WHILE many oil and gas companies around the world have complained about how difficult 2020 was, Canada’s Touchstone Exploration, which operates on land in South Trinidad, said it achieved “significant progress” last year.
Touchstone is based in Calgary, but most of its operations are focused in the Ortoire exploration block, where the company made two discoveries of natural gas last year.
“The year 2020, presented significant challenges to the wider oil and gas industry due to the impact of Covid-19 on working operations and the volatile nature of global oil prices.
“It is against that backdrop that I am delighted to report another year of significant progress at Touchstone in which we have enhanced our financial position significantly, encountered major natural gas discoveries as well as signed a historic long-term natural gas sales agreement with the National Gas Company of Trinidad and Tobago (NGC).
“As a result of their hard work, the company is very well positioned for another year of growth as we move forward with our exploration, development and production programme at Ortoire and across the wider portfolio,” said Paul Baay, Touchstone’s president and CEO, in remarks in the company’s 2020 financials.
Touchstone said the company’s primary objective remains to bring the two natural gas exploration discoveries at Ortoire into production in 2021. “Additionally, production testing operations are ongoing at our Chinook-1 and Cascadura Deep-1 prospects, and we anticipate drilling our Royston-1 location in the second half of 2021.
“As the current economic and health related challenges persist, we will continue to adapt our business operations and capital programmes to ensure health and safety and enhance long-term shareholder value,” the company statement said.
“The enhanced liquidity provided from our debt refinancing and our 2020 equity financings are expected to allow us to fund our exploration programme in 2021, with a core focus on drilling our final work commitment exploration well (Royston-1), completing our 2D seismic programme, testing our two exploration wells drilled in 2020, and bringing our Coho-1 and Cascadura-1ST1 discoveries onto production in 2021,” it said.
Touchstone observed that throughout 2020, it conducted minimal capital development activity and continued to allocate capital to exploration activities to its Ortoire property.
In December, Touchstone signed a natural gas supply agreement with the NGC.
Baay told the Express Business in an interview in February: “We got certainty for the price of our natural gas for the next five years, which allows us to do our drilling to find more gas, and it also provides some certainty for the petrochemical companies. NGC has agreed to take all of the gas we can find at Ortoire.”
In the interview with the Express Business last month, Baay said within the Ortoire Block, the Coho-1 exploration well was spud on August 7, 2019, and is expected to come on stream in April this year with about 10 million cubic feet a day of natural gas.
And in the fourth quarter of 2021, the Cascadura-1 well is expected to come on stream with 100 million cubic feet a day of natural gas and 2,000 barrels a day of oil.
“Assuming there is more success in the block, and a couple more exploratory wells that we have to drill, the company can see itself over the next 24 months adding over 200 million cubic feet a day and somewhere around 4,000 barrels a day of oil,” he told the business magazine.
Baay had said the company’s capital expenditure over the next 24 months was about US$24 million.
Baay had observed that the company’s stock price on the Toronto Stock Exchange in February 2020 was US$0.35 and in February 2021, the stock the stock traded at around US$2.50 which increased the overall value of the company from US$30 million to about US$500 million.
He had attributed the increase in the company’s value to the discoveries in Trinidad.
Losses in 2020
Despite their discoveries, Touchstone Exploration posted a US$11 million loss in its 2020 financial year.
In its financial results, released last Thursday, the company said it recognised a net loss of US$11,030,000 ($0.06 per share) compared to a net loss of US$5,620,000 ($0.04 per share) in 2019, driven by US$11,418,000 in net impairment losses recorded in the year predominantly based on lower forecasted crude oil pricing.
Among the company’s highlights were:
• It established a US$20 million term loan with a Trinidad based financial institution and successfully accessed capital markets to continue its Ortoire exploration programme, raising total net proceeds of US$39.2 million from two oversubscribed equity financings.
Touchstone undertook a private placement that closed on November 12, 2020 in order to support the completion of the initial phase of exploration work on the Ortoire block, raising $28,386,000.
• It maintained what it termed financial flexibility—exiting the year with cash of US$24,281,000, a working capital balance of US$12,933,000 and US$7,500,000 drawn on its US$20 million term credit facility, resulting in a net surplus of US$5,433,000.
• The company said despite limited capital and operational development asset investment and considerably lower crude oil pricing, it generated funds flow from operations of US$263,000 (2019 —$6,840,000) and an operating netback of $14.49 per barrel (2019 —$26.61).
• Touchstone said it achieved annual crude oil sales of 1,392 barrels a day, which was a 24 per cent decrease of the 1,825 barrels a day produced in 2019. “As expected and consistent with 2019, our crude oil production has reduced due to the ongoing impact of natural declines, reflecting a strategic focus on our Ortoire exploration programme which has limited development capital investment,” it said.
• The company said it continued to focus on discretionary cost reductions, with operating costs on a per barrel basis decreasing by 12 per cent and general and administration expenses declining by six per cent relative to 2019.
Touchstone said its business continuity plans remain effective across its locations in response to Covid-19 with minimal health and safety impacts or disruptions to production and that it executed a high impact, incident free $17,861,000 exploration programme, primarily focused on drilling two gross (1.6 net) wells.
Despite the challenges presented by the Covid-19 pandemic, Touchstone continued with “its focus on improving financial liquidity, capturing cost savings, and increasing the long-term value of our core assets. We managed our business prudently during the year, progressing with our Ortoire exploration program and maintaining our base production while continuing safe and reliable operations”.
Baay said: “As a result, crude oil production during the fourth quarter averaged 1,274 bbls/d, a 25 per cent decrease relative to the 1,690 bbls/d produced in the fourth quarter of 2019 based on the ongoing impact of natural declines. Further, commencing in March 2020, we deliberately reduced discretionary operating expenditures in response to lower crude oil pricing, focusing on performing well interventions on those deemed high priority.
“Accordingly, annual 2020 crude oil production averaged 1,392 bbls/d, representing a decrease of 24 per cent from crude oil production delivered in 2019. We invested $709,000 in development activities in 2020, which mainly consisted of recompletion activities on legacy wellbores and upgrades to our oilfield service equipment to maintain base production levels.
It said the resilience and quality of our employees and asset base were demonstrated throughout an extremely challenging operational and financial period in 2020.