TIDMTXP
RNS Number : 0212S
Touchstone Exploration Inc.
11 November 2021
TOUCHSTONE ANNOUNCES THIRD QUARTER 2021 RESULTS AND OPERATIONAL
UPDATE
CALGARY, ALBERTA (November 11, 2021) - Touchstone Exploration
Inc. ( " Touchstone ", "we", "our", "us" or the " Company " ) (TSX,
LSE: TXP) reports its operating and financial results for the three
and nine months ended September 30, 2021. Selected information is
outlined below and should be read in conjunction with Touchstone's
September 30, 2021 unaudited interim condensed consolidated
financial statements and related Management's discussion and
analysis, both of which will be available under the Company's
profile on SEDAR ( www.sedar.com ) and the Company's website (
www.touchstoneexploration.com ). Unless otherwise stated, all
financial amounts herein are stated in United States dollars .
Third Quarter Operational and Financial Highlights
-- Achieved quarterly average production volumes of 1,333
bbls/d, a 2 percent increase relative to the 1,310 bbls/d produced
in the third quarter of 2020.
-- Despite continuing COVID-19 challenges in Trinidad, executed
an incident free $7,542,000 exploration program, highlighted by the
drilling of the Royston-1 exploration well and completion of the
Royston area seismic program.
-- Realized petroleum sales of $7,650,000 from an average crude
oil price of $62.37 per barrel.
-- Generated an operating netback of $27.77 per barrel, our
highest quarterly operating netback since the first quarter of 2019
and a 97 percent increase relative to the third quarter of
2020.
-- Reported funds flow from operations of $1,073,000 versus
$192,000 in the third quarter of 2020.
-- Recognized a reduced net loss of $51,000 compared to a net
loss of $703,000 in the same period of 2020.
-- Exited the third quarter with a cash balance of $5,004,000
and $7,500,000 drawn on our term credit facility.
-- Successfully aided in exporting a third-party drilling rig to
Trinidad, with developmental drilling operations commencing on our
WD-4 block on early October 2021.
-- Exploration operations proceeded in the third quarter, with
Coho natural gas facility and pipeline construction operations
continuing towards targeted pipeline commissioning in the first
quarter of 2022, as well as the completion of the design of the
Cascadura natural gas facility.
Paul Baay, President and Chief Executive Officer, commented:
"Our third quarter results reflect the focused work the team has
done on maintaining base production with minimal expense while
executing a safe capital program at Ortoire. The higher reported
operating netbacks have resulted in strong cash flow for the
quarter which help fund our ongoing capital program while we move
closer to first production from Coho, which is forecasted to effect
a step change in our financial performance."
Financial and Operating Results Summary
Three months ended % change Nine months ended % change
September 30, September 30,
--------- ---------
2021 2020 2021 2020
------------------------------- ---------- --------- --------- --------- --------- ---------
Operational
Average daily oil
production(1) (bbls/d) 1,333 1,310 2 1,344 1,431 (6)
Net wells drilled 0.8 - n/a 0.8 - n/a
Brent benchmark price
($/bbl) 73.51 42.91 71 67.89 41.15 65
Operating netback(2)
($/bbl)
Realized sales price 62.37 39.20 59 58.06 38.54 51
Royalties (19.36) (11.17) 73 (17.75) (10.82) 64
Operating expenses (15.24) (13.94) 9 (14.90) (13.06) 14
------------------------------- ---------- --------- --------- --------- --------- ---------
Operating netback 27.77 14.09 97 25.41 14.66 73
------------------------------- ---------- --------- --------- --------- --------- ---------
Financial
($000's except per
share amounts)
Petroleum sales 7,650 4,725 62 21,356 15,178 41
Cash from operating
activities 384 4,126 (91) 158 2,129 (93)
Funds flow from operations(3) 1,073 192 459 2,816 999 182
Per share - basic
and diluted(2)(3) 0.01 0.00 n/a 0.01 0.01 -
Net loss (51) (703) (93) (795) (12,685) (94)
Per share - basic
and diluted (0.00) (0.00) - (0.00) (0.07) (100)
Exploration capital
expenditures 7,542 5,758 31 17,160 8,830 94
Development capital
expenditures 2,315 211 997 2,567 523 391
------------------------------- ---------- --------- --------- --------- --------- ---------
Total capital expenditures 9,857 5,969 65 19,727 9,353 111
------------------------------- ---------- --------- --------- --------- --------- ---------
Working capital deficit
(surplus)(2) 4,657 (869) n/a
Principal long-term
balance of term loan 7,125 15,000 (53)
Net debt(2) - end
of period 11,782 14,131 (17)
------------------------------- ---------- --------- --------- --------- --------- ---------
Share Information
(000's)
Weighted avg. shares
outstanding:
Basic and diluted 210,732 184,277 14 209,968 179,112 17
Outstanding shares
- end of period 210,732 184,408 14
Notes:
(1) References to crude oil in the above table and elsewhere in
this announcement is a mix of light and medium crude oil and heavy
crude oil for which there is not a precise breakdown since the
Company's oil sales volumes typically represent blends of more than
one type of crude oil.
(2) Non-GAAP financial measure that does not have a standardized
meaning prescribed by International Financial Reporting Standards
("IFRS" or "GAAP") and therefore may not be comparable with the
calculation of similar measures presented by other companies. See
"Advisories: Non-GAAP Measures" for further information.
(3) Additional GAAP term included in the Company's consolidated
statements of cash flows. Funds flow from operations represents net
loss excluding non-cash items. See "Advisories: Non-GAAP Measures"
for further information.
Operating results
Our third quarter 2021 crude oil sales averaged 1,333 bbls/d,
representing a 2 percent increase from the third quarter of 2020.
The nominal increase in production was reflective of increased
legacy well workover operations through 2021 that have mitigated
annual natural declines. We incurred $2,315,000 in development
asset expenditures in the third quarter of 2021, primarily relating
to third-party drilling rig mobilization fees and inventory for the
Company's fourth quarter 2021 development drilling program.
Touchstone's focus in the third quarter of 2021 remained on
Ortoire exploration operations, investing $7,542,000 and
progressing with the following exploration activities.
-- Completed the Royston area 22-kilometre seismic program,
which gave the Company further clarity regarding the Royston,
Steelhead, Bass and Kraken exploration prospects.
-- Drilled the Royston-1 exploration well, with wireline log
data indicating an aggregate 393 gross feet of potential
hydrocarbon pay.
-- Continued Coho-1 natural gas facility construction
operations, with pipeline installation operations commencing in
late October 2021.
-- Completed the design of the Cascadura natural gas facility,
with facility separators currently being fabricated and facility
equipment being sourced for procurement.
Financial results
We generated funds flow from operations of $1,073,000 in the
third quarter of 2021 compared to $192,000 in the same period of
2020. In comparison to the third quarter of 2020, the increase
primarily reflected a 59 percent increase in crude oil realized
pricing, which contributed to a $1,707,000 increase in third
quarter 2021 operating netbacks. Relative to the third quarter of
2020, further savings in third quarter 2021 term loan interest
costs were offset by increased general and administration costs and
income tax expenses accrued from increased taxable income.
Touchstone recorded a net loss of $51,000 ($0.00 per share) in
the third quarter of 2021 compared to a net loss of $703,000 ($0.00
per share) in the prior year equivalent quarter. The decreased 2021
net loss compared to the equivalent prior year period was primarily
attributed to the aforementioned increase in operating netbacks,
which were driven by stable production and increased realized
pricing.
Based on increased capital spending, we exited the third quarter
with a cash balance of $5,004,000, a working capital deficit of
$4,657,000 and $7,500,000 drawn on its term credit facility
resulting in a net debt position of $11,782,000. On October 1,
2021, we withdrew an additional $7,500,000 on our term credit
facility, resulting in a principal balance of $15,000,000 currently
outstanding. Our near-term liquidity is augmented by $5,000,000 of
current undrawn credit capacity, which may be accessed any time
prior to the end of the 2021.
Our primary objective remains to bring the Coho and Cascadura
area natural gas exploration discoveries at Ortoire onto production
as soon as practicable. As the current economic and health-related
challenges persist, we will continue to adapt business operations
and capital programs to ensure health and safety and enhance
long-term shareholder value.
Operational Update
Development drilling
Drilling with the newly imported Star Valley Rig 205 commenced
on our WD-4 block on October 6, 2021 with the PS-610 well, reaching
a depth of 7,589 feet on October 19, 2021. While drilling in the
lowermost section of the well, a high-pressure natural gas zone was
encountered which required an increased mud weight that resulted in
a stuck pipe event. After multiple recovery attempts, we abandoned
the wellbore and sidetracked uphole. PS-610ST commenced drilling on
October 31, 2021 and reached a total depth of 6,975 feet on
November 9, 2021. Wireline logs indicate that the well encountered
a total of 807 feet of sand and 370 feet of net oil pay at depths
between 3,900 and 6,900 feet as follows:
Upper Forest Formation 108 feet
Lower Forest Formation 236 feet
Upper Cruse Formation 26 feet
Total 370 feet
The well also encountered 353 feet of gross sand in the shallow
Morne L'Enfer Formation of which 349 feet is prospective oil pay.
The Morne L'Enfer Formation is productive in many parts of
Trinidad; however, economic production has not been established in
the Grand Ravine WD-4 area. While PS-610ST will not be testing
these sands, these results represent a future opportunity which
will be further investigated by our subsurface team.
The PS-610ST well is currently being cased for oil production,
and the drilling rig will be mobilizing to our WD-8 block where it
is expected to drill two development wells off a single pad. Once
the rig is off the PS-610ST location we will proceed with its
planned initial completion in the Upper Cruse Formation. Based on
offset well and wireline log data, we expect initial production
rates to be in line with internal forecasts.
Coho
The final construction stages of the Coho facility are
progressing, and the 3-kilometre pipeline field construction to the
Central Block Baraka natural gas facility has commenced with
pipeline commissioning expected in the first quarter of 2022.
Cascadura
We have completed the design of the surface facilities required
to meet the initial and long-term production capabilities of the
Cascadura-1ST1 and Cascadura Deep-1 exploration wells that have
been successfully tested. Currently the facility separators are
being fabricated, with other facility equipment being sourced for
procurement.
We continue to work in conjunction with a third-party contractor
on the Cascadura area Environmental Impact Assessment ("EIA") to
submit to the Trinidad and Tobago Environmental Management
Authority ("EMA"). The first phase of stakeholder engagement was
completed in September 2021, with the final phase expected to be
completed by the end of November 2021. The expected date of
completion of the EIA and submission to the EMA is anticipated to
occur by the end of 2021. The EMA has 80 business days to review
the submitted EIA upon receipt.
Chinook
Subsequent to the fourth and final production test performed on
the Chinook-1 well, the well was shut in on July 15, 2021 for a
30-day pressure buildup, and downhole pressure recorders were
retrieved on August 16, 2021. Analysis of the pressure buildup data
at this location suggests the Cruse reservoir is undamaged, small
in size, and uneconomic to produce. Touchstone has submitted a
notification of commercial potential for the Chinook area to the
Trinidad and Tobago Ministry of Energy and Energy Industries and is
currently working on declaration of commerciality and comprehensive
field development submissions.
Royston
As previously reported, the Royston-1 well was spud on August
12, 2021 and was the final exploration commitment well under our
Ortoire licence . Drilling samples and open hole wireline logs
indicated that the well encountered a significant Herrera turbidite
package with a total observed thickness of more than 1,000 feet.
The overall Herrera section drilled in Royston-1 contained
approximately 609 feet of clean sand, of which 393 gross feet in
two unique thrust sheets appeared to be hydrocarbon pay based on
mud gas logging and open hole logs.
Initial completion and production testing operations commenced
on October 20, 2021. The first of three scheduled production tests
was completed between 10,434 and 10,526 feet and, as previously
announced, proved the Intermediate Herrera section to be a
34.5-degree API crude oil reservoir which flowed at rates up to 360
bbls/d during testing. Based on wireline logging and drilling data,
we are configuring the next two uphole primary production test
intervals to evaluate probable liquids rich natural gas prospects,
with flowback and full buildup analysis planned for each zone. The
second test is expected to be completed within the next three
weeks, and we anticipate the third test to be completed by the end
of December 2021.
Touchstone Exploration Inc.
Touchstone Exploration Inc. is a Calgary, Alberta based company
engaged in the business of acquiring interests in petroleum and
natural gas rights and the exploration, development, production and
sale of petroleum and natural gas. Touchstone is currently active
in onshore properties located in the Republic of Trinidad and
Tobago. The Company's common shares are traded on the Toronto Stock
Exchange and the AIM market of the London Stock Exchange under the
symbol " TXP " .
For further information about Touchstone, please visit our
website at www.touchstoneexploration.com or contact:
Touchstone Exploration Inc.
Mr. Paul Baay, President and Chief Executive Officer Tel: +1
(403) 750-4487
Mr. Scott Budau, Chief Financial Officer
Mr. James Shipka, Chief Operating Officer
Shore Capital (Nominated Advisor and Joint Broker)
Nominated Advisor: Daniel Bush / Toby Gibbs / Michael McGloin
Tel: +44 (0) 207 408 4090
Canaccord Genuity (Joint Broker)
Adam James / Henry Fitzgerald O'Connor / Thomas Diehl Tel: +44
(0) 207 523 8000
Camarco (Financial PR)
Billy Clegg / Emily Hall / Lily Pettifar Tel: +44 (0) 203 781
8330
Advisories
Non-GAAP Measures
This announcement contains terms commonly used in the oil and
natural gas industry, including funds flow from operations, funds
flow from operations per share, operating netback, working capital
and net debt. These terms do not have a standardized meaning
prescribed under GAAP or IFRS and may not be comparable to similar
measures presented by other companies. Shareholders and investors
are cautioned that these measures should not be construed as
alternatives to cash flow from operating activities, net earnings,
net earnings per share, total assets, total liabilities, or other
measures of financial performance as determined in accordance with
GAAP. Management uses these non-GAAP measures for its own
performance measurement and to provide stakeholders with measures
to compare the Company's operations over time.
Funds flow from operations is an additional GAAP measure
included in the Company's consolidated statements of cash flows.
Funds flow from operations represents net earnings (loss) excluding
non-cash items. Touchstone considers funds flow from operations to
be an important measure of the Company's ability to generate the
funds necessary to finance capital expenditures and repay debt. The
Company calculates funds flow from operations per share by dividing
funds flow from operations by the weighted average number of common
shares outstanding during the applicable period.
The Company uses operating netback as a key performance
indicator of field results. Operating netback is presented on a
total and per barrel basis and is calculated by deducting royalties
and operating expenses from petroleum sales. The Company considers
operating netback to be a key measure as it demonstrates
Touchstone's profitability relative to current commodity prices.
This measurement assists Management and investors with evaluating
operating results on a historical basis.
The Company closely monitors its capital structure with a goal
of maintaining a strong financial position in order to fund current
operations and the future growth of the Company. The Company
monitors working capital and net debt as part of its capital
structure to assess its true debt and liquidity position and to
manage capital and liquidity risk. Working capital is calculated as
current assets minus current liabilities as they appear on the
consolidated statements of financial position. Net debt is
calculated by summing the Company's working capital and the
principal (undiscounted) long-term amount of senior secured
debt.
Please refer to the Company's September 30, 2021 Management's
discussion and analysis for reconciliations of non-GAAP measures
contained herein to applicable GAAP measures.
Forward-Looking Statements
Certain information provided in this announcement may constitute
forward-looking statements and information (collectively,
"forward-looking statements") within the meaning of applicable
securities laws. Such forward-looking statements include, without
limitation, forecasts, estimates, expectations and objectives for
future operations that are subject to assumptions, risks and
uncertainties, many of which are beyond the control of the Company.
Forward-looking statements are statements that are not historical
facts and are generally, but not always, identified by the words
"expects", "plans", "anticipates", "believes", "intends",
"estimates", "projects", "potential" and similar expressions, or
are events or conditions that "will", "would", "may", "could" or
"should" occur or be achieved.
Forward-looking statements in this announcement may include, but
are not limited to, statements relating to the Company's
development and exploration plans and strategies, including
anticipated development and exploration well drilling operations
and locations, well test results and the Company's interpretation
thereof, anticipated production testing operations, the timing
thereof and results therefrom, facility construction and pipeline
tie-in operations and the timing thereof, the quality and quantity
of prospective hydrocarbon accumulations based on internal
interpretations of wireline logs, anticipated completion,
submission and receipt of regulatory approvals, and ultimate
production from development and exploration wells, the Company's
current financial position and its expectations of future funds
flow and the sufficiency of resources and available financing to
fund future capital expenditures and maintain financial liquidity.
Although the Company believes that the expectations and assumptions
on which the forward-looking statements are based are reasonable,
undue reliance should not be placed on the forward-looking
statements because the Company can give no assurance that they will
prove to be correct. Since forward-looking statements address
future events and conditions, by their very nature they involve
inherent risks and uncertainties. Actual results could differ
materially from those currently anticipated due to a number of
factors and risks. Certain of these risks are set out in more
detail in the Company's 2020 Annual Information Form dated March
25, 2021 which is filed under the Company's profile on SEDAR (
www.sedar.com ) and is available on the Company's website (
www.touchstoneexploration.com ). The forward-looking statements
contained in this announcement are made as of the date hereof, and
except as may be required by applicable securities laws, the
Company assumes no obligation to update publicly or revise any
forward-looking statements made herein or otherwise, whether as a
result of new information, future events or otherwise.
Oil and Gas Matters
References in this announcement to production test rates and
initial flow rates are useful in confirming the presence of
hydrocarbons; however, such rates are not determinative of the
rates at which the well will commence production and decline
thereafter and are not indicative of long-term performance or of
ultimate recovery. Additionally, such rates may also include
recovered "load oil" fluids used in well completion stimulation.
While encouraging, readers are cautioned not to place reliance on
such rates in calculating the aggregate production for the Company.
A final pressure transient analysis and/or well-test interpretation
has yet to be carried out in respect of the well. Accordingly, the
Company cautions that the production test results contained herein
should be considered preliminary.
Abbreviations
bbls/d barrels per day
API American Petroleum Institute gravity
psi pounds per square inch
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