Touchstone Exploration (LSE:TXP) looked like an interesting buy today, with shares dropping 9.4pc to 18.8p despite the firm reporting on-track production figures and progress at its prospective Ortoire block. The Trinidad-focused business, which is currently undertaking a game-changing ten well 2018 drilling campaign, reported estimated crude oil production of 1,757bbls a day.
However, Touchstone said two wells drilled in the programme are currently producing from deeper secondary opportunities as per regulatory guidelines. As a result, they are not contributing to stabilised production at present. The company said it has now applied to move up-hole to the primary zone of interest for both wells, where it anticipates greater production, and believes both wells will be on full production before the end of August. If true, this would put the company comfortably on track to hit its 2,000bopd production target by the end of Summer.
Elsewhere, the business said it has drilled, cased and commenced completion on the sixth and seventh wells of the programme, and has begun pre-drilling operations on the eight well.
Interestingly, the firm also reported that it has identified six potential drilling locations on individual prospects at its prospective Ortoire block. It has now commenced applications for a certificate of environmental compliance for the areas with local regulatory authorities.
Ortoire is a 35,765 net acre exploration site containing four established mixed oil and gas pools called Balata West, Mayaro, Maloney, Lizard Springs. Although Ortoire is structurally complex, Touchstone has said it is seismically well defined, containing structural traps, stratigraphic traps, and turbidite deposits. Work at Ortoire is in its early stages, but Baay has said the firm will progress work on the area towards the end of 2018 and into 2019.
Encouragingly, a prosperous collection of three gas discoveries known as the Central Block containing 500BCF of gas lies just beyond Ortoirs’s borders. Carapal Ridge – one of these discoveries – is Trinidad’s largest onshore gas/ condensate discovery in 50 years, containing 25MMboe. Meanwhile, a nearby development called Catshill contains 30MMbbls oil and another called Navette includes 60MMbbls. If these discoveries are anything to go by, then Ortoire could house some serious potential.
Paul Baay, president and chief executive officer of Touchstone, said: ‘I am pleased to report that we now have drilled the first seven wells of the ten well program. With four of the seven wells yet to contribute to our current stabilizedproduction, we are excited to increase production in the near-term. With the combination of these four wells and the remaining three to be drilled this year, we are looking forward to a strong start to 2019. In addition to the existing drilling program, the Ortoire exploration opportunities and future development potential are expected to contribute to our robust growth objectives going forward.’
Expectations of higher production likely hit Touchstone’s shares today, but, as mentioned, four of the seven wells drilled in the programme to date are not currently contributing to stabilised output. With this in mind, today’s weakness could present a great buying opportunity given the potential on offer at the firm throughout the rest of 2018 and the whole of 2019 – as outlined in greater detail here.
Author: Daniel Flynn
Disclosure: The author does not owns shares in the company mentioned above