TIDMTXP
RNS Number : 2018F
Touchstone Exploration Inc.
13 November 2020
THIRD QUARTER 2020 RESULTS
CALGARY, ALBERTA (November 13, 2020) - Touchstone Exploration
Inc. ( " Touchstone ", "we", "our", "us" or the " Company " ) (TSX,
LSE: TXP) reports its unaudited financial and operating results for
the three months ended September 30, 2020. Selected information is
outlined below and should be read in conjunction with Touchstone's
September 30, 2020 unaudited consolidated interim financial
statements and related Management's Discussion and Analysis, both
of which will be available on the Company's website (
www.touchstoneexploration.com ) and under the Company's profile on
SEDAR ( www.sedar.com ). Unless otherwise stated, all financial
amounts herein are rounded to thousands of United States dollars
.
Third Quarter Highlights
-- Delivered average daily crude oil production of 1,310 barrels
per day ("bbls/d"), compared to 1,396 bbls/d in the second quarter
of 2020 and 1,729 bbls/d in the third quarter of 2019. As expected
and consistent with prior quarters, our crude oil production has
reduced due to the ongoing impact of natural declines, reflecting a
strategic focus on our Ortoire exploration program which has
limited capital investment and reduced discretionary field
maintenance expenditures.
-- Invested $5,758,000 in exploration activities, primarily
focused on Chinook-1 drilling operations and surface facility
equipment expenditures relating to Coho-1 tie-in operations.
-- Generated funds flow from operations of $192,000 and an
operating netback of $14.09 per barrel, representing increases from
the second quarter of 2020 based on higher realized crude oil sales
pricing.
-- Continued to focus on discretionary cost reductions, with
operating costs on a per barrel basis decreasing by 10 percent and
general and administrative expenses declining by 9 percent relative
to the third quarter of 2019.
-- Recognized a net loss of $703,000 ($0.00 per share) compared
to a net loss of $1,053,000 ($0.01 per share) in the third quarter
of 2019 despite a 47 percent reduction in petroleum revenues
between the corresponding periods.
-- Maintained financial flexibility, exiting the quarter with
cash of $7,673,000 and raising gross proceeds of approximately
$30.3 million via a private placement completed on November 12,
2020.
Paul R. Baay, President and Chief Executive Officer,
commented:
"The Board's focus remains on our Ortoire property where
exploration activities to date have significantly exceeded
expectations. Our base crude oil production continues to cover our
operating costs, allowing us to direct our capital exclusively to
our ongoing exploration program. The oversubscribed private
placement completed post period end places us in a strong position
to continue the execution of our Ortoire drilling, production
testing and tie-in operations. We are currently drilling our fourth
exploration well, Cascadura Deep-1, and we are in the process of
finalizing a nine-month extension to the exploration phase of the
Ortoire licence. Alongside this, we continue to negotiate a natural
gas sales agreement with the National Gas Company of Trinidad and
Tobago. I look forward to updating our shareholders as operations
progress."
Third Quarter Summary and Outlook
Despite the ongoing challenges as a result of COVID-19, we
continued to manage our business prudently during the quarter,
achieving positive cash flows despite limited developmental capital
activity since 2018 and progressing with our Ortoire exploration
program while maintaining safe and reliable operations. Our
investment focus remains on the Ortoire exploration block, as we
spudded our third drilling prospect (Chinook-1) in the quarter
which reached total depth in mid-October. We believe our operating
and general and administrative ("G&A") cost reductions
initiated in the second quarter of 2020 have enhanced our financial
resilience and financial capability to maintain our base production
and to deliver safe operations.
We remain focused on protecting the health of our employees and
communities while ensuring a decisive response for our investors.
We will continue to follow the advice of public health officials in
supporting our employees, their families and our business partners.
Our objective remains to bring our two natural gas exploration
discoveries onto production as soon as possible, which are expected
to not only increase cash flow but insulate us from further crude
oil price volatility from the continued effects of COVID-19.
Drilling operations are ongoing at our Cascadura Deep-1 prospect,
and we anticipate commencing production testing at our Chinook-1
discovery upon completion.
The rapid decline in oil prices had a negative impact on our
cash flows during the nine months ended September 30, 2020 and our
projections for the balance of the year. Ongoing weakness in
commodity prices resulting from COVID-19 impacts on demand and
market volatility may adversely affect our future financial and
operational results. We continue to monitor the situation and
economic environment, and we will continue to adapt our business
operations and exploration program to ensure that we preserve and
grow long-term shareholder value.
On the basis of the successful results from the first three
Ortoire exploration wells, we undertook a private placement that
closed on November 12, 2020 in order to support the completion of
the initial phase of exploration work on the Ortoire block. The
private placement raised gross proceeds of approximately $30.3
million by way of a placing of 24,291,866 common shares at a price
of 95 pence (C$1.64). We believe this enhanced liquidity will allow
us to continue with our exploration program at an optimal pace,
with a focus on bringing our initial exploration discoveries onto
production in 2021.
Financial and Operating Results Summary
Three months ended % change Nine months ended % change
September 30, September 30,
--------- ---------
2020 2019 2020 2019
--------------- ---------------------- ---------------------- --------- ---------------------- ---------------------- ---------
Operating
Highlights
Average daily
oil
production(1)
(bbls/d) 1,310 1,729 (24) 1,431 1,871 (24)
Net wells
drilled - 0.8 n/a - 0.8 n/a
Brent
benchmark
price
($/bbl) 42.91 61.95 (31) 41.15 64.65 (36)
Operating
netback(2)
($/bbl)
Realized
sales price 39.20 56.67 (31) 38.54 58.21 (34)
Royalties (11.17) (16.61) (33) (10.82) (16.32) (34)
Operating
expenses (13.94) (15.50) (10) (13.06) (14.82) (12)
--------------- ---------------------- ---------------------- --------- ---------------------- ---------------------- ---------
14.09 24.56 (43) 14.66 27.07 (46)
--------------- ---------------------- ---------------------- --------- ---------------------- ---------------------- ---------
Notes:
(1) The Company's reported crude oil production is a mix of
light and medium crude oil and heavy crude oil for which there is
not a precise breakdown since the Company's oil sales volumes
typically represent blends of more than one type of crude oil.
(2) Non-GAAP financial measure that does not have a standardized
meaning prescribed by International Financial Reporting Standards
("IFRS") and therefore may not be comparable with the calculation
of similar measures presented by other companies. See "Advisories:
Non-GAAP Measures" for further information.
Three months ended % change Nine months ended % change
September 30, September 30,
--------- ---------
2020 2019 2020 2019
---------------- ----------------------- ----------------------- --------- ----------------------- ----------------------- ---------
Financial
Highlights
($000's except
as
indicated)
Petroleum sales 4,725 9,011 (48) 15,178 29,734 (49)
Cash flow from
(used
in) operating
activities 4,126 (1,205) n/a 2,129 3,364 (37)
Funds flow
from
operations(2) 192 1,082 (82) 999 4,822 (79)
Per share -
basic
and
diluted(1)(2) 0.00 0.01 (100) 0.01 0.03 (67)
Net loss (703) (1,053) (33) (12,685) (2,071) 513
Per share -
basic
and diluted (0.00) (0.01) (100) (0.07) (0.01) 600
Exploration
capital
expenditures 5,758 3,234 78 8,830 4,275 107
Development
capital
expenditures 211 517 (59) 523 1,231 (58)
---------------- ----------------------- ----------------------- --------- ----------------------- ----------------------- ---------
Total capital
expenditures 5,969 3,751 59 9,353 5,506 70
---------------- ----------------------- ----------------------- --------- ----------------------- ----------------------- ---------
Working
capital
(surplus)
deficit(1) (869) 805 n/a
Principal
balance
of term loan 15,000 11,328 32
Net debt(1) -
end
of period 14,131 12,133 16
---------------- ----------------------- ----------------------- --------- ----------------------- ----------------------- ---------
Share
Information
(000's)
Weighted
average shares
outstanding -
basic
and diluted 184,277 160,688 15 179,112 154,192 16
Outstanding
shares
- end of
period 184,408 160,688 15
Notes:
(1) Non-GAAP financial measure that does not have a standardized
meaning prescribed by IFRS and therefore may not be comparable with
the calculation of similar measures presented by other companies.
See "Advisories: Non-GAAP Measures" for further information.
(2) Additional GAAP term included in the Company's consolidated
statements of cash flows. Funds flow from operations represents net
loss excluding non-cash items. See "Advisories: Non-GAAP Measures"
for further information.
Operating results
In the third quarter of 2020, we invested $5,758,000 in
exploration activities, which were predominantly Chinook-1 drilling
and Coho-1 tie-in expenditures. The Chinook-1 well reached its
target depth on October 13, 2020, and we are awaiting regulatory
approval to commence installation of the Coho-1 surface facility
equipment and pipeline operations.
We conducted minimal developmental activity in the quarter, with
average crude oil sales declining to 1,310 bbls/d, a 6 percent
decrease relative to the 1,396 bbls/d produced in the second
quarter of 2020 and a 24 percent reduction from 1,729 bbls/d
produced in the third quarter of 2019. Our crude oil sales volumes
have decreased due to the ongoing impact of natural declines
associated with limited capital investment since the final two
wells of the 2018 drilling program were brought onstream in January
2019. Further, since March 2020 we have deliberately reduced
discretionary operating expenditures in response to lower crude oil
pricing, focusing on performing well interventions on those deemed
high priority. Development capital activity for the fourth quarter
of 2020 is expected to be minimal as we continue to focus on our
exploration program.
Financial results
We reported nominal funds flow from operations of $192,000 in
the third quarter of 2020 versus $1,082,000 generated in the 2019
third quarter. The decrease reflected a 31 percent reduction in our
average realized crude oil prices as a result of the impact of the
COVID-19 pandemic and a 24 percent decline in crude oil production
from limited capital and operational investment.
We recorded a net loss of $703,000 ($0.00 per share) in the
third quarter of 2020 versus a net loss of $1,053,000 ($0.01 per
share) in the prior year equivalent quarter despite a 47 percent
reduction in petroleum revenues over the equivalent period. The
decrease in petroleum revenues was driven by a 24 percent decline
in crude oil production, a 31 percent reduction in realized average
crude oil pricing, and a corresponding 49 percent decrease in
royalty expenses. We continued with our cost-saving initiatives in
the third quarter, as quarterly operating costs decreased 32
percent and 10 percent on an absolute and per barrel basis from the
third quarter of 2019. In addition, we reduced third quarter 2020
G&A expenses by 9 percent in comparison to the third quarter of
2019. Relative to the third quarter of 2019, current income tax
expense decreased by $1,146,000 or 95 percent, reflective of
$1,087,000 of supplemental petroleum taxes incurred in the prior
year third quarter from higher realized crude oil pricing.
Touchstone exited the quarter with a working capital surplus of
$869,000, $15 million withdrawn on our term credit facility and net
debt of $14,131,000. Our liquidity is augmented by $5 million of
undrawn credit capacity, as well as the net proceeds from the
private placement that closed subsequent to quarter-end.
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 or contact:
Touchstone Exploration Inc.
Mr. Paul Baay, President and Chief Executive Officer Tel: +1
(403) 750-4487
Mr. Scott Budau, Chief Financial Officer
Shore Capital (Nominated Advisor and Joint Broker)
Nominated Advisor: Edward Mansfield / Daniel Bush / Michael McGloin Tel: +44 (0) 207 408 4090
Corporate Broking: Jerry Keen
Canaccord Genuity (Joint Broker)
Adam James / Henry Fitzgerald O'Connor / Thomas Diehl Tel: +44
(0) 207 523 8000
Camarco (Financial PR)
Nick Hennis / Billy Clegg Tel: +44 (0) 203 781 8330
Advisories
Non-GAAP Measures
This announcement contains terms commonly used in the oil and
natural gas industry, including funds flow from operations, funds
flow from operations per share, operating netback, working capital
and net debt. These terms do not have a standardized meaning
prescribed under Generally Accepted Accounting Principles ("GAAP")
or IFRS and may not be comparable to similar measures presented by
other companies. Shareholders and investors are cautioned that
these measures should not be construed as alternatives to cash flow
from operating activities, net earnings, net earnings per share,
total assets, total liabilities, or other measures of financial
performance as determined in accordance with GAAP. Management uses
these Non-GAAP measures for its own performance measurement and to
provide stakeholders with measures to compare the Company's
operations over time.
Funds flow from operations is an additional GAAP measure
included in the Company's consolidated statements of cash flows.
Funds flow from operations represents net earnings (loss) excluding
non-cash items. Touchstone considers funds flow from operations to
be an important measure of the Company's ability to generate the
funds necessary to finance capital expenditures and repay debt. The
Company calculates funds flow from operations per share by dividing
funds flow from operations by the weighted average number of common
shares outstanding during the applicable period.
The Company uses operating netback as a key performance
indicator of field results. Operating netback is presented on a
total and per barrel basis and is calculated by deducting royalties
and operating expenses from petroleum sales. If applicable, the
Company also discloses operating netback both prior to realized
gains or losses on derivatives and after the impacts of derivatives
are included. Realized gains or losses represent the portion of
risk management contracts that have settled in cash during the
period, and disclosing this impact provides Management and
investors with transparent measures that reflect how the Company's
risk management program can impact netback metrics. The Company
considers operating netback to be a key measure as it demonstrates
Touchstone's profitability relative to current commodity prices.
This measurement assists Management and investors with evaluating
operating results on a historical basis.
The Company closely monitors its capital structure with a goal
of maintaining a strong financial position in order to fund current
operations and the future growth of the Company. The Company
monitors working capital and net debt as part of its 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 is
calculated by summing the Company's working capital and the
principal (undiscounted) non-current amount of senior secured
debt.
Please refer to the Company's September 30, 2020 Management's
Discussion and Analysis for reconciliations of Non-GAAP Measures
contained 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
is not limited to, statements relating to the Company's exploration
plans and strategies, including anticipated drilling, timing,
production testing, development, tie-in, facilities construction,
and ultimate production from exploration wells; the Company's
expectation regarding future demand for the Company's petroleum
products and economic activity in general; the impacts of COVID-19
on the Company's business and measures taken in response thereto;
uncertainty regarding COVID-19 and the impact it will have on
future petroleum pricing, global financial markets and the
Company's operations; and the sufficiency of resources and
available financing 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 2019 Annual
Information Form dated March 25, 2020 which has been filed on SEDAR
and can be accessed at www.sedar.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.
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END
QRTFXLBFBFLZFBK
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