1     Background and 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.

 

Background

Trinity Exploration & Production plc ("Trinity") previously Bayfield Energy Holdings plc ("Bayfield") was incorporated and registered in England and Wales on 21 February 2011 and traded on the Alternative Investment Market ("AIM"), a market operated by the London Stock Exchange plc. On 14 February 2013, Bayfield was acquired by Trinity Exploration & Production (UK) Limited ("TEPL"), a Company incorporated in Scotland, through a reverse acquisition.  On the 14 February 2013, the enlarged Group was re-admitted to trading on AIM and Bayfield changed its name to Trinity Exploration & Production plc. Trinity ("the Company") and its subsidiaries (together "the Group") are involved in the exploration, development and production of oil and gas reserves in Trinidad.

 

Basis of Preparation

This consolidated financial information has been prepared on a going concern basis, in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union ("EU"), IFRS Interpretations Committee ("IFRS IC") interpretations as adopted by the EU and those parts of the Companies Act 2006 as applicable to companies reporting under IFRS. This consolidated financial information has been prepared under the historical cost convention, modified for fair values under IFRS.

 

The preparation of the consolidated financial information in conformity with IFRS requires the use of certain critical accounting estimates. It also requires 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.

 

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 $2.4 million (2014 $205.8 million loss).

 

Going Concern

 

In making their going concern assessment, the Directors have considered the Group's budget and cash flow forecasts. The Group is incurring expenditure in order to continue operations from its existing fields but is faced with the challenge of lower revenues due to current global oil prices.  The Group is making limited payments to its creditors and bankers pending discussions with potential new investors to refinance the Group. Discussions with the Group's creditors and bankers are ongoing and it is expected that the current moratorium agreement with its bankers will be extended further.  Creditors continue to delay repayment requests and the bank has continued to provide extensions as required on a weekly or bi-monthly basis since the Group breached the loan covenants at the end of 2014 with the next expiration due on 27 May 2016.

 

The Group is in discussions with a number of interested parties about a refinancing of the Group.  Such a refinancing is required in order for the Group and Company to continue as a going concern.  As part of the refinancing deal it is expected that there would have to be significant discounts agreed on the outstanding senior debt and with its creditors.  Without such a refinancing, the Group and Company would be unlikely to be able to continue as a going concern.

 

The Board of Directors has carefully considered and formed a reasonable judgement that, at the time of approving these financial statements, there is a reasonable expectation that the Group and Company will be able to complete the refinancing and obtain the funding required to continue operations for the foreseeable future. For this reason, the Board of Directors continues to adopt the going concern basis of preparing the financial statements. However, the need for additional funding indicates the existence of a material uncertainty which may cast significant doubt on the Company and the Group's ability to continue as a going concern and, therefore the Group and Company may be unable to fully realise their assets and discharge their liabilities in the normal course of business. The financial statements do not include the adjustments that would be necessary if the Group and Company were unable to continue as a going concern.

New and amended standards adopted by the Group:

There have been no amendments with effect from 1 January 2015 adopted by the Group. The following standards have been published and are effective for periods beginning after 1 January, 2015 but had no significant impact on the Group:

 

IFRS 10 Consolidated Financial Statements	This is a new standard that replaces existing guidance on this area and introduces new criteria for determining whether an entity should be consolidated within the results of the Group, with the key determinant now being whether the Group controls the entity (i.e. has the power to direct the level of returns the entity makes, and whether the Group receives variable returns from the Group.	Periods beginning on / after 1 January2013
IFRS 11 Joint Arrangements	As with the above, this is a new standard, which reduces the number of categories of and therefore options for accounting for joint arrangements. Joint ventures are accounted for using the equity method, and a joint operator in a joint operation will recognise its share of assets, liabilities, revenues and expenses in its own financial statements. The previous accounting policy choice has been removed.	Periods beginning on / after 1 January 2013
IFRS 12 Disclosure of Interests in Other Entities	This new standard sets out the disclosure requirements in the financial statements in respect of IFRS 10 and IFRS 11 The key additional disclosure above those already required under existing standards, is that additional information is required on the nature, risks and financial effects of the Company's interests in other entities.	Periods beginning on / after 1 January 2013
IAS 19 Employee Benefits	A further amendment to IAS 19R is designed to clarify the application of the standard to plans that require employees or third parties to contribute towards the cost of benefits. Contributions that are linked to service, but do not vary with the length of the employee service are to be deducted from the cost of benefits earned in the period that the service is provided. However, contributions that vary according to the length of service must be spread over the service period. Contributions not linked to service are reflected in the measurement of the balance sheet liability.	Periods beginning on / after 1 July 2014
IAS 36 Impairment of Assets	Some narrow scope amendments have been made to the Standard, which will impact entities who recognise or reverse an impairment loss on non-financial assets by altering some of the associated disclosure requirements.	Periods beginning on / after 1 January 2014
IAS 39 Financial Instruments: recognition and measurement	The amendment clarifies the accounting impact on hedge accounting when entities novate derivative contracts to central counterparties to reduce counterparty risk.	Periods beginning on / after 1 January 2014

 

New and amended standards not yet adopted by the Group:

The following standards and amendments to existing standards have been published and are effective for periods beginning after 1 January 2015 and have not been applied in preparing these consolidated financial statement.  None of these is expected to have a significant effect on the Group:

 

IFRS 15 Revenue from Contracts with Customers	The new standard for revenue replaces IAS 18, and will have a significant impact on some entities. The changes could have an impact on the timing of when revenue is recognised and the period over which it is recognised as well as on the financial statement disclosures.	Periods beginning on / after 1 January 2017
IFRS 9 Financial Instruments	This is a new accounting standard that introduces a new classification approach for financial assets and liabilities. The previous four categories for financial assets will be reduced to three, being fair value through profit and loss, fair value through other comprehensive income and amortised cost, and financial liabilities will be measured at amortised cost or fair value through profit and loss.  This may result in additional gains or losses being recognised in the Income.	Periods beginning on / after 1 January 2018
IFRS 16 Leases	This is a new accounting standard which requires lessees to recognise nearly all leases on the balance sheet which will reflect their right to use an asset for a period of time and the associated liability for payments.	Periods beginning on / after 1 Jan 2019

Basis of consolidation

The consolidated financial information incorporates the financial information of the Company and entities controlled by the Company (its subsidiaries) 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. The excess of the cost of acquisition over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill. 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.

 

Business combination

The acquisition of subsidiaries is accounted for using the acquisition method. Identifying the acquirer in a business combination is based on the concept of 'control'.  However in certain circumstances the positions may be reversed and it is the legal subsidiary entity's shareholders who effectively control the combined Group even though the other party is the legal parent.  IFRS 3 requires, in a business combination effected through an exchange of equity interests, all relevant facts and circumstances be considered to determine which of the combining entities has the power to govern the financial and operating policies of the other entity.  These combinations are commonly referred to as 'reverse acquisitions'.

 

For each business combination, the cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree. Transaction costs are expensed directly to the Statement of Comprehensive Income. The acquiree's identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 are recognised at their fair value at the acquisition date. Where the Group has acquired assets held in a subsidiary undertaking that do not meet the definition of a business combination, purchase consideration is allocated to the net assets acquired and the interests of non-controlling shareholders are initially measured at their proportionate share of the acquiree's net assets.

 

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for the sale of crude oil and services provided in the ordinary course of business, net of discounts and sales related taxes. Revenue is recognised when goods are delivered and title has passed when the oil is transferred to the Petroleum Company of Trinidad & Tobago ("Petrotrin") pipelines, at which point revenue will be recognised.  Petrotrin are the group's only customer.

Interest income is accrued on a time basis, by reference to the principal outstanding and the interest rate applicable, unless collectability is in doubt.

 

Share-based payments

The Group operates a number of equity-settled, share-based compensation plans comprised of warrants, options and long term incentive plans ("LTIP") 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 payment is recognised as an expense.

 

 

The total amount to be expensed is determined by reference to the fair value of the options 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 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 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.

 

Where the services provided relate solely to the issue of share capital, the expense will be charged to equity within the share premium account.

 

The Company granted employees 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.

 

Foreign currency translation

 

(a)                                                           Functional and presentation currency

 

The functional currency of the Group operating entity is Trinidad & Tobago Dollars ("TTD") as this is the currency of the primary economic environment in which the entities operate. The presentation currency is United States Dollars ("USD") which better reflects the Group's business activities and improves ability of users of the financial statements to compare financial results with others in the International Oil and Gas industry. The Statement of Financial Position is translated at the closing rate and Statement of Comprehensive Income is translated at the average rate for the period. The following exchange rates have been used in the preparation of these financial statements:

 

	2015		2014
	USD	£	USD	£
Average rate TTD= USD/£*	6.354	9.784	6.385	10.523
Closing rate TTD= USD/£	6.420	9.594	6.359	9.934
(*): £ means Great British Pound ("GBP")

(b)                                                          Transactions and balances

 

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of comprehensive income.

 

Intangible assets

 

(a)        Exploration and evaluation assets

i)    Capitalisation

Exploration and Evaluation assets are initially classified as intangible assets. Such costs include those directly associated with an exploration area. Upon discovery of commercial reserves capitalisation is recognised within Property, Plant and Equipment.

Oil and natural gas exploration and evaluation 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 exploration and evaluation of assets includes:

ii)    License and property acquisition costs

Exploration and property leasehold acquisition costs are capitalised within exploration and evaluation assets.

iii)   Exploration and evaluation 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 the 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, exploration and evaluation expenditures are written off as a dry hole when that determination is made.

Once commercial reserves are found, exploration and evaluation assets are tested for impairment and transferred to development tangible and intangible assets as applicable. No depreciation and/or amortisation are charged during the exploration and evaluation phase.

iv)   Impairment

 

Exploration and evaluation 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 exploration and evaluation assets' carrying amount exceed their recoverable amount. The recoverable amount is the higher of the exploration and evaluation assets' fair value less costs to sell and their value in use. For the purposes of assessing impairment, the exploration and evaluation 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.

·    Whether substantive expenditure on further exploration and evaluation in the specific area is budgeted or planned.

·    Whether exploration and evaluation 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.

·    Whether sufficient data exist to indicate that, although a development in the specific area is likely to proceed, the carrying amount of the exploration and evaluation asset is unlikely to be recovered in full from successful development or by sale.

 

(b)        Goodwill

Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interest over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognised in profit or loss.

 

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Company's cash-generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.

 

Property, plant and equipment

 

(a)    Oil and gas assets

 

i)    Development and Producing Assets - Capitalisation

Acquisitions of oil and gas properties are accounted for under the purchase method where the transaction meets the definition of a business combination.

Transactions involving the purchase of an individual field interest, or a Group of field interests, that do not qualify as a business combination are treated as asset purchase, irrespective of whether the specific transactions involve the transfer of the field interests directly, or the transfer of an incorporated entity. Accordingly, the consideration is allocated to the assets and liabilities purchased on a relative fair value basis.

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 statement of comprehensive income and any shortfall between the proceeds and the carrying amount is recorded as a loss on disposal in the statement of comprehensive income.

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 Geological and Geophysical (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, deteriorating local conditions such that it becomes obsolete and unsafe to continue operations.

 

The carrying value is compared against the expected recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and the value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels (its cash generating unit) for which there are separately identifiable cash flows. The cash generating unit applied for impairment test purposes is generally the field. These fields are the same as that used for reserves reporting purposes.

 

iii)   Producing Assets - Depreciation, depletion and amortisation

 

The provision for depreciation, depletion and amortisation of developed and producing oil and gas assets are calculated using the unit of production method.

 

Oil and 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

 

Provision for decommissioning is recognised in full 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 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.

 

(b)    Non-oil and 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:

 

Buildings                                                                -           20 years

Plant and equipment                                               -           4 years

Other                                                                     -           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 statement of comprehensive income.

 

Repairs and maintenance are charged to the 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 are depreciated over the remaining useful life of the related asset.

 

Impairment of non-financial assets

 

At each reporting date, assets that have an indefinite useful life, for example, goodwill, are not subject to amortisation and are tested for impairment. 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 fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units). Non-financial assets other than goodwill which suffer 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 (AVCO) method. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses.

 

Materials and supplies are stated at lower of cost and net realisable value. Cost is determined using the average cost method.

 

Cash and cash equivalents

 

Cash and cash equivalents comprises cash in hand, deposits held at call with banks and other short-term highly liquid investments with original maturities of three months or less.

 

Trade receivables

 

Trade receivables are amounts due from customers for crude oil sold in the ordinary course of business. If collection is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets.

 

Trade receivables are recognised initially at fair value less provision for impairment. Appropriate provisions for estimated irrecoverable amounts are recognised in the statement of comprehensive income when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of sale.

 

Trade payables

 

Trade payables are initially recognised at fair value.

 

Current and deferred income taxes

 

The taxation expense for the period comprises current and deferred tax. Tax is recognised in the statement of comprehensive income, except to the extent that it relates to items recognised in equity. In this case the tax is also recognised directly in equity.

 

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the statement of financial position date 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 recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial information. However, the deferred income tax is 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 statement of financial position date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

 

Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

 

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority and the Company intends to settle the balances on a net basis.

 

Borrowings

 

Borrowings are recognised initially at fair value net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any differences between proceeds (net of transaction costs) and the redemption value is recognised in the statement of comprehensive income over the period of the borrowings using the effective interest method.

 

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the statement of financial position date.

 

General and specific borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

 

All other borrowing costs are recognised in comprehensive income in the period in which they are incurred.

 

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.

 

Employee retirement benefits

The Group provides retirement benefits for certain employees in the form of individual annuity policies. These are defined contribution plans.

 

For defined contribution plans, the Group pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The Group has no further payment obligations once contributions have been paid. The contributions are recognised as employee benefit expenses when they are due.

 

Non-current assets (or disposal Groups) held for sale

Non-current assets (or disposal Groups) classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell. Non-current assets and disposal Groups are classified as held for sale if their carrying amount will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset (or disposal Group) is available for immediate sale in its present condition. Management must be committed to the sale which should be expected to qualify for recognition as a completed sale within one year from the date of classification.

 

Leases

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases.  Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease.

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.

 

Operating segment information

 

The steering committee is the Group's chief operating decision-maker. Management has determined the operating segments 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 steering committee of Management which comprises; the Chief Executive Officer/ Country Manager, Chief Operating Officer and Chief Financial Officer, that makes strategic decisions in accordance with Board policy. 

 

Exceptional Items

 

Exceptional items are disclosed separately in the financial statements where it is necessary to do so to provide further understanding of the financial performance of the Group.  They are material items of income or expense that have been shown separately due to the non-recurring nature and the significance of their nature or amount.

 

2     Financial Risk Management

 

(a)  Financial risk factors

 

The Group's activities expose it to a variety of financial risks. The Group's overall risk management programme seeks to minimise potential adverse effects on the Group's financial performance.

 

Risk management is carried out by management. Management identifies and evaluates financial risks.

 

(b)  Market risk

 

(i)       Foreign exchange risk

 

The Group is exposed to foreign exchange risk primarily with respect to the United States dollar. Foreign exchange 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.

 

At 31 December 2015, if the functional currency had weakened/strengthened by 10 per cent against the US dollar with all other variables held constant, post- tax(loss)/profit for the year would have been $1.0 million (2014: $1.8 million) lower/higher, mainly as a result of foreign exchange gain/losses on translation of US dollar-denominated borrowings and sales.

 

(ii)      Price risk

 

The Group is exposed to commodity price risk regarding its sales of crude oil which is an internationally traded commodity.

 

At 31 December 2015, if commodity prices had been 20 per cent higher/lower with all other variables held constant, post-tax (loss)/profit for the year would have been $10.0 million (2014: $12.0 million) lower/higher.

 

 (iii)    Interest rate risk

 

The Group's interest rate risk arises from borrowings. Borrowings issued at variable rates expose the Group to cash flow interest rate risk.

 

At 31 December 2015, if interest rates on foreign currency-denominated borrowings had been 1 per cent higher/lower with all other variables held constant, post-tax (loss)/profit for the year would have been $0.1 million (2014: $0.3 million) lower/higher, mainly as a result of higher/lower interest expense on floating rate borrowings.

 

 

(c)  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 and committed transactions. For banks and financial institutions, management determines the placement of funds based on its judgement and experience.

 

All sales are made to a state-owned entity - Petrotrin. As Petrotrin is state owned, credit risk is considered to be low.

 

(d)  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 is facing liquidity issues over its current liabilities which include borrowings, accounts payable, accruals and taxes.  The Groups' revenues have decreased considerably as a result of a continued decline in oil prices impacting the main source of revenue generation.  In addition, the Group's credit facility arrangement remains in default with Citibank Trinidad & Tobago Limited who has provided a moratorium on principal repayments of the $13.0 million outstanding until 27 May 2016, until the Group formalises its plan to repay. The Group has a working capital deficit of $34.6 million (2014: deficit $16.7 million).  Management has suspended investment in appraisal and development activities and is continuing to manage its relationships with the Bank and Suppliers in an effort to handle the liquidity issue. 

 

Management refers to the disclosures of note 1 "Going Concern" for more information regarding the factors considered by the Company in managing liquidity risk.  The table below analyses the Group's financial liabilities into relevant maturity groupings based on the remaining period at the statement of financial position to the contractual maturity date. The amounts disclosed are the contractual undiscounted cash flows.

 

	Less than 1 year	Between 2 and 5 years
	$'000	$'000
At 31 December 2015
Borrowings (including interest) (note 15)	13,900	--
Accounts payable, other provision, accruals and taxes (note 18,9)	48,703	--
At 31 December 2014
Borrowings (including interest) (note 15)	33,414	--
Accounts payable, accruals and taxes (note 18,9)	51,855	--

 

 

 

(e)  Capital risk management

 

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. At the end of 2015 the Citibank debt covenants were in default (note 15).

 

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 debt divided by total capital. Net debt is calculated as total borrowings (including 'current and non-current borrowings' as shown in the consolidated statement of financial position) less cash and cash equivalents. Total capital is calculated as 'equity' as shown in the consolidated statement of financial position plus net debt.

 

	2015	2014
	$'000	$'000
Total borrowings	13,000	33,000
Less: cash and cash equivalents	(8,200)	(33,084)
Net debt/(Funds)	4,800	(84)
Total equity	17,609	78,756
Total capital	22,409	78,672
Gearing ratio	21.42%	(0.11)%

 

Fair value estimation

 

The carrying values of trade receivables (less impairment provision) and payables are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments.

 

3     Critical Accounting Estimates and Assumptions

 

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

 

Management makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. 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) Income taxes

 

Some judgement is required in determining the provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain. Management recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

 

(b) Recoverability of deferred tax assets

 

Deferred tax assets are recognised only to the extent it is considered probable that those assets will be recoverable. This involves an assessment of when those deferred tax assets 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 and is therefore inherently uncertain. To the extent assumptions regarding future profitability change, there can be an increase or decrease in the level of deferred tax assets recognised which can result in a charge or credit in which the change occurs. 

 

(c) Provision for decommissioning costs

 

This provision is significantly affected by changes in technology, laws and regulations which may affect the actual cost 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 to the local oil and gas industry. The provision has been estimated using a discount rate of 3.9 per cent (2014: 3.9 per cent) and a core inflation rate of 3 per cent (2014: 3 per cent). The impact in 2015 of a 1 per cent change in these variables is as follows:

 

 

 

 

	Statement of Financial Position Obligation	Statement of Comprehensive Income/Expense
	2015	2015
	$'000	$'000
Discount rate
1 per cent increase in assumed rate	(6,111)	76
1 per cent decrease in assumed rate	7,350	(173)
Inflation rate
1 per cent increase in assumed rate	8,156	299
1 per cent decrease in assumed rate	(6,797)	(262)

 

 

(d) 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 become available. The Group estimated its own commercial reserves in 2014 and 2015 based on 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 Group's reserve estimates are also evaluated periodically by independent external reserve evaluators, the last independent external reserve valuation was done in 2012.

 

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 exploration and evaluation assets, oil and gas properties, property, plant and    equipment, and goodwill may be affected due to changes in estimated future cash flows.

-    Depreciation and amortisation charges in profit or loss may change where such charges are            determined using the unit of production method, or where the useful life of the related assets            change.

-    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.

-    The recognition and carrying value of deferred tax assets may change due to changes in the            judgements regarding the existence of such assets and in estimates of the likely recovery of such    assets.

 

During 2015 all subsidiaries onshore and offshore 2P reserve estimates were re-evaluated by management and approved by the Board of Directors. In 2014 management re-evaluated the reserve estimates for all assets. 

 

(e) Farm outs and lease operatorship agreements

 

The Group financial statements for its farmout and lease operatorship agreements on the basis that they will be renewed upon expiry. If any of these farmout or lease operatorship agreements are not renewed or renewed on disadvantageous terms this may severely impact the profitability and ongoing operations of the Group.

 

 

 

 

(f)  Share-based payments

 

Management is required to make assumptions in respect of the inputs used to calculate the fair values of share-based payment arrangements which include expected volatility, risk free interest rate and current share price.

 

(g) Impairment of property, plant and equipment

 

Management performs impairment assessments on the Group's property, plant and equipment once there are indicators of impairment with reference to IAS 36:  Impairment of Assets and in accordance with the accounting policy stated in note 1. In order to test for impairment, the higher of fair value less costs to sell and values in use calculations are prepared which require arm's length offers and an estimate of the timing and amount of cash flows expected respectively to arise from the CGU, cash generating unit.  A CGU represents an individual field held by Trinity.

 

During 2015 an impairment charge was recognised on the Group's property, plant and equipment of $ 2.6 million (2014: $96.2 million) see note 5, resulting in the carrying amount of the respective CGUs being written down to their recoverable amount.

 

As part of this assessment, management has carried out an impairment test on the oil and 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 Fair Value Less Costs to Sell ("FVLCTS") and value in use ("VIU").  The FVLCTS is the amount that a market participant would pay for the CGU less the cost to sell. .  The FVLCTS approach utilised signed sale and purchase agreements as well as formal offer letter for the sale of certain CGU's of the Group.  For the VIU calculations, the period over which management has projected its cash flow forecast, ranges between a 9-16 year economic life based on the production profile. 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 value in use assessment involves judgement as to the likely commerciality of the asset; its proven and probable ('2P') reserves which are estimated using standard recognised evaluation techniques on a fully funded basis; future revenues and estimated development costs pertaining to the CGU's; and a discount rate utilised for the purposes of deriving a recoverable value.

 

If the price deck used in the impairment calculation had been 10 per cent lower than management's estimates at 31 December 2015, the Group would have no changes in impairment of Oil and Gas assets (2014: $ 17.4 million).  If the price deck used in the impairment calculation had been 10 per cent higher than management's estimates at 31 December 2014, the Group would have no change in impairment of Oil and Gas assets in 2015 (2014: $20.4 million).

 

Price Strip	2016E	2017E	2018E	2019E	2020E	2021E	2022E	2023E	2024E
Bloomberg	42.7	47.1	50.2	52.7	54.2	55.2	55.9	56.3	56.7

 

If the estimated cost of capital of 10 per cent (2014: 10 per cent) used in determining the post-tax discount rate for the CGU's had been 1 per cent lower than management's estimates the Group would have no change in its impairment for 2015 (2014: $3.1 million) against Oil and Gas assets within property, plant and equipment.  If the estimated cost of capital had been 1 per cent higher than management's estimates the Group would have recognised no change in 2015 (2014: $2.9 million).

 

(h)    Impairment of intangible exploration and evaluation assets

 

The Group reviews the carrying values of intangible exploration and evaluation assets when there are impairment indicators which would tell whether an exploration and evaluation asset has suffered any impairment, in accordance with the accounting policy stated in note 1.  The amounts of intangible exploration and evaluation assets represent the costs of active projects the commerciality of which is unevaluated until reserves can be appraised.

 

In 2015 an impairment review was carried out and an impairment loss recognised of $0.1 million, there were no further impairments losses realised against the carrying values of the Group's exploration and evaluation assets. 

 

In 2014 the Group has utilised internal management expertise in determining that the exploration well EG-8 and the exploration costs accumulated in South Africa were impaired (note 6).  An impairment charge of $23.5 million arose in the Trintes and in the South Africa CGU's during 2014, resulting in the full impairment of the Trintes EG-8 exploration well of $22.6 million and South Africa exploration costs of $0.9 million.

 

(i)     Provision for restructuring

 

Management is required to make assumptions in respect of the assessment used to arrive at the restructuring costs. The provision for restructuring includes the cost of severance and redundancies in accordance with the laws of Trinidad and Tobago where the restructuring is expected to take place.

 

4    Segment Information

 

Management have considered the requirements of IFRS 8, in regard to the determination of operating segments, and concluded that the Group has only one significant operating segment being the production, development and exploration and extraction of hydrocarbons.

 

All revenue is generated from sales to one customer in Petrotrin.  All non-current assets of the Group are located in Trinidad & Tobago.

 

5    Property, Plant and Equipment

	Plant & Equipment	Land & Buildings	Oil & Gas Assets	Other	Total
	$'000	$'000	$'000	$'000	$'000
Year ended 31 December 2015
Opening net book amount at 1st January 2015	4,974	2,334	78,347	--	85,655
Additions	528	(46)	530	--	1,012
Impairment 1 (note 28)	--	--	(2,559)	--	(2,559)
Transferred to available for sale (note 14)	(877)	(416)	(29,306)	--	(30,599)
Adjustment to decommissioning estimate (note 16)	--	--	853	--	853
Depreciation, depletion and amortisation charge for year	(659)	(243)	(7,317)	--	(8,219)
Closing net book amount at 31 December 2015	3,966	1,629	40,548	--	46,143
At 31 December 2014
Cost	11,982	2,696	248,473	336	263,487
Accumulated depreciation, depletion, amortisation and impairment	(8,016)	(1,067)	(207,925)	(336)	(217,344)
Closing net book amount	3,966	1,629	40,548	--	46,143

Note (¹): An impairment loss of $2.6 million was recognised in respect of one CGU, (see note 3 (g), (2014: $96.2 million) as a result of the carrying value being higher than the recoverable amount. The recoverable amount was determined by utilising its fair value less costs to sell. For the 2014 impairment, management utilised the VIU approach which included a production profile based on proven and probable reserves estimates and a range of assumptions, including third party oil price assumptions and a discount rate assumption of 10 per cent.

 

 

 

 

	Plant & Equipment	Land & Buildings	Oil & Gas Assets	Other	Total
	$'000	$'000	$'000	$'000	$'000
Year ended 31 December 2014
Opening net book amount at 1st January 2014	6,133	2,558	168,901	--	177,592
Additions	40	(106)	12,007	--	11,941
Impairment (note 28)	--	--	(96,242)	--	(96,242)
Transferred to available for sale	--	--	(672)	--	(672)
Adjustment to decommissioning estimate (note 16)	--	--	8,156	--	8,156
Depreciation, depletion and amortisation charge for year	(1,270)	(151)	(14,914)	--	(16,335)
Translation difference	71	33	1,111	--	1,215
Closing net book amount at 31 December 2014	4,974	2,334	78,347	--	85,655
At 31 December 2014
Cost	12,260	3,125	275,284	336	291,005
Accumulated depreciation, depletion, amortisation and impairment	(7,357)	(824)	(198,048)	(336)	(206,565)
Translation difference	71	33	1,111	--	1,215
Closing net book amount	4,974	2,334	78,347	--	85,655

 

 

6      Intangible Assets

 

The carrying amounts and changes in the year are as follows:

	Exploration and evaluation assets $'000	Total $'000
At 1 January 2015	25,676	25,676
Additions	1,206	1,206
Impairment (note 28)	(131)	(131)
At 31 December 2015	26,751	26,751
At 1 January 2014	59,002	59,002
Additions	4,970	4,970
Exploration cost write-off	(14,929)	(14,929)
Impairment (note 28)	(23,430)	(23,430)
Translation difference	167	167
At 31 December 2014	25,676	25,676

 

Notes: In 2015 an impairment loss of $0.1 million was recognised in relation to certain costs within Intangible assets following an impairment review on intangible assets. In 2014 the El Dorado exploration well costing $ 14.9 million was written off as a dry hole. The EG-8 exploration well costing $22.6 million and South Africa exploration costs of $0.9 million, were impaired following an impairment review.

 

7     Trade and Other Receivables

     

	Group		Company
	2015 $'000	2014 $'000	2015        $'000	2014 $'000
Due after more than one year
Amounts due from Group companies	--	--	10,813	10,106
Due within one year
Trade receivables	1,709	3,882	--	--
Less: provision for impairment of trade receivables	--	--	--	--
Trade receivables - net	1,709	3,882	--	--
Prepayments	852	3,986	63	79
VAT recoverable	7,805	12,144	1,113	1,027
Other receivables	227	1,978	--	--
	10,593	21,990	1,176	1,106

     

The Company provides funding to other Group companies.

 

The fair value of trade and other receivables approximate their carrying amounts.

 

At 31 December 2015, trade receivables of $1.7 million (2014: $3.9 million) were fully performing. Trade receivables that are less than three months past due are not considered impaired. At 31 December 2015, no trade receivables (2014: nil) were impaired and provided for.  At the end of 2015 and impairment loss of $1.0 million was recognised against other receivables from relating NIKO Resources Limited who have ceased operations in Trinidad and Tobago (note 28)

 

Ageing analysis of these trade receivables is as follows:

	2015 $'000	2014 $'000
Up to 3 months	1,709	3,882
	1,709	3,882

 

The carrying amount of the Group's trade and other receivables are denominated in the following currencies:

	2015 $'000	2014 $'000
USD	1,358	3,606
GBP	1,730	1,562
Trinidad & Tobago Dollar ("TTD")	7,505	16,822
	10,593	21,990

 

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:

 

	Group		Company
	2015	2014	2015	2014
	$'000	$'000	$'000	$'000
Trade receivables
Counterparties without external credit rating:
Existing customers (more than 6 months) with no defaults in the past	1,709	3,882	--	--
All trade receivables are with the Group's only customer, Petrotrin.

8    Inventories 

	Crude oil	Materials and supplies	Total
	$'000	$'000	$'000
At 1 January 2015	346	11,563	11,909
Inventory movement	(186)	(5,278)	(5,464)
Impairment (note 28)	--	(2,483)	(2,483)
At 31 December 2015	160	3,802	3,962
At 1st January 2014	435	11,594	12,029
Inventory movement	(89)	(31)	(120)
At 31 December 2014	346	11,563	11,909

 

 

The cost of inventories recognised as an expense and included in operating expenses amounted to $0.1 million (2014: $0.3 million). At the end of 2015 an impairment loss of $2.5 million (2014: nil) was recognised against the materials and supplies inventory.

 

 

9     Taxation Recoverable/(Payable)

	Group		Company
	2015	2014	2015	2014
	$'000	$'000	$'000	$'000
Taxation recoverable
Production Petroleum Tax ("PPT")/ Unemployment Levy ("UL")	192	548	--	--
Taxation payable
PPT/ UL	(1,561)	(1,596)	--	--
Corporation Tax	(2,228)	(1,883)	(1,614)	(1,160)
Supplemental Petroleum Tax ("SPT")	(19,640)	(15,002)	--	--
	(23,429)	(18,481)	(1,614)	(1,160)

 

 

10    Cash and Cash Equivalents

 

                

	Group		Company
	2015	2014	2015	2014
	$'000	$'000	$'000	$'000
Cash and cash equivalents	8,200	33,084	--	10
	8,200	33,084	--	10

 

Included within cash and cash equivalents are $ 3.1 million restricted cash which have been put aside in escrow for abandonment and environmental purposes in accordance with contractual obligations to be used any time during the existence of the contract.

 

 

11    Share Capital and Share Premium

 

		Number of shares No.	Ordinary shares   $'000	Share premium   $'000	Total     $'000
As at 1 January 2015		94,799,986	94,800	116,395	211,195
Movement		--	--	--	--
As at 31 December 2015		94,799,986	94,800	116,395	211,195
As at 1 January 2014		94,799,986	94,800	116,395	211,195
Movement		--	--	--	--
As at 31 December 2014		94,799,986	94,800	116,395	211,195

 

 

12    Share Warrants

 

The Group's policy with respect to equity-settled share-based payment transactions is to measure the value of the good or service received with the corresponding increase in equity at the fair value of the services received. If the Group cannot estimate reliably the fair value of the good or services received it then shall measure their value and the corresponding increase in equity indirectly by reference to the fair value of the equity instrument.

 

	2015	2014
	$'000	$'000
Issued
Oriel Securities Limited	71	71
	71	71

 

Oriel Securities Limited warrants

 

Oriel Securities Limited ('Oriel') was appointed to assist TEPL in introducing potential subscribers for private placing of new ordinary shares in 2011 (the 'Placing'). In consideration for the services under the engagement, and subject to receipt of the gross proceeds as a result of the Placing, Trinity and Oriel agreed a fee in cash to the value of $150,000.

 

In addition to the fees above, Oriel was granted an option by TEPL over shares equivalent in value to 0.25 per cent (one quarter of one per cent) of the value of TEPL following the Placing, such option to be exercisable at the share price at which the new funds were raised in the Placing. The option can be exercised between the 1^st and 5^th anniversary of the option being granted or if later on the 1^st anniversary of any flotation.

                       

The Group recognised the warrants by estimating the services received at fair value at the date of the transaction. In arriving at the fair value of the services received an estimate was received from Oriel indicating that the cost of the service had no warrant been included would have been 1.5 per cent of the Placing. As the cost is associated with the raising of capital, this expense has been recognised as a deduction from share premium.

 

Following the acquisition on 14 February 2013 Oriel has confirmed that it does not intend to exercise its 83 Trinity Warrants; Oriel shall hold warrants over 62,027 shares with an exercise price of $5.60 per share (based on the same conversion ratio of 747.8 new shares).

 

13   Merger and Reverse Acquisition Reserves

	Reverse Acquisition Reserve	Merger Reserve	Total
	$'000	$'000	$'000
At 1 January 2015	(89,268)	75,467	(13,801)
Movement	--	--	--
Translation differences	--	--	--
At 31 December 2015	(89,268)	75,467	(13,801)
At 1st January 2014	(89,268)	74,808	(14,460)
Movement	--	--	--
Translation differences	--	659	659
At 31 December 2014	(89,268)	75,467	(13,801)

 

The issue of shares by the Company as part of the reverse acquisition 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.

The insertion of the Company as the new parent to the Group has been accounted for using business combination accounting as described in note 1. The reverse acquisition difference recorded in the consolidated financial statements represents the difference in accounting for reverse acquisition transactions.

 

 

14   Non-current assets held for sale

 

Certain assets and liabilities relating to Trinity's oil and gas fields owned and operated by its indirect subsidiary Trinity Exploration and Production (Trinidad and Tobago) Limited ("TEPTTL") have been presented as held for sale following approval by management and Board of Directors by way of a Formal Sales Process ("FSP") on 8 April 2015.  On 1 February 2015 The WD-16 block was sold and the carrying value of $0.1 million has been removed from the assets held-for-sale.  The sale and purchase agreement for Tabaquite was terminated during 2015 with Leni Gas and Oil. The assets held for sale at 31 December 2015 relate to the onshore and west coast assets of the Group.

 

(a)  Assets of the disposal Group classified as held for sale

 

	2015	2014
Property, plant & equipment	$'000	$'000
Net Book Value at 1 January	672	--
Movement	(780)	--
Transferred from property, plant & equipment	30,599	672
Net Book Value	30,491	672

 

(b)  Liabilities of the disposal group classified as held for sale

 

	2015	2014
Other provisions	$'000	$'000
Decommissioning provision	21,927	--

 

In accordance with IFRS 5, the assets and liabilities held for sale criteria were met between the statement of financial position date and the date that the consolidated financial statements were authorised.

 

15   Borrowings

	2015	2014
	$'000	$'000
Non-current portion:
Citibank (Trinidad & Tobago) Limited	--	--
Total	--	--
Current portion:
Citibank (Trinidad & Tobago) Limited	13,000	33,000
Total	13,000	33,000

 

Drawn Loan Facilities

 

Citibank (Trinidad & Tobago) Limited Loan 1

 

Joint Lenders: Citibank (Trinidad & Tobago) Limited and Citicorp Merchant Bank Limited

Borrower: Trinity Exploration and Production (Trinidad & Tobago) Limited

 

The key terms of the loan are as follows:

·    Principal amount $20.0 million

·    Interest rate is set at three month US LIBOR plus 600 basis points per annum. Interest payable monthly in arrears commenced 20 March 2013

·     Quarterly Interest payment are up to date and were paid during the year: March, June, September and December 2015

·    Debenture over the fixed and floating assets of Trinity Exploration and Production (Trinidad and Tobago) Limited and its subsidiaries.

·    Principal repayment in equal quarterly instalments commencing on 20 March 2013 and ending on 20 December 2017

·      Principal repayments: 2015: nil (2014: $4.0 million).  In 2015, the closing outstanding balance was $12.0 million.

 

Citibank (Trinidad & Tobago) Limited Loan 2

 

Lender: Citibank N.A. (acting through its international banking facility) Citibank (Trinidad & Tobago) Limited

Joint Borrowers: Trinity Exploration and Production (Trinidad and Tobago) Limited and Trinity Exploration and Production (Galeota) Limited

 

The Group negotiated a floating rate medium term facility on 17 August 2013 of $25.0 million with Citibank (Trinidad & Tobago) Limited 'Citibank' which at 31 December 2014 was fully drawdown. 

 

The key terms of the loan are as follows:

 

·      Principal amount $25.0 million. Initial drawdown on 22 January 2014 of $5.0 million and a second drawdown of $20.0 million on 4 August 2014

·      Interest rate is set at three month US LIBOR plus 575 basis points per annum. The negotiated principal repayments in two initial quarterly instalments of 16.0 per cent following 6.5 per cent to 7.0 per cent quarterly instalments commencing on 21 November 2014 and ending on 21 August 2017

·      Quarterly Interest payment are up to date and were paid during the year: February, May, August and November 2015

·      Debenture over the fixed and floating assets of Trinity Exploration and Production (Trinidad & Tobago) Limited and its subsidiaries.

·      Principal repayments: 2015: $20.0 million (2014: $4.0 million).  In 2015, the closing outstanding balance was $1.0 million.

 

 

Financial covenants applicable to each of the above facilities are:

·    Minimum debt service coverage 1.4:1

·    Maximum total debt to EBITDA-Operating taxes 2.75:1

·    Minimum EBITDA-Operating taxes to Interest Expense 1.5:1

 

The carrying value of borrowings is not materially different from their fair value. The entire borrowings since 2014 have been classified as current due to the default in the debt service coverage.  At the end of 2015 all three financial covenants were in default.  Citibank is aware of the default and has continued to support the Company whilst the FSP is in progress with a moratorium on repayment of the remaining principal agreed until 27 May 2016.

 

 

Analysis of net debt

	At 1 January 2015 $'000	Cash flow $'000	At 31 December 2015 $'000
Cash and cash equivalents	33,084	24,884	8,200
Financial liabilities - borrowings current and non-current	(33,000)	(20,000)	(13,000)
	84	4,884	(4,800)

 

16   Provision and Other Liabilities

 

   Non-Current:

 

	Potential  Claim	Decommissioning cost	Total
	$'000	$'000	$'000
Year ended 31 December 2015
Opening amount as at 1 January 2015	1,270	38,505	39,775
Adjustment to estimates (note 5)	--	853	853
Transferred to liabilities held for sale	--	(21,927)	(21,927)
Unwinding of discount (note 20)	--	1,524	1,524
Translation differences	--	(394)	(394)
Closing balance at 31 December 2015	1,270	18,561	19,831
Year ended 31 December 2014
Opening amount as at 1 January 2014	--	29,027	29,027
Adjustment to estimates (note 5)	--	8,156	8,156
Record potential claim	1,270	--	1,270
Unwinding of discount (note 20)	--	1,167	1,167
Translation differences	--	155	155
Closing balance at 31 December 2014	1,270	38,505	39,775

 

 

   Current:

	Restructuring Costs	Total
	$'000	$'000
Year ended 31 December 2015
Opening amount as at 1 January 2015	-	-
Provision for restructuring (note 28)	1,930	1,930
Closing balance at 31 December 2015	1,930	1,930

 

 

Potential claim

The amounts represent a provision for a potential claim against a subsidiary of the Group by a supplier of services in the oil and gas industry. The charge is recognised in the statement of comprehensive income within 'exceptional items'. In management's opinion these claims will not give rise to any significant losses beyond the amounts provided at 31 December 2014.  The potential claim is anticipated to be settled no later than September 2016.

 

Decommissioning cost

The Group operates Oil and Gas fields and this cost represents an estimate of the amounts required for abandonment of the Group's wells, platforms and pipeline infrastructures. The amounts are calculated based on the provisions of existing contractual agreements with Petrotrin. 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 - 3 per cent (2014: 3 per cent) 

b.    Risk free rate - 3.9 per cent (2014 3.9 per cent)

c.    Estimated market value/decommissioning cost

d.    Estimated life of each asset

                         

See note 3(c) for the rates used and sensitivity analysis.

 

Adjustment to estimates

The Group makes provision for the cost of decommissioning its oil and gas infrastructure at the completion of their useful lives. Decommissioning is estimated to be required in various fields during 2024-2036. In the current year there was an increase in the provision mainly due to a revision of assumptions used in determining the estimated cost to decommission the Group's tank farm facilities of $0.9. There has been a corresponding increase in the carrying amount of property plant and equipment (note 5).

 

17   Deferred Income Taxation

 

Group

The analysis of deferred tax assets is as follows:

	2015	2014
	$'000	$'000
Deferred tax assets:
To be recovered in more than 12 months	(2,460)	(27,630)
To be recovered in less than 12 months	--	--
Deferred tax liabilities:
To be settled in more than 12 months	3,308	--
To be settled in less than 12 months	--	3,778
Net deferred tax liability/(assets)	848	(23,852)

 

The movement on the deferred income tax is as follows:

	2015	2014
	$'000	$'000
At beginning of year	(23,852)	(18,306)
Movement for the year	24,766	3,849
Unwinding of deferred tax on fair value uplift	(66)	(9,395)
Net deferred tax liability/(assets)	848	(23,852)

 

 

Deferred tax assets and liabilities are only offset where there is a legally enforceable right of offset and there is an intention to settle the balances net. The deferred tax balances are analysed below:

 

	2013	Movement	2014	Movement	2015
	$'000	$'000	$'000	$'000	$'000
Deferred tax assets
Acquisition	(33,436)	--	(33,436)	--	(33,436)
Tax losses recognised	(31,257)	--	(31,257)	--	(31,257)
Tax losses derecognised	--	37,063	37,063	25,170	62,233
	(64,693)	37,063	(27,630)	25,170	(2,460)
Deferred tax liabilities
Accelerated tax depreciation	14,778	--	14,778	(404)	14,374
Non-current asset impairment	--	(33,214)	(33,214)	--	(33,214)
Acquisitions	19,580	--	19,580	--	19,580
Fair value uplift	12,029	(9,395)	2,634	(66)	2,568
	46,387	(42,609)	3,778	(470)	3,308

 

Deferred income tax assets are recognised for tax loss carry-forwards to the extent that the realisation of the related tax benefit through future taxable profits is probable.  Deferred tax assets of $25.2 million have been derecognised as recoverability is now considered less than probable, these continue to be available for realisation whenever future taxable profits are probable. The Group has unrecognised tax losses amounting to $200.6 million which have no expiry date.  Deferred tax liabilities have reduced by $0.5 million as the carrying values of property, plant and equipment and intangible assets which gave rise to the temporary  differences have been written down to their recoverable amount.

 

 

18   Trade and Other Payables

 

	Group		Company
	2015 $'000	2014 $'000	2015 $'000	2014 $'000
Trade payables	15,900	16,712	411	26
Accruals	5,008	8,888	183	142
VAT payable	230	433	--	--
Other payables	2,150	1,778	265	--
Amounts due to related parties (note 23 (d))	1,986	5,563	--	979
	25,274	33,374	859	1,147

 

19   Operating (Loss)/ Profit After Exceptional Items

 

	2015 $'000	2014 $'000
Operating (loss)/ profit before exceptional items is stated after taking the following items into account:
Depreciation, depletion and amortisation (note 5)	8,219	16,335
Employee costs (note 26)	13,673	12,781
Operating lease rentals	2,315	3,122
Inventory recognised as expense, charged to operating expenses	116	262

 

Auditors' remuneration

During the year the Group (including its overseas subsidiaries) obtained the following services from the Company's Auditors as detailed below:

	2015 $'000	2014 $'000
Fees payable to the Company's auditors' and its associates:
For Audit of the parent Company and consolidated financial statements	73	73
For other services:      Audit of Company's subsidiaries	162	173
Audit related assurance services - interim review	50	52
Total assurance	285	298
Tax advisory	75	--
Other advisory	5	48
Total auditors' remuneration	365	346

 

All fees are in respect of services provided by PricewaterhouseCoopers LLP ("PwC"). The independence and objectivity of the external auditors is considered on a regular basis by the Audit Committee, with particular regard to the level of non-audit fees incurred.

 

20   Finance Costs

	2015	2014
	$'000	$'000
Decommissioning (note 16)	1,524	1,167
Interest on taxes	4,079	2,134
Interest on loans	1,072	1,850
	6,675	5,151

 

Interest on taxes $4.0 million (2014; 2.1 million) relate to interest accrued on late payment of corporation tax, supplemental petroleum taxes and petroleum profits taxes for 2015 and 2014.

 

21   Income Tax Expense

 

	2015	2014
	$'000	$'000
Current tax
Petroleum profits tax	(167)	1,075
Corporation tax	586	2,182
Supplemental petroleum tax	1,830	14,931
Deferred tax
Movement in asset due to tax losses (note 17)	25,170	37,063
Movement in liability due to accelerated tax depreciation (note 17)	(470)	(33,214)
Unwinding of deferred tax on fair value uplift	--	(9,396)
Translation difference	27	16
Income tax expense	26,976	12,657

 

The Group's effective tax rate varies from the statutory rate for UK companies of 20.25 per cent as a result of the differences shown below:

	2015	2014
	$'000	$'000
(Loss) /Profit before taxation	(33,457)	(128,788)
Tax charge at expected rate of 20.25 per cent (2014: 21.50 per cent)	(6,775)	(27,677)
Effects of:
Higher overseas tax rate	(11,626)	(43,157)
Profits not subject to tax	--	--
Disallowable expenses	39,524	123,498
Deferred tax asset not recognised	6,950	5,517
Tax loss generated not recognised	20,359	3,562
Tax losses utilised	4,400	8,111
Tax losses previously recognised	(25,170)	(66,693)
Supplemental petroleum tax	(1,146)	7,508
Green fund levy	180	83
Other differences	280	(95)
Tax charge	26,976	12,657

 

Taxation losses at 31 December 2015 available for set off against future taxable profits amount to approximately $205.0 million (2014: $171.3 million), with tax losses recognised of $4.4 million. 

 

22   Investment In Subsidiaries

	Company
	2015	2014
	$'000	$'000
Opening balance	44,513	94,401
Capital contribution relating to share based payment	262	212
Impairment	--	(50,100)
Closing balance	44,775	44,513

 

 

The investment in Group undertakings is recorded at cost which is the fair value of the consideration paid. In 2014 an impairment loss of $50.1 million was recognised on the investment in subsidiary as a result of property plant and equipment impairments recognised in the operating subsidiaries of the Group due to a sharp fall in oil prices and a downgrade in reserve estimates of certain fields (see note 5).

 

During 2015, 2 entities from the Trinity Group were wound up; Trinity Exploration and Production (Pletmos) Limited, a subsidiary of Trinity Exploration & Production (UK) Limited and Bayfield Energy Alpha Limited, a subsidiary of Bayfield Energy Limited   .

 

In December 2014 the Group restructured its Trinidadian subsidiaries with the aim of reducing the administrative costs associated with the operations of several individual subsidiaries.  On 15th December 2014 a vertical amalgamation was done with Antilles Resources Limited, NAKT Company Limited, Pioneer Petroleum Company Limited, Lennox Production Services Limited and Ten Degrees North Operating Company Limited ("TDNOCL").  The surviving entity following the vertical amalgamation was TDNOCL.

 

On 31 December 2014 a horizontal amalgamation was done between TDNOCL and Oilbelt Service Limited ("OSL") and the surviving entity following the restructuring was OSL, which holds the Group's onshore and west coast fields.

 

On 20 November 2014 Bayfield Energy (St Lucia) Limited was dissolved.

 

Listing of Subsidiaries 

 

The Group's principal subsidiaries at 31 December 2015 are listed below:

 

Name	Country of Incorporation	Nature of Business	Proportion of ordinary shares held by the Group (per cent)
Bayfield Energy Limited	UK	Holding Company	100 per cent
Trinity Exploration and Production (UK) Limited	UK	Holding Company	100 per cent
Trinity Exploration and Production Services (UK) Limited	UK	Service Company	100 per cent
Bayfield Energy do Brasil Ltda	Brazil	Dormant	100 per cent
Trinity Exploration & Production (Barbados) Limited	Barbados	Holding Company	100 per cent
Trinity Exploration and Production (Trinidad and Tobago) Limited	Trinidad & Tobago	Holding Company	100 per cent
Galeota Oilfield Services Limited	Trinidad & Tobago	Oil and Gas	100 per cent
Trinity Exploration and Production (Galeota) Limited	Trinidad & Tobago	Oil and Gas	100 per cent
Oilbelt Services Limited	Trinidad & Tobago	Oil and Gas	100 per cent
Ligo Ven Resources Limited	Trinidad & Tobago	Oil and Gas	100 per cent
Trinity Exploration and Production Services Limited	Trinidad & Tobago	Service Company	100 per cent
Tabaquite Exploration & Production Company Limited	Trinidad & Tobago	Oil and Gas	100 per cent
Trinity Exploration and Production (GOP) Limited	Trinidad & Tobago	Oil and Gas	100 per cent
Trinity Exploration and Production (GOP-1B) Limited	Trinidad & Tobago	Oil and Gas	100 per cent

 

23   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. The following are the major transactions and balances with related parties:

 

(a) Sales of services and loans issued to subsidiaries

	Group		Company
	2015 $'000	2014 $'000	2015 $'000		2014 $'000
Related party:
Well Services Petroleum Company Limited	1,407	142	--		--
Blanket Securities Limited	1,069	--	--		--
Blanket Securities Limited	1,075	--	--		--
Group subsidiaries:
Bayfield Energy Limited - loan	--	--	--	(89,840)
Bayfield Energy Alpha - loan	--	--	--		(535)
Trinity Exploration and Production Services (UK) Limited - loan	--	--	(328)		(62)
Trinity Exploration and Production (Galeota) Limited - loan Trinity Exploration and Production Services Limited	-- --	-- --	337 698		(71,194) --
	3,551	142	707		(161,631)

 

Related party sales transactions and loans issued to subsidiaries are exchanged at arm's length and are comparable to terms that would be available to third parties.

 

(b) Purchases of services

	Group		Company
	2015 $'000	2014 $'000	2015 $'000	2014 $'000
Purchases of services:
Related party:
Bayfield Energy Limited	--	--	--	--
Blanket Security Limited	906	794	--	--
Rigtech Services Limited	--	589	--	--
Well Services Petroleum Company Limited	291	9,265	--	--
Trinity Lift Boat Services Limited	--	52	--	--
Group subsidiaries:
Trinity Exploration and Production Services (UK) Limited	--	--	--	(267)
	1,197	10,700	--	(267)

 

Goods and services are bought from related entities on normal commercial terms and conditions, with the majority coming from the Well Services Group, which includes; Blanket Securities Limited, Rigtech Services Limited, Well Services Petroleum Company Limited, Trinity Lift Boat Services Limited and Trinity Infrastructure Construction Limited.

 

(c) Key management and Directors' compensation

 

Key management includes Directors' (executive and non-executive), the Chief Operating Officer and Chief Financial Officer.  The compensation paid or payable to key management for employee services is shown below:

	Group
	2015 $'000	2014 $'000
Salaries and short-term employee benefits	1,114	1,958
Post-employment benefits	76	137
Share-based payment (note 27)	150	217
	1,340	2,312

 

(d) Year-end balances arising from sales/purchases of services

	Group		Company
	2015 $'000	2014 $'000	2015 $'000	2014 $'000
Receivables from related parties:
Trinity Exploration and Production Services Limited	--	--	698	--
Trinity Exploration and Production (Galeota) Limited	--	--	992	655
Trinity Exploration and  Production Services (UK) Limited	--	--	9,123	9,451
	--	--	10,813	10,106
Payables to related parties:
Blanket Securities Limited	144	431	--	--
Rigtech Services Limited	(62)	328	--	--
Well Services Petroleum Company Limited	1,904	4,804	--	--
Trinity Infrastructure Construction Limited	--	--	--	4
Trinity Exploration & Production (UK) Limited	--	--	--	975
	1,986	5,563	--	979

 

During 2015 the Group has endeavoured to reduce the payables due to related parties through an exchange of casing and tubing.  An agreement has been established with the related party Well Services Petroleum Company Limited where the amount is being repaid over an eight month period ending May 2016.

 

Company Loans to subsidiaries

There were no impairments to Loan to subsidiaries in 2015. In 2014 an impairment review on the Company's loan receivables were carried out by comparing the carrying value of the loans to subsidiaries against their recoverable amount.  From the borrowers perspective the subsidiaries have been forgiven by Trinity and the obligation extinguished. The following are the loan receivable debt forgiven by Trinity:

 

	Company
	2015 $'000	2014 $'000
Trinity Exploration and Production (Galeota) Limited	--	71,194
Bayfield Energy Limited	--	89,840
Bayfield Energy Alpha Limited	--	535
	--	161,569

 

Group and Company

The receivables from related parties arise mainly from sale transactions and are due two months after the date of sales. The receivables are unsecured and bear no interest. No provisions are held against receivables from related parties (2014: nil). The payables to related parties arise mainly from purchase transactions and are due two months after the date of purchase. The payables bear no interest. 

(e) Loans from related parties: There are no loans from related parties

 

24   Financial Instruments by Category

 

The accounting policies for financial instruments have been applied to the line items below:

 

	Group		Company
	2015	2014	2015	2014
	$'000	$'000	$'000	$'000
Trade and other receivables - non current	--	--	10,813	10,106
Trade and other receivables - current	10,593	21,990	1,176	1,106
Cash and cash equivalents	8,200	33,084	--	10
	18,793	55,074	11,989	11,222

 

The only category of financial assets held by the Group are loans and receivables. There are no assets held at fair value through profit or loss, derivatives used for hedging and available-for-sale financial instruments.

 

	Group		Company
	2015	2014	2015	2014
	$'000	$'000	$'000	$'000
Borrowings	13,000	33,000	--	--
Amounts due to related party	--	--	--	979
Accounts payable and accruals	25,274	33,374	859	168
	38,274	66,374	859	1,147

 

The only category of financial liabilities held by the Group is liabilities at amortised cost. There are no liabilities held at fair value through profit or loss and derivatives used for hedging.

 

 

25   Commitments and Contingencies

 

a)   Commitments

 

There are commitments for decommissioning costs of the wells and facilities under the Group's agreements with Petrotrin, which have been provided for as described in note 16.

 

The Group leases vehicles, offices and photocopiers under cancellable operating lease agreements.  The lease terms are between 1 and 5 years, and the majority of lease agreements are renewable at the end of the lease period.  The lease expenditure charged to the income statement during the year is as follows:

 

	Group
	2015	2014
	$'000	$'000
Not later than 1 year	1,969	529
Later than 1 year and no later than 5 years	346	2,593
	2,315	3,122

     

b)   Contingent Liabilities

 

i.                                                                                                    One of the subsidiaries has received an assessment from the tax authority of Trinidad & Tobago namely, the Board of Inland Revenue ("BIR"), in respect of Supplemental Profits Tax. The subsidiary has filed a notice of objection with the BIR and until the matters are determined, the assessments raised are not considered final. No material unrecorded liabilities are expected to crystallise and accordingly no provision has been made in these financial statements.

 

ii.                                                                                                    A subsidiary Company is a defendant in certain legal proceedings. A claim was made against the subsidiary by Mora Ven Holdings limited. The claim being made was that the subsidiary bought the shares of Ligo Ven Resources Limited, a fellow subsidiary, at gross under-value. Management, after taking appropriate professional advice, is of the view that no material liabilities will crystallise and accordingly no provision has been made in the financial statements for any potential liabilities.

 

iii. The farmout agreement for the Tabaquite block (held by Coastline International Inc.) has expired. There may be additional liabilities arising when a new agreement is finalised, but these cannot be presently quantified as a new agreement has not yet been finalised by both parties which would agree any terms or conditions inherent the financial statements do not include any estimates of such liabilities.

 

iv.   Parent company guarantees:

(a)  A Letter of Guarantee has been established over the Point Ligoure-Guapo Bay-Brighton Block where a subsidiary of Trinity is obliged to carry out a Minimum Work Programme to the value of $8.4 million.  The guarantee shall be reduced at the end of each twelve month period upon presentation of all technical data and results of the Minimum Work Programme performed.  Trinity has submitted the technical data for reducing the performance guarantee at the end of 2015 and are awaiting a response.

 

(b)  A letter of Guarantee is in place with Citibank (Trinidad & Tobago) Limited for the full $25.0 million loan facility should there be a default.

 

v.    The Group has certain liabilities in respect of entering a rig share agreement for the Rowan Gorilla III which it used to drill the TGAL-1 well.  The agreement was made amongst four parties and the liabilities are joint and several.  The liabilities cannot be presently quantified and no estimates have been included in the financial statements. For 2015 the Group has recorded $0.06 million in cost and does not expect that these liabilities will be material.

 

vi.   The Group has certain decommissioning obligations in respect of the tank farm infrastructure in its Brighton Marine and Trintes fields; these have been provided for in the 2015 decommissioning obligation.

 

vii.  The group is party to various claims and actions.   Management have 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.

 

viii.  The UK subsidiaries have received an assessment from the tax authority of the United Kingdom namely, the Her Majesty's Revenue and Customs (HMRC), in respect of Value Added Tax claims. The subsidiaries have requested an independent reconsideration of the matters with the HMRC, the assessments raised are not considered final. No material unrecorded liabilities are expected to crystallise and accordingly no provision has been made in these financial statements

 

26   Employee Costs

Employee costs for the Group during the year	2015 $'000	2014 $'000
Wages and salaries	12,785	11,982
Other pension costs	544	636
Share based payment expense (note 27)	344	163
	13,673	12,781

 

Average monthly number of people (including executive and non-executive Directors') employed by the Group	2015 number	2014 number
Executive and non-executive Directors	3	7
Administrative staff	117	179
Operational staff	113	120
	233	306

 

27   Share Based Payments

 

 

	2015	2014
	$'000	$'000
At 1 January	11,834	11,523
Movement	344	163
Translation differences	--	148
At 31 December	12,178	11,834

 

 

During 2015 the Group had in place two share-based payment arrangements for its employees and Directors, the Share Option Plan and the Long Term Incentive Plan ('LTIP'). The charge in relation to these arrangements is shown below, with further details of each scheme following:

 

	2015	2014
	$'000	$'000
Share based payment expense:
Share option expense	187	21
Legacy share options adjustment	--	--
Long term incentive plan	157	142
	344	163

 

Share Option Plan

 

Share options are granted to Directors and to selected employees. The exercise price of the granted option is equal to management's best estimate of the market price 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.

                                      

At 31 December 2012, TEPL had 3,638 share options outstanding.  On 14 February 2013 following the completion of the acquisition, 120 of the 3,638 share options were exercised. The remaining 3,518 share options were surrendered in return for the grant by Trinity of new options. 747.8 new ordinary shares were issued for each TEPL share over which TEPL options were held. These options were treated as a modification to the original share option scheme.  The modification did not increase the fair value of the equity instruments granted, measured immediately before and after the modification, as a result there was no incremental fair value.  At the point of acquisition Bayfield had 4,447,546 share options, following completion of the acquisition and share consolidation, the newly combined Group share options outstanding of:

 

(a) Legacy Bayfield - 444,754 share options

(b) Legacy TEPL - 2,630,759 share options

 

On 29 May, 2013 the Group issued 1,275,660 options at an exercise price of GBP1.20 per option to certain employees. These options were valued at grant date using a Black-Scholes option pricing model. During 2014 certain employees who had share options departed forfeiting their options.

Movement in the number of options outstanding and their related weighted average exercise prices are as follows:

	2015		2014
	Average exercise price per share	Number of Options	Average exercise price per share	Number of Options
At 1 January	GBP1.01	3,871,419	GBP1.14	4,256,419
Lapsed	GBP(1.12)	(1,896,335)	--	--
Forfeited	--	--	GBP(1.15)	(385,000)
At 31 December	GBP0.82	1,975,084	GBP1.01	3,871,419

 

 

Share Options outstanding at the end of the year have the following expiry date and exercise prices:

		2015		2014
Grant-Vest	Expiry Date	Exercise price per share options	Number of Options	Exercise price per share options	Number of Options
2011-15	2015	--	--	GBP1.61	350,000
2012-15	2022	GBP0.86	1,685,540	GBP0.86	2,574,674
2013-16	2023	GBP1.20	289,544	GBP1.20	946,745
			1,975,084		3,871,419

 

The inputs into the Black-Scholes model for options granted during the period are as follows:

 

	29 May 2013	14 February 2013
Share price	GBP 1.19	GBP 1.20
Average Exercise price	GBP 1.20	GBP 0.89
Expected volatility	55%	78%
Risk-free rates	4.5%	4.5%
Expected dividend yields	0%	0%
Vesting period	3 years	3 years

 

Long Term Incentive Plan

On 14 February 2013, following the completion of the acquisition, 108,712 Bayfield LTIP's were outstanding.  These LTIP Awards are conditional awards of Existing Unconsolidated Ordinary Shares and vest three years from the date of grant, subject to the satisfaction of certain performance conditions (based on the growth in the Company's total shareholder return). No payment is required on vesting and there is no accelerated vesting arising as a result of the Merger.

On 1 July 2013, 739,440 LTIP Awards were granted by the Company to Senior Management Group (including the Executive Directors).  The LTIP awards will be tested against two performance targets: stretching reserves growth and absolute returns targets (share price). Performance against these measures will be assessed based on performance to the end of the 2015 financial year and following announcement of the Company's audited financial results. Subject to the achievement of the performance targets all Options will be subject to a further holding period whereby Options will not vest until 1 January 2017.

The measurement of growth in 2P Reserves is the aggregated total of all fields included in the Trinity Exploration & Production plc (formerly Bayfield Energy Holdings plc) and Trinity Exploration & Production (UK) Limited Group as recorded at financial year end 2012 which is 35.6 mmboe. Share price growth will be calculated from the price at which equity was raised at the point of the merger which was GBP 1.20.

 

The conditions of the scheme are market and non-market based, and therefore the scheme is valued on the date of grant and amortised over the vesting period. The grants have been valued using a Monte Carlo simulation model.

 

Movements in the number of LTIPs outstanding and their related weighted average exercise prices are as follows:

		2015			2014
	Average exercise price per share		Number of Options		Average exercise price per share	Number of Options
At 1 January	GBP0.00		772,312		GBP0.00	848,152
Lapsed	GBP0.00		(582,712)		--	--
Forfeited	--		--		GBP0.00	(75,840)
At 31 December	GBP0.00		189,600		GBP0.00	772,312

 

Inputs into the Monte Carlo Simulation Model for LTIPs granted during the period are as follows:

 

	1 July 2013
Share price	GBP1.06
Exercise price	GBP0.00
Expected volatility	55%
Risk-free rates	4.5%
Expected dividend yields	0%
Vesting period	3.5 years

 

28   Exceptional Items

 

Items that are material either because of their size or 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 as exceptional expenses below operating profit in the Income Statement. An analysis of the amounts presented as exceptional items in these financial statements are highlighted below

	2015	2014
	$'000	$'000
Loss on disposal of WD 16 block	108	--
Loss on disposal of casing	1,302	--
Loss on winding up of subsidiaries	214
Fees relating to Formal Sale Process 'FSP'	1,086	--
Potential claim (note 16)	--	1,270
Impairment of property, plant and equipment (note 5)	2,559	96,242
Impairment of intangibles (note 6)	131	23,484
Impairment of receivables	1,036	--
Impairment of inventory	2,483	--
Written off  1(a) & 1(b) pre-acquisition cost	6,385	--
Provision for restructuring	1,943	--
Translation difference	(18)	(57)
	17,229	120,939

 

Exceptional items 2015: 

 

Loss on disposal -- a loss of $0.1 million was recognised on the disposal of the WD 16 block as there were certain operating costs incurred by Trinity whilst the awaiting on regulatory approvals.  The $1.3 million loss on disposal of casing and tubing to the related party the Well Services Petroleum Company Limited group was a result of fall in the casing and tubing market internationally.

 

Loss on winding up of subsidiaries - $0.2 million related to the write off of carrying values of non-current asset balances following the winding up Trinity Exploration and Production (Pletmos) Limited.

 

Formal Sales Process - Fees relating to the FSP included data room fees incurred for 2015

 

Impairments - In 2015 impairment reviews were carried out over the non-current and current assets on the Statement of Financial Position with impairment losses being recognised on property, plant and equipment, intangible assets, inventories and receivables.

 

Write off of 1a and 1b pre acquisition cost - On 27 July 2015 Trinity, announced that it has been unable to extend the term of its agreement to complete the purchase of 80% interests in Blocks 1a & 1b from Centrica. Consequently the Sale and Purchase Agreement between Trinity and the two subsidiaries of Centrica has been terminated. The cost incurred relating to pre-acquisition cost of these blocks of $ 6.4 million was written off in 2015.

 

Provision for restructuring - a provision was created based on the restructuring of the Group in 2015 as approved by management and the board of directors, and includes the cost of severance and redundancy payments.

 

Exceptional items 2014:

 

Potential claim - In 2014 a claim has been made by a supplier for an amount of $1.3 million, relating to a matter pre-merger with the Bayfield Group.  Management has provided for this claim in 2014 (see note 16)

 

Impairment of property, plant and equipment - A sharp fall in oil prices combined with a downgrade in reserve estimates triggered an impairment review of the Group's carrying values within property, plant and equipment.  Impairment losses were incurred relating to the CGU's which were written down to their recoverable amount (see note 3 (h)).

 

Impairment of intangibles - An impairment loss was taken on the exploration well EG-8 ($ 22.6 million) and exploration

 

29   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 dilutive potential ordinary shares.

 

	Earnings		Weighted Average Number Of Shares $'000		Earnings Per Share $
Year ended 31 December 2015
Basic	(58,520)		94,800		(0.62)
Diluted	(58,520)		94,800		(0.62)
Impact of dilutive ordinary shares: As net losses from continuing operations were recorded in 2015, the dilutive potential shares are anti-dilutive and both basic and diluted earnings per share are the same.
Year ended 31 December 2014
Basic	(141,182)		94,800		(1.49)
Diluted	(141,182)		94,800		(1.49)
Impact of dilutive ordinary shares: As net losses from continuing operations were recorded in 2014, the dilutive potential shares are anti-dilutive and both basic and diluted earnings per share are the same.

30   Events after the Reporting Year

 

i.    On 21 October 2015, Trinity announced that it entered into an agreement (the "Touchstone SPA") to sell its interests in the WD-2, WD-5/6, WD-13, WD-14 and FZ-2 licenses and related fixed assets (the "Blocks") to Touchstone Exploration Inc. ("Touchstone") for a cash consideration of $20.8 million.  This sale was subject to various conditions precedent, with a backstop date of 13 March 2016 and expired without all of the required consents having been received. The Group has sent a termination notice in respect of the Touchstone Sale and Purchase Agreement (SPA) to Touchstone. 

 

As a result, the sale of the Blocks to Touchstone will not be completed and the deposit of $2.08 million, currently held in escrow, is expected to be released to Touchstone under the terms of the Touchstone SPA and a related escrow agreement. 

 

 

ii.    On 14 March 2015 Trinity announced that the company has engaged two specialist refinancing advisers, Imperial Capital of New York and Cantor Fitzgerald of London. Whilst at an early stage in discussions, Management is encouraged by the interest levels from several institutions. Trinity's near term objective is to conclude a complete refinancing structure that will enable the Company to retire its existing senior debt facilities, reduce other outstanding payables and provide sufficient additional capital to retain the integrity of its assets and grow production and cash flow.

 

iii.   The sale of the Group's 100% interest in the Guapo-1 block ("Block GU-1") to New Horizon Exploration Trinidad and Tobago Unlimited ("New Horizon") for a cash consideration of USD 2.8 million (the "Guapo Transaction") has been completed. All the conditions precedent for the Guapo Transaction has been satisfied including standard regulatory approvals, which were granted on 15 April 2016. The transaction was subsequently finalised with the closure of the cash settlement on 25 May 2016. The cash proceeds will be used predominantly by Trinity for working capital purposes.

 

iv.   The Group has received further extensions on the moratorium until 27 May 2016 on principal repayments relating to Trinity's outstanding debt of $13.0 million with Citibank as discussions continue.