This morning’s news of “positive exploration results” from the COHO-1 gas appraisal well has given Touchstone Exploration (LSE:TXP) a decent bump in the market. The stock is currently up 11% at 16.5p on the mid on news the company has encountered 105 feet of net gas pay at depths of between 5,486ft and 7,240ft. Touchstone will now commence what it calls a “comprehensive test plan” to evaluate the economic potential of this find, but the RNS suggests there could be much more to come.
Referring back to our coverage of the company’s exploration efforts on its Ortoire Block in Trinidad and Tobago just over a month ago, we highlighted Touchstone’s belief that it had a 73% of adding peak production of 1,965barrels of oil equivalent (“boepd”) through COHO-1. Today’s announcement goes a long way towards vindicating this view.
In last month’s article we published a copy of the projected economics for COHO-1, published in Touchstone’s latest presentation:
The company presented its assessment of both the Contingent and Prospective resources it expected to encounter if the drill at COHO-1 was successful. The Contingent target, which had a 95% chance of success, represented the two upper layers of oil sands that Touchstone was targeting. The Prospective target, which had a 30% chance of success, represented the lower two layers of oil sands.
Referring back to this morning’s announcement and it is clear that the firm has hit gas in both the upper and lower targets. Although we must wait for final confirmation of the economic potential of these results, it is highly encouraging that the lower targets have now been proven to be gas bearing. This opens the door to significantly upgrading the 30% chance of commerciality for the prospective targets, meaning Touchstone could be on the cusp of adding over 3m barrels of oil equivalent to its stated reserves.
Given its current £27m market cap, this would be a significant step forward for the company.
And there’s more.
Towards the end of the RNS is a tantalising reference to more potential exploration upside.
According to this, Touchstone encountered at 100-foot thick gross interval of oil sands at 7,788ft. Although this was not commercially prospective, the firm believes “the presence of hydrocarbons in this previously untested thrust sheet and may de-risk future exploration opportunities.” In other words, Touchstone might have identified a new deep target to explore on the Ortoire Block.
As enticing as this potential is, in the meantime Touchstone has other low hanging fruit to pick first.
Now that the COHO-1 drill is complete, the company will release the rig and mobilise it to the drill pad for the CASCADURA-1 well. CASCADURA-1 will be drilled to a depth of 8,190ft and is targeting a best estimate target of just over 7m barrels of oil equivalent, over twice the size of the COHO-1 target.
We’ll follow up with further coverage about CASCADURA-1 nearer spud, but it is worth nothing that in today’s announcement Touchstone revealed COHO-1 was drilled “on time and within budget”. This is important for the company as it confirms the competency of the drill team on the ground and ensures the business works within its financial model.
With test results from COHO-1 and the spud of CASCADURA-1 expected in the next month or so, things really are looking increasingly exciting for Touchstone Exploration.