Trio Petroleum (TPET) has recently achieved significant milestones in its operations, potentially marking a turning point for its stock. Over the past eight weeks, the company has reported advancements in its petroleum assets in Monterey County, California, and Uintah County, Utah, focusing on expanding production capabilities and capitalizing on new opportunities.

Initial Oil Shipment from McCool Ranch Field

On April 24, 2024, Trio Petroleum announced its first oil sale from the McCool Ranch Field in Monterey County, California, with 2,100 barrels sold, yielding approximately $105,000 in net revenue.

Drilling Activities in Uintah County, Utah

The company commenced drilling at the Asphalt Ridge project in Uintah County, Utah. As of June 11, 2024, Trio successfully drilled two exploratory wells, both encountering significant oil-bearing pay zones.

Innovations and Production Expectations

Trio installed downhole-heaters to enhance oil extraction, with production from the HSO 2-4 well expected soon. Encouraging geological data and drilling results support high economic expectations for the project.

What are Downhole-Heaters?

Downhole heaters are specialized equipment used in the oil and gas industry to assist with the production of hydrocarbons from wells, particularly in heavy oil or bitumen reservoirs. These heaters are installed within the wellbore and serve to heat the surrounding formation, reducing the viscosity of the hydrocarbons and facilitating their flow towards the wellbore for extraction. Here’s a detailed overview of downhole heaters and their applications:

Purpose and Function

1. Reducing Viscosity: The primary function of downhole heaters is to reduce the viscosity of heavy oil or bitumen. Heavy hydrocarbons can be too thick to flow naturally at reservoir temperatures, so heating them makes them more fluid and easier to pump to the surface.
2. Enhanced Oil Recovery (EOR): Downhole heaters are often used as part of enhanced oil recovery methods, particularly thermal recovery techniques such as Steam Assisted Gravity Drainage (SAGD) or Cyclic Steam Stimulation (CSS). These techniques involve heating the reservoir to improve the mobility of the oil.

Types of Downhole Heaters

1. Electric Heaters: These use electrical energy to generate heat. Electric heaters can be powered by surface generators or by connecting to a power grid. They are commonly used because of their precise control and ability to deliver consistent heat.
2. Steam Injectors: These inject steam into the reservoir, providing heat to the oil. The steam can be generated at the surface and then injected into the wellbore. This method is commonly used in SAGD and CSS processes.
3. Gas-Fired Heaters: These use natural gas or other hydrocarbons as a fuel source to generate heat. The combustion process takes place downhole, directly heating the oil.

Applications

1. Heavy Oil Production: Downhole heaters are extensively used in the production of heavy oils and bitumen, which are found in places like Canada’s oil sands or Venezuela’s Orinoco Belt.
2. Preventing Paraffin and Asphaltene Deposition: In some wells, the cooling of crude oil as it travels to the surface can cause paraffin and asphaltene to precipitate, leading to blockages. Downhole heaters can prevent these substances from solidifying.
3. Hydrate Prevention: In gas wells, downhole heaters can be used to prevent the formation of hydrates, which are crystalline structures that can block the flow of gas.

Benefits

1. Increased Production: By reducing the viscosity of the oil, downhole heaters can significantly increase the flow rate and overall production from a well.
2. Extended Well Life: Heating the reservoir can improve recovery rates, extending the productive life of the well.
3. Reduced Chemical Use: In some cases, downhole heaters can reduce the need for chemical additives used to manage flow assurance issues like paraffin and asphaltene deposition.

Challenges and Considerations

1. Energy Consumption: Downhole heating can be energy-intensive, which can impact the overall economics of the production operation.
2. Equipment Reliability: The harsh downhole environment can pose reliability challenges for heating equipment, necessitating robust design and regular maintenance.
3. Environmental Impact: The use of certain types of downhole heaters, especially those involving combustion, can have environmental implications that need to be managed.

In summary, downhole heaters are a critical technology in the oil and gas industry, particularly for enhancing the recovery of heavy oils and managing flow assurance issues. They improve production efficiency and well performance but require careful consideration of energy use, equipment reliability, and environmental impacts.

Trio Petroleum Corp (TPET) Company Overview

Economic Impact and Future Plans

Trio projects significant oil recovery and plans to acquire additional interests in the project area, supported by its operating partner covering initial drilling costs. Extensive data collection for compliance with Utah regulations will enable the scaling of the drilling program.

Initial Oil Shipment from McCool Ranch Field

First Sale and Shipment

On April 24, 2024, Trio Petroleum announced a crucial milestone in its operations. The company reported its first sale and shipment of oil produced at the McCool Ranch Field in Monterey County, California. This initial shipment included approximately 2,100 barrels of oil, primarily sourced from the HH-1 well, which was reactivated in late February 2024.

Financial Impact

After accounting for royalties and trucking costs, the net revenue from this sale is expected to be around $105,000 for Trio Petroleum. This revenue represents 80% of the total, highlighting the financial viability of the McCool Ranch Field and its potential to contribute significantly to the company’s overall earnings.

Drilling Activities in Uintah County, Utah

Commencement of Drilling

Simultaneously, Trio Petroleum has initiated drilling activities on the Asphalt Ridge project in Uintah County, Utah. This project marks a critical expansion of the company’s operations into a region known for its substantial oil reserves.

Successful Drilling of Exploratory Wells

On June 11, 2024, Trio Petroleum provided an update on its drilling activities in Uintah County. The company successfully drilled its first two exploratory wells, HSO 8-4 and HSO 2-4. The HSO 8-4 well reached a total depth of 1,020 feet, while the HSO 2-4 well extended to 1,390 feet. Both wells encountered significant oil-bearing pay zones, with over 100 feet of oil-pay in the Rimrock Sandstone in the HSO 8-4 well and a combined 190 feet in the Rimrock and Asphalt Ridge Sandstones in the HSO 2-4 well.

Innovations and Production Expectations

Installation of Downhole-Heaters

To enhance oil extraction, Trio Petroleum installed a downhole-heater in the HSO 2-4 well, beginning the heating process on June 3, 2024. Production from this well is expected to commence shortly. The HSO 8-4 well is awaiting the delivery of a second downhole-heater, which is anticipated to be installed by June 15, 2024.

Encouraging Results and High Expectations

Michael Peterson, CEO of Trio Petroleum, expressed optimism regarding these developments. He highlighted that the geological data prior to drilling were promising, and the drilling results have confirmed the company’s favorable view of the project. Core samples from the tar sand showed high oil saturation, with oil dripping from the core when heat was applied. This evidence supports the company’s expectations for high economic returns from the Asphalt Ridge project.

Economic Impact and Future Plans

Projected Production and Economic Viability

Based on the new data, Trio Petroleum believes that the economic impact of its interest in the Asphalt Ridge project could surpass its substantial assets in California. The company projects an estimated 40% oil recovery per well, with an estimated ultimate recovery (EUR) of 300,000 barrels of oil per well. The expected production rate is approximately 40 barrels of oil per day per well, and the total drilling and completion cost is estimated to be less than $500,000 per well.

Acquisition of Additional Interests

Given the promising initial drilling results, Trio Petroleum intends to exercise its rights to acquire the remaining 17.75% working interest in the initial 960 acres of the project. The company’s operating partner, Lafayette Energy Corp, will cover all drilling costs up to the first $10 million of capital expenditures. Lafayette Energy Corp, through its operator, Valkor Oil and Gas, plans to drill a third well as early as late June and an additional five wells during Q3 2024, subject to rig and services availability.

Compliance and Future Drilling Plans

During the drilling process, Trio Petroleum gathered extensive data for submission to the Utah Division of Oil, Gas and Mining (OGM). This data includes core samples and analyses of oil-bearing sandstones. Once the submission process is complete, the company will be permitted to scale its drilling program, potentially drilling wells on as little as 1.5-acre spacing. The initial development plan covers approximately 476 wells on the first 960 acres, with the opportunity to expand the project by an additional 1,920 acres.

Insights

1. Initial oil sale from McCool Ranch highlights financial viability.
2. Significant progress in exploratory drilling in Utah.
3. Innovative downhole-heater installations to boost oil extraction.
4. High expectations for economic returns from Asphalt Ridge project.
5. Plans for extensive drilling expansion and regulatory compliance.

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Trio Petroleum is significantly advancing its operations in Monterey County, California, and Uintah County, Utah. Key developments include the first oil sale from McCool Ranch Field and successful exploratory drilling in Utah, with plans to expand production through innovative extraction methods and strategic acquisitions. These efforts are expected to enhance the company’s production capabilities and economic returns.

The Action Plan – What Trio Petroleum Will Do

1. Monitor ongoing production from McCool Ranch Field for sustained revenue.
2. Continue drilling and installing downhole-heaters in Utah to optimize oil extraction.
3. Acquire additional interests in the project area to capitalize on promising results.
4. Ensure compliance with regulatory requirements to facilitate project scaling.
5. Evaluate further expansion opportunities based on drilling outcomes and market conditions.

Blind Spot

Potential environmental and regulatory challenges in expanding drilling operations, which may impact project timelines and costs, should be closely monitored and addressed.

Trio Petroleum (TPET) Technical Analysis

1. Price Trend: The stock is experiencing a significant upward trend. After a long period of sideways movement, there’s a sharp increase in the price starting from mid-May. This is a bullish signal indicating strong upward momentum.
2. Moving Averages:

• The 50-day moving average (blue line) is currently at approximately 0.3346, and the 200-day moving average (red line) is at approximately 0.3463. The stock price has recently crossed above both moving averages, which is a bullish indicator.
• The happening soon crossover of the shorter-term moving average (50-day) above the longer-term moving average (200-day) can be seen as a “Golden CrossWhen the 50 day moving average crosses above the 200 day moving average, it is called a Resurrection Cross. Conversely, when the 50 day moving average crosses below the 200 day mov... More,” a strong bullish signal.

1. Volume: The volume has significantly increased during the price spike, indicating strong buying interest. High volume on upward movements generally confirms the strength of the trend.
2. Relative Strength IndexIn the world of technical analysis, the Relative Strength Index (RSI) stands as a cornerstone tool for traders seeking insights into market momentum. Developed by J. Welles Wilder ... More (RSI): The RSI is at 63.07, which is below the overbought threshold of 70. This suggests that there is still room for the price to move higher before becoming overbought.
3. On Balance VolumeThe On Balance Volume indicator (OBV) is a technical analysis tool used to measure the flow of money into and out of a security over a specified period of time. It is a cumulative ... More (OBV): The OBV shows a substantial increase, confirming the upward price movement is supported by increasing buying pressure.
4. Stochastic RSIIn the realm of technical analysis, the Stochastic RSI (StochRSI) emerges as a powerful tool for traders seeking to navigate market dynamics with precision. Developed by Tushar S. ... More: The Stochastic RSI is at 1.000, indicating the stock is currently overbought in the short term. This may suggest a potential for a short-term pullback or consolidation before continuing its upward trend.
5. Average Directional IndexThe Average Directional Index (ADX) stands as a cornerstone indicator in the toolkit of technical traders, offering insights into the strength of market trends. Developed by Welles... More (ADX): The ADX is at 16.6752, which is relatively low, indicating that the trend strength is still developing. A rising ADX would confirm strengthening trend momentum.
6. Chaikin OscillatorNamed after its creator Marc Chaikin, the Chaikin Oscillator stands as a formidable tool in the arsenal of technical analysts. This oscillator is designed to measure the accumulati... More: The Chaikin Oscillator is at -701.891. This negative value indicates that there has been some distribution, but this may not be significant given the recent strong price increase and other bullish indicators.

Time-Frame Signals:

• 3 Months: Buy. The recent bullish indicators and strong upward momentum suggest potential for further gains in the short term.
• 6 Months: Hold. While the stock shows strong bullish signs, the overbought condition in the short term and relatively low ADX suggest monitoring for potential consolidation.
• 12 Months: Buy. Given the overall positive indicators and the potential for further development of the upward trend, the long-term outlook remains bullish.

In summary, the technical indicators for Trio Petroleum Corp suggest a bullish outlook with potential for further price increases. Short-term caution is advised due to overbought conditions, but the long-term trend appears positive.

Remember, past performance is not an indication of future results. Always conduct your own research and consider consulting with a financial advisor before making any investment decisions. 🧡

Looking Ahead

Trio Petroleum’s recent developments signify a transformative period for the company. With successful initial production in California and promising exploratory drilling results in Utah, the company is well-positioned for substantial growth. These advancements underscore Trio Petroleum’s strategic efforts to enhance its production capabilities and economic returns, paving the way for a potentially bright future for its stock.

Frequently Asked Questions (FAQs) – Trio Petroleum