REG - Touchstone Explrtn. - 2022 Year-End Reserves
06/03/2023 07:00
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RNS Number : 9249R Touchstone Exploration Inc. 06 March 2023
2022 YEAR-END RESERVES
CALGARY, ALBERTA (March 6, 2023) - Touchstone Exploration Inc. ("Touchstone",
"we", "our", "us" or the "Company") (TSX, LSE: TXP) announces our 2022
year-end reserves.
Our independent reserves evaluation was prepared by GLJ Ltd. ("GLJ") with an
effective date of December 31, 2022 (the "Reserves Report"). Highlights of our
total proved developed producing ("PDP"), total proved ("1P"), total proved
plus probable ("2P") and total proved plus probable plus possible ("3P")
reserves from the Reserves Report are provided below. All finding and
development ("F&D") costs below include changes in future development
capital ("FDC"). Unless otherwise stated, all financial amounts referenced
herein are stated in United States dollars. Financial information contained
herein is based on the Company's unaudited results for the year ended December
31, 2022 and is subject to change. Readers are further cautioned to read the
applicable advisories contained herein.
Touchstone's 2022 year-end reserves reflect the sustainability of our low
decline asset base, as our 2022 capital program focused on exploration
activities on our Ortoire property, where we completed construction of the
Coho natural gas facility and continued construction operations of the
Cascadura natural gas and liquids facility. Touchstone did not drill any
development or exploration wells in the 2022 year.
In 2022 we achieved initial production from our Coho-1 well, which produced
net volumes of 5.7 MMcf/d (approximately 955 boe/d) in the fourth quarter of
2022 contributing to average quarterly production volumes of 2,229 boe/d and
average 2022 annual production volumes of 1,581 boe/d.
2022 Year-end Reserves Report Highlights
· Relative to year-end 2021 and after 2022 production, we increased
PDP gross reserves by 33% to 4,843 Mboe, decreased 1P gross reserves by 0.7%
to 38,463 Mboe, decreased 2P gross reserves by 0.6% to 75,074 Mboe and
decreased 3P gross reserves by 0.6% to 120,594 Mboe in 2022.
· PDP reserves replaced 2022 annual production by 308%, reflecting
forecasted Coho-1 natural gas volumes that were brought online in 2022.
· Our net present value of future net revenues discounted at 10%
("NPV10") on a before tax PDP basis increased by 21% to $62.6 million,
increased by 12% to $530.3 million on a 1P basis, increased by 13% to $993.7
million on a 2P basis, and increased by 12% to $1.47 billion on a 3P basis
from the prior year.
· Realized after tax PDP NPV10 of $51.8 million representing an
increase of 45% from the prior year, after tax 1P NPV10 increased by 22% from
year-end 2021 to $256.6 million, after tax 2P NPV10 increased by 24% from the
prior year to $450.6 million and after tax 3P NPV10 increased by 22% from 2021
to $654.9 million.
· Limited development operations and a focus on investing in our
natural gas facilities led to a 1P recycle ratio of 0.6 times and a 2P recycle
ratio of 0.2 times.
· We continue to maintain a long producing reserve life index
("RLI") of 5.8 years PDP and 13.1 years 1P reflecting the low decline nature
of our asset base.
2022 Year-end Reserves Report Summary
Touchstone's year-end crude oil, natural gas and NGL reserves in Trinidad were
evaluated by independent reserves evaluator, GLJ, in accordance with
definitions, standards and procedures contained in the Canadian Oil and Gas
Evaluation Handbook and National Instrument 51-101 - Standards of Disclosure
for Oil and Gas Activities ("NI 51-101"). Additional reserves information as
required under NI 51-101 will be included in the Company's Annual Information
Form, which will be filed on SEDAR on or before March 31, 2023.
The reserve estimates set forth below are based upon GLJ's Reserves Report
dated March 3, 2023 with an effective date of December 31, 2022. The Reserves
Report uses the average price forecasts of the three leading Canadian oil and
gas evaluation consultants (GLJ, McDaniel & Associates Consultants Ltd.
and Sproule Associates Ltd. (collectively, the "Consultants")). All values in
this announcement are based on the three Consultants' average forecast pricing
and GLJ's estimates of future operating and capital costs as of December 31,
2022. Please refer to "Advisories: Reserves Advisories" for further
information. In certain tables set forth below, the columns may not add due to
rounding.
2022 Reserves Summary by Category
PDP 1P 2P 3P
Total gross reserves((1)) (Mboe) 4,843 38,463 75,074 120,594
Reserve additions (reductions)((2)) (Mboe) 1,769 306 101 (164)
NPV10 before income tax((3)) ($000's) 62,561 530,264 993,714 1,473,380
NPV10 after income tax((3)) ($000's) 51,770 256,623 450,624 654,913
Notes:
(1) Gross reserves are the Company's working interest share before
deduction of royalties.
(2) Reserve additions exclude period production. See "Advisories: Oil
and Gas Metrics".
(3) Based on the three Consultants' average December 31, 2022 forecast
prices and costs. See "Forecast prices and costs".
Year-Over-Year Reserves Data
December 31, 2022 December 31, 2021((1)) % Change
PDP gross reserves((2)) (Mboe) 4,843 3,648 33
1P gross reserves((2)) (Mboe) 38,463 38,731 (1)
2P gross reserves((2)) (Mboe) 75,074 75,547 (1)
3P gross reserves((2)) (Mboe) 120,594 121,332 (1)
PDP NPV10 before income tax((3)) ($000's) 62,561 51,737 21
1P NPV10 before income tax((3)) ($000's) 530,264 474,922 12
2P NPV10 before income tax((3)) ($000's) 993,714 881,753 13
3P NPV10 before income tax((3)) ($000's) 1,473,380 1,313,006 12
PDP NPV10 after income tax((3)) ($000's) 51,770 35,781 45
1P NPV10 after income tax((3)) ($000's) 256,623 210,036 22
2P NPV10 after income tax((3)) ($000's) 450,624 363,068 24
3P NPV10 after income tax((3)) ($000's) 654,913 535,613 22
Notes:
(1) Prior year reserve estimates per GLJ's independent reserves
evaluation dated March 4, 2022 with an effective date of December 31, 2021.
(2) Gross reserves are the Company's working interest share before
deduction of royalties.
(3) Based on the three Consultants' average December 31, 2022 forecast
prices and costs. See "Forecast prices and costs".
Summary of Crude Oil and Natural Gas Reserves by Product Type
Company Gross((1)) Reserves Light and Medium Crude Oil (Mbbl) Heavy Crude Oil Conventional Natural Gas (MMcf) Natural Gas Liquids (Mbbl)((2)) Total Oil Equivalent (Mboe)
(Mbbl)
Proved
Developed Producing 3,470 258 6,690 - 4,843
Developed Non-Producing 1,529 210 86,146 2,198 18,294
Undeveloped 4,979 - 53,841 1,373 15,326
Total 1P 9,977 468 146,677 3,571 38,463
Probable 8,711 416 144,850 3,342 36,611
Total 2P 18,688 884 291,527 6,913 75,074
Possible 5,902 332 205,894 4,972 45,520
Total 3P 24,590 1,216 497,421 11,885 120,594
Company Net((3)) Reserves Light and Medium Crude Oil (Mbbl) Heavy Crude Oil Conventional Natural Gas (MMcf) Natural Gas Liquids (Mbbl)((2)) Total Oil Equivalent (Mboe)
(Mbbl)
Proved
Developed Producing 2,091 230 5,854 - 3,296
Developed Non-Producing 965 187 75,378 1,923 15,638
Undeveloped 3,658 - 47,111 1,202 12,712
Total 1P 6,714 417 128,343 3,125 31,646
Probable 6,540 370 126,744 2,925 30,959
Total 2P 13,254 787 255,086 6,049 62,605
Possible 4,342 295 180,157 4,350 39,013
Total 3P 17,596 1,082 435,243 10,399 101,618
Notes:
(1) Gross reserves are the Company's working interest share before
deduction of royalties.
(2) NGLs are comprised of 100% condensate.
(3) Net reserves are the Company's working interest share after the
deduction of royalty obligations.
Summary of Net Present Values of Future Net Revenues((1))
Net Present Values Before Income Taxes ($000's) Undiscounted Discounted at 5% Discounted at 10% Discounted at 15% Discounted at 20%
Proved
Developed Producing 84,121 71,897 62,561 55,515 50,081
Developed Non-Producing 373,318 303,750 256,815 222,221 195,600
Undeveloped 349,815 268,045 210,888 169,542 138,744
Total 1P 807,254 643,692 530,264 447,278 384,425
Probable 929,042 634,858 463,450 354,683 281,289
Total 2P 1,736,296 1,278,550 993,714 810,961 665,714
Possible 1,162,845 706,880 479,666 350,833 270,402
Total 3P 2,899,141 1,985,430 1,473,380 1,152,794 936,116
Net Present Values After Income Taxes((2)) ($000's) Undiscounted Discounted at 5% Discounted at 10% Discounted at 15% Discounted at 20%
Proved
Developed Producing 59,691 56,612 51,770 47,274 43,432
Developed Non-Producing 159,207 134,649 117,278 104,014 93,519
Undeveloped 153,285 114,778 87,576 67,879 53,270
Total 1P 372,183 306,039 256,623 219,166 190,222
Probable 383,287 265,306 194,000 148,011 116,700
Total 2P 755,470 571,344 450,624 367,177 306,922
Possible 474,034 296,499 204,289 150,949 117,211
Total 3P 1,229,504 867,843 654,913 518,126 424,133
Notes:
(1) Based on the three Consultants' average December 31, 2022 forecast
prices and costs. See "Forecast prices and costs".
(2) The after-tax net present values prepared by GLJ in the evaluation
of the Company's crude oil and natural gas assets presented herein are
calculated by considering current Trinidad tax regulations and are based on
the Company's estimated tax pools and non-capital losses as of December 31,
2022. The values reflect the expected income tax burden on the assets on a
consolidated basis. Values do not represent an estimate of the value at the
business entity level or consider tax planning, which may be significantly
different. See "Advisories: Unaudited Financial Information".
Reconciliation of Gross Reserves by Product Type
The following table sets forth a reconciliation of the Company's total gross
proved, gross probable and total gross proved plus probable reserves as of
December 31, 2022 by product type against such reserves as at December 31,
2021 based on forecast prices and cost assumptions.
Reserves Category and Factors Light and Medium Crude Oil (Mbbl) Heavy Crude Oil Conventional Natural Gas (MMcf) Natural Gas Liquids (Mbbl)((1)) Total Oil Equivalent (Mboe)
(Mbbl)
Total Proved
December 31, 2021((2)) 10,174 471 147,093 3,571 38,731
Extensions and improved recovery((3)) 94 - - - 94
Technical revisions((4)) 169 23 111 - 211
Production (460) (27) (527) - (574)
December 31, 2022 9,977 468 146,677 3,571 38,463
Total Probable
December 31, 2021((2)) 8,908 458 144,642 3,342 36,815
Technical revisions((4)) (201) (42) 208 - (208)
Economic factors((5)) 3 - - - 3
December 31, 2022 8,711 416 144,850 3,342 36,611
Total Proved plus Probable
December 31, 2021((2)) 19,082 929 291,735 6,914 75,547
Extensions and improved recovery((3)) 94 - - - 94
Technical revisions((4)) (31) (18) 320 - 4
Economic factors((5)) 3 - - - 3
Production (460) (27) (527) - (574)
December 31, 2022 18,688 884 291,527 6,913 75,074
Notes:
(1) NGLs are comprised of 100 percent condensate.
(2) Prior year reserve estimates per GLJ's independent reserves
evaluation dated March 4, 2022 with an effective date of December 31, 2021.
(3) Reserve amounts for Infill Drilling, Extensions and Improved
Recovery are combined and reported as "Extensions and Improved Recovery".
(4) Technical revisions factor includes all changes in reserves due to
well performance and previously booked wells which were drilled in the year.
(5) Economic factors are the change in reserves exclusively due to
changes in pricing.
In comparison to December 31, 2021 on a proved plus probable reserve basis,
2022 light and medium crude oil reserves declined 394 Mbbl. Improved recovery
attributed to well recompletions was offset by 2022 annual production. 2022
proved plus probable heavy crude oil reserves decreased by 45 Mbbl from the
prior year due to downward technical revisions of 18 Mbbl associated with
reduced well performance at our Fyzabad block, combined with 27 Mbbl of
production. Proved plus probable conventional natural gas reserves decreased
by 208 MMcf relative to December 31, 2021, as an increase from reduced surface
loss estimates related to Coho was offset by 2022 production.
Future Development Costs
The following table provides information regarding the development costs
deducted in the estimation of the Company's future net revenue using forecast
prices and costs as included in the Reserves Report.
Year ($000's) PDP 1P 2P 3P
2023 190 23,648 26,938 26,938
2024 - 31,810 45,006 45,006
2025 - 8,841 38,067 38,067
2026 - 11,232 15,885 15,885
2027 - 11,213 15,470 15,470
Thereafter - - - -
Total undiscounted 190 86,744 141,366 141,366
Total discounted at 10% per year 181 72,435 116,145 116,145
The following table sets forth the changes in undiscounted future development
costs included in the Reserves Report against such costs in our December 31,
2021 reserves report prepared by GLJ dated March 4, 2022.
($000's unless otherwise stated) PDP 1P 2P 3P
(Decrease) / increase in forecasted capital costs (110) 3,450 5,685 5,685
Increase in forecasted wells - 4,757 4,720 4,720
Decrease in forecasted facility and pipeline costs - (1,477) (2,613) (2,613)
Total (decrease) / increase in FDC from 2021 (110) 6,730 7,792 7,792
Total (decrease) / increase in FDC from 2021 (%) (37) 8 6 6
Forecast Pricing and Costs
Forecast pricing and costs are prices and costs that are generally acceptable,
in the opinion of GLJ, as being a reasonable outlook of the future as of the
evaluation effective date. The forecast cost assumptions consider inflation
with respect to future operating and capital costs. The following table sets
forth the benchmark reference prices and inflation rates reflected in the
Reserves Data as of December 31, 2022. These price assumptions were provided
to the Company by GLJ and represented the average price forecast of the three
Consultants as of the date of the Reserves Report.
Consultants Average Price Forecast
Forecast Year Brent Spot Crude Oil((1)) Henry Hub Natural Gas((1)) Inflation Rate
($/bbl) ($/MMBtu) (% per year)
2023 84.67 4.74 0.0
2024 82.69 4.50 2.3
2025 81.03 4.31 2.0
2026 81.39 4.40 2.0
2027 82.65 4.49 2.0
2028 84.29 4.58 2.0
2029 85.98 4.67 2.0
2030 87.70 4.76 2.0
2031 89.46 4.86 2.0
2032 91.25 4.95 2.0
Thereafter +2.0% / year +2.0% / year 2.0
Note:
(1) This summary table identifies benchmark reference pricing schedules
that might apply to a reporting issuer. Product sales prices will reflect
these reference prices with further adjustments for specific marketing
arrangements, quality differentials and transportation to point of sale.
Capital Program Efficiency
2022 2022 - 2020 Total
1P 2P 1P 2P
Estimated capital expenditures((1),(4)) ($000's) 11,330 11,330 57,763 57,763
Change in FDC ($000's) 6,730 7,792 41,369 69,685
F&D costs((2),(4)) ($000's) 18,060 19,122 99,132 127,448
Reserve additions((2),(3)) (Mboe) 306 101 28,193 54,588
F&D costs per boe((2),(4)) ($/boe) 59.02 189.33 3.52 2.33
Estimated operating netback((1),(4)) ($/boe) 33.42 33.42 25.16 25.16
Recycle ratio((2),(4)) 0.6x 0.2x 7.2x 10.8x
Notes:
(1) Financial information is based on the Company's preliminary 2022
unaudited financial statements and is therefore subject to change. See
"Advisories: Unaudited Financial Information".
(2) See "Advisories: Reserves Advisory" and "Advisories: Oil and Gas
Metrics".
(3) Based on gross reserves, which are the Company's working interest
share before deduction of royalties.
(4) Non-GAAP financial measure. See "Advisories: Non-GAAP Financial
Measures ".
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:
Paul Baay, President and Chief Executive
Officer Tel: +1 (403) 750-4487
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)
Nick Hennis / Ben Brewerton
Tel: +44 (0) 203 727 1000
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 statements
relating to the Company's exploration plans and strategies; the sustainability
and low decline nature of our asset base; estimated crude oil, NGL and natural
gas reserves and the net present values of future net revenue therefrom; and
the forecasted future production, commodity prices, inflation rates and all
future costs used by GLJ in their evaluation.
In addition, information and statements relating to reserves are by their
nature forward-looking statements, as they involve the implied assessment,
based on certain estimates and assumptions, that the reserves described exist
in the quantities predicted or estimated, and can be profitably produced in
the future. The recovery and reserve estimates of Touchstone's reserves
provided herein are estimates only, and there is no guarantee that the
estimated reserves will be recovered. Consequently, actual results may differ
materially from those anticipated in the forward-looking statements.
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 2021
Annual Information Form dated March 25, 2022 which is available under the
Company's profile on SEDAR (www.sedar.com (http://www.sedar.com/) ) 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.
Reserves Advisory
The disclosure in this announcement summarizes certain information contained
in the Reserves Report but represents only a portion of the disclosure
required under NI 51-101. Full disclosure with respect to the Company's
reserves as at December 31, 2022 will be contained in the Company's Annual
Information Form for the year ended December 31, 2022 which will be filed on
SEDAR on or before March 31, 2023.
The recovery and reserve estimates of crude oil, NGL and natural gas reserves
provided herein are estimates only, and there is no guarantee that the
estimated reserves will be recovered. Actual reserves may eventually prove to
be greater than or less than the estimates provided herein. This announcement
summarizes the crude oil, NGL and natural gas reserves of the Company and the
net present values of future net revenue for such reserves using forecast
prices and costs as at December 31, 2022 prior to provision for interest and
finance costs, general and administration expenses, and the impact of any
financial derivatives. It should not be assumed that the present worth of
estimated future net revenues presented in the tables above represent the fair
market value of the reserves. There is no assurance that the forecast prices
and costs assumptions will be attained, and variances could be material.
"Proved Developed Producing Reserves" are those reserves that are expected to
be recovered from completion intervals open at the time of the
estimate. These reserves may be currently producing, or if shut-in, they must
have previously been on production, and the date of resumption of production
must be known with reasonable certainty.
"Proved" reserves are those reserves that can be estimated with a high degree
of certainty to be recoverable. It is likely that the actual remaining
quantities recovered will exceed the estimated proved reserves.
"Probable" reserves are those additional reserves that are less certain to be
recovered than proved reserves. It is equally likely that the actual
remaining quantities recovered will be greater or less than the sum of the
estimated proved plus probable reserves.
"Possible" reserves are those additional reserves that are less certain to be
recovered than probable reserves. There is a 10% probability that the
quantities actually recovered will equal or exceed the sum of proved plus
probable plus possible reserves. It is unlikely that the actual remaining
quantities recovered will exceed the sum of the estimated proved plus probable
plus possible reserves.
In the Reserves Report, GLJ forecasted reserve volumes and future cash flows
based upon current and historical well performance through to the economic
production limit of individual wells. Notwithstanding established precedence
and contractual options for the continuation and renewal of the Company's
existing licence, sub-licence and marketing agreements, in many cases the
forecasted economic limit of individual wells is beyond the current term of
the relevant agreements. There is no certainty as to any renewal of the
Company's existing exploration, production, and marketing arrangements.
Oil and 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.
Oil and Gas Metrics
This announcement contains several oil and gas metrics that are commonly used
in the oil and gas industry such as reserves additions, reserve life index,
finding and development costs, and recycle ratio. These metrics have been
prepared by Management and do not have standardized meanings or standardized
methods of calculation, and therefore such measures may not be comparable to
similar measures presented by other companies and should not be used to make
comparisons. Such metrics have been included herein to provide readers with
additional measures to evaluate the Company's performance; however, such
measures are not reliable indicators of the future performance of the Company,
and future performance may not compare to the performance in prior periods,
and therefore such metrics should not be unduly relied upon. The Company uses
these oil and gas metrics for its own performance measurements and to provide
shareholders with measures to compare the Company's operations over time.
Readers are cautioned that the information provided by these metrics, or that
can be derived from the metrics presented in this announcement, should not be
relied upon for investment purposes.
Reserve additions are calculated as the change in reserves from the beginning
to the end of the applicable period excluding period production. Management
uses this measure to determine the relative change of its reserves base over a
period of time.
RLI is calculated by dividing the applicable reserves by forecasted 2023
production volumes derived from the Reserve Report.
F&D costs represent the costs of exploration and development incurred
(refer to "Advisories: Non-GAAP Financial Measures"). Specifically, F&D is
calculated as the sum of exploration and development capital expenditures
incurred in the period and the change in future development costs required to
develop those reserves. The Company's annual audit of its December 31, 2022
consolidated financial statements is not complete. Accordingly, unaudited
exploration and development capital expenditure amounts used in the
calculation of F&D costs are Management's estimates and are subject to
change. F&D costs per barrel is determined by dividing current period
reserve additions to the corresponding period's F&D costs. Readers are
cautioned that the aggregate of capital expenditures incurred in the most
recent financial year and the change during that year in estimated FDC
generally will not reflect total F&D costs related to reserves additions
for that year. Management uses F&D costs as a measure of its ability to
execute its capital program, the success in doing so, and of the Company's
asset quality.
Recycle ratio is a measure used by Management to evaluate the effectiveness of
its capital reinvestment program and is calculated by dividing the annual
F&D costs per barrel to operating netback per barrel prior to realized
gains or losses on commodity derivative contracts in the corresponding period
(refer to "Advisories: Non-GAAP Financial Measures"). The Company's annual
audit of its December 31, 2022 consolidated financial statements is not
complete. Accordingly, unaudited operating netbacks used in calculations of
recycle ratios are Management's estimates and are subject to change. The
recycle ratio compares netbacks from existing reserves to the cost of finding
new reserves and may not accurately indicate the investment success unless the
replacement of reserves are of equivalent quality as the produced reserves.
Unaudited Financial Information
Certain annual 2022 financial information disclosed herein including capital
expenditures and operating netback are based on unaudited estimated results
and are subject to the same limitations as discussed in the forward-looking
statements advisory disclosed herein. These estimated results are subject to
change upon completion of the Company's audited financial statements for the
year ended December 31, 2022, and changes could be material. Touchstone
anticipates filing its audited consolidated financial statements and related
management's discussion and analysis for the year ended December 31, 2022 on
SEDAR on March 24, 2023.
Supplemental Information Regarding Product Types
This announcement includes references to fourth quarter and annual 2022
production. The following table provides production by product type
composition as defined by NI 51-101.
Period Light and Medium Crude Oil (bbls/d) Heavy Crude Oil Conventional Natural Gas (Mcf/d) Natural Gas Liquids (bbls/d) Total Oil Equivalent (boe/d)
(bbls/d)
Fourth quarter of 2022 1,207 67 5,729 - 2,229
Annual 2022 1,265 75 1,444 - 1,581
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. Non-GAAP financial measures presented
herein include operating netback, capital expenditures, F&D costs and
recycle ratio.
The Company 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. Operating netback per boe is a non-GAAP ratio calculated by dividing
the operating netback by total production volumes for the period. The
following table presents the computation of estimated operating netback
disclosed herein, using unaudited financial information for the year ended
December 31, 2022 in both periods presented.
($000's unless otherwise stated) Year ended December 31, 2022 Three years ended December 31, 2022
Petroleum and natural gas sales 42,944 92,104
Royalties (14,641) (29,380)
Operating expenses (9,022) (23,006)
Estimated operating netback 19,281 39,718
Production (boe) 567,987 1,578,775
Estimated operating netback ($/boe) 33.42 25.16
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 flows used in investing
activities. Touchstone considers capital expenditures to be a useful measure
of its investment in its existing asset base.
The following table presents the computation of estimated capital expenditures
disclosed herein, using unaudited financial information for the year ended
December 31, 2022 in both periods presented.
($000's) Year ended December 31, 2022 Three years ended December 31, 2022
Exploration and evaluation asset expenditures 9,788 47,755
Property, plant and equipment expenditures 1,542 10,008
Estimated capital expenditures 11,330 57,763
Refer to "Advisories: Oil and Gas Metrics" regarding F&D costs and recycle
ratio.
Abbreviations
Mbbl thousand barrels
MMcf million cubic feet
MMBtu million British Thermal Units
NGL(s) natural gas liquid(s)
boe barrels of oil equivalent
boe/d barrels of oil equivalent per day
Mboe thousand barrels of oil equivalent
Competent Persons Statement
In accordance with the AIM Rules for Companies, the technical information
contained in this announcement has been reviewed and approved by James Shipka,
Chief Operating Officer of Touchstone Exploration Inc. Mr. Shipka is a
qualified person as defined in the London Stock Exchange's Guidance Note for
Mining and Oil and Gas Companies and is a Fellow of the Geological Society of
London (BGS) as well as a member of the Canadian Society of Petroleum
Geologists and the Geological Society of Trinidad and Tobago. Mr. Shipka has a
Bachelor of Science in Geology from the University of Calgary and has over 30
years of oil and gas exploration and development experience.
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