Touchstone Exploration Inc (LON:TXP) Chief Executive Officer Paul Baay caught up with DirectorsTalk for an exclusive interview to discuss their year-end results, having no effects from coronavirus, progress of all wells and what investors should be looking for.
Q1: Year-end results out earlier, could you just walk us through the highlights of those results?
A1: I think the main highlights are really three areas.
One is that the production is about 1825 barrels of oil per day which is up about 6% over the previous year and the significance of that is that we didn’t drill any wells last year that added to production so what we end up with is you can see the ability of this production to stay pretty flat with a low level of capital which is pretty key.
The second one was that even thought Brent oil price was down a little bit last year, we were still able to maintain our $26.60 netback and that was a result of some cost reduction and just smart efficiencies that we were able to squeeze out of the system.
The third part is that currently we’re sitting on about $13.5 million of cash so we’re in good shape looking at this crisis that we’ve got facing us right now.
So, they’re probably the highlights from the update.
Q2: Obviously coronavirus is affecting everyone around the world but you’ve highlighted that there’s no effect on Touchstone Exploration operations due to Coronavirus. Do you see this changing in the near future?
A2: I hope not. We’ve taken all of the necessary steps that we can, we cut all of our crews down so they’re working either in one-man or two-man shifts to make as much social distancing as we can. Heritage, the purchaser of our crude, down in Trinidad is obviously still taking the crude and we’re isolating all of the office staff so I think that all works as well as we can in the crisis.
The other half of the crisis is of course the $25 oil price so this other part of the crisis for us is to really to try to maintain production as lower operating costs as we can.
So, right now, I would say no it’s not going to affect us and we’ll just have to keep our fingers crossed that everybody stays safe.
Q3: You’ve delivered great results on the Ortoire Block during the period, how are developments at COHO and Cascadura progressing?
A3: The main drilling programme last year was the Ortoire block, as you point out, and Cascadura and COHO are where we had the two successful gas well so the real focus for this year is to get those two wells on stream as quickly as we can.
COHO, we’re still targeting to have that on stream by July, bids will come in next week for the pipeline and the surface equipment and then we can put in the necessary applications. So, hopefully be in the field in May and have that on for July so COHO is looking really great, it’ll virtually double production that day it comes on.
Cascadura well, because the volumes were much higher than we had originally anticipated, we’re going to have to take that to a different pipeline to get it in to the capacity there, it’s only 3-4km away so we’re starting that process as well, I think that’ll be on in early 2021.
So, we’re funded to do those projects and they’re moving ahead, they may get delayed a little bit just depending on how this virus affects transportation but, at this point, certainly nothing in the way of making that happen.
Q4: Now, you mention that the company is now working on drilling Chinook, when can we expect to see results from that well?
A4: So, the Chinook well is about a mile south of the Cascadura well and right now we’re doing a little bit of maintenance of the rig to try to set the rig up differently to improve our drilling efficiency over what we saw at Cascadura. Hopefully that’ll move in in April, spud sometime in May and we should have the results at the end of June.
The real key about that well is, as I say, it’s only about a mile south from Cascadura, we’re targeting the exact same type of formation and the only difference is the structure there looks 4-5 times bigger than what we see at Cascadura.
So, it’s really exciting and it could make up for a great mid-year for us and certainly would add a lot of production to 2021.
Q5: Finally, is there anything you’d like to you say to investors who have seen the Touchstone Exploration share price affected by the volatility in the market over the last couple of months?
A5: I’ve obviously had a bunch of calls on that and I think its twofold for us; one is the meltdown that we’re seeing in the market overall and the second thing is really the oil war that’s going on between Saudi Arabia and Russia.
It’s really important that when people look at TXP, by this time next year we’re going to be a mainly gas company producing to the industrials on the island in Trinidad where there’s currently a major shortage of gas. We’re going to be getting a price of somewhere near $3 of mcf we hope for that gas that just generates a ton of cash flow.
So, this company is going to look very very different so I think when people look at the share price there’s going to be a lag between what we’re seeing in the markets today and what we see a year from now. I do think the share price overall has held pretty well compared to some of our peers which is maybe a good measure as well.