TIDMTXP
RNS Number : 0513H
Touchstone Exploration Inc.
08 March 2018
2017 YEAR- RESERVES AND NOTICE OF RESULTS
Calgary, Alberta - March 8, 2018 - Touchstone Exploration Inc.
("Touchstone" or the "Company") (TSX / LSE: TXP) announces the
results of its independent year-end 2017 reserves evaluation.
Reserve numbers provided herein were derived from an independent
reserves report (the "Reserves Report") prepared by GLJ Petroleum
Consultants Ltd. ("GLJ") effective December 31, 2017.
All currency amounts are in Canadian dollars unless otherwise
stated. The financial information contained herein is based on the
Company's unaudited expected results for the year ended December
31, 2017 and is subject to change.
The Company expects to release an operational update next week
and 2017 year-end results on March 27, 2018.
2017 Year-end Reserve Report Highlights
-- The Company increased proved reserves ("1P") by 20% or 1,756
Mbbl after production and increased proved plus probable reserves
("2P") by 18% or 2,837 Mbbl after production.
-- The increase in reserves replaced production by 450% on a 1P basis and 665% on a 2P basis.
-- The Company's December 31, 2017 net present value of future
net revenues before tax (discounted at 10 percent) was $407.9
million ($210.5 million on a 1P basis).
-- December 31, 2017 net present value of future net revenues
after tax (discounted at 10 percent) was $156.7 million ($83.5
million on a 1P basis).
-- Future development costs ("FDC") associated with a portion of
the Company's internally identified drilling location inventory and
portfolio of low risk recompletion projects totaled $57.8 million
for 1P and $85.3 million for both 2P.
-- Finding and development costs (including changes in FDC) were
$7.66 for 1P and $6.33 for 2P. Using the Company's estimated 2017
operating netback of $24.23 per barrel, the 1P recycle ratio was
3.2 times, and the 2P recycle ratio was 3.8 times.
-- The Company's asset base remains conservatively booked, with
1P assigned 62 drilling locations (30% of the Company's identified
drilling inventory) and 2P assigned 90 drilling locations (43% of
the Company's identified drilling inventory).
Paul Baay, President and Chief Executive Officer, commented:
"The updated reserves report confirms the large reserve base
consolidated by the Company and the opportunity to significantly
increase production over the near term. With 208 drilling locations
identified by Management and only 90 locations booked in the
report, the team remains conservative on the potential upside of
the asset base. With the current drilling and recompletion program
the Company expects to rapidly convert reserves into production,
cash flows and earnings."
2017 Year-end Reserves Summary
Touchstone's year-end crude reserves in Trinidad were evaluated
by independent reserves evaluator GLJ in accordance with
definitions, standards and procedures contained in the Canadian Oil
and Gas Evaluation Handbook and National Instrument 51-101
Standards of Disclosure for Oil and Gas Activities ("NI 51-101").
Additional reserves information as required under NI 51-101 will be
included in the Company's Annual Information Form, which will be
filed on SEDAR on or before March 31, 2018. The reserves estimates
set forth below are based upon GLJ's Reserve Report dated March 7,
2018. All values in this announcement are based on GLJ's forecast
prices and estimates of future operating and capital costs as at
December 31, 2017. In certain tables set forth below, the columns
may not add due to rounding. Possible reserves are those additional
reserves that are less certain to be recovered than probable
reserves. There is a 10 percent probability that the quantities
actually recovered will equal or exceed the sum of proved plus
probable plus possible reserves.
Summary of Gross Oil Reserves as of December 31, 2017 by Product
Type(1),(2)
Reserves Category Light Heavy Total
and Medium Oil Oil Equivalent
Oil (Mbbl) (Mbbl)
(Mbbl)
---------------------------- -------------------- -------------------- ------------------
Proved
Developed Producing 4,017 571 4,588
Developed Non-Producing 781 213 994
Undeveloped 4,594 558 5,152
------------------------------ -------------------- -------------------- ------------------
Total Proved 9,391 1,342 10,733
Probable 7,058 744 7,802
Total Proved plus
Probable 16,450 2,086 18,535
------------------------------ -------------------- -------------------- ------------------
Possible 5,297 624 5,921
------------------------------ -------------------- -------------------- ------------------
Total Proved plus Probable
plus Possible 21,747 2,710 24,456
----------------------------- -------------------- -------------------- ------------------
Notes:
(1) Gross Reserves are the Company's working interest share of
the remaining reserves before deduction of any royalties.
(2) See "Advisories: Oil and Natural Gas Reserves".
Summary of Net Present Values of Future Net Revenue as of
December 31, 2017(1),(2)
Reserves Category Net Present Values of Future
Net Revenues Before Income
Taxes Discounted at (% per
year) ($000's)
------------------------- --------------------------------------------------
0% 5% 10% 15% 20%
------------------------- ---------- -------- -------- -------- --------
Proved
Developed Producing 114,771 79,682 62,994 53,032 46,294
Developed Non-Producing 53,820 44,682 37,912 32,742 28,692
Undeveloped 195,543 140,798 109,612 88,523 73,281
------------------------- ---------- -------- -------- -------- --------
Total Proved 364,134 265,163 210,518 174,297 148,268
Probable 393,087 265,708 197,411 154,840 125,856
------------------------- ---------- -------- -------- -------- --------
Total Proved plus
Probable 757,221 530,871 407,929 329,136 274,124
Possible 323,132 188,257 132,408 102,272 83,287
------------------------- ---------- -------- -------- -------- --------
Total Proved plus
Probable plus Possible 1,080,353 719,128 540,337 431,408 357,411
------------------------- ---------- -------- -------- -------- --------
Reserves Category Net Present Values of Future
Net Revenues After Income
Taxes(3) Discounted at (%
per year) ($000's)
------------------------- ------------------------------------------------
0% 5% 10% 15% 20%
------------------------- -------- -------- -------- -------- --------
Proved
Developed Producing 48,259 37,339 31,670 28,047 25,452
Developed Non-Producing 19,282 16,114 13,779 12,002 10,614
Undeveloped 69,483 49,554 38,035 30,218 24,574
------------------------- -------- -------- -------- -------- --------
Total Proved 137,024 103,007 83,484 70,267 60,640
Probable 141,383 97,435 73,214 57,881 47,356
------------------------- -------- -------- -------- -------- --------
Total Proved plus
Probable 278,406 200,442 156,698 128,148 107,996
Possible 113,175 69,477 50,329 39,691 32,888
------------------------- -------- -------- -------- -------- --------
Total Proved plus
Probable plus Possible 391,581 269,919 207,027 167,839 140,884
------------------------- -------- -------- -------- -------- --------
Notes:
(1) Based on GLJ's December 31, 2017 escalated price forecast.
See "Summary of Pricing, Inflation and Foreign Exchange
Assumptions".
(2) See "Advisories: Oil and Natural Gas Reserves".
(3) Income taxes include all resource income, appropriate income
tax calculations per current Republic of Trinidad and Tobago tax
regulations and estimated December 31, 2017 consolidated tax pools
and non-capital losses.
Summary of Pricing, Inflation and Foreign Exchange
Assumptions
The following table sets forth the benchmark reference prices,
inflation and foreign exchange rates reflected in the Reserves
Report.
Forecast Year NYMEX Brent Inflation US$/C$
WTI at Blend Rate (%/year)(2) Exchange
Cushing, FOB North Rate(3)
Oklahoma Sea (US$/bbl)(1)
(US$/bbl)(1)
--------------------- -------------- ------------------ ------------------ ----------
2018 59.00 65.50 2.0 0.79
2019 59.00 63.50 2.0 0.79
2020 60.00 63.00 2.0 0.80
2021 63.00 66.00 2.0 0.81
2022 66.00 69.00 2.0 0.82
2023 69.00 72.00 2.0 0.83
2024 72.00 75.00 2.0 0.83
2025 75.00 78.00 2.0 0.83
2026 77.33 80.33 2.0 0.83
2027 78.88 81.88 2.0 0.83
Thereafter % change
per year 2.0% 2.0% Nil Nil
Notes:
(1) This summary table identifies benchmark reference pricing
schedules that might apply to a reporting issuer. Product sales
prices will reflect these reference prices with further adjustments
for quality differentials and transportation to point of sale.
(2) Inflation rates for forecasting pricing and costs.
(3) Exchange rates used to generate the benchmark reference prices in this table.
Reconciliation of Changes in Gross Reserves(1),(2)
Factors Total Proved Total Proved
Reserves plus Probable
(Mbbl) Reserves
(Mbbl)
------------------------- ----------------------- ----------------------
December 31, 2016 8,977 15,698
Extensions and improved
recovery 1,880 3,256
Technical revisions 386 110
Economic factors (8) (26)
Production (502) (502)
-------------------------- ----------------------- ----------------------
December 31, 2017 10,733 18,535
-------------------------- ----------------------- ----------------------
Reserves replacement
ratio (%)(3) 450 665
-------------------------- ----------------------- ----------------------
Notes:
(1) Gross Reserves are the Company's working interest share of
the remaining reserves before deduction of any royalties.
(2) See "Advisories: Oil and Natural Gas Reserves".
(3) Reserves replacement ratio is calculated as net increase to
reserves divided by 2017 average production of 502 Mbbl. See
"Advisories: Oil and Gas Metrics".
Future Development Costs
The following table provides information regarding the
development costs deducted in the estimation of the Company's
future net revenue using forecast prices and costs as included in
the Reserves Report.
Year Total Proved Total Proved
Reserves plus Probable
($000's) Reserves
($000's)
-------------------- ------------- ---------------
2018 10,400 13,170
2019 18,039 23,633
2020 18,020 25,703
2021 11,384 22,780
Thereafter - -
-------------------- ------------- ---------------
Total undiscounted 57,842 85,287
Total discounted
at 10% per year 47,906 69,615
--------------------- ------------- ---------------
Reserve Life Index by Reserves Category(1),(2)
The Company reduced its December 31, 2017 2P reserve life index
by 19% from year-end 2016 from 24.0 years to 20.2 years. The
following table provides the reserve life index by reserves
category as included in the Reserves Report.
Reserves Category Gross Reserve Reserve
Reserves Life Life
Volume (years) Index
(Mbbl) (years)
------------------- ------------------- --------- ---------
Total Proved 10,733 50.0 14.2
Total Probable 7,802 50.0 48.7
--------------------- ------------------- --------- ---------
Total Proved plus
Probable 18,535 50.0 20.2
--------------------- ------------------- --------- ---------
Notes:
(1) Gross Reserves are the Company's working interest share of
the remaining reserves before deduction of any royalties.
(2) See "Advisories: Oil and Gas Metrics".
Estimated Company Gross Reserve Metrics(1)
Total Proved Total Proved
Reserves plus Probable
Reserves
----------------------------------- ---------------------- ----------------------
Exploration capital expenditures
($000's)(2),(3) 1,183 1,183
Development capital expenditures
($000's)(2),(3) 6,960 6,960
Change in future development
costs ($000's) 9,142 12,986
----------------------------------- ---------------------- ----------------------
Estimated finding and development
costs(4) 17,285 21,129
----------------------------------- ---------------------- ----------------------
Net reserve additions (Mbbl)((4) 2,258 3,339
----------------------------------- ---------------------- ----------------------
Estimated finding and development
costs per barrel ($/bbl)(4) 7.66 6.33
----------------------------------- ---------------------- ----------------------
Estimated 2017 operating netback
($/bbl)(2),(5) 24.23 24.23
----------------------------------- ---------------------- ----------------------
Estimated recycle ratio(4) 3.2x 3.8x
----------------------------------- ---------------------- ----------------------
Notes:
(1) Gross Reserves are the Company's working interest share of
the remaining reserves before deduction of any royalties.
(2) Financial information is based on the Company's preliminary
2017 unaudited financial statements and is therefore subject to
audit. Accordingly, unaudited capital expenditure amounts and
operating netbacks used in the calculation of finding and
development costs and recycle ratios are Management's estimate and
are subject to change.
(3) Exploration and development capital excludes capitalized
general and administration costs and corporate asset expenditures.
See "Advisories: Oil and Gas Metrics".
(4) See "Advisories: Oil and Natural Gas Reserves" and "Advisories: Oil and Gas Metrics".
(5) See "Non-GAAP Measures".
Advisories
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
estimated crude oil reserves, current field estimated production,
the potential undertaking, timing, locations and costs of future
well drilling, the quality and quantity of prospective hydrocarbon
accumulations as indicated by wireline logs, drilling location
inventory, future development costs associated with crude oil
reserves, and sufficiency of resources to fund 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. Because 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 Annual Information Form dated March 24, 2016 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.
Statements relating to reserves are by their nature
forward-looking statements, as they involve the implied assessment,
based on certain estimates and assumptions, that the reserves and
resources described exist in the quantities predicted or estimated,
and can be profitably produced in the future. The recovery and
reserve estimates of Touchstone's reserves provided herein are
estimates only, and there is no guarantee that the estimated
reserves will be recovered. Consequently, actual results may differ
materially from those anticipated in the forward-looking
statements.
Oil and Natural Gas Reserves
The disclosure in this announcement summarizes certain
information contained in the Reserves Report but represents only a
portion of the disclosure required under NI 51-101. Full disclosure
with respect to the Company's reserves as at December 31, 2017 will
be contained in the Company's Annual Information Form for the year
ended December 31, 2017 which will be filed on SEDAR on or before
March 31, 2018. All evaluations and reviews of future net revenues
are stated prior to any provision for finance expenses or general
and administrative costs and after the deduction of estimated
future capital expenditures and estimated future well abandonment
costs. It should not be assumed that the present worth of estimated
future net revenues presented in the tables above represent the
fair market value of the reserves. There is no assurance that the
forecast prices and costs assumptions will be attained, and
variances could be material. The recovery and reserves estimates of
crude oil provided herein are estimates only, and there is no
guarantee that the estimated reserves will be recovered. Actual
crude oil reserves may be greater than or less than the estimates
provided herein.
GLJ has forecast reserve volumes and future cash flows based
upon current and historical well performance through to the
economic production limit of individual wells. Notwithstanding
established precedence and contractual options for the continuation
and renewal of the Company's existing operating agreements, in many
cases the forecast economic limit of individual wells is beyond the
current term of the relevant operating agreements.
Oil and Gas Metrics
This announcement contains certain oil and gas metrics that are
commonly used in the oil and gas industry such as reserves
additions, reserves replacement ratio, reserve life index, finding
and development costs, and recycle ratio. These metrics do not have
standardized meanings or standardized methods of calculation and
therefore such measures may not be comparable to similar measures
presented by other companies. Such metrics have been included
herein to provide readers with additional metrics to evaluate the
Company's performance; however, such measures are not reliable
indicators of the future performance of the Company, and future
performance may not compare to the performance in prior periods and
therefore such metrics should not be unduly relied upon. The
Company uses these oil and gas metrics for its own performance
measurements and to provide shareholders with measures to compare
the Company's operations over time. Readers are cautioned that the
information provided by these metrics, or that can be derived from
the metrics presented in this announcement, should not be relied
upon for investment purposes.
Net reserve additions are calculated as the change in reserves
from the beginning to the end of the applicable period excluding
period production. Reserves replacement ratio is calculated as
period net reserve additions divided by period production. Reserve
life index is calculated as total Company gross reserves divided by
annual production.
Finding and development costs are the sum of capital
expenditures excluding capitalized general and administrative costs
and corporate capital expenditures incurred in the period and the
change in future development costs required to develop those
reserves. The Company's annual audit of its December 31, 2017
consolidated financial statements is not complete. Accordingly,
unaudited capital expenditure amounts used in the calculation of
finding and development costs are Management's estimate and are
subject to change. Finding and development costs per barrel is
determined by dividing current period net reserve additions to the
corresponding period's finding and development cost. The aggregate
of the exploration and development costs incurred in the most
recent financial year and the change during that year in estimated
future development costs generally will not reflect total finding
and development costs related to reserves additions for that
year.
Recycle ratios are calculated by dividing the current period
finding and development costs per barrel to operating netbacks
prior to realized gains or losses on commodity derivative contracts
in the corresponding period (see "Non-GAAP Measures"). The
Company's annual audit of its December 31, 2017 consolidated
financial statements is not complete. Accordingly, unaudited
operating netbacks used in the calculation of recycle ratio are
Management's estimate and are subject to change. The recycle ratio
compares netbacks from existing reserves to the cost of finding new
reserves and may not accurately indicate the investment success
unless the replacement of reserves are of equivalent quality as the
produced reserves.
Drilling Locations
This announcement discloses drilling locations in three
categories: (i)1P locations; (ii) 2P locations; and (iii) unbooked
locations.1P locations and 2P locations are derived from the
Reserves Report and account for locations that have associated
proved and/or probable reserves, as applicable. Unbooked locations
are internal estimates based on the prospective acreage associated
with the Company's assets and an assumption as to the number of
wells that can be drilled based on industry practice and internal
review. Unbooked locations do not have attributed reserves. Of the
approximately 208 (net) drilling locations identified herein, 62
(net) are 1P locations; 28 (net) are 2P locations; and the
remaining are unbooked locations. Unbooked locations have been
identified by Management as an estimation of the Company's
multi-year drilling activities based on evaluation of applicable
geologic, seismic, engineering, production and reserves
information. There is no certainty that the Company will drill all
unbooked locations, and if drilled there is no certainty that such
locations will result in additional oil and gas reserves or
production. The locations on which the Company will actually drill
wells will ultimately depend upon the availability of capital,
regulatory approvals, crude oil prices, costs, actual drilling
results, additional reservoir information that can be obtained and
other factors. While certain of the unbooked drilling locations
have been de-risked by drilling existing wells in relative close
proximity to such unbooked drilling locations, other unbooked
drilling locations are farther away from existing wells where
Management has less information about the characteristics of the
reservoir and therefore there is more uncertainty whether wells
will be drilled in such locations, and if drilled there is more
uncertainty that such wells will result in additional oil and gas
reserves or production.
Non-GAAP Measures
The Company uses operating netback as a key performance
indicator of field results. Operating netback does not have a
standardized meaning under IFRS and therefore may not be comparable
with the calculation of similar measures by other companies.
Operating netback is presented on a per barrel basis and is
calculated by deducting royalties and operating expenses from
petroleum revenue. Operating netback is presented herein prior to
realized gains or losses on commodity derivative contracts. The
Company's annual audit of its December 31, 2017 consolidated
financial statements is not complete. Accordingly, unaudited
figures used in the calculation of operating netback and recycle
ratios are Management's estimate and are subject to change. The
Company considers operating netbacks to be a key measure as they
demonstrate Touchstone's profitability relative to current
commodity prices. This measurement assists Management and investors
in evaluating operating results on a per barrel basis to analyze
performance on a historical basis.
Crude Oil Abbreviations
bbl(s) barrel(s)
bbls/d barrels per day
Mbbl one thousand barrels
For further information, please contact:
Touchstone Exploration Inc.
Mr. Paul Baay, President and Chief Executive Officer Tel: +1
(403) 750-4487
Mr. James Shipka, Chief Operating Officer
www.touchstoneexploration.com
Shore Capital (Nominated Advisor and Joint Broker)
Nominated Adviser: Edward Mansfield / Mark Percy Tel: +44 (0) 20
7408 4090
Corporate Broking: Jerry Keen
GMP FirstEnergy (Joint Broker)
Jonathan Wright / Hugh Sanderson Tel: +44 (0) 207448 0200
Camarco (Financial PR)
Nick Hennis / Jane Glover / Billy Clegg
About Touchstone
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".
Competent Persons Statement
In accordance with the AIM Rules for Companies, the technical
information contained in this announcement has been reviewed and
approved by James Shipka, Chief Operating Officer of Touchstone
Exploration Inc. Mr. Shipka is a qualified person as defined in the
London Stock Exchange's Guidance Note for Mining and Oil and Gas
companies and is a member of the Canadian Society of Petroleum
Geologist and the Geological Society of Trinidad and Tobago. Mr.
Shipka has a Bachelor of Science in Geology from the University of
Calgary and has over 29 years of oil and gas exploration and
development experience.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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