Press

Touchstone Exploration Third Quarter Results

Posted by OilVoice Press - OilVoice

16-Nov-2018


Touchstone Exploration Inc. (“Touchstone” or the “Company”) (TSX / LSE: TXP) announces its financial and operating results for the three and nine months ended September 30, 2018. Selected financial and operational information is outlined below and should be read in conjunction with Touchstone's September 30, 2018 unaudited interim consolidated financial statements and the related Management's discussion and analysis, both of which will be available under the Company's profile on SEDAR (www.sedar.com) and the Company's website (www.touchstoneexploration.com). Unless otherwise stated, tabular amounts herein are in thousands of Canadian dollars, and amounts in text are rounded to thousands of Canadian dollars.    

Third Quarter Highlights

  • Achieved average crude oil production of 1,758 barrels per day (“bbls/d”), representing an increase of 22% from the third quarter of 2017.
  • Continued our 2018 development program with total drilling and development capital expenditures of $4,543,000, drilling three wells and performing 12 well recompletions.
  • Realized $12,890,000 in petroleum sales, a 63% increase from the prior year third quarter.
  • Generated an operating netback of $37.13 per barrel, a 52% increase relative to the $24.46 per barrel generated in the prior year comparative quarter.
  • Delivered funds flow from operations of $3,260,000 ($0.03 per basic share) compared to $1,387,000 ($0.01 per basic share) in the third quarter of 2017.
  • Recognized net earnings of $267,000 compared to a net loss of $1,203,000 reported in the equivalent quarter of 2017.
  • Exited the quarter with net debt of $12,975,000, representing 1.0 times net debt to third quarter 2018 annualized funds flow from operations.

Financial and Operating Results Summary

 

 

Three months ended September 30,

 

% change

 

      Nine months ended September 30,

 

% change

 

 

 

 

2018

 

2017

 

2018

 

2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average daily oil production(bbls/d)

 

1,758

 

1,437

 

22

 

1,674

 

1,351

 

24

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net wells drilled

 

3

 

1

 

200

 

8

 

4

 

100

 

 

Net wells recompleted

 

12

 

3

 

300

 

21

 

13

 

62

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Brent benchmark price(US$/bbl)

 

75.10

 

52.10

 

44

 

72.15

 

51.75

 

39

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating netback(1) ($/bbl)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Realized sales price

 

79.71

 

59.64

 

34

 

78.32

 

61.58

 

27

 

 

Royalties

 

(20.52)

 

(14.59)

 

41

 

(21.46)

 

(17.07)

 

26

 

 

Operating expenses

 

(22.06)

 

(20.59)

 

7

 

(20.46)

 

(21.81)

 

(6)

 

 

 

 

37.13

 

24.46

 

52

 

36.40

 

22.70

 

60

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial ($000's except share and per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Petroleum sales

 

12,890

 

7,885

 

63

 

35,782

 

22,712

 

58

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Funds flow from operations

 

3,260

 

1,387

 

135

 

9,119

 

2,218

 

311

 

 

Per share – basic(1)

 

0.03

 

0.01

 

200

 

0.07

 

0.02

 

250

 

 

Per share – diluted(1)

 

0.02

 

0.01

 

100

 

0.07

 

0.02

 

250

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings (loss)

 

267

 

(1,203)

 

n/a

 

(300)

 

(4,600)

 

n/a

 

 

Per share – basic and diluted

 

0.00

 

(0.01)

 

n/a

 

(0.00)

 

(0.05)

 

n/a

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exploration

 

578

 

202

 

186

 

1,240

 

910

 

36

 

 

Development

 

   4,543

 

   1,889

 

   140

 

   12,684

 

   7,375

 

72

 

 

 

 

   5,121

 

   2,091

 

   145

 

   13,924

 

   8,285

 

68

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net debt(1) – end of period

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Working capital surplus

 

 

 

 

 

 

 

   (2,025)

 

   (402)

 

 

 

 

Principal long-term balance of loan

 

 

 

 

 

 

 

   15,000

 

   15,000

 

 

 

 

 

 

 

 

 

 

 

 

   12,975

 

   14,598

 

(11)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding(000's)

 

 

 

 

 

 

 

 

 

 

 

Basic

 

129,021

 

103,137

 

25

 

129,021

 

90,243

 

43

 

 

Diluted

 

130,728

 

103,137

 

27

 

129,021

 

90,243

 

43

 

 

Outstanding shares – end of period (000's)

 

 

 

 

 

129,021

 

103,137

 

        25

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note:

  1. See “Advisories: Non-GAAP Measures”.

 

Operating Results

In the third quarter we continued with our expanded 2018 drilling campaign by successfully drilling three wells, bringing the total to eight development wells drilled through September 30, 2018. Capital expenditures totaled $5,121,000, of which $4,543,000 related to drilling and development activities. We recompleted 12 wells in the quarter, with an aggregate 21 wells recompleted through September 30, 2018.

Third quarter 2018 crude oil production averaged 1,758 bbls/d, a 22% increase relative to the 1,437 bbls/d produced in the third quarter of 2017. Third quarter average daily production increased 2% from the second quarter of 2018, with growth slowed by weather based electrical supply disruptions and higher than normal crude oil inventory held at September 30, 2018.

The eight wells drilled in 2018 combined to add approximately 249 bbls/d of incremental production in the third quarter, despite two new wells beginning to produce in mid-August and one well initiating production at the end of September. The four wells drilled in 2017 continued to perform above internal expectations, contributing approximately 351 bbls/d of production in the quarter.

Financial Results

Our third quarter operating netback was $6,004,000 ($37.13 per barrel), an improvement of 86% compared to $3,234,000 ($24.46 per barrel) recorded in the third quarter of 2017. Higher realized prices and production resulted in a $5,005,000 increase in petroleum sales relative to the third quarter of 2017. This was offset by higher royalties of $1,390,000 from increased production and the sliding scale effect of increased commodity pricing to royalty rates. Operating costs increased by $845,000 from the prior year comparative quarter based on variable costs from increased production and increased well site security and monitoring costs.

We generated funds flow from operations of $3,260,000 in the third quarter of 2018 versus $1,387,000 in the equivalent quarter of 2017. The increase in funds flow was largely attributed to stronger realized crude oil pricing and operating netback combined with a 22% increase in production. As a result, we generated net earnings of $267,000 in the quarter, compared to a net loss of $1,203,000 reported in the prior year comparative quarter.

We maintained stable financial liquidity, exiting the quarter with positive working capital of $2,025,000 and a $15,000,000 principal term loan balance. Our September 30, 2018 net debt of $12,975,000 represented net debt to trailing twelve-month funds flow from operations of 1.3 times and net debt to third quarter 2018 annualized funds flow from operation of 1.0 times.

Operations

Touchstone delivered October 2018 crude oil average sales volumes of 1,964 bbls/d at an average realized price of $89.13 (US$68.48) per barrel. After achieving field estimated peak production of 2,088 bbls/d buoyed by flush production from the new WD-8 completed in early October, production volumes decreased as the wells were converted from flowing to pumping production.

We spud the ninth well of our 2018 drilling program on November 1, 2018, and we expect the well to reach total depth within the next two days. The well is located on our WD-8 property and will be followed by the drilling of two additional wells in WD-8 from a common surface location. The Company has contracted a second third party rig to drill an additional WD-4 location, with spudding expected by the end of the month. Touchstone anticipates that the four wells will be drilled and completed by the end of the year.

We previously planned on utilizing a separate rig to drill two shallow work commitment wells on our South Palo Seco property prior to the end of the year. However, Petrotrin identified internal surface lease issues with the two previously approved locations. This will result in the Company drilling a total of 12 wells by year-end, with the two Palo Seco wells likely being pushed into the 2019 drilling program.

The Petroleum Company of Trinidad and Tobago Limited (“Petrotrin”) Restructuring

On August 28, 2018, Petrotrin announced its intention to discontinue refining operations and focus on upstream production and exploration activities. This restructuring is expected to be completed prior to the end of the year. The Company subleases various petroleum production and exploration rights from Petrotrin and the national oil company is currently the Company's sole purchaser of crude oil.

The Company has been officially informed that Petrotrin will continue to meet its contractual operations and commitments throughout the transition process. Petrotrin has indicated that it will be meeting with all pertinent stakeholders following completion of the restructuring to discuss future changes and opportunities.

We do not expect the restructuring to impact our current crude oil production and marketing arrangements and future operations. We believe our crude oil will continue to be purchased by Petrotrin and consolidated with all Trinidad production for export. Touchstone is looking forward to working with the restructured national oil company to grow crude oil production in Trinidad.



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