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(Alliance News) - Touchstone Exploration Inc on Thursday said a large impairment charge, triggered by the impact of materially lower forward crude oil price forecasts, led to a sharply widened quarterly loss, but the company remains confident in its long-term strategy amidst a volatile crude oil market.
For the three months to March-end, the Trinidad-focused oil explorer posted a net loss of USD9.2 million compared to a net loss of USD185,000 reported in the prior year quarter. Non-cash impairments charges of USD19.2 million were recognised, offset by a deferred income tax recovery of USD10.1 million.
Crude oil sales for the quarter averaged 1,589 barrels per day, down from 1,690 barrels in the fourth quarter of 2019 and 2,121 barrels in the first quarter of 2019. Realised crude oil prices averaged USD46.10 per barrel, decreasing 20% from both USD57.38 per barrel in the prior quarter and USD57.71 per barrel in the first quarter of 2019.
"Our mature field production has declined as a result of our increased focus of capital directed towards Ortoire exploration activities since January 2019," the company explained.
"A 44% decline in realised pricing from February to March 2020 led us to immediately restrict certain field operations and discretionary operational spending," Touchstone added.
The company generated USD1.3 million in funds flow from operations, a decrease of 48% relative to USD2.4 million in the first quarter of 2019. The decline was primarily attributable to lower production and significantly lower crude oil prices received in March.
Touchstone is currently reviewing the option of drilling a second deeper exploration well on the Cascadura field ahead of the previously planned Royston location in order to mitigate possible delays in the construction of the access road and fulfil its drilling obligations under the Ortoire licence.
President & Chief Executive Officer Paul Baay said: "With clear exploration targets, we remain confident about the long-term strategy of the company, especially given our increasing focus on natural gas, and the increased stability that this will give us from a financial perspective amidst a volatile crude oil market".
In response to the Covid-19 pandemic, the company has made numerous adjustments to its operating practices to provide ongoing safety and business continuity. Aside from delaying timing of its capital projects, the company has had no material operational impacts from the pandemic at present.
Shares in Touchstone were up 2.9% early Friday at 34.97 pence each in London.
By Tapan Panchal; tapanpanchal@alliancenews.com
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