Touchstone Reports Second Quarter 2024 Results

CALGARY, ALBERTA (August 13, 2024) - Touchstone Exploration Inc. ("Touchstone", "we", "our" or the "Company") (TSX, LSE: TXP) reports financial and operating results for the three and six months ended June 30, 2024 and updated 2024 guidance.

Selected financial information is outlined below and should be read in conjunction with our June 30, 2024 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.sedarplus.ca) and on our website (www.touchstoneexploration.com). Unless otherwise stated, all financial amounts presented herein are rounded to thousands of United States dollars, and all production volumes disclosed herein are sales volumes based on Company working interest before royalty burdens.

Paul R. Baay, President and Chief Executive Officer, commented:

"Our results for the first half of 2024 highlight Touchstone's remarkable transformation over the past year, with notable improvements in both financial and production performance compared to the previous year. The second quarter has been particularly productive, marked by our efforts to optimize production, enhance processing capacity, and tie in our new wells to the Cascadura natural gas facility. We were excited to increase average sales volumes to 5,816 boe/d in July 2024, following the successful recompletion of the Cascadura Deep-1 well, representing an 18 percent increase from June 2024.

Since we began production at Cascadura in September 2023, we have gained valuable insights into the reservoir that will benefit our future drilling initiatives. However, we have observed that field declines have been steeper than anticipated, leading us to adjust our midpoint forecasted 2024 average production to 8,000 boe/d. Consequently, we now project an approximate annual funds flow from operations of $28 million for 2024.

Following our drilling program in the first half of the year, we remain on track to achieve initial production from the two Cascadura wells by the end of September. In line with our commitment to capital discipline and operational efficiency, we have decided to leverage the current drilling rig location and the installation of the Cascadura field flowline to drill two additional development wells from our Cascadura B site in the fourth quarter of 2024. This strategic shift will replace the previously planned two Coho wells. We look forward to sharing further updates with our shareholders in due course."

Year to Date Second Quarter 2024 Financial and Operating Highlights

• Attained average production volumes of 6,223 boe/d (78 percent natural gas), representing a 214 percent increase relative to the 1,982 boe/d (39 percent natural gas) produced in the six months ended June 30, 2023, mainly attributed from Cascadura natural gas and associated liquids volumes that were brought online in September 2023.
• Achieved funds flow from operations of $10,110,000 versus $809,000 reported in the prior year comparative period, driven by an increase in operating netback of $12,112,000 primarily from increased production volumes and realized commodity pricing.
• Recognized net earnings of $6,967,000 ($0.03 per basic and diluted share) during the six months ended June 30, 2024 compared to a net loss of $350,000 ($0.00 per basic share) reported in the equivalent 2023 period.

Second Quarter 2024 Financial and Operating Highlights

• Achieved average quarterly production of 5,432 boe/d (77 percent natural gas), a 23 percent decrease relative to 7,015 boe/d produced in the first quarter of 2024 (80 percent natural gas), mainly reflecting natural declines from our Cascadura field.
• Realized petroleum and natural gas sales of $14,090,000 compared to $16,584,000 in the first quarter of 2024, primarily attributed to a decrease in natural gas and NGL sales volumes.
• Cascadura field production volumes in the quarter contributed $5,168,000 of natural gas sales at an average realized price of $2.52 per Mcf and $680,000 of petroleum sales at an average realized price of $73.86 per barrel.
• Natural gas production from the Coho-1 well contributed $483,000 of natural gas sales in the quarter at an average realized price of $2.16 per Mcf.
• Crude oil production contributed $7,759,000 of petroleum sales at an average realized price of $73.62 per barrel.
• Generated an operating netback of $8,127,000, a 22 percent decrease from the first quarter of 2024, primarily due to decreased natural gas and NGL sales volumes.
• Achieved quarterly funds flow from operations of $3,968,000 in the second quarter of 2024 compared to $6,142,000 in the preceding quarter.
• Delivered net earnings of $3,339,000 ($0.01 per basic and diluted share) versus $3,628,000 ($0.02 per basic and diluted share) recognized in the first quarter of 2024.
• $5,543,000 in quarterly capital investments primarily focused on expenditures directed towards one CO-1 well and progressing construction on the flowline from the Cascadura C site to the Cascadura natural gas processing facility.
• In April 2024 we entered into a third amended and restated loan agreement with our existing lender providing for an additional $13 million of bank debt capacity.
• Effective June 1, 2024 we closed an asset swap where we exchanged private San Francique leases for the Balata East block, which resulted in a $1,535,000 gain on asset disposition.
• Exited the second quarter of 2024 with a cash balance of $6,990,000 and a net debt position of $28,674,000, resulting in a net debt to annual funds flow from operations ratio of 1.25 times.

Post Period-end Highlights

• Effective July 1, 2024 we entered into exploration and production licences for the Charuma and Cipero onshore blocks awarded pursuant to the 2022 onshore competitive bid round, where we have an 80 percent operating interest in each licence.
• Following a recompletion of Cascadura Deep-1, in July 2024 we attained average net sales volumes of 5,816 boe/d representing an increase of 18 percent from June 2024 average net sales, comprised of:
• average natural gas sales volumes of 27.5 MMcf/d (4,578 boe/d); and
• average crude oil and natural gas liquid sales volumes of 1,238 bbls/d.
• Cascadura facility infrastructure and tie-in operations are progressing as scheduled, and we continue to target initial production from our Cascadura-2ST1 and Cascadura-3ST1 wells prior to the end of September 2024.

Financial and Operating Results Summary

Notes:

• Refer to the "Advisories - Product Type Disclosures" section herein for further information.

Outlook and Guidance

We continue to focus on financial discipline and value creation from our portfolio of development and exploration assets. Our principal near term strategy is to increase cash flow generation via the development of our Cascadura field in 2024. On December 19, 2023, the Company issued a news release to announce the approval of our preliminary financial and operating guidance for 2024. This guidance is summarized below along with updated 2024 guidance which reflects a 15 percent reduction in the midpoint of our production forecast driven by year-to-date production levels.

The first half of our 2024 capital program has progressed as planned, with four wells in the program successfully drilled and cased, including two Cascadura development wells and two legacy property crude oil wells. Road and pipeline construction to tie-in the two Cascadura development wells to our natural gas facility is progressing and we continue to expect initial production from the two wells prior to the end of September 2024.

Our original capital guidance in the fourth quarter of 2024 contemplated drilling one Coho development well and one Coho exploration well. In order to focus on the development of our Cascadura field, we have elected to postpone our Coho capital program and drill two additional Cascadura development wells from the Cascadura B site. We expect to commence Cascadura drilling operations during the fourth quarter of 2024 after site preparations are complete and the drilling rig has been mobilized from our Cascadura C site. As such, our 2024 capital budget has been revised from $33 million to $35 million to accommodate increased estimated Cascadura facility tie-in expenditures and the construction of the Cascadura B drilling pad. Similar to our original Coho well production guidance, associated production from the two additional Cascadura development wells is expected to commence in the first quarter of 2025 pending successful drilling, completion and tie-in operations.

Our year-to-date 2024 Cascadura field production has experienced higher declines than anticipated in our preliminary 2024 guidance. Accordingly, we have revised our midpoint forecasted 2024 average production from 9,400 boe/d to 8,000 boe/d, in addition to revising our 2024 exit production rate from 14,500 boe/d to 13,500 boe/d. The material forecasted 2024 production increase continues to be weighted to the fourth quarter of 2024 based on anticipated initial production from our two recently drilled Cascadura development wells, which have been forecasted based on the actual Cascadura-1ST1 type curve.

Based on forecasted average mid-point production of 8,000 boe/d and updates to both our 2024 average Brent crude oil price and percent realized discount to Brent benchmark pricing, we now expect to generate approximately $28 million in funds flow from operations compared to our previous forecast of $32 million. Our annual funds flow from operations includes an estimated $1.5 million in transaction costs from the proposed acquisition of Trinity Exploration and Production Plc, which were not incorporated into our previous guidance. In combination with the revision to our 2024 capital program, we have revised our year-end 2024 net debt guidance to $28 million, representing a 12 percent increase from previous guidance.

2024 Updated Guidance Summary

Notes:

• Forward-looking statement representing Management estimates. Additional information regarding the assumptions used are provided in the "Advisories - Assumptions for Updated 2024 Guidance" section herein.
• As announced on December 19, 2023.
• The financial performance measures provided in the Company's updated 2024 guidance are based on the midpoint of the average production forecast, being 8,000 boe/d (formerly (9,400 boe/d).

Touchstone Exploration Inc.

Touchstone Exploration Inc.

Paul Baay, President and Chief Executive Officer Tel: +1 (403) 750-4487

Scott Budau, Chief Financial Officer

Brian Hollingshead, Executive Vice President Engineering and Business Development

Shore Capital (Nominated Advisor and Joint Broker)

Daniel Bush / Toby Gibbs / Tom Knibbs Tel: +44 (0) 207 408 4090

Canaccord Genuity (Joint Broker)

Adam James / Charlie Hammond Tel: +44 (0) 207 523 8000

FTI Consulting (Financial PR)

Nick Hennis / Ben Brewerton Tel: +44 (0) 203 727 1000

Advisories

Non-GAAP Financial Measures

Operating netback

Capital expenditures

Working capital and net debt

Net debt to funds flow from operations ratio

Supplementary Financial Measures

Realized crude oil sales per boe, realized NGL sales per boe and realized natural gas sales per boe - are comprised of sales from the respective product type as determined in accordance with IFRS, divided by the Company's total production volumes of the respective product type for the period. Crude oil sales, NGL sales and natural gas sales are components of petroleum and natural gas sales as disclosed on the consolidated statements of net earnings (loss) and comprehensive income (loss).

Realized crude oil and liquids sales per boe - is comprised of the sum of crude oil and NGL product sales as determined in accordance with IFRS, divided by the sum of the Company's total crude oil and NGL production volumes for the period. Crude oil and NGL sales are components of petroleum and natural gas sales.

Royalties per boe, operating expenses per boe, general and administration expenses per boe and current income tax expense per boe - are comprised of the respective line item on the consolidated statements of net earnings (loss) and comprehensive income (loss) as determined in accordance with IFRS, divided by the Company's total production volumes for the period.

Cash finance expenses per boe - is comprised of cash finance expenses, divided by the Company's total production volumes for the period. Cash finance expenses are calculated as net finance expenses as determined in accordance with IFRS, less accretion on bank debt and accretion on decommissioning obligations, both of which are non-cash in nature.

For further information, please refer to the "Advisories - Non-GAAP Financial Measures" section of the Company's most recent Management's discussion and analysis for the three and six months ended June 30, 2024 accompanying our June 30, 2024 unaudited interim condensed consolidated financial statements, both of which will be available on our website (www.touchstoneexploration.com) and under our SEDAR+ profile (www.sedarplus.ca). Our Management's discussion and analysis includes further discussion of the purpose and composition of the specified non-GAAP financial measures consistently used by the Company and detailed reconciliations to the most directly comparable GAAP measures.

Assumptions for Updated 2024 Guidance

The significant assumptions used in the forecast of average daily production, funds flow from operations and net debt are summarized below. These key performance measures are based on the midpoint of our updated 2024 average production guidance of 8,000 boe/d.

Production estimates contained herein are expressed as anticipated average production over the calendar 2024 year. All production volumes disclosed herein are based on Company working interest before royalty burdens. In determining anticipated 2024 production, Touchstone considered historical drilling, completion, production results and decline rates for prior years and the year-to-date 2024 period and considered the estimated impact on production of the Company's remaining 2024 expected drilling and completion activities.

Touchstone expects that approximately 14 percent of its midpoint average production guidance will be comprised of crude oil, 4 percent NGLs, and 82 percent conventional natural gas. See the "Advisories - Product Type Disclosures" section herein for further information.

Notes:

• The financial performance measures included in the Company's updated 2024 guidance are based on the midpoint of the average production forecast, being 8,000 boe/d (formerly (9,400 boe/d).

Variations in forecasted crude oil and liquids prices, differences in the amount and timing of capital expenditures, and variances in average production estimates and decline rates can have a significant impact on the key performance measures included in the guidance disclosed herein. The actual results of the Company's operations and the resulting financial results will vary from the amounts set forth in this announcement and such variations may be material.

Using the midpoint of the Company's updated production guidance and holding all other assumptions constant, a $5/bbl increase (decrease) in the forecasted average Brent crude oil price for the second half of 2024 would increase funds flow from operations by approximately $620,000 (decrease by $710,000). Assuming capital expenditures are unchanged, the impact on funds flow from operations is estimated to result in an equivalent decrease (increase) in forecasted year end 2024 net debt.

Oil and Natural Gas Measures

Product Type Disclosures

For information regarding specific product disclosures in accordance with NI 51-101, please refer to the "Advisories - Product Type Disclosures" section in the Company's most recent Management's discussion and analysis for the three and six months ended June 30, 2024 accompanying our June 30, 2024 unaudited interim condensed consolidated financial statements, both of which will be available on our website (www.touchstoneexploration.com) and under our SEDAR+ profile (www.sedarplus.ca).

Abbreviations

The following abbreviations are referenced in this announcement:

bbls(s) barrel(s)

bbls/d barrels per day

boe barrels of oil equivalent

boe/d barrels of oil equivalent per day

Mcf thousand cubic feet

Mcf/d thousand cubic feet per day

MMcf million cubic feet

MMcf/d million cubic feet per day

NGL(s) natural gas liquid(s)

Touchstone Exploration Inc.

Interim Condensed Consolidated Balance Sheets

Unaudited, stated in thousands of United States dollars

Touchstone Exploration Inc.

Interim Condensed Consolidated Statements of Earnings (Loss) and Comprehensive Income (Loss)

Unaudited, stated in thousands of United States dollars (except per share amounts)

Touchstone Exploration Inc.

Interim Condensed Consolidated Statements of Changes in Shareholders' Equity

For the six months ended June 30

Unaudited, stated in thousands of United States dollars

Touchstone Exploration Inc.

Interim Condensed Consolidated Statements of Cash Flows

Unaudited, stated in thousands of United States dollars