TIDMTXP
RNS Number : 6507H
Touchstone Exploration Inc.
26 March 2020
TOUCHSTONE ANNOUNCES YEAR- 2019 RESULTS
CALGARY, ALBERTA (March 26, 2020) - Touchstone Exploration Inc.
( " Touchstone ", "we", "our", "us" or the " Company " ) (TSX, LSE:
TXP) reports its operating and financial results for the three
months and year ended December 31, 2019. Selected information is
outlined below and should be read in conjunction with Touchstone's
December 31, 2019 audited consolidated financial statements, the
related Management's discussion and analysis and Annual Information
Form, all of which will be available under the Company's profile on
SEDAR (www.sedar.com) and the Company's website
(www.touchstoneexploration.com). Unless otherwise stated, all
financial amounts herein are rounded to thousands of United States
dollars .
Subsequent Events and Outlook
-- Subsequent to year-end, we issued 22,500,000 common shares
raising net proceeds of approximately $10.8 million to primarily
fund the Chinook prospect on our Ortoire block.
-- Our emphasis remains on bringing Coho-1 and Cascadura-1ST1
onto production as soon as possible.
-- We are preparing to drill an earning exploration well at the
Chinook prospect and anticipate continuing with the planned
exploration program unless it becomes absolutely necessary to
suspend it.
-- Touchstone has immediately responded to the significant
global economic uncertainty created by the novel coronavirus
("COVID-19") pandemic combined with the unprecedented decline in
crude oil prices. Discretionary costs have been minimized with
field operations limited to emergency workovers.
-- Management's main concern is the safety and wellbeing of its
employees and stakeholders. International travel has been
restricted, and remote working and physical distancing measures
have been implemented where possible to allow our operations to
continue as smoothly as possible in the circumstances.
-- Aside from voluntarily restricting certain field operations,
the Company has had no operational impacts from COVID-19 to date,
and we will monitor the situation and adapt our operations
accordingly.
-- Our low base production decline rate, strong operating
netbacks, top-tier capital efficiencies, lack of development
drilling commitments and solely operated exploration capital
program provide flexibility in this volatile market. Bolstered by
the recent private placement, the Company had approximately $13.5
million of cash as at February 29, 2020, and no repayments are
required on the Company's debt until January 2021. We remain
focused on managing our operations to ensure that we operate within
our credit facility financial covenants.
2019 Highlights
-- Achieved annual crude oil sales of 1,825 barrels per day
("bbls/d"), a 6% increase relative to the 1,718 bbls/d produced in
2018.
-- Executed a $10,113,000 exploration program to drill two gross (1.6 net) successful wells.
-- Increased petroleum sales by 2% from the prior year,
generating $38,654,000 versus $37,729,000 in 2018.
-- Despite an annual 10% decrease in Brent reference pricing, we
realized an operating netback of $26.61 per barrel in 2019,
consistent with the $26.68 per barrel generated in the prior
year.
-- Reduced operating costs by 8% and 14% on an absolute and per
barrel basis from the prior year, respectively.
-- Despite a 90% annual decrease in discretionary development
capital investment, we delivered funds flow from operations of
$6,840,000 ($0.04 per share) compared to $8,548,000 ($0.07 per
share) realized in 2018.
-- Exited the year with cash of $6,182,000 and net debt of
$16,503,000, representing 2.4 times net debt to annual funds flow
from operations.
2019 Financial and Operating Results Summary
Three months ended % change Year ended December % change
December 31, 31,
---------- ---------
2019 2018 2019 2018
--------------------------- --------------- --------------- ---------- --------------- --------------- ---------
Operating Highlights
Average daily oil
production (bbls/d) 1,690 1,851 (9) 1,825 1,718 6
Net wells drilled 0.8 3.0 (73) 1.6 11.0 (85)
Brent benchmark price
($/bbl) 63.17 68.76 (8) 64.28 71.31 (10)
($/bbl)
Realized sales price 57.38 58.54 (2) 58.01 60.15 (4)
Royalties (17.05) (14.81) 15 (16.49) (16.16) 2
Operating expenses (15.21) (21.18) (28) (14.91) (17.31) (14)
--------------------------- --------------- --------------- ---------- --------------- --------------- ---------
Operating netback(1) 25.12 22.55 11 26.61 26.68 -
--------------------------- --------------- --------------- ---------- --------------- --------------- ---------
Financial Highlights
($000's except as
indicated)
Petroleum sales 8,920 9,970 (11) 38,654 37,729 2
Cash flow from operating
activities 2,090 1,810 15 5,454 6,331 (14)
Funds flow from
operations(2) 2,018 1,482 36 6,840 8,548 (20)
Per share - basic
and diluted(1)(2) 0.01 0.01 - 0.04 0.07 (43)
Net (loss) earnings (3,549) 552 n/a (5,620) 358 n/a
Per share - basic
and diluted (0.02) 0.00 n/a (0.04) 0.00 n/a
Exploration capital
expenditures 5,838 1,603 264 10,113 2,557 296
Development capital
expenditures 157 4,773 (97) 1,388 14,606 (90)
--------------------------- --------------- --------------- ---------- --------------- --------------- ---------
Total capital expenditures 5,995 6,376 (6) 11,501 17,163 (33)
--------------------------- --------------- --------------- ---------- --------------- --------------- ---------
Working capital deficit 1,139 3,318 (66)
Principal balance
of term loan 15,364 11,004 40
--------------------------- --------------- --------------- ---------- --------------- --------------- ---------
Net debt(1) - end
of period 16,503 14,322 15
--------------------------- --------------- --------------- ---------- --------------- --------------- ---------
Share Information
(000's)
Weighted average shares
outstanding - basic 160,691 129,021 25 155,830 129,021 21
Weighted average shares
outstanding - diluted 160,691 130,532 23 155,830 130,220 20
Outstanding shares
- end of period 160,703 129,021 25
Notes:
(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".
(2) Additional GAAP term included in the Company's consolidated
statements of cash flows. Funds flow from operations represents net
earnings (loss) excluding non-cash items. See "Advisories: Non-GAAP
Measures".
Operating Results
Throughout 2019, Touchstone conducted minimal capital
development activity and continued to allocate capital to
exploration activities on our Ortoire property. As a result, crude
oil production during the fourth quarter averaged 1,690 bbls/d, a
9% decrease relative to the 1,851 bbls/d produced in the fourth
quarter of 2018, as incremental production achieved from wells
drilled in 2018 were offset by natural declines. 2019 crude oil
production averaged 1,825 barrels per day, representing an increase
of 6% from production delivered in 2018. We invested $1,388,000 in
development activities in 2019, which mainly consisted of
recompletion activities on legacy wellbores.
We commenced our onshore exploration program on the Ortoire
block (80% working interest) in the second half of 2019, drilling
two gross exploration wells (1.6 net). Coho-1, the first natural
gas prospect, had an encouraging production test that exceeded the
Company's expectations. Touchstone completed drilling its second
Ortoire exploration prospect, Cascadura-1ST1, in December 2019,
with production testing in February and March 2020 confirming a
substantial liquids-rich gas discovery. In aggregate, we invested
$10,113,000 in exploration activities, including $8,901,000 in
drilling, completion and lease building activities (2018 -
$2,557,000 and $nil, respectively).
Financial Results
Despite an 8% decrease in average Brent reference pricing, our
fourth quarter operating netback was $25.12 per barrel,
representing an 11% increase from the $22.55 per barrel operating
netback achieved in the equivalent prior year period. Realized
fourth quarter 2019 crude oil pricing was $57.38 per barrel, 2%
less than the $58.54 per barrel received in the fourth quarter of
2018 as the Company's realized pricing differential to Brent
reference pricing narrowed significantly. 2019 fourth quarter
royalties represented 29.7% of petroleum sales compared to 25.3% in
the prior year comparative period. This reflected an increase in
overriding royalties, as production from development wells drilled
in 2017 and 2018 qualified for reduced royalty rates throughout
2018. In comparison to the fourth quarter of 2018, operating
expenses on a per barrel basis decreased 28% to $15.21 per barrel,
predominately due to decreased well servicing expenditures and
licence fees. On an annual basis, our 2019 operating netback of
$26.61 per barrel was consistent with the $26.68 recorded in the
prior year. Despite a 10% decrease in average Brent reference
pricing, the Company realized $58.01 per barrel, a 4% decrease from
the $60.15 per barrel recognized in 2018. In comparison to 2018,
2019 royalties per barrel increased by 2% while operating costs per
barrel decreased by 14%, reflecting the Company's 2019 cost control
efforts.
For the three months and year ended December 31, 2019,
Touchstone delivered funds flow from operations of $2,018,000
($0.01 per share) and $6,840,000 ($0.04 per share), respectively.
Fourth quarter 2019 funds flow from operations increased by
$536,000 from the $1,482,000 recorded in the corresponding 2018
period, reflecting savings in cash finance expenses from the
reversal of previously accrued income tax interest expenses,
slightly offset by increased income tax expenses recorded in 2019.
2019 funds flow from operations were $1,708,000 less than the
$8,548,000 recognized in 2018. Annual savings in operating costs
and cash finance expenses were offset by an increase of $3,513,000
in current income taxes. Fourth quarter and annual 2019 income
taxes increased based on minimal capital development activity,
which decreased credits used to offset supplemental petroleum
taxes.
We recorded net losses of $3,549,000 ($0.02 per share) and
$5,620,000 ($0.04 per share) during the three months and year ended
December 31, 2019, respectively, in comparison to net earnings of
$552,000 ($0.00 per share) and $358,000 ($0.00 per share) in the
comparative 2018 periods, respectively. The annual variances were
driven by property and equipment impairments, as $7,594,000 in
impairments were recorded in the fourth quarter of 2019 versus
impairment reversals of $3,719,000 recognized in the fourth quarter
of 2018. The impairment expenses were minimized by their
corresponding effect on deferred taxes, as recoveries of $3,945,000
and $1,813,000 were recognized during the three months and year
ended December 31, 2019 (2018 - expenses of $3,228,000 and
$6,897,000).
Touchstone exited the year with a cash balance of $6,182,000, a
working capital deficit of $1,139,000 and a C$20 million principal
term loan balance. Net debt as at December 31, 2019 was
$16,503,000, which represented net debt to annual 2019 funds flow
from operations of 2.4 times. In the fourth quarter of 2019, we
increased the principal balance of our credit facility from C$15
million to C$20 million in order to fund the Cascadura-1ST1
exploration well. The credit facility does not require the
commencement of principal payments until January 1, 2021, and we
were within the financial covenants as at December 31, 2019.
Subsequent Events Outlook
On the basis of the successful results from the first two
Ortoire exploration wells, the Company undertook a private
placement in February 2020 in order to support the drilling of a
further Ortoire exploration well at the Chinook prospect, which is
targeting a separate structure along the same geological trend. The
private placement raised net proceeds of approximately $10.8
million by way of a placing of 22,500,000 common shares at a price
of 40 pence (approximately C$0.69). The net proceeds of the equity
issuance are also expected to be used to complete the second stage
of the Cascadura-1ST1 production test and provide additional
working capital while we progress the Ortoire exploration
program.
With the significant drop and volatility in financial markets
and world crude oil prices as a result of the COVID-19 pandemic and
concurrent oil market share war, consistent with past practices the
Company will manage its development and operational spending and
will only adjust the 2020 exploration capital program if absolutely
necessary.
The Company's response to these events will be to continue its
approach of maintaining prudence and financial flexibility with a
focus on preserving value and financial liquidity. All operations
will be thoroughly vetted to optimize corporate cash flows which
may include shutting in any wells that will not generate positive
cash flow under current forward crude oil prices. Further operating
and corporate cost efficiencies will also be pursued in
consideration of the current pricing environment. To date, the
Company has not been subject to supply chain disruptions nor the
unavailability of personnel.
We continue to monitor the situation and economic environment,
and we will adapt our business operations to ensure that we
preserve and grow long-term shareholder value. We thank our
shareholders and stakeholders for their continuing support and look
forward to coming out of this unprecedented challenge with a
stronger and sustainable Company.
Touchstone Exploration Inc.
Touchstone Exploration Inc. is a Calgary based company engaged
in the business of acquiring interests in petroleum and natural gas
rights and the exploration, development, production and sale of
petroleum and natural gas. Touchstone is currently active in
onshore properties located in the Republic of Trinidad and Tobago.
The Company's common shares are traded on the Toronto Stock
Exchange and the AIM market of the London Stock Exchange under the
symbol " TXP " .
For further information about Touchstone, please visit our
website at www.touchstoneexploration.com or contact:
Touchstone Exploration Inc.
Mr. Paul Baay, President and Chief Executive Officer Tel: +1
(403) 750-4487
Mr. Scott Budau, Chief Financial Officer
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
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 Generally
Accepted Accounting Principles ("GAAP") 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
earnings, net earnings per share, total liabilities, or other
measures of financial performance as determined in accordance with
GAAP. Management uses these Non-GAAP measures for its own
performance measurement and to provide stakeholders with measures
to compare the Company's operations over time.
Funds flow from operations is an additional GAAP measure
included in the Company's consolidated statements of cash flows.
Funds flow from operations represents net earnings (loss) excluding
non-cash items. Touchstone considers funds flow from operations to
be an important measure of the Company's ability to generate the
funds necessary to finance capital expenditures and repay debt. 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) amount of senior secured debt.
Forward-Looking Statements
Certain information provided in this announcement may constitute
forward-looking statements within the meaning of applicable
securities laws. Forward-looking information in this announcement
may include, but is not limited to, statements relating to the
Company's exploration plans and strategies, including anticipated
drilling, timing, development, tie-in, and production from
exploration wells; the Company's expectation of preserving future
cash flows and future demand for the Company's petroleum products
and economic activity in general; the Company's flexibility to
shut-in non-economic wells; uncertainty regarding the spread of
COVID-19 and the impact it will have on the Company's operations
and future petroleum pricing; and the sufficiency of resources and
available financing to fund future capital expenditures and
maintain financial liquidity. 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 2019 Annual
Information Form dated March 25, 2020 which has been filed on SEDAR
and can be accessed at www.sedar.com. The forward-looking
statements contained in this announcement are made as of the date
hereof, and except as may be required by applicable securities
laws, the Company assumes no obligation to update publicly or
revise any forward-looking statements made herein or otherwise,
whether as a result of new information, future events or
otherwise.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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