CALGARY, AB, March 5, 2021 /CNW/ - Touchstone Exploration Inc.
("Touchstone", "we", "our", "us" or the "Company") (TSX: TXP),
(LSE: TXP) announces a summary of its 2020 year-end reserves
and provides an operational update.
Our independent reserves evaluation was prepared by GLJ Ltd.
("GLJ") with an effective date of December
31, 2020 (the "Reserves Report"). Highlights of our total
proved ("1P"), total proved plus probable ("2P") and total proved
plus probable plus possible ("3P") reserves from the Reserves
Report are provided below. All finding and development ("F&D")
costs below include changes in future development capital ("FDC").
Unless otherwise stated, all financial amounts referenced herein
are stated in United States
dollars. Financial information contained herein is based on
the Company's unaudited results for the year ended December 31, 2020 and is subject to change.
Readers are further cautioned to read the applicable advisories
contained herein.
2020 Year-end Reserves Report Highlights
- Increased 3P net reserves by 236% to 100,150 Mboe, increased 2P
net reserves by 194% to 64,947 Mboe and increased 1P net reserves
by 189% to 34,238 Mboe from the prior year.
- In comparison to 2019, 10% discounted net present value of
future net revenues ("NPV10") on a before tax 3P basis increased by
90% to $1,002.8 million and after tax
3P NPV10 increased by 108% to $419.4
million.
- Achieved a before tax 2P NPV10 of $683.1
million, representing an increase of 72% from $397.9 million reported in 2019 and realized an
annual after tax 2P NPV10 increase of 88% to $289.2 million.
- Realized before tax 1P NPV10 of $362.9
million, representing an increase of $160.7 million or 79% from the prior year and
increased after tax 1P NPV10 by 95% from year-end 2019 to
$163.0 million.
- Realized 1P F&D costs of $1.26 per boe, resulting in a recycle ratio 11.3
times using our unaudited annual estimated 2020 operating netback
of $14.29 per boe. Touchstone's low
F&D costs are primarily attributed to our meaningful 2020
reserves growth from our Cascadura-1ST1 well discovery.
- Recognized 2P F&D costs of $0.71 per boe, resulting in a 2P recycle ratio of
20.3 times, demonstrating Touchstone's capital efficient operations
in the Ortoire block.
- FDC associated with only a portion of our internally identified
drilling location inventory and low-risk recompletion projects
totaled $55.9 million for 1P reserves
and $83.9 million for both 2P and 3P
reserves.
- The Cascadura assessment area was assigned gross working
interest 1P reserves of 23,622 Mboe and gross working interest 2P
reserves of 45,030 Mboe with an estimated before tax 2P NPV10 of
$411.8 million.
- The Reserves Report excluded any potential reserves from the
Company's Chinook-1 and Cascadura Deep-1 wells drilled in the
fourth quarter of 2020.
Paul Baay, President and Chief
Executive Officer, commented:
"Our year-end 2020 reserves evaluation provides further
independent confirmation of the significant opportunities that the
Company has in place from our Trinidad assets. Our 1P reserves are now
significantly higher than our 3P reserves at the same time last
year, providing greater operational and financial certainty for
investors, and exclude any potential reserves from the recently
drilled Chinook-1 well or Cascadura Deep-1 wells. We have a lot to
be excited about as we focus on converting our world class reserves
to production during 2021 as well as expanding opportunities
through additional drilling at Ortoire."
Operational Highlights
- Tested two identified pay zones in the Chinook-1 well, with
both zones encountering potential upside in the form of light sweet
crude oil. One pay zone is currently being configured for an
extended production test.
- Equipment has arrived in Trinidad to enable testing of the main gas
bearing zones in the Cascadura Deep-1 well, where significant
hydrocarbon accumulations were reported in December based on
drilling and wireline logging data.
- Testing of the potential gas bearing sands in the Chinook-1
well will commence following the extended crude oil test.
- We continue to target the second quarter of 2021 for initial
Ortoire gas commercialization, with final regulatory approvals for
the tie-in of our Coho-1 well received and construction
underway.
- Working with the National Gas Company of Trinidad and Tobago to commence regulatory
applications to tie-in Cascadura and any potential Chinook
production volumes, with the objective of achieving initial
production prior to the end of 2021.
- The primary access road to the Royston-1 well location has been cleared, and
we have commenced road resurfacing and lease building
operations.
- Initiated line clearing for the 21-kilometre 2D seismic program
in the Royston area.
- Expected to enter into a minimum three-year drilling services
contract from a Canadian based private company to supply an
ultra-heavy telescopic drilling rig to Trinidad in late 2021, which will enable us
access to three drilling rigs in Trinidad capable of drilling to depths of
10,000 feet or more.
Operational Update
Well Testing
Touchstone has yet to test the targeted gas bearing zones in the
Chinook-1 and Cascadura Deep-1 exploration wells due to unavoidable
delays associated with third-party equipment including the natural
gas testing unit. However, we are pleased to report that all
required equipment has now been cleared through the various levels
of government organizations in Trinidad and is expected to be on location
within the next ten days.
Touchstone has tested two low resistivity zones in the Chinook-1
well. The first test interval was in the lower sub-thrust sheet,
which was a previously unknown thrust-sheet where we identified 68
net feet of potential pay based on wireline logging data. During
this test, the well recovered trace amounts of 41 degrees API sweet
oil along with significant high pressure and high temperature
water, which was indicative of encountering a fracture at the base
of the formation. With the high volume of water, the zone is
considered uneconomic; however, indications of light oil prove the
concept of hydrocarbons in the sub-thrust sheet. Based on 3D
seismic data, future development locations are anticipated to be
positioned structurally up-dip by as much as 1,000 feet from the
Chinook-1 well to evaluate the sub-thrust sheet in an optimal
structural position. The Company has permanently abandoned this
lowermost zone and completed a second zone in the Herrera formation
which encountered 35 degrees API sweet oil and is currently being
configured for an extended oil production test. We anticipate
conducting the first natural gas test at the Cascadura Deep-1 well
while the Chinook-1 well is on the extended oil production
test.
James Shipka, Chief Operating
Officer, commenting on the Chinook-1 well tests, said:
"This is an encouraging start to the production testing
program as it confirms the presence of hydrocarbons in the
sub-thrust sheet and will allow for further up-dip drilling targets
based on available 3D seismic data. The sub-thrust sheet was not
one of the original Chinook-1 well targets, so the confirmation of
hydrocarbons in the deep section is very positive. Although the
lower zone was considered uneconomic given the high water cuts, the
reservoir displayed potential as fluid flowed to surface at over
2,200 bbls/d. Future targets structurally up-dip from Chinook-1
hold tremendous potential.
The second production test is also very exciting and could
result in numerous development locations. The presence of oil in
the intermediate section reaffirms that the hydrocarbon system in
the Herrera is extensive and variable. Our extended production test
will determine if this zone is commercial in Chinook-1 before we
move up in the wellbore to our next test which we anticipate being
a natural gas zone immediately above the oil. It is unfortunate
that due to third-party issues beyond our control we have had to
wait on the gas test equipment; nevertheless, valuable data has
been collected in the interim period.
The multi-target project at Ortoire is still in the early
stages. The oil discovery at Chinook-1 adds another layer of
opportunity that we have not previously forecasted. For reference,
the offsetting Barrackpore oil pool has over 60 wells that
have produced approximately 18.7 million barrels, averaging
300,000 barrels per well with oil ranging from 27 to 30 degrees
API."
Coho-1 Tie-in
On January 22, 2021, the Company
received approval to proceed with the construction of the Coho-1
tie-in project. Subsequent to the required initial notification
period, construction operations have commenced. Touchtone is
targeting initial gas production from Coho-1 in the second quarter
of 2021. In conjunction with the project, we have also been working
with the Natural Gas Company of Trinidad
and Tobago to survey and commence regulatory applications to
tie-in Cascadura and any potential Chinook production volumes, with
a goal to achieve initial production prior to the end of 2021. The
Company is concurrently applying for two additional surface
locations at both Cascadura and Chinook which will allow for up to
16 development locations.
Royston Drilling Preparations
Touchstone is pleased to report that we have cleared the primary
access road to the Royston-1
drilling location and are currently surfacing the road and
performing lease preparations. The Royston well will be drilled using Well
Services Rig #60 targeting a total depth of approximately 11,500
feet. The drilling rig is scheduled to move onto location early in
the second quarter of 2021.
Drilling Rig Contract
Given our exploration success, the Company expects to execute a
contract with a Canadian based private company to provide state of
the art drilling equipment commencing in late 2021. The contractor
will deploy a North American based drilling rig equipped for us to
evaluate the deep targets at Royston, Cascadura and Chinook along with
drilling on our legacy crude oil development properties. Pursuant
to the current terms of the drilling contract, Touchstone must
utilize the rig for a minimum of 120 days per year over an initial
three-year term and is obligated to pay for rig mobilization costs,
which are currently estimated to be approximately $1 million. This arrangement, in combination with
our current drilling services provider, will give the Company
access to three drilling rigs capable of drilling to depths of
10,000 feet or more on the Ortoire block as well as the Company's
legacy oil development properties.
Seismic Program
Touchstone has initiated surveying and line clearing for our
21-kilometre 2D seismic program. The seismic information will be
used for further delineation of the structure to be drilled at
Royston and adjacent prospects in
the Mid Miocene Herrera formation and is expected to optimize
future drilling into the previously identified Cretaceous
exploration target. The program is scheduled to be completed prior
to July 2021.
2020 Year-end Reserves Report Summary
Touchstone's 2020 capital program focused on exploration
activities on our Ortoire property, where we drilled two gross (1.6
net) exploration wells. Similar to 2019, we conducted minimal
capital development activity on our development properties, mainly
performing wellbore recompletions and workover operations to arrest
production declines. The Reserves Report includes those reserves
associated with our legacy development properties and our Coho
natural gas discovery in 2019, as well as new reserves associated
with our Cascadura discovery in 2020. The Reserves Report does not
include any reserves associated with our Chinook-1 and Cascadura
Deep-1 wells drilled in 2020, as production testing operations were
not completed prior to the effective date of the Reserves
Report.
Touchstone's year-end crude oil and natural gas reserves in
Trinidad were evaluated by
independent reserves evaluator, GLJ, in accordance with
definitions, standards and procedures contained in the Canadian Oil
and Gas Evaluation Handbook and National Instrument 51-101
Standards of Disclosure for Oil and Gas Activities ("NI
51-101"). Additional reserves information as required under NI
51-101 will be included in the Company's Annual Information Form,
which will be filed on SEDAR on or before March 31, 2021. The reserve estimates set forth
below are based upon GLJ's Reserves Report dated March 4, 2021 with an effective date of
December 31, 2020. All values in this
news release are based on GLJ's forecast prices and estimates of
future operating and capital costs as at December 31, 2020. In certain tables set forth
below, the columns may not add due to rounding.
Summary of Company Gross Oil and Gas Reserves as of
December 31, 2020 by Product
Type(1),(2)
Reserves
Category
|
Light and
Medium Oil
(Mbbl)
|
Heavy Oil
(Mbbl)
|
Conventional
Natural Gas
(MMcf)
|
Natural Gas
Liquids
(Mbbl)
|
Total Oil
Equivalent
(Mboe)
|
|
|
|
|
|
|
Proved
|
|
|
|
|
|
Developed
Producing
|
3,470
|
175
|
-
|
-
|
3,644
|
Developed
Non-Producing
|
1,717
|
367
|
48,708
|
1,061
|
11,264
|
Undeveloped
|
3,703
|
-
|
81,313
|
2,074
|
19,329
|
Total
Proved
|
8,890
|
542
|
130,021
|
3,136
|
34,238
|
|
|
|
|
|
|
Probable
|
6,562
|
469
|
125,022
|
2,842
|
30,709
|
Total Proved plus
Probable
|
15,452
|
1,010
|
255,043
|
5,977
|
64,947
|
|
|
|
|
|
|
Possible
|
4,873
|
362
|
157,386
|
3,738
|
35,203
|
Total Proved plus
Probable plus Possible
|
20,325
|
1,372
|
412,429
|
9,715
|
100,150
|
Notes:
|
(1)
|
Gross reserves are
the Company's working interest share of the remaining reserves
before deduction of any royalties.
|
(2)
|
See "Advisories:
Reserves Advisory".
|
Summary of Net Present Values of Future Net Revenues
Before Tax as of December 31,
2020 (1),(2)
Reserves
Category
|
Net Present Values
of Future Net Revenues Before Income
Taxes Discounted at (% per year) ($000's)
|
0%
|
5%
|
10%
|
15%
|
20%
|
|
|
|
|
|
|
Proved
|
|
|
|
|
|
Developed
Producing
|
61,934
|
45,680
|
37,399
|
32,106
|
28,344
|
Developed
Non-Producing
|
207,971
|
162,378
|
133,400
|
112,822
|
97,384
|
Undeveloped
|
351,317
|
255,396
|
192,092
|
148,557
|
117,550
|
Total
Proved
|
621,222
|
463,454
|
362,891
|
293,485
|
243,278
|
|
|
|
|
|
|
Probable
|
646,336
|
439,959
|
320,192
|
243,712
|
191,811
|
Total Proved plus
Probable
|
1,267,557
|
903,413
|
683,084
|
537,197
|
435,089
|
|
|
|
|
|
|
Possible
|
737,859
|
463,396
|
319,751
|
234,400
|
179,349
|
Total Proved plus
Probable plus Possible
|
2,005,416
|
1,366,809
|
1,002,835
|
771,597
|
614,438
|
Notes:
|
(1)
|
Based on GLJ's
December 31, 2020 escalated price forecast. See "Summary of
Pricing and Inflation Rate Assumptions".
|
(2)
|
See "Advisories:
Reserves Advisory".
|
Summary of Net Present Values of Future Net Revenues After
Tax as of December 31,
2020 (1),(2),(3)
Reserves
Category
|
Net Present Values
of Future Net Revenues After Income
Taxes Discounted at (% per year) ($000's)
|
0%
|
5%
|
10%
|
15%
|
20%
|
|
|
|
|
|
|
Proved
|
|
|
|
|
|
Developed
Producing
|
35,991
|
29,848
|
26,081
|
23,358
|
21,259
|
Developed
Non-Producing
|
90,946
|
74,294
|
62,920
|
54,527
|
48,055
|
Undeveloped
|
140,503
|
100,506
|
74,021
|
55,827
|
42,929
|
Total
Proved
|
267,440
|
204,648
|
163,022
|
133,712
|
112,242
|
|
|
|
|
|
|
Probable
|
254,214
|
173,852
|
126,150
|
95,476
|
74,642
|
Total Proved plus
Probable
|
521,655
|
378,501
|
289,172
|
229,188
|
186,884
|
|
|
|
|
|
|
Possible
|
294,079
|
187,684
|
130,262
|
95,795
|
73,487
|
Total Proved plus
Probable plus Possible
|
815,734
|
566,185
|
419,434
|
324,983
|
260,371
|
Notes:
|
(1)
|
Based on GLJ's
December 31, 2020 escalated price forecast. See "Summary of
Pricing and Inflation Rate Assumptions".
|
(2)
|
See "Advisories:
Reserves Advisory".
|
(3)
|
Income taxes include
all resource income, appropriate income tax calculations per
current Republic of Trinidad and Tobago tax regulations and
estimated unaudited December 31, 2020 consolidated tax pools and
non-capital losses. See "Advisories: Unaudited Financial
Information".
|
Reconciliation of Changes in Gross Reserves by Product
Type(1),(2)
Reserves Category
and Factors
|
Light and
Medium
Crude Oil
(Mbbl)
|
Heavy Crude
Oil (Mbbl)
|
Conventional
Natural Gas
(MMcf)
|
Natural Gas
Liquids
(Mbbl)
|
Total Oil
Equivalent
(Mboe)
|
|
|
|
|
|
|
Total
Proved
|
|
|
|
|
|
December 31,
2019(3)
|
9,590
|
1,103
|
6,888
|
-
|
11,840
|
Exploration
discoveries
|
-
|
-
|
122,916
|
3,136
|
23,622
|
Technical
revisions
|
(196)
|
(516)
|
218
|
-
|
(675)
|
Economic
factors
|
(33)
|
(12)
|
-
|
-
|
(45)
|
Production
|
(471)
|
(33)
|
-
|
-
|
(504)
|
December 31,
2020
|
8,890
|
542
|
130,021
|
3,136
|
34,238
|
|
|
|
|
|
|
Total Proved plus
Probable
|
|
|
|
|
|
December 31,
2019(3)
|
16,906
|
1,801
|
20,091
|
-
|
22,056
|
Exploration
discoveries
|
-
|
-
|
234,318
|
5,977
|
45,030
|
Technical
revisions
|
(934)
|
(743)
|
634
|
-
|
(1,571)
|
Economic
factors
|
(50)
|
(15)
|
-
|
-
|
(65)
|
Production
|
(471)
|
(33)
|
-
|
-
|
(504)
|
December 31,
2020
|
15,452
|
1,010
|
255,043
|
5,977
|
64,947
|
Notes:
|
(1)
|
Gross reserves are
the Company's working interest share of the remaining reserves
before deduction of any royalties.
|
(2)
|
See "Advisories:
Reserves Advisory".
|
(3)
|
Prior year reserve
estimates per GLJ's independent reserves evaluation dated March 4,
2020 with an effective date of December 31, 2019.
|
In comparison to December 31, 2019
on a 2P reserve basis, light and medium crude oil reserves
decreased 984 Mbbl from technical revisions and economic factors in
2020. Approximately 597 Mbbl of this change reflected
decreased well performance from the Company's Coora, WD-8 and WD-4
blocks. In addition, the removal of future development locations on
the Company's Barrackpore and San Francique properties decreased 2P
reserves by approximately 387 Mbbl.
Heavy crude oil was attributed combined downward technical
revisions and economic factors of 758 Mbbl as of December 31, 2020, primarily reflecting a
decrease in future development locations on Touchstone's Fyzabad
and New Dome properties based on decreased future planned activity
and expenditures.
Upward technical revisions of approximately 106 Mboe were
reflective of reduced surface loss estimates related to the Coho
natural gas discovery in 2019. The Company's successful
Cascadura-1ST1 well drilled and tested on our Ortoire property led
to a 45,030 Mboe increase in conventional natural gas and natural
gas liquids 2P reserves in 2020.
Future Development Costs
The following table provides information regarding the future
development costs deducted in the estimation of the Company's
future net revenue using forecast prices and costs as included in
the Reserves Report.
Year
|
Proved
Reserves
($000's)
|
Proved plus
Probable Reserves
($000's)
|
Proved plus
Probable plus
Possible Reserves
($000's)
|
|
|
|
|
2021
|
9,530
|
11,360
|
11,360
|
2022
|
16,236
|
23,397
|
23,397
|
2023
|
12,584
|
16,787
|
16,787
|
2024
|
8,906
|
17,759
|
17,759
|
2025
|
8,666
|
14,625
|
14,625
|
Thereafter
|
-
|
-
|
-
|
Total
undiscounted
|
55,920
|
83,927
|
83,927
|
Total discounted
at 10% per year
|
45,098
|
66,584
|
66,584
|
The following table sets forth the changes in undiscounted
future development costs included in the Reserves Report against
such costs included in the December 31,
2019 reserves report.
($000's unless
otherwise stated)
|
Proved
Reserves
|
Proved plus
Probable Reserves
|
Proved plus
Probable plus
Possible Reserves
|
|
|
|
|
Increase in
forecasted capital costs
|
1,645
|
1,976
|
1,976
|
Decrease in
development locations
|
(6,905)
|
(10,158)
|
(10,158)
|
Cascadura
discovery
|
15,805
|
20,428
|
20,428
|
Total undiscounted
change
|
10,545
|
12,246
|
12,246
|
Total undiscounted
change (%)
|
19
|
15
|
15
|
Summary of Pricing and Inflation Rate
Assumptions
The following table sets forth benchmark reference pricing and
inflation rates reflected in the Reserves Report.
Forecast
Year
|
Brent
Spot
Crude
Oil
($/bbl)(1)
|
NYMEX Henry
Hub
Natural
Gas
($/MMBtu)(1)
|
Conway
Condensate
($/bbl)(1)
|
Inflation
Rates
(% per
year)(2)
|
|
|
|
|
|
2021
|
50.75
|
2.75
|
43.20
|
0.0
|
2022
|
55.00
|
2.80
|
46.35
|
1.0
|
2023
|
58.50
|
2.85
|
49.05
|
2.0
|
2024
|
61.79
|
2.90
|
52.01
|
2.0
|
2025
|
62.95
|
2.95
|
53.06
|
2.0
|
2026
|
64.13
|
3.01
|
54.12
|
2.0
|
2027
|
65.33
|
3.07
|
55.20
|
2.0
|
2028
|
66.56
|
3.13
|
56.30
|
2.0
|
2029
|
67.81
|
3.19
|
57.43
|
2.0
|
2030
|
69.17
|
3.25
|
58.58
|
2.0
|
Thereafter
|
+2.0% /
year
|
+2.0% /
year
|
+2.0% /
year
|
2.0
|
|
|
|
|
|
|
|
Notes:
|
(1)
|
This summary
table identifies benchmark reference pricing schedules that might
apply to a reporting issuer. Product sales prices will reflect
these reference prices with further adjustments for marketing
arrangements, quality differentials and transportation to point of
sale.
|
(2)
|
Inflation rates for
forecasting pricing and costs.
|
Estimated Company Capital Program Efficiency
|
Proved
Reserves
|
Proved plus
Probable Reserves
|
|
|
|
Estimated capital
expenditures ($000's)(1)
|
18,349
|
18,349
|
Change in FDC
required to develop reserves ($000's)
|
10,545
|
12,246
|
Estimated F&D
costs ($000's)(2)
|
28,894
|
30,595
|
|
|
|
Gross reserve
additions
(Mboe)(2),(3)
|
22,902
|
43,395
|
|
|
|
Estimated F&D
costs per boe ($/boe)(2)
|
1.26
|
0.71
|
|
|
|
Estimated 2020
operating netback ($/boe)(1),(4)
|
14.29
|
14.29
|
|
|
|
Estimated 2020
recycle ratio(2)
|
11.3x
|
20.3x
|
Notes:
|
(1)
|
Financial information
is based on the Company's preliminary 2020 unaudited financial
statements and is therefore subject to audit. See "Advisories:
Unaudited Financial Information".
|
(2)
|
See "Advisories:
Reserves Advisory" and "Advisories: Oil and Gas
Metrics".
|
(3)
|
Gross reserves are
the Company's working interest share of the remaining reserves
before deduction of any royalties.
|
(4)
|
See "Non-GAAP
Measures".
|
Advisories
Forward-Looking Statements
Certain information provided in this news release may constitute
forward-looking statements and information (collectively,
"forward-looking statements") within the meaning of applicable
securities laws. Such forward-looking statements include, without
limitation, forecasts, estimates, expectations and objectives for
future operations that are subject to assumptions, risks and
uncertainties, many of which are beyond the control of the Company.
Forward-looking statements are statements that are not historical
facts and are generally, but not always, identified by the words
"expects", "plans", "anticipates", "believes", "intends",
"estimates", "projects", "potential" and similar expressions, or
are events or conditions that "will", "would", "may", "could" or
"should" occur or be achieved.
Forward-looking statements in this news release may
include, but is not limited to, statements relating to estimated
crude oil and natural gas reserves and the net present values of
future net revenue therefrom, the forecasted future production,
commodity prices, inflation rates and all future costs used by GLJ
in their evaluation, the potential undertaking, timing, locations
and costs of future well testing, well drilling, well tie-in and
seismic operations, the expected timing of initial production from
exploration wells and the expected execution of a drilling rig
contract, including drilling rig mobilization timing and
costs. Although the Company believes that the expectations and
assumptions on which the forward-looking statements are based are
reasonable, undue reliance should not be placed on the
forward-looking statements because the Company can give no
assurance that they will prove to be correct. Since forward-looking
statements address future events and conditions, by their very
nature they involve inherent risks and uncertainties. Actual
results could differ materially from those currently anticipated
due to a number of factors and risks. Certain of these risks are
set out in more detail in the Company's 2019 Annual Information
Form dated March 25, 2020 which has
been filed on SEDAR and can be accessed at www.sedar.com. The
forward-looking statements contained in this news release are
made as of the date hereof, and except as may be required by
applicable securities laws, the Company assumes no obligation to
update publicly or revise any forward-looking statements made
herein or otherwise, whether as a result of new information, future
events or otherwise.
In addition, statements relating to reserves are by their nature
forward-looking statements, as they involve the implied assessment,
based on certain estimates and assumptions, that the reserves
described exist in the quantities predicted or estimated, and can
be profitably produced in the future. The recovery and reserve
estimates of Touchstone's reserves provided herein are estimates
only, and there is no guarantee that the estimated reserves will be
recovered. Consequently, actual results may differ materially from
those anticipated in the forward-looking statements.
Reserves Advisory
The disclosure in this news release summarizes certain
information contained in the Reserves Report but represents only a
portion of the disclosure required under NI 51-101. Full disclosure
with respect to the Company's reserves as at December 31, 2020 will be contained in the
Company's Annual Information Form for the year ended December 31, 2020 which will be filed on SEDAR on
or before March 31, 2021.
The recovery and reserve estimates of crude oil and natural gas
reserves provided herein are estimates only, and there is no
guarantee that the estimated reserves will be recovered. Actual
crude oil and natural gas reserves may eventually prove to be
greater than or less than the estimates provided herein. This news
release summarizes the crude oil and natural gas reserves of the
Company and the net present values of future net revenue for such
reserves using forecast prices and costs as at December 31, 2020 prior to provision for interest
and finance costs, general and administration expenses, the impact
of any financial derivatives or liabilities associated with the
abandonment and reclamation of certain facilities and wells. It
should not be assumed that the present worth of estimated future
net revenues presented in the tables above represent the fair
market value of the reserves. There is no assurance that the
forecast prices and costs assumptions will be attained, and
variances could be material.
"Proved Developed Producing Reserves" are those reserves that
are expected to be recovered from completion intervals open at the
time of the estimate. These reserves may be currently
producing, or if shut-in, they must have previously been on
production, and the date of resumption of production must be known
with reasonable certainty.
"Proved Developed Non-Producing Reserves" are those reserves
that either have not been on production or have previously been on
production but are shut-in, and the date of resumption of
production is unknown.
"Proved Undeveloped Reserves" are those reserves expected to be
recovered from known accumulations where a significant expenditure
(e.g., when compared to the cost of drilling a well) is required to
render them capable of production. They must fully meet the
requirements of the reserves category (proved, probable, possible)
to which they are assigned.
"Proved" reserves are those reserves that can be estimated with
a high degree of certainty to be recoverable. It is likely
that the actual remaining quantities recovered will exceed the
estimated proved reserves.
"Probable" reserves are those additional reserves that are less
certain to be recovered than proved reserves. It is equally
likely that the actual remaining quantities recovered will be
greater or less than the sum of the estimated proved plus probable
reserves.
"Possible" reserves are those additional reserves that are less
certain to be recovered than probable reserves. There is a 10%
probability that the quantities actually recovered will equal or
exceed the sum of proved plus probable plus possible reserves. It
is unlikely that the actual remaining quantities recovered will
exceed the sum of the estimated proved plus probable plus possible
reserves.
In the Reserves Report, GLJ forecasted reserve volumes and
future cash flows based upon current and historical well
performance through to the economic production limit of individual
wells. Notwithstanding established precedence and contractual
options for the continuation and renewal of the Company's existing
licence, sub-licence and marketing agreements, in many cases the
forecasted economic limit of individual wells is beyond the current
term of the relevant agreements. There is no certainty as to any
renewal of the Company's existing exploration, production, and
marketing arrangements.
Oil and Gas Measures
Where applicable, natural gas has been converted to barrels of
oil equivalent based on six thousand cubic feet to one barrel of
oil. The barrel of oil equivalent rate is based on an energy
equivalent conversion method primarily applicable at the burner
tip, and given that the value ratio based on the current price of
crude oil as compared to natural gas is significantly different
than the energy equivalency of the 6:1 conversion ratio, utilizing
the 6:1 conversion ratio may be misleading as an indication of
value.
Oil and Gas Metrics
This news release contains several oil and gas metrics that are
commonly used in the oil and gas industry such as reserves
additions, finding and development costs, and recycle ratio. These
metrics have been prepared by Management and do not have
standardized meanings or standardized methods of calculation, and
therefore such measures may not be comparable to similar measures
presented by other companies and should not be used to make
comparisons. Such metrics have been included herein to provide
readers with additional measures to evaluate the Company's
performance; however, such measures are not reliable indicators of
the future performance of the Company, and future performance may
not compare to the performance in prior periods, and therefore such
metrics should not be unduly relied upon. The Company uses these
oil and gas metrics for its own performance measurements and to
provide shareholders with measures to compare the Company's
operations over time. Readers are cautioned that the information
provided by these metrics, or that can be derived from the metrics
presented in this news release, should not be relied upon for
investment purposes.
Net reserve additions are calculated as the change in reserves
from the beginning to the end of the applicable period excluding
period production. Management uses this measure to determine the
relative change of its reserves base over a period of time.
F&D costs represent the costs of exploration and development
incurred. Specifically, F&D is calculated as the sum of
exploration and development capital expenditures incurred in the
period and the change in future development costs required to
develop those reserves. The Company's annual audit of its
December 31, 2020 consolidated
financial statements is not complete. Accordingly, unaudited
capital expenditure amounts used in the calculation of F&D
costs are Management's estimates and are subject to change. F&D
costs per barrel is determined by dividing current period net
reserve additions to the corresponding period's F&D cost.
Readers are cautioned that the aggregate of capital expenditures
incurred in the most recent financial year and the change during
that year in estimated FDC generally will not reflect total F&D
costs related to net reserves additions for that year. Management
uses F&D costs as a measure of its ability to execute its
capital program, the success in doing so, and of the Company's
asset quality.
Recycle ratio is a measure used by Management to evaluate the
effectiveness of its capital reinvestment program and is calculated
by dividing the annual F&D costs per barrel to operating
netback per barrel prior to realized gains or losses on commodity
derivative contracts in the corresponding period (see "Non-GAAP
Measures"). The Company's annual audit of its December 31, 2020 consolidated financial
statements is not complete. Accordingly, unaudited operating
netbacks used in calculations of recycle ratios are Management's
estimates and are subject to change. The recycle ratio compares
netbacks from existing reserves to the cost of finding new reserves
and may not accurately indicate the investment success unless the
replacement of reserves are of equivalent quality as the produced
reserves.
Unaudited Financial Information
Certain annual 2020 financial information disclosed herein
including capital expenditures and operating netback are based on
unaudited estimated results and are subject to the same limitations
as discussed in Forward-Looking Statements set out above. These
estimated results are subject to change upon completion of the
Company's audited financial statements for the year ended
December 31, 2020, and changes could
be material. Touchstone anticipates filing its audited consolidated
financial statements and related management's discussion and
analysis for the year ended December 31,
2020 on SEDAR on March 26,
2021.
Non-GAAP Measures
The Company uses operating netback as a key performance
indicator of field results. Operating netback is presented on a
total and per barrel basis and is calculated by deducting royalties
and operating expenses from petroleum sales. Operating netback is
presented herein prior to realized gains or losses on commodity
derivative contracts. Operating netback does not have a
standardized meaning under Generally Accepted Accounting Principles
and therefore may not be comparable with the calculation of similar
measures by other companies. The Company considers operating
netback to be a key measure as it demonstrates Touchstone's
profitability relative to current commodity prices. This
measurement assists Management and investors in evaluating
operating results on a historical basis.
Abbreviations
|
|
|
bbl(s)
|
barrel(s)
|
bbls/d
|
barrels per
day
|
Mbbl
|
thousand
barrels
|
Mcf
|
thousand cubic
feet
|
MMcf
|
million cubic
feet
|
Bcf
|
billion cubic
feet
|
MMBtu
|
million British
Thermal Units
|
boe
|
barrels of oil
equivalent
|
Mboe
|
thousand barrels of
oil equivalent
|
API
|
American Petroleum
Institute gravity
|
Touchstone Exploration Inc.
Touchstone Exploration Inc. is a Calgary, Alberta based company engaged in the
business of acquiring interests in petroleum and natural gas rights
and the exploration, development, production and sale of petroleum
and natural gas. Touchstone is currently active in onshore
properties located in the Republic of Trinidad and Tobago. The Company's common
shares are traded on the Toronto Stock Exchange and the AIM market
of the London Stock Exchange under the symbol "TXP".
SOURCE Touchstone Exploration Inc.