REG - Touchstone Explrtn. - Execution of Asset Exchange Agreement

Touchstone ExplorationAnnouncement

09/01/2023 07:00

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RNS Number : 0111M  Touchstone Exploration Inc.  09 January 2023

TOUCHSTONE EXPLORATION INC.

 

EXECUTION OF ASSET EXCHANGE AGREEMENT

 

CALGARY, ALBERTA (January 9, 2023) - Touchstone Exploration Inc.
("Touchstone", "we", "our", "us" or the "Company") (TSX, LSE: TXP) announces
that its indirect wholly owned Trinidadian subsidiary, Primera Oil and Gas
Limited, has entered into an Asset Exchange Agreement (the "Agreement") for
the exchange of certain onshore Trinidad assets with Lease Operators Limited,
a privately held Trinidadian entity (the "Transaction").

 

Pursuant to the Agreement, we have agreed to transfer our Fyzabad, San
Francique and Barrackpore blocks, which currently produce aggregate crude oil
volumes of approximately 130 barrels per day ("bbls/d"), in exchange for the
Rio Claro, Balata East and Balata East Deep Horizons ("Balata Deep") blocks,
which offset our Ortoire block and currently produce aggregate crude oil
volumes of approximately 35 bbls/d.

 

Transaction Highlights

·     The Transaction contemplates swapping producing legacy crude oil
fields which we consider non-core due to limited scalability in exchange for
highly prospective exploration and development acreage contiguous to our
Ortoire block.

·     Acquisition of approximately 28,000 working interest acres directly
offsetting our Ortoire block, allowing us to significantly expand development
prospects adjacent to our Cascadura and Royston discoveries.

·   The Balata East block has a liquids facility which may potentially be
used as a delivery point for future liquids volumes produced at Cascadura and
Royston.

·     The Transaction also provides Touchstone access to an 18-kilometre
oil pipeline that transects our Ortoire block.

·     Future potential production from the Rio Claro block is not subject
to our current Ortoire block natural gas sales agreement with The National Gas
Company of Trinidad and Tobago Limited, with any potential discoveries subject
to separate product marketing arrangements.

Transaction Details

 

Under the Agreement, Touchstone has agreed to swap its operated 100% working
interests in the Fyzabad, San Francique and Barrackpore producing blocks for
the counterparty's working interest in the Rio Claro, Balata East and Balata
Deep blocks for no cash consideration with the swap becoming effective upon
closing. The Agreement remains subject to certain closing conditions,
including receipt of applicable regulatory approvals and an extension of the
Rio Claro Exploration and Production (Public Petroleum Rights) Licence (the
"Rio Claro Licence"), and is expected to close prior to the end of 2023.

 

The 100% working interest Balata East block is governed by an Enhanced
Production Service Contract with Heritage Petroleum Company Limited
("Heritage") in the shallow horizon that is effective through June 30, 2030.
The Balata Deep asset is a 100% working interest in the area identified in the
Balata East block from a depth of 5,000 feet downwards with no limit. The
Balata Deep block is governed by an Exploration and Production (Public
Petroleum Rights) Licence with the Trinidad and Tobago Ministry of Energy and
Energy Industries ("MEEI"), where the initial exploration period expires
August 13, 2025. The Rio Claro Licence with the MEEI is currently expired, and
an extension through August 2025 is a condition precedent for closing. The Rio
Claro Licence is for an 80% operated working interest, with Heritage holding
the remaining 20% working interest.

 

As at and during the year ended December 31, 2021, Touchstone's Fyzabad, San
Francique and Barrackpore blocks generated estimated aggregate operating
netbacks of $1,453,000, with aggregate net liabilities of $89,000.

As at and during the year ended December 31, 2021, the Rio Claro, Balata East
and Balata Deep blocks recorded estimated aggregate operating netbacks of
negative $97,000 (unaudited) and had estimated net assets of $683,000
(unaudited).

 

Paul Baay, President and Chief Executive Officer, commented:

 

"The proposed exchange of assets further high-grades our portfolio as we focus
on the Herrera turbidite fairway directly offsetting our Ortoire block in
close proximity to our Cascadura discovery. With the technical data that we
have reviewed on the three licences, we have identified numerous drilling
opportunities that can be incorporated into our infrastructure currently being
constructed. A revised map reflecting the proposed Transaction can be found in
our updated corporate presentation available on our website."

 

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.

Mr. Paul Baay, President and Chief Executive Officer
          Tel: +1 (403) 750-4487

Mr. Scott Budau, Chief Financial 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

 

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.

 

Forward-looking statements in this announcement may include, but are not
limited to, statements relating to the anticipated closing of the Transaction
and the timing thereof, anticipated benefits of the Transaction, Touchstone's
development and exploration plans with respect to such assets and the
anticipated future receipt and timing of regulatory approvals including the
required licence extension with respect to the Transaction. 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.

 

Non-GAAP Financial Measures

 

The Company discloses operating netback herein, which does not have a
standardized meaning as prescribed by International Financial Reporting
Standards ("IFRS" or "GAAP") and therefore is considered a non-GAAP financial
measure. Operating netback is commonly used in the oil and gas industry and by
the Company as a key performance indicator of operating 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. This measure may not be comparable to similar measures presented by
other issuers. Readers are cautioned that operating netback 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.

 

Operating netback is calculated by deducting royalties and operating expenses
from petroleum sales. Operating netback is presented herein prior to realized
gains or losses on commodity derivative contracts. The following table
presents the computation of Touchstone's estimated operating netback relating
to its disposed properties disclosed herein.

 

 ($000's)                                Year ended December 31, 2021

 Petroleum sales                         3,609
 Royalties                               (434)
 Estimated operating expenses            (1,722)
 Estimated operating netback             1,453

 

The following table presents the computation of the net liabilities relating
to Touchstone's disposed properties disclosed herein.

 

 ($000's)                                 December 31, 2021

 Property, plant and equipment            5,724
 Abandonment fund                         72
 Assets                                   5,796

 Decommissioning obligations              (5,885)
 Liabilities                              (5,885)

 Net liabilities                          (89)

 

The unaudited operating netback and net asset value related to the acquired
properties disclosed herein was estimated by the counterparty.

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