Operational and Financial Highlights
- Achieved quarterly crude oil sales of 1,402 barrels per day ("bbls/d"), an 8 percent increase relative to the preceding quarter and consistent relative to the 1,396 bbls/d produced in the same period of 2020.
- Despite COVID-19 challenges in
Trinidad , executed an incident free$6,664,000 exploration program, primarily focused on Cascadura Deep-1 and Chinook-1 well production testing,Royston -1 lease and drilling expenditures, and theRoyston area seismic program. - Realized crude oil prices averaged
$59.06 per barrel, representing a 13 percent increase from the first quarter of 2021 and a 101 percent increase from the second quarter of 2020. - Generated an operating netback of
$26.30 per barrel from an average Brent price of$68.98 per barrel. - Despite limited petroleum asset capital investment of
$125,000 , generated funds flow from operations of$1,205,000 compared to a$450,000 use of funds flow in the second quarter of 2020. - Recognized a reduced net loss of
$284,000 ($0.00 per share) compared to a net loss of$2,742,000 ($0.01 per share) in the 2020 equivalent quarter. - Liquidity remained strong as we ended the second quarter with cash of
$11,214,000 , a working capital balance of$4,671,000 and$7,500,000 drawn on our term credit facility, resulting in a net debt position of$2,829,000 . - Entered into revised ten-year lease operating agreements for our Coora-1, Coora-2, WD-4 and WD-8 blocks through
December 31, 2030 . - Executed an amendment to our
$20 million term loan facility agreement, extending the principal availability period fromJune 15, 2021 toDecember 31, 2021 , thereby allowing us to access the outstanding$12.5 million available balance prior to the end of the year. - Spudded our final Ortoire minimum exploration commitment well,
Royston -1, onAugust 12, 2021 .
"Our second quarter results continue to demonstrate the progress we are making in all areas of our operations in
Financial and Operating Results Summary
Three months ended | % | Six months ended | % | |||
2021 | 2020 | 2021 | 2020 | |||
Operational | ||||||
Average daily oil production(1) (bbls/d) | 1,402 | 1,396 | - | 1,350 | 1,493 | (10) |
Brent benchmark price ($/bbl) | 68.98 | 29.70 | 132 | 64.95 | 40.23 | 61 |
Operating netback(2) ($/bbl) | ||||||
Realized sales price | 59.06 | 29.34 | 101 | 55.90 | 38.25 | 46 |
Royalties | (17.98) | (6.99) | 157 | (16.94) | (10.66) | 59 |
Operating expenses | (14.78) | (11.62) | 27 | (14.72) | (12.67) | 16 |
Operating netback | 26.30 | 10.73 | 145 | 24.24 | 14.92 | 62 |
Financial | ||||||
( | ||||||
Petroleum sales | 7,586 | 3,755 | 102 | 13,706 | 10,453 | 31 |
Cash from (used in) operating activities | 1,008 | (1,921) | n/a | (226) | (1,997) | (89) |
Funds flow from (used in) operations(3) | 1,205 | (450) | n/a | 1,743 | 807 | 116 |
Per share – basic and diluted(2)(3) | 0.01 | (0.00) | n/a | 0.01 | 0.00 | n/a |
Net loss | (284) | (2,742) | (90) | (744) | (11,982) | (94) |
Per share – basic and diluted | (0.00) | (0.01) | (100) | (0.00) | (0.07) | (100) |
Exploration capital expenditures | 6,664 | 1,249 | 434 | 9,618 | 3,072 | 213 |
Development capital expenditures | 125 | 92 | 36 | 252 | 312 | (19) |
Total capital expenditures | 6,789 | 1,341 | 406 | 9,870 | 3,384 | 192 |
Working capital surplus (2) | (4,671) | (6,543) | (29) | |||
Principal non-current balance of term loan | 7,500 | 15,000 | (50) | |||
Net debt(2) – end of period | 2,829 | 8,466 | (67) | |||
Share Information (000's) | ||||||
Weighted avg. shares outstanding: | ||||||
Basic and diluted | 209,757 | 183,640 | 14 | 209,579 | 176,500 | 19 |
Outstanding shares – end of period | 210,732 | 184,161 | 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 crude oil for which there is not a precise breakdown since the Company's oil sales volumes typically represent blends of more than one type of crude oil. |
(2) | Non-GAAP financial measure that does not have a standardized meaning prescribed by International Financial Reporting Standards ("IFRS" or "GAAP") and therefore may not be comparable with the calculation of similar measures presented by other companies. See "Advisories: Non-GAAP Measures" for further information. |
(3) | Additional GAAP term included in the Company's consolidated statements of cash flows. Funds flow from (used in) operations represents net loss excluding non-cash items. See "Advisories: Non-GAAP Measures" for further information. |
Operating results
Despite numerous challenges surrounding the COVID-19 pandemic in
Our crude oil sales averaged 1,402 bbls/d in the second quarter of 2021, representing an 8 percent increase from the first quarter of 2021 and consistent with production realized in the second quarter of 2020. The increase in production was reflective of increased workover operations that mitigated natural declines.
Our focus in the second quarter of 2021 remained on Ortoire exploration operations, as we invested
- Executed production testing operations on the Cascadura Deep-1 well, with results indicating a liquids rich natural gas discovery.
- Continued progress on the
Royston area 22-kilometre seismic program, which was completed in lateJuly 2021 . - Completed the
Royston -1 well access road and lease, with the well spudding onAugust 12, 2021 . - Continued Coho-1 natural gas facility construction operations and currently await stakeholder approval to proceed with pipeline installation.
- Perforated and initiated production testing of the Cruse Formation in the Chinook-1 well, with final results expected in late
August 2021 .
In
Financial results
We reported funds flow from operations of
Touchstone recorded a net loss of
We exited the second quarter with a cash balance of
Our primary objective remains to bring our 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 our business operations and capital programs to ensure health and safety and enhance long-term shareholder value.
Operational Update
Coho
The Coho facility construction is nearing completion, with all outstanding equipment in
Our Ortoire exploration and production licence was set to expire on
The
In
Chinook-1
In the fourth quarter of 2020 and the first quarter of 2021, we performed a total of three production tests on the Chinook-1 well in three unique Herrera sand reservoirs. All tests encountered minor amounts of oil and were subsequently abandoned.
A fourth zone was completed over a 25-foot interval in the Cruse Formation between 3,004 feet to 3,029 feet on
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. The Company has submitted a comprehensive field development plan to the
The Cascadura surface facility Certificate of Environmental Clearance ("CEC") application was submitted to the
A third-party contractor has been engaged to assist with the Cascadura EIA Terms of Reference ("TOR"). Dry season baseline environmental survey work was completed in
Advisories
Non-GAAP Measures
This news 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) non-current amount of senior secured debt.
Please refer to the Company's
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. 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 Chinook-1 well. Accordingly, the Company cautions that the production test results contained herein should be considered preliminary.
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 well drilling operations, including timing and locations, production testing operations and initial production testing results, facility construction and tie-in operations and timing thereof, anticipated completion 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
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