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Touchstone Exploration on a drilling roll at Ortoire project

Snapshot

  • Trinidad-basad producer
  • Coho and Cascadura wells beat expectations
  • Ortoire exploration accelerated after success so far 
Touchstone

Quick facts: Touchstone Exploration Inc

Price: 158 GBX

AIM:TXP
Market: AIM
Market Cap: £329.75 m
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If you look around the world natural gas prices are getting quite strong, so it is going to be an ideal time to be bringing on additional gas over the next twelve to eighteen months.

Paul Baay, chief executive

What Touchstone does

Touchstone Exploration Inc (LON:TXP) is a Canadian-based oil and gas company focused on the exploration, development and production of onshore assets in Trinidad.

The group has been producing oil in Trinidad since 2010 and is now one of the largest onshore independent oil producers in the country.

What it owns

Touchstone has production assets across 10 licence blocks in Trinidad, including 208 well locations over some 7,910 acres.

Across its portfolio, the company also has areas with exploration upside, through which it has earmarked potential growth projects.

Specifically, the Ortoire block covers a large area (about 55,000 acres).

Successes in the first two wells at Ortoire have exceeded expectations and have driven production growth.

Production and financial performance

Daily production was 1,310 barrels of oil per day (bopd) in the third quarter of 2020.

The rate compares to 1,396 bopd in the preceding quarter and 1,729 bopd in the comparative three months last year.

Touchstone said its production generated US$192,000, with operating netback noted at US$14.09 per barrel, supported by higher realised crude prices.

At the same time operating costs reduced by around 10% and G&A costs declined 9% as the company continued to focus on discretionary cost reductions.

The company recognised a third-quarter net loss of US$703,000, compared to a net loss of US$1.03mln at the same stage last year.

Exploration hit after hit

The Ortoire exploration block in Trinidad continues to exceed expectations.

Cascadura Deep-1 was drilled down to a total depth of 8,303 feet and was paused before reaching the planned depth of 10,600 feet because high-pressure gas zones were encountered while drilling.

Nevertheless, the well encountered some 2,100 feet of the targeted Herrera sands across multiple stacked zones.

Chinook-1 meanwhile is targeting hydrocarbon prospects in the Herrera formation, the same horizon found in the successful Coho and Cascadura discoveries.

It will be drilled to a depth of 9,880 feet and the drill programme is expected to take 40 days.

The plan is to complete the next two wells and bring any successes online at the same time as Cascadura, in 2021.

In December, a long-term natural gas sales agreement was agreed with the National Gas Company of Trinidad and Tobago Limited (NGC), covering all future gas production from the Ortoire block.

It will allow the recent discoveries at 80%-owned Ortoire to be delivered into production, starting with the Coho-1 well which was drilled successfully in 2019. 

Executive interview – CEO Paul Baay

What brokers say: SP Angel

SP Angel said the NGC agreement provides a stable, multi-decade revenue stream for Touchstone to fully develop the field at Ortoire.

This comes directly after the recently announced significant gas discovery at its latest Cascadura Deep-1 well (TXP 80% WI) earlier this month.

Cascadura Deep-1 was drilled to a total measured depth of 8,303ft (8,133ft TVD) and whilst the well was originally planned to be drilled to a total depth of 10,600ft, the gas sands encountered in overthrust Sheet 4 proved difficult to manage, and the decision was made to cease drilling to preserve the substantial pay section encountered in the well.

"While details of the agreement remain thin at this stage, it does serve to transition TXP from an exploration Company to one that is a full-cycle energy provider in our view. The structure of the agreement provides Touchstone with a predictable cash flow and earnings stream for years to come while minimising the capital required to maximise the resource."

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Touchstone Exploration Shareholder Q&A

Touchstone Exploration Inc's (LON:TXP) Paul Baay joins Proactive London's Katie Pilbeam to answer questions from shareholders. Following Baay's live presentation at the Proactive One2One Investment Forum, shareholders were given the chance to put forward all of their queries. Baay runs...

on 19/1/21

4 min read