Touchstone Exploration (LSE:TXP) dipped 2.8pc to 19.3p this morning despite announcing that it has now passed its 2,000bopd near-term production target. In an operational update, the business said it delivered average field estimated crude oil production of 2,015bopd over the first nine days of October.
Touchstone has been working towards 2,000bopd production since it listed in London last year, carrying out a four-well drilling programme in 2017 and an extended 14-well programme this year. It had originally planned to reach its target by the end of the Summer, but, as we wrote last month, it was held up by a minor technical delay.
Touchstone also said it achieved average third quarter crude oil production of 1,758bopd, a 22pc increase on the same period in 2017. It also said it has now drilled eight wells in this programme. All of these are now on production and contributing a combined 454bopd to Touchstone’s output.
Touchstone’s president and chief executive officer Paul Baay said: ‘I am pleased to report that we have exceeded our near-term production target of 2,000 barrels per day. The team has established a solid production base with our focus now on the six additional wells that we expect to drill prior to year-end. With the majority of our drilling obligations satisfied, the advantage of having our large diversified asset base allows us to focus on the assets that provide the greatest shareholder returns.
Elsewhere in today’s update, the company said it has identified five additional exploratory drilling prospects on its Ortoire exploration block. It has now identified 11 prospective locations at the 80pc-owned block, which contains four structurally complex oil and gas pools called Balata West, Mayaro, Maloney, Lizard Springs. On this, Baay said: We continue to refine exploration prospects on our Ortoire property and are very excited about its future developmental potential.’
Last month, Baay told us Touchstone has spent the last two years building up a proper picture of the potential offered by Ortoire, bringing together seismic information and well reports for the 70 wells historically drilled on the block.
Through this work, it became clear that the Herrera sandstone reservoirs, on which Ortoire sits, are turbidite deposits. In basic terms, turbidites are deep deposits formed by massive gravity flows down the offshore continental shelf and slope that, over time, can turn into vast hydrocarbon reserves.
Importantly, as oil and gas firms did not begin to focus on turbidites until the 1970/80s, they have often been left untapped in previously explored areas, creating substantial new potential. Indeed, over the last 20 years, many of the world’s largest hydrocarbon discoveries have been identified within turbidite deposits in areas like New Mexico and Scandinavia.
Baay told us the firm expects to begin drilling three exploration locations on the Herrera sandstone reservoirs next year. The first target will be Corosan, a prospect located just north of Shell’s Carapal Ridge discovery, Trinidad’s largest onshore gas/condensate discovery in 50 years. Touchstone has identified potential gas opportunities on three different fault blocks at Corosan, but it expects to kick things off with a well called Corosan-1 in Q2 next year.
After Corosan, Touchstone will target a prospect called Balata West where it has identified a fault block in the north containing an estimated 15-58MMbbls of oil and another in the south containing 70-281MMbbls. Finally, it will move to a third exploration area called OL-4, which Baay described as the most prospective of all Touchstone’s Ortoire targets.