TIDMTXP
RNS Number : 8378M
Touchstone Exploration Inc.
14 May 2020
FIRST QUARTER 2020 RESULTS AND OPERATIONAL UPDATE
CALGARY, ALBERTA (May 14, 2020) - Touchstone Exploration Inc. (
" Touchstone ", "we", "our", "us" or the " Company " ) (TSX, LSE:
TXP) reports its operating and financial results for the three
months ended March 31, 2020. Selected information is outlined below
and should be read in conjunction with Touchstone's March 31, 2020
unaudited interim consolidated financial statements and related
Management's Discussion and Analysis, both of which will be
available under the Company's profile on SEDAR (www.sedar.com) and
the Company's website (www.touchstoneexploration.com). Unless
otherwise stated, all financial amounts herein are rounded to
thousands of United States dollars .
Operational Highlights
-- In response to the coronavirus ("COVID-19") pandemic, we have
made numerous adjustments to our operating practices to provide
ongoing safety and business continuity. Aside from delaying timing
of our capital projects, the Company has had no material
operational impacts from the pandemic at present.
-- First quarter 2020 crude oil sales averaged 1,589 barrels per
day ("bbls/d"), compared to 1,690 bbls/d in the fourth quarter of
2019 and 2,121 bbls/d in the first quarter of 2019. Our mature
field production has declined as a result of our increased focus of
capital directed towards Ortoire exploration activities since
January 2019.
-- In the first quarter we invested $1,823,000 in exploration
activities, completing two successful production tests on our
Cascadura-1ST1 exploration well and completing lease preparations
on our Chinook-1 exploration well site.
-- We continue to prepare to drill an exploration well at our
Chinook prospect and currently anticipate drilling the well in July
2020.
-- We have negotiated a contract with a local construction firm
to tie in the Coho-1 well, with operations expected to commence
once government-imposed restrictions are lifted.
-- Subsequent to quarter end, Touchstone entered into a
framework agreement with the National Gas Company of Trinidad and
Tobago and Heritage Petroleum Company Limited for the development,
sale and purchase of natural gas and natural gas liquids produced
from the Ortoire block.
-- On May 13, 2020 we retrieved the downhole pressure recorder
from the Cascadura-1ST1 well. The reservoir data will be
interpreted internally and by our independent reserves evaluator,
and we expect to release the results prior to the end of May
2020.
-- Subsequent to the drilling of Chinook-1, we are currently
reviewing the option of drilling a second deeper exploration well
on the Cascadura field ahead of the previously planned Royston
location in order to mitigate possible delays in the construction
of the access road and fulfill our drilling obligations under the
Ortoire licence.
Financial Highlights
-- Touchstone exited the quarter with cash of $12,219,000 and
net debt of $5,244,000. Net debt decreased by 68% from year end as
a result of the previously announced February 2020 private
placement that raised net proceeds of $10,850,000.
-- Realized crude oil prices averaged $46.10 per barrel,
decreasing 20% from both $57.38 per barrel in the prior quarter and
$57.71 per barrel in the first quarter of 2019. A 44% decline in
realized pricing from February to March 2020 led us to immediately
restrict certain field operations and discretionary operational
spending.
-- We generated $1,257,000 in funds flow from operations ($0.01
per share), a decrease of 48% relative to $2,430,000 ($0.02 per
share) in the first quarter of 2019. The decline was primarily
attributable to lower production and significantly lower crude oil
prices received in March 2020.
-- Non-cash impairments charges of $19,215,000 were recognized,
triggered by the impact of materially lower forward crude oil
forecasts, offset by a deferred income tax recovery of $10,072,000.
As a result, a net loss of $9,240,000 ($0.05 per share) was
recognized in the first quarter of 2020 compared to a net loss of
$185,000 reported in the prior year equivalent quarter.
Paul R. Baay, President and Chief Executive Officer,
commented:
"The first quarter of 2020 has been unprecedented for the oil
and gas industry given the collapse of oil prices and the global
economic uncertainty of COVID-19. The safety of our employees
continues to be of paramount importance to the Board and management
team, and I would like to thank our employees for their dedication
and flexibility during this challenging period as we adjusted to a
new working environment.
While there have been major sector challenges, I am pleased to
report that Touchstone has continued to take several positive steps
during the quarter. In addition to the successful production tests
at Cascadura, we have made progress on tying in the Coho-1 gas
well, and the $10.85 million fundraising completed in February
allows us to continue to prepare for drilling at our Chinook
location, the third exploration well on the Ortoire block. With
clear exploration targets, we remain confident about the long-term
strategy of the Company, especially given our increasing focus on
natural gas, and the increased stability that this will give us
from a financial perspective amidst a volatile crude oil
market."
Operations Update
Current and forecasted c rude oil pric ing have deteriorat ed
from a significant decrease in worldwide demand as a result of the
pandemic and an increase in global supply due to disagreements over
production restrictions between members of OPEC and Russia. Our
realized crude oil price decreased by 44% from February to March.
The rapid decline in oil prices had a negative impact on our cash
flows during the first quarter and our projections for the balance
of the year. The scale and duration of the COVID-19 outbreak remain
uncertain, and the full extent of the impact on the Company's
operations and future financial performance is currently
unknown.
We remain focused on protecting the health of our employees and
communities and ensuring a decisive response for our investors.
During the quarter, we introduced operating measures to protect the
well-being of all stakeholders in line with local public health
official guidelines while continuing to maintain safe operations
and business continuity. With the continued volatility in crude oil
pricing and our focus on effective and efficient operations, we are
continuing to preserve liquidity and protect our financial position
during this period of economic turmoil. We have reduced all
discretionary development and operational spending and have only
completed workovers on essential wells. We have also reduced
operating and general and administrative costs and are continuing
to identify greater reductions. In addition, we expect to store a
portion of our second quarter 2020 crude oil production on an
interim basis to sell in the future subject to internal and
external levels of storage capacity.
Our objective remains to bring our two gas exploration
discoveries onto production as soon as possible, which are expected
to not only increase cash flow but insulate us from expected future
crude oil price volatility from the continued effects of COVID-19
and worldwide oversupply. Despite current restrictions in Trinidad,
we have proceeded with preparations for the tie in of the Coho-1
natural gas well, as we have submitted the necessary regulatory
applications to build the required pipeline and surface facilities.
Touchstone has contracted a local operator to proceed with the
project, who has confirmed that the majority of the equipment is
currently available domestically. Upon receipt of all approvals, we
expect to commence operations immediately and are targeting 120
days to complete. We currently estimate to commence production from
the well in October 2020.
In addition, we completed the construction of the Chinook-1
drilling location prior to the March 15, 2020 pandemic related
lockdown, which gives us the option to mobilize the drilling rig
following the removal or easing of government-imposed
transportation restrictions. Subject to maintaining liquidity
targets, the Company is currently anticipating spudding the well in
July with additional procedures in place to keep all personnel safe
during drilling operations.
We are reviewing our exploration program and are evaluating the
option of drilling a second exploration well on the Cascadura field
ahead of the previously planned Royston location. This option
mitigates possible delays in the construction of the Royston access
road as Trinidad enters the rainy season, as well as affording us
additional information relating to the production facilities
required to optimize sales from the Cascadura field. This well
remains subject to future commodity prices and liquidity targets,
making it dependent on the Company achieving Coho-1 natural gas
sales.
We continue to monitor the situation and economic environment,
and we will adapt our business operations and drilling program to
ensure that we preserve and grow long-term shareholder value. We
thank our shareholders and stakeholders for their continuing
support and look forward to coming out of this challenging period
with a stronger and sustainable Company.
Q1 2020 Financial and Operating Results Summary
Three months ended % change
March 31,
---------
2020 2019
------------------------------------- ----------------------- ----------------------- ---------
Operating Highlights
Average daily oil production
(bbls/d) 1,589 2,121 (25)
Brent benchmark price ($/bbl) 50.27 63.10 (20)
Operating netback(1) ($/bbl)
Realized sales price 46.10 57.71 (20)
Royalties (13.90) (15.29) (9)
Operating expenses (13.59) (13.07) 4
-------------------------------------- ----------------------- ----------------------- ---------
18.61 29.35 (37)
------------------------------------- ----------------------- ----------------------- ---------
Financial Highlights
($000's except as indicated)
Petroleum sales 6,698 11,015 (39)
Cash flow (used in) from operating
activities (76) 2,737 n/a
Funds flow from operations(2) 1,257 2,430 (48)
Per share - basic and diluted(1)(2) 0.01 0.02 (50)
Net loss (9,240) (185) 100
Per share - basic and diluted (0.05) (0.00) n/a
Exploration capital expenditures 1,823 360 100
Development capital expenditures 220 399 (45)
-------------------------------------- ----------------------- ----------------------- ---------
Total capital expenditures 2,043 759 100
-------------------------------------- ----------------------- ----------------------- ---------
Working capital surplus (8,094) (1,963) 100
Principal non-current balance
of term loan 13,338 11,235 19
-------------------------------------- ----------------------- ----------------------- ---------
Net debt(1) - end of period 5,244 9,272 (43)
-------------------------------------- ----------------------- ----------------------- ---------
Share Information (000's)
Weighted average shares outstanding
- basic and diluted 169,361 140,984 20
Outstanding shares - end of period 183,489 160,688 14
Notes:
(1) Non-GAAP financial measure that does not have a standardized
meaning prescribed by International Financial Reporting Standards
("IFRS") and therefore may not be comparable with the calculation
of similar measures presented by other companies. See "Advisories:
Non-GAAP Measures".
(2) Additional GAAP term included in the Company's consolidated
statements of cash flows. Funds flow from operations represents net
loss excluding non-cash items. See "Advisories: Non-GAAP
Measures".
Operating Results
In the first quarter of 2020, Touchstone completed two
successful production tests on the Cascadura-1ST1 exploration well
on the Ortoire block, investing a total of $1,536,000 in testing
and lease building activities (2019 - $nil).
We conducted minimal developmental activity in the quarter, with
average crude oil sales declining to 1,589 bbls/d, a 6% decrease
relative to the 1,690 bbls/d produced in the prior quarter and a
25% reduction from 2,121 bbls/d produced in the first quarter of
2019. Our crude oil sales volumes have decreased due to the ongoing
impact of natural declines associated with limited capital
investment since the final two wells of the 2018 drilling program
were brought onstream in January 2019. In March 2020 we sold 702
net barrels of natural gas liquids produced from the Cascadura-1ST1
production tests.
Financial Results
We generated $1,257,000 in funds flow from operations in the
first quarter of 2020, which was down 48% from the prior year first
quarter primarily due to a 24% decline in production and 20% drop
in realized crude oil pricing. We recorded a net loss of $9,240,000
($0.05 per share) in the first quarter of 2020 versus a net loss of
$185,000 ($0.00 per share) generated in the prior year equivalent
quarter. The decrease was primarily driven by non-cash property and
equipment impairment charges of $19,215,000 as a result of
decreases in forecasted commodity prices, partially offset by an
associated deferred tax recovery of $10,072,000. Impairment charges
were incurred due to the material reduction in crude oil price
forecasts but may be reversed in future periods if commodity price
forecasts improve .
In February we completed a United Kingdom based private
placement in order to support the drilling of our third exploration
commitment well at the Chinook prospect. The private placement
raised net proceeds of approximately $10,850,000 by way of a
placing of 22,500,000 common shares. As a result, we exited the
first quarter with a cash balance of $12,219,000, a working capital
surplus of $8,094,000 and a C$20 million principal term loan
balance. Net debt on March 31, 2020 was $5,244,000, which
represented a reduction of 68% relative to year end. Our credit
facility does not require the commencement of principal payments
until January 2021, and we remained comfortably within the
financial covenants as at March 31, 2020.
Annual Meeting of Shareholders
We will be holding our annual meeting of shareholders on
Wednesday, June 3, 2020, at 10:00 a.m. (Mountain time). This year,
to proactively address the unprecedented public health impact of
COVID-19 and to mitigate risks to the health and safety of our
communities, shareholders, employees and other stakeholders, we
will hold a virtual-only meeting, which will be conducted via live
audio webcast. Shareholders will not be able to attend the meeting
in person but will have an opportunity to participate in the
meeting online regardless of their geographic location. Guests will
be able to listen to the meeting but will not be able to vote at
the meeting or ask questions.
Details on how to attend the meeting are as follows:
-- https://web.lumiagm.com/238625532 in your web browser.
-- Password "touchstone2020" (case sensitive).
-- If you have voting rights, select "Login" and follow the instructions.
-- If you do not have voting rights, select "Guest" and complete the online form.
Further details on how to attend the meeting are included on our
website. The meeting materials, including our Notice of Meeting and
Management Information Circular dated April 24, 2020, are also
available on our website (
https://www.touchstoneexploration.com/investors/shareholder-meeting
) and under our profile on SEDAR ( www.sedar.com ).
Touchstone Exploration Inc.
Touchstone Exploration Inc. is a Calgary 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.
Mr. Paul Baay, President and Chief Executive Officer Tel: +1
(403) 750-4487
Mr. Scott Budau, Chief Financial Officer
Mr. James Shipka, Chief Operating Officer
Shore Capital (Nominated Advisor and Joint Broker)
Nominated Advisor: Edward Mansfield / Daniel Bush / Michael McGloin Tel: +44 (0) 207 408 4090
Corporate Broking: Jerry Keen
Canaccord Genuity (Joint Broker)
Adam James / Thomas Diehl Tel: +44 (0) 207 523 8000
Camarco (Financial PR)
Nick Hennis / Billy Clegg Tel: +44 (0) 203 781 8330
Advisories
Non-GAAP Measures
This announcement contains terms commonly used in the oil and
natural gas industry, including funds flow from operations, funds
flow from operations per share, operating netback and net debt.
These terms do not have a standardized meaning under Generally
Accepted Accounting Principles ("GAAP") and may not be comparable
to similar measures presented by other companies. Shareholders and
investors are cautioned that these measures should not be construed
as alternatives to cash flow from operating activities, net
earnings, net earnings per share, total liabilities, or other
measures of financial performance as determined in accordance with
GAAP. Management uses these Non-GAAP measures for its own
performance measurement and to provide stakeholders with measures
to compare the Company's operations over time.
Funds flow from operations is an additional GAAP measure
included in the Company's consolidated statements of cash flows.
Funds flow from operations represents net earnings (loss) excluding
non-cash items. Touchstone considers funds flow from operations to
be an important measure of the Company's ability to generate the
funds necessary to finance capital expenditures and repay debt. The
Company calculates funds flow from operations per share by dividing
funds flow from operations by the weighted average number of common
shares outstanding during the applicable period.
The Company uses operating netback as a key performance
indicator of field results. Operating netback is presented on a
total and per barrel basis and is calculated by deducting royalties
and operating expenses from petroleum sales. If applicable, the
Company also discloses operating netback both prior to realized
gains or losses on derivatives and after the impacts of derivatives
are included. Realized gains or losses represent the portion of
risk management contracts that have settled in cash during the
period, and disclosing this impact provides Management and
investors with transparent measures that reflect how the Company's
risk management program can impact netback metrics. The Company
considers operating netback to be a key measure as it demonstrates
Touchstone's profitability relative to current commodity prices.
This measurement assists Management and investors with evaluating
operating results on a historical basis.
The Company closely monitors its capital structure with a goal
of maintaining a strong financial position in order to fund current
operations and the future growth of the Company. The Company
monitors working capital and net debt as part of its capital
structure to assess its true debt and liquidity position and to
manage capital and liquidity risk. Working capital is calculated as
current assets minus current liabilities as they appear on the
consolidated statements of financial position. Net debt is
calculated by summing the Company's working capital and the
principal (undiscounted) non-current amount of senior secured
debt.
Forward-Looking Statements
Certain information provided in this announcement may constitute
forward-looking statements within the meaning of applicable
securities laws. Forward-looking information in this announcement
may include, but is not limited to, statements relating to the
Company's exploration plans and strategies, including anticipated
drilling, timing, development, tie in, and ultimate production from
exploration wells; the Company's expectation of preserving future
cash flows and future demand for the Company's petroleum products
and economic activity in general; the impacts of COVID-19 on the
Company's business and measures taken in response thereto;
uncertainty regarding COVID-19 and the impact it will have on
future petroleum pricing; the Company's cost reduction efforts and
anticipated benefits therefrom; the Company's ability to store and
market oil production volumes in the future; the Company's ability
to reverse property and equipment impairments in the future; and
the sufficiency of resources and available financing to fund future
capital expenditures and maintain financial liquidity. 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 2019
Annual Information Form dated March 25, 2020 which has been filed
on SEDAR and can be accessed at www.sedar.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 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 information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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