My oil and gas plays have delivered some eye-catching gains this year: Chariot (CHAR), Jersey Oil & Gas (JOG) and Parkmead’s (PMG) share prices are up by 174, 75 and 42 per cent, respectively, in a weak stock market environment.
The outlier is Trinity Exploration & Production (TRIN:94p), a £36.5mn market capitalisation oil and gas explorer and producer focused on Trinidad and Tobago, which has shed a quarter of its market value. The de-rating is wholly unjustified. Second-quarter results highlight a company that produced operating cash flow of $6.9mn (pre-tax and hedging) with operating break-even less than a third of the $96.80 per barrel average realised price on 3,093 barrels of oil daily production.
Hedges are unwinding as 70 per cent of second-half output is exposed to the spot oil price, while a low-risk onshore drilling programme offers attractive cash payback of 1.6 years (conventional infill well) to 1.3 years (horizontal well). It will be mainly funded by internal cash flow, so net cash of $15mn (33p a share) should be little changed by the year-end.