Touchstone Exploration Inc. (LON:TXP, TSX: TXP) has reported its financial and operating results for the three and nine months ended September 30, 2025. Selected financial information is outlined below and should be read in conjunction with Touchstone’s September 30, 2025 unaudited interim condensed consolidated financial statements and related Management’s discussion and analysis, both of which are available online on the Company’s profile on SEDAR+ (www.sedarplus.ca) and website (www.touchstoneexploration.com). Unless otherwise stated, all financial amounts presented herein are in United States dollars.
Third Quarter 2025 Highlights
· Production: Averaged 5,141 boe/d in the third quarter of 2025 (71 percent natural gas), compared to 4,399 boe/d (69 percent natural gas) in the second quarter of 2025 and 5,211 boe/d (75 percent natural gas) in the third quarter of 2024. Central volumes contributed approximately 2,217 boe/d during the third quarter.
· Petroleum and Natural Gas Sales: Totaled $12.70 million, a 4 percent decrease from $13.25 million recorded in the comparative prior year quarter.
– Crude oil sales: $5.84 million from average production of 1,051 bbls/d at an average realized price of $60.30 per barrel.
– NGL sales: $1.34 million from average production volumes of 436 bbls/d at an average realized price of $33.41 per barrel.
– Natural gas sales: $5.52 million from average production of 21.9 MMcf/d (3,654 boe/d) at an average realized price of $2.74 per Mcf.
· Operating Netback: Generated $5.86 million in operating netback, a 21 percent decrease from the third quarter of 2024, primarily due to decreased petroleum and natural gas sales and related royalties and increased natural gas operating expenses.
· Funds Flow from Operations: Declined to $0.74 million from $3.02 million in the prior year equivalent quarter, largely driven by lower operating netbacks, higher cash finance expenses, and increased current income taxes, partially offset by lower transaction costs.
· Net Loss: Recorded a net loss of $2.06 million ($0.01 per share) compared to net earnings of $1.85 million ($0.01 per share) in the third quarter of 2024. The variance was primarily driven by the decrease in year-over-year funds flow from operations, $1.50 million in additional depletion and depreciation expense, and the absence of a $0.78 million gain on asset disposition recognized in the prior year.
· Capital Investments: Invested $9.60 million with the majority of expenditures focused on Cascadura drilling operations and the procurement of compression equipment for the Cascadura natural gas processing facility.
· Convertible Debt Financing: Issued a three-year secured convertible debenture (the “Debenture”) on August 8, 2025, bearing interest at 5 percent per annum to a private investor. The Debenture is convertible at approximately US$0.22 (C$0.30) per share and the investor received 6,250,000 warrants exercisable at C$0.40 per share for two years. Proceeds from the financing supported the completion of the Company’s Cascadura development drilling activities.
· Financial Position: Net debt increased to $77.75 million at September 30, 2025, reflecting the issuance of the Debenture.
· Strategic Disposition: Entered into an agreement to divest the non-core Fyzabad property to a Trinidad-based third party for consideration of three turnkey drilling wells on the Company’s WD-8 and WD-4 blocks. The property contributed average production of 49 bbls/d during the third quarter of 2025, with $2.59 million in net liabilities classified as held for sale at September 30, 2025. The transaction remains subject to customary regulatory approvals.
Post Period-end Highlights
· Private Placement: On October 30, 2025, Touchstone raised gross proceeds of approximately $9.1 million (£7 million) from the issuance of 63,636,363 common shares at 11 pence sterling (approximately C$0.205) per share.
· Bank Waiver Obtained: Following completion of the October private placement, Touchstone received a waiver from its lender, which waives the testing of the debt service coverage financial covenant under its loan agreement for the year ended December 31, 2025.
· Production Update: Field-estimated production for October 2025 averaged 4,691 boe/d, a 3.3 percent decrease from 4,852 boe/d in September. The decline primarily reflected approximately two days of planned maintenance at the Central facility. Estimated October production volumes comprised 19.7 MMcf/d of net natural gas production (3,289 boe/d) and 1,402 bbls/d of net crude oil and liquids production.
· Drilling Update: The drilling rig is currently being mobilized to the newly constructed Central block location to drill a well targeting a previously identified natural gas zone with bypassed pay potential. Any successful results are expected to be tied into the Company’s existing natural gas processing facility in the first quarter of 2026.
Paul Baay, Touchstone Exploration Chief Executive Officer, commented:
“Third quarter production reflected strong performance from the Central field and the stabilization of existing wells at both Cascadura and Coho, with legacy oil production continuing to underpin our low decline rates.
The Cascadura-5 well commenced production on November 1, 2025, as planned; however, initial rates did not exhibit the high flush production observed in previous wells. Notably, for the first time, we encountered 26-degree API gravity crude oil from Cascadura. This represents an important new data point, adding further complexity to our understanding of the field’s structure.
While oil produced at Cascadura is approximately four times more valuable than natural gas on a per-boe basis at current pricing, initial production rates were below expectations. However, based on newly acquired data, we have identified additional reservoir intervals for perforation in both the Cascadura-2ST1 and Cascadura-5 wells. Encouragingly, these zones are capable of producing water-free oil and can be accessed at minimal cost without the use of a service rig.
We now have an opportunity to re-evaluate and refine our reservoir model at Cascadura as we advance drilling at the Central block and proceed with the compression installation at Cascadura, which remains on schedule to commence operations in the second quarter of 2026. All Cascadura wells, including Cascadura-2ST1 and Cascadura-5, are expected to benefit from compression. In addition, we have completed reprocessing of the three-dimensional seismic data, which will be integral to ongoing field evaluation.
The Central asset continues to outperform the estimates established at the time of acquisition. As we enter the next phase of development, we plan to drill up to four additional development wells and may conduct fracture stimulations on two existing wells. The drilling rig is currently mobilizing from Cascadura to the Central field, where it is expected to remain for the next year as we optimize production and prepare for the anticipated natural gas price increase stipulated in our marketing contract in May 2027.
We also continue to work constructively with the National Gas Company of Trinidad and Tobago on revising gas pricing at Cascadura, as current pricing does not adequately reflect the capital intensity of development or align with that received by other producers in the country.“
Third Quarter 2025 Financial and Operating Results Overview
| Three months ended September 30, | % change | Nine months ended September 30, | % change | |||
| 2025 | 2024 | 2025 | 2024 | |||
| Operational | ||||||
| Average daily production | ||||||
| Crude oil(1) (bbls/d) | 1,051 | 1,244 | (16) | 1,118 | 1,190 | (6) |
| NGLs(1) (bbls/d) | 436 | 45 | 100 | 230 | 135 | 70 |
| Crude oil and liquids(1) (bbls/d) | 1,487 | 1,289 | 15 | 1,348 | 1,325 | 2 |
| Natural gas(1) (Mcf/d) | 21,926 | 23,531 | (7) | 19,647 | 27,349 | (28) |
| Average daily production (boe/d)(2) | 5,141 | 5,211 | (1) | 4,623 | 5,883 | (21) |
| Production mix (% of production) | ||||||
| Crude oil and liquids(1) | 29 | 25 | 29 | 23 | ||
| Natural gas(1) | 71 | 75 | 71 | 77 | ||
| Average realized prices(3) | ||||||
| Crude oil(1) ($/bbl) | 60.30 | 66.79 | (10) | 60.92 | 70.03 | (13) |
| NGLs(1) ($/bbl) | 33.41 | 65.35 | (49) | 35.71 | 70.18 | (49) |
| Crude oil and liquids(1) ($/bbl) | 52.42 | 66.74 | (21) | 56.62 | 70.04 | (19) |
| Natural gas(1) ($/Mcf) | 2.74 | 2.47 | 11 | 2.61 | 2.47 | 6 |
| Realized commodity price ($/boe)(2) | 26.84 | 27.65 | (3) | 27.59 | 27.25 | 1 |
| Operating netback ($/boe)(2) | ||||||
| Realized commodity price(3) | 26.84 | 27.65 | (3) | 27.59 | 27.25 | 1 |
| Royalty expense(3) | (6.00) | (7.11) | (16) | (6.58) | (6.62) | (1) |
| Operating expense(3) | (8.46) | (5.08) | 67 | (7.50) | (4.50) | 67 |
| Operating netback(3) | 12.38 | 15.46 | (20) | 13.51 | 16.13 | (16) |
| Financial | ||||||
| ($000’s except per share amounts) | ||||||
| Petroleum and natural gas sales | 12,696 | 13,253 | (4) | 34,816 | 43,927 | (21) |
| Cash from operating activities | 4,850 | 3,607 | 34 | 10,227 | 12,359 | (17) |
| Funds flow from operations | 735 | 3,024 | (76) | 4,748 | 13,134 | (64) |
| Net (loss) earnings | (2,064) | 1,847 | n/a | (2,733) | 8,814 | n/a |
| Per share – basic and diluted | (0.01) | 0.01 | n/a | (0.01) | 0.04 | n/a |
| Capital expenditures(3) | 9,602 | 3,068 | 100 | 20,934 | 20,573 | 2 |
| Acquisition expenditure | – | – | n/a | 28,400 | – | n/a |
| Principal balance of bank debt | 59,875 | 32,353 | 85 | |||
| Principal balance of convertible debenture | 12,500 | – | n/a | |||
| Net debt(3) | 77,753 | 29,593 | 100 | |||
| Share Information (000’s) | ||||||
| Weighted avg. shares outstanding: | ||||||
| Basic | 261,097 | 236,382 | 10 | 248,824 | 235,189 | 6 |
| Diluted | 261,097 | 236,749 | 10 | 248,824 | 236,578 | 5 |
| Outstanding shares – end of period | 261,097 | 236,461 | 10 | |||
Notes:
(1) Refer to “Advisories – Product Type Disclosures” for further information.
(2) Refer to “Advisories – Oil and Natural Gas Measures” for further information.
(3) Specified or supplementary financial measure. Refer to “Advisories – Non-GAAP Financial Measures” for further information.
Cascadura-5 Well Update
Cascadura-5 was successfully brought onstream as planned on November 1, 2025, and is currently producing through a 70 percent choke to the Cascadura natural gas facility. Since coming online, the well has averaged gross production of approximately 500 boe/d, comprised of liquids-rich natural gas and 26-degree API gravity crude oil, with no associated water.
Cascadura-5 is the first well in Block B to produce medium-gravity crude oil in addition to natural gas. Preliminary production data suggest that a lower sand interval perforated in the well is contributing a crude oil leg. This result will be evaluated further to determine the potential for optimization opportunities in existing Block B wells and to assess future development implications across the block.
2025 Outlook and Revised Guidance
On October 24, 2025, the Company released its revised 2025 operational and financial guidance. Following initial production results from Cascadura-5, Touchstone Exploration provides the following updates to the Revised guidance.
| Annual Guidance Summary(1) | November Guidance | Revised Guidance(2) | Variance | |
| Amount | % | |||
| Capital expenditures(3) ($000’s) | 27,000 | 26,000 | 1,000 | 4 |
| Average daily production (boe/d) | 4,700 | 5,000 | (300) | (6) |
| % natural gas | 71% | 73% | (2) | |
| % crude oil and liquids | 29% | 27% | 2 | |
| Funds flow from operations ($000’s) | 4,000 | 6,000 | (2,000) | (33) |
| Net debt – end of year(3) ($000’s) | 69,000 | 65,000 | 4,000 | 6 |
Notes:
(1) Forward-looking statement and financial outlook information based on Management current estimates. Refer to “Advisories – Forward-looking Statements“.
(2) As disclosed in the Company’s October 24, 2025 announcement.
(3) Specified or supplementary financial measure. Refer to the “Advisories – Non-GAAP Financial Measures” section of this MD&A.
Since coming online on November 1, 2025, the Cascadura-5 well has produced estimated gross average daily volumes of 2.4 MMcf/d of natural gas and 106 bbls/d of crude oil (approximately 506 boe/d), below the Revised Guidance, which had anticipated gross volumes of approximately 17.0 MMcf/d of natural gas and 275 bbls/d of associated liquids (approximately 3,108 boe/d) over the initial 30 days.
Based on this lower-than-expected performance, the Company now expects 2025 average daily production of 4,700 boe/d, representing a decrease of approximately 300 boe/d (6 percent) relative to the 5,000 boe/d midpoint in the Revised Guidance.
As a result of the forecasted decline in production, the Company expects funds flow from operations of approximately $4 million for 2025, down from $6 million in the Revised Guidance.
Capital expenditures are expected to total $27 million, representing a nominal $1 million increase compared to the Revised Guidance.
Reflecting the anticipated reduction in funds flow from operations combined with the higher capital program, Touchstone now expects to exit 2025 with net debt of approximately $69 million, an increase of $4 million (6 percent) relative to the $65 million disclosed in the Revised Guidance.
Liquidity
Touchstone’s near-term development strategy remains focused on enhancing operating cash flows through continued field development activities. The Company will maintain a disciplined approach to future capital spending to preserve financial liquidity while executing its operational plans.
The September 30, 2025 unaudited interim condensed consolidated financial statements include a going concern statement. In a downside scenario, and in the absence of mitigating actions, the Company’s current cash resources may not be sufficient to fund expected operating and development expenditures and scheduled bank debt repayments over the next twelve months. These circumstances represent material uncertainties that may cast significant doubt on the Company’s ability to continue as a going concern.
As at September 30, 2025, Touchstone had a working capital deficit of $16.74 million, excluding the carrying value of the Debenture, which may be converted into common shares at any time prior to its August 2028 maturity. The Company’s going concern assessment is dependent on the timely collection of value-added tax receivables and anticipated incremental production from its 2025 development program, which has experienced additional costs and operational challenges to date.
In the event that expected cash inflows from value-added tax receivables and increased production are delayed, Management is evaluating and prepared to implement various contingency measures to address remaining capital requirements. These measures may include adjustments to planned operational activities and, if required, consideration of additional debt or equity financing.
Management continues to closely monitor the Company’s liquidity position to ensure that operating cash flows, available credit capacity, and working capital remain sufficient to support ongoing financial obligations, planned capital programs, and future work commitments.
