TIDMTXP
RNS Number : 1033S
Touchstone Exploration Inc.
07 March 2019
2018 YEAR- RESERVES
Calgary, Alberta - March 7, 2019 - Touchstone Exploration Inc.
("Touchstone" or the "Company") (TSX / LSE: TXP) announces the
results of its independent reserves evaluation as at December 31,
2018. Reserve numbers provided herein were derived from an
independent reserves report (the "Reserves Report") prepared by GLJ
Petroleum Consultants Ltd. ("GLJ") effective December 31, 2018.
All currency amounts are in United States dollars ("US$") unless
otherwise stated.
The financial information contained herein is based on the
Company's unaudited expected results for the year ended December
31, 2018 and is subject to change.
2018 Year-end Reserve Report Highlights
-- Increased proved ("1P") reserves by 5% to 11,222 Mbbl and
increased proved plus probable ("2P") reserves by 4% to 19,275 Mbbl
from the prior year.
-- Replaced 2018 annual production by 178% on a 1P reserves
basis and 218% on a 2P reserves basis.
-- Realized an after tax 1P 10% discounted net present value of
future net revenues ("NPV") of $79.8 million, an increase of $12.1
million or 18% from the prior year.
-- Achieved an after tax 2P 10% discounted NPV of $145.4
million, representing an increase of 14% from $127.4 million in
2017.
-- Future development costs ("FDC") associated with only a
portion of our internally identified drilling location inventory
and portfolio of low risk recompletion projects totaled $46.0
million for 1P reserves and $68.6 million for 2P reserves.
-- Realized 1P finding, development and acquisition ("FD&A")
costs of $12.71 per barrel, resulting in a 2.2 times recycle ratio
using our unaudited annual 2018 operating netback of $27.34 per
barrel.
-- Achieved 2P FD&A costs of $10.85 per barrel. Using the
unaudited annual 2018 estimated operating netback, the 2P FD&A
recycle ratio was 2.5 times.
-- The Reserves Report included only those reserves associated
with our development properties and did not include our previously
announced estimated resources associated with our Ortoire
exploration block prospects.
James Shipka, Chief Operating Officer, commented:
"The updated reserves evaluation validated our strong base
production and reflected the results of our successful 2018
development drilling campaign. Solid 2018 reserves growth was
achieved from our low decline production base and drilling success.
Capital efficiencies seen in our low finding and development costs
and strong recycle ratios support our belief in organic growth
through the drill bit complemented by low cost recompletions."
2018 Year-end Reserves Report 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, 2019. The reserve estimates
set forth below are based upon GLJ's Reserve Report dated March 6,
2019 with an effective date of December 31, 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, 2018. In
certain tables set forth below, the columns may not add due to
rounding.
Summary of Gross Oil Reserves as of December 31, 2018 by Product
Type(1),(2)
Reserves Category Light and Heavy Oil Total Oil
Medium (Mbbl) Equivalent
Oil (Mbbl)
(Mbbl)
---------------------------- ------------------- -------------------- ------------
Proved
Developed Producing 4,719 461 5,180
Developed Non-Producing 1,482 217 1,699
Undeveloped 3,785 558 4,343
------------------------------ ------------------- -------------------- ------------
Total Proved 9,986 1,236 11,222
Probable 7,298 755 8,053
Total Proved plus Probable 17,284 1,991 19,275
------------------------------ ------------------- -------------------- ------------
Possible 5,564 611 6,265
------------------------------ ------------------- -------------------- ------------
Total Proved plus Probable
plus Possible 22,938 2,602 25,540
----------------------------- ------------------- -------------------- ------------
Notes:
(1) Gross Reserves are the Company's working interest share of
the remaining reserves before deduction of any royalties.
(2) See "Advisories: Reserve Advisory".
Summary of Net Present Values of Future Net Revenue as of
December 31, 2018(1),(2)
Reserves Category Net Present Values of Future Net Revenues
Before Income Taxes Discounted at (%
per year) (US$000's)
---------------------------- --------------------------------------------------
0% 5% 10% 15% 20%
---------------------------- ---------- -------- -------- -------- --------
Proved
Developed Producing 106,422 76,788 62,572 53,898 47,864
Developed Non-Producing 81,704 59,930 49,142 41,968 36,659
Undeveloped 142,421 106,112 81,816 64,791 52,406
---------------------------- ---------- -------- -------- -------- --------
Total Proved 330,548 242,830 193,530 160,657 136,929
Probable 368,384 248,422 184,476 144,523 117,239
---------------------------- ---------- -------- -------- -------- --------
Total Proved plus Probable 698,932 491,252 378,006 305,180 254,168
Possible 301,629 175,091 122,301 93,724 75,742
---------------------------- ---------- -------- -------- -------- --------
Total Proved plus Probable
plus Possible 1,000,561 666,343 500,307 398,904 329,910
---------------------------- ---------- -------- -------- -------- --------
Reserves Category Net Present Values of Future Net Revenues
After Income Taxes(3) Discounted at
(% per year) (US$000's)
---------------------------- --------------------------------------------------
0% 5% 10% 15% 20%
---------------------------- --------- --------- -------- -------- --------
Proved
Developed Producing 47,110 38,230 33,522 30,365 27,980
Developed Non-Producing 28,537 21,578 18,082 15,759 14,044
Undeveloped 50,922 37,286 28,153 21,742 17,078
---------------------------- --------- --------- -------- -------- --------
Total Proved 126,568 97,093 79,757 67,866 59,102
Probable 129,216 88,061 65,620 51,406 41,636
---------------------------- --------- --------- -------- -------- --------
Total Proved plus Probable 255,784 185,154 145,378 119,272 100,739
Possible 101,777 61,598 43,764 33,833 27,514
---------------------------- --------- --------- -------- -------- --------
Total Proved plus Probable
plus Possible 357,561 246,752 189,142 153,105 128,253
---------------------------- --------- --------- -------- -------- --------
Notes:
(1) Based on GLJ's December 31, 2018 escalated price forecast.
See "Summary of Pricing and Inflation Assumptions".
(2) See "Advisories: Reserve Advisory".
(3) Income taxes include all resource income, appropriate income
tax calculations per current Republic of Trinidad and Tobago tax
regulations and estimated December 31, 2018 consolidated tax pools
and non-capital losses.
Summary of Pricing and Inflation Assumptions
The following table sets forth the benchmark reference prices
and inflation rates reflected in the Reserves Report.
Forecast Year NYMEX WTI at Brent Blend Inflation
Cushing, Oklahoma FOB North Sea Rates (%/year)(2)
(US$/bbl)(1) (US$/bbl)(1)
--------------- ------------------- --------------- -------------------
2019 56.25 63.25 0.0
2020 63.00 68.50 2.0
2021 67.00 71.25 2.0
2022 70.00 73.00 2.0
2023 72.50 75.50 2.0
2024 75.00 78.00 2.0
2025 77.50 80.50 2.0
2026 80.41 83.41 2.0
2027 82.02 85.02 2.0
2028 83.66 86.66 2.0
Thereafter +2.0% / year +2.0% / year 2.0
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.
Reconciliation of Changes in Gross Reserves(1),(2)
Factors Total Proved Total Proved
Reserves (Mbbl) plus Probable
Reserves (Mbbl)
---------------------- ------------------------ ----------------------
December 31, 2017 10,733 18,535
Drilling extensions 903 1,283
Infill drilling - 35
Technical revisions 229 72
Dispositions (38) (55)
Economic factors 21 31
Production (626) (626)
----------------------- ------------------------ ----------------------
December 31, 2018 11,222 19,275
----------------------- ------------------------ ----------------------
Reserves replacement
ratio (%)(3) 178 218
----------------------- ------------------------ ----------------------
Notes:
(1) Gross Reserves are the Company's working interest share of
the remaining reserves before deduction of any royalties.
(2) See "Advisories: Reserve Advisory".
(3) Reserves replacement ratio is calculated as net increase to
reserves divided by 2018 average production of 626 Mbbl. See
"Advisories: Crude Oil 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 Proved Reserves Proved plus
(US$000's) Probable Reserves
(US$000's)
------------------------- ---------------- -------------------
2019 8,120 10,902
2020 16,211 20,519
2021 12,448 18,764
2022 9,221 18,457
Thereafter - -
------------------------- ---------------- -------------------
Total undiscounted 45,999 68,642
Total discounted at 10%
per year 38,207 56,188
-------------------------- ---------------- -------------------
Reserve Life Index by Reserves Category(1),(2)
The Company reduced its December 31, 2018 gross 2P reserve life
index by 12% from year-end 2017 from 20.2 years to 17.7 years. The
following table provides the reserve life index by reserves
category as included in the Reserves Report.
Reserves Category Gross Reserves Reserve Reserve
Volume Life Life Index
(Mbbl) (years) (years)
---------------------------- ------------------- --------- ------------
Total Proved 11,222 48.0 11.9
Total Probable 8,053 50.0 57.0
------------------------------ ------------------- --------- ------------
Total Proved plus Probable 19,275 50.0 17.7
------------------------------ ------------------- --------- ------------
Notes:
(1) Gross Reserves are the Company's working interest share of
the remaining reserves before deduction of any royalties.
(2) See "Advisories: Crude Oil Metrics".
Estimated Company Gross Reserve Metrics(1)
(US$000's unless otherwise stated) Total Proved Total Proved
Reserves plus Probable
Reserves
--------------------------------------------------- ------------------------ ----------------------
Exploration capital expenditures(2),(3) 1,419 1,419
Development capital expenditures (2),(3) 13,355 13,355
Proceeds from dispositions (500) (500)
Change in future development costs (104) 553
--------------------------------------------------- ------------------------ ----------------------
Estimated FD&A costs(4) 14,170 14,827
--------------------------------------------------- ------------------------ ----------------------
Net reserve additions (Mbbl)((4) 1,115 1,366
--------------------------------------------------- ------------------------ ----------------------
Estimated FD&A costs per barrel (US$/bbl)(4) 12.71 10.85
--------------------------------------------------- ------------------------ ----------------------
Estimated 2018 operating netback (US$/bbl)(2),(5) 27.34 27.34
--------------------------------------------------- ------------------------ ----------------------
Estimated 2018 recycle ratio(4) 2.2x 2.5x
--------------------------------------------------- ------------------------ ----------------------
Notes:
(1) Gross Reserves are the Company's working interest share of
the remaining reserves before deduction of any royalties.
(2) Financial information was converted to US$ based on the
Company's preliminary 2018 unaudited financial statements and is
therefore subject to audit. See "Advisories: Unaudited Financial
Information".
(3) Exploration and development capital exclude capitalized
general and administration costs and corporate asset expenditures.
See "Advisories: Crude Oil Metrics".
(4) See "Advisories: Reserve Advisory" and "Advisories: Crude Oil Metrics".
(5) See "Non-GAAP Measures".
Advisories
Reserve Advisory
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, 2018 will
be contained in the Company's Annual Information Form for the year
ended December 31, 2018 which will be filed on SEDAR on or before
March 31, 2019.
The recovery and reserve estimates of crude oil reserves
provided herein are estimates only, and there is no guarantee that
the estimated reserves will be recovered. Actual crude oil reserves
may eventually prove to be greater than or less than the estimates
provided herein. This announcement summarizes the crude oil
reserves of the Company and the net present values of future net
revenue for such reserves using forecast prices and costs as at
December 31, 2018 prior to provision for interest, general and
administrative expenses, the impact of any financial derivatives or
liabilities associated with the abandonment and reclamation of
certain facilities and wells. 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.
"Proved Developed Producing Reserves" are those reserves that
are expected to be recovered from completion intervals open at the
time of the estimate. These reserves may be currently producing, or
if shut-in, they must have previously been on production, and the
date of resumption of production must be known with reasonable
certainty.
"Proved Developed Non-Producing Reserves" are those reserves
that either have not been on production or have previously been on
production but are shut-in, and the date of resumption of
production is unknown.
"Proved Undeveloped Reserves" are those reserves expected to be
recovered from known accumulations where a significant expenditure
(e.g. when compared to the cost of drilling a well) is required to
render them capable of production. They must fully meet the
requirements of the reserves category (proved, probable, possible)
to which they are assigned.
"Proved" reserves are those reserves that can be estimated with
a high degree of certainty to be recoverable. It is likely that the
actual remaining quantities recovered will exceed the estimated
proved reserves.
"Probable" reserves are those additional reserves that are less
certain to be recovered than proved reserves. It is equally likely
that the actual remaining quantities recovered will be greater or
less than the sum of the estimated proved plus probable
reserves.
"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. It is unlikely that the actual remaining quantities
recovered will exceed the sum of the estimated proved plus probable
plus possible reserves.
In the Reserves Report GLJ forecasted 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 forecasted economic limit of
individual wells is beyond the current term of the relevant
operating agreements.
Crude Oil Metrics
This announcement contains several 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,
development and acquisition costs, and recycle ratio. These metrics
have been prepared by Management and 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 and should not be used to make comparisons. Such
metrics have been included herein to provide readers with
additional measures 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.
FD&A costs represent the costs of net property acquisitions
and dispositions, exploration, and development incurred, converted
to US$ where applicable. Specifically, FD&A is calculated as
the sum of net acquisition costs less proceeds of dispositions,
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, 2018 consolidated financial statements is not complete.
Accordingly, unaudited capital expenditure amounts used in the
calculation of FD&A costs are Management's estimate and are
subject to change. FD&A costs per barrel is determined by
dividing current period net reserve additions to the corresponding
period's FD&A 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 annual FD&A
costs per barrel to operating netback per barrel prior to realized
gains or losses on commodity derivative contracts in the
corresponding period (see "Non-GAAP Measures"). Operating netback
has been converted to US$ where applicable. The Company's annual
audit of its December 31, 2018 consolidated financial statements is
not complete. Accordingly, unaudited operating netbacks used in
calculations of recycle ratios 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.
Unaudited Financial Information
Certain financial information included herein including capital
expenditures and operating netback are based on unaudited estimated
results. These estimated results are subject to change upon
completion of the Company's audited financial statements for the
year ended December 31, 2018, and changes could be material.
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 total and per barrel basis and
is calculated by deducting royalties and operating expenses from
petroleum sales. Operating netback is presented herein prior to
realized gains or losses on commodity derivative contracts. 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
in evaluating operating results on a historical basis.
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 and the net present values of future
net revenue therefrom, future development costs associated with
crude oil reserves, the potential undertaking, timing, locations
and costs of future well drilling, and the sufficiency of resources
to fund future development 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 December
31, 2017 Annual Information Form dated March 26, 2018 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.
In addition, 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
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.
Crude Oil Abbreviations
bbl(s) barrel(s)
bbls/d barrels per day
Mbbl one thousand barrels
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".
For further information:
Touchstone Exploration Inc.
Mr. Paul Baay, President and Chief Executive Officer Tel: +1
(403) 750-4487
Mr. James Shipka, Chief Operating Officer
Shore Capital (Nominated Advisor and Joint Broker)
Nominated Advisor: Edward Mansfield / Mark Percy / 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 / Billy Clegg Tel: +44 (0) 203 757
4980
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 Fellow of the Geological Society of London (BGS)
as well as of member of the Canadian Society of Petroleum
Geologists 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 30 years of oil and gas exploration and
development experience.
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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