Touchstone Exploration Share Discussion Threads

[brasso3] 08/8/2018 07:15

Welcome Richard Sneller!

[awise355] 08/8/2018 07:12

Richard Sneller from Baillie Gifford & Co Ltd

[mount teide] 08/8/2018 01:16

ross - TXP only raised £2.7m net of costs last December.

How is that funding a 10 well production development programme with average cost of $850k per completed well? If it was ALL spent on the 2018 drilling programme it would provide funding for at most 4 of the 10 wells.

As mentioned before, with circa 70% of the production increase from the 2018 development drilling programme coming in H2/2018 - H2 will give a much better guide as to what the business can achieve going forward.

[mount teide] 07/8/2018 23:46

Ross - Paul Baay gave the market a $14m cash flow forecast for 2018 - TXP is basically spending cash flow on its 10 well drilling and 24 well recompilation programme etc.

The increase in gross revenue generated over the last year largely as a result of the increase in the POO, is equivalent to three times TXP's market cap when it came to AIM in June 2016.

[mount teide] 07/8/2018 23:00

Flyinghorse:

TXP established that 20 well re-completions carried out in 2017 were sufficient to offset the natural field decline.

Brent average Prices

$44.50 - When TXP started the 2017 4 well production development programme.
$56.50 - H2/2017
$66.75 - Q1/2018
$76.50 - Q2/2018 (circa 15% up on Q1 and 35% on H2/2017)
$77.00 - Q3/2018 average to date

Using your estimated production figures suggests TXP will on an annualised basis be generating circa US$24m additional gross revenue by the end of Q2/2018 compared to where the POO was when they commenced the 2017 drilling campaign; from the addition of just 7 new wells and 20 recompilations - such is the revenue generating power of the increase in the POO.

I have an estimated year end cash forecast of circa US$7.5m at $70-$75 oil - 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 suggesting a dramatic ramp up in production from the 10 well 2018 programme will occur in H2/2018.

With actual production in early June of 1,821 bopd, and first production from a further 7 wells in H2/2018, i estimate EOY production in the range of 2,250 - 2,500 bopd.

Regarding costs, 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 completed production development well of the 2018 drilling programme).


Ross - as Spangle has mentioned - all oil production is a big plate spinning - whereby your constantly trying to increase production at a faster rate than the field decline rate.

The fact is that over the last year even without any increase in production TXP will have seen a $20.5m increase in gross revenue JUST FROM THE RECOVERY IN THE OIL PRICE TO 50% OF ITS PREVIOUS CYCLE PEAK! That will help to fund the drilling of an awful lot of wells !


AIMHO/DYOR

[rafieh] 07/8/2018 22:57

I agree. Add to your mix the chart pattern, which is just about the most bullish type of the chart you may see. The rise from here could be so big and sudden that the previous fluctuations may be dwarfed into an almost flat line!

[awise355] 07/8/2018 22:30

In my opinion and experience of markets, on an individual store basis with this kind of trade activity, blue sky horizon, undervaluation and potential short term expectation on news, coupled against this fly tiger hidden shoe poster i'm going to say with no guarantees who's is a screaming hold! Expect some tree shakes shortly as we progress to 25p by end of week and 30p by end of month, on the expectation of similar performance from 2017 wells drilled.

[flyinghorse1] 07/8/2018 22:21

Regarding production, my main concern till I see the data is production in an annualized (in year average) sense is hard to keep increasing as you have natural decline across all producers, electrical outages,pumps needing re-spaced/replaced etc etc that make it difficult to day in day out deliver growing production due to the nature of the land business--this is not North Sea 14,000 boped single well territory.
So the new wells simply dont add to a base thats declining due to depletion anyway-they fill in the gaps and decline themselves.

On the new well front some of the YE2017 wells have already been RCP'd (Recompleted due to first zone petering out, and if you remove Coora wells then the incremental production from "non Coora " wells is not huge, so I am really interested to see what the sustained impact of these new wells are against the backdrop of declining base.

Its a big plate spinning exercise that takes cash and resources.

For example Q1 was 1543bbls/day sales ave (June presentation)
Say Q2 is 1708bbls/day ave (Stated May 31-June 6th 1831bbls)
Lets say Q3+Q4 is 2000bbls every day

Then the annual average for the year 2018 is 1815bbls/day

If they cant sustain a Q3/4 average of 2000bbls/day (Sales) then the year-end average will be lower. (i.e If Q3/4 is 1900bbls/day then year average is 1764bbls/day)

This is against a backdrop of decline-its normal.

The danger I see here is Ross/myself are prepared to state whats not quite so good.
I am being cautious to read between the lines of the presentation material.

[mount teide] 07/8/2018 21:48

Chinese crude futures hit its 5% DAILY TRADING RANGE UPPER LIMIT today to US$78.37 (537.20 yuan) per barrel.


China’s Oil Futures Jump To Record High - OilPrice.com today

'China’s yuan-denominated crude oil futures contract for September delivery jumped to an all-time high on Tuesday by its daily limit, as speculators are eagerly trading the Chinese futures, while investors are uncertain where the most actively traded international benchmarks — Brent Crude and WTI Crude — are heading.

The Chinese oil futures, launched in March this year, have jumped as much as 5 percent so far in August and have been steadily gaining over the past two weeks.

Meanwhile, Brent Crude and WTI Crude are stuck in a tight range as market participants and traders try to make sense of the conflicting forces in the current oil market—the returning U.S. sanctions on Iran on the one hand, and fears that trade wars could curb demand growth, on the other hand.

On Tuesday, the Chinese crude futures contract for September jumped by its 5-percent daily limit compared to Monday’s settlement price, to US$78.37 (537.20 yuan) per barrel.

WTI Crude was up 1.10 percent at $69.24, and Brent Crude was trading up 1.26 at $74.13.

According to Bloomberg, there could be several reasons why the Chinese oil futures are soaring these days, unlike the two most active and important crude oil benchmarks. One is that a weaker yuan versus the US dollar could be enticing traders to buy the cheaper yuan-denominated Chinese futures, Bruce Xue, an analyst with Haitong Securities Co, told Bloomberg.

China’s reduction of U.S. crude oil imports amid the ongoing trade war raises speculation that the world’s biggest crude importer may see a shortage of cargoes, according to the analyst.

After months of subdued trading in the December 2019 futures contract, it has now become popular, and one of the reasons behind its appeal could be that Chinese oil traders and speculators prefer to trade futures on a quarterly instead of on a monthly basis, Xue told Bloomberg.'

[lord gnome] 07/8/2018 20:23

zho - thank you for that link.

MT - thank you for that confirmation of my guesswork.

We do indeed live in interesting times where TXP is concerned.

[brasso3] 07/8/2018 19:58

Q2 results end of next week?

[crooky1967] 07/8/2018 19:46

Rossannan, I am not convinced they will need to. Production should be at min 2300 bopd at year end and if oil prices stay where they are or a predictive rise then they should be ok with a netback of CND $40 a barrel. Let’s not forget they do not have to pay for all wells at the beginning of the year and new wells drilled will only add cash going forward and when they come in to production.

[crooky1967] 07/8/2018 19:46

Rossannan, I am not convinced they will need to. Production should be at min 2300 bopd at year end and if oil prices stay where they are or a predictive rise then they should be ok with a netback of CND $40 a barrel. Let’s not forget they do not have to pay for all wells at the beginning of the year and new wells drilled will only add cash going forward and when they come in to production.

[2prsimo] 07/8/2018 19:16

Think a few will really regret selling this early on in the story - I still reckon it's 50% undervalued on known production!!, but wdik.

[flyinghorse1] 07/8/2018 18:12

I have sold today after a nice rise of late. I may be proven wrong, but think TXP have the capacity to also surprise small shareholders with a placing/raise/flat-declining production, whilst spending.
I feel that the recent TXP presentation is quite rampy from TXP -a change in direction from past presentations, of slow and steady, especially the Ortoire block speculation.
At the end of the day they have had this license since 2014, its about to expire , has MWO and suddenly its marvelous.

The gas is deep in Carapal, yet the wells to be drilled under MWO are shallow (5000/6000ft) so low cost they will not be (think extra casing strings, pressure ramps, if gas extended testing to prove up compartment sizes).
Low risk -yes , but only because they are drilling to where hydrocarbons were found before-low cost -yes if shallow, but that wont be where the gas is.

Compartmentalization in gas fields is hard to determine (ie connectivity) so will require some testing /convincing of GIIP.

MT's constant ramping /regurgitation of selected nuggets has also worried me until I read post 2359 from him where he states his annoyances with out thinking the same can happen here.

Good luck , but in the absence of news and proper plans/spend for Ortoire I see it as high risk /reward for the gas and prefer to wait till a clearer picture of current production sustainability from the drills, and how they plan to tackle the deep gas is communicated.

[mount teide] 07/8/2018 17:52

LG

Did Cantor finish on the bid today?' Not only did they finish on the bid but repeatedly raised it into the close such was their desperation to flush out sellers.

'I suspect that it was Cantor's who came off the bid first thing to see if they could shake out any weak sellers.' It was indeed - no one got poor underestimating MM skulduggery and greed!

'Slightly less than successful I would suspect.' Cantor's behaviour today strongly supports such a view.

[lord gnome] 07/8/2018 17:44

Del - I have that 500k timed at 12:41:16 today, when the bid was 21p. I make that a sell with Cantors picking up the stock. Are you sure it was yesterday?