
accelerate the data interpretation of
non-traditional plays and targets.
Annual Report & Financial Statements 2020
Strategic Report
31
East Coast Assets
TGAL 1 Discovery
Samaan
Galeota Terminal
& Export Facility
Galeota
Teak
Trintes
Poui
Current East Coast production
is from the Alpha, Bravo and
Delta platforms in the Trintes
Field which resides within the
Galeota Block.
Average 2020 net production from the
East Coast was 1,188 bopd (2019: 1,205)
which accounted for 37% of the Group’s
total with production levels broadly
maintained from the prior year. To
achieve this, the team conducted
16 restorative WOs (2019: 13) and 4 well
reactivations to underpin production.
With the focus being placed on
operational intelligence during
optimisation and troubleshooting
activity, minimal wellbore interventions
were required on our high-volume
ESP wells.
Throughout 2020, the team retained
focus on the management and
maintenance of all critical assets in
the field. The positive performance
indicators experienced in power
reliability and operational efficiency are
reflected in the field’s low production
volatility. Trinity’s ability to effectively
and economically manage these
mature assets is a testament to a series
of innovative solutions which form the
foundation to our approach on all our
projects.
Facilities Management
In 2020, the Facilities team continued
to execute a robust plan aimed at
improving facility integrity and
equipment reliability. The maintenance
plan for the Trintes cranes was revised
to capitalise on the competencies of
the team and to deliver more frequent
scheduled preventative maintenance
activities. The benefit of this approach
was that the cranes were able to be
recertified without delays, with no
downtime and at a reduced cost.
Of the 33 projects progressed during
2020 25 were completed with 7
continuing into 2021. Most projects
continued to focus on welfare,
structural and operational reliability.
Of note was the construction of a new
10,000 bbls tank in the Trintes asset
which commenced in October 2020
and is well on its way to completion
(targeted for Q4 2021). This tank will
bring additional storage capacity
and operational flexibility to the Trintes
operations ensuring tank certification
compliance without disruption to
production.
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Trinity Exploration & Production plc
Strategic Report
Trintes Case Study in Well Management
During 2020, continued focus was placed on
improving production assurance of the asset.
The team was able to replace production
manifolds across two of its three operating
facilities with minimal production interruption.
This modified design has enabled detailed
nodal analysis and pointed optimisation
strategies. Ongoing investment into increasing
storage capacity continues with the construction
of a new 10,000 bbls sales tank.
1,600 bopd
1,400
1,200
1,000
800
600
400
200
01/01/17
01/01/18
01/01/19
01/01/20
01/11/20
What did we do?
What were the results?
What does this mean?
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Production increase of 20% from
1,000 bopd (high volatility) to over
1,200 bopd (low volatility).
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Production volatility reduced
dramatically: 12m trailing volatility:
31 December 2017 11.4% to 31
December 2020 at 4.6%.
More cash generative barrels
produced.
Increasing roll-out of SCADA units
and wider scale automation on
higher margin Onshore expected
to deliver meaningful uplift to top
and bottom-line.
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Better Electrical Submersible
Pump (“ESP”) run life (from 2.5 years
to >8 years).
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Stabilised power supply.
Introduced scale inhibitor
treatment.
Improve Artificial Lift Design.
Precision monitoring and
improved operational oversite.
Made our ‘big’ wells automated
and ‘tuned’ to inflow performance.
Re-activated more wells (added 16
more wells).
Used onshore (Sucker Rod Pump)
technology on low producers via
use of MPHU (Mechanical Hydraulic
Pumping Unit).
Annual Report & Financial Statements 2020
Strategic Report
33
West Coast Assets
Brighton
Inner
Guaracara
Refinery
Brighton
Outer
Pt. Ligoure
Forest Reserve
Field
Atlantic LNG
West coast production is from
the Point Ligoure-Guapo Bay-
Brighton Marine (“PGB”) and
Brighton Marine (“BM”) fields.
Average 2020 net production from
the West coast was 245 bopd which
accounted for 8% of the Group’s total
annual average production. This
represents a 30% increase in production
from 2019 average levels of 189 bopd.
The step change in production was
delivered through targeted production
and infrastructural initiatives.
On the PGB asset production increases
were realised through the modification
of the surface equipment allowing for
the optimisation of the wells operating
parameters. No RCPs or WOs (2019: 4)
were conducted in the PGB block
asset for the period.
A multifaceted approach was utilised
on the management of the BM asset
ensuring that safety, logistical efficiency
and infrastructural integrity remained
paramount. These attributes coupled
with an adequately resourced team,
modified operational strategies and the
inclusion of a second swab unit led to
21% production growth across the asset.
The work programme entailed 2 RCPs
(2019: nil) along with 1 WO (2019: 1) being
conducted on the land-based wells in
the Brighton field.
The team continues to explore multiple
opportunities to achieve optimal
production from all offshore platforms
in this asset along with expansion
of the land- based wells via RCPs,
reactivations and swabbing activities.
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Trinity Exploration & Production plc
Strategic Report
Operational Review (continued)
Reserves and Resources
A comprehensive management review of all assets has been concluded and has estimated the current 2P reserves to be 19.55
mmstb at the end of 2020, compared to the year-end 2019 reserve estimate of 20.94 mmstb. This represents a 6.6% decrease
year-on-year from 2019. The reduction in reserves of -1.39 mmstb predominantly reflects 2020 production of 1.18mmstb together
with the application of the oil price forward curve prevailing at 2 January 2021, as well as updated well numbers and decline curve
analysis on planned infills and producing wells onshore and offshore the East Coast.
WTI Forward Price Deck applied to Reserves Economic Limit Testing (“ELT”) from Britannic Trading LLC as at 2 January 2021
(USD/bbl) 2021 2022 2023 2024 2025 2026 2027 2028
Price Strip 49.30 47.13 45.75 44.90 44.51 44.45 44.80 44.80
Management considers the reserves and resources presented herein to represent the best estimate as at 31 December 2020
of the quantity of reserves that will actually be recovered from the assets. It represents production which is commercially
recoverable, either to licence/relevant permitted extension end or earlier via the application of the economic limit test. The
subsurface review has defined investment programmes and constituent drilling targets to commercialise these reserves as detailed
by asset area in the following table:
Unaudited 2020 2P Reserves
31 December 31 December
2019 Production Revisions 2020
Net Oil Production mmstb mmstb mmstb mmstb
Asset
Onshore 7.43 (0.66) (1.34) 5.44
East Coast 11.27 (0.44) 0.83 11.66
West Coast 2.24 (0.09) 0.30 2.45
Total 20.94 (1.18) (0.21) 19.55
Note (*):
–
–
–
Onshore 2P reserves decreased due to production of 0.66 mmstb during 2020 and by 1.34 mmstb largely as a result of the lower applied forward oil price strip and a
downward revision in decline curve analysis of producing wells which has been re-classified as 2C resources.
East Coast and West Coast 2P reserve changes primarily reflects increased well production performance and the positive revision of infill well decline profiles.
Across the portfolio Trinity has further risked the production profiles to reflect reservoir performance from more recent drills, RCPs and WOs which resulted in a more
cautious assessment of initial flow rates and production profile declines.
Management’s best estimate of 2C resources as at 31 December 2020 is 23.25 mmstb (2019: 20.13 mmstb). The positive movement
of 3.12 mmstb in 2C resources primarily reflects the re-categorisation of some infill development drilling locations to 2C (previously
carried as 2P in 2019) and the allocation of the ALM22 discovery (+2.17mmstb) also provided a significant uplift to 2C across the
West Coast asset as a result of revised subsurface work across the PBG asset in 2020.
Management’s Estimate of 2C Resources as at 31 December 2020
31 December 31 December
2019 Revisions 2020
Asset mmstb mmstb mmstb
Onshore 1.85 2.16 4.01
East Coast 17.28 (1.34) 15.94
West Coast 1.00 2.30 3.30
Total 20.13 3.12 23.25
Annual Report & Financial Statements 2020
Strategic Report
35
Management’s Estimate of Reserves and Resources as at 31 December 2020
2020 2019
2020 2020 2P Reserves 2P Reserves
2P 2C and 2C and 2C
Reserves Resources Resources Resources
Asset mmstb mmstb mmstb mmstb
Onshore 5.44 4.01 9.45 9.28
East Coast 11.66 15.94 27.60 28.55
West Coast 2.45 3.30 5.75 3.24
Total 19.55 23.25 42.80 41.07
Trintes (Trinity: 100% WI)
On the East Coast, Trinity has an
established production hub on the
Trintes field with four offshore platforms;
(Alpha, Bravo, Charlie & Delta) that
have an aggregate of 36 active wells.
Current 2P reserves underpin only the
producing Trintes field. However, across
the East Coast Galeota anticline
licence area, Management estimates
total gross STOIIP of over 700 mmstb
of which only 249 mmstb of STOIIP is
mapped against the Trintes Field.
Trintes has current booked East Coast
2P reserves of 11.66 mmstb which
represents an incremental recovery
factor of 4.7% with a further 1.43 mmstb
booked within current contingent
resources.
Galeota Asset Development
(Trinity: 65% WI)
The TGAL discovery area (proposed
Echo hub) lies in the Galeota Licence
and sits within a separate Fault Block
(mapped as Fault Block 6), an updip
panel located to the north east of the
Trintes Field, confirmed as being oil
bearing in six major stacked reservoir
horizons by the TGAL-1 exploration well
with an internal best estimate STOIIP of
186 mmstb. The FDP (to be submitted in
May 2021) describes the first phase of a
potential wider development across the
Galeota anticline to fully develop the
reserves potential from the large
volumes of oil in place.
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Trinity Exploration & Production plc
Strategic Report
Operational Review (continued)
Development Schematic
CHARLIE
BRAVO
DELTA
ALPHA
ECHO
TGAL-1
Indicative Depth
S.I.
2500’
5000’
Trintes SW1
Prospective:
STOIIP 30.0 mmstb
Trintes
2P: c.11.66 mmstb
2C: c.1.43 mmstb
TGAL
2C Development:
c.14.51 mmstb
TGAL NE2
Prospective:
STOIIP 68.0 mmstb
Notes (1&2): Unaudited as at YE 2020 and considered best technical estimates
Some of the key aspects of the
proposed Echo Development include:
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An unmanned platform with
minimal top-side design (Platform
Echo).
25-year design life.
Drilling via the use of a jack-up rig.
A new pipeline from the Echo
Platform to shore.
Subsea power cable from shore to
the Echo Platform.
First oil estimated to be produced
during 2023, subject to prevailing
market conditions with peak
production estimated at over
4,000 bopd.
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2C resources of c.22.32 mmstb
gross (14.51 mmstb net).
2C resources are expected to be
revised upwards following
completion of the dynamic
modelling exercise during 2021.
At FID, Trinity anticipates the net
2C resources developed by the
Echo Platform would be reclassified
as 2P reserves.
The COVID-19 pandemic and
subsequent oil price crash in April 2020
did impact the project by triggering
a slowdown in activity between May
and June 2020 while management
attempted to evaluate the overall
impact on the company’s financial
position. However, the project ramped
up activity again in the second half of
the year.
Works progressed (and are continuing)
on various pre-FEED studies to improve
the topside and other aspects of the
hardware design. In addition, work
continued on building a dynamic
reservoir model for forecasting
production performance and
cumulative estimated ultimate
recoverable (EUR) volumes. Of equal
importance, the environmental impact
assessment (“EIA”) field work was
completed in 2020; advancing the
permitting process with the EMA into
2021. The EIA is a key item on the critical
path to FID. The EIA was submitted in
February 2021 and represented a
significant milestone. The FDP is to be
submitted in May 2021.
Annual Report & Financial Statements 2020
Strategic Report
37
Galeota Asset Development key milestones achieved in 2020
February 2020
The contract for the EIA was awarded to
Coastal Dynamics Limited, signed in
February 2020
The Temple by Sea,
Waterloo, Trinidad
© Zaheer Mohammed
March 2020
First public engagement exercise was held.
Commenced ongoing onshore and offshore
environmental baseline data collection was conducted
for the dry and wet seasons.
The Project Team compared three unmanned platform
design solutions and one manned alterantive before
recommending a modular unmanned platform design
with a Tier One contractor.
April 2020
Decision Support Paper issued
The Team selected a turnkey contracting strategy
bundling the offshore facilities with the same contractor.
The platform provider would also supply a flexible export
pipeline and an umbilical to provide power,
communications and fluids from the onshore Galeota
tank farm facility. It was a natural conclusion from the
platform design selection work.
A Memorandum of Understanding had been signed with
the contractor. An integrated team of Trinity and
contractor personnel worked on fine-tuning the platform
design to ensure it met all of Trinity’s requirements. The
platform is an unmanned design with power and control
from shore.
September 2020
Execution of the geophysical pipeline
route survey.
November 2020
The contract for an onshore facilities concept
study was awarded to Worley Parsons.
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Trinity Exploration & Production plc
Strategic Report
Sustainability Review
“As a responsible Operator, we
continuously promote a safety
culture in which HSSE underpins
all activities being undertaken.”
Nirmala Maharaj
Chief of Staff & General Counsel
Trinity’s ultimate success is
reliant on working to promote the
activities of the Company for
the benefit of all stakeholders
(including shareholders,
employees, local communities,
suppliers, customers and the
environment).
As a ratified signatory to the Paris
Agreement, T&T has committed to its
Nationally Determined Contribution
(“NDC”) of delivering, by 2030, an
overall 15% reduction in cumulative
emissions from its three main emitting
sectors (power generation, transport
and industry). Trinity’s total GHG
emissions, as per the baseline
assessment conducted in 2017, reported
0.02 million metric tonnes (“mt”) per
year. Trinity has also developed a
Waste Inventory Template using our
FZ-2 Field as the pilot location.
2017 – 2020 Pollution Parameters:
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Significant improvement in our
Total Petroleum Hydrocarbons
(“TPH”) and Total Oil and Grease
(“TOG”) metrics.
Engineering and Administrative
Controls.
Effective at low cost (Buffer Tanks
installation).
To date Trinity has demonstrated
conformity with the EMA & MEEI
guidelines and Trinity will continue to
implement low cost initiatives and
conduct reviews of all field instructions
for better management of effluent
discharge.
Environment
Complementing Trinity's commitment to
delivering its production targets safely,
the Board is also pursuing the Group's
environmental responsibilities to ensure
that its carbon footprint is reduced.
In order to deliver on Trinity’s aims to
be at the forefront of T&T and the wider
Caribbean region’s energy transition
ambitions, during 2020 we effected
measures both to more cleanly and
efficiently manage our conventional
asset base and also to develop the
use of alternative energy sources.
Reducing Trinity’s GHG Contributions
Trinity has been establishing an
abatement framework during 2020 to
ensure that it becomes a more efficient
and cleaner business. Specific work
streams to be executed include the
development of waste inventories and
established targets to reduce, reuse
and recycle waste streams across the
Group; progression of the Green House
Gases (“GHG”) Emissions Study to
develop the Group’s understanding
of its total emissions and subsequent
targets and strategy to reduce GHG;
the identification of potential impact
categories which include Workplace,
Industrial, Community and
Environmental and the beneficial
impact of the increased usage of
technology and enhanced overall
operating efficiencies.
Annual Report & Financial Statements 2020
Strategic Report
39
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Energy Transition
During 2020, Trinity also advanced
plans to pursue more sustainable
environmental/lower carbon alternative
energy sources for power generation, i.e.
transition fuels and renewable power.
Trinidad and Tobago’s, like much of the
wider Caribbean region’s, electricity
generation is fired by fuel, with c.8% (c.
237 MMcfd/c.39,500 boepd) of its
substantial natural gas production
being used for electricity generation.
In addition to this, large amounts of
natural gas is flared and vented across
Trinidad’s brownfield operations (see our
Marketplace on pages 10 to 13 for more
details).
One of the aims of Trinity’s MoU with
the NGC is to explore micro LNG
opportunities in T&T and the wider
Caribbean region. By redirecting smaller
gas supplies (including flared gas) to
micro LNG facilities it is possible to
supply compressed natural gas (“CNG”)
and/or LNG for use in more heavy duty
road and marine transportation modes,
thereby aiding decarbonisation and
reducing pollution levels.
The MoU with the NGC and the more
recently signed MoU with the UWI are
further aimed at exploring renewable
energy solutions both for existing
operations and to identify new projects.
No Man’s Land, Tobago
© Zaheer Mohammed
40
Trinity Exploration & Production plc
Strategic Report
Sustainability Review (continued)
Social
Trinity’s workforce stood at 241
(2019: 210) at 31 December 2020
with 78% (189) male and 22% (52)
female employees. Our core
employees are nationals of T&T,
UK and France with the majority
(99%) based in T&T at our central
operations. Our Executive
Management is 50% based in
T&T with 33% being female.
Health, Safety, Security & Environment
(“HSSE”)
2020 proved to be quite a challenging
year due to a number of external
factors, namely, COVID-19 and volatile
fluctuations in the oil price. By placing
HSSE at the forefront of operations,
the Group was able to successfully
maintain its HSSE culture to focus on
the welfare of its team and contractors
whilst delivering its operational plan
successfully. Our emphasis on
continuous improvement through all
aspects of the HSSE culture has been
strengthened and sustained and the
ability to adapt has been actively
demonstrated in our management
system as per its respective
deliverables.
Trinity’s response to the Pandemic
was acknowledged by The American
Chamber of Commerce of Trinidad and
Tobago (“AMCHAM T&T”) by receiving
the award in Business Continuity and
Surviving the Pandemic 2020
(Honourable mention) for small/medium
enterprises in the Energy and
Manufacturing Sector.
The Group’s HSSE performance updates
have been made fully visible and
communicated every month to the
Board and continues to be the first
aspect of business discussions.
opportunities for local people to share
in the benefits of our activities.
Trinity undertakes regular formal and
informal engagement processes with
our local communities to ensure
concerns or questions are heard and
addressed whilst ensuring information
about our activities is readily available.
Trinity continues to maintain its HSSE
management system through our Safe
to Work (“STOW”) Trinidad & Tobago
certification. At our last audit in August
2020 we were recertified for a further
two years with a rating of 99% (a 3%
increase from our last audit in 2017). This
certification provides validation that our
accredited HSSE management system
is developed in such a form to allow us
to have the ability to respond, control
and analyse safety events and
performance data as well as allowing
us to be proactive in mitigating and
managing risk. Notwithstanding our
2020 achievements, in 2021 Trinity
intends to continue its focus on
sustaining and further improving the
HSSE management system to ensure the
delivery of production targets safely and
efficiently with the goal of becoming ISO
45001: 2018 compliant by Q2 2022.
Our Community
Trinity is a local operator, so engaging
with the local community to understand
the impact of Trinity’s operations is
integral to our operating approach.
Trinity strives to establish and maintain
strong community relations and trust
by undertaking activities in a manner
to minimise risk whilst maximising the
As an organisation we also inspire our
workforce and suppliers to engage with
local communities and charities. During
2020 food parcels were delivered to
local communities, school supplies were
provided to 75 students in the Galeota
community and sponsorship of a Local
School Rewards & Recognition
Programme was undertaken.
Trinity also engaged with and updated
its Contractors, Suppliers, Government
Ministries and the national oil company,
Heritage, on a regular basis throughout
2020.
Governance
Trinity’s approach to governance is
grounded in transparency, using our
values and principles to guide ethical
decision making. We recognise that
strong governance is a key element in
building and maintaining trust with
stakeholders and act in accordance
with the QCA Corporate Governance
Code. The QCA code is a practical,
outcome-orientated approach to
corporate governance, see pages 63
to 67 for further details.
Gender Breakdown
HSSE KPIs
Executive Management
4
Business Support
8
29
Operational
177
2
21
0%
10%
20%
30%
40%
50%
60%
70%
80%
90% 100%
l Male
l Female
Notes:
1.
2.
3.
Executive Management- Includes both Executive Directors - (refer to pages
68 to 69 for full list of directors).
Business Support- Employees providing administrative support to day to
day operations.
Operational- Employees directly linked to operations and producing assets.
2020
2019
Change %
Leading Indicators
Start Cards1
Training Hours2
Man Hours3
10,644
3,388
11,154
3,364
878,025
844,074
Lagging Indicators
Reportable Environmental
Incidents (REI)4
Lost Time Accidents (LTA)5
Refer to page 41 for Notes to HSSE KPI's.
6
1
13
3
-5
1
4
54
67
Annual Report & Financial Statements 2020
Strategic Report
41
Notes to HSSE KPIs
e
Start Card Programme
r
Training
Management’s commitment to behaviour based
HSSE programmes - of which the See, Think, Act,
Reinforce and Track (“START”) Card programme is
an example - has positively impacted our HSSE
culture. During 2020, we launched an online
platform for our START Card System and while we
note a minimal decrease in the number of cards,
we have seen significant improvement in the
participation of all of our employees. Our continued
drive to report both safe and unsafe acts within
our operations so as to raise awareness.
Due to COVID-19, our in-person certification training
sessions were suspended and as such, we reverted
to online internal training. Given the limitations, we
were still able to achieve 0.7% increase from 2019
and maintain the competence of the HSSE critical
training for our employees.
u
Reportable
Environmental Incidents
i
Loss Time
Accidents
Over 2020, REI’s reduced by 53.8% due to our
ongoing monitoring and measuring plans. It is
important to note that the reporting guidelines
were reduced to 1 Gallon and as a result would
have contributed to the overall 2020 numbers. We
noted that both Contractor activity and integrity
issues accounted for the majority of the REIs
incurred. During Q4 of 2020, we initiated a Spill
Potential Analysis of all Routine, Non-Routine
Operations, Existing and Idle Facilities to establish
a baseline of opportunities for spills. We have
finalised a plan based on evaluation and auditing
to ensure that all gaps identified during this
Analysis are closed during 2021.
Our LTA occurrence during 2020 was due to an
employee’s complacency with his surroundings
resulting in a twisted ankle. Given our robust
implementation of our planned strategies over
2019 into 2020 we were able to significantly curb
incidents resulting in injuries to our employees.
We do recognise that the behaviour of our
employees impacts us the most and as such, we
are continuing to place emphasis on people and
process to ensure that our operations are executed
in the safest manner possible. Our Management
and HSSE teams are working towards further
developing and sustaining employee awareness
through greater HSSE communication and
Business ethics
Trinity is committed to upholding the
highest possible ethical standards.
All our activities are conducted in
accordance with our core values:
l
l
l
Behaviour: Demonstrate
professionalism, respect and
fairness; conducting business in
a socially responsible and ethical
manner.
Rigour: Initiate thought before
action by promoting sustainability
and proactively protecting the
environment.
Purpose: Engaging, learning from,
respecting and supporting the
communities and cultures within
which we operate.
Anti-bribery
Bribery is strictly prohibited by Trinity.
It is the policy of the Group to conduct
business in an honest and ethical
manner. Trinity takes a zero tolerance
approach to bribery and corruption and
is committed to acting professionally,
fairly and with integrity in all business
dealings and relationships wherever we
operate. Trinity seeks to uphold all laws
relevant to countering bribery and
corruption in all the jurisdictions in which
we operate. However, as best practice,
we remain principally aligned to the laws
of the UK namely, the Bribery Act 2010 in
respect of our conduct both at home
and abroad.
Whistleblowing
Trinity has a whistleblowing policy and
procedure in place that provides all
Trinity employees the opportunity and
means to independently and
anonymously report conduct which
relates to suspected wrongdoing or
dangers at work. This may include:
criminal activity, bribery, failure to
comply with legal obligations, financial
fraud or mismanagement, negligence,
breach of internal policies and
procedures including Anti-Corruption
and Bribery Policies, miscarriages of
justice, actions which endanger the
health & safety of staff or the public,
actions which cause damage to the
environment, conduct likely to damage
Trinity’s reputation, unauthorised
disclosure of confidential information
and actions which are intended to
deliberately conceal any of these issues.
Any whistleblowing report can be
made orally or in writing to an
immediate supervisor or to the
Chairman of the Audit Committee.
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Man Hours
Trinity recorded 878,025-man hours in 2020 (2019:
844, 074-man hours), a 4% increase year on year,
despite the restrictions presented due to COVID-19.
Our protocols were aggressively evaluated and
adjusted to ensure continued safe operations
throughout all assets. Significant improvements in
our HSSE reporting and communication were noted
due to our continued emphasis on a strong HSSE
culture, facilitated by an increase in Management
visits to all assets, increased feedback on lessons
learned and multiple proactive initiatives
implemented across all operations.
education methods, enforcing START Card
participation and disseminating closure rates of
the said Cards Management continues to conduct
regular site visits across all fields, increase training
sessions, cycle emergency drills readiness
supported by regulatory compliance, reporting and
auditing to sustain and improve our HSSE Culture.
Political engagement
Trinity maintains a positive working
relationship with government
stakeholders at national, regional,
district and local level is through regular
engagement. This ensures government
stakeholders are aware of, and can
provide input to, our present and future
activities. However, Trinity does not
make any form of political donation to
any individual, party or organisation.
Stakeholder engagement
We update and where appropriate seek
feedback, from all key stakeholders via
regular meetings and communications
throughout the year. Specifically, in
regards to shareholders, both retail
investor events and institutional investor
meetings are held during the year to
provide updates and receive feedback.
We value the feedback we receive from
our stakeholders and we take every
opportunity to ensure that where
possible their wishes are duly
considered.
42
Trinity Exploration & Production plc
Strategic Report
Financial Review
“Our performance in 2020 was
encouraging, and the outlook for our
business is positive. We have made
good progress in strengthening our
balance sheet and, while that focus
will continue, we are also now able to
invest in opportunities that will drive
long-term growth and enhance
future returns.”
Edouard Brain
Chief Financial Officer (CFO)
Trinity assesses the Group’s performance using both
International Financial Reporting Standards (“IFRS”)
and Alternative Performance Measures Guidelines
(“APM”) governed by the European Securities and
Markets Authority (“ESMA”). Management believes
that analysis of both these performance measures
promote better guidance to Management for both
operational and strategic decision making purposes.
KPI’S
The Group was profitable at an operating level in 2020, despite
the material reduction in the realised oil price, with a 46%
increase in the year-end cash balance to USD 20.2 million (2019:
USD 13.8 million) and a 25% increase in the net cash plus working
capital surplus of USD 21.7 million (2019: USD 17.3 million).
A summary of the year-on-year operational and financial
highlights are set out below:
FY 2020 FY 2019 Change %
Average realised oil price1 USD/bbl 37.7 58.1 35
Average net production bopd 3,226 3,007 7
Annual production2 mmbbls 1.2 1.1 9
Revenues USD million 44.1 63.9 31
Cash balance USD million 20.2 13.8 46
IFRS Results
Operating Profit before SPT & PT USD million 3.0 10.3 71
Operating Profit before Exceptional Items USD million 2.6 2.4 9
Operating Profit/(Loss) USD million 1.4 (12.8) 111
Total Comprehensive Loss For The Year USD million (2.8) (9.6) 70
Loss Per Share - Diluted USD cents (0.7) (2.3) 70
APM Results
Adjusted EBITDA3 USD million 12.3 21.8 43
Adjusted EBITDA4 USD/bbl 11.4 19.8 42
Adjusted EBITDA margin5 % 28 34 18
Adjusted EBITDA Per Share - Diluted6 US cents 3.0 5.3 43
Adjusted EBITDA after SPT & PT7 USD million 12.0 13.9 14
Adjusted EBITDA after SPT & PT8 USD/bbl 11.1 12.6 12
Adjusted EBITDA after SPT & PT Per Share - Diluted9 US cents 2.9 3.3 14
Consolidated operating break-even10 USD/bbl 20.1 26.4 24
Net cash plus working capital surplus11 USD million 21.7 17.3 25
Notes:
1.
2.
3.
4.
5.
6.
7.
Realised price: Actual price received for crude oil sales per barrel (“bbl”).
Annual production (mmbbls) – Production sold in a given year.
Adjusted EBITDA (USD MM): Operating Profit before Taxes for the period,
adjusted for non-cash DD&A, SOE, ILFA and FX gain/(loss).
Adjusted EBITDA (USD/bbl): Adjusted EBITDA/Annual production.
Adjusted EBITDA margin (%): Adjusted EBITDA/Revenues.
Adjusted EBITDA per Share – Diluted: Adjusted EBITDA / Weighted average
ordinary shares outstanding-diluted.
Adjusted EBITDA after SPT & PT (USD MM): Adjusted EBITDA after SPT & PT.
8.
9.
Adjusted EBITDA after SPT & PT (USD/bbl): Adjusted EBITDA after SPT & PT /
Annual production.
Adjusted EBITDA after SPT & PT per Share –– Diluted: Adjusted EBITDA after
SPT & PT / Weighted average ordinary shares outstanding-diluted.
10. Consolidated operating break-even: The realised price where Adjusted EBITDA
11.
for the entire Group is equal to zero.
Net cash plus working capital surplus: Current Assets less Current Liabilities
(other than Provisions for other liabilities).
Note (*): See Note 24 to Consolidated Financial Statements – Adjusted EBITDA for
further details on pages 131 to 132.
Annual Report & Financial Statements 2020
Strategic Report
43
Adjusted EBITDA Calculation
Adjusted EBITDA is an APM used by the Group to measure business performance. The Group presents Adjusted EBITDA metrics as
they are used by Management to assess the Group's underlying operational and financial performance.
2020 2019
USD MM USD MM Change %
Operating Profit before SPT & PT (IFRS Result) 3.0 10.3 71
DD&A 8.2 9.8 16
SOE 1.0 1.0 7
ILFA 0.3 0.6 59
FX loss/(gain) (0.0) 0.1 109
Adjusted EBITDA (APM Result) 12.3 21.8 43
2020 Trading Summary
A five year historical summary of realised price, production, operating break-even, Production Costs (“Opex”) and General &
Administrative (“G&A”) expenditure metrics is set out below.
Details 20164 20174 20184 2019 2020
Realised Price USD/bbl 39.4 48.6 59.8 58.1 37.7
Production
Onshore bopd 1,343 1,347 1,563 1,616 1,793
West Coast bopd 190 212 198 185 245
East Coast bopd 1,009 961 1,110 1,208 1,188
Consolidated bopd 2,542 2,519 2,871 3,007 3,226
Operating Break-Even1
20164 20174 20184 2019 2020
Onshore USD/bbl 17.4 16.6 16.1 16.4 16.5
West Coast USD/bbl 37.7 26.6 26.8 32.4 24.6
East Coast USD/bbl 26.3 24.9 25.9 21.9 21.0
Consolidated2 USD/bbl 29.2 28.4 29.0 26.4 20.1
Metrics
Opex/bbl - Onshore USD/bbl 11.8 11.1 11.7 12.1 12.2
Opex/bbl - West Coast USD/bbl 31.6 22.1 22.1 26.9 20.3
Opex/bbl - East Coast USD/bbl 20.1 18.9 20.1 17.1 16.5
G&A/bbl – Consolidated3 USD/bbl 4.4 4.4 5.0 5.1 4.3
Notes
1.
2.
3.
Operating break-even: The realised price where Adjusted EBITDA for the respective asset or the entire Group (Consolidated) is equal to zero.
2020 consolidated break-even benefits from derivative income of USD 1.6 million (2019: expense of USD 0.1 million). Consolidated operating break-even: Includes G&A
but excludes SOE and FX gain/loss.
G&A/bbl – Consolidated: Excludes SOE and FX gain/loss.
4. Metrics for 2018 and prior are pre-IFRS 16 adoption effective 1 January 2019 which impacted the Operating Break-Even Levels and Opex/bbl & G&A/bbl Metrics for
historical comparative purposes. Full details of the impact were set out in the 2019 annual report and accounts.
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44
Trinity Exploration & Production plc
Strategic Report
Financial Review (continued)
Production increased by 7% to 3,226
bopd, the second consecutive year
that production averaged over 3,000
bopd and the third consecutive year
of production increases. This strong
performance was achieved despite
COVID-19, depressed WTI oil prices and
no new wells being drilled during 2020,
and demonstrates the benefits of
innovation and the continued
performance of the new development
wells drilled during 2018/19.
Of particular note from a financial
standpoint is that operating break-
evens were reduced by an aggregate
24% to USD 20.1/bbl (2019: USD
26.4/bbl). The consolidated operating
break-even includes the Group’s cash
G&A costs and therefore captures the
corporate costs associated with
supporting the asset base. At the
corporate level, the ability to yield such
a robust operating break-even level
reflects higher production volumes
and lower combined expenses as
detailed below:
l
l
Opex increased by 1% to USD 16.5
million (2019: 16.4 million) with a 7%
decrease on an Opex/bbl basis to
USD 13.9/bbl (2019: USD 15.0/bbl).
This was largely a function of a
reduced costs due to Strategic
Business Partnering, reduced
WO programme, production
optimisation and better well
uptimes, re-negotiated terms
of the supply/ personnel vessels
and port rental.
G&A costs (which excludes non-
cash SOE and FX gain/loss)
decreased by 9% to USD 5.1 million
(2019: USD 5.6 million) with a 13%
decrease in G&A/bbl to USD
4.5/bbl (2019: USD 5.1/bbl). This
resulted from decreased staff
costs, reduced levies and lower
corporate expenses.
Review of Financial Statements
Trinity and its subsidiaries (“the Group”)
consolidated financial information has
been prepared on a going concern
basis, in accordance with International
Financial Reporting Standards (“IFRS”)
Interpretations Committee (“IFRS IC”)
interpretations in conformity with those
parts of the Companies Act (“CA”) 2006
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 Group’s
accounting policies and details of
accounting judgements and critical
accounting estimates are disclosed
within Note 1 of the Financial
Statements on pages 100 to 108. The
Group has adopted additional
accounting policies in the year ended
31 December 2020 as set out in Note 1
of the Financial Statements on pages
100 to 108.
Throughout this report reference is
made to adjusted results and measures.
The Board believe that the selected
adjusted measures allow Management
and other stakeholders to better
compare the normalised performance
of the Group between the current and
prior year, without the effects of one-off
or non-operational items, and better
reflects the underlying cash earnings
achieved in the year. In exercising this
judgment, the Board have taken
appropriate regard of International
Accounting Standards (“IAS”) 1
“Presentation of financial statements”.
In particular, the APM measure of
Adjusted EBITDA excludes the impact
of Depreciation, Depletion &
Amortisation (“DD&A”), as well as the
non-cash impact of Share Option
Expense (“SOE”), Impairment losses
on financial assets (“ILFA”) and FX
gain/loss and these are summarised on
the face of the Consolidated Income
Statement as well as being described
in Note 1 to the financial statements.
Summary of Results for the Year
Revenue declined due to the
significantly lower average realised oil
price in 2020: The 35% decrease in
average oil price realisations to USD
37.7/bbl (2019: USD 58.1/bbl), partially
mitigated by a 7% increase in
production to 3,226 bopd (2019: 3,007
bopd), resulted in a 31% decrease in
revenues to USD 44.1 million (2019: USD
63.9 million).
Focus on controlling costs and
preserving strong operating margins:
The Group maintained its focus on
controlling costs and preserving strong
operating margins in the lower oil price
environment. The Adjusted EBITDA
margin declined to 28% (2019: 34%), with
the 24% lower consolidated operating
break-even price of USD 20.1/bbl (2019:
USD 26.4/bbl) demonstrating the
Group’s ability to adapt to adverse
conditions by enacting cost reductions.
The 43% reduction in Adjusted EBITDA
to USD 12.3 million (2019: USD 21.8
million) is a direct result of the lower
realised oil price, which was only
partially mitigated by higher production
levels, expense reductions and the
Group’s derivative income of USD 1.6
million.
Annual Report & Financial Statements 2020
Strategic Report
45
Successful Capex work programme:
USD 5.3 million (2019: USD 12.7 million)
incurred in predominantly infrastructure,
production and exploration and
evaluation expenditure. 2020 saw the
Group spend on Infrastructure Capex
across the assets to maintain asset
integrity and to support the production
initiatives, complete 18 Onshore RCP’s
and exploration and evaluation assets
comprising of internal time writing and
third-party costs for the Galeota asset
development project. Capex included:
l
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USD 0.3 million New Wells (drilling
planning, no New Wells drilled).
Additions (USD 1.2 million) inclusive of
accruals on page 121 .
USD 2.5 million Infrastructure
Capex.
USD 0.8 million 18 RCP’s.
USD 0.6 million Subsurface
time-writing costs.
USD 1.1 million Exploration and
Evaluation (“E&E”) assets.
Refer to Notes to Financial Statements:
Note 11 Property, Plant and Equipment -
Additions (USD 4.1 million) on page 119
and Note 13 - Intangible Assets -
Increased financial strength: The
Group’s cash balances at year end
increased by 46% to USD 20.2 million
(2019: USD 13.8 million). The higher cash
balance is as a result of a strong
operating performance, no SPT being
payable in 2020 and drawdown of
USD 2.7 million under the Group’s CIBC
facility. In aggregate, the net cash plus
working capital surplus stood at USD
21.7 million, a 25% increase (2019: USD
17.3 million).
Statement of Comprehensive Income
Consolidated Statement of Comprehensive Income
50
40
30
20
10
0
-5
44.1
(31.7)
12.3
(9.4)
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Revenues
Crude oil sales revenues of USD 44.1
million (2019: USD 63.9 million).
Operating expenses
Operating expenses decreased by
23% in 2020 to USD (41.2) million (2019:
USD (53.6) million) and comprised:
Cash Expenses: USD (31.7) million
(2019: (42.1) million):
l
Royalties of USD (11.7) million (2019:
USD (20.0) million) decreased
due to a combination of lower
overriding royalties (ORR rates fell
4.5% as a percentage of sales) and
3.0
(0.4)
2.6
1.2
0.0
1.4
0.1
(1.4)
(2.9)
(2.8)
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a decrease in production royalties
(as income was affected by the
lower average realised oil price).
Opex of USD (16.5) million (2019:
USD (16.4) million) was a function
of labour costs for new hires in
Q4 2019 impacting the full year,
salary adjustments in 2020
together with increased WO costs
(as 1 ESP and 2 MPHU type WOs
were conducted incurring higher
costs).
G&A expenses of USD (5.1) million
(2019: USD (5.6) million) have
decreased due to lower travel,
business development,
professional, ICT and other
expenses.
Derivative Income of USD 1.6 million
(2019: USD (0.1) million) includes
the net impact of derivative
instruments income of USD 2.4
million, partially offset by derivative
purchase costs of USD (1.0) million
and USD 0.02 fair value derivative
financial adjustments primarily to
protect future periods.
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46
Trinity Exploration & Production plc
Strategic Report
Financial Review (continued)
Non-Cash Expenses: USD (9.4) million
(2019: USD (11.5) million):
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DD&A of USD (8.2) million
(2019: USD (9.8) million).
SOE of USD (1.0) million
(2019: USD (1.0) million).
ILFA: USD (0.3) million
(2019: USD (0.6) million).
FX gain of USD 0.0 million
(2019: USD (0.1) million loss).
SPT & PT
SPT & PT were USD (0.4) million (2019:
USD (7.9) million) and comprised:
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SPT of USD 0.2 million (2019: USD
(7.4) million) comprising a credit
related to an ITC claim filed in
2020. There were no SPT liabilities
incurred for 2020 as the average
oil price realised was below USD
50.01 per bbl (SPT threshold) for
each of the four quarters.
PT charge of USD (0.5) million (2019:
USD (0.5) million). There is still no
official and formal indication on
the PT valuation method as it
relates to oil and gas entities.
The Group’s reported operating profit
before impairment and exceptional
items was USD 2.6 million (2019: USD 2.4
million). Adjusting for non-cash
expenses, the Group’s Adjusted EBITDA
after SPT & PT was USD 12.0 million
(2019: USD 13.9 million) (further details
below).
Impairments
Income Taxation
Impairments were USD (1.2) million
(2019: USD (15.2) million) related to
the Impairment of property, plant,
and equipment.
Income Taxation Expense for 2020 of
USD (2.9) million (2019: USD 4.4 million
Income Taxation credit), comprise the
following below.
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Reduction in Deferred Tax Assets
(“DTA”) due to the de-recognition
of tax losses of USD (3.4) million
charge (2019: Increase in DTA of
USD 3.4 million).
Decrease in Deferred Tax Liabilities
(“DTL”) USD 1.6 million due to
accelerated accounting
impairments/depreciation (2019:
USD 1.4 million decrease).
Unemployment Levy (“UL”) USD (0.3)
million (2019: USD (0.4) million).
Petroleum Profit Tax (“PPT”) charge
USD (0.8) million (2019: Nil).
See Note 8 to Consolidated Financial
Statements – Income Taxation for
further details on page 116 to 117.
The Group’s comprehensive post-tax
loss for the period was therefore USD
(2.8) million (2019: USD (9.6) million loss).
See Note 3(d) to Consolidated Financial
Statements - Impairment of Property,
Plant and Equipment for further details
on pages 113 to 114.
Exceptional items
Exceptional items were USD 0.04 million
(2019: nil) related to the reversal of the
Impairment of property, plant and
equipment and fees relating to
corporate restructuring advice.
See Note 6 to Consolidated Financial
Statements - Exceptional items for
further details on page 116.
Finance Income
Finance income is solely related to bank
interest income received on investments
with financial institutions (short term
investments) of USD 0.1 million (2019: 0.1
million).
Finance Costs
Finance costs amounted to USD (1.4)
million (2019: USD (1.4) million) and
comprised the:
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Unwinding of the decommissioning
liability USD (1.2) million (2019: USD
(1.2) million).
Interest on Leases USD (0.2) million
(2019: (0.1) million).
Bank overdraft USD (0.1) million
(2019: nil).
See Note 7 to Consolidated Financial
Statements – Finance Costs for further
details on page 116.
Annual Report & Financial Statements 2020
Strategic Report
47
Adjusted EBITDA
Adjusted EBITDA is a non-IFRS measure
used by the Group to measure business
performance. It is calculated as
Operating Profit before SPT & PT for the
period, adjusted for non-cash DD&A,
SOE, ILFA and FX.
The Group presents Adjusted EBITDA at
USD 12.3 million and Adjusted EBITDA
after SPT & PT at USD 12.0 million as it
is used by Management to assess
the Group’s underlying operational and
financial efficiencies and judged to be
a better measure of underlying
performance.
Adjusted EBITDA
50
40
30
20
10
0
44.1
(41.1)
9.4
12.3
(0.4)
12.0
3.0
Revenue
Operating
Expenses
Operating
Profit Before
SPT & PT
Add: Non-Cash
Expenses (DD&A,
SOE, ILFA & FX)
Adjusted
EBITDA
SPT & Other
Taxes
Adjusted
EBITDA after
SPT & PT
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48
Trinity Exploration & Production plc
Strategic Report
Financial Review (continued)
Statement of Cash Flows
Consolidated Statement of Cash Flows
30
25
20
15
10
5
0
10.3
(6.0)
2.2
20.2
13.8
12.0
Opening Cash
Balance
Operating
Activities
Investing
Activities
Financing
Activities
Closing Cash
Balance
Cash inflow/ (outflow) from operating
activities
Operating Cash Flow (“OCF”) was USD
10.3 million (2019: USD 15.6 million): Note:
year-on-year comparative based on
Restatement to Cash Flow Statement
as per page 47 in the Financial Review.
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Operating cash flow (pre-working
capital movements and income
tax) of USD 12.1 million (2019: USD
13.1 million) reflected a reported
Operating Profit before income tax
of USD 0.1 million (2019: USD (14.1)
million.
Changes in working capital of USD
0.8 million outflow (2019: USD 2.8
million inflow), primarily as a
result of the decrease in trade
receivables compared to the
2019 year end.
Current income taxation paid USD
(1.0) million outflow (2019: USD (0.3)
million outflow).
Cash (outflow) from investing activities
Cash outflow from investing activities
was USD (6.0) million (2019: USD (11.5)
million):
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Expenditure on property, plant and
equipment for the year was USD
(5.0) million (2019: USD (11.0) million)
which mainly included 18 RCPs and
infrastructure upgrades.
Expenditure on exploration and
evaluation assets USD (1.1) million
(2019: USD (0.4) million) as the
Group continued to invest in
Galeota and other growth
initiatives.
Cash (outflow)/inflow from financing
activities
Cash inflow from financing activities
was USD 2.2 million (2019: USD (0.6)
million outflow):
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Drawdown of CIBC working capital
Facility of USD 2.7 million (2019: nil*).
Finance cost of USD (0.01) million
(2019: nil*).
Principal paid on lease liability
USD (0.4) million (2019: (0.4) million)
Interest paid on lease liability
USD (0.1) million (2019: (0.2) million)
Finance Cost of USD (0.01) million
(2019: nil).
Note (*): Amount restated as per note
33 in Financials.
Annual Report & Financial Statements 2020
Strategic Report
49
Net Cash Plus Working Capital Surplus
FY 2020 FY 2019 FY 2018
USD MM USD MM USD MM
All figures in USD million Audited Audited Audited
A: Current Assets
Cash and cash equivalents 20.2 13.8 10.2
Trade and other receivables 7.2 9.3 13.3
Inventories 5.3 5.2 3.7
Derivative Financial Instrument 0.3 0.1 -
Total Current Assets 33.0 28.4 27.2
B: Liabilities
Trade and other payables 7.8 10.4 9.1
Bank overdraft 2.7 — —
Lease liability 0.6 0.6 —
Taxation payable 0.2 0.1 —
Derivative Financial Instrument — — —
Total Current Liabilities 11.3 11.1 9.1
(A-B): Cash plus working capital surplus 21.7 17.3 18.1
Note: Current Liabilities excludes Provision for other liabilities.
Events since Year End
1.
Hedging
The Company implemented additional crude derivatives over the Group’s monthly production in 2021 and H1 2022.
The derivative protection currently in effect for 2021-2022 is as follows:
Type of Derivatives Index
Sell
Put
Buy
Put
Sell
Call
Effective Expiry Execution
Production Date Date Date
Premium
USD MM
USD/bbl
USD/bbl USD/bbl
Monthly
Barrels
Put Spread WTI
Put Spread WTI
20.0
20.0
Put Spread Dated Brent
32.5
2-Way Cost Collar ICE Brent
3-Way Cost Collar ICE Brent
50.0
30.0
30.0
42.5
42.5
60.0
-
-
-
15,000 01-Jan-21 31-Dec-21 21-Jul-20
15,000 01-Jan-21 31-Dec-21 17-Nov-20
15,000 01-Jan-21 30-Jun-21 25-Nov-20
64.4
66.9
15,000 01-Jul-21 31-Dec-21 5-Feb-21
10,000 01-Jan-22 30-Jun-22 4-Mar-21
0.36
0.25
0.19
-
-
2. CIBC Full Overdraft Credit Facility Drawdown
Trinity fully drew down its USD 2.7 million overdraft credit facility with CIBC effective 2 April 2020 as part of its strategy of
maximising available cash during the COVID-19 pandemic. This facility was increased on 5 January 2021 by USD 2.3 million
to a total of USD 5.0 million. This additional portion remains fully undrawn to date. The facility is a revolving overdraft credit
available to Trinity which is repayable upon demand to CIBC. Interest is payable monthly at an interest rate equivalent to
the US Prime Rate (currently 9%) minus 4.05% per annum (current effective rate 4.95%) with a floor rate of 3.95%.
3.
Fiscal Reforms
The revised threshold for SPT for small onshore producers was implemented via The Finance Act No. 30 of 2020 which came
into effect on 1 January 2021. As a result, the threshold at which SPT becomes due for individual onshore producers producing
less than 2,000 bopd has now increased from average realisations of USD 50.0/bbl to USD 75.0/bbl (in any given quarter) for
the financial years 2021 and 2022.
4. Acquisition of onshore block PS-4
On 4 May 2021, Trinity announced that it had entered into a sale and purchase agreement with Moonsie Oil Company Limited
to acquire an operated 100% interest in the PS-4 onshore block for a headline cash consideration of USD 3.5 million, to be
funded from the Group’s existing cash resources. The Group anticipates that the transaction will complete towards the end
of Q2 2021.
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50
Trinity Exploration & Production plc
Strategic Report
Risk Management
and Internal Controls
Our Board is committed to
effective risk management and
is supported by a pro-active
organisational culture and a
framework of effective internal
controls.
Risk Profile Matrix
The risk summary and explanatory
table below represents our current
assessment of the potential impact
by area and change from 2019 for each
of the prinicipal risks.
Aside from the generic risks faced by
all businesses, as a participant in the
upstream oil and gas industry, the
Group encounters and has to manage
several business specific risks and
uncertainties. Such risks and
uncertainties include those listed below.
These risks should not however be taken
as a complete and comprehensive
statement of all potential risks and
uncertainties that the Group faces.
Additional risks and uncertainties that
are not presently known to the Board,
or which they currently deem
immaterial, may also have an adverse
effect on the Group’s operating results,
financial condition and prospects.
Change Strategic
Risk from Objective
Profile What is the risk? KPI's affected 2019 impacted Responsibility Page
A HSSE LTA e Chief of Staff & 51
REI General Counsel
B Climate Change (Emissions) Production ru Board 52-53
& Energy Transmission Impact Liquidity
C Production and Reserves Risk Production u Executive Directors 53
Liquidity
D Development Risk Production t MD & COO 54
E Counterparty/Contractor Production e MD 54
Exposure Cash from Operations
Liquidity
F Commercial Risk - Oil Price Risk Production ru Board 54
Cash from Operations
Liquidity
G Customer Concentration Risk Cash from Operations t CFO 55
Liquidity
H Competition Risk and Liquidity rt EMT 55
Cost Inflation Operating Cash Flow
I Regulatory/Fiscal Risk Reputational e EMT 55
J Major breach of business, ethical, Cash from Operations eru EMT 56
or compliance standards Liquidity
K Cash Flow & Financing Risk Cash from Operations tu CFO 56
Liquidity
L Operational Risks Production ert COO 57
e Retain Integrity.
r Efficiency & Sustainability.
t Monetise our Resources.
u Scale & Relevance.
Refer to Our Strategic Objectives & Priorities on pages 14-15.
Annual Report & Financial Statements 2020
Strategic Report
51
Risk Details
Area
A
HSSE
COVID-19
Pandemic
Impact
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Potential Impact
Mitigation
Management of HSSE risk exposure is key and of
paramount importance to Management. As a
participant in the Onshore and Offshore development
and production of oil, the Group is exposed to material
risk in the event of a major safety incident, operational
accident, weather related/natural disasters,
pandemics, social unrest, any failure to comply with
approved policies/ processes or other external cause.
Should such risks materialise, the consequences could
be loss of life, injuries, environmental damage, disruption
to activities, reputational damage and financial loss.
Pandemics are large-scale outbreaks of infectious
disease that can greatly increase mortality rates over a
wide geographic area and cause significant economic,
social, and political disruption. Evidence suggests that
the likelihood of pandemics has increased over the past
century because of increased global travel and
integration, urbanisation, changes in land use, and
greater exploitation of the natural environment.
The COVID-19 virus is zoonotic, which is a member of
the coronavirus family that made the jump from
animals to humans. The virus was first medically traced
in China in November 2019 and, unusually for a
coronavirus, appears to transmit effectively in humans.
The World Health Organisation (“WHO”) officially
declared COVID-19 a pandemic on 11 March 2020 as
the virus has a higher mortality rate than common
illnesses such as the seasonal flu. The combination of
coronavirus’s ability to spread and cause serious illness
has prompted many countries to introduce or plan
extensive public health measures aimed at containing
and limiting the impact of the pandemic through social
distancing and placing restrictions on social interaction.
Effective 22 March 2020, the GORTT closed T&T borders
to both international and national travellers via the air
bridge and sea ports. Subsequently, the operation of
only essential services were approved by the GORTT
(which includes oil and gas companies within T&T) from
30 March 2020. The GORTT also prohibits groups of
more than five persons to congregate at the same
location effective 31 March 2020. In May 2020 the
University of Oxford published a research note that
ranked T&T first on a list of countries based on their
preparedness to lift physical distancing measures.
During February 2021 the WHO recognised T&T for its
exceptional response to COVID-19. As at 16 May 2021,
T&T has had 16,255 confirmed cases, all of whom have
been placed under quarantine for treatment, and 285
deaths.
Trinity had effective 13 March 2020, implemented WFH
arrangements for administrative staff, suspended all
international travel and ensured any local travel is kept
to the minimum required to maintain operations in the
fields with appropriate physical distancing being
adhered to. These measures have not, to date, had an
adverse impact on the Group’s operations, but the
situation continues to be monitored carefully by
Management and further measurers may need to be
put in place as and when required.
These HSSE risks are managed through the
Group’s dedicated HSSE personnel and the
Group’s risk management and internal controls
alongside third parties such as contractors and
other operators the Group may partner with. The
Group has insurance in place to cover such
exposure up to recommended industry limits but
should an incident occur of a scale in excess of
these recommended limits then the Group would
be fully exposed to the financial consequences. A
comprehensive HSSE update is provided to the
Directors at every Board meeting, being one of
the first items on the Agenda. In addition to this
the Board is updated via monthly Board calls on
HSSE statistics.
Trinity’s objective is to provide a safe and healthy
place of work for all staff members and to meet
all our duties and obligations to stakeholders. It
is Trinity’s intention to protect our employees
from ill health at our offices and operations. The
Group will seek to ensure that all requisite
contingency plans are implemented, to execute
adjusted working arrangements in order to
flatten transmission curves and provide
appropriate guidance to all staff until clearance
to premises and operations has been
communicated.
Trinity has addressed operational requirements
given the pandemic situation as follows:
1.
2.
Implemented pre-access screening of all
employees, contractors, sub-contractors and
suppliers to anticipate suspected and
potential cases.
Business Continuity Planning developed for
all assets to consider scenarios of suspected
and confirmed cases.
3. COVID-19 protocols implemented for staff to
observe in conducting operations.
4.
Response Plans and drills conducted on all
assets for the potential suspected case on
duty.
5. Continual contact with the Ministry of Health
of Trinidad and Tobago (“MOH”) and other
health and emergency professionals.
6.
Sanitisation stations installed and
heightened sanitisation implemented at all
assets.
7. Work at Offices guidelines and protocols.
8.
9.
Reinforced WFH Policy where applicable for
employees working remotely.
Face to face meetings to be conducted as
a last resort based on business needs
(assessed by criticality).
10. Recommended usage of all communication
networks and infrastructure implemented by
the Group.
52
Trinity Exploration & Production plc
Strategic Report
Risk Management and Internal Controls (continued)
Area
B
Climate Change
(Emissions) &
Energy
Transmition
Impact
Potential Impact
Mitigation
Our methods of adapting to climate change can be
addressed by considering two main areas:
1)
Hydro-meteorological events: Trinidad is the
southernmost country in the Caribbean Region
which is prone to hydro-meteorological events
including changing precipitation patterns, tropical
waves escalating to more intense weather events
such as tropical storms and (very rarely) hurricanes
which can create storm surges and flooding (which
are themselves potential indicators of a changing
tropical climate). Offshore on the East Coast, we
have infrastructure that faces the Atlantic Ocean
and as such, have exposure with regards to
personnel housed offshore and the potential for
infrastructural damage and follow-on operational
impacts. The safety of employees is of paramount
importance to the Group.
2) Geological phenomena: The Central Range fault
zone is closely associated with the El Pilar fault zone
which geologically separates the Caribbean and
South American tectonic plates. These fault zones
and associated smaller fault zones makes Trinidad
prone to dynamic geological phenomena including
earthquakes which can result in soil liquefaction,
mud volcanoes and mud flows and asphalt seepage
which can impact our Onshore and West Coast
assets. Over the last four years, heightened
geological activity has been noted in terms of
earthquakes with dormant mud volcanoes
becoming active and liquefaction taking place in
Southern Trinidad.
The safety of employees is of permanent
importance to the Group. In June 2017, Trinity was
affected by Tropical Storm Bret and the
Company implemented its robust Hurricane
Evacuation Plan to have the employees
evacuated and the Trintes Field shut in. This was
all done effectively, safely and according to the
Plan. In terms of future development plans for the
Galeota asset development, SCADA
implementation will reduce the need for manned
operations offshore which will create a more cost
effective safe and efficient infrastructure,
enabling Trinity to better withstand changing
weather patterns.
Trinity has Disaster Management Plans in place
to deal with these types of events should they
occur in our fields or in our offices. Trinity has also
partnered with The University of the West Indies
(“UWI”) at St. Augustine Seismic Research Centre
to conduct sponsored studies adjacent to our
operated fields which can also aid in our
understanding of these natural phenomena,
build proactive response capacity and assess
possible impacts on field development planning.
There are many uncertainties in energy transition,
including the pace of the transition. New technologies,
stricter climate change policies and new entrants may
disrupt the energy industry.
Our methods to mitigate climate change
(emissions) and the energy transition are an
extension of our ESG approach previously
mentioned:
Despite these uncertainties, Trinity believes that the
demand for lower emission oil will remain strong for
quite some time whilst the supply will become
increasingly challenged as the Majors divert capital
expenditure towards diversifying their revenue streams.
That being said, Trinity is aligning its business to the
energy transition challenge by making its existing
operations less carbon intensive and also pursuing
wider energy initiatives addressing both inputs and
outputs from its energy supply plan (i.e. renewable
power supplies and transition fuels). Furthermore, Trinity
believes that nothing prepares the business better for
uncertainty than responsiveness and innovation,
allowing Trinity to adapt to a changing energy world.
1. Water disposal and recycling methods:
During normal production and drilling
programmes there is a certain amount of
water produced which must be firstly
analysed and assessed for components such
as soluble and non-soluble oil/organics,
suspended solids, dissolved solids, and
various chemicals. Once the effluent water
can be recycled it can be used for activities
such as WO operations. Trinity is also
reviewing options for enhancing water
treatments and applicable disposal systems
which would have less impact to the
ecosystems once released. The latter also
forms part of Trinity’s Improved Oil Recovery
(“IOR”) Projects such as waterflooding
reservoirs to increase oil recovery. This
method can also effectively and safely
dispose of the produced water from the
fields.
2. Gas recycling: Gas is a by-product of oil
production. Trinity is looking at ways of
harnessing that energy. On our West Coast
assets this is important as gas can be re-
injected to facilitate a more efficient method
to lift our oil and better maintain pressure in
our wells.
Annual Report & Financial Statements 2020
Strategic Report
53
Area
B
Climate Change
(Emissions) &
Energy
Transmition
Impact
(continued)
C
Production and
Reserves Risk
Potential Impact
Mitigation
3.
Trinity is looking into methods of harnessing
gas from our other assets as a primary
source of energy to sell or use internally to
power our fields.
4. Trinity is also looking into renewable energy
solutions/sources of energy for its existing
and potential future assets.
1.
2.
3.
4.
5.
The Group continues to seek to balance
these risks by maintaining and building a
portfolio of assets that carry a range of
differing technical and commercial risks.
The Group ensures it has a wide suite of
measures to minimise natural decline and
grow production by having a dedicated
technical team to continually review wells,
optimise targets and generate and high
grade new drilling targets.
Production risks are mitigated by production
being spread over 284 currently producing
wells throughout three distinct locations
(Onshore T&T, Offshore East Coast T&T and
Offshore West Coast T&T). These risks are
further mitigated by production coming from
multiple reservoirs and the deployment of a
range of production methodologies.
Effective management systems in place
governing geoscience, reservoir and well
engineering, and production operations
activities. These include rigorous production
forecasting and reporting, field and well
performance monitoring and internal
reserves auditing.
Risks to production levels from the COVID-19
pandemic are being mitigated through cost
reductions with plans in place to ensure
operating break-evens align with oil prices
and sustain positive cash balances.
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The Group aims to manage natural production decline
and grow production via RCPs, WOs, reactivations,
swabbing and infill drilling. There is a risk that these
measures do not deliver on prognosis and therefore
production performance is below expectations for a
variety of reasons including geological uncertainty,
reservoir and well performance.
The Group produces from a significant number of wells
within multiple fields both onshore and offshore and so is
not reliant on any one well or field. However, certain wells
and fields do contribute disproportionately to overall
Group production. If mechanical or technical problems,
force majeure (earthquakes, storms or other events) or
problems affect the production on one or more of these
key wells or fields, facilities or the downstream
infrastructure, it may have direct and significant impact
on a substantial portion of the Group’s production. Long-
term unscheduled or scheduled shutdowns of production
may have a material impact on the business, as the
Group will lose production income whilst also bearing its
share of any continuing fixed operating expenditure
along with associated remedial or repair works which
may be unquantifiable at the outset and/or subject to
cost overruns.
The estimation of proved oil and gas reserves involves
subjective judgements and determinations based on
available geological, technical, contractual and
economic information. Estimates could change because
of new information from production or drilling activities,
or changes in economic factors, including changes in
the price of oil or gas and changes in the regulatory
policies of host governments, or other events. Estimates
could also be altered by acquisitions and divestments,
new discoveries, and extensions of existing fields as well
as the application of improved recovery techniques.
Published proved oil and gas reserves estimates could
also be subject to correction due to errors in the
application of published rules and changes in guidance.
Downward adjustments could indicate lower future
production volumes and could also lead to impairment
of assets. This could have a material adverse effect on
our earnings, cash flows and financial condition.
54
Trinity Exploration & Production plc
Strategic Report
Risk Management and Internal Controls (continued)
Area
D
Development
Risk
Potential Impact
Mitigation
The Group is seeking to limit its exposure to any
one aspect of development risk by taking
projects forward in a measured and sequential
manner, with FEED studies where possible
outsourced to larger international contractors.
The limited number of projects expected to be
undertaken at any one time ought to reduce the
probability of a significant development risk
materialising. For larger development project,
and in keeping with oil industry practices, the
Group would seek one or more partners
The Group is participating in certain development
projects, most notably the TGAL discovery offshore
development (the proposed Echo Platform
development). The Group’s ongoing development
projects may, once they have reached the FID stage,
involve advanced engineering work, extensive
procurement activities and complex construction work
to be carried out under various contract packages at
different locations, both offshore and onshore.
Furthermore, the Group (together with its licence
partners), might be required to carry out drilling
operations, install, test and commission offshore
installations and obtain governmental approval to take
them susceptible to delays or cost increases. The
current or future projected target dates for production
commencement may be delayed and significant cost
overruns incurred due to delays, changes in
development scope, technical challenges, actual
reserves being less than estimated, project
mismanagement, equipment failure, natural disasters,
political, economic, taxation, legal, regulatory
uncertainties, terrorism and protests, which again may
materially adversely affect the Group’s future business,
operating results, financial condition and cash flow.
Ultimately, the Group may be unable to meet its
ongoing share of project expenditures and be forced to
withdraw and/or default on its committed obligations,
which would have a material adverse effect on the
Group.
E
Counterparty/
Contractor
Exposure
F
Commercial
Risk -
Oil Price Risk
Many aspects of operations and projects in the oil
industry are undertaken by third party contractors and
facilitated by suppliers. We rely on these counterparties
to deliver on time, within budget and to a sufficient
quality in a safe and ethical manner. Failure by
counterparties to deliver on their commitments on time
and within budget creates a risk of delay and/or
overspend on any given project. The Covid 19
pandemic has further exacerbated the risk of
counterparty failure to deliver ontime and on budget
and the risk of counterparty default/failure.
In order to mitigate this risk the Group splits
development expenditures into competitive
packages for products and services from a
carefully selected set of suppliers. Where
appropriate the Group will also enter into fixed
cost turn-key supply arrangements. As the Group
continues to navigate this period of uncertainty,
Management are confident that our
demonstration of agility, adaptability and
alignment have placed Trinity in an
advantageous position as it relates to managing
counterparty/contractor risk.
The market price of oil is affected by global supply and
demand, can be very volatile and has the potential to
be at a level below operating break-even of the Group
for a protracted period. A fall in the price may not only
reduce short-term cash flow required to meet the
Group’s commitments as they fall due, but also reduce
the economic value and funding capacity of the
Group’s projects potentially rendering them
uneconomic. There is particular risk given the long-term
nature of development projects and associated
contracts or acquisitions based on assumed future oil
prices. In the event that oil prices remain low over long
term, the value in use of certain assets might need to
be revised and there could be a negative on the
Group’s net asset value, profitability and compliance
with financial ratios. Conversely, an increase in the price
of oil has a positive impact of the Group’s result.
Where and when appropriate the Group puts in
place suitable hedging arrangements to partially
mitigate the risk of a fall in oil prices. However,
such arrangements only cover the short-term,
leaving the Group exposed to any longer-term
protracted period of low oil prices. The Group
therefore seeks to maintain a low operating
break-even to provide a natural operational
hedge to mitigate against prolonged periods of
low oil prices. This ensures Trinity’s investment
opportunities are robust to most plausible
downside oil price scenarios.
Annual Report & Financial Statements 2020
Strategic Report
55
Area
G
Customer
Concentration
Risk
H
Competition
Risk and Cost
Inflation
Potential Impact
Mitigation
Whilst oil is an internationally traded commodity, Trinity
currently sells 100% of its oil production to Heritage
under evergreen COAs, which give rise to customer
concentration risk. As is the case for other T&T E&P
companies, Trinity is contractually obligated to sell all
production under its LOAs and FOA (Onshore) to
Heritage but has the right to market production from its
E&P licences (Galeota, Brighton Marine and PGB) to
third parties.
Trinity takes comfort that Heritage, while a
producer of its own oil, is also an aggregator of
significant additional volumes and Trinity’s
production therefore forms part of their overall
crude marketing strategy. The possibility that
Heritage is prevented from purchasing Trinity’s
production for a short period has been
considered both operationally and financially.
While the impact of a prolonged period where
Heritage is unable to purchase Trinity’s
production would be significantly challenging,
this scenario is seen as having a very low
probability of occurring.
There remains strong competition within the petroleum
industry for the acquisition of good quality hydrocarbon
assets. The Group competes with other oil and gas
companies, many of which have greater financial
resources than the Group, for the acquisition of such
properties, licences and other interests as well as for
the recruitment and retention of skilled personnel. The
challenge to Management is to secure assets and
recruit and retain key staff without having to pay
excessive premiums.
In formulating bids to acquire assets, the Group
utilises experienced senior professionals within
the Group to ensure that any bids are submitted
at a competitive price that reflects the potential
risked asset value and can generate appropriate
returns for the Group’s shareholders. Prior to any
asset being evaluated, Management will review
the target to ensure it fits within robust economic
parameters and overall strategic direction of the
Group.
In the current market many capital and operating costs
have decreased and, given the rapid decline in
hydrocarbon prices, we can expect a deferral of cost
inflation which may have a positive impact on the cash
required for economically viable projects.
To benefit from new opportunities, and in
keeping with oil industry practices, the Group
partners with other oil companies as part of the
process for evaluating permits from the
competent authorities.
This also allows it to share the associated costs.
I
Regulatory/
Fiscal Risk
The Group enters into commitments assuming a
relatively stable fiscal regime and any material change
represents a risk to the Group’s ability to fund its
operations and projects.
The Group operates in a jurisdiction with
sophisticated tax authorities capable of
assessing the adverse impact of any change in
legislation before it is enacted.
The revised threshold for Supplemental
Petroleum Tax ("SPT") for small onshore producers
has now been implemented via The Finance Act
No. 30 of 2020 which came into effect on 1
January 2021. As a result, the threshold at which
SPT would be due for individual producers
producing less than 2,000 barrels of crude oil per
day has now increased from USD 50.0 /bbl to
USD 75.0/bbl for the financial years 2021 and
2022. Trinity expects to be exempt from SPT
across all of its onshore licences below USD
75.0/bbl, which will have a significant positive
impact on future cash flows. Based on current
onshore production levels, Trinity estimates that
SPT of c.USD 3.5 million per annum or more would
previously have been payable if realisations were
above USD 50.01/bbl (although this could be
partially mitigated by the investment tax credits
shelter). The confirmation of these reforms
therefore represents a considerable boost to
potential cash generation from Trinity's onshore
licences should realisations average above USD
50.01/bbl for any calendar quarter during 2021
and 2022.
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Trinity Exploration & Production plc
Strategic Report
Risk Management and Internal Controls (continued)
Area
J
Major breach of
business, ethical,
or compliance
standards
Potential Impact
Mitigation
The Group is subject to or has adopted numerous
requirements and standards including the UK Bribery
Act, UK AIM Market Rules, UK QCA Code, and the
Disclosure and Transparency Rules, among others.
Additionally, some of our stakeholders, such as financial
institutions, may require us to comply with other
requirements or ask us to provide information on our
business, operations, employees and shareholders as
part of Know Your Client (“KYC”) procedures.
Failing to comply with onerous regulations and
requirements, such as failure to implement adequate
systems to prevent bribery and corruption or money
laundering, could result in prosecution, fines or penalties
imposed on the Group or its officers, suspension of
operations or listing. Inability to clear KYC procedures
to the satisfaction of the third parties may result in
refusal to engage in business relationships with the
Group.
K
Cash Flow &
Financing Risk
The ability to finance firm commitments, participate in
the Group’s developments (notably TGAL discovery
development via the proposed Echo platform)) and
generally develop the Group’s business depends upon:
1. Cash flow from the Group’s producing assets: cash
2.
flow is dependent upon a combination of factors
including field performance (both reservoir and
facilities), oil prices, fiscal regime and operating
costs, much of which are substantially beyond the
control of the Group.
Financing from the equity capital markets, debt
finance, farm downs and other means. A number of
the Group’s development commitments and infill
opportunities are long term in nature and there is
no assurance that the Group will be successful in
generating or obtaining the required financing to
undertake these initiatives. In those circumstances
some license interests may be relinquished, sold at
an undervaluation and/or the scope of operations
reduced or ultimately the Group may default on its
obligations. In the event that sufficient funds are
not available to finance the business, it would have
a material adverse effect on the Group’s financial
condition and its ability to conduct operations.
3.
Recoverability and timing of outstanding VAT
refunds from the BIR.
The Group seeks to mitigate these risks through
a number of measures and processes.
The Chief of Staff & General Counsel is
responsible for compliance and, with the support
of the Board, implements compliance-related
activities and procedures. Such activities focus
on training, monitoring, risk management, due
diligence and regular review of policies and
procedures.
We prohibit bribery and corruption in any form
by all employees and by those working for
and/or connected with the business. Employees
are expected to report actual, attempted or
suspected bribery or other issues related to
compliance to their line managers.
In dealing with third parties, our policy is to
maximise transparency and provide all
information available to address KYC-related
procedures and requests.
The Group seeks to mitigate these risks through
a number of measures including:
1. maintain a diverse portfolio of oil and gas
producing interests;
2.
3.
4.
rigid financial discipline and maintaining a
strong balance sheet and cost control
culture;
regular review of short-term and longer-
term cash flow forecasts by Management;
the Board reviewing and approving the
financial strategy of the Group; and
5. maintaining strong relations with its
shareholders, banks and the BIR.
BIR VAT Refunds Update
1.
VAT Bonds Update
The national budget in October 2019
announced commencement of the issuance
of VAT Bonds during Q2 2020 as a measure
to supplement for the equivalent of VAT
Refunds owed by the GORTT to
organisations prior to 2020. The GORTT VAT
bond regulations were published early April
2020 announced the intention to issue
transferrable VAT Bonds with an interest rate
of 3.3% per annum payable 30 June and 30
September 2020. Trinity would have
submitted its VAT Bonds applications to the
BIR for TTD 18.5 million (USD 2.7 million
equiv.). These VAT Bond certificates were
received 29 May 2021 and subsequently
transferred to First Citizens Investment
Services Limited (monetised for cash
equivalent) during June 2020.
2.
VAT Refunds Update
VAT refunds payments continue processed
by the BIR from 2020 onwards. As at 30 April
2021, the VAT refunds outstanding from the
BIR amounts to TTD 19.1 million (USD 2.8
million equiv.) for the period January 2020
to March 2021.
Annual Report & Financial Statements 2020
Strategic Report
57
Area
L
Operational
Risks
Potential Impact
Mitigation
Trinity operates five LOAs across its Onshore Assets
with Heritage, which were due to be renewed by 31
December 2020. Although Trinity has no reason to
believe that the LOAs will not be renewed, there can be
no certainty that this will be the case and the current
COVID-19 disruption has led to delays to the renewal
process.
During 2020, Trinity were in ongoing discussions
with Heritage and obtained LOA extension letters
in December 2020 and March 2021 to continue as
operators for WD 2, WD5/6, WD 13 and WD 14 for
a period of 4 months until 31 May 2021 during
which the process to close off the new LOAs with
Heritage was expected to conlude. A 2 year
extension was granted for FZ2 until 31 December
2022.
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Trinity Exploration & Production plc
Governance
03
GOVERNANCE
Our Governance
Directors’ Statement under
Section 172(1) of the CA 2006
Section 172 (1) of the CA 2006 obliges the Board to promote the
success of the Group for the benefit of the Group’s members as a
whole. The section specifies that the Board must act in good faith
when promoting the success of the Group and in doing so have
regard (amongst other things) to:
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the likely consequences of any decision in the long term,
the interests of the Group’s employees,
the need to foster the Group’s business relationship with
suppliers, customers and others,
the impact of the Group’s operations on the community
and the environment,
the desirability of the Group maintaining a reputation for high
standards of business conduct, and
the need to act fairly between members of the Group.
The Board is collectively responsible for the decisions made
towards the long-term success of the Group and how the
strategic, operational and risk management decisions have
been implemented throughout the business.
Annual Report & Financial Statements 2020
Governance
59
Information
The Board places equal importance
on institutional shareholders and
individual shareholders and recognises
the significance of transparent and
effective communications with
shareholders.
As an AIM listed Group there is a
need to provide fair and balanced
information in a way that is
understandable to all stakeholders
and particularly our shareholders.
The primary communication tool with
our shareholders is through Regulatory
News Service (“RNS”), on regulatory
matters and matters of material
substance. The Group’s website
provides information for stakeholders.
Changes to the Board and Board
Committees, changes to major
shareholder information and Quoted
Companies Alliance Corporate
Governance Code 2018 (the “QCA
Code”) disclosure updates, are
promptly published on the website to
enable shareholders to be kept abreast
of the Group’s affairs. The Group’s
Annual Report and Notice of Annual
General Meetings (“AGMs”) are
available to all shareholders and they
are kept up to date. The Interim Report
and other investor presentations are
also available for the last six years and
can be downloaded from our website.
The Board acknowledges that
effective two-way communication
with shareholders encourages mutual
understanding and better connection
with them. The benefits include
improved transparency of information
on the business and its performance,
appropriate consideration of all
shareholders views, as well as instilling
trust and confidence to allow informed
investment decisions to be made by
the Board. The Group has a Corporate
Development Manager who monitors
and coordinates investor relations
programmes.
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engagement with key suppliers to
ensure the ongoing safety and
performance of the business as the
Group implemented measures
to ensure the protection of staff,
including those working from home.
We update, and where appropriate
seek feedback from, all key
stakeholders via regular meetings and
communications throughout the year.
Specifically, in regards to shareholders,
both retail investor events and
institutional investor meetings are
held during the year to provide
updates and receive feedback. We
value the feedback we receive from
our stakeholders and we take every
opportunity to ensure that where
possible their wishes are duly
considered.
Policies and process
The Board periodically and on a
monthly basis reviews the HSSE
measures implemented by the Group
and the EMT’s recommendations for
better practices. Employees are
informed of the results and are
encouraged to feel engaged. The T&T
employees are given the opportunity
to participate in regular Town Hall
Meetings, an open forum moderated
by members of the EMT which takes
place on a quarterly basis (and ad hoc
as required). Employees’ opinions and
suggestions are considered and
valued, particularly with regards to
HSSE matters through the START card
system. Throughout 2020, where at
times engagement with staff in person
was not possible, contact was
maintained through virtual means,
including virtual Town Hall meetings.
The importance of making all staff feel
safe in their environment is maintained
and a Whistleblowing Policy is in place
to enable staff to confidentially raise
any concerns freely and to discuss any
issues that arise. Strong financial
controls are in place and are well
documented. Staff are annually
provided with refresher courses to
ensure that the issues of bribery and
corruption remain at front of mind.
The Audit Committee Chairman has
assumed the role of Whistleblowing
Officer.
Engagement
The Board recognises that employees
are one of the key resources which
enables delivery of the Group’s vision
and goals.
2020 was a particularly challenging
year globally with the COVID-19
pandemic. The Board has supported its
workforce throughout the year to help
keep all employees, contractors and
others who engage with the Company
safe during this period of uncertainty.
The Board reviewed the position,
receiving regular updates from
Management as to the steps being
taken to ensure safety within the
workforce, both with the offices and
out in the field.
Annual pay and benefit reviews are
carried out to determine whether all
levels of employees are aligned to the
benchmarks in the industry relevant to
our size and type of business and to
retain and encourage skills vital for the
business. The Remuneration Committee
oversees and makes recommendations
regarding executive remuneration and
long-term share awards. During 2020
awards were issued under the
Company’s long term incentive plan to
certain individuals within the executive
management team. The awards are
to encourage and incentivise senior
members within the organisation and
are based on total shareholder return
to align their interests with shareholders.
The Board encourages Management to
foster employee engagement and to
provide necessary training in order to
use their skills in the relevant areas in
the business. The Remuneration
Committee works to ensure that staff
are appropriately rewarded to maintain
engagement and commitment and
during 2021 is undertaking a review of
the Remuneration policy of the business
with the assistance of an external
consultant.
The Board acknowledges that a strong
business relationship with suppliers and
customers is an important factor for the
Group’s long term success. Whilst day
to day business operations regarding
suppliers and customers are delegated
to the EMT, the Board sets directions
and evaluates policies with regard to
new business ventures and investing in
research and development. The Board
upholds ethical business behaviour
across the business and encourages
the EMT to require comparable business
practices from all suppliers and
customers doing business with the
Group. During 2020 and through into
2021 there has been regular
60
Trinity Exploration & Production plc
Governance
Directors’ Statement under
Section 172(1) of the CA 2006 (continued)
Community and environment
Training
The Board advocates the highest
standards of care towards the
communities in which it operates and
is acutely conscious that the nature
of the Group’s business requires strong
measures to be put in place to protect
the environment. At its meetings, the
Board reviews the HSSE Report of the
Management and considers the impact
of the Group’s operations on the
environment and the neighbouring
community.
Our Corporate Social Responsibility
(“CSR”) philosophy is based on our core
watchwords which stems from our
vision to achieve our business goals of:
Behaviour:
Demonstrate professionalism, respect
and fairness; conducting business in a
socially responsible and ethical manner.
Rigour:
Initiate thought before action by
promoting sustainability and
proactively protecting the environment.
Purpose:
Fit for delivering our goals by engaging,
learning from, respecting and
supporting the communities and
cultures within which people operate.
Any CSR initiatives being undertaken
need to be aligned with our underlying
philosophy, must be relevant and
sustainable to audiences/target areas
which are to be impacted by what we
do and simultaneously be mutually
beneficial to our operations.
Although the Group is incorporated in
the UK and governed by the CA 2006,
the Group’s business operations are
carried out in T&T which requires the
Group to conform to statutory and
regulatory provisions of both the UK
and T&T. The Group has adopted the
QCA Code and the Board recognises
the need to maintain a high standard
of corporate governance as well
as to comply with the AIM Rules for
Companies to safeguard the interest
of the Group’s stakeholders. Anti-
corruption and Anti-bribery training are
compulsory for all staff and contractors
and the Anti-bribery statement and
policy is contained in the Group’s
Employee Manual as well as on the
Group’s website. The Group’s
expectation of honest, fair and
professional behaviour is reflected by
this and there is zero tolerance for
bribery and unethical behaviour by
anyone related to the Group.
2020 and on-going performance: This
continues to be a challenging time for
many businesses, particularly in the oil
and gas sector. Not only does the
global pandemic continue to impact
the economy but this was compounded
during the first half of 2020 by the
dramatic downturn in commodity
prices. The Group has worked hard to
ensure the stability of the business
throughout this period. The Company
has maintained production levels,
sought to renew its licence extensions
and progress projects to further the
growth of the business.
On behalf of Board
Bruce Dingwall, CBE
Executive Chairman
17 May 2021
Annual Report & Financial Statements 2020
Governance
Stakeholder Engagement
61
Who
Why
What
How we interact and respond
Stakeholder
Group
Employees
Communities
Government
& Regulators
AGMs,
Site Visits
and
Road-
shows
One
on one
meetings
and
interactive
sessions
Emails,
Newsletters,
Employee
Manual,
Policies
and
Memos
Surveys
3
3
3
3
Why it is
important to
engage
Key Issues /
Significant topics
raised
Responsible
Websites,
online
platforms1
Social
media2
Undertake quarterly
performance and ah doc
feedback meetings with
employees.
Undertake monthly
departmental ‘focal points’
meetings.
Operate an independent
whistleblowing service.
Company town halls and
pulse surveys increased
during COVID-19.
Host formal and ad-hoc
public consultations in order
to understand and discuss
local peoples’ concerns.
Support schools and less
fortunate families.
Operate grievance
mechanisms to address
community concerns.
Government & Regulators
Direct engagement with
local, regional and national
government authorities
regarding operations,
environmental issues,
permitting and other
relevant topics.
Provide monthly reports
to MEEI.
Reports to EMA.
Meeting with BIR as required
for payments and also
discussions on fiscal reform.
Operating, financial and
ESG performance.
Board &
EMT
Growth strategy and new
business.
Major project initiatives.
Strategic and organisational
announcements and
changes.
Training & development
Remuneration.
HSSE training, reviews
and updates.
Team Building Sessions.
Respect for local values
and traditions.
Community development
initiatives, including those to
stimulate economic
development.
Employment and
procurement opportunities.
EMT
3
3
3
Compliance with applicable
laws and regulations.
EMT
& Staff
Employment opportunities
and labour rights.
Health and safety.
Environmental stewardship.
Licences and permitting.
Taxation and royalties.
Safety performance.
Training.
Effluent results.
Production performance in
relations to MWOs/MPLs,
ESDs, swab wells, Future
plans, Inspections of
facilities/wells.
Working conditions.
Review and Assessments.
HSSE discussions on
issue and improvement.
EMT
& Staff
EMT
& Staff
3
3
3
3
3
3
3
3
Customers
(Heritage)
Quarterly review meetings
are held with Heritage.
Suppliers and
Contractors
Meetings coordinated as
required and ad-hoc.
Formal correspondence
issued to suppliers when
processes and procedures
are being revised and
standardised.
Partnerships
Meetings coordinated as
required and ad-hoc.
Strategic Review and
Assessments.
EMT
& Staff
3
3
3
3
Formal correspondence
issued as required.
General negotiations.
Discussion and working
groups.
Shareholders and
Investors
The primary
communication tool with
our shareholders is the
Group’s website,
www.trinityexploration.com.
Specifically, in regards to
shareholders, both retail
investor events and
institutional investor
meetings take place
during the year to provide
updates and receive
feedback.
Operating, financial
and ESG performance.
Board
& EMT
Growth strategy and new
business.
Major project initiatives
Strategic and organisational
and changes.
1
2
(lived and recorded interviews and corporate presentations)
(Twitter, LinkedIn)
3
3
3
3
3
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Trinity Exploration & Production plc
Governance
Corporate Governance Statement
On behalf of the Board, I am
pleased to present the
Corporate Governance Report
for the year ended 31 December
2020. We at Trinity believe that
a strong corporate governance
structure is critical to achieving
our strategic goals and creating
value for our shareholders. As
Executive Chairman of the Group
I have a keen interest in ensuring
that an effective and focused
Board leads the business and
builds upon its successes to date.
Following the requirement by AIM that
all AIM listed companies comply with
a recognised corporate governance
code, the decision was made by the
Board that the Group would adopt the
QCA Code. The Board believes the
QCA Code to be the most appropriate
recognised corporate governance
code for the Group. During the year
under review, the Board continued to
uphold the principles of the Code and
ensured that the Group complied with
the QCA Code in all aspects of the
business. Details of the principles of the
Code and how the Group applies them
are detailed within this report and also
on the Group’s website.
Strong corporate governance helps
underpin the foundations of a
successful business. The Board is
committed to ensuring good corporate
governance, at Board level and
throughout the operations of the
business.
As Executive Chairman it is my duty
to ensure that good standards of
governance are delivered and fed
down throughout the organisation.
The Board, as a whole, looks to instill
a positive culture across the Group,
delivering strong values and
behaviours. The importance of
delivering the Group’s objectives in a
manner consistent with our values is at
the forefront of the Board’s thinking, as
is ensuring that this culture is fed down
through the EMT and throughout the
business. The principal risks facing the
business, as set out on pages 50 to 57
of the Annual report are considered by
the Board, recognising that strong
governance across the organisation,
will help ensure a healthy culture across
the business.
2020 was a particularly challenging
year with the downturn in the oil and
gas sector combined with the global
pandemic. The Group has performed
well throughout, maintaining operations
in a safe environment throughout the
business. The solid framework that
Management has built over the last few
years has helped the business continue
to develop during a period of global
uncertainty. The Board has continued
to work effectively through this
challenging period, increasing the
number of Board meetings and ad hoc
engagement to ensure that the
strategy can continue to be delivered
and goals met whilst ensuring the risks
are monitored and a culture of support
and safety is provided to all
stakeholders, including employees,
suppliers and the wider environment
in which the business operates.
As the Group builds the next phase
of development for the business, as
Executive Chairman, I will work with the
Board to cement the existing values
that are in place and ensure that good
corporate governance and strong
principles continue to be present
throughout the organisation, for
the benefit of all stakeholders.
Bruce Dingwall, CBE
Executive Chairman
17 May 2021
Annual Report & Financial Statements 2020
Governance
QCA Principles
The Board recognises its
responsibility for the proper
management of the Group
and is committed to maintaining
a high standard of corporate
governance, commensurate
with the size and nature of the
Group and the interests of its
shareholders.
The Corporate Governance Code does
not apply to companies admitted to
trading on AIM and there is no formal
alternative for AIM companies. However,
the Quoted Companies Alliance has
published the QCA Code, which
includes a standard of minimum best
practice for AIM companies and
recommendations for reporting
corporate governance matters. The
Board have adopted the QCA Code
which they consider appropriate given
the size and resources of the Group.
The QCA has ten principles which the
Group is required to adhere to and in
relation to which the Group is required
to make certain disclosures within its
report and accounts and on its website,
www.trinityexploration.com.
This section outlines the ten QCA
principles and identifies how Trinity
adheres to each in detail:
1.
Establish a strategy and business
model which promotes long-term value
for shareholders
Trinity’s strategy is focused on
positioning the Group to create long-
term shareholder value by developing
and growing the resources base of our
T&T based assets, whilst maintaining
rigorous attention to cost control,
capital deployment and value creation.
The Board keeps abreast of the key
challenges associated with protecting
the Group from unnecessary risk and
securing its long-term future. We
achieve this through regular reviews
and meetings with all stakeholders, and
the ongoing identification, evaluation
and mitigation of risks. This is crucial to
keeping the level of risk associated to
activities within the Group to an
acceptable level.
Our Business Model and Strategy is
clearly articulated and outlined in page
63
27 of the Strategic Report and details
of the key risks for the business and how
these are mitigated can be found on
pages 50 to 57.
2.
Seek to understand and meet
shareholder needs and expectations.
The Group welcomes the opportunity
to maintain an ongoing open dialogue
with its shareholders, to ensure that
it is able to understand and meet
shareholder needs and expectations.
General inquiries can be submitted
directly to the Group or our PR advisors
(Walbrook PR) by either calling +1 868
612 0067 or emailing info@trinioil.com or
trinityexploration@walbrookpr.com. The
Executive Directors and the Group’s PR
advisors seek to respond to shareholder
queries directly (whilst remaining
cognisant of the UK Market Abuse
Regulations’ restrictions on inside
information and the requirements of the
AIM Rules for Companies). Non-deal
roadshows are arranged throughout
the year to meet with existing and
potential new shareholders to maintain,
as much as possible, an ongoing
dialogue. Despite COVID-19 this level
of engagement has been maintained
throughout 2020, using virtual platforms
to engage with stakeholders.
Our Senior Independent Non-Executive
Director, Nicholas Clayton is also
available to discuss any issues or
concerns that shareholders or other
stakeholders may have regarding
the Group’s performance and its
governance arrangements.
Arrangements can be made to get in
direct contact with Nicholas Clayton
by calling +44 131 240 3860.
Our AGM* is an annual opportunity
for all shareholders to meet with the
Executive Chairman and other members
of the Board, including the Managing
Director and the Senior Independent
Non-Executive Director. The meeting is
open to all shareholders, giving them a
forum for two-way communication and
the opportunity to raise issues during the
formal business or more informally
following the meeting.
At the AGM, separate resolutions are
proposed on each substantial issue.
For each proposed resolution, proxy
forms are issued which provide voting
shareholders with an opportunity to vote
in advance of the AGM if they are unable
to vote in person. Our registrar, Link Asset
Services, count the proxy votes which
are properly recorded and the results of
the AGM are announced through a
Regulatory News Service (“RNS”).
The Board is keen to ensure that the
voting decisions of shareholders are
reviewed and monitored and that
approvals sought at the Group’s AGM
are as much as possible within the
recommended guidelines of the QCA
Code. In the event that a significant
proportion of votes was ever cast
against a resolution, the Group would,
on a timely basis, provide an
explanation of what actions it intends
to take to understand the reasons
behind that vote result, and where
appropriate, any different action it has
taken, or will take, as a result of the vote.
3.
Take into account wider stakeholder
and social responsibilities and their
implications for long term success
The Board recognises that the long-
term success of the Group is
dependent upon the efforts of its
Management and employees, and
those of our contractors, suppliers, Joint
Venture (“JV”) partners, and regulators
and the position of the Group within
the communities we operate within.
The Group is committed to being
honest and fair in all its dealings with
its employees, partners, contractors,
suppliers and key stakeholders and
encourages the same in return. The
Group expects its employees, partners,
suppliers and operators to adhere to
business principles which are aligned
to its own.
Delivery of our business model is
underpinned by our core values of
Behaviour, Rigour and Purpose:
Behaviour: that mirrors professionalism,
respect and fairness by conducting
business in a socially responsible and
ethical manner;
Rigour: initiate thought before action
by promoting sustainability and
proactively protecting the environment;
and
Purpose: fit for delivering our business
goals by engaging, learning from,
respecting and supporting the
communities and cultures within
which we operate.
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Note(*): In light of the COVID-19 pandemic the 2021 AGM will not be held in the usual format. The Company is making arrangements for the
AGM, which will be held in accordance with the UK Government’s guidelines in respect of social distancing and gatherings. The AGM
Notice will advise shareholders of the details.
64
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Governance
QCA Principles (continued)
We value the feedback we receive from
our stakeholders and we take every
opportunity to ensure that where
possible their wishes are duly
considered. Quarterly (or ad hoc as
required) T&T Town Hall Meetings are
held with employees and attended by
members of the EMT and any visiting
Board members. Employees are given
an opportunity to participate in an
open forum and their opinions and
suggestions are considered and
valued, particularly with regards to
HSSE matters through the START Card
system. Despite the challenges of the
COVID-19 pandemic engagement has
been maintained with employees to
ensure not only the on-going success
of the business but the welfare of our
staff and their families, both mentally
and physically.
The Board advocates the highest level
of care given to the community in which
the business operates and are mindful
of the nature of the business and the
need to ensure strong HSE measures
are in place to protect the environment
in which the Group operates. The CSR
philosophy of the Group is fed down
from the Board throughout the
organisation. During 2020 the Group
engaged with the local community,
providing food supplies to local
communities. The business supports the
local schools in the Galeota community,
providing supplies and sponsoring the
Local Schools Rewards and
Recognition Programme.
4.
Embed effective risk management,
considering both opportunities and
threats, throughout the Organisation
The Board understands that the
Group’s financial standing and
reputation may be impacted by
various risks, not all of which are within
its control. It believes that the principal
risk categories for the business are:
corporate/strategic; operational
(exploration, development and
operating); financial; political/
regulatory; HSSE and management/
organisational. The risk management
framework and processes adopted by
the Board involves the identification,
assessment, mitigation, monitoring and
reporting of all key risks on a regular
basis to minimise the impact of such
risks. An element of risk is inherent to
the Group’s activities of oil and gas
exploration and development and as
such the Board has established formal
arrangements for determining the
extent of exposure to the risk.
The Board is responsible for regularly
reviewing and considering the key risks
and uncertainties facing the business.
Newly identified risks are noted and
communicated throughout the
organisation. The principal risk areas
for the business and the respective
mitigating actions are listed in the key
risks on pages 50 to 57. The risks of the
business are considered by the Audit
Committee and the Board as a whole.
Certain aspects of the business risks
are considered by the Board at each
formal Board meeting, this includes
HSSE and operational risks. When
considering new projects the risks and
opportunities both operationally and
financially are considered by the Board
and discussed at the relevant meeting.
These discussions would usually include
participation by members of the EMT
who are involved with the project. The
impact of Covid-19 on the business
and the support being given across
the business to employees, contractors
and the wider environment in which the
Group operates has been discussed by
the Board at every meeting during
2020 and into 2021.
5.
Maintain the Board as a
well-functioning, balanced team
led by the chair
The QCA Code requires that the
boards of AIM companies have an
appropriate balance between
Executive and Non-Executive Directors
of which at least two should be
independent. The Board is currently six
strong, and has a 1/3, 1/3, 1/3 balance
between Executive, Non-Executive
Directors and Independent Non-
Executive Directors.
The Board believes that all of the Non-
Executive Directors are independent in
character and judgement and have the
range of experience and calibre to
bring independence on issues of
strategy, performance, resources and
standards of conduct which are vital to
the success of the Group. However, two
of the Non-Executive Directors (David
Segel and Angus Winther) are not
deemed to be independent under the
QCA Code given their significant
interests in the Group’s shares.
During 2018 the Board appointed
Nicholas Clayton as Senior
Independent Non-Executive Director.
This was an important step in bringing
the governance structure of the Board
more in line with the requirements of
QCA Code and general good
governance. Mr. Clayton’s appointment
helped assist with the independence
required given the Group has an
Executive Chairman and two of the
Non-Executive Directors are not
deemed to be independent under
the QCA Code.
The Board, led by the Executive
Chairman, has the necessary skills and
knowledge to discharge their duties
and responsibilities effectively, setting
clear expectations and ensuring
stringent measures for corporate
governance standards are met
particularly in relation to executive
remuneration, accountability and audit.
The Board meets as regularly as
necessary. It has established an Audit
Committee and a Remuneration
Committee, particulars of which appear
hereafter. Appointments to the Board
are made by the Board as a whole
and so the Group has not created
a Nomination Committee.
The Executive Directors are expected
to devote substantially all of their
committed working time to the duties
of the Company. It is expected that
the Non-Executive Directors dedicate
approximately one day a month to the
Company, although it is recognised
that this may increase from time to
time as the business demands.
Generally, the level of Board
engagement has increased over the
past year as the business is on a
growth trajectory both operationally
and strategically. During 2019 the Board
commenced informal monthly meetings
to enable the Non-Executive Directors
to be more involved in core decision
making between formal board
meetings which involve approving
quarterly updates, interim and annual
financial accounts, budget and
remuneration reviews.
6.
Ensure that among them the Board has
the necessary up to date experience,
skills and capabilities.
The Board comprises the Executive
Chairman, four Non-Executive Directors
and one Executive Director, the
Managing Director. The Board has
significant industry, financial, public
markets and governance experience,
possessing the necessary mix of
experience, skills, personal qualities
and capabilities to deliver the strategy
of the Group for the benefit of the
shareholders over the medium to
long-term.
Annual Report & Financial Statements 2020
Governance
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Whilst the Board recognises that
having an Executive Chairman is not
considered best practice under the
QCA Code, Bruce Dingwall, CBE’s role
as a member of the EMT continues to
be extremely important in leading the
business forward. The Group at present
does not have a Chief Executive Officer.
The role of the Executive Chairman and
the potential appointment of a Chief
Executive Officer will continue to be
reviewed periodically by the Board.
The Group is mindful of the issue of
gender balance, although Board
appointments are made with the
primary aim of ensuring that the
candidate offers the required skills,
knowledge and experience. It is noted
that there are currently no female
members of the Board. However, the
Group has a female Chief of Staff &
General Counsel, Nirmala Maharaj,
as well as a female Corporate
Development Manager, Tracy Ann
Mackenzie, in the EMT and embraces
equality across the work place.
The Board is also mindful of the need
for considering succession planning.
Biography details of the Board of
Directors are outlined on pages 68
to 69.
7.
Evaluate Board performance on clear
and relevant objectives, seeking
continuous improvement.
Internal evaluation of the Board, its
Committees and individual Directors
is important and will develop as the
Group grows in the future. The
expectation is that, going forward,
Board reviews will be undertaken on
an annual basis to determine the
effectiveness and performance in
various areas as well as the Directors’
continued independence. A formal
Board review has not been carried out
in the year ended 31 December 2020.
The Board was reconstituted in 2017
and a further appointment of senior
independent director was made in 2018
to further strengthening the
composition of the Board.
Whilst the Board has not undertaken
any formal training, this is something
that will be considered as the business
grows and the Board is further
established. The Directors have a
wide knowledge of the business and
requirements of Directors’ fiduciary
duties. The Directors receive briefings
and updates from the Group’s advisors
(Legal, Auditors, NOMAD and Broker)
and the Group Secretary on
developments and initiatives as they
deem appropriate. All Directors receive
regular boardroom briefings from
Trinity’s Legal Advisors (Pinsent Masons
LLP) and the Group’s Auditors brief the
Audit Committee on accounting and
regulatory developments impacting the
Group. Individual Directors may also
engage external advisors at the
expense of the Group upon approval
by the Board in appropriate
circumstances, although no such
engagement was necessary during
2020.
8.
Promote a corporate culture that is
based on ethical values and
behaviours.
The Directors are committed to
promoting positive ethical values and
behaviours across the Group as a
whole. The Directors are mindful of the
industry that the business operates in
and take all issues of ethical values and
behaviours very seriously. The Board is
very aware that the tone and culture
set by it will greatly impact all aspects
of the Group’s performance. The Board
recognises that its decisions regarding
strategy and risk will impact the
corporate culture of the Group as a
whole and that this will impact the long
term performance of the Group. The
importance of delivering success whilst
maintaining a safe environment is
continually stressed by the Board
and the EMT.
Maintaining sound ethical values and
behaviour is crucial to the ability of
the Group to successfully achieve its
corporate objectives. The Board places
great importance on this and seeks to
ensure that this flows throughout the
organisation. The Group’s Employee
Manual is in place, which is provided to
staff as part of their induction and can
be accessed at all times. Staff are
made aware that they must adhere to
the standards set out in the Group’s
Employee Manual at all times and are
encouraged to ask questions and seek
clarification on any uncertainties. The
Board’s assessment of the culture within
the Group at the present time is one
where there is respect for all individuals,
open dialogue is actively encouraged
and there is commitment to best
practice and continuous improvement.
Annual Anti-corruption & Anti-Bribery
training is compulsory for all staff and
contractors and the Anti-bribery
statement and policy is contained in
the Group’s Employee Manual as well
as on the Group’s website. The Group’s
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expectation of honest, fair and
professional behaviour is reflected by
this and there is zero tolerance for
bribery and unethical behaviour by
anyone relating to the Group.
A Whistleblowing policy is also in place
which enables staff to confidentially
raise any concerns. The Group
considers it essential that all staff
should be made to feel safe in their
environment and therefore has the
means available to freely discuss any
issues that arise. Strong financial
controls are in place and are well
documented. Staff are annually
provided with refresher courses to
ensure that the issues of bribery and
corruption remain at the forefront of
peoples’ mind. The Chair of the Audit
Committee has assumed the role of
Whistleblowing Officer. Arrangements
can be made to get in direct contact
with Angus Winther via calling +44 131
240 3860.
A Delegation of Authority (“DOA”) is in
place which details the authorisation
process and accountability in the
organisation detailing the financial,
corporate and operational controls
that are in place.
9.
Maintain governance structures and
processes that are fit for purpose and
support good decision-making by the
Board.
The Board retains full and effective
control over the business and
operations of the Group. The Board’s
regular schedule provides for five board
meetings per annum. The Board also
has monthly and ad-hoc calls to keep
informed of business operations and
macro-environmental concerns
impacting the business. The Board
and its Committees receive appropriate
and timely information prior to each
meeting; a formal agenda is produced
for each meeting and Board and
Committee papers are typically
distributed one week before meetings
take place. Any Director may challenge
the EMT’s proposals and decisions are
taken democratically after discussions.
Any Director who feels that any concern
remains unresolved after discussions
may ask for that concern to be noted
in the minutes of the meeting, which
are then circulated the Board. Any
specific actions arising from such
meetings are agreed by the Board or
relevant Committee and then followed
up by EMT.
66
Trinity Exploration & Production plc
Governance
QCA Principles (continued)
The Executive Chairman has overall
responsibility for corporate governance
and the promotion of high standards
throughout the Group. He leads and
chairs the Board, ensures that
committees are properly structured
and operate within the appropriate
terms of reference. He also leads in
the development of strategies and
setting objectives and oversees
communication between the Group
and its shareholders.
The Senior Independent Non-Executive
Director is an important interlocutor
between shareholders and the Board,
especially in cases where contact via
the normal channel of the Executive
Chairman or Executive Directors has
failed to resolve an important issue.
The Senior Independent Non-Executive
Director also acts as a sounding board
for the Executive Chairman and an
intermediary for other Directors. He is
responsible for holding regular informal
meetings with other Directors and is
responsible for leading the annual
appraisal of the Executive Chairman’s
performance.
The Executive Directors are responsible
for implementing and delivering the
strategy and operational decisions
agreed by the Board, making
operational and financial decisions
required in the day-to-day operation
of the Group, providing executive
leadership to the wider staff team,
championing the Group’s core values
and promoting talent management.
The Non-Executive Directors and Senior
Independent Non-Executive Director
contribute independent thinking and
judgement through the application
of their external experience and
knowledge, scrutinise the performance
of EMT, provide constructive challenge
to the Executive Directors and ensure
that the Group is operating within the
governance and risk framework
approved by the Board.
As noted above the Board holds
regular meetings at which financial,
operational and other reports are
considered and where appropriate
voted upon. The Board is responsible
for the Group’s strategy and key
financial and compliance issues.
There are certain matters that are
reserved for the Board, they include:
1.
2.
approval of the Group’s strategic
aims and objectives;
approval of the Group’s annual
operating and Capex budgets and
any material changes to them;
3.
4.
5.
review of Group performance and
approving any necessary
corrective action that is to be
taken;
extension on the Group’s activities
into new business or geographical
areas;
any decision to cease to operate
all or any part of the Group’s
business;
6. major changes to the Group’s
corporate structure and
management and control
structure;
7.
8.
9.
any changes to the Group’s listing;
changes to governance and key
business policies;
ensure maintenance of a sound
system of internal control and risk
management;
10. approval of half yearly and annual
report, accounts and preliminary
announcements of final year
results;
11.
review material contracts and
contracts not in the ordinary
course of business; and
12. Setting EMT pay and conditions,
annual bonuses and awards under
the Long Term Incentive Plans
(“LTIPs”).
The Board has approved the adoption
of the QCA Code as its governance
framework against which this statement
has been prepared and will monitor the
suitability of this Code on an annual
basis and revise its governance
framework as appropriate as the
Group evolves.
The Board has a Remuneration
Committee and Audit Committee,
further details relating to which are
set out below. The Board has made
the decision not to have an HSSE
Committee. HSSE is considered to be of
the upmost importance to the Board
and throughout the organisation. An
HSSE report is provided and a verbal
update given at every Board meeting,
being one of the first items on the
agenda. At present the Directors feel
that HSSE matters being discussed by
the Board in its entirety is of benefit. At
some stage, especially if the operations
of the business grow significantly, the
decision may be made to establish
an HSSE Committee.
The Remuneration Committee
The Remuneration Committee is
responsible for determining and
recommending to the Board the
remuneration of the Group’s Executive
Chairman, Executive Directors and
other members of the EMT. It is also
responsible for the design of all share
incentive plans and the determination
of individual awards to Executive
Directors and other EMT and the
performance targets to be used.
The Remuneration Committee currently
comprises of Nicholas Clayton
(Chairman), James Menzies, David
Segel and Angus Winther. The
Committee generally meets twice
a year.
The Audit Committee
The main functions of the Audit
Committee include monitoring the
integrity of the Group’s financial
statements and reviewing the
effectiveness of the Group’s internal
controls and risk management systems.
The Audit Committee makes
recommendations to the Board in
relation to the appointment of the
Group’s auditors, overseeing the
approval of their remuneration and
terms of engagement and assessing
annually their independence,
objectivity and effectiveness. It also
ensures that the Group is compliant
with its relevant regulatory
requirements.
The Audit Committee currently
comprises of Angus Winther (Chairman),
James Menzies, David Segel and
Nicholas Clayton. The Audit Committee
generally meets three times a year.
10.
Communicate how the Group is
governed and is performing by
maintaining a dialogue with
shareholders and other relevant
stakeholders.
The Board places a high priority on
transparent and effective
communications with shareholders and
all other stakeholders. As an AIM listed
Group there is a need to provide fair
and balanced information in a way that
is understandable to all stakeholders.
The Board recognises the importance
of engaging with all stakeholders
including investors, partners, suppliers,
media, communities and the GORTT.
We update and where appropriate
seek feedback, from all key
stakeholders via regular meetings and
communications throughout the year.
Refer to Stakeholder Engagement
section on page 61 for further
information.
Annual Report & Financial Statements 2020
Governance
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Corporate Governance Framework
The Board is responsible for managing the Company, formulating strategy, setting budgets and raising capital, overseeing overall
performance and discharging legal and statutory obligations. The Board has established Audit and Remuneration Committees to assist
it in discharging its responsibilities and to have strong scrutiny over the related functions. The Board delegates day-to-day responsibility
for running the Group to the Executive Management Team led by the Executive Chairman.
The Board
Audit Committee
Remuneration Committee
The Audit Committee monitors the integrity of the Company and
Group’s financial statements and reviews the effectiveness of the
Group’s internal controls and risk management systems. The Audit
Committee makes recommendations to the Board in relation to the
appointment of the Company and Group’s auditors, overseeing the
approval of their remuneration and terms of engagement and
assessing annually
independence, objectivity and
effectiveness. It also ensures that the Company and Group is
compliant with its relevant regulatory requirements.
their
The Remuneration Committee determines and makes
recommendations to the Board on the remuneration of the
Company’s Executive Chairman, Executive Directors and other
members of the Executive Management Team. It is also responsible
for the design of all share incentive plans and the determination
of individual awards to Executive Directors and other Executive
Management and the performance targets to be used.
In addition to his role within the Board, the Executive Chairman is also responsible for leading the Executive Management Team by
monitoring as well as participating in day to day business decisions and driving the team towards strategic goals.
Executive Chairman
Executive Management Team
Company Secretary
The Executive Management Team ensures the Operational
functions of the Company are carried out safely/ efficiently and
provides Corporate, Legal, HSSE and Financial inputs and
recommendations to the Managing Director who in turn relates the
proposed initiatives to the Executive Chairman on operational
matters.
Company Secretary works closely with the Board and Board
Committees to ensure that Board and Committee members
receive appropriate updates on governance and compliance and
good boardroom practices are preserved.
The Group’s Annual Report and Notice
of AGMs are mailed to all shareholders.
The Interim Report and other investor
presentations are also available for the
last six years and can be downloaded
from our website. Our shareholders are
also kept up to date through RNS on
regulatory matters and matters of
material substance. Quarterly updates
are provided to the market and any
deviations to these updates are
announced through RNS.
The Group also communicates with
shareholders and potential investors
through a variety of other methods
including investor presentations, analyst
meetings, PR media, emails and one-
on-one and group meetings. The
Executive Chairman and, as necessary,
the Senior Independent Non-Executive
Director liaises regularly with the
Group’s major shareholders and other
relevant stakeholders and ensures that
their views are communicated to the
Board. Encouraging effective two-way
communication with shareholders
encourages mutual understanding
and better connection with them. The
benefits include improved transparency
of information on the business and its
performance, appropriate
consideration of all shareholders' views,
as well as instilling trust and confidence
to allow informed investment decisions
to be made by the Board.
On behalf of the Board
Bruce Dingwall, CBE
Executive Chairman
17 May 2021
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Trinity Exploration & Production plc
Governance
Board of Directors
Executive Directors
Bruce Dingwall, CBE
Executive Director
Jeremy Bridglalsingh
Executive Director
Independent
Non-Executive Directors
Nicholas Clayton
Senior Independent
Non-Executive Director
Remuneration Committee Chairman
(13 February 2013 to present)
(11 January 2017 to present)
(28 November 2018 to present)
Bruce holds dual citizenship as a
Trinidadian (birthplace) and British
(place of residency). He has over 30
years’ experience in the oil and gas
industry. Bruce founded Trinity in
2005 with the acquisition of Venture
Production Plc’s Trinidadian assets.
Bruce founded Venture Production in
1997 around the central strategy of
assisting the major operators in
releasing value from assets that were,
to them, no longer material. Venture
was sold to Centrica for over USD 2.0
billion following a hostile takeover. At
the time of the takeover Venture was
producing 45,000 barrels of oil
equivalent per day (“boepd”) and had
reserves of 225 mmbbls. Bruce is a
Geologist and studied at Aberdeen
University. He began his career with
Exxon as a Geophysicist in the North
Sea before moving to London and
Scottish Marine Oil (“Lasmo”) where he
held numerous senior management
roles in its South-East Asian operations.
Jeremy is a Trinidadian and is a
qualified accountant (Chartered
Institute of Management Accountants
(“CIMA”), 2006) with a BSc. in
Management Studies from the
University of the West Indies (2000).
Prior to joining Trinity in 2012, he
worked in financial services at
PricewaterhouseCoopers (T&T) and
Operis Group plc (London), mainly in an
advisory role on various transactions
across a number of jurisdictions. In the
past 9 years with Trinity, he has held
roles across the Financial, ICT and
Supply Chain disciplines and assumed
the role of CFO of Trinity in January
2016 and combined dual role of
Managing Director effective March 2019.
He officially handed over the CFO role
in September 2020.
Nicholas is British and has provided
strategic and corporate finance advice
to, and has been a Non-Executive
Director of, numerous public and private
oil and gas companies since 2007. Prior
to that, he held a series of senior oil and
gas corporate finance roles, including
Global Co-Head of Oil and Gas
Corporate Finance for Canaccord
Adams and Global Head of Oil and
Gas Corporate Finance for Dresdner
Kleinwort Wasserstein. He started his
career with BP, before moving into
financial services where he specialised
in the oil and gas sector. He brings to
the Board over 37 years of experience
within the oil and gas sector both as a
practitioner, a director, and as an
adviser. He currently serves as a Non-
Executive Director of Alpha Petroleum
Resources Limited. Nicholas is the
Chairman of Trinity’s Remuneration
Committee and a member of the
Audit Committee.
Annual Report & Financial Statements 2020
Governance
69
Non-Executive Directors
James Menzies
Independent Non-Executive Director
David Segel
Non-Executive Director
Angus Winther
Non-Executive Director
Audit Committee Chairman
(23 June 2017 to present)
(11 January 2017 to present)
(11 January 2017 to present)
James is British and is also a qualified
Geophysicist. He brings to the Board
a broad range of industrial and
corporate expertise as he has 32 years
of experience within the oil and gas
industry both as a technical
practitioner and as a Senior Executive.
James is the former Chief Executive
Officer of Coro Energy plc. James
founded Salamander Energy plc in
2004 and was the Chief Executive
Officer up until its takeover by Ophir
Energy that valued the business at
USD 850.0 million. James is a member
of Trinity’s Audit Committee and
Remuneration Committee.
David is an American businessman,
investor and philanthropist. He is the
Founding Partner of the Mako Group
(est. 1999), a London based financial
services business, and currently serves
as the Mako Group’s Chairman. He also
operates a portfolio of businesses in
media and technology. He co-founded
Mpower Pictures, LLC in 2006, which is
an independent motion picture
production group. David serves on the
board of Eastern Congo Initiative, a
philanthropic organization dedicated
to bringing sustainable clean water
solutions and best practice medical
clinics to the people of the Democratic
Republic of the Congo. He attended
Yale University and earned a B.A. in
Physics and Philosophy in 1986. David is
a member of Trinity’s Audit Committee
and Remuneration Committee.
Angus is British and has spent 27 years
working in the investment banking
industry, primarily advising clients in
insurance and financial services. He co-
founded Lexicon Partners, a London
based investment banking advisory
firm, in 2000 and was closely involved in
the leadership of that firm until it was
acquired by Evercore in 2011. He served
as a senior adviser at Evercore until
October 2016, when he left the firm to
pursue other interests. He is a Non-
Executive Director of Hiscox Syndicates
Limited (a Lloyd’s managing agent) and
the Ecclesiastical Insurance Office plc
(a specialist insurance group) and
trustee of several charities. He has a
degree in Politics from Durham
University. Angus is the Chairman of
Trinity’s Audit Committee and a
member of the Remuneration
Committee.
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70
Trinity Exploration & Production plc
Governance
Executive Management Team
Bruce Dingwall, CBE
Executive Chairman
Jeremy Bridglalsingh
Managing Director
Edouard Brain
Chief Financial Officer
Bruce founded Trinity in 2005. Bruce is a
Geologist and studied at Aberdeen
University. He began his career with
Exxon as a Geophysicist in the North
Sea before moving to London and
Scottish Marine Oil (“Lasmo”) where he
held numerous senior management
roles in its South-East Asian operations.
Joined Trinity in 2012. Chartered
Management Accountant for c.15 years
with previous financial services
experience gained in the United
Kingdom.
Joined Trinity in September 2020.
Edouard brings 20+ years of
international financial experience,
having previously held various senior
roles at; Maurel & Prom, Perenco and
PricewaterhouseCoopers (Paris).
Nirmala Maharaj
Chief of Staff & General Counsel
Rajesh Rajpaulsingh
Chief Operations Officer
Tracy Mackenzie
Corporate Development Manager
Joined Trinity as the Legal Manager in
2012, served as Legal and Corporate
Services Manager from 2014 and
Country Manager from October 2015 to
March 2019. She is an Attorney-at-Law
by background with 20+ years
experience.
Joined Trinity in 2011. Previously worked
at Petrotrin and BPTT in various
capacities. Petroleum Engineer by
background for 16+ years.
Joined Trinity in 2014. Previously worked
in Investment Banking at Panmure
Gordon and various other UK financial
institutions at a director level. Oil & Gas
Analyst for 13+ years.
Annual Report & Financial Statements 2020
Governance
Board Activities
71
The Board is responsible for full and
effective control over the Group. The
Board holds regular meetings at which
financial, operational and strategic
goals are considered and decided
upon.
Matters Reserved for the Board
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Approval of the Group’s strategy
and objectives;
Approval of the Group’s budgets,
including operating and
expenditure budgets;
Growth of activities into new
business or geographical locations;
Material changes to the Group’s
structure and management;
Changes to the Group’s listing,
governance or business processes;
Reviewing the effectiveness of the
Board and its Committees; and
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Setting EMT pay and conditions,
annual bonuses and awards under
the LTIPs.
Time commitment
Board and Board Committee meeting
dates are agreed at the beginning of
the year. It is expected that all Directors
attend all meetings of the Board and
any committees of which they are
members, as well as the AGM. It is also
expected that Directors devote
adequate time to prepare for
Board/Committee meetings. Effective
2020, it is also anticipated that the
Directors take part in annual visits to
the Group’s San Fernando Office,
located in Southern Trinidad, meeting
with administrative and technical
personnel via face to face meetings
and as well as making site visits to
well/drilling locations.
Whilst the Executive Chairman and the
Executive Director are expected to
devote substantially the whole of their
time to their duties within the Group the
Non-Executive Directors are expected
to allocate sufficient time to the Group
to discharge their responsibilities. Both
Audit and Remuneration Committees
are chaired by Non-Executive Directors
who work closely with the Group
Secretary in preparing agendas for the
meetings and ensuring adequate
advice and guidance is obtained in
their respective areas.
The Directors’ attendance at scheduled
and ad hoc Board Meetings and Board
Committees during 2020 is detailed in
the table below:
Directors’ attendance
Board Board
Scheduled Ad Hoc Audit Remuneration
Meetings Meeting1 Committee Committee
Director Requirement 11 5 3 2
Bruce Dingwall, CBE (Chairman) 11 4
Jeremy Bridglalsingh 11 5
Angus Winther 11 5 3 2
David Segel2 10 4 3 2
James Menzies 11 5 3 2
Nick Clayton 11 5 3 2
Total meetings 11 5 3 2
Notes:
1
2
Ad hoc meetings: Additional meetings called for a specific matter generally of a more administrative nature not requiring full Board attendance.
Rational for absence is due to conflicting commitment.
Relationship with Shareholders
The Board remains fully committed to
maintaining communication with the
Group’s shareholders. There is regular
dialogue with major shareholders and
meetings following significant
announcements.
The Group’s website
www.trinityexploration.com contains all
announcements, press releases, major
corporate presentations and interim
and year end results. The Group
publishes the annual report and
accounts each year which contains a
strategic report, governance section,
financial statements and additional
information. The Annual Report is
available on the Group’s website and
also available in paper format, on
request.
The Board uses its AGMs to
communicate with both private and
institutional investors. All Directors
attend the AGM and make it an
opportunity to engage with
shareholders, answer queries during
the formal business of the AGM or
to discuss more informally following
the meeting. The shareholders are
encouraged to attend and vote at
AGMs or to appoint a proxy to
represent them. Immediately after
the AGM, the decisions made on the
AGM resolutions are released to the
market by RNS.
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72
Trinity Exploration & Production plc
Governance
Audit Committee Report
2020 Highlights
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l Going concern assessment.
Review and approval of key
financial reporting issues,
assumptions and
judgements, particularly
those relating to complex
calculations including
non-current asset
impairments, provision for
decommissioning and
deferred taxes.
l Change of Auditor to BDO
LLP following completion of
year end 2019 Audit.
Review of the BDO 2020
Interim Review Report.
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Responsibilities of the
Audit Committee
The Committee reviews and makes
recommendations to the Board on:
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any change in accounting policies.
accounting issues that require a
major element of judgement or risk.
compliance with accounting
standards and legal and
regulatory requirements.
disclosures in the interim and
annual report and financial
statements.
reviewing the effectiveness of the
Group’s financial and internal
controls.
appointment of the Group’s
external auditors.
any significant concerns raised by
the external auditor about the
conduct or overall outcome of the
annual audit of the Group.
any matters that may significantly
affect the independence of the
external auditor.
During the year, the Committee met
three times and the members’
attendance record at Committee
meetings during the financial year is set
out in the Board Activities on page 71.
Although not a member of the Audit
Committee, the Managing Director and
Chief Financial Officer are invited to
attend meetings. The Group’s external
auditors are also invited to attend
Committee meetings, unless they have
a conflict of interest.
An essential part of the integrity of
the financial statements is the Going
Concern assessment and the key
assumptions, estimates and judgments
made within the financial statements.
The Committee reviews the Going
Concern assessment and key
assumptions, estimates and judgments
prior to publication of both the interim
and full year financial statements, as
well as considering significant issues
throughout the year. In particular, this
includes reviewing any subjective
material assumptions relating to the
Group’s activities to enable an
appropriate determination of asset
valuation, provisioning and the
accounting treatment thereof. The
Committee reviewed and was satisfied
that the Going Concern assessment
and judgments exercised by
management on material items
contained within the Report and
Financial Statements are reasonable.
The Audit Committee has considered
the Group’s internal control and risk
management policies and systems,
their effectiveness and the requirements
for an internal audit function in the
context of the Group’s overall risk
management system. The Committee
is satisfied that the Group does not
currently require an internal audit
function. However, it will continue to
periodically review the potential need
for an internal audit function. The
Committee is assured that the robust
internal financial controls, risk
management and mitigation measures
in place are sufficient and effectively
communicated.
Annual Report & Financial Statements 2020
Governance
73
Auditors
Rotation of Audit Partners
The Group’s external auditors are
required to rotate their audit partners
on a basis that allows them sufficient
time to be fully familiar with the
business, so that they can operate
effectively and efficiently, but not be
appointed in the role for so long that
it may give the appearance of a lack
of independence.
This policy requires the lead audit
partner to rotate after a maximum
period of five years, and all other
partners including the review partner
to rotate after a maximum period of
seven years.
Each of the Group’s subsidiaries also
apply the same rotation policy.
Angus Winther
Chairman of the Audit Committee
17 May 2021
During the year, the Group undertook
a competitive tender of the external
auditor role, following which they
appointed Binder Dijker Otte LLP
(“BDO”) to act as external auditors for
the Group. The Group fee to BDO for
the financial year to 31 December 2020
is USD 0.3 million.
The previous external auditors, PwC,
were first appointed in 2013. The Group
fees paid to PwC (mainly for advisory
and audit handover) for the financial
year to 31 December 2020 were
USD 0.1 million.
Policy on Auditor Appointments
Appointment of External Auditors
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External auditors are re-appointed
annually, subject to a satisfactory
review of their performance,
independence and service
proposal by the Audit Committee.
The Audit Committee undertakes
a comprehensive review of the
quality, effectiveness, value and
independence of the audit
provided each year, seeking the
views of the wider Board, together
with relevant members of the EMT.
Unless a change in external auditor
is deemed appropriate in the
intervening period, every five years
the Audit Committee consider the
appropriateness of putting the
external audit out to tender, and
will inform the shareholders as to
their decision.
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74
Trinity Exploration & Production plc
Governance
Remuneration Committee Report
Responsibilities of the
Remuneration Committee
The Remuneration Committee is
responsible for making
recommendations to the Board
regarding the framework for the
remuneration of the Executive Directors
and other members of EMT. The
Committee works within its terms of
reference, and its role includes:
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Review, evaluate, determine
and agree with the Board, the
Remuneration Policy for all
Executive Directors and under
guidance of the Executive
Directors, other members of EMT.
Ensure executive remuneration
packages are competitive.
Determine whether annual
bonuses should be payable and
recommending levels for individual
executives.
Determine each year whether any
awards/grants should be made
under the long-term incentive
schemes, the value of such awards
and their performance criteria.
Agree Directors’ service contracts
and notice periods.
The KPI matrix acts as a guide to
setting bonuses and directing the
activities of executives towards the
achievement of the strategic direction
established by the Board. Implicitly, this
reflects an overall assessment by the
Board of the risks involved in pursuing
the strategy of the Group.
Executives understand that the
Remuneration Committee will always
exercise discretion when finalising
bonuses to take into account stock
market, oil market and general
economic conditions prevailing globally
as well as in Trinidad and the UK, at
the time bonuses are set as well as the
underlying performance of the business.
For 2019, although bonuses were
agreed relating to the KPI matrix, the
Remuneration Committee concluded,
and the Executive Directors agreed,
that due to the economic conditions
prevailing in H1 2020 payment of these
bonuses would be deferred to a time
when it is financially prudent for the
business to do so. The 2019 bonus
awards were subsequently paid in
September 2020. Given the robust
performance of the business during
2020, and more stable conditions
currently prevailing it is expected that
2020 bonuses will be paid shortly after
publication of the audited accounts.
During 2020 the Remuneration
Committee decided to engage the
services of a third party remuneration
consultant (FIT) to assist it in its
deliberations on remunerative trends
and design. The consultant is a
member of the Remunerative
Consultants Group and, as such,
voluntarily operates under the Code
of Conduct in relation to executive
remuneration consulting in the UK.
Our Auditors have audited aspects of
this report as it relates solely to the
reported items within the financial
statements.
The Remuneration Committee utilises a
range of tools and measures to frame
its discussions and deliberations over all
aspects of executive remuneration at
Trinity. These include, but are not limited
to, a review of executive remuneration
in peer companies and surveys of
executive remuneration for similar sized
companies in other sectors. In addition,
in 2021 the Committee has engaged an
external consultant to review the
remuneration of its key executives in
a peer group context, in addition to
commissioning a report on market
trends in remuneration for executives
UK market wide.
The salaries of the EMT were increased
broadly in line with inflation in 2020
and have been held constant in 2021
reflecting the difficult operating
environment.
The framework for determining
executive bonuses is established by
a challenging matrix of KPIs that are
designed to align the interests of
executives with the overall strategy
of the Group. Typically, the scorecard
involves 15 to 20 KPIs covering a range
of strategic targets deemed critical to
the business and falling within the
following areas:
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Financial – including EBITDA per
share and Operating break-even
targets;
Operational – including annual
production targets and drilling
objectives;
HSSE – targets for LTIs and oilfield
security breaches;
Strategic – comprising major value
accretive initiatives; and
Corporate – includes investor
relations and shareholder structure
targets.
The Executive Directors work with
members of the EMT to translate these
KPIs into sets of secondary objectives
for each EMT member that drives their
individual performance evaluations
and, ultimately, cascades down to drive
the performance of all employees
working within the Group.
Annual Report & Financial Statements 2020
Governance
75
2020 Performance and Review
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Corporate Governance disclosure:
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Corporate KPI’s:
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Discussed UK Corporate
Governance requirements in
respect of responsibilities of
the Remuneration Committee
in recommending EMT pay.
The Group currently is not
required to adhere to the UK
Corporate Governance Code.
However, the Committee
recommended that best
practices are followed and
continuously monitors the
guidelines.
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Remuneration Policy:
To appoint a remuneration
consultant to assist the Committee
with reviewing the Company’s
remuneration policy.
Nicholas Clayton
Remuneration Committee Chairman
17 May 2021
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Setting corporate KPI’s which
are used to determine the
bonus awards of the Executive
Chairman and Executive
Director. EMT’s bonus awards
were set according to a
mixture of Corporate KPI’s and
personal performance.
Mid-year/Year-end review of
corporate KPI’s.
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Key pay outcomes:
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Bruce Dingwall, CBE’s base
salary for 2020 was USD
368,000 (2019: USD 360,000).
Jeremy Bridglalsingh’s base
salary for 2020 was USD
255,000 (2019: USD 240,000).
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LTIP awards
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Reviewed performance criteria
and recommended 2020 LTIP
awards.
The Group granted options
over 3,815,855 ordinary shares
on 25 June 2020 (representing
1% of the then issued capital of
the Group) to certain members
of the EMT in respect of
performance during 2019.
The Group also granted
options over 1,000,000
ordinary shares on 30 October
2020 to the newly appointed
chief financial officer of the
Group
The Group also granted
options over 1,422,961 ordinary
shares on 30 June 2020 to a
member of the EMT. These
options were granted on the
same terms as the 2017 LTIP
awards.
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76
Trinity Exploration & Production plc
Governance
Directors’ Remuneration Report
Review and Approval Process
The Group prepares the Remuneration
Report on an annual basis and
presents it to the Remuneration
Committee alongside the existing
Remuneration Policy. The Committee
review and evaluate the content
and advise of any amendments or
recommendations before final approval
is granted for publication. Our Auditors
have audited aspects this report as it
relates solely to the reported items
within the financial statements.
Remuneration Policy Table – Executive
Directors
Bruce Dingwall, CBE maintained the
role of Executive Chairman and Jeremy
Bridglalsingh served as Executive
Director throughout 2020. Jeremy
Bridglalsingh transitioned to being
solely Managing Director during
September 2020 post the appointment
of a new CFO of the Group.
The main components of the
Remuneration Policy and how they
are linked to and support the Group’s
business strategy, are summarised
below:
Element
Operation
Maximum opportunity
Performance assessment
Base salary
Reflects level of
responsibility and
achievement of the
individual.
Salaries are reviewed as required by
the Remuneration Committee and
adjustments are made accordingly.
Any salary increases in future
years will be determined by the
Remuneration Committee.
Not applicable.
When determining salaries for the
Executive Directors the Committee
takes into consideration:
> Market data;
>
>
Local market employment
conditions; and
Salary increases awarded to other
employees in the Group.
Salaries are benchmarked periodically
against comparable roles at
companies of a similar size, complexity
and which operate primarily, but not
exclusively, in the exploration &
production sector and the AIM market.
Annual bonus
The annual bonus
aligns rewards to key
Group strategic KPIs
agreed by the
Committee and
drives short term
performance of
the Group.
Executive Directors may participate in
an annual performance driven bonus
scheme.
The performance period is one
financial year.
Pension
To provide competitive
levels of retirement
benefit.
Salary supplement in lieu of
pension contributions for both
Executive Directors.
Maximum: 100% of base
salary.
This can be exceeded in
exceptional circumstances at
the discretion of the
Committee. It may also be
paid wholly or in part in
shares or deferred at the
discretion of the Committee.
There is no contractual
obligation to pay bonuses.
A KPI performance scorecard
is used as a guide by the
Committee, which can be
overridden based on a
broader assessment of overall
Group performance and
market conditions.
The measures are determined
by the Committee, typically at
the commencement of the
financial year.
Up to 10% of base salary.
Not applicable.
Annual Report & Financial Statements 2020
Governance
77
Element
LTIP
Operation
Maximum opportunity
Performance assessment
The LTIP aligns
Executive Director
interests with those of
shareholders and
drives superior long-
term performance.
Under the LTIP, Executive Directors
and other members of the EMT may
be provided with awards in the form
of conditional shares or nil-cost
options.
Annual awards will normally
vest at the end of a three year
period subject to performance
conditions.
Further details of the
performance conditions of
these awards can be found in
Note 22 in Notes to Financial
Statements.
In 2020, grants were made to
the Executive Directors and
other EMT members, relating
to their performance in 2019 ,
further details of which can be
found on page 75.
One-off awards were also
made to the new CFO of the
Group and one other EMT
member.
In future, aggregate annual
awards made to Executive
Directors and other members
of the EMT will normally be
capped at 1% of the issued
share capital of the Company.
Awards under the LTIP are
non-contractual., except
where one off awards are
made to new members of the
EMT or new joiners.
Other benefits
To provide competitive
levels of employment
benefits.
The Committee may provide a
benefits package to EMT members
at its discretion.
Reviewed periodically to ensure
benefits remain market competitive.
Benefit values vary year on
year depending on premiums
and the maximum potential
value is the cost of the
provision of these benefits.
Not applicable.
Shareholding policy
To ensure that
Executive Directors’
interests are aligned
with those of
shareholders over a
longer time horizon.
Requirement to build and maintain a
holding of shares equivalent in value to
a minimum of two times their salary
within a five year period.
Not applicable.
Not applicable.
Executive Directors’ service contracts
The Company’s policy on Directors’ service contracts are indicated below:
Effective term Notice period
Executive Chairman Rolling with no fixed expiry date. Six months
Executive Director Rolling with no fixed expiry date. Six months
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Trinity Exploration & Production plc
Governance
Directors’ Remuneration Report (continued)
Non-executive Director
Remuneration Policy
Objective
To attract Non-Executive Directors with
the requisite skills and experience.
Operation
Fee levels are set at a level paid for
comparable roles at companies of a
similar size, complexity and which
operate in the exploration & production
sector. Fee levels are reviewed annually.
No new appointments were made
during 2020 and no revisions to non-
executive director remuneration
occured during the year.
Annual Report on Remuneration
This section of the Remuneration
Report contains details of how the
Group’s Remuneration Policy was
implemented for Directors in 2020.
Our Auditors have audited aspects
of this report as it relates solely to the
reported items within the financial
statements.
Executive Remuneration (Unaudited)
Bruce Dingwall, CBE maintained the
role of Executive Chairman and Jeremy
Bridglalsingh served as Executive
Director throughout 2020. Jeremy
Bridglalsingh transitioned to being
solely Managing Director during
September 2020 post the appointment
of a new CFO of the Group.
The table below sets out the single
total figure of remuneration and
breakdown for each Director paid for
the 2020 financial year. Comparative
figures for 2019 have also been
provided where applicable.
Maximum potential value
Fees are to be paid on a quarterly basis
to Non-Executive Directors. Whilst there
is no maximum individual fee level, fees
are set at a level considered appropriate
to attract and retain the calibre of
individual required by the Group.
Fee increases may be made in line with
the market and to take into account
the time commitment and duties
involved. Non-Executive Directors do
not participate in any variable
remuneration element or any other
benefits arrangements.
Performance assessment
Not applicable for Non-Executive
Directors.
Bruce Dingwall, CBE1 Jeremy Bridglalsingh2
All figures expressed in USD 2020 2019 2020 2019
Base Salary 368,000 360,000 255,000 240,000
Taxable Benefits3 36,800 36,000 20,417 20,417
Annual Bonus 184,000 144,000 127,500 96,000
Pension — — 25,500 24,000
LTIP(s)5 289,485 339,305 179,274 204,086
Gain on exercise of
Share Options6 361,842 — — —
Total 1,240,127 879,305 607,691 584,503
Notes:
1.
2.
3.
4.
5.
6.
Bruce Dingwall, CBE – Executive Chairman effective 13 November 2015 (previously Executive Chairman appointed 14 February 2013 to 8 April 2015, Non-Executive
Chairman 8 April 2015 to 13 November 2015).
Jeremy Bridglalsingh – Executive Director effective since 11 January 2017. Assumed the role of Managing Director in September 2020 following the appointment of a
new CFO for the Group.
Taxable benefits include: Chairman’s benefits allowance, which is 10% of salary and vehicle allowance in favour of Executive Director.
Foreign Exchange (“FX”) Conversions:
i.
ii.
GBP fees were converted to USD using an exchange rate of 1: 1.2794 for 2020 (2019: 1: 1.2749).
TTD fees were converted to USD using an exchange rate of 1: 6.7580 for 2020 (2019: 1: 6.7591).
LTIP: The LTIP comprises an important aspect of Trinity’s remuneration philosophy and allows Management to share in the Group’s success when the business
strategy is executed successfully (refer to LTIPs section on pages 80 to 81 for further info).
Gain on exercise of Share Options ("SO")= (SO x Market Value at date of exercise less Exercise Price (0)). Bruce Dingwall exercised 3,121,080 LTIPs at a Market Value of
GBP 0.885. Gain value of GBP 276,215 was converted at 1.31.
Annual Report & Financial Statements 2020
Governance
79
Non-Executive Directors Fees (Audited)
USD Equiv.
Basic Fee 50,996
Audit Committee Chairman 12,749
Remuneration Committee Chairman 6,375
Committee Committee
Director Director Chairman Chairman
Fees Fees Fees Fees Total Total
All figures expressed in USD3 2020 2019 2020 2019 2020 2019
Angus Winther1 50,996 50,996 12,749 12,749 63,745 63,745
David Segel 50,996 50,996 — — 50,996 50,996
Nicholas Clayton4 50,996 50,996 6,375 6,375 57,371 57,371
James Menzies 50,996 50,996 — — 50,996 50,996
Total 203,984 203,984 19,124 19,124 223,108 223,108
Notes:
1.
2.
Angus Winther – Non-Executive Director effective 11 January 2017 and appointed Audit Committee Chairman effective 23 June 2017. Fees include Non-Executive
Director and Audit Committee Chairman Fees.
Nicholas Clayton – Senior Independent Non-Executive Director and appointed Remuneration Committee Chairman on 28 November 2018. Fees include Non-
Executive Director and Remuneration Committee Chairman Fees.
3.
Non-Executive Director Fees are paid in GBP and were converted to USD using an exchange rate of 1: 1.2794 for 2019 (2018: 1: 1.2749).
Company Remuneration Spend (Audited)
The following table indicates the Group’s total remuneration for 2020:
Year-on-year change % of Total
Directors & Other Directors Directors Directors
Key Managers Employees Total & Key Other & Key & Key
Total1 Total2 Remuneration Managers Employees Managers Managers
2020 2019 2020 2019 2020 2019 2020 2019 2020 2019
1,714 2,043 5,948 5,730 7,662 7,773 -16% 4% 22% 26%
Notes:
1.
2.
3.
Refer to Note 28 Related Party Transactions – Key Management and Directors’ compensation in the Financial Statements on page 135.
Refer to Note 32 Employee Costs on page 137.
All figures expressed in USD ‘000.
Statement of Executive Directors’ Shareholding (Unaudited)
The table below summarises the Executive Directors’ interests in shares at 31 December 2020:
Outstanding interests
Interests
subject
Shareholding to conditions
Total
Current Beneficially Vested but Share Options/ held at 31
Shareholding owned unexercised interests Mirror December
(% salary) shares LTIP awards – LTIP Scheme 2020
Director
Bruce Dingwall, CBE 350% 14,861,422 - 8,743,872 625,908 24,231,202
Jeremy Bridglalsingh 75% 410,382 1,788,912 5,312,952 20,000 7,532,246
Notes:
1.
2.
3.
4.
5.
The closing share price of GBP 0.11 (USD 0.14 equiv.) as at 31 December 2020 has been taken for the purpose of calculating the current shareholding as a
percentage of the salary at the last day of trading for the financial year.
Beneficial interests include shares held directly or indirectly by connected persons.
On 30 June 2020, one off 2017 LTIP awards granted to Bruce Dingwall, CBE and Jeremy Bridglalsingh over 3,120,080 and 1,788,912 ordinary shares respectively vested
in accordance with the terms of the LTIP scheme. On 12 August 2020, Bruce Dingwall, CBE exercised these options, and sold 1,744,772 ordinary shares to satsify tax
liabilities arising in relation to the award. The options over 1,788,912 ordinary shares held by Jeremy Bridglalsingh remain unexercised but have been included in the
Current Shareholding % of Salary calculation to better illustrate his interests in the Company.
The share options vesting period has passed for both Bruce and Jeremy. These have not been exercised and will expire March 2023.
All GBP fees were converted to USD using an exchange rate of 1.2794.
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Trinity Exploration & Production plc
Governance
Directors’ Remuneration Report (continued)
Share based payments
Refer to Note 22 - Notes to Financial Statements.
Total Shareholder Return (“TSR”) 2017-2020 (Audited)
TSR factors in capital gains and dividends when measuring the total return generated per share for a Trinity shareholder.
Average TSR GBp TSR USD
Share price Closing Opening % equiv.*%
2020 11.1 10.8 11.4 (5) (5)
2019 11.8 11.2 12.0 (7) (9)
2018 17.7 12.0 14.5 (17) (23)
2017 13.2 14.5 1.9 671 904
Note: * 2020 FX: USD: GBP rate used 1.2794.
Long term incentive Share Plans (“LTIPs”) (Unaudited)
The LTIP is designed to provide long-term incentives for Executive Directors and EMT members to deliver long-term shareholder
returns. Under the plan, participants are granted options which only vest if certain performance conditions are met. Participation
in the plan is at the Board’s discretion and no individual has a contractual right to participate in the plan or to receive any
guaranteed benefits.
In accordance with the announcement to the market on 25 August 2017, the current rules of the LTIP provide that the aggregate
number of ordinary shares issued or reserved for issuance under awards granted pursuant to the LTIP may not exceed 15% of the
Company’s issued share capital (including any shares held in treasury). This includes up to 10% for Initial Awards (which included
the 2017 LTIP Awards) and up to 1% per annum for Annual Awards.
Movements in the number of LTIPs outstanding and their related weighted average exercise prices are as follows:
2020 2019
Average Average
exercise exercise
price per Number of price per Number of
Share Option Options Share Option Options
At 1 January GBP 0.00 31,789,818 GBP 0.00 25,415,998
Forfeited GBP 0.00 (1,720,592) GBP 0.00 (283,004)
Granted GBP 0.00 6,238,817 GBP 0.00 6,656,824)
Exercised GBP 0.00 (4,745,056) GBP 0.00 –
At 31 December GBP 0.00 31,562,987 GBP 0.00 31,789,818
LTIPs outstanding as at 31 December 2020 have the following expiry date and exercise prices:
Expiry Exercise
Grant-Vest date price 2020 2019
24/8/2017 – 30/6/2022 24/8/2027 GBP 0.00 21,030,319 25,415,998
2/1/2019 – 1/1/2021 1/1/2023 GBP 0.00 2,525,101 2,824,000
9/5/2019 – 2/1/2022 2/1/2024 GBP 0.00 3,191,712 3,549,820
25/6/2020 – 2/1/2023 2/1/2025 GBP 0.00 4,815,856 –
2020 LTIPs
The following LTIP awards were granted to Executive Directors during 2020:
Number of ordinary shares
Name Position subject to the Option
Bruce Dingwall, CBE Executive Chairman 1,186,919
Jeremy Bridglalsingh Managing Director 791,281
Annual Report & Financial Statements 2020
Governance
81
On 25 June 2020 Options over 3,815,856
ordinary shares (representing 1% of the
Group’s issued share capital) were
granted under the LTIP in accordance
with the policy announced to the
market on 25 August 2017 and have
been made to certain individuals within
the Company in respect of the
performance of the Company as at the
end of the financial year ended 31
December 2019. These include the
awards to the Executive Directors
shown in the table above. In addition,
on 30 October 2020 the Remuneration
Committee granted Options over
1,000,000 ordinary shares under the
LTIP to a new member of the EMT who
joined the Group as Chief Financial
Officer. These Options were granted on
the same terms as the 25 June 2020
award. These Options will vest on 2
January 2023, subject to meeting the
performance criteria set and continued
employment in the Group. The Options
are exercisable at nil cost by the
participants.
The 2020 LTIP Awards are subject to
the achievement of Relative Total
Shareholder Return ("TSR") performance
targets measured over a three-year
performance period ending on 31
December 2022. The amounts shown
above represent the maximum possible
opportunity.
The Relative TSR ranking will be
determined by calculating the three
month average TSR to the end of the
performance period and dividing this
by the three month average TSR to the
beginning of the performance period
for all companies in the agreed
comparator group. Companies will be
ranked on this basis with the highest
performing Group ranked first. The
share price used to calculate the start
of the TSR calculation in respect of
these awards is based on the 3 month
average TSR leading into 31 December
2019, being 9.683p.
The peer companies comparator group
has been created using the following
filters:
Sector:
FTSE AIM All Share Oil & Gas
constituents
Size:
Market capitalisation of between GBP
20 to 400 million
Further relevance filter:
Exploration & Production operations,
excluding oil equipment and services
and Alternative energy. These filters
create a comparator group which
excludes larger companies that may be
expected to be on the main list and
micro explorers that can show extreme
volatility and which can be numerous
at certain points in the business cycle.
For 2020, the market cap range of
GBP 20-400 million has been deemed
appropriate but the Remuneration
Committee will review the appropriate
range for each new LTIP grant.
2019 LTIPs
May 2019
On 9 May 2019 the Group issued
awards under its LTIP. These awards
were made in accordance with the
policy announced to the market on
25 August 2017 in respect of the
performance of the Group as at the
end of the financial year ended 31
December 2018. The Group announced
the grant of Options over 3,832,824
ordinary shares (representing
approximately 1% of the Group’s issued
share capital) under the LTIP on 9 May
2019, including awards to the Executive
Directors; Bruce Dingwall, CBE (991,685
ordinary shares) and Jeremy
Bridglalsingh (661,124 ordinary shares).
The May 2019 Options will vest on 2
January 2022, subject to meeting the
Performance Vesting
Below the Median None of the award will vest
Median (50th percentile) 30% of the maximum award will vest
Between Median and Upper Quartile Straight Line basis between
these points
Upper Quartile (75%) 100% of the maximum award will vest.
Above the Upper Quartile 100% of the maximum award will vest
performance criteria set and continued
employment in the Group. The Options
are exercisable at nil cost by the
participants. The LTIP Awards are
subject to the achievement of relative
TSR performance targets measured
over a three year performance period
ending on 31 December 2021. The share
price used to calculate the start of the
TSR calculation in respect of these
awards is based on the 3 month
average TSR leading into 31 December
2018, being 14.66p.
January 2019
On 2 January 2019 the Group issued
awards under its LTIP. These awards
have been made in accordance with
the policy announced to the market on
25 August 2017 in respect of the
performance of the Group as at the
end of the financial year ended 31
December 2017. The Group announced
the grant of Options over 2,824,000
ordinary shares (representing 0.735% of
the Group’s then issued share capital)
under the LTIP on 2 January 2019,
including awards to the Executive
Directors; Bruce Dingwall, CBE (664,219
ordinary shares) and Jeremy
Bridglalsingh (478,238 ordinary shares).
The above Options vested on 1 January
2021. Based on the relative TSR
performance of Trinity against the
designated comparator group of
companies 1,882,665 LTIPs (representing
66.67% of the award) vested on this
occasion. The share price used to
calculate the start of the TSR
calculation in respect of these awards
was based on the three month average
TSR leading into 31 December 2017,
which was 16.77p. The share price used
to calculate the end of the TSR
calculation in respect of these awards
was based on the three month average
TSR leading into 31 December 2020,
which was 10.85p.
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82
Trinity Exploration & Production plc
Governance
2017 Grant of Initial Awards
On 25 August 2017 Trinity issued awards
under its LTIP to the Executive Directors
and other key employees. The Group
wished to recognise the need to ensure
that Management was retained and
incentivised to grow the value of the
business and generate shareholder
returns over its next phase of
development following the funding and
share reorganisation in January 2017.
The Group believed that this one-off
award gave Management the
opportunity to build up a meaningful
shareholding in Trinity which further
aligns its interest with shareholders and
will help maintain the culture within
Trinity which encourages strong and
sustained corporate performance that
drives absolute returns to shareholders
over the longer-term. As a result, the
Group announced the grant of Options
over 25,415,998 ordinary shares
(representing 9% of the Group’s then
issued share capital) under the LTIP on
25 August 2017, including awards to the
Executive Directors; Bruce Dingwall,
CBE (9,022,129 ordinary shares) and
Jeremy Bridglalsingh (5,171,221 ordinary
shares). In addition, a further 2,824,001
Options were held back (to form a
retention pool) to be issued at the
discretion of the Remuneration
Committee, for example in the case of
hiring new Executives or EMT members.
On 30 June 2020 the Remuneration
Committee granted Options over
1,422,961 ordinary shares under the LTIP
to a member of the EMT on the same
terms as the awards issued on 24
August 2017, having effectively replaced
2017 LTIP awards issued to a previous
member of the EMT who had left the
Group and whose awards had
consequently been forfeited. The
remaining Options held back (to form
a retention pool) were cancelled on
2 July 2020.
The Options will vest in full on 30 June
2022, subject to meeting performance
targets relating to:
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In respect of 70% of the award, the
Group’s share price growth from
the 2017 placing price of 4.98
pence per share. If the three month
Volume-Weighted Average Price
(“VWAP”) at the testing date is 35
pence or more per share, this part
of the award will vest in full. If the
VWAP at the testing date is 4.98
pence per share or less, this part of
the award will not vest at all. If the
VWAP at the testing date is
between 4.98 pence and 35 pence
per share, this part of the award
will vest on a pro-rated straight-
line basis;
In respect of 20% of the award, full
repayment of the amount due to
the BIR on or before 30 September
2019, in accordance with the terms
of the Creditors’ Proposal
approved in 2017. The final
payment to the BIR under the
Creditors’ Proposal occurred in
2018; and
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In respect of 10% of the award,
redemption of all the CLNs issued
in January 2017 before the second
anniversary of their issue. The CLNs
were redeemed in 2018.
The Options vest in whole or in part on
30 June 2020, 30 June 2021 and 30
June 2022, to the extent that the
relevant performance conditions have
been met. Subject to meeting these
conditions and continued employment
in the Group, the Options are
exercisable at nil cost by the
participants
The Options were tested on June 30
2020 against the relevant performance
conditions resulting in the following
outcome:
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In respect of the Group’s share
price growth, 1,184,019 LTIPs vested
based on the 3 month VWAP of
6.75p prevailing as at 30 June
2020.
As the BIR was repaid in full before
30 September 2019, 20% of the
overall award, being 5,155,075 LTIPs,
vested in full.
As the CLNs were duly redeemed
prior to the second anniversary of
their issue, 10% of the overall
award, being 2,577,538 LTIPs,
vested in full.
Therefore, at the first testing date, a
total of 8,916,631 LTIP's from the 2017
award vested. The remaining LTIP's
issued in respect of the 2017 award will
be retested again at 30 June 2021 and
30 June 2022.
Annual Report & Financial Statements 2020
Governance
Directors’ Report
The Directors’ Annual Report on
the affairs of the Group, together
with the Audited Consolidated
Financial Statements and
Independent Auditors’ Report
for the year ended 31 December
2020 are as follows:
Principal Activities
Trinity is an independent oil producer
whose principal activities are the
exploration, development, production
and sale of crude oil. Its core focus is
T&T where the Group operates assets
onshore and offshore on both the
West and East Coasts. 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 production and reserves
growth. The Group is also pursuing a
range of projects to enhance its ESG
credentials including Micro-LNG and
wind power option for the Galeota
project – to be drafted properly.
Strategic Report
The Group is required by the CA 2006
to include a Strategic Report in its
Annual Report. The information that
fulfils this requirement can be found
from pages 4 to 57.
Going Concern
The Directors have adopted the going
concern basis in preparing the Financial
Statements.
In making their going concern
assessment, the Board have considered
the Group’s current financial position,
budget and cash flow forecast. The
past twelve months has seen the
Group’s measured approach towards
the COVID-19 pandemic where there
were no forced shut-ins or interruptions
affecting the Group’s operations. The
Directors have considered the
continued potential impact of the
COVID-19 pandemic on the Group’s
operational capabilities, liquidity and
financial position over the next twelve
month period and beyond. The going
concern assessment has considered
the current measures put in place by
the Group to preserve cash and the
ability to reduce discretionary
expenditure during a period when the
Group has had to adapt to a volatile oil
price environment.
83
The Group started 2021 with a strong
operating and financial position; 2020
average production of 3,226 barrels of
oil per day (“bopd”), (2019: 3,007 bopd),
cash in hand and at bank of USD 20.2
million as at 31 December 2020 (2019:
USD 13.8 million), and crude oil hedges
in place protecting a significant
proportion of near-term production.
In making their going concern
assessment, the Directors have
considered a cash flow forecast
based on expected future oil prices,
production volumes and discretionary
expenditure reductions which could be
implemented in response to oil price
volatility. The base case forecast was
prepared with consideration of the
following:
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Future oil prices assumed to be
in line with the forward curve
prevailing as at May 2021,
with an average realised oil price
of USD 58.6/bbl in the period to
December 2021. The forward price
curve applied in the cash flow
forecast starts at USD 59.5/bbl in
May 2021, fluctuating each month
down to USD 57.3/bbl in December
2021 through to USD 55.3/bbl in
June 2022;
Average 2021 forecast production
of 3,067 bopd and for the six
months to June 2022 of 3,057 with
production being maintained
by RCPs, WOs and swabbing
activities and no new drilling;
No SPT incurred on the onshore
assets, as the SPT threshold for
small onshore has been increased
to USD 75.0/bbl;
The purchase of Onshore PS4
block being completed;
Trinity continuing with various
growth and business development
opportunities; and
Although derivative instruments are
in place to protect a portion of
cash flows against declining oil
prices, no derivative income is
assumed to be received over
the forecast period.
Management considers this is a
reasonable base scenario, reflecting
the outlook of the future oil price,
current production profile and costs.
The cash flow forecast showed that the
Group will remain in a strong financial
position for at least the next twelve
months, and as such be able to meet
its liabilities as they fall due.
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Management has considered separate
stressed scenarios including:
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the effect of reductions in oil prices
as low as USD10.0/bbl being
sustained across the forecast
period, noting that the base case
pricing is in line with market prices;
and
the impact of temporary disruption
from localised COVID-19 cases
reducing forecast production by
15% albeit operations have
continued uninterrupted to date
and the nature of the operations
reduces the risk of such an
eventuality.
All reasonably possible forecasts
demonstrate that the Group’s cash
balances are maintained under such
scenarios and they would be sufficient
to meet the Group’s obligations as they
fall due.
Based on the cash flow forecast, when
combined with mitigating actions that
are within the Group’s control, and
having considered the potential impact
of COVID-19 pandemic, together with
the GORTT response to date, the
Directors currently believe the Group
can maintain sufficient liquidity and a
healthy positive cash balance, and
remain in operational existence, for
at least the next twelve months.
As a result, at the date of approval
of the Consolidated and Company
financial statements, the Directors have
a reasonable expectation that the
Group has sufficient and adequate
resources to continue in existence for
at least twelve months post approval
of these financial statements and is
poised for continued growth as it
expect market conditions to improve.
For this reason, the Board have
concluded it is appropriate to continue
to adopt the going concern basis of
accounting in the preparation of the
Consolidated and Company financial
statements.
Dividend Policy
No dividend payments or declaration
was recommended by the Directors.
Capital Structure
As at 31 December 2020 the Company’s
issued share capital was 483,594,288
which comprised of 388,794,302
ordinary shares of USD 0.01 each and
94,799,986 deferred shares of USD 0.99
each. Each ordinary share carries the
84
Trinity Exploration & Production plc
Governance
Directors’ Report (continued)
right to one vote at general meetings of
the Company. The deferred shares have
no voting or dividend rights and on a
return of capital on a winding up, have
no valuable economic rights. Deferred
shares were issued at the sub-division
of shares carried out on 29 December
2016. The number of deferred shares
has not changed since the sub-division
of shares took place.
There are no specific restrictions on the
size of a holding nor on the transfer of
shares, which are both governed by the
general provisions of the Articles of
Substantial Shareholdings
Association and prevailing legislation.
The Directors are not aware of any
agreements between holders of the
Group’s shares that may result in
restrictions on the transfer of securities
or on voting rights. Details of employee
share schemes are set out in Notes 21
and 22 to the Consolidated Financial
Statements on pages 127 to 131. No
person has any special rights of control
over the Group’s share capital and all
issued shares are fully paid.
With regard to the appointment and
replacement of Directors, the Group is
governed by its Articles of Association,
the Companies Act 2006 and related
legislation. The Articles of Association
may be amended by special resolution
of the Shareholders. The powers of
Directors are described in the main
Board’s terms of reference, copies of
which are available on request, and
the Corporate Governance Statement
on page 62.
The Shareholders holding over 3% of the voting rights as at 1 February 2021 were as follows:
% of Issued
No. of Share
Shares capital
1. David & Christina Segel Living Trust 40,527,722 10.42%
2. Hargreaves Lansdown Asset Management (clients) 31,238,706 8.03%
3. Angus Winther 30,932,994 7.96%
4. Gavin White 30,667,481 7.88%
5. Jan-Dirk Lueders* 16,103,163 4.14%
6. Scott Casto 15,748,348 4.05%
7. Bruce Dingwall, CBE 14,861,422 3.82%
8. Tim & Lisa Robertson 14,633,743 3.76%
9. Marlborough Nano-Cap Growth Fund 14,000,000 3.60%
10. Interactive Investor clients 13,204,133 3.39%
11. HSBC Private Bank, London clients 12,981,813 3.33%
*
Includes 1,114,605 shares held jointly between Scott Casto & Jan -Dirk Lueders through CMT Investments LLC.
Directors
The Directors who served during the period and at the date of this Report are as follows:
Name Role Appointment Date
1 Bruce Dingwall, CBE Executive Chairman 13 November 2015 to present
2 Jeremy Bridglalsingh Executive Director 11 January 2017 to present
3 David Segel Non-Executive Director 11 January 2017 to present
4 Angus Winther Non-Executive Director 11 January 2017 to present
5 James Menzies Independent Non-Executive Director 23 June 2017 to present
6 Nicholas Clayton Senior Independent 28 November 2018 to present
Non-Executive Director
Annual Report & Financial Statements 2020
Governance
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The Directors who held office at 31 December 2019 had the following interests in the ordinary shares in the capital of the Group
which amounted to 22% of the Group’s total issued share capital:
No. of No. of
Consolidated Consolidated
Ordinary Shares Ordinary Shares
– USD 0.01 – USD 0.01
2020 2019
Bruce Dingwall, CBE 14,861,422 13,486,114
Jeremy Bridglalsingh 410,382 207,062
James Menzies 1,150,000 1,150,000
David Segel 40,527,722 40,527,722
Angus Winther 30,932,994 30,102,994
Nicholas Clayton 100,000 100,000
Total 87,982,520 85,573,892
Directors’ share options/LTIPs
The Share Dealing Code
Independent Auditors
The Group has adopted a code on
dealings in securities which the Board
regards as appropriate for an AIM listed
Group and is compliant with the Market
Abuse Regulations. The Group takes all
reasonable steps to ensure compliance
by Directors, employees and agents
with the provisions of the AIM rules
relating to dealings in securities.
Financial Risk Management
The details on the exposure to risk
on price, liquidity and cash flows
addressed under Risk Management
and Internal Controls on pages 50
to 57.
Likely Future Developments
Future development plans have been
addressed in the Strategic Report on
pages 4 to 57.
At the AGM of the Group held in June
2020, the Shareholders approved the
appointment of BDO as the incoming
auditors of the Group. Each of the
persons who is a Director at the date
of approval of this Annual Report
confirms that;
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so far as the Director is aware,
there is no relevant audit
information of which the Group’s
auditors are unaware; and
the Director has taken all the steps
that he ought to have taken as a
Director in order to make himself
aware of any relevant audit
information and to establish that
the Group’s auditors are aware of
that information.
This confirmation is given and should
be interpreted in accordance with
the provisions of Section 418 of the
CA 2006.
Details of Directors’ share options/LTIPs
are provided in the Directors’
Remuneration Report on pages 76
to 82.
Directors’ Indemnities
The Group has made qualifying third
party indemnity provisions for the
benefit of its Directors which were
made during the period and remain
in force at the date of this Report.
Political contributions
The Group has made no political
contribution to any source during both
the current and preceding years.
HSSE
In 2020, Trinity achieved a solid HSSE
performance despite COVID-19. The
Group continued to evolve its HSSE
strategies and standards through
lessons learnt from previous years and
improve our base performance as the
Group increases operational activity.
Amanda Bateman
For and on behalf of
AMBA Secretaries Limited
Group Secretary
17 May 2021
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Trinity Exploration & Production plc
Governance
Statement of Directors’ Responsibilities
In respect of the Financial Statements
The Directors are responsible for
preparing the Annual Report and
the financial statements in
accordance with applicable laws
and regulations.
Company law requires the Directors to
prepare financial statements for each
financial year. Under that law the
Directors have prepared the Company
financial statements and Group
financial statements in accordance
with IFRS in conformity with the
Companies Act 2006. Under Company
law the Directors must not approve the
financial statements unless they are
satisfied that they give a true and fair
view of the state of affairs of the
Company and Group and of the profit
or loss of the Company and Group
for that period. In preparing the
financial statements, the Directors
are required to:
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select suitable accounting policies
and then apply them consistently;
state whether applicable IFRS in
conformity with the Companies Act
2006 have been followed for the
Group’s Financial Statements for
the Company’s Financial
Statements, subject to any
material departures disclosed
and explained in the financial
statements;
make judgements and accounting
estimates that are reasonable and
prudent; and
prepare the Financial Statements
on the going concern basis unless
it is inappropriate to presume that
the Company and Group will
continue in business.
The Directors are also responsible for
safeguarding the assets of the
Company and Group and hence
for taking reasonable steps for the
prevention and detection of fraud
and other irregularities.
The Directors are responsible for
keeping adequate accounting records
that are sufficient to show and
explain the Company’s and Group’s
transactions and disclose with
reasonable accuracy at any time the
financial position of the Company and
Group and enable them to ensure that
the financial statements comply with
the CA 2006.
The Directors of the Company are
responsible for the maintenance and
integrity of the Group’s website.
Legislation in the UK governing the
preparation and dissemination of
financial statements may differ from
legislation in other jurisdictions.
On behalf of Board
Bruce Dingwall, CBE
Executive Chairman
17 May 2021
Annual Report & Financial Statements 2020
Governance
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Independent Auditor’s Report
to the members of Trinity Exploration & Production Plc
l We obtained management’s
base case cash flow forecast,
challenging the key operating
assumptions based on 2020 and
2021 year to date actual results,
external data and market
commentary, where possible.
l We obtained management’s
reverse stress testing analysis which
was performed to determine the
point at which liquidity breaks
and considered whether such
scenarios, including significant
reductions in commodity prices
and production were possible
given the further potential impacts
of Covid-19 and the level of
uncertainty.
l We tested the integrity of the
forecast models and the Group’s
wider impairment calculations and
assessed their consistency with
approved budgets and Field
Development Plans, as applicable.
l We reviewed the adequacy and
completeness of disclosures in the
financial statements in respect of
going concern.
Based on the work we have performed,
we have not identified any material
uncertainties relating to events or
conditions that, individually or
collectively, may cast significant doubt
on the Group and the Parent
Company’s ability to continue as a
going concern for a period of at least
twelve months from when the financial
statements are authorised for issue.
Our responsibilities and the
responsibilities of the Directors with
respect to going concern are described
in the relevant sections of this report.
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In our opinion:
Basis for opinion
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the financial statements give a true
and fair view of the state of the
Group’s and of the Parent
Company’s affairs as at 31
December 2020 and of the Group’s
loss for the year then ended;
the Group financial statements
have been properly prepared in
accordance with international
accounting standards in
conformity with the requirements
of the Companies Act 2006;
the Parent Company financial
statements have been properly
prepared in accordance with
international accounting standards
in conformity with the requirements
of the Companies Act 2006 and as
applied in accordance with the
provisions of the Companies Act
2006; and
the financial statements have been
prepared in accordance with the
requirements of the Companies
Act 2006.
We have audited the financial
statements of Trinity Exploration &
Production Plc (the ‘Parent Company’)
and its subsidiaries (the ‘Group’) for the
year ended 31 December 2020 which
comprise the consolidated and
company statements of financial
position, the consolidated and
company statement of comprehensive
income, the consolidated statement of
cash flow, and the consolidated and
company statements of changes in
equity and notes to the financial
statements, including a summary of
significant accounting policies. The
financial reporting framework that has
been applied in their preparation is
applicable law and international
accounting standards in conformity
with the requirements of the
Companies Act 2006 and, as regards
the Parent Company financial
statements, as applied in accordance
with the provisions of the Companies
Act 2006.
We conducted our audit in accordance
with International Standards on
Auditing (UK) (ISAs (UK)) and applicable
law. Our responsibilities under those
standards are further described in the
Auditor’s responsibilities for the audit of
the financial statements section of our
report. We believe that the audit
evidence we have obtained is sufficient
and appropriate to provide a basis for
our opinion.
Independence
We remain independent of the
Group and the Parent Company
in accordance with the ethical
requirements that are relevant to our
audit of the financial statements in the
UK, including the FRC’s Ethical Standard
as applied to listed entities, and we
have fulfilled our other ethical
responsibilities in accordance with
these requirements.
Conclusions relating to going concern
In auditing the financial statements,
we have concluded that the Directors’
use of the going concern basis of
accounting in the preparation of the
financial statements is appropriate.
We have highlighted going concern as
a key audit matter as a result of the
estimates and judgments required by
management in their going concern
assessment and the effect on our audit
strategy. The level of judgment and
estimation uncertainty has been
significantly increased by the Covid-19
pandemic.
Our evaluation of the Directors’
assessment of the Group and the
Parent Company’s ability to continue
to adopt the going concern basis of
accounting, has been set out in the
key audit matters included:
l We discussed the impact of Covid-
19 with management and the audit
committee including their
assessment of risks and
uncertainties associated with
areas such as the Group’s
workforce, supply chain, customer
sales and commodity market
prices that are relevant to the
Group’s business model and
operations. We compared this
against our own assessment of
risks and uncertainties based on
our understanding of the business
and oil and gas sector information.
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Trinity Exploration & Production plc
Governance
Independent Auditor’s Report (continued)
Overview
Coverage 94% of Group profit before tax
100% of Group revenue
99% of Group total assets
Key audit matters 2020
Carrying value of producing oil & gas assets Yes
Going concern Yes
Materiality Group financial statements as a whole
USD $440,000 based on 1% of total revenue.
An overview of the scope of our audit
Our Group audit was scoped by
obtaining an understanding of the
Group and its environment, including
the Group’s system of internal control,
and assessing the risks of material
misstatement in the financial
statements. We also addressed the risk
of management override of internal
controls, including assessing whether
there was evidence of bias by the
Directors that may have represented
a risk of material misstatement.
We determined that there were three
significant components and all of these
were subject to a full scope audit (two
in Trinidad & Tobago and the Parent
Company).
The audits of the Trinidad & Tobago
significant components were performed
in Trinidad & Tobago by a local BDO
network member firm. The audits of
the Parent Company and the Group
consolidation were performed in the
United Kingdom by the Group audit
team. The Group audit team performed
additional procedures in respect of
certain of the significant risk areas
that represented key audit matters
in addition to procedures performed
by the component auditor.
The remaining components of the
Group were considered non-significant
and these components were principally
subject to analytical review procedures
performed by the Group audit team
and the component auditor.
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Our involvement with component
auditor
For the work performed by the
component auditor, we determined the
level of involvement needed in order to
be able to conclude whether sufficient
appropriate audit evidence has been
obtained as a basis for our opinion on
the Group financial statements as a
whole. Our involvement with the
component auditor included the
following:
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Detailed Group reporting
instructions were sent to the
component auditor, which included
the significant areas to be covered
by the audits (including areas that
were considered to be key audit
matters as detailed above), and
set out the information to be
reported to the Group audit team.
The Group audit team was actively
involved in the direction of the
audits performed by the
component auditor for Group
reporting purposes, along with
the consideration of findings
and determination of conclusions
drawn.
The Group audit team reviewed
the component auditor’s work
papers remotely, attended
planning and clearance meetings
for the significant components
and engaged with the component
auditor during their fieldwork
and completion phases.
Key audit matters
Key audit matters are those matters
that, in our professional judgement,
were of most significance in our audit of
the financial statements of the current
period and include the most significant
assessed risks of material misstatement
(whether or not due to fraud) that we
identified, including those which had
the greatest effect on: the overall audit
strategy, the allocation of resources in
the audit, and directing the efforts of
the engagement team. These matters
were addressed in the context of our
audit of the financial statements as a
whole, and in forming our opinion
thereon, and we do not provide a
separate opinion on these matters. In
addition to the matter referred to in the
Conclusions relating to going concern
section we identified the following as
key audit matter.
Annual Report & Financial Statements 2020
Governance
89
Key audit matter
How the scope of our audit addressed the key audit matter
Carrying value of
producing oil & gas
assets
(see note 11)
The Group’s total producing oil & gas assets
at 31 December 2020 were USD37.7m (2019:
USD42.3m). This class of asset is the most
significant to the statement of financial
position.
Management and
the Directors are
required to assess whether there are
potential indicators of impairment of the
Group’s oil and gas assets at each
reporting date and, if potential indicators
of impairment are identified, management
are required to perform a full assessment of
the recoverable value of the oil and gas
assets in accordance with the requirements
of the relevant accounting standard.
During the first half of 2020 there was
significant turmoil to the market demand
for oil, caused by the COVID-19 pandemic,
which significantly impacted on pricing.
Management considered the above to be
an impairment indicator and therefore
prepared an impairment assessment in
relation to the Group’s producing assets
based on a Fair Value Less Costs of
Disposal
(“FVLCD”) methodology. Key
assumptions inherent within management’s
analysis include:
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Long term crude oil price;
Reserves estimates;
Production volume profiles;
Cost profiles and escalation applied;
Discount rates; and
Tax.
Management have recorded a pre-tax
impairment charge of USD1.2 million (2019:
USD15.2 million) on its oil and gas producing
assets during the year.
Carrying value of producing oil & gas assets
is considered a key audit matter as
significant judgement and estimates are
applied by Management.
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We obtained and examined management’s impairment
indicator paper to assess the appropriateness of their
conclusion that a potential indicator of impairment was present.
We assessed the appropriateness of Management’s
determination of each cash generating unit (CGU) in order
to determine if the conclusions were in line with the relevant
accounting standard.
We obtained management’s discounted cash flow models
(FVLCD) and performed data integrity and mechanical
checks on the models.
We determined whether the basis of preparation of the
models were in line with the applicable accounting
standard, our expectations and valuation methodology.
We compared the actual performance of the CGUs during
2020 to budgets for the period in order to assess the quality
of management’s forecasting.
We critically challenged the FVLCD model, focussing on the
appropriateness of estimates with reference to empirical
data and external evidence with specific emphasis on the
following assumptions: oil prices, foreign exchange rates,
reserves and production levels, operating and development
costs and discount rate.
We compared forecast oil prices to current pricing,
empirical data and market analysis.
We assessed the consistency of production profiles and
capital expenditure forecasts against the Group’s Field
Development Plans, approved budgets, external reserves
rates, and met with operational
engineer decline
management to inform our assessment and understanding
of these plans and budgets.
We have checked that the cash flows forecasts for each
CGU are prepared based on current approved budgets /
Field Development Plans and the forecast production levels
reconciled to the latest Reserves and Resources Statement.
We analysed the production profile on a field / well basis
and compared the trend analysis to capital expenditure
forecasts to identify and investigate anomalies. We also
reviewed year to date production data and made inquiries
with Management regarding the status of current
development.
the WACC calculation
With the use of our internal valuation experts we re-
from
performed
Management and assessed the reasonableness of key
inputs such as the market value of equity, market value of
debt, cost of equity (Ke), and cost of debt (Kd) against
market related data. A sensitivity analysis was also
performed on the discount rate used.
received
We reviewed the disclosures in the financial statements
regarding key assumptions and sensitivity of the carrying
value to reasonable changes in such assumptions to check
that were in accordance with the requirements of the
relevant accounting standard.
Key observations:
the procedures performed, we
Based on
found
Management’s assessment of the carrying value of
producing oil and gas assets to be supported by the
underlying models and the judgements and estimates
applied reasonable.
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Trinity Exploration & Production plc
Governance
Independent Auditor’s Report (continued)
Our application of materiality
We apply the concept of materiality
both in planning and performing our
audit, and in evaluating the effect of
misstatements. We consider materiality
to be the magnitude by which
misstatements, including omissions,
could influence the economic decisions
of reasonable users that are taken on
the basis of the financial statements.
In order to reduce to an appropriately
low level the probability that any
misstatements exceed materiality,
we use a lower materiality level,
performance materiality, to determine
the extent of testing needed.
Importantly, misstatements below these
levels will not necessarily be evaluated
as immaterial as we also take account
of the nature of identified
misstatements, and the particular
circumstances of their occurrence,
when evaluating their effect on the
financial statements as a whole.
Based on our professional judgement,
we determined materiality for the
financial statements as a whole and
performance materiality as follows:
Group financial statements Parent company financial statements
2020 2020
Materiality USD 440,000 USD 150,000
Basis for determining 1% of total Allocation of Group materiality.
materiality revenue
Rationale for the
benchmark applied
The benchmark reflects the Group’s
primary focus on generating sustainable
growth in revenue through increasing
production volume.
The benchmark reflects the Parent
Company’s relative contribution to the
Group’s total assets capped at an
allocation of Group materiality.
Performance materiality USD 330,000 USD 112,500
Basis for determining
performance materiality
Performance materiality was set at 75% of
the above materiality level.
Performance materiality was set at 75% of
the above materiality level.
Component materiality
We set materiality for each component
of the Group from USD0.1m to USD0.3m
dependent on the size and our
assessment of the risk of material
misstatement of that component. In the
audit of each component, we further
applied performance materiality levels
of 75% of the component materiality to
our testing to ensure that the risk of
errors exceeding component
materiality was appropriately
mitigated and to sufficiently address
aggregation risk.
Reporting threshold
We agreed with the Audit Committee
that we would report to them all
individual audit differences in excess of
USD8,000 (Group audit) and USD3,000
(Parent Company audit). We also
agreed to report differences below this
threshold that, in our view, warranted
reporting on qualitative grounds.
Other information
The directors are responsible for the
other information. The other information
comprises the information included in
the Annual Report and Accounts other
than the financial statements and our
auditor’s report thereon. Our opinion on
the financial statements does not cover
the other information and, except to the
extent otherwise explicitly stated in our
report, we do not express any form of
assurance conclusion thereon. Our
responsibility is to read the other
information and, in doing so, consider
whether the other information is
materially inconsistent with the financial
statements or our knowledge obtained
in the course of the audit, or otherwise
appears to be materially misstated. If we
identify such material inconsistencies or
apparent material misstatements, we
are required to determine whether this
gives rise to a material misstatement in
the financial statements themselves. If,
based on the work we have performed,
we conclude that there is a material
misstatement of this other information,
we are required to report that fact.
We have nothing to report in this
regard.
Other Companies Act 2006 reporting
Based on the responsibilities described
below and our work performed during
the course of the audit, we are required
by the Companies Act 2006 and ISAs
(UK) to report on certain opinions and
matters as described below.
Strategic report and Directors’ report
In our opinion, based on the work
undertaken in the course of the audit:
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the information given in the
Strategic report and the Directors’
report for the financial year for
which the financial statements are
prepared is consistent with the
financial statements; and
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the Strategic report and the
Directors’ report have been
prepared in accordance with
applicable legal requirements.
In the light of the knowledge and
understanding of the Group and Parent
Company and its environment obtained
in the course of the audit, we have not
identified material misstatements in the
strategic report or the Directors’ report.
Matters on which we are required to
report by exception
We have nothing to report in respect
of the following matters in relation to
which the Companies Act 2006 requires
us to report to you if, in our opinion:
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adequate accounting records
have not been kept by the Parent
Company, or returns adequate for
our audit have not been received
from branches not visited by us; or
the Parent Company financial
statements are not in agreement
with the accounting records and
returns; or
certain disclosures of Directors’
remuneration specified by law
are not made; or
we have not received all the
information and explanations
we require for our audit.
Responsibilities of Directors
As explained more fully in the
Statement of Directors’ Responsibilities,
Annual Report & Financial Statements 2020
Governance
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the Directors are responsible for the
preparation of the financial statements
and for being satisfied that they give a
true and fair view, and for such internal
control as the Directors determine is
necessary to enable the preparation of
financial statements that are free from
material misstatement, whether due to
fraud or error.
In preparing the financial statements,
the Directors are responsible for
assessing the Group’s and the Parent
Company’s ability to continue as a
going concern, disclosing, as
applicable, matters related to going
concern and using the going concern
basis of accounting unless the Directors
either intend to liquidate the Group or
the Parent Company or to cease
operations, or have no realistic
alternative but to do so.
Auditor’s responsibilities for the audit of
the financial statements
Our objectives are to obtain reasonable
assurance about whether the financial
statements as a whole are free from
material misstatement, whether due to
fraud or error, and to issue an auditor’s
report that includes our opinion.
Reasonable assurance is a high level of
assurance, but is not a guarantee that
an audit conducted in accordance with
ISAs (UK) will always detect a material
misstatement when it exists.
Misstatements can arise from fraud or
error and are considered material if,
individually or in the aggregate, they
could reasonably be expected to
influence the economic decisions of
users taken on the basis of these
financial statements.
Extent to which the audit was capable
of detecting irregularities, including
fraud
Irregularities, including fraud, are
instances of non-compliance with
laws and regulations. We design
procedures in line with our
responsibilities, outlined above, to
detect material misstatements in
respect of irregularities, including fraud.
The extent to which our procedures are
capable of detecting irregularities,
including fraud is detailed below:
We obtained an understanding of
the legal and regulatory framework
applicable to the Group. We
considered the associated oil & gas,
environmental and taxation laws and
regulations of Trinidad & Tobago to
be the most relevant to the audit given
the Geographical areas of focus of
the Group.
We assessed compliance with these
laws and regulations through:
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Discussion with the management
and those charged with
governance;
Testing the financial statement
disclosures to supporting
documentation;
Making enquiries of Management
as to whether there was any
correspondence from regulators in
so far as the correspondence
related to the Financial
Statements.
Reviewing minutes from board
meetings of those charged with
governance to identify any
instances of non-compliance with
laws and regulations; and
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our local BDO network member
firm in Trinidad & Tobago to
evaluate the Group’s compliance
with relevant tax legislation
considered of most significance
to the Group’s operations.
We assessed the susceptibility of the
financial statements to material
misstatement, including fraud and
considered areas of the financial
statements subject to elevated
potential fraud risks.
Our procedures included:
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Testing the appropriateness of
journal entries made through the
year by applying specific criteria
to detect possible irregularities
and fraud;
Performing a detailed review of the
Group’s year-end adjusting entries
and investigating any that appear
unusual as to nature or amount
and agreeing to supporting
documentation;
For significant and unusual
transactions, particularly those
occurring at or near year-end,
obtaining evidence for the
rationale of these transactions and
the sources of financial resources
supporting the transactions;
Assessed whether the judgements
made in accounting estimates
were indicative of a potential bias
(refer to key audit matters above);
Extending inquiries to individuals
outside of management and the
accounting department to
corroborate management’s ability
and intent to carry out plans that
are relevant to developing the
estimate set out in the key audit
matters section above; and
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Directing the auditors of the
significant components to ensure
an assessment is performed on
the extent of the components
compliance with the relevant
local and regulatory framework.
Reviewing this work and holding
meetings with relevant internal
management and external third
parties to form our own opinion
on the extent of Group wide
compliance.
Our audit procedures were designed
to respond to risks of material
misstatement in the financial
statements, recognising that the risk of
not detecting a material misstatement
due to fraud is higher than the risk of
not detecting one resulting from error,
as fraud may involve deliberate
concealment by, for example, forgery,
misrepresentations or through collusion.
There are inherent limitations in the
audit procedures performed and the
further removed non-compliance with
laws and regulations is from the events
and transactions reflected in the
financial statements, the less likely
we are to become aware of it.
A further description of our
responsibilities is available on
the Financial Reporting Council’s
website at: www.frc.org.uk/
auditorsresponsibilities. This description
forms part of our auditor’s report.
Use of our report
This report is made solely to the Parent
Company’s members, as a body, in
accordance with Chapter 3 of Part 16
of the Companies Act 2006. Our audit
work has been undertaken so that we
might state to the Parent Company’s
members those matters we are required
to state to them in an auditor’s report
and for no other purpose. To the fullest
extent permitted by law, we do not
accept or assume responsibility to
anyone other than the Parent
Company and the Parent Company’s
members as a body, for our audit work,
for this report, or for the opinions we
have formed.
Matt Crane
(Senior Statutory Auditor)
For and on behalf of
BDO LLP, Statutory Auditor
London, United Kingdom
17 May 2021
BDO LLP is a limited liability partnership
registered in England and Wales (with
registered number OC305127).
92
Trinity Exploration & Production plc
Financial Accounts
04
FINANCIAL
ACCOUNTS
Financial Accounts
(Expressed in United States Dollars)
31 December 2020
Contents
93 Consolidated Statement of Comprehensive Income
94 Consolidated Statement of Financial Position
95 Company Statement of Financial Position
96 Consolidated Statement of Changes in Equity
97 Company Statement of Changes in Equity
98 Consolidated Statement of Cash Flows
99 Company Statement of Cash Flows
100 Notes to the Consolidated Financial Statements
Annual Report & Financial Statements 2020
Financial Accounts
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2020
(Expressed in United States Dollars)
Notes
Revenues
Crude oil sales
Other income
Operating Expenses
Royalties
Production costs
Depreciation, Depletion & Amortisation (“DD&A”)
General & Administrative (“G&A”) expenses
Impairment losses on financial assets (“ILFA”)
Share Option Expense (“SOE”)
Foreign exchange (“FX”) gain/(loss)
Derivative income/(expenses)
Operating Profit before Supplemental Petroleum Taxes (“SPT”)
& Property Taxes (“PT”), Impairment and Exceptional Items
SPT
PT
Operating Profit before Impairment and Exceptional Items
Impairment
Exceptional items
Operating Profit/(Loss)
Finance income
Finance costs
Profit/(Loss) Before Income Taxation
Income taxation (expense)/credit
Loss for the year
Other Comprehensive Income
Items that may be subsequently reclassified to profit or loss
Currency translation
Total Comprehensive Loss For The Year
Earnings per share (expressed in dollars per share)
Basic
Diluted
11-13
19
3(d)
6
7
7
8
9
9
93
2019
$’000
63,878
14
63,892
(20,034)
(16,426)
(9,772)
(5,589)
(608)
(1,038)
(76)
(78)
2020
$’000
44,074
4
44,078
(11,746)
(16,458)
(8,174)
(5,095)
(252)
(963)
7
1,568
(41,113)
(53,621)
2,965
153
(532)
2,586
(1,218)
43
1,411
108
(1,416)
103
(2,938)
(2,835)
10,271
(7,413)
(492)
2,366
(15,187)
-
(12,821)
138
(1,372)
(14,055)
4,408
(9,647)
(1)
85
(2,836)
(9,562)
(0.01)
(0.01)
(0.03)
(0.03)
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94
Trinity Exploration & Production plc
Financial Accounts
Consolidated Statement of Financial Position
at 31 December 2020
(Expressed in United States Dollars)
ASSETS
Non-current Assets
Property, plant and equipment
Right-of-Use (“ROU”) assets
Intangible assets
Abandonment fund
Performance bond
Deferred Tax Assets (“DTA”)
Current Assets
Inventories
Trade and other receivables
Derivative financial instruments
Cash and Cash equivalents
Total Assets
EQUITY AND LIABILITIES
Capital and Reserves Attributable to Equity Holders
Share capital
Share premium
Share based payment reserve
Merger reserves
Reverse acquisition reserve
Translation reserve
Accumulated losses
Total Equity
Non-current Liabilities
Lease liability
Deferred Tax Liabilities (“DTL”)
Provision for other liabilities
Current Liabilities
Trade and other payables
Bank overdraft
Lease liability
Provision for other liabilities
Taxation payable
Total Liabilities
Total Equity and Liabilities
Notes
2020
$’000
2019
$’000
11
12
13
14
15
16
17
18
19
20
21
21
22
23
23
12
16
25
26
27
12
25
29
37,756
1,014
27,349
3,490
253
5,997
75,859
5,267
7,239
266
20,237
33,009
108,868
97,692
139,879
14,764
75,467
(89,268)
(1,650)
(188,332)
42,380
1,402
26,255
3,378
253
9,362
83,030
5,143
9,337
85
13,810
28,375
111,405
97,692
139,879
14,328
75,467
(89,268)
(1,649)
(186,024)
48,552
50,425
465
2,611
45,405
48,481
7,803
2,700
614
516
202
11,835
60,316
108,868
841
4,188
44,330
49,359
10,386
-
637
518
80
11,621
60,980
111,405
The financial statements on pages 92 to 138 were authorised for issue by the Board of Directors on 17 May 2021 and were signed
on its behalf by:
Jeremy Bridglalsingh
Director
17 May 2021
Annual Report & Financial Statements 2020
Financial Accounts
95
Company Statement of Financial Position
at 31 December 2020
(Expressed in United States Dollars)
ASSETS
Non-current Assets
Investment in subsidiaries
Current Assets
Trade and other receivables
Intercompany
Derivative financial instruments
Cash and Cash equivalents.
Total Assets
EQUITY AND LIABILITIES
Capital and Reserves Attributable to Equity Holders
Share capital
Share premium
Share based payment reserve
Merger reserves
Accumulated losses
Total Equity
Current Liabilities
Trade and other payables
Total Liabilities
Total Equity and Liabilities
Notes
2020
$’000
2019
$’000
10
18
18
20
21
21
26
60,021
59,306
424
4,318
266
4,317
9,325
218
3,631
85
5,286
9,220
69,346
68,526
97,692
139,879
4,064
56,652
97,692
139,879
3,628
56,652
(229,422)
(229,833)
68,865
68,018
481
481
481
69,346
508
508
508
68,526
The Company has elected to take the exemption under section 408 of the Companies Act 2006, to not present the Statement
of comprehensive income. The net loss for the parent company was $0.1 million (2019: $1.71 million).
The financial statements on pages 92 to 138 were authorised for issue by the Board of Directors on 17 May 2021 and were signed
on its behalf by:
Jeremy Bridglalsingh
Director
17 May 2021
Trinity Exploration & Production plc
Registered Number: 07535869
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96
Trinity Exploration & Production plc
Financial Accounts
Consolidated Statement of Changes in Equity
for the year ended 31 December 2020
Share
Based Reverse
Share Share Payment Acquisition Merger Translation Accumulated Total
Capital Premium Reserve Reserve Reserves Reserve Losses Equity
Year ended 31 December 2019 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000
At 1 January 2019 97,692 139,879 13,290 (89,268) 75,467 (1,638) (176,473) 58,949
Share based payment
expense (Note 22) - - 1,038 - - - - 1,038
Translation difference - - - - - (11) 96 85
Loss for the year - - - - - - (9,647) (9,647)
Total comprehensive
loss for the year - - - - - (11) (9,551) (9,562)
At 31 December 2019 97,692 139,879 14,328 (89,268) 75,467 (1,649) (186,024) 50,425
Year ended 31 December 2020
At 1 January 2020 97,692 139,879 14,328 (89,268) 75,467 (1,649) (186,024) 50,425
LTIPs exercised (Note 21) - - (527) - - - 527 -
Share based payment
expense (Note 22) - - 963 - - - - 963
Translation difference - - - - - (1) - (1)
Loss for the year - - - - - - (2,835) (2,835)
Total comprehensive
loss for the year - - - - - (1) (2,835) (2,836)
At 31 December 2020 97,739 139,879 14,764 (89,268) 75,467 (1,650) (188,332) (48,552)
Annual Report & Financial Statements 2020
Financial Accounts
97
Company Statement of Changes in Equity
for the year 31 December 2020
Share
Based
Share Share Payment Merger Accumulated Total
Capital Premium Reserve Reserves Losses Equity
Year ended 31 December 2019 $’000 $’000 $’000 $’000 $’000 $’000
At 1 January 2019 97,692 139,879 2,590 56,652 (228,126) 68,687
Share based payment charge (Note 22) - - 1,038 - - 1,038
Total comprehensive expense for the year - - - - (1,707) (1,707)
At 31 December 2019 97,692 139,879 3,628 56,652 (229,833) 68,018
Year ended 31 December 2020
At 1 January 2020 97,692 139,879 3,628 56,652 (229,833) 68,018
LTIPs exercised (Note 21) - - (527) - 527 -
Share based payment charge (Note 22) - - 963 - - 963
Total comprehensive expense for the year - - - - (116) (116)
At 31 December 2020 97,692 139,879 4,064 56,652 (229,422) 68,865
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98
Trinity Exploration & Production plc
Financial Accounts
Consolidated Statement of Cash Flows
for the year 31 December 2020
(Expressed in United States Dollars)
Operating Activities
Profit/(Loss) before taxation
Adjustments for:
Translation difference
Finance cost – loans and interest
Finance income
Finance cost – decommissioning provision
Share based payment charge
DD&A
Loss on disposal of assets
Impairment losses on financial assets
Reversal of impairment
Impairment of property, plant and equipment
Changes In Working Capital
Inventories
Trade and other receivables
Trade and other payables
Income taxation paid
Net Cash Inflow From Operating Activities
Investing Activities
Purchase of Exploration and Evaluation (“E&E”) assets
Purchase of computer software
Purchase of property, plant and equipment
Net Cash Outflow From Investing Activities
Financing Activities
Finance income
Finance cost
Principal paid on lease liability**
Interest paid on lease liability**
Bank overdraft
Net Cash Inflow/(Outflow) From Financing Activities
Increase in Cash and Cash Equivalents
Cash and Cash Equivalents
At beginning of year
Effects of foreign exchange rates differences on cash
Increase in Cash and Cash equivalents
At end of year
Notes
*
**
Comparative amounts for the year have been restated. Refer to Note 33 for further details.
Prior year was amended and split to show principal and interest.
Notes
7
7
25
22
11-13
11
11
17
14, 18, 19
25, 26
13
13
11
20
2020
$’000
103
83
195
(108)
1,221
963
8,174
2
515
(126)
1,121
12,143
(124)
1,290
(1,985)
(819)
(1,028)
10,296
(1,062)
-
(4,979)
(6,041)
108
(55)
(441)
(140)
2,700
2,172
2019
$’000
As Restated*
(14,055)
(63)
174
(138)
1,198
1,038
9,772
-
-
-
15,187
13,113
(1,454)
3,638
605
2,789
(316)
15,586
(420)
(99)
(11,020)
(11,539)
138
-
(403)
(173)
-
(438)
6,427
3,609
13,810
(14)
6,441
20,237
10,201
(27)
3,636
13,810
Annual Report & Financial Statements 2020
Financial Accounts
Company Statement of Cash Flows
for the year 31 December 2020
(Expressed in United States Dollars)
Note
Operating Activities
Loss before taxation
Adjustments for:
Translation differences
Finance income
Share based payment charge
Changes In Working Capital
Trade and other receivables
Trade and other payables
Taxation Paid
Net Cash (Outflow)/Inflow from Operating Activities
Financing Activities
Finance income
Net Cash Inflow from Financing Activities
99
2019
$’000
As Restated*
(1,707)
1
(233)
221
(1,718)
(4,015)
6,730
2,715
-
997
233
233
2020
$’000
(116)
-
(126)
248
6
(1,074)
(27)
(1,101)
-
(1,095)
126
126
(Decrease)/Increase In Cash and Cash Equivalents
(969)
1,230
Cash and Cash Equivalents
At beginning of year
(Decrease)/Increase Cash and Cash equivalents
5,286
(969)
4,056
1,230
At End of Year
20
4,317
5,286
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100
Trinity Exploration & Production plc
Financial Accounts
Notes to the Consolidated Financial Statements
31 December 2020
1
Background and Summary of significant 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. The financial statements
are for the Trinity Exploration & Production plc (“Trinity” or “the Company” or “Parent”) and its subsidiaries (together “the
Group”).
Background
Trinity is an independent energy company limited by shares and listed on the Alternative Investment Market (“AIM”) market of
the London Stock Exchange (“LSE”). The Company is incorporated and domiciled in England and the address of the registered
office is C/o Pinsent Masons LLP 1 Park Row, Leeds LS1 5AB, United Kingdom (“UK”). The Group is involved in the exploration,
development and production of oil reserves in T&T.
Basis of preparation
The Group’s financial statements have been prepared and approved by the Board of Directors (“Board”) in accordance with
International Financial Reporting Standards, International Accounting Standards and Interpretations (collectively “IFRS”)
applied in accordance with the provisions of the Companies Act 2006. This consolidated financial information has been
prepared under the historical cost convention, except certain financial assets and liabilities (including derivative financial
instruments) and certain classes of property, plant and equipment – which are measured at fair value through the
Consolidated Statement of Comprehensive Income. Accounting policies have been applied consistently, other than where a
new accounting policy has been adopted.
The preparation of the consolidated financial information in conformity with IFRS requires the use of certain critical accounting
estimates. It also requires the Board and Executive Management Team (“EMT”) (together “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: Critical Accounting Estimates and Assumptions.
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 $0.04 million
(2019: $1.7 million loss).
Prior year comparatives
During the year ended 31 December 2020 a classification error was identified in the prior year Consolidated Statement of
Cash Flows, whereby cash flows from investing activities included non-cash accruals which were not adjusted from changes
in working capital. As a result the net cash inflow from operating activities and net cash outflow from investing activities were
both overstated by $1.2 million. To correct the error, amounts in the prior year consolidated financial statements have been
reclassified, resulting in a $1.2 million decrease in net cash inflows from operations and a $1.2 million decrease in net cash
outflows from investing activities. There is no profit or net asset impact as a result of the prior year restatement. See note 33
for further details.
Going Concern
The Board have adopted the going concern basis in preparing the Financial Statements.
In making their going concern assessment, the Board have considered the Group’s current financial position, budget and
cash flow forecast. The past twelve months has seen the Group’s measured response to the COVID-19 pandemic where there
were no forced shut-ins or interruptions affecting the Group’s operations. The Board have considered the continued potential
impact of the COVID-19 pandemic on the Group’s operational capabilities, liquidity and financial position over the next twelve
month period and beyond. The going concern assessment has considered the current measures put in place by the Group
to preserve cash and the ability to reduce discretionary expenditure during a period when the Group has to adapt to a
volatile oil price environment.
The Group started 2021 with a strong operating and financial position; 2020 average production of 3,226 barrels of oil per
day (“bopd”) (2019: 3,007 bopd), cash in hand and at bank of $20.2 million as at 31 December 2020 (2019: $13.8 million), and
Derivative financial instruments in place protecting a significant proportion of near-term production. In making their going
concern assessment, the Board have considered a cash flow forecast based on expected future oil prices, production volumes
and discretionary expenditure reductions which could be implemented in response to oil price volatility. The base case forecast
was prepared with consideration of the following:
l
Future oil prices assumed to be in line with the forward curve prevailing as at May 2021, with an average realised oil price
of $58.6/bbl in the period to December 2021. The forward price curve applied in the cash flow forecast starts at $59.5/bbl
in May 2021, fluctuating each month down to $57.3/bbl in December 2021 through to $55.3/bbl in June 2022;
Annual Report & Financial Statements 2020
Financial Accounts
101
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Average forecast production for the year to December 2021 of 3,067 bopd and for the six months to June 2022 of 3,057
bopd with production being maintained by Recompletions (“RCPs”), Workovers (“WOs”) and swabbing activities and no
new drilling;
No SPT incurred on the onshore assets, as the SPT threshold for small onshore has been increased to $75.0/bbl;
The purchase of Onshore PS 4 block being completed;
Trinity continuing with various growth and business development opportunities; and
Although derivative instruments are in place to protect a portion of cashflows against declining oil prices, no derivative
income is assumed to be received over the forecast period.
Management considers this is a reasonable base scenario, reflecting the outlook of the future oil price, current production
profile and costs. The cash flow forecast showed that the Group will remain in a strong financial position for at least the next
twelve months, and as such being able to meet its liabilities as they fall due.
Management has considered separate stressed scenarios including:
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the effect of reductions in oil prices as low as $10.0/bbl being sustained across the forecast period, noting that the base
case pricing is in line with market prices; and
the impact of temporary disruption from localised COVID-19 cases reducing forecast production by 15%, albeit operations
have continued uninterrupted to date and the nature of the operations reduces the risk of such an eventuality.
All reasonably possible forecasts demonstrate that the Group’s cash balances are maintained under such scenarios and
being sufficient to meet the Group’s obligations as they fall due.
Based on the cash flow forecast, when combined with mitigating actions that are within the Group’s control, and having
considered the potential impact of COVID-19 pandemic, together with the Government of Trinidad and Tobago’s (“GORTT’s”)
response to date, the Board currently believe the Group can maintain sufficient liquidity and a healthy positive cash balance,
and remain in operational existence, for at least the next twelve months.
As a result, at the date of approval of the financial statements, the Board have a reasonable expectation that the Group
has sufficient and adequate resources to continue in existence for at least twelve months post approval of these financial
statements and is poised for continued growth as it expects market conditions to improve. For this reason, the Board have
concluded it is appropriate to continue to adopt the going concern basis of accounting in the preparation of the consolidated
and company financial statements.
Changes in accounting policies
(a) New standards, interpretations and amendments adopted from 1 January 2020:
New standards impacting the Group that have been adopted in the annual financial statements for the year ended 31
December 2020 are:
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Definition of a Business (Amendments to IFRS 3); and
COVID-19-Related Rent Concessions (Amendments to IFRS 16).
The application of these standards has had no impact on the disclosures or the amounts recognised in the Group’s
consolidated financial statements.
Other standards
New standards that have been adopted in the annual financial statements for the year ended 31 December 2020, but
have not had a significant effect on the Group are:
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IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and
Errors (Amendment – Disclosure Initiative - Definition of Material); and
Revisions to the Conceptual Framework for Financial Reporting.
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(b) New standards, interpretations and amendments not yet effective
There are a number of standards, amendments to standards, and interpretations which have been issued by the IASB
that are effective in future accounting periods that the Group has decided not to adopt early.
The following amendments will become effective for the period beginning 1 January 2022:
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Interest Rate Benchmark Reform – IBOR ‘phase 2’ (Amendments to IFRS 9, IAS 39 and IFRS 7);
Onerous Contracts – Cost of Fulfilling a Contract (Amendments to IAS 37);
Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16); and
Annual Improvements to IFRS Standards 2018-2020 (Amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41).
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Trinity Exploration & Production plc
Financial Accounts
Notes to the Consolidated Financial Statements (continued)
In January 2020, the IASB issued amendments to IAS 1, which clarify the criteria used to determine whether liabilities are
classified as current or non-current. These amendments clarify that current or non-current classification is based on
whether an entity has a right at the end of the reporting period to defer settlement of the liability for at least twelve
months after the reporting period. The amendments also clarify that ‘settlement’ includes the transfer of cash, goods,
services, or equity instruments unless the obligation to transfer equity instruments arises from a conversion feature
classified as an equity instrument separately from the liability component of a compound financial instrument.
The amendments were originally effective for annual reporting periods beginning on or after 1 January 2022. However, in
May 2020, the effective date was deferred to annual reporting periods beginning on or after 1 January 2023. The Group
is currently assessing the impact of these new accounting standards and amendments.
Basis of consolidation
The Consolidated Financial Statements comprise the financial statements of the subsidiaries listed in Note 10. The financial
information incorporates the financial information of the Group 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. 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.
Share-based payments
The Group operates a number of equity-settled, share-based compensation plans comprised of Share Options and Long-
Term Incentive Plans (“LTIPs”) 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 payments is recognised as an expense. The total amount to be expensed
is determined by reference to the fair value of the options or LTIP awards granted:
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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 or LTIP awards 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 Consolidated 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.
The grant by the Company of 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
Company: The functional and presentation currency of the Company is United States Dollars (“USD” or “$”).
Group: The functional currencies of the Group operating entities are Trinidad & Tobago Dollars (“TTD”) and United States
dollars as these are the currencies of the primary economic environment in which the entities operate. The presentation
currency is USD which better reflects the Group’s business activities and improves the ability of users of the financial
statements to compare financial results with others in the international Oil and Gas industry. The Consolidated Statement
of Financial Position is translated at the closing rate and Consolidated Statement of Comprehensive Income is translated
at the average rate from both USD and Great British Pound (“GBP” or “£”) currencies. The following exchange rates have
been used in the preparation of these financial statements:
Annual Report & Financial Statements 2020
Financial Accounts
103
Average rate TTD= $/£
Closing rate TTD= $/£
(b) Transactions and balances
$
6.758
6.761
2020
£
8.646
9.213
$
6.759
6.762
2019
£
8.617
8.965
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the
transactions. FX gains/losses resulting from the settlement of such transactions and from the translation of monetary
assets and liabilities denominated in foreign currencies at year end exchange rates are generally recognised in profit or
loss. They are deferred in equity if they relate to qualifying cash flow hedges and qualifying net investment hedges or
are attributable to part of the net investment in a foreign operation.
Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at
the date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are
reported as part of the fair value gain or loss. For example, translation differences on non-monetary assets and liabilities
such as equities held at fair value through profit or loss are recognised in profit or loss as part of the fair value gain or
loss and translation differences on non-monetary assets.
(c) Group companies
The results and financial position of foreign operations (none of which has the currency of a hyperinflationary economy)
that have a functional currency different from the presentation currency are translated into the presentation currency
as follows:
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assets and liabilities for each Statement of Financial Position presented are translated at the closing rate at the
date of that Consolidated Statement of Financial Position,
income and expenses for each statement of profit or loss and Statement of Comprehensive Income are translated
at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates
prevailing on the transaction dates, in which case income and expenses are translated at the dates of the
transactions), and
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all resulting exchange differences are recognised in other comprehensive income.
On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of
borrowings and other financial instruments designated as hedges of such investments, are recognised in other
comprehensive income. When a foreign operation is sold or any borrowings forming part of the net investment are repaid,
the associated exchange differences are reclassified to profit or loss, as part of the gain or loss on sale.
(d) Translation differences
Differences arising from retranslation of the financial statements at the year-end are recognised in the Translation reserve
through “Other comprehensive income”.
Intangible assets
(a) Exploration and Evaluation (“E&E”) assets
i)
Capitalisation
E&E 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 E&E 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 E&E of assets includes:
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Licence and property acquisition costs.
Exploration and property leasehold acquisition costs are capitalised within E&E assets.
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E&E 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 a 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, E&E
expenditures are written off as a dry hole when that determination is made.
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Trinity Exploration & Production plc
Financial Accounts
Notes to the Consolidated Financial Statements (continued)
Once commercial reserves are found, E&E assets are tested for impairment and transferred to development tangible
and intangible assets as applicable. No depreciation and/or amortisation are charged during the E&E phase.
ii)
Impairment
E&E 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 E&E assets’ carrying amount exceed their recoverable amount. The recoverable amount
is the higher of the E&Es assets’ Fair Value Less Costs of Disposal (“FVLCD”) and their Value In Use (“VIU”). For the
purposes of assessing impairment, the E&E 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:
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The period for which the Group has the right to explore in the specific area has lapsed;
l Whether substantive expenditure on further E&E in the specific area is budgeted or planned;
l Whether E&E 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; and/or
l Whether sufficient data exists to indicate that, although a development in the specific area is likely to proceed,
the carrying amount of the E&E asset is unlikely to be recovered in full from successful development or by sale.
(b) Computer software
Computer software is initially recognised at cost, once it is purchased. Internally generated software is capitalised once
it is proven technological feasibility, probable future benefits, intent and ability to use the software, resources to complete
the software, and ability to measure cost. It is amortised over its four year useful life, based on pattern of benefits (straight-
line is the default) and charge recognised under DD&A.
Property, plant and equipment
(a) Oil & Gas Assets
i)
Development and Producing Assets – Capitalisation
Development expenditures are costs incurred to obtain access to proven reserves and to provide facilities for
extracting, treating, gathering and storing the oil and gas. These costs include transfers from E&Es subsequent to
finding commercially viable reserves, development drilling and new reserve type, infrastructure costs and
development Geological and Geophysical (“G&G”) costs. Acquisitions of oil and gas properties are accounted for
under the acquisition method where the transaction meets the definition of a business combination.
Transactions involving the purchases of an individual field interest, or a group of field interests, that do not meet the
definition of a business (and therefore do not apply business combination accounting) are treated as asset
purchases, 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 Consolidated Statement of Comprehensive
Income and any shortfall between the proceeds and the carrying amount is recorded as a loss on disposal in the
Consolidated Statement of Comprehensive Income.
Development 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 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, market capitalisation being below net assets,
deteriorating local conditions such that it become unsafe to continue operations and obsolescence.
The carrying value is compared against the expected recoverable amount. The recoverable amount is the higher
of an asset’s FVLCD and the VIU. For the purposes of assessing impairment, assets are grouped at the lowest levels
Annual Report & Financial Statements 2020
Financial Accounts
105
(its CGU) for which there are separately identifiable cash flows. The CGU applied for impairment test purposes is
generally the field. These fields are the same as that used for reserves reporting purposes.
iii)
Producing Assets – DD&A
The provision for DD&A of developed and producing Oil & Gas Assets are calculated using the unit-of-production
method. Oil & 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 asset
Provision for decommissioning is recognised in accordance with the contractual obligations 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 Consolidated 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 & 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:
Leasehold and 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 Consolidated Statement of Comprehensive Income.
Repairs and maintenance are charged to the Consolidated 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 such as leasehold improvements are depreciated over the remaining
useful life of the related asset.
Impairment of non-financial assets
At each reporting date, 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
FVLCD and VIU. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are
separately identifiable cash flows (CGUs). Non-financial assets that suffered 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 method. Net realisable
value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses. Materials and
supplies used mainly in drilling wells, RCPs and WOs are stated at lower of cost and net realisable value. Cost is determined
using the weighted average cost method.
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Trinity Exploration & Production plc
Financial Accounts
Notes to the Consolidated Financial Statements (continued)
Cash and Cash equivalents
For the purpose of presentation in the Consolidated Statement of Cash Flows, Cash and Cash equivalents includes cash on
hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of
three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of
changes in value.
Trade receivables
Trade receivables are amounts due from customers for crude oil sold in the ordinary course of business. They are generally
due for settlement within thirty days and therefore are all classified as current. Trade receivables are recognised initially at
the amount of consideration that is unconditional unless they contain significant financing components, when they are
recognised at fair value.
The Group applies the simplified approach to determine impairment of trade receivables. The simplified approach requires
expected lifetime losses to be recognised from initial recognition of the receivables. This involves determining the expected
loss rates using a provision matrix that is based on the historical default rates observed over the expected life of the receivable
and adjusted forward-looking estimates. This is then applied to the gross carrying amount of the receivable to arrive at the
lost allowance for the period.
Trade payables
Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest
method.
Impairment of Financial Assets
The financial assets within the Group are subject to the Expected Credit Losses (“ECL”) model. However, the Group applies
the ECL model to trade receivables for sales of inventory and from the provision of consulting services as well as Intercompany
receivables. While Cash and Cash equivalents are also subject to the impairment requirements of IFRS 9, the identified
impairment loss was immaterial.
(i)
Trade receivables
The Group applies the IFRS 9 simplified approach to measuring ECL which uses a lifetime expected loss allowance for
all trade receivables.
Financial assets recognition of impairment provisions under IFRS 9 is based on the ECL model. The ECL model is
applicable to financial assets classified at amortised cost and contract assets under IFRS 15: Revenue from Contracts
with Customers. The measurement of ECL reflects an unbiased and probability weighted amount that is available without
undue cost or effort at the reporting date, about past events, current conditions and forecasts of future economic
conditions. The Group applied the simplified approach to determine impairment of its trade and other receivables. The
simplified approach requires expected lifetime losses to be recognised from initial recognition of the receivables. This
involves determining the expected loss rates using a provision matrix that is based on the Group’s historical default rates
observed over the expected life of the receivables and adjusted forward looking estimates. This is then applied to the
gross carrying amount of the receivables to arrive at the loss allowance for the period.
(ii)
Intercompany receivables
The Company applies IFRS 9 through the recognition of ECL for intercompany. Intercompany positions eliminate in the
consolidated financial statements. In measurement of the ECL, IFRS 9 notes that the maximum period over which
expected impairment losses is measured is the longest contractual period where the Company is exposed to credit risk.
The three-stage general impairment model was used, Probability of Default (“PD”) x Loss Given Default (“LGD”) x Exposure
at Default (“EAD”). Measurement of the ECL at a probability-weighted amount that reflects the possibility of a credit loss
occurs, and the possibility that no credit loss occurs and even if the possibility of a credit loss occurring is low.
Income tax
The income tax expense or credit for the period is the tax payable on the current period’s taxable income based on the
applicable income tax rate for each jurisdiction adjusted by changes in DTA and DTL attributable to temporary differences
and to unused tax losses.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the
reporting period 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.
Annual Report & Financial Statements 2020
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Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of
assets and liabilities and their carrying amounts in the consolidated financial statements. However, DTL are not recognised if
they arise from the initial recognition of goodwill. Deferred income tax is also 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 end of the reporting period and are expected to apply when the related
deferred income tax asset is realised or the deferred income tax liability is settled.
DTA are recognised only if it is probable that future taxable amounts will be available to utilise those temporary differences
and losses.
DTL and DTA are not recognised for temporary differences between the carrying amount and tax bases of investments in
foreign operations where the Company is able to control the timing of the reversal of the temporary differences and it is
probable that the differences will not reverse in the foreseeable future.
DTA and DTL are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the
deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity
has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability
simultaneously.
Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other
comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly
in equity, respectively.
Property Tax (“PT”)
PT is recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.
Assessments are based on the Annual Rental Value (“ARV”) of property. The Annual Taxable Value (“ATV”) is the ARV subject
to deductions and allowances in respect of voids and loss of rent multiplied by the respective PT rate. The PT rates applicable
to the Group are industrial with building rates at 6% and industrial without building rates at 3%.
Revenue recognition
IFRS 15 Revenue from Contracts with Customers requires that revenue is recognised by performance obligation, as or when
each performance obligation is satisfied, and that variable elements of pricing are recognised and to the extent that it is
not highly probable they will be reversed.
The Group has evaluated its customer contract with the Heritage Petroleum Company Limited (“Heritage”) formerly the
Petroleum Company of Trinidad and Tobago Limited (“Petrotrin”), to identify the performance obligations, the timing of the
revenue recognition and the treatment of variable elements of pricing. Sales revenue represents the sales value of the Group’s
oil sold in the year.
Revenue associated with the sale of crude oil is measured based on the consideration specified in contracts with customers.
Revenue is recognised when control is transferred from the Group to its customer and the Group has the present right to
payment. The transfer of control of crude oil coincides with title passing to the customer and the customer taking physical
possession. Typically, payment for the sale of the oil is received by the end of the month following the month in which the sale
is recognised.
Prices are based on prices determined by Heritage, with agreed contractual adjustments for quality. Revenue is measured
at the fair value of the consideration received or receivable, and represents amounts receivable for oil and gas products in
the normal course of business.
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.
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Trinity Exploration & Production plc
Financial Accounts
Notes to the Consolidated Financial Statements (continued)
Leases
All leases are accounted for by recognising a right-of-use asset and a lease liability except for:
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Leases of low value assets; and
Leases with a duration of 12 months or less.
Lease liabilities were measured at the present value of the contractual payments due to the lessor over the lease term, with
the discount rate determined by reference to the group’s incremental borrowing rate. The lease payments are discounted
using the Group’s incremental borrowing rate, being the rate that the Group would have to pay to borrow the funds necessary
to obtain an asset of similar value to the ROU asset in a similar economic environment with similar terms, security and
conditions. To determine the incremental borrowing rate, Trinity received an indicative third party lending rate from Central
Bank of Trinidad and Tobago.
Right of use assets were initially measured at the amount of the lease liability. Subsequent to initial measurement lease
liabilities increase as a result of interest charged at a constant rate on the balance outstanding and are reduced for lease
payments made. Right-of-use assets are amortised on a straight-line basis over the remaining term of the lease.
In 2020 the Group revised its estimates due to the lease term of the copiers being renewed in August 2020 for an additional
36 months. As a result, there was an adjustment in the carrying amount of the lease liability to reflect the payments to be
made over over the revised term, which was discounted using a revised discount rate. Equivalent adjustment is made to the
carrying value of the right-of-use asset, with the revised carrying amount being amortised over the remaining (revised) lease
term.
Extension and termination options are included in a few leases entered into by the Group. These are used to maximise
operational flexibility in terms of managing the assets used in the Group’s operations. The majority of extension options held
are exercisable only by the Group and not by the respective lessor.
In determining the lease term, Management considers all facts and circumstances that create an economic incentive to
exercise an extension option, or not exercise a termination option. Extension options (or periods after termination options)
are only included in the lease term if the lease is reasonably certain to be extended (or not terminated).
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.
Derivative financial Instruments and hedging activities
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-
measured to their fair value at the end of each reporting period. The accounting for subsequent changes in fair value depends
on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group
has not applied hedge accounting and all oil price derivative financial instruments (categorised as Derivative
Income/(Expenses)) are measured at fair value through profit and loss.
Financial assets at fair value through profit or loss are classified in this category if acquired principally for the purpose of
selling in the short term. Derivatives are also categorised as held for trading unless they are designated as hedges. Assets in
this category are classified as current assets if expected to be settled within twelve months, otherwise they are classified as
non-current. Financial assets are derecognised when the rights to the cash flows expire, risks and rewards are transferred or
control of the asset is transferred.
A financial liability is removed from the Statement of Financial Position only when it is extinguished; that is, when the obligation
specified in the contract is discharged, cancelled or expired.
Investments
Investments are shown at cost less provision for any impairment in value. The Company performs impairment reviews in respect
of investments whenever events or changes in circumstances indicate that the carrying amount of the investment may not
be recoverable. An impairment loss is recognised when the higher of the investment’s net realisable value and fair value less
cost of disposal is less than the carrying amount.
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 distinct from routine operations which are material items
of income or expense that have been shown separately due to the non-recurring nature and in the significance of their nature
or amount.
Annual Report & Financial Statements 2020
Financial Accounts
109
2
Financial Risk Management
Financial risk factors
The Group’s activities expose it to a variety of financial risks. The Group’s overall Risk Management program seeks to minimise
potential adverse effects on the Group’s financial performance.
Management is responsible for Group Risk Management and for identifying and evaluating financial risks.
(a) Market risk
(i)
Foreign Exchange (“FX”) risk
The Group is exposed to FX risk primarily with respect to the United States dollar. FX 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.
FX sensitivity
The Group is mainly exposed to the currency fluctuations of the US dollar. The sensitivity analysis principally arises
on FX gain/loss on translation of the USD denominated receivables. The following table details the Group’s sensitivity
to a 10% (2019: 10%) increase and decrease in the functional currency (TT Dollar) of the main operating subsidiary
against the US Dollar with all other variables held constant. 10% (2019: 10 %) is the sensitivity rate that best represents
Management’s assessment of the possible change in the foreign exchange rates affecting the Group. A positive
number below indicates an increase in profit and equity when the US dollar weakens against the functional currency.
For a strengthening of the US Dollar against the functional currency, there would be an equal and opposite impact
on the profit and equity, and the balances below would be negative.
Profit/(loss) for the year and Equity
10% strengthening of the US Dollar/ (2019: 10%)
10% weakening of the US Dollar/ (2019: 10%)
(ii)
Price risk
2020
$’000
(168)
168
2019
$’000
(303)
303
The Group is exposed to commodity price risk regarding its sales of crude oil which is an internationally traded
commodity.
Price risk sensitivity
The Group is a price taker and is mainly exposed to the risk relating to price fluctuations. The following table details
the Group’s sensitivity to a 20% (2019: 20%) increase and decrease in realised oil prices. 20% (2019: 20%) is the sensitivity
rate that best represents Management’s assessment of the possible change in the oil prices that may affect the
Group. A positive number below indicates an increase in revenue, while, there would be an equal and opposite
impact on revenue if there is a decrease in prices by 20%.
Profit/(loss) for the year
20% increase in price/ (2019: 20%)
20% decrease in price/ (2019: 20%)
2020
$’000
2019
$’000
11,702
(11,702)
12,701
(12,701)
The Group implemented crude derivatives during the financial year, the purpose of which is to offer protection in
the event of oil prices declining significantly.
(iii) Cash flow and fair value interest rate risk
The Group’s main interest rate risk arises from borrowings which expose the Group to cash flow interest rate risk. The
Group manages risk by limiting the exposure to floating interest rates and maintaining a balance between floating
and fixed contract rates.
At 31 December 2020, there were no loan commitments to attract interest rates on foreign currency-denominated
borrowings, (2019: nil). During 2020 there was a bank overdraft facility which incurred $0.1 million interest (2019: nil).
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110
Trinity Exploration & Production plc
Financial Accounts
Notes to the Consolidated Financial Statements (continued)
(b) 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. For banks and financial institutions, Management determines
the placement of funds based on its judgement and experience to minimise risk.
All sales are made to a state-owned entity, Heritage.
The Group applies an IFRS 9 simplified model for measuring the ECL which uses a lifetime expected loss allowance and
are measured on the days past due criterion. Having reviewed past payments combined with the credit profile of its
existing trade debtors in order to assess the potential for impairment, Management made the decision in keeping with
the standard to calculate a provision for long outstanding receivables associated with the Petrotrin outstanding ORR
incentive receipts. The ECL for those sales were assessed at the end of the year and was immaterial. A provision matrix
was applied to determine the historical and forward-looking loss rates which was used to ultimately calculate an ECL
allowance, which resulted in a provision being made of $0.01 million.
For the Heritage sales, the ECL was immaterial as all sales payment were made during the stipulated time frame.
However, ECL was also calculated on other receivable balances and a provision of $0.9 million was derived. Similar to
sales a provision matrix was applied to determine the historical and forward-looking loss rates which was used to
ultimately calculate an ECL allowance.
The Company also assessed impairment through the three-stage approach to derive at the ECL. Through assessing
impairment via this method, a provision amount of $0.1 million was calculated.
(c)
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 held cash at bank
of $20.2 million (2019: $13.8 million).
Management monitors rolling forecasts of the Group’s Cash and Cash equivalents on the basis of expected cash flows.
This is carried out at the Group level in accordance with practice and limits set by the Group, refer to the disclosures in
Note 1: Background and accounting policies – Going Concern for more information regarding the factors considered by
the Company in managing liquidity risk.
The table below analyses the Group’s and Company’s financial liabilities into relevant maturity groupings based on their
contractual maturities for:
(a) All non-derivative financial liabilities, and
(b) Net and gross settled derivative financial instruments for which the contractual maturities are essential for an
understanding of the timing of the cash flows.
The following table sets out the contractual maturities (representing undiscounted contractual cash-flows) of financial
liabilities.
Annual Report & Financial Statements 2020
Financial Accounts
111
Group
At 31 December 2020
Non-derivatives
Trade and other payables
Lease liabilities
Less than 1 year
$'000
1 to 2 years
$'000
2 to 5 years
$'000
Total
$'000
7,803
614
8,417
-
442
442
-
23
23
7,803
1,079
8,882
At 31 December 2019
$'000
$'000
$'000
$'000
Non-derivatives
Trade and other payables
Lease liabilities
Company
At 31 December 2020
Non-derivatives
Trade and other payables
At 31 December 2019
Non-derivatives
Trade and other payables
10,386
637
11,023
-
447
447
-
393
393
Less than 1 year
$'000
481
481
10,386
1,477
11,863
Total
$'000
481
481
$'000
$'000
508
508
508
508
(d) Capital risk
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. 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 Cash/(Debt) is calculated as total borrowings less Cash and Cash equivalents.
Borrowing relates to the overdraft facility where all covenants (current ratio not less than) were met. Total capital is
calculated as ‘equity’ as shown in the Consolidated Statement of Financial position plus Net Cash/(Debt).
Net cash
Total equity
Total capital
Gearing ratio
2020
$’000
(17,537)
48,552
31,015
2019
$’000
(13,810)
50,425
36,615
(56.5)%
(37.7)%
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112
Trinity Exploration & Production plc
Financial Accounts
Notes to the Consolidated Financial Statements (continued)
(e) Fair value estimation
The Group and Company have classified financial instruments into the three levels prescribed under the accounting
standards.
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Level 1: The fair value of financial instruments traded in active markets (such as publicly traded derivatives, and
equity securities) is based on quoted market prices at the end of the reporting period. The quoted market price
used for financial assets held by the Group is the current bid price. These instruments are included in level 1.
Level 2: The fair value of financial instruments that are not traded in an active market (for example, over-the-counter
derivatives) is determined using valuation techniques which maximise the use of observable market data and rely
as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are
observable, the instrument is included in level 2.
Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included
in level 3. This is the case for unlisted equity securities. See Note 19 for details.
3. Critical Accounting Estimates and Judgements
The preparation of the financial statements requires the use of accounting estimates which, by definition, seldom equal the
actual results. Management also exercise judgement in applying the Group’s and the Company’s accounting policies. 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) Recoverability of DTA
DTA mainly arise from tax losses and are recognised only to the extent it is considered probable that those assets will be
recoverable. This involves an assessment of when those DTA 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 on key estimates of future cost, production volumes, price and is therefore inherently
uncertain. To the extent assumptions regarding future profitability change, there can be an increase or decrease in the
level of DTA recognised which can result in a charge or credit during the period in which the change occurs. The Group
has concluded that the DTA recognised will be recoverable using approved business plans and budgets for the specific
subsidiaries in which the DTA arose. See note 16.
(b) Provision for decommissioning costs
This provision is significantly affected by changes in technology, laws and regulations which may affect the actual cost
and timing 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. The provision has been estimated using a rate based on maturity and a core inflation rate. See Note 25:
Provision for other liabilities.
Risk free rates
Inflation rate
Bands (years)
9-12
13-18
19-24
2020
3.14%
3.17%
2.42%
2%
2019
2.13%
3.07%
2.91%
2%
Annual Report & Financial Statements 2020
Financial Accounts
113
The following table details the Group’s sensitivity to a 1% (2019: 1%) increase and decrease in discount and inflation rates.
1% (2019: 1%) is the sensitivity rate that best represents Management’s assessment of the possible change in the rates
that may affect the Group. A positive number below indicates an increase in provisions and finance costs, while a
negative number indicates a decrease in provisions and finance costs. The impact in 2020 of a 1% change in these
variables is as follows:
Discount rate
1% increase in assumed rate
1% decrease in assumed rate
Inflation rate
1% increase in assumed rate
1% decrease in assumed rate
(c) Estimation of reserves
Consolidated
Statement of
Financial Position:
Obligation
2020
$’000
Consolidated
Statement of
Comprehensive:
Income/Expense
2020
$’000
(7,790)
9,679
9,638
(7,903)
181
(289)
231
(194)
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
becomes available. The Group’s reserve estimates are also evaluated when required by independent external reserve
evaluators. The last independent external reserve valuation was done in 2012. Since 2012 up to and including 2020 the
Group estimated its own commercial reserves 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 key assumptions used in the estimation of reserves are as follows:
-
-
Technical production profiles for the various assets onshore and offshore held by the Group.
Economic assumptions such as forecast period, discount rate, crude price, operating cost, capital expenditure and
fiscal structure.
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 E&E assets, oil and gas properties, property and plant and equipment, may be affected due
to changes in estimated future cash flows. See note 11 and 13.
Depreciation and amortisation charges in profit or loss are depreciated on a unit of production basis at a rate
calculated by reference to proved and probable (“2P”) reserve estimates and incorporating the estimated future
cost of developing and extracting those reserves. There may be changes where such charges are determined using
the unit of production method, or where the useful life of the related assets change. See note 11 and 13.
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. See note 25.
The recognition and carrying value of DTA may change due to changes in the judgements regarding the existence
of such assets and in estimates of the likely recovery of such assets. See note 16.
As at 31 December 2020 all subsidiaries onshore and offshore 2P reserve estimates were re-evaluated by the EMT and
approved by the Board.
(d)
Impairment of Property, Plant And Equipment
Management performs impairment assessments on the Group’s property, plant and equipment once there are indicators
of impairment. Triggers for impairment relates to changes in the key factors that impact on impairment which are
production, oil price, capital expenditures and operating expenditures. In order to test for impairment, the higher of
FVLCD and VIU calculations are prepared and an estimate of the timing and amount of cash flows expected respectively
to arise from the CGU. A CGU represents an individual field or asset held by the Group. During 2020 an impairment charge
of $1.1 million was recognised on the Group’s property, plant and equipment (2019: $15.2 million) see Note 11. The impairment
charge resulted in the carrying amount of the respective CGUs being written down to their recoverable amount.
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114
Trinity Exploration & Production plc
Financial Accounts
Notes to the Consolidated Financial Statements (continued)
Oil & Gas Assets $1.1 million (2019: $15.2 million) impairment
Management has carried out an impairment test on the Oil & 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 FVLCD and VIU. The FVLCD is the amount that a market participant would
pay for the CGU less the cost of disposal. The FVLCD approach utilised a discounted cash flow based on the 2P reserve
estimates of the CGUs of the Group. VIU is the present value of the future cash flows expected to be derived from an
asset or CGU in its current condition. The period over which Management has projected its cash flow forecast, ranges
between 9-24 year economic lives based on the field economic life profile. The field economic life profile was derived by
using licence extension data which is permitted in accordance with the Society of Petroleum Engineers (“SPE”) reserves
reporting guidelines outlined in the 2019 Petroleum Resource Management System (“PRMS”). While there is the risk that
licences may not be renewed upon expiry, Management considers this to be very low based on historic precedent. 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 impairment calculation considers the decommissioning asset and liability used to derive the
impairment charge.
The discounted cash flow approach assessment involves judgement as to the likely commerciality of the asset. For the
discounted cash flows to be calculated, Management has used a production profile based on its 2P reserve estimate of
the assets and a range of assumptions (see note 3(c)). Its 2P reserves which are estimated using standard recognised
evaluation techniques on a fully funded basis; future revenues and estimated development costs and decommissioning
liabilities pertaining to the CGU’s; and a discount rate utilised for the purposes of deriving a recoverable value.
Realised price
2021
46.3
2022
44.3
2023
43.0
2024
42.2
2025
41.8
2026
41.8
If the price deck used in the impairment calculation had been 10% lower than Management’s estimates at 31 December
2020, the Group would have a $1.0 million increase on impairment of Oil & Gas Assets (2019: $3.5 million increase). If the
price deck used in the impairment calculation had been 10% higher than Management’s estimates at 31 December 2020,
the Group would have $0.6 million decrease on impairment of the Oil & Gas Assets (2019: $6.0 million decrease). The
valuation is considered to be a level 3 in the fair value hierarchy due to unobservable inputs used in the valuation.
For the year ended 31 December 2020, Management’s estimate of the Group’s cost of capital was 12% (2019:13%). If the
estimated cost of capital used in determining the post-tax discount rate for the CGU’s had been 1% lower than
Management’s estimates the Group would have $0.2 million decrease on impairment position for 2020 (2019: $0.7 million
decrease) against Oil & Gas Assets within property, plant and equipment. If the estimated cost of capital had been 1%
higher than Management’s estimates the Group would have $0.2 million increase on impairment for 2020 (2019: $0.7 million).
(e)
Impairment of intangible E&E assets
In estimating the recoverability of exploration asset Management considers contingent resources associated with certain
evaluation assets as estimated by the Group’s internal experts. Furthermore, Management factors in future development
plans and licence expiries into the assessment. Exploration assets remain capitalised as long as sufficient progress is
being made in assessing whether petroleum production is technically feasible and commercially viable. This assessment
requires significant Management judgement, as exploration assets are subject to regular internal review to confirm the
continued intent to establish the technical feasibility and commercial viability of a project. At the end of 2020 a review
for impairment triggers was carried out and there were no impairment losses realised against the carrying values of the
Group’s E&E assets.
The Group reviews the carrying values of intangible E&E assets when there are impairment indicators which would tell
whether an E&E asset has suffered any impairment. The amounts of intangible E&E assets represent the costs of active
projects the commerciality of which is unevaluated until reserves can be appraised.
(f) Property Tax Accrual
Property Tax is assessed on property owned by the Group in Trinidad and Tobago governed by the Property Tax Act
2009 and later Property Tax (Amendment) Act 2018 of Trinidad and Tobago. The calculation of the Property tax is
described in note 1 Background and Summary of significant accounting policies.
At the end of 2020 the property tax accrued for the period 2018 to 2020 with Trade and Other Payables was $1.5 million
(2019: $1.0 million). Property Tax has been accrued using Management’s best estimate, as the administration arrangements
of the Property Tax under the Valuation of Land Act is not in place and the actual method for calculating the Property
Tax is therefore unavailable. There is sentiment, based on government communication that until the administration
arrangements are put in place by the Government of Trinidad and Tobago the Property Tax will not be collected over
those respective years (2018-2020) and a waiver might be forthcoming. As at 31 December 2020 and the date of this
report that waiver has not been enacted and Management’s judgement is to continue to assess that a liability is required
based on the current tax law enacted.
Annual Report & Financial Statements 2020
Financial Accounts
115
(g)
Share based payments
The Company has in place a share-based compensation plan (the LTIP), for Executive Directors and the EMT which is
designed to provide long term incentives to align interests with shareholders. The Company measures the cost of these
equity-settled transactions by reference to the fair value of the equity instruments at the date at which they are granted.
The fair value of share-based payments is measured using a Monte Carlo or Black-Scholes option pricing model. The
measurement inputs to this model, including expected volatility, weighted average expected life of the instruments,
expected dividends and risk-free interest rate, rely on Management judgements. See note 22 for details.
4 Segment Information
The Steering Committee provides support, guidance and oversight on the progression of the Company through various project
that may be undertaken. The committee is led by the Group’s chief operating decision-maker. Management has determined
the operating segments which are Onshore, West Coast and East Coast 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 EMT (which comprises the Executive Chairman, Managing Director, Chief
Financial Officer, Chief Operations Officer and Chief of Staff & General Counsel) which makes strategic decisions in
accordance with Board policy.
Management have considered the requirements of IFRS 8 Operating Segments, in regard to the determination of operating
segments, and concluded that the Group has only one significant operating segment being the exploration and
development, production and extraction of hydrocarbons.
All revenue is generated from crude oil sales in T&T to one customer, Heritage. All non-current assets of the Group are located
in T&T.
5 Operating Profit Before Impairment and Exceptional Items
Operating profit before exceptional items is stated after taking the following items into account:
DD&A (Note 11)
Depreciation on ROU (Note 12)
Amortisation of computer software (Note 13)
Employee costs (Note 32)
Inventory recognised as expense, charged to operating expenses
2020
$’000
7,566
502
106
7,662
330
2019
$’000
9,218
477
77
7,773
104
Auditors’ remuneration
During the year the Group (including its overseas subsidiaries) obtained the following services from the Company’s Auditors
as detailed below:
- Fees payable to the Company’s auditors’ and their affiliated firms for the audit
of the parent Company and consolidated financial statements:
BDO LLP (UK based)*
BDO Limited (T&T based)*
- Fees payable to the Company’s auditors’ for other services:
The audit of Company’s subsidiaries
Audit related assurance services – interim review
Total assurance and auditors’ remuneration
* Please note that prior year relates to previous auditors.
2020
$’000
2019
$’000
93
127
13
29
262
153
124
20
38
335
All fees in 2020 are in respect of services provided by BDO LLP and their affiliated firms. The independence and objectivity of
the external auditors are considered on a regular basis by the Audit Committee, with particular regard to the level of non-
audit fees incurred.
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116
Trinity Exploration & Production plc
Financial Accounts
Notes to the Consolidated Financial Statements (continued)
6
Exceptional Items
Items that are material either because of their size, 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 in the Consolidated Statement of Comprehensive Income. An analysis of the amounts presented
as exceptional items in these financial statements are highlighted below.
Exceptional items:
Reversal of Impairment on equipment
Fees relating to corporate restructuring advice
Exceptional Income
Exceptional items 20201:
2020
$’000
(126)
83
(43)
2019
$’000
-
-
-
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Reversal of Impairment on equipment: ($0.1) million credit in relation to reversal of impairment for pumping Unit.
Fees relating to corporate restructuring advice: $0.1 million charge in relation to professional advice on a potential
corporate restructuring.
Note 1: Impairment losses on property, plant and equipment have been reclassified from exceptional items in 2020 and 2019 comparative.
7
Finance income and costs
Recognised in the consolidated statement of comprehensive income
Finance income
Interest Income
Finance costs
Decommissioning – Unwinding of discount (Note 25)
Interest on Leases
Interest on overdraft
8
Income Taxation
Current tax
Petroleum profits tax
Unemployment levy
Deferred Tax
- Current year
Movement in asset due to tax losses recognised (Note 16)
Movement in liability due to accelerated tax depreciation (Note 16)
Income tax expense/(credit)
2020
$’000
108
2020
$’000
(1,221)
(140)
(55)
(1,416)
2020
$’000
817
333
3,365
(1,577)
2,938
2019
$’000
138
2019
$’000
(1,198)
(174)
-
(1,372)
2019
$’000
-
390
(3,389)
(1,409)
(4,408)
Annual Report & Financial Statements 2020
Financial Accounts
117
The Group’s effective tax rate varies from the statutory rate for UK companies of 19% (2019:19%) as a result of the differences
shown below:
Profit/(loss) before taxation
Tax calculated at domestic tax rates applicable to profits in the respective countries
Expenses not deductible for tax purposes
Impact on tax losses
Deferred tax on capital allowances in the current period recognised
Tax losses previously generated now recognised in the current period
Other reconciling differences
Tax charge
2020
$’000
103
741
2,163
(2,187)
(1,389)
3,365
245
2,938
2019
$’000
(14,055)
(6,236)
9,833
(2,962)
(2,044)
(3,389)
390
(4,408)
Corporate income tax is calculated at 19% (2019: 19%) of the assessable profit for the year for the UK parent company, 55% for
the operating subsidiaries in Trinidad and Tobago (2019: 55%) and 30% (2019: 30%) for the corporate subsidiaries in Trinidad
and Tobago.
Taxation losses at 31 December 2020 available for set off against future taxable profits amounts to approximately $237.2
million (2019: $240.2 million), with tax losses recognised of $12.0 million in 2020. These losses do not have an expiry date and
have not yet been confirmed by the Board of Inland Revenue (“BIR”) and the Her Majesty's Revenue and Customs (“HMRC”).
The 2019 reconciliation was revised using the same method as 2020.
9
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 potentially dilutive ordinary shares.
Year ended 31 December 2020
Basic
Diluted
Year ended 31 December 2019
Basic
Diluted
Impact of dilutive ordinary shares:
Weighted
Average
Number Of
Shares
’000’
386,233
386,233
384,049
384,049
Loss
$’000
(2,835)
(2,835)
(9,647)
(9,647)
Earnings
Per Share
$
(0.01)
(0.01)
(0.03)
(0.03)
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume
conversion of all dilutive potential ordinary shares. The awards issued under the Company’s LTIP (see movements in number
of LTIPs Note 22) are considered potential ordinary shares. Share Options of 1,975,084 are considered potential ordinary shares
and have not been included as the exercise hurdle would not have been met.
There was no impact on the weighted average number of shares outstanding during 2020 as all Share Options and LTIP’s
were excluded from the weighted average dilutive share calculation because their effect would be anti-dilutive and therefore
both basic and diluted earnings per share are the same in 2020.
I
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I
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A
T
E
G
C
R
E
P
O
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T
G
O
V
E
R
N
A
N
C
E
I
F
I
N
A
N
C
A
L
A
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C
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U
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S
G
L
O
S
S
A
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A
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I
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118
Trinity Exploration & Production plc
Financial Accounts
Notes to the Consolidated Financial Statements (continued)
10 Investment In Subsidiaries
Company
Opening balance
Share based payment
Closing balance
2020
$’000
59,306
715
60,021
2019
$’000
58,489
817
59,306
The investment in subsidiaries is recognised initially at the fair value of the consideration paid. The Group subsequently
measures the investment in subsidiaries at cost less impairments. Increases in the investment in subsidiaries relate to capital
contributed by the Company to its subsidiary undertakings.
Listing of Subsidiaries
The Group’s subsidiaries at 31 December 2020 are listed below:
Name
Registered Address/
Country of Incorporation
Nature of Business
Bayfield Energy Limited
c/o Pinsent Masons LLP,
Holding Company
1 Park Row, Leeds,
LS1 5AB, UK
Trinity Exploration & Production
(UK) Limited
13 Queen’s Road, Aberdeen,
AB15 4YL, UK
Holding Company
Trinity Exploration and
c/o Pinsent Masons LLP,
Service Company
Production Services (UK) Limited
1 Park Row, Leeds,
LS1 5AB, UK
Bayfield Energy do Brasil Ltda
Av. Presidente Vargas 509,
Dormant
Rio de Janeiro, 20071-003,
Brazil
Trinity Exploration & Production
Ground Floor,
Holding Company
(Barbados) Limited
One Welches, Welches,
St. Thomas BB22025,
Barbados
% Shares held
by the Group
99.99%
100%
100%
100%
100%
Trinity Exploration and
3rd Floor Southern Supplies
Holding Company
100%
Production (Trinidad and
Limited Building,
Tobago) Limited
40 -44 Sutton Street,
San Fernando,
Trinidad & Tobago
(“Trinidad address”)
Trinity Exploration and
Production (Galeota) Limited
Trinidad address
Oil and Gas
Oilbelt Services Limited
Trinidad address
Oil and Gas
Trinity Exploration and
Production Services Limited
Tabaquite Exploration &
Production Company Limited
Trinity Exploration and
Production (GOP) Limited
Trinity Exploration and
Production (GOP-1B) Limited
Trinidad address
Service Company
Trinidad address
Oil and Gas
Trinidad address
Oil and Gas
Trinidad address
Oil and Gas
100%
100%
100%
100%
100%
100%
Annual Report & Financial Statements 2020
Financial Accounts
119
11 Property, Plant and Equipment
Year ended 31 December 2020
Opening net book amount
at 1 January 2020
Disposals
Additions
Adjustment to decommissioning
estimate (Note 24)
Impairment reversal equipment
Impairment charge1
DD&A charge for year
Closing net book amount
at 31 December 2020
At 31 December 2020
Cost
Accumulated DD&A and impairment
Closing net book amount
Year ended 31 December 2019
Opening net book amount
at 1 January 2019
Additions
Adjustment to decommissioning
estimate (Note 25)
Impairment1
DD&A charge for year
Translation difference
Closing net book amount
at 31 December 2019
At 31 December 2019
Cost
Accumulated DD&A and impairment
Translation difference
Closing net book amount
Plant &
Equipment
$'000
Leasehold
& Buildings
$'000
Oil &
Gas Assets
$'000
Other
$'000
Total
$'000
1,141
-
1,124
-
126
(116)
(247)
1,652
(2)
(16)
-
-
-
(153)
39,587
-
2,983
(152)
-
(1,005)
(7,166)
2,028
1,481
34,247
14,894
(12,866)
2,028
3,338
(1,857)
1,481
300,857
(266,610)
34,247
Plant &
Equipment
$'000
Leasehold
& Buildings
$'000
Oil &
Gas Assets
$'000
962
369
-
-
(190)
-
1,705
111
-
-
(164)
-
50,932
11,676
1,031
(15,187)
(8,864)
(1)
1,141
1,652
39,587
13,760
(12,619)
-
1,141
3,356
(1,704)
-
1,652
298,879
(259,291)
(1)
39,587
-
-
-
-
-
-
-
-
336
(336)
-
Other
$'000
-
-
-
-
-
-
-
336
(336)
-
-
42,380
(2)
4,091
(152)
126
(1,121)
(7,566)
37,756
319,425
(281,669)
37,756
Total
$'000
53,599
12,156
1,031
(15,187)
(9,218)
(1)
42,380
316,331
(273,950)
(1)
42,380
1 An impairment loss of $1.1 million (2019: $15.2 million) was recognised on Oil & Gas Assets (see Note 3 (d)) as a result of the carrying value being higher than the
recoverable amount. The recoverable amount was determined by assessing its fair value less costs of disposal.
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G
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120
Trinity Exploration & Production plc
Financial Accounts
Notes to the Consolidated Financial Statements (continued)
12 Leases
The Group has recognised ROU assets and lease liabilities
(i)
Amounts recognised in the Consolidated Statement of Financial Position
The Consolidated Statement of Financial Position shows the following amounts relating to leases:
Right-of-use assets
Non-current assets
Lease Liabilities
Current
Non-current
31 December
2020
$'000
31 December
2019
$'000
1,014
1,402
614
465
1,079
637
841
1,478
The ROU assets relate to Motor vehicles, Office building, Staff housing and Office equipment leases that met the
recognition criteria of a Lease under IFRS 16.
(ii) Amounts recognised in the Consolidated Statement of Comprehensive Income
The Consolidated Statement of Comprehensive Income shows the following amounts relating to leases:
Depreciation charge of ROU assets
Depreciation
Interest expense (including finance cost)
2020
$'000
(502)
(140)
2019
$'000
(477)
(173)
The total cash outflow for leases in 2020 was $0.6 million (2019: $0.6 million).
(iii) The Group’s leasing activities and how these are accounted for
The Group leases various offices, equipment, staff housing and vehicles. Rental contracts are typically made for fixed
periods of 6 months to 4 years.
Contracts may contain both lease and non-lease components. There were no non-lease components identified and as
such the Group allocates the consideration in the contract to a single lease component based on their relative stand-
alone prices.
Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease
agreements do not impose any covenants other than the security interests in the leased assets that are held by the
lessor. Leased assets may not be used as security for borrowing purposes.
Annual Report & Financial Statements 2020
Financial Accounts
13 Intangible Assets
The carrying amounts and changes in the year are as follows:
Year ended 31 December 2020
Opening net book amount at 1 January 2020
Additions
Amortisation charge for year
Closing net book amount at 31 December 2020
At 31 December 2020
Cost
Accumulated amortisation
Closing net book amount
Year ended 31 December 2019
Opening net book amount at 1 January 2019
Additions
Amortisation charge for year
Closing net book amount at 31 December 2019
At 31 December 2019
Cost
Accumulated amortisation
Closing net book amount
121
Total
$'000
26,255
1,200
(106)
27,349
27,562
(213)
27,349
Total
$'000
25,757
575
(77)
26,255
26,362
(107)
26,255
Exploration and
Evaluation assets
$'000
Computer
software
$'000
25,987
1,055
-
27,042
27,042
-
27,042
268
145
(106)
307
520
(213)
307
Exploration and
Evaluation assets
$'000
Computer
software
$'000
25,511
476
-
25,987
25,987
-
25,987
246
99
(77)
268
375
(107)
268
Computer Software: In 2020, capital cost incurred for software acquisition.
E&E assets: Represents the cost for the TGAL 1 exploration well and further field E&E cost. The Group tests whether E&E assets
has suffered any impairment triggers on an annual basis and there were no impairment triggers (2019: nil).
14 Abandonment fund
At 1 January
Additions
At 31 December
2020
$'000
3,378
112
3,490
2019
$'000
2,979
399
3,378
Abandonment funds are restricted cash put aside in escrow for abandonment and environmental purposes in accordance
with contractual obligations to be used in accordance with the contract.
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122
Trinity Exploration & Production plc
Financial Accounts
Notes to the Consolidated Financial Statements (continued)
15 Performance bond
At 1 January and 31 December
2020
$'000
253
2019
$'000
253
A Performance Bond in favour of Heritage was put in place on 3 July 2017 of $0.3 million at 1.75% rate per annum, executed
with First Citizens Bank Trinidad and Tobago Limited and is effective until 31 December 2020. These funds have been restricted
to a Fixed Deposit for 36 months at the agreed interest rate of 1.25%. The Performance Bond is a requirement under the Lease
Operatorship Agreement (“LOAs”) as Trinity is the Operator of the FZ 2, WD 2, WD 5/6, WD 13 and WD 14 fields.
16 Deferred Income Taxation
Group
The analysis of DTA is as follows:
DTA:
-DTA to be recovered in more than 12 months
-DTA to be recovered in less than 12 months
DTL:
-DTL to be settled in more than 12 months
Net DTA
The movement on the deferred income tax is as follows:
At beginning of year
Movement for the year
Unwinding of deferred tax on fair value uplift
Net DTA
The deferred tax balances are analysed below:
2020
$'000
2019
$'000
(4,447)
(1,550)
2,611
(3,386)
2020
$'000
(5,174)
1,879
(91)
(3,386)
(5,127)
(4,235)
4,188
(5,174)
2019
$'000
(375)
(4,725)
(74)
(5,174)
DTA
Acquisition
Tax losses recognised
Tax losses derecognised
2018
$’000
Movement
$’000
2019
$’000
Movement
$’000
2020
$’000
(33,436)
(36,087)
63,550
(5,973)
-
(3,389)
-
(3,389)
(33,436)
(39,476)
63,550
(9,362)
-
-
3,365
3,365
(33,436)
(39,476)
66,915
(5,997)
Annual Report & Financial Statements 2020
Financial Accounts
123
DTL
Accelerated tax depreciation and
non-current asset impairment
Acquisitions
Fair value uplift
2018
$’000
Movement
$’000
2019
$’000
Movement
$’000
2020
$’000
(16,043)
19,580
2,061
5,598
(1,337)
-
(73)
(1,410)
(17,380)
19,580
1,988
4,188
(1,487)
-
(90)
(1,577)
(18,867)
19,580
1,898
2,611
DTA are recognised for tax loss carry-forwards to the extent that the realisation of the related tax benefit through future
taxable profits are probable. Deferred tax assets of $3.4 million have been derecognised (2019: $3.4 million was recognised)
based on future taxable profits. The Group has unrecognised deferred tax asset amounting to $102.2 million which have no
expiry date.
DTL have decreased by $1.6 million as the temporary difference between the accounting values of property, plant and
equipment and intangible assets and tax values decreased compared to 2019 year-end.
l
l
DTA and DTL can only be offset in the Consolidated Statement of Financial Position if an entity has a legal right to settle
current tax amounts on a net basis and Deferred Tax amounts are levied by the same tax authority (as per IAS 12).
Tax losses – At the end of 2020 the Group had gross tax losses carried forward of $237.2 million (2019: $240.2 million)
represented by corporate tax losses in the UK of $16.6 million (2019: $16.3 million) and PPT and Corporate tax losses in
Trinidad and Tobago of $220.6 million (2019: $223.9 million). In Trinidad and Tobago PPT losses and corporate tax losses
may be carried forward indefinitely to reduce the taxes in future years. As of 1 January 2020, PPT losses can only be
utilised to shelter a maximum of 75% of PPT per annum.
17 Inventories
At 1 January 2020
Net inventory movement
At 31 December 2020
At 1 January 2019
Impairment
Net inventory movement
At 31 December 2019
Crude oil
$’000
Materials
and supplies
$’000
89
(22)
67
89
-
-
89
5,054
146
5,200
3,649
(49)
1,454
5,054
Total
$’000
5,143
124
5,267
3,738
(49)
1,454
5,143
(i)
Assigning costs to inventories
The costs of individual items of inventory within the category material and supplies are determined using weighted
average costs. The cost assigned for crude oil is based on the lower of cost and net realisable value. There were no
obsolete inventories written off during the year.
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O
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G
C
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P
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N
A
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I
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A
N
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A
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A
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G
L
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S
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124
Trinity Exploration & Production plc
Financial Accounts
Notes to the Consolidated Financial Statements (continued)
18 Trade and Other Receivables
Due within 1 year
Amounts due from related parties (Note 28 (d))
Trade receivables
Less: provision for impairment of trade and
intercompany receivables
Trade receivables/Amounts due from related parties – net
Prepayments
VAT recoverable
Other receivables
Less: provision for Impairment of other receivables
Group
Company
2020
$'000
-
3,357
(6)
3,351
862
2,467
1,413
(854)
7,239
2019
$'000
-
5,307
(225)
5,082
859
2,932
847
(383)
9,337
2020
$'000
4,418
-
(100)
4,318
149
125
150
-
4,742
2019
$'000
3,722
-
(91)
3,631
147
71
-
-
3,849
All trade receivables are with the Group’s only customer, Heritage. Ageing analysis of these trade receivables as at 31
December 2020 is as follows:
Up to 30 days
>60 days
>180 days
2020
$'000
3,217
-
140
3,357
The carrying amount of the Group’s trade and other receivables are denominated in the following currencies:
USD
GBP
TTD
Group
Company
2020
$'000
4,567
191
2,481
7,239
2019
$'000
4,200
159
4,978
9,337
2020
$'000
4,589
252
-
4,841
2019
$'000
4,491
104
712
5,307
2019
$'000
3,690
159
-
3,849
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
2020
$'000
2019
$'000
2020
$'000
2019
$'000
Trade receivables
Counterparties without external credit rating:
Existing customers with no defaults in the past
7,239
9,337
-
-
The fair value of trade and other receivables approximate their carrying amounts.
The Group applies the IFRS 9 simplified model for measuring expected credit losses (“ECL”) using a lifetime expected loss
provision for trade and other receivables. The expected loss rates are based on the Group’s historical credit losses experienced
over a period prior to the period end. The historical loss rates are then adjusted for current and forward-looking information
on key macroeconomic factors affecting the Group’s customer including GDP, foreign exchange rates, WTI crude oil price
and inflation rates. In calculating an ECL, two default loss rates are established; default loss rate 1 which is calculated through
the ageing profiles of sales, and default loss rate 2 which is default loss rate 1 adjusted based on forward looking information.
Annual Report & Financial Statements 2020
Financial Accounts
125
Having reviewed past payment performance combined with the credit rating of Heritage (and its predecessor, Petrotrin), a
Provision matrix was completed to calculate a potential impairment on the receivable balances. Trade receivables that are
less than six months past due are not considered impaired and at 31 December 2020, trade receivables of $3.4 million (2019:
$4.8 million) were therefore considered to be fully performing.
Although all Heritage revenue payments have been received on a timely basis, the Joint Interest billings has not followed
that trend. For other receivables, which relate to Joint Interest Billing receivable amounts from Heritage, an ECL of $0.9 million
(2019: $0.4 million) was therefore calculated.
Petrotrin has long outstanding balances and Heritage on Joint Interest billings which give rise to a potential impairment.
Consequently, a provision was calculated.
Although all Heritage revenue payments have been received on a timely basis, the Joint Interest billings has not. For other
receivables, which relate to Joint Interest Billing receivable amounts from Heritage, an ECL of $0.9 million (2019: $0.4 million)
was therefore calculated.
At the end of 2020 a total of $0.1 million was outstanding from Petrotrin (2019: $0.5 million), with $0.4 million of the outstanding
amounts having been received during 2020. An ECL of $0.0 million was applied to the outstanding $0.1 million receivables
amount due from Petrotrin.
Amounts due from related parties are repayable on demand and entities have the ability to repay if called immediately.
19 Derivative financial assets
The following table compares the carrying amounts and fair values of the Group’s financial assets and financial liabilities as
at 31 December 2020.
Derivative asset
Total
As at
31 December
2020
$’000
As at
31 December
2019
$’000
266
266
85
85
The group considers that the carrying amount of the following financial assets and financial liabilities are a reasonable
approximation of their fair value:
l
l
l
Trade receivables.
Trade payables.
Cash and cash equivalents.
Fair Value Hierarchy
The level in the fair value hierarchy within which the derivative financial asset is categorised is determined on the basis of the
lowest level input that is significant to the fair value measurement.
The derivative financial assets are classified in their entirety into only one of the three levels.
The fair value hierarchy has the following level:
l
l
l
Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 - inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices).
Level 3 - inputs for the asset or liability that are not based on observable market data (unobservable inputs).
I
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O
D
U
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T
O
N
I
I
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T
R
A
T
E
G
C
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E
P
O
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G
O
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E
R
N
A
N
C
E
I
F
I
N
A
N
C
A
L
A
C
C
O
U
N
T
S
G
L
O
S
S
A
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Y
C
O
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P
A
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I
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126
Trinity Exploration & Production plc
Financial Accounts
Notes to the Consolidated Financial Statements (continued)
Level 2 recurring fair value measurements:
As at 31 December 2020
Opening balance
Derivative instrument purchased
Derivative asset expensed
Closing balance
$'000
85
946
(765)
266
On 31 December 2020 the crude derivative contracts were valued using a mark to market report. The report provides forward
looking value on the existing crude derivatives held at 31 December 2020.
The net gain in fair value is recognised in the Consolidated Statement of Comprehensive Income during the year:
Derivative expense
Derivative income
Total income/(expense)
Net derivative income/(expense)
FV of derivative financial instruments
31 December
2020
$’000
31 December
2019
$’000
(765)
2,333
1,568
1,302
266
1,568
(126)
48
(78)
(78)
-
(78)
Further details of the derivative financial instruments outstanding at 31 December 2020, and additional derivative financial
instruments purchased since the year end, are set out in Note 34 below.
20 Cash and Cash Equivalents
Short term investment
Cash and cash equivalents
Group
Company
2020
$'000
4,055
16,182
20,237
2019
$'000
5,081
8,729
13,810
2020
$'000
4,055
261
4,317
2019
$'000
5,081
205
5,286
Cash and Cash equivalents disclosed above and in the Consolidated Statement of Cash Flows exclude restricted cash and
are available for general use by the Group.
Annual Report & Financial Statements 2020
Financial Accounts
127
21 Share Capital and Share Premium
Group
Year ended 31 December 2020
As at 1 January and 31 December 2019
As at 1 January 2020
LTIPs exercised*
As at 31 December 2020
Number
of shares
478,489,232
478,849,232
4,745,056
483,594,288
Share
capital
$'000
97,692
97,692
-
97,692
Share
premium
$'000
139,879
139,879
-
139,879
Total
$'000
237,571
237,571
-
237,571
l
The Company does not have a limited amount of authorised share capital.
l Within the number of shares shown above there are 94,799,986 deferred shares of USD 0.99 each totalling $93.9 million of
share capital. The deferred shares have no voting or dividend rights and on a return of capital on a winding up have no
valuable economic rights.
l
The remaining 388,794,302 Ordinary shares in issue as at 31 December 2020 have a par value of USD 0.01 per share.
Year ended 31 December 2020
At 1 January 2020
LTIPs exercised
At 31 December 2020
Note: $:GBP rate 1.312:1
Number
of shares
478,849,232
4,745,056
483,594,288
Ordinary
shares
$'000
3,840
-
3,840
Deferred
shares
$'000
93,852
-
93,852
Share
premium
$'000
139,879
-
139,879
Total
$'000
237,571
-
237,571
*
LTIPs exercised - 4,745,056 LTIPs were exercised during the year ended 31 December 2020. These shares were issued for nil consideration and therefore for less than
the nominal value of the shares which was in contravention of s580 of the UK Companies Act. Following the 31 December 2020 year end the Directors have sought
legal advice with regards to this breach of UK company law and are in the process of implementing a remedy. Given remedial action can be taken, the Directors
do not consider this to be a material breach of UK company law. The shares have been issued and therefore the number of shares in issue has been appropriately
reflected in the table above. There is no corresponding increase to the value of share capital as they were issued below nominal value.
22 Share Based Payment Reserve
The share-based payments reserve is used to recognise:
l
l
l
l
The grant date fair value of options issued to employees but not exercised;
The grant date fair value of share awards issued to employees;
The grant date fair value of deferred share awards granted to employees but not yet vested; and
The issue of shares held by the Employee Share Trust to employees.
During 2020 the Group had in place share-based payment arrangements for its employees and Executive Directors, the LTIP.
The Share Option Plan referenced below is fully vested and expensed. The current year charge for share based payments
are solely in relation to the LTIP arrangements shown below, with further details of each scheme following:
At 1 January
Share based payment expense:
LTIP exercised
LTIP expense
At 31 December
2020
$’000
2019
$’000
14,328
13,290
(527)
963
14,764
–
1,038
14,328
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128
Trinity Exploration & Production plc
Financial Accounts
Notes to the Consolidated Financial Statements (continued)
Share Option Plan
Share Options were granted to Executive Directors and to selected employees. The exercise price of the granted option was
equal to Management’s best estimate of the fair value 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. These Share Options were fully vested in 2015
and 2016 with nil exercised and expiry dates in 2022 and 2023. The table below gives details:
Grant-Vest
2012-2015
2013-2016
Expiry
Date
2022
2023
Exercise
price per
Share Options
GBP0.86
GBP1.20
2020
Number of
Options
1,685,540
289,544
1,975,084
Exercise
price per
Share Options
GBP0.86
GBP1.20
2019
Number of
Share Options
1,685,540
289,544
1,975,084
The inputs into the Black-Scholes model for options granted in prior periods were as follows:
Grant date
Share price
Average Exercise price
Expected volatility
Risk-free rates
Expected dividend yields
Vesting period
LTIP
29 May 2013
14 February 2013
GBP 1.19
GBP 1.20
55%
4.5%
0%
3 years
GBP 1.20
GBP 0.89
78%
4.5%
0%
3 years
LTIP awards are designed to provide long-term incentives for the EMT to deliver long-term shareholder returns. Under the plan,
participants are granted options which only vest if certain performance standards are met. Participation in the plan is at the
Board’s discretion and no individual has a contractual right to participate in the plan or to receive any guaranteed benefits.
2017 LTIPs
One off LTIP awards were granted in August 2017 over 25,415,998 ordinary shares and in June 2020 over a further 1,422,961
ordinary shares (the “2017 LTIP Awards”). The 2017 LTIP awards, which ordinarily vest on 30 June 2022, partially vested on 30
June 2020 and may vest in full or in part on 30 June 2021, subject to meeting performance targets relating to the following:
l
l
l
In respect of 70% of the award, the Company’s share price growth from the 2017 placing price of 4.98 pence per share. If
the three month volume-weighted price (“VWAP”) at the testing date is 35 pence or more per share, this part of the
award will vest in full. If the VWAP at the testing date is 4.98 pence per share or less, this part of the award will not vest
at all. If the VWAP at the testing date is between 4.98 pence and 35 pence per share, this part of the award will vest on
a pro-rated straight-line basis;
In respect of 20% of the award, repayment of the amount due to the BIR in accordance with the terms of the Creditors
Proposal approved in 2017. The final payment occurred in 2018; and
In respect of 10% of the award, redemption of all the Convertible Loan Notes (“CLN”) issued in January 2017 before the
second anniversary of their issue. All of the CLNs were redeemed in 2018.
The total fair value of the 2017 LTIP Award is $2.6 million and will be expensed over the vesting period with the full charge pro-
rated over the period up to 30 June 2022. However, the LTIP Award may vest in full or in part on 30 June 2020 or 2021 with the
appropriate charge being taken over the vesting period. The fair value at grant date is independently determined using an
adjusted form of the Black Scholes Model which includes a Monte Carlo simulation model that takes into account the exercise
price, the term of the option, the share price at grant date and expected price volatility of the underlying share, the expected
dividend yield, the risk free interest rate for the term of the option and the correlations and volatilities of the peer group
companies.
Annual Report & Financial Statements 2020
Financial Accounts
129
The model inputs for LTIP Awards granted in 2017:
Grant Date
Share price at grant date
Exercise price
Expected volatility
Risk-free interest rates
Expected dividend yields
Vesting period 1
Vesting period 2
Vesting period 3
2019 LTIPs
25 August 2017
25 June 2020
GBP 10.75
GBP 0.00
GBP 7.90
GBP 0.00
73.3%
0.44%
0%
30 June 2020
30 June 2021
30 June 2022
84.9%
(0.07%)
0%
-
-
30 June 2022
In January 2019 Options over 2,824,000 ordinary shares and in May 2019 Options over 3,832,824 ordinary shares were granted
under the LTIP in accordance with the policy announced to the market on 25 August 2017. The LTIP awards are designed to
provide long-term incentives for the EMT to deliver long-term shareholder returns. Under the plan, participants were granted
options which only vest if certain performance standards are met. Participation in the plan is at the Board’s discretion and
no individual has a contractual right to participate in the plan or to receive any guaranteed benefits.
The January 2019 LTIP awards will vested on 1 January 2021, while the May 2019 awards will vest on 2 January 2022 subject
to meeting the performance criteria set out in the table below and continued employment with the Company. The Options
are exercisable at nil cost by the participants.
Performance targets
January 2019
LTIPs
May 2019
LTIPs
Below the Median
None of the award will vest
None of the award will vest
Median (50th percentile)
30% of the maximum award will vest
30% of the maximum award will vest
Between Median and
Upper Quartile
Straight-Line basis between
these points
Straight-Line basis between
these points
Upper Quartile (75%) and above
100% of the maximum award will vest
100% of the maximum award will vest
The total fair value at grant date of the 2019 LTIP awards was $0.9 million and this will be expensed over the vesting period
with the full charge pro-rated over the vesting period. The 2019 LTIP Awards are subject to the achievement of relative Total
Shareholder Return ("TSR") performance targets measured over a 3-year performance period ending on 1 January 2021 and
31 December 2021 respectively.
The fair value at grant date was determined using a Monte Carlo simulation model that takes into account the exercise price,
the term of the option, the share price at grant date and expected price volatility of the underlying share, the expected
dividend yield, the risk free interest rate for the term of the option and the correlations and volatilities of the peer group
companies. The model inputs for the 2019 LTIP awards granted during the period ended 31 December 2019 included:
Grant Dates
Share price at grant dates
Exercise price
Expected volatility
Risk-free interest rates
Expected dividend yields
Vesting period
2020 LTIPs
January 2019
LTIPs
May 2019
LTIPs
2 January 2019
9 May 2019
GBP16.77
GBP0.00
113.9%
0.73%
0%
GBP14.66
GBP0.00
113.9%
0.73%
0%
1 January 2021 2 January 2022
On 25 June 2020 and 30 October 2020 Options over a total of 3,815,856 ordinary shares and 1,000,000 ordinary shares
respectively were granted under the LTIP in accordance with the policy announced to the market on 25 August 2017 to
members of the EMT in respect of the performance of the Company in the financial year ended 31 December 2019. The LTIP
awards are designed to provide long-term incentives for the EMT to deliver long-term shareholder returns. Under the plan,
participants were granted options which only vest if certain performance standards are met. Participation in the plan is at
the Board’s discretion and no individual has a contractual right to participate in the plan or to receive any guaranteed
benefits.
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130
Trinity Exploration & Production plc
Financial Accounts
Notes to the Consolidated Financial Statements (continued)
These LTIP awards will vest on 2 January 2023, subject to meeting the performance criteria set and continued employment
in the Company. The Options are exercisable at nil cost by the participants.
The LTIP Awards are subject to the achievement of relative Total Shareholder Return ("TSR") performance targets measured
over a three-year performance period ending on 31 December 2022. The amounts stated above represent the maximum
possible opportunity.
TSR is the increase in share price plus the value of any dividends paid over a period of time and captures the full return
shareholders see on an investment. Relative TSR is the comparison of these returns against peer companies over a set period
of time. For Trinity, the performance will be assessed over a three year period.
The Relative TSR ranking will be determined by calculating the three month average TSR to the end of the performance
period and dividing this by the three month average TSR to the beginning of the performance period for all companies in the
agreed comparator group. Companies will be ranked on this basis with the highest performing company ranked first. The
share price used to calculate the start of the TSR calculation in respect of these awards is based on the three-month average
TSR leading into 31 December 2019, being 9.683p.
The amount of the award which will vest at the end of the three year period is based on performance against a comparator
group. Threshold vesting occurs when Trinity is ranked at median against the comparator group and maximum vesting occurs
when Trinity is ranked at upper quartile (or above). The table below shows the level of vesting at threshold and maximum:
Vesting occurs on a straight line basis between threshold and maximum.
Performance
Vesting
Below the Median
None of the award will vest.
Median (50th percentile)
30% of the maximum award will vest.
Between Median and Upper Quartile Straight Line basis between these points.
Upper Quartile (75%)
100% of the maximum award will vest.
Above the Upper Quartile
100% of the maximum award will vest.
The total fair value at grant date of the 2020 LTIP awards was $0.4 million and this will be pro-rated and expensed over the
vesting period. The fair value at grant date was determined using a Monte Carlo simulation model that takes into account
the exercise price, the term of the option, the share price at grant date and expected price volatility of the underlying share,
the expected dividend yield, the risk free interest rate for the term of the option and the correlations and volatilities of the
peer group companies. The model inputs for the 2020 LTIP awards granted during the period included:
Grant Dates
Share price at grant dates
Exercise price
Expected volatility
Risk-free interest rates
Expected dividend yields
Vesting dates
June 2020
LTIPs
October 2020
LTIPs
25 June 2020
30 October 2020
GBP7.90
GBP0.00
84.9%
(0.07%)
0%
2 January 2023
GBP7.70
GBP0.00
84.9%
(0.07%)
0%
2 January 2023
Movements in the number of LTIPs outstanding and their related weighted average exercise prices are as follows:
At 1 January
Forfeited
Granted1
Exercised2
At 31 December
1 Weighted average fair value of LTIPs granted GBP 0.07.
2 Weighted average share price at the date of exercise GBP 0.08.
2020
Average exercise
price per
Share Option
GBP 0.00
GBP 0.00
GBP 0.00
GBP 0.00
GBP 0.00
Number of
Options
31,789,818
(1,720,592)
6,238,817
(4,745,056)
31,562,987
2019
Average exercise
price per
Share Option
GBP 0.00
GBP 0.00
GBP 0.00
GBP 0.00
GBP 0.00
Number of
Options
25,415,998
(283,004)
6,656,824
-
31,789,818
Annual Report & Financial Statements 2020
Financial Accounts
131
LTIPs outstanding at the end of the year have the following expiry date and exercise prices:
Grant-Vest
24/8/2017 – 30/6/2022
2/1/2019 – 1/1/2021
9/5/2019 – 2/1/2022
25/6/2020 – 2/1/2023
Expiry date
Exercise price
2020
2019
24/8/2027
1/1/2023
2/1/2024
2/1/2025
GBP 0.00
GBP 0.00
GBP 0.00
GBP 0.00
21,030,319
2,525,101
3,191,712
4,815,856
25,415,998
2,824,000
3,549,820
-
23 Merger and Reverse Acquisition Reserves
At 1 January 2020
Movement
Translation differences
At 31 December 2020
At 1 January 2019
Movement
Translation differences
At 31 December 2019
Reverse
Acquisition
Reserve
$’000
(89,268)
-
-
(89,268)
(89,268)
-
-
Merger
Reserve
$’000
75,467
-
-
75,467
75,467
-
-
Total
$’000
(13,801)
-
-
(13,801)
(13,801)
-
-
(89,268)
75,467
(13,801)
The issue of shares by the Company as part of the reverse acquisition (February 2013) 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.
24 Adjusted EBITDA
Adjusted EBITDA is a non-IFRS measure used by the Group to measure business performance. It is calculated as Operating
Profit before SPT, PT, Impairment and Exceptional Items for the period, adjusted for DD&A, ILFA, SOE, and FX Gain/(Loss).
The Group presents Adjusted EBITDA as it is used in assessing the Group’s growth and operational efficiencies as it
illustrates the underlying performance of the Group’s business by excluding items not considered by Management to reflect
the underlying operations of the Group.
Adjusted EBITDA is calculated as follows:
Operating Profit Before SPT, PT, Impairment and Exceptional Items
DD&A (note 11 – 13)
ILFA (note 18)
SOE (note 22)
FX (loss)/gain
Adjusted EBITDA
Weighted average ordinary shares outstanding - basic
Weighted average ordinary shares outstanding - diluted
Adjusted EBITDA per share – basic (note 9)
Adjusted EBITDA per share - diluted (note 9)
2020
$'000
2,965
8,174
252
963
(7)
2019
$'000
10,271
9,772
608
1,038
76
12,347
21,765
$'000
$'000
386,233
417,796
384,049
415,840
$
0.032
0.030
$
0.057
0.052
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132
Trinity Exploration & Production plc
Financial Accounts
Notes to the Consolidated Financial Statements (continued)
Adjusted EBITDA after the impact of SPT & PT is calculated as follows:
Adjusted EBITDA
SPT
PT
Adjusted EBITDA After SPT & PT
Weighted average ordinary shares outstanding - basic
Weighted average ordinary shares outstanding - diluted
Adjusted EBITDA After SPT & PT per share - basic
Adjusted EBITDA After SPT & PT per share - diluted
25 Provision for Other Liabilities
(a) Non-current:
Year ended 31 December 2020
Opening amount as at 1 January 2020
Unwinding of discount (Note 7)
Revision to estimates
Translation differences
Closing balance at 31 December 2020
Year ended 31 December 2019
Opening amount as at 1 January 2019
Unwinding of discount (Note 7)
Increase in provision for new wells
Revision to estimates
Decommissioning contribution
Closing balance at 31 December 2019
Decommissioning cost
2020
$'000
12,347
153
(532)
11,968
2019
$'000
21,765
(7,413)
(492)
13,860
'000
'000
386,233
417,796
384,049
415,840
$
0.031
0.029
$
0.036
0.033
Decommissioning
provision
$’000
44,330
1,221
(152)
6
45,405
41,802
1,198
755
380
195
44,330
The Group operates Oil fields and this cost represents an estimate of the amounts required for abandonment of the
Group’s wells, platforms, gathering station and pipeline infrastructures. The amounts are calculated based on the
provisions of existing contractual agreements with Heritage and MEEI. 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.
Annual Report & Financial Statements 2020
Financial Accounts
133
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 – 2.00% (2019: 2.00%).
b.
c.
d.
Risk free rate – 2.42% - 3.17% (2019: 2.13% - 3.07%).
Estimated market value/decommissioning cost.
Estimated life of each asset.
See Note 3(b): Critical Accounting Estimates and Assumptions for the rates used and sensitivity analysis.
(b) Current:
Year ended 31 December 2020
Opening amount as at 1 January 2020
Decrease in provision
Closing balance at 31 December 2020
Year ended 31 December 2019
Opening amount as at 1 January 2019
Decrease in provision
Increase in provision
Closing balance at 31 December 2019
Litigation claims
In 2020 there were no litigation settlements.
Closure of Pits
Litigation
claims
$’000
Closure
of Pits
$’000
46
-
46
115
(69)
-
46
472
(2)
470
232
-
240
472
Total
$’000
518
(2)
516
347
(69)
240
518
In 2020 there was a decrease in the provision of $0.0 million relating to the revision to remedy and closure of pits associated
with drilling new onshore wells. It is an environmental regulatory requirement set by the EMA that all open drill pits for onshore
drilling must be closed after sufficient testing has deemed it safe to close the pit. Testing period can last up to or over a year
depending on the testing criteria.
26 Trade and Other Payables
Current
Trade payables
Accruals
Other payables
SPT & PT
Group
Company
2020
$'000
2,024
3,793
471
1,515
7,803
2019
$'000
2,123
5,039
619
2,605
10,386
2020
$'000
130
351
-
-
481
2019
$'000
87
421
-
-
508
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134
Trinity Exploration & Production plc
Financial Accounts
Notes to the Consolidated Financial Statements (continued)
27 Bank overdraft
Bank Overdraft
31 December
2020
$’000
31 December
2019
$’000
2,700
2,700
-
-
During the year, an on demand operating (overdraft) line of $2.7 million was entered with FirstCaribbean International Bank
(Trinidad & Tobago) Limited (“CIBC”). Details of the overdraft facility:
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Description: Demand revolving credit.
Interest Rate: United States dollar prime rate minus 6.30 % per annum, effective rate 4.95%.
Repayment: Upon demand at CIBC’s discretion.
Debenture: Floating charge debenture over inventory and Trade Receivables only.
Covenant: Current Ratio not less than 1.25:1.
On 2 April 2020 the Company drew down the $2.7 million in full.
28 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 during the year. The
following are the major transactions and balances with related parties:
(a) Transfers of funds from related parties
Company subsidiaries:
Trinity Exploration and Production Services Limited
Trinity Exploration & Production (UK) Limited
Trinity Exploration and Production (Galeota) Limited
Bayfield Energy Limited
Oilbelt Services Limited
Trinity Exploration and Production (Trinidad and Tobago) Limited
Galeota Oilfield Services Limited
Trinity Exploration and Production Services (UK) Limited
(b) Transfer of funds to related parties
Company subsidiaries:
Trinity Exploration and Production Services Limited
Oilbelt Services Limited
Trinity Exploration and Production Services (UK) Limited
2020
$'000
-
10
26
61
170
-
3
899
1,169
2020
$'000
(473)
-
-
(473)
Company
2019
$'000
14
4
120
29
-
4
3
-
174
2019
$'000
-
(338)
(2,744)
(3,082)
Company
Related party transactions comprise of the transfer of funds to and from related parties which are payable on demand.
Positive balances indicate increase in funds transferred to the entities, while negative balances indicate repayment to
entities.
Annual Report & Financial Statements 2020
Financial Accounts
135
(c) Key Management and Directors’ compensation: Key Management includes Board (Executive & Non-Executive). The
compensation paid or payable to Key Management for employee services is shown below:
Salaries and short-term employee benefits
Post-employment benefits
Share-based payment expense1 (Note 22)
Group
2020
$'000
1,219
26
469
1,714
1. During 2020 LTIPs with a market value of $0.4 million were exercised by Key Management, refer to Directors remuneration report.
(d) Year-end balances arising from transfer to and from related parties
Company
Receivables from related parties:
Trinity Exploration and Production Services Limited
Trinity Exploration & Production (UK) Limited
Trinity Exploration and Production (Galeota) Limited
Bayfield Energy Limited
Oilbelt Services Limited
Galeota Oilfield Services Limited
Trinity Exploration and Production (Trinidad and Tobago) Limited
Trinity Exploration and Production Services (UK) Limited
Total intercompany receivables (Note 18)
Less: provision for impairment of intercompany receivables
Closing intercompany receivables (Note 18)
2020
$'000
408
28
159
104
1,029
4
414
2,272
4,418
(100)
4,318
2019
$'000
1,305
41
697
2,043
2019
$'000
881
18
133
43
859
4
411
1,373
3,722
(91)
3,631
Company
-
The receivables from related parties arise mainly from inter-group recharges. The receivables are unsecured and bear
no interest. An ECL provision was calculated $0.1 million (2019: $0.1 million).
29 Taxation Payable
Taxation payable
PPT
UL
2020
$'000
144
58
202
Group
2019
$'000
-
80
80
Trinidad and Tobago statutory petroleum profit tax (“PPT”) and unemployment levy (‘UL”) are a combined rate of 55% of
taxable income. PPT has a tax charge of 50%, while UL has a tax charge of 5% on taxable profits.
I
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I
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C
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P
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V
E
R
N
A
N
C
E
I
F
I
N
A
N
C
A
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A
C
C
O
U
N
T
S
G
L
O
S
S
A
R
Y
C
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P
A
N
Y
I
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A
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136
Trinity Exploration & Production plc
Financial Accounts
Notes to the Consolidated Financial Statements (continued)
30 Financial Instruments by Category
At 31 December 2020 and 2019, the Group held the following financial assets at amortised cost:
Trade and other receivables – current*
Abandonment fund – non current
Intercompany
Cash and Cash equivalents
Note (*): Excludes prepayments and VAT recoverable.
Group
Company
2020
$'000
3,910
3,490
-
20,237
27,637
2019
$'000
5,546
3,378
-
13,810
22,734
2020
$'000
150
-
4,318
4,317
8,785
At 31 December 2020 and 2019, the Group held the following financial liabilities at amortised cost:
Accounts payable and accruals
Bank overdraft
Group
Company
2020
$'000
7,803
2,700
10,503
2019
$'000
10,386
-
10,386
2020
$'000
481
-
481
At 31 December 2020 and 2019, the Group held the following financial asset at fair value through profit or loss:
Derivative financial instrument
31 Commitments and Contingencies
a) Commitments
Group
Company
2020
$'000
266
266
2019
$'000
85
85
2020
$'000
266
266
2019
$'000
-
-
3,631
5,286
8,917
2019
$'000
508
-
508
2019
$'000
85
85
There are commitments for decommissioning costs of the wells and facilities under the Group’s agreements with Heritage,
which have been provided for as described in Note 25: Provision for other liabilities.
b) Contingent Liabilities
i)
ii)
iii)
iv)
The East Coast Galeota, West Coast Point Ligoure Guapo, Brighton Marine licences and the Farm-Out Agreement
for the Tabaquite Block (held by Coastline International Inc.) has expired. There may be additional liabilities and
commitments arising when a new agreement is finalised, but these cannot be presently quantified until a new
agreement is available.
Parent Company Guarantee. A Letter of Guarantee was established in substance over the PGB 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 the twelve month period contingent upon specific clause within the Letter of
Guarantee. The clause implied that Guarantor may reduce the Guarantee Sum available for payment to the MEEI
under the Letter of Guarantee on an obligation by obligation basis provided PGB delivers to the Guarantor a
certificate duly issued and signed by the MEEI. The PGB licence has expired (see note 31 (b) (i)).
The Group is party to various claims and actions. Management has 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 in these financial statements.
The Group’s Lease Operatorship Assets (“LOA”) for WD 5/6, WD 2, WD 13 and WD 14 blocks expired on 31 December
2020, and are in final stages of being renewed with Heritage as of the date of this report and following their renewal
a new performance bond will be put in place.
Annual Report & Financial Statements 2020
Financial Accounts
32 Employee Costs
Employee costs for the Group during the year
Wages and salaries
Other pension costs
Share based payment expense (Note 22)
Group
Company
2020
$'000
6,266
358
963
7,662
2019
$'000
6,393
342
1,038
7,773
2020
$'000
910
-
248
1,158
Average monthly number of people
(including Executive and Non-Executive Directors’) employed by the Group
137
2019
$'000
910
-
221
1,131
Executive and Non-Executive Directors
Administrative staff
Operational staff
33 Restatement
Group
Company
2020
Number
2019
Number
2020
Number
2019
Number
6
85
131
222
6
78
130
214
6
-
-
6
6
-
-
6
During 2020, a presentation error was identified in the prior year Cash flow Statement whereby the Cashflow from investing
activities included non-cash accruals and these were not adjusted from the working capital movement (Trade and other
payables). As a result, the cash inflow from operations and cashflow outflow from investing activities were overstated in the
prior year financial statements by equivalent amounts. To correct the error, a reclassification was done as at 31 December
2019, resulting in a $1.2 million decrease in net cash inflows from operations and a $1.2 million decrease in net cash outflows
from investing activities.
There is no profit or net asset impact as a result of the prior year restatement.
The adjustment is reflected in the statement below:
Operating Activities
Changes In Working Capital
Inventories
Trade and other receivables
Trade and other payables
Tax paid
Investing Activities
Purchase of Exploration and Evaluation (“E&E”) assets
Purchase of computer software
Purchase of property, plant and equipment
Net Cash Outflow From Investing Activities
Net Cash (Outflow)/Inflow From Financing Activities
Increase/(Decrease) in Cash and Cash Equivalents
At end of year
2019
$’000
As previously
reported
13,113
Impact of
Prior period
Adjustment
$’000
(1,192)
(1,192)
56
1,136
1,192
(1,454)
3,638
1,797
17,094
(316)
(476)
(99)
(12,156)
(12,731)
(438)
3,609
13,810
2019
$’000
Restated
13,113
(1,454)
3,638
605
15,902
(316)
(420)
(99)
(11,020)
(11,539)
(438)
3,609
13,810
I
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P
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F
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138
Trinity Exploration & Production plc
Financial Accounts
Notes to the Consolidated Financial Statements (continued)
34 Events after the Reporting Year
1.
Derivative Financial Instruments
In addition to the crude oil derivatives put in place during 2020, the Company has put in place a number of crude oil
derivative financial instruments post the year end to protect a portion of its revenue against fluctuation in oil prices. The
crude oil derivative financial instruments currently in place are as follows:
Type of Derivatives Index
Sell
Put
Buy
Put
Sell
Call
Effective Expiry Execution
Production Date Date Date
Premium
USD MM
USD/bbl
USD/bbl
Monthly
USD/bbl Barrels
Put Spread WTI
Put Spread WTI
20.0
20.0
Put Spread Dated Brent 32.5
2-Way Cost Collar ICE Brent
3-Way Cost Collar ICE Brent
50.0
30.0
30.0
42.5
42.5
60.0
-
-
-
15,000 01-Jan-21 31-Dec-21 21-Jul-20
15,000 01-Jan-21 31-Dec-21 17-Nov-20
15,000 01-Jan-21 30-Jun-21 25-Nov-20
64.4
66.9
15,000 01-Jul-21 31-Dec-21 5-Feb-21
10,000 01-Jan-22 30-Jun-22 4-Mar-21
0.36
0.25
0.19
-
-
2. CIBC overdraft facility
Trinity fully drew down its $2.7 million overdraft credit facility with CIBC effective 2 April 2020 as part of its strategy of
maximising available cash during the short-medium term which currently remains unpaid. This facility was further up
stamped on 5 January 2021 by $2.3 million to a total of $5.0 million for which this portion remains fully undrawn to date.
The facility is a revolving overdraft credit available to Trinity which is repayable upon demand to CIBC. Interest is payable
monthly at an interest rate US Prime Rate (currently 9%) minus 4.05% per annum with present effective rate 4.95% with a
floor rate of 3.95%.
3.
Fiscal Reforms
The revised threshold for Supplemental Petroleum Tax ("SPT") for small onshore producers has now been implemented
via The Finance Act No. 30 of 2020 which came into effect on 1 January 2021. As a result, the threshold at which SPT
would be due for individual producers producing less than 2,000 barrels of crude oil per day has now increased from
$50.0 /bbl to $75.0/bbl for the financial years 2021 and 2022.
Trinity expects to be exempt from SPT across all of its onshore licences below $75.0/bbl, which will have a significant
positive impact on future cash flows. Based on current onshore production levels, Trinity estimates that SPT of c. $3.5
million per annum or more would previously have been payable if realisations were above $50.01/bbl (although this could
be partially mitigated by the Investment Tax Credit (“ITC”) shelter). The confirmation of these reforms therefore represents
a considerable boost to potential cash generation from Trinity's onshore licences should realisations average above
$50.01/bbl for any calendar quarter during 2021 and 2022.
4. Acquisition of onshore block PS-4
On 4 May 2021, Trinity announced that it had entered into a sale and purchase agreement with Moonsie Oil Company
Limited to acquire an operated 100% interest in the PS-4 onshore block for a headline cash consideration of $3.5 million,
to be funded from the Group's existing cash resources. The Group anticipates that the transaction will complete towards
the end of Q2 2021.
Annual Report & Financial Statements 2020
Glossary
Glossary
Abbreviation
Meaning
139
2P
2C
Adjusted EBITDA
AGM
AIM
API
ARV
ATV
bbl
BDO
BIR
BM
Brexit
Board
bopd
boepd
c.
CA 2006
Capex
CGU
CIBC
CIMA
CLN
COSA
COVID-19
DD&A
DOA
DTA
DTL
EAD
E&E
ECTT
EIA
ECL
EMA
EMT
ESG
ESP
EU
EUR
I
N
T
R
O
D
U
C
T
O
N
I
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
I
F
I
N
A
N
C
A
L
A
C
C
O
U
N
T
S
G
L
O
S
S
A
R
Y
C
O
M
P
A
N
Y
I
N
F
O
R
M
A
T
O
N
I
Proved and probable resources
Best estimate of contingent resources
Operating Profit before Taxes for the period, adjusted for depreciation, depletion &
amortisation (“DD&A”), non-cash Share Option Expenses (“SOE”), Impairment losses
on Financial assets (“ILFA”) and FX gains/(loss)
Annual General Meeting
Alternative Investment Market of the London Stock Exchange plc
American Petroleum Institute
Annual Rental Value
Annual Taxable Value
barrel
Binder Dijker Otte
Board of Inland Revenue of Trinidad & Tobago
Brighton Marine
Withdrawal of the UK from the EU
Board of Directors
barrels of oil per day
barrels of oil equivalent per day
circa (approximately)
Companies Act 2006 (as amended from time to time)
Capital expenditure
Cash generating units
FirstCaribbean International Bank (Trinidad & Tobago) Limited
Chartered Institute of Management Accountants
Convertible Loan Notes previously in issue by the Group which were fully redeemed
as part of the Group's fundraising in 2018
Crude Oil Sales Agreement
Coronavirus disease (COVID-19) is an infectious disease caused by a new virus. The
disease causes respiratory illness (like the flu) with symptoms such as a cough, fever,
and in more severe cases, difficulty breathing.
Depreciation, depletion and amortisation
Delegation of Authority
Deferred Tax Asset
Deferred Tax Liabilities
Exposure at Default
Exploration and Evaluation
Energy Chamber of Trinidad and Tobago
Environmental Impact Assessment
Expected Credit Loss
Environmental Management Authority
Executive Management Team
Environmental Social Governance
Electric Submersible Pump
European Union
Estimated Ultimate Recovery
140
Trinity Exploration & Production plc
Glossary
Glossary (continued)
Abbreviation
FCF
FEED
FDP
FID
FOA
FRC
FVLCD
FX
G&A
GBP or £
GHG
GORTT
Group
H
HAW
Derivatives
Heritage
HMRC
HSSE
IOC
IP
IOR
IAS
IFRS
IFRS IC
ITC
ILFA
JOA
KPI(s)
LGD
LLP
LNG
LO
LOA
LTA
LTIP
MOU
MEEI
MM
Management
mmbbls
mmstb
Meaning
Free Cash Flow
Front End Engineering Design
Field Development Plan
Final Investment Decision
Farmout Agreement
Financial Reporting Council
Fair Value less Costs of Disposal
Foreign Exchange
General and Administrative expenses
Great British Pound
Green House Gases
Government of the Republic of Trinidad and Tobago
Trinity and its Subsidiaries
Half Year i.e. H1 means first half
High Angle Well
Oil Price Derivative Financial Instruments
Heritage Petroleum Company Limited
Her Majesty Revenue and Customs of the United Kingdom
Health, Safety, Security & Environment
Independent Oil Group
Initial Production
Improved Oil Recovery
International Accounting Standards
International Financial Reporting Standards
IFRS Interpretations Committee
Investment Tax Credits
Impairment losses on Financial assets
Joint Operatorship Agreement
Key Performance Indicator(s)
Loss Given Default
Limited liability partnership
Liquefied Natural Gas
Lease Operator
Lease Operatorship Agreement
Lost Time Accidents
Long-Term Incentive Plan
Memorandum of Understanding
Ministry of Energy and Energy Industries of Trinidad & Tobago
million
Board and EMT
million barrels
million stock tank barrels
Annual Report & Financial Statements 2020
Glossary
Glossary (continued)
141
Abbreviation
MPHU
mt
NDC
NE
NGC
NOC
NOS
Operating Break-even
OCF
Operating Expenses
Opex
OPEC
Operating Profit
ORR
Paris Agreement
PCP
PD
Petrotrin
PGB
Plc
PPE
ppm
PPT
PRMS
PT
PwC
Q
REI
RNS
RCP(s)
Realised price
ROU
SCADA
SOE
SPE
I
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D
U
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N
I
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T
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A
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G
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P
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N
A
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I
F
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A
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C
A
L
A
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N
T
S
G
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O
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S
A
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P
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Meaning
Mechanical Pumping Hydraulic Unit
metric tonnes
Nationally Determined Contribution
North East
National Gas Company of Trinidad and Tobago Ltd
National Oil Company also known as Heritage
Net Oil Sands
The realised price where the Adjusted EBITDA for the respective asset is equal to zero.
Consolidated Operating Break-even is the realised price where the Adjusted EBITDA
for the entire Group is equal to zero)
Net Cash Flow from Operating Activities
Royalties, Production costs (“Opex”), Depreciation, Depletion & Amortisation (“DD&A”),
General & Administrative (“G&A”) expenses, Impairment losses on financial assets
(“ILFA”), Share Option Expense (“SOE”) and Foreign exchange (“FX”) (loss)/gain
Production costs
Organization of the Petroleum Exporting Countries
Operating Profit from business operations (Operating Revenues less Operating
Expenses less SPT & PT less Exceptional items)
Overriding Royalties
The Paris Agreement is an agreement within the United Nations Framework
Convention on Climate Change, dealing with greenhouse-gas-emissions mitigation,
adaptation, and finance, signed in 2016 including Least Developed Countries and
Small Island Developing States.
Progressive Cavity Pumps
Probability of Default
The Petroleum Group of Trinidad and Tobago Limited
Point Ligoure-Guapo Bay-Brighton Marine Outer (West Coast Assets)
Public Limited Group
Personnel Protective Equipment
parts per million
Petroleum Profits Tax
Petroleum Resource Management System
Property Tax
PricewaterhouseCoopers LLP
Year quarter (3 months) i.e. Q1 means first quarter
Reportable Environmental Incidents
Regulatory News Service
Recompletion(s)
Actual price received for crude oil sales per bbl. A discount is normally applied to the
WTI price by Petrotrin and, since 1 December 2018, Heritage to derive the realised
price received by Trinity.
Right-of-Use
Supervisory Control and Data Acquisition
Share Option Expense
Society of Petroleum Engineers
142
Trinity Exploration & Production plc
Glossary
Glossary (continued)
Abbreviation
SPT
START Card
STOIIP
STOW
SW
Meaning
Supplemental Petroleum Tax
See Think Act Reinforce Track Card
Stock Tank Oil Initially in Place
Safe to Work
South West
T&T based bank
First Citizens Bank Limited
TEPUKL
TEPGL
Trinity Exploration & Production (UK) Limited
Trinity Exploration and Production (Galeota) Limited
Trinity/Company/Parent
Trinity Exploration & Production plc
TOG
TPH
TSR
TTD
T&T
Total Oil and Gas
Total Petroleum Hydrocarbons
Total Shareholder Return
Trinidad & Tobago Dollars
Trinidad & Tobago
T&T State creditors
Reference to both BIR and MEEI
UK
UL
USA
USD or USD
UWI
VAT
VIU
vs
VWAP
WFH
WHO
WTI
WO(s)
YE
United Kingdom
Unemployment Levy
United States of America
United States Dollars
University of the West Indies
Value Added Tax
Value in Use
versus
Volume-Weighted Average Price
Work From Home
World Health Organisation
West Texas Intermediate - is a grade of crude oil used as a benchmark in oil pricing
Workover(s)
Year-end
Annual Report & Financial Statements 2020
Company Information
Company Information
Company addresses
Corporate Secretarial
United Kingdom and Registered Office
c/o Pinsent Masons LLP
1 Park Row
Leeds LS1 5AB
Company Secretary
AMBA Secretaries Limited
400 Thames Valley Park Drive
Thames Valley Park
Reading RG6 1PT
Advisers
NOMAD
SPARK Advisory Partners Limited
5 St. John’s Lane
London EC1M 4BH
Registrar
Link Group
10th Floor
Central Square
29 Wellington Street
Leeds LS1 4DL
Main Bankers
Lloyds Banking Group plc
Bank of Scotland
Level 6 110 St Vincent Street
Glasgow G2 5ER
First Citizens Bank Limited
Superpharm Building
2 South Trunk Road, Gulf View
La Romain
Trinidad & Tobago
CIBC FirstCaribbean International Bank
(Trinidad & Tobago) Limited
74 Long Circular Road
Maraval, Port of Spain
Trinidad & Tobago
Broker
Cenkos Securities plc
678 Tokenhouse Yard
London EC2R 7AS
Independent Auditors
BDO LLP
55 Baker Street
London W1U 7EU
United Kingdom
Tax Advisers
Ernst & Young LLP
Blenheim House
Fountainhall Road
Aberdeen AB15 4DT
Legal Advisers & Solicitors
Pinsent Masons LLP
1 Earl Grey Street
Edinburgh EH3 9AQ
Public Relations Adviser
Walbrook PR
4 Lombard Street
London EC3V 9HD
Trinidad & Tobago Office
3rd Floor Southern
Supplies Limited Building
40-44 Sutton Street
San Fernando
Trinidad, West Indies
Certifications
Affiliations
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Trinity Exploration & Production plc
c/o Pinsent Masons LLP
1 Park Row
Leeds LS1 5AB
United Kingdom
T: +44 (0)131 240 3860
E: info@trinioil.com
www.trinityexploration.com
Cover image:
© Zaheer Mohammed