Trinidad-focused oil & gas explorer Touchstone Exploration (LSE:TXP) soared by nearly 60% to an all-time high of 21.6p on Tuesday after announcing a ‘milestone’ discovery on its prospective Ortoire block. The business revealed that cased-hole wireline logs from a well drilled on Ortoire’s Cascadura prospect have indicated crude oil pay totalling 1,037ft from 1,374ft of gross sand.
Specifically, 80ft of oil pay was hit in the regional Lower Cruse sands at between 1,030 and 2,134ft, and 180ft was encountered in the Upper Herrera formation between 4,198 and 4,994ft for the first-ever time. Meanwhile, 600ft of oil pay was met in the Middle Herrera horizon at between 5,516 and 6,162ft – also for the first time – and 177 feet was hit in the Lower Herrera at between 6,162 and 6,350ft.
Touchstone now expects to complete and test the successful well in the first quarter of 2020. President and chief executive Paul Baay said the well results far exceed any of the company’s pre-drill expectations and even establish ‘a new development stage for onshore drilling in Trinidad’.
‘In the new year, we expect to test each zone independently in order to better understand the economic potential of the prospective oil sands, and if the findings are positive, it will set up an expansive development drilling program in the area,’ he added.
Ortoire covers 35,786 acres in east Trinidad where it is based on previously-untested geological formations called ‘turbidites’. These have grown in popularity hugely since the 1970s (Ortoire was mostly drilled in the fifties and sixties) and are responsible for some of the world’s most significant oil and gas discoveries over the last 20 years alone.
Touchstone has identified three key, initial oil and gas drilling locations across Ortoire – Corosan (gas), Ortoire West (an oil target on which the Cascadura prospect is based), and Ortoire Central (oil). Numerous additional exploration targets – including a deeper Corosan gas prospect and another called Ortoire East – will be tested at a later date.
The firm has also commissioned GLJ Petroleum Consultants to complete an independent evaluation of its three initial Ortoire prospects. This work gave the opportunities total risked recoverable volumes, for the combination of prospective and contingent resources, of 9,237Mboe net in the best estimate case and 23,337Mboe net in the high estimate case. These figures equate to a Net Present Value 10 (“NPV10”) of C$108.3m in the best estimate case and C$302.5m in the high estimate case.
Touchstone kicked things off at Ortoire in August this year, targeting Corosan with a well called Coho-1. In November, Touchstone’s share price rose from 11p to 15.5p when it revealed that production testing on Coho-1 had far exceeded expectations, marking a ‘new era’ for its operations.
Touchstone said the average natural gas flow rate for the final testing period on the well was 17.5 million cubic feet of gas a day (“MMCFD”), equivalent to 2,917 barrels of oil equivalent a day. The average stabilised test rate over 11 hours was 11.8 MMCFD (1,963 BOEPD). Assuming that further pressure testing on Coho-1 confirms a gas flow rate in this range, Touchstone could comfortably double its current average daily production (1,871 BOEPD).
Encouragingly, water production averaged 23 barrels per MMcf of natural gas – notably below Touchstone’s expectations based on offset well data. This suggests that it should not be too challenging to develop Coho-1 into an efficient production well.
In Monday’s update, Touchstone said it would provide further details on the Coho-1 testing and pressure data results before the end of the week. The firm’s independent engineering firm is currently analysing the data.
Touchstone also plans to drill two further high-impact wells at Ortoire next year. The first, targeting the Chinook prospect at Ortoire West, will be called “Chinook-1”. The second, designated “Royston”, will be drilled at Ortoire Central. This last well is potentially the largest of all of the four Ortoire exploration wells, with its objective at a deeper horizon. In preparation for this, Touchstone’s engineering team is continuing to work on the well design and a decision is expected on rig requirements in the New Year.