Touchstone Exploration increased PDP gross reserves by 33% to 4,843 Mboe

Touchstone Exploration Inc. (LON:TXP) has announced our 2022 year-end reserves.

Our independent reserves evaluation was prepared by GLJ Ltd. with an effective date of December 31, 2022. Highlights of our total proved developed producing (“PDP”), 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, 2022 and is subject to change. Readers are further cautioned to read the applicable advisories contained herein.

Touchstone’s 2022 year-end reserves reflect the sustainability of our low decline asset base, as our 2022 capital program focused on exploration activities on our Ortoire property, where we completed construction of the Coho natural gas facility and continued construction operations of the Cascadura natural gas and liquids facility. Touchstone did not drill any development or exploration wells in the 2022 year.

In 2022 we achieved initial production from our Coho-1 well, which produced net volumes of 5.7 MMcf/d (approximately 955 boe/d) in the fourth quarter of 2022 contributing to average quarterly production volumes of 2,229 boe/d and average 2022 annual production volumes of 1,581 boe/d.

2022 Year-end Reserves Report Highlights

·      Relative to year-end 2021 and after 2022 production, we increased PDP gross reserves by 33% to 4,843 Mboe, decreased 1P gross reserves by 0.7% to 38,463 Mboe, decreased 2P gross reserves by 0.6% to 75,074 Mboe and decreased 3P gross reserves by 0.6% to 120,594 Mboe in 2022.

·      PDP reserves replaced 2022 annual production by 308%, reflecting forecasted Coho-1 natural gas volumes that were brought online in 2022.

·      Our net present value of future net revenues discounted at 10% (“NPV10”) on a before tax PDP basis increased by 21% to $62.6 million, increased by 12% to $530.3 million on a 1P basis, increased by 13% to $993.7 million on a 2P basis, and increased by 12% to $1.47 billion on a 3P basis from the prior year.

·      Realized after tax PDP NPV10 of $51.8 million representing an increase of 45% from the prior year, after tax 1P NPV10 increased by 22% from year-end 2021 to $256.6 million, after tax 2P NPV10 increased by 24% from the prior year to $450.6 million and after tax 3P NPV10 increased by 22% from 2021 to $654.9 million.

·      Limited development operations and a focus on investing in our natural gas facilities led to a 1P recycle ratio of 0.6 times and a 2P recycle ratio of 0.2 times.

·      We continue to maintain a long producing reserve life index (“RLI”) of 5.8 years PDP and 13.1 years 1P reflecting the low decline nature of our asset base.

2022 Year-end Reserves Report Summary

Touchstone’s year-end crude oil, natural gas and NGL 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, 2023.

The reserve estimates set forth below are based upon GLJ’s Reserves Report dated March 3, 2023 with an effective date of December 31, 2022. The Reserves Report uses the average price forecasts of the three leading Canadian oil and gas evaluation consultants (GLJ, McDaniel & Associates Consultants Ltd. and Sproule Associates Ltd. (collectively, the “Consultants”)). All values in this announcement are based on the three Consultants’ average forecast pricing and GLJ’s estimates of future operating and capital costs as of December 31, 2022. Please refer to “Advisories: Reserves Advisories” for further information. In certain tables set forth below, the columns may not add due to rounding.

2022 Reserves Summary by Category

	PDP	1P	2P	3P
Total gross reserves(1) (Mboe)	4,843	38,463	75,074	120,594
Reserve additions (reductions)(2) (Mboe)	1,769	306	101	(164)
NPV10 before income tax(3) ($000’s)	62,561	530,264	993,714	1,473,380
NPV10 after income tax(3) ($000’s)	51,770	256,623	450,624	654,913

Notes:

(1)    Gross reserves are the Company’s working interest share before deduction of royalties.

(2)    Reserve additions exclude period production. See “Advisories: Oil and Gas Metrics“.

(3)    Based on the three Consultants’ average December 31, 2022 forecast prices and costs. See “Forecast prices and costs“.

Year-Over-Year Reserves Data

	December 31, 2022	December 31, 2021(1)	% Change
PDP gross reserves(2) (Mboe)	4,843	3,648	33
1P gross reserves(2) (Mboe)	38,463	38,731	(1)
2P gross reserves(2) (Mboe)	75,074	75,547	(1)
3P gross reserves(2) (Mboe)	120,594	121,332	(1)
PDP NPV10 before income tax(3) ($000’s)	62,561	51,737	21
1P NPV10 before income tax(3) ($000’s)	530,264	474,922	12
2P NPV10 before income tax(3) ($000’s)	993,714	881,753	13
3P NPV10 before income tax(3) ($000’s)	1,473,380	1,313,006	12
PDP NPV10 after income tax(3) ($000’s)	51,770	35,781	45
1P NPV10 after income tax(3) ($000’s)	256,623	210,036	22
2P NPV10 after income tax(3) ($000’s)	450,624	363,068	24
3P NPV10 after income tax(3) ($000’s)	654,913	535,613	22

Notes:

(1)    Prior year reserve estimates per GLJ’s independent reserves evaluation dated March 4, 2022 with an effective date of December 31, 2021.

(2)    Gross reserves are the Company’s working interest share before deduction of royalties.

(3)    Based on the three Consultants’ average December 31, 2022 forecast prices and costs. See “Forecast prices and costs“.

Summary of Crude Oil and Natural Gas Reserves by Product Type

Company Gross(1) Reserves	Light and Medium Crude Oil (Mbbl)	Heavy Crude Oil(Mbbl)	Conventional Natural Gas (MMcf)	Natural Gas Liquids (Mbbl)(2)	Total Oil Equivalent (Mboe)
Proved
Developed Producing	3,470	258	6,690	–	4,843
Developed Non-Producing	1,529	210	86,146	2,198	18,294
Undeveloped	4,979	–	53,841	1,373	15,326
Total 1P	9,977	468	146,677	3,571	38,463
Probable	8,711	416	144,850	3,342	36,611
Total 2P	18,688	884	291,527	6,913	75,074
Possible	5,902	332	205,894	4,972	45,520
Total 3P	24,590	1,216	497,421	11,885	120,594
Company Net(3) Reserves	Light and Medium Crude Oil (Mbbl)	Heavy Crude Oil(Mbbl)	Conventional Natural Gas (MMcf)	Natural Gas Liquids (Mbbl)(2)	Total Oil Equivalent (Mboe)
Proved
Developed Producing	2,091	230	5,854	–	3,296
Developed Non-Producing	965	187	75,378	1,923	15,638
Undeveloped	3,658	–	47,111	1,202	12,712
Total 1P	6,714	417	128,343	3,125	31,646
Probable	6,540	370	126,744	2,925	30,959
Total 2P	13,254	787	255,086	6,049	62,605
Possible	4,342	295	180,157	4,350	39,013
Total 3P	17,596	1,082	435,243	10,399	101,618

Notes:

(1)    Gross reserves are the Company’s working interest share before deduction of royalties.

(2)    NGLs are comprised of 100% condensate.

(3)    Net reserves are the Company’s working interest share after the deduction of royalty obligations.

Summary of Net Present Values of Future Net Revenues⁽¹⁾

Net Present Values Before Income Taxes ($000’s)	Undiscounted	Discounted at 5%	Discounted at 10%	Discounted at 15%	Discounted at 20%
Proved
Developed Producing	84,121	71,897	62,561	55,515	50,081
Developed Non-Producing	373,318	303,750	256,815	222,221	195,600
Undeveloped	349,815	268,045	210,888	169,542	138,744
Total 1P	807,254	643,692	530,264	447,278	384,425
Probable	929,042	634,858	463,450	354,683	281,289
Total 2P	1,736,296	1,278,550	993,714	810,961	665,714
Possible	1,162,845	706,880	479,666	350,833	270,402
Total 3P	2,899,141	1,985,430	1,473,380	1,152,794	936,116
Net Present Values After Income Taxes(2) ($000’s)	Undiscounted	Discounted at 5%	Discounted at 10%	Discounted at 15%	Discounted at 20%
Proved
Developed Producing	59,691	56,612	51,770	47,274	43,432
Developed Non-Producing	159,207	134,649	117,278	104,014	93,519
Undeveloped	153,285	114,778	87,576	67,879	53,270
Total 1P	372,183	306,039	256,623	219,166	190,222
Probable	383,287	265,306	194,000	148,011	116,700
Total 2P	755,470	571,344	450,624	367,177	306,922
Possible	474,034	296,499	204,289	150,949	117,211
Total 3P	1,229,504	867,843	654,913	518,126	424,133

Notes:

(1)    Based on the three Consultants’ average December 31, 2022 forecast prices and costs. See “Forecast prices and costs“.

(2)    The after-tax net present values prepared by GLJ in the evaluation of the Company’s crude oil and natural gas assets presented herein are calculated by considering current Trinidad tax regulations and are based on the Company’s estimated tax pools and non-capital losses as of December 31, 2022. The values reflect the expected income tax burden on the assets on a consolidated basis. Values do not represent an estimate of the value at the business entity level or consider tax planning, which may be significantly different. See “Advisories: Unaudited Financial Information“.

Reconciliation of Gross Reserves by Product Type

The following table sets forth a reconciliation of the Company’s total gross proved, gross probable and total gross proved plus probable reserves as of December 31, 2022 by product type against such reserves as at December 31, 2021 based on forecast prices and cost assumptions.

Reserves Category and Factors	Light and Medium Crude Oil (Mbbl)	Heavy Crude Oil(Mbbl)	Conventional Natural Gas (MMcf)	Natural Gas Liquids (Mbbl)(1)	Total Oil Equivalent (Mboe)
Total Proved
December 31, 2021(2)	10,174	471	147,093	3,571	38,731
Extensions and improved recovery(3)	94	–	–	–	94
Technical revisions(4)	169	23	111	–	211
Production	(460)	(27)	(527)	–	(574)
December 31, 2022	9,977	468	146,677	3,571	38,463
Total Probable
December 31, 2021(2)	8,908	458	144,642	3,342	36,815
Technical revisions(4)	(201)	(42)	208	–	(208)
Economic factors(5)	3	–	–	–	3
December 31, 2022	8,711	416	144,850	3,342	36,611
Total Proved plus Probable
December 31, 2021(2)	19,082	929	291,735	6,914	75,547
Extensions and improved recovery(3)	94	–	–	–	94
Technical revisions(4)	(31)	(18)	320	–	4
Economic factors(5)	3	–	–	–	3
Production	(460)	(27)	(527)	–	(574)
December 31, 2022	18,688	884	291,527	6,913	75,074

Notes:

(1)    NGLs are comprised of 100 percent condensate.

(2)    Prior year reserve estimates per GLJ’s independent reserves evaluation dated March 4, 2022 with an effective date of December 31, 2021.

(3)    Reserve amounts for Infill Drilling, Extensions and Improved Recovery are combined and reported as “Extensions and Improved Recovery”.

(4)    Technical revisions factor includes all changes in reserves due to well performance and previously booked wells which were drilled in the year.

(5)    Economic factors are the change in reserves exclusively due to changes in pricing.

In comparison to December 31, 2021 on a proved plus probable reserve basis, 2022 light and medium crude oil reserves declined 394 Mbbl. Improved recovery attributed to well recompletions was offset by 2022 annual production. 2022 proved plus probable heavy crude oil reserves decreased by 45 Mbbl from the prior year due to downward technical revisions of 18 Mbbl associated with reduced well performance at our Fyzabad block, combined with 27 Mbbl of production. Proved plus probable conventional natural gas reserves decreased by 208 MMcf relative to December 31, 2021, as an increase from reduced surface loss estimates related to Coho was offset by 2022 production.

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 ($000’s)	PDP	1P	2P	3P
2023	190	23,648	26,938	26,938
2024	–	31,810	45,006	45,006
2025	–	8,841	38,067	38,067
2026	–	11,232	15,885	15,885
2027	–	11,213	15,470	15,470
Thereafter	–	–	–	–
Total undiscounted	190	86,744	141,366	141,366
Total discounted at 10% per year	181	72,435	116,145	116,145

The following table sets forth the changes in undiscounted future development costs included in the Reserves Report against such costs in our December 31, 2021 reserves report prepared by GLJ dated March 4, 2022.

($000’s unless otherwise stated)	PDP	1P	2P	3P
(Decrease) / increase in forecasted capital costs	(110)	3,450	5,685	5,685
Increase in forecasted wells	–	4,757	4,720	4,720
Decrease in forecasted facility and pipeline costs	–	(1,477)	(2,613)	(2,613)
Total (decrease) / increase in FDC from 2021	(110)	6,730	7,792	7,792
Total (decrease) / increase in FDC from 2021 (%)	(37)	8	6	6

Forecast Pricing and Costs

Forecast pricing and costs are prices and costs that are generally acceptable, in the opinion of GLJ, as being a reasonable outlook of the future as of the evaluation effective date. The forecast cost assumptions consider inflation with respect to future operating and capital costs. The following table sets forth the benchmark reference prices and inflation rates reflected in the Reserves Data as of December 31, 2022. These price assumptions were provided to the Company by GLJ and represented the average price forecast of the three Consultants as of the date of the Reserves Report.

Consultants Average Price Forecast

Forecast Year	Brent Spot Crude Oil(1)($/bbl)	Henry Hub Natural Gas(1)($/MMBtu)	Inflation Rate(% per year)
2023	84.67	4.74	0.0
2024	82.69	4.50	2.3
2025	81.03	4.31	2.0
2026	81.39	4.40	2.0
2027	82.65	4.49	2.0
2028	84.29	4.58	2.0
2029	85.98	4.67	2.0
2030	87.70	4.76	2.0
2031	89.46	4.86	2.0
2032	91.25	4.95	2.0
Thereafter	+2.0% / year	+2.0% / year	2.0

Note:

(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 specific marketing arrangements, quality differentials and transportation to point of sale.

Capital Program Efficiency

	2022 1P	2022 2P	2022 – 2020 Total 1P	2022 – 2020 Total 2P
Estimated capital expenditures(1),(4) ($000’s)	11,330	11,330	57,763	57,763
Change in FDC ($000’s)	6,730	7,792	41,369	69,685
F&D costs(2),(4) ($000’s)	18,060	19,122	99,132	127,448
Reserve additions(2),(3) (Mboe)	306	101	28,193	54,588
F&D costs per boe(2),(4) ($/boe)	59.02	189.33	3.52	2.33
Estimated operating netback(1),(4) ($/boe)	33.42	33.42	25.16	25.16
Recycle ratio(2),(4)	0.6x	0.2x	7.2x	10.8x

Notes:

(1)    Financial information is based on the Company’s preliminary 2022 unaudited financial statements and is therefore subject to change. See “Advisories: Unaudited Financial Information“.

(2)    See “Advisories: Reserves Advisory” and “Advisories: Oil and Gas Metrics“.

(3)    Based on gross reserves, which are the Company’s working interest share before deduction of royalties.

(4)    Non-GAAP financial measure. See “Advisories: Non-GAAP Financial Measures “.