Trinidad-focused oil & gas firm Touchstone Exploration (LSE:TXP) laid out a bright future for shareholders in its 2019 results on Thursday.
The £48 million business said its emphasis moving forward will remain on bringing the Coho-1 and Cascadura-1ST1 wells on its highly prospective Ortoire block into production “as soon as possible”.
This will be a watershed moment for the business. A second round of well tests at Cascadura delivered average production of more than 10,600 barrels of oil equivalent per day (“boe/d”). Meanwhile, modelling at Coho has supported initial production rates of 1,667 to 2,000 boe/d gross.
With Touchstone’s average production in 2019 coming in at just 1,825 boe/d – these figures would be transformational. As the company’s president and chief executive officer Paul Baay put it to us earlier this month – the test numbers at Cascadura alone exceed Touchstone’s entire existing reserve base.
This is not a fact that has been lost on the market – Touchstone’s share price soared around 13p a share to highs of 48.5p throughout the period in which the well results were released. Indeed, in spite of the recent oil price crash and spread of Covid-19, the company’s shares remain far higher than 2019 levels at around 26p each.
In Thursday’s results, Touchstone said it had responded immediately to these unprecedented macro events, minimising discretionary costs and limited field operations to emergency workovers. Aside from this, the firm said it has had “no operational impacts from Covid-19 to date“.
“Our low base production decline rate, strong operating netbacks, top-tier capital efficiencies, lack of development drilling commitments and solely operated exploration capital program provide flexibility in this volatile market,” said the firm. “Bolstered by the recent private placement, the company had approximately $13.5 million of cash as at February 29, 2020, and no repayments are required on the company’s debt until January 2021. We remain focused on managing our operations to ensure that we operate within our credit facility financial covenants.”
With this in mind, Touchstone reiterated its commitment to drilling another exploration well at Ortoire on the Chinook prospect, adding that its ongoing work on the block will only be suspended if “absolutely necessary”.
Elsewhere, Touchstone said petroleum sales were up 2% year-on-year in 2019 while operating netbacks were consistent with 2018 at $26.61 per barrel despite a 10% decrease in Brent reference pricing over the period. Finally, the firm revealed that funds flow from operations of $6,840,000 – a small drop on $8,548,000 in 2018 given that discretionary development capital investment fell 90% in 2019.
“We continue to monitor the situation and economic environment, and we will adapt our business operations to ensure that we preserve and grow long-term shareholder value,” added Touchstone. “We thank our shareholders and stakeholders for their continuing support and look forward to coming out of this unprecedented challenge with a stronger and sustainable company.”