A few oil & gas investors may have missed this company on the London Stock Market, Touchstone Exploration Inc. One of the largest independent onshore oil producers in Trinidad, Operator of approximately 78,000 gross acres of exploration and development rights and listed on AIM 26 June 2017.
Highlights:
Touchstone has an experienced management and executive team with a track record of delivering value to shareholders
Paul Baay, President and Chief Executive Officer of Touchstone, founded True Energy Inc. which increased production between 2000 and 2007 from 350 boepd to 20,000 boepd
True Energy Inc. then split into Bellatrix Exploration Inc. and Vero Energy Inc.; subsequently Vero Energy Inc. was sold to TORC Oil and Gas Ltd. for approximately C$200 million in 2012
Touchstone is one of the largest independent onshore oil producers in Trinidad, currently producing 1,300 bbls/d
Operator of approximately 78,000 gross acres of exploration and development rights
Touchstone has a low risk production business model with material upside
Low finding and development costs: C$7.35 per barrel for proved reserves and C$6.00 per barrel for proved plus probable reserves
Low operating costs per barrel and low decline rate – resilient in a low oil price environment 208 potential development drilling locations and potential exploration upside
Touchstone has a strong reserve base
Proved reserves of 8.97 Mbbl with an net present value (“NPV”) (10% discount after tax) of C$72.7 million and a reserve life index of 15.1 years
Proved plus probable reserves of 15.7 Mbbl with an NPV (10% discount after tax) of C$130.7 million and a reserve life index of 24.0 years
Proved plus probable plus possible reserves of 20.4 Mbbl with an NPV (10% discount after tax) of C$169.0 million with a reserve life index of 28.7 years
Only 37.5% of potential drilling locations booked under the proved plus probable case
· Achieved July 2017 and August 2017 crude oil sales of 1,349 and 1,591 barrels per day (“bbls/d”), respectively.
· The first two wells of the 2017 drilling program drilled on the Coora 1 block have been on production for the last 90 days at an average combined rate of 202 bbls/d; current field estimated production from the two wells is 246 bbls/d.
· The final two wells of the 2017 drilling program drilled on the Grand Ravine WD-4 block have been on production for the last 49 days at an average combined rate of 97 bbls/d; current field estimated production from the two wells is 139 bbls/d.
Production
Touchstone’s July and August 2017 crude oil production averaged 1,470 bbls/d. The increase was buoyed by incremental production from the four well drilling campaign as well as continued production from recompletions conducted earlier in the year. The Company’s current field estimated production is approximately 1,500 bbls/d.
Drilling Campaign
Coora 1 Block
The CO-368 well was completed on June 13, 2017 with 15 feet of oil sand being perforated in the Cruse Formation. The well has produced approximately 4,700 barrels of oil in 90 days of production, an average of 52 bbls/d. On September 8, 2017, the Company added 26 feet of additional perforations originally planned as part of the initial completion, and the well is currently producing at a field estimated rate of 76 bbls/d.
CO-369 was completed on June 23, 2017 with 45 feet of oil sand being perforated in the Cruse Formation. The well is currently pumping and produced an average daily oil production rate of 166 bbls/d over the first 81 days. To date, CO-369 has produced approximately 13,400 barrels of oil, and current field estimated production is 170 bbls/d.
Grand Ravine WD-4 Block
The PS-598 well was completed on July 23, 2017 and placed on production on July 26, 2017. The initial completion evaluated a 15-foot interval below the primary zone of interest and incurred higher than expected water cuts. Production from the zone was suspended on August 22, 2017, and the primary zone of interest was perforated on August 25, 2017. The well has produced approximately 1,400 barrels of oil in 49 days, representing an average of 29 bbls/d. The well is currently flowing at a controlled, field estimated rate of 23 bbls/d on an 9/32″ choke. The Company will continue to monitor and optimize this well.
PS-599 was completed on July 26, 2017 and placed on production on July 28, 2017. The well has produced approximately 3,350 barrels over the first 47 days of production, flowing an average of 71 bbls/d. The well was recently equipped with a pump to optimize production and is currently producing at a field estimated rate of 116 bbls/d.
James Shipka, Chief Operating Officer, said:
“Touchstone is very encouraged by the early results of our drilling program. The four wells were targeting slightly deeper horizons in established fields and the results have exceeded our internal expectations.”
Paul Baay, President and Chief Executive Officer, commented:
“This positive operational and production update represents another exciting milestone for Touchstone. Achieving August crude oil sales of 1,591 bbls/d is a testament to our ability to deploy capital rapidly, to drive production and add further growth to our business. We are currently assessing the potential to drill an additional four wells prior to the end of the year subject to acceptable commodity pricing and approval from our Board.”
Notes to Editors
Touchstone is an oil exploration and production company active in Trinidad, with an experienced management and executive team which has a track record of delivering value to shareholders. Touchstone is one of the largest independent onshore oil producers in Trinidad, currently producing 1,300 bbls/d and has a low risk production business model, with a strong reserve base of proved reserves of 8.97 Mbbl, proved plus probable reserves of 15.7 Mbbl and proved plus probable plus possible reserves of 20.4 Mbbl.
Strategy
Touchstone’s long-term strategy is to leverage the Board of Director’s (the “Board”) enhanced oil recovery experience and capability to develop international onshore properties to create shareholder value. Throughout 2016 the Board executed on this strategy deploying exploration and development capital with financial discipline, focused on operations directly related to maintaining production from the Company’s core Trinidad developmental properties. Touchstone’s strategy is to spend 10% of its capital budget on exploration. The Board believes there are compelling economics behind focusing capital expenditures on the development of the Company’s existing production assets.
