Touchstone Exploration Share Discussion Threads

[buffythebuffoon] 02/11/2018 10:08

"I know one or two peps who just don't get this..."

Not to mention at least as many peeps.

Buffy

[captainfatcat] 02/11/2018 07:35

MT "In the current oil price and well drilling cost environment, anyone in the Boardroom advocating paying down debt over production development need their heads read as they would be at extreme risk of getting taken away in a straightjacket."

Well said,

I know one or two peps who just don't get this...

[mount teide] 01/11/2018 21:36

CFC - 'The well recompletions and infill well drilling stuff might be boring buts its exceptionally low risk and highly profitable way to generate cash!

Exactly CFC - with Brent at sub $50 back in Q2/2017, Paul Baay raised more than a few eyebrows when he announced that a recession leaned TXP was commencing a programme of four infill production development wells across their assets in T&T - the first post oil recession onshore development wells on the Island for three years.

Some 16 months of production later, the four wells which cost circa $1 million each to drill and complete have collectively generated revenue of circa $12 million net of Petrotrin's Sales Tax - completely validating the decision.

And at $75 Brent the four wells are still currently producing revenue net of sales tax at the rate of $10m a year.

In the current oil price and well drilling cost environment, anyone in the Boardroom advocating paying down debt over production development need their heads read as they would be at extreme risk of getting taken away in a straightjacket.

[red rook] 01/11/2018 21:25

Regarding the Ortoire Drills:

There was a question in the webcast (at~20:50) about the chance of success (CoS) for the drills. PB gave it a CoS of around 20-25% ! These are not great odds, and seem pretty low considering the amount of historical drill data and current seismics they have.

[mr. t] 01/11/2018 15:54

Thanks for sharing Crooky, I always like hearing Paul Baay speak - he's competent with a great story to tell.

I like how he's open with the risks and negatives too, managing shareholder expectations. We heard that the discount to Brent for oil sales has widened this month (I imagine in part due to the changes at Petrotrin), and about the (already announced) disappointing coora-2 wells.

PB's a little more conservative on funds flow from operations forecasts at around $12m this year and $20m next (IIRC in an earlier projection he hoped for $12-14m this year and $20-25m next year). His forecast production for next year at 2,400 bopd sounds conservative - I was hoping for close to that in Q1 after this years' drills are all online. Either my assumptions are poor, or PB is giving himself room for out performance.

I liked the comments on the Board not wanting to add debt or equity, and investment being funded from cash flow. Related to this, the Chairman John Wright has 4,745,027 shares (just under 4% of the company - the third or fourth largest shareholder) and he attended every Board meeting last year. He'll have a strong motivation in making sure Board decisions are made in shareholders' best interest - nicely complementing Paul Baay.

Without Ortoire, TXP would be an attractive, well run, low risk company to invest in for exposure to oil production. With Ortoire, I think it's great.

[sleveen] 01/11/2018 13:23

Webcast added to header info.

[mount teide] 01/11/2018 12:40

Spangle - thanks - based my calculations rightly or wrongly on the following:

Since the 2017 wells generated hardly any decline in the first year - i used the average annual decline rate of circa 11.7% up to 1,500 bopd of production from the monthly production graph and excluded the production from the 2018 wells on the assumption that the performance would largely mirror the 2017 wells(little first year decline).

If we take the historical decline rate of circa 12% and assume production from the 2018 wells were to decline by the same amount during the first year then that would probably suggest two not one infill wells would be required in 2019 in addition to the annual well recompletion programme to offset the decline.

[crooky1967] 01/11/2018 12:06

Last nights TXP presentation is up on Valuethemarkets.com

[spangle93] 01/11/2018 11:57

Mount T "Average field decline rate (over 2ys 9 mths) = 13.9 bls / month" - according to the notes on Paul Baay's presentation in the header, base decline is 12%, which would equate to 240 bopd/year at 2000 bopd.

[captainfatcat] 01/11/2018 11:42

Buffy the well recompletions and infill well drilling stuff might be boring buts its exceptionally low risk and highly profitable way to generate cash!

Consider the economics of the recent Columbus Primera purchase (which I think its still to complete)?

Columbus will be paying TXP roughly $50K per flowing barrel for Primera. TXP production cost is roughly $10k per flowing barrel so they are basically swapping an asset that produces 10bopd for a future 50bopd potentially generating a 500% increase in revenue from the sale of that asset.

[mount teide] 01/11/2018 11:33

Hi Buffy - I look at it this way for 2019 - the well recompletions and one infill well means that the other nine infill wells should potentially be all production upside.

At say an average of 75 bopd, that's an additional 675 bopd on top of what the current 2,015 bops plus 6 further 2018 wells and the two 2018 wells currently in production but yet to contribute from the lower zone add.

The cash flow this 'boring' near 50% production increase this year delivers in 2019 along with the contribution that another 10 infill wells generates at an average of $65-$80 oil, will enable shareholders at the current share-price to gain exposure to the drilling of three ultra high impact onshore exploration prospects next year with offshore potential reserves, at a drill cost at a circa 82.5% discount to the $20m cost for a similar offshore well.

Where else on any equity bourse can you get such low cost, relatively "low risk" exposure to offshore size exploration potential with such huge upside valuation potential for a small cap? - through self funded very low cost wells using modern drilling technology on large, deep prospects that were originally drilled 60-70 years ago and, despite the extremely modest equipment and drilling technology of the day still found and tested successfully for natural gas and oil.

The Ortoire exploration wells also offer the additional prospect and insurance policy as Paul Bay pointed out yesterday, to test the shallow oil zones on the way down, that TXP were originally planning to target before the team identified the huge potential that the deeper zones offered, especially for natural gas, since in the 1950's any discoveries were considered 'worthless' and the wells immediately abandoned as there was no possibility to commercially develop gas discoveries on the island.

It would be another 40 years before the situation changed with the building of a World Class LNG facility to commercially exploit the large number of huge offshore gas discoveries subsequently found off the island after the oil majors following the advancement of drilling technology and development of offshore drilling platforms largely transferred their exploration operations offshore during the 80's and 90's.

[captainfatcat] 01/11/2018 11:23

Thanks crooky

[crooky1967] 01/11/2018 10:49

captainfatcat, they are aiming to publish today according to Twitter

[homebrewruss] 01/11/2018 10:22

Buffy fair point to a degree but how many companies are offering a number of potential 10 bag like chances funded from internal cashflow?

Surely the ortoire prospects are a game changer here while the price is more than underpinned by production.

[buffythebuffoon] 01/11/2018 10:04

Hi MT,

Obviously Ortoire could genuinely be a game changer; but some might view all of the activity that 15-20 well recompletions and an infill well entails just to stand still, is not overly exciting.

Buffy

[mount teide] 01/11/2018 08:51

Some broad brush calculations from the latest presentation and recent news that average production in early October pushed through the 2,000 bopd milestone;

Average field decline rate (over 2ys 9 mths) = 13.9 bls / month

Average production contribution from well recompletion programme since recommencement in Jan 2017 = 12.1 bls / month

Current production contribution from four 2017 wells = 300 bopd / 75 bopd per well

Current production contribution from eight 2018 wells = circa 500 bopd / 62.5 bopd

Assuming the two 2018 wells testing the upper zone(proved uneconomic) are currently producing 20 bopd each until the primary target lower zones are brought into production, it pushes the average of the other 6 primary zone wells up to 77 bopd.


Suggests an annual programme of 15-20 well recompletions together with one new infill well per year should currently be sufficient to offset the overall field decline rate.

[captainfatcat] 01/11/2018 08:45

I thought a recording of yesterdays live feed was going to be made available looking on valuethemarkets where it was hosted I cant see anything available as yet.

[scottishfield] 31/10/2018 20:25

Thanks all, appreciated.

[mount teide] 31/10/2018 20:11

ten - 'interesting to see that they may accelerate Ortoire drilling if the first drill is a success (at the expense of the development programme)'


Since we are targeting offshore size prospects onshore at less than one fifth the drill cost - I for one would have no problem with that!

[che7win] 31/10/2018 19:49

For Ortaire, the first 4 wells Petrotrin carried in, so maybe they keep the best prospects to after these?

[tektonik] 31/10/2018 19:49

Good interview from PB, interesting to see that they may accelerate Ortoire drilling if the first drill is a success (at the expense of the development programme). The board are not interested in any sort of raise and are confident that the company can proceed self-funded

[brasso3] 31/10/2018 19:47

They believe they are undervalued when compared to TRIN and CERP as they are relatively new to the london markets. They also believe they did not have the high impact exploration targets until recently and expect those to get factored into the price in the near term.

[brasso3] 31/10/2018 19:44

All T & T producers will benefit from the Petrotin situation.

[brasso3] 31/10/2018 19:44

They are happy with the loan situation as it is fixed term and only 8% interest. The BoD are not keen to increase debt or raise equity. The slow and steady approach living within their means is preferred.

[brasso3] 31/10/2018 19:43

Based on 10 development wells TXP are targeting 2400 BOPD production. The development campaign may be extended in H2 2019 (same approach as 2018). If they drill more wells then the end of year target will be higher.