Touchstone Exploration (LON:TXP) continues to showcase its resilience and growth potential as it navigates the challenges of the oil and gas sector. A recent research note from Canaccord Genuity reaffirms a Speculative Buy rating for the company, highlighting significant upside potential despite a revised target price of 60p, down from 90p. This updated price still represents an impressive 110% upside compared to the company’s last closing price.
Strong Growth and a Refined Strategy
Touchstone Exploration has adjusted its production forecasts for FY24 and FY25, reflecting prudent updates on well performance. The Cascadura wells, key contributors to the company’s output, exhibited higher-than-expected decline rates. Consequently, FY25 production is now projected in the range of 6,700-7,300 barrels of oil equivalent per day (boepd), with a robust 77% contribution from natural gas.
Speaking about the company’s prospects, Phil Hallam of Canaccord Genuity noted, “We still see considerable value in Touchstone, with our new target price representing a c. 110% upside to Friday’s close. However, the lower-than-anticipated production from the Cascadura wells has left more work for Touchstone to do to prove the value of its onshore production assets in Trinidad.”
Encouraging Financial Metrics
The company’s financial health remains sound, with an operating cash flow forecast of approximately $22 million in FY25 and an expected year-end net debt of $30 million. Touchstone’s ongoing investment in drilling and infrastructure, including four new wells planned for FY25, demonstrates its commitment to maximising the potential of its assets on the Ortoire block.
Q3 2024 results were a testament to the company’s operational efficiency, achieving a daily average production of 5,211 boepd, marking a 54% year-on-year increase. This performance translated to $13.3 million in sales, with an operating netback of $7.4 million.
A Vision for the Future
Touchstone’s expansion strategy is well-aligned with the long-term potential of its Trinidad assets. During a recent site visit, analysts observed the operational readiness of the Cascadura infrastructure, which will support future drilling campaigns on Pad C and Pad B. Such advancements ensure the company is well-positioned to deliver on its production targets.
Reflecting on the visit, Charlie Sharp shared, “The logistical challenges of operating in Trinidad are evident, but the company’s ability to overcome these hurdles underscores the scale of potential we should see in FY25.”
Final Thoughts
Touchstone Exploration continues to prove its mettle in a volatile energy landscape. By refining its production strategy and maintaining a focus on high-value gas production, the company is setting the stage for sustainable growth. While challenges remain, the long-term outlook for Touchstone’s operations in Trinidad is highly promising.
With its strategic investments and commitment to unlocking value, Touchstone Exploration remains an exciting prospect for investors seeking growth in the oil and gas sector.
