Touchstone Exploration Share Discussion Threads

[mount teide] 29/9/2018 22:11

North Energy buying again:

MarketBeat: TSE:TXP - Touchstone Exploration Insider Trading Activity

9/26/2018 - North Energy Capital - Insider Buy: 175,000



Trading report suggests North Energy picked up the 175k at C$0.17 - like to know how they managed that!

[brasso3] 29/9/2018 12:11

I cashed in 25% of my TXP holding at 20p to lock in some profits and ensure I had some powder dry for a pullback. I will be putting that money back into TXP this week when the time is right.

[mount teide] 29/9/2018 11:26

FB - equity markets today are characterised by short term traders thinking they can jump in and out of positions with more success than buying value and following a buy and hold approach - industry research strongly suggests otherwise since few have much success over the longer term.

Those who bought initial positions last summer/early autumn have seen to date circa 100% return - about 95 years interest in the current best cash ISA's for basically doing nothing other than buying value and sitting back and letting the management and oil market recovery phase work its magic.

Barring a collapse in the POO(highly unlikely considering the market fundamentals) i am expecting a similar return over the next year from the core business with the ultra high impact Ortoire prospects thrown in for free.

Volatility is to be expected - most small/medium caps i hold or have on watch routinely experience five to seven 15%-20% moves up and down a year - which is useful for those wishing to use the pullbacks to average up as the investment case strengthens.

With the progress the business has made over the last 12 months combined with $83 oil, i consider the current value on offer at TXP is significantly better than when two friends and i purchased circa 1% each last summer at around 8.5p - hence why we all have since averaged up heavily at prices up to 17p-18p.

If like us you can see Brent averaging $75 - $85 over the next 12 months - some of these lowly valued small cap oilers like TXP that are now throwing off serious cash flow relative to the market cap, offer potentially outstanding risk/reward

During the last oil market cycle recovery/boom phase 2000-2008, oil equities badly lagged the recovery in the POO for the first 2-3 years before finally catching a bid and taking off. We are currently 2.5 years into a new oil market cycle recovery phase where the equities are once again seriously lagging the recovery in the POO.

I suspect oil's rise above $80 (the average price since 2008) will likely be the catalyst the market has been waiting for to kick start a period of strong outperformance by oil market equities considering how lean most of the survivors are now, following a brutal near half decade of falling oil prices and cost saving initiatives into 2016.

AIMHO/DYOR

[sleveen] 29/9/2018 10:48

Re buy at current levels for the next leg up?

No share price goes up without a retrace as peep take profits.

[fardels bear] 29/9/2018 10:08

Then what though?

[sleveen] 29/9/2018 10:06

profit taking?

Buy at 12p sell at 20p very nice, very nice.

[fardels bear] 29/9/2018 09:30

So why the big retrace?It can't all be down to rossbangin' (on)..

[mr. t] 28/9/2018 05:22

Thanks Spangle, your comments make sense.

[mount teide] 28/9/2018 01:38

Spangle - thanks for your thoughts.

'they'd far rather take the processing and transportation costs than get involved in the field itself.' - With regard to Corosan prospects i would agree.

The Ortoire Central gas prospects are an order of magnitude larger than the Corosan prospects (each potentially twice Shell's Central Block) and might be looked at differently. Since in the event of significant drilling success on these mega prospects its difficult to see a company the size of TXP taking the route of commercial development - as with the nearby Carapal Ridge in 2004, an outright sale would surely be the most likely outcome.

[spangle93] 28/9/2018 00:16

otemple3 - well, there are many on this thread who are better blessed at interpreting accounts, so take this with a pinch of salt. All I was trying to do was reconcile the $2MM a month quoted by Baay against the $1.1MM noted by Mr T

In the Interims 18th August, there's a table titled
"Interim Consolidated Statements of Comprehensive Income (Loss)"

First line is revenue at $12,508k for the quarter
There are two other lines: Royalty ($3,531k) and Operating Expenses ($3,010)
If you subtract these costs from the revenue and divide the result by the 1,717 average barrels and 91 days, you get precisely the netback figures shown in the presentation, and also the $2MM/month

In the original table
"Financial and Operating Results Summary"
It states funds flow from operations $3,258k or $1.1MM roughly per month

this comes from the table further down the results called
"Interim Consolidated Statements of Cash Flows"
Which starts with the net loss of $692k which is the earnings after tax, then adds back all the non-operational cash items that were taken out of the comprehensive income column, to get back to $3258

So, to within noise, that I can't resolve ("others", Forex gap), the gap between the $2MM a month (revenue minus royalties, minus operating cost) and the $1.1MM/month is arises from G&A, tax due, and finance cost

[otemple3] 27/9/2018 23:28

Hi SpangleI can follow the cash flows until the critical 'Buckets of positivity' - can you elaborate as I am struggling to see where the positive cash flow is coming fromThanks

[spangle93] 27/9/2018 22:57

Mount T - and finally...

Ref: Corosan: it would surely be a logical step for TXP to approach Shell to offer them a farm-in deal on the Ortoire Central 11,500 - 12,500ft mega gas prospects?

Yes it would certainly be good to approach Shell

As in the event of success any commercial development of the assets would inevitably involve Shell and since the upside potential of the prospects is so large, to lose say 25%-30% for a substantial carry would be totally immaterial for a company with a present market cap of £21m - plus it would likely see the drilling of these prospects brought forward.

Well, since this is conjecture, and late in the evening, I invoke the use ofcaptainfatcat's analogy of a pub discussion....

I rarely, if ever, see Shell as a non-operating, minority equity partner to a junior operator. If they were in, they'd want much more, and probably to run the show

Also, if they did enter, based on how majors operate, I'd suggest their modus operandi would be to farm in AFTER any discovery

Shell decision-making process and speed in comparison to a micro-cap is labyrinthine, so yes, having them on-board might speed up development, but it could also delay things.

Finally, I'd argue in the virtual pub that for a company of Shell's size, Corosan is not material enough to bother with, and they'd far rather take the processing and transportation costs than get involved in the field itself.

[Watch for the RNS to the contrary tomorrow ;-)

[spangle93] 27/9/2018 22:43

Mount T - ref your pipeline question, there are so many variables to the cost of a flowline that it would be really hard to give any kind of a usable answer, e.g. pipe diameter, wall thickness, terrain to be crossed, whether it has to be buried, plus whether mobilisation cost could be spread across other flowlines. Then there are the tie-in costs at Shell's plant for which TXP would be liable.

The company does not express any difficulty in tying this back to Shell's plant, but there would be rights of way to acquire before any digging could be done.

I found one estimate in a CPR for a 3.5km tieback of a well, of US$1.1MM, excluding tie-ins but including a small compressor. I think the land would make pipeline laying more tricky than in that location, so if I were to take a flying guess, I'd say $1.5MM total, including reception facility tie-in, +/- 100%. But in practice, who knows. [I don't want someone digging this out 2 years hence and saying "but you said $1.5MM ..." ]


edit - post 3000, sweet!

[spangle93] 27/9/2018 22:02

Mr T - I guess it depends what he meant by operating cash.

He tends to talk in netback per barrel quite a bit, e.g. slide 6 of the September presentation. If you use the same method on the gross totals (i.e. not per barrel) and just remove royalties and direct operating costs from the 2Q gross revenue, you get $5.96MM (Canadian) or pretty much exactly $2MM per month

If you add G&A & DD&A that's $2.2MM more cost, then there are some other categories like loan servicing that add cost, but then there are other buckets of positivity, until ultimately you get to the roughly $1.1MM per month headline "funds flow from operations"

[mr. t] 27/9/2018 20:45

Spangle, thanks for sharing your analysis.

One comment I have is on Paul Baay’s statement that TXP is generating $2m operating cash per month. I’m surprised it’s that high. In Q2 2018, TXP averaged 1717b/d production, Brent averaged $74.53, and operating cash flow averaged less than $1.1m per month.

In July, average production was only slightly higher at 1757b/d and Brent remained about $74.50. We don’t know August production figures yet, but Brent was lower at under $74 and the September valuethemarkets article quoted PB saying production was stuck around 1800b/d.

Given Jul and Aug production was only slightly above q2 and Brent was the same or lower, how come monthly cash flow is almost double what it was in q2?

Factors I can think of are there may have been cost efficiencies, more operating costs have been capitalised with the increased drilling (so are carved out of operating cash expenses), and/or the realized price discount to Brent has reduced.

Even considering the above, I find the q2 cash flow figures and Paul Bays $2m comment hard to reconcile.

[buffythebuffoon] 27/9/2018 20:40

Hi Spangle,

6) The question was:

Given the relatively low valuation of TXP against other operators in the area, do you think the debt is a concern to the market?

His response, which was mildly tetchy, was that the debt was a cheap loan that he saw no reason to repay before he had to. This missed the point the questioner was raising.

Buffy

[mount teide] 27/9/2018 14:36

Spangle - thanks for your reply - what would you estimate the likely 2-3km tie-in cost from the Corosan prospects in the event commercial success to Shell's Central Block gas field infrastructure/pipeline network?

Ref: Corosan: Considering the good relationship with Shell the major shareholder and operator of the Port Fortin LNG terminal; who has freely given TXP all their technical drill data/logs etc for their nearby Central Block gas field/wells, it would surely be a logical step for TXP to approach Shell to offer them a farm-in deal on the Ortoire Central 11,500 - 12,500ft mega gas prospects?

As in the event of success any commercial development of the assets would inevitably involve Shell and since the upside potential of the prospects is so large, to lose say 25%-30% for a substantial carry would be totally immaterial for a company with a present market cap of £21m - plus it would likely see the drilling of these prospects brought forward.

[crooky1967] 27/9/2018 12:46

awise355 - Sorry that was me, sold 25% of my ISA holding to buy some RRE. It that comes off I'll buy them back.

[highly geared] 27/9/2018 12:16

45 wells over 3 years should give say 3,000 bopd (being conservative). Allowing for declines of existing wells, hard to get a run rate but I'd have thought 4,000 bopd going into 2021-22 without Ortoire (the high impact stuff.)

The market cap is £22 million; go figure.....

[awise355] 27/9/2018 12:16

Someone sold £20k are they off setting buys and sells to keep prices at this level?

[awise355] 27/9/2018 11:57

Just topped up with some shares, come on has to be news flow soon, next week? So many Wells to come on stream let's just hope they are average Wells, not below, not above just average is good enough for the milestone....