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Malcom Shaw comment.

https://www.hydracapital.ca/hydra-blog/

Touchstone Taps the Market for US$30 Million

By Malcolm Shaw November 3, 2020

(Disclosure: The following represents my opinions only. I am not receiving any compensation for writing this article, nor does Hydra Capital have any business relationship with companies mentioned in this post. I am long TXP.TO)

A very quick note today, but I did want to point out that Touchstone Energy (TXP.TO, last at $1.76) tapped the market overnight by issuing 24.3 million shares for ~US$30 million at 95 pence / C$1.64 per share. For those who have forgotten Rule #1 of the issuer side of the capital markets, it is “always take the money” (i.e., holding out for slightly better pricing for a financing that represents minor overall dilution is a mug’s game). At times like these, armchair quarterbacks abound, with everyone having their own opinion about pricing, offering size, and relative dilution, but none of it is relevant today. What is relevant to me is that TXP, which barely had two dimes to rub together just a year ago, is now “properly” cashed up, insulating it from the financial risks associated with drilling high-pressure wells (it would really suck to get into a “rodeo” on a well without adequate cash reserves to ride it out) and answering the market’s question of “when are they going to raise”. This much cash should seal the deal for a two-rig program in 2021 assuming that TXP can find another rig that it likes. It also gives TXP all the cash it needs for topside equipment to get gas out of the ground and to the edge of its lease at Cascadura-Chinook, at which point NGC will take it to market.

With a well drilling (Cascadura Deep), a well test pending (Chinook), a gas sales contract around the corner, and first gas from Coho in the near-term, TXP has no lack of things to keep the market interested. BHP’s recent (apparently) dry hole at Broadside in the T&T offshore only serves to underscore what a unique situation TXP finds itself in at Ortoire. It’s very are for a company to find gas fields like these so close to a major pipeline with significant free capacity. Never mind the fact that the pipeline serves industrial customers who are literally starved for gas.

All in all, it’s steady as she goes with a boatload full of cash. Onwards and upwards.

Casca Deep success.......end Q4 2020 at around 150p.

Chinook/Casca Deep testing success......end Q1 2021 at around 225p

Royston success........end Q2 2021 around 275p

Royston flow test success........end Q3 2021 around 315p.

All on line and flowing and cash piling in..........end Q4 2021 around 400p

News.

Alkaid approval.

https://www.investegate.co.uk/pantheon-resources--panr-/rns/formal-approval-of-the-alkaid-unit/202011031223441196E/

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Surface facilities maybe for the liquids. NGC wants the gas............ Coho is just gas but Casca and Chinook is gas and condensate. So the surface facilities maybe the liquids side...........NGC are paying for all the gas related, but TXP have to put in place the LTX to extract the liquids to sell separately ?

Will be good to get the last top up out of the way. Then its sit back and wait for the cash flow to pile in.

https://www.investegate.co.uk/touchstone-explrtn---txp-/rns/proposed-private-placement-raising-up-to-us-30m/202011021644590043E/

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New interview with Paul, following Casc Deep spud.

https://bit.ly/3mMhKNY

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This was the Cormack comment when they done their initiation of coverage and 3.25 CAD target price. This has, as stated, now been upgraded to 3.75 CAD following the initial Chinook news. More for Chinook will be added after flow test results I am sure.

The interesting thing is, Chinook they rate at 200 BCF.

Cascadura Deep they say is potentially 500 BCF plus liquids on its own.

So we now have, on best estimates.

Cascadura--------395 BCF (GLJ best estimate)

Chinook----------200 BCF (estimate pre-flow test - GLJ report)

Cascadura Deep---500 BCF (estimate pre-drill, pre discovery, pre-flow test)

Casca Deeo comes in and its potential over 1TCF recoverable gas for Christmas, with the big Royston drill in Q2 2021, and 21 more targets to drill after that.

Cormark Securities initiated coverage of Touchstone Exploration Inc. (TXP-T) with a “buy” rating and $3.25 target.

– Buy, 3.25 Target,

Garett Ursu: We are initiating research coverage on Touchstone Exploration. Details: As detailed in our “Emerging Ideas” report from May 29th, Touchstone Exploration’s Ortoire block onshore Trinidad has already provided investors with impressive stock market gains and behind-pipe production that will increase corporate volumes exponentially over the next 3-12 months.

Near-term activity should also continue to unlock material untapped resources with the Chinook-1 well (200 Bcf prospect) currently drilling, to be followed by the Cascadura Deep well (500 Bcf plus liquids) prior to year-end.

An additional 21 exploration prospects have the potential to individually move the stock and boost future volumes. Based on our current 25 MBOE/d forecast and the attractive operating regime in Trinidad for natural gas (supply/demand, pricing, tax, regulatory, counterparty risk, economics, etc.) we believe Touchstone could generate ~$65 MM of free cash flow in 2022. With results expected shortly from the high-impact Chinook-1 exploration well, we believe Touchstone is a unique and timely E&P investment opportunity. Recommendation: We are initiating coverage on Touchstone Exploration with a Buy rating and C$3.25 target (3.0x 2022 EV/EBITDA). Not only is the company’s exploration upside not being valued in the market, but the company’s past success is also being heavily discounted given potential volume growth and free cash flow through 2022

I see Cormark increased their Target Price for TXP up to 3.75 C$ on 15th October.

https://www.marketbeat.com/stocks/TSE/TXP/price-target/

3.75 CAD = 217 pence.

I expect that to go higher on Chinook testing news, and of course, any success at Cascadura Deep.

https://www.forbes.com/sites/arthurberman/2020/10/31/shale-plays-fail-to-deliver-look-to-alaska/?sh=1049946746af

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Good news.......first batch of the Sinopharm "inactivated" vaccine will be delivered to Morocco in December, so vaccination starts before year end.

Looks like perhaps April 2021 lifting of all restrictions and PRD on for a spud in Q2.

Sinopharm vaccine has been given to millions worldwide already, with good results and no serious side effects. Being an "inactivated" vaccine, its old technology, safe and proven.

https://pledgetimes.com/covid-19-morocco-will-take-possession-of-10-million-doses-of-chinese-vaccine-sinopharm-in-december/

by Bhavi Mandalia October 30, 2020 in Business

A first order of the vaccine manufactured by the Chinese laboratory Sinopharm will be delivered to Morocco during the month of December 2020, reveals the Moroccan press. Thanks to this first batch, the kingdom could start a first vaccination campaign at the end of the year. This vaccine is considered one of the most advanced of the 200 vaccine r..........................

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Cenkos update on DGOC in the link below, PDF file:

https://ufile.io/5ymjdkgb

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SimonT, I think he means a rig capable of doing 12,000 feet.

Royston primary target was just the 7a.

Now they will go into the 7bc around 10,000 feet. They run out of rig at Chinook (meaning they wanted to go deeper but could not as the rig limited them) - so with a rig capable of 12,000 feet they can go to 10,600 and beyond at Royston.......

Interview with the CEO.

https://tinyurl.com/y62qwcfb

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Something else that may have been missed but could be exciting.

Cascadura Deep is targeting the 7a formation, but will poke its nose into the deeper 7bc formation.

If you notice today, the news is the well next year (Royston) - which was targeting the 7a formation as Primary - will now be drilled to 10,600 feet and poke its nose into the 7bc.

Chinook had 68 feet net pay in the 7bc subthrust.

If you add 2 and 2.

Chinook hit net pay in the deep 7bc subthrust (as Paul said, thanks to the crew for drilling deeper and running out of drill, else they would not have known)

Casca-Deep will also go down in the 7bc subthrust now.

NOW - Royston also will go past the 7a target and into the 7bc subthrust (todays news of the Royston drill going to 10,600 feet)

Are they indeed suggesting the whole 7bc subtrhust might be in connection from Casca to Chinook to Royston ?

Thats what got me interested when they said today Royston will now go to 10,600 feet (which therefore means that they are drilling the primary 7a target of Royston and now includes a secondary 7bc target lower down).

If Casca Deep (lets not forget primary target is 7a) hits pay in the 7bc - then it now opens up the potential for the whole 7bc to be connected and laden with hydrocarbons from Casca to Chinook to Royston and beyond.

Get your toast ready - there is jam !!

So watch that Casca Deep results RNS in December - the primary target is 7a but keep a very keen watch for any net pay in the deeper 7bc.

One assumes that the reduction in the seismic is offset by the drilling of the Royston well.

TXP will have completed the required 4 drills with Casca Deep........they dont have to drill Royston for the license commitment.

So a very clever swap of cash use here......reduce the seismic but drill a 5th well - more benefit for T&T and more benefit for TXP.....win-win and also reduces TXP funding needs.......greatly reducing the chances of any fund raise, provided Coho-1 is online in late Q1.

Done well, we should be getting Casca Deep results then around 18th to 25th Dec.....so a real Christmas bonus is possible.

And Chinook testing to commence around year end, which is well earlier than expected.

Should be having lots of news ahead then.

Late Nov / Early Dec NGC deal and Coho-1 pipeline news.

Mid / Late Dec Casca Deep result

Jan / Feb Chinook testing result, then Casca Deep testing result.

Mar Coho-1 on line producing

Then after that Royston spud.

Perfect.........and dividend raised to 4 cents for Q3 div.

If you want to see how important gas is to Morocco, see the RNS from Chariot today.

https://www.investegate.co.uk/article.aspx?id=202010280700023770D

This is why ConocoPhillips has moved into Morocco, and in the next door license to PRD. Gas is high priority for the country, discover and develop.

And PRD is sat right in the right place at the right time :)

https://www.hartenergy.com/exclusives/analysis-shows-natural-gas-primed-bigger-expected-spike-190541

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https://www.hartenergy.com/exclusives/analysis-shows-natural-gas-primed-bigger-expected-spike-190541

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