# Touchstone Exploration Budget, 2024 Guidance and Operational Update

- Link: https://www.directorstalkinterviews.com/touchstone-exploration-budget-2024-guidance-and-operational-update/4121136389
- Published: 2023-12-19T07:10:05+00:00
- Author: Ethan Davis

**[Touchstone Exploration](https://www.directorstalkinterviews.com/company/touchstone-exploration-inc/txp.l)
Inc.** (TSX, [LON:TXP](https://www.directorstalkinterviews.com/company/touchstone-exploration-inc/txp.l))
has announced its annual 2024 capital budget, preliminary 2024 guidance and an operational
update.

**Paul Baay, President and Chief Executive Officer, commented:**

“_Our top priority remains maintaining a culture of safe and responsible operations
that continues to drive near and long-term value creation for our investors._ _I
am pleased to announce our growth-oriented capital budget for 2024 which reinforces
Touchstone’s commitment to pursue development opportunities that generate positive
returns to position the Company for sustained success. The budget and preliminary
guidance reflects our near-term strategy to deploy capital to developmental drilling
opportunities and use our existing natural gas and liquids infrastructure capacity.
We will remain disciplined when deploying our 2024 capital and increasing our credit
capacity, adhering to our long-term net debt and liquidity targets. This approach
will allow us to fund future exploration drilling from cash flows expected to be
generated through our 2024 development drilling program and maximization of our 
existing financing facilities._“

**Funding Position**^((1))

The Company is in advanced discussions with its existing lender to increase its 
current debt capacity to facilitate the forecasted timing and amount of the 2024
capital budget presented herein. The 2024 budget contemplates increasing the Company’s
revolving component of its credit facility from $7 million to $20 million in the
first quarter of 2024. Although we are confident of reaching agreement, currently
there is no firm commitment in place between the parties. Accordingly, the 2024 
budget and preliminary guidance may be subject to change, and such changes may be
material. The Company will provide further updates in due course.

**2024 Budget Highlights**^(([1]))

·     **Capital budget allocation** – we plan to invest approximately $33 million
of capital in 2024, with approximately 42 percent of our capital expenditures^(([
2])) directed to our Cascadura field and 38 percent to our Coho assets. The remaining
20 percent is allocated to our legacy oil properties, exploration licence payments
and corporate infrastructure.

·     **Drilling operations** – the initial 2024 capital budget contemplates drilling
two Cascadura development wells, two CO-1 Block crude oil development wells, one
Coho development well, and one Coho exploration well.

·      **Production growth** – our 2024 mid-point annual average production guidance
of 9,400 boe/d represents an approximate 135 percent increase from our forecasted
2023 average production, with a budgeted exit average production rate of 14,500 
boe/d. Annual production guidance is 9,100 to 9,700 boe/d (approximately 82 percent
natural gas weighted).

·      **Funds flow generation and balance sheet strength** – the 2024 budget is
designed to generate approximately $32 million of funds flow from operations^((2))(
Brent price of $75.00/bbl and an 18 percent realized Brent differential), resulting
in a net debt to annual funds flow from operations ratio^((2)) of 0.78 times.

**2024 Budget and Guidance Overview**

For 2024, Touchstone’s Board of Directors has approved an initial capital budget
of $33 million to drill, complete and tie-in six wells, resulting in estimated annualized
average daily production between 9,100 boe/d and 9,700 boe/d with a forecasted production
mix of 82 percent natural gas and 18 percent crude oil and liquids.

Touchstone’s initial 2024 drilling plan includes drilling two legacy property crude
oil wells, two Cascadura development wells, one Coho development well and one Coho
exploration well. Production growth is expected to be weighted in the fourth quarter
of 2024, with two Cascadura wells expected to be drilled in the first half of the
year and tied-in to the Cascadura plant prior to the end of the third quarter of
2024. The two Coho wells are expected to be drilled in the fourth quarter of 2024,
and production additions from those wells are anticipated in the first quarter of
2025.

Using midpoint forecasted average production of 9,400 boe/d and a Brent Benchmark
price of $75.00 for crude oil and liquids, Touchstone expects to generate approximately
$32 million of funds flow from operations. Based on the approved capital budget 
of $33 million, Touchstone is forecasting to exit 2024 with a net debt of $25 million,
resulting in a net debt to annual funds flow from operations ratio of 0.78 times.

**2024 Guidance Summary**^((1))

| **Annual Guidance** | ** ** | **Year ending December 31, 2024** | 
|  | ** ** |  | 
| Capital expenditures^((2)) _($000’s)_ |  | 33,000 | 
|  |  |  | 
| Average daily production^((3)) _(boe/d)_ |  | 9,100 to 9,700 | 
| % natural gas^((4)) | ** ** | 82% | 
| % crude oil and liquids^((4)) | ** ** | 18% | 
|  | ** ** |  | 
| Average Brent crude oil price _($/bbl)_ | ** ** | 75.00 | 
| % realized discount to Brent benchmark price | ** ** | 18% | 
|  | ** ** |  | 
| Funds flow from operations^((5)) _($000’s)_ | ** ** | 32,000 | 
|  | ** ** |  | 
| Net debt _–_ end of year^((2)(5)) _($000’s)_ | ** ** | 25,000 | 
|  | ** ** |  |

Notes:

(1)   Forward-looking statement representing Management estimates. Additional information
regarding the assumptions used are provided in the “_Advisories – Assumptions for
2024 Guidance_” section herein.

(2)   Non-GAAP financial measure. See the “_Advisories – Non-GAAP Financial Measures_”
section herein for additional information on the definitions and calculation of 
these measures.

(3)   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. See the “_Advisories –_ _Oil and Natural Gas Measures_” section herein for
further information.

(4)   See the “_Advisories –_ _Product Type Disclosures_” section herein for further
information.

(5)   The financial performance measures included in the Company’s 2024 preliminary
guidance are based on the midpoint of the average production forecast.

**Operational Update**

In November 2023, we achieved average net sales volumes of 8,268 boe/d as follows:

·     6,623 boe/d (8,279 boe/d gross) of Cascadura field net sales volumes consisting
of:

–     net natural gas sales volumes of 36.1 MMcf/d or 6,022 boe/d (45.1 MMcf/d or
7,528 boe/d gross) with a realized price of $2.46/Mcf; and

–     net natural gas liquids volumes of 601 bbls/d (751 bbls/d gross) with an average
realized price of $71.46 per barrel;

·     Coho field net average natural gas sales volumes of 3.2 MMcf/d or 527 boe/
d (4.0 MMcf/d or 659 boe/d gross) at a realized price of $2.29/Mcf; and

·     average gross and net daily crude oil sales volumes of 1,118 bbls/d with an
average realized price of $71.46 per barrel.

_Cascadura_

Commissioning of the Cascadura natural gas facility has been completed, and the 
facility is fully functional. Since commencing production in September, the Cascadura
facility has had an uptime of 97.9 percent with minimal interruptions experienced
through the commissioning phase. Through November 30, 2023, the facility has processed
3.8 billion cubic feet of gross natural gas volumes and 73 Mbbls of gross NGL production
volumes.

Touchstone continues to optimize Cascadura production volumes, with adjustments 
being made to the mechanical chokes which are constraining production in both wells.
Through December 1 to December 17, 2023, Cascadura-1ST1 produced approximately 35.7
MMcf/d of gross field estimated natural gas volumes from the upper overthrust sheet
while Cascadura Deep-1 contributed approximately 11.4 MMcf/d of gross field estimated
natural gas production from the lower overthrust sheet.

We are evaluating the Cascadura Deep-1 well for future optimization, including the
potential for additional perforations in the lower sheet. The additional perforations
could increase production by reducing current reservoir draw down rates allowing
for an increase in the surface choke, which is currently at 54 percent. These additional
perforations can be achieved without the use of a service rig or having to kill 
the well. The Cascadura Deep-1 well has approximately 200 feet of perforations currently
open (118 feet net pay), and wireline logs indicate an additional 149 feet of reservoir
sands (109 feet net pay) in the lower part of the formation available for future
completion. The well also has 366 feet of gross sand (274 feet net pay) in the upper
overthrust sheet that can also be perforated in the future. Touchstone anticipates
commencing a staged approach to adding these sands in the lower overthrust sheet
in the first half of 2024.

Preparation works for drilling the Cascadura-2 development well using Star Valley
Rig #205 are underway, with the intent to spud early in the first quarter of 2024
from the Cascadura-C surface location located approximately 5,000 feet northeast
of our producing Cascadura wells. The Cascadura-2 well is targeting the same Herrera
7bc overthrust sand packages as the current Cascadura producing wells.

_Coho_

Touchstone completed a workover on the Coho-1 well on December 4, 2023, successfully
isolating the lowermost perforations and shutting off approximately 77 percent of
the produced water. Two weeks following the workover, field estimated gross production
volumes have averaged approximately 4.6 MMcf/d of natural gas with approximately
54 barrels of water per day, compared to November gross production volumes of 4.0
MMcf/d of natural gas and 230 barrels of water per day. Based on the decreased water
production, Touchstone expects fluid hauling expenses to decrease by approximately
80 percent.

Preparations are underway to facilitate the drilling of the Coho-2 development well
and the Gibba-1 exploration well which are expected to be drilled on the existing
Coho-1 surface location in the fourth quarter of 2024.

_Royston_

Production testing of the Royston-1X exploration well has been suspended, and no
further testing or expenditures are planned. The uppermost Karamat and Herrera sands
were put to pump, however the rates encountered were not economic. Touchstone will
review the data collected during testing from both the Royston-1 and Royston-1X 
wells to determine if a declaration of commerciality for the Royston structure is
warranted.

_CO-1 Block_

Preparations are underway on our CO-1 block for a two development well drilling 
program. A local drilling contractor is expected to mobilize a drilling rig to the
location in late January, pending completion of their current drilling operations.
Two wells are expected to be drilled from an existing surface location, both targeting
Forest and Cruse sands which have proven to be highly prospective based on the Company’s
previous drilling campaign offsetting the area.

**Touchstone Exploration Inc.**

Touchstone’s updated corporate presentation is available on our website at [www.touchstoneexploration.com](http://www.touchstoneexploration.com/).

Touchstone Exploration Inc. is a Calgary, Alberta 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”.

Share on: