Trio Petroleum Corp. (TPET) is an oil and gas exploration and development company headquartered in Bakersfield, California, with operations in Monterey County, California and Uintah County, Utah. The company was incorporated in 2021 and has been working to establish a foothold in the industry, facing both successes and challenges along the way.

Business Overview

Trio Petroleum's primary assets include an 85.75% working interest in the South Salinas Project in Monterey County, California, a 22% working interest in the McCool Ranch Oil Field, also in Monterey County, and a 2.25% working interest with an option to acquire up to 20% in a 960-acre drilling and production program in the Asphalt Ridge formation in Uintah County, Utah. The company's strategy has been to acquire and develop these properties, leveraging its technical expertise and operational capabilities to extract value.

The South Salinas Project is a large, approximately 9,300-acre property with two notable oil and gas accumulations - the Humpback Area and the Presidents Area. As of the latest reporting period, there were no proved reserves attributable to the property, but the company has been actively working to bring the HV-3A well back into production, which commenced in March 2024 and is now generating revenue.

In October 2023, Trio Petroleum acquired a 21.918315% working interest in the McCool Ranch Oil Field, located near its flagship South Salinas Project. The company has been focused on refurbishing and restarting production operations on the assets, with three wells currently producing as of the end of the first quarter of 2024.

The company's most recent acquisition is its interest in the Asphalt Ridge project in Utah, where it has the option to acquire up to a 20% working interest in a 960-acre drilling and production program. Trio Petroleum has already begun drilling activities on this project, with the first two wells completed and showing promising results in terms of oil saturation and porosity.

Financials

Trio Petroleum's financial performance has been mixed, as the company has yet to achieve profitability. For the fiscal year ended October 31, 2023, the company reported a net loss of $6,544,426, with no revenue generated. Operating cash flow for the year was negative $4,036,834, and free cash flow was negative $4,398,856.

The company's liquidity position has been a concern, with a working capital deficiency of $1,213,963 as of April 30, 2024. To date, Trio Petroleum has been funding its operations through a combination of equity and debt financing, including an initial public offering in April 2023 and subsequent convertible note and promissory note issuances.

In the first quarter of fiscal 2024, the company reported revenues of $72,923, a significant improvement over the prior-year period, which had no revenue. This revenue was primarily generated from the company's oil production activities, particularly at the McCool Ranch Oil Field. However, the company continued to report a net loss of $4,045,935 for the quarter, driven by increased exploration expenses, general and administrative costs, and interest expenses.

Operational Highlights

During the first quarter of fiscal 2024, Trio Petroleum made several operational advancements. At the McCool Ranch Oil Field, the company successfully returned three wells to production, with the HH-1 well initially producing at a rate of 47 barrels of oil per day. The company also made its first sale and shipment of approximately 1,925 barrels of oil, primarily from the HH-1 well.

At the South Salinas Project, the HV-3A well was returned to production in March 2024, initially producing at a rate of 30 barrels of oil per day. The company believes that production from this well can be significantly increased through additional perforations, opening deeper oil zones, and other optimization techniques.

On the company's Asphalt Ridge project in Utah, Trio Petroleum has commenced drilling activities, with the first two wells completed and showing promising results in terms of oil saturation and porosity. The company is currently waiting on the arrival of a down-hole heater for the first well and expects to begin production from this well around June 15, 2024.

Risks and Challenges

Trio Petroleum faces several risks and challenges as it continues to navigate the oil and gas industry. The company's limited operating history and the emerging nature of the markets in which it competes have resulted in operating losses to date, and there is no assurance that the company will be able to achieve profitability in the future.

The company's liquidity position is also a concern, as it has relied heavily on equity and debt financing to fund its operations and development activities. There is no guarantee that the company will be able to secure additional financing on favorable terms, or at all, which could limit its ability to execute its growth strategy.

Another key risk is the company's reliance on a limited number of large customers for its oil sales. As of the first quarter of fiscal 2024, one purchaser accounted for 100% of the company's total oil and natural gas revenue. The loss of this customer or a significant reduction in their purchases could have a material adverse effect on the company's financial performance.

Outlook

Trio Petroleum has not provided any formal guidance for the remainder of fiscal 2024. However, the company has expressed optimism about its ability to increase production from the HV-3A well at the South Salinas Project and the potential of its Asphalt Ridge project in Utah.

The company's management team has also indicated that it is actively exploring ways to strengthen the company's financial position, including through additional capital raises and cost-cutting measures. Trio Petroleum is also working to regain compliance with the NYSE American's continued listing standards, which it lost in February 2024 due to its shares trading at a low price for an extended period.

Conclusion

Trio Petroleum is an emerging player in the oil and gas industry, facing both challenges and opportunities as it works to establish a foothold in the market. The company's recent operational successes, such as the return to production of wells at the McCool Ranch Oil Field and the South Salinas Project, as well as the promising results from its Asphalt Ridge project, suggest that the company is making progress in its development efforts.

However, the company's financial performance and liquidity position remain areas of concern, and the company will need to continue to execute its growth strategy and secure additional financing to achieve long-term sustainability. Investors should closely monitor the company's progress in addressing these challenges and capitalizing on its operational successes in the quarters ahead.