REG - Touchstone Explrtn. - Q2 2023 FINANCIAL AND OPERATING RESULTS
11/08/2023 07:00
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RNS Number : 0068J Touchstone Exploration Inc. 11 August 2023
SECOND QUARTER 2023 FINANCIAL AND OPERATING RESULTS
CALGARY, ALBERTA (August 11, 2023) - Touchstone Exploration Inc.
("Touchstone", "we", "our", "us" or the "Company") (TSX, LSE: TXP) reports its
operating and financial results for the three and six months ended June 30,
2023.
Selected information is outlined below and should be read in conjunction with
our June 30, 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.
Paul Baay, President and Chief Executive Officer, commented:
"I am pleased to provide an update on our financial and operational results
for the second quarter of the 2023 financial year. The results come as we
continue to focus our efforts on the commissioning of the Cascadura facility
and completing production testing at Royston-1X. We look forward to providing
shareholders with further updates in the near term."
Second Quarter 2023 Financial and Operational Highlights
· Achieved quarterly production average volumes of 1,827 boe/d,
representing a 29 percent increase relative to the 1,420 boe/d produced in the
prior year equivalent quarter.
· Natural gas production from our Coho-1 well averaged net volumes
of 4.2 MMcf/d (703 boe/d) in the quarter and contributed $811,000 of net
natural gas sales at an average realized price of $2.11/Mcf.
· Realized petroleum and natural gas sales of $7,181,000 compared
to $12,596,000 in the 2022 comparative quarter, as $811,000 in net natural gas
sales were offset by decreased crude oil sales of $6,226,000, reflecting a 36
percent decline in realized crude oil pricing and a 21 percent decrease in
crude oil production.
· Generated an operating netback of $2,826,000, representing a 51
percent decrease from the 2022 equivalent quarter primarily attributed to the
43 percent decline in petroleum and natural gas sales.
· Reported funds flow from operations of $6,000 in the quarter
compared to $803,000 in the preceding quarter and $1,150,000 in the prior year
equivalent quarter.
· Recognized a net loss of $71,000 ($0.00 per basic share) and
comprehensive income of $136,000 in the quarter compared to a net loss of
$262,000 ($0.00 per basic share) and a comprehensive loss of $529,000 reported
in the same period of 2022.
· $5,135,000 in quarterly capital investments primarily focused on
expenditures related to the construction of the Cascadura natural gas and
liquids facility and two Royston-1X production tests.
· Amended our Trinidad based loan agreement in May 2023, allowing
for an additional $7 million revolving loan component that was fully drawn in
June 2023 to provide liquidity while we complete construction of the Cascadura
facility.
· Exited the quarter with a cash balance of $10,138,000, a bank
debt principal balance of $31,000,000 and a net debt position of $28,913,000.
Financial and Operating Results Summary
Three months ended June 30, % change Six months ended % change
June 30,
2023 2022 2023 2022
Operational
Average daily production
Crude oil((1)) (bbls/d) 1,124 1,420 (21) 1,204 1,408 (14)
Natural gas((1)) (Mcf/d) 4,215 - n/a 4,667 - n/a
Average daily production (boe/d)((2)) 1,827 1,420 29 1,982 1,408 41
Average realized prices((3))
Crude oil((1)) ($/bbl) 62.26 97.48 (36) 63.64 90.61 (30)
Natural gas((1)) ($/Mcf) 2.11 - n/a 2.12 - n/a
Realized commodity price ($/boe)((2)) 43.19 97.48 (56) 43.64 90.61 (52)
Production mix (% of production)
Crude oil((1)) 62 100 61 100
Natural gas((1)) 38 - 39 -
Operating netback ($/boe)((2))
Realized commodity price((3)) 43.19 97.48 (56) 43.64 90.61 (52)
Royalties((3)) (12.94) (34.97) (63) (12.98) (31.80) (59)
Operating expenses((3)) (13.25) (17.52) (24) (12.61) (17.35) (27)
Operating netback((3)) 17.00 44.99 (62) 18.05 41.46 (56)
Financial
($000's except per share amounts)
Petroleum and natural gas sales 7,181 12,596 (43) 15,657 23,092 (32)
Cash from operating activities 2,975 3,533 (16) 3,888 3,883 -
Funds flow from operations 6 1,150 (99) 809 2,593 (69)
Net loss (71) (262) (73) (350) (498) (30)
Per share - basic and diluted (0.00) (0.00) - (0.00) (0.00) -
Exploration capital expenditures 4,795 2,932 64 13,545 4,806 182
Development capital expenditures 340 436 (22) 609 1,116 (45)
Capital expenditures((3)) 5,135 3,368 52 14,154 5,922 139
Working capital deficit (surplus)((3)) 10,913 (346) n/a
Principal long-term bank debt 18,000 24,000 (25)
Net debt((3)) - end of period 28,913 23,654 22
Share Information (000's)
Weighted average shares outstanding - basic and diluted 233,144 212,204 10 233,091 211,517 10
Outstanding shares - end of period 233,428 212,275 10
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.
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 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 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
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
Management monitors working capital and net debt as part of 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.
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 and six months ended June 30, 2023 accompanying our June 30, 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 and six
months ended June 30, 2023 accompanying our June 30, 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
Touchstone Exploration Inc.
Interim Condensed Consolidated Balance Sheets
Unaudited, stated in thousands of United States dollars
As at June 30, December 31, 2022
2023
Assets
Current assets
Cash 10,138 16,335
Accounts receivable 6,734 7,487
Inventory 101 129
Prepaid expenses 941 1,342
Assets held for sale - 1,122
17,914 26,415
Exploration and evaluation assets 65,310 51,352
Property, plant and equipment 66,098 67,162
Restricted cash 903 1,021
Other assets 412 481
Abandonment fund 1,567 1,446
Total assets 152,204 147,877
Liabilities
Current liabilities
Accounts payable and accrued liabilities 15,519 12,737
Income taxes payable 308 1,014
Current portion of bank debt 13,000 6,000
Liabilities associated with assets held for sale - 1,672
28,827 21,423
Lease liabilities 1,662 1,373
Bank debt 17,961 20,962
Decommissioning liabilities 11,017 11,182
Deferred income taxes 13,717 14,557
Total liabilities 73,184 69,497
Shareholders' equity
Shareholders' capital 114,743 114,635
Contributed surplus 5,583 4,905
Other comprehensive loss (13,313) (13,517)
Deficit (27,993) (27,643)
Total shareholders' equity 79,020 78,380
Total liabilities and shareholders' equity 152,204 147,877
Touchstone Exploration Inc.
Interim Condensed Consolidated Statements of Loss and Comprehensive Income
(Loss)
Unaudited, stated in thousands of United States dollars (except per share
amounts)
Three months ended June 30, Six months ended June 30,
2023 2022 2023 2022
Revenue
Petroleum and natural gas sales 7,181 12,596 15,657 23,092
Less: royalties (2,152) (4,519) (4,656) (8,105)
Petroleum and natural gas revenue, net of royalties 5,029 8,077 11,001 14,987
Other revenue 22 11 34 20
Total revenue 5,051 8,088 11,035 15,007
Expenses
Operating 2,203 2,264 4,523 4,421
General and administration 2,376 1,897 4,477 3,870
Net finance 631 617 1,062 1,560
Gain on asset dispositions (800) (85) (800) (120)
Foreign exchange loss (gain) 48 (140) (62) (196)
Equity-based compensation 252 399 613 643
Depletion and depreciation 1,041 975 2,418 1,905
Impairment 14 35 29 171
Other (440) 540 (440) 540
Total expenses 5,325 6,502 11,820 12,794
(Loss) earnings before income taxes (274) 1,586 (785) 2,213
Provision for income taxes
Current expense 180 1,547 395 2,175
Deferred (recovery) expense (383) 301 (830) 536
Total income tax (recovery) expense (203) 1,848 (435) 2,711
Net loss (71) (262) (350) (498)
Currency translation adjustments 207 (267) 204 133
Comprehensive income (loss) 136 (529) (146) (365)
Net loss per common share
Basic and diluted (0.00) (0.00) (0.00) (0.00)
Touchstone Exploration Inc.
Interim Condensed Consolidated Statements of Changes in Shareholders' Equity
For the six months ended June 30
Unaudited, stated in thousands of United States dollars
2023 2022
Shareholders' capital
Balance, beginning of period 114,635 101,757
Equity-based settlements 108 336
Balance, end of period 114,743 102,093
Contributed surplus
Balance, beginning of period 4,905 3,466
Equity-based settlements (39) (119)
Equity-based compensation expense 613 643
Equity-based compensation capitalized 104 159
Balance, end of period 5,583 4,149
Other comprehensive loss
Balance, beginning of period (13,517) (13,219)
Other comprehensive income 204 133
Balance, end of period (13,313) (13,086)
Deficit
Balance, beginning of period (27,643) (24,446)
Net loss (350) (498)
Balance, end of period (27,993) (24,944)
Touchstone Exploration Inc.
Interim Condensed Consolidated Statements of Cash Flows
Unaudited, stated in thousands of United States dollars
Three months ended June 30, Six months ended June 30,
2023 2022 2023 2022
Operating activities
Net loss (71) (262) (350) (498)
Items not involving cash from operations:
Gain on asset dispositions (800) (85) (800) (120)
Unrealized foreign exchange loss (gain) 52 (139) (67) (279)
Equity-based compensation expense 252 399 613 643
Depletion and depreciation expense 1,041 975 2,418 1,905
Impairment expense 14 35 29 171
Other (81) (24) (186) 285
Deferred income tax (recovery) expense (383) 301 (830) 536
Decommissioning expenditures (18) (50) (18) (50)
Funds flow from operations 6 1,150 809 2,593
Change in non-cash working capital 2,969 2,383 3,079 1,290
Cash from operating activities 2,975 3,533 3,888 3,883
Investing activities
Exploration and evaluation expenditures (4,795) (2,932) (13,545) (4,806)
Property, plant and equipment expenditures (340) (436) (609) (1,116)
Abandonment fund expenditures (56) (30) (122) (59)
Proceeds from asset dispositions 250 100 250 135
Change in non-cash working capital (4,312) (1,186) 112 (6,806)
Cash used in investing activities (9,253) (4,484) (13,914) (12,652)
Financing activities
Changes in restricted cash 59 35 118 40
Net advance of bank debt 5,500 - 4,000 -
Net finance lease receipts (payments) 95 74 (200) 153
Issuance of common shares 69 142 69 217
Change in non-cash working capital (122) (143) (252) (250)
Cash from financing activities 5,601 108 3,735 160
Change in cash (677) (843) (6,291) (8,609)
Cash, beginning of period 10,859 10,148 16,335 17,936
Impact of foreign exchange on foreign denominated cash balances (44) 120 94 98
Cash, end of period 10,138 9,425 10,138 9,425
Supplementary information for cash flow from operating activities:
Interest paid in cash 501 588 1,031 1,128
Income taxes paid in cash 86 520 1,099 556
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