TIDMTXP
RNS Number : 4606T
Touchstone Exploration Inc.
20 July 2020
TOUCHSTONE ANNOUNCES SIGNIFICANT CASCADURA INDEPENT RESERVES
EVALUATION
CALGARY, ALBERTA (July 20, 2020) - Touchstone Exploration Inc.
("Touchstone", "we", "our", "us" or the "Company") (TSX, LSE: TXP)
announces highlights of our independent reserves evaluation of the
Cascadura Assessment Area prepared by GLJ Ltd. ( " GLJ " ) with an
effective date of June 30, 2020 (the "Cascadura Reserves Report "
). Highlights of our total proved ("1P"), total proved plus
probable ("2P") and total proved plus probable plus possible ("3P")
reserves from the Cascadura Reserves Report are provided below.
Unless otherwise stated, all financial amounts herein are rounded
to thousands of United States dollars .
The Cascadura Assessment Area is located in the Company's
Ortoire exploration block, onshore in the Republic of Trinidad and
Tobago (Touchstone 80% working interest operator, Heritage
Petroleum Company Limited 20% working interest). The Cascadura
Assessment Area represents the geologically and geophysically
defined reservoirs which were evaluated by the Company's
Cascadura-1ST1 exploration well drilled in the fourth quarter of
2019 and tested in the first half of 2020.
The Cascadura Reserves Report evaluates the Cascadura Assessment
Area on a stand-alone basis and provides a reserves estimate of
natural gas and natural gas liquids, as well as a before income tax
estimate of net present values of future net revenues as of June
30. 2020. The Cascadura Reserves Report should be considered as
supplementary to, and reconciled with, the volumes and future net
revenues disclosed 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.
Paul R. Baay, President and Chief Executive Officer, commented
:
"We are delighted to report that the independent reserves report
verifies the material size of the reserves yet to be produced in
the Cascadura structure and provides the groundwork for a
multi-year future onshore development program in Trinidad. Through
the excellent work of the Touchstone team in the drilling of our
first two exploration wells, we have successfully proven up the
hydrocarbon bearing turbidite model in Ortoire. This model will be
further evaluated by our next two exploration targets at Chinook
and Cascadura deep, with drilling at Chinook on track to commence
within the next few weeks.
We could not have envisioned a better start from the first two
wells of the Ortoire exploration program, and we look forward to
updating the market and our Trinidad stakeholders as we progress
with our Ortoire exploration and development activities in the
coming months."
Cascadura Reserves Report Highlights
-- Gross Discovered Petroleum Initially-in-Place ("DPIIP") is
estimated to be between 571.5 Bcf of natural gas in the High
Estimate and 241.2 Bcf in the Low Estimate, with a Best Estimate of
398.5 Bcf.
-- Company working interest 3P reserves of 73,190 Mboe (85%
recovery of High Estimate DPIIP), 2P reserves of 45,030 Mboe (75%
recovery of Best Estimate DPIIP), and 1P reserves of 23,622 Mboe
(65% recovery of the Low Estimate DPIIP).
-- Net peak production is estimated to be 22,600 boe/d in the 3P
forecast, 15,108 boe/d in the 2P forecast, and 10,266 boe/d in the
1P forecast.
-- Estimated before tax 3P 10% discounted net present value of
future net revenues ("NPV10") of $802.9 million, 2P NPV10 of $519.2
million, and 1P NPV10 of $287.7 million.
-- Net future development costs associated with the development
of the Cascadura Assessment Area is estimated at $11.6 million for
1P reserves and $15.8 million for both 2P and 3P reserves.
James Shipka, Chief Operating Officer, commented:
"GLJ's independent evaluation of the Cascadura-1ST1 production
test results and the subsequent reserves evaluation of the
Cascadura Assessment Area confirms the tremendous potential of the
Ortoire exploration block. The Cascadura Reserves Report combines
both the pressure and flow testing of the Cascadura-1ST1 well with
the 3D seismic data which covers the entirety of the Cascadura
structure as we now understand it. The team is currently working
hard to design the facilities and infrastructure required to bring
the Cascadura gas and liquids to market as quickly as possible, and
with GLJ estimating there is in excess of 500 Bcf of discovered
natural gas in place in the Cascadura area, it is evident that we
have a clear pathway to a multi-year development program."
Cascadura Reserves Report Summary
Touchstone's petroleum reserves for the Cascadura Assessment
Block were evaluated by independent qualified reserves evaluator,
GLJ, in accordance with definitions, standards and procedures
contained in the Canadian Oil and Gas Evaluation ("COGE") Handbook
and National Instrument 51-101 - Standards of Disclosure for Oil
and Gas Activities ( " NI 51-101 " ). The reserve estimates set
forth below are based upon GLJ's Cascadura Reserves Report dated
July 17, 2020 with an effective date of June 30, 2020. All values
in this announcement are based on GLJ's July 1, 2020 forecast
prices and estimates of future operating and capital development
costs as at June 30, 2020. In certain tables set forth below, the
columns may not add due to rounding.
Summary of Cascadura Assessment Area Company Gross Reserves as
of June 30, 2020 by Product Type (1),(2)
Reserves Category Conventional Natural Total Oil
Natural Gas Liquids Equivalent
Gas (MMcf) (Mbbl) (Mboe)
--------------------------------- ------------------------- ------------------------- -------------------------
Proved
Developed Producing - - -
Developed Non-Producing 41,602 1,061 7,995
Undeveloped 81,313 2,074 15,627
--------------------------------- ------------------------- ------------------------- -------------------------
Total Proved 122,916 3,136 23,622
Probable 111,402 2,841 21,408
Total Proved plus Probable 234,318 5,977 45,030
--------------------------------- ------------------------- ------------------------- -------------------------
Possible 146,530 3,738 28,160
--------------------------------- ------------------------- ------------------------- -------------------------
Total Proved plus Probable plus
Possible 380,848 9,715 73,190
--------------------------------- ------------------------- ------------------------- -------------------------
Notes:
(1) Gross Reserves are the Company's working interest share of
the remaining reserves before deduction of any royalties.
(2) See " Advisories: Reserve Advisory, Oil and Gas Measures and
Definitions of Petroleum Reserves ".
Summary of Cascadura Assessment Area Company Net Present Values
of Future Net Revenues as of June 30, 2020 (1), (2),(3)
Reserves Category Net Present Values of Future Net Revenues
Before Income Taxes Discounted at (%
per year) ($000's)
---------------------------- ----------------------------------------------------
0% 5% 10% 15% 20%
---------------------------- ---------- ---------- -------- -------- --------
Proved
Developed Producing - - - - -
Developed Non-Producing 161,557 128,781 105,583 88,572 75,714
Undeveloped 330,677 241,377 182,167 141,328 112,193
---------------------------- ---------- ---------- -------- -------- --------
Total Proved 492,234 370,158 287,749 229,901 187,908
Probable 477,556 324,397 231,458 171,836 131,760
---------------------------- ---------- ---------- -------- -------- --------
Total Proved plus Probable 969,790 694,555 519,207 401,737 319,668
---------------------------- ---------- ---------- -------- -------- --------
Possible 653,133 416,464 283,674 203,110 151,106
---------------------------- ---------- ---------- -------- -------- --------
Total Proved plus Probable
plus Possible 1,622,923 1,111,019 802,881 604,847 470,774
---------------------------- ---------- ---------- -------- -------- --------
Notes:
(1) Based on GLJ's July 1, 2020 escalated price forecast. See "
Summary of Pricing and Inflation Assumptions " .
(2) See " Advisories: Reserve Advisory and Definitions of Petroleum Reserves " .
(3) GLJ did not forecast after tax net present values of future
net revenues in the Cascadura Reserves Report given the Cascadura
Assessment Area is an asset owned by a Trinidad corporate entity.
Calculating income taxes on cash flows derived from a stand-alone
asset would not be indicative of business entity level income
taxes.
Summary of Pricing and Inflation Assumptions
The following table sets forth GLJ's forecasted benchmark
reference pricing and inflation rates reflected in the Cascadura
Reserves Report effective June 30, 2020.
Forecast Year Brent Spot Conway Henry Hub Inflation Rates
Crude Oil Condensate Natural Gas (%/year)(2)
($/bbl)(1) ($/bbl)(1) ($/MMBtu)(1)
--------------- ------------- ------------- -------------- ----------------
2020 Q3-Q4 43.50 36.90 2.08 0.0
2021 48.00 39.60 2.55 0.0
2022 51.50 42.75 2.65 1.0
2023 56.50 47.25 2.75 2.0
2024 60.00 50.40 2.85 2.0
2025 62.95 53.06 2.95 2.0
2026 64.13 54.12 3.01 2.0
2027 65.33 55.20 3.07 2.0
2028 66.56 56.30 3.13 2.0
2029 67.81 57.43 3.19 2.0
Thereafter +2.0% / year +2.0% / year +2.0% / year 2.0
Notes:
(1) This summary table identifies benchmark reference pricing
schedules that might apply to a reporting issuer. Product sales
prices will reflect these reference prices with further adjustments
for quality differentials and transportation to point of sale. See
" Advisories: Reserve Advisory ".
(2) Inflation rates for forecasting pricing and costs.
Cascadura Assessment Area Company Future Development Costs
(1)
The following table provides information regarding the
development costs deducted in the estimation of the Company's
working interest future net revenue using forecast prices and costs
included in the Cascadura Reserves Report.
Year Proved Reserves Proved plus Proved plus
($000's) Probable Reserves Probable plus
($000's) Possible Reserves
($000's)
------------------------- ---------------- ------------------- -------------------
2020 - - -
2021 1,000 1,000 1,000
2022 6,464 6,464 6,464
2023 4,121 4,121 4,121
2024 - 4,203 4,203
------------------------- ---------------- ------------------- -------------------
Total undiscounted 11,585 15,788 15,788
Total discounted at 10%
per year 9,347 12,218 12,218
------------------------- ---------------- ------------------- -------------------
Note:
(1) See " Advisories: Reserve Advisory " .
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. 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
Reserve Advisory
The reserves estimates prepared herein have been evaluated by an
independent qualified reserves evaluator in accordance with NI
51-101 and the COGE Handbook. The disclosure in this announcement
summarizes certain information contained in the Cascadura Reserves
Report but represents only a portion of the disclosure required
under NI 51-101. In accordance with Canadian practice, production
volumes and revenues are reported on a Company gross basis, before
deduction of crown and other royalties. Unless otherwise specified,
all reserves volumes in this announcement (and all information
derived therefrom) are based on Company gross reserves using
forecast prices and costs.
The recovery and reserve estimates provided herein are estimates
only, and there is no guarantee that the estimated reserves will be
recovered. Actual reserves may eventually prove to be greater than
or less than the estimates provided herein. This announcement (i)
summarizes the reserves of the Company's Cascadura Assessment Area
only and the net present values of future net revenue for such
reserves using forecast prices and costs as at June 30, 2020 prior
to provision for income taxes, interest, general and administrative
expenses, the impact of any financial derivatives or liabilities
associated with the abandonment and reclamation of certain
facilities and wells, and (ii) should be considered as
supplementary to, and reconciled with, the volumes and net present
values of future net revenues disclosed 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 estimates of
reserves and future net revenue have been made assuming that the
development will occur. The estimates of reserves and future net
revenue for individual properties may not reflect the same
confidence level as estimates of reserves and future net revenue
for all properties, due to the effects of aggregation. It should
not be assumed that the present worth of estimated before tax
future net revenues presented in the table above represent the fair
market value of the reserves. There is no assurance that the
forecast prices and costs assumptions will be attained, and
variances could be material. The term "future development costs"
does not have a standardized meaning and should not be used to make
comparisons.
The DPIIP set forth in this announcement has been provided for
the sole purpose of highlighting the recovery factors used by GLJ
in attributing reserves to the Cascadura Assessment Area effective
as of June 30, 2020. As disclosed below, DPIIP is defined by COGE
as that quantity of petroleum that is estimated, as of a given
date, to be contained in known accumulations prior to production.
The recoverable portion of DPIIP includes production, reserves and
contingent resources; the remainder is unrecoverable. It should not
be assumed that any portion of the DPIIP set forth in this
announcement is recoverable other than the portion which has been
attributed reserves by GLJ. There is uncertainty that it will be
commercially viable to produce any portion of the DPIIP other than
the portion that is attributed reserves.
In the Cascadura Reserves Report, GLJ estimated conventional
natural gas revenues referencing Henry Hub natural gas forecasted
pricing and natural gas liquids revenues based on forecasted Conway
Condensate reference pricing. The Company is currently negotiating
a marketing agreement for all petroleum products produced on the
Ortoire property, and accordingly, such revenue estimates in the
Cascadura Reserves Report may not be attained, and variances could
be material. In addition, GLJ forecasted reserve volumes and future
cash flows based upon volumetric interpretations and extrapolations
based upon well testing. Notwithstanding contractual options for
the extension of the Company's Ortoire block production and
exploration agreement (the "Licence") upon a commercial discovery,
the forecasted economic limit of individual wells and the net
present values of future net revenue therefrom is currently beyond
the initial exploration term of the Licence.
Definitions of Petroleum Reserves
The reserves have been categorized accordance with the reserves
definitions as set out in the COGE Handbook, which are set out
below.
"Reserves" are estimated remaining quantities of petroleum
anticipated to be recoverable from known accumulations, as of a
given date, based on the analysis of drilling, geological,
geophysical, and engineering data; the use of established
technology; and specified economic conditions, which are generally
accepted as being reasonable. Reserves are further classified
according to the level of certainty associated with the estimates
as follows:
"Proved Developed Producing Reserves" are those reserves that
are expected to be recovered from completion intervals open at the
time of the estimate. These reserves may be currently producing, or
if shut-in, they must have previously been on production, and the
date of resumption of production must be known with reasonable
certainty.
"Proved Developed Non-Producing Reserves" are those reserves
that either have not been on production or have previously been on
production but are shut-in, and the date of resumption of
production is unknown.
"Proved Undeveloped Reserves" are those reserves expected to be
recovered from known accumulations where a significant expenditure
(e.g. when compared to the cost of drilling a well) is required to
render them capable of production. They must fully meet the
requirements of the reserves category (proved, probable, possible)
to which they are assigned.
"Proved Reserves" are those reserves that can be estimated with
a high degree of certainty to be recoverable. It is likely that the
actual remaining quantities recovered will exceed the estimated
proved reserves.
"Probable Reserves" are those additional reserves that are less
certain to be recovered than proved reserves. It is equally likely
that the actual remaining quantities recovered will be greater or
less than the sum of the estimated proved plus probable
reserves.
"Possible Reserves" are those additional reserves that are less
certain to be recovered than probable reserves. There is a 10
percent probability that the quantities actually recovered will
equal or exceed the sum of proved plus probable plus possible
reserves. It is unlikely that the actual remaining quantities
recovered will exceed the sum of the estimated proved plus probable
plus possible reserves.
"Discovered Petroleum Initially-in-Place ("DPIIP)" is that
quantity of petroleum that is estimated, as of a given date, to be
contained in known accumulations prior to production. The
recoverable portion of DPIIP includes production, reserves, and
contingent resources; the remainder is categorized as
unrecoverable.
"Uncertainty Ranges" are described in the COGE Handbook as low,
best, and high estimates for reserves and resources as follows:
The "Low Estimate" is considered to be a conservative estimate
of the quantity that will actually be recovered. It is likely that
the actual remaining quantities recovered will exceed the low
estimate. If probabilistic methods are used, there should be at
least a 90 percent probability (P90) that the quantities actually
recovered will equal or exceed the low estimate.
The "Best Estimate" is considered to be the best estimate of the
quantity that will actually be recovered. It is equally likely that
the actual remaining quantities recovered will be greater or less
than the best estimate. If probabilistic methods are used, there
should be at least a 50 percent probability (P50) that the
quantities actually recovered will equal or exceed the best
estimate.
The "High Estimate" is considered to be an optimistic estimate
of the quantity that will actually be recovered. It is unlikely
that the actual remaining quantities recovered will exceed the high
estimate. If probabilistic methods are used, there should be at
least a 10 percent probability (P10) that the quantities actually
recovered will equal or exceed the high estimate.
Oil and Gas Measures
Where applicable, natural gas has been converted to barrels of
oil equivalent based on six thousand cubic feet to one barrel 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. The boe rate is based on an energy equivalency conversion
method primarily applicable at the burner tip and does not
represent a value equivalent at the wellhead. Use of boe in
isolation may be misleading.
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
estimated DPIIP, reserves and the before tax net present values of
future net revenue therefrom, future development costs and
production rates associated with reserves , the potential
undertaking, timing, locations and costs of future well drilling
and related facilities , and the sufficiency of resources and
available financing to fund future development and exploration
operations. 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 factors and
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.
In addition, statements relating to reserves are by their nature
forward-looking statements, as they involve the implied assessment,
based on certain estimates and assumptions, that the reserves
described exist in the quantities predicted or estimated, and can
be profitably produced in the future. The recovery and reserve
estimates of Touchstone's reserves provided herein are estimates
only, and there is no guarantee that the estimated reserves will be
recovered. Consequently, actual results may differ materially from
those anticipated in the forward-looking statements.
Abbreviations
bbl barrel
Mbbl thousand barrels
MMcf million cubic feet
Bcf billion cubic feet
MMBtu million British Thermal Units
boe barrels of oil equivalent
boe/d barrels of oil equivalent per day
Mboe thousand barrels of oil equivalent
Competent Persons Statement
In accordance with the AIM Rules for Companies, the technical
information contained in this announcement has been reviewed and
approved by James Shipka, Chief Operating Officer of Touchstone
Exploration Inc. Mr. Shipka is a qualified person as defined in the
London Stock Exchange's Guidance Note for Mining and Oil and Gas
Companies and is a Fellow of the Geological Society of London (BGS)
as well as a member of the Canadian Society of Petroleum Geologists
and the Geological Society of Trinidad and Tobago. Mr. Shipka has a
Bachelor of Science in Geology from the University of Calgary and
has over 30 years of oil and gas exploration and development
experience.
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
MSCRMMATMTITMAM
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