Touchstone Exploration step change expected by Shore capital 

Touchstone Exploration

Touchstone Exploration (LON:TXP) is the topic of conversation when we caught up with Shore Capital Analyst Craig Howie to discuss the notification by The National Gas Company of Trinidad and Tobago Limited that they expect to be ready to receive first gas from the Cascadura natural gas and associated liquids facility on or about June 30, 2023..

Touchstone Exploration this week announced that it has been notified that state gas company NGC expects to be ready to receive first gas on or around the 30th June 2023. What does this mean for the company?

Anticipated first gas at the end of June is basically three months later than Touchstone’s previous end-Q1 guidance for commercial production from Cascadura. We are nonetheless encouraged to see the receipt of NGC’s expected first gas date, which further enhances visibility on the commencement of commercial gas and liquids sales. Touchstone also confirmed that it is on track to complete the Cascadura facility prior to the end of June, to ensure that production can commence as soon as NGC is able to receive first gas.

How do you see the outlook for the company?

We continue to expect a step-change Touchstone’s financial performance once Cascadura is onstream and we are comfortable maintaining our 6c adjusted EPS estimate for FY23 ahead of the anticipated release of full year results in March. This is notwithstanding the latest update on the anticipated timing of first gas from Cascadura, with our model having already baked in a material margin of safety for our US$15m net profit forecast and our FY23 EPS forecast remaining below other analyst estimates.

How do you see the company in terms of an investment case?

Despite continuing to trade above December’s 54.5p placing price, the prevailing share price has weakened in recent weeks and clearly remains at a very substantial discount to our estimated 215p/share Risked NAV. We therefore continue to see excellent scope for patience to be rewarded as demonstrable progress at Cascadura helps to close what is obviously a substantial valuation gap.

What news flow should investors be looking out for over the coming months?

Notwithstanding our assertions about Touchstone’s fundamental value and earnings outlook, we acknowledge that commercial production from Cascadura remains a key deliverable which is likely to be required to drive a sustained share price performance on the upside. However, we have every confidence that Cascadura will be onstream and contributing substantial revenues in the not-too-distant future, with initial logging results from the Royston-1X sidetrack well also offering scope for an important share price catalyst in the shorter term.

Touchstone Exploration Inc (LON:TXP) is a Canadian-based, international upstream oil and gas company currently active in the Republic of Trinidad and Tobago. It is one of the largest independent onshore oil producers in Trinidad, with an experienced management and executive team that have a track record of delivering value to shareholders.   

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