Touchstone Exploration Inc (LON:TXP) has reported its operating and financial results for the three months ended March 31, 2023. Selected information is outlined below and should be read in conjunction with our March 31, 2023 unaudited interim condensed consolidated financial statements and related Management’s discussion and analysis, both of which will be available under our profile on SEDAR (www.sedar.com) and on our website (www.touchstoneexploration.com). Unless otherwise stated, all financial amounts herein are rounded to thousands of United States dollars.
First Quarter 2023 Financial and Operational Highlights
· Produced quarterly average volumes of 2,139 boe/d, representing a 53 percent increase relative to the 1,396 boe/d produced in the prior year equivalent quarter and a 4 percent decrease compared to the fourth quarter of 2022.
· Natural gas production from our Coho-1 well averaged net volumes of 5.1 MMcf/d (854 boe/d) in the quarter and contributed $976,000 of net natural gas sales at an average realized price of $2.12/Mcf.
· Realized petroleum and natural gas sales of $8,476,000 compared to $10,496,000 in the 2022 comparative quarter, as the incremental $976,000 in net natural gas sales were offset by decreased crude oil sales of $2,996,000, reflecting a 22 percent decline in realized crude oil pricing and an 8 percent decrease in crude oil production.
· Generated an operating netback of $3,652,000, representing a 23 percent decrease from the 2022 equivalent quarter primarily attributed to a 19 percent decline in petroleum and natural gas sales.
· Reported funds flow from operations of $803,000 in the quarter compared to $691,000 in the preceding quarter and $1,443,000 in the prior year equivalent quarter.
· Recognized a net loss of $279,000 ($0.00 per basic share) in the quarter compared to a net loss of $236,000 ($0.00 per basic share) reported in the same period of 2022.
· $9,019,000 in quarterly capital investments primarily focused on expenditures directed to the drilling of the Royston-1X sidetrack well and progressing construction of the Cascadura natural gas and liquids facility.
· Exited the quarter with a cash balance of $10,859,000, a working capital deficit of $4,383,000 and a principal balance of $25,500,000 remaining on our term credit facility, resulting in a net debt position of $23,883,000.
· Natural gas and liquids facility construction operations on the Cascadura A surface location have progressed and we continue to target completion and commissioning for first production at Cascadura on or about June 30, 2023.
· Construction of the Cascadura C surface location is complete, which will be the location of our first Cascadura development well.
· The second production test of the Royston-1X well is expected to commence in late May 2023 once the service rig has moved onto the lease following the drilling rig being moved to the Cascadura C location.
Financial and Operating Results Summary
| Three months ended | |||
| March 31,2023 | December 31, 2022 | March 31, 2022 | |
| Operational | |||
| Average daily production | |||
| Crude oil(1) (bbls/d) | 1,285 | 1,274 | 1,396 |
| Natural gas(1) (Mcf/d) | 5,124 | 5,729 | – |
| Average daily production (boe/d)(2) | 2,139 | 2,229 | 1,396 |
| Average realized prices(3) | |||
| Crude oil(1) ($/bbl) | 64.86 | 75.10 | 83.55 |
| Natural gas(1) ($/Mcf) | 2.12 | 2.11 | – |
| Realized commodity price ($/boe)(2) | 44.03 | 48.36 | 83.55 |
| Production mix (% of production) | |||
| Crude oil(1) | 60 | 57 | 100 |
| Natural gas(1) | 40 | 43 | – |
| Operating netback ($/boe)(2) | |||
| Realized commodity price(3) | 44.03 | 48.36 | 83.55 |
| Royalties(3) | (13.01) | (15.24) | (28.55) |
| Operating expenses(3) | (12.05) | (12.07) | (17.17) |
| Operating netback(3) | 18.97 | 21.05 | 37.83 |
| Financial ($000’s except per share amounts) | |||
| Petroleum and natural gas sales | 8,476 | 9,919 | 10,496 |
| Cash from (used in) operating activities | 913 | (1,189) | 350 |
| Funds flow from operations(3) | 803 | 691 | 1,443 |
| Net loss | (279) | (1,921) | (236) |
| Per share – basic and diluted | (0.00) | (0.01) | (0.00) |
| Exploration capital expenditures | 8,750 | 2,290 | 1,874 |
| Development capital expenditures | 269 | 219 | 680 |
| Capital expenditures(3) | 9,019 | 2,509 | 2,554 |
| Working capital deficit (surplus)(3) | 4,383 | (4,992) | (4,259) |
| Principal long-term balance of term loan | 19,500 | 21,000 | 25,500 |
| Net debt(3) – end of period | 23,883 | 16,008 | 21,241 |
| Share Information (000’s) | |||
| Weighted average shares outstanding – basic and diluted | 233,037 | 217,106 | 210,823 |
| Outstanding shares – end of period | 233,037 | 233,037 | 211,164 |
Notes:
(1) In the table above and elsewhere in this announcement, references to “crude oil” refer to light and medium crude oil and heavy crude oil product types combined and references to “natural gas” refer to conventional natural gas, all as defined in National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities (“NI 51-101”). Refer to “Advisories – Product Type Disclosures” for further information.
(2) In the table above and elsewhere in this announcement, references to “boe” mean barrels of oil equivalent that are calculated using the energy equivalent conversion method. Refer to “Advisories – Oil and Natural Gas Measures” for further information.
(3) Non-GAAP financial measure. See “Advisories – Non-GAAP Financial Measures” for further information.
Annual and Special Meeting of Shareholders
Touchstone’s virtual-only Annual and Special Meeting of Shareholders (the “Meeting”) will be held on Thursday, June 29, 2023 at 10:30 a.m. (Mountain time).
Registered and beneficial shareholders will be mailed a notice-and-access notification and form of proxy on or around May 30, 2023, advising as to the electronic availability of the Meeting materials, including the 2023 Management Information Circular, the 2022 audited consolidated financial statements and related management’s discussion and analysis. For holders of our depositary interests, our Management Information Circular and form of direction will be mailed on or about May 30, 2023. Subsequent to the mailing date, the Meeting materials will be available on our website (www.touchstoneexploration.com/investors/shareholder-meetings) and under our profile on SEDAR (http://www.sedar.com/www.sedar.com).
Touchstone Exploration’s annual audited consolidated financial statements and related management’s discussion and analysis for the year ended December 31, 2022 were also mailed on April 4, 2023 to those shareholders who elected to receive physical copies. Shareholders may also access these documents on our website and under our profile on SEDAR.
