Touchstone Exploration Share Discussion Threads

[mr. t] 27/7/2018 14:49

ross - I appreciate your skeptical views, and you've encouraged me to look closer at the details of TXP's accounts and economics than I had done beforehand.

But right now it reads like you're trying to enter into and win a points scoring contest with MT - is it necessary?

[fardels bear] 27/7/2018 14:48

We had all this exact same discussion two weeks ago, rossannan. Practically word for word.Is this a game you two play? One sucks them in and the other drops it so you can both get another round of trades in?

[fardels bear] 27/7/2018 09:22

Doesn't China buy all its oil from Iran? And is China not attempting to establish the PetroYuan to rival The Donald's established reserve currency?I foresee fun and games ahead.

[mount teide] 26/7/2018 23:23

Thanks guys.


China’s Economic Growth Stimulus Could Boost Oil Demand - OilPrice.com today

'China unveiled this week measures to reinvigorate its economic growth with support for infrastructure investments that are likely to boost demand for various commodities, including oil.

As the U.S.-China trade war is escalating and policy makers around the world are warning that tariffs and counter-tariffs could weaken global economic growth, China is looking to boost its economy with measures to expand domestic demand and promote investments, including in infrastructure.

China’s key policies in supporting investment include guaranteeing funds for projects under construction, and promoting the construction of major projects. The investment, will be focused on the transportation, oil and gas, and telecommunications sectors, according to the Chinese cabinet meeting’s statement.

Beijing also plans to pursue a more proactive fiscal policy, extend loans to small and medium-sized enterprises (SMEs), and cut corporate taxes.

The plan—ChinaR17;s most notable attempt this year to accelerate its economic growth—is expected to lead to growing demand for oil and other commodities, according to analysts.

In the oil market, the Chinese economic and fiscal package boosted investor confidence earlier this week that a potentially stronger Chinese economy would raise oil demand in the world’s top crude oil importer.

The Chinese government is intent on preserving growth amid the rising U.S.-China trade tensions.....“The government is sending a clear signal that it is preparing to defend growth,” ANZ economists said in a note.

According to economists at ING, "We expect more aggressive fiscal spending will be announced and believe this year’s stimulus could be around 4.5% of GDP,”.

ING Analysts expect China to protect the pace of its economic growth....this is good news for oil demand in the world’s largest crude oil importer and a potential bullish factor for oil prices.'

[walter walcarpets] 26/7/2018 21:40

ditto MT - appreciate you sharing your vast research and knowledge

[2prsimo] 26/7/2018 13:54

Some serious knowledge you have there MT - really succinct post - thanks

[mr. t] 26/7/2018 13:50

Great post MT

[grannyboy] 26/7/2018 13:40

I wouldn't have any problems with a fundraising for the Ortoire whatsover...I think the potential is huge!!

[mount teide] 26/7/2018 13:35

With production from an additional 7 wells between now and year end TXP should be doing circa 2,250 bopd entering 2019.

The intention for 2019 is to continue to substantially increase production from development drilling - a target of an additional 1,000 bopd in 2019 is very realistic - this would have the potential to generate considerable incremental free cash - circa $25M of cash flow in 2019 at present oil pricing.

If any of the 5 Ortoire prospects prove equal to Shell's nearby huge Carapal Ridge gas discovery, (never mind potentially better, as management's technical analysis leads them to suggest), then each prospect could be worth circa £100m to £150m minimum in the event of success using just $1.5-$2.0/boe. Each prospect at £125m would be worth circa 100p/share.

Regardless as to the success or otherwise of the Ortoire exploration programme, it is reasonable to assume that TXP should be able to grow to circa 4-5k bopd over the next 2-3 years from the planned development drilling programme, which is likely to also deliver the additional benefit of a substantial increase in reserves. In which circumstances a potential valuation of £100m m/cap minimum (80p/share) by 2020/2021 could well prove conservative.

A single Ortoire success prospect in addition to the planned development of the existing assets/production could easily see a 180p target - a 10 bagger from today.

These calculations/projections/comments are based on $70-$75 oil - should oil average the $95 average seen between 2008 and 2015, then the potential returns could be considerably higher since most of TXP's costs are largely fixed.

The ultra high impact Ortoire exploration prospects are low cost and according to management's technical evaluation "low risk". TXP say that each of the 5 prospects has the potential to exceed the nearby Carapal ridge - that suggests from Jan 2019 TXP will be targeting 5X Carapal Ridge at 108 mmboe = ie in excess of 500 mmboe or $1b-$$1.5b (£700m-£1b) value at just $2-$3/boe.

TXP has an alternative option to a placing over the next 6-12 months - namely to reduce their production development programme to just 17 - 22 wells between now and the end of 2019 - this would still be close to double that of TRIN's recently announced development programme through to end of 2019.

My own view is that a TXP placing over the next 6 months is unlikely, particularly if the oil price continues to strengthen.

Would i support a modest placing to separately fund the ultra high impact, low cost Ortoire exploration programme - you bet! - the reserves potential of each of the 5 targets is so large, it would probably be a no brainer for most shareholders - particularly with T&T having the only world class LNG export terminal built in the Western Hemisphere in the last 40 years to 2010, but a 3-5 mile pipeline tie-in away.

At the end of the day investing is all about risk/reward - in a strong and rising oil price environment the economics strongly favour drilling over sitting on cash - as even the still loss making US shale industry continues to demonstrate, by borrowing hundreds of $billions from Wall Street to continue drilling.

Last time i looked TXP with a net debt of circa £5.4m and a debt to capital ratio of circa 34% was below that of BP(38% with net borrowings of £40bn) and equal to the 34% average of the major multi nationals - some might say very good company for a business with a £23m market cap to be mirroring !


AIMHO/DYOR

[euclid5] 25/7/2018 20:07

Thanks for the reply post Mount T

[spangle93] 25/7/2018 18:40

How tranquil. I thought something had happened at Range Resources, as there were 400 posts since I last looked 2 days ago.... but no.

[ballymoss18] 25/7/2018 10:59

Thankyou so much for the informative posts.Interesting times ahead for us

[goldry] 25/7/2018 10:07

Been watching this for a while now. Wanted in on Monday, but had to wait until today. On board now!

[spangle93] 25/7/2018 09:57

Hello ballymoss - it's sort of tough to answer your post succinctly, so it's probably worth you reading general "how oil and gas works" type things or watching youtube videos.

Oil and gas start life as dead organic matter which is transported by air, rivers or tides into inert sediments like sand or clay, which over time become buried by more material and earth movements (faulting, folding). With burial, temperature and pressure increases, until above a certain threshold, the carbon-based organics decompose into liquid hydrocarbons [coal is a similar process, but it's a different source and environment].

Like any liquid, oil will try to move from high pressure to low pressure (i.e. up to surface). But typically there are impermeable layers that prevent its passage. Oil will reach the highest point it can, and then build up underneath. So any prospectors are looking for the tops of subterranean structures (up-dip) as these are the most likely places where oil is trapped.

Ref the article, the Venezuelan oil basin is one of the biggest in the world, so up-dip from his would be a good address to have.

Does that help

[ballymoss18] 25/7/2018 08:44

MTSorry I am very much a noviceThe up dip end of the Venezuelan basinDoes the gas push the oil up dip?I seem to think this happens.Is it a possibility for an oil find.

[mount teide] 25/7/2018 08:28

Oil’s Perfect Storm Lays At Trump’s Feet - OilPrice.com today


'It’s becoming painfully clear that the way forward for global oil markets is going to be bumpy, very bumpy, particularly as we head into next year. Much of this uncertainty, even blame, is being increasingly leveled at a person that has surprised, flabbergasted and even shocked political opponents, allies and adversaries alike since he took office - President Donald Trump.

A growing line of thought surmises that while Trump uses the presidential bully pulpit, in this case Twitter, to put pressure on long-time ally and de facto OPEC leader Saudi Arabia to get ready to pump more oil to keep (both oil and gas) prices from spiraling out of control, much of the blame for higher prices actually belong to Trump.

The argument makes perfect sense. If Trump would ease back on both his heated rhetoric toward Iran, though that case could be made over much of Trump’s dealings with China, the EU, Canada and others, and if Trump would revisit his decision on re-imposing sanctions on Iran, then oil markets would benefit. Why? A softer line on Iran would reduce the worry or even fear that a loss of some 2.7 million barrels per day (bpd) of Iranian crude would roil oil markets so much that the Saudis would have to pump an unprecedented amount of oil, perhaps as much as 12.5 million bpd, eating up all of its spare capacity.

The Saudi’s have never pumped more than around 10.7 million bpd of oil, a level reached in June, and has for more than 50 years kept at least 1.5-2 million bpd of spare capacity for oil market management.
Related: A Storm Is Brewing For U.S. Oil Exports

Under such a worst-case scenario, global oil markets would be dangerously exposed to any oil demand/consumption increases as well as geopolitical developments that always take aim at global oil markets. A recent Bloomberg article articulated the problem well. It said that “the simple truth is that there isn’t enough spare capacity in the world to replace the complete loss of Iranian exports.”

However, all of this seems to be lost on Trump. With mid-term November elections approaching and decisive House and Senate seats in contention, much of the second half of the president’s term could be jeopardized if higher gas prices (amid higher oil prices) eat into voters’ pocket books and they take their frustration out at the polls. Trump’s only plan appears to put undue, perhaps geopolitically damaging pressure on the Saudis to make up for anticipated lost barrels when the Saudis likely can’t do it alone.

It’s also apparent that Trump has taken an emboldened stance with the Saudis since its Riyadh who was instrumental in Trump’s decision to re-impose Iranian sanctions.

With oil production problems persisting in Libya and in Venezuela and with those problems likely to carry into the fall election season and beyond, Trump is playing a dangerous game and could find his back against the wall. Voter angst in November would also spill over into the upcoming 2020 presidential election season. Consequently, the often-used campaign slogan of presidential incumbents, “Re-elect the President” may fall on deaf ears.

Two weeks ago, Hootan Yazhari, head of frontier markets equity research at Bank of America Merrill Lynch, said Trump’s push to disrupt Iranian oil production could cause oil prices to hit $90 per barrel by the end of the second quarter of next year. Others have forecast even higher prices, breaching the $100 plus per barrel price point.

The only option, alluded to at the top of this piece, would be for Trump to re-engage with America’s European allies over Iranian nuclear development and other concerns. This would tone down oil market worries and perhaps even open the door for re-negotiation with both the EU and in time Tehran - in essence, cooler heads and diplomacy would prevail. However, there is little chance that the president would, or even could at this point, change his mind without losing immense political face. Something, thus far, he has been unwilling to do.'

[mount teide] 25/7/2018 00:00

euclid5

The Ortoire Block and Exploration Drilling Programme:

The Ortoire block technical work carried out by Touchstone has identified five large exploration prospects - each "Carapal Ridge Plus" size targets. Three are gas prospects within the prolific Herrara Turbidite Fan Fairway - with up to 2,000ft of potential pay that will be drilled to a depth of up to 10,000ft.

The two oil prospects are much shallower targets in the Forest and Gros Morne Formations - at a similar depth to some of the deeper development plays drilled over the last year at around 5-7,000ft. The two oil targets are defined in part by oil bearing legacy wells - they are analogous structures to offsetting pools.

To the immediate south west of TXP's Ortoire block lies the Central Block, which contains T&T's only producing onshore gas fields. The Central Block (along with most of the Ortoire block) sits in the highly prolific Herrara Turbidite Fan Fairway - the up dip end of the Venezuelan basin.

The Shell owned Central Block contains three pools of which Carapal Ridge is the largest. The three pools - Carapal Ridge, Baraka 1 and Baraka East 1 - produced some of the largest on-shore natural gas production test results in the world at the time of initial testing in 2002. Carapal Ridge tested at 62 MCF million cu ft per day and 1,620 (bcpd) barrels of condensate per day.

[euclid5] 24/7/2018 21:59

Hello Mount T,

Thanks for your detailed posts

Out of interest, has TXP for the Ortoire Block on the exploration oil ./ Gas blocks?

[mount teide] 24/7/2018 20:13

Global oil consumption growth for the last 45 years has been driven overwhelmingly by the high population Asia Pacific region where consumption has nearly quadrupled - but where consumption per capita is still a tiny fraction of that in the USA and Europe.


Regional oil consumption 1965-2017

United States consumption is 3.5 million BPD higher than in 1973, which amounts to growth of just under 15% in 45 years. Demand in the EU has declined by 13% since then.

But demand in the Asia Pacific region climbed from 9.1 million BPD in 1973 to 34.6 million BPD in 2017. This huge increase in demand is the primary reason the global demand curve has marched steadily higher.

Of course, Asia Pacific is where most of the world’s population lives - therefore demand growth is being driven by billions of people who use a lot less oil per capita than the US, but whose per capita consumption is not only rising but accelerating.

Chinese demand has increased by 5.0 million BPD over the past decade, by far the most of any country. But Chinese per capita demand is still only 3.3 barrels per person per year.

The US consumes about 22 barrels per person per year. That is partially a result of a more mobile and affluent population, but US consumption also drives a much larger economy.

To put the current US demand in perspective: if China’s per capita demand were as high, it would be nearly as great as the entire current global consumption.

In second place for the largest increase in oil demand over the past decade is India, which has seen its demand increase by 1.7 million BPD. Third place will probably be a surprise to many - Saudi Arabia has increased its oil demand by 1.5 million BPD over the past decade.

These three countries were the only ones to experience demand growth over one million BPD over the past decade.

The largest decrease in demand over the past decade was in Japan, which saw oil demand decline by 1.0 million BPD. Second place will be another surprise, as the US saw oil demand decline by 800,000 BPD. Italy was third with a decline of 493,000 BPD, while the entire EU saw demand fall by 1.7 million BPD.

Source - 2018 BP Statistical Review of World Energy

[essential] 24/7/2018 16:44

That parabolic chart developing nicely!!!

[mount teide] 24/7/2018 16:43

L2 - closed at 2 v 4 / 18p v 19p - up 0.6p/3.35% on the day.

Encouraging that the transaction volume on this further break out today was 70% up on last weeks average figure.