Shore Capital Analyst Craig Howie caught up with us to discuss Touchstone Exploration Inc. (LON:TXP).
Q. Touchstone have just released a trading update which looked very positive. Craig what were the key highlights in your opinion?
A. Touchstone has reported FY2020 year-end reserves which, as we expected, have demonstrated very strong year-on-year progression. Operationally, the company reports continued good progress and, with gas production testing now scheduled to commence shortly at Chinook and Cascadura Deep, we look forward to the announcement of production test results from these wells by May or June. Operationally, the company continues to press forward and, with gas production testing scheduled to commence shortly at the above locations, the announcement of test results from these wells remains a key milestone to look forward to, noting the recent discovery of oil at Chinook. This is a positive upside surprise and has the potential to result in numerous follow-on development well locations. Progress with other key deliverables, such as the tie-in of Coho-1 and Royston drilling, is nicely on track.
Q. How do you see the company in terms of a valuation?
A. Our last-published Risked NAV estimate stands at 200p/share and we confidently maintain this following today’s update.
Q. How do you view the outlook?
A. Very positively – we see material upside potential for reported reserves once Chinook and Cascadura Deep have been fully evaluated, and also see excellent scope for upgrades to our prevailing earnings forecasts (issued in December) once production testing of these recent discoveries has been completed.
Q. In terms of news flow what are you hoping to see over the coming months?
A. The company remains very active on the ground in Trinidad and we expect to see production test results from Chinook and Cascadura Deep announced by mid-year. In addition, Touchstone reports that it continues to target the second quarter of this year for initial Ortoire gas commercialisation, with initial gas production from Coho-1 on track for the second quarter of this year. In addition, the drilling rig is scheduled to move to the Royston well location early in Q2, with a seismic survey covering the Royston area targeted for completion by July. We therefore see a very active few months ahead – particularly from a well testing, drilling and gas commercialisation standpoint.