Touchstone Exploration Share Discussion Threads

[king suarez] 28/2/2019 11:27

Interesting pots by Gizzy87 on LSE TXP board yesterday. Worth a read.

[wanobi] 28/2/2019 08:11

thanx wif, great interview, he said all the right things for me, cheers Wan

[wheniamfree] 28/2/2019 07:27

Paul Baay recent interview.

[mount teide] 26/2/2019 17:27

Wall Street is finally calling time on the loss making shale industry.



Wall Street Loses Faith In Shale - OilPrice.com

'To Wall Street, the shale industry has lost a lot of its allure. A decade’s worth of promises have failed to materialize, and Big Finance is cutting some of its ties with smaller shale drillers who have not delivered.

The Wall Street Journal reports that the shale industry only saw $22 billion in new bond and equity deals, down by more than half from 2016 levels, which was a much worse time for the market.

The steep decline in new debt and equity issuance is a sign that major investors are no longer rushing to finance unprofitable shale drilling. It’s worth noting that this is a new development. For years Wall Street financed unprofitable drilling, holding out on the promise that rapid production growth would eventually pay off.

Shale wells suffer from precipitous decline rates, with as much as three quarters of a well’s total lifetime production coming out in the first year or two. After an initial burst of output, shale wells enter a steep decline.

Of course, this has been known since the beginning and Wall Street has long been fully aware. But major investors hoped that shale companies would scale up, achieve efficiencies and lower breakeven prices to the point that they could turn a profit.

However, that has not been the case. While there are some drillers that are profitable, taken as a whole the industry has been cash flow negative essentially since its beginning in the mid-2000s. For instance, the IEA estimates that the shale industry posted cumulative negative free cash flow of over $200 billion between 2010 and 2014.

The red ink has narrowed since then, but so too has the patience from Wall Street. In 2018, even as oil prices hit their highest levels in years, new debt and equity issuance plunged. That makes it harder for small and even medium-sized companies to finance growth. It’s not all that surprising, then, that a wave of spending cuts have cropped up in the last few months.

The WSJ notes that the credit environment also worsened when the market hit its nadir in 2016. Regulators tightened lending requirements, raising the cost of capital for indebted drillers. That, of course, made it even more difficult for these drillers to turn a profit.

To top it off, all of these pesky investors are much more demanding than they used to be, calling on companies to stop spending so much and instead return cash to shareholders. That leaves less capital available to inject back into the ground. Earlier this month Barclays issued a double-downgrade to Occidental Petroleum, lowering it from Overweight to Underweight, citing the company’s deficit after dividends at a time when the driller still expected to aim for an aggressive production target.But some companies are between a rock and a hard place. The WSJ notes that CNX Resources has lost over 20 percent since late January when it announced that it was bowing to investor pressure to cut spending. That led to speculation that the company wouldn’t meet its production target. It’s a no-win situation for some.

What to make of all of this? As Liam Denning of Bloomberg Opinion put it, “[t]the prevailing financial model for many frackers has hit a wall.” Denning points out that the shale industry has not posted a return on capital above 10 percent any year since 2006, which says is a “feature of shale, not a bug.”

According to Rystad Energy, the 33 largest publicly-traded shale companies, accounting for 39 percent of U.S. shale output, will struggle to please shareholders while also trimming debt. “Shale E&Ps struggle to please equity investors and reduce leverage ratios simultaneously. Despite a significant deleverage last year, estimated 2019 free cash flow barely covers operator obligations, putting E&Ps on thin ice as future dividend payments remain in question,” Rystad Energy senior analyst Alisa Lukash said in a statement.

Taking a step back, explosive shale growth was only possible because in the context of the post-2008 financial crisis and the response by the Federal Reserve to drop interest rates close to zero, something Bethany McLean argues in her book, “Saudi America.” Cheap money financed the debt-fueled shale revolution.

Rystad finds that over half of the total debt pile for the 33 companies it analyzed is due within the next seven years. Ultimately, the industry may have to erase $4 billion in promised dividend payments. “The obvious gap in expected versus likely dividend payments confirms the industry’s inability to deliver sustained investors’ payback while simultaneously deleveraging,” Lukash said.

That doesn’t mean that production is going to fall off of a cliff. These days, the shale drilling frenzy is being pushed along increasingly by the oil majors, who have gobbled up smaller companies. ExxonMobil and Chevron, for instance, can take a long view, and put mountains of cash into drilling. Investor pressure is different for these multinationals and, in any event, they are much more profitable than smaller shale companies due to various assets in refining, chemicals, offshore and otherwise conventional production.

As such, production growth will continue for a while longer. But the go-go days are over.'

[ileeman] 25/2/2019 13:34

Wake up Mr Market.

"The first target will be Corosan, a natural gas prospect located just north of Shell’s Carapal Ridge discovery, which will be drilled in June. Corosan could contain up to 50Bcf of gas which could effectively double Touchstone’s current production. The second prospect is called Balata West, which Baay says could support 30-40 wells producing 3,000-4,000bopd. Baay believes the third prospect, called OL-4, could be the most prospective of all the Ortoire targets.

The prospects are considered lower risk, having been drilled previously in the 1950s-1960s, and success at each prospect will be a ‘step change’ for Touchstone."

hxxp://www.valuethemarkets.com/index.php/2019/02/25/podcast-touchstones-paul-baay-discusses-potential-ortoire-block-ahead-three-drill-campaign-txp/

[ileeman] 25/2/2019 11:09

Again maybe you should look at the oil chart Hari, oil has a long way to go to get back to the highs although it is recovering.

[hari] 24/2/2019 21:24

Excuse the typoAutocorrect having a mare In that respect the company announce that due to crude price volatility they have ‘held back from recommencing our development drilling programme’ and will drill only based on the ‘prevailing’ commodity marketI just do not buy that excuse ... oil has been volatile but has moved back up The Co have been talking up this drilling program ... wonder why now Placing and drop the idea with a lame reason The placing is not at a small discount I am sure price was nearer 20p when Placing was being negotiated It is the reason for the drop . Even when oil started recovering the it was being sold into Cash in bank , but yes with creation of dilution ...let's hope the cash hits oil or it will fall back again

[spangle93] 24/2/2019 20:09

"the future is in hold as drooling has been suspended?"??

Try sitting with food in front of a golden retriever, then you'll know it's not a true statement

[ileeman] 24/2/2019 19:30

Have you been living under a rock? I assume you do not look at oil price then.

Oil dropped and in turn so did TXP although you can clearly see the drop has been overdone as is the norm on AIM.

More money in the bank with cornerstone backing at basically no discount is a very good outcome for shareholders, shareraises are looked down upon due to retail involvment/flippers and large discounts TXP did neither.

Newest interview states production hit 2100bodp + Ortoire soon, happy days....fundamentals improving, oil moving back up, shareprice will follow at some point.

[hari] 24/2/2019 18:05

ILeeman"Although unexpected I am actually quite pleased at the raise, a very good price and cornerstone investors involved which provides a very nice safety net."really One you have been talking this up as it began falling from 20p to 10.5pAll this additional oil to come online in the future is in hold as drooling has been suspended Then you are pleased with a placing when you did but expect one in the first place Are you wearing rose tinted glasses or just cannot be objective because you to justify your investment even as the share price kept falling It is where it is because the Co needed to raise funds as ppl in know drive it down ... nothing knew really

[mount teide] 23/2/2019 22:55

Energy Sector Research Data - Weekly 'Numbers Report' - OilPrice.Com Subscription Article so just a few snippets:


'OPEC+ cuts could push market into deficit:

* OPEC produced around 30.8 million barrels per day in January, down 880,000 bpd from a month earlier and down 1.5 mb/d from the November peak, according to Standard Chartered.
* Saudi Arabia has pledged to cut another 0.5 mb/d by March. That alone should be enough to eliminate the surplus.
* “We forecast that the oil market will move into a deficit of over 500kb/d in February and March, with the call on OPEC crude rising while output falls,” Standard Chartered concluded.
* Standard Chartered sees Brent prices moving back to $70 per barrel in the relatively near future.

Oil supply outages at highest level in years:

* Not only are the OPEC+ cuts slated to erase the supply surplus, but a series of unplanned outages are also tightening the oil market.
* Libya, Nigeria, Venezuela and Iran have all seen unscheduled outages. Canada cut production to rescue prices in the face of midstream bottlenecks. The volume of unexpected supply disruptions is arguably at its highest rate in years.
* “Angola and Mexico continue to over-comply due to lack of investments causing natural decline,” JP Morgan added in a report.
* These latest supply outage figures do not even include the unfolding rapid declines in Venezuela, nor do they include the deteriorating situation in Iran.
* JP Morgan argues that the markets are “not pricing in the risk premiums associated with such events fairly.” '

[sleveen] 23/2/2019 11:36

rossannan 23 Feb '19 - 01:25 - 3857 of 3859

Pretty fair summary IMV.

[ileeman] 23/2/2019 11:02

Think they are just thumbing down you in general, either you are deramping or taking sly shots or ramping TRIN haha

Back on topic

Although unexpected I am actually quite pleased at the raise, a very good price and cornerstone investors involved which provides a very nice safety net.

Another point which no one has touched on, we know TXP is significantly undervalued compared to peers and even more so with Ortoire coming up one reason for this is because the company is so far off the radar. I understand most of the raise was through institutions but a small portion did get allocated to retail investors which could actually help bring the company on the map and spread awareness.

Oil trending higher with production now at an all time high of 2100 bopd and growing, no doubt Ortoire will see the excitment return over the next few months.

[spangle93] 22/2/2019 13:02

Thanks MT, rossannan for your views

[mount teide] 22/2/2019 13:01

TRIN's 2018 field decline rate: they had every man and his brother on the bellows last year to combat field declines, carrying out;

17 RCP's and 143 well work-overs!