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Bully, the BB is playing up. If you click reply my other post should reappear!
Trek
Worth reading the whole note. It’s free on the website. Sorry I get it emailed to me. IMO FinnCap recognise it’s impossible to value upside here. Another extract.....
“While Touchstone’s cash flow is set for an inflection point as Coho and Cascadura volumes kick-in this year, exploration is still a key driver for the shares.
Successful testing of the gas zones at Chinook and Cascadura Deep in the coming weeks would allow us to fully de-risk these discoveries, which all else being equal would raise our risked-NAV by 13% to 215p/sh.
Royston is next up to be drilled in Q2. This was always seen as the largest prospect within the current exploration programme and results so far have only raised management’s expectations and confidence in this target.
Pre-drill estimates suggest Royston could contain 0.5 - 1.0 tcf (83-167 mmboe) of gas. We assume 430 bcf (72 mmboe) and apply a 50% Geological CoS to get to our current 29p/sh risked-NPV. Success at Royston could boost our risked-NAV by another 33p/sh to ~250p/sh.
Beyond the current programme, a second stage of exploration will target some of the additional 21 prospects identified on the Ortoire block, so there is plenty of running room left. We do not include anything within our NAV for these prospects, while initial deeper testing at Chinook has highlighted additional prospectivity. As details emerge, they should drive further upside to valuation, especially in light of the 100% exploration drilling success rate delivered to date on the Ortoire block.
Moreover, with a strong cash position following November’s US$30m raise and a cash flow inflection point expected this year, Touchstone is lining up a third drilling rig to accelerate the pace of exploration and development drilling from late 2021. It feels like we are constantly playing catch-up with this management team that is pressing ahead rapidly with its extensive Ortoire block opportunity set.”
Trek
Pedal to the metal
Aside from a minor delay to its gas testing programme Touchstone is keeping its Ortoire exploration and development plans moving along rapidly. Q2 will see several important catalysts – oil and gas testing results from Chinook and Cascadura Deep, the start-up of production at Coho and drilling at Royston, its largest exploration prospect – which could add another 30% to our risked-NAV. A third rig will also be employed, allowing the pace of exploration and development drilling to accelerate from late 2021. There is a lot still to come from TXP.
?Gas testing delayed, but new oil zones encountered. Testing of the gas bearing zones at Chinook and Cascadura Deep has incurred third-party related delays, but all required equipment is expected on site within the next ten days. In the interim, TXP tested two low resistivity zones in the Chinook-1 well, with both zones encountering potential upside in the form of light sweet oil. The first in the lower sub-thrust sheet recovered significant water, deeming it uneconomic, but the presence of light oil proves the concept of hydrocarbons in this sheet and future development locations will be more optimally located. The second zone that encountered oil in the Herrera formation is being prepared for an extended oil production test.
?Development scope expanding. Coho-1 tie-in operations have started with initial gas production expected in Q2 2021. Regulatory applications are also in progress for the tie-in of Cascadura and any potential Chinook production before year-end. We currently assume Cascadura starts up in Q4, but do not include any Chinook volumes in our estimates. Touchstone is also applying for additional development locations at Cascadura and Chinook, suggesting further upside to these developments.
?Next exploration wave in sight. The Royston-1 exploration well remains on track to start drilling in Q2 2021, the last and largest prospect in the initial Ortoire exploration phase. Touchstone is looking to contract a third drilling rig for at least three years to drill deep targets at Royston, Cascadura and Chinook. A further 21 prospects have already been identified on the Ortoire block, so there is plenty of running room left.
?Estimate changes. We have raised our Brent oil price assumption to US$55/bbl in 2021 and 2022 and trimmed our Coho volumes in 2021, lowering group production by 4%. Nevertheless, the higher oil price assumptions drive a 3% increase in 2021 and 2022 revenues and a 5-7% increase in cash flow. Our risked-NAV and price target only increase slightly, however, to 191p/sh due to the additional burden of SPT charged at 18% beyond 2022 at our higher oil price assumptions.
Trek