Triangle Energy Achieves Steady State Production of 970 bpd, Taking Cost-Cutting Measures: Stock Up 22%

On 3 April 2020, Perth-based oil producer & explorer, Triangle Energy (Global) Limited (ASX:TEG) released an update on its flagship oil operations Cliff Head and cost-cutting measures amid the current extraordinarily low oil price.

Post this market update, TEG stock inched upward by more than 22% to close the day’s trade at $0.033 on 3 April 2020. The Company has a market capitalisation of $9.74 million.

TEG

Cliff Head Production in Steady State at 970 bpd

The Company confirmed that the Cliff Head operations have attained a steady state production rate averaging at 970 barrels per day of oil, following the production resumption on 10 March 2020 after the conclusion of an extensive testing and inspection program.

Production at Cliff Head was suspended on 24 February 2020 after an electrical fault was observed during a routine maintenance. The onsite management took note of the fault and immediately suspended the operations as per standard procedures.

facilities

Triangle Energy had resumed production from all the 5 oil wells in December last year after approximately 9 months of operating only 4 wells. In addition to replacing an electrical submersible pump (ESP) at the CH13 well, the Company initiated a change in methodology review program following which a new approach has been selected, targeted towards minimising the well downtime and consequently, assisting in saving production losses and revenue linked to the production during longer downtime.

To know more: Triangle Energy Optimises ESP Turnaround, Targeting Higher Oil Throughput

Cost Cutting Measures Amid Low Crude Oil Prices

The market is currently witnessing extremely low oil prices due to supply glut, weak demand given the coronavirus outbreak and the price spat between Saudi Arabia and Russia.

In milieu of which, the Company has already negotiated contracts with many of its suppliers to cut down on expenses such as reduction in office rent, lower charges with air and marine service suppliers and lower costs from its parts and equipment suppliers. Through these initiatives, TEG has achieved significant and immediate cost savings, thereby positively influencing the cash flow position.

MD comments

Effective from 1 May 2020, the Company has implemented a temporary 30% salary deferment in executive salaries applicable for Managing Director, CFO and COO, in addition to fees for Directors. The Cliff Head JV has reinvested $4.47 million into the assets since July 2019 and is benefitting from the robust and steady production.

Other measures to reduce the expenses include reduction in operating costs and postponement of the $2.5 million non-essential planned and proposed capital expenditures in 2020, lowering lifting costs to almost US$15.4 per barrel excluding trucking and non-routine costs, for the rest of the financial year.

It is to note that Cliff Head produces light-sweet crude oil, which is sent to BP’s Kwinana refinery. The crude oil is priced on a derivative based on the sweet crude benchmark, the Brent crude, and has been offered a premium over the benchmark in the recent months.

TEG reports

Triangle Energy reduced operating costs from more than US$40 a barrel in 2017 to just US$24.95 average from July 2019 to February 2020 at the Cliff Head operations. The resumption of production at the CH13 well ensured higher throughput of up to 1,000 barrels per day and also assisted in reducing the per barrel fixed/routine costs.

Having identified several workover, infill and satellite drilling opportunities in and around Cliff Head field, the Company will be well positioned to make an investment decision on these opportunities when business conditions improve.

Though impacts of COVID – 19 were unexpected, leading to weakening of demand for crude oil, Triangle Energy, with recent investment, strong production and cost reduction measures, is expecting to remain on track towards maximising the margin.


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