REG - Touchstone Explrtn. - Q1 2023 FINANCIAL AND OPERATING RESULTS

Touchstone ExplorationAnnouncement

12/05/2023 07:00

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RNS Number : 1798Z  Touchstone Exploration Inc.  12 May 2023

 

FIRST QUARTER 2023 FINANCIAL AND OPERATING RESULTS

 

CALGARY, ALBERTA (May 12, 2023) - Touchstone Exploration Inc. ("Touchstone",
"we", "our", "us" or the "Company") (TSX, LSE: TXP) reports its operating and
financial results for the three months ended March 31, 2023. Selected
information is outlined below and should be read in conjunction with our March
31, 2023 unaudited interim condensed consolidated financial statements and
related Management's discussion and analysis, both of which will be available
under our profile on SEDAR (www.sedar.com (http://www.sedar.com/) ) and on our
website (www.touchstoneexploration.com (http://www.touchstoneexploration.com/)
). Unless otherwise stated, all financial amounts herein are rounded to
thousands of United States dollars.

 

First Quarter 2023 Financial and Operational Highlights

·      Produced quarterly average volumes of 2,139 boe/d, representing a
53 percent increase relative to the 1,396 boe/d produced in the prior year
equivalent quarter and a 4 percent decrease compared to the fourth quarter of
2022.

·      Natural gas production from our Coho-1 well averaged net volumes
of 5.1 MMcf/d (854 boe/d) in the quarter and contributed $976,000 of net
natural gas sales at an average realized price of $2.12/Mcf.

·      Realized petroleum and natural gas sales of $8,476,000 compared
to $10,496,000 in the 2022 comparative quarter, as the incremental $976,000 in
net natural gas sales were offset by decreased crude oil sales of $2,996,000,
reflecting a 22 percent decline in realized crude oil pricing and an 8 percent
decrease in crude oil production.

·      Generated an operating netback of $3,652,000, representing a 23
percent decrease from the 2022 equivalent quarter primarily attributed to a 19
percent decline in petroleum and natural gas sales.

·      Reported funds flow from operations of $803,000 in the quarter
compared to $691,000 in the preceding quarter and $1,443,000 in the prior year
equivalent quarter.

·      Recognized a net loss of $279,000 ($0.00 per basic share) in the
quarter compared to a net loss of $236,000 ($0.00 per basic share) reported in
the same period of 2022.

·      $9,019,000 in quarterly capital investments primarily focused on
expenditures directed to the drilling of the Royston-1X sidetrack well and
progressing construction of the Cascadura natural gas and liquids facility.

·      Exited the quarter with a cash balance of $10,859,000, a working
capital deficit of $4,383,000 and a principal balance of $25,500,000 remaining
on our term credit facility, resulting in a net debt position of $23,883,000.

·      Natural gas and liquids facility construction operations on the
Cascadura A surface location have progressed and we continue to target
completion and commissioning for first production at Cascadura on or about
June 30, 2023.

·      Construction of the Cascadura C surface location is complete,
which will be the location of our first Cascadura development well.

·      The second production test of the Royston-1X well is expected to
commence in late May 2023 once the service rig has moved onto the lease
following the drilling rig being moved to the Cascadura C location.

Financial and Operating Results Summary

 

                                                          Three months ended
                                                          March 31,  December 31, 2022  March 31,

                                                          2023                           2022

 Operational

 Average daily production
 Crude oil((1)) (bbls/d)                                  1,285      1,274              1,396
 Natural gas((1)) (Mcf/d)                                 5,124      5,729              -
 Average daily production (boe/d)((2))                    2,139      2,229              1,396

 Average realized prices((3))
 Crude oil((1)) ($/bbl)                                   64.86      75.10              83.55
 Natural gas((1)) ($/Mcf)                                 2.12       2.11               -
 Realized commodity price ($/boe)((2))                    44.03      48.36              83.55

 Production mix (% of production)
 Crude oil((1))                                           60         57                 100
 Natural gas((1))                                         40         43                 -

 Operating netback ($/boe)((2))
 Realized commodity price((3))                            44.03      48.36              83.55
 Royalties((3))                                           (13.01)    (15.24)            (28.55)
 Operating expenses((3))                                  (12.05)    (12.07)            (17.17)
 Operating netback((3))                                   18.97      21.05              37.83

 Financial ($000's except per share amounts)

 Petroleum and natural gas sales                          8,476      9,919              10,496

 Cash from (used in) operating activities                 913        (1,189)            350

 Funds flow from operations((3))                          803        691                1,443

 Net loss                                                 (279)      (1,921)            (236)
 Per share - basic and diluted                            (0.00)     (0.01)             (0.00)

 Exploration capital expenditures                         8,750      2,290              1,874
 Development capital expenditures                         269        219                680
 Capital expenditures((3))                                9,019      2,509              2,554

 Working capital deficit (surplus)((3))                   4,383      (4,992)            (4,259)
 Principal long-term balance of term loan                 19,500     21,000             25,500
 Net debt((3)) - end of period                            23,883     16,008             21,241

 Share Information (000's)

 Weighted average shares outstanding - basic and diluted  233,037    217,106            210,823
 Outstanding shares - end of period                       233,037    233,037            211,164

 

Notes:

(1)    In the table above and elsewhere in this announcement, references to
"crude oil" refer to light and medium crude oil and heavy crude oil product
types combined and references to "natural gas" refer to conventional natural
gas, all as defined in National Instrument 51-101 Standards of Disclosure for
Oil and Gas Activities ("NI 51-101"). Refer to "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)    Non-GAAP financial measure. See "Advisories - Non-GAAP Financial
Measures" for further information.

 

Annual and Special Meeting of Shareholders

 

Touchstone's virtual-only Annual and Special Meeting of Shareholders (the
"Meeting") will be held on Thursday, June 29, 2023 at 10:30 a.m. (Mountain
time).

 

Registered and beneficial shareholders will be mailed a notice-and-access
notification and form of proxy on or around May 30, 2023, advising as to the
electronic availability of the Meeting materials, including the 2023
Management Information Circular, the 2022 audited consolidated financial
statements and related management's discussion and analysis. For holders of
our depositary interests, our Management Information Circular and form of
direction will be mailed on or about May 30, 2023. Subsequent to the mailing
date, the Meeting materials will be available on our website
(www.touchstoneexploration.com/investors/shareholder-meetings
(http://www.touchstoneexploration.com/investors/shareholder-meetings) ) and
under our profile on SEDAR (http://www.sedar.com/ (http://www.sedar.com/)
www.sedar.com (http://www.sedar.com/) ).

 

Touchstone's annual audited consolidated financial statements and related
management's discussion and analysis for the year ended December 31, 2022 were
also mailed on April 4, 2023 to those shareholders who elected to receive
physical copies. Shareholders may also access these documents on our website
and under our profile on SEDAR.

 

Touchstone Exploration Inc.

 

Touchstone Exploration Inc. is a Calgary, Alberta based company engaged in the
business of acquiring interests in petroleum and natural gas rights and the
exploration, development, production and sale of petroleum and natural gas.
Touchstone is currently active in onshore properties located in the Republic
of Trinidad and Tobago. The Company's common shares are traded on the Toronto
Stock Exchange and the AIM market of the London Stock Exchange under the
symbol "TXP".

 

For further information about Touchstone, please visit our website at
www.touchstoneexploration.com (http://www.touchstoneexploration.com/) or
contact:

 

Touchstone Exploration Inc.

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

Scott Budau, Chief Financial Officer

James Shipka, Chief Operating Officer

 

Shore Capital (Nominated Advisor and Joint Broker)

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

 

Canaccord Genuity (Joint Broker)

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

 

FTI Consulting (Financial PR)

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,
forward-looking statements relating to the Company's development and
exploration plans and strategies; Cascadura facility construction operations
and the expected timing of completion and initial production therefrom;
anticipated future drilling operations and locations; the timing of
anticipated Royston-1X well completion and testing operations; and
Touchstone's current and future financial position including the sufficiency
of resources to fund future capital expenditures and maintain financial
liquidity.

 

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 will be 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

 

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

 

Funds flow from operations

 

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

 

Operating netback

 

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

 

Capital expenditures

 

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

Working capital and net debt

 

Touchstone closely monitors its capital structure with a goal of maintaining a
strong financial position to fund current operations and future growth.
Working capital and net debt are capital management measures used by
Management to steward the Company's overall debt position and assess overall
financial strength. Working capital is calculated as current assets minus
current liabilities as they appear on the consolidated balance sheets. Net
debt is calculated by summing the Company's working capital and the principal
(undiscounted) long-term amount of senior secured debt.

 

Supplementary Financial Measures

 

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

 

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

 

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

 

For information regarding such measures, including reconciliations to the
nearest GAAP measures, please refer to the "Advisories - Non-GAAP Financial
Measures" section in the Company's Management's discussion and analysis for
the three months ended March 31, 2023 accompanying our March 31, 2023
unaudited interim condensed consolidated financial statements which will be
available on our website (www.touchstoneexploration.com
(http://www.touchstoneexploration.com/) ) and under our SEDAR profile
(www.sedar.com (http://www.sedar.com/) ).

 

Oil and Natural Gas Measures

 

Where applicable, natural gas has been converted to barrels of oil equivalent
based on six thousand cubic feet to one barrel of oil. The barrel of oil
equivalent rate is based on an energy equivalent conversion method primarily
applicable at the burner tip, and given that the value ratio based on the
current price of crude oil as compared to natural gas is significantly
different than the energy equivalency of the 6:1 conversion ratio, utilizing
the 6:1 conversion ratio may be misleading as an indication of value.

 

Product Type Disclosures

 

For information regarding specific product disclosures in accordance with NI
51-101, please refer to the "Advisories - Product Type Disclosures" section in
the Company's Management's discussion and analysis for the three months ended
March 31, 2023 accompanying our March 31, 2023 unaudited interim condensed
consolidated financial statements which will be available on our website
(www.touchstoneexploration.com (http://www.touchstoneexploration.com/) ) and
under our SEDAR profile (www.sedar.com (http://www.sedar.com/) ).

 

Abbreviations

 

bbls/d               barrels per day

boe                  barrels of oil equivalent

boe/d               barrels of oil equivalent per day

Mcf                  thousand cubic feet

Mcf/d               thousand cubic feet per day

MMcf/d             million cubic feet per day

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