Touchstone Exploration (LSE:TXP) announced a further increase in its 2018 capital program with its interim results this morning. The Canadian based oil company with operations in Trinidad will drill four additional wells this year. The interim results highlight the progress the company is making with its existing drilling and workovers campaign with a record CAD$12.5m of petroleum sales made in Q2 of this year – a 68% increase from the second quarter of 2017.
Cashflow has naturally increased over that period, with funds from operations for Q2 totalling CAD$3.3m compared with CAD$438k during Q2 last year. The reason for the dramatic jump is three-fold; average daily production has increased from 1,334bopd in Q2 2017 to 1,717bopd in Q2 2018, oil prices have increased substantially, and operating expenses have decreased. As a result, operating netback has almost doubled from CAD$19.88 to CAD$38.19 over the period.
As of 30th June, Touchstone held a cash balance of CAD$10.5m, a working capital surplus of CAD$3.7m and a CAD$15m principal term loan balance. The company also reported it has extended the maturity of the term loan by one year to November 23, 2022, with no payments required until January 1, 2020. In addition, the amended agreement removes the minimum $5m quarterly cash reserves financial covenant. The one-year deferral of principal payments will allow Touchstone to continue its near-term development strategy into 2019.
Operationally, Touchstone states that the five wells drilled to date in 2018 combined to add 183 bopd of incremental production in the second quarter, and that the four-well 2017 program continued to perform above internal expectations, contributing approximately 351 bopd of production in the quarter.
In last week’s operational update, CEO & president of Touchstone, Paul Baay 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 stabilized production, 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.’
Today, the company announced it is increasing its capital program by a further US$4.8 million to fund the drilling of four additional wells this year. As a result, Touchstone is now set to drill seven more wells this year, and taking into account that four of the drilled wells are yet to be added onto production, the company appears well on target to hit its goal of reaching a production rate of 2000 bopd.
The current drilling campaign is not Touchstone’s only focus, it’s also eyeing up exploring the 35,785-acre Ortoire Block on the East of Trinidad. Touchstone has an 80% interest, and to date, 77 wells have been drilled at Ortoire. The company has identified six independent exploratory drilling prospects on the block and has commenced applications for certificates of environmental compliance with local regulatory authorities.
Paul Baay: 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.”
Author: Stuart Langelaan
Disclosure: The Author owns shares in the company mentioned above