TIDMTXP
RNS Number : 3498T
Touchstone Exploration Inc.
14 November 2019
TOUCHSTONE ANNOUNCES RESULTS FOR THE THREE AND NINE MONTHSED
SEPTEMBER 30, 2019
CALGARY, ALBERTA (November 14, 2019) - Touchstone Exploration
Inc. ("Touchstone", "we", "our", "us" or the "Company") (TSX, LSE:
TXP) reports its operating and financial results for the three and
nine months ended September 30, 2019. Selected information is
outlined below and should be read in conjunction with Touchstone's
September 30, 2019 unaudited interim consolidated financial
statements and related Management's discussion and analysis, both
of which will be available under the Company's profile on SEDAR
(www.sedar.com) and the Company's website
(www.touchstoneexploration.com). Unless otherwise stated, all
financial amounts herein are rounded to thousands of United States
dollars.
Highlights
-- Achieved crude oil sales of 1,729 barrels per day ("bbls/d")
and 1,871 bbls/d for the three and nine months ended September 30,
2019, respectively, representing a decrease of 2% and an increase
of 12% relative to the prior year comparative periods.
-- Successfully drilled our first exploration well at Ortoire,
which is currently rigged to commence production testing.
-- Generated an operating netback of $24.56 per barrel in the
third quarter of 2019 and $27.07 per barrel during the nine months
ended September 30, 2019.
-- Delivered funds flow from operations of $1,082,000 ($0.01 per
share) and $4,822,000 ($0.03 per share) during the third quarter
and nine months ended September 30, 2019, respectively.
-- Exited the quarter with cash of $3,423,000 and net debt of
$12,286,000, representing 2.0 times net debt to trailing
twelve-month funds flow from operations.
-- Spudded our second Ortoire exploration well on October 4,
2019, which is currently drilling at 4,600 feet.
-- Increased our financial liquidity by enlarging the principal
amount of our credit facility from C$15 million to C$20 million on
October 31, 2019.
Financial and Operating Results Summary
Three months ended % change Nine months ended % change
September 30, September 30,
------------ ---------
2019 2018 2019 2018
------------ ---------------------- ---------------------- ------------ ---------------------- ---------------------- ---------
Operating
Highlights
Average
daily oil
production
(bbls/d) 1,729 1,758 (2) 1,871 1,674 12
Net wells
drilled 0.8 3.0 (73) 0.8 8.0 (90)
Brent
benchmark
price
($/bbl) 61.95 75.10 (18) 64.62 72.15 (10)
($/bbl)
Realized
sales
price 56.67 60.98 (7) 58.21 60.76 (4)
Royalties (16.61) (15.70) 6 (16.32) (16.66) (2)
Operating
expenses (15.50) (16.89) (8) (14.82) (15.87) (7)
------------ ---------------------- ---------------------- ------------ ---------------------- ---------------------- ---------
Operating
netback(1) 24.56 28.39 (13) 27.07 28.23 (4)
------------ ---------------------- ---------------------- ------------ ---------------------- ---------------------- ---------
Note:
(1) Non-GAAP financial measure that does not have a standardized
meaning prescribed by International Financial Reporting Standards
("IFRS") and therefore may not be comparable with the calculation
of similar measures presented by other companies. See "Advisories:
Non-GAAP Measures".
Three months ended % change Nine months ended % change
September 30, September 30,
----------- ---------
2019 2018 2019 2018
---------------- ----------------------- ---------------------- ----------- ----------------------- ----------------------- ---------
Financial
Highlights
($000's except
as
indicated)
Petroleum sales 9,011 9,862 (9) 29,734 27,759 7
Cash flow
(used) from
operating
activities (1,205) 831 n/a 3,364 4,521 (26)
Funds flow from
operations(2) 1,082 2,497 (57) 4,822 7,066 (32)
Per share -
basic
and
diluted(1)(2) 0.01 0.02 (50) 0.03 0.05 (40)
Net (loss)
earnings (1,053) 199 n/a (2,071) (194) 968
Per share -
basic
and diluted (0.01) 0.00 n/a (0.01) (0.00) n/a
Exploration
capital
expenditures 3,234 443 630 4,275 954 348
Development
capital
expenditures 517 3,475 (85) 1,231 9,833 (87)
Net debt(1) -
end
of period 12,286 10,059 22
Share
Information
(000's)
Weighted
average shares
outstanding -
basic 160,688 129,021 25 154,192 129,021 20
Weighted
average shares
outstanding -
diluted 160,688 130,728 23 154,192 129,021 20
Outstanding
shares
- end of
period 160,688 129,021 25
Notes:
(1) Non-GAAP financial measure that does not have a standardized
meaning prescribed by IFRS and therefore may not be comparable with
the calculation of similar measures presented by other companies.
See "Advisories: Non-GAAP Measures".
(2) Additional GAAP financial measure included in the Company's
consolidated statements of cash flows. See "Advisories: Non-GAAP
Measures".
Third quarter operating results
In the third quarter of 2019, Touchstone conducted minimal
capital development activity and continued to allocate capital to
exploration activities on our Ortoire property. As a result, crude
oil production during the third quarter averaged 1,729 bbls/d, a 2%
decrease relative to the 1,758 bbls/d produced in the third quarter
of 2018, as incremental production achieved from wells drilled in
the fourth quarter of 2018 were offset by natural declines.
Production in the first nine months of 2019 averaged 1,871 barrels
per day, representing an increase of 12% from production delivered
in the prior year equivalent period.
Touchstone drilled its first exploration well on Ortoire for
approximately $2,900,000 and invested $3,234,000 in total
exploration capital during the three months ended September 30,
2019. Third quarter development capital expenditures totaled
$517,000 which included recompletion activities.
Third quarter financial results
Our third quarter operating netback was $24.56 per barrel
compared to $28.39 per barrel in the third quarter of 2018. This
represented a 13% decrease despite an 18% decrease in average Brent
benchmark pricing between the respective periods. Realized third
quarter 2019 crude oil pricing was $56.67 per barrel, 7% less than
the $60.98 per barrel received in the equivalent quarter of 2018 as
the Company's realized pricing differential to Brent reference
pricing narrowed significantly. 2019 third quarter royalties
represented 29.3% of petroleum sales compared to 25.7% in the prior
year comparative period. This reflected an increase in overriding
royalties, as production from wells drilled in 2017 qualified for
reduced royalty rates in the 2018 third quarter. In comparison to
the third quarter of 2018, operating expenses on a per barrel basis
decreased 8% to $15.50 per barrel, predominately due to decreased
well servicing expenditures.
We delivered third quarter 2019 funds flow from operations of
$1,082,000 ($0.01 per share), representing a 57% decrease from the
prior year comparative period. The decrease was predominantly a
result of a combined decrease in petroleum sales based on decreased
production and realized pricing and increased current income tax
expenses. Third quarter 2019 income taxes increased based on
minimal capital development activity, which decreased credits used
to offset supplemental petroleum taxes. As a result, we recognized
a net loss of $1,053,000 ($0.01 per share) in the third quarter of
2019 versus net earnings of $199,000 ($0.00 per share) in the
equivalent prior year quarter.
Touchstone exited the third quarter with a cash balance of
$3,423,000, a working capital deficit of $805,000 and a Canadian
dollar ("C$") 15 million principal term loan balance. Our September
30, 2019 net debt position of $12,286,000 represented net debt to
trailing twelve-month funds flow from operations of 2.0 times. We
expect our net debt position to increase as we continue to focus on
our initial two exploration wells that are anticipated to generate
cash flows in the second half of 2020.
On October 31, 2019, the Company and its lender executed an
amendment to the credit facility, increasing the principal amount
of the credit facility from C$15 million to C$20 million. The
expanded credit facility will primarily be used to fund the
Company's Cascadura-1 exploration well and for general working
capital purposes. Our amended credit facility does not require the
commencement of principal payments until January 1, 2021, and we
continued to be within the financial covenants as at September 30,
2019. Touchstone will maintain a measured approach to future
developmental drilling in an effort to manage financial liquidity
while focusing on our Ortoire exploration opportunity.
Operational update
Touchstone's October 2019 crude oil sales volumes were 1,781
bbls/d. Our October average realized price of US$56.11 represented
a 6% discount to average Brent reference October pricing.
The Company has completed the primary target in the Coho-1
exploration well on the Ortoire block and is currently rigged up to
commence production testing. Testing operations are expected to be
completed next week. Production testing is slightly behind schedule
due to delays in obtaining suitable surface testing equipment and
required regulatory approvals.
Touchstone is currently drilling the Cascadura ST-1 exploration
well on Ortoire. After some initial mechanical issues with the
drilling rig, the well was sidetracked beneath surface casing and
is now drilling at approximately 4,600 feet. We plan to set
intermediate casing at approximately 6,000 feet and anticipate
drilling the primary zone to a total depth of 8,150 feet by early
December.
Touchstone Exploration Inc.
Touchstone Exploration Inc. is a Calgary based company engaged
in the business of acquiring interests in petroleum and natural gas
rights and the exploration, development, production and sale of
petroleum and natural gas. Touchstone is currently active in
onshore properties located in the Republic of Trinidad and Tobago.
The Company's common shares are traded on the Toronto Stock
Exchange and the AIM market of the London Stock Exchange under the
symbol "TXP".
For further information about Touchstone, please visit our
website at www.touchstoneexploration.com or contact:
Touchstone Exploration Inc.
Mr. Paul Baay, President and Chief Executive Officer Tel: +1
(403) 750-4487
Mr. Scott Budau, Chief Financial Officer
Mr. James Shipka, Chief Operating Officer
Shore Capital (Nominated Advisor and Joint Broker)
Nominated Advisor: Edward Mansfield / Daniel Bush Tel: +44 (0)
207 408 4090
Corporate Broking: Jerry Keen
GMP FirstEnergy (Joint Broker)
Jonathan Wright / Hugh Sanderson Tel: +44 (0) 207 448 0200
Camarco (Financial PR)
Nick Hennis / Jane Glover Tel: +44 (0) 203 781 8330
Advisories
Non-GAAP Measures
This announcement contains terms commonly used in the oil and
natural gas industry, including funds flow from operations, funds
flow from operations per share, operating netback and net debt.
These terms do not have a standardized meaning under IFRS and may
not be comparable to similar measures presented by other companies.
Shareholders and investors are cautioned that these measures should
not be construed as alternatives to cash flow from operating
activities, net income, total liabilities, or other measures of
financial performance as determined in accordance with Generally
Accepted Accounting Principles ("GAAP"). Management uses these
Non-GAAP measures for its own performance measurement and to
provide stakeholders with measures to compare the Company's
operations over time.
Funds flow from operations is an additional GAAP measure
included in the Company's consolidated statements of cash flows.
The Company calculates funds flow from operations per share by
dividing funds flow from operations by the weighted average number
of common shares outstanding during the applicable period.
The Company uses operating netback as a key performance
indicator of field results. Operating netback is presented on a
total and per barrel basis and is calculated by deducting royalties
and operating expenses from petroleum sales. If applicable, the
Company also discloses operating netback both prior to realized
gains or losses on derivatives and after the impacts of derivatives
are included. Realized gains or losses represent the portion of
risk management contracts that have settled in cash during the
period, and disclosing this impact provides Management and
investors with transparent measures that reflect how the Company's
risk management program can impact netback metrics. The Company
considers operating netback to be a key measure as it demonstrates
Touchstone's profitability relative to current commodity prices.
This measurement assists Management and investors with evaluating
operating results on a historical basis.
The Company closely monitors its capital structure with a goal
of maintaining a strong financial position in order to fund current
operations and the future growth of the Company. The Company
monitors working capital and net debt as part of its capital
structure to assess its true debt and liquidity position and to
manage capital and liquidity risk. Working capital is calculated as
current assets minus current liabilities as they appear on the
consolidated statements of financial position. Net debt is
calculated by summing the Company's working capital, long-term
lease liabilities and the principal (undiscounted) amount of
long-term debt.
Forward-Looking Statements
Certain information provided in this announcement may constitute
forward-looking statements within the meaning of applicable
securities laws. Forward-looking information in this announcement
may include, but is not limited to, statements relating to future
positive cash flows expected from exploration/appraisal wells, the
potential timing, production rates and costs of exploration well
drilling and testing operations, and the sufficiency of resources
and available financing to fund future exploration drilling
operations. Although the Company believes that the expectations and
assumptions on which the forward-looking statements are based are
reasonable, undue reliance should not be placed on the
forward-looking statements because the Company can give no
assurance that they will prove to be correct. Since forward-looking
statements address future events and conditions, by their very
nature they involve inherent risks and uncertainties. Actual
results could differ materially from those currently anticipated
due to a number of factors and risks. Certain of these risks are
set out in more detail in the Company's 2018 Annual Information
Form dated March 26, 2019 which has been filed on SEDAR and can be
accessed at www.sedar.com. The forward-looking statements contained
in this announcement are made as of the date hereof, and except as
may be required by applicable securities laws, the Company assumes
no obligation to update publicly or revise any forward-looking
statements made herein or otherwise, whether as a result of new
information, future events or otherwise.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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