REG - Touchstone Explrtn. - THIRD QUARTER 2023 FINANCIAL AND OPERATING RESULTS

Touchstone ExplorationAnnouncement

14/11/2023 07:15

For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20231114:nRSN3056Ta&default-theme=true

RNS Number : 3056T  Touchstone Exploration Inc.  14 November 2023

TOUCHSTONE ANNOUNCES THIRD QUARTER 2023 FINANCIAL AND OPERATING RESULTS

 AND PROVIDES AN OPERATIONAL UPDATE

 

CALGARY, ALBERTA (November 14, 2023) - Touchstone Exploration Inc.
("Touchstone", "we", "our" or the "Company") (TSX, LSE: TXP) provides an
operational update and reports its operating and financial results for the
three and nine months ended September 30, 2023.

 

Selected financial information is outlined below and should be read in
conjunction with our September 30, 2023 unaudited interim condensed
consolidated financial statements and related Management's discussion and
analysis, both of which will be available under our profile 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 rounded to
thousands of United States dollars, and all production volumes disclosed
herein are sales volumes based on Company working interest before royalty
burdens.

 

Paul Baay, President and Chief Executive Officer, commented:

 

"The positive impact that initial output from our Cascadura field has had on
both our production profile, and more importantly, our operating cash flows is
clear. The results from the first few weeks of production at Cascadura
demonstrate that we can look forward to materially enhanced operational and
financial results.

 

While we are encouraged with our initial output levels, we are focused on
optimizing production across our portfolio including Cascadura, Coho and our
legacy oil properties. These operations are anticipated to be completed by the
end of the year and will provide Touchstone with a strong platform upon which
to continue our growth in 2024.

 

Along with our significant production gains, we continue to work to expand our
land footprint and look forward to commencing our development drilling program
on both the Ortoire block and our legacy acreage."

 

Third Quarter 2023 and Recent Operational Highlights

·      Achieved first production from the Cascadura-1ST1 well on
September 6, 2023 and initial production from the Cascadura Deep-1 well on
September 14, 2023.

·      Produced record quarterly average volumes of 3,391 boe/d in the
third quarter of 2023, representing a 167 percent increase relative to the
1,272 boe/d produced in the third quarter of 2022.

·      Achieved average net sales volumes of 8,917 boe/d in October
2023, with the Cascadura field contributing 7,234 boe/d in the month.

·      Cascadura wells are currently restricted by surface chokes while
final facility commissioning progresses, with a production volume increase
expected when the recycle compressor is operational.

·      Coho-1 well workover is currently scheduled for late November
2023 to isolate water production from the lowest set of perforations.

·      Preparations are underway at our Cascadura and CO-1 fields for
future development drilling.

Third Quarter 2023 Financial Results Highlights

·      Realized petroleum and natural gas sales of $11,682,000 compared
to $9,933,000 in the 2022 comparative quarter, as $3,855,000 of incremental
natural gas and NGL sales were partially offset by a $2,106,000 decrease in
crude oil sales, reflecting a 15 percent decline in realized crude oil pricing
and a 7 percent reduction in crude oil production.

·      Cascadura field production volumes in the quarter contributed
$1,871,000 of natural gas sales at an average realized price of $2.40/Mcf and
$1,264,000 of NGL sales at an average realized price of $78.12/bbl.

·      Natural gas production from the Coho-1 well averaged net volumes
of 3.7 MMcf/d (618 boe/d) in the quarter and contributed $720,000 of net
natural gas sales at an average realized price of $2.11/Mcf.

·      Generated an operating netback of $6,011,000, representing a 37
percent increase from the 2022 third quarter primarily reflecting incremental
Cascadura natural gas and NGL production volumes.

·      Reported funds flow from operations of $2,432,000 in the third
quarter of 2023 compared to $6,000 in the preceding quarter and $256,000 in
the prior year equivalent quarter.

·      Recognized net earnings of $988,000 and comprehensive income of
$809,000 in the quarter compared to a net loss of $778,000 and a comprehensive
loss of $1,228,000 reported in the third quarter of 2022.

·      $3,609,000 in quarterly capital investments primarily focused on
expenditures related to the construction and commissioning of the Cascadura
natural gas and liquids facility and three Royston-1X well production tests.

·      Exited the quarter with a cash balance of $3,794,000, a bank debt
principal balance of $29,500,000 and a net debt position of $29,919,000.

·      October 31, 2023 estimated cash balance of approximately $5.4
million.

Operational Update

 

Touchstone commenced production from the Cascadura facility in September 2023,
with the Cascadura-1ST1 well and the Cascadura Deep-1 well coming onstream on
September 6, 2023 and September 14, 2023, respectively. Both wells are
currently restricted by surface chokes while we proceed with final
commissioning of the facility. The facility is designed as a closed system
where vent gas from both the condensate flash separator and the vapours off
the condensate storage tanks are captured, compressed, and reinjected into the
system for sales, resulting in minimal emissions. The recycle compressor is
currently non-operational resulting in vented production volumes being flared
at the facility. Once the compressor is operational, we will be able to
optimize the facility and we expect to see an increase in production volumes.

 

Our Coho facility has been operational for over a year and has produced
approximately 2.26 billion cubic feet of gross natural gas volumes through
October 2023. The Coho-1 well had a workover completed in October 2023 which
was designed to isolate and shut off water production from the lowest
perforations in the well. The workover was unsuccessful as the packer
collapsed after the well commenced dry natural gas production. We have sourced
a second packer which is currently scheduled to be installed prior to the end
of November 2023, with the well continuing to produce until we commence the
workover.

 

In October 2023, we achieved average net sales volumes of 8,917 boe/d as
follows:

·      Cascadura field contributed net sales volumes of 7,234 boe/d
(9,042 boe/d gross) consisting of:

-     net natural gas sales volumes of 38.7 MMcf/d or 6,456 boe/d (48.4
MMcf/d or 8,069 boe/d gross) with a realized price of $2.43/Mcf; and

-     net natural gas liquids volumes of 778 bbls/d (973 bbls/d gross)
with an average realized price of $77.18 per barrel.

·      Net average natural gas sales volumes from Coho were 3.1 MMcf/d
or 519 boe/d (3.9 MMcf/d or 649 boe/d gross) at a realized price of $2.15/Mcf.

·      Average gross and net daily crude oil sales volumes were 1,164
bbls/d with an average realized price of $77.18 per barrel.

Touchstone has designed a work program for the Royston-1X well that will
isolate and evaluate the two uppermost zones in the wellbore and expects to
commence testing prior to the end of the year.

 

The Company is preparing to commence development drilling on our Cascadura and
CO-1 fields. At Cascadura, the third-party drilling company is on site to
obtain the required drilling rig certifications. At CO-1, we plan to drill two
development wells off an existing surface lease and have contracted a Trinidad
based drilling company to perform these operations. The rig is currently
undergoing certifications to drill a well for another party and once complete
it will be mobilized to our lease site, where we expect to drill the two CO-1
prospects in the first quarter of 2024.

 

Financial and Operating Results Summary

 

                                        Three months ended September 30,      % change  Nine months ended     % change

                                                                                        September 30,
                                        2023               2022               2023                 2022

 Operational

 Average daily production
 Crude oil((1)) (bbls/d)                1,183              1,272              (7)       1,197      1,362      (12)
 NGLs((1)) (bbls/d)                     176                -                  n/a       59         -          n/a
 Crude oil and liquids (bbls/d)         1,359              1,272              7         1,256      1,362      (8)
 Natural gas((1)) (Mcf/d)               12,191             -                  n/a       7,203      -          n/a
 Average daily production (boe/d)((2))  3,391              1,272              167       2,457      1,362      80

 Average realized prices((3))
 Crude oil((1)) ($/bbl)                 71.89              84.85              (15)      66.38      88.80      (25)
 NGLs((1)) ($/bbl)                      78.12              -                  n/a       78.12      -          n/a
 Crude oil and liquids ($/bbl)          72.69              84.85              (14)      66.94      88.80      (25)
 Natural gas((1)) ($/Mcf)               2.31               -                  n/a       2.23       -          n/a
 Realized commodity price ($/boe)((2))  37.44              84.85              (56)      40.76      88.80      (54)

 Production mix (% of production)
 Crude oil and liquids                  40                 100                          51         100
 Natural gas                            60                 -                            49         -

 Operating netback ($/boe)((2))
 Realized commodity price((3))          37.44              84.85              (56)      40.76      88.80      (54)
 Royalties((3))                         (10.23)            (29.14)            (65)      (11.70)    (30.97)    (62)
 Operating expenses((3))                (7.94)             (18.16)            (56)      (10.44)    (17.60)    (41)
 Operating netback((3))                 19.27              37.55              (49)      18.62      40.23      (54)

 Financial
 ($000's except per share amounts)

 Petroleum and natural gas sales        11,682             9,933              18        27,339     33,025     (17)

 Cash from operating activities         343                3,058              (89)      4,231      6,941      (39)

 Funds flow from operations             2,432              256                850       3,241      2,849      14

 Net earnings (loss)                    988                (778)              n/a       638        (1,276)    n/a
 Per share - basic and diluted          0.00               (0.00)             n/a       0.00       (0.01)     n/a

 Exploration capital expenditures       3,498              2,692              30        17,043     7,498      127
 Development capital expenditures       111                207                (46)      720        1,323      (46)
 Capital expenditures((3))              3,609              2,899              24        17,763     8,821      101

 Working capital deficit((3))                                                           13,419     4,537      196
 Principal long-term bank debt                                                          16,500     22,500     (27)
 Net debt((3)) - end of period                                                          29,919     27,037     11

 Share Information (000's)

 Weighted avg. shares outstanding:
 Basic                                  233,541            212,647            10        233,243    211,898    10
 Diluted                                237,138            212,647            12        236,947    211,898    12
 Outstanding shares - end of period                                                     234,213    213,113    10

 

Notes:

(1)   In the table above and elsewhere in this announcement, references to
"crude oil" refer to "light and medium crude oil" and "heavy crude oil"
product types combined; references to "NGLs" refer to condensate; and
references to "natural gas" refer to "conventional natural gas", all as
defined in National Instrument 51-101 Standards of Disclosure for Oil and Gas
Activities ("NI 51-101"). Refer to the "Advisories - Product Type Disclosures"
for further information.

(2)   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. Refer to the "Advisories - Oil and Natural Gas
Measures" for further information.

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

 

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) 750-4487

 Scott Budau, Chief Financial Officer

 James Shipka, Chief Operating Officer

 Shore Capital (Nominated Advisor and Joint Broker)

 Daniel Bush / Toby Gibbs / Iain Sexton                                                          Tel: +44 (0) 207 408 4090

 Canaccord Genuity (Joint Broker)

 Adam James / Gordon Hamilton                                                                    Tel: +44 (0) 207 523 8000

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

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

 

Advisories

 

Forward-Looking Statements

 

Certain information provided in this announcement may constitute
forward-looking statements and information (collectively, "forward-looking
statements") within the meaning of applicable securities laws. Such
forward-looking statements include, without limitation, forecasts, estimates,
expectations and objectives for future operations that are subject to
assumptions, risks and uncertainties, many of which are beyond the control of
the Company. Forward-looking statements are statements that are not historical
facts and are generally, but not always, identified by the words "expects",
"plans", "anticipates", "believes", "intends", "estimates", "projects",
"potential" and similar expressions, or are events or conditions that "will",
"would", "may", "could" or "should" occur or be achieved. The forward-looking
statements contained in this announcement speak only as of the date thereof
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 expectation of future
production, operational results and expanding its land position, the Company's
development plans and strategies, including: Cascadura facility commissioning
operations and the anticipated increase in production upon expected
completion; Coho workover operations and the expected timing thereof; the
timing of anticipated Royston-1X production testing operations; and forecasted
future development well drilling, including the locations and expected timing
thereof.

 

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.

 

Non-GAAP Financial Measures

 

This announcement may reference 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
GAAP and do not have a standardized meaning prescribed by International
Financial Reporting Standards ("IFRS" or "GAAP") 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 in this announcement.

 

Funds flow from operations

 

Funds flow from operations is included in the Company's consolidated
statements of cash flows. Touchstone considers funds flow from operations to
be a key measure of operating performance as it demonstrates the Company's
ability to generate the funds necessary to finance capital expenditures and
repay debt. Management believes that by excluding the temporary impact of
changes in non-cash operating working capital, funds flow from operations
provides a useful measure of the Company's ability to generate cash that is
not subject to short-term movements in non-cash operating working capital.

 

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 royalties 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

 

Management monitors working capital and 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. 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.

 

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

 

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.

 

For information regarding such measures, including reconciliations to the
nearest GAAP measures, please refer to the "Advisories - Non-GAAP Financial
Measures" section in the Company's Management's discussion and analysis for
the three and nine months ended September 30, 2023 accompanying our September
30, 2023 unaudited interim condensed consolidated financial statements which
will be available on our website (www.touchstoneexploration.com
(http://www.touchstoneexploration.com/) ) and under our SEDAR+ profile
(www.sedarplus.ca (http://www.sedarplus.ca/) ).

 

Oil and Natural Gas Measures

 

Where applicable, natural gas has been converted to barrels of oil equivalent
based on six thousand cubic feet to one barrel 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.

 

Product Type Disclosures

 

For information regarding specific product disclosures in accordance with NI
51-101, please refer to the "Advisories - Product Type Disclosures" section in
the Company's Management's discussion and analysis for the three and nine
months ended September 30, 2023 accompanying our September 30, 2023 unaudited
interim condensed consolidated financial statements which will be available on
our website (www.touchstoneexploration.com
(http://www.touchstoneexploration.com/) ) and under our SEDAR+ profile
(www.sedarplus.ca (http://www.sedarplus.ca/) ).

 

Abbreviations

 

The following abbreviations are referenced in this announcement:

 

bbls/d               barrels per
day
Mcf                  thousand cubic feet

boe                  barrels of oil
equivalent
Mcf/d               thousand cubic feet per day

boe/d               barrels of oil equivalent per
day             MMcf/d             million cubic feet
per day

NGLs                natural gas liquids

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
 or visit
www.rns.com (http://www.rns.com/)
.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
.   END  QRTEAFFDFDPDFAA