REG - Touchstone Explrtn. - 2024 BUDGET GUIDANCE AND OPERATIONAL UPDATE

Touchstone ExplorationAnnouncement

19/12/2023 07:00

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RNS Number : 2208X  Touchstone Exploration Inc.  19 December 2023

THIS ANNOUNCEMENT RELATES TO THE DISCLOSURE OF INFORMATION THAT QUALIFIED OR
MAY HAVE QUALIFIED AS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF THE
MARKET ABUSE REGULATION (EU) 596/2014 AS IT FORMS PART OF UK DOMESTIC LAW BY
VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018.

 

TOUCHSTONE ANNOUNCES 2024 CAPITAL BUDGET, PRELIMINARY 2024 GUIDANCE AND AN
OPERATIONAL UPDATE

 

CALGARY, ALBERTA (December 19, 2023) - Touchstone Exploration Inc.
("Touchstone", "we", "our" or the "Company") (TSX, LSE: TXP) is pleased to
announce its annual 2024 capital budget, preliminary 2024 guidance and an
operational update.

 

Paul Baay, President and Chief Executive Officer, commented:

 

"Our top priority remains maintaining a culture of safe and responsible
operations that continues to drive near and long-term value creation for our
investors. I am pleased to announce our growth-oriented capital budget for
2024 which reinforces Touchstone's commitment to pursue development
opportunities that generate positive returns to position the Company for
sustained success. The budget and preliminary guidance reflects our near-term
strategy to deploy capital to developmental drilling opportunities and use our
existing natural gas and liquids infrastructure capacity. We will remain
disciplined when deploying our 2024 capital and increasing our credit
capacity, adhering to our long-term net debt and liquidity targets. This
approach will allow us to fund future exploration drilling from cash flows
expected to be generated through our 2024 development drilling program and
maximization of our existing financing facilities."

 

Funding Position((1))

 

The Company is in advanced discussions with its existing lender to increase
its current debt capacity to facilitate the forecasted timing and amount of
the 2024 capital budget presented herein. The 2024 budget contemplates
increasing the Company's revolving component of its credit facility from $7
million to $20 million in the first quarter of 2024. Although we are confident
of reaching agreement, currently there is no firm commitment in place between
the parties. Accordingly, the 2024 budget and preliminary guidance may be
subject to change, and such changes may be material. The Company will provide
further updates in due course.

 

2024 Budget Highlights((( 1  (#_ftn1) )))

·     Capital budget allocation - we plan to invest approximately $33
million of capital in 2024, with approximately 42 percent of our capital
expenditures((( 2  (#_ftn2) ))) directed to our Cascadura field and 38 percent
to our Coho assets. The remaining 20 percent is allocated to our legacy oil
properties, exploration licence payments and corporate infrastructure.

·     Drilling operations - the initial 2024 capital budget contemplates
drilling two Cascadura development wells, two CO-1 Block crude oil development
wells, one Coho development well, and one Coho exploration well.

·      Production growth - our 2024 mid-point annual average production
guidance of 9,400 boe/d represents an approximate 135 percent increase from
our forecasted 2023 average production, with a budgeted exit average
production rate of 14,500 boe/d. Annual production guidance is 9,100 to 9,700
boe/d (approximately 82 percent natural gas weighted).

·      Funds flow generation and balance sheet strength - the 2024
budget is designed to generate approximately $32 million of funds flow from
operations((2)) (Brent price of $75.00/bbl and an 18 percent realized Brent
differential), resulting in a net debt to annual funds flow from operations
ratio((2)) of 0.78 times.

2024 Budget and Guidance Overview

 

For 2024, Touchstone's Board of Directors has approved an initial capital
budget of $33 million to drill, complete and tie-in six wells, resulting in
estimated annualized average daily production between 9,100 boe/d and 9,700
boe/d with a forecasted production mix of 82 percent natural gas and 18
percent crude oil and liquids.

 

Touchstone's initial 2024 drilling plan includes drilling two legacy property
crude oil wells, two Cascadura development wells, one Coho development well
and one Coho exploration well. Production growth is expected to be weighted in
the fourth quarter of 2024, with two Cascadura wells expected to be drilled in
the first half of the year and tied-in to the Cascadura plant prior to the end
of the third quarter of 2024. The two Coho wells are expected to be drilled in
the fourth quarter of 2024, and production additions from those wells are
anticipated in the first quarter of 2025.

 

Using midpoint forecasted average production of 9,400 boe/d and a Brent
Benchmark price of $75.00 for crude oil and liquids, Touchstone expects to
generate approximately $32 million of funds flow from operations. Based on the
approved capital budget of $33 million, Touchstone is forecasting to exit 2024
with a net debt of $25 million, resulting in a net debt to annual funds flow
from operations ratio of 0.78 times.

 

2024 Guidance Summary((1))

 

 Annual Guidance                                   Year ending December 31, 2024

 Capital expenditures((2)) ($000's)                33,000

 Average daily production((3)) (boe/d)             9,100 to 9,700
 % natural gas((4))                                82%
 % crude oil and liquids((4))                      18%

 Average Brent crude oil price ($/bbl)             75.00
 % realized discount to Brent benchmark price      18%

 Funds flow from operations((5)) ($000's)          32,000

 Net debt - end of year((2)(5)) ($000's)           25,000

 

Notes:

(1)   Forward-looking statement representing Management estimates.
Additional information regarding the assumptions used are provided in the
"Advisories - Assumptions for 2024 Guidance" section herein.

(2)   Non-GAAP financial measure. See the "Advisories - Non-GAAP Financial
Measures" section herein for additional information on the definitions and
calculation of these measures.

(3)   In the table above and elsewhere in this announcement, references to
"boe" mean barrels of oil equivalent that are calculated using the energy
equivalent conversion method. See the "Advisories - Oil and Natural Gas
Measures" section herein for further information.

(4)   See the "Advisories - Product Type Disclosures" section herein for
further information.

(5)   The financial performance measures included in the Company's 2024
preliminary guidance are based on the midpoint of the average production
forecast.

 

Operational Update

 

In November 2023, we achieved average net sales volumes of 8,268 boe/d as
follows:

·     6,623 boe/d (8,279 boe/d gross) of Cascadura field net sales
volumes consisting of:

-     net natural gas sales volumes of 36.1 MMcf/d or 6,022 boe/d (45.1
MMcf/d or 7,528 boe/d gross) with a realized price of $2.46/Mcf; and

-     net natural gas liquids volumes of 601 bbls/d (751 bbls/d gross)
with an average realized price of $71.46 per barrel;

·     Coho field net average natural gas sales volumes of 3.2 MMcf/d or
527 boe/d (4.0 MMcf/d or 659 boe/d gross) at a realized price of $2.29/Mcf;
and

·     average gross and net daily crude oil sales volumes of 1,118
bbls/d with an average realized price of $71.46 per barrel.

Cascadura

 

Commissioning of the Cascadura natural gas facility has been completed, and
the facility is fully functional. Since commencing production in September,
the Cascadura facility has had an uptime of 97.9 percent with minimal
interruptions experienced through the commissioning phase. Through November
30, 2023, the facility has processed 3.8 billion cubic feet of gross natural
gas volumes and 73 Mbbls of gross NGL production volumes.

 

Touchstone continues to optimize Cascadura production volumes, with
adjustments being made to the mechanical chokes which are constraining
production in both wells. Through December 1 to December 17, 2023,
Cascadura-1ST1 produced approximately 35.7 MMcf/d of gross field estimated
natural gas volumes from the upper overthrust sheet while Cascadura Deep-1
contributed approximately 11.4 MMcf/d of gross field estimated natural gas
production from the lower overthrust sheet.

 

We are evaluating the Cascadura Deep-1 well for future optimization, including
the potential for additional perforations in the lower sheet. The additional
perforations could increase production by reducing current reservoir draw down
rates allowing for an increase in the surface choke, which is currently at 54
percent. These additional perforations can be achieved without the use of a
service rig or having to kill the well. The Cascadura Deep-1 well has
approximately 200 feet of perforations currently open (118 feet net pay), and
wireline logs indicate an additional 149 feet of reservoir sands (109 feet net
pay) in the lower part of the formation available for future completion. The
well also has 366 feet of gross sand (274 feet net pay) in the upper
overthrust sheet that can also be perforated in the future. Touchstone
anticipates commencing a staged approach to adding these sands in the lower
overthrust sheet in the first half of 2024.

 

Preparation works for drilling the Cascadura-2 development well using Star
Valley Rig #205 are underway, with the intent to spud early in the first
quarter of 2024 from the Cascadura-C surface location located approximately
5,000 feet northeast of our producing Cascadura wells. The Cascadura-2 well is
targeting the same Herrera 7bc overthrust sand packages as the current
Cascadura producing wells.

 

Coho

 

Touchstone completed a workover on the Coho-1 well on December 4, 2023,
successfully isolating the lowermost perforations and shutting off
approximately 77 percent of the produced water. Two weeks following the
workover, field estimated gross production volumes have averaged approximately
4.6 MMcf/d of natural gas with approximately 54 barrels of water per day,
compared to November gross production volumes of 4.0 MMcf/d of natural gas and
230 barrels of water per day. Based on the decreased water production,
Touchstone expects fluid hauling expenses to decrease by approximately 80
percent.

 

Preparations are underway to facilitate the drilling of the Coho-2 development
well and the Gibba-1 exploration well which are expected to be drilled on the
existing Coho-1 surface location in the fourth quarter of 2024.

 

Royston

 

Production testing of the Royston-1X exploration well has been suspended, and
no further testing or expenditures are planned. The uppermost Karamat and
Herrera sands were put to pump, however the rates encountered were not
economic. Touchstone will review the data collected during testing from both
the Royston-1 and Royston-1X wells to determine if a declaration of
commerciality for the Royston structure is warranted.

CO-1 Block

 

Preparations are underway on our CO-1 block for a two development well
drilling program. A local drilling contractor is expected to mobilize a
drilling rig to the location in late January, pending completion of their
current drilling operations. Two wells are expected to be drilled from an
existing surface location, both targeting Forest and Cruse sands which have
proven to be highly prospective based on the Company's previous drilling
campaign offsetting the area.

 

Touchstone Exploration Inc.

 

Touchstone's updated corporate presentation is available on our website at
www.touchstoneexploration.com (http://www.touchstoneexploration.com/) .

 

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 (http://www.touchstoneexploration.com/) or
contact:

 

 Touchstone Exploration Inc.                         Tel: +1 (403) 750-4487

 Paul Baay, President and Chief Executive Office

 Scott Budau, Chief Financial Officer

 James Shipka, Chief Operating Officer

 Shore Capital (Nominated Advisor and Joint Broker)  Tel: +44 (0) 207 408 4090

 Daniel Bush / Toby Gibbs / Iain Sexton

 Canaccord Genuity (Joint Broker)                    Tel: +44 (0) 207 523 8000

 Adam James / Ana Ercegovic

 FTI Consulting (Financial PR)                       Tel: +44 (0) 203 727 1000

 Nick Hennis / Ben Brewerton                         Email: touchstone@fticonsulting.com (mailto:touchstone@fticonsulting.com)

 

 

Advisories

 

This announcement contains information that qualified or may have qualified as
inside information for the purposes of Article 7 of the Market Abuse
Regulation (EU) 596/2014 ("MAR") as it forms part of UK domestic law by virtue
of the EUWA ("UK MAR"), encompassing information relating to the Company's
2024 capital budget and preliminary guidance. For the purposes of UK MAR and
Article 2 of the binding technical standards published by the Financial
Conduct Authority in relation to MAR as regards Commission Implementing
Regulation (EU) 2016/1055, the person responsible for the release of this
announcement is Paul Baay, President and Chief Executive Officer.

 

Currency

 

All financial figures are stated in United States dollars unless otherwise
noted.

 

Forward-looking Statements

 

The information provided in this announcement contains certain 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 "expect", "plan",
"anticipate", "believe", "intend", "maintain", "continue to", "pursue",
"design", "result in", "sustain" "estimate", "potential", "growth",
"near-term", "long-term", "forecast", "contingent" and similar expressions, or
are events or conditions that "will", "would", "may", "could" or "should"
occur or be achieved. The forward-looking statements contained in this
announcement speak only as of the date hereof and are expressly qualified by
this cautionary statement.

 

Specifically, this announcement includes, but is not limited to,
forward-looking statements relating to: the Company's business plans,
strategies, priorities and development plans; Touchstone's ability to pursue
development opportunities that generate positive returns and position it for
success; the Company's intention to expand the current revolving portion of
its credit facility; the focus of Touchstone's 2024 capital plan, including
pursuing developmental drilling activities and optimizing existing natural gas
and liquids infrastructure capacity; anticipated 2023 and 2024 annual average
production and production by commodity; forecasted production decline rates;
anticipated timing of developmental and exploration drilling production;
anticipated 2024 capital expenditures including estimations of costs and
inflation incorporated therein; expected drilling activities, including
locations and the timing thereof; anticipated timing of well tie-in
operations; forecasted 2024 average Brent reference price and the Company's
budgeted realized price in relation thereto; forecasted royalty, operating,
general and administration, cash finance and income tax expenses; anticipated
funds flow from operations and net debt; field estimated production; the
Company's expectation of decreased Coho fluid hauling expenses; the quality
and quantity of prospective hydrocarbon accumulations based on analysis of
wireline logs; and Touchstone's current and future financial position,
including the sufficiency of resources to fund future capital expenditures and
maintain financial liquidity. The Company's actual decisions, activities,
results, performance, or achievement could differ materially from those
expressed in, or implied by, such forward-looking statements and accordingly,
no assurances can be given that any of the events anticipated by the
forward-looking statements will transpire or occur or, if any of them do, what
benefits that Touchstone will derive from them. The assumptions used to
generate this forward-looking formation and statements include, among other
things, the assumption that the Company will be able to increase the revolving
component of its credit facility from $7 million to $20 million in the first
quarter of 2024.

 

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 2022
Annual Information Form dated March 23, 2023 which is available under the
Company's profile on SEDAR+ (www.sedarplus.ca (http://www.sedarplus.ca/) ) and
on the Company's website (www.touchstoneexploration.com
(http://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 or intent to update publicly or revise any forward-looking
statements made herein or otherwise, whether as a result of new information,
future events or otherwise.

 

This announcement contains future-oriented financial information and financial
outlook information (collectively, "FOFI") about Touchstone's prospective
results of operations and production included in its 2024 guidance, all of
which are subject to the same assumptions, risk factors, limitations, and
qualifications as set forth in the paragraphs above. The FOFI contained in
this announcement was approved by Management as of the date of this
announcement and was provided for the purpose of providing further information
about Touchstone's future business operations. This information has been
provided for illustration only and, with respect to future periods, is based
on budgets and forecasts that are speculative and are subject to a variety of
contingencies and may not be appropriate for other purposes. Touchstone and
its Management believe that FOFI has been prepared on a reasonable basis,
reflecting Management's best estimates and judgments, and represents, to the
best of Management's knowledge and opinion, the Company's expected course of
action. However, because this information is highly subjective, it should not
be relied on as necessarily indicative of future results. Touchstone disclaims
any intention or obligation to update or revise any FOFI contained in this
announcement, whether as a result of new information, future events or
otherwise, unless required pursuant to applicable law. Readers are cautioned
that the FOFI contained in this announcement should not be used for purposes
other than for which it is disclosed herein, and the financial outlook
information contained herein is not conclusive and is subject to change.
Changes in the intended increase in the Company's credit facility, variations
in forecasted crude oil and liquids prices, differences in the amount and
timing of capital expenditures, and variances in average production estimates
and decline rates can have a significant impact on the key performance
measures included in the guidance disclosed herein. Management does not have
firm commitments for its intended increase in debt capacity nor for the costs,
expenditures, prices or other financial assumptions used to prepare the
financial outlook or assurance that such operating results will be achieved
and, accordingly, the complete financial effects of the forecasted costs,
expenditures, prices and operating results are not objectively determinable.
The actual results of the Company's operations and the resulting financial
results will vary from the amounts set forth in this announcement and such
variations may be material.

 

Non-GAAP Financial Measures

 

This announcement references various non-GAAP financial measures, non-GAAP
ratios, capital management measures and supplementary financial measures as
such terms are defined in National Instrument 52-112 Non-GAAP and Other
Financial Measures Disclosure. Such measures are not recognized measures under
Canadian Generally Accepted Accounting Principles ("GAAP") and do not have a
standardized meaning prescribed by International Financial Reporting Standards
("IFRS") and therefore may not be comparable to similar financial measures
disclosed by other issuers. Readers are cautioned that the non-GAAP financial
measures referred to herein should not be construed as alternatives to, or
more meaningful than, measures prescribed by IFRS, and they are not meant to
enhance the Company's reported financial performance or position. These are
complementary measures that are commonly used in the oil and natural gas
industry and by the Company to provide shareholders and potential investors
with additional information regarding the Company's performance. Below is a
description of the non-GAAP financial measures, non-GAAP ratios, capital
management measures and supplementary financial measures disclosed herein.

 

Capital expenditures

 

Capital expenditures is a non-GAAP financial measure that is calculated as the
sum of exploration and evaluation asset expenditures and property, plant and
equipment expenditures included in the Company's consolidated statements of
cash flows and is most directly comparable to cash used in investing
activities. Touchstone considers capital expenditures to be a useful measure
of its investment in its existing asset base. The following table presents a
historical computation of capital expenditures and reconciles capital
expenditures to cash used in investing activities for the periods indicated.

 

 ($000's)                                Three months ended September 30,      Nine months ended

                                                                               September 30,
                                         2023               2022               2023       2022

 E&E asset expenditures                  3,498              2,692              17,043     7,498
 PP&E expenditures                       111                207                720        1,323
 Capital expenditures                    3,609              2,899              17,763     8,821
 Abandonment fund expenditures           131                26                 253        85
 Proceeds from asset dispositions        -                  (11)               (250)      (146)
 Net change in non-cash working capital  1,090              (824)              978        5,982
 Cash used in investing activities       4,830              2,090              18,744     14,742

 

Net debt

 

Management monitors net debt as part of the Company's capital structure to
evaluate its true debt and liquidity position and to manage capital and
liquidity risk. Net debt is a capital management measure calculated by summing
the Company's working capital and the principal (undiscounted) long-term
amount of senior secured debt and is most directly comparable to total
liabilities disclosed in the Company's consolidated balance sheets. Working
capital is calculated by subtracting current liabilities from current assets
as they appear on the applicable consolidated balance sheets. The following
table presents historical working capital and net debt computations for the
periods indicated.

 

 ($000's)                                  September 30,  December 31,

                                            2023           2022

 Current assets                            (17,370)       (26,415)
 Current liabilities                       30,789         21,423
 Working capital deficit (surplus)         13,419         (4,992)
 Principal long-term balance of bank debt  16,500         21,000
 Net debt                                  29,919         16,008

 

The following table reconciles total liabilities to net debt for the
historical periods indicated.

 

 ($000's)                                                     September 30,  December 31,

                                                               2023           2022

 Total liabilities                                            73,832         69,497
 Lease liabilities                                            (1,662)        (1,373)
 Other liabilities                                            -              -
 Decommissioning liabilities                                  (11,594)       (11,182)
 Deferred income tax liability                                (13,318)       (14,557)
 Variance of carrying value and principal value of bank debt  31             38
 Current assets                                               (17,370)       (26,415)
 Net debt                                                     29,919         16,008

 

Net debt to funds flow from operations ratio

 

The Company monitors its capital structure using a net debt to funds flow from
operations ratio, which is a non-GAAP financial ratio and a capital management
measure calculated as the ratio of the Company's net debt to trailing twelve
months funds flow from operations for any given period. The following table is
a calculation of the Company's projected net debt to annual funds flow from
operations ratio disclosed herein.

 

                                                         December 31,

                                                          2024 Guidance

 Net debt((1)(2)) ($000's)                               25,000
 Annual funds flow from operations((1)(2)) ($000's)      32,000

 Net debt to funds flow from operations ratio            0.78 times

 

Notes:

(1)   Forward-looking statement representing Management estimates.
Additional information regarding the assumptions used are provided in the
"Advisories - Assumptions for 2024 Guidance" section herein.

(2)   The financial performance measures included in the Company's 2024
preliminary guidance are based on the midpoint of the average production
forecast.

 

Supplementary Financial Measures

 

Realized commodity price per boe - is comprised of petroleum and natural gas
sales as determined in accordance with IFRS, divided by the Company's total
production volumes for the period.

 

Royalties as a percentage of petroleum and natural gas sales - is comprised of
royalties as determined in accordance with IFRS, divided by petroleum and
natural gas sales as determined in accordance with IFRS.

 

Operating expenses per boe - is comprised of operating expenses as determined
in accordance with IFRS, divided by the Company's total production volumes for
the period.

 

General and administration expenses per boe - is comprised of general and
administration expenses as determined in accordance with IFRS, divided by the
Company's total production volumes for the period.

 

Cash finance expenses per boe - is comprised of cash finance expenses, divided
by the Company's total production volumes for the period. Cash finance
expenses are calculated as net finance expenses as determined in accordance
with IFRS, less accretion on decommissioning obligations, which are non-cash
in nature.

 

Current income tax expense per boe - is comprised of current income tax
expenses as determined in accordance with IFRS, divided by the Company's total
production volumes for the period.

 

For further information, please refer to the "Advisories - Non-GAAP Financial
Measures" section of the Company's most recent Management's discussion and
analysis for the three and nine months ended September 30, 2023 available on
SEDAR+ (www.sedarplus.ca (http://www.sedarplus.ca/) ) and on the Company's
website (www.touchstoneexploration.com (http://www.touchstoneexploration.com/)
), which includes further discussion of the purpose and composition of the
specified non-GAAP financial measures consistently used by the Company and
detailed reconciliations to the most directly comparable GAAP measures.

 

Product Type Disclosures

 

In this announcement, references to "crude oil" refer to "light crude oil and
medium crude oil" and "heavy crude oil" combined product types; references to
"NGLs" refer to condensate; and references to "natural gas" refer to the
"conventional natural gas" product type, as such terms are defined in National
Instrument 51-101 Standards of Disclosure for Oil and Gas Activities ("NI
51-101"). References to "crude oil and liquids" herein include crude oil and
NGLs.

 

For information regarding historical production product disclosures in
accordance with NI 51-101, please refer to the "Advisories - Product Type
Disclosures" section in the Company's most recent Management's discussion and
analysis for the three and nine months ended September 30, 2023 available on
SEDAR+ (www.sedarplus.ca (http://www.sedarplus.ca/) ) and on the Company's
website (www.touchstoneexploration.com (http://www.touchstoneexploration.com/)
).

 

Oil and Natural Gas Measures

 

Where applicable, natural gas has been converted to barrels of oil equivalent
(boe) based on six thousand cubic feet (Mcf) to one barrel (bbl) of oil. The
barrel of oil equivalent rate is based on an energy equivalent conversion
method primarily applicable at the burner tip and given that the value ratio
based on the current price of crude oil as compared to natural gas is
significantly different than the energy equivalency of the 6:1 conversion
ratio, utilizing the 6:1 conversion ratio may be misleading as an indication
of value. This conversion factor is an industry accepted norm and is not based
on either energy content or prices.

 

Assumptions for 2024 Guidance

 

The significant assumptions used in the forecast of average daily production,
funds flow from operations and net debt are summarized below. These key
performance measures are based on the midpoint of 2024 average production
guidance of 9,400 boe/d.

 

The 2024 budget is contingent on the Company increasing the revolving
component of its credit facility from $7 million to $20 million in the first
quarter of 2024. Although advanced discussions have commenced, there can be no
certainty that the Company will be able to increase its current credit
capacity at all, or in the quantum and time frame contemplated by Management.
Accordingly, the 2024 budget and preliminary guidance disclosed herein may be
subject to change, and such changes may be material.

 

Production estimates contained herein are expressed as anticipated average
production over the calendar 2024 year. All production volumes disclosed
herein are based on Company working interest before royalty burdens. In
determining anticipated 2024 production, Touchstone considered historical
drilling, completion, production results and decline rates for prior years and
considered the estimated impact on production of the Company's 2024 expected
drilling and completion activities.

 

Touchstone expects that approximately 12 percent of its midpoint average
production guidance will be comprised of crude oil, 6 percent NGLs, and 82
percent conventional natural gas. See the "Advisories - Product Type
Disclosures" section herein for further information.

( )

 Annual Financial Guidance((1))                            Units  Year ending December 31, 2024

 Realized commodity price((2))                             $/boe  23.10

 Expenses
 Royalties as a % of petroleum and natural gas sales((2))  %      20
 Operating expenses((2))                                   $/boe  3.50
 General and administration expenses((2))                  $/boe  3.10
 Cash finance expenses((2))                                $/boe  1.00
 Current income tax expenses((2))                          $/boe  1.80

 

Note:

(1)   The financial performance measures included in the Company's 2024
preliminary guidance are based on the midpoint of the average production
forecast.

(2)   Non-GAAP financial measure. See the "Advisories - Non-GAAP Financial
Measures" section herein for further information.

 

Changes in the Company's available bank debt capacity, variations in
forecasted crude oil and liquids prices, differences in the amount and timing
of capital expenditures, and variances in average production estimates and
decline rates can have a significant impact on the key performance measures
included in the guidance disclosed herein. The actual results of the Company's
operations and the resulting financial results will vary from the amounts set
forth in this announcement and such variations may be material.

 

Using the midpoint of the Company's production guidance and holding all other
assumptions constant, a $5/bbl increase (decrease) in the forecasted average
Brent crude oil price for 2024 would increase funds flow from operations by
approximately $1.2 million (decrease by $1.2 million). Assuming capital
expenditures are unchanged, the impact on funds flow from operations is
estimated to result in an equivalent decrease (increase) in forecasted year
end 2024 net debt.

 

Abbreviations

 

The following abbreviations referenced in this announcement have the meanings
set forth below:

 

bbls/d               barrels per day

Mbbls               thousand barrels

boe                  barrels of oil equivalent

boe/d               barrels of oil equivalent per day

Mcf                  thousand cubic feet

Mcf/d               thousand cubic feet per day

MMcf                million cubic feet

MMcf/d             million cubic feet per day

NGLs                natural gas liquids

(#_ftnref1) ( 1 ) Forward-looking statement representing Management estimates.
Additional information regarding the assumptions used are provided in the
"2024 Guidance Summary" and "Advisories - Assumptions for 2024 Guidance"
sections herein.

(#_ftnref2) ( 2 ) Non-GAAP financial measure. See the "Advisories - Non-GAAP
Financial Measures" section herein for additional information on the
definitions and calculation of these measures.

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