CALGARY, AB, July 20, 2020 /CNW/ - Touchstone Exploration
Inc. ("Touchstone", "we", "our", "us" or the "Company") (TSX: TXP),
(LSE: TXP) announces highlights of our independent reserves
evaluation of the Cascadura Assessment Area prepared by GLJ Ltd.
("GLJ") with an effective date of June 30,
2020 (the "Cascadura Reserves Report"). Highlights of our
total proved ("1P"), total proved plus probable ("2P") and total
proved plus probable plus possible ("3P") reserves from the
Cascadura Reserves Report are provided below. Unless otherwise
stated, all financial amounts herein are rounded to thousands of
United States dollars.
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The Cascadura Assessment Area is located in the Company's
Ortoire exploration block, onshore in the Republic of Trinidad and Tobago (Touchstone 80% working
interest operator, Heritage Petroleum Company Limited 20% working
interest). The Cascadura Assessment Area represents the
geologically and geophysically defined reservoirs which were
evaluated by the Company's Cascadura-1ST1 exploration well drilled
in the fourth quarter of 2019 and tested in the first half of
2020.
The Cascadura Reserves Report evaluates the Cascadura Assessment
Area on a stand-alone basis and provides a reserves estimate of
natural gas and natural gas liquids, as well as a before income tax
estimate of net present values of future net revenues as of
June 30. 2020. The Cascadura Reserves
Report should be considered as supplementary to, and reconciled
with, the volumes and future net revenues disclosed 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.
Paul R. Baay, President and
Chief Executive Officer, commented:
"We are delighted to report that the independent reserves
report verifies the material size of the reserves yet to be
produced in the Cascadura structure and provides the groundwork for
a multi-year future onshore development program in Trinidad. Through the excellent work of the
Touchstone team in the drilling of our first two exploration wells,
we have successfully proven up the hydrocarbon bearing turbidite
model in Ortoire. This model will be further evaluated by our next
two exploration targets at Chinook and Cascadura deep, with
drilling at Chinook on track to commence within the next few
weeks.
We could not have envisioned a better start from the first
two wells of the Ortoire exploration program, and we look forward
to updating the market and our Trinidad stakeholders as we progress with our
Ortoire exploration and development activities in the coming
months."
Cascadura Reserves Report Highlights
- Gross Discovered Petroleum Initially-in-Place ("DPIIP") is
estimated to be between 571.5 Bcf of natural gas in the High
Estimate and 241.2 Bcf in the Low Estimate, with a Best Estimate of
398.5 Bcf.
- Company working interest 3P reserves of 73,190 Mboe (85%
recovery of High Estimate DPIIP), 2P reserves of 45,030 Mboe (75%
recovery of Best Estimate DPIIP), and 1P reserves of 23,622 Mboe
(65% recovery of the Low Estimate DPIIP).
- Net peak production is estimated to be 22,600 boe/d in the 3P
forecast, 15,108 boe/d in the 2P forecast, and 10,266 boe/d in the
1P forecast.
- Estimated before tax 3P 10% discounted net present value of
future net revenues ("NPV10") of $802.9
million, 2P NPV10 of $519.2
million, and 1P NPV10 of $287.7
million.
- Net future development costs associated with the development of
the Cascadura Assessment Area is estimated at $11.6 million for 1P reserves and $15.8 million for both 2P and 3P reserves.
James Shipka, Chief Operating
Officer, commented:
"GLJ's independent evaluation of the Cascadura-1ST1
production test results and the subsequent reserves evaluation of
the Cascadura Assessment Area confirms the tremendous potential of
the Ortoire exploration block. The Cascadura Reserves Report
combines both the pressure and flow testing of the Cascadura-1ST1
well with the 3D seismic data which covers the entirety of the
Cascadura structure as we now understand it. The team is currently
working hard to design the facilities and infrastructure required
to bring the Cascadura gas and liquids to market as quickly as
possible, and with GLJ estimating there is in excess of 500 Bcf of
discovered natural gas in place in the Cascadura area, it is
evident that we have a clear pathway to a multi-year development
program."
Cascadura Reserves Report Summary
Touchstone's petroleum reserves for the Cascadura Assessment
Block were evaluated by independent qualified reserves evaluator,
GLJ, in accordance with definitions, standards and procedures
contained in the Canadian Oil and Gas Evaluation ("COGE") Handbook
and National Instrument 51-101 - Standards of Disclosure for Oil
and Gas Activities ("NI 51-101"). The reserve estimates set
forth below are based upon GLJ's Cascadura Reserves Report dated
July 17, 2020 with an effective date
of June 30, 2020. All values in this
news release are based on GLJ's July 1,
2020 forecast prices and estimates of future operating and
capital development costs as at June 30,
2020. In certain tables set forth below, the columns may not
add due to rounding.
Summary of Cascadura Assessment Area Company Gross
Reserves as of June 30, 2020 by
Product Type(1),(2)
Reserves
Category
|
Conventional
Natural Gas
(MMcf)
|
Natural Gas
Liquids
(Mbbl)
|
Total Oil
Equivalent (Mboe)
|
|
|
|
|
Proved
|
|
|
|
Developed
Producing
|
-
|
-
|
-
|
Developed
Non-Producing
|
41,602
|
1,061
|
7,995
|
Undeveloped
|
81,313
|
2,074
|
15,627
|
Total
Proved
|
122,916
|
3,136
|
23,622
|
|
|
|
|
Probable
|
111,402
|
2,841
|
21,408
|
Total Proved plus
Probable
|
234,318
|
5,977
|
45,030
|
|
|
|
|
Possible
|
146,530
|
3,738
|
28,160
|
Total Proved plus
Probable plus Possible
|
380,848
|
9,715
|
73,190
|
|
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, Oil and Gas Measures and Definitions of Petroleum
Reserves".
|
Summary of Cascadura Assessment Area Company Net Present
Values of Future Net Revenues as of June 30,
2020(1),(2),(3)
Reserves
Category
|
Net Present Values
of Future Net Revenues Before Income
Taxes Discounted at (% per year) ($000's)
|
0%
|
5%
|
10%
|
15%
|
20%
|
|
|
|
|
|
|
Proved
|
|
|
|
|
|
Developed
Producing
|
-
|
-
|
-
|
-
|
-
|
Developed
Non-Producing
|
161,557
|
128,781
|
105,583
|
88,572
|
75,714
|
Undeveloped
|
330,677
|
241,377
|
182,167
|
141,328
|
112,193
|
Total
Proved
|
492,234
|
370,158
|
287,749
|
229,901
|
187,908
|
|
|
|
|
|
|
Probable
|
477,556
|
324,397
|
231,458
|
171,836
|
131,760
|
Total Proved plus
Probable
|
969,790
|
694,555
|
519,207
|
401,737
|
319,668
|
|
|
|
|
|
|
Possible
|
653,133
|
416,464
|
283,674
|
203,110
|
151,106
|
Total Proved plus
Probable plus Possible
|
1,622,923
|
1,111,019
|
802,881
|
604,847
|
470,774
|
|
Notes:
|
(1)
|
Based on GLJ's July
1, 2020 escalated price forecast. See "Summary of Pricing and
Inflation Assumptions".
|
(2)
|
See "Advisories:
Reserve Advisory and Definitions of Petroleum
Reserves".
|
(3)
|
GLJ did not forecast
after tax net present values of future net revenues in the
Cascadura Reserves Report given the Cascadura Assessment Area is an
asset owned by a Trinidad corporate entity. Calculating income
taxes on cash flows derived from a stand-alone asset would not be
indicative of business entity level income taxes.
|
Summary of Pricing and Inflation Assumptions
The following table sets forth GLJ's forecasted benchmark
reference pricing and inflation rates reflected in the Cascadura
Reserves Report effective June 30,
2020.
Forecast
Year
|
Brent
Spot Crude
Oil ($/bbl)(1)
|
Conway Condensate ($/bbl)(1)
|
Henry
Hub Natural
Gas ($/MMBtu)(1)
|
Inflation
Rates
(%/year)(2)
|
|
|
|
|
|
2020 Q3-Q4
|
43.50
|
36.90
|
2.08
|
0.0
|
2021
|
48.00
|
39.60
|
2.55
|
0.0
|
2022
|
51.50
|
42.75
|
2.65
|
1.0
|
2023
|
56.50
|
47.25
|
2.75
|
2.0
|
2024
|
60.00
|
50.40
|
2.85
|
2.0
|
2025
|
62.95
|
53.06
|
2.95
|
2.0
|
2026
|
64.13
|
54.12
|
3.01
|
2.0
|
2027
|
65.33
|
55.20
|
3.07
|
2.0
|
2028
|
66.56
|
56.30
|
3.13
|
2.0
|
2029
|
67.81
|
57.43
|
3.19
|
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. See
"Advisories: Reserve Advisory".
|
(2)
|
Inflation rates for
forecasting pricing and costs.
|
Cascadura Assessment Area Company Future Development
Costs(1)
The following table provides information regarding the
development costs deducted in the estimation of the Company's
working interest future net revenue using forecast prices and costs
included in the Cascadura Reserves Report.
Year
|
Proved
Reserves
($000's)
|
Proved plus
Probable Reserves
($000's)
|
Proved plus
Probable plus
Possible Reserves
($000's)
|
|
|
|
|
2020
|
-
|
-
|
-
|
2021
|
1,000
|
1,000
|
1,000
|
2022
|
6,464
|
6,464
|
6,464
|
2023
|
4,121
|
4,121
|
4,121
|
2024
|
-
|
4,203
|
4,203
|
Total
undiscounted
|
11,585
|
15,788
|
15,788
|
Total discounted
at 10% per year
|
9,347
|
12,218
|
12,218
|
|
Note:
|
(1)
|
See "Advisories:
Reserve Advisory".
|
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 reserves estimates prepared herein have been evaluated by an
independent qualified reserves evaluator in accordance with NI
51-101 and the COGE Handbook. The disclosure in this news
release summarizes certain information contained in the
Cascadura Reserves Report but represents only a portion of the
disclosure required under NI 51-101. In accordance with Canadian
practice, production volumes and revenues are reported on a Company
gross basis, before deduction of crown and other royalties. Unless
otherwise specified, all reserves volumes in this news
release (and all information derived therefrom) are based on
Company gross reserves using forecast prices and costs.
The recovery and reserve estimates provided herein are estimates
only, and there is no guarantee that the estimated reserves will be
recovered. Actual reserves may eventually prove to be greater than
or less than the estimates provided herein. This news release (i)
summarizes the reserves of the Company's Cascadura Assessment Area
only and the net present values of future net revenue for such
reserves using forecast prices and costs as at June 30, 2020 prior to provision for income
taxes, interest, general and administrative expenses, the impact of
any financial derivatives or liabilities associated with the
abandonment and reclamation of certain facilities and wells, and
(ii) should be considered as supplementary to, and reconciled with,
the volumes and net present values of future net revenues disclosed
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 estimates of reserves and
future net revenue have been made assuming that the development
will occur. The estimates of reserves and future net revenue for
individual properties may not reflect the same confidence level as
estimates of reserves and future net revenue for all properties,
due to the effects of aggregation. It should not be assumed that
the present worth of estimated before tax future net revenues
presented in the table 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. The
term "future development costs" does not have a standardized
meaning and should not be used to make comparisons.
The DPIIP set forth in this news release has been provided for
the sole purpose of highlighting the recovery factors used by GLJ
in attributing reserves to the Cascadura Assessment Area effective
as of June 30, 2020. As disclosed below, DPIIP is defined by
COGE as that quantity of petroleum that is estimated, as of a given
date, to be contained in known accumulations prior to production.
The recoverable portion of DPIIP includes production, reserves and
contingent resources; the remainder is unrecoverable. It should not
be assumed that any portion of the DPIIP set forth in this news
release is recoverable other than the portion which has been
attributed reserves by GLJ. There is uncertainty that it will be
commercially viable to produce any portion of the DPIIP other than
the portion that is attributed reserves.
In the Cascadura Reserves Report, GLJ estimated conventional
natural gas revenues referencing Henry Hub natural gas forecasted
pricing and natural gas liquids revenues based on forecasted Conway
Condensate reference pricing. The Company is currently negotiating
a marketing agreement for all petroleum products produced on the
Ortoire property, and accordingly, such revenue estimates in the
Cascadura Reserves Report may not be attained, and variances could
be material. In addition, GLJ forecasted reserve volumes and future
cash flows based upon volumetric interpretations and extrapolations
based upon well testing. Notwithstanding contractual options for
the extension of the Company's Ortoire block production and
exploration agreement (the "Licence") upon a commercial discovery,
the forecasted economic limit of individual wells and the net
present values of future net revenue therefrom is currently beyond
the initial exploration term of the Licence.
Definitions of Petroleum Reserves
The reserves have been categorized accordance with the reserves
definitions as set out in the COGE Handbook, which are set out
below.
"Reserves" are estimated remaining quantities of
petroleum anticipated to be recoverable from known accumulations,
as of a given date, based on the analysis of drilling, geological,
geophysical, and engineering data; the use of established
technology; and specified economic conditions, which are generally
accepted as being reasonable. Reserves are further classified
according to the level of certainty associated with the estimates
as follows:
"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.
"Discovered Petroleum Initially-in-Place ("DPIIP)" is
that quantity of petroleum that is estimated, as of a given date,
to be contained in known accumulations prior to production. The
recoverable portion of DPIIP includes production, reserves, and
contingent resources; the remainder is categorized as
unrecoverable.
"Uncertainty Ranges" are described in the COGE
Handbook as low, best, and high estimates for reserves and
resources as follows:
The "Low Estimate" is
considered to be a conservative estimate of the quantity that will
actually be recovered. It is likely that the actual remaining
quantities recovered will exceed the low estimate. If probabilistic
methods are used, there should be at least a 90 percent probability
(P90) that the quantities actually recovered will equal or exceed
the low estimate.
The "Best
Estimate" is considered to be the best estimate of the
quantity that will actually be recovered. It is equally likely that
the actual remaining quantities recovered will be greater or less
than the best estimate. If probabilistic methods are used, there
should be at least a 50 percent probability (P50) that the
quantities actually recovered will equal or exceed the best
estimate.
The "High Estimate" is
considered to be an optimistic estimate of the quantity that will
actually be recovered. It is unlikely that the actual remaining
quantities recovered will exceed the high estimate. If
probabilistic methods are used, there should be at least a 10
percent probability (P10) that the quantities actually recovered
will equal or exceed the high estimate.
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. The boe rate is based on an energy equivalency conversion
method primarily applicable at the burner tip and does not
represent a value equivalent at the wellhead. Use of boe in
isolation may be misleading.
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 DPIIP, reserves and the before tax net
present values of future net revenue therefrom, future development
costs and production rates associated with reserves, the potential
undertaking, timing, locations and costs of future well drilling
and related facilities, 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
factors and 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.
Abbreviations
|
|
|
bbl
|
barrel
|
Mbbl
|
thousand
barrels
|
|
|
MMcf
|
million cubic
feet
|
Bcf
|
billion cubic
feet
|
MMBtu
|
million British
Thermal Units
|
|
|
boe
|
barrels of oil
equivalent
|
boe/d
|
barrels of oil
equivalent per day
|
Mboe
|
thousand barrels of
oil equivalent
|
SOURCE Touchstone Exploration Inc.