Finncap4 Dec 2020 08:24
Touchstone’s Ortoire block exploration programme onshore Trinidad has again exceeded expectations with its Cascadura Deep-1 well delivering another major gas discovery, its fourth in a row after Coho, Cascadura and Chinook. Further testing is required to determine the ultimate potential of the discovery, but this well again confirms the accuracy of Touchstone’s geological model and extends the runway for future production growth from this prolific acreage. Our risked-NAV and price target rise 58% to 188p/sh as a result of this discovery and a higher Royston pre- drill resource assumption.
?100% exploration success rate maintained. Touchstone maintains its 100% exploration success record on the Ortoire block in Trinidad with its fourth straight discovery, Cascadura Deep. The Cascadura Deep-1 well did not reached its planned depth due to high pressure gas zones, but still encountered a massive 2,100 ft of sands. Wireline logs indicate 1,315 net ft of natural gas pay in four separate Herrera thrust sheets down to total depth, two of which were previously untested.
?Touchstone’s best well yet. According to management, this is the best well drilled so far on the Ortoire block, confirming that the Cascadura field has numerous targets within each of the thrust sheets. More drilling horsepower is required to evaluate the deeper zones, but the well has demonstrated that the system is hydrocarbon charged. It also expands the known boundaries of the sands tested in the Cascadura-1ST1 well, which should have positive implications for resource estimates.
?Focus shifts to testing. The focus now shifts back to production testing, with Chinook-1 expected later this month before further testing on Cascadura Deep-1 to determine the potential of the well, which is expected in Q1 2021. Touchstone will also now design a future development and exploration drilling program for the Ortoire block while it completes and ties in the existing Coho-1 and Cascadura-1ST1 wells, setting it up for rapid production growth in 2021 and beyond.
?Risked-NAV raised to 188p/sh. We have scrubbed our Touchstone model, updating our NAV to include the Cascadura Deep discovery and a larger prospect size for Royston. Our risked-NAV and price target rise by 69p or 58% as a result, to 188p/sh. Cascadura Deep accounts for 40p of that move, with our forecasts now assuming a 49 mmboe discovery. Our higher Royston resource estimate adds another 26p/sh to risked-NAV. We still do not include anything for the wider prospectivity on the Ortoire block, where an additional 21 prospects have already been identified. As details of these are revealed, they should drive further upside to our valuation.
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