Touchstone Exploration (LSE:TXP) reveals it is within touching distance of achieving a current production level of 1800bopd in an operational and drilling update this morning. Earlier this year Touchstone announced it had become profitable at PLC level, generating free funds from operations of $3.1m during 2017 – based on average production of 1375bopd for the year. Since then we have seen a significant increase in oil prices, and today’s output level only includes production from two of the ten proposed wells to be added in Touchstone’s 2018 drilling program.
When we caught up with CEO Paul Baay in April, he told us, ‘by year-end we are going to have cash flow of well over $1m a month. That is a big number when you think that we will be generating the same amount every month as we made every quarter last year.’
In today’s update, the company announced it has drilled and cased the first five wells of the 2018 drilling program. Two wells have been completed and are currently in production, with the remaining three wells expected to come on stream by the end of June.
Touchstone completed the drilling of two wells in the WD-8 block targeting oil reserves in the relatively undeveloped northern portion of the property. The two wells were drilled into separate fault blocks and although offset by legacy wells, represented a significant step-out from the Company’s previous drilling in the area. The company plans to drill another well in WD-8 in the third quarter of 2018.
Over at its Coora 2 block, Touchstone successfully drilled two wells from a single surface location. The wells were drilled to develop crude oil reserves trapped in separate fault blocks offsetting wells originally drilled in the 1940s.
Next, attention is focused on the Coora 1 Block, where Touchstone is currently preparing the common surface location for the sixth and seventh wells of the 2018 drilling campaign. Drilling is anticipated to resume in approximately three weeks.
Paul Baay commented: “The first five wells of 2018 have been successfully drilled. With the promising net pay indicated on the logs, we expect to have the potential for significant production coming on stream as the wells are completed. We are excited to see the stabilised production results from these wells as we accelerate to our target of 2,000 barrels per day. We are pleased with the momentum achieved with the 2018 drilling campaign to date, and increased realized oil pricing has allowed us to be more profitable on a per barrel basis.”
Shares are up over 7% as I write, moving through first resistance of 14.25p. A close above that level makes previous highs of 16.75p the next target. However, with the company well on track to hitting its 2000bopd target for year-end and the current oil price environment very favourable, there may be much more in the tank for Touchstone’s share price.