REG - Touchstone Explrtn. - Second Quarter 2025 Results
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RNS Number : 2582V Touchstone Exploration Inc. 14 August 2025
TOUCHSTONE EXPLORATION ANNOUNCES SECOND QUARTER 2025 RESULTS
CALGARY, ALBERTA (August 14, 2025) - Touchstone Exploration Inc.
("Touchstone", "we", "our" or the "Company") (TSX, LSE: TXP) reports its
financial and operating results for the three and six months ended June 30,
2025. Selected financial information is outlined below and should be read in
conjunction with Touchstone's June 30, 2025 unaudited interim condensed
consolidated financial statements and related Management's discussion and
analysis, both of which are available online on SEDAR+ (www.sedarplus.ca
(http://www.sedarplus.ca/) ) and on our website (www.touchstoneexploration.com
(http://www.touchstoneexploration.com/) ). Unless otherwise stated, all
financial amounts presented herein are in United States dollars.
Second Quarter 2025 Highlights
· Strategic Acquisition: Completed the acquisition of Shell
Trinidad Central Block Limited, adding approximately 1,910 boe/d of
liquids-rich natural gas production and providing access to global LNG
pricing.
· Production: Averaged 4,399 boe/d in the second quarter of 2025
(69 percent natural gas), compared to 4,317 boe/d (72 percent natural gas) in
the first quarter of 2025 and 5,432 boe/d (77 percent natural gas) in the
second quarter of 2024. Second quarter 2025 volumes include approximately 1.5
months of production from the Central block acquisition, which contributed
approximately 1,910 boe/d over the post-acquisition period.
· Petroleum and Natural Gas Sales: Totaled $11.01 million, a 22
percent decrease from $14.1 million recorded in the comparative prior year
quarter.
- Crude oil sales: $6.08 million from average production of 1,142
bbls/d at an average realized price of $58.52 per barrel.
- NGL sales: $0.68 million from average production volumes of 210
bbls/d at an average realized price of $35.40 per barrel.
- Natural gas sales: $4.25 million from average production of 18.3
MMcf/d (3,047 boe/d) at an average realized price of $2.55 per Mcf.
· Operating Netback: Generated $5.04 million in operating netback,
a 38 percent decrease from the second quarter of 2024, primarily due to
decreased petroleum and natural gas sales and related royalties and increased
natural gas related operating expenses.
· Funds Flow from Operations: Declined to $1.43 million from $3.97
million in the prior year equivalent quarter, largely driven by lower
operating netbacks and increased cash finance expenses, partially offset by
lower current income tax.
· Net Loss: Recorded a net loss of $0.71 million ($0.00 per share)
compared to net earnings of $3.34 million ($0.01 per share) in the second
quarter of 2024. The variance was primarily driven by the decrease in
year-over-year funds flow from operations and a $1.5 million gain on asset
disposition recorded in the prior year.
· Capital Investments: Invested $4.66 million, primarily directed
toward the drilling of the Cascadura-5 development well.
· Private Placement: Raised net proceeds of $5.22 million in the
quarter from the issuance of 24,636,585 common shares at 20.5 pence sterling
(approximately C$0.38) per share.
· Financial Position: Net debt increased to $63.89 million at June
30, 2025, reflecting the close of the Central block acquisition which was
funded by an additional $30 million term loan facility.
Post Period-end Highlights
· Convertible Debenture Offering: On August 13, 2025, the Company
closed a $12.5 million private placement of convertible debentures and common
share purchase warrants (the "Offering") with a Canadian private investor. Net
proceeds will fund the remaining 2025 Cascadura development drilling program
and reduce outstanding accounts payable. The Company has received written
confirmation from its lender that the Offering proceeds satisfy an equivalent
portion of the equity raise requirement under its Fourth Amended and Restated
Loan Agreement (the "Loan Agreement").
· Production Update: July 2025 field-estimated production averaged
5,281 boe/d, up 3.8 percent from 5,088 boe/d in June. Estimated volumes
included 22.3 MMcf/d of net natural gas production (3,717 boe/d) and 1,564
bbls/d of net crude oil and liquids production.
Second Quarter 2025 Financial and Operating Results Overview
Three months ended June 30, % change Six months ended % change
June 30,
2025 2024 2025 2024
Operational
Average daily production
Crude oil((1)) (bbls/d) 1,142 1,158 (1) 1,152 1,162 (1)
NGLs((1)) (bbls/d) 210 101 100 125 181 (31)
Crude oil and liquids((1)) (bbls/d) 1,352 1,259 7 1,277 1,343 (5)
Natural gas((1)) (Mcf/d) 18,282 25,036 (27) 18,489 29,279 (37)
Average daily production (boe/d)((2)) 4,399 5,432 (19) 4,359 6,223 (30)
Production mix (% of production)
Crude oil and liquids((1)) 31 23 29 22
Natural gas((1)) 69 77 71 78
Average realized prices((3))
Crude oil((1)) ($/bbl) 58.52 73.62 (21) 61.20 71.78 (15)
NGLs((1)) ($/bbl) 35.40 73.86 (52) 39.80 70.78 (44)
Crude oil and liquids((1)) ($/bbl) 54.93 73.64 (25) 59.11 71.64 (17)
Natural gas((1)) ($/Mcf) 2.55 2.48 3 2.53 2.47 2
Realized commodity price ($/boe)((2)) 27.50 28.50 (4) 28.04 27.08 4
Operating netback ($/boe)((2))
Realized commodity price((3)) 27.50 28.50 (4) 28.04 27.08 4
Royalty expense((3)) (6.63) (7.25) (9) (6.94) (6.41) 8
Operating expense((3)) (8.28) (4.81) 72 (6.92) (4.26) 62
Operating netback((3)) 12.59 16.44 (23) 14.18 16.41 (14)
Financial
($000's except per share amounts)
Petroleum and natural gas sales 11,007 14,090 (22) 22,120 30,674 (28)
Cash (used in) from operating activities (234) 3,383 n/a 5,377 8,752 (39)
Funds flow from operations 1,433 3,968 (64) 4,013 10,110 (60)
Net (loss) earnings (710) 3,339 n/a (669) 6,967 n/a
Per share - basic and diluted (0.00) 0.01 n/a (0.00) 0.03 n/a
Capital expenditures((3)) 4,659 5,543 (16) 11,332 17,505 (35)
Acquisition expenditure 28,400 - n/a 28,400 - n/a
Working capital deficit((3)) 11,816 2,674 100
Principal long-term bank debt 52,071 26,000 100
Net debt((3)) - end of period 63,887 28,674 100
Share Information (000's)
Weighted avg. shares outstanding:
Basic 248,644 234,959 6 242,586 234,586 3
Diluted 248,644 236,364 5 242,586 236,451 3
Outstanding shares - end of period 261,097 236,307 10
Notes:
(1) Refer to "Advisories - Product Type Disclosures" for further
information.
(2) Refer to "Advisories - Oil and Natural Gas Measures" for further
information.
(3) Specified or supplementary financial measure. Refer to "Advisories -
Non-GAAP Financial Measures" for further information.
2025 Outlook and Guidance
On December 9, 2024, the Company released its preliminary 2025 operational and
financial guidance (the "Original Guidance"). Following the closing of the
Central block acquisition in May 2025, Touchstone has updated its 2025
guidance as summarized in the following table.
Annual Guidance Summary((1)) Updated Guidance Original Guidance((2)) Variance
Amount %
Capital expenditures((3)) ($000's) 28,000 23,000 5,000 22
Average daily production (boe/d) 5,300 to 5,900 6,700 to 7,300 (1,400) (20)
% natural gas 74% 77% (3)
% crude oil and liquids 26% 23% 3
Funds flow from operations((4)) ($000's) 11,000 22,000 (11,000) (50)
Net debt - end of year((3)(4)) ($000's) 64,000 30,000 34,000 113
Notes:
(1) Forward-looking statement and financial outlook information based
on Management's current estimates. Refer to "Advisories - Forward-looking
Statements".
(2) As previously announced on December 9, 2024.
(3) Specified or supplementary Non-GAAP financial measure. Refer to
"Advisories - Non-GAAP Financial Measures".
(4) Based on the midpoint of the average production forecast: updated -
5,600 boe/d; original - 7,000 boe/d.
The Company remains focused on capital discipline and maximizing value from
its core development and exploration assets. The near-term strategy
prioritizes enhancing operating cash flows through disciplined development
drilling and the execution of targeted projects.
The Company now plans to fund its 2025 capital program primarily through
proceeds from the May private placement and the $12.5 million Offering,
supplemented by an additional equity financing of approximately $7.3 million,
expected to close before the end of 2025, to satisfy obligations under the
Loan Agreement. This approach replaces the original plan to fund the program
through expanded credit facilities, which were utilized to finance the
Acquisition.
The preliminary 2025 capital program contemplated four Cascadura development
wells at Cascadura. The updated program replaces two of these wells with one
development well on the Central block and two development wells at the WD-8
property. In addition, approximately $2.6 million in capital expenditures are
expected in the second half of 2025 for a Cascadura facility compression
project, scheduled for completion in the second quarter of 2026.
As a result of the Acquisition and the deferral of the initial Cascadura
wells, the midpoint of the 2025 production forecast has been reduced by
approximately 20 percent, and expected funds flow from operations has
decreased by 50 percent. Forecast year-end net debt is expected to increase by
113 percent, primarily reflecting the $30 million term loan facility used to
finance the Acquisition and proceeds from the Offering to support development
activities.
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
(http://www.touchstoneexploration.com/) or contact:
Touchstone Exploration Inc.
Paul Baay, President and Chief Executive Officer
Tel: +1 (403) 750-4405
Scott Budau, Chief Financial Officer
Shore Capital (Nominated Advisor and Joint Broker)
Daniel Bush / Toby Gibbs / Tom Knibbs
Tel: +44 (0) 207 408 4090
Canaccord Genuity (Joint Broker)
Adam James / Charlie Hammond
Tel: +44 (0) 207 523 8000
FTI Consulting (Financial PR)
Nick Hennis / Ben Brewerton / Lucy Wigney
Tel: +44 (0) 203 727 1000
Email: touchstone@fticonsulting.com (mailto:touchstone@fticonsulting.com)
Advisories
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", "believe",
"estimate", "potential", "anticipate", "forecast", "pursue", "aim", "intends",
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; field estimated production; the
Company's intended use of proceeds of the Offering; the focus of Touchstone's
remaining 2025 capital plan, including pursuing developmental drilling
activities and optimizing existing natural gas and liquids infrastructure
capacity; anticipated 2025 annual average production by commodity; forecasted
production decline rates; anticipated developmental drilling activities,
including locations, the timing thereof and related production and cash flows
therefrom; anticipated 2025 capital expenditures including estimations of
costs and inflation incorporated therein; anticipated timing of drilling and
completion activities, well tie-in operations and production coming online;
forecasted future commodity prices; forecasted royalty, operating, general and
administration, cash finance and income tax expenses; anticipated funds flow
from operations and net debt; 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 Touchstone will derive from them.
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 2024
Annual Information Form dated March 19, 2025 which is available online 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 updated 2025 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 herein,
whether as a result of new information, future events or otherwise, unless
required pursuant to applicable law. Readers are cautioned that the FOFI
contained herein should not be used for purposes other than for which it is
disclosed herein, and the FOFI contained herein is not conclusive and is
subject to change. Variations in forecasted commodity 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 all of 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.
Assumptions for Updated 2025 Guidance
The updated 2025 capital budget and financial guidance is predicated on the
Company securing an additional $7.3 million in equity financing as required
under the terms of its Fourth Amended and Restated Loan Agreement. There is no
assurance that the Company will successfully raise the additional equity,
either in the amount or within the timeframe envisioned by Management.
Consequently, the updated 2025 budget and guidance disclosed herein are
subject to potential revision, and such revisions could be material.
Production estimates contained herein are expressed as anticipated average
production over the calendar 2025 year. All production volumes disclosed
herein are based on Company working interest before royalty burdens. In
determining anticipated 2025 production, Touchstone considered historical
drilling, completion, production results and decline rates for prior years and
the year-to-date 2025 period and considered the estimated impact on production
of the Company's remaining 2025 expected drilling and completion activities.
The key assumptions underpinning the forecast for average daily production,
funds flow from operations, and net debt are outlined below. These metrics are
based on the midpoint of the updated 2025 average production guidance of 5,600
boe/d (formerly 7,000 boe/d).
Annual Production Guidance((1)) Units Updated Guidance Previous Guidance((2)) Variance
Amount %
Midpoint average daily production
Light and medium crude oil bbls/d 1,097 1,092 5 -
Heavy crude oil bbls/d 33 8 25 100
Crude oil bbls/d 1,130 1,100 30 3
Condensate bbls/d 160 510 (350) (69)
Other NGLs 160 - 160 n/a
Crude oil and liquids bbls/d 1,450 1,610 160 (10)
Conventional natural gas Mcf/d 24,900 32,340 (7,440) (23)
Midpoint average daily production boe/d 5,600 7,000 (1,400) (20)
Annual Financial Guidance((1)) Units Updated Guidance Previous Guidance((2)) Variance
Amount %
Realized commodity price((3)) $/boe 26.80 25.00 1.80 7
Expenses
Royalties as a % of petroleum and natural gas sales((3)) % 22 21 1 5
Operating expenses((3)) $/boe 6.80 4.30 2.50 58
General and administration expenses((3)) $/boe 5.20 4.40 0.80 18
Cash finance expenses((3)) $/boe 2.50 1.20 1.30 100
Current income tax expenses((3)) $/boe 0.80 1.10 (0.30) (27)
Notes:
(1) Forward-looking statement representing Management estimates. See
"Advisories - Forward-looking Statements".
(2) As previously announced on December 9, 2024.
(3) Non-GAAP financial measure. See the "Advisories - Non-GAAP Financial
Measures" section herein for further information.
Variations in the amount of future equity raises, forecasted commodity 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 updated production guidance and holding
all other assumptions constant, a 20 percent increase (decrease) in forecasted
average commodity prices realized would increase funds flow from operations by
approximately $2,500,000 (decrease by $2,100,000). 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 2025 net debt.
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 IFRS Accounting Standards as Issued by the
International Accounting Standards Board ("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.
Operating netback
Touchstone uses operating netback as a key performance indicator of field
results. The Company considers operating netback to be a key measure as it
demonstrates Touchstone's profitability relative to current commodity prices
and assists Management and investors with evaluating operating results on a
historical basis. Operating netback is a non-GAAP financial measure calculated
by deducting royalty and operating expenses from petroleum and natural gas
sales. The most directly comparable financial measure to operating netback
disclosed in the Company's consolidated financial statements is petroleum and
natural gas revenue net of royalties. Operating netback per boe is a non-GAAP
ratio calculated by dividing the operating netback by total production volumes
for the period. Presenting operating netback on a per boe basis allows
Management to better analyze performance against prior periods on a comparable
basis.
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.
Working capital and net debt
Working capital and net debt are capital management measures used by
Management to monitor the Company's capital structure to evaluate its true
debt and liquidity position and to manage capital and liquidity risk. Working
capital is calculated by subtracting current liabilities from current assets
as they appear on the applicable consolidated balance sheet. Net debt is
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.
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.
Realized crude oil sales per barrel, realized NGL sales per barrel and
realized natural gas sales per boe - are comprised of sales from the
respective product type as determined in accordance with IFRS, divided by the
Company's total production volumes of the respective product type for the
period. Crude oil sales, NGL sales and natural gas sales are components of
petroleum and natural gas sales as disclosed on the consolidated statements of
net earnings and comprehensive income.
Realized crude oil and liquids sales per barrel - is comprised of the sum of
crude oil and NGL product sales as determined in accordance with IFRS, divided
by the sum of the Company's total crude oil and NGL production volumes for the
period. Crude oil and NGL sales are components of petroleum and natural gas
sales.
Royalty expense per boe - is comprised of royalty expense as determined in
accordance with IFRS, divided by the Company's total production volumes for
the period.
Royalty expense as a percentage of petroleum and natural gas sales - is
comprised of royalty expense as determined in accordance with IFRS, divided by
petroleum and natural gas sales as determined in accordance with IFRS.
Operating expense per boe - is comprised of operating expense as determined in
accordance with IFRS, divided by the Company's total production volumes for
the period.
General and administration expense per boe - is comprised of general and
administration expense as determined in accordance with IFRS, divided by the
Company's total production volumes for the period.
Cash finance expense per boe - is comprised of cash finance expense divided by
the Company's total production volumes for the period. Cash finance expenses
are calculated as net finance expense as determined in accordance with IFRS,
less accretion on bank debt, accretion on decommissioning obligations, and
lease modifications, all of 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 six months ended June 30, 2025 accompanying our
June 30, 2025 unaudited interim condensed consolidated financial statements,
both of which are available online 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/) ).
Touchstone's Management's discussion and analysis is incorporated by reference
herein and 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.
Oil and Natural Gas Measures
To provide a single unit of production for analytical purposes, natural gas
production has been converted mathematically to barrels of oil equivalent. The
Company uses the industry-accepted standard conversion of six thousand cubic
feet of natural gas to one barrel of oil (6 Mcf = 1 bbl). The 6:1 boe ratio is
based on an energy equivalent conversion method primarily applicable at the
burner tip. It does not represent a value equivalency at the wellhead and is
not based on either energy content or current prices. While the boe ratio is
useful for comparative measures and observing trends, it does not accurately
reflect individual product values and might be misleading, particularly if
used in isolation. As well, given that the value ratio, based on the current
price of crude oil to natural gas, is significantly different from the 6:1
energy equivalency ratio, using a 6:1 conversion ratio may be misleading as an
indication of value.
Product Type Disclosures
This announcement includes references to crude oil, NGLs, crude oil and
liquids, natural gas, and average daily production volumes. Under National
Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities ("NI
51-101"), disclosure of production volumes should include segmentation by
product type as defined in the instrument. 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
propane; and references to "natural gas" refer to the "conventional natural
gas" product type, all as defined in the instrument. In addition, references
to "crude oil and liquids" herein include crude oil and NGLs. The Company's
average field estimated production for July 2025 consists of the following
product types as defined in NI 51-101 using a conversion of 6 Mcf to 1 boe
where applicable.
Period Light and Medium Crude Oil (bbls/d) Heavy Crude Oil Condensate (bbls/d) Other Natural Gas Liquids (bbls/d) Conventional Natural Gas (Mcf/d) Total Oil Equivalent (boe/d)
(bbls/d)
July 2025 (estimated) 1,073 66 155 269 22,301 5,281
For further information regarding specific product disclosures in accordance
with NI 51-101, please refer to the "Advisories - Product Type Disclosures"
section of the Company's most recent Management's discussion and analysis for
the three and six months ended June 30, 2025 accompanying our June 30, 2025
unaudited interim condensed consolidated financial statements, both of which
are available online 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/) ).
Abbreviations
The following abbreviations may be referenced in this announcement:
bbl(s) barrel(s)
bbls/d barrels per day
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
MMBtu million British thermal units
NGLs natural gas liquids
LNG liquefied natural gas
Touchstone Exploration Inc.
Interim Condensed Consolidated Balance Sheets
Unaudited, Stated in thousands of United States dollars
As at Note June 30, December 31, 2024
2025
Assets
Current assets
Cash 6,340 6,744
Accounts receivable 3 26,668 13,805
Value added tax bonds 4 2,960 -
Inventory 103 85
Prepaid expenses 977 1,517
37,048 22,151
Exploration and evaluation assets 6 4,571 3,743
Property, plant and equipment 7 175,276 122,382
Restricted cash 10 2,758 924
Other assets 36 108
Abandonment fund 11 9,319 2,965
Total assets 229,008 152,273
Liabilities
Current liabilities
Accounts payable and accrued liabilities 8 30,329 16,254
Acquisition consideration payable 3,5 8,524 -
Income taxes payable 17 82 6
Current portion of bank debt 10 9,929 7,250
48,864 23,510
Lease liabilities 9 3,733 4,368
Bank debt 10 51,660 27,541
Decommissioning liabilities 11 14,812 9,985
Share-based compensation liabilities 16 162 117
Deferred income taxes 17 35,863 17,924
Total liabilities 155,094 83,445
Shareholders' equity
Shareholders' capital 12 120,831 115,610
Contributed surplus 7,218 7,069
Other comprehensive loss (13,497) (13,882)
Deficit (40,638) (39,969)
Total shareholders' equity 73,914 68,828
Total liabilities and shareholders' equity 229,008 152,273
Going Concern (Note 1)
Commitments (Note 20)
Subsequent event (Note 21)
See accompanying notes to these unaudited interim condensed consolidated
financial statements.
Touchstone Exploration Inc.
Interim Condensed Consolidated Statements of Earnings (Loss) and Comprehensive
Income (Loss)
Unaudited, stated in thousands of United States dollars (except per share
amounts)
Note Three months ended Six months ended
June 30, June 30,
2025 2024 2025 2024
Revenue
Petroleum and natural gas sales 13 11,007 14,090 22,120 30,674
Less: royalties (2,653) (3,585) (5,471) (7,262)
Petroleum and natural gas sales, net of royalties 8,354 10,505 16,649 23,412
Other revenue 22 34 35 52
Total revenue 8,376 10,539 16,684 23,464
Expenses
Operating 3,314 2,378 5,458 4,822
General and administration 2,360 2,608 4,850 4,974
Net finance 14 1,513 761 2,332 1,440
Transaction 15 166 840 302 1,220
Exploration 13 76 24 170
Gain on asset dispositions - (1,535) - (1,535)
Foreign exchange gain 18 (113) (122) (164) (69)
Share-based compensation 16 (83) 309 81 710
Depletion and depreciation 7 2,650 1,782 5,076 4,034
Impairment (reversal) 6,7 - (22) - 502
Total expenses 9,820 7,075 17,959 16,268
(Loss) earnings before income taxes (1,444) 3,464 (1,275) 7,196
Provision for income taxes
Current expense 17 170 75 337 919
Deferred (recovery) expense 17 (904) 50 (943) (690)
Total income tax (recovery) expense (734) 125 (606) 229
Net (loss) earnings (710) 3,339 (669) 6,967
Currency translation adjustments 239 142 385 (155)
Comprehensive (loss) income (471) 3,481 (284) 6,812
Net (loss) earnings per common share
Basic and diluted 12 (0.00) 0.01 (0.00) 0.03
See accompanying notes to these unaudited interim condensed consolidated
financial statements.
Touchstone Exploration Inc.
Interim Condensed Consolidated Statements of Changes in Shareholders' Equity
For the six months ended June 30
Unaudited, stated in thousands of United States dollars
Note 2025 2024
Shareholders' capital
Balance, beginning of period 115,610 114,965
Issued pursuant to private placement, net of fees 12 5,221 -
Issued under share-based compensation plans 12 - 561
Balance, end of period 120,831 115,526
Contributed surplus
Balance, beginning of period 7,069 6,166
Recognized under share-based compensation plans 16 - (200)
Share-based compensation expense 16 137 710
Share-based compensation capitalized 7 12 26
Balance, end of period 7,218 6,702
Other comprehensive loss
Balance, beginning of period (13,882) (13,124)
Currency translation adjustments 385 (155)
Balance, end of period (13,497) (13,279)
Deficit
Balance, beginning of period (39,969) (48,241)
Net (loss) earnings (669) 6,967
Balance, end of period (40,638) (41,274)
See accompanying notes to these unaudited interim condensed consolidated
financial statements.
Touchstone Exploration Inc.
Interim Condensed Consolidated Statements of Cash Flows
Unaudited, stated in thousands of United States dollars
Note Three months ended Six months ended
June 30, June 30,
2025 2024 2025 2024
Operating activities
Net (loss) earnings (710) 3,339 (669) 6,967
Items not involving cash from operations:
Gain on asset dispositions - (1,535) - (1,535)
Unrealized foreign exchange gain 18 (1) (23) (61) (3)
Share-based compensation expense 16 (83) 309 81 710
Depletion and depreciation expense 7 2,650 1,782 5,076 4,034
Impairment (reversal) expense 6,7 - (22) - 502
Non-cash finance expense 14 481 68 529 125
Deferred income tax (recovery) expense 17 (904) 50 (943) (690)
Funds flow from operations 1,433 3,968 4,013 10,110
Net change in non-cash working capital (1,667) (585) 1,364 (1,358)
Cash (used in) from operating activities (234) 3,383 5,377 8,752
Investing activities
Exploration and evaluation expenditures 6 (395) (60) (818) (168)
Property, plant and equipment expenditures 7 (4,264) (5,483) (10,514) (17,337)
Acquisition expenditures 5 (28,400) - (28,400) -
Abandonment fund expenditures 11 (145) (226) (320) (527)
Net change in non-cash working capital 3,186 (5,297) 5,278 4,951
Cash used in investing activities (30,018) (11,066) (34,774) (13,081)
Financing activities
Changes in restricted cash 10 (1,901) (316) (1,834) (257)
Advances of bank debt, net of fees 10 29,423 9,747 29,423 9,747
Repayment of bank debt 10 (1,500) (4,500) (3,000) (6,000)
Net finance lease payments 9 (250) (125) (757) (754)
Issuance of common shares, net of fees 12 5,221 361 5,221 361
Net change in non-cash working capital (40) 3 21 (7)
Cash from financing activities 30,953 5,170 29,074 3,090
Change in cash during the period 701 (2,513) (323) (1,239)
Cash, beginning of period 5,718 9,537 6,744 8,186
Impact of foreign exchange on foreign denominated cash balances (79) (34) (81) 43
Cash, end of period 6,340 6,990 6,340 6,990
Supplementary information for cash from operating activities:
Interest paid in cash 10 601 615 1,264 1,155
Income taxes paid in cash 17 88 448 208 806
See accompanying notes to these unaudited interim condensed consolidated
financial statements.
1. Nature of Business
Touchstone Exploration Inc. and its subsidiaries (collectively, "Touchstone"
or the "Company") are engaged in the business of petroleum and natural gas
exploration, development, acquisition and production. The Company is currently
active in the Republic of Trinidad and Tobago ("Trinidad").
Touchstone Exploration Inc. is incorporated under the laws of Alberta, Canada
with its head and principal office located at 4100, 350 7(th) Avenue SW,
Calgary, Alberta, Canada T2P 3N9. Touchstone's common shares are listed on the
Toronto Stock Exchange ("TSX") and on the AIM market of the London Stock
Exchange ("AIM") under the symbol "TXP".
Going Concern
Under the terms of its Fourth Amended and Restated Loan Agreement (the "Loan
Agreement"), the Company is required to comply with three financial covenants
assessed annually. Based on current forecasts, the Company anticipates a
potential breach of the net senior funded debt to trailing annual EBIDA ratio
due to the $12.5 million convertible debenture offering that closed on August
13, 2025 (refer to Note 21). Such a breach could result in the Company's
outstanding bank debt balance becoming immediately due and payable. While no
waiver has been obtained as at the date of these financial statements, the
Company intends to seek a waiver from the lender prior to the December 31,
2025 covenant measurement date.
The Loan Agreement also requires the Company to raise an additional $7.3
million in equity proceeds on or before December 31, 2025 to maintain
compliance (refer to Note 10).
There can be no assurance that a covenant waiver will be obtained or that the
required equity financing will be completed. Failure to achieve either outcome
may cast significant doubt on the Company's ability to continue as a going
concern. These financial statements do not reflect potential adjustments to
the carrying amounts of assets and liabilities, reported amounts of revenue
and expenses, and balance sheet classifications that would be required if the
going concern assumption were deemed inappropriate. Such adjustments could be
material.
2. Basis of Preparation
Statement of compliance
These unaudited interim condensed consolidated financial statements (the
"financial statements") have been prepared in accordance with International
Accounting Standard 34 "Interim Financial Reporting" using accounting policies
consistent with IFRS Accounting Standards as issued by the International
Accounting Standards Board ("IFRS"). These financial statements are condensed
as they do not include all the information required by IFRS for annual
financial statements and therefore should be read in conjunction with the
Company's audited consolidated financial statements for the year ended
December 31, 2024 (the "2024 audited financial statements").
Unless otherwise stated, amounts presented in these financial statements are
denominated in United States dollars ("$" or "US$"). Canadian dollars ("C$"),
Trinidad and Tobago dollars ("TT$") and UK Pounds Sterling ("£") may also be
referenced herein.
These financial statements have been prepared on a historical cost basis. All
accounting policies and methods of computation followed in the preparation of
these financial statements are consistent with those of the 2024 audited
financial statements.
These financial statements were approved and authorized for issuance by
Touchstone's Board of Directors (the "Board") on August 13, 2025.
Use of estimates, judgements and assumptions
The timely preparation of financial statements requires Management to use
judgments, estimates and assumptions that affect the reported amounts of
assets, liabilities and the disclosure of contingencies at the date of the
financial statements, and revenues and expenses during the reporting period.
Accordingly, actual results could differ from those estimated
In preparing these financial statements, the judgments made by Management in
applying the Company's accounting policies and the key sources of significant
estimation uncertainty were the same as those applied to the 2024 audited
financial statements.
3. Financial Assets and Credit Risk
As at June 30, 2025, Touchstone was exposed to credit risk with respect to its
accounts receivable. Credit risk is considered low, as the Company's credit
exposure primarily relate to monthly commodity sales to Trinidad
government-owned entities and a major independent oil and gas company, joint
interest billings from State-owned Heritage Petroleum Company Limited
("Heritage"), and value added tax ("VAT") receivables from the Government of
Trinidad and Tobago.
Petroleum and natural gas sales are generally collected within one to two
months following production. As at June 30, 2025, approximately 29 percent of
the Company's credit exposure was attributed to accrued revenue for May and
June 2025 production volumes. Joint interest billings are typically settled
within one to three months following invoicing. The following tables summarize
the composition and aging of Touchstone's accounts receivable balance as of
the periods indicated, representing the Company's maximum credit risk
exposure.
($000's) June 30, December 31,
2025 2024
Composition
Petroleum and natural gas sales 7,819 4,334
Joint interest billings 1,789 806
VAT 6,700 7,678
Other 1,836 987
Amount to be remitted pursuant to business combination (Note 5) 8,524 -
Accounts receivable balance 26,668 13,805
Aging
Current (less than 30 days) 10,700 6,045
31-60 days 2,005 539
61-90 days 381 556
Past due (greater than 90 days) 5,058 6,665
Subtotal 18,144 13,805
Amount to be remitted pursuant to business combination (Note 5) 8,524 -
Accounts receivable balance 26,668 13,805
As at June 30, 2025, Touchstone determined that the average expected credit
loss on its accounts receivable was $nil. Management considers past due
balances to be fully recoverable, as they primarily represent VAT receivable
from the Government of Trinidad and Tobago. While the timing of recovery
remains uncertain, the Company has not experienced any historical collection
issues. During the six months ended June 30, 2025, the Company collected
$724,000 of previously past due VAT receivable and received $2,960,000 in
government-issued bonds in lieu of VAT payments (refer to Note 4).
In connection with the business combination (refer Note 5), the Company
recognized $8,524,000 in accounts receivables relating to VAT and income tax
receivable from the Government of Trinidad and Tobago. In accordance with the
share purchase agreement, these funds are only to be remitted to the seller
upon collection. A corresponding liability was recorded as an acquisition
consideration payable. As a result, the Company does not bear any credit risk
in respect of these receivable balances.
4. Value Added Tax Bonds
On January 31, 2025, the Government of Trinidad and Tobago issued fixed-rate
bonds totaling $2,960,000 to two of the Company's Trinidadian subsidiaries in
settlement of outstanding VAT receivables. The bonds bear interest at a fixed
rate of 4.01 percent and have a three-year maturity term. The bonds are
subject to a six-month non-transferability restriction from the date of
issuance.
5. Business Combination
On May 16, 2025, the Company, through its wholly owned Trinidadian subsidiary,
completed the acquisition of 100 percent of the share capital of a Shell
Trinidad Central Block Limited, a private Trinidad-based company (the
"Acquisition") for preliminary cash consideration of $28,400,000. The Company
financed the acquisition with an additional $30 million six-year term loan
facility (refer to Note 10).
The acquired entity, now renamed Touchstone Trinidad Central Block Ltd., holds
a 65 percent operating participating interest in the onshore Central block
exploration and production licence. The Central block asset includes four
producing natural gas wells and a gas processing facility. Heritage holds the
remaining 35 percent participating interest. The Acquisition provides
Touchstone with increased low decline base production, exposure to global
liquefied natural gas ("LNG") pricing, and expanded access to the
hydrocarbon-rich Herrera fairway, which is contiguous with the Company's
Ortoire block.
The Acquisition has been recognized in accordance with IFRS 3 Business
Combinations using the acquisition method. The cost of the Acquisition has
been measured at the fair value of the consideration transferred at the
acquisition date, which consisted of cash paid. Identifiable assets acquired
and liabilities assumed were measured and recognized at their estimated fair
values as at the acquisition date, except for income tax items. Deferred
income tax assets and liabilities arising from the Acquisition were also
recognized at the acquisition date. Transaction expenses associated with the
Acquisition were expensed as incurred (refer to Note 15).
The determination of fair value is estimated based on information available at
the date of the Acquisition and requires Management to make assumptions and
estimates about future events. The assumptions and estimates with respect to
determining the fair value of property, plant and equipment ("PP&E")
generally require significant judgment and include forward price estimates of
petroleum and natural gas, volume of proved plus probable reserves and
associated assumptions, including future production costs, required capital
investments, reserve life and discount rate. Assumptions are also required to
determine the fair value of the decommissioning liabilities associated with
the assets and other deferred liabilities. Changes in any of the assumptions
or estimates used in determining the fair value of acquired assets and
liabilities could impact the amounts assigned to assets and liabilities.
Future comprehensive income or loss will be affected as the fair value on
initial recognition impacts future depletion and depreciation expenses and
non-financial asset impairment expenses or reversals.
The Company estimated the fair value of petroleum and natural gas development
assets acquired as at the acquisition date using proved plus probable
petroleum and natural gas reserves derived from an independent third-party
reserve evaluation. The independent qualified reserves evaluator provided
estimates of the acquired proved plus probable petroleum and natural gas
reserves, which were used to calculate associated future cash flows. These
cash flows were discounted at an after-tax rate of 31 percent to reflect
acquisition-date market participant assumptions. The fair value of the
associated decommissioning liabilities was initially determined using a
credit-adjusted risk-free rate of 14 percent.
The following table summarizes the preliminary purchase price allocation based
on Management's best estimate of the values of assets acquired and liabilities
assumed. The purchase price allocation is subject to change as the Company
continues to obtain and evaluate information related to the fair values of the
net assets acquired, including but not limited to, petroleum and natural gas
development assets, accounts receivable, decommissioning liabilities, accounts
payable and accrued liabilities, and deferred income tax liabilities.
Adjustments to the purchase price allocation may be required as additional
information becomes available within the measurement period, which is up to
one year from the acquisition date. Any such adjustments will be applied
retrospectively to the acquisition date and may affect the recognized values
of assets, liabilities, and any resulting goodwill or gain on acquisition.
Consideration ($000's)
Cash consideration paid 28,400
Consideration payable (Note 3) 8,524
Total consideration paid 36,924
Net assets acquired
Accounts receivable 5,278
Accounts receivable to be remitted to seller (Note 3) 8,524
Inventory 60
Petroleum and natural gas development assets (Note 7) 44,683
Abandonment fund (Note 11) 6,009
Accounts payable and accrued liabilities (6,365)
Decommissioning liabilities (Note 11) (2,468)
Deferred income tax liability (Note 17) (18,797)
Total identifiable net assets acquired 36,924
The results of operations from the Acquisition have been included in the
financial statements effective May 16, 2025. From the acquisition date to June
30, 2025, the acquired operations contributed petroleum and natural gas sales
of $1,702,000 and a net loss of $95,000.
Had the Acquisition closed on January 1, 2025, Management estimates that the
acquired operations would have contributed approximately $9,156,000 in
petroleum and natural gas sales and an estimated net loss of $348,000 for the
six months ended June 30, 2025. These amounts are based on unaudited financial
information prepared by the acquiree and do not reflect any potential
synergies, integration costs, or other adjustments that could arise from
combining the operations.
The following table summarizes the estimated minimum contractual payments
acquired from the Acquisition as at June 30, 2025, which include lease
payments and fees related to the Central block exploration and production
licence and various short-term leases.
($000's) Total Estimated payments due by year
2025 2026 2027 2028 2029 Thereafter
Licence obligations 4,627 98 657 695 735 777 1,665
Other 9 9 - - - - -
Minimum payments 4,636 107 657 695 735 777 1,665
6. Exploration and Evaluation Assets
($000's) Six months ended June 30, 2025 Year ended December 31,
2024
Balance, beginning of period 3,743 5,030
Additions 818 1,046
Impairment expense - (2,311)
Effect of change in foreign exchange rates 10 (22)
Balance, end of period 4,571 3,743
7. Property, Plant and Equipment
($000's) Petroleum and natural gas development assets Right-of-use Corporate assets Total
assets
Cost
Balance, January 1, 2024 186,846 5,492 2,697 195,035
Additions 21,256 2,930 1,449 25,635
Transfers within PP&E 1,283 (1,283) - -
Change in decommissioning assets 97 - - 97
(Note 11)
Acquisitions 356 - - 356
Dispositions (1,085) - - (1,085)
Foreign exchange translation (1,272) (40) (187) (1,499)
Balance, December 31, 2024 207,481 7,099 3,959 218,539
Acquired on close of Acquisition (Note 5) 44,683 - - 44,683
Additions 10,489 - 42 10,531
Transfers within PP&E 549 (549) - -
Change in decommissioning assets 2,176 - - 2,176
(Note 11)
Lease modification (Note 9) - (110) - (110)
Foreign exchange translation 841 46 124 1,011
Balance, June 30, 2025 266,219 6,486 4,125 276,830
Accumulated depletion, depreciation and impairment
Balance, January 1, 2024 84,029 726 2,132 86,887
Depletion and depreciation 8,245 1,020 236 9,501
Impairment expense 337 - - 337
Foreign exchange translation (392) (18) (158) (568)
Balance, December 31, 2024 92,219 1,728 2,210 96,157
Depletion and depreciation 4,620 302 154 5,076
Foreign exchange translation 197 17 107 321
Balance, June 30, 2025 97,036 2,047 2,471 101,554
Carrying amounts
Balance, December 31, 2024 115,262 5,371 1,749 122,382
Balance, June 30, 2025 169,183 4,439 1,654 175,276
During the three and six months ended June 30, 2025, $96,000 and $206,000 of
direct and attributable overhead charges were capitalized to PP&E,
respectively (2024 - $100,000 and $180,000).
As at June 30, 2025, the Company assessed its petroleum and natural gas
development assets included in PP&E for indicators of impairment or
reversal of impairment. Based on this assessment, Management concluded that it
was not necessary to estimate the recoverable amount for any of its
cash-generating units.
8. Financial Liabilities and Liquidity Risk
Liquidity risk is the risk that the Company will be unable to meet its
financial obligations as they become due. Touchstone manages this risk through
prudent cash and debt management practices, which include the ongoing
monitoring of actual and forecasted cash flows, working capital levels, and
compliance with the financial covenants under its bank debt agreements (refer
to Note 1). The Company also regularly assesses its ability to access
additional liquidity through debt or equity financing when appropriate.
Touchstone's near-term development strategy is focused on increasing operating
cash flows through continued development activities. The Company intends to
maintain a disciplined approach to future development and exploration capital
expenditures in order to preserve financial flexibility. Management continued
to actively monitor liquidity levels to ensure that the Company can meet
current and anticipated financial obligations, including its planned capital
programs and contractual commitments.
As at June 30, 2025, the Company had a working capital deficiency, primarily
due to increased accounts payable and accrued liabilities related to capital
expenditures invested during the six months ended June 30, 2025. Following the
cancellation of a previously proposed private placement (refer to Note 12),
the Company completed a gross $12.5 million convertible debenture and warrant
offering with a Canadian private investor on August 13, 2025 (refer to Note
21). Net proceeds from the offering are intended to fund the remainder of the
Company's 2025 development drilling program and to settle outstanding accounts
payable related to prior capital activities.
The following table summarizes the Company's estimated undiscounted cash
outflows and financial maturities of its financial liabilities as at June 30,
2025.
($000's) Undiscounted cash outflows((1)) Financial maturity by period
Less than 1 year 1 to 3 years Thereafter
Accounts payable and accrued liabilities((2)) 28,815 28,815 - -
Income taxes payable (Note 17) 82 82 - -
Lease liabilities((3)) (Note 9) 6,013 1,626 3,140 1,247
Bank debt((3)) (Note 10) 73,736 14,262 37,597 21,877
Share-based compensation liabilities((4)) (Note 16) 480 318 162 -
Total financial liabilities 109,126 45,103 40,899 23,124
Notes:
(1) Undiscounted cash outflows equal the carrying values of the
associated liabilities, except for lease liabilities and bank debt.
(2) Excludes the current portion of lease liabilities and share-based
compensation liabilities.
(3) Includes both notional interest and principal payments. Future
interest payments are based on interest rates in effect as at June 30, 2025.
Interest rates on three of the Company's four loan facilities are reset
annually (refer to Note 10).
(4) Represents accrued obligations related to share-based compensation
awards expected to be settled in cash.
Refer to Note 10 "Bank Debt", Note 19 "Capital Management" and Note 20
"Commitments" for additional information regarding the Company's debt
structure, capital management objectives and contractual obligations.
9. Lease Liabilities
Touchstone is a party to lease arrangements for a drilling rig, office
facilities, vehicles and equipment. The following table provides a continuity
of the Company's lease liabilities for the periods presented.
($000's) Six months ended June 30, 2025 Year ended December 31,
2024
Balance, beginning of period 5,866 4,328
Additions - 2,930
Interest expense 267 415
Repayments (1,073) (1,775)
Modifications (143) -
Effect of change in foreign exchange rates 12 (32)
Balance, end of period 4,929 5,866
Current (included in accounts payable and accrued liabilities) 1,196 1,498
Non-current 3,733 4,368
Lease liabilities balance 4,929 5,866
10. Bank Debt
On May 12, 2025, the Company entered into the Loan Agreement with its
Trinidad-based lender, which provided for an additional $30 million six-year
term loan facility used to finance the Acquisition (refer to Note 5). As at
June 30, 2025, the Company had the following facilities in place under the
Loan Agreement:
· a $30 million non-revolving term loan facility ("Term
Loan Facility 1");
· a $10 million non-revolving term loan facility ("Term
Loan Facility 2");
· a $30 million non-revolving term loan facility ("Term
Loan Facility 3"); and
· a $10 million revolving loan facility.
Term Loan Facility 1
Term Loan Facility 1 matures on June 15, 2027 and bears a fixed interest rate
of 7.85 percent per annum, compounded and payable quarterly. As at June 30,
2025, the principal balance was $12,000,000, with eight equal quarterly
principal payments of $1,500,000 remaining.
Term Loan Facility 2
Term Loan Facility 2 matures on April 30, 2029 and bears an interest rate of
6.08 percent through April 30, 2026, subject to annual reset thereafter. As at
June 30, 2025, the outstanding principal balance was $10,000,000, with sixteen
equal quarterly principal payments of $625,000 scheduled from July 31, 2025
through to maturity.
Term Loan Facility 3
Term Loan Facility 3 matures on May 12, 2031 and bears an interest rate of
8.21 percent through May 11, 2026, with annual resets thereafter. As at June
30, 2025, the principal balance was $30,000,000, with twenty-one equal
quarterly principal payments of $1,429,000 scheduled from May 12, 2026 through
to maturity.
Revolving loan facility
The revolving loan facility matures on May 12, 2027 and may be extended by
additional two-year increments upon mutual agreement. The facility bears
interest at a rate of 6.09 percent through May 31, 2026, subject to annual
resets. Outstanding principal may be repaid at any time without penalty and
any amounts repaid may be redrawn at the Company's discretion up to the
facility limit.
The following table summarizes the movements of the Company's bank debt
balances for the periods indicated.
($000's) Term Loan Facility 1 Term Loan Facility 2 Term Loan Facility 3 Revolving loan facility Bank debt
Balance, January 1, 2024 20,977 - - 7,000 27,977
(Repayments) advances (6,000) 9,747 - 3,000 6,747
Accretion 16 51 - - 67
Balance, December 31, 2024 14,993 9,798 - 10,000 34,791
(Repayments) advances (3,000) - 29,423 - 26,423
Accretion - 36 339 - 375
Balance, June 30, 2025 11,993 9,834 29,762 10,000 61,589
Current 6,000 2,500 1,429 - 9,929
Non-current 5,993 7,334 28,333 10,000 51,660
Bank debt balance 11,993 9,834 29,762 10,000 61,589
Touchstone's bank debt is secured by a pledge of equity interests and fixed
and floating charges over all present and after acquired assets of its three
Trinidad-based exploration and production subsidiaries. The Loan Agreement
includes customary representations and warranties, affirmative and negative
covenants, events of default, and annual financial covenant requirements, all
assessed on a consolidated basis and unchanged from December 31, 2024. As at
June 30, 2025, the Company was compliant with all covenants under the Loan
Agreement.
Based on current forecasts, the Company forecasts a potential breach of the
net senior funded debt to trailing annual EBIDA ratio as a result of the $12.5
million convertible debenture completed on August 13, 2025 (refer to Notes 1
and 21).
Under the terms of the Loan Agreement, Touchstone is required to raise not
less than approximately $7.3 million in equity proceeds on or before December
31, 2025 (refer to Note 21).
In addition, the Loan Agreement requires the Company to maintain a cash
reserves balance in respect of the three term loan facilities. Accordingly,
$2,758,000 of cash has been classified as long-term restricted cash as at June
30, 2025 (December 31, 2024 - $924,000).
11. Decommissioning Liabilities and Abandonment Fund
The Company's decommissioning liabilities were determined by Management based
on Touchstone's net ownership interest in all wells and facilities, estimated
future costs to reclaim and abandon these assets, and the estimated timing of
such expenditures.
As at June 30, 2025, the estimated net present value of the future cash flows
required to settle the Company's decommissioning liabilities was $14,812,000
based on an inflation-adjusted undiscounted liability of $22,254,000 (December
31, 2024 - $9,985,000 and $15,197,000, respectively). The liabilities were
calculated using a weighted average risk-free discount rate of 5.6 percent and
a long-term inflation rate of 1.9 percent (December 31, 2024 - 5.5 percent and
1.9 percent, respectively).
The following table summarizes the changes in the Company's estimated
decommissioning liability for the periods presented.
($000's) Six months ended June 30, 2025 Year ended December 31,
2024
Balance, beginning of period 9,985 9,733
Liabilities incurred from development activities 179 407
Liabilities acquired on close of Acquisition (Note 5) 2,468 130
Liabilities settled - (19)
Accretion expense 151 226
Revisions to estimates 2,000 (282)
Dispositions - (166)
Effect of change in foreign exchange rates 29 (44)
Balance, end of period 14,812 9,985
Under the terms of the Company's production and exploration licences and
related agreements, Touchstone is required to make payments into designated
abandonment funds based on production volumes. These funds are restricted for
use in the future abandonment of wells within the respective licenced areas.
As at June 30, 2025, the Company recognized $9,319,000 of accrued or
contributed amounts as non-current abandonment fund assets (December 31, 2024
- $2,965,000), which included $6,009,000 of additional contributions acquired
through the Acquisition (refer to Note 5).
12. Shareholders' Capital
Issued and outstanding common shares
The Company is authorized to issue an unlimited number of voting common shares
without nominal or par value. Holders of common shares are entitled to one
vote per share at meetings of shareholders and are entitled to receive any
dividends declared by the Company.
The following table summarizes changes in the number of common shares
outstanding and the related shareholders' capital for the periods presented.
Number of shares outstanding Shareholders' capital
($000's)
Balance, January 1, 2024 234,212,726 114,965
Issued under share-based compensation plans 2,247,935 645
Balance, December 31, 2024 236,460,661 115,610
Issued pursuant to private placement, net of fees 24,636,585 5,221
Balance, June 30, 2025 261,097,246 120,831
On May 8, 2025, the Company announced a United Kingdom-based private placement
to raise gross proceeds of £15,375,000 through the issuance of 75,000,000 new
common shares at a price of 20.5 pence sterling per share (approximately
C$0.38 per share). On May 16, 2025, the Company issued 75,000,000 common
shares to the broker's settlement agent, to be held in trust pending receipt
of proceeds.
In May 2025, the Company received gross proceeds of £5,051,000 ($6,746,000)
and issued an aggregate of 24,636,585 common shares to investors. Net proceeds
from the private placement totalled $5,221,000. As the remaining subscription
proceeds were not received, the Company cancelled the balance of the private
placement on June 30, 2025. As a result, 50,363,415 common shares were
cancelled, reducing the total number of issued and outstanding common shares
to 261,097,246.
Weighted average common shares
The following table presents the weighted average number of common shares used
in the calculation of basic and diluted net (loss) earnings per share.
Three months ended June 30, Six months ended June 30,
2025 2024 2025 2024
Weighted average common shares outstanding - basic 248,643,588 234,959,160 242,585,779 234,585,943
Dilutive impact of equity-based compensation - 1,404,512 - 1,865,241
Weighted average common shares outstanding - diluted 248,643,588 236,363,672 242,585,779 236,451,184
For the three and six months ended June 30, 2025, approximately 8.9 million
share-based compensation awards were excluded from the diluted weighted
average share calculation, as they were anti-dilutive (2024 - 10 million).
13. Petroleum and Natural Gas Sales
The Company generates its primary revenue through the sale of crude oil,
natural gas liquids, and natural gas. Revenue from the sale of crude oil,
natural gas liquids and natural gas delivered to state-owned Heritage and the
National Gas Company of Trinidad and Tobago is recognized at the point of
delivery, based on contractually agreed pricing mechanisms.
Revenue from natural gas sales to Atlantic LNG is recognized when legal title
transfers at the inlet of the processing facility. At the time of delivery,
revenue is estimated based on the applicable marketing arrangement and is
subsequently adjusted when the product is lifted and final pricing is
determined.
The following table presents petroleum and natural gas sales by product type
for the periods indicated.
($000's) Three months ended June 30, Six months ended June 30,
2025 2024 2025 2024
Crude oil 6,081 7,759 12,760 15,183
Natural gas liquids 676 680 898 2,337
Natural gas 4,250 5,651 8,462 13,154
Petroleum and natural gas sales 11,007 14,090 22,120 30,674
At June 30, 2025, accounts receivable related to petroleum and natural gas
sales totalled $7,819,000, representing amounts outstanding for May and June
2025 production (December 31, 2024 - $4,334,000 related to December 2024
production).
14. Net Finance Expense
($000's) Three months ended June 30, Six months ended June 30,
2025 2024 2025 2024
Interest income (30) (8) (50) (13)
Finance lease interest income (6) (7) (12) (15)
Lease liability interest expense 127 86 267 186
(Note 8)
Bank debt interest expense (Note 10) 924 610 1,581 1,145
Accretion on bank debt (Note 10) 360 12 375 14
Accretion on decommissioning liabilities (Note 11) 86 55 151 109
Other 52 13 20 14
Net finance expense 1,513 761 2,332 1,440
15. Transaction expense
For the three and six months ended June 30, 2025, Touchstone incurred $166,000
and $302,000 in transaction costs pursuant to the Acquisition, respectively
(refer to Note 5). The Company recognized $840,000 and $1,220,000 in
transaction expenses relating to a terminated acquisition during the three and
six months ended June 30, 2024, respectively.
16. Share-based Compensation Plans
The Company maintains share-based compensation plans to align the interests of
employees, directors and officers with those of shareholders and to attract
and retain key personnel.
Stock option plans
The Company previously granted stock options under a Stock Option Plan (the
"Legacy Stock Option Plan"), which was replaced by an Omnibus Incentive
Compensation Plan (the "Omnibus Plan") in June 2023. The Omnibus Plan allows
for the issuance of stock options, restricted share units ("RSUs"), and
performance share units ("PSUs") to directors, officers, employees, and
consultants. The aggregate number of common shares reserved for issuance under
both the Legacy Stock Option Plan and the Omnibus Plan at any time is limited
to 10 percent of the Company's issued and outstanding common shares. No
additional grants will be made under the Legacy Stock Option Plan; however,
existing awards governed by the plan will continue to vest in accordance with
their original terms.
Unless otherwise determined by the Board, stock option vest in one-third
instalments on each of the first three anniversaries of the grant date,
subject to continued service. Stock options expire five years from the date of
grant and entitle the holder to purchase one common share at the grant
exercise price. Equity-settled share-based compensation expense is recognized
over the vesting period.
The following table summarizes stock option activity for the periods
presented.
Number of stock options outstanding Weighted average exercise price (C$)
Issued and outstanding, January 1, 2024 14,327,935 1.10
Exercised (2,247,935) 0.25
Forfeited (349,000) 1.52
Issued and outstanding, December 31, 2024 11,731,000 1.25
Forfeited (748,667) 1.37
Expired (2,052,000) 0.48
Issued and outstanding, June 30, 2025 8,930,333 1.42
Exercisable, June 30, 2025 6,793,002 1.50
Long-term incentive plans
Share awards plan
Share awards in the form of RSUs and PSUs are granted under the Omnibus Plan
to executive officers and key employees. Unless otherwise approved by the
Board, RSUs vest in equal one-third tranches on each of the first three
anniversaries of the grant date. PSU awards cliff vest on the third
anniversary of the grant date and are subject to a performance multiplier
ranging from zero times to 1.75 times based on achievement of predefined
corporate performance targets set by the Board over the vesting period. RSU
awards are fixed while the number of PSUs earned is variable.
Each RSU and PSU award may, at the Board's discretion, be settled in common
shares, cash, or a combination thereof. Currently, all share awards are
classified as cash settled. Cash-settled awards are measured at fair value
based on the Company's closing common share price as at the reporting date and
are recognized over the vesting period. PSU liabilities are further adjusted
based on the estimated performance multiplier. A forfeiture rate of 5 percent
is applied on grant and updated to reflect actual forfeitures.
Deferred share unit plan
The Company offers a deferred share unit ("DSU") plan to non-employee
directors. DSUs vest immediately upon grant but may only be redeemed after the
director ceases to be a member of the Board. DSUs are settled in cash based on
the market price of the Company's common shares at the time of redemption. DSU
liabilities are measured at fair value based on the Company's closing share
price at each reporting date.
The following table summarizes outstanding awards for the periods presented.
(number of awards outstanding) RSUs PSUs((1)) DSUs
Issued and outstanding, January 1, 2024 - - -
Granted 1,447,780 1,397,780 977,332
Issued and outstanding, December 31, 2024 1,447,780 1,397,780 977,332
Forfeited (39,063) (39,063) -
Issued and outstanding, June 30, 2025 1,408,717 1,358,717 977,332
Note:
(1) PSU figures are presented based on the number of notional units
granted, before application of any performance multiplier.
Share-based compensation expense
The following table summarizes share-based compensation expense in the periods
indicated.
($000's) Three months ended June 30, Six months ended June 30,
2025 2024 2025 2024
Equity-settled compensation (stock options) 14 323 149 736
Cash-settled compensation (RSUs, PSUs and DSUs) (92) - (50) -
Capitalized expense (5) (14) (18) (26)
Share-based compensation expense (83) 309 81 710
Share-based compensation liabilities
The following table summarizes changes in share-based compensation liabilities
for the periods presented.
($000's) Six months ended June 30, 2025 Year ended December 31, 2024
Balance, beginning of period 500 -
Liability incurred from grant of DSUs - 429
Increase in liability related to RSUs and PSUs 192 253
Fair value adjustments (243) (154)
Effect of change in foreign exchange rates 31 (28)
Balance, end of period 480 500
Current (included in accounts payable and accrued liabilities) 318 383
Non-current 162 117
Share-based compensation liabilities balance 480 500
17. Income Taxes
The following provides a reconciliation of the income tax (recovery) expense
based on applying the combined statutory Trinidad and Tobago petroleum tax and
unemployment levy rates to net (loss) earnings before income taxes.
($000's unless otherwise stated) Three months ended June 30, Six months ended June 30,
2025 2024 2025 2024
Net (loss) earnings before taxes (1,444) 3,464 (1,275) 7,196
Combined Trinidad statutory petroleum income tax and levy rate 55.0% 55.0% 55.0% 55.0%
Expected income tax (recovery) expense at statutory rate (794) 1,905 (701) 3,958
Effect on income tax resulting from:
Change in tax assets not recognized 26 (2,685) (650) (5,372)
Income tax rate differential 1,199 (305) 1,228 (809)
Effect of change in foreign exchange rates and other (1,165) 1,210 (483) 2,452
Income tax (recovery) expense (734) 125 (606) 229
The Company's net deferred income tax liability relates to its Trinidad-based
subsidiaries. The following table outlines the components of the net deferred
income tax liability for the periods presented.
($000's) Six months ended June 30, 2025 Year ended December 31,
2024
Deferred income tax liabilities
PP&E in excess of income tax basis 50,413 29,618
Other (76) 67
Deferred income tax assets
Decommissioning liabilities (3,145) (636)
Lease liabilities (2,368) (2,734)
Non-capital losses (1,834) (1,575)
Intercompany interest (7,127) (6,816)
Net deferred income tax liability 35,863 17,924
The June 30, 2025 net deferred income tax liability increased by $17,939,000
from December 31, 2024. The increase primarily reflected the $18,797,000
deferred income tax liability recognized in connection with the Acquisition
(refer to Note 5). In addition, $85,000 and $943,000 of deferred income tax
recoveries were recognized though equity and comprehensive loss, respectively,
during the six months ended June 30, 2025.
Tax legislation, regulations, and interpretations continue to evolve in the
jurisdictions where the Company operates. As a result, income tax matters are
subject to ongoing review. Management believes that the provision for income
taxes is adequate.
18. Financial Instruments and Market Risk Management
Financial instruments
The classification of financial assets is determined based on the
characteristics of their contractual cash flows. Financial assets and
liabilities are initially recognized at fair value, which is typically the
transaction price net of directly attributable transaction costs, unless the
instrument contains a significant financing component.
As at June 30, 2025, the Company's financial instruments measured at amortized
cost included accounts receivable, restricted cash, accounts payable and
accrued liabilities, and income taxes payable. Due to the short-term nature of
these instruments, their carrying values approximate their fair values.
VAT bonds were classified as fair value through profit and loss and were
categorized as Level 2 within the fair value hierarchy. The estimated fair
value of these bonds was based on observable market data for comparable
instruments and has remained unchanged since the issuance date.
Market risk management
The Company is exposed to various financial and market risks inherent in
international oil and natural gas operations. These include commodity price
risk, foreign exchange rate risk, interest rate risk, equity price risk,
credit risk (refer to Note 3), and liquidity risk (refer to Note 8).
Touchstone continuously monitors these risks and implements strategies to
mitigate them through internal controls and proactive financial management.
Cash flow management is central to the Company's risk strategy, and material
changes in business conditions are reviewed with the Board to establish
appropriate risk mitigation guidelines.
Commodity price risk
Touchstone's financial performance is dependent on prices received for crude
oil, natural gas liquids, and natural gas production. Fluctuations in
commodity prices may significantly impact comprehensive income or loss and
cash flows. While the Company does not currently hedge this risk - partially
due to a fixed-price natural gas contract on a portion of production -
Management continuously monitors forward commodity prices and may enter into
future commodity price risk management contracts to reduce petroleum and
natural gas sales volatility and support capital planning.
Foreign currency risk
The Company is exposed to foreign exchange risk through financial assets and
liabilities denominated in foreign currencies. Touchstone's policy is to
manage foreign currency exposure by matching revenue and expenditures in the
same currency where feasible. The Company does not currently employ foreign
exchange hedging strategies.
As operations are based in Trinidad, changes in the TT$ to the US$ exchange
rate can materially affect financial results. Although crude oil prices are
based on US$ benchmarks, the majority of related invoices are paid in TT$,
creating exposure to TT$/US$ movements. Further exposure arises from
US$-denominated debt and associated interest payments. This risk is partially
mitigated as the TT$ has historically been informally pegged to the US$.
Additionally, sales of natural gas and natural gas liquids are denominated and
paid in US$.
The Company is also exposed to foreign exchange fluctuations on C$ and pound
sterling-denominated balances, as well as on general and administration
expenses incurred at its Canadian head office and to maintain its AIM listing
in the United Kingdom. Material movements in C$/US$ or GBP/US$ exchange rates
could impact the Company's reported results.
Interest rate risk
Interest rate risk arises from the potential for changes in market interest
rates to affect the Company's comprehensive income or loss and cash flows.
Touchstone is exposed to interest rate fluctuations on its Term Loan
Facilities 2 and 3, and its revolving loan facility, as the applicable
interest rates are reset annually based on the one-year Secured Overnight
Financing Rate (refer to Note 10).
Equity price risk
The Company is exposed to equity price risk related to the valuation of
share-based compensation awards issued under its Omnibus Plan and Deferred
Share Unit Plan. These awards are classified as cash-settled and are
remeasured at each reporting date based on Touchstone's common share price.
Accordingly, fluctuations in the share price may increase or decrease
share-based compensation expense and ultimately affect the cash settlement
obligation.
19. Capital Management
Touchstone actively manages its capital structure and adjusts it in response
to changes in economic conditions and the risk characteristics of its
underlying assets. The Company defines its capital structure to include
shareholders' equity, working capital, and bank debt. Touchstone primarily
finances its operations and strategic initiatives through equity issuances and
bank debt.
The Company considers funds flow from operations to be a key measure of both
capital management and operating performance, as it reflects Touchstone's
ability to fund capital expenditures and service debt obligations. Management
believes that excluding the temporary impact of changes in non-cash operating
working capital provides a more representative measure of recurring cash
generation capacity.
As part of its capital management framework, the Company monitors working
capital, net debt, and managed capital to assess liquidity and financial
flexibility. These measures are defined as follows:
· Working capital is calculated as current assets minus
current liabilities, as presented in the consolidated balance sheet.
· Net debt is calculated as the working capital surplus or
deficit plus the principal (undiscounted) balance of non-current senior
secured debt. Net debt is most directly comparable to total liabilities on the
Company's consolidated balance sheet.
· Managed capital is defined as the sum of net debt and
shareholders' equity.
Touchstone's long-term strategy is to maintain a net debt to trailing
twelve-month funds flow from operations ratio of 2.0 times or less under
normalized commodity price conditions. This ratio may temporarily exceed the
target due to higher capital investment, acquisitions, or weaker commodity
prices. The Company also monitors its net debt to managed capital ratio, with
a long-term target of less than 0.4 to 1, reflecting its strategy to
prioritize equity over debt financing. The following table presents
Touchstone's internal capital management metrics for the periods indicated.
($000's) Target measure June 30, December 31,
2025 2024
Current assets (37,048) (22,151)
Current liabilities 48,864 23,510
Working capital deficit((1)) 11,816 1,359
Principal balance of non-current bank debt 52,071 27,750
Net debt((1)) 63,887 29,109
Shareholders' equity 73,914 68,828
Managed capital((1)) 137,801 97,937
Trailing twelve-month funds flow from operations((2)) 10,651 16,748
Net debt to funds flow from operations ratio((1)) At or < 2.0 times 6.00 1.74
Net debt to managed capital ratio((1)) < 0.4 times 0.46 0.30
Notes:
(1) Non-IFRS capital management measures and ratios and therefore may
not be comparable to calculations of similar measures disclosed by other
entities.
(2) Trailing twelve-month funds flow from operations as at June 30, 2025
comprises the sum of funds flow from operations for the six months ended June
30, 2025, and the six-month period from July 1, 2024 through December 31,
2024.
20. Commitments
Touchstone has contractual obligations incurred in the normal course of
business. These include minimum work commitments under operating agreements
with Heritage, licence payments and exploration commitments pursuant to its
exploration and production licences with the Government of Trinidad and Tobago
Ministry of Energy and Energy Industries, and various lease obligations (refer
to Note 9). The following table summarizes the Company's estimated minimum
contractual payments as at June 30, 2025.
($000's) Total Estimated payments due by year
2025 2026 2027 Thereafter
Operating agreements 22,460 8,207 2,335 5,171 6,747
Exploration agreements 61,242 1,762 11,726 11,930 35,824
Other commitments 558 203 264 73 18
Minimum payments 84,260 10,172 14,325 17,174 42,589
Under the terms of its operating agreements with Heritage, the Company is
obligated to fulfill minimum annual work commitments over the term of each
licence. With respect to these obligations, Touchstone is required to drill
six development wells prior to December 31, 2025.
In addition, the Company is committed to drilling a total of ten exploration
wells on its various exploration blocks by the end of 2029.
21. Subsequent Event
Convertible Debenture Offering
The Company closed a private placement of a secured convertible debenture and
warrants (the "Offering"), with a Canadian private investor and existing
shareholder on August 13, 2025, raising gross proceeds of $12,500,000. Net
proceeds from the Offering are intended to fund the remaining 2025 Cascadura
development drilling program and to reduce outstanding accounts payable.
The convertible debenture has a three-year term and bears interest at a rate
of 5 percent per annum, payable semi-annually. The debenture is convertible
into common shares of the Company at any time prior to maturity at a
conversion price of approximately US$0.22 per share at the holder's option,
representing the US dollar equivalent of C$0.30 per share at the date of
issuance. At the holder's option, interest may be paid in cash or in Company
common shares, with the number of shares determined based on the market price
of the common shares and prevailing exchange rate at the time of payment,
subject to TSX approval.
As part of the Offering, the Company issued 6,250,000 common share purchase
warrants, each exercisable to acquire one Company common share at an exercise
price of C$0.40 per share for a period of two years from the date of issuance.
The Company received written confirmation from its lender that the proceeds
from the Offering satisfy an equivalent portion of the equity raise
requirement pursuant to Loan Agreement. As a result, the Company is required
to raise an additional $7.3 million in net equity proceeds on or before
December 31, 2025 to remain in compliance with the terms of the Loan
Agreement.
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. END IR DGGDIBSBDGUXRecent news on Touchstone Exploration
See all newsREG - Touchstone Explrtn. - Second Quarter 2025 Results
AnnouncementREG - Touchstone Explrtn. - US$12.5M CONVERTIBLE DEBENTURE ISSUANCE
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AnnouncementREG - Touchstone Explrtn. - TOTAL VOTING RIGHTS
Announcement