Trillion Energy (TCF) - Gas Producer Funded for Life??

Trillion Energy International Inc. is an oil and gas producer with various assets throughout Turkey and Bulgaria. The company’s asset portfolio includes the SASB natural gas field, located in the Black Sea, as well as a 19.6 interest in the Cendere oil field in Bulgaria, with a 9.7% interest in three other wells as well as a prospective unconventional natural gas property, the Vranino 1-11 block.

The company announced at the beginning of September 2022 that it had received a price increase for the sale of natural gas from its SASB natural gas field to USD$ 30.68 per thousand cubic feet (Mcf). The recent increase in price results in the price of natural gas having increased to September 2022 by 350% from a 2021 average of USD$ 8.84/mcf. The price increase is accredited to a supply shortage caused by the Nord Stream pipeline shutdown, the shutdown of nuclear power in Germany and the regional conflict seen in Ukraine.

Trillion Energy International Inc. on the 19th of September 2022 announced that it had commenced its multi-well drilling program on the SASB natural gas field. The rig will be initially situated at the Akçakoca platform from where it will move to the next three platforms. The company anticipates the first gas production from its ramp-up activities will occur in November 2022.

Trillion Energy International Inc. plans to continue its expansion initiatives after the completion of its 2022 ramp-up activities. The future expansion initiatives will be funded from the proceeds obtained through natural gas production at the SASB natural gas field. The internal funding of the expansion initiatives has led to the company not anticipating having to raise funds again.

Global Natural gas market and outlook

The global natural gas sector has seen a tumultuous 2022, with the sector burdened by challenges including a supply shortage caused by the shutdown of the Nord Stream pipeline between Russia and Europe as well as the regional conflict experienced in Ukraine. The market volatility has however created an opportunity for companies which are able to meet the supply shortage. Arthur Halleran, the CEO of Trillion Energy International Inc. explains the effect of the market volatility and supply shortage on the company’s operations as well as the price per one thousand cubic feet (Mcf) of natural gas it enjoys as follows:

“Since May, we went from about USD$ 18.00 on the US McF, to now where we're at over USD$ 30.68, and at the same time, if you want to talk about the security market and so on, we had decided to do this project before Covid, we struggled through Covid, and so we were happy that we were getting USD$ 8.00 to USD$ 9.00 per McF. We did our first raise in early February, we got the price lined out and so on, and then the Russian invasion of Ukraine happened. We raised that money, so what's happened is we've actually come out of the storm, drill ready with a lot of gas that's already proven on an existing facility.”

The Covid-19 pandemic played a role in the launching of new natural gas operations globally, which has also added to the supply shortage currently experienced. Trillion Energy International Inc. however was able to launch its initiatives at such a time that it was able to advance the project throughout this period, resulting in the company’s operations being ahead of its peers.

“In terms of the rig drilling, any other company that happened to be stalled over Covid, or either one broke or they put things on the burner, now they are going to have to play catch up, maybe for 6-8 months or 1 year, whereas now we have very good investor eyes on our company. Both times we were oversubscribed, we get calls every day and we're in the USD$ 30.00 mcf environment, which is an excellent situation for the company.”

The sales price of natural gas, which is currently at a high, may see a decrease in the future. The company however believes that the sales price will remain in the USD$ 30.00/mcf range throughout the European winter months. Halleran expects the sales price to average USD$ 20/mcf in the future but explains the economics of the project are at such a resilient point that even if the price should fall drastically to between USD$ 8.00 and USD$ 9.00 per McF the operation is still profitable.

“I think that for the winter, they're going to stay up in the USD$ 30.00 range. We've been told that it will probably increase by 10% a month because we get a new price every month. In the long term, meaning 2 to 3 years, I don't think any of the problems are going to be solved. It might not be USD$ 30.00, it might be $20.00. However, in a scenario where we're going to get USD$ 26.00 and then USD$ 18.00 in 2024, it's still really good because you have to remember that we were very happy at USD$ 8.00 to USD$ 9.00. The economics were really stellar. Therefore, USD$ 10.00, USD$ 15.00 or USD$ 20.00, that's still really good for us. I don't think it's going to go below USD$ 20.00 for the next couple of years though.”

SASB gas field and initiatives

Trillion Energy International Inc. on the 19th of September 2022 announced that it had commenced its multi-well drilling program on the SASB natural gas field. The rig will be initially situated at the Akçakoca platform of the gas field from where it will move to the next three platforms. The company anticipates the first gas production at the SASB gas field resulting from its drilling activities will occur in November 2022.

The company previously raised approximately CAD$ 41 million, which enables it to fully fund its program A drilling. The planned natural gas production in November 2022, will enable the company to not have to go back to the market again to raise funds.

“The other issue that's really important is that all the money we raised is going into drilling the wells and bringing the gas on. We don't need any extra capital to put any more facilities, like more pipelines or anything, because we're actually drilling off the platform. We got this facility for pennies on the dollar but it's in really good shape. Again, that's the reason why it's a quick pay-out because there is no large CAPEX facility.”

The increase in the sales price of the produced natural gas announced by the company in September 2022, adds to its financial security. The projected cash flow from its operations is estimated to be USD$ 12 million per month at the end of program A which is anticipated to be May 2023. The cash flow at the end of program B, anticipated to be June 2024, is projected to be USD$ 20 million.

Trillion Energy International Inc. is looking to expand its operations with the cash generated from its operations, according to Halleran. He explains that the company would not be correct to not reinvest the funds in order to further grow.

“To just sit on cash is not good business. You've got to invest cash to get a good return. Our rigs are actually owned by a drilling company in Romania. We rent them, we sign a contract, and we are guaranteed a certain fee, but it's rented per day. I treat SASB as the cash engine to generate activity.”

Halleran explains that the company can follow two paths in its future endeavours, one being to accelerate the program in such a way as to reach its milestone in half the time allocated and the second being to expand its operations.

“To accelerate the program, there are two aspects to it: one is to accelerate the program, and the other is to look for other opportunities. I have many shareholders contacting me and saying, is there any way you can accelerate the program? If I was a lazy guy, I would say no, there isn't, because we have everything worked out for one rig and that's all there is. But they bring up a valid point, which is that nobody can predict what the future gas price 4, 5, or 6 years down the road will be. We have a good idea of what will happen 2-3 years down the road, so what if I can bring more gas on?

Recently initiated drilling and Future initiatives

Trillion Energy International Inc. plans to continue its drilling initiatives after the completion of its program A drilling. The second drilling program (program B) will be funded from the proceeds obtained through the natural gas production at the SASB natural gas field. The internal funding of the expansion initiatives has led to the company not anticipating to raise funds again.

“Going through Covid when commodities weren't very good, there were a lot of companies that went in distress, and now because we are the talk of the block, I'm getting companies approaching us with opportunities saying, look, we have this good opportunity, we need money, we need a partner, so we're looking at those. I'd like to see if I can find a block in the same neck of the woods where I am based in Turkey, but you know that cash is king, and when you have cash, you have a lot of opportunities.”

Trillion Energy International Inc. forecasts its annual revenue to be at approximately USD$ 100 million by the end of 2023, with it forecast to be USD$ 150 million by the end of the following year.

“We expect to exit 2023 in the order of USD$75M to maybe USD$100M. In around 2024, maybe in the order of USD$125M-USD$150M. We put a bit of a lower price on it, but it is substantial revenue.”

The company does not foresee a listing on the TSX-V in the near future. The company may be open to a TSX-V listing in the future should it want to have a larger investor base, or should the possibility of a merger exist. Halleran explains listing on the TSX-V as follows:  

“I have something of a pet peeve or a bias here. My bias is what happens is when the shares don't exactly perform like people want them to perform, and so everybody thinks our shares should be up at USD$60c-$70c, and I believe that too, but they're at USD$0.45c, they think the way to cure it is to go on to another board. In my view, when you want to move your company to another board you have to have your company pick the board. In other words, your company grows the right way to pick the board. You don't squeeze your company or change your company to hit the board.”

The company will continue with its current initiatives, with Halleran explaining that should the correct opportunity come to light the company will look at further acquisitions.

“I'm a petroleum guy and if there was a good opportunity where I see a really undervalued or an oil property that is not properly developed and I think I can get another project for pennies on the dollar, even dimes on a dollar, I won't turn it away. It all depends on what you make.”

To find out more, go to the Trillion Energy website