CALGARY, March 6, 2020 /CNW/ - Touchstone Exploration Inc.
("Touchstone", "we", "our", "us" or the "Company") (TSX, LSE: TXP)
announces highlights of our independent reserves evaluation
prepared by GLJ Petroleum Consultants Ltd. ("GLJ") with an
effective date of December 31, 2019
(the "Reserves Report").
Highlights of our total proved ("1P"), total proved plus
probable ("2P") and total proved plus probable plus possible
reserves from the Reserves Report are provided below. All finding,
development and acquisition ("FD&A") costs below include
changes in future development capital ("FDC"). Unless otherwise
stated, all financial amounts herein are rounded to thousands of
United States dollars. The
financial information contained herein is based on the Company's
unaudited expected results for the year ended December 31, 2019 and is subject to
change.
Touchstone's 2019 capital program focused on exploration
activities on our Ortoire property, where we drilled two gross (1.6
net) exploration wells. We conducted minimal capital development
activity on our development properties, mainly performing wellbore
recompletions to arrest production declines. The Reserves Report
included those reserves associated with our development properties
as well as new reserves associated with our Coho natural gas
discovery in 2019. The Reserves Report does not include any
reserves associated with the Cascadura discovery given well testing
commenced subsequent to the effective date of the report.
2019 Year-end Reserves Report Highlights
- Increased 1P reserves by 6% to 11,840 Mboe and increased 2P
reserves by 14% to 22,056 Mboe from the prior year.
- Replaced 2019 annual production by 193% on a 1P reserves basis
and 519% on a 2P reserves basis.
- Realized after tax 1P 10% discounted net present value of
future net revenues ("NPV10") of $83.7
million, representing an increase of $4.0 million or 5% from the prior year.
- Achieved an after tax 2P NPV10 of $153.9
million, an increase of 6% from $145.4 million in 2018.
- Realized 1P FD&A costs of $7.75 per boe, resulting in a recycle ratio 3.4
times using our unaudited annual 2019 operating netback of
$26.62 per boe.
- Achieved 2P FD&A costs of $3.95 per boe, resulting in a 2P recycle ratio of
6.7 times.
- FDC associated with only a portion of our internally identified
drilling location inventory and portfolio of low risk recompletion
projects totaled $45.4 million for 1P
reserves and $71.7 million for 2P
reserves.
- Coho was assigned gross working interest 1P reserves of 1,148
Mboe and gross working interest 2P reserves of 3,349 Mboe with a 2P
NPV10 of $27.5 million before
taxes.
James Shipka, Chief Operating
Officer, commented:
"The Company's independent 2019 reserves evaluation reflected
the strong performance of our base production and included the
first reserves associated with our discoveries on the Ortoire
exploration block. With gross working interest 2P reserves of
over 20 Bcf (approximately 3.4 million boe) assigned at Coho, the
Company has exceeded the best estimates of the recoverable gas in
the pool compared to the independent evaluation report prepared for
the Company in the prior year. With the second stage of the
production test at Cascadura-1ST1 expected to commence this
weekend, we look forward to updating our shareholders on this
material discovery and the impact it will have on corporate
reserves."
2019 Year-end Reserves Report Summary
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 30, 2020. The reserve estimates set forth
below are based upon GLJ's Reserves Report dated March 4, 2020 with an effective date of
December 31, 2019. 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, 2019. 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, 2019 by Product
Type(1),(2)
Reserves
Category
|
Light and
Medium Oil
(Mbbl)
|
Heavy Oil
(Mbbl)
|
Conventional Natural Gas
(MMcf)
|
Total
Oil Equivalent (Mboe)
|
|
|
|
|
|
Proved
|
|
|
|
|
Developed
Producing
|
4,351
|
363
|
-
|
4,714
|
Developed
Non-Producing
|
1,452
|
294
|
6,888
|
2,893
|
Undeveloped
|
3,787
|
446
|
-
|
4,233
|
Total
Proved
|
9,590
|
1,103
|
6,888
|
11,840
|
|
|
|
|
|
Probable
|
7,317
|
698
|
13,203
|
10,215
|
Total Proved plus
Probable
|
16,906
|
1,801
|
20,091
|
22,056
|
|
|
|
|
|
Possible
|
5,411
|
571
|
10,524
|
7,735
|
Total Proved plus
Probable plus Possible
|
22,317
|
2,372
|
30,615
|
29,791
|
|
|
Notes:
|
|
(1)
|
Gross Reserves are
the Company's working interest share of the remaining reserves
before deduction of any royalties.
|
(2)
|
See "Advisories:
Reserve Advisory".
|
Summary of Net Present Values of Future Net Revenues as of
December 31,
2019(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
|
101,871
|
74,072
|
60,187
|
51,683
|
45,800
|
Developed
Non-Producing
|
96,266
|
75,368
|
62,537
|
53,439
|
46,563
|
Undeveloped
|
137,702
|
102,837
|
79,500
|
63,128
|
51,196
|
Total
Proved
|
335,839
|
252,276
|
202,224
|
168,250
|
143,559
|
|
|
|
|
|
|
Probable
|
390,549
|
262,615
|
195,689
|
153,716
|
124,875
|
Total Proved plus
Probable
|
726,388
|
514,891
|
397,913
|
321,966
|
268,434
|
|
|
|
|
|
|
Possible
|
310,663
|
184,353
|
129,718
|
99,472
|
80,216
|
Total Proved plus
Probable plus Possible
|
1,037,051
|
699,244
|
527,631
|
421,438
|
348,650
|
|
|
Reserves
Category
|
Net Present Values
of Future Net Revenues After Income Taxes(3) Discounted at (%
per year) ($000's)
|
0%
|
5%
|
10%
|
15%
|
20%
|
|
|
|
|
|
|
Proved
|
|
|
|
|
|
Developed
Producing
|
47,867
|
38,463
|
33,156
|
29,569
|
26,893
|
Developed
Non-Producing
|
35,676
|
28,865
|
24,651
|
21,648
|
19,360
|
Undeveloped
|
49,677
|
35,447
|
25,933
|
19,293
|
14,503
|
Total
Proved
|
133,220
|
102,775
|
83,740
|
70,510
|
60,756
|
|
|
|
|
|
|
Probable
|
139,212
|
94,523
|
70,164
|
54,647
|
43,946
|
Total Proved plus
Probable
|
272,431
|
197,297
|
153,904
|
125,157
|
104,702
|
|
|
|
|
|
|
Possible
|
108,046
|
66,699
|
47,646
|
36,801
|
29,817
|
Total Proved plus
Probable plus Possible
|
380,477
|
263,996
|
201,550
|
161,958
|
134,519
|
|
|
Notes:
|
|
(1)
|
Based on GLJ's
December 31, 2019 escalated price forecast. See "Summary of
Pricing and Inflation Assumptions".
|
(2)
|
See "Advisories:
Reserve Advisory".
|
(3)
|
Income taxes include
all resource income, appropriate income tax calculations per
current Republic of Trinidad and Tobago tax regulations and
estimated unaudited December 31, 2019 consolidated tax pools and
non-capital losses.
|
Summary of Pricing and Inflation Assumptions
The following table sets forth benchmark reference pricing and
inflation rates reflected in the Reserves Report.
Forecast
Year
|
WTI Crude Oil
Cushing,
Oklahoma
($/bbl)(1)
|
Brent
Spot
Crude
Oil
($/bbl)(1)
|
Henry
Hub
Natural
Gas
($/MMBtu)(1)
|
Inflation
Rates
(%/year)(2)
|
|
|
|
|
|
2020
|
61.00
|
67.00
|
2.42
|
0.0
|
2021
|
63.00
|
68.00
|
2.75
|
2.0
|
2022
|
66.00
|
71.00
|
2.90
|
2.0
|
2023
|
68.00
|
73.00
|
3.00
|
2.0
|
2024
|
70.00
|
75.00
|
3.10
|
2.0
|
2025
|
72.00
|
76.00
|
3.20
|
2.0
|
2026
|
74.00
|
78.00
|
3.27
|
2.0
|
2027
|
75.81
|
79.81
|
3.33
|
2.0
|
2028
|
77.33
|
81.33
|
3.40
|
2.0
|
2029
|
78.88
|
82.88
|
3.47
|
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 quality
differentials and transportation to point of sale.
|
(2)
|
Inflation rates for
forecasting pricing and costs.
|
Reconciliation of Changes in Gross
Reserves(1),(2)
Factors
|
|
Total Proved
Reserves (Mboe)
|
Total Proved
plus
Probable Reserves
(Mboe)
|
|
|
|
|
December 31,
2018
|
|
11,222
|
19,275
|
Infill
drilling
|
|
52
|
64
|
Technical
revisions
|
|
69
|
15
|
Exploration
discoveries
|
|
1,148
|
3,349
|
Improved
recovery
|
|
12
|
17
|
Production
|
|
(663)
|
(663)
|
|
|
|
|
December 31,
2019
|
|
11,840
|
22,056
|
|
|
|
|
Reserves
replacement ratio (%)(3)
|
|
193
|
519
|
|
|
Notes:
|
|
(1)
|
Gross Reserves are
the Company's working interest share of the remaining reserves
before deduction of any royalties.
|
(2)
|
See "Advisories:
Reserve Advisory".
|
(3)
|
Reserves replacement
ratio is calculated as net increase to reserves divided by 2019
average production of 663 Mbbl. See "Advisories: Oil and Gas
Metrics".
|
Future Development Costs
The following table provides information regarding the
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)
|
|
|
|
|
2020
|
|
9,367
|
12,324
|
2021
|
|
15,939
|
19,192
|
2022
|
|
13,564
|
22,277
|
2023
|
|
6,506
|
17,888
|
Thereafter
|
|
-
|
-
|
Total
undiscounted
|
|
45,375
|
71,681
|
Total discounted
at 10% per year
|
|
38,095
|
58,753
|
Estimated Company Capital Program Efficiency
($000's unless
otherwise stated)
|
Total
Proved
Reserves
|
Total Proved
plus
Probable
Reserves
|
|
|
|
Exploration capital
expenditures(1),(2)
|
9,858
|
9,858
|
Development capital
expenditures (1),(2)
|
696
|
696
|
Change in future
development costs
|
(624)
|
3,039
|
Estimated FD&A
costs(4)
|
9,930
|
13,593
|
|
|
|
Gross reserve
additions
(Mboe)(3),(4)
|
1,281
|
3,444
|
|
|
|
Estimated FD&A
costs per boe ($/boe)(4)
|
7.75
|
3.95
|
|
|
|
Estimated 2019
operating netback ($/boe)(1),(5)
|
26.62
|
26.62
|
|
|
|
Estimated 2019
recycle ratio(4)
|
3.4x
|
6.7x
|
|
|
Notes:
|
|
(1)
|
Financial information
is based on the Company's preliminary 2019 unaudited financial
statements and is therefore subject to audit. See "Advisories:
Unaudited Financial Information".
|
(2)
|
Exploration and
development capital exclude capitalized general and administration
costs and corporate asset expenditures. See "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 "Advisories:
Reserve Advisory" and "Advisories: Oil and Gas
Metrics".
|
(5)
|
See "Non-GAAP
Measures".
|
Touchstone Exploration Inc.
Touchstone Exploration Inc. is a Calgary 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".
Advisories
Reserve 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, 2019 will be contained in the
Company's Annual Information Form for the year ended December 31, 2019 which will be filed on SEDAR on
or before March 30, 2020.
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, 2019 prior to provision for
interest, general and administrative 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
percent 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
operating agreements, in many cases the forecasted economic limit
of individual wells is beyond the current term of the relevant
operating agreements.
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, reserves replacement ratio, finding, development and
acquisition 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. Reserves replacement ratio is calculated as
period net reserve additions divided by period production.
FD&A costs represent the costs of net property acquisitions
and dispositions, exploration, and development incurred.
Specifically, FD&A is calculated as the sum of net acquisition
costs less proceeds of dispositions, capital expenditures excluding
capitalized general and administrative costs and corporate 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, 2019
consolidated financial statements is not complete. Accordingly,
unaudited capital expenditure amounts used in the calculation of
FD&A costs are Management's estimate and are subject to change.
FD&A costs per barrel is determined by dividing current period
net reserve additions to the corresponding period's FD&A cost.
The aggregate of the exploration and development costs incurred in
the most recent financial year and the change during that year in
estimated future development costs generally will not reflect total
finding and development costs related to reserves additions for
that year.
Recycle ratios are calculated by dividing the annual FD&A
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,
2019 consolidated financial statements is not complete.
Accordingly, unaudited operating netbacks used in calculations of
recycle ratios are Management's estimate 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 2019 financial information disclosed herein
including capital expenditures and operating netback are based on
unaudited estimated results. These estimated results are subject to
change upon completion of the Company's audited financial
statements for the year ended December 31,
2019, and changes could be material.
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.
Forward-Looking Statements
Certain information provided in this news release may constitute
forward-looking statements within the meaning of applicable
securities laws. Forward-looking information 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, future development costs
associated with crude oil and natural gas reserves, the potential
undertaking, timing, locations and costs of future well testing,
well drilling, and the sufficiency of resources and available
financing to fund future development and exploration
operations. 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 2018 Annual
Information Form dated March 26, 2019
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.
Abbreviations
bbl(s)
|
barrel(s)
|
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
|
SOURCE Touchstone Exploration Inc.