Touchstone Exploration (LSE:TXP) announced after market close on Monday it had inked a deal for the sale of natural gas and gas liquids produced from the Ortoire block in Trinidad and Tobago.
The Canada-based oil and gas explorer said it had signed a framework agreement with the National Gas Company of Trinidad and Tobago and Heritage Petroleum Company.
Heritage and Touchstone are JV partners in the Ortoire block. Together the companies have made gas discoveries in two wells, Coho and Cascadura.
TXP shares were more than 6% higher at 30.8p in early Tuesday trading.
In February 2020 Touchstone raised more than £9m to accelerate its exploration at Ortoire, a 35,786-acre block in east Trinidad. A month earlier bosses confirmed a “liquids-rich natural gas discovery” at Cascadura, with a 20 January first-stage production test yielding “significant pressures and natural gas volumes.”
In December last year, modelling of the Coho well supported initial production rates of up to 2,000 boe/d gross. A month later, the fully-funded business revealed that testing of the Cascadura well delivered an average flow back rate of 5,180 boe/d.
Trinidad’s LNG sector has been in trouble in recent years, with domestic production falling off a cliff and government executives under severe pressure to develop new resources.
The country’s economy had boomed over the last decade due to rapid growth in LNG production and exports to the US and beyond.
BP (LSE:BP) and Royal Dutch Shell (LSE:RDSB) are still majority shareholders in all four trains of the Atlantic liquefaction facility in Point Fortin on the island’s southwest coast. But poor drilling results reported by FTSE 100 giant BP at the Cannonball and Cashima fields in May 2019 heralded the end of the dominance of the Atlantic LNG facility. BP warned at the time that Train 1 might have to shut altogether.
Atlantic, which sent out its first exports in 1999, was one of the world’s largest LNG producers at the time and played a key role in the growth of Trinidad and Tobago’s economy. According to the World Bank, as of 2018, Trinidad and Tobago was the wealthiest nation in the Caribbean and the third-richest by GDP per capita in the Americas.
So, results like those achieved by Touchstone at Coho and Cascadura represent a significant win-win situation. As a key explorer in Trinidad, and now with a government framework contract in play for the sale of LNG, we would expect the TXP share price to continue rising.
Demand is slowly recovering for oil and gas as coronavirus-induced lockdowns start to be lifted worldwide. Prices for the commodities are starting to tick up, too.
We have upped our 30p target for the TXP share price to at least 40p by the end of 2020.