viewTouchstone Exploration Inc

Touchstone Exploration is accelerating exciting exploration at Ortoire project


  • Trinidad basad producer
  • Coho and Cascadura wells beat expectations
  • Chinook well is next
  • Ortoire campaign accelerated

Quick facts: Touchstone Exploration Inc

Price: 117 GBX

Market: AIM
Market Cap: £244.18 m

If you look around the world natural gas prices are getting quite strong, so it is going to be an ideal time to be bringing on additional gas over the next twelve to eighteen months.

Paul Baay, chief executive

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).

Successes in the first two wells at Ortoire have exceeded expectations and have driven production growth.


Production and financial performance

Touchstone released second-quarter results in August confirming average daily

It reported meaningful cost reductions, with operating costs down 28%.Financially, the company reported a US$2.74mln net loss, narrowed from the US$9.24mln it lost in the preceding quarter.

Touchstone highlighted that it had enhanced its financial flexibility and reduced its overall cost of borrowing, by refinancing long-term debt. It exited the quarter with some US$6.89mln of cash, and had US$8.46mln of net debt.


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

Test 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

Touchstone said it supports a possible initial production range of 7,750 to 9,700 boepd, including 1,100 to 1,400 barrels of gas liquids.

An independent report in July, confirmed Cascadura as a significant discovery in a new independent reserves report. Consultant GLJ Ltd has estimated Cascadura hosts between 241.2 and 571.5 billion cubic feet of discovered natural gas in place, with the ‘best’ estimate pitched at 398.5bn.

Before Cascadura, the company made its first impressive discovery in the Ortoire block at 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.

Success at Coho was particularly encouraging as it was one of the smaller identified prospects within Ortoire yet provided a strong result.

Operations for the Chinook-1 well kicked off in August.

Chinook-1 is targeting hydrocarbon prospects in the Herrera formation, the same horizon found in the successful Coho and Cascadura discoveries. It will be drilled to depth of 9,880 feet and the drill programme is expected to take 40 days.

The plan is to complete next two well and bring any successes online at the same time as Cascadura, in 2021.

In the meantime Coho could be delivering gas by October 2020, as Touchstone continues its efforts to construct key pieces of infrastructure and seal necessary permits.


Executive interview – CEO Paul Baay


What brokers say

Success at Chinook-1 would provide another major uplift to the valuation and the growth outlook, suggest finnCap.

Production has taken a back seat to the drilling programme, but impressive cost reductions and cash preservation efforts leave Touchstone in a healthy financial position with US$15mln of available liquidity, said the broker.

“Touchstone remains not only an exciting high-impact exploration play but also a strong production and cash flow growth story as it looks to rapidly bring its material low-cost gas/condensate discoveries onshore Trinidad into production”.

The broker has a target price of 91p.

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Touchstone Exploration raises US$30m for production at Ortoire project

Touchstone Exploration's (LON:TXP) Paul Baay explains why the company has decided to raise US$30m via a share placing. Baay talks through the reason for the funding, which is to advance ongoing and successful programmes within the Ortoire project. The Trinidad oil and gas firm is issuing...

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