TIDMTXP
RNS Number : 9110F
Touchstone Exploration Inc.
10 November 2022
THIRD QUARTER 2022 FINANCIAL AND OPERATING RESULTS
CALGARY, ALBERTA (November 10, 2022) - Touchstone Exploration
Inc. ( " Touchstone ", "we", "our", "us" or the " Company " ) (TSX,
LSE: TXP) reports its operating and financial results for the three
and nine months ended September 30, 2022. Selected information is
outlined below and should be read in conjunction with our September
30, 2022 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 ) and on our website ( www.touchstoneexploration.com
). Unless otherwise stated, all financial amounts herein are
rounded to thousands of United States dollars .
Third Quarter 2022 Financial and Operational Highlights
-- Produced quarterly average crude oil volumes of 1,272 bbls/d,
representing a 10 percent decrease relative to the preceding
quarter and a 5 percent decrease from the 1,333 bbls/d produced in
the third quarter of 2021, as three key wells were down in the
quarter.
-- Realized petroleum sales of $9,933,000 from an average crude
oil price of $84.85 per barrel compared to $7,650,000 from an
average realized price of $62.37 per barrel in the comparative
quarter of 2021.
-- Generated an operating netback of $37.55 per barrel, a 17
percent decrease from the second quarter of 2022 and a 35 percent
increase from $27.77 per barrel in the third quarter of 2021, with
the variances primarily attributed to movements in realized crude
oil pricing.
-- Recognized current income tax expenses of $1,381,000 in the
quarter compared to $377,000 in the third quarter of 2021, driven
by $1,173,000 in supplemental petroleum tax ("SPT") expenses based
on our average realized oil price exceeding the $75.00 per barrel
threshold in the period.
-- Our funds flow from operations was $290,000 in the quarter
compared to $1,073,000 in the prior year equivalent quarter, and
our year to date funds flow from operations increased 1 percent
from the same period of 2021.
-- Recognized a net loss of $778,000 in the quarter compared to
a net loss of $51,000 reported in the same period of 2021,
principally driven by higher current income tax expenses.
-- Capital investments of $2,899,000 primarily focused on
facility and pipeline expenditures related to the Coho-1 natural
gas facility and investments directed to the Cascadura natural gas
and liquids facility.
-- Exited the quarter with cash of $8,732,000, a working capital
deficit of $4,537,000 and a $28,500,000 term credit facility
balance, resulting in a net debt position of $27,037,000.
Post Period-End Highlights
-- Delivered first natural gas from the Coho facility on October
10, 2022, with net October sales over 19 operating days averaging
7.3 MMcf/d (1,212 boe/d).
-- In conjunction with initial Coho production, we sold the
gathering pipeline from our Coho facility to the third party
natural gas facility for net proceeds of $1.2 million.
-- Daily crude oil sales averaged 1,304 bbls/d in October 2022
with a realized price of $81.32 per barrel.
-- Clearing of the surface location expansion area has been
completed at the Cascadura facility site.
Paul Baay, President and Chief Executive Officer, commented:
"The focus of the third quarter was the completion of the Coho
natural gas facility which is currently on production, providing us
with our first natural gas revenues in October. Our base oil
production continues to generate positive operating cash flows
while we progress on construction of the Cascadura natural gas and
liquids facility. Production from our Cascadura discoveries will
mark an inflection point for Touchstone, both from a cash flow and
production volume basis. As we plan for our next stage of
production growth, we are targeting further expansion of our
onshore asset portfolio, through both the Trinidad 2022 onshore bid
round and by considering other licence acquisition opportunities to
expand our exploration and development acreage in prospective areas
in Trinidad."
Financial and Operating Results Summary
Three months % change % change
ended September Nine months ended
30, September 30,
---------------------------- --------- ---------
2022 2021 2022 2021
---------------------------- --------- -------- --------- --------- --------- ---------
Operational
Average daily production
(bbls/d)
Crude oil(1) 1,272 1,333 (5) 1,362 1,344 1
NGLs - - - - 3 (100)
---------------------------- --------- -------- --------- --------- --------- ---------
Average daily production 1,272 1,333 (5) 1,362 1,347 1
---------------------------- --------- -------- --------- --------- --------- ---------
Average realized prices(2)
($/bbl)
Crude oil 84.85 62.37 36 88.80 58.09 53
NGLs - - - - 46.32 (100)
---------------------------- --------- -------- --------- --------- --------- ---------
Realized commodity
price 84.85 62.37 36 88.80 58.06 53
---------------------------- --------- -------- --------- --------- --------- ---------
Operating netback
($/bbl)
Realized commodity
price(2) 84.85 62.37 36 88.80 58.06 53
Royalties(2) (29.14) (19.36) 51 (30.97) (17.75) 74
Operating expenses(2) (18.16) (15.24) 19 (17.60) (14.90) 18
---------------------------- --------- -------- --------- --------- --------- ---------
Operating netback(2) 37.55 27.77 35 40.23 25.41 58
---------------------------- --------- -------- --------- --------- --------- ---------
Financial
($000's except per
share amounts)
Petroleum sales 9,933 7,650 30 33,025 21,356 55
Cash from operating
activities 3,092 384 705 6,941 158 4,293
Funds flow from operations 290 1,073 (73) 2,849 2,816 1
Net loss (778) (51) 1,425 (1,276) (795) 61
Per share - basic
and diluted (0.00) (0.00) - (0.01) (0.00) n/a
Exploration capital
expenditures 2,692 7,542 (64) 7,498 17,160 (56)
Development capital
expenditures 207 2,315 (91) 1,323 2,567 (48)
---------------------------- --------- -------- --------- --------- --------- ---------
Capital expenditures(2) 2,899 9,857 (71) 8,821 19,727 (55)
---------------------------- --------- -------- --------- --------- --------- ---------
Working capital deficit(2) 4,537 4,657 (3)
Principal long-term
bank loan 22,500 7,125 216
Net debt(2) - end
of period 27,037 11,782 129
---------------------------- --------- -------- --------- --------- --------- ---------
Share Information
(000's)
Weighted average shares
outstanding - basic
and diluted 212,647 210,732 1 211,898 209,968 1
Outstanding shares
- end of period 213,113 210,732 1
Notes:
(1) References to crude oil production volumes in the above
table and elsewhere in this announcement refer to light, medium and
heavy crude oil product types as defined in National Instrument
51-101 - Standards of Disclosure for Oil and Gas Activities. Our
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
given 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.
Operational Update
Coho
On October 10, 2022, we achieved first natural gas production
from our Coho facility located on the Ortoire block, in which we
have an 80 percent operating working interest. In conjunction with
initial production, we sold the 2.7-kilometre, 6-inch gathering
line tying in the Coho facility to the Baraka natural gas facility
to The National Gas Company of Trinidad and Tobago Limited for net
proceeds of $1,200,000.
Over 19 operational days in October, the Coho-1 well delivered
average net October sales of 7.3 MMcf/d (approximately 1,212 boe/d)
on a controlled choke. We will continue to optimize production from
the well as conditions stabilize.
Cascadura
On August 16, 2022, we received a Certificate of Environmental
Clearance to conduct development operations within the Cascadura
area of the Ortoire block from the Trinidad and Tobago
Environmental Management Authority. On September 15, 2022, we
received approval from the Forestry Division of the Trinidad and
Tobago Ministry of Agriculture, Land and Fisheries to commence
lease building operations.
Work on the surface location is progressing, as the clearing of
the lease expansion area has been completed, and we are currently
levelling and preparing the area for pouring of the concrete
foundation. Components for the facility are currently being
fabricated by local contractors or being imported to Trinidad in
completed form. Once the concrete foundation has been completed,
delivery of the facility equipment will commence. We are currently
targeting completion of the facility by the end of the first
quarter of 2023.
Licences and work obligations
Under the terms of our lease operating agreements with Heritage
Petroleum Company Limited ("Heritage"), we are required to fulfill
minimum work obligations on an annual basis over the specific
licence term. With respect to these obligations, we have four
development wells and three heavy workover commitments to perform
in 2022. Touchstone has notified Heritage its intent to defer the
development drilling commitments to 2023.
We have completed all of our minimum work commitment obligations
pursuant to our Ortoire block exploration and production licence.
In March 2022, we were notified that the Trinidad and Tobago
Ministry of Energy and Energy Industries approved an extension to
the exploration period of the licence to July 31, 2026. The licence
amendment agreement has been approved by the Trinidad and Tobago
government and is awaiting formal execution. Upon execution, we
will be required to drill three exploration wells prior to the end
of the amended term.
Trinidad fiscal regime
In October 2022, the Trinidad and Tobago government proposed an
amendment to the current SPT regime, allowing small onshore liquids
producers to access the increased $75.00 SPT threshold incentive
post 2022. If enacted, this fiscal measure will potentially reduce
the SPT expenses applicable to liquids produced from our two
Trinidadian subsidiaries in 2023 and beyond. More importantly, we
welcome the news that an energy sector review will be performed and
are hopeful that additional measures to support the Trinidad energy
sector are considered.
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)
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
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
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
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 crude oil and NGL sales volumes
for the period.
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 flows 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
Touchstone closely monitors its capital structure with a goal of
maintaining a strong financial position to fund current operations
and future growth. Working capital and net debt are capital
management measures used by Management to steward the Company's
overall debt position and assess overall financial strength.
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 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) long-term amount of senior secured
debt.
Supplementary Financial Measures
The following supplementary financial measures are disclosed
herein.
Realized commodity price per barrel - is comprised of petroleum
sales as determined in accordance with IFRS, divided by the
Company's total production volumes for the period.
Royalties per barrel - is comprised of royalties as determined
in accordance with IFRS, divided by the Company's total production
volumes for the period.
Operating expenses per barrel - is comprised of operating
expenses as determined in accordance with IFRS, divided by the
Company's total production volumes for the period.
Refer to the "Non-GAAP Financial Measures" advisory section in
the Company's September 30, 2022 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 the Company's
development and exploration plans and strategies, including the
number of development and exploration opportunities, anticipated
completion of the Cascadura facility and the timing thereof,
estimated future Cascadura natural gas and liquids production, the
anticipated reduction of future income taxes if proposed fiscal
measures are enacted into law, 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 is available under the Company's profile on SEDAR (
www.sedar.com ) and on the Company's website (
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.
Oil and 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.
Abbreviations
boe barrels of oil equivalent
boe/d barrels of oil equivalent per day
Mcf thousand cubic feet
MMcf/d million cubic feet per day
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END
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