Touchstone Exploration Share Discussion Threads

[someuwin] 17/7/2018 21:40

Touchstone Explor. @TouchstoneExp 2 minutes ago

Battery site on #TXP WD-4 block #Trinidad #OilandGas #OOTT

[lord gnome] 17/7/2018 08:43

MT - thanks for that article. I have copied it over to the DGOC thread as it is highly relevant and explains why DGOC has been able to cut such good deals with the shale drillers. They are heavily leveraged and need to cut debt, they are distressed sellers. Avoid shale - buy DGOC.

[captainfatcat] 16/7/2018 20:27

Nice post MT

[someuwin] 16/7/2018 10:26

Online buy limit cut right back to £1k.

Could move up soon.

[fardels bear] 16/7/2018 09:52

It's a bit heavy going this thread.

Can't we have Kylie on that rocket?

[tektonik] 16/7/2018 09:35

Very interesting, thanks for sharing MT. TXP has been on my watchlist for a long time, hoping to get a piece very soon :)

[mount teide] 15/7/2018 11:12

Oil Demand/Supply - Medium Term - some thoughts:

What has the last 10 years taught us about the likely growth in future demand over the next 10 years in the boom and bust oil industry?

There's little doubt on my part about these 3 assumptions:
A) Demand is growing and will continue to grow in the foreseeable future
B) Demand will control the price dynamics in the foreseeable future (not the US shale or Venezuela/Iraq problems)
C) The march of demand is pretty robust and not particularly sensitive to the price unless it spikes dramatically from a high base level as in late 2007.

Brent was $97 a barrel when the global financial crisis hit in Q4/2007, some nine months later it topped out at $147 before briefly collapsing to circa $40 and then recovering back above $100 in 2010.

Between 2008 and 2015 Brent averaged $95 - yet global consumption grew from to 84.3m bopd to 94.9mbopd - an average annual increase of 1.37m bopd.

Oil Bottomed in early 2016 and has since averaged $58 - from 2016 to 2018 oil consumption increased to 99.3mbopd - an annual average increase of 1.47mbopd.

So, even during a period with high historic average oil prices ($95 during 2008-2015) the growth in consumption hardly varied to that when prices are averaging nearly 40% cheaper(2016 to date).

This is largely due to developing Nations accounting for all of the growth and this is where the very high population Asian Nations dominate, with about seven out of every 10 extra barrels consumed globally. India’s oil demand growth is expected to outpace China by 2020. While electric vehicles are an important growing factor for oil demand, the IEA estimates they will displace only very limited amounts of transportation fuel by 2022.

The supply side of the Oil Industry:

Rystad Energy reports that 2017 was yet another record low year for discovered conventional volumes globally. Less than seven billion barrels of oil equivalent was discovered.

“We haven’t seen anything like this since the 1940s,” says Sonia Mladá Passos, Senior Analyst at Rystad Energy. “The discovered volumes averaged at 550 million barrels of oil equivalent per month. The most worrisome is the fact that the reserve replacement ratio in 2017 reached only 11% (for oil and gas combined) - compared to over 50% in 2012.” According to Rystad’s analysis, 2006 was the last year when reserve replacement ratio reached 100%; largely thanks to the giant onshore gas field Galkynysh in Turkmenistan.

Not only did the total volume of discovered resources decrease – so did the resources per discovered field. An average offshore discovery in 2017 held 100 million barrels of oil equivalent, compared to 150 million boe in 2012. “Low resources per discovered field can influence its commerciality. Under our current base case price scenario, we estimate that over 1 billion boe discovered during 2017 might never be developed”, says Passos.

“While there have been some notable successes this year, we have to face the fact that the low discovered volumes on a global level represent a serious threat to the supply levels down the road,” says Passos. “Global exploration expenditures have decreased year-over-year for three consecutive years now, falling by over 60% from 2014 to 2017. We need to see a turnaround in this trend if a significant supply deficit is to be avoided in the future.”

The dramatic price decline of oil between 2014 and 2016 and the slow recovery that followed resulted in deep cuts in exploration and development throughout the industry.

The International Energy Agency has been waving its arms for some time that this dearth of investment will mean constrained supplies after 2020.

"We are witnessing the start of a second wave of US supply growth, and its size will depend on where prices go,” said Dr Fatih Birol, the IEA’s Executive Director. “But this is no time for complacency. We don’t see a peak in oil demand any time soon. And unless investments globally rebound sharply, a new period of price volatility looms on the horizon.”

Data Sources: IEA, Rystad Energy and Statistics Portal

AIMHO/DYOR

The Industrial metals mining industry - particularly Copper, has identical market supply/demand challenges to the oil market as a result of a similar collapse in pricing through to 2016, which generated an even greater collapse in development and exploration Capital expenditure. Despite a partial recovery in pricing over the last two years, both the global oil(outside US shale) and copper industries are demonstrating little evidence of increasing capital expenditures from the decade lows.

[brasso3] 13/7/2018 23:36

I was surprised at how poor (relatively speaking) the net backs are at Goudron when the compare to Bonasse. They have not mentioned that before.

TXP net backs are also modest but now with oil at $70+ they are definitely spinning off a lot of cash.

[zengas] 13/7/2018 23:22

I think they will do ok also Brasso but I think they have had to diversify as they have their concerns about Goudron and this is what they highlighted in their presentation.

"Goudron prpoduction is fragile - 7 out of 57 wells produce 50% of our production".
"Downtime on any of these wells result in significant daily production variations.
"Artificial lift systems are challenged".
"Water injection constrained by available water".
"Acquired Steeldrum to diversify reducing dependence on several key wells".

If Goudron had performed to their original expectations then they might not have gone for this acquisition and further dilution - ie re last line above.

(Thanks euclid5 re 35p t/p)

[brasso3] 13/7/2018 22:17

CERP are clearly well managed and will be successful. I cannot see how they will keep pace with TXP though with their strategy to focus on infrastructure and workovers. CERP are aiming to close the year at 1000 BOPD but that includes todays 250 BOPD acquisition. TXP should comfortibly pass 2200 BOPD by December. As of today I feel that TXP have a deep understanding of their wells/ assets, where CERP on still on a learning curve with Goudron.

[euclid5] 13/7/2018 18:04

Hello Zengas,

GMP Energy's last BN recently had a 60cad / 35p TP

[captainfatcat] 13/7/2018 14:04

Zengas that's a nice comparison.

[zengas] 13/7/2018 12:55

The CERP deal to me just shows what a bargain TXP is in terms of value.

To buy (if it goes through) up to approx 6.7 mmbls reserves and 200-250 bopd production. Cost they say is $5.8m (£4.4m) through the issuance of 92.7m shares "equivalent to 12.5% of the current issued share capital".

The current issued share capital is 649.2m shares.
They may also have to issue a further 30m shares to Lind to convert the loan.
Also a possible 33m deferred shares.
To me that adds up to a potential 155.7m new shares which would be over 24% dilution in real terms. They also have to pick up the liabilities of Steeldrum including a $1.25m loan.
Above adds up to just over 800m shares in real terms and a real m/cap of £40m at 4.95p
Goudron did not make headway as quickly as originally envisaged and with this acquisition would give a combined 775 - 825 bopd or about 1,000 bopd less than what we were last known to be doing. There's an £18m m/cap difference and even if you were to strip £8m out for TXP when looking at both companies debt, that still gives a lower £10m m/cap difference for TXP and a 1,000 bopd greater production advantage for TXP and that's worth a further 15p on TXPs share price which brings it to within 10% lower than the broker current value target .

By comparrison TXP just via normal development drilling in lifting prodution added an additional 2.8 mmbls reserves 2P along the way in 2017 while the 2018 drilling campaign was much greater and we will see by March the impact of likely additional reserves then. In my opinion we may add as much reserves via development drilling equal to what CERP have had to pay to acquire theirs.

[marvelman] 13/7/2018 12:21

No, still pretty tight on the buy side, no problem in selling

[mr.oz] 13/7/2018 12:13

I presume it got easier two minutes after your post?

[2prsimo] 13/7/2018 11:08

Still can't get a decent quote online

[someuwin] 13/7/2018 10:17

Still can't buy many - they're going to have to move it up higher imo.

[phowdo] 13/7/2018 09:34

Cerp have made an acquisition. All hotting up on T&T.

[someuwin] 13/7/2018 08:53

Can't get a buy quote for just £1k.

[gabrieloak] 12/7/2018 23:09

Hi MT...interesting. I would be interested to discuss some of that further; particularly the SPT mitigation by capital spending and detail around drilling...happy to send sheet to you (or anyone) if you ping me on [e-mail]...we could discuss further there if you want?

[mount teide] 12/7/2018 22:53

Gabrieloak - Interesting post - I have an estimated year end cash forecast of circa US$7.5m at $70-$75 oil - the forecast uses many similar cost and tax assumptions to your work but, with a slightly higher annual production figure (by May the additional production generated from the 2018 drilling programme was just 2 months from the first well and 1 month from the second - this should ramp up dramatically in H2.

With actual production in early June of 1,821 bopd, and first production from a further 7 wells to come in Q3 and early Q4, i estimate EOY production in the range of 2,250 - 2,500 bopd.

SPT can be significantly reduced by capital spending - i understand TXP's current 10 well drilling program attracts a 20% SPT input tax credit.

Using a conservative EOY production figure of 2,250 bopd - at $70-$75 oil i estimate TXP could enter 2019 generating monthly cash flow of US$1.7m - US$1.9m(2.2 to 2.4 times the cost per well of the 2018 development drilling programme.).

[mr. t] 12/7/2018 19:47

P.s have a good holiday!