Touchstone Exploration Share Discussion Threads

[lazarus2010] 26/1/2016 14:58

Carp, thanks for posting that. Good to see the focus purely on T&T now. Next news is the Trin purchase, which hopefully won't go through. I think at the moment I would rather see them lose C$2mln than proceed with the acquisition. The only caveat is if the cost savings from doubling production and keeping opex almost level can make the asset return cash even at these prices.

Must say I am somewhat surprised that the T&T government have not taken a leaf out of Argentina's book and set a minimum oil price for T&T production. If they did it at say $49.95 (just below the $50 tax threshold) for 12 months and got producers to agree that even if WTI went above this price they could still only receive $49.95/bbl, I think most of them would agree to the deal. It would protect T&T's oil producers without having much of an impact on the economy, in fact with the additional jobs it might bring due to investment in exploration and production, it could have a benefit to their economy.

[carpadium] 21/1/2016 12:15

Website news release

TOUCHSTONE ANNOUNCES KERROBERT SASKATCHEWAN DISPOSITION
Calgary, Alberta – January 20, 2016 – Touchstone Exploration Inc. (“Touchstone” or the “Company”;) (TSX:
TXP) announces that it has entered into an agreement to dispose of its Kerrobert, Saskatchewan facility,
infrastructure and the associated PNG rights to Quattro Exploration and Production Ltd. (“Quattro̶1;) (TSXV:
QXP) for total consideration of $4,150,000. The consideration includes $650,000 in cash and $3,500,000
in securities through the issuance of 35,000 non-voting Quattro Class “C”, Series 3 preferred shares. The
preferred shares have a face value of $100 per share and pay an annual preferred dividend of $3.50 per
share. The cash consideration consists of $100,000 to be paid upon signing of the Purchase and Sale
Agreement with the balance payable no later than February 15, 2016. Non-payment of the final cash
installment will result in Quattro forfeiting the initial cash deposit. The disposition is effective December 31,
2015 and is expected to close on or before February 15, 2016, subject to satisfaction of closing conditions
customary in transactions of this nature.
James Shipka, Chief Operating Officer, said “the Kerrobert property was our final producing asset in
Canada. The disposition of the property will eliminate operating losses and allow our team to focus on our
core onshore Trinidad producing assets.”
The property contributed an average of 100 barrels of heavy oil per day during the three months ended
September 30, 2015 and was a legacy Petrobank combustion project. With no intent to pursue combustion
projects now or in the future, the Company had no development plans for the property. As of December 31,
2014, the property was assigned net Total Proved reserves of 399,400 barrels and net Total Proved plus
Probable reserves of 606,100 barrels of heavy oil. Associated future capital costs were $1,020,000 under
both the Proved and Proved plus Probable cases. The property incurred unaudited operating losses of
approximately $1.35 million during the eleven months ended November 30, 2015. Through this disposition,
the Company will eliminate an internally estimated $3.33 million in future abandonment liabilities associated
with the assets. Following the disposition, Touchstone has an interest in 32,723 acres of undeveloped land
in Saskatchewan focusing mainly on the Viking formation.

[carpadium] 23/12/2015 15:32

Tried not to look at this for a couple of weeks, got enough painful checking to do with larger holdings .. but .. TXP bid now 6.79 on today's exchange rate.

Will look in again once Baay sees Brent at $68, all together a seasonal hohoho :-(

[lazarus2010] 15/12/2015 12:04

Carp, LGO assets are proven to mostly have very large decline rates...yes the oil has been proven but whether it will pay back the cost of drilling is another matter. Maybe there are some bolt-ons that we could acquire which, if cheap enough could result in upside in the future.

[carpadium] 11/12/2015 17:18

Within that 'touchstone-take-over-of-trinity-land-assets' blog Baay states that, depending on oil price, the 2016 drilling programme will be continuous BUT they really require $68 for Brent 'before it makes sense to move back into the field'.

So, looks like they'll be sitting on the sidelines for some time yet, possibly but hopefully not, all next year.

[carpadium] 07/12/2015 08:23

Bit soon following Trinity but hoping TXP, bearing in mind their ambition for fast growth in T&T, can afford a cash/shares deal for LGO assets less Spain.
They'd be well on the way then to their 10kb/d target.

[carpadium] 04/12/2015 17:27

Thanks Jb, given their clear ambition that's an encouraging read.

Noticed it was written by a David Renwick ... do hope not the same chap who wrote 'One foot in the Grave' !!

[lazarus2010] 03/12/2015 13:21

good news...more disposals to come which will reduce the amount needing to be borrowed. Still not entirely happy with the price TXP have paid and think they could have got it for a lot less if they had waited...but we don't know who else might have been bidding so I guess they didn't want to take the chance of losing out and made Trin an offer they couldn't refuse.

“we have continued to sell assets in Canada to focus purely on Trinidad and Tobago. We expect that, by the end of the year, we will be entirely focussed on Trinidad and Tobago.”

[lazarus2010] 30/11/2015 07:41

pg 8

In Trinidad:
Achieved YTD operating netbacks
of $27.84 per barrel
Realized YTD funds flow netbacks
of $17.49 per barrel
Generated YTD $5.96 million in
funds flow from operations


Hedged 800 bopd production through September 30, 2016
Brent US$70.60 from November 1, 2015 through November 30, 2015
Brent US$66.50 from December 1, 2015 through April 30, 2016
Brent US$68.00 from May 1, 2016 through May 31, 2016
Brent US$65.00 from June 1, 2016 through September 30, 2016


great hedge in place for 800bopd through to Sept 2016 should see TXP through the worst of the low oil prices. If they don't recover by 09/2016 then there is something seriously wrong with the global economy and the US are using low oil prices to reduce their borrowing requirements (or slow their growth)

[lazarus2010] 26/11/2015 17:11

TBH JB it looks a bit expensive to me and I believe they could have gotten a better price unless there was some competition. On the +ve side the key to success is the fact that they are buying ONLY the oil asset and are therefore not having to strip out all of Trin's G&A costs as they will NOT be transferred as part of the sale. They will then use existing management and engineering teams to operate the new asset, thus almost halving their current G&A per barrel of production. We just need $60+ and bingo it will be a great buy.

Also good to see that they have practically eliminated the losses from the Canadian assets, ad have sold East Brighton for a gross royalty on all production of 3.5%, so no future commitment costs, and $6mln LoC has been cancelled. Streamlining the company to reduce costs as much as possible and benefit even more when PoO rises.

Would be interesting to know what their current netback at c.$40 oil is...any idea?

[jamesiebabie] 20/11/2015 23:11

New presentation with details of the Trinity purchase, looks good to me. Purchase price plus development costs is c.$10/bbl. Pure purchase price is c.$6/bbl.

[lazarus2010] 19/11/2015 13:32

East Brighton has been hived off for a 3.5% no deduction gross royalty and $6mln loc cancelled. Streamlining operations and reducing costs as much as possible.

[lazarus2010] 19/11/2015 09:27

this looks very good,

'Trinidad operating netbacks of $3,985,000 ($28.16 per barrel) which offset Canadian operating netback losses of $437,000 (($47.41) per barrel). Company third quarter operating netbacks were $3,548,000 or $23.54 per barrel, which represented a decrease of 40% from the prior year comparative quarter and an increase of 4% from the prior quarter.'



although I expect it to be worse for the current qtr due to the continued drop in oil prices.

Canadian losses seem to have been almost eliminated, so no drag on Trin cash flow going forward.

If TXP can make such good returns at below $50/bbl, then the Trin acquisition should be almost transformational as soon as PoO starts to rise

[lazarus2010] 19/11/2015 09:25

shouldn't we have the details behind the proposed acquisition of Trin assets by now? Anybody seen it yet?

Any comments on the following? Net debt all but eliminated before the Trin acquisition

Highlights

During the three month period ended September 30, 2015 ("third quarter"), Touchstone reported:

• A decrease in net debt of $5,716,000 from $5,755,000 reported in the prior quarter to $39,000.

• Average oil sales of 1,638 barrels per day ("bbls/d"), 1,538 bbls/d produced in Trinidad and 100 bbls/d produced in Canada (100% oil). Combined quarterly production decreased 8% from the prior quarter.

• Funds flow from operations of $313,000 ($0.01 per basic share) compared to funds flow from operations of $762,000 ($0.01 per basic share) in the prior quarter. The Company generated year to date funds flow from operations of $1,500,000 ($0.02 per basic share) versus a loss of $1,857,000 (($0.03) per basic share) realized in the comparative 2014 period.

• Trinidad operating netbacks of $3,985,000 ($28.16 per barrel) which offset Canadian operating netback losses of $437,000 (($47.41) per barrel). Company third quarter operating netbacks were $3,548,000 or $23.54 per barrel, which represented a decrease of 40% from the prior year comparative quarter and an increase of 4% from the prior quarter.

• The disposition of our Dawson, Alberta exploration property for cash proceeds of $2,100,000 and the disposition of undeveloped land in Beadle, Saskatchewan for cash proceeds of $4,200,000.

[lazarus2010] 05/11/2015 21:00

useful for checking Canadian stock prices, here's txp

[jamesiebabie] 05/11/2015 11:22

Carp - you are pretty much correct, but Trinidad has its own oil price. The ST is payable on oil bought by Petrotin above $50; it's neither WTI or Brent, but somewhere around 12% below Brent.

TXP are better off with either sub $50 oil or above $65, everything else becomes marginal.

[lazarus2010] 05/11/2015 11:18

still waiting...should be out soon

A circular, together with a notice to convene a general meeting of the Company, will be posted to Trinity's shareholders in due course.

[lazarus2010] 05/11/2015 11:13

JB should be able to answer that one...but basically I think you are correct with the $50 threshold, so yes from a Trin pov WTI is best under $50 or over $60. I would expect there to be some discussions behind the scenes with the T&T oil ministry as it is in the interests of T&T to maximise domestic production and minimise imports even if they lose a bit in tax revenues. The small gains to the govt from the tax are irrelevant compared with the necessity for the local companies to fund additional exploration and increase production. Maybe they will introduce a tiered tax rate to solve the issue?

[carpadium] 03/11/2015 18:44

I recall reading somewhere that the Supplementary Tax of 18% becomes due once wti hits $50, effectively reducing the income to $41 per barrel. In other words $50 won't be received by TXP until wti over $60 a barrel.

Can this be right, must we hope that wti stays at $49.99 rather than hovering around in the $50s?

[lazarus2010] 26/10/2015 08:00

Carp,

I received an email from TXP rep on Fri last week, he couldn't say much except that there will be a release of further details in the coming weeks regarding the metrics of the deal. Main area of focus are synergies and resulting cost savings due to the acquired blocks being very close to those already owned. Indications are that the deal will be very good...of course he would say that, but by my reckoning if they can get a netback of minimum $5/bbl (after all opex, G&A and finance costs), and by the time they acquire the asset say they are doing only 1400bopd, this would mean c. $200,000 pcm additional net revenue.

While wti is below $50, there will be no special oil tax to pay, only tax on profits.

Could be worth topping up while C$ still weak and oil prices are low

[lazarus2010] 22/10/2015 11:31

JB, looking at the timing of the deal, if they have valued the assets commensurate with $45 oil then TXP will have bought pretty close to the bottom...ok we have seen $38 oil earlier this year and we might get close to that again, but from a longer term perspective looking at oil price cycles, this should be earnings and asset value accretive.

It would also be interesting to know when TXP take control of the cash flow from the project...is it immediately after the payment of the $2mln advance, or only after the transaction completes ie early 2016?

[jamesiebabie] 21/10/2015 18:15

Laz - at the current PoO we don't have to pay the one tax, so our cashflow should be okay; once the PoO gets above $50, then it becomes more difficult. As I said, maybe the Trin govt will change the tax laws for onshore assets and make things a bit easier. The Trin govt cannot be happy at this level.

I'm never one for debt, but if they are making an informed decision at this level, then they must think there is some upside. TXP have been quite cute recently imho.

[lazarus2010] 21/10/2015 14:31

JB, when I saw the field names I though they must be pretty close to the ones held by TXP, now confirmed by their press release. If they can reduce a significant number of operational staff for the acquired assets and all management of the assets will be carried out by existing in house team, then the synergies mentioned should be substantial. Must admit I don't like the additional bank borrowing that will need to be taken out, cash flow is king and the banks always need to be paid first!

[jamesiebabie] 21/10/2015 14:10

TXP's view: No dilution, yet and may not be.