Third Quarter Operational and Financial Highlights
- Achieved quarterly average production volumes of 1,333 bbls/d, a 2 percent increase relative to the 1,310 bbls/d produced in the third quarter of 2020.
- Despite continuing COVID-19 challenges in
Trinidad , executed an incident free$7,542,000 exploration program, highlighted by the drilling of theRoyston -1 exploration well and completion of theRoyston area seismic program. - Realized petroleum sales of
$7,650,000 from an average crude oil price of$62.37 per barrel. - Generated an operating netback of
$27.77 per barrel, our highest quarterly operating netback since the first quarter of 2019 and a 97 percent increase relative to the third quarter of 2020. - Reported funds flow from operations of
$1,073,000 versus$192,000 in the third quarter of 2020. - Recognized a reduced net loss of
$51,000 compared to a net loss of$703,000 in the same period of 2020. - Exited the third quarter with a cash balance of
$5,004,000 and$7,500,000 drawn on our term credit facility. - Successfully aided in exporting a third-party drilling rig to
Trinidad , with developmental drilling operations commencing on our WD-4 block on earlyOctober 2021 . - Exploration operations proceeded in the third quarter, with Coho natural gas facility and pipeline construction operations continuing towards targeted pipeline commissioning in the first quarter of 2022, as well as the completion of the design of the Cascadura natural gas facility.
"Our third quarter results reflect the focused work the team has done on maintaining base production with minimal expense while executing a safe capital program at Ortoire. The higher reported operating netbacks have resulted in strong cash flow for the quarter which help fund our ongoing capital program while we move closer to first production from Coho, which is forecasted to effect a step change in our financial performance."
Financial and Operating Results Summary
Three months ended | % | Nine months ended | % | |||
2021 | 2020 | 2021 | 2020 | |||
Operational | ||||||
Average daily oil production(1) (bbls/d) | 1,333 | 1,310 | 2 | 1,344 | 1,431 | (6) |
Net wells drilled | 0.8 | - | n/a | 0.8 | - | n/a |
Brent benchmark price ($/bbl) | 73.51 | 42.91 | 71 | 67.89 | 41.15 | 65 |
Operating netback(2) ($/bbl) | ||||||
Realized sales price | 62.37 | 39.20 | 59 | 58.06 | 38.54 | 51 |
Royalties | (19.36) | (11.17) | 73 | (17.75) | (10.82) | 64 |
Operating expenses | (15.24) | (13.94) | 9 | (14.90) | (13.06) | 14 |
Operating netback | 27.77 | 14.09 | 97 | 25.41 | 14.66 | 73 |
Financial | ||||||
( | ||||||
Petroleum sales | 7,650 | 4,725 | 62 | 21,356 | 15,178 | 41 |
Cash from operating activities | 384 | 4,126 | (91) | 158 | 2,129 | (93) |
Funds flow from operations(3) | 1,073 | 192 | 459 | 2,816 | 999 | 182 |
Per share – basic and diluted(2)(3) | 0.01 | 0.00 | n/a | 0.01 | 0.01 | - |
Net loss | (51) | (703) | (93) | (795) | (12,685) | (94) |
Per share – basic and diluted | (0.00) | (0.00) | - | (0.00) | (0.07) | (100) |
Exploration capital expenditures | 7,542 | 5,758 | 31 | 17,160 | 8,830 | 94 |
Development capital expenditures | 2,315 | 211 | 997 | 2,567 | 523 | 391 |
Total capital expenditures | 9,857 | 5,969 | 65 | 19,727 | 9,353 | 111 |
Working capital deficit (surplus)(2) | 4,657 | (869) | n/a | |||
Principal long-term balance of term loan | 7,125 | 15,000 | (53) | |||
Net debt(2) – end of period | 11,782 | 14,131 | (17) | |||
Share Information (000's) | ||||||
Weighted avg. shares outstanding: | ||||||
Basic and diluted | 210,732 | 184,277 | 14 | 209,968 | 179,112 | 17 |
Outstanding shares – end of period | 210,732 | 184,408 | 14 | |||
Notes: | |
(1) | References to crude oil in the above table and elsewhere in this news release is a mix of light and medium crude oil and heavy |
(2) | Non-GAAP financial measure that does not have a standardized meaning prescribed by International Financial Reporting |
(3) | Additional GAAP term included in the Company's consolidated statements of cash flows. Funds flow from operations represents |
Operating results
Our third quarter 2021 crude oil sales averaged 1,333 bbls/d, representing a 2 percent increase from the third quarter of 2020. The nominal increase in production was reflective of increased legacy well workover operations through 2021 that have mitigated annual natural declines. We incurred
Touchstone's focus in the third quarter of 2021 remained on Ortoire exploration operations, investing
- Completed the
Royston area 22-kilometre seismic program, which gave the Company further clarity regarding theRoyston , Steelhead, Bass and Kraken exploration prospects. - Drilled the
Royston -1 exploration well, with wireline log data indicating an aggregate 393 gross feet of potential hydrocarbon pay. - Continued Coho-1 natural gas facility construction operations, with pipeline installation operations commencing in late
October 2021 . - Completed the design of the Cascadura natural gas facility, with facility separators currently being fabricated and facility equipment being sourced for procurement.
Financial results
We generated funds flow from operations of
Touchstone recorded a net loss of
Based on increased capital spending, we exited the third quarter with a cash balance of
Our primary objective remains to bring the Coho and Cascadura area natural gas exploration discoveries at Ortoire onto production as soon as practicable. As the current economic and health-related challenges persist, we will continue to adapt business operations and capital programs to ensure health and safety and enhance long-term shareholder value.
Operational Update
Development drilling
Drilling with the newly imported Star Valley Rig 205 commenced on our WD-4 block on
Upper Forest Formation | 108 feet |
Lower Forest Formation | 236 feet |
Upper Cruse Formation | 26 feet |
Total | 370 feet |
The well also encountered 353 feet of gross sand in the shallow Morne L'Enfer Formation of which 349 feet is prospective oil pay. The Morne L'Enfer Formation is productive in many parts of
The PS-610ST well is currently being cased for oil production, and the drilling rig will be mobilizing to our WD-8 block where it is expected to drill two development wells off a single pad. Once the rig is off the PS-610ST location we will proceed with its planned initial completion in the Upper Cruse Formation. Based on offset well and wireline log data, we expect initial production rates to be in line with internal forecasts.
Coho
The final construction stages of the Coho facility are progressing, and the 3-kilometre pipeline field construction to the Central
Cascadura
We have completed the design of the surface facilities required to meet the initial and long-term production capabilities of the Cascadura-1ST1 and Cascadura Deep-1 exploration wells that have been successfully tested. Currently the facility separators are being fabricated, with other facility equipment being sourced for procurement.
We continue to work in conjunction with a third-party contractor on the Cascadura area Environmental Impact Assessment ("EIA") to submit to the
Chinook
Subsequent to the fourth and final production test performed on the Chinook-1 well, the well was shut in on July 15, 2021 for a 30-day pressure buildup, and downhole pressure recorders were retrieved on
As previously reported, the
Initial completion and production testing operations commenced on
Advisories
Non-GAAP Measures
This new release contains terms commonly used in the oil and natural gas industry, including funds flow from operations, funds flow from operations per share, operating netback, working capital and net debt. These terms do not have a standardized meaning prescribed under GAAP or IFRS and may not be comparable to similar measures presented by other companies. Shareholders and investors are cautioned that these measures should not be construed as alternatives to cash flow from operating activities, net earnings, net earnings per share, total assets, total liabilities, or other measures of financial performance as determined in accordance with GAAP. Management uses these non-GAAP measures for its own performance measurement and to provide stakeholders with measures to compare the Company's operations over time.
Funds flow from operations is an additional GAAP measure included in the Company's consolidated statements of cash flows. Funds flow from operations represents net earnings (loss) excluding non-cash items. Touchstone considers funds flow from operations to be an important measure of the Company's ability to generate the funds necessary to finance capital expenditures and repay debt. The Company calculates funds flow from operations per share by dividing funds flow from operations by the weighted average number of common shares outstanding during the applicable period.
The Company uses operating netback as a key performance indicator of field results. Operating netback is presented on a total and per barrel basis and is calculated by deducting royalties and operating expenses from petroleum sales. The Company considers operating netback to be a key measure as it demonstrates Touchstone's profitability relative to current commodity prices. This measurement assists Management and investors with evaluating operating results on a historical basis.
The Company closely monitors its capital structure with a goal of maintaining a strong financial position in order to fund current operations and the future growth of the Company. The Company monitors working capital and net debt as part of its capital structure to assess its true debt and liquidity position and to manage capital and liquidity risk. Working capital is calculated as current assets minus current liabilities as they appear on the consolidated statements of financial position. Net debt is calculated by summing the Company's working capital and the principal (undiscounted) long-term amount of senior secured debt.
Please refer to the Company's
Forward-Looking Statements
Certain information provided in this news release may constitute forward-looking statements and information (collectively, "forward-looking statements") within the meaning of applicable securities laws. Such forward-looking statements include, without limitation, forecasts, estimates, expectations and objectives for future operations that are subject to assumptions, risks and uncertainties, many of which are beyond the control of the Company. Forward-looking statements are statements that are not historical facts and are generally, but not always, identified by the words "expects", "plans", "anticipates", "believes", "intends", "estimates", "projects", "potential" and similar expressions, or are events or conditions that "will", "would", "may", "could" or "should" occur or be achieved.
Forward-looking statements in this news release may include, but are not limited to, statements relating to the Company's development and exploration plans and strategies, including anticipated development and exploration well drilling operations and locations, well test results and the Company's interpretation thereof, anticipated production testing operations, the timing thereof and results therefrom, facility construction and pipeline tie-in operations and the timing thereof, the quality and quantity of prospective hydrocarbon accumulations based on internal interpretations of wireline logs, anticipated completion, submission and receipt of regulatory approvals, and ultimate production from development and exploration wells, the Company's current financial position and its expectations of future funds flow and the sufficiency of resources and available financing to fund future capital expenditures and maintain financial liquidity. Although the Company believes that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because the Company can give no assurance that they will prove to be correct. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. Certain of these risks are set out in more detail in the Company's 2020 Annual Information Form dated
Oil and Gas Matters
References in this news release to production test rates and initial flow rates are useful in confirming the presence of hydrocarbons; however, such rates are not determinative of the rates at which the well will commence production and decline thereafter and are not indicative of long-term performance or of ultimate recovery. Additionally, such rates may also include recovered "load oil" fluids used in well completion stimulation. While encouraging, readers are cautioned not to place reliance on such rates in calculating the aggregate production for the Company. A final pressure transient analysis and/or well-test interpretation has yet to be carried out in respect of the well. Accordingly, the Company cautions that the production test results contained herein should be considered preliminary.
Abbreviations
bbls/d | barrels per day |
API | |
psi | pounds per square inch |
SOURCE
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