Trillion Energy Fixing Turkish Gas Wells, While Eyeing Massive Oil Field

• Trillion Energy has 6 successful gas wells in Türkiye, but production has been unstable due to water loading issues
• They are implementing artificial lift systems starting in Q1 2024 to pump out the water and increase gas production
• Goal is to get production up to 15 million cubic feet per day by Q2 2024 from these existing wells
• Also plan to add 5-6 sidetrack wells to boost production further to 20-25 million cubic feet per day
• Separately exploring a promising oil block, but focused first on delivering results from existing gas wells

Reviving Production & Potential in Türkiye

Trillion Energy is a Canadian oil and gas company focused exclusively on assets located in Türkiye. The country provides a stable operating environment and a growing demand outlook. Trillion Energy specifically targets the prolific Black Sea basin, one of the world’s largest natural gas regions. Here the company holds a major stake in the SASB gas field alongside partner Turkish Petroleum. After facing production setbacks, Trillion has engineered solutions to unlock greater value.

Interview with Chief Executive Officer, Arthur Halleran

The Promise of SASB

Trillion owns 49% of the off-shore SASB gas field, having invested considerable capital into appraisal and development. Last September, the company announced guidance on six new wells, but due to production issues, Trillion pushed this guidance back by 3 months. CEO Arthur Halleran acknowledged that "I’ve had the misfortune of over promising and under delivering.” Production lagged expectations due to suboptimal natural well pressures.

But Halleran stressed, “the gas is not lost.” The issues stemmed from managing water volumes. He explained, “It’s just the weight of the water on the perforations and the tubing that pushes the gas back into the formation and it doesn’t produce as well as it should.”

Fixing the Problems

To rectify this, Trillion alongside a third-party engineering firm designed a plan to install artificial lift systems on the SASB wells. The technology pumps out excess water to reduce pressure. According to Halleran, “What that'll do is allow the wells to produce about two to two and a half million cubic feet per day for two or three years per well.”

With six wells online, the production gains could be substantial. “By the second quarter we should be up to 100% production about 15 million cubic feet per day,” Halleran stated. Beyond that, several sidetrack wells accessing nearby zones offer further growth for minimal cost.

Upsizing the Opportunity

The cash flows from this rejuvenated production promise strong returns. Natural gas prices in Türkiye run consistently around $11-12 per mcf. Halleran noted that even after royalties and taxes, Trillion earns an estimated netback of about $9-10 per mcf.

With so much gas and continued demand growth in the country, Trillion Energy occupies an enviable position. At 15 million cubic feet per day total field production, Trillion’s cash flows could exceed $40 million per year. If sidetracks eventually grow to 25 million cubic feet daily, the company’s 49% take likely far outpaces operating costs and capital needs.

Though focused firmly on SASB, Trillion also holds early-stage rights to a promising onshore oil block. Significantly, Trillion has already defined drill-ready locations from 3D seismic surveying. Adjacent fields see active drilling by Turkish Petroleum. The heavy oil production gets trucked to local refineries. So despite being less advanced than SASB, the oil play grants Trillion a free option on potentially huge reserves.

Trillion Energy confronts enviable opportunities but needs to execute reliably on its drilling and production plans. As Halleran admitted, “over promising and under delivering” damages credibility. Installing artificial lifts across existing SASB wells constitutes the vital first step toward reconciliation and meeting guidance targets matters most near-term.

Investing in a Value Reset

Trillion Energy sits primed for a value reset. Despite setbacks, the company’s SASB gas field retains tremendous production upside. The artificial lift solution now underway promises to unlock substantially higher outputs and cash generation ability. Supported by strong natural gas demand and favorable gas pricing in Türkiye, Trillion holds the keys to transform financial performance. Executing reliably stands as the next critical milestone to regain investor enthusiasm. An enviable oil exploration kicker waits in the wings when timing allows. For risk tolerant investors, Trillion Energy warrants consideration given extensive turnaround potential based on assets in place.

Investment Thesis for Trillion Energy

• Near-term production growth and cash flow generation from implementing artificial lift on existing SASB gas wells
• Additional low-cost sidetrack well opportunities can further boost outputs by 2024
• Favorable gas pricing and unit costs in Türkiye provide high-margin potential
• Strategic onshore oil block adds free upside option for future exploration
• Assets located in safe, stable, energy-hungry Turkish market

Trillion Energy offers a unique exposure to high-quality assets in Türkiye's gas and oil industry. The company’s engineering solutions to de-bottleneck production issues promise to unlock significant near-term cash flows. Meanwhile, top-tier adjacent fields validate the huge upside inherent in Trillion’s oil exploration acreage. Investors have an opportunity to capitalize on both near and long-term catalysts for outsized returns.