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Investing in a business at a discount to its intrinsic value is a bet that the factors responsible for the discount will eventually reverse. While this may seem obvious, it's fundamentally important.
If Royston fails to live up to expectations, it could negatively impact the stock price. As investors have already been selling their shares at a discount, this trend is likely to continue.
We know that Cascadura - will still generate approximately $14 million per quarter, or $64 million per year in cash flow from phase 1.
Currently, the stock is trading at roughly 3 times Cascadura's 2023/2024 cash flow which is a huge discount.
It's unclear whether investors are selling at this multiple to buy into other opportunities at 2 times cash flow.
Regardless, such a move seems illogical, if not outright foolish.
I am sorry but I am getting tired of reading this bs.. They've spent a relatively small amount of money to find half a billion in reserves in the last 4 years and are months away from becoming cashflow positive.
Cascadura is firmly scheduled to start production by June 30th.
We all knew the risks involved, some like Shell are obvious in hindsight, at the end of the day it's just business.
if we didn't know then, we know now.
Overall management has done an amazing job managing all the risks and have executed. Hope you all are having a nice April. If Royston hits the company is probably worth about 700-800 million.
That's about 3 per share. If it doesn't then probably around 500 million or so.
Time is on the side of a good business. I think it eventually gets to 10-20 per share. They are finding a ton of oil in Guyana and we have the same geologic features in Trinidad. Sure its an extremely outside (10%) chance but I think one day soon they turn turn the proverbial drill bit to the left and find billions of dollars in reserves. Can't wait to see the results from the bid round and Royston. April will be an exciting month for Touchstone.
I was using $22.50 to be conservative, in case prices dip, spt was in effect or production isn't quite there. I always rather undershoot than over.
I got the $14m from Paul Baay, I believe he said that's what we should expect per quarter as fcf from Cascadura once they get phase 1 hooked up.
What I think is so cool is that they can put all that capital to work at very attractive rates of return in oil or gas.
21 wells at Royston would be fantastic. Especially when one of them will try to tap the Kraken.
Dunder - what I'm suggesting is that they are Penny rich and pound foolish. Seems stupid to me.
If Touchstone takes all the cashflow from Cascadura and invests it in Royston the back of the envelope math on the conservative side is something like 6k bopdx $22.50x365 x80% =39 million per year. @10k 65 million. Between the two projects they can get to 100-125 million per year in after tax cashflow that they can use for dividends and drilling. I don't understand why anyone would sell their shares at current prices other than they don't understand what they own.
Please someone correct me if I'm wrong but I believe once Cascadura is up, Paul said they would be generating about 14 million per quarter that can be used for capex, dividends etc. Each one of these wells costs around 6-8 million to drill so they can afford to drill almost non stop once Cascadura is connected. The selling price is set, wells have been drilled, its just a matter of connecting to ngc and opening the spigot. Someone please correct me if I'm wrong, it might not be till they get the new Cascadura wells drilled that they expect 14 million. I know that's not including Royston 1, which should generate something in the ballpark of 700k-800k per quarter in cashflow.
Smasher, it's all relative. I think 3 years is a relatively short time to own a business. I think of myself as a business owner. If you had a chance to own a piece of the most successful restaurant in your town, would you care about what others were willing to pay or the fundamental long term future of the business ml?
It sounds like you think like a stock trader, it's a different game. We are all free to play what makes sense to us. I really don't care what Mr. Market thinks, I care about what Touchstone will be doing in the mid to long term.
I knew Coho wasn't going to effect the stock because it's a relatively minor improvement to cashflow compared to Cascadura and wasn't enough to put them nto self funding mode. Your 100% right, there was a lot of uncertainty about whether they would need to raise more money, and turns out they did. Did it destroy some long term value? Depends on what they do with Royston. If they spend 15 million to find 200 million in reserves, are we worse off?
Sorry Smasher, you are asking too much. The company is only required to divulge significantly material information, as investors all we need are quarterly and annual updates. I don't need to know anything unless something had materially changed ie. If the company knows Cascadura won't be producing by end of Q1, they need to let us know. When Royston has flowed and they have data, they will tell us.
I disagree Alligator, like Scott pointed out, the stock is in show me mode. The reason for the discount isn't poor management, it's the fact that Chinook didn't work and the first Royston drill was screwed up even though it still flowed. Coho also took longer than expected and they had to issue stock at an inopportune time even though they said they didn't need to.
Bringing Cascadura on will make sure they can fund all their future drills without anymore raises.
Managements job is to grow reserves at a reasonable cost and get production online.
They are doing that, it's just taking a long time and investors have short attention span.
Hi Scott,
I don't think the 2024 Cascadura drills are set yet, Paul said it would depend on what kind of deal they can get.
The cashflow from oil is far greater than gas, if they can get 600-800 bopd from one well and tell us that there 4-6 more just like it they can drill in the next year, the price will jump even before those wells are drilled. The problem with Touchstone is that everything took way longer than expected, but really things are just getting started now and the company is ready to show us that it was well worth the wait.
I've owned shares for about 10 years now. The last 2 years have had a few misses namely Chinook. Royston 1 was a partial success, to me it was great but the market clearly isn't ready to price anything in for it. That's why the share is down, it was priced for 100% success and the odds of any of these drills working out were like 30%. I like those odds, spend 6-8 million, with a 30% chance to find hundreds of millions worth of reserves. And you also get potential grand slam upside from Kraken. I am a happy shareholder. Hope that answers your question.
Talk to me in two months when we have the well results and Cascadura is online. Stop shaking the trees, yes the raise wasn't ideal but they felt it was necessary to get Royston drilled sooner.
Why spend time on a board of a share you don't like? I thought trolls lived under bridges
Why would you do a rns to say everything is on track? .They've never done that in the past and under no circumstances are required to do so. Why would you as an owner want them to spend any extra time or resources on unnecessary fillings..