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Touchstone Exploration Inc: DEEP DIVE

Touchstone Exploration prepares to spud at Ortoire block, production jumps in first quarter

In June, Touchstone CEO chief executive Paul Baay said the company was ready to spud the first well on the Ortoire block, which according to a prospect evaluation by GLJ has an estimated net present value between US$10.5mln and US$86.86mln
OVERVIEW: TXP The Big Picture
The company reported a 37% rise in production in the first quarter of 2019
  • Trinidad's largest onshore independent oil producers

  • Independent evaluation on Ortoire shows potential for a multi-year exploration campaign

  • 37% inprovement in production for Q1 2019


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.

The firm started off 2019 producing about 1,900 barrels of oil per day and is ramping up as it heads into the first quarter.

Last year was an active year for the company, having successfully drilled 11 wells and completed 28 well recompletions, and expects to maintain a similar pace in 2019.


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). To date, the company has only scratched the surface and it has identified four 'high grade' exploration opportunities that could host some prospective resources in a range of 5.49mln to 66.50mln barrels of oil equivalent (boe), according to recent estimates provided by GLJ Petroleum Consultants Ltd.


Inflection points

• In June, Touchstone CEO chief executive Paul Baay said the company was ready to spud their first well on the Ortoire block project, which according to a prospect evaluation process undertaken by GLJ has an estimated net present value between US$10.5mln and US$86.86mln

• In its results for the first quarter of 2019, Touchstone said its production in the period had averaged 2,121 barrels per day, a 37% improvement on the comparative period of 2018

• Over 2018, the company reported sales of US$48.9mln, up 53% from US$32mln a year before, as operating net-back similarly rose by 53% to US$34.58 per barrel, from US$22.56 in 2017


CEO interview – Paul Baay


Blue Sky

Looking across 2019, Touchstone is looking at growth through exploration, with Baay saying that following a £3.8mln private placement in February the company was funded to commence drilling at the Ortoire block, where there was a “significant opportunity to achieve a step-change in future reserves and production”.

“We will take a measured approach to our 2019 capital drilling program as we focus on our exploration opportunities", the CEO added.


What the broker says

Commenting on the company’s first quarter results in May, analysts at Touchstone’s ‘house’ broker Shroe Capital said the firm was “tracking very nicely” against their production forecasts for the full year and that they continued to see an “excellent opportunity” for investors to gain exposure to the Trinidadian operator.

With the shares trading at around 16.5p in London as of 21 June 2019, Touchstone carries a market cap of £26.5mln.

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