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CSE:TCFOTCQB:TCFF
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Trillion Energy International is quickly becoming an energy powerhouse in Eastern Europe

Snapshot

The Canadian junior has a 49% interest in the SASB natural gas development project in Turkey, one of the Black Sea region’s largest undeveloped natural gas projects

Trillion Energy International Inc. -

Quick facts: Trillion Energy International Inc.

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CSE:TCF

Price: 0.22 CAD

Market Cap: $37.68 m
  • Eastern Europe-focused producer of natural gas from portfolio of assets in Turkey and Bulgaria
  • Flagship SASB offshore gas project in Turkey poised for ambitious development program
  • 2020 year-end total 2P reserves of 40.3 billion cubic feet with a combined net present value of US$139.8 million

What Trillion Energy does:

Trillion Energy International Inc (CSE:TCF) (OTCMKTS:TCFF) is building an integrated oil and gas portfolio along the Black Sea.

The Canadian energy junior has a 49% interest in the SASB (South Akcakoca Sub-Basin) natural gas development project in Turkey, one of the Black Sea region’s largest undeveloped natural gas projects with 23 shallow water wells and four offshore platforms, as well as pipeline infrastructure and a gas processing plant. The gas field produced around 42 billion cubic feet of gas between 2007 and 2011.

In addition to its flagship asset, SASB, Trillion has a 19.6% interest in the Cendere oil play in Turkey, a profitable operation with 135 barrels of oil per day that brings in around US$234,000 per month in net revenue to the firm.

Trillion also has a 100% interest in the Derecik licenses in Turkey, which cover just over 42,800 hectares near prolific oil fields such as the Atrush Field located 65 kilometres away that produces around 41,700 barrels of oil per day (bopd) and boasts an estimated resource of around 2 billion barrels of oil.

Another asset is the early stage Vranino play in Bulgaria, a 38,663 hectares property with potentially 1 trillion cubic feet of gas in place.

Led by a team of veteran oil and gas executives based in Canada and Turkey, Trillion is poised for substantial growth over the near term. With new development projects in the works and more oil wells expected to come online in the next few years at SASB alone, Trillion could see its potential revenue stream exceed $1 billion very soon.

How is it doing:

Trillion Energy has been making progress so far in 2021 after being disrupted by the coronavirus pandemic in 2020.

On the financing front, at the end of April, Trillion signed a letter of intent (LOI) with a US investment fund to obtain up to US$17.5 million in new financing. The company said the funds will be used to finance the development of new producing gas wells on the SASB field. 

Trillion Energy said the LOI is subject to due diligence, where the company and investor will work towards definitive agreements to bring the financing to fruition. The planned financing includes an overriding royalty on gas and oil production and a convertible debt scheme.

Earlier in April, Trillion said it had retained Oil and Gas Hunter (OGH) to conduct geophysical analysis to advance its plan to expand its current offshore acreage at the SASB field aimed at discovering additional new gas resources and search for deeper gas potential in the contiguous blocks.

On March 18, Trillion had issued its 2020 end-of-year reserves report, which was prepared by GLJ Consultants. The report assessed oil reserves on the group's Cendere oil field as well as four developed, unproduced gas pools on the SASB fields. It did not include any assessment of risked development prospects contiguous to the reserves.

The total reserves for 2P (proven and probable) of discovered but non-producing prospects along with a medium estimate for risked development prospects was 40.3 billion cubic feet (Bcf) with a combined net present value of EBITA/cashflows, discounted at 10% was US$139.8 million. For 3P reserves (proven and probable and possible) plus high estimates, the total was 62.4 Bcf with a value of US$243.3 million.

Trillion noted in the release that it aims to assess the 13 unassessed gas prospects during the initial redevelopment of SASB, which will add further gas reserves and resources.

In the same month, Trillion had announced plans to expand its offshore acreage at the SAS field from its current 12,385 hectares by approximately 200,000 hectares, a 16 fold increase, aimed at discovering additional new gas resources proximate to its field and search for deeper gas potential.

The company noted that the first step in the process is to conduct a technical study under a Technical Investigation Survey Permit of the surrounding area. The license fee for the permit was approximately US$40,000 for the 200,000 hectares, it said.

Trillion said its decision to commence new exploration was spurred by the recently announced discoveries1 of 405 BCM (billion cubic meters) (14 TCF) of natural gas during August and October 2020 by TPAO in a block 100 miles north of its production block, a find which the company believes to be one of the biggest for Europe in 30 years.

And in January, Trillion had revealed that it was in talks with drilling companies over starting re-development work at SASB. It said the plan is to sink five new wells at the shallow water asset and conduct two or more workovers. 

The aim is to exploit proven and probable gas reserves with a net present value to the company after all costs of US$79.5 million, it added. 

Inflection points:

  • Completion of  new financing from US investment fund for up to US$17.5 million
  • News on geophysical analysis to advance its plan to expand its current offshore acreage at the SASB field
  • Sink five new wells at the shallow water asset at SASB and conduct two or more workovers

What the broker says:

Trillion Energy has a fair value of C$0.24 per share, said Fundamental Research Corp analyst Sid Rajeev when he initiated coverage of the gas producer in December 2020 with a 'Speculative Buy' rating.

“Trillion Energy has the potential to significantly ramp up production and cash flows, if management is able to raise funds for SASB’s development, ” Rajeev said.

The analyst noted that Trillion Energy has a strong partner in both projects, that being a state-owned oil and gas company, which is also the country’s largest producer. He pointed out that gas prices in Turkey are currently $6/mcf, compared with $2.9/mcf in North America, with Turkey importing 99% of its gas consumption. The company stated that it has received an average price of $7-plus over the past decade.  

The Fundamental Research analyst also noted that Trillion Energy is focused on ramping up production at SASB, with 17 additional production wells planned for 2021/2022.

“In this scenario, annual production net to TCF is expected to peak at 11.3 bcf (implying a potential to generate $68M in revenue at $6 per mcf gas), with average annual production of 4-5 bcf ($24-$30M in annual revenue) over the first 10 years,” he said.

Rajeev also pointed out that Trillion Energy is evaluating options to raise $10 million to $20 million to fund its portion for the first three well workovers and four new wells. The remaining CAPEX is expected to be paid through operating cash flows.

What the boss says:

In April's statement announcing the start of the work program to expand the SASB license area in the Black Sea, Trillion Energy CEO Art Halleran said: “We are confident that the geophysical assessments by Oil and Gas Hunter will significantly increase our understanding of the gas resources on the SASB gas field.”

“The geophysical work is expected to define new exploration targets proximate to the Production Block but located outside the current boundaries and also to identify new gas on the existing production block as well as confirm existing targets to be drilled in our 2021 drilling program later this year,” he added.

Contact the author at jon.hopkins@proactiveinvestors.com

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