Touchstone Exploration Share Discussion Threads

[menameismud] 25/1/2019 11:50

Other than the possibility of an equity raise one thing holding TXP back is presumably the tax burden - average 28% royalties across the portfolio, plus 55% income tax plus supplementary petroleum tax plus windfall tax etc, doesn't leave much upside......

[alamaison5] 25/1/2019 10:55

ROO: TXP is way too expensive mate.

[lauders] 25/1/2019 01:27

Don't think this link has been shared yet:

Market reaction: positive

This is the first time there has been independent verification of the commerciality of the Ortoire block.

We had not factored in any contingent resources at all in our model and the very high chance of commerciality validates what Touchstone has been saying for some time about the very low risk of Corosan and the fact that it is easy to monetise.

Similarly, at Balata West, the oil prospect, we can now have confidence in its commercial value.

We also understand the resource estimates are based on only one of three prospects at Corosan and one of two at Balata West. There are therefore multiple follow-on prospects.

At Ortoire Central, where the company has previously seen the most upside, Touchstone believes the structure could be quite broken up and the independent estimate doesn’t represent the whole thing. The company still believes the entire structure could contain c. 440 bcf of gross gas in place(TXP WI 80%).

Recommendation:

BUY rating and £0.40 target price

Touchstone continues to be one of our preferred small cap names given the very attractive risk profile of the company.

Our eyes remains on the high impact Ortoire block where drilling is expected to start in 2019.

Our target price of £0.40 per share has been set close to our ReNAV.

40p per share would be nice!

[sleveen] 24/1/2019 20:12

KS

Explanation 1 applies to TXP.

[menameismud] 24/1/2019 19:17

King Suarez - thank you for your comments, I shall try to investigate more as the liability is large relative to the company size and so the the timing of any required payments could affect cashflow significantly.

[ileeman] 24/1/2019 18:54

I agree you should not always listen straight up and do research but it is fairly obvious they will not raise and this has been confirmed.

They are making good money currently breakeven is significantly lower than $40 and they dont need to fund Ortoire if they wish they can bring in a partner.

[gabrieloak] 24/1/2019 18:25

That comment was aimed at ceo’s In general, not txp.

[gabrieloak] 24/1/2019 18:06

Ileeman, really? CEO of a listed business...rule number 1: never say you want to do a placing before trying to do a placing. Rule number 2: if you can’t get traction on a placing then talk about something else.

G

[king suarez] 24/1/2019 17:55

Hi Menameisud,

I am not a tax accountant, but my reading about deferred tax liabilities is that these can occur due to either:

1) Using a rate/method of depreciation that, whilst is allowable under tax regulation, is higher than might be commonly used. In this scenario more of the exploration and development expenditure cost would be depreciated in the early life of the oil field thus decreasing taxable income in the short-term and instead generating a deferred tax liability - essentially a difference in the timing of tax payable due to differing depreciation rates. What might happen in practice is that as development drilling proves up greater reserves (or moves reserves into a higher confidence interval of recovery %) then the remained of the already booked development costs will have to be depreciated over a longer field life - causing a lower depreciation charge (and thus higher taxable income) further down the line.

2) Items expensed in the P&L that are non-deductable for tax purposes. A mining company I invest in Azerbaijan has offices in the UK and the admin costs for those are included in the profit before tax figure in their accounts, however the expense is not tax deductible under Azer tax laws (just one example).

I haven't looked into the details for TXP (although I am an investor/holder) but that might give you some ideas?

[ileeman] 24/1/2019 17:50

gabrieloak

Listen to the recent interviews, clearly says no raise required can juggle about well program to fund out out of cashflow + bring in partner if they want.

That is straight from the CEO.

[menameismud] 24/1/2019 17:39

Could anyone explain clearly the deferred tax income tax line? I can't understand the explanation in the notes, but at C$15m it needs to be understood. I see they have C$29 of T&T tax losses, the benefit of which they say they have not booked - given the tax loss position how come they are generating a liability? Is it theoretical or under what circumstances does this need to be paid?

[menameismud] 24/1/2019 17:21

I looked at the funds flow because it takes out non-cash deductions to reported earnings such as depreciation. What I don't know is how much cash they need to maintain production against natural depletion. And I'm not sure about the tax liabilities. I agree that they are not exactly swimming in cash, but I don't really see a need for an equity financing at this time and at this level (which doesn't mean that they won't do it!).

[menameismud] 24/1/2019 15:15

I'm just looking at the Q3 results

[gabrieloak] 24/1/2019 14:41

Just out of interest: given that heritage is selling Trinidad oil benchmarked against wti (like the SPT calc for all Trinidadian Oilers benchmarked against wti, where are you assuming you are selling oil right now to generate $3mln a quarter?)

[gabrieloak] 24/1/2019 14:13

Probably because of a difference of opinion on $3mln a quarter...perhaps I need to revisit the numbers...and assume very limited capex to keep the plates spinning. G

[menameismud] 24/1/2019 12:39

gabrieloak

interesting commentary - txp has $6m cash and cashflow/quarter of about $3m. There is about $14m debt at effective 14%, with a few $m headroom. They say they can bring in a partner fairly easily if needed to fund some drilling on the new block. Baay says he doesn't want to issue equity, but you seem to expect a raise......why?

[ileeman] 24/1/2019 08:22

Very hard to buy FWIW

[gabrieloak] 23/1/2019 23:46

Che7win

Definition of irony: nobody on Trin boards complain about the Trin placing anymore while you complain about Trin placing on the txp board.

Second definition of irony: jumping out of Trin post the pain in 2018 into a stock that probably needs to face its own pain in 2019.

Maybe time to move on? Everybody else seems to have.

Anyone who felt hard done by could have sold at ~17 p and purchased at 12p by the tail end of last year...(well below the placing price of 15p). Share now creeping up: is that stoking your reference today following a good quarterly fact sheet...(quarterly meaning not possible to provide annually generated eps.)?

For a few longs here, the medicine was felt in Trin and some followed the “advice” to exit in 2018, heading into txp... to go straight into a stock that may very well need to go through a similar process. You’re not talking about it here, but if you run the numbers and look at the debt/equity ratio then arguably it needs to happen.

If a txp raise does occur, are you going to blame Trin for that as well...or perhaps look at your investing in capital intensive businesses that have to navigate a non-intuitive fiscal regime?

As things are shaping up, the main unforeseen difference between Trin in 2018 and txp in 2019 seems to be that Trin did it with a tailwind and txp may now have to wait to avoid a headwind...depending on what sort of a program you algebraically deduce needs to get funded.

I am a supporter of txp and enjoyed meeting Paul Baay...I want all Trinidadian Oilers to be around and flourishing...itR17;s good for the Trinidad brand and adds more voices to seek a long overdue oil fiscal reform.

I read this board often as it mainly has interesting comment.

G

[spangle93] 23/1/2019 15:50

I look forward to hearing full details of your bull case, rossannan... It will be a treat to be spared the bear case for a while ;-)

[ileeman] 23/1/2019 14:37

And like clockwork rossannan has bought back in and is now leaning more and more bullish in their posts, I did say lol

A lot of devious tactics at work in the markets so nothing new, as I always say ignore the noise and focus on fundamentals.

This market cap is a gift and recent presentations + RNS just solidiifes that breakeven significantly below $40 + can fund from cashflow was a key factor some have missed.