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Touchstone Exploration is accelerating exciting exploration at Ortoire project

Snapshot

  • One of Trinidad's largest onshore independent oil producers
  • Coho and Cascadura wells beat expectations
  • Aims to drill Chinook well next
  • US$11.6mln funding to accelerate Ortoire campaign
Touchstone

Quick facts: Touchstone Exploration Inc

Price: 45.5 GBX

AIM:TXP
Market: AIM
Market Cap: £83.49 m
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What Touchstone does

Touchstone Exploration Inc (LON:TXP) is a Canadian-based oil and gas company focused on the exploration, development and production of onshore assets in Trinidad.

The group has been producing oil in Trinidad since 2010 and is now one of the largest onshore independent oil producers in the country.

 

 

What it owns

Touchstone has production assets across 10 licence blocks in Trinidad, including 208 well locations over some 7,910 acres.

Across its portfolio, the company also has areas with exploration upside, through which it has earmarked potential growth projects.

Specifically, the Ortoire block covers a large area (about 55,000 acres).

 

 

Funded to accelerate exploration

On 20 February, Touchstone raised US$11.6mln (£9mln) through a share placing to institutional investors, with the new funds earmarked for the acceleration of exciting exploration activities in the Ortoire block.

It is issuing 22.5mln new shares priced at 40p each to institutional investors, with the placing arranged by Shore Capital as book runner.

"The results of the first two wells drilled at Ortoire have exceeded our expectations, and as a result the board has decided to complete the placing in order to accelerate exploration drilling on the property,” Paul Baay, Touchstone chief executive said in a statement.

“We are delighted by the support we have received from new and existing investors We continue to thank our shareholders for their ongoing support, and we look forward to continuing to update shareholders as the exploration program continues," he added.

 

How it’s doing

Latest results from the Cascadura-1ST1 well confirmed what the company described as a “vast opportunity”, as test rates exceeded 10,000 barrels of oil equivalent per day in aggregate as a second section was assessed.

Touchstone told investors that the test results support a possible initial production range of 7,750 to 9,700 boepd, including 1,100 to 1,400 barrels of gas liquids.

Earlier in March, Touchstone upgraded its reserves estimates for the Ortoire block, with proven (1P) reserves increased by 6% to 11.8mln barrels oil equivalent while proved and probable (2P) reserves increased 14% to 22.05mln barrels.

Touchstone, in early February, revealed successful test results from the Cascadura-1ST1 well.

The well encountered a total of 777 feet of pay in the Herrera formation, and, first stage testing covered the lower-most 162 feet. Flow rates were measured at 5,180 barrels oil equivalent per day (boepd) over a fourteen-hour test period – comprising 26.9mln cubic feet and 694 barrels of natural gas liquids per day. The rate saw a peak of 5,736 boepd.

The findings confirmed a significant liquids-rich natural gas discovery.

It was the latest impressive discovery in the Ortoire block, following Coho-1 which in December “greatly exceeded” expectations.

The gas was described as “pure, sweet [and] dry”, containing almost 99% methane and no hydrogen sulphide.

At Coho, output peaked at 19.8mln cubic feet which is the equivalent of 3,300 barrels of oil per day, and averaged 2,917 of crude equivalent.

According to Touchstone, the Ortoire results mark "a new era" for the company, adding significant natural gas volumes to its production base.

Significantly, for context, Coho was one of the smallest prospects in the Ortoire exploration programme.

Responding to coronavirus

On 26 March, Touchstone said it would press ahead with the drilling of the Chinook prospect – designed to follow-up Cascadura and Coho in the Ortoire acreage.

Whilst responding to the challenges created by the coronavirus, the company’s operational focus is on delivering the Coho and Cascadura discovery wells - which will significantly boost production volumes - and drill Chinook.

Posting full-year results on Thursday, the AIM-quoted oil firm also noted that it has immediately responded to the significant global economic uncertainty created by the Covid-19 pandemic and the unprecedented decline in crude oil prices.

“Aside from voluntarily restricting certain field operations, the company has had no operational impacts from COVID-19 to date, and we will monitor the situation and adapt our operations accordingly,” Touchstone said.

It added: “Our low base production decline rate, strong operating netbacks, top-tier capital efficiencies, lack of development drilling commitments and solely operated exploration capital program provide flexibility in this volatile market.”

Executive interview – CEO Paul Baay

What brokers say

In February, Shore Capital analyst Craig Howie, in a note, said: “an average flow rate of 27mmcfd  of  gas  was achieved during the final extended test period, with almost 700bopd of associate liquids reported and the well exceeding expectations (ahead of testing of an upper zone covering 450ft of identified pay).”

“With these flow rates translating into a very substantial 5,180boepd in oil equivalent terms, and the upper zone at Cascadura providing additional potential beyond this.”

Results to date gave house broker Shore Cap enough confidence for it to significantly upgrade forecasts production forecasts for 2021, which in turn lift the broker’s estimate of US$7.7mln profit next year.

“Our latest forecasts (and recently upgraded 48p/share Risked NAV estimate) are intended to provide a conservative baseline ahead of a further update on Cascadura testing next month,” Howie said.

“We therefore see an upside bias to further revisions, as more information emerges in the coming weeks, along with considerable remaining running room for Touchstone shares.” Howie added: “we already expect this liquids-rich gas discovery to provide a step-change for Touchstone’s production profile, beyond the success previously achieved with Coho-1.

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on 15/11/18

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