Heritage Petroleum, the company that acquired the exploration and production assets of the failed Petrotrin, has made an after-tax profit for the first four months of its operations of approximately $565 million.
In its pitch to investors, the company noted that it has been profitable up to March 2019, although in December 2018, the first month of its operations, it lost $25 million.
Investors were told that according to unaudited figures, last month alone the company made an after-tax profit of $222 million.
The figures did not include a breakdown of the taxes that were paid, and therefore one cannot be certain if all the taxes owed to the Government were paid, including Supplemental Petroleum Taxes(SPT) and Petroleum Profits Tax (PPT).
Last week, Finance Minister Colm Imbert told a news conference that Heritage was expected to make its first royalty payment to the Government soon and the company’s Chief Executive Officer Mike Wylie told investors that Heritage was expected to provide 8.7 per cent of Government revenue.
Wylie said with sufficient investment and proper management the company will be able to generate cash flow to cover its bills and repay the debt that its legacy company Petrotrin was owing.
He posited that Heritage has significant reserves and production, with significant upside potential.
“As of September 30, 2018, legacy Petrotrin had 223 million barrels of oil equivalent in proved and probable oil and gas reserves (2P) this is broken down into 143.7 million barrels of oil equivalent in proved reserves of which 110.9 boo/e is developed and producing and 15.7 million are developed non producing while 17.1 million barrels are undeveloped,” Wylie reported to investors.
He said based on today’s prices and with a discounted rate of 10 per cent, it is estimated that the proven reserves of Heritage are valued at US$1.6 billion while the proved and probable reserves combined are worth US$2.3 billion.
Wylie argued that this country’s low rates of recovery are way below industry standard and over the years this has left hundreds of millions of barrels of valuable crude in the ground.
“Based on our estimates Heritage existing land assets we have over 4 billion barrels of remaining oil in place. With average recovery rates today of 20 per cent, we believe these assets enjoy significant upside potential that can be tapped by correcting inefficiency in the development and production,” the Heritage Petroleum CEO revealed.
Wylie said the company had mature and highly-predictable assets that will allow it to develop more reserves with the relatively low capital requirement.
He said already the company had taken major steps to improve its efficiency and was expecting to operate with a quarter of the staff that Petrotrin had in its E&P operations.
He also said Heritage will Implement global best practices to ensure it achieves its goal as a mature field, low-cost producer.
In its presentation to investors, the company’s CEO pointed to a number of measures that he felt will quickly boost production and reserves.
Wylie said there was a need for greater field depletion planning on the part of Heritage, which he estimates will lead to the better use of money and the ability to recover more oil and gas.
He said: “We believe that field depletion planning will result in both an increase in capital efficiency and resource recovery.”
With respect to work over programmes, Wylie is promising an increase which he expects will improve production rates by 10 to 20 per cent by reducing scant and cleaning out well bores on previously identified high opportunity wells.
This should lead to more activity in the south of the country which has been hit hard by the closure of Petrotrin.
Wylie indicated that recovery rates in other jurisdictions have been as high as between 40 and 60 per cent when compared with the low of 20 per cent in T&T. With this in mind, the Heritage CEO told investors the production potential was significant.
“Through state of the art technologies, we believe we can improve the yield.
“Heritage will apply a number of technologies to enhance yield, along with a more-disciplined capital allocation to further enhance production,” Wiley promised.
He said 3D seismic will become the norm and he expected it will help optimise infill drilling programmes to maximise recoveries and increase recoverable reserves. It will also reduce risk in exploration and development drilling.
Enhanced oil recovery is also part of the strategy with the use of water flooding. He estimated that can increase reserves by about 100 million barrels and recovery factors by up to 35 per cent. Water flooding will be primarily used in what used to be the Trinmar asset.
On the land fields, Heritage plans to use steam injection or water and chemical flooding. This Wylie expects would increase reserves by between 800 million barrels and 1.6 billion barrels. To increase flow rates Wylie said horizontal drilling will be done on land.
Wiley revealed that last year’s earthquake had damaged some of the facilities offshore and the company is deferring approximately 2300 barrels of oil per day but that work is on the way to bring back up that production.
He also called for the use of best practice in procurement, including the use of international tenders and maximising the sale of its inventory, which he felt will improve.
One of the changes Wylie wants to see is a lower level on inventory which he felt would free up working capital. The inventory of 1.6 million barrels he felt was too high.
To reduce debt and short term borrowing, Wylie said Trinidad Petroleum Holdings Limited may sell several assets, including developed and undeveloped land, sports club, a golf course, and a hospital.