Touchstone Exploration (LON:TXP) has announced a significant step forward with the acquisition of the Central Block licence from Shell. This deal, priced at $23 million in cash (subject to closing adjustments), includes a gas processing facility and is set to bring transformative benefits to the company. With an effective date of 1st January 2025, the acquisition is expected to close in the second quarter of 2025.
A Transformative Deal for Touchstone
The Central Block licence currently produces 18 million standard cubic feet per day (mmscf/d) of natural gas and 200 barrels per day (bbls/d) of natural gas liquids (NGLs) from four active wells. For Touchstone, this acquisition translates to an additional production of approximately 2,100 barrels of oil equivalent per day (boepd) net, 94% of which will be natural gas.
Notably, the facility in the Central Block has the capacity to process 80 mmscf/d of gas and is connected to both the domestic market and the Atlantic LNG export hub. The latter offers access to premium pricing, with natural gas prices reaching as high as $7.50 per mmscf, presenting a promising opportunity for Touchstone to significantly improve its average gas sales prices.
Phil Hallam, E&P Research Analyst at Canaccord Genuity, observed:
“This is a material deal and a needed positive move for Touchstone. The increased production, improved pricing contracts potential, and synergies with existing assets is hard to ignore; however, we do note that this will result in a further step up in the Company’s debt levels, and the deal is still subject to regulatory approval.”
Funding and Strategic Impact
The acquisition is expected to be financed through debt, with Touchstone actively negotiating with its Trinidad-based lender, Republic Bank, to secure the necessary funding. While the increase in debt adds a layer of complexity, the potential synergies between the Central Block and Touchstone’s existing Coho production assets could offset these challenges. Coho production, already tied into the Central Block facility, stands to benefit from higher-priced Atlantic LNG contracts.
In Closing
This acquisition signals a bold move for Touchstone Exploration, promising increased production, improved pricing opportunities, and operational synergies. While hurdles remain, including regulatory approval and finalising funding, the strategic benefits make this a compelling development for the company. As Phil Hallam aptly stated, this is indeed a “needed positive move” for Touchstone’s growth trajectory.
Investors and stakeholders will be watching closely as the company navigates the path to closing this transformational deal.
