TIDMTXP
RNS Number : 9337Y
Touchstone Exploration Inc.
14 May 2019
FIRST QUARTER 2019 RESULTS
Calgary, Alberta - May 14, 2019 - Touchstone Exploration Inc.
("Touchstone" or the "Company") (TSX / LSE: TXP) announces its
financial and operating results for the three months ended March
31, 2019. Selected financial and operational information is
outlined below and should be read in conjunction with Touchstone's
March 31, 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).
The Company changed its presentation currency from Canadian
dollars to United States dollars effective January 1, 2019, with
retrospective application on comparative figures. The change in
accounting policy was made to better reflect the Company's
international business activities and to improve comparability of
the Company's financial results with other internationally focused
junior oil and gas companies. Unless otherwise stated, all
financial amounts herein are rounded to thousands of United States
dollars.
Highlights
-- Achieved quarterly average crude oil production of 2,121
barrels per day ("bbls/d"), representing increases of 37% and 15%
from the first quarter of 2018 and the fourth quarter of 2018,
respectively.
-- Realized $11,015,000 in petroleum sales, a 34% increase from the prior year first quarter.
-- Generated an operating netback of $29.35 per barrel, an 11%
increase relative to the $26.52 per barrel recorded in the prior
year comparative quarter.
-- Delivered funds flow from operations of $2,430,000 ($0.02 per
share) compared to $2,062,000 ($0.02 per share) in the first
quarter of 2018.
-- Recognized a net loss of $185,000 versus net earnings of
$130,000 in the first quarter of 2018, primarily driven by a
$1,256,000 increase in supplemental petroleum tax expense.
-- Completed a private placement raising net proceeds of
$4,496,000 by placing 31,666,667 new common shares at a price of
C$0.21 per share.
-- Extended our C$15 million term loan maturity date and initial
principal repayments by one year, with initial quarterly principal
payments of C$810,000 commencing in January 2021.
-- Exited the quarter with net debt of $10,016,000, representing
1.1 times net debt to trailing twelve-month funds flow from
operations.
Financial and Operating Results Summary
Three months ended % change
March 31,
---------
2019 2018
----------------------- --- ---------------------- ---------------------- ---------
Operating highlights
Average daily oil
production (bbls/d) 2,121 1,543 37
Net wells drilled - 2 (100)
Brent benchmark price
(US$/bbl) 63.10 66.86 (6)
Operating netback(1)
(US$/bbl)
Realized sales price 57.71 59.12 (2)
Royalties (15.29) (16.83) (9)
Operating expenses (13.07) (15.77) (17)
------------------------------ ---------------------- ---------------------- ---------
29.35 26.52 11
--------------------------- ---------------------- ---------------------- ---------
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
March 31,
---------
2019 2018
------------------------------------- --- ----------------------- ---------------------- ---------
Financial highlights
(US$000's except share and
per share amounts)
Petroleum sales 11,015 8,212 34
Cash flow from (used in) operating
activities 2,737 (1,021) n/a
Funds flow from operations(2) 2,430 2,062 18
Per share - basic
and diluted(1)(2) 0.02 0.02 -
-------------------------------------------- ----------------------- ---------------------- ---------
Net (loss) earnings (185) 130 n/a
Per share - basic
and diluted (0.00) 0.00 n/a
Capital expenditures
Exploration 360 177 103
Development 399 2,852 (86)
-------------------------------------------- ----------------------- ---------------------- ---------
759 3,029 (75)
----------------------------------------- ----------------------- ---------------------- ---------
Net debt(1) - end
of period
Working capital surplus (1,963) (3,818) (49)
Principal long-term
balance of loan 11,235 11,630 (3)
Long-term lease liabilities 744 - n/a
10,016 7,812 28
----------------------------------------- ----------------------- ---------------------- ---------
Weighted average shares outstanding
(000's)
Basic 140,984 129,021 9
Diluted 140,984 129,692 9
Outstanding shares - end of
period (000's) 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".
Operating results
Through the first quarter of 2019, Touchstone did not drill any
development wells as we focused on managing working capital,
reducing net debt levels and preparing for our initial Ortoire
exploration well. First quarter development capital expenditures
totaled $399,000 which included recompletion activities and the
completion of two wells drilled in December 2018.
First quarter 2019 crude oil production averaged 2,121 bbls/d, a
37% increase relative to the 1,543 bbls/d produced in the first
quarter of 2018. First quarter average daily production increased
15% from average production achieved in the fourth quarter of 2018,
as the full impact of the Company's 2018 drilling program was
realized. Production from the 2018 development drilling campaign
contributed an average of approximately 692 bbls/d of incremental
production in the first quarter of 2019.
Financial results
First quarter 2019 operating netback was $29.35 per barrel,
representing an improvement of 11% from the $26.52 per barrel
recognized in the equivalent quarter of 2018. Operating netback
increased despite a 2% decrease in realized crude oil pricing, with
the Company realizing an average of $57.71 per barrel in the first
quarter of 2019 versus $59.12 per barrel received in the 2018
comparative quarter. Although the first quarter 2019 average Brent
reference price weakened by 6% compared to the first quarter 2018
average, Touchstone's realized differential to Brent narrowed from
11.7% to 8.5%. Relative to the equivalent quarter of 2018, first
quarter 2019 petroleum sales increased 34% to $11,015,000 based on
a 37% increase in production volumes, offset by the slight decrease
in realized pricing. Royalty expenses represented 26.5% of
petroleum sales during the three months ended March 31, 2019 versus
28.5% in the prior year equivalent period. The decrease was a
result of incremental production achieved from our 2018 drilling
program which qualified for royalty incentives. First quarter 2019
operating costs decreased 17% on a per barrel basis versus the
first quarter of 2018, which was primarily attributable to
increased production and minimal increases to the fixed component
of operating expenses.
Touchstone generated first quarter 2019 funds flow from
operations of $2,430,000 ($0.02 per share), representing an
increase of $368,000 or 18% from the prior year comparative period.
The variance was mainly a result of elevated operating netbacks
achieved in the first quarter of 2019, partially offset by
increased current income taxes. First quarter 2019 current income
taxes increased $1,327,000 from the prior year equivalent period,
as increased supplemental petroleum tax was incurred based on
increased production and minimal capital activity completed in
2019.
We recognized a net loss of $185,000 ($0.00 per share) in the
first quarter of 2019 versus net earnings of $130,000 ($0.00 per
share) in the first quarter of 2018. The increase in funds flow
from operations was mainly offset by increased depreciation and
depletion recorded in the 2019 period. Relative to the equivalent
quarter of 2018, increased depletion was recognized based on
increased production achieved in the first quarter of 2019.
In February, Touchstone raised gross proceeds of $5,013,000
(GBP3,800,000) by way of a placing of 31,666,667 new common shares
at a price of C$0.21 (12 pence) per common share. Fees incurred
from the private placement were $517,000, resulting in net proceeds
of $4,496,000. We intend to use the net proceeds from the private
placement to fund the first exploration well on our Ortoire
property.
Touchstone exited the first quarter with a cash balance of
$7,586,000, a working capital surplus of $1,963,000 and a C$15
million principal term loan balance. Attributable to limited
capital expenditures and the net funds received from the private
placement, Touchstone's net debt was $10,016,000, representing a
30% decrease from $14,322,000 as of December 31, 2018. Our 2018
developmental capital investments increased both production and
funds flow from operations from the prior year, as net debt to
trailing twelve-month funds flow from operations was 1.1 times as
of March 31, 2019 versus 1.7 times as at December 31, 2018. As a
result of an extension executed in the first quarter of 2019, our
credit facility does not require the commencement of principal
payments until January 1, 2021, and we continued to be comfortably
within the financial covenants as at March 31, 2019.
The Company's near-term development plan is strategically
balanced between maintaining base production levels and proceeding
with exploratory activities on our Ortoire property. The Company
intends to remain focused on financial discipline and cost control.
Touchstone will continue to take a measured approach to 2019
developmental drilling in an effort to manage financial liquidity
while focusing on our Ortoire exploration opportunity.
Ortoire exploration program
Touchstone's Board of Directors approved the drilling of a
second well on our Ortoire property. We have commenced construction
of the surface location of the initial well and anticipate spudding
in late June, subject to drilling rig availability. We expect to
drill the second well using the same drilling rig immediately
thereafter. Touchstone has an 80% working interest in both wells
and is obligated to fund the full cost of the exploration wells on
behalf of Heritage Petroleum Company Limited, its 20% working
interest partner.
Operations update
The Company's April 2019 production averaged 1,789 bbls/d. In
addition to natural decline, a significant portion of the monthly
drop in production was due to downtime on two of the Company's high
rate flowing wells. CO-372, which contributed approximately 131
bbls/d in the first quarter of 2019, suffered from a tubing failure
resulting in a fish being stuck in the hole. The Company has
sourced the required fishing tools to recover the tubing and bottom
hole assembly and anticipates moving a service rig to the location
within the next two weeks. PS-605 experienced a packer failure
which allowed water from a previously suspended horizon to enter
the wellbore. The well produced approximately 55 bbls/d in the
first quarter of 2019. A new packer will be run to isolate the
lower zone of the well, and the Company expects that production
will be restored thereafter. Additionally, the Company's key
service rig provider currently has two service rigs down for
repairs which have led to short-term backup of rig work. Touchstone
currently has 15 lower rate workovers awaiting service and has
recently brought two additional rigs into operations to facilitate
completion. We anticipate returning to a production rate in excess
of 2,000 bbls/d within the next four to six weeks.
Annual General Meeting
Touchstone will be holding its annual general meeting of
shareholders on Wednesday, June 12, 2019, at 10:00 a.m. (Calgary
time) in the Chambers Room on floor B1 of First Canadian Centre,
350 7th Avenue S.W., Calgary, Alberta. The meeting materials,
including the Company's Management Information Circular and Proxy
Statement, are available under the Company's profile on SEDAR
(www.sedar.com) and the Company's website
(www.touchstoneexploration.com).
For Further Information:
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
www.touchstoneexploration.com
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
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".
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. 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 and the
principal (undiscounted) amounts of long-term debt and lease
liabilities.
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 the
potential undertaking, timing, locations, production rates and
costs of future well drilling, completion, exploration and workover
activities, and the sufficiency of resources and available
financing to fund future exploration, drilling and completion
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 December 31, 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
QRFGUGDUDXBBGCS
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