Touchstone Exploration Inc (AIM:TXP, TSX:TXP, OTC:PBEGF) shares dropped 14% to 9.5p after the TSX and LSE-listed oil and gas producer disclosed material uncertainties over its ability to continue as a going concern, with the company projecting a potential breach of banking covenants by the end of 2026.
The Trinidad-focused company said it could breach net senior funded debt and debt service coverage covenants as of 31 December this year, which could render its bank debt immediately repayable, while a working capital deficit of $15.4 million at the year end leaves limited headroom.
Management said it was in active discussions with its lender regarding potential amendments or waivers and was prepared to implement contingency measures, including optimising capital expenditure or raising additional debt or equity financing if required.
The warning accompanied full-year results for 2025 that showed revenue fall 20% to $45.8 million, with funds flow from operations down 68% to $5.4 million, as lower natural gas production and weaker crude oil and liquids pricing weighed on performance.
Annual production averaged 4,686 barrels of oil equivalent per day, an 18% decline from 5,734 in 2024, though the May 2025 acquisition of Shell Trinidad's Central Block, which contributed approximately 2,095 barrels per day, partially offset natural declines at the Cascadura field.
Net income for the year was $10.9 million, up from $8.3 million in 2024, though the improvement reflected a $12.6 million deferred tax recovery and a $5.0 million gain on asset dispositions rather than underlying trading performance.
Net debt rose to $72.9 million from $29.1 million a year earlier, reflecting borrowings taken on to finance the Central Block acquisition.