REG - Touchstone Explrtn. - YEAR-END 2021 RESULTS

Touchstone ExplorationAnnouncement

28/03/2022 07:00

For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20220328:nRSb1482Ga&default-theme=true

RNS Number : 1482G  Touchstone Exploration Inc.  28 March 2022

YEAR-END 2021 RESULTS

 

CALGARY, ALBERTA (March 28, 2022) - Touchstone Exploration Inc. ("Touchstone",
"we", "our", "us" or the "Company") (TSX, LSE: TXP) reports its operating and
financial results for the three months and year ended December 31, 2021.
Selected information is outlined below and should be read in conjunction with
our December 31, 2021 audited consolidated financial statements, the related
Management's discussion and analysis and Annual Information Form, all 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.

 

Fourth Quarter 2021 Highlights

·      Achieved quarterly average production volumes of 1,336 barrels
per day ("bbls/d"), representing a 5 percent increase from 1,274 bbls/d
produced in the fourth quarter of 2020.

·      Realized petroleum sales of $8,212,000 from an average crude oil
price of $66.81 per barrel compared to petroleum sales of $7,650,000 from
average realized pricing of $62.37 per barrel in the third quarter of 2021.

·      Generated an operating netback of $29.96 per barrel, an 8 percent
increase from the third quarter of 2021 and a 116 percent increase from the
$13.90 per barrel in the fourth quarter of 2020.

·      Our funds flow from operations improved to $1,291,000 in the
quarter compared to funds flow used in operations of $736,000 in the fourth
quarter of 2020.

·      Reported net earnings of $6,514,000 ($0.03 per basic and diluted
share) compared to net earnings of $1,655,000 ($0.01 per basic and diluted
share) in the same period of 2020. Net earnings in the fourth quarter included
net impairment reversals of $13,716,000, partially offset by associated
deferred income tax expenses of $7,226,000.

·      Exploration and evaluation capital investments of $2,946,000
focused on completing and initiating production testing operations on the
Royston-1 well drilled in the third quarter of 2021 and submitting the
required regulatory application for the Cascadura surface facility.

·      Drilled three gross and net commitment wells on our legacy crude
oil properties in the quarter, representing our first infill development
drilling since 2019.

·      Expanded our Trinidad-based term loan facility from $20 million
to $30 million to fund our budgeted Ortoire facility projects in 2022. We
exited the year with cash of $17,936,000, working capital surplus of
$6,925,000 and $30,000,000 drawn on our term credit facility, resulting in a
net debt position of $20,075,000.

Annual 2021 Highlights

·      Reported average daily crude oil sales of 1,342 bbls/d in 2021, a
nominal 4 percent decrease relative to the 1,392 bbls/d produced in 2020 due
to natural declines, reflecting strategic capital allocation on our Ortoire
exploration program. Production from our three development wells drilled in
the fourth quarter of 2021 came online in the first quarter of 2022.

·      Generated funds flow from operations of $4,107,000 (2020 -
$263,000) and an annual operating netback of $26.55 per barrel (2020 - $14.49
per barrel).

·      Recognized net earnings of $5,719,000 ($0.03 per basic and
diluted share) compared to a net loss of $11,030,000 ($0.06 per basic share)
in 2020, driven by $13,674,000 in net impairment reversals recognized in the
year predominantly based on increased forecasted crude oil pricing and
partially offset by the deferred income tax expense impact of $7,463,000.

·      Despite COVID-19 challenges in Trinidad, we executed an
incident-free $20,106,000 exploration program, primarily focused on drilling
one gross (0.8 net) well, acquiring 22-line kilometres of 2D seismic and
testing two exploration wells drilled in 2020. We fulfilled all required
minimum work obligations in the initial exploration period of our Ortoire
exploration and production licence.

·      Development capital expenditures of $7,757,000 focused on
exporting a third-party drilling rig to Trinidad, which was used to drill
three development wells in the fourth quarter of 2021.

·      Entered into revised ten-year lease operating agreements for our
Coora-1, Coora-2, WD-4 and WD-8 blocks through December 31, 2030.

Post Period-end Highlights

·      Daily crude oil sales averaged 1,382 bbls/d in January 2022 with
a realized price of $71.68 per barrel and averaged 1,384 bbls/d in February
2022 with a realized price of $81.30 per barrel.

·      In February 2022, we executed the relevant agreements with our
third-party partners to allow for the final tie-in of the Coho gas field, with
pipeline tie-in operations proceeding towards anticipated initial production
in May 2022.

·      In March 2022, we were notified that the Trinidad government
approved a five-year extension to the exploration period of our Ortoire
licence to July 31, 2026 for an additional three exploration well commitment.

Paul Baay, President and Chief Executive Officer, commented:

 

"Building on our operational and financial momentum generated in 2021, our
near-term priority is to bring our Coho and Cascadura exploration discoveries
onto production. With the extension of the operating agreements on our legacy
assets and the five year extension of the exploration period of our Ortoire
licence, we are able to prioritize and allocate future capital expenditures on
projects that provide the best economic return. Our assets, including natural
gas development at Cascadura and Coho, along with oil development at Royston
and our legacy properties, complemented by internally identified exploration
targets, advances Touchstone to a level of portfolio balance. Barring any
significant delays, we forecast that our year-end 2021 liquidity position
provides the funding required to meet our near-term focus of commencing
production at Coho and Cascadura. By the end of the year, we expect to develop
into a sustainable cash flow generating production-based company with strong
exploration prospects."

 

Financial and Operating Results Summary

 

                                             Three months ended December 31,     % change  Year ended December 31,     % change
                                             2021              2020                        2021          2020

 Operational

 Average daily oil production((1)) (bbls/d)  1,336             1,274             5         1,342         1,392         (4)

 Net wells drilled                           3.0               1.6               88        3.8           1.6           138

 Brent benchmark price ($/bbl)               79.61             44.32             80        70.86         41.96         69

 Operating netback ($/bbl)
 Realized sales price((2))                   66.81             37.66             77        60.25         38.34         57
 Royalties((2))                              (22.15)           (10.48)           111       (18.85)       (10.74)       76
 Operating expenses((2))                     (14.70)           (13.28)           11        (14.85)       (13.11)       13
 Operating netback((2))                      29.96             13.90             116       26.55         14.49         83

 

Notes:

(1)   References to crude oil in the above table and elsewhere in this
announcement is a mix of light and medium crude oil and heavy crude oil for
which there is not a precise breakdown since our oil sales volumes typically
represent blends of more than one type of crude oil.

(2)   Non-GAAP financial measure. See "Advisories: Non-GAAP Financial
Measures" for further information.

 

 

 

                                           Three months ended December 31,     % change  Year ended December 31,     % change
                                           2021              2020                        2021          2020

 Financial
 ($000's except per share amounts)

 Petroleum sales                           8,212             4,414             86        29,568        19,592        51

 Cash from operating activities            1,388             167               731       1,546         2,296         (33)

 Funds flow from (used in) operations      1,291             (736)             n/a       4,107         263           1,462
 Per share - basic and diluted((1))        0.01              (0.00)            n/a       0.02          0.00          n/a

 Net earnings (loss)                       6,514             1,655             294       5,719         (11,030)      n/a
 Per share - basic and diluted             0.03              0.01              200       0.03          (0.06)        n/a

 Exploration capital expenditures          2,946             9,031             (67)      20,106        17,861        13
 Development capital expenditures          5,190             186               2,690     7,757         709           994
 Total capital expenditures                8,136             9,217             (12)      27,863        18,570        50
 Working capital surplus((1))                                                            (6,925)       (12,933)      (46)
 Principal long-term balance of term loan                                                27,000        7,500         260
 Net debt (surplus)((1)) - end of period                                                 20,075        (5,433)       n/a

 Share Information (000's)
 Weighted average - basic                  210,732           197,686           7         210,160       183,781       14
 Weighted average - diluted                218,102           206,072           6         217,678       183,781       18
 Outstanding shares - end of period                                                      210,732       209,400       1

 

Note:

(1)   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.

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

Mr. Scott Budau, Chief Financial Officer

Mr. James Shipka, Chief Operating Officer

 

Shore Capital (Nominated Advisor and Joint Broker)

Daniel Bush / Toby Gibbs / Michael McGloin
                    Tel: +44 (0) 207 408 4090

 

Canaccord Genuity (Joint Broker)

Adam James / Henry Fitzgerald O'Connor / Thomas
Diehl                      Tel: +44 (0) 207 523 8000

 

Camarco (Financial PR)

Billy Clegg / Emily Hall / Lily Pettifar
                                      Tel: +44 (0) 203 781
8330

 

Advisories

 

Non-GAAP Financial Measures

 

Certain financial measures in this announcement do not have a standardized
meaning as prescribed by International Financial Reporting Standards ("IFRS"
or "GAAP") and therefore are considered non-GAAP financial measures. These
financial measures may not be comparable to similar financial measures
disclosed by other issuers. Readers are cautioned that any 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, liquidity and
ability to generate funds to finance its operations. Below is a description of
the non-GAAP financial measures, non-GAAP ratios, capital management measures
and supplementary financial measures disclosed herein.

 

Funds flow from operations and funds flow from operations per share

 

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.

 

Funds flow from operations per share is a non-GAAP ratio calculated by
dividing funds flow from operations by the weighted average number of common
shares outstanding during the applicable period on a basic and dilutive basis.

 

Operating netback

 

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 sales. Operating
netback per barrel is a non-GAAP ratio calculated by dividing the operating
netback by production volumes for the period.

 

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. These
are capital management measures used by Management to steward the Company's
overall debt position and as measures of overall financial strength.

 

Management monitors working capital and net debt as part of the Company's
capital structure to assess its true debt and liquidity position and to manage
capital and liquidity risk. Working capital is calculated as current assets
minus current liabilities as they appear on the consolidated statements of
financial position. Net debt (surplus) is calculated by summing the Company's
working capital and the principal (undiscounted) long-term amount of senior
secured debt.

 

Supplementary Financial Measures

 

The following supplementary financial measures are disclosed herein.

 

Realized sales price per barrel - is comprised of petroleum sales as
determined in accordance with IFRS, divided by the Company's total crude oil
and natural gas liquid ("NGL") sales volumes.

Royalties per barrel - is comprised of royalties as determined in accordance
with IFRS, divided by the Company's total crude oil and NGL sales volumes.

 

Operating expenses per barrel - is comprised of operating expenses as
determined in accordance with IFRS, divided by the Company's total crude oil
and NGL sales volumes.

 

Refer to the "Non-GAAP Financial Measures " advisory section on page 43 of the
Company's December 31, 2021 Management's discussion and analysis for
reconciliations of non-GAAP financial measures included herein to applicable
GAAP measures.

 

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 Touchstone's near-term priorities, the
Company's development and exploration plans and strategies including
anticipated production timelines, Touchstone's exploration prospects, the
Company's future allocation of capital, the Company's expectations of becoming
a cash flow generating business, 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 2021 Annual Information Form dated
March 25, 2022 which will be filed under the Company's profile on SEDAR
(www.sedar.com (http://www.sedar.com/) ) and will be available 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 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 information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
 or visit
www.rns.com (http://www.rns.com/)
.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
.   END  FR JRMPTMTMTMFT