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Https://www.malcysblog.com/2024/12/oil-price-touchstone-sintana-and-finally/

Well this announcement bookends a remarkably busy week for TXP in which they have given guidance for 2025, had two major meetings on the Capital Markets Day, a major TV interview with CEO Paul Baay and many shareholder meetings. I had planned to publish my wrap-up note this morning, headlined 8 big ticks in the boxes, it is a summation of the chat I had with Paul and will now appear at a later date.

And that is due to todays announcement with regard to the potential but agreed deal with Shell to buy their Central block asset for $23m in cash. The deal brings an increase in production of some 2,080 boe/d of which is 94% natural gas, a meaningful addition to their current 6,294 boe/d. Almost as importantly, it brings strategic infrastructure for example, the midstream assets of STCBL include an 80 MMcf/d gas processing plant, field natural gas and liquids flowlines, and a gas export pipeline to both the domestic market and the Atlantic LNG facility all that will be a natural fit with the TXP asset base.

But most importantly it is a game-changer for Touchstone with regard to gas pricing in Trinidad, box number 8 ticked in my list and one which I discussed at some length with Paul Baay in our interview, the link is below. In the note, and our chat I look at the change that is occurring for natural gas producers, created by the additional potential route of selling to BP or Shell at Point Fortin, the destination here being the higher priced LNG market rather than existing sales to the government at Point Lisas. Originally selling at c.$2.30, the change to the Atlantic LNG facility could increase that number substantially.

During this week I have been talking about Touchstone it seems like most of the time, and at least one subject has of course been about the Trinity deal falling. Today’s deal is of course is a much more exciting and financially valuable transaction, whilst it adds about the same in b/d it comes with it a great infrastructure package.

Whilst I had expected good performance from TXP earlier this year the god news has arrived, later than I first thought but understandably so and no less welcome, this is a great Christmas gift and in Touchstone with such huge potential upside it looks like a great play for 2025.

No presentation for now. The RNS says, “Touchstone is not able to provide further information to the market on this Acquisition until the transaction is effectively closed, or terminated, as the case may be.”

This time last year when the Trinity acquisition was being planned Touchstone needed to issue shares to fund a $30.1 million deal. This year they plan to fund a $23 million deal with cash. That’s perhaps a rather good demonstration of how the business has improved over the year.

Although the Trinity deal would have resulted in cost saving, this deal seems a better fit too.

Here's Malcy's comment:

Ahead of what is a very busy week for Touchstone, guidance today, Capital Markets Day tomorrow, a CEO interview on Wednesday and shareholder meetings throughout the company has issued updated guidance for 2025. The numbers set the company up for a solid, robust future and I expect more meat on the bones tomorrow.

Net mid-point average production looks like being 7,000 boe/d, up an impressive 19% from most recent guidance with a range of 6,700-7,300boe/d with c.77% of production being natural gas. To achieve this, the preliminary capex budget includes the drilling of four Cascadura development wells, two from pad B in Q1 and two from pad C in Q3 of next year.

The 2025 budget is expected to generate some $22m in funds flow from operations giving a net debt to annual funds flow from operations ratio of 1.36 times, ‘well within the Company’s internal target of 2.0 times or below’. This leaves year end net debt ‘comparable with forecast 2024 closing position ‘underscoring our commitment to maintaining financial discipline during a period of growth’ and the management has said that it is working to expand its debt facilities by $10m during Q1 FY25F to support these investment plans.

Having recently visited Cascadura and been able to see at first hand the extensive infrastructure installed I know that it will be possible to unlock the fields potential and the ‘drill-to-fill’ strategy that will enable the company to capitalise on the existing process capacity at the asset. Accordingly with more to come this week I remain excited by the prospects at touchstone.

https://www.malcysblog.com/2024/12/oil-price-touchstone-and-finally-4/

Here's the the full Share Cast report on Canaccord Genuity's target cut: https://www.sharecast.com/news/broker-recommendations/canaccord-genuity-cuts-target-price-on-touchstone-exploration--18287359.html

I find it rather difficult to reconcile this morning's announcement with this interview from just over a month ago: https://www.proactiveinvestors.co.uk/companies/news/1059916/touchstone-ceo-on-new-developments-at-cascadura-c-field-1059916.html

Hopefully, a proper explanation will be provided tomorrow.

The encouraging things are: (i) 2025's production is forecast to be higher than 2024's; (ii) 2025's income is forecast to be higher than 2024's; (iii) production from the third and fourth wells doesn't show up in the average production figures for the year, so the exit rate for 2025 (which is obviously 12 months away) may well be higher than 7,300 bopd; and (iv) maybe, after a year in which targets fell short of expectations, a more cautious approach is being adopted for 2025 on the basis that's it better to under promises and over deliver than the other way around.

Morgan Stanley and HSBC are forecasting that Brent Oil will sell for $70 in 2025, which knocks $320,000 off the funds flow forecast; whereas Goldman Sachs is forecasting $76, which adds $1.6 million: https://boereport.com/2024/12/06/goldman-sachs-maintains-2025-brent-oil-price-forecast-at-76-per-barrel/

Look at the 2025 Guidance Summary chart dbh and you’ll see the average production forecast for 2025: 6,700 to 7,300bopd.

Since it’s the average for the year, production commencing in the final quarter (ie, from the third and fourth wells) is unlikely to make much of a contribution.

The first and second wells, which were due to be drilled this year, should increase production, but they will be offset by any natural declines in existing production.

Hopefully, Touchstone are making cautious forecasts on the basis that it’s better to under promise and over deliver than the other way around.

You’ve misunderstood it dbh. The average production forecast from all production in 2025 is 6,700 to 7,300 bopd. However, since the third and fourth wells won’t produce until the fourth quarter, exit production for the year will hopefully be higher.

Tuesday’s presentation was scheduled months ago (at least September).

The closed period rules don’t apply to executive purchase schemes: look at the last 12 months of RNSs and you’ll see that purchases are announced in the early days of each month.

According to Twitter, the presentation’s at 2pm next Tuesday. There’s a link to book here: https://x.com/EngageInvestor/status/1863529841955426375

There’s a post on ADVFN stating that pictures showing the main piece of the bridge in place have been posted on Discord.

My initial thoughts here, to be added to after talking to the company are of significant pleasure as these results are potentially a good deal better than I or the market might have hoped for particularly at Cascadura-3ST1. The whole play is massively underwritten by this result as in the CEO comments above, as they not only extend into the Rio Clara block but also unlock a new play with both oil and natural gas on the eastern side of Fault C.

As I have commented recently, the TXP oil portfolio is incredibly important as it generates much bigger revenues and again as above ‘strong cash flow generating capabilities. These flow rates in both hydrocarbons are exceptionally good and I look forward to writing more after speaking to the company.

https://www.malcysblog.com/2024/11/flash-blog-kistos-arrow-touchstone-jadestone-ntog-tower/

Today’s comment from Malcy:

It seems like that it was only yesterday as we drove through the country of Trinidad, our team leader telling us that we were about to physically cross over the Rio Claro licence. I say this to be able to put into perspective how important this news is, as we were driving through the Cascadura field at the time and knowing now that this valuable piece of real estate was genuinely adjacent is very important.

The geological thinking is that the likelihood is that the Cascadura structure extends into the Rio Clara block. It marks ‘a vital extension of Touchstone’s exploration and development focus within the Herrera Formation fairway. Proprietary seismic data highlights several promising Herrera Formation anomalies, which extend from the Ortoire block into the Rio Claro Licence acreage, situated in structurally favorable up-dip positions’.

Touchstone’s Cascadura-3ST1 discovery within the Ortoire block appears to extend into the Rio Claro block. Furthermore, seismic interpretation reveals that both the Royston anomaly in the Herrera Formation and the Kraken anomaly in the Cretaceous Formation extend into the Rio Claro Licence acreage.

Notably, Touchstone’s Cascadura-3ST1 discovery within the Ortoire block appears to extend into the Rio Claro block. Furthermore, seismic interpretation reveals that both the Royston anomaly in the Herrera Formation and the Kraken anomaly in the Cretaceous Formation extend into the Rio Claro Licence acreage.

The company has also said that with existing sales infrastructure at Ortoire and Balata East, any future discoveries of liquid hydrocarbons or natural gas within the Rio Claro block can be ‘seamlessly integrated into production’ which we could see as we stood in the field next to Rio Claro. Indeed it actually gets better as at present gas sales are mandated into the domestic market, this could change as sales from Rio Claro might be able to be sold into the more lucrative LNG market.

So, I’m very happy that things are going so well for Touchstone who now have a 6 year exploration term and a possible 19 year extension on an approved commercial discovery. We have identified its proximity to existing production, the ability to ‘seamlessly integrate into production’ on success and its added value of its gas on production so what’s not to like?

As I have recently commented a couple of times I see a bright future for Touchstone and now that its canny investments are beginning, slightly belatedly, to bear fruit I think that investment here will be a wise decision.

https://www.malcysblog.com/2024/11/oil-price-touchstone-and-finally-3/

Here's what Malcy wrote about Touchstone in March 2024 (he's not always right, but many shareholders will be very happy if he's just half right):

I have published the reserves report in full below as it contains plenty of exciting information now that Touchstone is making such good progress at Cascadura. The key takeaways are that the figures reflect ‘the initial transition of the Cascadura production base into the PDP reserves category as the company brought onstream the first two Cascadura wells, Cascadura-1ST1 and Cascadura Deep-1′ which confirm the numbers as being very good indeed.

Relative to year-end 2022 and after 2023 production, TXP increased gross PDP reserves by 180 percent to 13,547 Mboe, decreased gross 1P reserves by 12 percent to 33,696 Mboe, decreased gross 2P reserves by 10 percent to 67,379 Mboe and decreased gross 3P reserves by 10 percent to 108,859 Mboe in 2023.

These reductions in reserves were primarily as the company removed 8 PUD locations on what they call ‘non-core’ legacy blocks and at Royston, plus some liquids revisions and of course recent production. However it is important to note that PDP reserves replaced 2023 annual production by 699 percent, reflecting Cascadura-1ST1 and Cascadura Deep-1 natural gas and associated liquids volumes that were brought online in 2023.

Touchstone is growing fast as the reserves numbers show and what is more now has the flexibility to decide its own fate by picking out the best possible projects in its exciting portfolio of exploration and development opportunities. This is no way reflected in the share price where my Target Price is still 200p.

https://www.malcysblog.com/2024/03/oil-price-touchstone-eco-molecular-coro-and-finally/

From Malcy:

This is exceptionally good news for Touchstone and its shareholders who have waited patiently for this next significant move at Cascadura which has now been connected and is producing. TXP will do production tests on Cascadura-2ST1 and Cascadura-3ST1 to identify potential capacity and refine production and reservoir models.

Additionally, a new natural gas separator has been installed and brought online, expanding the plant’s gross natural gas processing capacity to approximately 140 million cubic feet per day which will mean considerable revenue and as CEO Paul Baay says, ‘a significant milestone’.

A recent visit to Trinidad enabled a group of analysts a chance to see not only the upgraded facilities but the uniquely strong team of people on site making things happen. Expect a few updates as the facility, including the new gas separator which will deliver the increased production after testing in the next few days.

I expect that as the Touchstone management carefully deliver Cascadura to its peak performance the share price value will start to go to that which I had previously predicted at the beginning of this year. As further news comes to the market I plan to add to the notes I wrote about on my recent visit, this is a very positive story indeed.

https://www.malcysblog.com/2024/11/oil-price-savannah-touchstone-challenger/

Yesterday was a wipe-up day catching up with members of the Touchstone team before everybody scattered homeward bound today. It has been a really good week and whilst my reports have been brief due to time constraints I will enjoy writing more about the company in coming weeks.

Touchstone has very good operations down here, both in gas which it is known for but also in oil for which it is less famed but which is a key part of the equation for the company.

Having met pretty much everyone in the team over here I can say that they are fantastic all the way through and up to the senior team both here and from Calgary. Overall they make a very good team, work together and cover all the bases with diligence, hard work and expertise. It’s been a great week and there is much good to come from Touchstone.

https://www.malcysblog.com/2024/10/trinidad-flash-blog-touchstone-petro-matad-prospex/

Yesterday’s team building exercise was extremely valuable and almost all of us from the company and guests took part. It certainly did prove what has become obvious during the visit that the management team both from Calgary and in-country are tight and sing from the same song book.

Dinner was the opportunity to catch and question all the other participants back at the hotel, a great opportunity to pick up and share information gained on the trip so far. I have been very impressed so far and that opinion seems to have been endorsed by the others, things are definitely looking up at TXP.

https://www.malcysblog.com/2024/10/trinidad-flash-blog-touchstone-reabold/

A very long day yesterday as the groups traversed the island seeing Touchstone’s operations in different areas. Fully suited and booted we had the usual HSE briefings including the warnings about snakes…

Into the boardroom for a presentation by several board meetings followed by the field tours which include Cascadura pads where the wells could be observed and the pads having space for further drilling. Finally we saw the Coho operation and where there is also scope for more wells including an exploration well. Dinner was taken on a boat in a mangrove swamp watching the majestic red Ibis’ flying home to roost.

https://www.malcysblog.com/2024/10/trinidad-flash-blog-touchstone-hunting-petro-matad/

Touchstone has announced that it has released a new updated presentation ahead of the analysts’ visit to Trinidad which started yesterday. Over the next week the company will show the analysts field operations, company local headquarters and get a chance to meet all executive board and local management as well as Ministry officials and politicians.

https://www.malcysblog.com/2024/10/malcys-flash-trinidad-blogtouchstone-deltic-seascape-sound/

Https://www.touchstoneexploration.com/content/uploads/2024/10/Corporate-Presentation-October-18.pdf