REG - Touchstone Explrtn. - First Quarter 2025 Financial and Operating Results

Touchstone ExplorationAnnouncement

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RNS Number : 6097I  Touchstone Exploration Inc.  14 May 2025

FIRST QUARTER 2025 FINANCIAL AND OPERATING RESULTS

 

CALGARY, ALBERTA (May 14, 2025) - Touchstone Exploration Inc. ("Touchstone",
"we", "our" or the "Company") (TSX, LSE: TXP) reports its operating and
condensed financial results for the three months ended March 31, 2025.

 

Selected financial information is outlined below and should be read in
conjunction with our March 31, 2025 unaudited interim condensed consolidated
financial statements and related Management's discussion and analysis, both of
which are available online 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 in United States dollars, and all
production volumes disclosed herein are sales volumes based on Company working
interest before royalty burdens.

 

First Quarter 2025 Financial and Operating Highlights

·      Production: Average quarterly production decreased to 4,317 boe/d
(72 percent natural gas), compared to 5,287 boe/d (73 percent natural gas) in
the fourth quarter of 2024 and 7,015 boe/d (80 percent natural gas) in the
first quarter of 2024. The decrease was primarily driven by natural declines
in natural gas and liquids production from the Cascadura-1ST1 and Cascadura
Deep-1 wells, partially offset by incremental volumes from the Cascadura-2ST1
and Cascadura-3ST1 wells which began production in November 2024.

·      Revenue: Petroleum and natural gas sales totaled $11.11 million,
an 18 percent reduction from the $13.54 million recorded in the previous
quarter.

-     Crude oil sales: $6.68 million from average production of 1,162
bbls/d at a realized price of $63.86 per barrel.

-     NGL sales: $0.22 million from average production of 39 bbls/d at a
realized price of $64.05 per barrel.

-     Natural gas sales: $4.21 million from average production of 18.7
MMcf/d (3,116 boe/d) at a realized price of $2.50 per Mcf.

·      Operating Netback: Generated $6.15 million in operating netback,
an 11 percent decrease from the fourth quarter of 2024, primarily due to
decreased petroleum and natural gas sales and related royalties, partially
offset by a 38 percent reduction in operating costs, supported in part by
revisions to historical crude oil field head licence expenses.

·      Funds Flow from Operations: Decreased to $2.58 million from $3.61
million in the previous quarter, as lower operating netbacks and higher cash
finance and general and administrative expenses were partially offset by
reduced transaction and current income tax expenses.

·      Net Earnings: Recorded net earnings of $41,000 ($0.00 per basic
and diluted share), compared to a net loss of $542,000 ($0.00 per basic share)
in the fourth quarter of 2024 which was primarily driven by both $2.31 million
in pre-tax Ortoire exploration asset impairment expenses and higher depletion
expenses recorded in the prior quarter following Cascadura reserves
reductions.

·      Capital Investments: Invested $6.67 million during the quarter,
primarily for the Cascadura-4 development well. Drilling operations were
suspended in February for rig repairs, briefly resumed in March, and halted
again due to wellbore instability. Activities are expected to resume by the
end of May with the arrival of specialized equipment.

·      Financial Position: Ended the quarter with a cash balance of
$5.72 million and net debt of $33.33 million, resulting in a net debt to funds
flow from operations ratio of 2.53 times.

Post Period-end Highlights

·      Private Placement: On May 8, 2025, the Company announced a
private placement targeting United Kingdom investors, expected to raise gross
proceeds of approximately $20.5 million through the issuance of 75,000,000
common shares at a price of 20.5 pence sterling per share (approximately
C$0.38 per share). Proceeds will be used to advance development activities.

·      Acquisition Financing: On May 12, 2025, Touchstone executed a
Fourth Amended and Restated Loan Agreement with its existing Trinidad-based
lender, securing a new six-year, $30 million non-revolving term loan facility
to finance the Company's previously announced acquisition.

·      Production Update: In April 2025, the Company produced average
net sales volumes of 3,628 boe/d, including average net natural gas sales
volumes of 14.7 MMcf/d (2,445 boe/d) and average net crude oil and natural gas
liquid sales volumes of 1,183 bbls/d.

First Quarter 2025 Financial and Operating Results Overview

 

                                                Three months ended
                                                March 31,  December 31, 2024  March 31,

                                                2025                          2024

 Operational

 Average daily production
 Crude oil((1)) (bbls/d)                        1,162      1,310              1,166
 NGLs((1)) (bbls/d)                             39         121                262
 Crude oil and liquids((1)) (bbls/d)            1,201      1,431              1,428
 Natural gas((1)) (Mcf/d)                       18,698     23,136             33,521
 Average daily production (boe/d)((2))          4,317      5,287              7,015

 Production mix (% of production)
 Crude oil and liquids((1))                     28         27                 20
 Natural gas((1))                               72         73                 80

 Average realized prices((3))
 Crude oil((1)) ($/bbl)                         63.86      62.50              69.95
 NGLs((1)) ($/bbl)                              64.05      62.05              69.59
 Crude oil and liquids((1)) ($/bbl)             63.87      62.47              69.88
 Natural gas((1)) ($/Mcf)                       2.50       2.50               2.46
 Realized commodity price ($/boe)((2))          28.60      27.85              25.98

 Operating netback ($/boe)((2))
 Realized commodity price((3))                  28.60      27.85              25.98
 Royalty expense((3))                           (7.25)     (6.59)             (5.76)
 Operating expense((3))                         (5.52)     (7.09)             (3.83)
 Operating netback((3))                         15.83      14.17              16.39

 Financial ($000's except per share amounts)

 Petroleum and natural gas sales                11,113     13,543             16,584

 Cash from operating activities                 5,611      822                5,369

 Funds flow from operations                     2,580      3,614              6,142

 Net earnings (loss)                            41         (542)              3,628
 Per share - basic and diluted                  0.00       (0.00)             0.02

 Exploration and evaluation asset expenditures  423        426                108
 Property, plant and equipment expenditures     6,250      2,680              11,854
 Capital expenditures((3))                      6,673      3,106              11,962

 Working capital deficit((3))                   7,705      1,359              14,121
 Principal long-term bank debt                  25,625     27,750             13,500
 Net debt((3)) - end of period                  33,330     29,109             27,621

 Share Information (000's)

 Weighted average shares outstanding
 Basic                                          236,461    236,461            234,213
 Diluted                                        236,461    236,461            236,548
 Outstanding shares - end of period             236,461    236,461            234,213

 

Notes:

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

(3)   Specified or supplementary financial measure. Refer to "Advisories -
Non-GAAP Financial Measures" for further information.

 

2025 Outlook and Guidance

 

We remain focused on financial discipline and maximizing value from our
development and exploration assets. Our near-term strategy is to close the
previously announced acquisition and increase cash flows through the
development of the Cascadura field, leveraging the processing capacity
established in 2024.

 

On December 9, 2024, we issued a news release announcing the approval of our
preliminary financial and operating guidance for 2025. Given the material
nature of the pending acquisition, the Company intends to provide updated 2025
guidance following its expected closing.

 

2025 Annual Meeting of Shareholders

 

Touchstone's virtual-only Annual Meeting of Shareholders (the "Meeting") will
be held on Thursday, June 19, 2025 at 8:00 a.m. (Mountain Time).

 

Registered and beneficial shareholders will be mailed a notice-and-access
notification and form of proxy on or about May 20, 2025, advising as to the
electronic availability of the Meeting materials, including the 2025
Management Information Circular dated May 8, 2025, the 2024 audited
consolidated financial statements and related Management's discussion and
analysis.

 

For holders of our depositary interests, hard copies of our Management
Information Circular and form of direction will be mailed on or about May 20,
2025.

 

Subsequent to the estimated mailing date, the Meeting materials will be
available online under our profile on SEDAR+ (www.sedarplus.ca
(http://www.sedarplus.ca/) ) and on our website (www.touchstoneexploration.com
(http://www.touchstoneexploration.com/) ).

 

Touchstone Exploration Inc.

 

Touchstone Exploration Inc. is a Calgary, Alberta based company engaged in the
business of acquiring interests in petroleum and natural gas rights and the
exploration, development, production and sale of petroleum and natural gas.
Touchstone is currently active in onshore properties located in the Republic
of Trinidad and Tobago. The Company's common shares are traded on the Toronto
Stock Exchange and the AIM market of the London Stock Exchange under the
symbol "TXP". For further information about Touchstone, please visit our
website at www.touchstoneexploration.com
(http://www.touchstoneexploration.com/) or contact:

 

Touchstone Exploration Inc.

Paul Baay, President and Chief Executive
Officer                       Tel: +1 (403) 750-4405

Scott Budau, Chief Financial Officer

 

Shore Capital (Nominated Advisor and Joint Broker)

Daniel Bush / Toby Gibbs / Tom
Knibbs
Tel: +44 (0) 207 408 4090

Canaccord Genuity (Joint Broker)

Adam James / Charlie
Hammond
Tel: +44 (0) 207 523 8000

 

FTI Consulting (Financial PR)

Nick Hennis / Ben Brewerton / Lucy
Wigney                                Tel: +44
(0) 203 727 1000

Email: touchstone@fticonsulting.com (mailto:touchstone@fticonsulting.com)

 

Advisories

 

Forward-looking Statements

 

The information provided in this announcement contains certain forward-looking
statements and information (collectively, "forward-looking statements") within
the meaning of applicable securities laws. Such forward-looking statements
include, without limitation, forecasts, estimates, expectations and objectives
for future operations that are subject to assumptions, risks and
uncertainties, many of which are beyond the control of the Company.
Forward-looking statements are statements that are not historical facts and
are generally, but not always, identified by the words "expect", "believe",
"estimate", "potential", "anticipate", "forecast", "pursue", "aim", "intends",
and similar expressions, or are events or conditions that "will", "would",
"may", "could" or "should" occur or be achieved. The forward-looking
statements contained in this announcement speak only as of the date hereof and
are expressly qualified by this cautionary statement.

 

Specifically, this announcement includes, but is not limited to,
forward-looking statements relating to: the Company's business plans,
strategies, priorities and development plans; the Company's proposed
acquisition, including the Company's expectation that the acquisition will
close, the timing thereof, the method of funding and the benefits to be
derived therefrom; the Company's intended private placement, its expectation
that the private placement will close, the timing thereof, and the Company's
intended use of the proceeds therefrom; the timing of resuming drilling
operations; and Touchstone's current and future financial position, including
the sufficiency of resources to fund future capital expenditures and maintain
financial liquidity. The Company's actual decisions, activities, results,
performance, or achievement could differ materially from those expressed in,
or implied by, such forward-looking statements and accordingly, no assurances
can be given that any of the events anticipated by the forward-looking
statements will transpire or occur or, if any of them do, what benefits
Touchstone will derive from them.

 

This announcement refers to the Company's private placement, the proposed
acquisition of a private Trinidad-based entity, and the related debt
financing. For further information and the related advisories thereto (all of
which are incorporated by reference herein), refer to the Company's news
release dated May 8, 2025 entitled "Touchstone Exploration Announces Private
Placement and an Acquisition Financing Update" and its news release dated May
13, 2025 entitled "Touchstone Exploration Announces Amended Loan Agreement to
Support Pending Acquisition", both of which are available online on
Touchstone's profile on SEDAR+ (www.sedarplus.ca (http://www.sedarplus.ca/) )
and on the Company's website (www.touchstoneexploration.com
(http://www.touchstoneexploration.com/) ).

 

This announcement also references Touchstone's preliminary 2025 guidance. For
further information and the related advisories thereto (which are incorporated
by reference herein), refer to the Company's news release dated December 9,
2024 entitled "Touchstone Exploration Announces Preliminary 2025 Guidance"
which is available online under Touchstone's profile on SEDAR+
(www.sedarplus.ca (http://www.sedarplus.ca/) ) and on the Company's website
(www.touchstoneexploration.com (http://www.touchstoneexploration.com/) ).

 

Although the Company believes that the expectations and assumptions on which
the forward-looking statements are based are reasonable, undue reliance should
not be placed on the forward-looking statements because the Company can give
no assurance that they will prove to be correct. Since forward-looking
statements address future events and conditions, by their very nature they
involve inherent risks and uncertainties. Actual results could differ
materially from those currently anticipated due to a number of factors and
risks. Certain of these risks are set out in more detail in the Company's 2024
Annual Information Form dated March 19, 2025 which is available online under
the Company's profile on SEDAR+ (www.sedarplus.ca (http://www.sedarplus.ca/) )
and on the Company's website (www.touchstoneexploration.com
(http://www.touchstoneexploration.com/) ). The forward-looking statements
contained in this announcement are made as of the date hereof, and except as
may be required by applicable securities laws, the Company assumes no
obligation or intent to update publicly or revise any forward-looking
statements made herein or otherwise, whether as a result of new information,
future events or otherwise.

 

Non-GAAP Financial Measures

 

This announcement references various non-GAAP financial measures, non-GAAP
ratios, capital management measures and supplementary financial measures as
such terms are defined in National Instrument 52-112 Non-GAAP and Other
Financial Measures Disclosure. Such measures are not recognized measures under
Canadian Generally Accepted Accounting Principles ("GAAP") and do not have a
standardized meaning prescribed by IFRS Accounting Standards as Issued by the
International Accounting Standards Board ("IFRS") and therefore may not be
comparable to similar financial measures disclosed by other issuers. Readers
are cautioned that the non-GAAP financial measures referred to herein should
not be construed as alternatives to, or more meaningful than, measures
prescribed by IFRS, and they are not meant to enhance the Company's reported
financial performance or position. These are complementary measures that are
commonly used in the oil and natural gas industry and by the Company to
provide shareholders and potential investors with additional information
regarding the Company's performance. Below is a description of the non-GAAP
financial measures, non-GAAP ratios, capital management measures and
supplementary financial measures disclosed herein.

 

Operating netback

 

Touchstone uses operating netback as a key performance indicator of field
results. The Company considers operating netback to be a key measure as it
demonstrates Touchstone's profitability relative to current commodity prices
and assists Management and investors with evaluating operating results on a
historical basis. Operating netback is a non-GAAP financial measure calculated
by deducting royalty and operating expenses from petroleum and natural gas
sales. The most directly comparable financial measure to operating netback
disclosed in the Company's consolidated financial statements is petroleum and
natural gas revenue net of royalties. Operating netback per boe is a non-GAAP
ratio calculated by dividing the operating netback by total production volumes
for the period. Presenting operating netback on a per boe basis allows
Management to better analyze performance against prior periods on a comparable
basis.

 

Capital expenditures

 

Capital expenditures is a non-GAAP financial measure that is calculated as the
sum of exploration and evaluation asset expenditures and property, plant and
equipment expenditures included in the Company's consolidated statements of
cash flows and is most directly comparable to cash used in investing
activities. Touchstone considers capital expenditures to be a useful measure
of its investment in its existing asset base.

 

Working capital and net debt

 

Working capital and net debt are capital management measures used by
Management to monitor the Company's capital structure to evaluate its true
debt and liquidity position and to manage capital and liquidity risk. Working
capital is calculated by subtracting current liabilities from current assets
as they appear on the applicable consolidated balance sheet. Net debt is
calculated by summing the Company's working capital and the principal
(undiscounted) long-term amount of senior secured debt and is most directly
comparable to total liabilities disclosed in the Company's consolidated
balance sheets.

 

Net debt to funds flow from operations ratio

 

The Company monitors its capital structure using the net debt to funds flow
from operations ratio, which is a non-GAAP ratio and a capital management
measure calculated as the ratio of the Company's net debt to trailing twelve
months funds flow from operations for any given period.

 

Supplementary Financial Measures

 

Realized commodity price per boe - is comprised of petroleum and natural gas
sales as determined in accordance with IFRS, divided by the Company's total
production volumes for the period.

 

Realized crude oil sales per barrel, realized NGL sales per barrel and
realized natural gas sales per boe - are comprised of sales from the
respective product type as determined in accordance with IFRS, divided by the
Company's total production volumes of the respective product type for the
period. Crude oil sales, NGL sales and natural gas sales are components of
petroleum and natural gas sales as disclosed on the consolidated statements of
net earnings and comprehensive income.

 

Realized crude oil and liquids sales per barrel - is comprised of the sum of
crude oil and NGL product sales as determined in accordance with IFRS, divided
by the sum of the Company's total crude oil and NGL production volumes for the
period. Crude oil and NGL sales are components of petroleum and natural gas
sales.

 

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

 

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

 

For further information, please refer to the "Advisories - Non-GAAP Financial
Measures" section of the Company's most recent Management's discussion and
analysis for the three months ended March 31, 2025 accompanying our March 31,
2025 unaudited interim condensed consolidated financial statements, both of
which are available online under the Company's profile on SEDAR+
(www.sedarplus.ca (http://www.sedarplus.ca/) ) and on the Company's website
(www.touchstoneexploration.com (http://www.touchstoneexploration.com/) ).
Touchstone's Management's discussion and analysis is incorporated by reference
herein and includes further discussion of the purpose and composition of the
specified non-GAAP financial measures consistently used by the Company and
detailed reconciliations to the most directly comparable GAAP measures.

 

Oil and Natural Gas Measures

 

To provide a single unit of production for analytical purposes, natural gas
production has been converted mathematically to barrels of oil equivalent. The
Company uses the industry-accepted standard conversion of six thousand cubic
feet of natural gas to one barrel of oil (6 Mcf = 1 bbl). The 6:1 boe ratio is
based on an energy equivalent conversion method primarily applicable at the
burner tip. It does not represent a value equivalency at the wellhead and is
not based on either energy content or current prices. While the boe ratio is
useful for comparative measures and observing trends, it does not accurately
reflect individual product values and might be misleading, particularly if
used in isolation. As well, given that the value ratio, based on the current
price of crude oil to natural gas, is significantly different from the 6:1
energy equivalency ratio, using a 6:1 conversion ratio may be misleading as an
indication of value.

 

Product Type Disclosures

 

This announcement includes references to crude oil, NGLs, crude oil and
liquids, natural gas, and average daily production volumes. Under National
Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities ("NI
51-101"), disclosure of production volumes should include segmentation by
product type as defined in the instrument. In this announcement, references to
"crude oil" refer to "light crude oil and medium crude oil" and "heavy crude
oil" combined product types; references to "NGLs" refer to condensate; and
references to "natural gas" refer to the "conventional natural gas" product
type, all as defined in the instrument. In addition, references to "crude oil
and liquids" herein include crude oil and NGLs.

 

The Company's average production for April 2025 consists of the following
product types as defined in NI 51-101 using a conversion of 6 Mcf to 1 boe
where applicable.

 

 Period      Light and Medium Crude Oil (bbls/d)  Heavy Crude Oil  Natural Gas Liquids (bbls/d)  Conventional Natural Gas (Mcf/d)  Total Oil Equivalent (boe/d)

                                                  (bbls/d)

 April 2025  1,098                                61               24                            14,672                            3,628

 

For further information regarding specific product disclosures in accordance
with NI 51-101, please refer to the "Advisories - Product Type Disclosures"
section of the Company's most recent Management's discussion and analysis for
the three months ended March 31, 2025 accompanying our March 31, 2025
unaudited interim condensed consolidated financial statements, both of which
are available online under the Company's profile on SEDAR+ (www.sedarplus.ca
(http://www.sedarplus.ca/) ) and on the Company's website
(www.touchstoneexploration.com (http://www.touchstoneexploration.com/) ).

 

Abbreviations

 

The following abbreviations may be referenced in this announcement:

 

bbl(s)                barrel(s)

bbls/d               barrels per day

boe                  barrels of oil equivalent

boe/d               barrels of oil equivalent per day

NGLs                natural gas liquids

Mcf                  thousand cubic feet

Mcf/d               thousand cubic feet per day

MMcf                million cubic feet

MMcf/d             million cubic feet per day

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