HC TXP blog comment19 Aug 2020 02:29
Hydra Capital blog comment...
http://hydracapital.ca/hydra-blog.html
..........With gas on my mind, I come back to Touchstone Exploration (TXP.TO, last at $1.22), which is being hailed as the largest onshore discovery in the history of Trinidad in local media. I’m not sure if that’s technically true, as I thought the nearby Carapal Ridge field from the early 2000's was bigger, but I’m splitting hairs at this point. It’s a big discovery already based on Cascadura alone, and with Chinook drilling underway (it started drilling on August 13th) it’s going to be an interesting 4 to 6 weeks. Chinook-1 is supposed to take 38 days to drill and is targeting a fault block adjacent to Cascadura-1. CEO Paul Baay has referred to Chinook as a “broader” structure, which to me would indicate that I should expect less vertical column height but perhaps larger areal extent. The well is being drilled up-structure from an old Shell well from the 1950’s much like the old Shell well that set up the Cascadura-1 location, so that mitigates some risk, but hey, it’s still exploration. Immediately after Chinook, Cascadura Deep will be drilled from the same surface location as Cascadura-1, targeting a deeper untested thrust sheet in the same structure. The high-impact Royston gas target is in TXP’s sights in 2021 when the roads dry out, and that’s a pretty exciting looking target. In the near-term Chinook is what matters to most, as does the Cascadura Deep well and the outcome of gas sales agreement negotiations for the anticipated Cascadura gas volumes. I’m sticking with my potential value matrix from back in May on this one and so far it’s served me well in terms of assessing what I think my risk-reward looks like. TXP is tough because if they miss Chinook, you just know the stock is going to get hit, but it’s arguably not yet priced for Cascadura so what’s a guy to do? Decisions, decisions..........
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