Touchstone Exploration Share Discussion Threads

[mount teide] 28/1/2019 12:05

Trouble In Paradise For US Frackers - OilPrice.com

'The oil hedge data can be read as a warning that the capital expenditures of independent producers may be constrained in 2019. All these firms will meet with their bankers in the next two or three months. The bankers will likely demand to see the companies’ hedging plans. In some cases, the E&P firms will discover that the cost of hedging their next few wells will force them to curtail or even cancel their 2019 drilling programs.'

[lauders] 28/1/2019 01:35

Shame that the recent Ortoire independent prospect evaluation did not kick some life into TXP but perhaps there will be a delayed action and folk are waiting for the spudding to start as well. Still, with a 100%+ share price target from where we are now (according to the link below) I am "expecting" some movement northwards in the not too distant future.



Touchstone is expected to commence exploration on Ortoire, "which provides investors with high-impact upside potential," Newman indicated. At the same time, the company will keep expanding its production base through continued exploration of its 'low-risk locations on its development blocks."

Mackie Research has a Speculative Buy and a CA$0.50 target price on Touchstone. The stock is currently trading at around CA$0.22 per share—at a "large discount to its core net asset value," which Mackie estimates is about $1.11 per fully diluted share, or $143.7 million, Newman pointed out.

[mount teide] 25/1/2019 18:11

Paul Baay proved his business expertise during the brutal recession that hit the sector during 2013-2017 - many T&T oilers/service companies either went out of business or were very fortunate indeed to survive.

Baay's early cost cutting policy and smart hedging saw TXP not only avoid the fate of many T&T oilers but enabled them to pick up cut priced assets.

[sleveen] 25/1/2019 17:45

Another 2p off CERP should see reasonable value @ 0.7p.

[gabrieloak] 25/1/2019 17:44

R...Maybe some day soon if prices stay around these levels and the Trinidadian oil industry starts to notch up casualties...what party wants to choke the hell out of smaller local independents

[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?