Touchstone Exploration Share Discussion Threads

[costax1654x] 14/8/2018 07:41

Probably 15-16 today

[awise355] 14/8/2018 07:35

Whig helped the share price move up initially around 100%

[meep] 14/8/2018 07:29

Capital raise last year was significant I think. Number of shares has gone up from 103m to 129m since the end of June last year. 25% dilution.

[costax1654x] 14/8/2018 07:26

-15-20% down I guess!A very red day!

[awise355] 14/8/2018 07:09

Looks very good net back, in Canadian Dollars. Increased drilling in Q4 have the same affect as Q4 2017, small capital raise expected to pay for it, like last time?

[junky monkey] 13/8/2018 22:02

Toronto down 13% on a volume of 77,900 shares, which is less than 20% of just my holding alone. Looks dramatic, simply isn't. Some small fish wanted out or needed cash today and churned went through the offer book to do it quickly, while most likely missing out on a tremdendous opportunity.

Nothing to see here, keep it moving.

[mount teide] 13/8/2018 20:25

ross - many might suggest that most TXP shareholders (and oil industry investors generally) are probably more interested in where the valuation of the company/sector is likely to be in 2-3 years time or, at least in TXP's case following the initial 2019 programme of Ortoire "low risk" ultra high impact exploration drills !

Following a brutal oil market recession, the recovery of the oil price over the last two years to circa $70 kick started the lower operating cost basins of the oil industry into the early stages of recovery - and over the last 6 months has slowly breathed a little life back into the higher cost basins like the North Sea, where exploration and production development drilling fell off a cliff in 2013 and until this year was showing very few green shoots of recovery.

As shipbroker Clarkson has experienced in the recovery phase of this and the last shipping/commodity market cycle - although the general direction of travel is very much up, it has not stopped the chart being characterised by huge rises and stomach churning falls as short term traders react to every piece of news 'good and bad', most of which from the benefit of hindsight has usually proved to be largely background noise compared to the flood tide of consistently rising annual revenues driving the sector as a result of rising charter rates/commodity pricing.

The one regret i've had since being a shareholder in Clarkson from 1999 - with the exception of a brief period from early 2008 until late 2009 , where i liquidated my entire portfolio some 6 months before the 2008 global financial crisis - was to wait far too long before re-entering the market. Following a ten fold return on Clarkson during the recovery stage of the last shipping/commodity cycle between 1999 and 2007, i sold out at circa £9.00. And then watched the share price fall from £10.50 to circa £3 by the peak of the financial crisis in late 2008. Despite hovering over the buy button on many occasions when the share price was £3.00-£3.25, i foolishly waited until mid/late 2009 before rebuilding my original position at circa £7.25. With the share price now back at £28 that relatively small £4 differential in re-entry price has had an incredibly large impact on the potential capital growth of the last 18 years.


AIMHO/DYOR

[sleveen] 13/8/2018 16:22

Eyes down and look in for tomorrow's interims.

[mount teide] 13/8/2018 12:11

As expected, with the Baltic Dry Index rising close to 50% since Q1/2018, the world's largest shipbroker Clarkson's has experienced a stronger Q2/2018 across most of its main shipbroking and sale&purchase markets.

The oil tanker market although still the exception is now seeing green shoots, moving up strongly off multi year lows; vessel charter rates have increased by over 100% since the start of Q3/2018 which should bode well for H2/2018 and 2019.

Likewise the oil services sector, also recently made a bottom and entered a new cyclical recovery phase following a brutal 5 year recession which brought the industry to its knees.

Clarkson's highly expensive takeover of Platou some 3 years ago - a specialist oil tanker and oil services sector shipbroker - could not have been more badly judged/timed but, following an awful post acquisition period should now start to generate better news and results going forward. Oil tanker rates dropped over 10 fold peak to trough following Clarkson's takeover of Platou and the oil services sector completely collapsed, with large sections of many major fleets put in to long term lay-up.

The Clarkson share-price which briefly dropped from £30 to below £20 following the profit warning in Q1/2018, has recovered strongly since, hitting £29 this morning following this morning's Interims

With the shipping markets forecast to be close to a demand/supply balance for the first time in a decade in 2019, I'm maintaining my earlier call of a £100 Clarkson share price by 2023/25 as the shipping markets continue to strengthen into this new shipping /commodity cycle recovery stage, which like all previous recovery stages will come with the high stomach churning volatility these markets are renown for.

The shipping and commodity markets may not be for the fainthearted, widows or orphans perhaps - but for those with the constitution to withstand the volatility, with careful stock selection the once in every 15-20 year recovery/boom stage of these long term, highly cyclical markets offer investors the opportunity of tremendous multi year outperformance compared to the wider market indexes.

[mount teide] 13/8/2018 10:02

PricewaterhouseCoopers recently published their 2018 Mining Sector Review - it is a well researched report and worth a read, since the oil market recession bottomed with the equally long industrial metals market recession in H1/2016, following which both entered a strong new cycle recovery phase with similar opportunities and challenges, brought about from much stronger commodity pricing, together with the astute cost saving initiatives and waterfall drop in capital expenditure seen over the previous 5 years.


PWC - Mine 2018 - Overview



The world’s 40 largest mining companies have delivered an impressive financial performance in 2017, increasing revenue by 23% to USD$600bn. The report confirms an upswing in the mining cycle, which comes on the back of rising global economic growth and a recovery in commodity prices. Helped by astute cost-saving strategies over the past few years, margins and cash-generating ability has improved significantly, leading to a 126% jump in net profits.

Our 2018 outlook indicates that the Top 40’s improved financial performance will continue as companies continue to benefit from this upward momentum in the mining cycle.

'For the world’s Top 40 miners, 2017 was a remarkable year. Thanks in large measure to the continuing recovery in commodity prices, fuelled by general economic growth, revenues rose dramatically by 23 per cent. At the same time, the cost- saving strategies of the past few years delivered, with margins and cash- generating ability improved as well, leading to a sharp increase in profits. Capital expenditures remained flat. With liquidity concerns that were still lingering in 2016 mostly resolved and balance sheets strengthened, companies have the flexibility to act.

Across the board, a heightened focus on safety in operations, reducing leverage, and avoiding aggressive investments in new capacity indicates that management is proceeding in a measured and deliberate way.

For the first time, we have included a 2018 outlook. Our outlook indicates that the Top 40’s improved performance will continue in 2018, as companies continue to reap the benefits of the upswing in the mining cycle. The critical question facing leaders and investors is how they will respond to their current run
of good fortune. Will they give in to the impulses that have spurred aggressive actions in the past, or will they continue to pursue a path of safety first?

Perhaps the most significant risk currently facing the world’s top miners is the temptation to acquire mineral-producing assets at any price in order to meet rising demand. In the previous cycle, many miners eschewed capital discipline in the pursuit of higher production levels, which set them up to suffer when the downturn came.

While we expect capital expenditure to increase next year as companies implement their long-term growth strategies, miners must be careful to maintain discipline and transparency in the allocation of capital. They need to resist the urge to pursue projects or acquisitions at any price, and instead, focus on mining for profit, not for tonne.

Miners may also find themselves tempted to give in to stakeholder demands for a share of the success. Given the sector’s strong overall performance, this pressure will come from multiple directions. As they view the improving results, shareholders, governments, workers, management and host communities will all be ramping up their asks – for higher dividends, higher taxes, and higher wages. Miners need to strike a balance between near-term demands and their long-term vision to deliver value.

Indications are that this current cycle has several more years to
run. Steady global annual GDP growth over the next five years, along with significant infrastructure growth in emerging economies, is expected to underpin continued demand for mining products. But the operating environment is not without significant headwinds: geopolitical uncertainty, regulatory risk, technology and cyber risks, and social licence risks are all on the rise.

So while the future looks bright for the Top 40, long-term success is by no means assured. Both risks and temptations loom and miners will need to stay focused and deliberate in the pursuit of their long-term goals to create value for all stakeholders on a sustainable basis.'

[mr. t] 12/8/2018 18:01

Mount Teide, thank you for another superb post. I always appreciate you backing your views with reasoned analysis.I look forward to the results this week.

[mount teide] 12/8/2018 16:40

2018 Production Development

1,503 bopd - average for Q1/2018 (less Q1 production from first 2018 well drilled)

1,543 bopd - average for Q1/2018 - (inc part production from first 2018 well)

1,717 bopd - average for Q2/2018 - (inc part production from 2 of 3 2018 wells)

1,757 bopd - est prod for July 2018 (inc full production from 3 2018 wells)

The July 2018 figure indicates an average 254 bopd production increase over Q1/2018(less any part contribution from the first 2018 well) - equivalent to an average 81 bopd per well drilled in 2018.

Assumptions: TXP carried out the 6 budgeted workovers in Q/2 2018, giving a total of 11 workovers for H1/2018(one below budget) and each increased production at the historic average of 10 bopd, which was shown in 2017 to offset the rate of historic annual field decline.


Q1/2018 - realized an operating netback of CAN$33.53 per barrel

The strong cash flow generation in Q1/2018 will have accelerated further in Q2 from the double whammy effect of rising production and oil prices.
Brent average Prices in US$ - post the oil sector recession H1/2016 low:
$39.25 - H1/2016
$48.25 - H2/2016
$52.25 - H1/2017
$56.25 - H2/2017
$66.75 - Q1/2018
$75.00 - Q2/2018

An example of what a more than doubling of the price of Brent and 42% lower drill cost can do for the economics of T&T on-shore production development drilling is demonstrated well by TXP's first four wells of the 2017/18 programme:

The four 2017 wells have collectively produced circa 170,000 barrels during the last 14 months, while Brent has averaged $64 - generating circa US$10.9 million of gross revenue to date. Currently the four wells are producing at an average rate of 91.25 bopd, generating the equivalent of circa US$9.73 million gross revenue per annum. The 4 wells were drilled at a completed cost of circa US$1.1m each - US$4.4m in total for a total drilled depth of 25,200ft/6,300ft average per well.


Ortoire Block 2019 Drilling Programme - some comments by Paul Baay at the AGM in response to analyst questions:

"If you look at the wells in the fields(Oil & Gas) adjacent to the Ortoire block - the daily production rates are pretty dramatic - thousands of barrels of oil and 30-40 million cubic metres of gas. So when you look at that compared to the current size and production of Touchstone today you can see why we are very excited about the Ortoire drilling programme"

"To keep things in perspective i don't want people to leave the AGM thinking we will be putting all the eggs in one basket - what actually is going to happen is that 20%-25% of the capital programme will go to exploration, with the other 75%-80% going to drilling 20-25 wells a year on our development blocks - to give you some idea of the balance."

"We are not putting the company at risk by drilling Ortoire we are giving it a controlled step change".

[mount teide] 12/8/2018 12:36

Ross - 'What investors, particularly investors on AIM, really need is some idea of what the accounts will eventually reveal because it is that in all financial reality that dictates, for example, whether a fundraise is necessary. When you rely solely on BB arithmetic, fundraises more often than not take you by surprise.'

With respect, there is a delicious irony to that advice given to TXP shareholders!

Since, it did't work out very well for many who were constantly crowing on the TRIN thread about how TRIN's cash build/debt pay down position in the accounts was continuing to progress well ahead of schedule - and by inference, strongly suggesting that a placing to raise further cash was almost inconceivable compared to their T&T on-shore peers!

Most invested in TRIN were badly caught out, particularly those like me who in good faith foolishly acted on what the company accounts were supposedly telling us, by heavily averaging up immediately PRIOR to the highly surprising announcement of a 40% of market cap placing at a 40%+ discount to the May share price high.

As a consequence, I am now probably far from alone in watching the TRIN management like a hawk.


TXP forecast cash flow for 2018 of $14m is not BB maths but an actual figure from the CEO in answer to a question during a market interview. Any forward cash flow projections I post are based on this figure adjusted for the latest oil price and estimated production increases based on an average of 75 bopd per new well( the first 4 wells after 15 months on production are still producing at an average rate per well some 23% above this figure, and 53% above the top end of the estimated range given by management).

[crooky1967] 11/8/2018 20:01

Rossannan - yes it is

[mount teide] 11/8/2018 14:11

Del - they had given sellers over 19p during the morning, so presumably raised the 18.5p bid position on the book to 19p in an attempt to attract more volume.

crooky - 'more ups and downs' - its the nature of on-shore production development drilling on T&T. The first four wells of the 2017/18 programme are a good example - they had a wide range of stabilised production yet some 15 months later are still producing an average of 91.25 bopd each, some 82% higher than the management's original stabilised target.

With production from seven further wells due this year, a 2,250 bopd target to exit 2018 is a reasonable and realistic year end target.

Then, in conjunction with the ongoing 24 well annual re-completion programme, a 10 production development well programme for 2019 would need to average circa 75 bopd each, to get to 3,000 bopd by end of 2019, while a 15 well programme would need circa 50 bopd - again an entirely reasonable target going by the results of the first 7 wells of the 2017/18 programme.

Such a scenario suggests TXP could have the flexibility to reduce their proposed 2019 programme from 20 wells to 10-15 wells and still target 3,000 bopd; while in addition provide the financial flexibility to fund the initial Ortoire exploration programme mostly, if not all, from cash/cash flow.

[deltrotter] 11/8/2018 11:42

Also interesting to see cfep move back up Friday MT....

[mount teide] 11/8/2018 10:23

Encouraging to note that Euroclear's just published 'Stock on Loan' July report sees both Touchstone and Asia Met continuing to have zero percent of stock out on loan(zero short position) - this has been the case throughout 2018.

[crooky1967] 10/8/2018 19:38

With the drills next year and the target no doubt being 3000 bopd by end 2019 there will be more ups than downs. With 6 prospects in Ortoire as well will build the excitement going in to the new year. If one of those comes off then 100 pennies will be short change me feels.