Touchstone Exploration (LON:TXP | TSE:TXP) had much to celebrate in 2020, with major gas discoveries and a long-term sales agreement being its biggest highlights. The company’s 2020 results on Friday highlighted this success, especially during a worldwide pandemic.
President and chief executive Paul Baay expressed his delight in being able “to report another year of significant progress” for the company, particularly given Covid-19’s impact on working operations as well as “volatile” oil prices.
Touchstone achieved 1,392 barrels per day (“bbls/d”) of crude oil sales in 2020. As expected, this was a 24% drop from 1,825 bbls/d in 2019 as the company’s crude oil production shrank though natural declines.
This reflects the firm’s strategic focus on the Ortoire exploration programme in Trinidad. Touchstone executed a $17.9 million high-impact exploration program at Ortoire in 2020. So far, Touchstone has hit hydrocarbons at every one of its Ortoire wells.
Touchstone ended 2020 with $24.3 million in cash and a $12.9 million working capital balance, with $7.5 million of the $20 million loan drawn down. This resulted in a $5.4 million net surplus.
Impressively, the firm also managed to cut operating costs per barrel by 12% and shrink general and administration expenses by 6% from 2019.
Despite limited investment and very low crude oil pricing during the pandemic, Touchstone successfully generated $263,000 of funds flow from operations and a $14.49 per barrel operating netback. This compares to funds flow of $6.8 million and a $26.61 operating netback per barrel in 2019.
Net loss widened, mostly on impairment losses based on lower forecasted crude oil pricing.
While Touchstone’s shares dipped very slightly on Friday to 134.70p in London, it is well worth noting that they are up more than 390% from just 27.25p last year after such impressive results from Ortoire.
Touchstone is currently active in Trinidad and Tobago and is among Trinidad’s largest independent onshore oil producers.
An independent evaluation showed an incredible 189% rise in Touchstone’s total proved reserves to 34,238 thousand barrels of oil equivalent at the end of 2020 compared to the year before. This was before any potential reserves from the Chinook-1 well and Cascadura Deep-1 wells, drilled in the final quarter.
The company has established a $20 million loan in Trinidad and raised a combined $39.2 million from two oversubscribed equity financings. These will allow Touchstone to keep funding its Ortoire programme.
A core focus of this of this will be drilling Royston-1, Touchstone’s final work commitment exploration well. This is set to take place in the second quarter of 2021.
Royston is targeting a deep gas prospect with an estimated 11,500 feet target depth. Wireline logs from the 1960s indicate around 700 feet of gas, though the well has yet to be tested. A primary access road to the Royston-1 well has already been cleared, with road resurfacing and lease building operations already begun.
Another area of focus for Touchstone is completing a 2D seismic programme, as well as testing the two exploration wells already drilled in 2020. Testing operations are taking place right now at Chinook-1 and Cascadura Deep-1.
In December, Touchstone reported significant hydrocarbon accumulations at the Cascadura Deep-1 well based on drilling and wireline logging data. The well was drilled to an 8,303 feet total depth. Wireline logs suggested around 1,315 net feet of natural gas pay from 5,455 feet to total depth.
Very importantly, Touchstone also intends to bring discoveries Coho-1 and Cascadura-1ST1 onto production this year.
The Coho-1 well was Touchstone’s maiden discovery at Ortiore, with testing having already estimated 1,600 barrels of oil equivalent per day (“boe/d”) of gross future production from net pay of 105 feet. Meanwhile, Cascadura-1ST1 has encountered enough oil and gas for a flow rate of 6,213 to 7,787 boe/d.
Touchstone has much to look forward to in 2021 after such a fruitful year of exploration and discovery at Ortoire.
Baay said: “The company is very well positioned for another year of growth as we move forward with our exploration, development and production program at Ortoire and across the wider portfolio.