The latest research note from Cavendish highlights a busy period for Touchstone Exploration (LON:TXP), with the company reporting its 1Q26 results while also progressing operational work across its Trinidad portfolio. Cavendish has placed its target price under review pending the outcome of Touchstone’s strategic recapitalisation plan, but the note points to several areas of potential improvement, including commodity pricing, production stability and new wells coming onstream.
Research Analysts James McCormack and James Midgley wrote: “Further gains are expected to be made via the commissioning of the Cascadura compressor (expected June 2026). The unit is designed to mitigate elevated sales pipeline pressures, improving both production rates and overall operational stability.”
This is an important near-term operational point for Touchstone Exploration. While 1Q26 production averaged 4,657boepd, around 5% lower than 4Q25 due to natural field declines, April production improved to 4,677boepd, helped by higher liquids sales volumes. The expected commissioning of the Cascadura compressor in June 2026 could support a more stable production profile, which is central to the investment case described in the research note.
1Q26 Results Highlights
- Average production was 4,657boepd in 1Q26, compared with 4,877boepd in 4Q25.
- Revenue rose 14% quarter-on-quarter to US$12.5m, supported by stronger realised prices.
- Operating netback improved 46% quarter-on-quarter to US$13.73/boe.
- Funds flow from operations increased to US$1.8m, up from US$0.6m in 4Q25.
- Touchstone ended 1Q26 with reported net debt of US$76.1m, compared with US$72.9m at the end of 4Q25.
- Exploration and development capital expenditure was US$3.2m, down from US$7.4m in 4Q25.
A key positive from the quarter was that lower production was more than offset by stronger realised pricing. Cavendish noted that petroleum and natural gas sales reached US$12.5m in the quarter, while operating netback increased materially. This helped funds flow from operations rise to US$1.8m, reflecting improved cash generation from the underlying asset base.
Touchstone also continues to benefit from its liquids exposure. Crude oil and liquids represented around 29% of its 1Q26 production mix, giving the company exposure to stronger oil prices. The note states that March 2026 oil volumes averaged US$86.6/bbl, while 1Q26 average realised oil pricing rose by around 25% quarter-on-quarter to US$67.94/bbl.
Gas Pricing Could Become a Future Catalyst
Cavendish draws attention to Touchstone’s gas pricing structure, particularly the scheduled redetermination of the Ortoire gas contract in October 2027. The Ortoire volumes are currently priced at US$2.33/MMBtu, subject to annual inflationary adjustment, while domestic gas prices in Trinidad are noted as being in the region of US$4/MMBtu. This creates the potential for a higher future pricing reset.
The Central block also offers scope for improved pricing exposure. Its current LNG contract expires in May 2027, which could potentially increase Touchstone’s exposure to LNG-linked international pricing. Cavendish describes these contract milestones as introducing “meaningful structural upside” to realised gas prices across the portfolio.
Operational Progress Across the Portfolio
Touchstone has completed a two-well drilling campaign on the WD-8 block, with both wells expected to be brought onstream imminently. This follows the asset swap of the non-core Fyzabad property for three turnkey development wells, providing another route to near-term production additions.
The CR-3 well has delivered stable gross production rates of 2.2MMscf/d of natural gas and 14bbls/d of condensate since production began. However, Cavendish notes that the well appears to be experiencing an inflow restriction, with equipment awaited to help enhance reservoir inflow and well productivity.
Balance Sheet and Recapitalisation
The main area to watch is liquidity. Cavendish states that Touchstone is actively executing a strategic recapitalisation plan to address near-term liquidity and ensure the company is funded for its development programme. In the absence of mitigating action, the note says current cash resources and forecast operating cash flow may not be sufficient to fund expected operating and development expenditure and scheduled bank debt repayments over the next 12 months.
As a result, Cavendish has moved its target price from 30.6p to under review. The recommendation is also under review, pending further clarity on the company’s financial and operational position.
On a Final Note
Touchstone Exploration’s 1Q26 update shows a company with near-term financial challenges, but also several practical catalysts that could support performance. Higher realised prices, improving April production, the expected Cascadura compressor commissioning, WD-8 wells nearing production and potential future gas price resets all provide points of interest. The outcome of the recapitalisation plan will be important, but Cavendish’s latest research note suggests there remains meaningful operational and pricing upside to monitor over the coming months.
