3rd Quarter Results
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CALGARY, ALBERTA (November 13, 2024) - Touchstone Exploration Inc. ("Touchstone", "we", "our" or the "Company") (TSX, LSE: TXP) reports financial and operating results for the three and nine months ended September 30, 2024 and updated 2024 guidance.
Selected financial information is outlined below and should be read in conjunction with our September 30, 2024 unaudited interim condensed consolidated financial statements and related Management's discussion and analysis, both of which are 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.
Third Quarter 2024 Financial and Operating Highlights
- Achieved average quarterly production of 5,211 boe/d (75 percent natural gas), a 54 percent increase relative to 3,391 boe/d produced in the third quarter of 2023 (60 percent natural gas), reflecting a full quarter of natural gas production from the Cascadura field, slightly offset by Cascadura natural gas and associated liquids natural declines.
- Realized petroleum and natural gas sales of $13,253,000 compared to $11,682,000 in the equivalent quarter of 2023, primarily attributed to a 93 percent increase in natural gas production volumes, slightly offset by a reduction in average realized crude oil and liquids pricing.
- Crude oil production contributed $7,603,000 of petroleum sales at an average realized price of $66.72 per barrel.
- Cascadura field production volumes in the quarter contributed $4,908,000 of natural gas sales at an average realized price of $2.50 per Mcf and $306,000 of petroleum sales at an average realized price of $67.15 per barrel.
- Natural gas production from the Coho-1 well contributed $436,000 of natural gas sales in the quarter at an average realized price of $2.16 per Mcf.
- Generated an operating netback of $7,408,000, a 23 percent increase from the third quarter of 2023, primarily due to increased petroleum and natural gas sales and related royalties, as well as a 2 percent reduction in operating expenses.
- Achieved quarterly funds flow from operations of $3,024,000 in the third quarter of 2024 compared to $2,432,000 in the prior year equivalent period, attributed to the increase in operating netback partially offset by $722,000 of transaction costs incurred in the quarter.
- Recognized net earnings of $1,847,000 ($0.01 per basic and diluted share) compared to net earnings of $988,000 ($0.00 per basic and diluted share) in the comparative quarter of 2023.
- $3,068,000 in quarterly capital investments primarily focused on the completion of two Cascadura development wells, advancing the construction of the flowline from the Cascadura C site to the Cascadura natural gas processing facility and construction of the Cascadura B drilling pad.
- Exited the third quarter of 2024 with a cash balance of $6,549,000 and a net debt position of $29,593,000, resulting in a net debt to annual funds flow from operations ratio of 1.25 times, well within the Company's internal target of 2.0 times or below.
- Touchstone continued to accumulate Trinidad onshore acreage, executing two exploration and production licences in the third quarter for the Charuma and Cipero blocks.
Post Period-end Operating Highlights
- Primarily based from ongoing declines from our Cascadura-1ST1 and Cascadura-2ST1 wells, as well as the Cascadura facility being shut-in four days to accommodate the tie-in of the Cascadura C flow line and expansion project, we sold average net volumes of 3,993 boe/d in October 2024, comprised of:
- average natural gas sales volumes of 16.4 MMcf/d (2,726 boe/d); and
- average crude oil and natural gas liquid sales volumes of 1,267 bbls/d.
- On November 2, 2024, we safely commissioned the flowline connecting the Cascadura-2ST1 and Cascadura-3ST1 wells to our natural gas processing plant and commenced production testing operations.
- We entered into a minimum six-year exploration and production licence for an 80 percent operating working interest in the Rio Claro block effective November 5, 2024, which is strategically located adjacent to our Ortoire block and surrounds our Balata East field.
- On November 9, 2024, production testing of the Cascadura-2ST1 well was completed, with the well placed on continuous production at a choke restricted gross natural gas flow rate of approximately 20 MMcf/d and 400 bbls/d of NGLs.
- Cascadura-3ST1 production testing operations were completed on November 12, 2024, and the Company intends to place the well on permanent production at a choke restricted initial gross rate of approximately 600 to 700 bbls/d of oil.
Financial and Operating Results Summary
| Three months ended September 30, | % change | Nine months ended September 30, | % change | |||
|---|---|---|---|---|---|---|
| 2024 | 2023 | 2024 | 2023 | |||
| Operational | ||||||
| Average daily production | ||||||
| Crude oil (1) (bbls/d) | 1,239 | 1,183 | 5 | 1,188 | 1,197 | (1) |
| NGLs (1) (bbls/d) | 50 | 176 | (72) | 137 | 59 | 100 |
| Crude oil and liquids (1) (bbls/d) | 1,289 | 1,359 | (5) | 1,325 | 1,256 | 5 |
| Natural gas (1) (Mcf/d) | 23,531 | 12,191 | 93 | 27,349 | 7,203 | 100 |
| Average daily production (boe/d) (2) | 5,211 | 3,391 | 54 | 5,883 | 2,457 | 100 |
| Average realized prices (3) | ||||||
| Crude oil (1) ($/bbl) | 66.72 | 71.89 | (7) | 70.01 | 66.38 | 5 |
| NGLs (1) ($/bbl) | 67.15 | 78.12 | (14) | 70.34 | 78.12 | (10) |
| Crude oil and liquids (1) ($/bbl) | 66.74 | 72.69 | (8) | 70.04 | 66.94 | 5 |
| Natural gas (1) ($/Mcf) | 2.47 | 2.31 | 7 | 2.47 | 2.23 | 11 |
| Realized commodity price ($/boe) (2) | 27.65 | 37.44 | (26) | 27.25 | 40.76 | (33) |
| Production mix (% of production) | ||||||
| Crude oil and liquids (1) | 25 | 40 | 23 | 51 | ||
| Natural gas (1) | 75 | 60 | 77 | 49 | ||
| Operating netback ($/boe) (2) | ||||||
| Realized commodity price (3) | 27.65 | 37.44 | (26) | 27.25 | 40.76 | (33) |
| Royalties (3) | (7.11) | (10.23) | (30) | (6.62) | (11.70) | (43) |
| Operating expenses (3) | (5.08) | (7.94) | (36) | (4.50) | (10.44) | (57) |
| Operating netback (3) | 15.46 | 19.27 | (20) | 16.13 | 18.62 | (13) |
Notes:
- Refer "Advisories - Product Type Disclosures" for further information.
- Non-GAAP financial measure. Refer to "Advisories - Non-GAAP Financial Measures" for further information.
| Three months ended September 30, | % change | Nine months ended September 30, | % change | |||
|---|---|---|---|---|---|---|
| 2024 | 2023 | 2024 | 2023 | |||
| Financial | ||||||
| ($000's except per share amounts) | ||||||
| Petroleum and natural gas sales | 13,253 | 11,682 | 13 | 43,927 | 27,339 | 61 |
| Cash from operating activities | 3,607 | 343 | 100 | 12,359 | 4,231 | 100 |
| Funds flow from operations | 3,024 | 2,432 | 24 | 13,134 | 3,241 | 100 |
| Net earnings | 1,847 | 988 | 87 | 8,814 | 638 | 100 |
| Per share - basic and diluted | 0.01 | 0.00 | n/a | 0.04 | 0.00 | n/a |
| Exploration capital expenditures | 452 | 3,498 | (87) | 620 | 17,043 | (96) |
| Development capital expenditures | 2,616 | 111 | 100 | 19,953 | 720 | 100 |
| Capital expenditures (1) | 3,068 | 3,609 | (15) | 20,573 | 17,763 | 16 |
| Working capital deficit (1) | 3,865 | 13,419 | (71) | |||
| Principal long-term bank debt | 25,728 | 16,500 | 56 | |||
| Net debt (1) - end of period | 29,593 | 29,919 | (1) | |||
| Share Information (000's) | ||||||
| Weighted avg. shares outstanding: | ||||||
| Basic | 236,382 | 233,541 | 1 | 235,189 | 233,243 | 1 |
| Diluted | 236,749 | 237,138 | - | 236,578 | 236,947 | - |
| Outstanding shares - end of period | 236,461 | 234,213 | 1 | |||
Note:
- Non-GAAP financial measure. Refer to "Advisories - Non-GAAP Financial Measures" for further information.
Outlook and Guidance
We remain committed to financial discipline and maximizing value from our portfolio of development and exploration assets. Our primary near-term strategy is to increase cash flow through the development of the Cascadura field. Our revised 2024 guidance is summarized in the table below.
| Summary (1) | 2024 Guidance (December 19, 2023) | 2024 Updated Guidance (August 13, 2024) | 2024 Updated Guidance (November 12, 2024) |
|---|---|---|---|
| Capital expenditures (2) ($000's) | 33,000 | 35,000 | 28,000 |
| Average daily production (boe/d) | 9,100 to 9,700 | 7,700 to 8,300 | 5,600 to 6,200 |
| % natural gas | 82% | 82% | 76% |
| % crude oil and liquids | 18% | 18% | 24% |
| Average Brent crude oil price ($/bbl) | 75.00 | 82.00 | 80.00 |
| % realized discount to Brent price | 18% | 16% | 16% |
| Funds flow from operations (3) ($000's) | 32,000 | 28,000 | 17,000 |
| Net debt - end of year (2)(3) ($000's) | 25,000 | 28,000 | 32,000 |
Notes:
- Forward-looking statement representing Management estimates. Refer to "Advisories - Forward-looking Statements" for further information.
- Non-GAAP financial measure. Refer to "Advisories - Non-GAAP Financial Measures" for further information.
- The financial performance measures provided in the Company's 2024 guidance are based on the midpoint of the average production forecast, being 5,900 boe/d (formerly 9,400 boe/d and 8,000 boe/d).
In the third quarter of 2024, we faced delays in completing the final commissioning of the flowline connecting our Cascadura C well pad to the Cascadura natural gas processing facility. Additionally, bridge construction required for relocating the drilling rig to the Cascadura B well site was delayed.
Our capital guidance from August 13, 2024 originally planned for drilling two Cascadura development wells from the Cascadura B well pad in the fourth quarter of 2024. However, inclement weather delayed bridge construction, and we now anticipate drilling one Cascadura development well in December 2024, with the second well and related completion activities rescheduled for the first quarter of 2025. Consequently, our 2024 capital expenditures are expected to decrease from approximately $35 million to $28 million. Production from these two additional Cascadura B development wells is projected to commence in 2025, pending successful drilling, completion, and tie-in operations.
Our previous guidance projected initial production from the two Cascadura C wells by the end of September 2024. Production testing for our Cascadura-2ST1 and Cascadura-3ST1 development wells commenced on November 2, 2024. On November 9, 2024, the Cascadura-2ST1 well was placed on continuous production at an initial, choke-restricted gross natural gas flow rate of approximately 20 MMcf/d, accompanied by associated NGLs. Testing on the Cascadura-3ST1 well has verified it as a producer of medium gravity crude oil with natural gas. Touchstone plans to initiate continuous production from the Cascadura-3ST1 well at a choke-restricted initial gross production rate between 600 to 700 barrels of oil per day.
The delay in first production, along with updates to the type curves and commodity types for Cascadura-2ST1 and Cascadura-3ST1 based on initial test data, has led us to further update the midpoint of our 2024 annual production guidance from 8,000 boe/d to 5,900 boe/d. Earlier production expectations were based on the Cascadura-1ST1 natural gas type curve, which has since been adjusted with our production testing data and anticipated online volumes.
With a revised average mid-point production forecast and updated estimates for the 2024 average Brent crude oil price, we now expect to generate approximately $17 million in funds flow from operations, down from our previous forecast of $28 million. In line with the adjustments to our 2024 capital program, we have also revised our year-end 2024 net debt guidance to $32 million, reflecting a 14 percent increase from our previous guidance.
Touchstone Exploration Inc.
Touchstone Exploration Inc.
Paul Baay, President and Chief Executive Officer Tel: +1 (403) 750-4405
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
Working Interest
Touchstone has an 80 percent operating working interest in the Cascadura field, which is located on the Ortoire block onshore in the Republic of Trinidad and Tobago. Heritage Petroleum Company Limited holds the remaining 20 percent working interest. All Cascadura production testing figures disclosed herein are gross volumes.
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 and comprehensive income.
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 and comprehensive income 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 nine months ended September 30, 2024 accompanying our September 30, 2024 unaudited interim condensed consolidated financial statements, both of which are 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 5,900 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 new Cascadura wells that commenced production testing operations on November 2, 2024.
Touchstone expects that approximately 21 percent of its midpoint average production guidance will be comprised of crude oil, 3 percent NGLs, and 76 percent conventional natural gas. See the "Advisories - Product Type Disclosures" section herein for further information.
| Annual Financial Guidance (1)(2) | Units | 2024 Guidance (December 19, 2023) | 2024 Updated Guidance (August 13, 2024) | 2024 Updated Guidance (November 12, 2024) |
|---|---|---|---|---|
| Realized commodity price (3) | $/boe | 23.10 | 24.50 | 27.40 |
| Expenses | ||||
| Royalties as a % of petroleum and natural gas sales (3) | % | 19.5 | 21.5 | 23.9 |
| Operating expenses (3) | $/boe | 3.50 | 3.80 | 4.70 |
| General and administration expenses (3) | $/boe | 3.10 | 3.40 | 4.80 |
| Cash finance expenses (3) | $/boe | 1.00 | 1.00 | 1.30 |
| Current income tax expenses (3) | $/boe | 1.80 | 1.20 | 0.90 |
| Transaction costs | $000's | - | 1,500 | 2,000 |
Notes:
- Forward-looking statement representing Management estimates. Refer to "Advisories - Forward-looking Statements" for further information.
- The financial performance measures provided in the Company's 2024 guidance are based on the midpoint of the average production forecast, being 5,900 boe/d (formerly 9,400 boe/d and 8,000 boe/d).
- Non-GAAP financial measure. Refer to "Advisories - Non-GAAP Financial Measures" for further information.
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 fourth quarter of 2024 would increase funds flow from operations by approximately $330,000 (decrease by $330,000). 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
The Company's average production for October 2024 consist of the following product types as defined in NI 51-101 using a conversion of 6 Mcf to 1 boe where applicable.
| Period | Light and Medium Crude Oil (bbls/d) | Heavy Crude Oil (bbls/d) | Natural Gas Liquids (bbls/d) | Conventional Natural Gas (Mcf/d) | Total Oil Equivalent (boe/d) |
|---|---|---|---|---|---|
| October 2024 | 1,198 | 44 | 25 | 16,353 | 3,993 |
For further 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 nine months ended September 30, 2024 accompanying our September 30, 2024 unaudited interim condensed consolidated financial statements, both of which are 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)
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