REG - Touchstone Explrtn. - 2023 YEAR-END RESERVES
01/03/2024 07:00
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RNS Number : 2252F Touchstone Exploration Inc. 01 March 2024
2023 YEAR-END RESERVES
CALGARY, ALBERTA (March 1, 2024) - Touchstone Exploration Inc. ("Touchstone",
"we", "our" or the "Company") (TSX, LSE: TXP) announces 2023 year-end
reserves.
Touchstone's independent reserves evaluation was prepared by GLJ Ltd. ("GLJ")
with an effective date of December 31, 2023 (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. 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, 2023 and is
subject to change. Readers are further cautioned to read the applicable
advisories contained herein.
Touchstone's 2023 year-end reserves reflect the initial transition of our
Cascadura production base into the PDP reserves category as we brought
onstream the first two Cascadura wells, Cascadura-1ST1 and Cascadura Deep-1.
In addition to successfully constructing and commissioning the Cascadura
natural gas and liquids facility in 2023, we also prepared for our Cascadura C
delineation and development program.
In 2023 we achieved initial production from our Cascadura field which produced
net volumes of 37.4 MMcf/d of natural gas and 622 bbls/d of natural gas
liquids in the fourth quarter of 2023, contributing to corporate average
quarterly net production volumes of 8,504 boe/d and average 2023 annual net
production volumes of 3,981 boe/d.
2023 Year-end Reserves Report Highlights
· Relative to year-end 2022 and after 2023 production, we increased
gross PDP reserves by 180 percent to 13,547 Mboe, decreased gross 1P reserves
by 12 percent to 33,696 Mboe, decreased gross 2P reserves by 10 percent to
67,379 Mboe and decreased gross 3P reserves by 10 percent to 108,859 Mboe in
2023.
· PDP reserves replaced 2023 annual production by 699 percent,
reflecting Cascadura-1ST1 and Cascadura Deep-1 natural gas and associated
liquids volumes that were brought online in 2023.
· With the addition of Cascadura property reserves, PDP reserves
represent 40 percent of 1P reserves, reflecting an attractive ratio of base
production to low risk proved undeveloped ("PUD") drilling targets.
· Reductions in our 1P, 2P, and 3P year-end reserves balances from
2022 reflected the removal of eight PUD locations on our non-core legacy crude
oil blocks and Royston, technical revisions to the natural gas liquids yields
at Cascadura, increased annual production volumes in 2023 and a limited 2023
development capital program.
· Our net present value of future net revenues discounted at 10
percent ("NPV10") on a before tax PDP basis increased by 142 percent to $151.4
million, decreased by 30 percent to $372.5 million on a 1P basis, decreased by
27 percent to $730.1 million on a 2P basis, and decreased by 29 percent to
$1.05 billion on a 3P basis from the prior year.
· Realized after tax PDP NPV10 of $99.8 million representing an
increase of 93 percent from the prior year, after tax 1P NPV10 decreased by 25
percent from year-end 2022 to $191.4 million, after tax 2P NPV10 decreased by
24 percent from the prior year to $342.5 million and after tax 3P NPV10
decreased by 26 percent from 2022 to $482.6 million.
· We continue to maintain a long producing reserve life index of 7.9
years 1P and 14.4 years 2P, reflecting the low decline nature of our asset
base.
· The Cascadura-2 well was drilled subsequent to the effective date
of the Reserves Report and will be reflected in our future reserve
evaluations.
2023 Year-end Reserves Report Summary
Touchstone's year-end light and medium crude oil, heavy crude oil,
conventional natural gas and natural gas liquid 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 ("COGE 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+
(www.sedarplus.ca (http://www.sedarplus.ca/) ) on or before March 30, 2024.
The reserve estimates set forth below are based upon GLJ's Reserves Report
dated February 29, 2024 with an effective date of December 31, 2023. 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, 2023. Please refer to "Advisories: Reserves Disclosure" for
further information. In certain tables set forth below, the columns may not
add due to rounding.
2023 Reserves Summary by Category
PDP 1P 2P 3P
Total gross reserves((1)) (Mboe) 13,547 33,696 67,379 108,859
Reserve additions (reductions)((2)) (Mboe) 10,158 (3,313) (6,241) (10,281)
NPV10 before income tax((3)) ($000's) 151,433 372,547 730,065 1,052,803
NPV10 after income tax((3)) ($000's) 99,791 191,466 342,527 482,575
Notes:
(1) Gross reserves are the Company's working interest share before
deduction of royalties.
(2) Reserve additions (reductions) exclude 2023 annual production. See
"Advisories: Oil and Gas Metrics".
(3) Based on the Consultants' average December 31, 2023 forecast prices
and costs. See "Forecast prices and costs" herein.
Year-Over-Year Reserves Data
December 31, 2023 December 31, 2022((1)) % Change
PDP gross reserves((2)) (Mboe) 13,547 4,843 180
1P gross reserves((2)) (Mboe) 33,696 38,463 (12)
2P gross reserves((2)) (Mboe) 67,379 75,074 (10)
3P gross reserves((2)) (Mboe) 108,859 120,594 (10)
PDP NPV10 before income tax((3)) ($000's) 151,433 62,561 142
1P NPV10 before income tax((3)) ($000's) 372,547 530,264 (30)
2P NPV10 before income tax((3)) ($000's) 730,065 993,714 (27)
3P NPV10 before income tax((3)) ($000's) 1,052,803 1,473,380 (29)
PDP NPV10 after income tax((3)) ($000's) 99,791 51,770 93
1P NPV10 after income tax((3)) ($000's) 191,446 256,623 (25)
2P NPV10 after income tax((3)) ($000's) 342,527 450,624 (24)
3P NPV10 after income tax((3)) ($000's) 482,575 654,913 (26)
Notes:
(1) Prior year reserve estimates per GLJ's independent reserves
evaluation dated March 3, 2023 with an effective date of December 31, 2022.
(2) Gross reserves are the Company's working interest share before
deduction of royalties.
(3) Based on the three Consultants' average December 31, 2023 forecast
prices and costs. See "Forecast prices and costs" herein.
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 3,360 224 56,296 580 13,547
Developed non-producing 1,331 10 4,020 37 2,048
Undeveloped 3,846 0 80,427 849 18,100
Total 1P 8,538 234 140,743 1,467 33,696
Probable 8,084 58 145,180 1,344 33,683
Total 2P 16,622 292 285,923 2,811 67,379
Possible 5,141 87 205,911 1,933 41,480
Total 3P 21,763 379 491,834 4,744 108,859
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 2,022 199 49,259 508 10,939
Developed non-producing 856 9 3,518 32 1,484
Undeveloped 2,786 0 70,374 743 15,258
Total 1P 5,664 209 123,150 1,283 27,681
Probable 6,056 51 127,032 1,176 28,456
Total 2P 11,720 260 250,183 2,460 56,137
Possible 3,780 78 180,171 1,691 35,578
Total 3P 15,500 338 430,354 4,151 91,715
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
Net Present Values Before Income Taxes((1)) ($000's) Undiscounted Discounted at 5% Discounted at 10% Discounted at 15% Discounted at 20%
Proved
Developed producing 203,893 173,513 151,433 134,704 121,630
Developed non-producing 41,188 32,603 27,853 24,538 21,988
Undeveloped 316,080 243,189 193,262 157,745 131,632
Total 1P 561,162 449,304 372,547 316,987 275,251
Probable 708,321 487,694 357,518 274,398 218,055
Total 2P 1,269,483 936,998 730,065 591,386 493,306
Possible 920,790 504,989 322,738 228,824 173,899
Total 3P 2,190,273 1,441,987 1,052,803 820,210 667,205
Note:
(1) Based on the three Consultants' average December 31, 2023 forecast
prices and costs. See "Forecast prices and costs" herein.
Net Present Values After Income Taxes((1)(2)) ($000's) Undiscounted Discounted at 5% Discounted at 10% Discounted at 15% Discounted at 20%
Proved
Developed producing 118,430 109,202 99,791 91,684 84,890
Developed non-producing 14,408 13,126 11,716 10,546 9,583
Undeveloped 137,087 103,315 79,938 63,308 51,161
Total 1P 269,925 225,643 191,446 165,539 145,633
Probable 296,550 207,139 151,082 114,601 89,695
Total 2P 566,475 432,782 342,527 280,140 235,328
Possible 386,142 216,473 140,048 100,088 76,482
Total 3P 952,617 649,255 482,575 380,228 311,810
Notes:
(1) Based on the three Consultants' average December 31, 2023 forecast
prices and costs. See "Forecast prices and costs" herein.
(2) The after-tax net present values prepared by GLJ in the evaluation
of the Company's petroleum 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,
2023. 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 gross proved plus probable reserves as of December
31, 2023 by product type against such reserves as at December 31, 2022 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, 2022((2)) 9,977 468 146,677 3,571 38,463
Extensions and improved recovery((3)) 327 - - - 327
Technical revisions((4)) (1,359) (209) (242) (2,030) (3,638)
Economic factors((5)) (2) - - - (2)
Production (406) (25) (5,692) (74) (1,454)
December 31, 2023 8,538 234 140,743 1,467 33,696
Total Probable
December 31, 2022((2)) 8,711 416 144,850 3,342 36,611
Extensions and improved recovery((3)) 82 - - - 82
Technical revisions((4)) (702) (359) 330 (1,998) (3,003)
Economic factors((5)) (7) - - - (7)
Production - - - - -
December 31, 2023 8,084 58 145,180 1,344 33,683
Total Proved plus Probable
December 31, 2022((2)) 18,688 884 291,527 6,913 75,074
Extensions and improved recovery((3)) 409 - - - 409
Technical revisions((4)) (2,061) (567) 87 (4,028) (6,641)
Economic factors((5)) (9) - - - (9)
Production (406) (25) (5,692) (74) (1,454)
December 31, 2023 16,622 292 285,923 2,811 67,379
Notes:
(1) NGLs are comprised of 100 percent condensate.
(2) Prior year reserve estimates per GLJ's independent reserves
evaluation dated March 3, 2023 with an effective date of December 31, 2022.
(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.
December 31, 2023 gross proved plus probable reserves were 67,379 Mboe,
representing a 7,695 Mboe or 10 percent decrease from the 75,074 Mboe reported
in the prior year. Relative to December 31, 2022, light and medium crude oil
reserves decreased by 2,006 Mbbl. The annual decline predominately reflected a
combination of annual production, the removal of two proved undeveloped
drilling locations at Royston and six proved undeveloped drilling locations at
our CO-2 field, partially offset by two new proved undeveloped drilling
locations at our CO-1 property and improved recovery from well recompletions
at our WD-4 field. Proved plus probable heavy crude oil reserves decreased by
592 Mbbl from the prior year, reflecting the removal of all future
recompletion activity at our Fyzabad property and 2023 production. Proved plus
probable conventional natural gas reserves decreased by 5,604 MMcf relative to
December 31, 2022, mainly attributed to annual Cascadura and Coho field
production. Proved plus probable natural gas liquids reserves decreased by
4,102 Mbbl in comparison to December 31, 2022, reflecting a reduction in
forecasted Cascadura natural gas liquids yields and 2023 annual 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
2024 50 19,270 28,260 28,260
2025 - 12,143 24,786 24,786
2026 - 21,505 28,236 28,236
2027 - 11,493 40,857 40,857
2028 - 12,995 18,537 18,537
Thereafter - - - -
Total undiscounted 50 77,406 140,676 140,676
Total discounted at 10% per year 48 62,540 112,018 112,018
The following table sets forth the changes in undiscounted future development
costs ("FDC") included in the Reserves Report against such costs in our
December 31, 2022 reserves report prepared by GLJ dated March 3, 2023.
($000's unless otherwise stated) PDP 1P 2P 3P
(Decrease) increase in forecasted well costs (140) 11,692 19,414 19,414
Decrease in forecasted well locations - (15,630) (15,481) (15,481)
Decrease in forecasted facility and pipeline costs - (5,400) (4,623) (4,623)
Total decrease in FDC from 2022 (140) (9,338) (690) (690)
Total decrease in FDC from 2022 (%) (74) (11) - -
Forecast Pricing and Costs
Forecast pricing and costs are prices and costs that are generally acceptable,
in the opinion of GLJ, as being a reasonable outlook of the future as of the
evaluation effective date. The forecast cost assumptions consider inflation
with respect to future operating and capital costs. The following table sets
forth the benchmark reference commodity prices and inflation rates reflected
in the Reserves Data as of December 31, 2023. These price assumptions were
provided to the Company by GLJ and represented the average price forecast of
the three Consultants as of the date of the Reserves Report.
Consultants Average Price Forecast
Forecast Year Brent Spot Crude Oil((1)) Henry Hub Natural Gas((1)) Inflation Rate
($/bbl) ($/MMBtu) (% per year)
2024 78.00 2.75 0.0
2025 79.18 3.64 2.0
2026 80.36 4.02 2.0
2027 81.79 4.10 2.0
2028 83.41 4.18 2.0
2029 85.09 4.27 2.0
2030 86.79 4.35 2.0
2031 88.52 4.44 2.0
2032 90.29 4.53 2.0
2033 92.10 4.62 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
2023 2023 - 2019 Total
1P 2P 1P 2P
Estimated capital expenditures((1)(2)) ($000's) 18,949 18,949 88,213 88,213
Change in FDC ($000's) (9,338) (690) 31,407 72,034
Finding and development ("F&D") costs((2)(3)) ($000's) 9,611 18,259 119,620 160,247
Reserve (reductions) additions((3)(4)) (Mboe) (3,313) (6,241) 26,161 51,791
F&D costs per boe((2)(3)) ($/boe) n/a n/a 4.57 3.09
Estimated operating netback((1)(2)) ($/boe) 18.04 18.04 22.62 22.62
Recycle ratio((2)(3)) n/a n/a 4.9x 7.3x
Notes:
(1) Financial information is based on the Company's preliminary 2023
unaudited financial statements and is therefore subject to change. See
"Advisories: Unaudited Financial Information".
(2) Non-GAAP financial measure. See "Advisories: Non-GAAP Financial
Measures".
(3) See "Advisories: Reserves Disclosure" and "Advisories: Oil and Gas
Metrics".
(4) Based on gross reserves, which are the Company's working interest
share before deduction of royalties.
January 2024 Sales Volumes and Realized Prices
In January 2024, we achieved average net sales volumes of 7,436 boe/d as
follows:
· Cascadura contributed net sales volumes of 5,799 boe/d consisting
of:
- net natural gas sales volumes of 32.8 MMcf/d or 5,460 boe/d with a
realized price of $2.47 per Mcf; and
- net natural gas liquids volumes of 339 bbls/d with an average
realized price of $68.15 per barrel;
· Coho field net average natural gas sales volumes were 2.8 MMcf/d
or 467 boe/d at a realized price of $2.28 per Mcf (excluding third party
processing fees); and
· average net daily crude oil sales volumes were 1,170 bbls/d per
day with an average realized price of $68.15 per barrel.
January 2024 production decreased by approximately 11 percent from December
2023, attributed to natural declines and the Cascadura Deep-1 well being shut
in for four days in the month.
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. Tel: +1 (403) 750-4487
Paul Baay, President and Chief Executive Officer
James Shipka, Chief Operating Officer
Brian Hollingshead, VP Engineering and Business Development
Shore Capital (Nominated Advisor and Joint Broker) Tel: +44 (0) 207 408 4090
Daniel Bush / Toby Gibbs / Iain Sexton
Canaccord Genuity (Joint Broker) Tel: +44 (0) 207 523 8000
Adam James / Ana Ercegovic
FTI Consulting (Financial PR) Tel: +44 (0) 203 727 1000
Nick Hennis / Ben Brewerton Email: touchstone@fticonsulting.com (mailto:touchstone@fticonsulting.com)
Advisories
Forward-Looking Statements
The information provided in this announcement contains certain forward-looking
statements and information (collectively, "forward-looking statements") within
the meaning of applicable securities laws. Such forward-looking statements
include, without limitation, forecasts, estimates, expectations and objectives
for future operations that are subject to assumptions, risks and
uncertainties, many of which are beyond the control of the Company.
Forward-looking statements are statements that are not historical facts and
are generally, but not always, identified by the words "expect", "plan",
"anticipate", "believe", "intend", "maintain", "continue to", "pursue",
"design", "result in", "sustain" "estimate", "potential", "growth",
"near-term", "long-term", "forecast", "contingent" and similar expressions, or
are events or conditions that "will", "would", "may", "could" or "should"
occur or be achieved. The forward-looking statements contained in this
announcement speak only as of the date hereof and are expressly qualified by
this cautionary statement.
Specifically, this announcement includes, but is not limited to,
forward-looking statements relating to: the Company's business plans,
strategies, priorities and development plans; 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. The Company's actual decisions,
activities, results, performance, or achievement could differ materially from
those expressed in, or implied by, such forward-looking statements and
accordingly, no assurances can be given that any of the events anticipated by
the forward-looking statements will transpire or occur or, if any of them do,
what benefits that Touchstone will derive from them.
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 (see "Advisories:
Reserves Disclosure").
Although the Company believes that the expectations and assumptions on which
the forward-looking statements are based are reasonable, undue reliance should
not be placed on the forward-looking statements because the Company can give
no assurance that they will prove to be correct. Since forward-looking
statements address future events and conditions, by their very nature they
involve inherent risks and uncertainties. Actual results could differ
materially from those currently anticipated due to a number of factors and
risks. Certain of these risks are set out in more detail in the Company's 2022
Annual Information Form dated March 23, 2023 which is available under the
Company's profile on SEDAR+ (www.sedarplus.ca (http://www.sedarplus.ca/) ) and
on the Company's website (www.touchstoneexploration.com
(http://www.touchstoneexploration.com/) ). The forward-looking statements
contained in this announcement are made as of the date hereof, and except as
may be required by applicable securities laws, the Company assumes no
obligation or intent to update publicly or revise any forward-looking
statements made herein or otherwise, whether as a result of new information,
future events or otherwise.
This announcement contains inside information for the purposes of Article 7 of
the UK version of the Market Abuse Regulation (EU) No.596/2014, which forms
part of UK law by virtue of the European Union (Withdrawal) Act 2018.
Reserves Disclosure
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, 2023 will be contained in the Company's Annual
Information Form for the year ended December 31, 2023 which will be filed on
SEDAR+ (www.sedarplus.ca (http://www.sedarplus.ca/) ) on or before March 30,
2024. All reserves values, future net revenue and ancillary information
contained in this announcement are derived from the Reserves Report unless
otherwise noted. Unless otherwise noted, reserve references in this
announcement are Company "gross reserves". Company gross reserves are the
Company's total working interest reserves before the deduction of any
royalties payable by the Company. Estimates of reserves and future net revenue
for individual properties may not reflect the same level of confidence as
estimates of reserves and future net revenue for all properties, due to the
effect of aggregation. All reserves assigned in the Reserves Report are
located onshore in the Republic of Trinidad and Tobago and presented on a
consolidated basis.
The recovery and reserve estimates of Touchstone's 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. There are
numerous uncertainties inherent in estimating quantities of petroleum and
natural gas reserves and the future cash flows attributed to such reserves.
The reserve and associated cash flow information set forth herein are
estimates only. 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, 2023
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 estimates of future net revenues presented herein 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.
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.
"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 percent 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.
Certain terms used in this announcement but not defined are defined in NI
51-101, CSA Staff Notice 51-324 - Revised Glossary to NI 51-101 Standards of
Disclosure for Oil and Gas Activities ("CSA 51-324") and/or the COGE Handbook
and, unless the context otherwise requires, shall have the same meanings
herein as in NI 51-101, CSA 51-324 and the COGE Handbook, as the case may be.
Oil and Gas Measures
Where applicable, natural gas has been converted to barrels of oil equivalent
(boe) based on six thousand cubic feet (Mcf) to one barrel (bbl) of oil. The
barrel of oil equivalent rate is based on an energy equivalent conversion
method primarily applicable at the burner tip and given that the value ratio
based on the current price of crude oil as compared to natural gas is
significantly different than the energy equivalency of the 6:1 conversion
ratio, utilizing the 6:1 conversion ratio may be misleading as an indication
of value. This conversion factor is an industry accepted norm and is not based
on either energy content or prices.
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 (reductions), reserve
life index ("RLI"), 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 (reductions) 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 2024
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
costs are 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, 2023 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, 2023 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 2023 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, 2023, 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, 2023 on
SEDAR+ (www.sedarplus.ca (http://www.sedarplus.ca/) ) on March 21, 2024.
Supplemental Information Regarding Product Types
This announcement includes references to fourth quarter and annual 2023
average daily 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 2023 1,068 65 40,491 622 8,504
Annual 2023 1,113 68 15,593 201 3,981
In this announcement, any references to "crude oil" refer to "light crude oil
and medium crude oil" and "heavy crude oil" combined product types; references
to "NGLs" refer to condensate; and references to "natural gas" refer to the
"conventional natural gas" product type, all as defined in NI 51-101. Any
references to "crude oil and liquids" herein include crude oil and NGLs.
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. 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. The following table presents the computation of estimated operating
netback disclosed herein, using unaudited financial information for the year
ended December 31, 2023 in both periods presented.
($000's unless otherwise stated) Year ended December 31, 2023 Five years ended December 31, 2023
Petroleum and natural gas sales 48,098 178,856
Less: royalties (12,173) (52,539)
Petroleum and natural gas revenue, net of royalties 35,925 126,317
Less: operating expenses (9,705) (42,647)
Estimated operating netback 26,220 83,670
Production (boe) 1,453,073 3,698,125
Estimated operating netback ($/boe) 18.04 22.62
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, 2023 in both
periods presented.
($000's) Year ended December 31, 2023 Five years ended December 31, 2023
Exploration and evaluation asset expenditures 17,638 75,506
Property, plant and equipment expenditures 1,311 12,707
Estimated capital expenditures 18,949 88,213
Refer to "Advisories: Oil and Gas Metrics" regarding F&D costs and recycle
ratio.
Abbreviations
bbl(s) barrel(s)
bbls/d barrels per day
Mbbl thousand barrels
Mcf thousand cubic feet
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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