Touchstone Exploration Inc. (TSX, LON:TXP) has reported its operating and financial results for the three months and year ended December 31st, 2021. Selected information is outlined below and should be read in conjunction with our December 31, 2021 audited consolidated financial statements, the related Management’s discussion and analysis and Annual Information Form, all 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.
Fourth Quarter 2021 Highlights
· Achieved quarterly average production volumes of 1,336 barrels per day (“bbls/d”), representing a 5 percent increase from 1,274 bbls/d produced in the fourth quarter of 2020.
· Realized petroleum sales of $8,212,000 from an average crude oil price of $66.81 per barrel compared to petroleum sales of $7,650,000 from average realized pricing of $62.37 per barrel in the third quarter of 2021.
· Generated an operating netback of $29.96 per barrel, an 8 percent increase from the third quarter of 2021 and a 116 percent increase from the $13.90 per barrel in the fourth quarter of 2020.
· Our funds flow from operations improved to $1,291,000 in the quarter compared to funds flow used in operations of $736,000 in the fourth quarter of 2020.
· Reported net earnings of $6,514,000 ($0.03 per basic and diluted share) compared to net earnings of $1,655,000 ($0.01 per basic and diluted share) in the same period of 2020. Net earnings in the fourth quarter included net impairment reversals of $13,716,000, partially offset by associated deferred income tax expenses of $7,226,000.
· Exploration and evaluation capital investments of $2,946,000 focused on completing and initiating production testing operations on the Royston-1 well drilled in the third quarter of 2021 and submitting the required regulatory application for the Cascadura surface facility.
· Drilled three gross and net commitment wells on our legacy crude oil properties in the quarter, representing our first infill development drilling since 2019.
· Expanded our Trinidad-based term loan facility from $20 million to $30 million to fund our budgeted Ortoire facility projects in 2022. We exited the year with cash of $17,936,000, working capital surplus of $6,925,000 and $30,000,000 drawn on our term credit facility, resulting in a net debt position of $20,075,000.
Annual 2021 Highlights
· Reported average daily crude oil sales of 1,342 bbls/d in 2021, a nominal 4 percent decrease relative to the 1,392 bbls/d produced in 2020 due to natural declines, reflecting strategic capital allocation on our Ortoire exploration program. Production from our three development wells drilled in the fourth quarter of 2021 came online in the first quarter of 2022.
· Generated funds flow from operations of $4,107,000 (2020 – $263,000) and an annual operating netback of $26.55 per barrel (2020 – $14.49 per barrel).
· Recognized net earnings of $5,719,000 ($0.03 per basic and diluted share) compared to a net loss of $11,030,000 ($0.06 per basic share) in 2020, driven by $13,674,000 in net impairment reversals recognized in the year predominantly based on increased forecasted crude oil pricing and partially offset by the deferred income tax expense impact of $7,463,000.
· Despite COVID-19 challenges in Trinidad, we executed an incident-free $20,106,000 exploration program, primarily focused on drilling one gross (0.8 net) well, acquiring 22-line kilometres of 2D seismic and testing two exploration wells drilled in 2020. We fulfilled all required minimum work obligations in the initial exploration period of our Ortoire exploration and production licence.
· Development capital expenditures of $7,757,000 focused on exporting a third-party drilling rig to Trinidad, which was used to drill three development wells in the fourth quarter of 2021.
· Entered into revised ten-year lease operating agreements for our Coora-1, Coora-2, WD-4 and WD-8 blocks through December 31, 2030.
Post Period-end Highlights
· Daily crude oil sales averaged 1,382 bbls/d in January 2022 with a realized price of $71.68 per barrel and averaged 1,384 bbls/d in February 2022 with a realized price of $81.30 per barrel.
· In February 2022, we executed the relevant agreements with our third-party partners to allow for the final tie-in of the Coho gas field, with pipeline tie-in operations proceeding towards anticipated initial production in May 2022.
· In March 2022, we were notified that the Trinidad government approved a five-year extension to the exploration period of our Ortoire licence to July 31, 2026 for an additional three exploration well commitment.
Paul Baay, Touchstone Exploration President and Chief Executive Officer, commented:
“Building on our operational and financial momentum generated in 2021, our near-term priority is to bring our Coho and Cascadura exploration discoveries onto production. With the extension of the operating agreements on our legacy assets and the five year extension of the exploration period of our Ortoire licence, we are able to prioritize and allocate future capital expenditures on projects that provide the best economic return. Our assets, including natural gas development at Cascadura and Coho, along with oil development at Royston and our legacy properties, complemented by internally identified exploration targets, advances Touchstone to a level of portfolio balance. Barring any significant delays, we forecast that our year-end 2021 liquidity position provides the funding required to meet our near-term focus of commencing production at Coho and Cascadura. By the end of the year, we expect to develop into a sustainable cash flow generating production-based company with strong exploration prospects.”