Annual Report & Accounts for the year ended 31 December 2021 Company Number: 07535869 Stock Code: TRIN Contents Strategic Report Financial Accounts 85 Consolidated Statement of Comprehensive Income 86 Consolidated Statement of Financial Position 87 Company Statement of Financial Position 88 Consolidated Statement of Changes in Equity 89 Company Statement of Changes in Equity 90 Consolidated Statement of Cash Flows 91 Company Statement of Cash Flows 92 Notes to the Consolidated Financial Statements Glossary of Terms 134 Glossary of Terms Company Information 137 Company Information 2021 Highlights At a Glance Bruce Dingwall CBE Tribute Chairman’s Letter 2021 CEO’s Review of 2021 1 2 4 5 8 12 Business Strategy and Model 14 Operations Review 22 Technical Review 25 Stakeholder Engagement 27 Sustainability 35 Financial Review 44 Risk Management and Internal Controls Governance 50 Directors' Statement under S 172(1) CA 2006 52 Corporate Governance Statement 53 QCA Principles 58 Board of Directors 60 Executive Management Team 61 Board Activities 62 Audit Committee Report 64 Remuneration Committee Report 66 Directors’ Remuneration Report 74 Directors’ Report 77 Statement of Directors’ Responsibilities 78 Independent Auditors’ Report For more information on Trinity Exploration & Production visit trinityexploration.com Annual Report & Financial Statements 2021 Highlights of 2021 1 l Strategic Report Governance Financial Accounts Glossary Company Information Sales (bopd) 3,006 (2020: 3,226 bopd) Adjusted EBITDA (USD) 19.8m (2020: $12.1m USD) Operating Profit Before SPT, PT, Impairments, Covid 19 Expenses and Exceptional Items (USD) 10.0m (2020: $3.0m USD) Cash generated from continuing operations (USD) 12.6m (2020: $10.3m USD) Cash flow used in investing activities (USD) Total year-end cash (USD) 13.9m (2020: 6.0m USD) 18.3m (2020: $20.2m USD) West Coast Onshore East Coast mmstb 19.73 47.22 2P 2C 66.95 Total mmstb 2.70 3.01 5.71 2P 2C Total mmstb 7.26 3.82 2P 2C 11.08 Total mmstb 9.77 40.39 50.16 Total YE 2021 2P Reserves + 2C Resources* 2P 2C Total Note: Refer to the Financial Review pages 35 to 43 for additional information. * 2021 Management estimates for reserves and resources 2 Trinity Exploration & Production plc At a glance Trinity is an independent energy producer focused on Trinidad & Tobago. Trinidad & Tobago is our home. Trinity is based in San Fernando, in South Trinidad, and we have developed a deep understanding of the country, its culture and the geology that hosts such exciting hydrocarbon opportunities. We are a forward-thinking, modern energy producer, harnessing the benefits of new technologies to drive efficiency and maximise production. We deliver around 5% of the country’s oil production and provide excellent careers for a wide range of skilled workers, employing 250 personnel at the end of 2021, almost all of whom are based in-country. TOBAGO Producing Wells TRINIDAD Tabaquite PGB Guapo Bay Brighton Marine Outer Brighton Marine Inner Point Ligoure WD-13 WD-14 FZ-2 WD-5/6 PS4 WD-2 ● Onshore ● West Coast ● East Coast Trintes Field Galeota Echo development (cid:79) Onshore (66%) (cid:79)(cid:3) West Coast (25%) (cid:79)(cid:3) East Coast (9%) Asset Agreement Trinity Heritage Production 2P 2C Exploration Key l West Coast PGB (Point Ligoure, Guapo Marine, JOA 70% 30% LI DRC Brighton Marine - Outer) BM (Brighton Marine - Inner) CVORR 100% LI DRC l Onshore FZ-2, WD-2, WD-5/6 LOA 100% LI DRC WD-13 & WD-14 & PS4 Tabaquite FOA 100% LI l East Coast Galeota - Trintes JOA 100% FDP DRC Galeota - Other (i.e.: TGAL/Echo) CVORR 100% FDP OI Crude oil production Farmout Agreement Joint Venture Agreement Lease Operatorship Agreement Offshore Infrastructure Drilling, Recompletions & Workovers Field Development Plan Land Infrastructure Offshore Exploration FOA JOA LOA OI DRC FDP LI OE CVORR Conversion to Overriding Royalty Annual Report & Financial Statements 2021 3 l Strategic Report Governance Financial Accounts Glossary Company Information $56.4m 5% Spend in 2021 (USD) of the country’s oil production delivered 250 Skilled workers employed Our business contributes significantly to the local economy through payments made to the Government of the Republic of Trinidad and Tobago (“GORTT”) in royalties and current taxes (USD 25.0 million in 2021), operating and capital expenditure (USD 31.4 million in 2021) which supports an extensive supply chain, employing more than 380 contractors, and supporting the communities that surround us with a number of initiatives, many of which are conceived and driven by our own staff. This network of relationships sits at the very heart of our business and our Core Values of Behaviour, Rigour & Purpose apply wherever we are present Behaviour Rigour Purpose professionalism, respect and fairness initiate thought before action fit for delivering our business goals Trinity provides excellent careers for 250 Male / Female Staff Field Office Staff (cid:79)(cid:3) Male (79% (cid:79) Female (21%) (cid:79)(cid:3) (cid:79) Field (67%) Office (33%) Our Environmental Social and Governance (“ESG”) Commitment ESG is at the forefront of our minds as we drive towards the future and good ESG practices are at the core of Trinity’s forward planning. We are currently making significant steps in the development of our ESG Strategy and reporting. You can read more in our Sustainability Review on pages 27 to 34. 4 Trinity Exploration & Production plc Bruce Dingwall CBE Tribute The tragic and sudden passing of Bruce Dingwall CBE, Executive Chairman and Founder of Trinity on August 3rd, 2021 was a serious shock to the entire Trinity “family”. Bruce was the heartbeat of our Company, he created its value system, he pioneered the introduction of the innovative technologies that help to set us apart from the crowd today, and he acted as a mentor to so many employees and members of the Executive Management Team. He was also a key driving force behind the activities of our subsurface team, illustrating his life-long fascination for “rocks”. He was a unique, enthusiastic and irrepressible leader who will be sadly missed by all in the Company. Bruce was Trinidadian by birth, having been raised adjacent to the onshore oilfields, and loved everything about Trinidad including its culture, its natural beauty and especially its people. It is no exaggeration to describe Trinity as a “family” and Bruce was its patriarch. He started the Company in 2005 via the purchase of a package of assets from Venture Production, the successful UK based independent that he also helped to establish and then built it, step-by-step, into the successful business it is today. “Behaviour, Rigour, Purpose”, the mantra that drives Trinity’s activities today are values that were central to Bruce. Do the right things, examine the impact of your actions and make sure those actions benefit all stakeholders. This describes what Bruce was seeking to achieve with Trinity and we have carried this value system forward into the refreshed strategy and operating philosophy that run through this year’s Annual Report. Bruce was passionate about technology, and believed that the successful application of cutting-edge technologies, tried and tested in other hydrocarbon basins around the world, could help differentiate Trinity from other operators and most importantly, provide a source of commercial advantage. The roll-out of Supervisory Control and Data Acquisition (“SCADA”) and the purchase and interpretation of the 3D seismic covering our onshore licences are classic examples of Bruce’s ethos in action in the Company. Bruce had a genuine love for people. One of his biggest attributes was helping his friends and colleagues in Trinity to believe that they could achieve so much more. Bruce provided support and guidance to many of our younger employees and was an important mentor for the Executive Management Team. The promotion of Jeremy Bridglalsingh to the role of Chief Executive Officer following Bruce’s passing bears testimony to this. Bruce coached Jeremy to be his natural successor, whilst he served as CFO and then Managing Director, but whilst this was always the plan, none of us expected the baton to be handed over in such tragic circumstances. Bruce’s love of the subsurface, the “rocks”, meant that he was always intimately involved in driving the Company’s strategy in this area. There can be no question that the gap left by Bruce’s passing drove the Board’s decision to establish the Technical Committee. On a personal note, Bruce was a big and endearing personality and this shone through in our interactions at Board level. He was an optimist, with great faith in people, and irrepressible in his enthusiasm for the array of opportunities available to the Company. We will all miss his leadership, experience and council. The Board wanted, in some way, to acknowledge and celebrate the immense contribution that Bruce has made to the Company, and to the land and its people that he loved. To do so, we have started a bursary fund at the University of the West Indies, sponsoring young and talented women and men to study geology and geoscience. Our hope is that they will develop a similar love of the ”rocks”, and find productive and fulfilling careers in the industry which was so central to Bruce’s life. Annual Report & Financial Statements 2021 Chairman’s Letter 5 l Strategic Report Governance Financial Accounts Glossary Company Information “It is a privilege to chair Trinity as we emerge from a period of significant change during which management refreshed our strategy and focused the business on clear and deliverable growth opportunities. Our dynamic strategy for growth is underpinned by a strong balance sheet and resilient and dependable cash flow from production - something of a rarity amongst the smaller companies in our sector - and a testament to our strong business model. I would like to commend our team which has maintained focus, momentum and professionalism throughout a challenging year, allowing us to protect the integrity of existing assets and operate safely to deliver steady production and cash flow. Importantly, this core operating model provides the basis from which we can grow the Company into a leading independent producer of scale both by maximising value from existing assets and through acquisitions and partnerships. We have a clearly defined, risk-mitigated strategy in place and believe that this will drive returns for shareholders through value growth and the potential to return cash. At time of publishing, the world is in turmoil and we are deeply concerned for those most affected by hostilities in the Ukraine. This global upheaval brings with it a raft of new and different challenges to an industry already coping with the perfect storm of restrictions on working practices imposed by the Covid 19 pandemic, unprecedented volatility in commodity prices and, in our own case, the shock of the sudden and untimely passing of our founder and Executive Chairman, Bruce Dingwall, CBE. As such, 2021 proved to be an extraordinarily difficult year to navigate, but one in which Trinity proved its resilience and, perhaps as importantly, its ability to act decisively for the benefit of our stakeholders, refining and prioritising our extensive opportunity set, with a view to generating significant growth in value in the relatively near term. Board Changes In the past year we have changed the composition of our Board to bring Trinity’s governance structure more in-line with market practice, with the role of Chairman becoming a non-executive position, complimented by the promotion of Jeremy Bridglalsingh to the position of Chief Executive Officer. Jeremy is a Trinidadian whose contribution to the Company’s strategy and development since becoming CFO in 2016, and more recently Managing Director in 2019, cannot be underestimated. Further, we added depth and breadth to an already strong Board, welcoming two important new non- executive directors, Derek Hudson and Kaat Van Hecke, both highly respected and experienced members of the international energy industry whose impressive biographies can be found on pages 58 to 59. David Segel stood down from the board in February 2022, and I would like to place on record my thanks for his invaluable contribution to our deliberations since he joined the board following our recapitalisation in 2016. Technical Committee Trinity fields an expert sub-surface team whose knowledge of the geology of Trinidad’s hydrocarbon- bearing basins is a core strength of the Company. To support them and assist the Board by bringing a global 6 Trinity Exploration & Production plc Chairman’s Letter (continued) context to analysis of potential new projects, during 2021 we established an external advisory committee of world- class sub-surface and petroleum engineering experts who will help us to critique and filter prospects so that we can confidently focus expertise, energies and investment to fast-track only the most viable, high-grade opportunities. The Technical Committee comprises two board members and three high-quality independent experts and has helped management refine and prioritise its existing opportunity set to focus on risk-mitigated prospects capable of being delivered with the Company's existing financial and operational resources to increase scale and optimise returns. It has set ambitious but deliverable growth targets, and the resumption of onshore drilling during the second half of this year is the first part of this scaling up process. Managing risk to deliver growth in production and cash flow This additional layer of uncompromising, qualitative analysis in geoscience and petroleum engineering is matched by two of Trinity’s key financial characteristics; capital discipline, with an increasing focus on risk assessment, and a relentless commitment to cost management. 2021 saw Trinity turn in its sixth consecutive year of sub USD30.0/bbl operating break-even, in fact USD 29.2/bbl, a real achievement in such challenging times and an excellent discipline to provide a buffer against times of low market prices. The Company expects an increase on the usual operating breakeven in FY 2022 to support medium term growth through increased technical and intellectual capacity and with industry-wide cost pressures increasing. Furthermore, Trinity maintains a strong balance sheet, with cash resources of USD 18.3 million at 31 December 2021 (2020: USD 20.2 million), meaning we have the resources we require to deliver our near term growth objectives. These pillars of our business culture will underpin our dynamic future strategy where we aim to grow our predictable, stable production and cash-flow allowing us the opportunity to both fund attractive new growth opportunities and deliver cash returns to shareholders. Risk-appropriate investment for future growth Stable cashflow forms the bedrock of Trinity’s financial strength and positions us well for our next, exciting growth phase. One of our key operational objectives is to safely and sustainably build and scale production and we have already commenced planning for an ambitious, risk-appropriate exploration programme that will tap into the region’s material remaining reserves, using 3d seismic to map prospects with potential to be fast-tracked to monetisation, generating material growth for our shareholders whilst understanding and hopefully ameliorating technical and commercial risk. An additional layer of potential comes from the ongoing farm-down process for our Galeota licence, comprising the producing Trintes field, the Echo Prospect and potential from the Foxtrot and Golf accumulations. The Company has engaged with a range of potential partners and whilst initial feedback has been encouraging, several participants have indicated their inability to fully assess the economics of the opportunity without clarity being considered by the Government of Trinidad and Tobago ("GORTT"). As these considerations seem to have been delayed, and to ensure that the Company attains the best possible value proposition for this highly valued asset, we have made the decision to pause our farm-down process until the GORTT fiscal reforms have been concluded. We continue to explore a variety of options for this asset, with the aim of maintaining exposure while avoiding the need for material additional debt or diluting existing shareholders. These key criteria must be met, together with tax reform in Trinidad, which has been flagged by the Government, before your Board will commit to/progress any partnership offers. We eagerly anticipate T&T’s new bidding rounds for exploration blocks both onshore and near offshore. We will target licences that provide additional opportunities to expand our footprint in Trinidad. Concurrent with that, we will continue to evaluate acquisition opportunities. Investing in future energy and transition Unfolding geopolitical events have made it clear that, for many years to come, ‘traditional’ energy (i.e. oil & gas) will remain an essential part of the energy mix. However, the clock is ticking towards Energy Transition & Net Zero and Trinity’s goal is to be at the forefront of T&T and the wider Caribbean region’s energy transition. During 2021 we established a new senior executive role of Innovation, supported by a small but highly qualified team, and have already instigated several meaningful studies and ground-breaking collaborations that we believe will challenge conventional thought and help to develop innovative new approaches to energy production. Trinity’s ESG programme is designed to build environmental considerations into the mindsets of our people and the heart of our business culture such that sustainability becomes one of the cornerstones of our future vision. Financial Discipline Our 2021 results demonstrate your Company’s resilience. Adjusted EBITDA for the year was USD 19.8 million (2020: USD 12.1 million) and cash resources were USD 18.3 million (2020: USD 20.2 million) at year end despite the absence of new drilling activity. In 2021, in line with previous years, we hedged around 50% of our production to counteract the impact of low oil prices and the effects of Supplemental Petroleum Tax (“SPT”), which is at its most punitive when realised oil prices are between USD 50.01 and USD 55.0 per barrel. The adoption of a similar policy for 2022 has significantly reduced the immediate benefit of high oil prices on our profitability and cashflow, especially in the first half of the year. However, we expect the impact will decrease in H2 2022, as a lower proportion of our existing production is hedged and our onshore drilling programme will bring new production onstream. Annual Report & Financial Statements 2021 7 l Strategic Report Governance Financial Accounts Glossary Company Information Financial restructuring Thanks At an appropriate future point it is our goal to make returns to shareholders either in the form of cash dividends or share buy-backs. With this in mind, during 2021, your Board undertook a complex share capital re-organisation to position the distributable reserves at PLC level that will enable us to return cash to shareholders as and when appropriate. Fiscal Reform Throughout 2021 Trinity continued to leverage its deep and long-standing relationships with Government, Heritage and the region’s energy participants more broadly to make the case for positive fiscal reform. We remain confident that the Government understands the requirement for fiscal reform, despite the near-term outlook for crude oil prices, in order to stimulate investment and development of the country’s oil and gas resources, to the benefit of all T&T stakeholders. We understand that the Government’s deliberations on tax reform, specifically in relation to SPT, are ongoing, and we look forward with keen interest to receiving positive news on this matter in the near term. I would like to conclude by extending the thanks of the Board to our Shareholders who have remained supportive and engaged despite a difficult year. As the frustrating limitations imposed by the Covid 19 pandemic hopefully subside we look forward to engaging ‘in-situ’ with shareholders and our broader stakeholder community with plans for a busy agenda of presentations and events throughout the coming year. I would also like to extend the sincere thanks of the Board to our management and employees whose unstinting dedication has allowed us to successfully and safely navigate the challenges posed by the Covid-19 pandemic. We entered 2022 with a refreshed strategy, a strong balance sheet and a dynamic vision for growth. We believe the time is right for Trinity and are energised to deliver optimum value on your behalf. Nicholas Clayton Non-Executive Chairman 23 May 2022 8 Trinity Exploration & Production plc Chief Executive Officer’s Review of 2021 “The sudden and unexpected passing of our founder and Executive Chairman, Bruce Dingwall CBE, in August 2021, has accelerated our plans to focus the business, building on the strong foundations he had built to take Trinity into a new and dynamic growth phase.” In this context, I am extremely proud to be leading a strongly bonded, talented team of hard-working individuals who have consistently brought their top game to bear throughout the year, enabling Trinity to deliver an applaudably resilient performance in challenging circumstances. Growth Strategy We believe that this is an inflection point for the Company with the imminent resumption of drilling commencing the next stage of our growth. During the past year we have re-focused, prioritising Trinity’s existing opportunity set to focus on risk-mitigated prospects capable of being delivered with the Company’s existing financial and operational resources to increase scale and optimise returns. In addition, we now have the expertise and processes in place to mitigate risk and appropriately prioritise the various opportunities we continue to consider. This rigorous approach has resulted in the Company de-selecting some options, a signal of the important contribution of our Technical Committee’s mentorship and guidance. The level of commercial and operational input their experience brings is now enabling us to shape our decision-making process by adding quality reviews alongside technical risk assurance of the options we are pursuing. Whilst we are focused on expanding our portfolio we will not put undue pressure on the Company’s cash and operational resources. We are now positioned to activate our refined strategy with a view to driving value. Our ambition is to double production over the next few years, and thereby generate sufficient free cash flow both to fund future growth initiatives and deliver meaningful cash returns for shareholders, and we believe that we now have the structure in place to deliver this challenging target. Financial Performance Following a difficult year in 2020, when commodity prices dipped dramatically and Trinity’s average price received was USD 37.7/bbl, we welcomed the market’s recovery and the subsequent uplift in our realised price for 2021 to USD 60.4/bbl. The combined effects of this uplift and our relentless pursuit of cost efficiencies delivered an adjusted EBITDA of USD 19.8 million (2020: USD 12.1 million) and ending cash of USD 18.3 million after meaningful capex invested of USD 13.9 million (2020: USD 6.0 million) Our hedging policy has historically been designed to provide protection from low commodity prices and to ameliorate the impact of realised prices in the USD 50-55/bbl range where SPT in Trinidad is most punitive. Annual Report & Financial Statements 2021 9 l Strategic Report Governance Financial Accounts Glossary Company Information In the context of the recent extraordinary and unpredictable uplift in commodity prices, magnified by Russia’s invasion of Ukraine in March 2022, we are not alone in finding that our hedges have blunted the otherwise positive impact these higher prices would have had on our operating cashflow. We expect the impact will decrease in H2 2022, as a lower proportion of our existing production is hedged and our onshore drilling programme will bring new production onstream. Going forward, we expect that growing our onshore production, further driving down our operating break-even, and the expected reform of the SPT regime will significantly reduce our future hedging requirements. HSSE My first priority is the health and safety of our workforce and contractors as well as minimising the environmental impact associated with our operations. However, while our leading indicators continue on a favourable trajectory, we incurred three Lost Time Incidents (“LTIs”) during 2021. This has prompted us to place even greater emphasis on HSE throughout the organisation, from the Boardroom to the well head. We have created an HSE Steering Committee, and have also appointed an HSSE champion at Board level, Kaat Van Hecke, to oversee this function and highlight its critical importance to us as a company. This has begun to inject greater rigour into our HSE oversight, with a prime focus on creating Trinity’s Safety Rules to underpin our safe systems of work. I am delighted to chair the HSE Steering Committee and the energy and enthusiasm of those involved is helping to drive improvements in the effectiveness of our HSE function. This will further strengthen our operations, motivate our team and demonstrate to our partners and regulatory stakeholders our competency as an operator. Operations in 2021 Reducing Volatility During 2021, having taken a commercial decision not to recommence drilling activity, we opted to underpin our base production via a programme of seven recompletions, 96 workovers and increasing the volume under surveillance via SCADA to ~50% of total production. The impact of these activities, allowing us to increase the predictability of our production profile and mitigate natural reservoir decline for the second consecutive year, has been significant. Despite the absence of drilling, production for the year reached the upper quartile of our guidance (2,900-3100 bopd), averaging 3,069 bopd, slightly lower than 2020’s 3,232 bopd. In particular, our strategic decision to invest in technology to automate and optimise our wells has proved to be highly effective. The operation of 31 Tier 1 onshore wells, over half of all Trinity’s production, is now automated, helping to ensure steady, low-cost production whilst minimising non-productive downtime. As a result, 2021 saw Trinity deliver its sixth consecutive year of sub-USD 30.0/bbl operating break-even, a real achievement in such challenging times and an effective buffer against times of low market prices. Shareholders will see a small upward shift in our breakeven to low USD30’s in 2022 as we increase the intellectual resource to achieve our medium term vision of scaling up Trinity, but our relentless focus on optimising production and reducing cost continues. “The challenges of 2021 tested, and yet again proved, the efficacy of our business model which is designed to ensure that your Company can withstand shocks and uncertainties and grow value throughout oil price cycles.” Trinity is already one of T&T’s top five crude oil producers, giving us a deep historical knowledge of the region’s hydrocarbon basins and strong working relationships with our partners and regulatory stakeholder. The benefit of this unique skillset came to the fore during 2021 when our Field Development Plan (“FDP”) for Galeota attained full Ministry approval within just three months, an unusually short timeframe and testament to the quality of our technical rationale. This was aided by the timely acquisition of the full suite of Certificates of Environmental Clearances for Galeota’s Echo project from the Environmental Management Authority. In line with our strategy to refine and prioritise the range of growth options at our disposal, our sub-surface team, supported by world class external consultants, continued their study of the 37 km2 of 3D seismic acquired during 2021 from Heritage Petroleum Company Limited (“Heritage”). This activity was significantly complemented by gaining access to the entire 287 km2 3D seismic data made available via our participation in the NWD process. The Technical Team continues to work hard to accelerate its interpretation and integration of this data to enable Trinity to develop a regional geological framework with a view to identifying new play concepts, deeper, largely undrilled reservoirs, and the best locations for drilling into the key productive Forest and Upper Cruze horizons, being the dominant producing reservoirs onshore Southern Trinidad. Our principal objective is to improve our drilling returns by developing a mix of lower risk, conventional wells, with technically more challenging but potentially higher return, high angle, horizontal and deeper wells. These more complex wells have the potential to increase the ratio of barrels recovered to the capital invested, and thereby provide stronger economics. Growth through acquisition and collaboration The Company is in robust financial health, and is conservatively financed compared with many of our peers, where operating break-evens are higher and finances more constrained. We are therefore well placed to take advantage of commercial opportunities as and when they arise. A prime example of this was our acquisition of the PS-4 Block Lease Operatorship 10 Trinity Exploration & Production plc Chief Executive Officer’s Review of 2021 (continued) Sub-Licence, onshore Trinidad, which was finalised in December 2021. We moved quickly to secure this synergistic asset, adjacent to our core WD5/6 and WD2 producing assets, funding this acquisition out of existing cash resources. To progress some of the exciting opportunities in the T&T region Trinity continues to develop excellent working relationships with potential partners, both Heritage (the state-owned oil company) and larger international operators. Reviewing opportunities for growth, we consistently apply rigorous technical and financial metrics to balance risk with reward. In this context, having carefully appraised the NWD exploration play in Trinidad’s Southern Basin with partner Capricorn Energy PLC, the Board decided not to participate further with this process as neither we nor our partner Capricorn Energy were comfortable with the technical and operational risks associated with the deeper Cretaceous leads that were identified. Galeota Our Galeota prospect offers a broad range of opportunities to add value for Trinity • • • • The Trintes field, currently producing at 1,107 bopd, in which the significant 2P reserve potential has not been fully exploited The Echo Prospect, which has an approved FDP, with potential peak production of 7,000 bopd The Foxtrot and Golf appraisal prospects with combined peak production of 7,000 bopd Significant tax losses of circa US$164 million A crucial milestone In July 2021 our negotiations with the Ministry of Energy and Energy Industries (“MEEI”) and state oil company Heritage were rewarded with the award of new and improved commercial terms including • • • • A new 25-year licence commencing 14 July 2021, covering an area of 19,280 acres A significant reduction in minimum work obligations and performance guarantees A new Crude Oil Sales Agreement (“COSA”) provides greater pricing clarity An improved Joint Operating Agreement (“JOA”) more aligned with international standards One of the outcomes of this development is that Management’s estimate of the net 2P plus 2C reserves increased to 50.16 mmbbls (previously 27.60 mmbbls). An additional benefit is the conversion of Heritage’s 35% working interest to an Overriding Royalty (“ORR”) whereby the Company now benefits from holding a 100% Working Interest over the entire block, enabling Trinity to apply the bulk of its tax losses across the entire Galeota Licence area. These improved terms provide Trinity and prospective funding partners with more attractive commercial terms and the requisite visibility to bring on new low carbon development projects such as Echo, incentivising maximum resource extraction at a time of high oil prices and a transition towards lower carbon intensity energy supplied. Annual Report & Financial Statements 2021 The Galeota farm-down process got underway in December 2021, hosted by Stellar Energy Advisers, and whilst initial feedback has been encouraging, participants were unable to fully assess the economic opportunities at Galeota without clarity on expected SPT reform. On this basis the Company has decided to pause the Galeota farm down process pending SPT reform. This will enable the Company to seek the best value proposition for Galeota. In keeping with our prudent commercial strategy, Trinity is working hard to achieve the most capital efficient outcome, balancing acceptable and proportionate levels of investment with a desire to maintain a significant share in the project and thus our ability to deliver significant upside for shareholders. Sub Licence Renewals We were delighted that Heritage reconfirmed their trust in Trinity’s skills and commitment by extending five of the Company’s six Lease Operatorship Agreements (“LOAs”) for an additional 10 years, effective 1 January 2021, on improved commercial terms. This will allow Trinity to plan and commit to future work programmes across its onshore assets with greater confidence. New Exploration Licences In response to the recent announcement made by the T&T Government of its intention to conduct new onshore, shallow water and deep offshore bidding rounds, Trinity has registered non-binding interest in six onshore blocks. Details of the shallow water blocks have not yet been released. We anticipate that further details will become available following announcements relating to fiscal reform, which we consider to be essential to the success of the bid rounds. Fiscal Reform We remain optimistic about the prospects for imminent, and necessary, reform of T&T’s fiscal regime, specifically SPT which significantly discourages investment and stifles activity in the sector. This is, in our view, essential if Trinidad is to attract the necessary investment to maximise the value of its world class hydrocarbon deposits within the Net Zero time frame. We continue to work with the MEEI and wider Government with the goal of delivering a positive outcome. Our ESG Activities In 2021 a structured and focused approach has been initiated towards our ESG Programme as we position Trinity on a trajectory to deliver a sustainable future for your Company. The measurement and reporting of environmental performance is an emerging science and Trinity is taking the important steps to understand what is required and to ensure that what we measure and report is transparent, provable and, most importantly contributes positively to sustainable operations in years to come. In Q4 2021 we appointed an expert external advisory team to help us refine our ESG strategy and develop a clear process by which ESG becomes embedded across the business. They have hosted several well-attended 11 l Strategic Report Governance Financial Accounts Glossary Company Information workshops including both office and field-based staff, tailor-made to explain the regulation framework in the context of our own operations and provide ongoing guidance on the necessary changes to our work methods to ensure that the data we report is reliable. Internally, an ESG Committee was established and a new senior post of Executive Manager, Innovation was created along with an Innovation Team. With regard to the Social element of ESG, our HR and Business Administration Teams have been pro-active in enhancing our healthcare provision, devising wellness programmes and ramping up our community engagement to provide much needed support for school children and families. In collaboration with the University of West Indies (“UWI”) a scholarship fund in our recently deceased Bruce Dingwall’s name has been established. Our Chairman has already alluded to changes made to our Board to upgrade our governance model and we are delighted to have welcomed two new members, one of whom, Kaat Van Hecke, brings specific expertise and focus on HSSE matters. Renewables Momentum in energy efficiency and transition to renewable energy is picking up. We believe that in the medium term there may be renewable power opportunities with the potential to be accretive to shareholder value. For that reason, Trinity is building a strong network of partners to ensure that our Company is part of the vanguard leading T&T’s commercialisation of emerging renewable technology. We are delighted to continue to develop these important relationships, helping to explore and develop new projects with the National Gas Company (“NGC”) and the UWI. The scope of their mission is to enable energy transition not only in T&T, but potentially in the wider Caribbean and Latin America. We have no doubt that a number of innovative projects will come out of this important collaboration which is already bearing fruit with: • • Commencement of T&T’s inaugural Solar irradiance study adjacent to Trinity’s Galeota field office, with plans for a further Wind Resource Assessment Installation of a solar power system for the WD5/6 field office In summary, 2022 marks the start of a planned growth phase for Trinity; a robust operating platform, a refreshed Board, further complemented by the formation of a world-class technical advisory committee, a refined strategy and a healthy balance sheet all put Trinity in an ideal position to accelerate growth and generate meaningful returns for shareholders. Jeremy Bridglalsingh Chief Executive Officer 23 May 2022 12 Trinity Exploration & Production plc Business strategy & model Why Invest in Trinity? We are a forward-thinking company, harnessing the benefits of new technologies to drive efficiency and responsibly deliver energy. Trinity has a strong investment case, based upon resilient, low-cost production; near term, deliverable, opportunities to achieve scale; and a medium-term hopper of both organic and inorganic growth opportunities. On behalf of our shareholders, we are actively targeting significant growth in production and free cash flow, allowing us to pursue new growth opportunities and deliver cash returns to shareholders. Our strategy and our business model are designed to deliver this core objective. Annual Report & Financial Statements 2021 13 l Strategic Report Governance Financial Accounts Glossary Company Information Our Business Strategy Our objective is for Trinity to be a leading independent energy producer, capable of delivering meaningful and sustainable growth in shareholder value whilst working closely and respectfully with all stakeholders in a safe, ethical and transparent manner. 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. KEY PRINC IP LES O F OUR BUSINESS MO DEL We strive to ensure that our business can endure uncertainties and grow value throughout oil price cycles and changes to the macro-environment by operating safely and responsibly, persevering and innovating and exercising financial and capital efficiency. EFFICIENCY & INNOVATION Deploy our capital to efficiently monetise our reserves and resources OPERATE SAFELY & RESPONSI BLY Maintain the integrity of our assets, operating safely, responsibly and sustainably FINANCIAL & CAPITAL DISCIPLINE Scale our operations, thereby increasing cash flows and returns PRIORITISE HSSE • PRESERVE THE INTEGRITY OF OUR ASSET BASE • PROTECT OUR PEOPLE, OUR COMMUNITY AND THE ENVIRONMENT • MAINTAIN STRONG RELATIONSHIPS WITH THE GOVERNMENT AND HERITAGE • CONTINUALLY EARN THE SOCIAL AND LEGAL RIGHT TO OPERATE ACTIVE PORTFOLIO MANAGEMENT AND CONTINUAL COMMERCIAL INNOVATION • OPTIMISE COMMERCIAL TERMS ON OUR EXISTING ASSETS • USE AUTOMATION AND DATA ANALYTICS TO MAXIMISE EFFICIENCY • INCREASED FOCUS ON ESG REPORTING AND TRANSITION TECHNOLOGIES • DEVELOP COMPLEMENTARY STRATEGIC PARTNERSHIPS COST MANAGEMENT • MAINTAIN A STRONG BALANCE SHEET • DEPLOY CAPITAL ON RISK-MITIGATED GROWTH PROSPECTS TO ACHIEVE SCALE • ENGAGE WITH SHAREHOLDERS AND OTHER POTENTIAL CAPITAL PROVIDERS • DELIVER VALUE TO SHAREHOLDERS 14 Trinity Exploration & Production plc Operations Review “2021 is a testament to our “One Team” ethos which showcased our resilience and adaptability to safely achieve our production targets, against the backdrop of the Covid-19 pandemic. Our learnings when overcoming challenges and our increased use of technologies across all of our assets will deepen our competencies and confidence as we seek to grow Trinity in 2022 and beyond.” Rajesh Rajpaulsingh Chief Operations Officer (COO) In the face of a year dominated by lockdown and Covid 19 restrictions, a decision was made to desist from any new drilling within our portfolio, meaning that Group production for 2021 aligned with natural reservoir decline of ~7%. As we weathered the pandemic we were forced to adapt our operating plans to achieve the budgeted level of production and with production growing by 4% from Q3 to Q4 we exited 2021 at 3,143 bopd. This has provided us with a stable platform entering 2022. “In 2022, 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. Annual Report & Financial Statements 2021 The graphic below demonstrates the results of our efforts to maintain production in spite of the severe challenges encountered during the year. 2021 vs 2020 Annual Production and 2021 Half Year & Quarterly Breakdown (bopd) 15 l Strategic Report Governance Financial Accounts Glossary Company Information 3500 3000 2500 2000 1500 1000 500 bopd 0 245 255 253 258 245 260 258 258 1188 1107 1122 1091 1108 1137 1100 1083 1793 1644 1657 1631 1697 1616 1566 1698 12m 2020 12m 2021 H1 2021 H2 2021 Q1 2021 Q2 2021 Q3 2021 Q4 2021 The 2021 daily production volume chart below illustrates the production across each of the assets by location. Reported Production 2021 (bopd) 4000 3500 3000 2500 2000 1500 1000 500 bopd 0 Jan 2021 Feb 2021 Mar 2021 Apr 2021 May 2021 Jun 2021 Jul 2021 Aug 2021 Sept 2021 Oct 2021 Nov 2021 Dec 2021 l Onshore l East Coast l West Coast 16 Trinity Exploration & Production plc Operations Review (continued) Onshore Assets G U L F O F P A R I A Guaracara Refinery Tabaquite WD 13/14 FZ 2 Atlantic LNG PS4 WD 5/6 WD 2 Onshore Assets 2021 Workover Activity Current onshore production is from Lease Operatorship Blocks: WD-5/6, WD-2, FZ-2, WD-14, WD-13, PS-4 and Farmout Block, Tabaquite. 2020 Avg Sales 2021 Avg Sales Field (bopd) (bop d) WD-5/6 1,076 1,050 WD-2 333 246 FZ-2 109 122 WD-14 121 110 WD-13 132 95 PS-4* 0 52 Tabaquite 21 17 Annual Average 1,793 1,644 Note PS-4* was acquired on 1 Dec 2021. Average 2021 net sales from the onshore assets was 1,644 bopd (2020: 1,793 bopd), which accounted for 55% of total annual average sales. The projections for the year anticipated this decline since no drilling was planned. The team’s multi-faceted approach to production delivery included recompletions (“RCPs”), work-overs (“WOs”), reactivations, sand exclusions, an expanded swab portfolio and production optimisation initiatives to maintain production delivery. Trinity executed 7 RCPs Onshore during the year (2020: 16) as well as 74 WOs (2020: 92) and 5 sand control jobs (2020:2). Field WO RCP SCN WD-5/6 31 1 3 FZ-2 14 4 - WD-2 13 1 - WD-13 8 - 2 WD-14 7 1 - PS-4 1 - - TAB 0 - - Total 74 7 5 Overall, we aim to minimise the need for well interventions, and reduce the frequency of WOs, as we target an increasingly predictable and sustainable production base. Timely execution of WOs when they are required is an essential component of our strategy, in returning base wells to production as quickly as possible. Our sand control measures focused on high frequency wells impacted by formation entry. As described below, the combination of surveillance and automation further assisted in our ability to improve our response to our Tier 1 ( > 25 bopd) wells on which they were installed in WD-5/6. Natural annual field decline of 7-10% can be significantly mitigated via the execution of RCPs and, in spite of a slow approval process (within Heritage and the Government) due to Covid-19, our campaign delivered substantially all of the intended production targeted from the RCP programme. 17 l Strategic Report Governance Financial Accounts Glossary Company Information East Coast Assets Current East Coast production is generated from the Alpha, Bravo and Delta platforms in the Trintes Field which resides within the Galeota Block. Average 2021 net sales from the East Coast were 1,107 bopd (2020: 1,188) accounting for 37% of the Group’s total sales in line with 2020. To achieve this, the team conducted 15 restorative WOs (2020: 20) including 1 well reactivation to underpin production (2020: 4 well reactivations) and 2 electrical submersible pump (“ESP”) WOs were conducted (2020: 1 ESP WO) with continuous emphasis being placed on optimisation and stabilisation of all wells via a data driven strategy utilising automation. An enhanced chemical injection strategy was executed to counteract increased solids deposition in the mature wells. Surveillance Technician Rienzi Gayapersad remotely monitors our automated onshore wells Annual Report & Financial Statements 2021 In 2022, 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. Automation continues to enhance efficiency Trinity’s use of automation to optimise our production uptime took a significant step forward in 2021, with the execution of the automation of 31 Top Tier wells that covers 85% of the Block production in WD-5/6, which has delivered some preliminary results: • • • • 11 WOs have been avoided during the period due to remote surveillance by the SCADA monitoring team Real time data collection through the SCADA system is facilitating faster responses to changing well conditions and optimised real time production. Speed ramp up and pump stroke optimization in real time netted > 3000 bbls increased production. Reduction in Man Hours required for production and monitoring. Carbon footprint has been reduced by having less frequent wellsite visits and fewer WOs. Further works are being progressed to building internal competency and leveraging more cost- effective automation that can be deployed on lower producing wells. East Coast Assets TGAL 1 Discovery Trinity’s COO, Rajesh Rajpaulsingh on site, inspecting an automated well Trintes Galeota Galeota Terminal & Export Facility 18 Trinity Exploration & Production plc Operations Review (continued) Again, our ongoing approach of digitalising the Trintes field to provide reliable and informative essential data in relation to the wells, thereby pre-empting potential issues and problems, allowed us to stabilise production. The result is an ongoing reduction in the production fluctuations in the field brought about by proactively predicting possible failures and effectively developing mitigation plans. These production focused operations were coupled with the team’s ongoing efforts to maintain the integrity of our mature offshore assets. This process is ongoing and is expected to further improve the team’s ability to execute essential workplans safely. Galeota Asset Development (Trinity: 100% 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 northeast 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 187.5 mmstb. Trinity received FDP approval for the Echo Development from the Ministry of Energy and Energy Industries (“MEEI”) in November 2021. The approved FDP proposed a conservative eight well configuration. Both the MEEI and reserve auditor, NSAI, have indicated that the current approved FDP Case leaves considerable upside potential for recoverable hydrocarbons with an increased number of well slots. On this basis, Trinity has considered a variety of Development Schematic development cases to maximise the recoverable hydrocarbons from the Echo Development. Trinity’s preferred development case (Most Likely Case) consists of an Echo twelve well configuration. This aligns with MEEI’s FDP and NSAI 2021 CPR recommendations and strategy to accelerate the development and production of its remaining oil and gas reserves in the time available during the energy transition. CHARLIE BRAVO DELTA ALPHA ECHO TGAL-1 Trintes SW1 Prospective: STOIIP 26.0 mmstb Trintes 2P: c.9.77 mmbbls 2C: c.1.20 mmstbc TGAL 2C Development: c.39.1 mmstb Notes (1&2): Unaudited as at YE 2021 and considered best technical estimates TGAL NE2 Prospective: STOIIP 69.0 mmstb Indicative Depth S.I. 2500 ft 5000 ft Annual Report & Financial Statements 2021 19 l Strategic Report Governance Financial Accounts Glossary Company Information The Most Likely Case, a 12 well configuration may be adopted and will not only target TGAL but also additional proven oil and reservoir sands from the adjacent Trintes fault blocks FB4 and FB5; targeting recoverable resources of 25.2 mmbbls with peak annualised production of 6,977 bopd, approximately one year after first oil. Works on various pre-FEED studies to improve the topside and other aspects of the facilities design was completed in 2021. In addition, subsurface model building to support dynamic reservoir simulation for forecasting production performance and cumulative estimated ultimate recoverable (EUR) volumes were completed in 2021. The Environmental Impact Assessment (“EIA”) is a key item on the critical path to Final Investment Decision (“FID”) which was submitted in February 2021 and represented a significant milestone. The Certificate of Environmental Clearance was granted in February 2022. Other key milestones achieved in 2021 included the conversion of the working interest in the Galeota block from 65% to 100% and attaining FDP approval from MEEI In Q4, the Company commenced a formal marketing process for a farm-down of the GAD Project and has appointed Stellar Energy Advisors as its advisor for the divestment. There is potential for the GAD Project, which encompasses the Trintes Field's current production, the Echo Field Development and the Foxtrot and Golf appraisal areas, to significantly change the scale of Trinity's operations. As previously announced, the combined 2P reserves and 2C/2U resources from these fields exceeds 50 mmbbls, with dynamic modelling indicating peak annualised production of circa 7,000 bopd from Echo alone. An Independent Competent Person's Report on these assets was completed in Q4 2021 by Netherland, Sewell & Associates, Inc., which offers significant support to Trinity's own internal volumetric assessment of the Galeota Block. The Company has engaged with a range of potential partners as part of the Galeota farm down process. Whilst initial feedback has been encouraging, a number of participants have informed the Company that they are unable to fully assess the economics of the opportunity at Galeota without clarity on the expected reforms to Supplemental Petroleum Tax ("SPT"), which are currently being considered by the Government of Trinidad and Tobago ("GORTT") and which were initially expected to have been confirmed sooner than now appears likely. Pending SPT reform, which management still expects to happen, the Company has decided to pause the Galeota farm down process. This will enable the Company to seek the best value proposition for Galeota when the GORTT's fiscal reforms have been confirmed. West Coast Assets West coast production is generated from the Point Ligoure-Guapo Bay - Brighton Marine (“PGB”) and Brighton Marine (“BM”) fields. Average 2021 net sales from the West coast was 255 bopd (2020: 245 bopd) which accounted for 8% of the Group’s total annual average sales and a 4% increase from 2020 average. This increase was achieved by continuing infrastructural initiatives coupled with the production enhancing project to arrest the decline from the West Coast assets. West Coast Assets Brighton Inner Guaracara Refinery Brighton Outer Pt. Ligoure Atlantic LNG 20 Trinity Exploration & Production plc Operations Review (continued) The team remains focused on exploring opportunities to optimise production from all offshore platforms in this asset. No RCPs (2020: 0) were conducted, however two WOs were completed in the PGB asset for the period. BM asset sales experienced a 17% increase to 155 bopd (2020: 133 bopd). This was achieved by the team implementing a number of rigless production enhancing initiatives. No WOs or RCPs were conducted during this period (2020: 2 RCPs and 1 WO). The team remains focused on improving asset integrity on its offshore platforms to create a safer working environment and ensure production is maintained. We continue to evaluate additional initiatives to extend the operations horizon by increased WO, RCP and swabbing activity. Facilities Management and Infrastructure In 2021, the Facilities team paid particular attention to upgrading production and the welfare infrastructure on its East Coast Trintes Field and addressed key integrity challenges in relation to the West Coast Brighton Marine Field. These marine installations require a higher level of maintenance due to the harsher East/West Coast offshore environment. The internal team was supplemented by the recruitment of highly experienced contractors, mechanics and electricians, to ensure a higher level of operational reliability and uptime on the assets at lower cost. In 2021, the Team focused on structural and operational reliability, as such, we progressed 36 projects of which 23 were completed and 13 rolled over in 2022. One key activity is the construction of the new 10,000 bbls storge tank to service the Trintes field. This experienced some delays as a result of inclement weather and Covid 19 related issues. However, the works have resumed, with an anticipated completion during Q3 2022. This tank will bring additional storage capacity and operational flexibility to the Trintes operations ensuring tank certification compliance without any disruption to production. Facilities Management and Infrastructure spend in 2021 totaled USD 3.2mm. Reserves and Resources A comprehensive management review of all assets has been concluded and has estimated Trinity current 2P reserves to be 19.73 mmstb at the end of 2021, compared to the year-end 2020 reserve estimate of 19.55 mmstb. This represents a 0.9% year-on-year increase. The overall increase in reserves of 0.18 mmstb results from a combination of both negative and positive influences on oil volumes across all assets. However, a Reserves Replacement Ratio (RRR) of 100% was achieved in 2021 with production of 1.10 mmstb fully replaced together with updated well numbers and decline curve analysis on planned infill and producing wells Onshore and Offshore the West and East Coast. Brent Forward Price Deck applied to Reserves Economic Limit Testing (“ELT”) as at 3 January 2022 WTI Forward Price Deck applied to Reserves Economic Limit Testing ("ELT") from Britannic Trading LLC as at 3 January 2022 (USD/bbl) 2022 2023 2024 2025 2026 2027 2028 2029 Price Strip 76.48 71.76 68.91 67.09 65.97 65.25 65.65 65.65 Annual Report & Financial Statements 2021 21 l Strategic Report Governance Financial Accounts Glossary Company Information Management considers the reserves presented in the table below represent the best estimate as at 31 December 2021 of the quantity of reserves that will actually be recovered from our current 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 shown in the table. Unaudited 2021 2P Reserves Net Oil Production Asset Onshore East Coast West Coast Total Note (*): 31 December 2020 mmstb Production mmstb Revisions mmstb 31 December 2021 mmstb 5.44 11.66 2.45 19.55 (0.60) (0.40) (0.09) (1.09) 2.42 (1.48) 0.33 1.27 7.26 9.77 2.70 19.73 East Coast 2P reserves decreased due to a reclassification of three Trintes infill wells to horizontal well targets for Echo (-1.89MMstb) which was partially offset by the impact of wells optimisation and maintenance and economic limit testing improvements (+0.4 MMstb). Onshore and West Coast 2P reserve changes primarily reflect ongoing well optimisation across all assets to arrest decline from our base wells and, for the Onshore, the acquisition of PS4 adding 2P reserves of 0.67MMstb. The planned 2022 onshore drilling campaign, comprising a combination of high angle and horizontal wells, conventional wells and more materially, stratigraphically untested deeper reservoirs within the fields have utilised improved performance prediction methods (ie dynamic simulation, inflow equations etc) and decline curve analysis for assurance in forecast predictions. Management’s Estimate of 2C Resources as at 31 December 2021 Management’s best estimate of 2C resources as at 31 December 2021 is 47.22 mmstb (2020: 23.25 mmstb). The positive movement of 23.97 mmstb in 2C resources primarily reflects our increased working interest in Galeota, now 100% compared to 65% at YE 2020 following the successful revision of the license terms. Asset Net Oil Production Onshore East Coast West Coast Total 31 December 2020 mmstb 4.01 15.94 3.30 23.25 Revisions mmstb (0.19) 24.45 (0.29) 23.97 31 December 2021 mmstb 3.82 40.39 3.01 47.22 Note (*): • East Coast: - - • • Onshore: - - West Coast: - - - Working interest in Galeota is now 100% compared to 65% used in YE 2020. Year End 2020 ECHO FDP conservative 8 well development vs. Year End 2021 most likely Case of 12-well development inclusive of re-categorisation of three Trintes infills now being carried as 2C at ECHO. Additional contingent resources for the shallower TGAL G, H, and M Reservoirs, which are not targeted for initial TGAL (Echo) development, but forms part of phased future development plans. Base Production Optimisation Operations to recategorise some 2C to 2P. Improved Well Decline Analysis on planned 2P infills to capture more 2C. Recently concluded subsurface work across the Point Ligoure sub-licence asset has re-defined the subsurface structure resulting in a downward revision of 2C resources. Base Production Optimisation Operations to recategorise some 2C to 2P in particular execution of ABM151 RCP in Brighton. Management’s Estimate of Reserves and Resources as at 31 December 2021 Asset Onshore East Coast West Coast Total 2021 2P Reserves mmstb 7.26 9.77 2.70 19.73 2021 2C Resources mmstb 3.82 40.39 3.01 47.22 2021 2P Reserves and 2C Resources mmstb 2020 2P Reserves and 2C Resources mmstb 11.08 50.16 5.71 66.95 9.45 27.60 5.75 42.80 22 Trinity Exploration & Production plc Technical Review “Every day I have the privilege to work with Trinity’s team of world class subsurface domain experts, all of whom are committed to the company’s growth. The paradigm shift in technical philosophies, methodologies and integration of technology has now provided unparalleled insight into our reservoirs, giving us the competitive advantage to deliver sustained growth in reserves and resources.” Dr. Ryan Ramsook Executive Manager, Sub Surface The vision of our founder Bruce Dingwall, CBE, and his deep understanding of T&T’s unique geology, was the spark that created Trinity Exploration & Production plc. As such, subsurface is part of the Company’s DNA and fundamental to our business success. Trinity has an established and highly experienced multi-disciplinary Subsurface Team whose work is now complemented by the creation last year of the Technical Committee. The Technical Committee includes world class domain specialists; a geologist, geophysicist, petroleum engineer and drilling engineer, with over one hundred and fifty years of combined local, regional and international experience. As we drive forward our growth strategy, the Committee both supports the in-house Subsurface team and assists the Board by bringing a global perspective to the appraisal of new opportunities, applying additional rigour to our review process and ensuring that proposed subsurface projects meet the quality assurance levels required to make appropriately risk-mitigated commercial decisions. The in-house team utilises a mix of domain/disciplines, software and practical applications to enable its subsurface specialists to understand key aspects of exploration and development geology, both at local and international level; from operations and wellsite geology and sequence stratigraphy to practical modelling and well design. In recent years, this team has successfully developed and executed a fourteen well infill drilling programme. In the course of that programme, critical subsurface data was acquired by drilling infill wells to penetrate through deeper stratigraphic turbidite plays. This new intelligence moved our methodology towards deeper reservoir appraisal, rather than the historic drive for production from mature, stacked reservoirs and post-drill analysis and encouraged Trinity to acquire from Heritage 37 sq km of 3D seismic covering Trinity’s existing onshore assets. Integrating this seismic with our existing well data has allowed the team to develop a broader regional understanding, allowing Trinity to better understand the regional stratigraphy and an appreciation of the value of increasing the number of deeper, higher angle and horizontal well designs in our drilling mix going forward. This concept will provide further opportunities for growth from our existing portfolio through the drill bit and we look forward to our return to drilling later this year. Annual Report & Financial Statements 2021 Changing the paradigm of oil recovery onshore through subsurface modeling 23 l Strategic Report Governance Financial Accounts Glossary Company Information Palo Seco Field Offset Producing Wells Planned 607 Horizontal Well Well 2 WELL 2 Well 2 WELL 3 WELL 1 Well 1 WELL 4 WELL 5 Low Stacked Deltaic Reservoirs Modeled Permeability High Following the 2020 purchase and subsequent interpretation of that portion of the onshore NWD 3D seismic data covering Trinity’s LOA blocks, as part of a consortium, Trinity undertook a detailed evaluation of the wider NWD area via a Request For Proposal (“RFP”) process by Heritage Petroleum Company Limited (Heritage) in Q4 2021. The consortium also completed an evaluation of the Jubilee Field in Q1-Q2 2021 in response to the Heritage Expression Of Interest (“EOI”). Although the consortium concluded that the identified prospectivity does not support further participation in these processes, the overall evaluation of the datasets greatly enhanced our understanding of the regional geology and prospectivity. This has now positioned the Trinity team to develop basin wide geological models and the multi-disciplined technical competency needed to unlock the further potential of our current assets and from the upcoming bid rounds being launched by the MEEI in respect of new onshore and near offshore acreage, as well as further RFP processes by Heritage. We will continue to integrate the knowledge gained from past drilling campaigns and data room evaluations to further unlock the stratigraphic deeper potential of our onshore portfolio. Several prospective Miocene turbidite leads have been identified and are currently being high-graded and ranked for appraisal in upcoming drilling programmes. 24 Trinity Exploration & Production plc Technical Review (continued) Dr. Ramsook and team undertake a field study shallow reservoirs of the planned Echo development fault block; shallow reservoirs YE 2021 2C- 13.7mmstb vs YE 2020 2C- 0mmstb. This improved technical outlook was further supported by an independent Competent Person Report (“CPR”) undertaken in Q4 2021. During Q4 2021, Trinity initiated a multi-disciplined collaborative EOR feasibility study of all its onshore leases, providing the probabilistic analysis required to take the mature reservoirs of the Southern Basin to next phase of production recovery. These feasibility studies will be completed during late 2022.The application of EOR methodologies and technologies onshore could potentially allow our stripper wells and associated production facilities in good mechanical condition to continue to be operated beyond their primary production life, rather than shut-in for long periods of time or abandoned. Trinity has now appointed world class international independent consultants and service providers to assist in building and populating 3D static and dynamic reservoir models. The paradigm shift of embracing a modelling driven methodology has resulted in many projects being executed with more probabilistic deliverables including • • • Enhanced Oil Recovery (“EOR”) feasibility studies onshore, exploration prospect generation and risking across west and east coasts. In addition, the application of this approach has further de-risked and improved the static technical view of our Galeota asset where application of recent technology to seismic reprocessing and adoption of optimised well designs has allowed for a more phased approach to its development, allowing Trinity to further appraise and maximise recovery through a revised and regulator- approved FDP. Increased contingent resources This improved technical position along with improved licence commercial terms (working interest increased from 65% to 100%) has allowed Trinity to identify more contingent resources across the Galeota License (combined YE 2021 2C-40.39mmstb vs YE 2020 2C- 15.94mmstb) indicating development opportunities within Annual Report & Financial Statements 2021 Stakeholder Engagement Trinity has a broad range of stakeholders, including institutional and individual investors, financial institutions, employees, customers, suppliers and contractors, business partners, local communities and regulators, each with its own priorities and interests in what we do. We know that understanding what is important to them enables us to work more effectively as a business so our Board is committed to regular engagement. The Board recognises the need to balance the different and sometimes contrasting interests of our stakeholder groups and we believe that the Directors have acted in accordance with their duties as codified in law and in the table below we provide examples of our stakeholder engagement activity. 25 l Strategic Report Governance Financial Accounts Glossary Company Information Stakeholder Engagement Who Why What How we interact and respond Stakeholder Group Shareholders and Investors Why it is important to engage Key Issues / Significant topics raised Responsible Websites, online platforms1 Social media2 AGMs, Site Visits and Road- shows One on one meetings and interactive sessions Emails, Newsletters, Employee Manual, Policies and Memos Surveys 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 l3 l3 l3 l3 l3 Growth strategy and new business. Major project initiatives Strategic and organisational and changes. Financial Institution Meetings coordinated as required and ad-hoc. Employees Formal correspondence issued as required. Undertake quarterly performance and ad hoc 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. Customers (Heritage) Quarterly review meetings are held with Heritage. Routine and non routine banking transaction and general feedback EMT & Staff Operating, financial and ESG performance. Board & EMT l3 l3 l3 l3 l3 l3 l3 l3 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. Safety performance. Training. Effluent results. Production performance in relation to MWOs/MPLs, ESDs, swab wells, future plans, Inspections of facilities/wells. EMT & Staff l3 l3 l3 l3 26 Trinity Exploration & Production plc Stakeholder Engagement (continued) Trinity’s leadership team meets regularly to discuss stakeholder engagement. Who Why What How we interact and respond Stakeholder Group Why it is important to engage Key Issues / Significant topics raised Suppliers and Contractors Meetings coordinated as required and ad-hoc. Formal correspondence issued to suppliers when processes and procedures are being revised and standardised. Working conditions. Review and Assessments. HSSE discussions on issue and improvement. Websites, online platforms1 l3 Responsible EMT & Staff AGMs, Site Visits and Road- shows One on one meetings and interactive sessions Social media2 Emails, Newsletters, Employee Manual, Policies and Memos Surveys l3 l3 Partnerships Meetings coordinated as required and ad-hoc. Strategic Review and Assessments. EMT & Staff Formal correspondence issued as required. General negotiations. Discussion and working groups. l3 l3 l3 l3 l3 l3 Respect for local values and traditions. EMT Community development initiatives, including those to stimulate economic development. Employment and procurement opportunities. Communities Government & Regulators 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. 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. 1 2 (lived and recorded interviews and corporate presentations) (Twitter, LinkedIn) EMT & Staff l3 l3 l3 l3 Compliance with applicable laws and regulations. Employment opportunities and labour rights. Health and safety. Environmental stewardship. Licences and permitting. Taxation and royalties. Annual Report & Financial Statements 2021 Sustainability 27 l Strategic Report Governance Financial Accounts Glossary Company Information “Good Environmental, Social and Governance (“ESG”) practices are at the core of Trinity's forward planning as we help to drive Trinidad & Tobago's energy resources towards a secure, equitable and more sustainable future.” Nirmala Maharaj Chief of Staff & General Counsel Environmental Social Governance • Robust Internal Governance Framework: In 2021, Trinity formalised its ambitions to increase transparency in ESG by establishing a multidisciplinary working group of employees supported by an experienced United Kingdom based consultant. The team helped to define an ESG strategy and is in the process of developing implementation plans to further enhance transparency and data reporting over the coming years. We are working to align this new ESG strategy to the internationally recognised reporting frameworks GRI (Global Reporting Initiative) and TCFD (Task Force on Climate-Related Financial Disclosure) within the next 2 years. There were many highlights in 2021 as we continue to develop and implement our ESG initiatives. These include but are not limited to the following: - - Board governance in place through a Director being assigned to have ESG/HSSE oversight Management Structure amended to include the newly created positions of Executive Manager, Health Safety Security Environment and Quality and Executive Manager, Innovation • Robust HSSE Management Framework: - - - Active Governance Committees comprising of an Executive Management Steering Committee and a multidiscipline Tactical Committee HSSE Mentor/Advisor who has over 45 years’ experience both locally and internationally in the oil and gas industry retained to provide additional support to an experienced HSSE Team Lead Achieved the Trinidad and Tobago Energy Chamber’s Safe To Work recertification with a score of 99% compliance - Working towards ISO 45001:2018 compliance 28 Trinity Exploration & Production plc Sustainability (continued) • • Renewable Energy initiatives implemented to accelerate reduction of carbon footprint: - - Memorandum of Understanding with the University of the West Indies (“UWI”) and Trinity to study Renewable Energy in Trinidad and Tobago Solar Resource Assessment Research grade Solar Resource Assessment instruments installed at Galeota in February 2022. First such installation in the Southern Caribbean - - Solar Power Installation at the WD 5/6 location. This location is now off the electricity grid and being powered by renewable energy. The potential exists to expand this initiative to other assets and significantly lower the fields’ carbon footprints A drone mounted Laser Spectrometer is used to quantify and identify methane emissions (tanks, well sites, pipelines etc.) and provide high resolution area imagery. Complete baseline Emissions quantification underway in 2022 Trinity’s ESG Roadmap - An emissions monitoring program to reduce the environmental impact of methane escaping into the atmosphere to be developed • Automation underway: • • - Digitalization of fields to achieve reduced production volatility, better operational efficiencies and improve ESG credentials – currently circa 50% of Trinity’s production is automated Covid-19 Business Continuity Planning Recognition - Recognised by American Chamber of Commerce in 2021 for our Excellence in managing the Covid 19 Business Continuity Planning Security Leadership - Championed and implemented enhanced security initiatives in conjunction with Heritage Petroleum Company Limited, the national oil company thus significantly reducing incidents of theft and sabotage Reporting framework disclosure preparation Continued measurement and improvement Define ESG strategy with purpose Detailed emissions calculations and reduction strategy Materiality assessment through stakeholder feedback Target setting and goal alignment Initial materiality assessment with internal ESG working group Understand ESG objectives and priorities 2021 2022 2023 ONWARDS Annual Report & Financial Statements 2021 Trinity’s ESG Materiality Assessment E R O M MATERIAL TOPICS 29 l Strategic Report Governance Financial Accounts Glossary Company Information BIODIVERSITY WASTE & EMISSIONS ECONOMIC IMPACTS & EQUALITY CLIMATE CHANGE , GHG EMISSIONS ASSET INTEGR ITY , INCIDENT MANAGEMENT LOCAL COMMUNITIES EMPLOYEE PRACTICES OCCUPATIONAL HEALTH & SA FET Y S R E D L O H E K A T S N O T C A P M I IMPORTANT TOPICS PUBLIC POLICY ANTI-CORRUPTION & STRONG GOVERNANCE LAND & RESOURCE RIG HTS CONFLICT & SECURITY POST- PROJECT CLOSURE & REHABILI TATIO N LESS MO RE IMPACT ON TRINITY’S BUSINE SS • Responsible Corporate Citizen: - - - Sponsorship of awards and laptops for excellence in education at the Secondary Entrance Assessment Examinations and Caribbean Secondary Examination Certificate (O’Levels) to students from the Mayaro/Guayaguayare communities Sponsorship of school supplies to 500+ children and relief supplies to 100+ families in the communities in which we operate Major sponsor of the Andrea Project, a Non- governmental Organisation using technological solutions to avert incidents of crime, with a focus on vulnerable women ESG Journey In 2021, an ESG Multidisciplinary team was constituted to focus on developing and implementing a robust, long-term ESG strategy to support delivery of Trinity's business goals. Our 2022 goal is to develop a climate roadmap, set the baseline for emissions, generate impactful relevant targets and begin tracking our performance against them. This new ESG strategy is intended to align to the internationally recognised reporting frameworks namely Global Reporting Initiative (‘GRI’) and Task Force on Climate-Related Financial Disclosures (‘TCFD’) within the next 2 years. These frameworks will serve to guide the Company as we advance our ESG journey. A detailed emissions audit project spanning 2021 and 2022 is under way, to improve the accuracy of our Scope 1 & 2 emissions calculations. This will include sampling at production and storage facilities. This project will inform an emissions reduction strategy to address venting and fugitive emissions. Materiality Assessment & United Nations Sustainable Development Goals (UNSDGs) Trinity aims to be a leading operator in T&T with regards to our stakeholders and the communities in which we operate. During 2021, we kicked off an in-depth review of our the Global Reporting Initiative 11: Oil and Gas Sector 2021 Sector Standard (“GRI”). In recognition of the importance of our relationships and the changing environment in which we all work, Trinity plans in the next two years to develop its ESG benchmark alignment to include both the TCFD and GRI standards. However, as Trinity is not yet aligned to the full GRI standards, a simplified list of topics is considered in this initial materiality assessment, resulting from a thorough internal review including subject matter experts and challenges from team leads across Trinity’s business 30 Trinity Exploration & Production plc Sustainability (continued) and our Executive Management Team. The outcome of these considerations is illustrated in our Materiality Matrix which employs the related United Nations Sustainability Development Goals (“UNSGD”) that are relevant to our business. During 2022 and 2023, Trinity will be expanding this workstream to engage with its stakeholders to test and refine the Materiality Assessment presented in this document. To rank the material topics, each was considered with respect to its impact on Trinity's stakeholders and then in relation to its impact on the business. Topics that are determined to be material have been linked and aligned with the most relevant UNSDGs as outlined below. From this strong, contextual base, the wider Trinity ESG strategy is being built. Post our ESG Materiality Assessment, our ESG Working Group selected three core focus areas into which our material topics fit and then linked them to relevant UNSDGs. These core focus areas are: Energy Transition, Community, Environmental Protection. Key objectives and detailed metrics to measure our progress were defined for each of the three core areas An ESG Strategy with Purpose of focus. The Group identified UN Goals 16 (Peace, Justice and Strong Institutions) and 17 (Partnerships for the Goals) as cross-cutting all three areas of focus and framing how we strive to be a good business partner with all stakeholders. Other UNSDGs as illustrated in the diagram below were also deemed relevant to our various aspects of our operations and cumulatively underpins our areas of ESG focus. Such UNSDGs include Goal 3: Good Health and Well-Being, Goal 4: Quality Education, Goal 6: Clean Water and Sanitation, Goal 7: Affordable and Clean Energy, Goal 8: Decent Work and Economic Growth, Goal 13: Climate Action, Goal 14: Life Below Water and Goal 15: Life on Land. Our ESG strategy with the three core focus areas: Emissions & Transition, Community, and Environment are all interconnected and interdependent. This focus adds further depth and purpose to both our core values of Behaviour, Rigour, Purpose, and our business model, which is designed to enable Trinity to deliver our strategy whilst working closely and respectfully with all stakeholders in an ethical and transparent manner. Each of the three pillars of our business model - Operating Safely & Responsibly, Persevering & Innovating, and Financial & Capital Efficiency - have integral ESG elements that help us to deliver our goals with purpose. Emissions & Transition Community Environmental Protection Effective positive relationships with employees and stakeholders Zero tolerance and zero incidents of bribery and corruption Quantify energy emissions baseline through an audited GHG inventory Reduce methane venting Improve energy efficiency Increase renewable energy powering facilities Complete planned asset maintenance schedule on ageing infrastructure to achieve zero spills/unplanned discharge Support local content and diversity Participate in capacity building of local communities to enhance skills and contribute to local job development Top quartile health and safety performance with zero serious incidents during operations Understand baseline environmental conditions in all areas of operation Improvement in key environmental parameters and biodiversity in operational areas Zero incidents of accidental and untreated, waste and emissions discharge into the environment Annual Report & Financial Statements 2021 31 l Strategic Report Governance Financial Accounts Glossary Company Information Core Values, Business Model Pillars and ESG Strategy BEH AVIOUR • R IGOUR • P U RPOSE EFFICIENCY & INNOVATION OPERATE SAFELY & RESPONSIBLY FINANCIAL & CAPITAL DISCIPLINE Innovation & Development Improved ways of working Low carbon energy opportunities Open to change Emissions Reduction Measure, assess and monitor Reduce venting & fugitive emissions Utilise gas Partnerships & Collaboration Peer and Government projects Community involvement Transparency & Honesty Work towards Scope 1, 2 & 3 emissions Respectful stakeholder engagement Transparent reporting Health & Environment Focussed Safe place to work Emissions and waste management Rejuvenation projects Environment Energy Transition & Innovation Trinity’s Emission Reduction Plan As a responsible operator, Trinity is committed to implementing energy transition initiatives in our operations, and to become more climate and environmental action conscious Addressing climate change through reducing our emissions is identified as a material topic to our business and stakeholders and is one we are taking very seriously. Many of Trinity's assets include mature, brownfield sites, some with wells that have been producing for more than 50 years. This presents multiple challenges in terms of ensuring asset integrity is maintained, thereby preventing safety and environmental incidents, and optimising production rates. The age and in-field facilities of many of our assets also presents a challenge in accurately calculating our emissions. We have commenced a detailed sampling programme from a selection of wells in each of our fields to measure the volume of gas produced. As detailed in the following diagram this data will be collected, analysed and reported on during 2022 – 2024 and used in emissions calculations that will more accurately characterise our emissions footprint. In our Emissions Quantification, Trinity is considering the use of an aerial drone-mounted Laser Spectrometer to quantify and identify methane emissions (tanks, well sites, pipelines). The intent is to complete baseline Emissions quantification in 2022: fluid samples, tank monitoring, transport & logistics, energy assessments etc. We can then implement impactful reduction strategies and contribute meaningfully to the United Nations (“UN”) Sustainable Development Goal 13 of Climate Action: Take urgent action to combat climate change and its impacts. Transitioning to a Lower Carbon Future Our plans to evolve into a more efficient and cleaner business saw further operational automation initiatives rolled out in 2021. Of particular note, key onshore and offshore wells were automated to drive efficiency, improve safety, and reduce energy intensity. Approximately 50% of Trinity’s current production is automated as per the following: • A variety of technologies are used depending on the production requirements 32 Trinity Exploration & Production plc Sustainability (continued) Trinity’s Emission Reduction Plan UNDERS TANDI NG THE FULL RANG E OF EMISSIONS AND HAVING A PL AN TO RE D U CE IS KE Y TO TH E W ID ER E S G S T RATE GY 202 2 2023 2024 Full assessment of all emissions Measurement of fluid properties for representative calculations Full assessment of Scope 3 emissions Update to Scope 1 & 2 emissions Calculation of % methane emitted and locations Audit emissions data REPORT Review methane reduction options Methane reduction activities in place Ongoing reporting of all emissions Emissions reduction success REPORT Methane reduction activities ongoing - Partnering with the NGC and the UWI to study Wind Resources in the Southern area of Trinidad. A bespoke metrological tower with measuring instruments will be procured for installation at Galeota once the land and environmental approvals are received Biodiversity and Waste Management Conservation and restoration of the onshore and offshore environments in which we operate through management of our waste is material to our business. We are defining plans for going beyond our regulatory compliance obligations for waste management and environmental protection and restoration as part of our ESG strategy to contribute to UN Sustainable Development Goals 14: Life Below Water and 15: Life on Land. Water Courses As a small island nation, parts of Trinidad & Tobago are already experiencing the effects of water stress. Trinity recognises the importance of maintaining a safe and secure water supply and identify this topic as material to both its business and its stakeholders. We are defining initiatives to both mitigate pollution and waste, and restore and preserve our local water resources. • • Remote Monitoring Center surveils the production and employs automated control with a SCADA system (Supervisory Control And Data Acquisition) Trinity has in-house personnel with expertise within the Innovation Team that deploys and services all of its automation initiatives Through formation of our Innovation Group in Q4 2021, we will accelerate our work on applied analytics, transition technologies and automation across the wider portfolio during 2022 to further work towards our ESG objectives. Such work has already commenced and include but is not limited to the following: • • • • • Energy Audits have commenced across the assets Initiatives commissioned targeting energy and carbon footprint reduction; electricity, fuel, operations processes Renewable Energy; Solar and Wind: - - Memorandum Of Understanding entered with the University of the West Indies (“UWI” to study Renewable Energy in T&T Solar Resource Assessment Research grade Solar Resource Assessment instruments installed at Galeota in February 2022 which is the first of its kind in the Southern Caribbean First measurement of all three components of solar energy; Direct Normal Radiation (“DNI”), Diffuse Horizontal Irradiance [DHI] and Global Horizontal Irradiance [GHI] - Solar Installation at the WD 5/6 location. This location is now considered off the electrical grid as it is powered by renewable energy Annual Report & Financial Statements 2021 Social Caring for our Employees and Communities The Board advocates the highest standards of care towards our employees (250 on staff) and the communities in which we operate and is acutely conscious that the nature of the Group’s business requires strong measures to protect the people and environment that may be vulnerable to harm. The UNSDG Goal 3: Good Health and Well-Being, Goal 4: Quality Education and Goal 8: Decent Work and Economic Growth were selected by our ESG Working Group as the goals that represent our focus on our people. We were pleased to be able to support the communities in which we operate with, amongst other things, the following initiatives which were focused on education, well being and gender-based violence: • • Sponsorship of awards and laptops for excellence in education at the SEA and CSEC levels in the Mayaro/Guayaguayare communities Sponsorship of school supplies to 500+ children and relief hampers to 100+ families in the communities in which we operate • Major sponsor of the Andrea Project, a Non- governmental Organisation using technological solutions to avert incidents of crime, with a focus on vulnerable women Trinity is also proud of the healthcare provision and wellness programmes available to our employees as we recognise the importance of both physical and mental well-being to enable our people to perform at their best. Unrelenting Focus on HSSE Operating Safely and Responsibly is one of the three pillars of our Business Model. It was therefore important to our ESG Working Group that UNSDG 3 : Good Health and Well Being was integrated into our ESG Strategy. HSSE performance updates have been made fully visible within the business, are communicated every month to the Board and continue to be the first item discussed at Board and Management meetings. Our HSSE Management System has been continuously evolving with special focus on behaviour and comprehensive reporting of all incidents and accidents, moving our culture towards a ‘ZERO’ Incident work environment. 33 l Strategic Report Governance Financial Accounts Glossary Company Information Trinity continues to maintain its HSSE Management System through our STOW certification which is valid through to August 2022 when recertification will be undertaken. Trinity recorded 881,034-working hours in 2021 (2020: 878,025-working hours), a 0.3% increase, mainly due to its 2021 work programme of RCPs and WOs. Notable improvements in our HSSE reporting were achieved due to our continued emphasis on a strong HSSE culture, facilitated by an increase in Management’s visits to all assets, increased feedback on lessons learnt and multiple proactive initiatives implemented across all operations. Trinity’s HSSE periodic performance directly correlates to the strategies implemented across its assets and the areas of focus for evaluation and monitoring to ensure better outcomes. Various strategies and initiatives in place to strengthen the already robust HSSE culture and include leading and lagging indicators, some of which are: • • • • • Training Leadership Visits HSSE Planning and Auditing Journey Management and GPS Start Card & Near Miss Programme Partnerships for the Goals The Board places a high priority on transparent and effective communication with all of Trinity's stakeholders and as such including the principles of the overarching UN Sustainable Development Goal 17 (Partnerships for the Goals) in our ESG strategy was a natural step. Strong business relationships are an important factor for Trinity's long-term success and employees at all levels within the Company are expected to uphold ethical business behaviour and require comparable business practices from all suppliers and customers we do business with. We recognise the importance of engaging with all stakeholders including employees, investors, communities, partners, suppliers, customers, media, and the GORTT. We update and, where appropriate seek feedback, from all key stakeholders via regular meetings and communications throughout the year. See pages 25 to 26 Stakeholder Engagement 34 Trinity Exploration & Production plc Sustainability (continued) An important step in further developing our ESG strategy in 2022 will include involving stakeholders in discussions on material topics to refine the initial materiality assessment conducted by our ESG working group. This will help us gain a better understanding of our business impacts on our stakeholders and enable us to refine our ESG strategy accordingly. Governance Strong corporate governance is the foundation of Trinity's business, reflected in our core values of Behaviour, Rigour and Purpose. We have therefore aligned our ESG strategy to UNSDG Development Goal 16 (Peace, Justice and Strong Institutions) in recognition of its importance across all business activities. In addition to a focus on training, monitoring, risk management and due diligence, Trinity has various internal policies and standards in place that guide how we realise our Governance goals including policies on Anti Bribery and Corruption, Share Dealing, Whistleblowing, Cyber Security, Gender, Diversity & Inclusion and our Code of Business Conduct. 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. Any whistleblowing report can be made orally or in writing to an immediate supervisor, the Compliance Officer or to the Chairman of the Audit Committee. Governance in Action At an operational level, the Chief of Staff & General Counsel is responsible for compliance and, with the support of the Board, implements compliance-related activities and procedures. The Board is kept appraised of important topics throughout the year and in 2022 it will expand its agenda to ensure regular discussion on specific ESG topics to ensure a deeper level of understanding and engagement that will help to drive the overall ESG strategy. Policies for honest, fair and professional business ESG Data Measurement & Progress ESG Performance We have an expectation of honest, fair and professional behaviour and there is zero tolerance for bribery and unethical behaviour by anyone associated with the Group. Annual Anti-corruption & Anti-Bribery training is compulsory for all staff, the Anti-Bribery statement and policy is contained in the Group’s Employee Manual, and forms part of supplier due diligence for new contracts. Major breach of business, ethical, or compliance standards is defined as a key business risk (see Risk Profile Matrix on page 44). To mitigate this risk, Trinity is subject to or has adopted numerous requirements and standards including the UK Bribery Act, UK AIM Market Rules, UK QCA Code, Disclosure and Transparency Rules, and Know Your Client (“KYC”) procedures. Trinity recognises that ESG is important to our stakeholders and we understand it is essential to measure how we are performing as an entity in comparison to established standards and benchmarks. This ensures that the delivery of our financial and production objectives will be enhanced by strong environmental, social and governance performance. As part of our plans for implementing our ESG strategy, we are working towards expanding the data we are collecting throughout 2022 and 2023 to ensure we understand our impact on those focus areas that are material to Trinity's business and stakeholders. Annual Report & Financial Statements 2021 Financial Review 35 l Strategic Report Governance Financial Accounts Glossary Company Information “Strong financial performance underpinned by robust operational cashflows. The recovery in crude oil prices, combined with our continued financial discipline, meant we were able to generate solid results and invest in short to medium term growth initiatives.” Denva Seepersad Finance Director KPI’s The Group’s robust performance resulted in it being profitable at both an operating and total comprehensive income level in 2021, despite the backdrop of the ongoing Covid-19 pandemic. A summary of the year-on-year operational and financial highlights are set out below: Average realised oil price1 Average net sales2 Revenues Cash balance IFRS Results Operating Profit before SPT & PT Total Comprehensive income/(loss) for the year Earnings Per Share - Diluted FY 2021 FY 2020 Change % USD/bbl bopd USD million USD million USD million USD million USD cents 60.4 3,006 66.2 18.3 10.0 7.7 18.0 37.7 3,226 44.1 20.2 3.0 (2.8) (7.0) 60 (7) 50 (9) 233 375 357 36 Trinity Exploration & Production plc Financial Review (continued) APM Results Adjusted EBITDA3 Adjusted EBITDA4 Adjusted EBITDA margin5 Adjusted EBITDA after Current Taxes6 Adjusted EBITDA after Current Taxes Per Share - Diluted Consolidated operating break-even7 Net cash plus working capital surplus8 Notes: USD million USD/bbl % USD million US cents USD/bbl USD million 19.8 18.0 29.9 14.8 35.0 29.2 20.8 12.1 10.3 27.4 10.6 25.0 20.1 21.4 64 75 2.5 40 39 45 (3) 1. 2. 3. 4. 5. 6. 7. 8. Average realised price (USD/bbl): Actual price received for crude oil sales per barrel (“bbl”). Average net sales (bopd): Production sold in barrels per day in a given year. Adjusted EBITDA (USD MM): Operating Profit before Taxes for the period, adjusted for non-cash DD&A, SOE, ILFA, FX gain/(loss) and Fair Value Gains/Losses on Derivative Financial Instruments less Covid-19 expenses. Adjusted EBITDA (USD/bbl): Adjusted EBITDA/Annual sales. Adjusted EBITDA margin (%): Adjusted EBITDA/Revenues. Adjusted EBITDA after Current Taxes: Adjusted EBITDA less Supplemental Petroleum Taxes ("SPT"), Property Taxes ("PT"), Petroleum Profits Tax ("PPT") and Unemployment Levy ("UL"). Consolidated operating break-even: The realised price/bbl where the Adjusted EBITDA/bbl for the Group is equal to zero. Net cash plus working capital surplus: Current Assets less Current Liabilities (other than Derivative financial asset / liability and Provision for other liabilities). Note (*): See Note 26 to Consolidated Financial Statements – Adjusted EBITDA for further details on pages 126 to 127. Adjusted EBITDA Calculation Adjusted EBITDA is an Alternative Perfo rmance Measure Guidelines (“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. Operating Profit Before SPT, PT, Covid-19 expenses, Impairment and Exceptional Items (IFRS Result) DD&A SOE ILFA FX loss/(gain) FV Derivative Instruments Covid-19 expenses Adjusted EBITDA (APM Result) Current Taxes: SPT and PT PPT and UL Adjusted EBITDA after Current Taxes (APM Result) Refer to Glossary for abbreviations. 2021 USD MM 2020 USD MM Change % 10.0 7.4 0.6 (0.7) 0.0 3.2 (0.7) 19.8 (3.6) (1.4) 14.8 3.0 8.2 1.0 0.2 (0.0) (0.3) - 12.1 (0.4) (1.1) 10.6 238 (9) (35) (399) 0 1,284 100 64 839 20 40 Annual Report & Financial Statements 2021 37 l Strategic Report Governance Financial Accounts Glossary Company Information 2021 Trading Summary A five year historical summary of realised price, sales, operating break-even, Royalties, Production Costs (“Opex”) and General & Administrative (“G&A”) expenditure metrics is set out below. Details Realised Price USD/bbl USD/bbl Sales Onshore West Coast East Coast Consolidated Metrics Royalties/bbl – Onshore Royalties/bbl – West Coast Royalties/bbl – East Coast Royalties/bbl – Consolidated Opex/bbl – Onshore Opex/bbl – West Coast Opex/bbl – East Coast G&A/bbl – Consolidated2 Operating Break-Even3 Onshore West Coast East Coast Consolidated4 Notes bopd bopd bopd bopd USD/bbl USD/bbl USD/bbl USD/bbl USD/bbl USD/bbl USD/bbl USD/bbl USD/bbl USD/bbl USD/bbl USD/bbl 20171 48.6 1,347 212 961 2,519 18.5 7.5 11.7 22.2 11.1 22.1 18.9 4.4 16.6 26.6 24.9 28.4 20181 59.8 1,563 198 1,110 2,871 24.2 10.0 14.5 19.1 11.7 22.1 20.1 5.0 16.1 26.8 25.9 29.0 2019 58.1 1,616 185 1,208 3,007 22.3 10.0 14.1 18.3 12.1 26.9 17.1 5.1 16.4 32.4 21.9 26.4 2020 37.7 1,793 245 1,188 3,226 11.5 6.1 8.3 9.9 12.2 20.3 16.5 4.3 16.5 24.6 21.0 20.1 2021 60.4 1,644 255 1,107 3,006 22.6 11.1 13.0 18.1 14.4 26.2 18.3 6.3 19.0 32.2 23.2 29.2 1. 2. 3. 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. G&A/bbl – Consolidated: Excludes SOE, ILFA, Derivative FV gain/loss and FX gain/loss. Operating break-even: The realised price where Adjusted EBITDA for the respective asset or the entire Group (Consolidated) is equal to zero. Consolidated operating break-even: Includes G&A but excludes SOE, ILFA, Derivative FV gain/loss and FX gain/loss. 38 Trinity Exploration & Production plc Financial Review (continued) Increased capex investment programme to drive growth in the short to medium term: USD 13.9 million (2020: USD 5.3 million) invested acquiring a new onshore lease operatorship (PS 4, onshore), acquiring 3D Seismic data covering Trinity’s onshore acreage, exploration and evaluation spend on the Galeota Asset Development, continuing investment in the Group’s Infrastructure, Subsurface, Drilling planning and execution of 11 RCPs. Capex invested comprised: • • • • • • • • • USD 3.8 million acquisition of PS-4 Lease Operatorship USD 3.2 million Exploration and Evaluation (“E&E”) assets relating to the Galeota Asset Development USD 3.2 million Infrastructure Capex USD 1.1 million acquisition of 3D Seismic Data USD 1.1 million Subsurface time-writing costs USD 0.8 million 11 RCPs USD 0.4 million in computer software and research and development USD 0.2 million renewal of Galeota block licences USD 0.1 million Drilling planning (no New Wells drilled). Refer to Notes to Financial Statements: Note 13 Property, Plant and Equipment – Additions (USD 10.3 million) on page 114 and Note 15 – Intangible Assets – E&E Additions (USD 3.6 million) inclusive of accruals on page 116. Continued financial strength: The Group’s cash balances at year end reduced marginally by 9% to USD 18.3 million (2019: USD 20.2 million), primarily reflecting a strong operating performance offset increased taxes and derivative expenses and a material increase in capital spending. In aggregate, despite these significant cash outflows, the Group’s net cash plus working capital surplus stood at USD 20.8 million, a modest 3% decrease (2020: USD 21.4 million). 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 accounting standards as adopted in the United Kingdom. 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 Notes 1 to 3 of the Financial Statements on pages 92 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”), FX gain/loss and Fair Value Gains/Losses on Derivative Financial Instruments. Each of these are summarised on the face of the Consolidated Income Statement as well as being described in Note 1 to the consolidated financial statements. Summary of Results for the Year Revenue increased due to the material higher average realised oil price in 2021: The positive impact of a 60% increase in average oil price realisations to USD 60.4/bbl (2020: USD 37.7/bbl), was partially offset by a 7% decrease in average annual sales to 3,006 bopd (2020: 3,226 bopd), resulting in a 50% increase in revenues to USD 66.2 million (2020: USD 44.1 million). Continued financial discipline on costs and preserving strong operating margins: The Group continued to deliver strong operating margins despite an increase in costs incurred in dealing with the pandemic. The Adjusted EBITDA margin increased to 30% (2020: 27%), with consolidated operating break-even maintained at below USD 30 (2021: USD 29.2/bbl, 2020: USD 20.1/bbl) demonstrating the Group’s ability to be profitable across a broad range of oil prices. The 64% increase in Adjusted EBITDA to USD 19.8 million (2020: USD 12.1 million) is a direct result of the increased realised oil price and strong operational performance. Annual Report & Financial Statements 2021 39 l Strategic Report Governance Financial Accounts Glossary Company Information Statement of Comprehensive Income SPT & PT 2021 Financial Highlights Average realisation of USD 60.4/bbl (2020: USD 37.7/bbl) Operating Revenues Operating revenues up 50% to USD 66.2 million (2020: USD 44.1 million). Operating expenses Operating expenses increased by 37% in 2021 to USD (56.2) million reflecting a return to a cost structure similar to that which prevailed in 2019 (2020: USD (41.1) million) and comprised: Operating Expenses (excluding non-cash items): USD (45.7) million (2020: (31.9) million): • Royalties of USD (19.9) million (2020: USD (11.7) million), this increase being driven mainly due to higher average realised oil price. • Opex of USD (17.6) million (2020: USD (16.5) million) mainly due to a recovery in crude oil prices from lows in 2020 which had a commensurate impact on supply chain prices as well as increased workover and swabbing activity in the year. • • G&A expenses of USD (7.0) million (2020: USD (5.1) million) mainly due to an increase in new hires, employee bonuses, a one off director payment to the estate of Bruce Dingwall, an increase in professional services provided for the 2021 reserves audit and increased levies. Derivative expense of USD (1.2) million (2020: Derivative income of USD 1.3 million) being the cash impact of derivative instruments. Non-Cash Operating Expenses: USD (10.5) million (2020: USD (9.1) million): • • • • DD&A of USD (7.4) million (2020: USD (8.2) million). Fair Value of Derivatives: Expense of USD (3.2) million (2020: Derivative income of USD 0.3 million) being the FV impact of derivative instruments. SOE of USD (0.6) million (2020: USD (1.0) million). ILFA reversal/(charge) USD 0.7 million (2020: USD (0.3) million). Operating Profit Before Supplemental Petroleum Taxes ("SPT") and Property Tax ("PT), Covid-19 expenses, Impairment and Exceptional Items The operating profit before SPT, PT, Covid-19 expenses, impairment and exceptional items for the year amounted to USD 10.0 million (2020: USD 3.0 million) and was mainly due to higher operating revenues resulting from the higher oil prices. SPT & PT were net USD (3.6) million (2020: USD (0.4) million) and comprised: • • SPT of USD (5.1) million (2020: USD 0.2 million) mainly due to the higher realised oil prices in relation to the Group’s offshore operations in 2021. There was no SPT payable in respect of the Group’s onshore operations during the year. Reversal of PT charge of USD 1.5 million (2020: USD (0.5) million). The Property Tax Act and subsequent Amendment to the Act requires the Board of Inland Revenue to issue a Notice of Assessment on or before the 31 March in each year. As none have been received for the years 2018 to 2020, it is highly unlikely the tax will be required to be paid for these years and there is also no method to determine a reliable estimate for the liability. As such, the Company has made a reversal of the liability for periods 2018- 2020 and not recognised any liability for 2021. Operating Profit before Covid expenses, Impairment and Exceptional items The Group’s reported operating profit before Covid-19 expenses, impairment and exceptional items was USD 6.5 million (2020: USD 2.6 million). Adjusting for non-cash expenses, the Group’s Adjusted EBITDA after Current Taxes was USD 14.8 million (2020: USD 10.6 million) (further details below). Covid-19 expenses Covid-19 expenses incurred by the Group for 2021 was USD (0.7) million. This was triggered when the Covid-19 impact to the country was at its highest and the Company sought to protect its workforce by early detection through Covid testing USD (0.3) million, Offshore employee isolation prior to offshore rostering USD (0.3) million and heightened sanitisation efforts across the assets USD (0.1) million. Covid-19 expense of USD (0.1) million was previously recognised in 2020 in General and Administration expense relating to sanitation. See Note 7 to Consolidated Financial Statements – Exceptional items and Covid-19 expenses for further details on page 110. Impairments charge Impairment charges taken were USD (1.3) million (2020: USD (1.2) million) relating to the Impairment of property, plant, and equipment USD (0.1) million and Inventory (1.2) million. See Note 3(d) to Consolidated Financial Statements - Impairment of Property, Plant and Equipment for further details on page 106. Exceptional items Exceptional items were USD (0.1) million (2020: USD (0.04) million) mainly related to fees for corporate restructuring advice. See Note 7 to Consolidated Financial Statements - Exceptional items and Covid-19 expenses for further details on page 110. 40 Trinity Exploration & Production plc Financial Review (continued) Finance Income Finance income is solely related to bank interest income received on short term investments with financial institutions of USD 0.1 million (2020: 0.1 million). Finance Costs Finance costs amounted to USD (1.5) million (2020: USD (1.4) million) and comprised the: • • • Unwinding of the decommissioning liability USD (1.2) million (2020: USD (1.2) million). Bank overdraft USD (0.2) million (2020: (0.1) million). Interest on Leases USD (0.1) million (2020: (0.1) million). See Note 9 to Consolidated Financial Statements – Finance Costs for further details on page 111. Income Taxation Income Taxation Credit for 2021 of USD 4.7 million (2020: USD (2.9) million expense), comprise the following: • Increase in Deferred Tax Assets (“DTA”) recognised on available tax losses of USD 5.5 million credit resulting from higher oil prices (2020: Reduction in DTA of USD 3.4 million expense). • • • Decrease in Deferred Tax Liabilities (“DTL”) USD 0.6 million due to accelerated accounting impairments/depreciation (2020: USD 1.6 million decrease). Unemployment Levy (“UL”) USD (0.4) million (2020: USD (0.3) million). Petroleum Profit Tax (“PPT”) charge USD (1.0) million (2020: (0.8) million). See Note 10 to Consolidated Financial Statements – Income Taxation for further details on page 111. Total Comprehensive Income/(Loss) Total Comprehensive Income for the period was USD 7.7 million (2020: USD (2.8) million loss). 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, Covid-19 expenses, Impairment and Exceptional Items for the year, adjusted for non-cash DD&A, SOE, ILFA, FX and FV of Derivative Instruments. The Group presents Adjusted EBITDA at USD 19.8 million and Adjusted EBITDA after Current Taxes at USD 14.8 million as it is used by Management and judged to be a better measure of underlying performance. Adjusted EBITDA 80 70 60 50 40 30 20 10 0 USD MM 66.2 (45.7) (10.5) 9.8 19.8 (5.0) 14.8 Revenue Cash Operating Expenses Non-Cash Operating Expenses 10.0 Operating Profit Before SPT & PT Adjustments: Non-Cash Expenses (DD&A, SOE, Other Expenses, ILFA & FX) and Covid-19 expenses Adjusted EBITDA Currrent taxes Adjusted EBITDA After Current Taxes Annual Report & Financial Statements 2021 Statement of Cash Flows 41 l Strategic Report Governance Financial Accounts Glossary Company Information 35 30 25 20 15 10 5 0 USD MM 12.6 (13.9) 20.2 (0.6) 18.3 12.0 Opening Cash Balance Operating Activities Investing Activities Financing Activities Closing Cash Balance Reconciliation between Adjusted EBITDA after Current Taxes and Cash Inflow from Operating Activities 16 14.8 (1.9) 1.4 (1.7) 12 8 4 12.6 12.0 0 USD MM Adjusted EBITDA after current taxes Changes in Working Capital Income Tax Incurred Income Tax Paid Cash flow from Operating Activities 42 Trinity Exploration & Production plc Financial Review (continued) Cash inflow from operating activities Operating Cash Flow (“OCF”) was USD 12.6 million (2020: USD 10.3 million): • Operating activities 2021 generated an operating cash flow before working capital and income taxes of USD 16.1 million (2020: USD 11.9 million). • • Changes in working capital resulted in a net decrease of USD (1.8) million (2020: USD 0.6 million decrease), primarily as a result of the increase in trade receivables compared to the 2020 year end. Income taxes PPT and UL paid USD (1.7) million (2020: USD (1.0) million paid) resulting from higher oil price. Cash (outflow) from investing activities Cash outflow from investing activities was USD (13.9) million (2020: USD (6.0) million): • • Acquisition of PS 4, onshore 3D seismic, and property, plant and equipment for the year totalling USD (10.0) million (2020: USD (5.0) million). Expenditure on exploration and evaluation assets and other intangible assets USD (3.6) million (2020: USD (1.0) million) as the Group continued to invest in Galeota asset. Net Cash Plus Working Capital Surplus All figures in USD million A: Current Assets Cash and cash equivalents Trade and other receivables Inventories Total Current Assets B: Liabilities Trade and other payables Bank overdraft Lease liability Taxation payable Total Current Liabilities (A-B): Net Cash plus working capital surplus • Performance bond increase in renewal of Onshore Lease Operatorship Assets USD (0.3) million (2020: Nil). Cash (outflow)/inflow from financing activities Cash outflow from financing activities was USD (0.6) million (2020: USD 2.2 million inflow): • • • • Principal paid on lease liability USD (0.4) million (2020: (0.4) million). Interest paid on lease liability USD (0.1) million (2020: (0.1) million). Finance cost of USD (0.1) million (2020: (0.0) million). No further drawdown on of CIBC working capital Facility (2020: USD 2.7 million drawdown). Closing Cash Balance Trinity's cash balance at 31 December 2021 was USD 18.3 million (31 December 2020: USD 20.2 million). FY 2021 USD MM Audited FY 2020 USD MM Audited FY 2019 USD MM Audited 18.3 10.8 3.8 32.9 8.8 2.7 0.6 0.0 12.1 20.8 20.2 7.2 5.3 32.7 7.8 2.7 0.6 0.2 11.3 21.4 13.8 9.4 5.2 28.4 10.4 — 0.6 0.1 11.1 17.3 Note: Net cash plus working capital surplus: Current Assets less Current Liabilities (other than Derivative financial asset/liability and Provision for other liabilities). Annual Report & Financial Statements 2021 43 l Strategic Report Governance Financial Accounts Glossary Company Information Events since Year End 1. Hedging The Company implemented crude oil derivatives over the Group’s monthly production in 2021 and 2022. The derivative protection currently in effect for 2022 is as follows: Type of Derivatives Index Sell Put Buy Put Sell Call Buy Effective Expiry Execution Call Production Date Date Date Premium USD MM USD/bbl USD/bbl USD/bbl USD/bbl Barrels Monthly 3-Way Cost Collar ICE Brent 50.00 60.00 66.90 - 10,000 1 Jan 22 30 Jun 22 04 Mar 21 3-Way Cost Collar ICE Brent 50.00 60.00 74.40 - 12,500 1 Jan 22 31 Dec 22 02 Jun 21 4-Way Cost Collar ICE Brent 59.00 68.00 72.00 82.00 15,000 1 Jan 22 30 Jun 22 05 Jul 21 3-Way Cost Collar ICE Brent 40.00 50.00 80.50 - 15,000 1 Jan 22 31 Dec 22 27 Aug 21 Put Spread Option ICE Brent 40.00 50.00 - - 15,000 1 Jul 22 31 Dec 22 14 Jan 22 0.15 2. On 24 February 2022, Russian forces invaded Ukraine, causing wide-ranging economic sanctions to be applied against the Russian regime by the US, EU and other major economies. The event caused both Brent and WTI oil prices to soar, peaking well above USD 100 per bbl in March 2022. The increased oil prices has positively impacted the Group’s crude oil revenue but negatively impacted derivative expenses. Overall, whilst there has been no significant adverse impact to the Group, management continues to closely monitor the event’s impact as it unfolds. 3. In 2021 Trinity engaged with a range of potential partners as part of the Galeota farm down process. The Company on 3 May 2022 indicated, whilst initial feedback has been encouraging, a number of participants have informed the Company that they are unable to fully assess the economics of the opportunity at Galeota without clarity on the expected reforms to Supplemental Petroleum Tax (“SPT”), which are currently being considered by the Government of Trinidad and Tobago (“GORTT”) and which were initially expected to have been confirmed sooner than now appears likely. Pending SPT reform, which management still expects to happen, the Company has decided to pause the Galeota farm down process. This will enable the Company to seek the best value proposition for Galeota when the GORTT's fiscal reforms have been confirmed. In the interim, the Company will continue to refine its plans for Galeota. In particular, it will advance preparations for exploiting the 9.77mmstb of 2P reserves remaining in the Trintes field. 44 Trinity Exploration & Production plc Risk Management and Internal Controls Your Board is committed to effective risk management and is supported by a pro-active organisational culture and a framework of effective internal controls. 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. Risk Profile Matrix The risk summary and explanatory table below represents our current assessment of the potential impact by area and change from 2020 for each of the principal risks. Change Strategic Risk from Objective Profile What is the risk? KPI's affected 2020 Impacted Responsibility Page A HSSE & Covid 19 Loss Time Accidents h e Chief of Staff 45 Reportable Environmental & General Counsel Incidents B Climate Change (Emissions) Production = ru Board 45 to 46 & Energy Transmission Impact Liquidity C Production and Production = u CEO, COO and 46 Reserves Risk Executive Manager Sub Surface Liquidity D Development Risk Production = t CEO & COO 46 to 47 E Counterparty/Contractor Production = e CEO & FD 47 Exposure Cash from Operations Liquidity F Commercial Risk Production x ru Board 47 - Oil Price Risk Cash from Operations Liquidity G Customer Cash from Operations = t FD 47 Concentration Risk Liquidity H Competition Risk and Liquidity h rt EMT 47 to 48 Cost Inflation Operating Cash Flow I Regulatory/Fiscal Risk Reputational = e EMT 48 J Major breach of business, Cash from Operations = eru EMT 48 ethical, or compliance standards Liquidity K Cash Flow & Financing Risk Cash from Operations = tu CEO & FD 48 to 49 Liquidity L Operational Risks Production = ert COO 49 e Retain Integrity. r Efficiency & Sustainability. t Monetise our Resources. u Scale & Relevance. Annual Report & Financial Statements 2021 Risk Details A HSSE Management of HSSE risk exposure is of paramount importance to the organisation. 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, damage to property, disruption to activities, reputational damage and financial loss. These HSSE risks are managed through the Group’s dedicated HSSE personnel and the Group’s risk management and internal controls alongside those of the 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. During 2021, the Board appointed an HSSE Champion to oversee this function and to further highlight its criticality to the Company. This has been accompanied by the creation of an HSE Steering Committee comprising some of the Executive Management Team and chaired by the CEO, which is supported by a HSE Tactical Team. COVID-19 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 continues to ensure that all requisite business continuity and contingency plans are implemented, in order to flatten transmission curves and provide appropriate guidance to all staff. Trinity in 2021 adapted to a hybrid in-office and Work from Home (“WFH”) arrangements for administrative staff, curbed all international travel as guided by Government regulations and ensured all local safety regulations and protocols were being adhered to at a minimum. These measures have been effective, to date, and has not had a significant adverse impact on the Group’s operations. The situation continues to be monitored carefully by Management and a dedicated interdisciplinary team and measures are adjusted as guided by Government regulations and the macro Covid 19 environment. B Climate Change (Emissions) & Energy Transmission Impact 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 45 l Strategic Report Governance Financial Accounts Glossary Company Information 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. 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. 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, East 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. Trinity has Emergency Response 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. Despite these uncertainties, Trinity believes that the demand for 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. 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. lowering energy usage, 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. 46 Trinity Exploration & Production plc Risk Management and Internal Controls (continued) Our methods to mitigate climate change (emissions) and the energy transition are an extension of our ESG approach previously mentioned: 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. 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. In this regard, Trinity has employed a solar system to power its WD5/6 field office, and remove it from the grid. 5. Trinity is assessing our current total emissions and seeking methods to reduce them. 6. Energy Assessment Audits are also being employed to target energy usage across our assets with a goal to reduce our electrical power usage. C Production and Reserves Risk The Group aims to manage natural production decline via WOs, reactivations and swabbing while growing production via RCPs and infill drilling. There is potential risk that some of these measures may not deliver on prognosis and therefore production performance can be below expectations for a variety of reasons including geological uncertainty, reservoir and well performance. The Group produces from c.374 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 scheduled or unscheduled 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 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. 1. 2. 3. 4. 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. The work of the technical team is reviewed by a Board led Technical Committee including external industry specialists. Production risks are mitigated by production being spread over 374 currently producing wells throughout three distinct locations (Onshore T&T, Offshore East Coast T&T and Offshore West Coast T&T). Our wells are categorised by tiers which is linked to planned response depending well criticality on production delivery. These risks are further mitigated by utilising applicable artificial lift methodologies for production coming from multiple reservoirs. Effective management systems in place governing geoscience, engineering (reservoir, petroleum and completions) and production operations activities. These include rigorous production forecasting and reporting, field and well performance monitoring and internal reserves auditing. 5. Risks to production levels from the Covid 19 pandemic are being mitigated through appropriate business continuity plans. D Development Risk The Group is participating in certain development projects, most notably the TGAL discovery offshore development (the proposed Echo Platform development). Whilst considerable work has been performed to date, Annual Report & Financial Statements 2021 47 l Strategic Report Governance Financial Accounts Glossary Company Information the Echo Platform development has not yet reached Final Investment Decision (FID) stage and is unlikely to do so unless and until commitments from one or more external funding partners have been secured. 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 which make 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. 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 projects, and in keeping with oil industry practices, the Group would seek one or more partners with whom to share the risk and reward of the project. E Counterparty/Contractor Exposure 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 on time 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. F Commercial Risk - Oil Price 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 the 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, while an increase in the price of oil can have a positive impact of the Group’s revenue, it may also increase the hedging expenses, eroding profitability. Where and when appropriate the Group puts in place 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. G Customer Concentration Risk Whilst oil is an internationally traded commodity, Trinity currently sells 100% of its oil production to Heritage under evergreen Crude Oil Sales Agreements, 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. H Competition Risk and Cost Inflation 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 48 Trinity Exploration & Production plc Risk Management and Internal Controls (continued) 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 the current market many capital and operating costs have increased and, given the rapid increase in hydrocarbon prices, we can expect an increased level of cost inflation which may increase the cash required to support economically viable projects. Furthermore, due to the Russia Ukraine conflict, the Group may experience challenges with supply chain disruptions including higher freight costs and delays in receiving shipments. 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. 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 was implemented via The Finance Act No. 30 of 2020 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 increased from USD 50.0 /bbl to USD 75.0/bbl for the financial years 2021 and 2022. Trinity therefore expects to be exempt from SPT across all of its onshore licences below USD 75.0/bbl, which has a significant positive impact on 2021 and 2022 cash flows. In November 2021, the Government of Trinidad and Tobago announced that it intended to undertake a comprehensive review of the oil and gas taxation regime to ensure that Trinidad and Tobago remains an internationally competitive hydrocarbon province. Whilst Management are encouraged by this, there can be no certainty that the Government will enact any changes to the oil and gas taxation regime, and so Trinity’s onshore and offshore production may be subject to SPT above USD 50.0 / bbl in 2023 and beyond. J Major breach of business, ethical, or compliance standards The Group is subject to and 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 the applicable 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 and even 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. 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 the Compliance Officer and 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. K Cash Flow & Financing Risk The ability to finance firm commitments, participate in the Group’s developments (most notably the Galeota Asset Development) and generally develop the Group’s business depends upon: 1. Cash flow from the Group’s producing assets: cash 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. 2. 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 49 l Strategic Report Governance Financial Accounts Glossary Company Information • Trinity is operating the East Coast asset under one exploration and production licence which has a maximum term of 25 years effective 14 July 2021. There are certain Minimum Work Obligations to be observed. It is not unusual for an Operator to manage assets under an expired exploration and production license in Trinidad and Tobago. The Group is holding over as Operator with the full knowledge of the co Licencee Heritage and the MEEI and routinely seeks to mitigate any risks by ensuring that the co Licencee Heritage and the main government regulator MEEI are kept updated and informed throughout the period. Annual Report & Financial Statements 2021 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 Board of Inland Revenue (“ BIR”). 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. rigorous 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 There has been no official announcement on VAT bonds in 2022. VAT refund payments continue to be processed by the BIR from 2021 onwards. In 2022 the Group received VAT refunds of USD 0.9 million and generated VAT refunds of USD 0.7 million. As at 30 April 2022, the VAT refunds outstanding from the BIR amounts to USD 4.5 million. L Operational Risks Trinity operates Lease Operatorship Agreements (“LOA”), Joint Operating Agreements and a Farmout Agreement over its Onshore, East and West coast Assets. • Onshore has six LOAs and one Farmout Agreement with Heritage. Of the six LOA’s, five were renewed effective 1 January 2021 for a ten-year period with one LOA given a two-year extension until 31 December 2022. Each of these LOAs have a certain Minimum Work Obligations programme. Although the Tabaquite Farmout has expired Trinity is currently operating the asset under an agreed holding over arrangement pending the formal extension. • Trinity is operating the West Coast assets under two exploration and production licenses covering the Point Ligoure Guapo Bay Brighton Marine Block (PGB) and Guapo Bay Brighton Marine Block. The PGB license has expired and Trinity is currently operating the assets under an agreed holding over arrangement pending the formal extension. 50 Trinity Exploration & Production plc 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: • • • • • • 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. Engagement The Board recognises that the employees are one of the Group’s key resources, enabling delivery of the Group’s vision and goals. 2021 has been a challenging year globally due to the Covid 19 pandemic, requiring the Group to put robust measures in place to minimise the impact on the business. The Board has supported its workforce throughout the year, seeking to help keep all employees, contractors and others who engage with the Group safe during this period of uncertainty. The Board reviewed the position regularly throughout the year, receiving updates from Management as to the steps being taken to ensure safety within the workforce, both within 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 2021 awards were issued under the Company’s long term incentive plan to certain individuals within the executive management team and awards issued in 2017 and 2019 vested. 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 positive 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 undertook a review of the remuneration of both Executive and Non-Executive Directors, and members of the EMT, 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 behaviour across the business and encourages the EMT to require comparable business practices from all suppliers and customers doing business with the Group. During 2021 and through into 2022 there has been regular 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 reviews on a monthly basis the HSSE measures implemented by the Group and the EMT’s recommendations for better practices. Additionally, in 2022 Kaat Van Hecke, non-executive director, has been designated as the Board representative responsible for oversight of the HSSE function. Employees’ opinions and suggestions are considered and valued, particularly with regards to HSSE matters through the START card system. 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). Throughout 2021, 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. Information The Board places equal importance on institutional and individual shareholders and recognises the significance of transparent and effective communications with shareholders. Annual Report & Financial Statements 2021 51 Strategic Report l Governance Financial Accounts Glossary Company Information As an AIM listed company 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 also provides information for stakeholders. Changes to the composition of the Board and Board Committees, changes to major shareholder information and disclosure updates required under the Quoted Companies Alliance Corporate Governance Code 2018 (the “QCA Code”), 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 made available to all shareholders, and Interim Reports and other investor presentations for the last six years can also 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. Training 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 to safeguard the interests 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 being published 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. 2021 and on-going performance: The global pandemic continued to impact the economy in 2021 and it continues to be a challenging time for many businesses. Disruptions to supply chains, and increasing inflation, have been further exacerbated by Russia’s invasion of Ukraine in February 2022, although these factors have also led to a dramatic increase in the price of oil and gas. The Group has worked hard to ensure the stability of the business throughout this period, maintaining production levels, renewing and extending its licences and progressing projects to further the growth of the business. Community and environment Principal decisions during 2021 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 monthly meetings, the Board reviews an HSSE Report from 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: Key decisions made by the Board were in relation to: • • • • • • • A new and improved license for the Galeota asset and conversion to 100% working interest, Extending four of the Company’s five LOAs for an additional 10 years, Acquisition of the PS-4 Block, Entering Bid rounds - non-binding interest in six onshore blocks Appointing an expert external advisory team to help us refine our ESG strategy Commencement of Solar irradiance study adjacent to Trinity’s Galeota field office Significantly strengthening the Board, and the recently established Technical Committee Initiate thought before action by promoting sustainability and proactively protecting the environment. Further details can be found in Chief Executive Officer’s Review of 2021, pages 8 to 11. Purpose: On behalf of Board Fit for delivering our goals by engaging with, learning from, respecting and supporting the communities and cultures within which the Group operates. 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. Nicholas Clayton Non-Executive Chairman 23 May 2022 52 Trinity Exploration & Production plc Corporate Governance Statement On behalf of the Board, I am pleased to present the Corporate Governance Report for the year ended 31 December 2021. We at Trinity believe that strong corporate governance is critical to achieving our strategic goals and creating value for our shareholders. As Non-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. The Board is committed to ensuring good corporate governance, at Board level and throughout the business. During 2021 the Company made significant changes to the composition of the Board, which included my appointment as Non-Executive Chairman and Jeremy Bridglalsingh stepping up to the role of CEO. In addition, the Company has strengthened its independent non- executive presence by the appointment of Derek Hudson in September 2021 and Kaat Van Hecke in March 2022. These changes have helped strengthen corporate governance within the business yet further. As Non-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 instil 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 44 to 49 of the Annual Report are considered by the Board, recognising that strong governance across the organisation is essential to manage the risks and challenges that the Group faces. 2021 was a challenging year, characterised by increased volatility in commodity prices and rising inflation combined with the continuing impact of the global pandemic. The Group was further impacted by the sudden and unexpected death of its founder and Executive Chairman, Bruce Dingwall, CBE. The Group has performed well throughout, safely maintaining operations and production. The solid framework that Management has built over the last few years has helped the business continue to develop during a period of considerable uncertainty. The Board has continued to work effectively through this challenging period, increasing the number of ad hoc engagements 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. To emphasise the criticality of the HSSE and ESG functions with the Company, the Board appointed Kaat Van Hecke as the Board Champion to directly oversee the governance in these areas. As the Group builds the next phase of development for the business, as Non-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. Nicholas Clayton Non-Executive Chairman 23 May 2022 Annual Report & Financial Statements 2021 QCA Principles 53 Strategic Report l Governance Financial Accounts Glossary Company Information 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 outlined on pages 12 to 13 of the Strategic Report and details of the key risks for the business and how these are mitigated can be found on pages 44 to 49. 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 2021, using virtual platforms to engage with stakeholders. Nicholas Clayton, (formerly our Senior Independent Non-Executive Director,) was appointed Non-Executive Chairman in August 2021. Nicholas 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 by calling +44 0131 240 3860. Our AGM is an annual opportunity for all shareholders to meet with the Non-Executive Chairman and other members of the Board, including the Chief Executive and the Non-Executive Directors. 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 Group, 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, partners, regulators and the position of the Group within the communities we operate. The Group is committed to being honest and fair in all its dealings with its employees, partners, contractors, suppliers and other key stakeholders and encourages the same in return. The Group expects its employees, partners, contractors and suppliers 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: 54 Trinity Exploration & Production plc QCA Principles (continued) Behaviour: that mirrors professionalism, respect and fairness by conducting business in a socially responsible and ethical manner; Rigour: Purpose: initiate thought before action by promoting sustainability and proactively protecting the environment; and fit for delivering our business goals by engaging with, learning from, respecting and supporting the communities and cultures within which we operate. 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 engagement with, and support for, the communities 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. The CSR philosophy of the Group is fed down from the Board throughout the organisation. During 2021 the Group engaged with the local community, providing food supplies to vulnerable households. The business supports 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 44 to 49. The risks of the business are considered both 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, including 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 2021 and into 2022. 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 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, one of the Non- Executive Directors (Angus Winther) is not deemed to be independent under the QCA Code given his significant interest in the Group’s shares. Following the appointment of Nicholas Clayton as Non- Executive Chairman the Company does not at present have a Senior Independent Non-Executive Director. The Board does not deem this necessary given the transition from an Executive Chairman to a Non-Executive Chairman. The Board, led by the Non-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. 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 at least 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 with the unexpecting passing of the previous Executive Chairman, Bruce Dingwall, CBE. The Board continued to hold monthly board calls throughout 2021, 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. Annual Report & Financial Statements 2021 55 Strategic Report l Governance Financial Accounts Glossary Company Information 6. Ensure that among them the Board has the necessary up to date experience, skills and capabilities The Board currently comprises the Non-Executive Chairman, four Non-Executive Directors and one Executive Director, the Chief Executive Officer. 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. The Group is mindful of the issue of gender balance, and during 2022 a female Director, Kaat Van Hecke was appointed to the Board. The Group also 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 58 and 59. 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 its effectiveness and performance as the Directors’ continued independence. A formal Board review has not been carried out in the year ended 31 December 2021. However, recent changes to the Board in 2021 and 2022 have been made to strengthen 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 Company 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 2021. 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 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 four 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 56 Trinity Exploration & Production plc QCA Principles (continued) after discussions may ask for that concern to be noted in the minutes of the meeting, which are then circulated to the Board. Any specific actions arising from such meetings are agreed by the Board or relevant Committee and then followed up by the EMT. The Non-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 Non-Executive Chairman is an important interlocutor between shareholders and the Board. The Non-Executive Chairman also acts as a sounding board for the CEO and an intermediary for other Directors. He is responsible for holding regular informal meetings with other Directors. The Executive Director is 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 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 Director 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, which include: 1. 2. 3. 4. 5. 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; review of Group performance and approving any necessary corrective action that is to be taken; extension of 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, Audit Committee and Technical Committee, further details relating to which are set out below. The Board has made the decision not to have an HSSE Committee, but has recently appointed Kaat Van Hecke to be responsible for HSSE. 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 Executive Director 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 the Executive Director and other members of the EMT and the performance targets to be used. The Remuneration Committee currently comprises of Nicholas Clayton (Chair until 1 July 2022) Kaat Van Hecke (Chair from 1 July 2022), Derek Hudson and Angus Winther. The Committee generally meets four times 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 (Chair), Kaat Van Hecke and James Menzies. The Audit Committee generally meets three times a year. The Technical Committee The Board established a Technical Committee in January 2022 in order to ensure the technical effort in the Company is being utilised and directed effectively and that the resources are of the appropriate quality and supported in the optimal way. Annual Report & Financial Statements 2021 57 Strategic Report l Governance Financial Accounts Glossary Company Information The Technical Committee currently comprises two Non- executive directors; James Menzies (Chair) and Derek Hudson, and three other independent experts Allison Dupigny-Auguste; Alistair Sharp; and, Andrew Carmichael, who bring complementary and relevant expertise to the Committee’s deliberations. The Technical Committee is expected to meet at least four times a year (and on an ad hoc basis as required). 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 company 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 pages 25 to 26 for further information. the sub-surface teams from idea generation to evaluation and execution and provides the Board with confirmation that technical work has been considered and evaluated appropriately. Non-Executive Chairman The Non-Executive Chairman is responsible for leading the Board and engaging with, and providing advice to, the Chief Executive Officer as required. The Non- Executive Chairman also engages with investors and other stakeholders. Chief Executive Officer The Chief Executive Officer leads the EMT to deliver the business goals and objectives as directed by the Board. Executive Management Team The EMT ensures the operational functions of the Group are carried out safely / efficiently and provides Corporate, Legal, HSSE and Financial inputs and recommendations to the Chief Executive Officer who in turn relates the proposed initiatives to the Board. Corporate Governance Framework Company Secretary The Board The Board is responsible for managing the Company, formulating strategy, setting budgets, raising and deploying capital, overseeing overall performance and discharging legal and statutory obligations. The Board has established Audit, Remuneration and Technical Committees to assist it in discharging its responsibilities and to apply an appropriate level of scrutiny over the related functions. The Board delegates day-to-day responsibility for running the Group to the EMT led by the Chief Executive Officer. Audit Committee The Audit Committee monitors the integrity of the 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 Group’s auditors, overseeing the approval of their remuneration and terms of engagement and assessing annually their independence, objectivity and effectiveness. It also seeks to ensure that the Group is compliant with its relevant regulatory requirements. Remuneration Committee The Remuneration Committee determines and makes recommendations to the Board on the remuneration of the Company’s Executive Director 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 the Executive Director and other Executive Management and the performance targets to be used. The 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 provides guidance so that good boardroom practices are preserved. The Group’s Annual Report and Notice of AGMs are published to all shareholders. The Interim Report and other investor presentations are also available for the last six years and can be downloaded from the Group’s website. Quarterly updates are provided to the market. Shareholders are also kept up to date through RNS on regulatory matters and other matters of material substance. 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 Non-Executive Chairman 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 Board Technical Committee Nicholas Clayton Non-Executive Chairman The Technical Committee interacts with the sub-surface teams at a working level, offering mentorship. It follows 23 May 2022 58 Trinity Exploration & Production plc Board of Directors 1 2 3 Executive Directors Non-Executive Directors 1 Jeremy Bridglalsingh Executive Director (11 January 2017 to present) 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 held roles across the Financial, ICT and Supply Chain disciplines before assuming the role of CFO of Trinity in January 2016. He combined that with the role of Managing Director from March 2019 until he relinquished the CFO role in September 2020, and was appointed CEO of Trinity in August 2021. Bruce Dingwall, CBE Executive Director (13 February 2013 to 3 August 2021) 2 Nicholas Clayton Non-Executive Chairman Non-Executive Director Remuneration Committee Chairman (28 November 2018 to present) Nicholas is British and has provided strategic and corporate finance advice to, and has been an Executive and 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 and a Director of Active Away Ltd. Nicholas is currently the Chairman of Trinity’s Remuneration Committee. 3 James Menzies Independent Non-Executive Director Technical Committee Chairman (23 June 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 Chairman of the Technical Committee and a member of Trinity’s Audit Committee. Annual Report & Financial Statements 2021 59 Strategic Report l Governance Financial Accounts Glossary Company Information 4 5 6 4 Angus Winther Non-Executive Director Audit Committee Chairman 6 Derek Hudson Independent Non-Executive Director (11 January 2017 to present) (14 September 2021 to present) Derek is a geologist by profession, having over 30 years senior level experience in the oil and gas industry, operating globally (Trinidad and Tobago, United States, United Kingdom and East Africa) with multi-national organisations and state enterprises. Derek is currently Non-Executive Chairman of Scotiabank Trinidad and Tobago Ltd, one of Trinidad and Tobago’s largest banks. He worked for BG Group for over 20 years in senior managerial positions in the UK North Sea and Trinidad, prior to its combination with Royal Dutch Shell in 2016, and subsequently served as Shell’s Vice President and Country Chairman, Trinidad & Tobago from June 2016 until June 2019, where he was responsible for Shell’s upstream and LNG business activities in country. Subsequent to retiring from the role, Derek continued to serve as a Business Adviser to Shell’s Trinidad and Tobago business until June 2021. Derek is a member of Trinity’s Remuneration Committee and a member of the Technical Committee. David Segel Non-Executive Director (11 January 2017 to 22 February 2022) Angus is British and 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), Benefact Group plc and its subsidiary 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. 5 Kaat Van Hecke Independent Non-Executive Director and Remuneration Committee Chair (effective 1 July 2022) (22 February 2022 to present) Kaat is Belgian, has over 25 years’ experience in the oil & gas industry and has a strong operations background, having started her career as a Production Engineer with ExxonMobil and Shell in Europe and Nigeria. As the Operations Planning Manager at Sakhalin Energy – in the far east of Russia – she played a key integration role in the start-up of the 450,000 boepd company. From 2013-2016 she served as the MD and Senior Vice President Austria Upstream at OMV. Kaat is a member of both the Audit and Remuneration Committees and is responsible for the Board’s oversight of the HSSE function. 60 Trinity Exploration & Production plc Executive Management Team 1 4 2 5 3 6 1 Jeremy Bridglalsingh Chief Executive Officer 4 Rajesh Rajpaulsingh Chief Operations Officer Jeremy joined Trinity in 2012. Chartered Management Accountant for 15+ years with previous financial services experience gained in the United Kingdom. Rajesh joined Trinity in 2011. Previously worked at Petrotrin and BPTT in various capacities and has 20 years experience as a Petroleum Engineer. Petroleum Engineer by background for 20 years. 2 Denva Seepersad Finance Director 5 Dr. Ryan Ramsook Executive Manager, Sub Surface Denva started with Venture’s Trinidadian assets in 2005 as a Certified Chartered Accountant holding various key finance roles including Financial Controller. He is a Fellow Chartered Certified Accountant with 17+ years’ experience in the upstream oil sector in Trinidad. Ryan joined Trinity in 2013, served as Geoscientist 2013- 2014 and Deputy Subsurface Manager from 2014-2015. Re-joined Trinity in 2018 as Team Lead Subsurface from 2018-2021. Dr. Ramsook is also a Senior Lecturer at the University of the West Indies and Fellow of the Geological Society (FGS) of London. He is a Geologist by background with 16+ years’ experience. 3 Nirmala Maharaj Chief of Staff & General Counsel 6 Ronald Solomon Executive Manager, Innovation Nirmala 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. Ronald joined Trinity in 2021. Engineer by background. 17+ years’ experience in Oil & Gas operations and senior management. Previously held senior leadership roles for a major oilfield service company in Russia, Caspian countries and Caribbean areas. Annual Report & Financial Statements 2021 Board Activities 61 Strategic Report l Governance Financial Accounts Glossary Company Information The Board is responsible for maintaining full and effective control over the Group. The Board holds regular meetings at which financial, operational and strategic goals are considered and decided upon. Directors’ attendance Board- Board Scheduled Ad Hoc Audit Remuneration Meeting Meeting1 Committee Committee Matters which are reserved for the Board include: Director Requirement 13 5 3 5 • • • Approval of the Group’s strategy and objectives; Approval of the Group’s budgets, including operating and capital expenditure budgets; Growth of activities into new business areas or geographical locations; • Material changes to the Group’s structure and management; • • • • Changes to the Group’s listing, governance or business processes; Approval of the Group’s annual report and accounts and interim report; Setting EMT pay and conditions, annual bonuses and awards under the LTIPs; and Reviewing the effectiveness of the Board and its Committees. Time commitment Board and Board Committee meeting dates are agreed at the beginning of the year. The Board, 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. Whilst the Chief Executive Officer is expected to devote substantially the whole of their working time to their duties within the Group, the Non-Executive Directors are expected to allocate sufficient time to the Group to discharge their responsibilities. It is expected that all Directors attend, and devote adequate time to prepare for, all meetings of the Board and any Board Committees of which they are members, as well as the AGM. Since 2020, it is also expected that the Directors visit the Group’s San Fernando Office, located in Southern Trinidad, at least once a year, meeting with administrative and technical personnel via face to face meetings and as well as making site visits to well/drilling locations. The Directors’ attendance at scheduled and ad hoc Board Meetings and Board Committees during 2021 is detailed in the table below: Bruce Dingwall, CBE2 (Chairman) 8 0 Jeremy Bridglalsingh 13 5 Angus Winther 13 5 3 5 David Segel 13 5 3 5 James Menzies 5 11 5 3 5 Nick Clayton3 13 4 3 5 Derek Hudson4 3 1 Total meetings 13 5 3 5 Notes: 1. 2. 3. 4. 5. Ad hoc meetings: Additional meetings called for a specific matter generally of a more administrative nature not requiring full Board attendance. Mr Dingwall ceased as a director of the Company on 03.08.2021 Mr Clayton was appointed as Non-Executive Chair on 02.08.2021 Mr Hudson was appointed to the Board on 14.09.2021 (Mr Hudson missed one scheduled Board meeting since his appointment due to a conflicting commitment) Mr Menzies missed two scheduled Board meetings due to conflicted commitments 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. Whilst the last two AGM’s have had to be held virtually, due to the Covid restrictions which were in place, the Company looks forward to welcoming shareholders to the AGM in 2022. 62 Trinity Exploration & Production plc Audit Committee Report Responsibilities of the Audit Committee 2021 Activities The Committee reviews and makes recommendations to the Board on: • • • • • • • • compliance with accounting standards and legal and regulatory requirements. accounting issues that require a major element of judgement or risk. any change in accounting policies. 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 under Board Activities on page 61. Although not a member of the Audit Committee, the Chief Executive Officer and Finance Director 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 subjective assumptions relating to the Group’s activities, particularly those relating to complex calculations including non-current asset impairments, inventory impairments, provision for decommissioning and deferred taxes, 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 subjective items contained within the Report and Accounts are reasonable. During 2021, the Group undertook a Capital Reorganisation which was designed to increase the distributable reserves of the Company, and thereby support the Company’s ability to pay dividends and effect share buybacks in the future. The Capital Reorganisation involved the consolidation and sub-division of the Company’s ordinary shares, and the cancellation of the Company’s deferred shares and the share premium account. Other steps, involving the Group’s subsidiaries, were also undertaken to eliminate potential ‘dividend blocks’ within the Group’s corporate structure. As a consequence, the Company’s share capital now consists of 38,879,431 ordinary shares, and as at 31 December 2021 the Company had USD 51.0 million of distributable reserves and there are no material ‘dividend blocks’ remaining within the Group’s corporate structure. The Audit Committee reviewed the steps being undertaken pursuant to the Capital Reorganisation, and recommended its implementation to the Board. The Audit Committee also paid particular attention to the disclosures which were required in relation to the impact of Covid-19, oil price volatility and the accounting treatment of the acquisition of the PS4 block. 63 Strategic Report l Governance Financial Accounts Glossary Company Information Annual Report & Financial Statements 2021 External Auditors Appointment of External Auditors • • • The Company appointed BDO to act as external auditors for the Group for the financial year to 31 December 2020. The Group fee to BDO for the financial year to 31 December 2021 is USD 0.3 million (2020: USD 0.3 million). External auditors are re-appointed annually, subject to a satisfactory review by the Audit Committee of their performance, independence and service proposal. 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. Having completed this review, the Audit Committee is recommending BDO’s reappointment for the financial year to 31 December 2022. Unless a change in external auditor is deemed appropriate in the intervening period, the Audit Committee considers putting the external audit out to tender every five years, and will inform the shareholders as to their decision. 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 rise to 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. Internal Controls 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. Angus Winther Chairman of the Audit Committee 23 May 2022 64 Trinity Exploration & Production plc 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: • • • • • 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 Remuneration Committee utilises a range of tools and measures to frame its 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 engaged an external remuneration consultant, FIT, to provide a benchmarking analysis of Executive and Non-Executive Directors’ remuneration levels using comparator groups. Given the changes in the Company’s leadership, due to the unexpected passing of Bruce Dingwall, CBE, the benchmarking analysis provided useful guidance to the Committee in deciding the remuneration for the Chief Executive Officer and Non-Executive Chairman, and additionally in determining the increase in Non-Executive Director fees. The Remuneration Committee also enlisted the services of FIT to assist in its deliberations on remuneration trends and incentive scheme design. FIT is a member of the Remuneration Consultants Group and, as such, voluntarily operates under the Code of Conduct in relation to executive remuneration consulting in the UK. The salaries of the Executive Directors and other members of the EMT were held constant in 2021, reflecting the difficult operating environment. However, executive salary increases have been implemented in 2022 to ensure that they remain competitive. 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: • Financial – including EBITDA per share and Operating break-even targets; • Operational – including annual production targets and drilling objectives; • • • HSSE – targets for the avoidance of LTIs and reportable environmental incidents; Strategic – progression of 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, cascade down to drive the performance of all employees working within the Group. 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, however, 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 agreed as well as the underlying performance of the business. Based on the robust performance of the business, bonuses for 2020 were paid in June 2021 shortly after publication of the audited accounts. In 2021 the business continued to demonstrate resilient operating performance and, combined with a recovery in oil prices, improved financial performance. As a result, 2021 bonus awards were approved by the Remuneration Committee, and are to be paid shortly after publication of the 2021 audited accounts. Our Auditors have audited aspects of this report as it relates solely to the reported items within the financial statements. 2021 Performance and Review Corporate KPI’s: • Setting corporate KPI’s which are used to determine the bonus awards of the Executive Directors. The 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. Key pay outcomes: • Bruce Dingwall, CBE’s base salary for 1 January – 3 August 2021 was USD 214,667 (2020: USD 368,000). 65 Strategic Report l Governance Financial Accounts Glossary Company Information Corporate Governance disclosure: • Discussed UK Corporate Governance requirements in respect of responsibilities of the Remuneration Committee in recommending Executive Director and 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. Remuneration Policy: • Appointment of FIT, a remuneration consultant, to assist the Committee with benchmarking Executive Director and Non-executive Director pay, reviewing the Company’s remuneration policy and with long term incentive scheme design. Chair of the Remuneration Committee: • I am pleased to confirm that the Board has appointed Kaat Van Hecke to succeed me as Chair of the Remuneration Committee with effect from 1 July 2022. The Board believed that an independent Non- executive Director (other than the Chairman) should be tasked with performing this important role, and that Kaat’s appointment should take place after the current remuneration cycle has concluded. Nicholas Clayton Remuneration Committee Chairman 23 May 2022 Annual Report & Financial Statements 2021 • • • Jeremy Bridglalsingh’s base salary for 2021 was USD 273,750 (2020: USD 255,000). Prior to 3 August 2021 his base salary was USD 255,000 per annum, in line with 2020. Following the passing of Bruce Dingwall, CBE on 3 August 2021, and Jeremy Bridglalsingh’s appointment as Chief Executive Officer, his basic salary was increased to USD 300,000 per annum. This salary has been held constant for 2022. Nicholas Clayton was appointed Non-Executive Chairman on 3 August 2021. His fees for this role were established at equivalent USD 108,088 per annum. Mr Clayton, as chair of the Remuneration Committee, reclused himself from all discussions relating to his appointment and fee for the role. The benchmarking analysis prepared by FIT was used to determine an increase in the basic fee for Non-executive Directors from an equivalent USD 54,044 to USD 56,746 per annum, which has been applied with effect from 1 October 2021. This is the first increase in Non-executive Director fees to have occurred since 2017, and are intended to ensure they remain in line with comparator companies. Additional fees are also paid for chairing Board Committees and for additional consultancy services, beyond those normally provided by a Non-executive Director. The Non-executive Director fees were agreed by Mr Clayton (as chair of the Remuneration Committee) in consultation with Mr Bridglalsingh, with the other members of the Remuneration Committee reclusing themselves from all discussions relating to their fees. LTIP awards: • Reviewed performance criteria and recommended grant of 2021 LTIP awards. The Group granted options of 325,000 ordinary shares on 13 August 2021 (representing 0.84% of the Company’s then issued capital) in respect of performance during 2020, including 75,000 options to Jeremy Bridglalsingh. • On 30 June 2021, 471,131 options vested from awards granted on 25 August 2017 as a result of the performance conditions being partially satisfied. This included 95,742 options to Jeremy Bridglalsingh. • On 1 January 2021, 167,018 options vested from awards granted on 2 January 2019. This included 31,883 options to Jeremy Bridglalsingh. Leaver awards: • Payments made to estate of the Executive Chairman. Following the passing of Bruce Dingwall, CBE his estate was paid USD 359,733 which included an amount equal to 6 months’ notice (consistent with what he would have been due had left the Company voluntarily) and an imputed one off bonus equivalent to 50% of salary (paid pro-rata) in respect of 2021. The Remuneration Committee also agreed that Mr Dingwall’s estate should retain the benefit of all LTIPs issued to him during his tenure with the Company. 66 Trinity Exploration & Production plc Directors’ Remuneration Report Review and Approval Process Remuneration Policy Table – Executive Directors 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 of this report as it relates solely to the reported items within the financial statements. Bruce Dingwall, CBE, served as Executive Chairman until 3 August 2021 and Jeremy Bridglalsingh served as Executive Director throughout 2021. With the tragic passing of Bruce Dingwall on 3 August 2021, Nicholas Clayton assumed the role of Non-Executive Chairman and Jeremy Bridglalsingh assumed the position of Chief Executive Officer effective 13 August 2021. 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 (supported by analysis provided by FIT, the Company’s Remuneration Consultants) ; • 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 executive rewards to strategic KPIs agreed by the Committee and are intended to drive the 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 the Executive Directors. Maximum: 100% of base salary. This can be exceeded in exceptional circumstances at the discretion of the Committee. Bonuses 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 2021 67 Strategic Report l Governance Financial Accounts Glossary Company Information Element LTIP The LTIP aligns Executive Director, and other EMT member, interests with those of shareholders and drives superior long-term performance. Operation Maximum opportunity Performance assessment 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, except where one-off awards are made to new members of the EMT or new joiners. Awards under the LTIP are non-contractual. 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 24 in Notes to Financial Statements. 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. On 13 August 2021 it was announced that the LTIP scheme would be revised (the "Revised LTIP") and that grants were made to the Executive Director and other EMT members in respect of the Company's performance in the year to 31 December 2020 (the "2021 Annual LTIP Award). The terms of the Revised LTIP apply in respect of the 2021 Annual LTIP Award and subsequent issues but will not alter the terms of any previous awards made under the LTIP. Further details of which can be found on pages 70 to 73. Other benefits To provide competitive levels of employment benefits. Shareholding Policy To ensure that Executive Directors’ interests are aligned with those of shareholders over a longer time horizon. 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 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. Non-Executive Director Remuneration Policy Effective term Notice period Chief Executive Officer Rolling with no fixed expiry date. Six months Executive Directors’ service contracts Objective The Company’s policy on Directors’ service contracts are indicated below: To attract Non-Executive Directors with the requisite skills and experience. 68 Trinity Exploration & Production plc Directors’ Remuneration Report (continued) Operation Annual Report on Remuneration 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. One new appointment was made during 2021 and revisions to non-executive director remuneration were made during the year, effective 1 October 2021. Fees are to be paid on a quarterly basis to Non-Executive Directors with the exception of the Non-Executive Chairman who is paid monthly. 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. All figures expressed in USD3 Base Salary Taxable Benefits4 Annual Bonus and one off7 Pension LTIP(s)5 Gain on exercise of Share Options6 Total Notes: This section of the Remuneration Report contains details of how the Group’s Remuneration Policy was implemented in 2021. 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, served as Executive Chairman until his tragic passing on 3 August 2021 and Jeremy Bridglalsingh served as Executive Director throughout the year. Following Bruce Dingwall’s passing, Nicholas Clayton assumed the role of Non-Executive Chairman and Jeremy Bridglalsingh assumed the position of Chief Executive Officer on 13 August 2021. The table below sets out the single total figure of remuneration and breakdown for each Executive Director paid for the 2021 financial year. Comparative figures for 2020 have also been provided where applicable. Bruce Dingwall, CBE1 Jeremy Bridglalsingh 2 31 Jan - 3 August 2021 214,667 21,467 359,733 — 171,636 — 2020 2021 2020 368,000 36,800 184,000 — 289,485 361,842 273,750 20,417 138,000 27,375 132,908 — 255,000 20,417 127,500 25,500 179,274 — 767,503 1,240,127 592,450 607,691 1. 2. 3. 4. 5. 6. 7. Bruce Dingwall, CBE – Executive Chairman effective 13 November 2015 until his passing on 3 August 2021 (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 Chief Executive Officer on 13 August 2021 following the tragic passing of Bruce Dingwall. Foreign Exchange (“FX”) Conversions: i. ii. GBP fees were converted to USD using an exchange rate of 1: 1.3511 for 2021 (2020: 1: 1.2794). TTD fees were converted to USD using an exchange rate of 1: 6.7591 for 2021 (2020: 1: 6.7580). Taxable benefits include: Chairman’s benefits allowance, which was 10% of salary, and vehicle allowance in favour of Executive Director. 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 70 to 73 for further information). The cost shown in the table represents the Share Option Expense to the Company incurred in the year in relation to LTIP awards granted to the Executive Directors. 2020 Gain on exercise of Share Options ("SO")= (SO x Market Value at date of exercise less Exercise Price (0)). No share options were exercised in 2021. (2020: Bruce Dingwall exercised 312,108 LTIPs at a Market Value of GBP 0.885. Gain value of GBP 276,215 was converted at 1.31.). The gain does not take account of the Share Option Expense to the Company which will have been incurred (and therefore already included in the table) prior to the LTIP award vesting. Annual Bonus and one off - Following the passing of Bruce Dingwall, CBE his estate was paid an amount equal to 6 months’ notice (consistent with what he would have been due had left the Company voluntarily) and the Remuneration Committee also agreed to pay an imputed one off bonus equivalent to 50% of salary (paid pro-rata) in respect of 2021. The Remuneration Committee also agreed that Mr Dingwall’s estate should retain the benefit of all LTIPs issued to him during his tenure with the Company. 69 Strategic Report l Governance Financial Accounts Glossary Company Information All figures expressed in USD equivalent 56,746 108,088 13,511 13,511 13,511 Total 2020 57,371 63,745 50,996 50,996 Annual Report & Financial Statements 2021 Non-Executive Directors Fees (Audited) Non-Executive Director Fee Chair of the Board Audit Committee Chair Remuneration Committee Chair Technical Committee Chair Nicholas Clayton2 Angus Winther3 David Segel James Menzies 4 Derek Hudson (since 14 September 2021)5 Total Notes: Director Fees 2021 1 76,562 54,720 54,720 54,720 Director Fees 2020 Committee and Other Fees 2021 Committee and Other Fees 2020 50,996 50,996 50,996 50,996 32,089 13,511 — 3,378 6,375 12,749 — — Total 2021 108,651 68,231 54,720 58,097 16,836 — 7,481 — 24,317 — 257,558 203,984 56,459 19,124 314,016 223,108 1. 2. 3. 4. 5. 6. Non-Executive Director Fees were revised with effect from 3 August 2021 for Nicholas Clayton and with effect from 1 October 2021 for the other Non-Executive Directors. Nicholas Clayton –Non-Executive Director and appointed Remuneration Committee Chair on 28 November 2018. Appointed Non-executive Chair on 3 August 2021. Fees include Non-Executive Director, Non-Executive Chair and Chair of Remuneration Committee. Angus Winther – Non-Executive Director effective 11 January 2017 and appointed Audit Committee Chair effective 23 June 2017. Fees include Non-Executive Director and Audit Committee Chair Fees James Menzies – Non-Executive Director effective 23 June 2017 and appointed Technical Committee Chair effective 1 January 2022. Fees include Non-Executive Director and Technical Committee Chair. Derek Hudson – Non-Executive Director effective 14 September 2021. Other fees include consultancy fees. Non-Executive Director Fees are paid in GBP and were converted to USD using an exchange rate of 1: 1.3511 for 2021 (2020: 1: 1.2749) Company Remuneration Spend (Audited) The following table indicates the Group’s total remuneration for 2021: 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 2021 2020 2021 2020 2021 2020 2021 2021 2021 2020 1,669 1,714 8,001 5,873 9,670 7,587 -3% 36% 17% 23% Notes: 1. 2. 3. Refer to Note 30 Related Party Transactions – Key Management and Directors’ compensation in the Financial Statements on pages 129 to 130. Refer to Note 34 Employee Costs on page 132. 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 2021: Outstanding interests Interests subject Shareholding to conditions Director Current Shareholding (% salary)1 Beneficially owned shares2 Vested but unexercised LTIP awards3 Share interests – LTIP Options/ Mirror Scheme4 Total held at 31 December 2021 Jeremy Bridglalsingh 175% 52,836 306,516 478,670 2,000 828,224 Notes: 1. 2. 3. 4. 5. The closing share price of GBP 126.5 (USD 170.9 equiv.) as at 31 December 2021 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 and 30 June 2021, one off LTIP awards granted in 2017 vested in accordance with the terms of the LTIP scheme. In addition, the annual 2019 LTIP award vested on 1 January 2021. The options over 306,516 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. These have not been exercised and will expire March 2023. All GBP fees were converted to USD using an exchange rate of 1.3511. 70 Trinity Exploration & Production plc Directors’ Remuneration Report (continued) Share based payments Refer to Note 24 - Notes to Financial Statements. Total Shareholder Return (“TSR”) 2017-2021 (Audited) TSR factors in capital gains and dividends when measuring the total return generated per share for a Trinity shareholder. 2021 2020 2019 2018 2017 Average Share price Closing Opening Annual TSR GBp % Cumulative TSR since 2017 GBp % 142 83 118 177 132 127 109 112 120 145 109 112 120 145 50(1) 17 (3) (7) (17) 291 255 219 225 241 291 The opening figure for 2017 is the placing price of 49.8 pence, rather than the share price of 19 pence prevailing on the first trading day of 2017 (when the shares were still suspended). 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 Remuneration Committee’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). 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, except where one-off awards are made to new members of the EMT or new joiners. Movements in the number of LTIPs outstanding and their related weighted average exercise prices are as follows (Number of options are restated post share consolidation): At 1 January Forfeited Granted Exercised At 31 December Average exercise price per Share Option GBP 0.00 GBP 0.00 GBP 0.00 GBP 0.00 GBP 0.00 2021 2020 Number of Options 3,156,299 (100,000) 325,000 - 3,381,299 Average exercise price per Share Option GBP 0.00 GBP 0.00 GBP 0.00 GBP 0.00 GBP 0.00 Number of Options 3,178,982 (172,059) 623,882 (474,506) 3,156,299 LTIPs outstanding as at 31 December 2021 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 13/8/2021 – 1/1/2024 Expiry date Exercise price 2021 2020 24/8/2027 1/1/2023 2/1/2024 2/1/2025 1/1/2027 GBP 0.00 GBP 0.00 GBP 0.00 GBP 0.00 GBP 0.00 2,103,032 252,510 319,171 381,586 325,000 2,103,032 252,510 319,171 481,586 - Annual Report & Financial Statements 2021 2021 LTIPs The following LTIP awards were granted to Executive Directors during 2021: Name/Position Jeremy Bridglalsingh Chief Executive Officer Number of ordinary shares subject to the Option 71 Strategic Report l Governance Financial Accounts Glossary Company Information However, an underpin term applies to the Relative TSR Part which provides that, regardless of relative TSR performance, no vesting may ordinarily accrue in respect of the Relative TSR Part unless the Company's compound annual growth rate of TSR over the performance period is at least 10% per annum. Vesting occurs on a straight-line basis between threshold and maximum. 75,000 Performance Vesting On 13 August 2021, Options over a total of 325,000 ordinary shares were granted under the LTIP in accordance with a revised LTIP scheme (the Revised LTIP”) to members of the EMT in respect of the performance of the Company in the financial year ended 31 December 2020. This included 75,000 options to CEO Jeremy Bridglalsingh. The 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 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. These LTIP awards will vest on 1 January 2024, subject to meeting the performance criteria set and continued employment in the Company. The Options are exercisable at nil cost by the participants. The performance targets set for awards made under the 2021 Annual LTIP Award will be measured considering both the Company's absolute TSR performance and the Company's relative TSR performance over a three-year period, commencing 1 January 2021. TSR calculations will be determined by reference to the three-month volume weighted average price prior to the start and end of the measurement period (with the starting average price adjusted for the Share Consolidation). The three-month volume weighted average price at the start of the performance period for the 2021 Annual LTIP Award was 88p (adjusted for the Share Consolidation). The performance targets provide that: • • No portion of a distinct one-half of the 2021 Annual LTIP Award (the "Absolute TSR Part") may vest unless the Company's compound annual growth rate of TSR over the performance period is at least 10% p.a., for which 30% of the Absolute TSR Part may vest, rising on a straight line basis for full vesting of the Absolute TSR Part if the Company's compound annual growth rate of TSR over the performance period equals or exceeds 25% p.a. No portion of the other distinct one-half of the 2021 Annual LTIP Award (the "Relative TSR Part") may vest unless the Company's TSR over the performance period ranks at least median relative to the TSR performance within a comparator group of companies, for which 30% of the Relative TSR Part may vest, rising on a straight line basis for full vesting of the Relative TSR Part if the Company's TSR over the performance period ranks upper quartile or better relative to the TSR performance within a comparator group. Below the Median None of the award will vest Median (50th percentile) Between Median and Upper Quartile Upper Quartile (75%) Above the Upper Quartile 30% of the maximum award will vest Straight Line basis between these points 100% of the maximum award will vest. 100% of the maximum award will vest Sector: FTSE AIM All Share Oil & Gas constituents Size: Market capitalisation of between GBP 20 million and GBP 400 million Further relevance filter: Exploration & Production operations, excluding oil equipment and service, pure-play exploration and alternative energy companies. These filters create a comparator group of 30 companies 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 various points in the business cycle. For 2021, 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. 2020 LTIPs On 25 June 2020 Options over 381,586 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 of 118,692 and 79,128 share options to the Executive Chairman and Managing Director respectively. In addition, on 30 October 2020 the Remuneration Committee granted Options over 100,000 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. The departure of the Chief Financial Officer in June 2021 resulted in the 100,000 LTIPs issued to him being forfeited. The remaining Options will vest on 72 Trinity Exploration & Production plc Directors’ Remuneration Report (continued) 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 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 96.8p. 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 for the financial year ended 31 December 2018. The Group announced the grant of Options over 383,282 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 (99,168 ordinary shares) and Jeremy Bridglalsingh (66,112 ordinary shares). The May 2019 Options vested on 2 January 2022. Based on the relative TSR performance of Trinity against the designated comparator group of companies 318,009 Options (representing 82.97% of the award) vested on this occasion, including 82,280 to the estate of Bruce Dingwall and 54,853 to Jeremy Bridglalsingh. The share price used to calculate the start of the TSR calculation in respect of these awards was based on the three month volume weighted average share price leading into 31 December 2018, which was 146.6p. The share price used to calculate the end of the TSR calculation for these awards was based on the 3 month volume weighted average to 31 December 2021, being 138.4p. January 2019 On 2 January 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 for the financial year ended 31 December 2017. The Group announced the grant of Options over 282,400 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 (66,422 ordinary shares) and Jeremy Bridglalsingh (47,824 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 188,266 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 share price leading into 31 December 2017, which was 167.7p. The share price used to calculate the end of the TSR calculation in respect of these awards was based on the three month volume weighted average to 31 December 2020, which was 108.5p. 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 2,541,600 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 (902,213 ordinary shares) and Jeremy Bridglalsingh (517,122 ordinary shares). In addition, a further 282,400 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 142,296 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: • • • In respect of 70% of the award, the Group’s share price growth from the 2017 placing price of 49.8 pence per share. If the three month Volume- Weighted Average Price (“VWAP”) at the testing date is 350 pence or more per share, this part of the award will vest in full. If the VWAP at the testing date is 49.8 pence per share or less, this part of the award will not vest at all. If the VWAP at the testing date is between 49.8 pence and 350 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 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 73 Strategic Report l Governance Financial Accounts Glossary Company Information Annual Report & Financial Statements 2021 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: • • • In respect of the Group’s share price growth, 118,402 LTIPs vested based on the 3 month VWAP of 67.5p prevailing as at 30 June 2020. As the BIR was repaid in full before 30 September 2019, 20% of the overall award, being 515,507 LTIPs, vested in full. As the CLNs were duly redeemed prior to the second anniversary of their issue, 10% of the overall award, being 257,754 LTIPs, vested in full. Therefore, at the first testing date, a total of 891,663 LTIP's from the 2017 award vested. The Options were tested again on 30 June 2021 against the Group’s share price growth performance target resulting in 471,131 LTIPs vesting based on the 3 month VWAP of 148.9p prevailing at 30 June 2021. The Options will be tested again on 30 June 2022 when the final determination based on the share price growth performance target will be made. 74 Trinity Exploration & Production plc 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 2021 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 alternative energy projects, including an assessment of solar and wind power options for the Galeota asset development. 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 1 to 49. 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 for the next twelve months. For the past twelve months the Group continued to operate with no significant effects nor interruptions from the presence of the Covid 19 pandemic. However, the Board have continued to measure the 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 operating environment and the potential impact of the volatility of the oil price. Oil prices have trended in an upward direction throughout 2021 and continued to increase in 2022 well over USD 100 as at the date of this annual report. Oil prices are forecast to remain at elevated levels over the next 12 months, which will continue to positively impact the Group’s operations. The Group started 2022 with a strong operating and financial position; 2021 average sales of 3,006 barrels of oil per day (“bopd”), (2020 3,226 bopd), and net cash of USD 15.6 million (2020: USD 17.5 million) consisting of cash and short term investments of USD 18.3 million (2020: USD 20.2 million) and an overdraft facility of USD 2.7 million drawn (2020: USD 2.7 million) as at 31 December 2021. In making their going concern assessment, the Board considered a cash flow forecast based on expected future oil prices, production volumes and discretionary expenditure reductions including downside scenarios. The base case forecast was prepared with consideration of the following: • • • • Future oil prices assumed to be in line with the forward curve prevailing as at January 2022, with an average realised oil price of USD 68.7/bbl in the period to December 2022. The forward price curve applied in the cash flow forecast starts at USD 70.6/bbl in January 2022, fluctuating each month down to USD 65.8/bbl in December 2022 through to USD 63.4/bbl in June 2023 Average forecast production for the year to December 2022 of 3,173 bopd and for the six months to June 2023 of 3,133 bopd with production being maintained by RCPs, WOs and swabbing activities and no new drilling; No SPT incurred on the onshore assets in 2022, as the SPT threshold for small onshore operators was increased from USD 50 to USD 75.0/bbl for 2022; Trinity continuing to progress various growth and business development opportunities; and derivative instruments in place to protect a portion of cashflows against declining oil prices over the forecast period. As at the current date, Management considers this is a reasonable base scenario, reflecting the outlook of the current production profile and costs. As oil prices have trended upwards our base scenario will continue to be strengthened. 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: • • the effect of reductions in oil prices as low as USD 40.0/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 10%, 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. On 24 February 2022, Russian forces invaded Ukraine, causing wide-ranging economic sanctions to be applied against the Russian regime by the US, EU and other major economies. The event caused both Brent and WTI oil prices to soar, peaking well above USD 100 per bbl in March 2022. The increased oil prices have impacted the Group in several ways. These include, positively impacted the Group’s crude oil revenue, negatively impacted derivative expenses, increased inflationary impacts Annual Report & Financial Statements 2021 75 Strategic Report l Governance Financial Accounts Glossary Company Information and some challenges with supply chain including higher freight costs and delays in receiving shipments. Overall, whilst there has been no significant adverse impact to the Group, management continues to closely monitor the event’s impact as it unfolds. 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 market conditions continue 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. share carries the right to one vote at general meetings of the Company. 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 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 Note 24 to the Consolidated Financial Statements on pages 122 to 125. 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 52. Capital Structure As at 31 December 2021 the Company’s issued share capital was 38,879,431 which comprised of 38,879,431 ordinary shares of USD 0.01 each. Each ordinary Substantial Shareholdings The Shareholders holding over 3% of the voting rights as at 29 April 2022 were as follows: Shareholder The Shareholders holding over 3% of the voting rights as at 29 April 2022 were as follows: David & Christina Living Trust David & Monique Newlands Gavin Matthew White Angus Christian Winther Interactive Investor ISA (Clients)* Jan-Dirk Leuders** Scott Casto** Bruce Dingwall Interactive Investor Clients Hargreave Landsdown Private (Clients)* HSBC Private Bank, London Clients Notes: Number of shares shown are post 2021 share consolidation *Private Client Holdings **Includes 111,460 shares held jointly between Scott Casto and Jan-Dirk Lueders through CMT Investments LLC No of Shares as at 29 April 2022 4,052,772 3,528,500 3,285,748 3,113,299 1,719,800 1,610,317 1,574,834 1,486,141 1,352,432 1,288,465 1,247,076 % of issued Share Capital as at 29 April 2022 10.42% 9.08% 8.45% 8.01% 4.42% 4.14% 4.05% 3.82% 3.48% 3.31% 3.21% 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 3 August 2021 2 Jeremy Bridglalsingh Executive Director and CEO 11 January 2017 to present 3 David Segel Non-Executive Director 11 January 2017 to 22 February 2022 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 Non-Executive 28 November 2018 to present Director and Non-Executive Chairman 7 Derek Hudson Non-Executive Director 14 September to present 8 Kaat Van Hecke Non-Executive Director 22 February 2022 to present 76 Trinity Exploration & Production plc Directors’ Report (continued) The Directors who held office at 31 December 2021 had the following interests in the ordinary shares in the capital of the Group which amounted to 19% of the Group’s total issued share capital: Jeremy Bridglalsingh James Menzies David Segel Angus Winther Nicholas Clayton Total Notes: No. of Consolidated Ordinary Shares – USD 0.01 2021 No. of Consolidated Ordinary Shares – USD 0.01 2020 52,836 115,000 4,052,772 3,113,299 10,000 41,038 115,000 4,052,772 3,093,299 10,000 7,343,907 7,312,109 Shares figures shown for both 2020 and 2021 are post 2021 share consolidation Directors’ share options/LTIPs Likely Future Developments Details of Directors’ share options/LTIPs are provided in the Directors’ Remuneration Report on pages 66 to 73. Future development plans have been addressed in the Strategic Report on pages 1 to 51. Directors’ Indemnities Independent Auditors 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. At the AGM held in June 2021, the Shareholders approved the re-appointment of BDO as the auditors of the Group. Each of the persons who is a Director at the date of approval of this Annual Report confirms that; • • 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 they ought to have taken as a Director in order to make themselves 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. Amanda Bateman For and on behalf of AMBA Secretaries Limited Group Secretary 23 May 2022 Political contributions The Group has made no political contribution to any source during both the current and preceding years. HSSE In 2021, 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. The Share Dealing Code The Group has adopted a code on dealings in securities which the Board regards as appropriate for an AIM listed company 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 Details on the Group’s exposure to risk on price, liquidity and cash flows are addressed under Risk Management and Internal Controls on pages 44 to 49. Annual Report & Financial Statements 2021 Statement of Directors’ Responsibilities 77 Strategic Report l Governance Financial Accounts Glossary Company Information In respect of the Financial Statements The Directors are responsible for preparing the Annual Report and the financial statements contained therein 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 financial statements for the Company and for the Group (together, the “Financial Statements”) in accordance with UK adopted international accounting standards. 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: 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. • • 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 Financial Statements, subject to any material departures having been disclosed and explained in those 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. On behalf of Board Nicholas Clayton Non-Executive Chairman 23 May 2022 78 Trinity Exploration & Production plc Independent Auditor’s Report to the members of Trinity Exploration & Production Plc Opinion on the financial statements Conclusions relating to going concern In our opinion: • • • • 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 2021 and of the Group’s profit for the year then ended; the Group financial statements have been properly prepared in accordance with UK adopted international accounting standards; the Parent Company financial statements have been properly prepared in accordance with UK adopted international accounting standards 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 2021 which comprise the consolidated and company statements of financial position, the consolidated statement of comprehensive income, the consolidated and company statements of cash flows, 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 UK adopted international accounting standards and, as regards the Parent Company financial statements, as applied in accordance with the provisions of the Companies Act 2006. Basis for opinion 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. 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. 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 included: • We obtained the Director’s assessment of the ongoing impact of Covid-19 and the current global macro-economic conditions to date, together with potential future risks and uncertainties, considering the impact on the labour force, supply chain, commodity market prices and access to finance. We compared this against our own assessment of risks and uncertainties based on our understanding of the business and oil and gas sector information. • We obtained the Director’s going concern assessment and supporting base case cash flow forecasts, challenging the key operating assumptions based on 2021 and 2022 year to date actual results for certain performance metrics, external data and market commentary, where possible. See note 1 for the Director’s going concern considerations and assumptions. • 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. • We obtained the Director’s sensitivity analysis which was performed to determine the point at which the Group would exhaust cash reserves and considered whether such scenarios, including significant reductions in commodity prices and production were possible. We also considered the validity of deferring capital expenditure or other mitigating factors identified by the Directors, such as measures to reduce operating costs as part of our assessment. • We reviewed the terms of all facilities in place as at the date of sign off, confirming the consistency of the forecasts with the facilities and assessing the risk of any potential withdrawal of facilities or default events. • We reviewed the adequacy, completeness and consistency of going concern disclosures in the financial statements with the directors going concern forecasts. 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. Annual Report & Financial Statements 2021 79 Strategic Report l Governance Financial Accounts Glossary Company Information Overview Coverage 95% (2020: 94%) of Group profit before tax 100% (2020: 100%) of Group revenue 99% (2020: 99%) of Group total assets Key audit matters 2021 2020 Going Concern* No Yes Carrying Value of Oil and Gas assets Yes Yes Carrying value of Exploration and Evaluation assets Yes No *Based on our risk assessment taking into consideration the Group’s operational and financial performance throughout the year and forecast performance, coupled with the higher oil prices, Going Concern was not considered to be a key audit matter in the current year. Materiality Group financial statements as a whole £780,000 (2020: £440,000) based on 1.2% (2020: 1%) of revenue An overview of the scope of our audit Our involvement with component auditors 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 the financial information of these components were principally subject to analytical review procedures performed by the Group audit team and the component auditor. For the work performed by component auditors, 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 component auditors included the following: • • • 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 below) 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. 80 Trinity Exploration & Production plc Independent Auditor’s Report (continued) 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. Key audit matter How the scope of our audit addressed the key audit matter Carrying Value of Oil and Gas assets (refer to Note 1 & 13) The Group’s total producing oil & gas assets at 31 December 2021 were USD45.2m (2020: USD34.2m). This class of asset is the most significant to the statement of financial position. Management 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. There was significant turmoil to the market demand for oil, caused by the Covid 19 pandemic and the wider macro-economic climate (including the Ukraine conflict), which significantly impacted 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: • 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 USD0.1 million (2020: USD1.2 million) on its oil and gas producing assets during the year. The carrying value of producing oil & gas assets is considered a key audit matter as significant judgement and estimates are applied by Management in the determination thereof. Our procedures included the following: We obtained and examined management’s impairment indicator paper to assess the appropriateness of their conclusion that a potential indicator of impairment was present against observable market data, business plans and budgets. We assessed the appropriateness of Management’s determination of each cash generating unit (CGU) in order to determine if the conclusions were in accordance 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 accordance with the applicable accounting standard, our expectations and valuation methodology. We compared the actual performance of the CGUs during 2021 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, reserves and production levels, operating and development costs, tax 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 engineer decline rates, and met with operational management to inform our assessment and understanding of these plans and budgets. We have engaged an external auditor’s expert to check that the latest Reserves and Resources Statement has been prepared on the correct basis. We analysed the production profile on a field / well basis and compared the trend analysis to capital expenditure forecasts to determine if there were any anomalies. We also reviewed year to date production data and made inquiries with Management regarding the status of current development. With the use of our internal valuation experts we reperformed the WACC calculation received from 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. We reviewed the disclosures in the financial statements (Note 1) 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: Based on the procedures performed, we 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. Annual Report & Financial Statements 2021 81 Strategic Report l Governance Financial Accounts Glossary Company Information Key audit matter How the scope of our audit addressed the key audit matter Carrying Value of Exploration & Evaluation assets (refer to Note 1 & 15) Included in the Group’s intangible assets at 31 December 2021 is $30.2m classified as exploration and evaluation (“E&E”) assets predominantly relating to capitalised exploration costs in respect of the Galeota Development. For assets classed as E&E, Management are required to perform an assessment of whether there are any impairment indicators in accordance with IFRS 6 Exploration for the Evaluation of Mineral Resources. When assessing indicators of impairment over the E&E assets a number of factors common to the oil and gas sector are typically taken into consideration, including the validity of the licenses held, the budgeted expenditure on the asset and any information available surrounding the commerciality of the license areas such that the asset may not be recovered in full through development or sale. Management do not consider there to be any indicators of impairment. Management have noted that the Galeota asset is yet to secure financing for development and as a result is yet to be reclassified to a developing asset within PPE. Given the significant degree of judgment involved in assessing E&E assets for impairment indicators we considered this a key audit matter for our audit. Our procedures included the following: We reviewed Management’s indicator assessment and considered whether there were any of the indicators of impairment present in line with criteria set out under IFRS 6. We checked this assessment with reference to results of exploration work performed in the year, future planned expenditure and publicly available information. impairment We verified a sample of capitalised costs and assessed the nature of the costs capitalised under the accounting policy to evaluate whether they meet capitalisation criteria under IFRS 6. We reviewed the licences to determine their existence and checked the Group’s compliance with terms. We reviewed the board minutes during the year and post year-end, as well as the budget for future capital expenditure assessing Management’s intention to continue the Galeota Development We have reviewed the competent person’s report (CPR) report to determine whether commercial viability can be demonstrated, and that sufficient reserves and financial monetization is possible from the Galeota asset. We assessed the CPR’s independence, competence, capabilities and objectivity in producing the reserves report. We challenged management on whether the Galeota asset should be classified as a producing asset and that there are ongoing negotiations regarding financing that are key to development through inspection of board meeting minutes. Key observations: Based on the procedures performed, we found Management’s assessment of indicators of impairment over the carrying value of exploration and evaluation assets to be supportable and the judgements and estimates applied reasonable. We considered it appropriate given that the agreements and negotiations for funding with a third party are still ongoing that the E&E asset was not classified as in development. 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. 82 Trinity Exploration & Production plc Independent Auditor’s Report (continued) 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 2021 2020 2021 2020 Materiality $780,000 $440,000 $270,000 $150,000 Basis for determining materiality 1.2% of Total Total revenue 1% of Total Total revenue 1.3% of Total assets, capped at 35% of Group materiality 1% of Total assets, capped at 35% of Group materiality Rationale for the benchmark applied The benchmark reflects the Group’s Total assets are considered to be the primary focus on generating sustainable growth in revenue through increasing production volume. performance for the users of ost important determinant of the Parent Company’s financial m the financial statements. Materiality was capped at 35% of Group materiality given the assessment of the components’ aggregation risk. Performance materiality $590,000 $330,000 $202,500 $112,500 Basis for determining Performance materiality was set at 75% of the above materiality level. performance materiality This was determined taking into consideration the nature of activities, historic audit adjustments and Management’s attitude towards proposed adjustments. Component materiality Other information We set materiality for each component of the Group based on a percentage of between 35% and 62.75% of Group materiality dependent on the size and our assessment of the risk of material misstatement of that component. Component materiality ranged from $270,000 to $770,000. 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. Reporting threshold We agreed with the Audit Committee that we would report to them all individual audit differences in excess of £15,000 (2020:£8,000). We also agreed to report differences below this threshold that, in our view, warranted reporting on qualitative grounds. 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. Annual Report & Financial Statements 2021 83 Strategic Report l Governance Financial Accounts Glossary Company Information 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: • • 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 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: • • • 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, 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: • • Discussion with the management and those charged with governance; Testing the financial statement disclosures to supporting documentation; 84 Trinity Exploration & Production plc Independent Auditor’s Report (continued) • 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 Involving tax specialists from 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. We considered the significant fraud risk areas to be in relation to revenue recognition and management override of controls. Our procedures included: • • • • • • • Testing the appropriateness of journal entries made through the year by applying specific criteria to detect possible irregularities and fraud and agreeing to supporting documentation; Performing procedures targeted at the revenue recognition risk, including testing specific revenue entries around the year end, to supporting documentation, to check that they had been recorded in the correct period and obtaining third party confirmations where applicable; 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; Assessing 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; Directing the auditors of the significant components to ensure an assessment was performed on the extent of the components compliance with the relevant local and regulatory framework. We reviewed this work and held meetings with relevant internal management and external third parties to form our own opinion on the extent of Group wide compliance; • Directing the component auditors in carrying out the above testing in respect of management override of controls and revenue recognition and reviewing their working papers in this regard; and • We communicated relevant identified laws and regulations and potential fraud risks to all engagement team members, who were all deemed to have appropriate competence and capabilities, to remain alert to any indications of fraud or non-compliance with laws and regulations throughout the audit. 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 23 May 2022 BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127). Annual Report & Financial Statements 2021 Consolidated Statement of Comprehensive Income For the year ended 31 December 2021 85 Strategic Report Governance l Financial Accounts Glossary Company Information (Expressed in United States Dollars) Revenues Crude oil sales Other income Operating Expenses Royalties Production costs Depreciation, Depletion & Amortisation (“DD&A”) General & Administrative (“G&A”) expenses Net reversal/ (Impairment losses) on financial assets (“ILFA”) Share Option Expense (“SOE”) Foreign exchange (“FX”) (loss)/gain Derivative (expense)/income (realised) Fair value (expense)/income derivative instruments (unrealised) Operating Profit before Supplemental Petroleum Taxes (“SPT”) & Property Taxes (“PT”) SPT PT net reversal/(charge) Operating Profit before Covid 19 expenses, Impairment and Exceptional items Covid-19 expenses Impairment Exceptional items Operating Profit Finance income Finance costs Profit Before Income Taxation Income taxation credit/(charge) Profit/(Loss) for the year Other Comprehensive Income/(Expense) Items that may be subsequently reclassified to profit or loss Currency translation Notes 2021 $’000 2020 $’000 66,257 1 44,074 4 66,258 44,078 (19,828) (17,625) (7,428) (7,030) 754 (626) (14) (1,293) (3,149) (11,746) (16,458) (8,174) (5,095) (252) (963) 7 1,302 266 (56,239) (41,113) 10,019 (5,074) 1,516 6,461 (669) (1,316) (113) 4,363 94 (1,475) 2,982 4,744 7,726 2,965 153 (532) 2,586 – (1,218) 43 1,411 108 (1,416) 103 (2,938) (2,835) – (1) 13-15 6 6 7 8 7 9 9 10 Total Comprehensive Income/(Loss) for the year 7,726 (2,836) Earnings per share (expressed in dollars per share) Basic* Diluted* 11 11 0.20 0.18 (0.07) (0.07) * See note 23 regarding restatements as a result of the share capital reorganisation. 86 Trinity Exploration & Production plc Consolidated Statement of Financial Position at 31 December 2021 (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 Capital and Reserves Attributable to Equity Holders Share capital Share premium Share based payment reserve Merger reserves Reverse acquisition reserve Translation reserve Retained earnings/ (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 Derivative financial liabilities Taxation payable Total Liabilities Total Equity and Liabilities Notes 2021 $’000 2020 $’000 13 14 15 16 17 18 19 20 21 22 23 23 24 25 25 14 18 27 28 29 14 27 21 31 49,507 616 30,759 4,021 473 11,530 37,756 1,014 27,349 3,490 253 5,997 96,906 75,859 3,820 10,747 – 18,312 5,267 7,239 266 20,237 32,879 33,009 129,785 108,868 389 – 3,784 – (89,268) (1,650) 143,666 97,692 139,879 14,764 75,467 (89,268) (1,650) (188,332) 56,921 48,552 97 2,025 55,690 465 2,611 45,405 57,812 48,481 8,814 2,700 609 46 2,883 – 15,052 7,803 2,700 614 516 – 202 11,835 72,864 60,316 129,785 108,868 The financial statements on pages 85 to 133 were authorised for issue by the Board of Directors on 23 May 2022 and were signed on its behalf by: Jeremy Bridglalsingh Director 23 May 2022 Annual Report & Financial Statements 2021 Company Statement of Financial Position at 31 December 2021 (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 Retained earnings/ (accumulated losses) Total Equity Current Liabilities Trade and other payables Intercompany Derivative financial liabilities Total Liabilities Total Equity and Liabilities 87 Strategic Report Governance l Financial Accounts Glossary Company Information Notes 2021 $’000 2020 $’000 12 60,347 60,021 20 20 21 22 23 23 28 30 21 200 3,372 – 3,108 6,680 424 4,318 266 4,317 9,325 67,027 69,346 389 – 4,569 6,552 51,526 97,692 139,879 4,064 56,652 (229,422) 63,036 68,865 327 781 2,883 3,991 3,991 481 – – 481 481 67,027 69,346 The Company has elected to take the exemption under section 408 of the Companies Act 2006, to not present its own Statement of Comprehensive Income. The net loss for the parent company was $6.4 million (2020: $0.1 million). The financial statements on pages 85 to 133 were authorised for issue by the Board of Directors on 23 May 2022 and were signed on its behalf by: Jeremy Bridglalsingh Director 23 May 2022 Trinity Exploration & Production plc Registered Number: 07535869 88 Trinity Exploration & Production plc Consolidated Statement of Changes in Equity for the year ended 31 December 2021 Share Retained Based Reverse Earnings/ Share Share Payment Acquisition Merger Translation Accumulated Total Capital Premium Reserve Reserve Reserves Reserve Losses Equity Year ended 31 December 2020 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 At 1 January 2020 97,692 139,879 14,328 (89,268) 75,467 (1,649) (186,024) 50,425 LTIPs exercised (Note 23) – – (527) – – – 527 – Share based payment expense (Note 24) – – 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 97,692 139,879 14,764 (89,268) 75,467 (1,650) (188,332) 48,552 Year ended 31 December 2021 At 1 January 2021 97,692 139,879 14,764 (89,268) 75,467 (1,650) (188,332) 48,552 Capital reorganisation (Note 23 & 24) (97,303) (139,879) (11,485) – (75,467) – 324,134 – LTIPs exercised 1 – – – – – – 47 47 Share based payment expense (Note 24) – – 505 – – – 91 596 Profit for the year – – – – – – 7,726 7,726 Total comprehensive income for the year – – – – – – 7,726 7,726 At 31 December 2021 389 – 3,784 (89,268) – (1,650) 143,666 56,921 1 As described in the notes to the consolidated financial statements, in 2020 the Company issued 4,745,057 ordinary shares (pre share consolidation) to certain employees on exercise of LTIPs at less than the nominal value in contravention of S580 of the Companies Act 2006. In 2021, on becoming aware of the issue, the Company sought remedial advice and corrected this. Annual Report & Financial Statements 2021 Company Statement of Changes in Equity for the year 31 December 2021 89 Strategic Report Governance l Financial Accounts Glossary Company Information Share Based Share Share Payment Merger Accumulated Total Capital Premium Reserve Reserves Losses Equity Year ended 31 December 2020 $’000 $’000 $’000 $’000 $’000 $’000 At 1 January 2020 97,692 139,879 3,628 56,652 (229,833) 68,018 LTIPs exercised (Note 23) – – (527) – 527 – Share based payment expense (Note 24) – – 963 – – 963 Total comprehensive loss for the year – – – – (116) (116) At 31 December 2020 97,692 139,879 4,064 56,652 (229,422) 68,865 Year ended 31 December 2021 At 1 January 2020 97,692 139,879 4,064 56,652 (229,422) 68,865 Capital Reorganisation (Note 23 & 24) (97,303) (139,879) – (50,100) 287,282 – Share based payment charge (Note 24) – – 505 – – 505 LTIPs exercised 1 – – – – 47 47 Total comprehensive loss for the year – – – – (6,381) (6,381) At 31 December 2021 389 – 4,569 6,552 51,526 63,036 1 As described in the notes to the consolidated financial statements, in 2020 the Company issued 4,745,057 ordinary shares (pre share consolidation) to certain employees on exercise of LTIPs at less than the nominal value in contravention of S580 of the Companies Act 2006. In 2021, on becoming aware of the issue, the Company sought remedial advice and corrected this. 90 Trinity Exploration & Production plc Consolidated Statement of Cash Flows for the year 31 December 2021 (Expressed in United States Dollars) Operating Activities Profit 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 Net reversal/(Impairment loss) on financial assets Reversal of impairment Inventory impairment Impairment of property, plant and equipment Fair value loss on derivative financial instruments Other non-cash items Changes In Working Capital Inventories Trade and other receivables Trade and other payables Income taxation paid Net Cash Inflow from Operating Activities Notes 2021 $’000 2020 $’000 2,982 103 9 9 27 24 13-15 13 13 19 16,20,21 21,27,28 (39) 254 (94) 1,222 626 7,428 – (754) – 1,220 96 3,149 47 83 195 (108) 1,221 963 8,174 2 515 (126) – 1,121 (266) – 16,137 11,877 228 (3,019) 909 (1,882) (124) 1,556 (1,985) (553) (1,700) (1,028) 12,555 10,296 Investing Activities Purchase of Exploration and Evaluation (“E&E”) assets Purchase of computer software and investment in research & development Purchase of property, plant and equipment Performance bond released Net Cash Outflow from Investing Activities 15 15 13 (3,262) (401) (9,957) (220) (1,062) – (4,979) – (13,840) (6,041) Financing Activities Finance income Finance cost Principal paid on lease liability Interest paid on lease liability Bank overdraft Net Cash (Outflow)/Inflow from Financing Activities 94 (153) (480) (101) – (640) 108 (55) (441) (140) 2,700 2,172 (Decrease)/Increase in Cash and Cash Equivalents (1,925) 6,427 Cash and Cash Equivalents At beginning of year Effects of foreign exchange rates differences on cash (Decrease)/increase in Cash and Cash equivalents 20,237 19 (1,944) 13,810 (14) 6,441 At end of year 22 18,312 20,237 Annual Report & Financial Statements 2021 Company Statement of Cash Flows for the year 31 December 2021 (Expressed in United States Dollars) Operating Activities Loss before taxation Adjustments for: Finance income Share based payment charge Net reversal of impairment loss on financial assets Fair value loss on derivative financial instruments Other non-cash items Changes In Working Capital Trade and other receivables Trade and other payables 91 Strategic Report Governance l Financial Accounts Glossary Company Information Note 2021 $’000 2020 $’000 (6,381) (152) 178 (28) 3,149 (13) (3,247) 1,537 354 1,891 (116) (126) 248 – – – 6 (1,074) (27) (1,101) Taxation Paid – – Net Cash Outflow from Operating Activities (1,356) (1,095) Financing Activities Finance income Net Cash Inflow from Financing Activities 147 147 126 126 Decrease In Cash and Cash Equivalents (1,209) (969) Cash and Cash Equivalents At beginning of year Decrease Cash and Cash equivalents At End of Year 4,317 (1,209) 22 3,108 5,286 (969) 4,317 92 Trinity Exploration & Production plc Notes to the Consolidated Financial Statements 31 December 2021 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 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 and Company’s financial statements have been prepared and approved by the Board of Directors (“Board”) in accordance with international accounting standards as adopted in the United Kingdom. The preparation of the consolidated financial statements in compliance 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 $6.4 million (2020: $0.1 million loss) driven mainly by the derivative expenses incurred in 2021. Basis of measurement This consolidated financial statements has been prepared under the historical cost convention, except certain financial assets and liabilities (including derivative financial instruments) 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. 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 for the next twelve months. For the past twelve months the Group continued to operate with no significant effects nor interruptions from the presence of the Covid 19 pandemic. However, the Board have continued to measure the 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 operating environment and the potential impact of the volatility of the oil price. Oil prices have trended in an upward direction throughout 2021 and continued to increase in 2022 well over US$100 as at the date of this annual report. Oil prices are forecast to remain at elevated levels over the next 12 months, which will continue to positively impact the Group’s operations. The Group started 2022 with a strong operating and financial position; 2021 average sales of 3,006 barrels of oil per day (“bopd”), (2020 3,226 bopd), and net cash of US$15.6 million (2020: US$17.5 million) consisting of cash and short term investments of US$18.3 million (2020: US$20.2 million) and an overdraft facility of US$2.7 million drawn (2020: US$2.7 million) as at 31 December 2021. In making their going concern assessment, the Board considered a cash flow forecast based on expected future oil prices, production volumes and discretionary expenditure reductions including downside scenarios. The base case forecast was prepared with consideration of the following: • • • Future oil prices assumed to be in line with the forward curve prevailing as at January 2022, with an average realised oil price of US$68.7/bbl in the period to December 2022. The forward price curve applied in the cash flow forecast starts at US$70.6/bbl in January 2022, fluctuating each month down to US$65.8/bbl in December 2022 through to US$63.4/bbl in June 2023 Average forecast production for the year to December 2022 of 3,173 bopd and for the six months to June 2023 of 3,133 bopd with production being maintained by RCPs, WOs and swabbing activities and no new drilling; No SPT incurred on the onshore assets in 2022, as the SPT threshold for small onshore operators was increased from US$50 to US$75.0/bbl for 2022; Annual Report & Financial Statements 2021 93 Strategic Report Governance l Financial Accounts Glossary Company Information • Trinity continuing to progress various growth and business development opportunities; and derivative instruments in place to protect a portion of cashflows against declining oil prices over the forecast period. As at the current date, Management considers this is a reasonable base scenario, reflecting the outlook of the current production profile and costs. As oil prices have trended upwards our base scenario will continue to be strengthened. 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: • • the effect of reductions in oil prices as low as $40.0/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 10%, 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. On 24 February 2022, Russian forces invaded Ukraine, causing wide-ranging economic sanctions to be applied against the Russian regime by the US, EU and other major economies. The event caused both Brent and WTI oil prices to soar, peaking well above US$100 per bbl in March 2022. The increased oil prices have impacted the Group in several ways. These include, positively impacted the Group’s crude oil revenue, negatively impacted derivative expenses, increased inflationary impacts and some challenges with supply chain including higher freight costs and delays in receiving shipments. Overall, whilst there has been no significant adverse impact to the Group, management continues to closely monitor the event’s impact as it unfolds. 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 market conditions continue 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 2021: New standards impacting the Group that have been adopted in the annual financial statements for the year ended 31 December 2021 are: • • Covid 19-Related Rent Concessions beyond 30 June 2021 (Amendments to IFRS 16) On 31 March 2021, the IASB issued another amendment to IFRS 16: Covid-19-Related Rent Concessions beyond 30 June 2021, which extended the above practical expedient to reductions in lease payments that were originally due on or before 30 June 2022. This amendment is effective for annual periods beginning on or after 1 April 2021 with earlier application permitted. Interest Rate Benchmark Reform – IBOR ‘phase 2’ (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16) The amendments provide relief to Group in respect of certain loans whose contractual terms are affected by interest benchmark reform. The application of these standards has had no impact on the disclosures, or the amounts recognised in the Group’s consolidated financial statements. (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 (and, in the case of IFRS 17, 1 January 2023): • Onerous Contracts – Cost of Fulfilling a Contract (Amendments to IAS 37); • Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16); 94 Trinity Exploration & Production plc Notes to the Consolidated Financial Statements (continued) 1 Background and Summary of significant accounting policies (continued) • • • • • Annual Improvements to IFRS Standards 2018-2020 (Amendments to IFRS 1, IFRS 9, IFRS 16 and IAS 41); References to Conceptual Framework (Amendments to IFRS 3). Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2); Definition of Accounting Estimates (Amendments to IAS 8); Deferred Tax Related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12); and IFRS 17 Insurance Contracts (effective 1 January 2023) - In June 2020, the IASB issued amendments to IFRS 17, including a deferral of its effective date to 1 January 2023. While no formal assessment has been performed, the Group does not expect any other standards issued by the IASB, but not yet effective, to have a material impact on the Group. Basis of consolidation The Consolidated Financial Statements comprise the financial statements of the subsidiaries listed in Note 12. 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: • • • 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. Employee Benefit Trust On 15 November 2021, the Group established The Trinity Exploration and Production plc Employee Benefit Trust, which is consolidated in accordance with the principles in Note 1 – Basis of consolidation. When the options are exercised, trust transfers the appropriate number of shares to the employee. The proceeds received, net of any directly attributable transaction costs, are credited directly to equity. Annual Report & Financial Statements 2021 95 Strategic Report Governance l Financial Accounts Glossary Company Information 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 USD 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 consolidated 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: Average rate TTD= $/£ Closing rate TTD= $/£ (b) Transactions and balances $ 6.765 6.763 2021 £ 9.006 9.151 $ 6.758 6.761 2020 £ 8.646 9.213 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 the consolidated Statement of Comprehensive Income. 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 the consolidated Statement of Comprehensive Income 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: • • • 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 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 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”. 96 Trinity Exploration & Production plc Notes to the Consolidated Financial Statements (continued) 1 Background and Summary of significant accounting policies (continued) 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. E&E assets are reclassified from E&E when evaluation procedures have been completed including technical feasibility and commercial viability. E&E assets for which commercially viable reserves have been identified are reclassified to development assets (refer to E&E expenditure below). 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: • Licence and property acquisition costs Exploration and property leasehold acquisition costs are capitalised within E&E assets. • 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. 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&E 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: • The period for which the Group has the right to explore in the specific area has lapsed. • Whether substantive expenditure on further E&E in the specific area is budgeted or planned. • 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 • 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. Annual Report & Financial Statements 2021 97 Strategic Report Governance l Financial Accounts Glossary Company Information 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. Transactions involving the purchases of an individual field interest, or a group of field interests, that at a minimum includes an input and a substantive process that together significantly contribute to the ability to create output are classified as a business acquisition. The acquisition method of accounting is used to account for all business combinations. Alternatively, if these transactions do not meet this definition of a business combination they are classified as asset acquisitions. Assets are recognised at its fair value and subsequently depreciated over its useful life or reduced using the unit of production method. 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 (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. 98 Trinity Exploration & Production plc Notes to the Consolidated Financial Statements (continued) 1 Background and Summary of significant accounting policies (continued) Property, plant and equipment (continued) (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 Plant and equipment Other 20 years 4 years 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. 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. Annual Report & Financial Statements 2021 99 Strategic Report Governance l Financial Accounts Glossary Company Information 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. 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. 100 Trinity Exploration & Production plc Notes to the Consolidated Financial Statements (continued) 1 Background and Summary of significant accounting policies (continued) 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 had been recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. Assessments were 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 were industrial with building rates at 6% and industrial without building rates at 3%. Where PT accrued for past years is considered unlikely to be charged and paid, the accrual is reversed in the current year. Refer to note 3 (f) for further details. 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”), 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. Leases All leases are accounted for by recognising a right-of-use asset and a lease liability except for: • • 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. Annual Report & Financial Statements 2021 101 Strategic Report Governance l Financial Accounts Glossary Company Information 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. The lease term can be described as the non-cancellable period of the lease plus periods covered by an option to extend or an option to terminate if the lessee is reasonably certain to exercise the extension option or not exercise the termination option. In 2021 the Group revised its estimates due to an addition of two new leased vehicles in December 2021. As a result, there was a revision to the carrying amount of the lease liability to reflect the payments to be made over the revised term, which was discounted using the same incremental 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. 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 consolidated 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. Royalty expense Royalty expense is recognized on an accrual basis in accordance with the substance of the relevant agreement. There are two types of royalties incurred, government royalties and overriding royalties in accordance with the various agreements held and are calculated based on the percentage rate multiplied by the barrels of oil produced. Government royalties are paid to the Government of Trinidad and Tobago on a quarterly and monthly basis based on the terms of the various agreements. 102 Trinity Exploration & Production plc Notes to the Consolidated Financial Statements (continued) 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 currency (“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. Foreign currency 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% (2020: 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% (2020: 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/ (2020: 10%) 10% weakening of the US Dollar/ (2020: 10%) (ii) Price risk 2021 $’000 2020 $’000 (247) 247 (168) 168 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% (2020: 20%) increase and decrease in realised oil prices. 20% (2020 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%. Revenue 20% increase in price/ (2020: 20%) 20% decrease in price/ (2020: 20%) 2021 $’000 2020 $’000 13,168 (13,168) 11,702 (11,702) The Group implemented hedge options 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 2021, there were no loan commitments to attract interest rates on foreign currency- denominated borrowings, (2020: nil). During 2021 there was a bank overdraft facility which incurred $0.1 million interest (2020: $0.1 million). Annual Report & Financial Statements 2021 103 Strategic Report Governance l Financial Accounts Glossary Company Information (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, experience and the institution’s credit rating to minimise risk. Our financial institutions credit rating in Trinidad and the UK are BBB- and A+ respectively. (Standards and Poor 2021) 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 payments were made during the stipulated time frame. However, ECL was also calculated on Joint interest billings outstanding, which resulted in a provision of $0.1 million (2020: $0.9 million). Consequently, there was a net reversal of $0.8 million in the current period to reflect the decrease in the impairment provision. 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 (2020: $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 $18.3 million (2020: $20.2 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. Group At 31 December 2021 Non-derivatives Trade and other payables Bank overdraft Lease liabilities Less than 1 year $'000 1 to 2 years $'000 2 to 5 years $'000 Total $'000 8,814 2,700 609 12,123 – – 50 50 – – 47 47 8,814 2,700 706 12,220 At 31 December 2020 $'000 $'000 $'000 $'000 Non-derivatives Trade and other payables Bank overdraft Lease liabilities 7,803 2,700 614 11,117 – – 442 442 – – 7,803 2,700 23 1,079 23 11,582 104 Trinity Exploration & Production plc Notes to the Consolidated Financial Statements (continued) 2 Financial Risk Management (continued) Company At 31 December 2021 Non-derivatives Trade and other payables Intercompany At 31 December 2020 Non-derivatives Trade and other payables (d) Capital risk Less than 1 year $'000 327 781 1,108 Total $'000 327 781 1,108 $'000 $'000 481 481 481 481 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 Cash/(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 1.25:1) were met. Total capital is calculated as ‘equity’ as shown in the Consolidated Statement Of Financial position plus Net Debt/(Net Cash). Net cash Total equity Total capital Gearing ratio (e) Fair value estimation 2021 $’000 (15,612) 56,921 2020 $’000 (17,537) 48,552 41,309 31,015 (37.8)% (56.5)% The Group and Company have classified financial instruments into the three levels prescribed under the accounting standards. • • • 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 21 for details. Annual Report & Financial Statements 2021 105 Strategic Report Governance l Financial Accounts Glossary Company Information 3. Critical Accounting Estimates and Judgements The preparation of the consolidated 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 to be made by Management which are based on key estimates of future cost, production volumes and price and are 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 within three years using approved business plans and budgets for the specific subsidiaries in which the DTA arose. See note 18. (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 27: Provision for other liabilities. Risk free rates Inflation rate Bands (years) 2021 2020 8-12 13-18 19-25 1.80% 1.96% 2.20% 2.40% 3.14% 3.17% 2.42% 2.00% The following table details the Group’s sensitivity to a 1% (2020: 1%) increase and decrease in discount and inflation rates. 1% (2020: 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 2021 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 Consolidated Statement of Financial Position: Obligation 2021 $’000 Consolidated Statement of Comprehensive: Income/Expense 2021 $’000 (8,917) 10,963 10,813 (8,973) 262 (412) 225 (186) 106 Trinity Exploration & Production plc Notes to the Consolidated Financial Statements (continued) 3. Critical Accounting Estimates and Judgements (continued) (c) Estimation of reserves All reserve estimates involve some degree of uncertainty, which depends chiefly on the amount of reliable geological and engineering data available at the time of the estimate. Generally, reserve estimates are revised as additional data 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 2021 the Group estimated its own commercial reserves, guided by international Petroleum Resource Management System (PRMS) application guidelines, based on technical 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 notes 13 and 15. Depreciation and amortisation charges in the Statement of Comprehensive Income are applied 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 notes 13 and 15. 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 27. 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 18. As at 31 December 2021 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 2021 an impairment charge of $0.1 million was recognised on the Group’s property, plant and equipment (2020: $1.1 million) see Note 13. The impairment charge resulted in the carrying amount of the respective CGUs being written down to their recoverable amount. Oil & Gas Assets $0.1 million (2020: $1.1 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. Annual Report & Financial Statements 2021 107 Strategic Report Governance l Financial Accounts Glossary Company Information 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. 2022 2023 2024 2025 2026 2027 Realised price 65.0 61.0 58.6 57.0 56.1 55.5 If the price deck used in the impairment calculation had been 10% lower than Management’s estimates at 31 December 2021, the Group would have a $0.6 million increase on impairment of Oil & Gas Assets (2020: $1.0 million increase). If the price deck used in the impairment calculation had been 10% higher than Management’s estimates at 31 December 2021, the Group would have a $0.1 million decrease on impairment of the Oil & Gas Assets (2020: $0.6 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 2021, Management’s estimate of the Group’s cost of capital was 13% (2020:12%). 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 no change to the impairment position for 2021 (2020: $0.2 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 no change to the impairment position for 2021 (2020: $0.2 million increase). (e) Impairment of intangible E&E assets In estimating the recoverability of exploration assets, 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 2021 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 reversal of the prior period liability PT is assessed on property owned by the Group in Trinidad and Tobago governed by the Property Tax Act 2009 and later Property Tax 2018 amendment of Trinidad and Tobago. The calculation of PT is described in note 1 Background and Summary of significant accounting policies. At the end of 2020 PT accrued for the period 2018 to 2020 within Trade and Other Payables was $1.5 million (2020: $1.0 million). PT has been accrued using the guidance provided by the legislation noted above, as the administration arrangements of the PT under the valuation of land act is not in place and the actual method for calculating PT is therefore unavailable. The Property Tax Act and subsequent Amendment to the Act requires the Board of Inland Revenue to issue a Notice of Assessment on or before 31 March in each year. To date, none has been issued for any of the years 2018 to 2020 (nor for 2021). Based on public pronouncements the intention was to complete the assessment for residential properties by 2021 after which other categories can be assessed. Given the passage of time, it is remote that retroactive application will be implemented despite waivers being issued by the government for periods 2010- 2017 but not for the period 2018-2021. Whilst there remains some ambiguity within the interpretation of the law, Industry practice within Trinidad means that it is appropriate to reverse the accrual. The Group has considered whether a contingent liability exists, however given the judgement is that the law does not allow for retroactive application there is no liability arising from a past event. A liability will arise when the valuation roll has been completed and the Notice of Assessment given. The Group will continue to monitor developments in the Property tax law and reassess this at each reporting period. As such, the Group has agreed reverse the PT accruals previously recognized ($1.5 million) for 2018 to 2020 and not recognize any PT liability for the year ended 31 December 2021. 108 Trinity Exploration & Production plc Notes to the Consolidated Financial Statements (continued) (g) PS-4 Asset Acquisition The Group completed the acquisition of the Block on 1 December 2021. IFRS 3 Business Combination, requires an assessment to be performed to determine whether the acquisition should be accounted for as a business combination or asset acquisition. To be considered a business acquisition, an acquired set must include an input and a substantive process that together significantly contribute to the creation of an output otherwise the acquisition is considered an asset acquisition. An assessment was performed and concluded that although the acquisition contains outputs, the vast majority of its value resides in the proved undeveloped reserves which does not contain any material input or output. As such, it was concluded the acquisition did not meet the requirements to be classified as a business combination and as such the acquisition was treated as an asset acquisition. (h) 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 24 for details. 4 Segment Information Management has determined the operating segments which are Onshore, West Coast and East Coast which are 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 now comprises the Chief Executive Officer, Finance Director, 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, Covid-19 expenses and Exceptional Items Operating profit before impairment, Covid-19 expenses and exceptional items is stated after taking the following items into account: DD&A (Note 13) Depreciation on ROU (Note 14) Amortisation of computer software (Note 15) Employee costs (Note 34) Inventory recognised as expense, charged to operating expenses 2021 $’000 2020 $’000 6,756 505 166 9,707 322 7,566 502 106 7,587 330 Annual Report & Financial Statements 2021 109 Strategic Report Governance l Financial Accounts Glossary Company Information 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 and Barbados 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 Professional services: Tax advice 2021 $’000 2020 $’000 161 84 16 32 293 136 84 13 29 262 2021 $’000 2020 $’000 1 – All fees in 2021 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. The professional fees relates to tax services rendered for advice on tax losses. 6 Derivative (expenses)/income The net (loss)/ gain in fair value is recognised in the Consolidated Statement of Comprehensive Income during the year: Net derivative (expense)/income (realised) FV of derivative financial instruments (unrealised) 31 December 2021 $’000 31 December 2020 $’000 (1,293) (3,149) (4,442) 1,302 266 1,568 110 Trinity Exploration & Production plc Notes to the Consolidated Financial Statements (continued) 7 Exceptional Items and Covid-19 expenses 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 consolidated financial statements are highlighted below. Reversal of Impairment on equipment Fees relating to corporate restructuring advice Exceptional Expense/(Income) Exceptional items 2021: 2021 $’000 – 113 113 2020 $’000 (126) 83 (43) • Fees relating to corporate restructuring advice: $0.1 million charge in relation to professional advice on the capital reorganisation Covid-19 expenses: Covid-19 expense 2021 $’000 669 669 2020 $’000 – – • Covid-19 expense: $0.7 million charge in relation to Covid-19 costs incurred by the Group during 2021. Covid-19 expense of $0.1 million was previously recognised in General and Administration expense in the 2020 comparative. 8 Impairment Impairment of Inventory Impairment of property, plant and equipment Impairment expense 31 December 2021 $’000 31 December 2020 $’000 1,220 96 1,316 – 1,218 1,218 • • Impairment of inventory – $1.2 million charge in relation to inventory impairment. During the year Management engaged certified persons to conduct a review of high value slow moving inventory items which resulted in the above impairment. In 2020 there was no impairment on inventory items. Impairment of property, plant and equipment - $0.1 million charge in relation to property, plant and equipment. In 2020 and 2021 the impairment of property, plant and equipment related to charges for impairment losses on cash generating units (refer to Note 3(d)). Annual Report & Financial Statements 2021 9 Finance income and costs Recognised in the Consolidated Statement of Comprehensive Income Finance income Interest Income Finance costs Decommissioning – Unwinding of discount (Note 27) Interest on Leases (Note 14) Interest and other expenses on overdraft 10 Income Taxation Current tax Petroleum profits tax Unemployment levy Deferred Tax Current year Movement in asset due to tax losses (recognised)/derecognised (Note 18) Movement in liability due to accelerated tax depreciation (Note 18) Income tax (credit)/ expense 111 Strategic Report Governance l Financial Accounts Glossary Company Information 2021 $’000 2020 $’000 94 108 2021 $’000 2020 $’000 (1,222) (101) (152) (1,475) 2021 $’000 982 393 (1,221) (140) (55) (1,416) 2020 $’000 817 333 (5,533) (586) 3,365 (1,577) (4,744) 2,938 The Group’s effective tax rate varies from the statutory rate for UK companies of 19% (2020:19%) as a result of the differences shown below: Profit 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 2021 $’000 2,982 3,441 9,037 (2,595) (9,087) (5,533) (7) 2020 $’000 103 741 2,163 (2,187) (1,389) 3,365 245 Tax (credit)/ charge (4,744) 2,938 Corporate income tax is calculated at 19% (2020: 19%) of the assessable profit for the year for the UK parent company, 55% for the operating subsidiaries in Trinidad and Tobago (2020: 55%) and 30% (2020: 30%) for the corporate subsidiaries in Trinidad and Tobago. Taxation losses at 31 December 2021 available for set off against future taxable profits amounts to approximately $234.6 million (2020: $237.2 million), with tax losses generated of $7.4 million (2020: $1.7 million and tax losses utilised $10.0 million (2020: $5.2 million) during the year. 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”). Tax losses carried forward by companies engaged in the petroleum production business in Trinidad and Tobago are restricted to set off in a year of income 75% of the otherwise chargeable profits. 112 Trinity Exploration & Production plc Notes to the Consolidated Financial Statements (continued) 11 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 2021 Basic Diluted Year ended 31 December 2020 Basic* Diluted* Weighted Average Number Of Shares ’000’ 38,879 42,260 Profit/(loss) $’000 7,726 7,726 Earnings Per Share $ 0.20 0.18 (2,835) (2,835) 38,623 38,623 (0.07) (0.07) Impact of dilutive ordinary shares: 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 24) 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. * Restatement Comparative figures have been recalculated to conform with changes in presentation in the current year. The comparative figures were recalculated to show the impact on EPS resulting from the share consolidation which reduced the number of ordinary shares from 388,794,303 to 38,879,430 (refer to note 23). The impact of the restatement is summarised below: Year ended 31 December 2020 Basic (restated) Diluted (restated) Basic Diluted Weighted Average Number Of Shares ’000’ 38,623 38,623 386,233 386,233 Profit/(loss) $’000 (2,835) (2,835) (2,835) (2,835) Earnings Per Share $ (0.07) (0.07) (0.01) (0.01) 12 Investment In Subsidiaries Company Opening balance Share based payment reserve revision Share based payment Closing balance 2021 $’000 60,021 (121) 447 2020 $’000 59,306 – 715 60,347 60,021 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. In addition there was a revision to the Share based payment reserves as it relates to employees that no longer work for the Group. Annual Report & Financial Statements 2021 113 Strategic Report Governance l Financial Accounts Glossary Company Information Listing of Subsidiaries The Group’s subsidiaries at 31 December 2021 are listed below: Name Bayfield Energy Limited Registered Address/ Country of Incorporation c/o Pinsent Masons LLP, 1 Park Row, Leeds, LS1 5AB, UK Nature of Business Holding Company % Shares held by the Group 99.99998% Holding Company 100% Trinity Exploration & Production (UK) Limited 13 Queen’s Road, Aberdeen, AB15 4YL, UK Holding Company Trinity Exploration and Production Services (UK) Limited c/o Pinsent Masons LLP, 1 Park Row, Leeds, LS1 5AB, UK Service Company Bayfield Energy do Brasil Ltda Av. Presidente Vargas 509, Rio de Janeiro, 20071-003, Brazil Dormant Holding Company Trinity Exploration & Production (Barbados) Limited Trinity Exploration and Production (Trinidad and Tobago) Limited Ground Floor, One Welches, Welches, St. Thomas BB22025, Barbados 3rd Floor Southern Supplies Limited Building, 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 Trinidad address Service Company Trinity Midstream Limited Trinidad address Trinidad address Oil and Gas Oil and Gas Trinity Exploration and Production (Erin 1) Limited Trinity Exploration and Production (Erin 2) Limited Trinity Exploration and Production (Forest 1) Limited Trinity Exploration and Production (Forest 2) Limited Trinity Exploration and Production (Forest 3) Limited Trinity Renewable Resources Limited Trinidad address Oil and Gas Trinidad address Oil and Gas Trinidad address Oil and Gas Trinidad address Oil and Gas Trinidad address Oil and Gas Trinity Exploration and Production plc Employee Benefit Trust c/o Pinsent Masons LLP, 1 Park Row, Leeds, LS1 5AB, UK Employee Benefit Trust 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 114 Trinity Exploration & Production plc Notes to the Consolidated Financial Statements (continued) 13 Property, Plant and Equipment Year ended 31 December 2021 Opening net book amount at 1 January 2021 Additions Adjustment to decommissioning estimate (Note 27) Impairment charge 1 DD&A charge for year Translation differences Closing net book amount at 31 December 2021 At 31 December 2021 Cost Accumulated DD&A and impairment Plant & Equipment $'000 Leasehold & Buildings $'000 2,028 1,328 – – (437) – 1,481 74 – – (167) – Oil & Gas Assets $'000 34,247 8,794 8,407 (96) (6,153) 1 2,919 1,388 45,200 Other $'000 – – – – – – – Total $'000 37,756 10,196 8,407 (96) (6,757) 1 49,507 16,222 (13,303) 3,412 (2,024) 318,058 (272,858) 336 (336) 338,028 (288,521) Closing net book amount 2,919 1,388 45,200 – 49,507 Year ended 31 December 2020 Opening net book amount at 1 January 2020 Disposals Additions Adjustment to decommissioning estimate (Note 27) Impairment reversal equipment Impairment charge 1 DD&A charge for year Closing net book amount at 31 December 2020 At 31 December 2020 Cost Accumulated DD&A and impairment Plant & Equipment $'000 Leasehold & Buildings $'000 Oil & Gas Assets $'000 Other $'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 – – – – – – – – Total $'000 42,380 (2) 4,091 (152) 126 (1,121) (7,566) 37,756 14,894 (12,866) 3,338 (1,857) 300,857 (266,610) 336 (336) 319,425 (281,669) Closing net book amount 2,028 1,481 34,247 – 37,756 1 An impairment loss of $0.1 million (2020: $1.1 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. Annual Report & Financial Statements 2021 115 Strategic Report Governance l Financial Accounts Glossary Company Information 14 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 2021 $’000 31 December 2020 $’000 616 1,014 609 97 706 614 465 1,079 The ROU assets relate to motor vehicles, office building, rental property 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 Included in DD&A – ROU Depreciation Interest expense (including finance cost) 2021 $’000 (505) (101) 2020 $’000 (502) (140) The total cash outflow for leases in 2021 was $0.6 million (2020: $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. 116 Trinity Exploration & Production plc Notes to the Consolidated Financial Statements (continued) 15 Intangible Assets The carrying amounts and changes in the year are as follows: Year ended 31 December 2021 Opening net book amount at 1 January 2021 Additions Amortisation charge for year Closing net book amount at 31 December 2021 At 31 December 2021 Cost Accumulated amortisation Closing net book amount 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 Exploration and Evaluation assets $'000 Computer software $'000 Research and Development $'000 27,042 3,175 – 30,217 30,217 – 30,217 307 355 (166) 496 877 (381) 496 – 46 – 46 46 – 46 Exploration and Evaluation assets $'000 Computer software $'000 Total $'000 27,349 3,576 (166) 30,759 31,140 (381) 30,759 Total $'000 26,255 1,200 (106) 25,987 1,055 - 27,042 27,042 - 268 145 (106) 307 27,349 520 (213) 27,562 (213) 27,042 307 27,349 • • • E&E assets: Represents the cost of the TGAL 1 exploration well and further Galeota E&E costs. The Group tests whether E&E assets have suffered any impairment triggers on an annual basis and there were no impairment triggers identified in 2021 (2020: nil). In November 2021, the Group received approval for the Field Development Plan (FDP) for the Galeota Asset Development (GAD) from the MEEI. This approval confirmed the technical feasibility of the asset. To date, the Group is in the process of determining a funding plan to achieve commercial viability. As such, the Galeota E&E asset continues to be classified as an E&E asset until both the technical feasibility and commercial viability requirements are met. Computer Software: In 2021, costs incurred in connection with the acquisition of software. Research and Development: In 2021, costs incurred in connection with various initiatives reducing carbon emissions. 16 Abandonment fund At 1 January Additions At 31 December 2021 $’000 3,490 531 4,021 2020 $’000 3,378 112 3,490 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. Annual Report & Financial Statements 2021 17 Performance bond At 1 January and 31 December 117 Strategic Report Governance l Financial Accounts Glossary Company Information 2021 $’000 473 2020 $’000 253 In June 2021 the Group’s Lease Operatorship Assets (“LOA”) licences were renewed with Heritage for ten years effective 1 January 2021 with the exception of the Fyzabad (FZ-2) licence which was extended for two years effective 1 January 2021. New Performance Bonds for each of the LOA were put in place totalling $0.47 million at a bond fee of 1.75% executed with First Citizens Bank Trinidad and Tobago Limited and effective until 31 December 2030. These funds have been restricted to fixed deposits for the period of the respective LOA licences at varying rates of interest. 18 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: DTA Acquisition Tax losses recognised Tax losses derecognised DTL Accelerated tax depreciation and non-current asset impairment Acquisitions Fair value uplift 2021 $’000 2020 $’000 (5,130) (4,447) (6,400) (1,550) 2,025 2,611 (9,505) (3,386) 2021 $’000 (3,386) (6,041) (78) 2020 $’000 (5,174) 1,879 (91) (9,505) (3,386) 2019 $’000 Movement $’000 2020 $’000 Movement $’000 2021 $’000 (33,436) (39,476) 63,550 (9,362) – – 3,365 3,365 (33,436) (39,476) 66,915 – – (5,533) (33,436) (39,476) 61,382 (5,997) (5,533) (11,530) 2019 $’000 Movement $’000 2020 $’000 Movement $’000 2021 $’000 (17,380) 19,580 1,988 4,188 (1,487) – (90) (1,577) (18,867) 19,580 1,898 2,611 (508) – (78) (586) (19,375) 19,580 1,820 2,025 118 Trinity Exploration & Production plc Notes to the Consolidated Financial Statements (continued) 18 Deferred Income Taxation (continued) 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. A DTA of $5.5 million have been recognised during 2021 (2020: $3.4 million was derecognised) based on future taxable profits. The Group has unrecognised deferred tax assets amounting to $94.3 million which have no expiry date. DTL have decreased by $0.6 million as the temporary difference between the accounting values of property, plant and equipment and intangible assets and tax values decreased compared to 2020 year end • • 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 2021 the Group had gross tax losses carried forward of $234.6 million (2020: $237.2 million) represented by corporate tax losses in the UK of $23.7 million (2020: $16.6 million) and PPT and Corporate tax losses in Trinidad and Tobago of $210.9 million (2020: $220.6 million). In the UK corporation tax losses may be carried forward indefinitely. Similarly, in Trinidad and Tobago PPT and corporate tax losses may be carried forward indefinitely to reduce the taxes in future years. However, as of 1 January 2020, PPT losses can only be utilised to shelter a maximum of 75 percent of PPT per annum. 19 Inventories At 1 January 2021 Impairment (see note 8) Net inventory movement At 31 December 2021 At 1 January 2020 Impairment Net inventory movement At 31 December 2020 Crude oil $’000 Materials and supplies $’000 67 – 29 96 89 – (22) 67 5,200 (1,220) (256) 3,724 5,054 – 146 5,200 Total $’000 5,267 (1,220) (227) 3,820 5,143 – 124 5,267 (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. In the current year there was a total of $1.2 million of impairment of inventory items. 20 Trade and Other Receivables Due within 1 year Amounts due from related parties (Note 30 (d)) Trade receivables Less: provision for impairment of trade and intercompany receivables Trade receivables – net Prepayments VAT recoverable Other receivables Less: provision for Impairment of other receivables 2021 $’000 – 4,641 (6) 4,635 895 4,550 767 (100) 10,747 Group Company 2020 $’000 – 3,357 (6) 3,351 862 2,467 1,413 (854) 7,239 2021 $’000 3,372 – 2020 $’000 4,418 – – (100) 3,372 175 25 – – 3,572 4,318 149 125 150 – 4,742 Annual Report & Financial Statements 2021 119 Strategic Report Governance l Financial Accounts Glossary Company Information All trade receivables are with the Group’s only customer, Heritage. Ageing analysis of these trade receivables as at 31 December 2021 is as follows: Up to 30 days >60 days >180 days 2021 $’000 4,495 – 140 4,635 2020 $’000 3,211 – 140 3,351 The carrying amount of the Group’s trade and other receivables are denominated in the following currencies: USD GBP TTD Group Company 2021 $’000 3,292 169 7,286 10,747 2020 $’000 4,567 191 2,481 7,239 2021 $’000 3,416 156 – 3,572 2020 $’000 4,589 252 – 4,841 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: Trade receivables Counterparties without external credit rating: Existing customers with no defaults in the past Group Company 2021 $’000 2020 $’000 2021 $’000 2020 $’000 10,747 7,239 – – 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, crude oil prices 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. 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 2021, trade receivables of $4.6 million (2020: $3.4 million) were therefore considered to be fully performing. At the end of 2021 a total of $0.1 million was outstanding from Petrotrin (2020: $0.1 million). An ECL of $0.0 million was applied to the outstanding $0.1 million receivables amount due from Petrotrin. In June 2021 Trinity renewed its Galeota Block Joint Operating Agreement (JOA) with Heritage. In addition, Heritage and Trinity formed a new agreement to convert Heritage’s participating interest in the Galeota Block into an Overriding Royalty with Trinity now having 100% interest in the Galeota Block. Previously, Trinity invested 100% of the funds in capital expenditure towards the Galeota Asset Development and rebilled Heritage’s share (via Joint Interest Billings (JIBs)). As at 14 July 2021 all JIBs receivable relating to the Galeota Block was reclassified as capital expenditure. The total amounts converted from JIBs to E&E expenditure as at 14 July 2021 was $2.2 million which consisted of JIBs receivable of $1.4 million (2020: $1 million) and reversal of ECL $0.8 million (2020 ECL: $0.8 million). For other Joint Interest Billing receivable amounts from Heritage, an ECL of $0.1 million (2020: $0.9 million) was calculated. 120 Trinity Exploration & Production plc Notes to the Consolidated Financial Statements (continued) 21 Derivative financial assets 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 2021. Derivative asset Total 31 December 2021 $’000 31 December 2020 $’000 – – 266 266 The Group considers that the carrying amount of the following financial assets and financial liabilities are a reasonable approximation of their fair value: • • • 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: • • • 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). Level 2 recurring fair value measurements: Opening balance Opening derivative instrument realised Closing balance Derivative financial liabilities Derivative liabilities Total As at 31 December 2021 $'000 266 (266) – 31 December 2021 $’000 31 December 2020 $’000 2,883 2,883 – – On 31 December 2021 the crude derivative contracts were valued using a Mark to Market report. The report provides estimated forward looking values on the existing crude derivatives held at 31 December 2021. Annual Report & Financial Statements 2021 22 Cash and Cash Equivalents Short term investment Cash and cash equivalents 121 Strategic Report Governance l Financial Accounts Glossary Company Information Group Company 2021 $’000 2,449 15,863 2020 $’000 4,055 16,182 18,312 20,237 2021 $’000 2,449 659 3,108 2020 $’000 4,055 262 4,317 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. 23 Share Capital and Share Premium Group As at 1 January 2021 Share reduction and cancellation of deferred shares Capital reduction 2020 Share Issue – Nominal value 1 Number of shares 483,594,288 (444,714,857) – – Ordinary shares $'000 97,692 – (97,308) 5 Share premium $'000 139,879 – (139,879) – Total $'000 237,571 – (237,187) 5 As at 31 December 2021 38,879,431 389 – 389 During 2021 the Company undertook a Capital Reorganisation to enable the Company to pay dividends, or effect share buybacks, when it is considered prudent to do so. This process comprised: 1. 2. 3. a Consolidation of every 10 Existing Ordinary Shares into one Consolidated Ordinary Share an immediate Sub-Division of each of those Consolidated Ordinary Shares into one New Ordinary Share and one New Deferred Share; and a Capital Reduction by way of both the cancellation of the Existing Deferred Shares and the New Deferred Shares and the cancellation of the Company's Share Premium Account. • On 18 June 2021 the Share Consolidation and Sub-Division reduced the high number of existing Ordinary Shares in issue and the Sub-Division retained the nominal value of $0.01 each per New Ordinary Share, which is same as the previous nominal value of each of the existing Ordinary Shares. • On 14 July 2021 the Capital Reduction effectively cancelled the entire Share Premium Account of the Company as well as the Existing Deferred Shares and new Deferred Shares created following the Share Consolidation and Sub-Division. • • The Capital Reorganisation was completed on 14 July 2021 subsequent to the UK Court approval of the Capital Reduction. Following the Capital Reduction, the issued ordinary share capital of the Company stood at 38,879,431 ordinary shares of $0.01 each, with no Ordinary Shares held in treasury. The total number of voting rights in the Company also remains at 38,879,431. 1 In 2020, 4,745,057 shares (pre-consolidation) were issued at nil value to certain employees who exercised options that vested in respect to one off LTIP awards made in 2017. In 2021 the nominal value of these shares, being US$0.05 million, were paid to the Company and as part of the Capital Reduction, $0.05 million was transferred to retained earnings and the remaining US$0.0 million was treated as share capital. 122 Trinity Exploration & Production plc Notes to the Consolidated Financial Statements (continued) 24 Share Based Payment Reserve The share-based payments reserve is used to recognise: • • • • 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 2021 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 Capital Reduction Share based payment expense: LTIP exercised LTIP expense At 31 December Share Option Plan 2021 $’000 14,764 (11,485) – 505 2020 $’000 14,328 – (527) 963 3,784 14,764 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 expire in 2022 and 2023. The table below gives details: Grant-Vest 2012-2015 2013-2016 Expiry Date 2022 2023 Exercise price per Share Option GBP 8.60 GBP 12.00 2021 Number of Options 168,554 28,954 197,508 Exercise price per Share Option GBP8.60 GBP12.00 2020 Number of Share Options 168,554 28,954 197,508 The inputs into the Black-Scholes model for options granted in prior periods were as follows: Grant date Grant date Share price Average Exercise price Expected volatility Risk-free rates Expected dividend yields Vesting period LTIP 29 May 2013 14 February 2013 29 May 2013 GBP 11.90 GBP 12.00 55% 4.5% 0% 3 years 14 February 2013 GBP 12.00 GBP 8.90 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 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. The Options are exercisable at nil cost by the participants. Annual Report & Financial Statements 2021 123 Strategic Report Governance l Financial Accounts Glossary Company Information 2017 LTIPs One off LTIP awards were granted in August 2017 over 2,541,600 ordinary shares and in June 2020 over a further 142,296 ordinary shares (the “2017 LTIP Awards”). The 2017 LTIP awards, which ordinarily vest on 30 June 2022, partially vested on 30 June 2020 and 30 June 2021, subject to meeting performance targets relating to the following: • • • In respect of 70% of the award, the Company’s share price growth from the 2017 placing price of 49.8 pence per share. If the three-month volume-weighted price (“VWAP”) at the testing date is 350 pence or more per share, this part of the award will vest in full. If the VWAP at the testing date is 49.8 pence per share or less, this part of the award will not vest at all. If the VWAP at the testing date is between 49.8 pence and 350 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, 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. The model inputs for LTIP Awards granted in 2017 were as follows: 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 24 August 2017 30 June 2020 GBP 107.50p GBP 0.00 73.3% 0.44% 0% 30 June 2020 30 June 2021 30 June 2022 GBP 79.00p GBP 0.00 84.9% (0.07%) 0% – – 30 June 2022 In January 2019 Options over 282,400 ordinary shares and in May 2019 Options over 383,282 ordinary shares were granted under the LTIP in accordance with the policy announced to the market on 25 August 2017. The January 2019 LTIP awards 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. 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 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 amounts stated above represent the maximum possible opportunity. 124 Trinity Exploration & Production plc Notes to the Consolidated Financial Statements (continued) 24 Share Based Payment Reserve (continued) 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 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 were as follows: 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 GBP167.7p GBP0.00 113.9% 0.73% 0% 1 January 2021 9 May 2019 GBP146.6p GBP0.00 113.9% 0.73% 0% 2 January 2022 On 25 June 2020 and 30 October 2020 Options over a total of 481,586 ordinary shares 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. These LTIP awards will vest on 2 January 2023, subject to meeting the performance criteria set out in the table below and continued employment in the Company. 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 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. 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 were as follows: Grant Dates Share price at grant dates Exercise price Expected volatility Risk-free interest rates Expected dividend yields Vesting dates 2021 LTIPs June 2020 LTIPs October 2020 LTIPs 25 June 2020 GBP79.00p GBP0.00 84.9% (0.07%) 0% 2 January 2023 30 October 2020 GBP77.00p GBP0.00 84.9% (0.07%) 0% 2 January 2023 On 13 August 2021, Options over a total of 325,000 ordinary shares were granted under the LTIP in accordance with a revised LTIP scheme (the Revised LTIP”) to members of the EMT in respect of the performance of the Company in the financial year ended 31 December 2020. These LTIP awards will vest on 1 January 2024, subject to meeting the performance criteria set and continued employment in the Company. Annual Report & Financial Statements 2021 125 Strategic Report Governance l Financial Accounts Glossary Company Information The performance targets set for the 2021 Annual LTIP Awards will be measured considering both the Company's absolute TSR performance and the Company's relative TSR performance over a three-year period, commencing 1 January 2021. TSR calculations will be determined by reference to the volume weighted three-month average price prior to the start and end of the measurement period (with the starting average price adjusted for the Share Consolidation). The three-month volume weighted average price at the start of the performance period for the 2021 Annual LTIP Award was 88p (adjusted for the Share Consolidation). The performance targets provide that: • • No portion of a distinct one-half of the 2021 Annual LTIP Award (the "Absolute TSR Part") may vest unless the Company's compound annual growth rate of TSR over the performance period is at least 10% p.a., for which 30% of the Absolute TSR Part may vest, rising on a straight line basis for full vesting of the Absolute TSR Part if the Company's compound annual growth rate of TSR over the performance period equals or exceeds 25% p.a. No portion of the other distinct one-half of the 2021 Annual LTIP Award (the "Relative TSR Part") may vest unless the Company's TSR over the performance period ranks at least median relative to the TSR performance within a comparator group of companies, for which 30% of the Relative TSR Part may vest, rising on a straight line basis for full vesting of the Relative TSR Part if the Company's TSR over the performance period ranks upper quartile or better relative to the TSR performance within a comparator group. However, an underpin term applies to the Relative TSR Part which provides that, regardless of relative TSR performance, no vesting may ordinarily accrue in respect of the Relative TSR Part unless the Company's compound annual growth rate of TSR over the performance period is at least 10% per annum. The total fair value at grant date of the 2020 LTIP awards was $0.7 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 2021 LTIP awards granted during the period were as follows: Grant Date Share price at grant dates Exercise price Expected volatility Risk-free interest rates Expected dividend yields Vesting dates August 2021 LTIPs 13 August 2021 GBP146.00p GBP0.00 6.3% (0.20%) 0% 1 January 2024 Movements in the number of LTIPs outstanding and their related weighted average exercise prices are as follows: At 1 January Forfeited Granted 1 Exercised 2 At 31 December 2021 Average exercise price per Share Option GBP 0.00 GBP 0.00 GBP 0.00 GBP 0.00 2020 Average exercise price per Share Option GBP 0.00 GBP 0.00 GBP 0.00 GBP 0.00 Number of Options 3,156,299 (100,000) 325,000 – Number of Options 3,178,982 (172,059) 623,882 (474,506) GBP 0.00 3,381,299 GBP 0.00 3,156,299 1 Weighted average fair value of LTIPs granted GBP 0.70 2 Weighted average share price at the date of exercise GBP 0.80 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 13/8/2021 – 31/12/2023 Expiry date 24/8/2027 1/1/2023 2/1/2024 2/1/2025 2/1/2025 Exercise price 2021 2020 GBP 0.00 GBP 0.00 GBP 0.00 GBP 0.00 GBP 0.00 2,103,032 252,510 319,171 381,586 325,000 2,103,032 252,510 319,171 481,586 – 126 Trinity Exploration & Production plc Notes to the Consolidated Financial Statements (continued) 25 Merger and Reverse Acquisition Reserves At 1 January 2021 Capital re-organisation/reduction Translation differences At 31 December 2021 At 1 January 2020 At 31 December 2020 Reverse Acquisition Reserve $’000 (89,268) – – (89,268) Merger Reserve $’000 75,467 (75,467) – Total $’000 (13,801) (75,467) – – (89,268) (89,268) 75,467 (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. 26 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, FX Gain/(Loss) and FV Derivative Instruments. The Group presents Adjusted EBITDA as it is used in assessing the Group’s growth and operational performance 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 and Covid-19 expense Covid-19 expense DD&A (note 13 - 15) ILFA (note 20) SOE (note 24) FX (loss)/gain FV Derivative Instruments (note 6) Adjusted EBITDA Weighted average ordinary shares outstanding - basic Weighted average ordinary shares outstanding - diluted Adjusted EBITDA per share – basic (note 11) Adjusted EBITDA per share - diluted (note 11) 2021 $’000 2020 $’000 10,019 (669) 7,428 (754) 626 14 3,149 2,965 – 8,174 252 963 (7) (266) 19,813 12,081 $'000 $'000 38,879 41,969 38,623 41,780 $ $ 0.51 0.47 0.31 0.29 Annual Report & Financial Statements 2021 127 Strategic Report Governance l Financial Accounts Glossary Company Information Adjusted EBITDA after current taxes (the impact of SPT, PT and PPT/UL) is calculated as follows: Adjusted EBITDA SPT PT PPT/UL Adjusted EBITDA After Current Taxes Weighted average ordinary shares outstanding - basic Weighted average ordinary shares outstanding - diluted Adjusted EBITDA After Current Taxes per share - basic Adjusted EBITDA After Current Taxes per share - diluted * Restatement 2020 balance 2021 $’000 2020 $’000 19,813 (5,074) 1,516 (1,375) 12,081 153 (532) (1,143) 14,880 10,559 '000 '000 38,879 41,969 38,623 41,780 $ 0.38 0.35 $ 0.27 0.25 Comparative figures have been recalculated to conform with changes in presentation in the current year. The comparative figures were recalculated to show the impact on the Adjusted EBITDA per share resulting from the 10:1 share consolidation which reduced the number of ordinary shares from 388,794,303 to 38,879,430 (see note 23). The impact of the restatement is summarised below: Adjusted EBITDA Adjusted EBITDA per share - basic Adjusted EBITDA per share - diluted Adjusted EBITDA after Current Taxes Adjusted EBITDA after Current Taxes per share - basic Adjusted EBITDA after Current Taxes per share - diluted 27 Provision for Other Liabilities (a) Non-current: Year ended 31 December 2021 Opening amount as at 1 January 2021 Unwinding of discount (Note 9) Revision to estimates (Note 13) Decommissioning contribution Translation differences Closing balance at 31 December 2021 Year ended 31 December 2020 Opening amount as at 1 January 2020 Unwinding of discount (Note 9) Revision to estimates Translation differences Closing balance at 31 December 2020 31 December 2021 $ Restated 31 December 2020 $ Prior period 0.31 0.29 0.27 0.25 0.03 0.03 0.03 0.03 Decommissioning provision $’000 Closure of pits 1 $’000 45,405 1,222 8,407 195 (9) 55,220 44,330 1,221 (152) 6 45,405 470 – – – – 470 – – – – Total $’000 45,875 1,222 8,407 195 (9) 55,690 44,330 1,221 (152) 6 45,405 128 Trinity Exploration & Production plc Notes to the Consolidated Financial Statements (continued) 27 Provision for Other Liabilities (continued) Decommissioning cost The Group operates Oil fields and this cost represents an estimate of the amounts required for abandonment of the Group’s wells, platforms, gathering stations 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. 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 – 2.40% (2020: 2.00%) b. Risk free rate – 1.80% - 2.20% (2020: 2.42% - 3.17%) c. d. 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. 1 There was a change in estimate whereby the Closure of pits provision was reclassified from current to non-current liabilities for the period to 31 December 2021 as management obtained new information in the current period estimating that the liability may extend beyond 12 months. (b) Current: Opening and Closing balance 2021 Opening and Closing balance at 2020 Litigation claims Litigation claims $’000 46 46 In 2021 there was a litigation settlement for $0.0 million and increase in the provisions for $0.0 million. Closure of Pits 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 Environmental Management Authority (“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. 28 Trade and Other Payables Current Trade payables Accruals Other payables SPT & PT Group Company 2021 $’000 2,274 4,486 492 1,562 8,814 2020 $’000 2,024 3,793 471 1,515 7,803 2021 $’000 88 239 – – 327 2020 $’000 130 351 – – 481 Annual Report & Financial Statements 2021 29 Bank overdraft Bank Overdraft 129 Strategic Report Governance l Financial Accounts Glossary Company Information 31 December 2021 $’000 Restated 31 December 2020 $’000 Prior period 2,700 2,700 2,700 2,700 In 2020, an on-demand operating (overdraft) line of $2.7 million was established with FirstCaribbean International Bank (Trinidad & Tobago) Limited (“CIBC”). Details of the overdraft facility: • • • • • Description: Demand revolving credit Interest Rate: United States dollar prime rate minus 4.05% per annum, effective rate 4.95%, floor rate of 3.95%. Interest is payable monthly. Repayment: Upon demand at CIBC’s discretion. Debenture: Floating charge debenture, giving the lender a first ranking floating charge 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. For the year ended 31 December 2021, the credit limit was increased to $5 million but no further amounts were drawn. 30 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 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 Limited (UK) Limited Transfer of funds (b) Transfer of funds to related parties Company subsidiaries: Trinity Exploration and Production Services Bayfield Energy Limited Trinity Exploration and Production Services Limited (UK) Limited 2021 $’000 856 8 659 19 1,659 393 – 30 73 Company 2020 $’000 – 10 26 61 170 – 3 899 – 3,697 1,169 Company 2021 $’000 2020 $’000 (70) (100) (2,063) (2,233) (473) – –- (473) 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. 130 Trinity Exploration & Production plc Notes to the Consolidated Financial Statements (continued) 30 Related Party Transactions (continued) (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 expense (d) Year-end balances arising from transfer to and from related parties 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 Employee Benefit Trust (See note 1) Total intercompany receivables (Note 20) 2021 $’000 1,337 27 305 1,669 2021 $’000 – 28 – 192 – – 22 3,129 73 3,443 Group 2020 $’000 1,219 26 469 1,714 Company 2020 $’000 408 28 159 104 1,029 4 414 2,272 – 4,418 Less: provision for impairment of intercompany receivables Closing intercompany receivables (Note 20) (71) 3,372 (100) 4,318 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 (2020: 0.1 million). Payables to related parties: Trinity Exploration and Production Services Limited Trinity Exploration and Production Services (UK) Limited Trinity Exploration and Production (Galeota) Limited Oilbelt Services Limited Total intercompany payables Company 2021 $’000 2020 $’000 167 7 112 495 781 – – – – – Annual Report & Financial Statements 2021 31 Taxation Payable Taxation payable PPT UL 131 Strategic Report Governance l Financial Accounts Glossary Company Information 2021 $’000 – – – 2020 $’000 144 58 202 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. 32 Financial Instruments by Category At 31 December 2021 and 2020, 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 2021 $’000 5,302 4,021 – 18,312 27,635 2020 $’000 3,910 3,490 – 20,237 27,637 2021 $’000 200 – 3,372 3,108 2020 $’000 424 – 4,318 4,317 6,680 9,059 At 31 December 2021 and 2020, the Group held the following financial liabilities at amortised cost: Accounts payable and accruals Intercompany Bank overdraft Group Company 2021 $’000 8,814 – 2,700 11,514 2020 $’000 7,803 – 2,700 10,503 2021 $’000 327 781 – 1,108 2020 $’000 481 – – 481 At 31 December 2021 and 2020, the Group held the following financial asset at fair value through profit or loss: Derivative financial asset Derivative financial liability Group Company 2021 $’000 – – 2021 $’000 2,883 2,883 2020 $’000 266 266 2020 $’000 – – Group 2021 $’000 – – 2021 $’000 2,883 2,883 2020 $’000 266 266 Company 2020 $’000 – – 132 Trinity Exploration & Production plc Notes to the Consolidated Financial Statements (continued) 33 Commitments and Contingencies a) Commitments 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 27: Provision for other liabilities. b) Contingent Liabilities i) The West Coast Point Ligoure, Guapo Bay and Brighton Marine Outer (“PGB”) licences and the Farm-Out Agreement for the Tabaquite Block (held by Coastline International Inc.) have expired. There may be additional liabilities and commitments arising when new agreements are finalised, but these cannot be presently quantified until new agreements are available. ii) Parent Company Guarantee: a) PGB - A Letter of Guarantee has been 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. A clause within the Letter of Guarantee implies that the 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. b) Galeota - A Letter of Guarantee has been established in substance over the Galeota Block where a subsidiary of Trinity is obliged to carry out a Minimum Work Programme to the value of $0.9 million. A clause within the Letter of Guarantee implies that the Guarantor may reduce the Guarantee Sum available for payment to the MEEI under the Letter of Guarantee on an obligation by obligation basis provided the subsidiary of Trinity delivers to the Guarantor a certificate duly issued and signed by the Minister of the MEEI. The Letter of Guarantee was effective from 14 July 2021 until the earlier of performance of Minimum Work Programme or the Guarantor has paid the Guarantee amount. iii) 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 condensed consolidated financial statements. iv) On 1 December 2021, Trinity acquired the PS-4 Block Lease Operatorship Sub-Licence. As part of the lease agreement, a Performance Bond of $0.13 million is required to be executed with Heritage. At 31 December 2021, the Performance Bond was not finalised and is expected to be completed subsequent to the year-end. 34 Employee Costs Employee costs for the Group during the year Wages and salaries Other pension costs Share based payment expense (Note 22) Group Company 2021 $’000 8,625 372 673 9,670 2020 $’000 6,266 358 963 7,587 2021 $’000 1,170 – 94 1,264 2020 $’000 910 – 248 1,158 Average monthly number of people (including Executive and Non-Executive Directors’) employed by the Group Executive and Non-Executive Directors Administrative staff Operational staff 2021 number 2020 number 2021 number 2020 number 6 95 144 245 6 85 131 222 6 – – 6 6 – – 6 Annual Report & Financial Statements 2021 133 Strategic Report Governance l Financial Accounts Glossary Company Information 35 Events after the Reporting Period 1. The Company implemented crude derivatives over the Group’s monthly production in 2021 and 2022. The derivative protection currently in effect for 2022 is as follows: Type of Derivatives Index Sell Put Buy Put Sell Call Buy Effective Expiry Execution Call Production Date Date Date Premium USD MM USD/bbl USD/bbl USD/bbl USD/bbl Barrels Monthly 3-Way Cost Collar ICE Brent 50.00 60.00 66.90 - 10,000 1 Jan 22 30 Jun 22 04 Mar 21 3-Way Cost Collar ICE Brent 50.00 60.00 74.40 - 12,500 1 Jan 22 31 Dec 22 02 Jun 21 4-Way Cost Collar ICE Brent 59.00 68.00 72.00 82.00 15,000 1 Jan 22 30 Jun 22 05 Jul 21 3-Way Cost Collar ICE Brent 40.00 50.00 80.50 - Put Spread Option ICE Brent 40.00 50.00 - 15,000 1 Jan 22 31 Dec 22 27 Aug 21 - 15,000 1 Jul 22 31 Dec 22 14 Jan 22 0.15 2. On 24 February 2022, Russian forces invaded Ukraine, causing wide-ranging sanctions to be applied against the Russian regime by the US, EU and other major economies. The event caused both Brent and WTI oil prices to soar, peaking well above $100 per bbl into March 2022. The impact of increased oil prices has mainly positively impacted the Group’s crude oil revenue but negatively impacted derivative expenses. Overall, whilst there has been no significant adverse impact to the Group, Management continues to closely monitor the event’s impact as it unfolds. 3. In 2021 Trinity engaged with a range of potential partners as part of the Galeota farm down process. The Company on 3 May 2022 indicated, whilst initial feedback has been encouraging, a number of participants have informed the Company that they are unable to fully assess the economics of the opportunity at Galeota without clarity on the expected reforms to Supplemental Petroleum Tax (“SPT”), which are currently being considered by the Government of Trinidad and Tobago (“GORTT”) and which were initially expected to have been confirmed sooner than now appears likely. Pending SPT reform, which management still expects to happen, the Company has decided to pause the Galeota farm down process. This will enable the Company to seek the best value proposition for Galeota when the GORTT's fiscal reforms have been confirmed. In the interim, the Company will continue to refine its plans for Galeota. In particular, it will advance preparations for exploiting the 9.77mmstb of 2P reserves remaining in the Trintes field. 134 Glossary Trinity Exploration & Production plc Abbreviation Meaning 2P 2C Adjusted EBITDA AGM AIM APM ARV ATV bbl BDO BIR BM Board bopd boepd c./~ CA 2006 Capex CGU 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 Alternative Performance Measures Guidelines Annual Rental Value Annual Taxable Value barrel Binder Dijker Otte Board of Inland Revenue of Trinidad & Tobago Brighton Marine 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 CIBC FirstCaribbean International Bank (Trinidad & Tobago) Limited CIMA CLN COSA CSR Covid 19 CVORR DD&A DOA DRC DTA DTL EAD E&E ECTT EIA ECL EMA EMT ESG ESP EU EUR FCF FEED FDP FID FOA FRC 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 Corporate Social Responsibility 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. Conversion to Overriding Royalty Depreciation, depletion and amortisation Delegation of Authority Drilling, Recompletions & Workovers 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 Electrical Submersible Pump European Union Estimated Ultimate Recovery Free Cash Flow Front End Engineering Design Field Development Plan Final Investment Decision Farmout Agreement Financial Reporting Council FVLCD Fair Value less Costs of Disposal 135 Strategic Report Governance Financial Accounts l Glossary Company Information Annual Report & Financial Statements 2021 Abbreviation Meaning 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) LI LGD LLP LNG LO LOA LTA LTIP MOU MEEI MM Management mmbbls mmstb mt NE NGC NOC NOS 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) Land Infrastructure 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 metric tonnes North East National Gas Company of Trinidad and Tobago Ltd National Oil Company also known as Heritage Net Oil Sands Operating Break-even 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) OCF Net Cash Flow from Operating Activities Operating Expenses 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 Opex OPEC Operating Profit ORR 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 136 Trinity Exploration & Production plc Glossary (continued) Abbreviation PD Petrotrin PGB Plc PPE ppm PPT PRMS PT Q REI RNS RCP(s) Realised price ROU SCADA SOE SPE SPT Meaning 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 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 Supplemental Petroleum Tax START Card See Think Act Reinforce Track Card STOIIP STOW SW Stock Tank Oil Initially in Place Safe to Work South West T&T based bank First Citizens Bank Limited Trinity/Company/Parent Trinity Exploration & Production plc TSR TTD T&T UK UL USD or US$ UWI VAT VIU vs VWAP WFH WTI WO(s) YE Total Shareholder Return Trinidad & Tobago Dollars Trinidad & Tobago United Kingdom Unemployment Levy United States Dollars University of the West Indies Value Added Tax Value in Use versus Volume-Weighted Average Price Work From Home West Texas Intermediate - is a grade of crude oil used as a benchmark in oil pricing Workover(s) Year-end 137 Strategic Report Governance Financial Accounts Glossary l Company Information Advisers NOMAD SPARK Advisory Partners Limited 5 St. John’s Lane London EC1M 4BH 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 Annual Report & Financial Statements 2021 Company Information Company addresses Corporate Secretarial Company Secretary AMBA Secretaries Limited 400 Thames Valley Park Drive Thames Valley Park Reading RG6 1PT 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 United Kingdom and Registered Office c/o Pinsent Masons LLP 1 Park Row Leeds LS1 5AB Trinidad & Tobago Office 3rd Floor Southern Supplies Limited Building 40-44 Sutton Street San Fernando Trinidad, West Indies Certifications Affiliations Trinity Exploration & Production plc c/o Pinsent Masons LLP 1 Park Row Leeds LS1 5AB United Kingdom E: info@trinioil.com www.trinityexploration.com
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