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 $28,674,000, resulting
in a net debt to annual funds flow from operations ratio of 1.25
times.
Post
Period-end Highlights
· Effective July 1, 2024 we entered into exploration and
production licences for the Charuma and Cipero onshore blocks
awarded pursuant to the 2022 onshore competitive bid round, where
we have an 80 percent operating interest in each
licence.
· Following a recompletion of Cascadura Deep-1, in July 2024 we
attained average net sales volumes of 5,816 boe/d representing an
increase of 18 percent from June 2024 average net sales, comprised
of:
- average
natural gas sales volumes of 27.5 MMcf/d (4,578 boe/d);
and
- average
crude oil and natural gas liquid sales volumes of 1,238
bbls/d.
· Cascadura facility infrastructure and tie-in operations are
progressing as scheduled, and we continue to target initial
production from our Cascadura-2ST1 and Cascadura-3ST1 wells prior
to the end of September 2024.
Financial and Operating Results Summary
|
Three months ended June
30,
|
%
change
|
Six months
ended
June 30,
|
%
change
|
2024
|
2023
|
2024
|
2023
|
|
|
|
|
|
|
|
Operational
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average daily production
|
|
|
|
|
|
|
Crude oil(1)
(bbls/d)
|
1,158
|
1,124
|
3
|
1,162
|
1,204
|
(3)
|
NGLs(1)
(bbls/d)
|
101
|
-
|
n/a
|
181
|
-
|
n/a
|
Crude oil and
liquids(1) (bbls/d)
|
1,259
|
1,124
|
12
|
1,343
|
1,204
|
12
|
Natural gas(1)
(Mcf/d)
|
25,036
|
4,215
|
100
|
29,279
|
4,667
|
100
|
Average daily production
(boe/d)(2)
|
5,432
|
1,827
|
100
|
6,223
|
1,982
|
100
|
Average realized
prices(3)
|
|
|
|
|
|
|
Crude oil(1)
($/bbl)
|
73.62
|
62.26
|
18
|
71.78
|
63.64
|
13
|
NGLs(1)
($/bbl)
|
73.86
|
-
|
n/a
|
70.78
|
-
|
n/a
|
Crude oil and
liquids(1) ($/bbl)
|
73.64
|
62.26
|
18
|
71.64
|
63.64
|
13
|
Natural gas(1)
($/Mcf)
|
2.48
|
2.11
|
18
|
2.47
|
2.12
|
17
|
Realized commodity price
($/boe)(2)
|
28.50
|
43.19
|
(34)
|
27.08
|
43.64
|
(38)
|
|
|
|
|
|
|
|
Production mix (% of
production)
|
|
|
|
|
|
|
Crude oil and
liquids(1)
|
23
|
62
|
|
22
|
61
|
|
Natural gas(1)
|
77
|
38
|
|
78
|
39
|
|
|
|
|
|
|
|
|
Operating netback
($/boe)(2)
|
|
|
|
|
|
|
Realized commodity
price(3)
|
28.50
|
43.19
|
(34)
|
27.08
|
43.64
|
(38)
|
Royalties(3)
|
(7.25)
|
(12.94)
|
(44)
|
(6.41)
|
(12.98)
|
(51)
|
Operating
expenses(3)
|
(4.81)
|
(13.25)
|
(64)
|
(4.26)
|
(12.61)
|
(66)
|
Operating
netback(3)
|
16.44
|
17.00
|
(3)
|
16.41
|
18.05
|
(9)
|
|
|
|
|
|
|
|
Financial
|
|
|
|
|
|
|
($000's except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Petroleum and natural gas
sales
|
14,090
|
7,181
|
96
|
30,674
|
15,657
|
96
|
|
|
|
|
|
|
|
Cash from operating
activities
|
3,383
|
2,975
|
14
|
8,752
|
3,888
|
100
|
|
|
|
|
|
|
|
Funds flow from
operations
|
3,968
|
6
|
100
|
10,110
|
809
|
100
|
|
|
|
|
|
|
|
Net earnings (loss)
|
3,339
|
(71)
|
n/a
|
6,967
|
(350)
|
n/a
|
Per share - basic and
diluted
|
0.01
|
(0.00)
|
n/a
|
0.03
|
(0.00)
|
n/a
|
|
|
|
|
|
|
|
Exploration capital
expenditures
|
60
|
4,795
|
(99)
|
168
|
13,545
|
(99)
|
Development capital
expenditures
|
5,483
|
340
|
100
|
17,337
|
609
|
100
|
Capital
expenditures(3)
|
5,543
|
5,135
|
8
|
17,505
|
14,154
|
24
|
|
|
|
|
|
|
|
Working capital
deficit(3)
|
|
|
|
2,674
|
10,913
|
(75)
|
Principal long-term bank
debt
|
|
|
|
26,000
|
18,000
|
44
|
Net debt(3) - end of
period
|
|
|
|
28,674
|
28,913
|
(1)
|
|
|
|
|
|
|
|
Share Information (000's)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted avg. shares
outstanding:
|
|
|
|
|
|
|
Basic
|
234,959
|
233,144
|
1
|
234,586
|
233,091
|
1
|
Diluted
|
236,364
|
233,144
|
1
|
236,451
|
233,091
|
1
|
Outstanding shares - end of
period
|
|
|
|
236,307
|
233,428
|
1
|
|
|
|
|
|
|
|
Notes:
(1) Refer to the
"Advisories - Product Type Disclosures" section
herein for further information.
(2) In the table above
and elsewhere in this announcement, references to "boe" mean
barrels of oil equivalent that are calculated using the energy
equivalent conversion method. Refer to "Advisories - Oil and Natural Gas Measures" for
further information.
(3) Non-GAAP financial
measure. See the "Advisories -
Non-GAAP Financial Measures" 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
Annual Guidance Summary(1)
|
Updated
Guidance
|
Previous
Guidance(2)
|
Variance
|
Amount
|
%
|
|
|
|
|
|
Capital
expenditures(3) ($000's)
|
35,000
|
33,000
|
2,000
|
6
|
|
|
|
|
|
Average daily production
(boe/d)
|
7,700 to
8,300
|
9,100 to
9,700
|
|
|
% natural gas
|
82%
|
82%
|
|
|
% crude oil and liquids
|
18%
|
18%
|
|
|
|
|
|
|
|
Average Brent crude oil price
($/bbl)
|
82.00
|
75.00
|
7.00
|
9
|
% realized discount to Brent
price
|
16%
|
18%
|
(2)
|
(11)
|
|
|
|
|
|
Funds flow from
operations(4) ($000's)
|
28,000
|
32,000
|
(4,000)
|
(13)
|
|
|
|
|
|
Net debt - end of year(3)(4) ($000's)
|
28,000
|
25,000
|
3,000
|
12
|
|
|
|
|
|
Notes:
(1) Forward-looking
statement representing Management estimates. Additional information
regarding the assumptions used are provided in the "Advisories - Assumptions for Updated 2024
Guidance" section herein.
(2) As announced on
December 19, 2023.
(3) Non-GAAP financial
measure. See the "Advisories -
Non-GAAP Financial Measures" section herein for further
information.
(4) 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. is a
Calgary, Alberta based company engaged in the business of acquiring
interests in petroleum and natural gas rights and the exploration,
development, production and sale of petroleum and natural gas.
Touchstone is currently active in onshore properties located in the
Republic of Trinidad and Tobago. The Company's common shares are
traded on the Toronto Stock Exchange and the AIM market of the
London Stock Exchange under the symbol "TXP". For further
information about Touchstone, please visit our website at
www.touchstoneexploration.com
or contact:
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
Email: touchstone@fticonsulting.com
Advisories
This announcement contains
information that qualified or may have qualified as inside
information for the purposes of Article 7 of the Market Abuse
Regulation (EU) 596/2014 ("MAR") as it forms part of UK domestic
law by virtue of the EUWA ("UK MAR"), encompassing information
relating to the Company's updated 2024 guidance. For the purposes
of UK MAR and Article 2 of the binding technical standards
published by the Financial Conduct Authority in relation to MAR as
regards Commission Implementing Regulation (EU) 2016/1055, the
person responsible for the release of this announcement is Paul
Baay, President and Chief Executive Officer.
Forward-looking
Statements
The information provided in this
announcement contains certain forward-looking statements and
information (collectively, "forward-looking statements") within the
meaning of applicable securities laws. Such forward-looking
statements include, without limitation, forecasts, estimates,
expectations and objectives for future operations that are subject
to assumptions, risks and uncertainties, many of which are beyond
the control of the Company. Forward-looking statements are
statements that are not historical facts and are generally, but not
always, identified by the words "expect", "plan", "anticipate",
"believe", "intend", "maintain", "continue to", "pursue", "design",
"result in", "sustain" "estimate", "potential", "growth",
"near-term", "long-term", "forecast", "contingent" and similar
expressions, or are events or conditions that "will", "would",
"may", "could" or "should" occur or be achieved. The
forward-looking statements contained in this announcement speak
only as of the date hereof and are expressly qualified by this
cautionary statement.
Specifically, this announcement
includes, but is not limited to, forward-looking statements
relating to: the Company's business plans, strategies, priorities
and development plans; the focus of Touchstone's remaining 2024
capital plan, including pursuing developmental drilling activities
and optimizing existing natural gas and liquids infrastructure
capacity; anticipated 2024 annual average and exit production and
production by commodity; forecasted production decline rates;
anticipated developmental drilling activities, including locations,
the timing thereof and related production and cash flows therefrom;
anticipated 2024 capital expenditures including estimations of
costs and inflation incorporated therein; anticipated timing of
well tie-in operations, well completion activities and production
coming online; forecasted 2024 average Brent reference price and
the Company's budgeted realized price in relation thereto;
forecasted royalty, operating, general and administration, cash
finance, income tax expenses and transaction costs; anticipated
funds flow from operations and net debt; and Touchstone's current and future
financial position, including the sufficiency of resources to fund
future capital expenditures and maintain financial
liquidity. The Company's actual decisions,
activities, results, performance, or achievement could differ
materially from those expressed in, or implied by, such
forward-looking statements and accordingly, no assurances can be
given that any of the events anticipated by the forward-looking
statements will transpire or occur or, if any of them do, what
benefits that Touchstone will derive from
them.
Although the Company believes that
the expectations and assumptions on which the forward-looking
statements are based are reasonable, undue reliance should not be
placed on the forward-looking statements because the Company can
give no assurance that they will prove to be correct. Since
forward-looking statements address future events and conditions, by
their very nature they involve inherent risks and uncertainties.
Actual results could differ materially from those currently
anticipated due to a number of factors and risks. Certain of these
risks are set out in more detail in the Company's 2023 Annual
Information Form dated March 20, 2024 which is available under the
Company's profile on SEDAR+ (www.sedarplus.ca) and on the Company's website (www.touchstoneexploration.com).
The forward-looking statements contained in this announcement are
made as of the date hereof, and except as may be required by
applicable securities laws, the Company assumes no obligation or
intent to update publicly or revise any forward-looking statements
made herein or otherwise, whether as a result of new information,
future events or otherwise.
This announcement contains
future-oriented financial information and financial outlook
information (collectively, "FOFI") about Touchstone's prospective
results of operations and production included in its updated 2024
guidance, all of which are subject to the same assumptions, risk
factors, limitations, and qualifications as set forth in the
paragraphs above. The FOFI contained in this announcement was
approved by Management as of the date of this announcement and was
provided for the purpose of providing further information about
Touchstone's future business operations. This information has been
provided for illustration only and, with respect to future periods,
is based on budgets and forecasts that are speculative and are
subject to a variety of contingencies and may not be appropriate
for other purposes. Touchstone and its Management believe that FOFI
has been prepared on a reasonable basis, reflecting Management's
best estimates and judgments, and represents, to the best of
Management's knowledge and opinion, the Company's expected course
of action. However, because this information is highly subjective,
it should not be relied on as necessarily indicative of future
results. Touchstone disclaims any intention or obligation to update
or revise any FOFI contained herein, whether as a result of new
information, future events or otherwise, unless required pursuant
to applicable law. Readers are cautioned that the FOFI contained
herein should not be used for purposes other than for which it is
disclosed herein, and the financial outlook information contained
herein is not conclusive and is subject to change. 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. Management does not have firm commitments for all
of the costs, expenditures, prices or other financial assumptions
used to prepare the financial outlook or assurance that such
operating results will be achieved and, accordingly, the complete
financial effects of the forecasted costs, expenditures, prices and
operating results are not objectively determinable. 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.
Non-GAAP Financial
Measures
This announcement references various
non-GAAP financial measures, non-GAAP ratios, capital management
measures and supplementary financial measures as such terms are
defined in National Instrument 52-112 Non-GAAP and Other Financial Measures
Disclosure. Such measures are not recognized measures under
Canadian Generally Accepted Accounting Principles ("GAAP") and do
not have a standardized meaning prescribed by IFRS Accounting
Standards as Issued by the International Accounting Standards Board
("IFRS") and therefore may not be comparable to similar financial
measures disclosed by other issuers. Readers are cautioned that the
non-GAAP financial measures referred to herein should not be
construed as alternatives to, or more meaningful than, measures
prescribed by IFRS, and they are not meant to enhance the Company's
reported financial performance or position. These are complementary
measures that are commonly used in the oil and natural gas industry
and by the Company to provide shareholders and potential investors
with additional information regarding the Company's performance.
Below is a description of the non-GAAP financial measures, non-GAAP
ratios, capital management measures and supplementary financial
measures disclosed herein.
Operating netback
Touchstone uses operating netback as
a key performance indicator of field results. The Company considers
operating netback to be a key measure as it demonstrates
Touchstone's profitability relative to current commodity prices and
assists Management and investors with evaluating operating results
on a historical basis. Operating netback is a non-GAAP financial
measure calculated by deducting royalties and operating expenses
from petroleum and natural gas sales. The most directly comparable
financial measure to operating netback disclosed in the Company's
consolidated financial statements is petroleum and natural gas
revenue net of royalties. Operating netback per boe is a non-GAAP
ratio calculated by dividing the operating netback by total
production volumes for the period. Presenting operating netback on
a per boe basis allows Management to better analyze performance
against prior periods on a comparable basis.
Capital expenditures
Capital expenditures is a non-GAAP
financial measure that is calculated as the sum of exploration and
evaluation asset expenditures and property, plant and equipment
expenditures included in the Company's consolidated statements of
cash flows and is most directly comparable
to cash used in investing activities. Touchstone considers capital
expenditures to be a useful measure of its investment in its
existing asset base.
Working capital and net debt
Working capital and net debt are
capital management measures used by Management to monitor the
Company's capital structure to evaluate its true debt and liquidity
position and to manage capital and liquidity risk. Working capital
is calculated by subtracting current liabilities from current
assets as they appear on the applicable consolidated balance
sheet. Net debt is calculated by summing
the Company's working capital and the principal (undiscounted)
long-term amount of senior secured debt and is most directly comparable to total liabilities disclosed in
the Company's consolidated balance sheets.
Net debt to funds flow from operations ratio
The Company monitors its capital
structure using a net debt to funds flow from operations ratio,
which is a non-GAAP ratio and a capital management measure
calculated as the ratio of the Company's net debt to trailing
twelve months funds flow from operations for any given
period.
Supplementary Financial Measures
Realized commodity price per boe - is comprised of petroleum and natural gas sales as
determined in accordance with IFRS, divided by the Company's total
production volumes for the period.
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.
Royalties as a percentage of petroleum and natural gas
sales - is comprised of royalties as
determined in accordance with IFRS, divided by petroleum and
natural gas sales as determined in accordance with IFRS.
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.
Annual Financial Guidance(1)
|
Units
|
Updated
Guidance
|
Previous
Guidance(2)
|
Variance
|
Amount
|
%
|
|
|
|
|
|
|
Realized commodity
price(2)
|
$/boe
|
24.50
|
23.10
|
1.40
|
6
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
Royalties as a % of petroleum and
natural gas sales(2)
|
%
|
21.5
|
19.5
|
2.0
|
10
|
Operating
expenses(2)
|
$/boe
|
3.80
|
3.50
|
0.30
|
9
|
General and administration
expenses(2)
|
$/boe
|
3.40
|
3.10
|
0.30
|
10
|
Cash finance
expenses(2)
|
$/boe
|
1.00
|
1.00
|
-
|
-
|
Current income tax
expenses(2)
|
$/boe
|
1.20
|
1.80
|
(0.60)
|
(33)
|
Transaction costs
|
$000's
|
1,500
|
-
|
1,500
|
n/a
|
|
|
|
|
|
|
Notes:
(1) 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).
(2) Non-GAAP financial
measure. See the "Advisories -
Non-GAAP Financial Measures" section herein 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 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
Where applicable, natural gas has
been converted to barrels of oil equivalent (boe) based on six
thousand cubic feet (Mcf) to one barrel (bbl) of oil. The barrel of
oil equivalent rate is based on an energy equivalent conversion
method primarily applicable at the burner tip and given that the
value ratio based on the current price of crude oil as compared to
natural gas is significantly different than the energy equivalency
of the 6:1 conversion ratio, utilizing the 6:1 conversion ratio may
be misleading as an indication of value. This conversion factor is
an industry accepted norm and is not based on either energy content
or prices.
Product Type
Disclosures
This announcement includes references
to crude oil, NGLs, crude oil and liquids, natural gas, and average
daily production volumes. Under National
Instrument 51-101 - Standards of
Disclosure for Oil and Gas Activities ("NI 51-101"),
disclosure of production volumes should include segmentation by
product type as defined in the instrument. In this announcement,
references to "crude oil" refer to "light crude oil and medium
crude oil" and "heavy crude oil" combined product types; references
to "NGLs" refer to condensate; and references to "natural gas"
refer to the "conventional natural gas" product type, all as
defined in the instrument. In addition, references to "crude oil
and liquids" herein include crude oil and NGLs.
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
As
at
|
|
June 30,
2024
|
December
31, 2023
|
|
|
|
|
Assets
|
|
|
|
Current assets
|
|
|
|
Cash
|
|
6,990
|
8,186
|
Accounts receivable
|
|
11,122
|
12,852
|
Inventory
|
|
91
|
91
|
Prepaid expenses
|
|
1,071
|
764
|
Assets held for sale
|
|
1,181
|
677
|
|
|
20,455
|
22,570
|
|
|
|
|
Exploration and evaluation
assets
|
|
5,130
|
5,030
|
Property, plant and
equipment
|
|
120,129
|
108,148
|
Restricted cash
|
|
1,042
|
785
|
Other assets
|
|
251
|
334
|
Abandonment fund
|
|
2,544
|
2,081
|
Total assets
|
|
149,551
|
138,948
|
|
|
|
|
Liabilities
|
|
|
|
Current liabilities
|
|
|
|
Accounts payable and accrued
liabilities
|
|
15,872
|
15,013
|
Income taxes payable
|
|
355
|
240
|
Current portion of bank
debt
|
|
6,000
|
13,000
|
Liabilities associated with assets
held for sale
|
|
902
|
1,898
|
|
|
23,129
|
30,151
|
|
|
|
|
Lease liabilities
|
|
2,620
|
2,888
|
Bank debt
|
|
25,738
|
14,977
|
Decommissioning
liabilities
|
|
9,650
|
9,733
|
Deferred income taxes
|
|
20,739
|
21,433
|
Total liabilities
|
|
81,876
|
79,182
|
|
|
|
|
Shareholders' equity
|
|
|
|
Shareholders' capital
|
|
115,526
|
114,965
|
Contributed surplus
|
|
6,702
|
6,166
|
Other comprehensive loss
|
|
(13,279)
|
(13,124)
|
Deficit
|
|
(41,274)
|
(48,241)
|
Total shareholders' equity
|
|
67,675
|
59,766
|
|
|
|
|
Total liabilities and shareholders' equity
|
|
149,551
|
138,948
|
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)
|
|
Three months ended June
30,
|
Six months ended June
30,
|
2024
|
2023
|
2024
|
2023
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
|
Petroleum and natural gas
sales
|
|
14,090
|
7,181
|
30,674
|
15,657
|
Less: royalties
|
|
(3,585)
|
(2,152)
|
(7,262)
|
(4,656)
|
Petroleum and natural gas revenue,
net of royalties
|
|
10,505
|
5,029
|
23,412
|
11,001
|
Other revenue
|
|
34
|
22
|
52
|
34
|
Total revenue
|
|
10,539
|
5,051
|
23,464
|
11,035
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
Operating
|
|
2,378
|
2,203
|
4,822
|
4,523
|
General and
administration
|
|
2,608
|
2,376
|
4,974
|
4,477
|
Net finance
|
|
761
|
631
|
1,440
|
1,062
|
Transaction costs
|
|
840
|
-
|
1,220
|
-
|
Exploration
|
|
76
|
-
|
170
|
-
|
Gain on asset
dispositions
|
|
(1,535)
|
(800)
|
(1,535)
|
(800)
|
Foreign exchange (gain)
loss
|
|
(122)
|
48
|
(69)
|
(62)
|
Equity-based compensation
|
|
309
|
252
|
710
|
613
|
Depletion and
depreciation
|
|
1,782
|
1,041
|
4,034
|
2,418
|
Impairment (reversal)
|
|
(22)
|
14
|
502
|
29
|
Other
|
|
-
|
(440)
|
-
|
(440)
|
Total expenses
|
|
7,075
|
5,325
|
16,268
|
11,820
|
|
|
|
|
|
|
Earnings (loss) before income taxes
|
|
3,464
|
(274)
|
7,196
|
(785)
|
|
|
|
|
|
|
Provision for income taxes
|
|
|
|
|
|
Current expense
|
|
75
|
180
|
919
|
395
|
Deferred expense
(recovery)
|
|
50
|
(383)
|
(690)
|
(830)
|
Total income tax expense (recovery)
|
|
125
|
(203)
|
229
|
(435)
|
|
|
|
|
|
|
Net
earnings (loss)
|
|
3,339
|
(71)
|
6,967
|
(350)
|
Currency translation
adjustments
|
|
142
|
207
|
(155)
|
204
|
Comprehensive income (loss)
|
|
3,481
|
136
|
6,812
|
(146)
|
|
|
|
|
|
|
Net
earnings (loss) per common share
|
|
|
|
|
|
Basic and diluted
|
|
0.01
|
(0.00)
|
0.03
|
(0.00)
|
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
|
|
2024
|
2023
|
|
|
|
|
Shareholders' capital
|
|
|
|
Balance, beginning of
period
|
|
114,965
|
114,635
|
Equity-based settlements
|
|
561
|
108
|
Balance, end of period
|
|
115,526
|
114,743
|
|
|
|
|
Contributed surplus
|
|
|
|
Balance, beginning of
period
|
|
6,166
|
4,905
|
Equity-based settlements
|
|
(200)
|
(39)
|
Equity-based compensation
expense
|
|
710
|
613
|
Equity-based compensation
capitalized
|
|
26
|
104
|
Balance, end of period
|
|
6,702
|
5,583
|
|
|
|
|
Other comprehensive loss
|
|
|
|
Balance, beginning of
period
|
|
(13,124)
|
(13,517)
|
Other comprehensive (loss)
income
|
|
(155)
|
204
|
Balance, end of period
|
|
(13,279)
|
(13,313)
|
|
|
|
|
Deficit
|
|
|
|
Balance, beginning of
period
|
|
(48,241)
|
(27,643)
|
Net earnings (loss)
|
|
6,967
|
(350)
|
Balance, end of period
|
|
(41,274)
|
(27,993)
|
Touchstone
Exploration Inc.
Interim
Condensed Consolidated Statements of Cash Flows
Unaudited,
stated in thousands of United States dollars
|
|
Three months ended June
30,
|
Six months ended June
30,
|
2024
|
2023
|
2024
|
2023
|
|
|
|
|
|
|
Operating activities
|
|
|
|
|
|
Net earnings (loss)
|
|
3,339
|
(71)
|
6,967
|
(350)
|
Items not involving cash from
operations:
|
|
|
|
|
|
Gain on asset
dispositions
|
|
(1,535)
|
(800)
|
(1,535)
|
(800)
|
Unrealized foreign exchange (gain)
loss
|
|
(23)
|
52
|
(3)
|
(67)
|
Equity-based compensation
expense
|
|
309
|
252
|
710
|
613
|
Depletion and depreciation
expense
|
|
1,782
|
1,041
|
4,034
|
2,418
|
Impairment (reversal)
expense
|
|
(22)
|
14
|
502
|
29
|
Other
|
|
68
|
(81)
|
125
|
(186)
|
Deferred income tax expense
(recovery)
|
|
50
|
(383)
|
(690)
|
(830)
|
Decommissioning
expenditures
|
|
-
|
(18)
|
-
|
(18)
|
Funds flow from operations
|
|
3,968
|
6
|
10,110
|
809
|
Change in non-cash working
capital
|
|
(585)
|
2,969
|
(1,358)
|
3,079
|
Cash from operating activities
|
|
3,383
|
2,975
|
8,752
|
3,888
|
|
|
|
|
|
|
Investing activities
|
|
|
|
|
|
Exploration and evaluation
expenditures
|
|
(60)
|
(4,795)
|
(168)
|
(13,545)
|
Property, plant and equipment
expenditures
|
|
(5,483)
|
(340)
|
(17,337)
|
(609)
|
Abandonment fund
expenditures
|
|
(226)
|
(56)
|
(527)
|
(122)
|
Proceeds from asset
dispositions
|
|
-
|
250
|
-
|
250
|
Change in non-cash working
capital
|
|
(5,297)
|
(4,312)
|
4,951
|
112
|
Cash used in investing activities
|
|
(11,066)
|
(9,253)
|
(13,081)
|
(13,914)
|
|
|
|
|
|
|
Financing activities
|
|
|
|
|
|
Changes in restricted
cash
|
|
(316)
|
59
|
(257)
|
118
|
Advance of bank debt, net of
fees
|
|
9,747
|
7,000
|
9,747
|
7,000
|
Repayment of bank debt
|
|
(4,500)
|
(1,500)
|
(6,000)
|
(3,000)
|
Net finance lease (payments)
receipts
|
|
(125)
|
95
|
(754)
|
(200)
|
Issuance of common shares
|
|
361
|
69
|
361
|
69
|
Change in non-cash working
capital
|
|
3
|
(122)
|
(7)
|
(252)
|
Cash from financing activities
|
|
5,170
|
5,601
|
3,090
|
3,735
|
|
|
|
|
|
|
Decrease in cash
|
|
(2,513)
|
(677)
|
(1,239)
|
(6,291)
|
Cash, beginning of period
|
|
9,537
|
10,859
|
8,186
|
16,335
|
Impact of foreign exchange on
foreign denominated cash balances
|
|
(34)
|
(44)
|
43
|
94
|
Cash, end of period
|
|
6,990
|
10,138
|
6,990
|
10,138
|
|
|
|
|
|
|
Supplementary information for cash
from operating activities:
|
|
|
|
|
|
Interest paid in cash
|
|
615
|
501
|
1,155
|
1,031
|
Income taxes paid in cash
|
|
448
|
86
|
806
|
1,099
|