Touchstone Exploration Share Discussion Threads

[lazarus2010] 20/5/2015 08:19

no problem Phil, as a shareholder of both companies it's great to hear the different strengths and weaknesses of both companies on a single bb! Of course on the LGO thread such a conversation would not be possible as it would get in the way of all the general chit-chat and slagging that goes on there ;-)

thanks

[jamesiebabie] 19/5/2015 22:45

sttg - TXP sit well with $40 WTI as the tax becomes zero!! TXP and the operators are better off!! It's a stupid system.

[jamesiebabie] 19/5/2015 22:35

Phil - it's fine! As I said, TXP are doing quite a bit of 3D at the moment with Petrotrin.

I know you were critical of TXP's presentation in Jan, but it was aimed at a certain audience [not investors] and they were not the only ones suggesting change. ALL operators are hit by the SPT where there is a marked drop off.

[senttothegallows] 19/5/2015 22:34

JB

How does TXP sit with your forecast of $40wti spouted on the Empyrean energy board. TBH I am very uncomfortable with your post so thought it best to share with your followers?

[dalesman] 19/5/2015 22:06

Now that would be good news and I await that particular development with much interest - PLEASE keep me up to date.

I apologise for hijacking your board but the similarity between the companies, the environment in which they work and the ability as you say to learn from each other is a very good aspect of operating in Trinidad.

Horizontals should work well. Fracing has been carried out for many decades in Trinidad so they are experienced in this technique.

Tell me to bog off if I am dominating your board!

Kind regards

Phil

[jamesiebabie] 19/5/2015 21:55

Phil - TXP are doing the same, more infill and the interesting bit later this year depending on the new rigs, TXP want to do some horizontal drilling using their expertise from Canada.

TXP's older presentations show the expected horizontal drill locations. :0)

[dalesman] 19/5/2015 21:42

Not a fan of water flood schemes - one is planned for Goudron after the infill programme but that will thankfully be delayed as the infill programme is now set to drill many more wells than was first envisaged.

Again from the conference:

Speculator

Geochemical Analyses of Oils from Goudron Field

Oil samples from 13 wells in the Goudron field, plus 5 side cores from new wells reveal evaporative fractionation and biodegradation of the reservoired oils.

Evaporative fractionation is a process where only the lighter ends of the original oil separate and migrate into shallower reservoirs (e.g. Gros Morne/Cruse around 3’000' and Goudron Sandstones as shallow as 500’+). They are termed evaporative condensates. The heavier waxier oil is left behind as residual oil (sub 4,000’ in Lower Cruse and deeper 5,000'+ Karamath sands) in the source rock.

Biodegraded oil is oil where the lighter fractions have been consumed by bacteria introduced in groundwater along fault lines.

The majority of oils produced from Goudron have high API in the range 38-45 and are both fractionated and biodegraded.

The premise was that the lower oils from the C-sands (GM and Cruse) would be residual heavier oils and the higher oils from the GS would be lighter

However, the geochemical analysis of the various oils using high resolution gas chromatography revealed the following:

High API (lighter) oils in the lower C-sand reservoirs are evaporative condensates which have migrated from deeper, untapped sources and indicates the high probability of heavier residual oils even lower down (below 4’000’+). This feature is predominant on the Western side of the Goudron field. Deeper exploratory drilling is required to prove up this conclusion.

Heavier biodegraded oils found in shallower wells suggests that the lighter ends may have migrated to a nearby, as yet untapped reservoir. This is predominant in the Central part of the Goudron filed. “Pool extension” wells are required to find the nearby evaporative condensates derived from these residual oils which are likely to be shallow. Other fields in the country have a very high success rate in identifying and developing these nearby pool extensions. Surface oil seeps can reveal potential drill locations.

In Summary there is great further potential for production and exploratory drilling in Goudron. There is a reason the field was named “Goudron”; in the first place.

There was also a section on the potential of deeper unconventional (horizontal plus fracking) wells to target about 1 billion barrels STOOIP in the nearby SE area of Trinidad but this is outside LGO's current license area.

Here is my follow up post

Hi Speculator

That was an excellent post and holds out great potential for the future.

From what you are saying we have the possibility of multiple stacked reservoirs still to be tapped, with the Goudron and Lower Cruz sands only being the tip of the proverbial iceberg.

That makes absolute sense to me as I have always wondered why the API at Goudron - 40+ - was higher than experienced elsewhere on the island.

If the lab based analysis is identifying these two reservoirs as fractionated condensates then there must indeed be heavier oil sitting below the Lower Cruz sands.

As you say, that oil will not be light, nothing like the 40 API oil we currently produce (which so good it almost doesn't need refining: 0) - but heavy oil in the 12 - 18 API range has an economic value and perhaps there will be some pockets or pools of medium quality oil in the 23- 36 API range still to be discovered.

The presence of more stacked reservoirs means the life of the field will be extended.

If the Goudron c-sands are in communication with lower, heavier oil filled formations, as they must be if fractionated condensates are appearing in the upper reservoirs, I wonder what implications this may have for the water flood initiative? Any insight gratefully received.

Particularly if the seal between the lower heavy oil bearing strata is broken allowing easy communication of the lighter oil elements to condense / migrate upwards to the Goudron / c-sand formations. Both of these must have a top seal because the migration up to the surface over time appears to have been minimal.

Whatever the explanation it seems that we have more targets at Goudron than was first thought and the upside just gets better.

Many thanks again for your excellent post, it certainly highlights the increasing potential to LGO Energy of the Goudron concession. What's good for LGO Energy is good for us!

Kind regards

Phil

Im sure the same should be true for Ortoire.

[jamesiebabie] 19/5/2015 21:28

Phil - I know TXP are in touch with LGO; TXP are the operators of Icacos, so they have interest in what ids in the deep, but it maybe cheaper to watch and learn from others.

They are watching RRL and their waterflood, I understand there are issues about getting water on a full development level, so solutions are being looked at.

[dalesman] 19/5/2015 21:24

Many thanks for that bit of info much appreciated.

[dalesman] 19/5/2015 21:22

There is also one rig in Trinidad capable of drilling down to 15000 ft so Cedros could be drilled fairly soon if the BOD of LGO Energy decide the time is right. I hope they put off that decision until the Goudron drilling campaign is underway and new money is flowing in. By the way I'm using 30% first year decline on ordinary wells and 60% on the very gassy wells one of which produced in excess of 6000 bopd and was choked back to 1000bopd and I expect that it will have declined to around 400 now. The initial burst however delivered a big boost to the bank account of 40+ API light oil.

Maybe Touchstone would like to farm-in to the first deep drilled in the SWP for many a year reducing risk for all.

Kind regards

Phil

[jamesiebabie] 19/5/2015 21:14

Phil - from the horses mouth "And for clarity, Ortoire (and East Brighton) is not a PSC it is an Exploration License with the Ministry of Energy; Petrotrin is our Working Interest partner in the block."

[dalesman] 19/5/2015 21:13

My information from Trinidad is that it was a PSC - if you can find out I would appreciate it.

[jamesiebabie] 19/5/2015 21:12

Phil - FY- TOSL, West Indian, and others are looking to bring new rigs to onshore Trinidad.

[jamesiebabie] 19/5/2015 21:09

Phil - I have been told by TXP that they have contributed and are in receipt of some of the results.

FYI Ortoire in not on a PSC; it's on an Exploration Licence, so I have been informed.

[dalesman] 19/5/2015 21:03

Hi Nils and Jamsie

I'm using John (Onceatrader's) software and I believe he has run his calculations past Niel so I have confidence in his work. Using my own netback software we were only cents apart. I now defer to his spreadsheets as they take into account the step changes on royalty payments as various levels are crossed.

I know that the Ortoire block recently acquired by Touchstone and operated under a PSC could be a real winner for Touchstone.

Today we learn't that a second rig is scheduled to start work on LGO's Goudron field starting this Autumn targeting the shallower Goudron sands. This rig apparently is smaller and more mobile not requiring a pad from which to work.

The new wells are coming up with 300ft plus of net pay in the Goudron Sands, so two rigs going flat out one focusing on the C-sands and one on the Goudron sand will deliver even more oil into the coffers.

In the meantime there was a conference in Trinidad detailing the Arkex full tensor survey. I will find out tomorrow if Touchstone has contributed to the costs. I'll let you know.

But in the meantime here is Speculators post from the Trinidad conference and if TXP has contributed to the Arkex survey then there is a direct read across from LGO to TXP.

Enjoy

Hydrocarbon Micro Seepage Analysis of South West Peninsula (Cedros) SUMMARY (from a layman)

400 surface soil samples taken in grid pattern across entire peninsula for this survey. Various scientific analysis techniques undertaken by Deet Schumacher of GeoFrontiers (check out their website)

This analysis (flouorescene, gas presence, microbial anomally) has traditionally led to 4x to x6 increase in the success rate of exploration prospects.

Nearby analogue fields in Trinidad have already produced in excess of 1.8 bil barrels of oil (Soldado to the North, near shore 800 mil., Palo Seco to the East, onshore 1 billion)

The few wells that have been drilled in the SWP in the last 60 years have all found hydrocarbons. One near shore well in Soldado actually penetrated a 2,000’ column of pay, but the oil was “tight”.

Geochemical analysis of the 400 samples have allowed LGO to confirm 5 existing prospects (Bonasse, East Constance, Icacos etc), and to identify 8 additional new leads (currently named A, B and C lol). LGO have recently mapped these out and this now warrants the acquisition of additional geotechnical and 3D seismic information to further refine and high grade the leads.

Bonasse and East Constance are being signed up with Bolt.

In particular, there are 3 areas towards the Southern by LGO coast of the SWP that show shallow gas accumulations.

All we are waiting for now are the preliminary results of the aerial FTG gradiometry survey on which there is a basic presentation tomorrow evening at 9 pm UK time. That's when we may find out if the FTG data reveals the same leads and prospects as the existing geochemical, hydrocarbon micro seepage, 2D and 3D seismic data.

Now I do not know for sure if this will actually be revealed, as the presentation may well be generic - simply outlining ArKEX's FTG methodology. Or perhaps they are only trying to market the data to Trinity, Range Touchstone etc. The people that really need the information all work at LGO anyway.

I do know that the conference is not open to the public, and the media were politely asked to leave very early yesterday morning at the start of the technical presentations.

Stay tuned.

[jamesiebabie] 19/5/2015 16:01

Phil - re post 667, are your numbers looking at operating netback? Have LGO produced any public info on this; I can’t recall ever seeing LGO posting a breakdown of their operating costs or releasing a summary which includes netbacks after operating costs, administrative costs, taxes and royalties.

Can you guide me to where these are located or are the figures you have adopted your own numbers?

[dalesman] 18/5/2015 19:46

Hi Lazarus

Jamsie and I are old friends and he does have some very good ideas and recommendations even if I still think charts are black magic! Which probably firmly puts me in the stuck in the mud old git category :0)

I think that you are absolutely correct - both companies have a sound business plan and both are certainly worth watching and investing in.

I do wish that TXP would duel list to help with the liquidity.

I have a very good friend in the petroleum business in Trinidad who found his large TXP holding difficult to monetise when he wanted to switch.

Are there any plans to widen the share base of TXP?

If this is the old Gits board then I will fit in perfectly!

At least it is civil here and you can argue a case without profanity - thats becoming increasingly rare.

Many thanks for the welcome.

Kind regards

Phil

[lazarus2010] 18/5/2015 12:23

ps I'm in both almost equally.

[lazarus2010] 18/5/2015 12:22

Congrat's Dalesman and welcome to the 'Old Gits' society ;-)

Thanks for your input here, always good to get a different opinion and your research has opened up quite a few issues to be addressed and investigated further.

Basically whichever way one looks at oil stocks there are I believe three main things to watch for at the moment...
1. Is there a possibility that the company could go bankrupt due to the low PoO?
2. If no, does the company have sufficient revenues/cash resources or good lending terms to continue drilling and hence increasing production
3. Does the company have good upside from exploiting P1/P2 reserves

I think both LGO and TXP meet all of the above and therefore at current prices should be decent long term bets, and as you say by July LGO will probably be well ahead of where it is now and hence of TXP due to their drilling programme and expectations of success. I think TXP will get there and it might take a while longer based on slower drilling programme and the low PoO and netbacks from their lease contracts. These factors should change as oil inevitably increases in time (however it could take 6m, 1yr or 10yrs, nobody knows the true capacity of the Saudis and Opec to keep current high rates of production and hence keeping a lid on the PoO. What is clear s that this is stimulating global demand for oil and on current projections of reducing non-Opec (Saudi) production and increasing demand, the two charts are surely going to cross soon enough!)

[dalesman] 18/5/2015 11:39

Hi Jamsie

You may be right on that . Ortoire block is smack bang in the sweet spot and I think will be an excellent block to develop. Do you know what the drilling commitment is at Ortoire?

This website / blog may be of interest to you as it focuses on Cedros.

hxxp://lgospeculater.blogspot.co.uk

OT

My son and his partner Pandora have had a little girl- Kiera- born in January - Val has insisted that we move so she can be a proper Grandma - who am I to argue!

Kind regards

Phil

[jamesiebabie] 18/5/2015 10:12

Phil - Remember TXP are operators in some of the Cedros acreage. :0)

[jamesiebabie] 18/5/2015 09:53

Phil - congratulations on becoming a grandad!!

Did TXP not participate in the aeromag? I am informed they did and it covered Ortoire. and their other blocks.

[dalesman] 17/5/2015 23:17

OOPS I missed you question above before I go I'll try to answer that.

I can't speak to Canada or for Touchstone but I think that LGO is in the driving seat in Trinidad. It is now very well respected by Petrotrin and the Ministry as it has delivered early on all its promises and quickly fulfilled its commitments.

Trinity has over extended itself and its debt position is not good.
Range is a basket case and may have to de list after the failure of its money raising initiative has placed it in a very poor position.

There are four new blocks coming up in Trinidad. You have to ask who has the cash to bid? Who is not having to cut back on opex and capex? Who can increase its portfolio and up its reserve base?

Comparing the Market cap of Touchstone and LGO is really a red herring. The relative reserves will be reversed not to say eclipsed come June IMHO and the upside potential from the infill drilling is expected to mean that production will be above 3000bopd come the end of the year.

With LGO throwing off cash at low oil prices even though it is linked to the lower WTI crude as opposed to Brent means that it is seen as a safe haven compared with many that are struggling and having to make savings to try to conserve cash.

LGO based on the old CPR has recently had the correct market cap but with production about to increase with the start of the next 22 well continuous drilling campaign the MC will rise. The 30% rise last week shows the market is coming up to speed.

Add on to that the uplift in 1P and 2P reserves and 5-6p would be achievable.

5p x 3 billion shares would give a MC of around 150m

Or to put it another way I'm hoping for 30m 2P reserves at a notional $5 valuation for each barrel of 2P reserves (less than half the netback at $43 WTI crude oil price) we get to a MC of 150m

Thats not out of the way given that the new infill wells drilled last year have added around 175bopd / well. 22 x 175 = an additional 3875 bopd reduce that by 30% depletion until the wells reach plateaux production and we get an additional 2600 bopd on top of current production (remember Spain is still producing - not a lot but an additional 150 bopd does help)

Neil Ritson says that the depletion on last years new drills should be compensated by the re-completions (12 planned this year)

We have just completed the ARKeX full tensor survey which only Petrotrin and LGO has contributed to the cost and thus have gained the extra information. This will give LGO an edge. Touchstone was invited to participate but failed to cough up the readies.

So upping the reserves, increasing production - equals free cash flow, increased data from the ARKex Survey, reduction in drilling costs of $500,000 per well and a shortening of the drilling time between wells increasing the wells to be drilled this year means additional upside, pads 4/5/6 are being constructed now and having the confidence of the ministry and Petrotrin evidenced by them paying for the new enlarged pipeline to Goudron means a market cap of 150m looks cheap to me.

This leaves out the deep wells at Cedros to be drilled in the next 3 years, targeting an extension of the Venezuela reservoirs below the Herrera Sands- huge upside on success. The ArkeX survey should do a lot to target the sweet spots.

You said in the board above that LGO is over valued - not on a NAV basis its not or on a Canadian Production based metric. Rather Touchstone is undervalued on its booked reserves.

What you need to ask yourself is why is Touchstone so cheap and what does it have to do to lift its Market Cap to a level that reflects these booked reserves. Why is the market not recognising its potential because on its booked reserves alone it should be much higher.

I have to say that I don't think a presentation intimating that it is struggling to deal with the low oil prices currently gives the market a lot of confidence. It needs to slim down its operation, concentrate on the low hanging fruit, fulfil its drilling commitments to the ministry and look to do more than just work over legacy wells. Then its MC may reach 40m which compared with the expected reserves in LGOs portfolio after the up and coming CPR will be about the right ratio to LGO.

All my own opinion of course and I understand and respect that you have a very different view.

Kind regards

Phil

PS we are leaving the island and returning to the UK - I'm now a Granddad :0)

[dalesman] 17/5/2015 22:23

Your comment about Canada is interesting. I believe Touchstone have 22 employees in Canada lets hope that they won't have to increase this figure.

Canada may well be the driver needed to lift the SP, I hope so for your sake. I have no knowledge about their wells over there only that its heavy oil which is not really an issue as most N America refineries are geared to heavy oil.

As I said above as the POO increases the differential between Lease contracts and PSCs narrow I can see a big uplift in Touchstone if Brent gets above $80. If it does please rattle my cage.

I'll now leave you in peace hope I haven;t ruffled any feathers. Thanks for the stimulating discussions I can tell you that the lines to Trinidad have been hot!

Kind regards

Phil