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UK heavyweight snaps up 25 per cent of Trinity plc

Published: 
Thursday, February 28, 2013
Joel Pemberton, CEO of Trinity Exploration and Production plc

A leading UK financial services company, Legal & General Group plc, has acquired 25.43 per cent of San Fernando-based Trinity Exploration and Production plc since its listing on the London Stock Exchange (LSE) on Valentine's day, becoming the local oil company’s new single largest shareholder. 

 

With £388 billion invested worldwide, the 175-year-old Legal & General Group plc is one of the largest institutional investors in the UK. 

 

It is a major shareholder, defined by the LSE as owning at least 3 per cent, in several FTSE-100 companies that have already invested heavily in T&T, including BP, British American Tobacco (the parent company of Witco), BG Group, BHP Billiton, Royal Dutch Shell and Centrica. 

 

One of the largest investors in the UK stock market, the Legal & General Group is also a major shareholder in Barclays, AstraZeneca and Diageo.

 

On its own, as well as through subsidiary companies Legal & General Assurance Society Limited (LGAS & LGPL) and Legal & General Investment Management Limited (LGIM), the UK investor acquired a total of 24,108,727 shares in Trinity in three tranches on three days. 

 

The first was on the day Trinity plc opened for trading when Legal & General purchased of 14,608,445 shares. As the stock fell two pence from its Initial Public Offering (IPO) price of £1.20, Legal and General went in deeper, and purchased an additional 4,750,281 shares on February 20. On Tuesday, Legal and General purchased another 4,750,001 shares, taking its shareholding in the T&T oil company to 24,108,727.

 

Formerly Trinity E&P Ltd, the Bruce Dingwall-founded company fast-tracked its IPO when it merged with AIM-listed Bayfield Energy Holdings through a reverse takeover under AIM rules. Bayfield was delisted in October last year and re-admitted as Trinity plc on February 14.

 

Trinity has a total of 94,799,986 issued ordinary shares, each carrying the right to one vote. The new merged company does not hold any ordinary shares in treasury. 

...now producing nearly 4,000 bopd 

 

Trinity is an upstream oil and gas exploration and production company with interests onshore and offshore Trinidad and South Africa. The company has a current market capitalisation of approximately US$179 million. Trinity holds a 65 per cent operated interest in the Galeota Exploration and Production (E&P) license located offshore the east coast of Trinidad. 

 

The Galeota licence covers 30,084 acres (121.6 square kilometers) in the shallow waters (55 feet to 150 feet) of the Bayfield Basin. Within the Galeota licence area, Trinity operates four fixed drilling and production platforms approximately 10 kilometers (km) offshore in shallow water (100 to 150 feet). Trinity also holds an exploration license covering 11,000 square km in the Pletmos Inshore area in South Africa. 

 

Upon completion of the merger on February 14, the combined entity’s asset base surged to 31.2 million barrels of proved plus probable reserves, 38 million barrels of contingent resources and total onshore and offshore production of 3,965 barrels of oil per day.

 

More institutional interest

 

Another international investment company, Hong Kong-based Regent Pacific Group Limited acquired a holding of 3,479,850 shares, which represents more than 3 per cent of the issued share capital of Trinity, on the first day of its re-admission to AIM on February 14, 2013. 

 

With its new shareholding, Regent Pacific Group Limited now owns 3.67 per cent voting rights in Trinity. The Hong Kong group was one of the original investors in Trinity before it took over Bayfield and morphed into Trinity plc.

 

Prior to the subscription, the Hong Kong company held 1,912 shares in the then Trinity Exploration and Production Limited, which were acquired in November 2011 by way of subscription in respect of Trinity’s private placing at a price of US$4,185 per Trinity share, for an aggregate amount of cash consideration of US$8,001,720. These shares were exchanged, in respect of the merger, for 14,298,507 new Bayfield Shares (before the Share Consolidation) or 1,429,850 new Trinity Shares (following the Share Consolidation).

 

As a result of the merger, like many other original Trinity shareholders, the Hong Kong group's shareholding as a percentage dwindled, though not as small as Bayfield's original shareholders who received one Trinity plc share for every 10 Bayfield shares they had. 

 

Regent Pacific said in a release dated January 13, 2013: “As noted, in the company’s (Regent Pacific's) announcement issued on October 15, 2012, the merger values the company's (Regent Pacific’s) shareholding in Trinity at £2.97 million (or approximately US$4.69 million or HK$36.58 million), which is approximately 41.38 per cent below the Company’s original investment cost in Trinity."

 

Former Bayfield directors and at least one of the original Trinity investors have also been increasing their stake in Trinity. In response to a Business Guardian question, Arif Shah, a spokesperson for Trinity, said: "Finian (O'Sullivan, chairman of the former Bayfield) was issued new shares in the company. I do not have information on whether anyone else has raised their shares through the equity issue, but would assume that would be the case." 

 

Trinity raised US$90 million in new equity in the run up to its AIM listing. Trinity raised "in conjunction with completion of the merger" what it described as “gross proceeds of US$50 million through the issue of new ordinary shares to accelerate its development programme, and for general corporate purposes; and a further US$40 million to fund a material and high value infrastructure-led exploration programme.” 

 

Henderson Global Investors, a British-Australian institutional investor, was one group that took advantage of the US$90 million new equity issue to raise its stake in the company to more than 10 per cent. On January 25, 2013, it increased its stake in the then Bayfield to 10.11 per cent or 21,900,000 shares. 

 

Dr Jim Lee Young, one of the original Trinity investors, also increased his stake in the new Trinity, although he bemoaned that the merger was dilutive instead of accretive of existing shareholder. He said the merger of Trinity and Bayfield “destroyed value for the existing shareholders” as they now have a smaller percentage holding in a larger company. He said it was clear Bayfield needed the merger more than Trinity. 

 

Describing the IPO as a good deal for new investors, Lee Young, the former boss at Ten Degrees North the first incarnation of Trinit), said he would have walked away from the Bayfield merger, and launched a Trinity stand-alone IPO. 

 

He said in 2004/2005, Ten Degrees North Energy Ltd "at the time was worth US$30 million and the shares were sold at US$1,000 a share. At that time, the oil price was US$30 per barrel of oil." Still, Lee Young acknowledges that the assets of the merged company are undervalued, and he expressed confidence that the assets will propel the new Trinity to do well.

 

Bayfield needs repairs

 

Giving its first joint operations update to the LSE on February 13, Bayfield and Trinity acknowledged: "Production from the Trintes field has recently been impacted by a number of factors including a failure of the main generator on Alpha platform." They said: "January net production for Bayfield averaged 1,481 barrels of oil per day (bopd) (2,278 bopd - gross) and for Trinity 2,260 bopd representing aggregate net production for the two groups of 3,741 bopd."

 

Following repairs to the generator, intervention work has been undertaken to resume production from the wells impacted by a power outage, Bayfield said. "Production from these wells is increasing though still at levels below those achieved prior to the incident. Twelve wells from a total of 36 potential production wells are currently shut-in awaiting remediation. None of the recently drilled development wells which have utilised modern completion techniques and pumping equipment are impacted," Bayfield said.

 

The programme of remedial action is underway and is expected to add gross production of up to circa 410 bopd by the end of March, the update said. Action has already been taken to install new generator sets on Alpha and programmes of preventative maintenance implemented to reduce risk of future power outages, according to the update. "Separately, operations commenced on the B5X well on February 7, 2013. The schedule for eight infill development wells for 2013 is unchanged," Bayfield said.

 

Trinity ahead on plan

 

January sales averaged 2,260 bopd (net), ahead of budget for the period, Trinity said in the document. Trinity drilled two onshore wells during January and is currently drilling a third well, and so, is ahead of its plan to drill a total of 12 onshore wells in 2013, the update said. The two wells drilled to date are currently being completed and should be in production in the next two weeks, Trinity said.

 

Additionally, Trinity plans to initiate a programme of workover activities at its Brighton field during February. The repair or stimulation of an existing production well for the purpose of restoring, prolonging or enhancing the production of hydrocarbons is referred to as a "workover" in the oil industry, according to the Schlumberger oilfield glossary. "Trinity has acquired a capillary tubing unit to optimise its gas lift mechanism with eleven wells targeted for workover… Initial incremental rates from this project could be in the order of 135-150 bopd (net) in aggregate," Trinity said.

 

Hywel John, former chief executive officer of Bayfield, said: "We are working closely with our counterparts at Trinity to address the production issues encountered. The ability to address these issues in a timely manner demonstrates the additional resources that can be deployed as a consequence of the combination of the two groups."

 

Monty Pemberton, chief executive officer of Trinity, commented: "We are pleased that Trinity is ahead of its 2013 production budget and to be close to completing our third onshore well this year. We eagerly await completion of the merger with Bayfield to provide the financial resources needed to rectify Bayfield's current production issues and deliver the work programme as presented in the Admission Document. We remain confident that we will achieve the previous guidance of 5,000 bopd exit rate for 2013." The Admission Document is the document the newly (re) listed company had to submit to the LSE.

 

On its first day trading, February 14, Trinity opened at 120 pence, and closed 6 pence higher. During its first week trading, Trinity touched its high at 134 pence on February 14, and its low twice on February 19 and again on February 21 at 118 pence. Trinity closed its first week of trading on Friday (February 22) at £1.185. (£1=$10.05)