20-F/A: Trillion Energy International Restates 2023 Financials, Focuses on Production Growth

Trillion Energy International restated its 2023 financials due to a foreign exchange loss misclassification, while also highlighting its ongoing efforts to increase production at its Turkish gas and oil assets.

Summary

• Trillion Energy International restated its 2023 financial statements due to a foreign exchange loss that was incorrectly recorded in net loss instead of other comprehensive loss.
• The restatement had no impact on reported assets, liabilities, total shareholders equity, cash flows or comprehensive loss.
• The company's net loss for 2023 was $43,842, a significant decrease from the $6,121,754 loss in 2022.
• Operating revenue increased to $16,797,366 in 2023 from $9,375,029 in 2022, primarily due to increased production from the SASB gas fields.
• Total assets increased to $58,610,428 in 2023 from $37,018,219 in 2022, mainly due to an increase in oil and gas properties.
• The company's working capital deficit increased to $12,929,942 in 2023 from $4,819,052 in 2022, due to increased drilling expenditures.
• The company is focused on increasing production at its SASB gas field and is considering the sale of its Cendere oil field to improve its financial position.
• The company is also planning to drill several sidetrack wells at SASB in 2024-2025 and is reprocessing 3D seismic data to identify new exploration targets.
• Trillion has a 49% interest in the SASB gas field and a 19.6% interest in the Cendere oil field.
• The company also entered into a farm-in agreement for three oil exploration blocks in South East Turkey.

Sentiment

Score: 5

Explanation: The document presents a mixed picture. While there are positive developments in revenue and production, the increasing working capital deficit and the need to sell assets raise concerns. The restatement of financials also adds a layer of caution.

Positives

• The company's net loss significantly decreased in 2023 compared to 2022.
• Operating revenue increased substantially due to higher production from the SASB gas field.
• Total assets increased, reflecting the company's investment in oil and gas properties.
• The company is actively working to optimize production at the SASB gas field.
• Trillion is planning to drill several sidetrack wells at SASB in 2024-2025.
• The company is reprocessing 3D seismic data to identify new exploration targets.
• Trillion has entered into a farm-in agreement for three oil exploration blocks in South East Turkey.

Negatives

• The company's working capital deficit increased significantly in 2023.
• The company is considering the sale of its Cendere oil field to improve its financial position.
• The company is not fully funded for its next 12 months of operations.
• The company experienced a foreign exchange loss of $9.9 million in 2023.
• The company recorded a loss on the impairment of assets held for sale of $1.5 million.

Risks

• The company has a history of losses and may not achieve consistent profitability in the future.
• Exploration, development, and production activities may not be profitable or achieve expected returns.
• The company is subject to political, economic, and other risks in foreign countries where it operates.
• The company is subject to foreign currency risks, particularly with the Turkish Lira.
• The company is subject to operating hazards in the oil and gas industry.
• The company is subject to extensive and complex laws and government regulations.
• The company faces intense competition in the oil and gas industry.
• The company may not be able to obtain necessary permits, approvals, or agreements.
• The value of the company's common stock may be affected by matters not related to its operating performance.
• The company's stock price is volatile and subject to the Penny Stock Rules of the SEC.

Future Outlook

The company plans to increase production at its SASB gas field, drill sidetrack wells, and reprocess seismic data to identify new exploration targets. The company is also considering the sale of its Cendere oil field to improve its financial position. The company is also seeking a farm-in partner to pay for 100% of the expenditures at the Cudi-Gabar Oil Block.

Management Comments

• Trillions strategy is to increase production and reserves at its 12,385 hectare SASB natural gas field and capitalize on high regional gas prices to generate cash flow and build shareholder value through a multi-well drilling program.
• Trillion is currently undertaking work programs to optimize production and reduce downtime on the SASB Field to ensure all 6 previously drilled and completed wells are able to produce concurrently and with less than 90% downtime on a managed basis.
• Trillions short term focus is on increasing production on eight wells at the SASB gas field.

Industry Context

The document highlights the company's focus on increasing domestic production in Turkey, which aligns with the broader trend in Europe and Turkey to shift away from Russian energy imports. The company is also capitalizing on high regional gas prices.

Comparison to Industry Standards

• The document does not provide specific comparisons to industry standards or competitors.
• However, the company's focus on increasing production and reserves is a common strategy in the oil and gas industry.
• The company's use of 3D seismic reprocessing and artificial lift pumps are also standard practices in the industry.
• The company's farm-in agreement in South East Turkey is a common method for companies to expand their exploration portfolio.
• The company's financial results are not compared to any specific benchmarks or competitors.

Management Changes

Corporate Governance

Legal Proceedings

• The Company through its subsidiary PPE Turkey has advanced arbitration against an offshore drilling rig contractor for $ 20.3 million for gross negligent and breach of contact involving health and safety issues during the prior year drilling program resulting in loss and damages to Company.
• The Company and its subsidiary PPE Turkey is defending an action brought by the same drilling contractor in Europe to which it has advanced an arbitration claim, for drilling services and lost profits seeking $ 5 million.

Related Party Transactions

• At December 31, 2023, accounts payable and accrued liabilities included $115,526 due to related parties.
• During the year ended December 31, 2023, management fees and salaries of $924,083, director fees of $145,500, consulting fees of $52,313, and stock-based compensation of $1,294,051 were incurred to related parties.
• During the year ended December 31, 2023, the Company issued 808,680 shares to directors for services performed and for RSUs which were granted and vested in previous periods.
• During the year ended December 31, 2023, the Company issued 80,000 shares with a fair value of $115,304 to a director to settle debt of CAD$160,000 and recognized a gain on the settlement of $2,957.
• During the year ended December 31, 2023, the Company repurchased 586,868 RSUs from directors and recognized a reduction to equity of $799,212 on the transaction.

Stakeholder Impact

• Shareholders may experience dilution as a result of the issuance of additional common stock or the exercise of outstanding options and warrants.
• Employees may be affected by changes in compensation and benefits.
• Customers may be affected by changes in the company's production and pricing.
• Suppliers may be affected by changes in the company's purchasing and payment practices.
• Creditors may be affected by the company's ability to repay its debts.

Next Steps

• The company will continue to perform several new perforations of existing wells and install velocity string production tubing, pumps, gas lift to optimize production and reduce well downtime.
• The company will continue to undertake work programs to optimize production and reduce downtime on the SASB Field.
• The company will drill several sidetrack wells at SASB in 2024-2025.
• The company will complete new re-processing of 3D seismic during 2024.
• The company will continue to negotiate the Joint Operating Agreement for the Cudi-Gabar oil blocks.
• The company will seek a farm-in partner to pay for 100% of the expenditures at the Cudi-Gabar Oil Block.

Key Dates

Keywords

oil and gas, exploration, production, SASB gas field, Cendere oil field, Turkey, financial results, drilling, reserves, seismic, farm-in agreement, convertible debenture, working capital, production optimization