TIDMTXP
RNS Number : 2122F
Touchstone Exploration Inc.
06 March 2020
TOUCHSTONE ANNOUNCES 2019 YEAR- RESERVES
CALGARY, ALBERTA (March 6, 2020) - Touchstone Exploration Inc.
("Touchstone", "we", "our", "us" or the "Company") (TSX, LSE: TXP)
announces highlights of our independent reserves evaluation
prepared by GLJ Petroleum Consultants Ltd. ( " GLJ " ) with an
effective date of December 31, 2019 (the " Reserves Report " ).
Highlights of our total proved ("1P"), total proved plus
probable ("2P") and total proved plus probable plus possible
reserves from the Reserves Report are provided below. All finding,
development and acquisition ("FD&A") costs below include
changes in future development capital ("FDC"). Unless otherwise
stated, all financial amounts herein are rounded to thousands of
United States dollars . The financial information contained herein
is based on the Company's unaudited expected results for the year
ended December 31, 2019 and is subject to change.
Touchstone's 2019 capital program focused on exploration
activities on our Ortoire property, where we drilled two gross (1.6
net) exploration wells. We conducted minimal capital development
activity on our development properties, mainly performing wellbore
recompletions to arrest production declines. The Reserves Report
included those reserves associated with our development properties
as well as new reserves associated with our Coho natural gas
discovery in 2019. The Reserves Report does not include any
reserves associated with the Cascadura discovery given well testing
commenced subsequent to the effective date of the report.
2019 Year-end Reserves Report Highlights
-- Increased 1P reserves by 6% to 11,840 Mboe and increased 2P
reserves by 14% to 22,056 Mboe from the prior year.
-- Replaced 2019 annual production by 193% on a 1P reserves
basis and 519% on a 2P reserves basis.
-- Realized after tax 1P 10% discounted net present value of
future net revenues ("NPV10") of $83.7 million, representing an
increase of $4.0 million or 5% from the prior year.
-- Achieved an after tax 2P NPV10 of $153.9 million, an increase
of 6% from $145.4 million in 2018.
-- Realized 1P FD&A costs of $7.75 per boe, resulting in a
recycle ratio 3.4 times using our unaudited annual 2019 operating
netback of $26.62 per boe.
-- Achieved 2P FD&A costs of $3.95 per boe, resulting in a 2P recycle ratio of 6.7 times.
-- FDC associated with only a portion of our internally
identified drilling location inventory and portfolio of low risk
recompletion projects totaled $45.4 million for 1P reserves and
$71.7 million for 2P reserves.
-- Coho was assigned gross working interest 1P reserves of 1,148
Mboe and gross working interest 2P reserves of 3,349 Mboe with a 2P
NPV10 of $27.5 million before taxes.
James Shipka, Chief Operating Officer, commented:
"The Company's independent 2019 reserves evaluation reflected
the strong performance of our base production and included the
first reserves associated with our discoveries on the Ortoire
exploration block. With gross working interest 2P reserves of over
20 Bcf (approximately 3.4 million boe) assigned at Coho, the
Company has exceeded the best estimates of the recoverable gas in
the pool compared to the independent evaluation report prepared for
the Company in the prior year. With the second stage of the
production test at Cascadura-1ST1 expected to commence this
weekend, we look forward to updating our shareholders on this
material discovery and the impact it will have on corporate
reserves."
2019 Year-end Reserves Report Summary
Touchstone's year-end crude oil and natural gas 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
30, 2020. The reserve estimates set forth below are based upon
GLJ's Reserves Report dated March 4, 2020 with an effective date of
December 31, 2019. All values in this announcement are based on
GLJ's forecast prices and estimates of future operating and capital
costs as at December 31, 2019. In certain tables set forth below,
the columns may not add due to rounding.
Summary of Company Gross Oil and Gas Reserves as of December 31,
2019 by Product Type (1),(2)
Reserves Category Light and Heavy Oil Conventional Total Oil
Medium Oil (Mbbl) Natural Equivalent
(Mbbl) Gas (MMcf) (Mboe)
---------------------------- -------------------- -------------------- ------------- ------------
Proved
Developed Producing 4,351 363 - 4,714
Developed Non-Producing 1,452 294 6,888 2,893
Undeveloped 3,787 446 - 4,233
---------------------------- -------------------- -------------------- ------------- ------------
Total Proved 9,590 1,103 6,888 11,840
Probable 7,317 698 13,203 10,215
Total Proved plus Probable 16,906 1,801 20,091 22,056
---------------------------- -------------------- -------------------- ------------- ------------
Possible 5,411 571 10,524 7,735
---------------------------- -------------------- -------------------- ------------- ------------
Total Proved plus Probable
plus Possible 22,317 2,372 30,615 29,791
---------------------------- -------------------- -------------------- ------------- ------------
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 Revenues as of
December 31, 2019 (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 101,871 74,072 60,187 51,683 45,800
Developed Non-Producing 96,266 75,368 62,537 53,439 46,563
Undeveloped 137,702 102,837 79,500 63,128 51,196
---------------------------- ---------- -------- -------- -------- --------
Total Proved 335,839 252,276 202,224 168,250 143,559
Probable 390,549 262,615 195,689 153,716 124,875
---------------------------- ---------- -------- -------- -------- --------
Total Proved plus Probable 726,388 514,891 397,913 321,966 268,434
Possible 310,663 184,353 129,718 99,472 80,216
---------------------------- ---------- -------- -------- -------- --------
Total Proved plus Probable
plus Possible 1,037,051 699,244 527,631 421,438 348,650
---------------------------- ---------- -------- -------- -------- --------
Reserves Category Net Present Values of Future Net Revenues
After Income Taxes (3) Discounted at
(% per year) ($000's)
---------------------------- --------------------------------------------------
0% 5% 10% 15% 20%
---------------------------- --------- --------- -------- -------- --------
Proved
Developed Producing 47,867 38,463 33,156 29,569 26,893
Developed Non-Producing 35,676 28,865 24,651 21,648 19,360
Undeveloped 49,677 35,447 25,933 19,293 14,503
---------------------------- --------- --------- -------- -------- --------
Total Proved 133,220 102,775 83,740 70,510 60,756
---------------------------- --------- --------- -------- -------- --------
Probable 139,212 94,523 70,164 54,647 43,946
---------------------------- --------- --------- -------- -------- --------
Total Proved plus Probable 272,431 197,297 153,904 125,157 104,702
Possible 108,046 66,699 47,646 36,801 29,817
---------------------------- --------- --------- -------- -------- --------
Total Proved plus Probable
plus Possible 380,477 263,996 201,550 161,958 134,519
---------------------------- --------- --------- -------- -------- --------
Notes:
(1) Based on GLJ's December 31, 2019 escalated price forecast.
See " Summary of Pricing and Inflation Assumptions " .
(2) See " Advisories: Reserve Advisory " .
(3) Income taxes include all resource income, appropriate income
tax calculations per current Republic of Trinidad and Tobago tax
regulations and estimated unaudited December 31, 2019 consolidated
tax pools and non-capital losses.
Summary of Pricing and Inflation Assumptions
The following table sets forth benchmark reference pricing and
inflation rates reflected in the Reserves Report.
Forecast Year WTI Crude Oil Brent Spot Henry Hub Inflation Rates
Cushing, Oklahoma Crude Oil Natural Gas (%/year)(2)
($/bbl)(1) ($/bbl)(1) ($/MMBtu)(1)
--------------- ------------------- ------------- -------------- ----------------
2020 61.00 67.00 2.42 0.0
2021 63.00 68.00 2.75 2.0
2022 66.00 71.00 2.90 2.0
2023 68.00 73.00 3.00 2.0
2024 70.00 75.00 3.10 2.0
2025 72.00 76.00 3.20 2.0
2026 74.00 78.00 3.27 2.0
2027 75.81 79.81 3.33 2.0
2028 77.33 81.33 3.40 2.0
2029 78.88 82.88 3.47 2.0
Thereafter +2.0% / year +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 (Mboe) plus Probable
Reserves (Mboe)
------------------------- --------------------- ----------------------
December 31, 2018 11,222 19,275
Infill drilling 52 64
Technical revisions 69 15
Exploration discoveries 1,148 3,349
Improved recovery 12 17
Production (663) (663)
-------------------------- --------------------- ----------------------
December 31, 2019 11,840 22,056
-------------------------- --------------------- ----------------------
Reserves replacement
ratio (%) (3) 193 519
-------------------------- --------------------- ----------------------
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 2019 average production of 663 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 Proved Reserves Proved plus
($000's) Probable Reserves
($000's)
------------------------- ---------------- -------------------
2020 9,367 12,324
2021 15,939 19,192
2022 13,564 22,277
2023 6,506 17,888
Thereafter - -
------------------------- ---------------- -------------------
Total undiscounted 45,375 71,681
Total discounted at 10%
per year 38,095 58,753
-------------------------- ---------------- -------------------
Estimated Company Capital Program Efficiency
($000's unless otherwise stated) Total Proved Total Proved
Reserves plus Probable
Reserves
------------------------------------------ ------------------------ -----------------------
Exploration capital expenditures(1),(2) 9,858 9,858
Development capital expenditures (1),(2) 696 696
Change in future development costs (624) 3,039
------------------------------------------ ------------------------ -----------------------
Estimated FD&A costs (4) 9,930 13,593
------------------------------------------ ------------------------ -----------------------
Gross reserve additions (Mboe) (3),
( (4) 1,281 3,444
Estimated FD&A costs per boe ($/boe)
(4) 7.75 3.95
------------------------------------------ ------------------------ -----------------------
Estimated 2019 operating netback ($/boe)
(1),(5) 26.62 26.62
Estimated 2019 recycle ratio (4) 3.4x 6.7x
------------------------------------------ ------------------------ -----------------------
Notes:
(1) Financial information is based on the Company's preliminary
2019 unaudited financial statements and is therefore subject to
audit. See "Advisories: Unaudited Financial Information".
(2) Exploration and development capital exclude capitalized
general and administration costs and corporate asset expenditures.
See "Advisories: Oil and Gas Metrics".
(3) Gross Reserves are the Company's working interest share of
the remaining reserves before deduction of any royalties.
(4) See "Advisories: Reserve Advisory" and "Advisories: Oil and Gas Metrics".
(5) See "Non-GAAP Measures".
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. James Shipka, Chief Operating Officer
Shore Capital (Nominated Advisor and Broker)
Nominated Advisor: Edward Mansfield / Daniel Bush / Michael McGloin Tel: +44 (0) 207 408 4090
Corporate Broking: Jerry Keen
Camarco (Financial PR)
Nick Hennis / Billy Clegg Tel: +44 (0) 203 781 8330
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, 2019 will
be contained in the Company's Annual Information Form for the year
ended December 31, 2019 which will be filed on SEDAR on or before
March 30, 2020.
The recovery and reserve estimates of crude oil and natural gas
reserves provided herein are estimates only, and there is no
guarantee that the estimated reserves will be recovered. Actual
crude oil and natural gas reserves may eventually prove to be
greater than or less than the estimates provided herein. This
announcement summarizes the crude oil and natural gas 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,
2019 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.
Oil and Gas Measures
Where applicable, natural gas has been converted to barrels of
oil equivalent based on six thousand cubic feet to one barrel of
oil. The barrel of oil equivalent rate is based on an energy
equivalent conversion method primarily applicable at the burner
tip, and given that the value ratio based on the current price of
crude oil as compared to natural gas is significantly different
than the energy equivalency of the 6:1 conversion ratio, utilizing
the 6:1 conversion ratio may be misleading as an indication of
value.
Oil and Gas 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, 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.
FD&A costs represent the costs of net property acquisitions
and dispositions, exploration, and development incurred.
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, 2019 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"). The Company's
annual audit of its December 31, 2019 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 annual 2019 financial information disclosed 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, 2019, and changes could
be material.
Non-GAAP Measures
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. Operating netback is
presented herein prior to realized gains or losses on commodity
derivative contracts. Operating netback does not have a
standardized meaning under Generally Accepted Accounting Principles
and therefore may not be comparable with the calculation of similar
measures by other companies. 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 and natural gas reserves and the net present
values of future net revenue therefrom, future development costs
associated with crude oil and natural gas reserves , the potential
undertaking, timing, locations and costs of future well testing,
well drilling , and the sufficiency of resources and available
financing to fund future development and exploration 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.
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.
Abbreviations
bbl(s) barrel(s)
Mbbl thousand barrels
Mcf thousand cubic feet
MMcf million cubic feet
Bcf billion cubic feet
MMBtu million British Thermal Units
boe barrels of oil equivalent
Mboe thousand barrels of oil equivalent
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 a 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
DRLSSAEFIESSESD
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