This announcement contains inside information as stipulated under the UK version of the Market Abuse Regulation No 596/2014 which is part of English Law by virtue of the European (Withdrawal) Act 2018, as amended.  On publication of this announcement via a Regulatory Information Service, this information is considered to be in the public domain.

1 June 2023

Trinity Exploration & Production plc

("Trinity" or "the Group" or "the Company")

Full Year Results to 31 December 2022

Trinity Exploration & Production plc (AIM: TRIN), the independent E&P company focused on Trinidad and Tobago, announces its final results for the year ended 31 December 2022 ("the Period" or "FY 2022").

During 2022 Trinity put in place the foundations for an ambitious growth programme, developing a series of catalysts to drive shareholder value that we are now starting to execute in 2023.  These include:

·    drilling the Jacobin well targeting the deeper Miocene-age turbidite play in our onshore blocks;

·    the application for the highly prospective Buenos Ayres block in the 2022 Onshore Bid Round, the outcome of which is expected shortly; and

·    revised planning to further exploit the Galeota offshore block, focused on greater capital efficiency and shorter development and payback times. 

Underlining the resilience of the base business, the Company is committing to a new Capital Allocation Policy which will include a modest but sustainable dividend commencing in Q3 2023 with an intent for that to form part of a broader distribution of operating cash flow to shareholders, depending on realised oil prices.

Highlights

·    Group net sales for 2022 were 2,975 bopd (2021: 3,006 bopd)

·    Revenues of USD 92.2 million (2021: USD 66.3 million)

·    Profit before tax of USD 2.5 million (2021: USD 3.0 million)

·    Average price per barrel received was USD 84.9/bbl (2021: USD 60.4/bbl)

·    Adjusted EBITDA (before hedge costs) of USD 35.1 million (2021: USD 21.1 million)

·    Adjusted EBITDA of USD 24.7 million (2021: USD 19.8 million)

·    Operating Profit* of USD 19.0 million (2021: USD 9.3 million)

·    Cash generated from continuing operations USD 12.0 million (2021: USD 12.6 million)

·    Cash flow used in investing activities USD 15.6 million (2021: USD 13.9 million)

·    Year-end cash USD 12.1 million (2020: USD 18.3 million)

* Before SPT, Impairments and Exceptional Items

New Capital Allocation Policy

·    The Company aims to distribute 15% of operating cash flow to shareholders, for each calendar year when the realised oil price is greater than $50/bbl, and at least 20% of operating cash flow for periods when the realised price is above $80/bbl

·    Payment of a modest but sustainable dividend and the scope for additional distributions in the form of share buybacks or special dividends

·    Expected to include a total dividend (split 1/3 interim, 2/3 final) of 1.5p per share, provided the realised price is at least $50/bbl

·    It is expected that the maiden interim dividend will be declared following publication of the 2023 interim results, in Q3 2023, followed by a final dividend declared following publication of the 2023 preliminary results in Q2 2024

Positioned for Next Growth Phase and progressing catalysts

·    Dynamic strategy for growth is underpinned by a strong balance sheet and resilient and dependable cash flow

·    Clearly defined, risk-mitigated strategy to drive returns for shareholders - focus on maximising value from existing assets and through acquisitions and partnerships

·    Strengthened Management Team

·    Additions of Julian Kennedy, Mark Kingsley and Alistair Green further strengthening financial/commercial, operational and wider industry skill sets

·    Creation of Technical Committee

·    Focused on risk-mitigation and assurance of opportunities which can increase scale and optimise returns

Post Period Highlights

·    Continued momentum into Q1 2023

·    Q1 production levels resilient with sales volumes averaging 2,899 bopd (Q4 2022: 2,961 bopd).  Average production in 2023 will be influenced by the timing and outcome of the drilling campaign and continued workover and recompletion programme.

·    Average realisation of USD 67.9/bbl for Q1 2023 (Q4 2022: USD 75.4/bbl, Q1 2022: USD 83.1/bbl)

·    Cash balance of USD 11.4 million (unaudited) as at 31 March 2023 versus USD 12.1 million as at 31 December 2022 and USD 17.5 million as at 31 March 2022.

·    The Group had drawn borrowings (overdraft) of USD 2.3 million as at 31 March 2023 (USD 2.7 million as at 31 December 2022 and USD 2.7 million as at 31 March 2022).

·    On 9 January 2023, the Company submitted a bid for the Buenos Ayres block in the 2022 Onshore and Nearshore Competitive Bid Round.  The results of the Bid Round are expected shortly.

·    On 3 May 2023, the Government of Trinidad and Tobago Ministry of Energy and Energy Industries ("MEEI") provided confirmation of the renewal of the PGB Licence for an additional 25 years from the Effective Date of 18 December 2012.  Consequently, the PGB Licence expires on 17 December 2037.  There were no additional liabilities and commitments arising from the renewed Licence.

·    The Company commenced drilling the Jacobin prospect on 15 May 2023, the first of the nine 'Hummingbird' deeper prospects our 3D seismic has identified across our Palo Seco acreage.

Jeremy Bridglalsingh, Chief Executive Officer of Trinity, commented:

"During 2022 Trinity initiated an ambitious growth programme, seeking to develop a series of catalysts to drive shareholder value that we are now starting to execute in 2023.  We have actioned three key growth initiatives which we believe have the potential to deliver meaningful value for shareholders.

Our core business has continued to perform consistently, forming the basis upon which the capital allocation policy has been designed.  The spudding of Jacobin is an important milestone for the Company and will help determine our further activities throughout 2023 as we look to harness the potential of the extensive Palo Seco play which extends into the Buenos Ayres block to the west, which Trinity applied for in the 2022 Onshore Bid Round.  On Galeota we initiated a revised development plan, including the existing Trintes producing field as well as appraisal and exploration opportunities, which we are aiming to finalise by Q4 this year.

2022 was a significant year for Trinity and 2023 has begun to bear the fruits of this work. I believe we have the right focus to deliver further progress and I look forward to updating our key stakeholders as we move through the year."

Investor Presentation

The Company will host a presentation through the digital platform Investor Meet Company on 14 June 2023 at 10:00 British Summer Time.  Management will discuss the results and the Company's growth strategy.

The presentation is open to all existing and potential shareholders.  Questions can be submitted pre-event via the Investor Meet Company dashboard up until 09.00 the day before the meeting or at any time during the live presentation.

Investors can sign up to Investor Meet Company for free and add to meet Trinity Exploration via the following link https://www.investormeetcompany.com/trinity-exploration-production-plc/register-investor.  Investors who already follow Trinity on the Investor Meet Company platform will automatically be invited.

Enquiries:

About Trinity (www.trinityexploration.com)

Trinity is an independent oil production company focused solely on Trinidad and Tobago.  Trinity operates producing and development assets both onshore and offshore, in the shallow water West and East Coasts of Trinidad.  Trinity's portfolio includes current production, significant near-term production growth opportunities from low-risk developments and multiple exploration prospects with the potential to deliver meaningful reserves/resources growth.  The Company operates all of its ten licences and, across all of the Group's assets, management's estimate of the Group's 2P reserves as at the end of 2022 was 17.96 mmbbls.  Group 2C contingent resources are estimated to be 48.88 mmbbls.  The Group's overall 2P plus 2C volumes are therefore 66.84 mmbbls.

Trinity is quoted on AIM, a market operated and regulated by the London Stock Exchange Plc, under the ticker TRIN.

Competent Person's Statement

All reserves and resources related information contained in this announcement has been reviewed and approved by Dr. Ryan Ramsook, Trinity's Executive Manager, Exploration. Dr. Ryan Ramsook also lectures and is involved in collaborative Geoscience research with the University of the West Indies and Fellow of the Geological Society (FGS) of London. He is a Geologist by background with 19+ years' experience.

Disclaimer

This document contains certain forward-looking statements that are subject to the usual risk factors and uncertainties associated with the oil exploration and production business.  Whilst the Group believes the expectation reflected herein to be reasonable in light of the information available to it at this time, the actual outcome may be materially different owing to macroeconomic factors either beyond the Group's control or otherwise within the Group's control.

CHAIRMAN & CEO STATEMENT

Strategic Performance

During 2022 Trinity put in place the foundations for an ambitious growth programme, developing a series of catalysts to drive shareholder value that we are now starting to execute in 2023.  This important process has involved taking tough decisions based on identifying the most efficient allocation of capital across the portfolio. We chose not to pursue several initiatives which we had previously been exploring, such as the Jubilee field off the West Coast and NWD deeper play, and instead decided to focus on three key initiatives which we believe have the potential to deliver meaningful value for shareholders.

First, the Company has matured its understanding of the deeper prospectivity across its onshore portfolio using the 3D seismic which we had acquired to map nine 'Hummingbird' prospects across its Palo Seco assets.  In May 2023 we commenced the first well, Jacobin, the start of an ambitious, risk-appropriate exploration programme that we hope will fast-track the monetisation of these substantial resources.  In a success case, this will generate material growth for our shareholders, further de-risk this potentially extensive play across our existing acreage and allow us to quickly evaluate the significant potential in the Buenos Ayres block offered in the 2022 Onshore and Nearshore Competitive Bid Round.

Second, during 2022, the Company participated in the 2022 Onshore and Nearshore Competitive Bid Round,  bidding for the Buenos Ayres block, which is located immediately to the west of Trinity's existing Palo Seco interests, comprising Blocks WD5-6, WD-2 and PS-4 and, at its closest, is only around 500 metres from the Company's existing sub-licences.  If awarded, Trinity intends to take advantage of its unique understanding of the stratigraphy in this area onshore Trinidad, where there are strong analogues to the Company's existing acreage, to quickly progress from drilling to production.  As an Exploration and Production licence, Buenos Ayres would benefit from better commercial and fiscal terms than the Lease Operatorship Agreements; principally, no overriding royalty payable, instead state-owned Heritage participating as a joint venture partner with a 15% working interest carried through the exploration phase.

Third, having paused the Galeota farm-out process, we initiated an in-depth review of the opportunities across the offshore Galeota block, including the existing Trintes producing field, to formulate a revised development plan that offers greater capital efficiency and shorter development and payback timelines, with the aim of avoiding significant dilution for existing shareholders. This work continues in 2023 and we aim to finalise the development option in order to progress by Q4 this year.

In addition to progressing each of these attractive opportunities, Trinity has continued to lobby the Trinidadian Government to take the steps necessary to stimulate activity in the energy sector.  As well as the successfully completed 2022 Onshore and Nearshore Competitive Bid Round, we welcomed the fiscal changes that were introduced, particularly changes to Supplemental Petroleum Tax ("SPT"), announced in September 2022 which took effect from 1 January 2023.  This positive approach from the Government will provide additional growth opportunities for Trinity and we continue to engage with Government in a constructive way, as we believe further reform is necessary to achieve the Government's aim to stimulate greater activity levels across our sector. 

Operating Performance

Trinity delivered a robust operating performance in 2022 which continues to highlight the strength and resilience of our core business.  We delivered production for the year within guidance, and we remain on track to progress our growth agenda in 2023.

Group net sales for 2022 were 2,975 bopd (2021: 3,006 bopd). Trinity managed to substantially mitigate natural production decline through a programme including 3 new wells, 17 RCPs, 120 Workovers, swabbing across its asset base, including the recently acquired PS-4, and improved production monitoring using automation and revised completion strategies.

The Company's investment in technology to automate and remotely optimise over 50% of its production is proving to be effective, helping to ensure steady production whilst minimising non-productive downtime.  The Company aims to extend this automation to an additional 37 onshore wells during 2023, which would result in the proportion of Group production covered by automation rising from 50% to approximately 80%.

Three new development wells were drilled and completed during H2 2022. Initial production levels for the three wells were on prognosis but subsequent performance was below plan and increased supply chain costs have impaired the economic potential of conventional drilling. The data acquired through this campaign is helpful, however, and is currently being used to revise our plans for future drilling campaigns.

Financial Performance

Our 2022 financial results demonstrate the Company's resilience despite encountering significant external headwinds. Adjusted EBITDA for the year was USD 24.7 million (2021: USD 19.8 million) and cash resources were USD 12.1 million (2021: USD 18.3 million) at year-end. 

Global supply chain pressures and cost inflation saw our operating breakeven nudge above USD 30.0/bbl (to USD 32.1/ bbl) (2021: USD 29.2/bbl) for the first time in seven years.  This still represents a relatively low operating cost, which provides a buffer in times of low oil prices.  Nevertheless, we are continuing to experience inflationary pressures within the supply chain and are working with our contractors and partners proactively to manage our cost base and execute our development programme in a cost-effective manner.  

In 2022, in line with previous years, we hedged around 50% of our production to counteract the impact of low oil prices and the impact of SPT which, prior to the recent reforms, was at its most punitive when realised oil prices were between USD 50.01 and USD 55.0 per barrel.  The hedging programme, put in place during 2021 to shield the Company from the possibility of weaker oil prices, worked against us in 2022 when prices rose sharply in response to Russia's invasion of Ukraine.  This resulted in a cash payment for hedging of USD 10.4 million for the year (compared to USD 1.3 million in 2021). The Company has elected to remain unhedged moving into 2023.

Returns to Shareholders

Following the share capital re-organisation undertaken in 2021, to restore distributable reserves at PLC level, the Board sanctioned two share buyback programmes in 2022, commencing in September/October 2022 to repurchase up to USD 2.0 million in shares.  The second share buyback concluded at the end of April 2023. The first and second share buyback acquired 1,432,000 shares, representing 3.6% of our issued share capital for USD 2.0 million, terms which the Board believes are accretive to shareholder value. A third share buyback was announced on 28 April 2023 to return up to USD 1.0 million to shareholders of the Company.

The Board believes that consistent returns to shareholders should be an important driver for capital and operational discipline whilst not impeding the Company's growth potential and has accordingly affirmed a new Capital Allocation Policy which will comprise payment of a modest but sustainable dividend and the scope for additional distributions in the form of share buybacks or special dividends. Going forward, the Board intends to aim to distribute 15% of operating cash flow to shareholders, for each calendar year when the realised oil price is USD80/bbl and below, and at least 20% of operating cash flow for each calendar year when the realised price is above $80/bbl.  This is expected to include a total dividend (split 1/3 interim, 2/3 final) of 1.5p per share, provided the realised price is at least USD50/bbl.  It is expected that the maiden interim dividend will declared following publication of the 2023 interim results, in Q3 2023, followed by a final dividend being declared following publication of the 2023 preliminary results in Q2 2024.

HSSE and ESG performance

HSSE performance remains a high priority for Trinity, and at the beginning of 2022 an HSSE Improvement Plan was developed to enhance the existing HSSE Management System.  Key elements of this plan included creating a Steering Committee, chaired by the CEO, developing a monthly HSSE Scorecard of key leading and lagging indicators that is disseminated throughout the organisation, the introduction of an ongoing Critical Safety Rule campaign and more focus on contractor management and inclusion. The HSSE Team was instrumental in achieving "STOW" (Safe to Work) recertification for a further two years with a score of 100%.  Unfortunately, we recorded two Lost Time Incidents in 2022. Since then, we have bolstered our incident investigation procedure to ensure that actions and lessons learnt are being implemented throughout the organisation.

During 2022, we also commenced the quantification of our Scope 1 and 2 emissions across all assets; established the Bruce Dingwall Memorial Scholarship (in memory of our Founder and former Executive Chairman) for Caribbean nationals pursuing studies in Geoscience; and we continued to foster partnerships with our fence line communities through the sponsorship of awards for excellence in education to students undertaking the 11+ examinations.

Cyber Incident

In December 2022 Trinity was subject to a ransomware attack, something that is becoming increasingly commonplace across all businesses and geographies.  We responded quickly and comprehensively to this external attack on our business.  Our production facilities remained safe and continued to produce.  We suffered a temporary disruption to our administrative systems, but Trinity's IT team and our external advisers have returned systems to full capacity incorporating changes and learnings from the incident and embedding more resilient IT infrastructure, cybersecurity systems and procedures. 

Organisational changes

The Board and management team was restructured and strengthened in 2021 following the untimely passing of our founder and Executive Chairman Bruce Dingwall, CBE.  During 2022 the management team was further reinforced by the recruitment of Julian Kennedy (Chief Financial Officer), Alistair Green (Development Manager) and, more recently, Mark Kingsley (Chief Operating Officer). We welcome them all and look forward to driving the business forward with their assistance.  Angus Winther has completed two full terms as a Director and specifically in the role of the Audit Committee Chairman.  Therefore, he has decided not to stand for reelection at this forthcoming Annual General Meeting which coincides with Angus taking on greater levels of responsibility in other roles outside of Trinity.  We want to express our thanks and that of our fellow Directors for his conscientious stewardship of the Audit Committee since he joined the Board in 2017.

Thanks

Your Board is appreciative of the support we continue to receive from shareholders during what are very demanding and complex times.  On behalf of the Board, we must also thank our employees and suppliers for their commitment which has allowed Trinity to deliver its core business in a safe manner while positioning the Company to hopefully move into a period of growth.

In summary, following significant challenges experienced by Trinity in 2021, 2022 proved to be a year of consolidation and focus, resulting in the identification of numerous near-term and medium-term catalysts to drive growth and value. We will continue to advance these during 2023, with a view to generating meaningful returns for shareholders.

OPERATIONS REVIEW

The Group achieved net sales of 2,975 bopd in 2022 (2021: 3,006 bopd). Investments into production related activities, such as the three new infill wells, RCPs, workovers and swabbing, together with greater automation and monitoring of our key wells, enabled the Company to deliver annual production rate in-line with the prior year, thereby largely offsetting the expected natural field decline rate of between 7% and 10%.

ONSHORE ASSETS

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

The average net sales for 2022 was 1,655 bopd (2021: 1,644 bopd) which accounts for 56% of our total annual sales. A breakdown of the sales by block is shown in the table below.

Table 1: 2022 vs 2021 Onshore Sales breakdown by block

Note PS-4* was acquired on 1 Dec 2021 at an average monthly rate of 52 bopd

Trinity drilled 3 new onshore development wells in 2022 (2021: nil), completed 17 RCPs (2021: 7), 1 sand control job (2021: 5), and 86 workovers (2021: 74), which, together with the inclusion of PS-4 for the full year, resulted in a modest uplift in our onshore production for the year as a whole.

Table 2: 2022 Onshore Work Programme Breakdown by Block

In 2023, Trinity intends to manage its base production through additional automation of wells, further RCP activity, re-evaluation of the inactive well hopper, and swabbing. Trinity's use of automation to optimise  production and costs continues to meet our objectives. The three new wells drilled in 2022 contributed 20 bopd to the annual average.

EAST COAST ASSETS

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

Average net sales for 2022 from the East Coast were 1,051 bopd (2021: 1,107 bopd) which accounts for 35% of Group sales for the period. A total of 23 workovers in 2022 (2021: 16) were conducted across the assets focusing on optimising and stabilising production from all wells via a data-driven strategy utilising automation. Chemical injection initiatives were also deployed to counteract increased solids deposition in mature wells.

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

Having paused the Galeota farm-out process in May 2022, the Company initiated an in-depth review of the opportunities across the offshore Galeota block, including the existing Trintes producing field, to formulate a revised development plan that offers greater capital efficiency and shorter development and payback timelines.

WEST COAST ASSETS

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

West Coast net sales averaged 269 bopd in 2022 (2021: 255 bopd) which accounted for 9% of the Group's total annual average sales. This was a 5% year on year increase on the 2021 average.  The increase was achieved through increased swabbing activity via 10 conversions to swab workovers in 2022 (2021: nil) conducted across the assets. Subsequent to the period end, in March 2023, ABM-151, was producing at a managed rate of 140 bopd, higher than the expected range of 60 to 110 bopd, thereby significantly improving the economics of our West Coast assets in 2023. 

Facilities Management and Infrastructure

In 2022, the Facilities team focused on asset integrity, welfare initiatives and projects supporting production.

On Trintes, the Company replaced gratings on offshore platform production decks and improved key electrical equipment on the Alpha, Bravo and Delta platforms, resulting in the repurposing of floor space allowing for better access and more efficient use of the work area. Accommodation units were replaced, fuel and water tanks were upgraded and repositioned for better use of the available space.

The construction of a new 10,000 bbl storage tank to accommodate production from the Trintes field was 86% complete at the end of 2022. The project experienced some delays but is now expected to be fully operational in Q2-2023.

Activities for the Onshore and West Coast operations focused on upgrading welfare facilities and construction of a new crow's nest to support the ABM-151 well reactivation.

In total, the team progressed 40 projects of which 32 were completed by the end of 2022 and 8 rolled over in 2023.

Facilities Management and Infrastructure spend in 2022 was USD 4.0 million (comprising East Coast - USD 2.9 million, West Coast - USD 0.7 million and Onshore - USD 0.4 million).

Onshore Drilling

Trinity's onshore development drilling campaign during 2022 comprised three wells drilled in the second half of the year (one well in each of WD-5/6, WD-2 and WD-13) targeting Lower Forest and Upper Cruse reservoirs.  Supply chain challenges and inflationary pressures significantly increased the cost of drilling and impaired economics. While we encountered reservoir in all wells broadly on prognosis, we observed higher than expected depletion in all three which resulted in stabilised production rates being lower than predicted.  Our intention is to manage the wells' up-hole potential to maximise the economic recovery.  Data acquired from the 2022 drilling campaign and the performance of these wells will be incorporated into our regional model to de-risk and re-prioritise future infill development candidates.

Reserves and Resources

A comprehensive reserves and resources review of all assets has been completed by Management which estimates Trinity's current 2P reserves to be 17.96 mmstb at the end of 2022, compared to the year-end 2021 reserve estimate of 19.73 mmstb. This represents a 9% year-on-year decrease. The overall decrease in reserves of 1.77 mmstb comprise 1.09 mmstb produced in 2022 and revisions, including re-categorisation of reserves from 2P to 2C of 0.68 mmstb.  Factoring in the 2022 produced volume of 1.09 mmstb, the 2P year-on-year decline is 3.4%.

Brent Forward Price Deck applied to Reserves Economic Limit Testing ("ELT") from Britannic Trading LLC as at 3 January 2023

Management considers the reserves presented in the table below to be its best estimate as at 31 December 2022 of the quantity of reserves that can be recovered from Trinity's current assets.  It includes forecasted 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 2022 2P Reserves 

Note:

-           The 2022 produced volume of 1.09 mmstb accounts for 61.6% of the overall 2P decrease in 2022 compared to 2021.

-           Revisions:

·      Onshore: FZ-2 +0.22 mmstb and WD-14 +0.26 mmstb due to Economic Limit Testing. Onshore sub-licences decrease (-0.61 mmstb) due to uneconomic infills.

·      West cost: Reactivation of ABM-151 in March 2023 and revised IP of 80 bopd; +0.15 mmstb. Reallocation of infill wells from 2P to 2C category (-0.20 mmstb). PGB base decreased -0.37 mmstb.

·      East coast: Reduced base performance due to decreased well performance from key producers in Trintes (-0.78 mmstb). Reduced RCP 2P from 2021 to 2022 mainly due to reduced RCP count (-0.07 mmstb). Reclassification of three conventional infill wells from the Echo FDP back to Trintes development 2P reserves. +0.72 mmstb.

Management's Estimate of 2C Resources as at 31 December 2022

Note (*):

Onshore:

·      Recently concluded 3D seismic mapping work across WD-5/6, WD-2, PS-4 assets has redefined the subsurface structure/model resulting in the addition of 2C resources +4.80 mmstb in Year End 2022.

West Coast:

·      Reallocation of infill wells from 2P to 2C category across West Coast +0.44 mmstb

East Coast:

·      Year End 2021 most likely case of 12-well development inclusive of three Trintes infills re-categorised at Year End 2022 as part of Trintes development 2P rather than as Echo 2C (-3.58 mmstb)

Management's Estimate of Reserves and Resources as at 31 December 2022

Financial Review

KPIs

During 2022 the Group benefitted from higher oil prices and, combined with the Group's robust cost control structure, resulted in Adjusted EBITDA (before hedge costs) increasing by 66% to USD 35.1 million (2021: USD 21.1 million). The crude oil hedges in place muted our upside exposure, although the Group delivered a resilient operating performance as shown by Adjusted EBITDA (after hedge costs) increasing by 25% to USD 24.7 million and IFRS Operating Profit before SPT doubling compared to 2021.

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

Notes:

1.        Average realised price (USD/bbl): Actual price received for crude oil sales per barrel ("bbl").

2.        Average net sales (bopd): Production sold in barrels per day in a given year.

3.        Adjusted EBITDA (before hedge) (USD MM): Adjusted EBITDA for the period, before Derivative expense.

4.        Adjusted EBITDA (USD MM): Operating Profit before Taxes for the period, adjusted for non-cash DD&A, SOE, ILFA, FX gain/(loss) and Fair Value Gains/Losses on Derivative Financial Instruments.

5.        Adjusted EBITDA (USD/bbl): Adjusted EBITDA/Annual sales volume.  

6.        Adjusted EBITDA margin (%): Adjusted EBITDA/Revenues.

7.        Adjusted EBIDA after Current Taxes: Adjusted EBIDA less Supplemental Petroleum Taxes ("SPT"), Petroleum Profits Tax ("PPT") and Unemployment Levy ("UL").

8.        Consolidated operating break-even: The realised price/bbl where the Adjusted EBITDA/bbl for the Group is equal to zero.

9.        Net cash plus working capital surplus: Current Assets less Current Liabilities (other than Derivative financial asset / liability and Provision for other liabilities).

Note (*): See Note 26 to Consolidated Financial Statements - Adjusted EBITDA for further details.

Adjusted EBITDA Calculation

Adjusted EBITDA is an Alternative Performance Measure guideline ("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.

Refer to Glossary for abbreviations.

2022 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.

Notes

1.        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.

2.        G&A/bbl - Consolidated: Excludes SOE, ILFA, Derivative FV gain/loss and FX gain/loss.

3.        Operating break-even: The realised price where Adjusted EBITDA ([before hedge]) for the respective asset or the entire Group (Consolidated) is equal to zero.

4.        Consolidated operating break-even: Includes G&A but excludes SOE, ILFA, Derivative FV gain/loss and FX gain/loss.

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.

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 has 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 21 to the consolidated financial statements. 

Summary of Results for the Year

Higher revenue driven by higher average realised oil price in 2022: 

The positive impact of a 41% increase in average oil price realisations to USD 84.9/bbl (2021: USD 60.4/bbl), and a modest 1% decrease in average annual sales to 2,975 bopd (2021: 3,006 bopd), resulted in a 39% increase in revenues to USD 92.2 million (2021: USD 66.3 million).

Maintained robust operating profits despite inflationary pressures: 

The Group continued to deliver strong operating margins despite the inflationary pressures on goods and services. Operating profit before taxes was USD 19.0 million (2021: USD 9.3 million). The Adjusted EBITDA margin (pre-hedge costs) increased to 38.1% (2021: 31.9%), with consolidated operating break-even moving up to USD 32.1 (2021: USD 29.2) demonstrating the Group's ability to be profitable across a broad range of oil prices. The 25% increase in Adjusted EBITDA (after hedge costs) to USD 24.7 million (2021: USD 19.8 million) is a direct result of the increased realised oil price and strong operational performance.

Increased capex investment programme to drive growth: 

USD 15.5 million (2021: USD 13.6 million) invested to drive future production growth.  This comprised:

·    USD 8.4 million Production capex comprising three onshore wells drilled (USD 5.8 million), 17 RCP's (USD 1.5 million) and ABM-151 reactivation project (USD 1.1 million).

·    USD 4.8 million Infrastructure Capex including facilities, operations and ICT.

·    USD 1.7 million Subsurface and time-writing costs.

·    USD 0.3 million in Exploration and Evaluation ("E&E") relating to Onshore and West Coast.

·    USD 0.3 million Exploration and Evaluation ("E&E") assets relating to Galeota.

Refer to Notes to Financial Statements: Note 13 Property, Plant and Equipment - Additions (USD 15.1 million) and Note 15 - Intangible Assets - E&E Additions (USD 0.5 million) inclusive of accruals.

Continued financial strength:

The Group's cash balances at year end were USD 12.1 million (2021: USD 18.3 million), primarily reflecting positive cash generated from operations of USD 12.0 million (after derivative payments and taxes), Capex spend of USD (15.6) million and Financing activities of USD (2.2) million (which included effecting our first share buyback).  In aggregate, despite these significant cash outflows, the Group's net cash plus working capital surplus stood at USD 14.2 million (2021: USD 20.8 million) and our current ratio was a healthy 2.1x (2021: 2.2x).

Statement of Comprehensive Income

2022 Financial Highlights

Average realisation of USD 84.9/bbl (2021: USD 60.4/bbl).

Operating Revenues

Operating revenues up 39% to USD 92.2 million (2021: USD 66.3 million).

Operating expenses

Operating expenses increased by 29% in 2022 to USD (73.3) million reflecting operating in a higher crude oil price environment (2021: USD (56.9) million) and comprised:

Operating Expenses (excluding non-cash items):  USD (67.6) million (2021: (46.4) million):

·    Royalties of USD (30.1) million (2021: USD (19.8) million), this increase being driven by the higher average realised oil price.

·    Opex of USD (19.2) million (2021: USD (17.6) million), the increase mainly due to impact of inflationary pressures on goods and services as well as increased repairs and maintenance, workovers and fuel in the year.

·    G&A expenses of USD (7.2) million (2021: USD (7.0) million), the increase mainly due to recruitment and replacement of key personnel to support the businesses growth strategy, increased levies, business travel, and administrative costs including professional fees.

·    Derivative expense of USD (10.4) million (2021: Derivative expense of USD (1.3) million) being the cash impact of derivative instruments paid out for 2022. 

·    Covid 19 expense of USD (0.6) million (2021: USD (0.7) million) being the costs associated with accommodation, testing and sanitisation related to our prevention and response. 

·    Cash FX loss USD (0.1) million (2021: USD 0.0 million)

Non-Cash Operating Expenses: USD (5.7) million (2021: USD (10.5) million):

·    DD&A of USD (7.6) million (2021: USD (7.4) million).

·    Derivative credit of USD 2.9 million (2021: Derivative expense of USD (3.2) million) being the movement in the FV of derivative instruments held at the beginning and end of the financial year.

·    SOE of USD (0.7) million (2021: USD (0.6) million).

·    ILFA reversal USD 0.0 million (2021: USD 0.7 million).

·    FX loss USD (0.3) million (2021: USD 0.0 million).

Operating Profit Before SPT, Impairment and Exceptional Items 

The operating profit before SPT, impairment and exceptional items for the year amounted to USD 19.0 million (2021: USD 9.3 million) and was mainly due to higher operating revenues resulting from higher oil prices despite inflationary pressures on cost.

SPT and PT

SPT and PT of USD (9.0) million (2021: USD (3.6) million) and comprised:

·    SPT of USD (9.0) million (2021: USD (5.1) million) mainly due to the higher realised oil prices in relation to the Group's operations in 2022. Both onshore and offshore assets were subject to SPT in 2022 as the realised oil price throughout the year was higher than USD 75/bbl.

·    PT nil (2021: USD 1.5 million net reversal), as no Notice of Assessment has been received in relation to this tax.

Operating Profit before Impairment and Exceptional items

The Group's reported operating profit before impairment and exceptional items was USD 10.0 million (2021: USD 5.8 million). Adjusting for non-cash expenses, the Group's Adjusted EBIDA after Current Taxes was USD 12.3 million (2021: USD 14.8 million) (further details below).

Impairment charge

Impairment charges taken were USD (6.1) million (2021: USD (1.3) million) relating to the Impairment of property, plant, and equipment USD (5.8) million and Inventory (0.3) million.

See Note 3(d) to Consolidated Financial Statements - Impairment of Property, Plant and Equipment for further details. 

Exceptional items

Exceptional items were USD (0.2) million relating to the cyber incident costs in December 2022 (2021 : USD (0.1) million relating to fees for corporate restructuring advice).

See Note 7 to Consolidated Financial Statements - Exceptional items for further details. 

Finance Income

Finance income is solely related to bank interest income received on short term investments with financial institutions of USD 0.1 million (2021: 0.1 million).

Finance Costs

Finance costs amounted to USD (1.3) million (2021:  USD (1.5) million) and comprised:

·    Unwinding of the discount rate related to the decommissioning liability USD (1.1) million (2021: USD (1.2) million).

·    Bank overdraft interest USD (0.1) million (2021: (0.2) million).

·    Interest on Leases USD (0.1) million (2021: USD (0.1) million).

See Note 9 to Consolidated Financial Statements - Finance Costs for further details.

Income Taxation 

Income Taxation charge for 2022 of USD (2.3) million (2021: USD 4.7 million credit), comprising the following:

·    Current Taxes comprising

o  Petroleum Profit Tax ("PPT") USD (2.4) million (2021: (1.0) million).

o  Unemployment Levy ("UL") USD (1.0) million (2021: USD (0.4) million).

·    Increase in Deferred Tax Assets ("DTA") recognised on available tax losses of USD 1.0 million (2021: Increase in DTA of USD 5.5 million).

·    Decrease in Deferred Tax Liabilities ("DTL") USD 0.1 million due to accelerated accounting impairments/depreciation (2021: USD 0.6 million decrease).

See Note 10 to Consolidated Financial Statements - Income Taxation for further details. 

Total Comprehensive Income

Total Comprehensive Income for the period was USD 0.09 million (2021: USD 7.7 million income).

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, 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 after hedge expense at USD 24.7 million and Adjusted EBIDA after Current Taxes at USD 12.3 million as it is used by Management and judged to be a better measure of underlying performance.

Statement of Cash Flows

Cash inflow from operating activities

Operating Cash Flow was USD 12.0 million (2021: USD 12.6 million) comprising:

·    Operating cash flow before working capital and income taxes of USD 15.5 million (2021: USD 16.1 million). 

·    Changes in working capital resulted in a net decrease of USD (0.1) million (2021: USD (1.8) million decrease).

·    Income taxes, PPT and UL paid USD (3.4) million (2021: USD (1.7) million paid) resulting from the higher oil price.

Cash (outflow) from investing activities 

Cash outflow from investing activities was USD (15.6) million (2021: USD (13.8) million): 

·    Property, plant and equipment for the year totaling USD (15.0) million (2021: USD (10.0) million).

·    Expenditure on exploration and evaluation assets and other intangible assets USD (0.4) million (2021: USD (3.2) million) as the Group continued to invest in Galeota.

·    Computer software USD (0.1) million (2021: USD (0.4) million).

·    Performance bond related to the onshore lease operatorship assets USD (0.1) million (2021: USD (0.3) million)

Cash outflow from financing activities 

Cash outflow from financing activities was USD (2.2) million (2021: USD (0.6) million):

·    Share buyback of USD (1.5) million (2021: nil).

·    Principal paid on lease liability USD (0.5) million (2021: (0.4) million).

·    Interest paid on lease liability USD (0.1) million (2021: (0.1) million).

·    Net Finance cost of USD (0.1) million (2021: (0.1) million).

Closing Cash Balance

Trinity's cash balance at 31 December 2022 was USD 12.1 million (31 December 2021: USD 18.3 million).

Net Cash Plus Working Capital Surplus

Note: Net cash plus working capital surplus: Current Assets less Current Liabilities (other than Derivative financial asset/liability and Provision for other liabilities).

Events since year end

1.    Subsequent to 31 December 2022, the Group has received further VAT refunds of USD 2.6 million as at 31 May 2023. On 10 May 2023, the Government of Trinidad and Tobago announced that it intends to settle outstanding VAT refunds via interest bearing bonds in order to meet VAT arrears of those registrants who are owed in excess of USD 0.03 million in VAT refunds.  At the end of May 2023, the Group had USD 2.0 million in VAT refunds recoverable in VAT bonds.

2.    On 31 December 2022, the FZ-2 Lease Operating Agreement ("LOA") expired. Trinity obtained an interim renewal of the LOA to 31 March 2023 and obtained a further extension to 30 June 2023 to execute the LOA for the period 1 January 2023 to 30 September 2031. 

3.    On 29 March 2023, the Group provided six-months' notice to Heritage to terminate the sub-licence Farm-Out agreement for the Tabaquite block.  The new sub-licencee requirements proposed to the Group makes this licence uneconomic to operate.

4.    Cyber incident - The Group was the subject of a sophisticated cyber incident in December 2022 and immediately took precautionary measures to protect its IT infrastructure.  The Group engaged with external specialists to investigate the nature and extent of the incident and implement its systems recovery plan.  Trinity moved quickly to notify relevant regulators and law enforcement agencies. Trinity's production facilities continued to operate safely throughout. In 2023, the Group continues to execute its recovery plan. Trinity's IT team and its external advisers continue to support the business in returning its administrative systems to full capacity incorporating learnings from the incident and embedding more resilient IT infrastructure, cyber security systems and procedures. 

5.    Trintes Field Incident - On the evening of 10 April 2023, a fire occurred in one of the two generators on the Trintes Bravo platform.  Production across the field was halted and the fire was contained.  Production restarted from Alpha and Delta platforms on 11 April 2023. Four operators, all Trinity staff, were on Bravo at the time of the incident and, having suffered minor injuries, all have now recovered and resumed work. Following approval from the Ministry of Energy and Energy Industries, received on 17 April 2023, the Company successfully restored oil production from all previously producing wells on the Bravo platform on 18 April 2023.  Production from the field is in-line with pre-incident levels at approximately 1,010 bopd.

6.    Share buyback - As at 31 December 2022, the second tranche of the share buyback programme was still ongoing with 400,000 shares having been repurchased to 31 December 2022 utilising USD 0.5 million of the USD 1.0 million second tranche. On 26 April 2023, the second tranche of the share buyback programme was completed and a third tranche was announced on 28 April 2023 for up to a further USD 1.0 million. This tranche will be funded from the Group's existing cash resources and will, unless terminated at an earlier date, expire at the conclusion of the 2023 AGM, or 30 June 2023, whichever is earlier. 

7.    Renewal of PGB Exploration and Production Licence - On 3 May 2023, the MEEI provided confirmation of the renewal of the PGB Licence for an additional 25 years from the Effective Date of 18 December 2012. Consequently, the PGB Licence expires on 17 December 2037. There were no additional liabilities and commitments arising from the renewed Licence.

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2022

* Covid-19 expenses have been reclassified as Operating Expenses

Consolidated Statement of Financial Position

at 31 December 2022

Company Statement of Financial Position

at 31 December 2022

The Company has elected to take the exemption under section 408 of the Companies Act 2006, to not present the Statement of comprehensive income. The net loss for the parent company was $9.4 million (2021: $6.4 million).