TIDMTXP
RNS Number : 6218C
Touchstone Exploration Inc.
22 June 2021
EXECUTION OF TEN-YEAR LEASE OPERATORSHIP AGREEMENTS
CALGARY, ALBERTA (June 22, 2021) - Touchstone Exploration Inc.
("Touchstone", "we", "our", "us" or the "Company") (TSX, LSE: TXP)
announces that we have executed ten-year Lease Operatorship
Agreements ("LOAs") with Heritage Petroleum Company Limited
("Heritage") for our CO-1, CO-2, WD-4 and WD-8 Blocks
(collectively, the "Blocks") effective January 1, 2021. The LOAs
governing our core legacy oil producing properties expire December
31, 2030 and were renewed under substantially similar terms to the
previous arrangements. In conjunction with the execution of the
LOAs, the Company's Board of Directors has approved the drilling of
one well on each Block in the second half of 2021.
Paul Baay, President and Chief Executive Officer, commented:
"Our suite of mature crude oil assets continues to provide
consistent and predictable base petroleum revenue as we expand our
operations in Trinidad on the Ortoire exploration property. With
the recovery of world oil prices, we are focusing on optimizing
these mature assets through well recompletion and workover
operations.
The new arrangements present an opportunity for us to drill
additional wells in the second half of 2021, with the expectation
that any increase in production will decrease overall royalties
under the revised fiscal structure. We have budgeted to drill four
wells on the Blocks prior to the end of the year at an average cost
of $1 million per well and expect to utilize the new drilling
equipment that we have contracted onto the island to perform the
drilling operations.
The long-term agreements will also allow us to evaluate deeper
exploration opportunities which we have identified on our CO-1 and
CO-2 Blocks. With legacy wells and new 3D seismic data from
Heritage, we plan to delineate a Coora Herrera turbidite trend for
future exploitation. In addition, the agreements will permit us to
target zero effluent discharge by the end of 2021, which is a major
Company-wide environmental initiative in our continued efforts to
significantly reduce the environmental footprint of our
operations.
We would also like to thank Heritage for engaging in
collaborative renewal negotiations, and we look forward to
continuing to work together as partners in the years to come. "
LOA Key Terms
Minimum production and work obligations
Under the new arrangements, the Company is subject to annual
minimum production levels and minimum work obligations from 2021
through 2030 specified under each LOA. Failing to reach either the
annual minimum production levels or complete the annual minimum
work obligations will not constitute a breach provided the minimal
production levels have been attained or the minimum work
obligations have been completed, as the case may be.
The LOAs contain an aggregate minimum of 20 new infill wells and
40 well recompletions to be completed over the licence periods.
Similar to the previous arrangements, we will be required to
provide aggregate guarantees to Heritage of approximately $0.5
million to support the future minimum work obligations .
Royalties
The new LOAs include favourably adjusted royalty rates to
incentivize increased production from all field activities.
In addition to the crown royalty rate of 12.5 percent, the LOAs
apply a sliding scale overriding royalty ("ORR") structure, which
is indexed to the average price of oil realized in a production
month. Base ORR rates are applicable to pre-defined monthly base
production levels which decline by 2 percent per annum. For any
monthly volumes sold in excess of base production levels, the
Company incurs reduced enhanced ORR rates. The former arrangements
allowed for new drill ORR incentives, which were reduced ORR rates
applicable to production from new wells drilled in the initial two
years. This concept has been replaced with the super enhanced ORR,
which contemplates a further reduction in royalty rates based on
increased property production from all field activities. The super
enhanced ORR applies a 50 percent reduction from enhanced ORR rates
for any production in excess of combined base and enhanced
production levels.
In the current realized oil price band (US$50.01 to US$70.01),
base ORR and enhanced ORR rates have decreased from the rates
specified under the previous licences by 15 percent and 11 percent,
respectively.
LOA Operations
Crude oil volumes from the properties governed by the LOAs
currently comprise approximately 87 percent of our 2021 crude oil
sales through May 31, 2021. With the execution of the new ten-year
arrangements, the Company will move forward with a number of
planned projects on the Blocks. The Blocks have significant oil in
place across multiple stacked sand reservoirs and offer tremendous
potential for recovery factor improvements through both primary and
secondary recovery development. In aggregate, we have identified 80
drilling opportunities on the Blocks and will prioritize the
projects based on economic parameters and liquidity. Initially the
Company expects to drill four development wells prior to the end of
2021 and will review the timing of future drilling on a regular
basis.
At Forest Reserve WD-8, we have identified three high-grade
drilling locations on the north-west section of the property which
are targeting the Lower Cruse Formation. The Lower Cruse Formation
has yielded exceptional production in previous drilling campaigns,
particularly following our successful 2018 drilling program. These
locations are focused on targets offsetting the FR-1801 well, which
to date has produced over 88,000 barrels of oil since its
completion in January 2019 and is currently producing approximately
37 barrels per day ("bbls/d"). Along with this planned drilling
program, the Company has applied for a pilot waterflood program
using the FR-1715 well which is anticipated to further enhance
production potential from the WD-8 Block.
At Grande Ravine WD-4, Touchstone has identified five initial
high-grade drilling locations, two of which target the Lower Cruse
Formation at depths of approximately 8,000 feet. Located on the
south side of the Los Bajos Fault, minimal development has been
completed in the Lower Cruse Formation in WD-4 compared to other
properties including our WD-8 Block located to the north. The
remaining three prospects target the shallower Upper and Middle
Cruse Formations which achieved exceptional results in our 2017 and
2018 drilling campaigns. Further development and a potential
exploration program on the WD-4 Block will be evaluated as new
information, including available 3D seismic data, is reviewed and
interpreted.
On our Coora Blocks (CO-1 and CO-2), we have identified three
development drilling locations to further evaluate the fault blocks
offsetting our 1CO-369 well which has produced in excess of 249,000
barrels of oil in four years of production and is currently
producing approximately 173 bbls/d. The Company is using historical
well data and anticipates available 3D seismic data will help us
evaluate the potential for an exploration well targeting oil in the
Herrera Formation. This is the same formation that we have been
pursuing on the Ortoire Block on the eastern side of the island and
is on trend with the Penal-Barrackpore field which is one of the
most productive onshore blocks in Trinidad. The Company is also
applying to commence a waterflood program at our 1QU-26 well where
initial injectivity testing has shown excellent recovery
potential.
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
Mr. James Shipka, Chief Operating 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
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 the Company's
development plans and strategies, including anticipated well
recompletions, workovers, waterflood programs and infill drilling,
drilling locations, timing thereof and ultimate production
therefrom ; the Company's estimate of oil in place and the
potential for increased recovery factors; estimated cumulative and
current field production levels; the Company's expectation of
reduced royalty rates based on expectations of increased
production; and the Company's expected achievement of zero effluent
discharge in its operations and the expected timing thereof .
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 2020 Annual Information Form dated March
25, 2021 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
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