Q2 2022 FINANCIAL AND OPERATING RESULTS

RNS Number : 6344V
Touchstone Exploration Inc.
11 August 2022
 

SECOND QUARTER 2022 FINANCIAL AND OPERATING RESULTS

 

CALGARY, ALBERTA (August 11, 2022) - Touchstone Exploration Inc. ( " Touchstone ", "we", "our", "us" or the " Company " ) (TSX, LSE: TXP) reports its operating and financial results for the three and six months ended June 30, 2022. Selected information is outlined below and should be read in conjunction with our June 30, 2022 unaudited interim condensed consolidated financial statements and related Management's discussion and analysis, both of which will be available under our profile on SEDAR ( www.sedar.com ) and on our website ( www.touchstoneexploration.com ). Unless otherwise stated, all financial amounts herein are rounded to thousands of United States dollars .

 

Second Quarter 2022 Financial and Operational Highlights

· Achieved quarterly average crude oil production volumes of 1,420 barrels per day ("bbls/d"), representing a 2 percent increase relative to the preceding quarter and a 1 percent increase from the 1,402 bbls/d produced in the second quarter of 2021.

· Realized petroleum sales of $12,596,000 from an average crude oil price of $97.48 per barrel compared to petroleum sales of $7,586,000 from an average realized price of $59.06 per barrel in the comparative quarter of 2021.

· Generated an operating netback of $44.99 per barrel, a 19 percent increase from the first quarter of 2022 and a 71 percent increase from the $26.30 per barrel reported in the second quarter of 2021.

· Recognized current income tax expenses of $1,547,000 in the quarter compared to $432,000 in the second quarter of 2021, driven by $1,043,000 in supplemental petroleum tax expenses based on our average realized oil price exceeding the $75.00 per barrel threshold in 2022.

· Our funds flow from operations was $1,133,000 in the quarter, which was net of $540,000 accrued for reclamation costs related to the previously announced oil spill which occurred as a result of vandalism in June 2022.

· Recognized a net loss of $262,000 in the quarter compared to a net loss of $284,000 reported in the same period of 2021, reflecting the $540,000 provision for oil spill reclamation costs.

· Capital investments of $3,368,000 primarily focused on facility and pipeline expenditures related to the Coho-1 facility and investments directed to the Cascadura natural gas facility.

· Exited the quarter with cash of $9,425,000, a working capital surplus of $346,000 and $30,000,000 drawn on our term credit facility, resulting in a net debt position of $23,654,000.

Post Period-End Highlights

· Daily crude oil sales averaged 1,303 bbls/d in July 2022 with a realized price of $89.52 per barrel.

· Preparation for Coho gas facility and pipeline pre-commissioning operations is underway, which will be followed by system commissioning operations to introduce natural gas from the Coho-1 well into the facility and pipeline.

· Received confirmation from the Trinidad and Tobago Environmental Management Authority that determination of our Certificate of Environmental Clearance application for development operations in the Cascadura area will be made by September 15, 2022.

Paul Baay, President and Chief Executive Officer, commented:

 

"This quarter represents the end of an era for the Company as a pure crude oil producer in Trinidad with the next quarter seeing a transition to a combination of oil and natural gas production from our Coho-1 gas well. Our team has maintained base production while remaining focused on our Coho and Cascadura projects including associated commissioning operations and regulatory approvals, which are both progressing. Our Trinidad team successfully implemented our emergency response plan in response to the vandalism at Fyzabad which had a minimal impact to the environment and residents affected in the area but resulted in reclamation costs which we fully accrued for in the quarter. We will continue to complete the restoration required and work with our insurance provider to identify any costs that may be recoverable under our policy."

 

Financial and Operating Results Summary

 


Three months ended June 30,

% change

% change


2022

2021

2022

2021


 

 


 

 


Operational

 

 


 

 


 

 

 


 

 


Average daily oil production(1) (bbls/d)

1,420

1,402

1

1,408

1,350

4


 



 



Brent benchmark price(2) ($/bbl)

113.84

68.98

65

107.20

64.95

65


 



 



Operating netback ($/bbl)

 



 



Realized sales price(3)

97.48

59.06

65

90.61

55.90

62

Royalties(3)

(34.97)

(17.98)

94

(31.80)

(16.94)

88

Operating expenses(3)

(17.52)

(14.78)

19

(17.35)

(14.72)

18

Operating netback(3)

44.99

26.30

71

41.46

24.24

71


 



 



Financial

 



 



($000's except per share amounts)

 



 




 



 



Petroleum sales

12,596

7,586

66

23,092

13,706

68


 



 



Cash from (used in) operating activities

3,516

1,008

249

3,849

(226)

n/a


 



 



Funds flow from operations

1,133

1,205

(6)

2,559

1,743

47

Per share - basic and diluted(3)

0.01

0.01

-

0.01

0.01

-


 



 



Net loss

(262)

(284)

(8)

(498)

(744)

(33)

Per share - basic and diluted

(0.00)

(0.00)

-

(0.00)

(0.00)

-


 



 



Exploration capital expenditures

2,932

6,664

(56)

4,806

9,618

(50)

Development capital expenditures

436

125

249

1,116

252

343

Capital expenditures

3,368

6,789

(50)

5,922

9,870

(40)

 

 



 



Working capital surplus(3)

 



(346)

(4,671)

(93)

Principal long-term balance of term loan

 



24,000

7,500

220

Net debt(3) - end of period

 



23,654

2,829

736


 



 



Share Information (000's)

 



 



Weighted average shares outstanding - basic and diluted

212,204

209,757

1

211,517

209,579

1

Outstanding shares - end of period

 



212,275

210,732

1








 

Notes:

(1)  References to crude oil production volumes in the above table and elsewhere in this announcement refer to light, medium and heavy crude oil product types as defined in National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities. Our reported crude oil production is a mix of light and medium crude oil and heavy crude oil for which there is not a precise breakdown given our oil sales volumes typically represent blends of more than one type of crude oil.

(2)  References to Brent benchmark pricing in the above table and elsewhere in this announcement refer to the average daily closing spot prices of Dated Brent over the specified time period. Source: US Energy Information Administration.

(3)  Non-GAAP financial measure. See "Advisories: Non-GAAP Financial Measures" for further information.

 

Touchstone Exploration Inc.

 

Touchstone Exploration Inc. is a Calgary, Alberta based company engaged in the business of acquiring interests in petroleum and natural gas rights and the exploration, development, production and sale of petroleum and natural gas. Touchstone is currently active in onshore properties located in the Republic of Trinidad and Tobago. The Company's common shares are traded on the Toronto Stock Exchange and the AIM market of the London Stock Exchange under the symbol " TXP " .

 

For further information about Touchstone, please visit our website at www.touchstoneexploration.com or contact:

 

Touchstone Exploration Inc.

Mr. Paul Baay, President and Chief Executive Officer                            Tel: +1 (403) 750-4487

Mr. Scott Budau, Chief Financial Officer

Mr. James Shipka, Chief Operating Officer

 

Shore Capital (Nominated Advisor and Joint Broker)

Daniel Bush / Toby Gibbs / Iain Sexton      Tel: +44 (0) 207 408 4090

 

Canaccord Genuity (Joint Broker) 

Adam James / Gordon Hamilton               Tel: +44 (0) 207 523 8000

 

Camarco (Financial PR)

Billy Clegg / Emily Hall / Lily Pettifar    Tel: +44 (0) 203 781 8330

 

Advisories

 

Non-GAAP Financial Measures

 

Certain financial measures in this announcement do not have a standardized meaning as prescribed by International Financial Reporting Standards ("IFRS" or "GAAP") and therefore are considered non-GAAP financial measures. These financial measures may not be comparable to similar financial measures disclosed by other issuers. Readers are cautioned that any non-GAAP financial measures referred to herein should not be construed as alternatives to, or more meaningful than, measures prescribed by IFRS and they are not meant to enhance the Company's reported financial performance or position. These are complementary measures that are commonly used in the oil and natural gas industry and by the Company to provide shareholders and potential investors with additional information regarding the Company's performance, liquidity and ability to generate funds to finance its operations. Below is a description of the non-GAAP financial measures, non-GAAP ratios, capital management measures and supplementary financial measures disclosed herein.

 

Funds flow from operations and funds flow from operations per share

 

Funds flow from operations is included in the Company's consolidated statements of cash flows. Touchstone considers funds flow from operations to be a key measure of operating performance as it demonstrates the Company's ability to generate the funds necessary to finance capital expenditures and repay debt. Management believes that by excluding the temporary impact of changes in non-cash operating working capital, funds flow from operations provides a useful measure of the Company's ability to generate cash that is not subject to short-term movements in non-cash operating working capital.

 

Funds flow from operations per share is a non-GAAP ratio calculated by dividing funds flow from operations by the weighted average number of common shares outstanding during the applicable period on a basic and dilutive basis.

 

Operating netback

 

The Company uses operating netback as a key performance indicator of field results. The Company considers operating netback to be a key measure as it demonstrates Touchstone's profitability relative to current commodity prices and assists Management and investors with evaluating operating results on a historical basis. Operating netback is a non-GAAP financial measure calculated by deducting royalties and operating expenses from petroleum sales. Operating netback per barrel is a non-GAAP ratio calculated by dividing the operating netback by crude oil and NGL sales volumes for the period.

 

Working capital and net debt

 

Touchstone closely monitors its capital structure with a goal of maintaining a strong financial position to fund current operations and future growth. Working capital and net debt are capital management measures used by Management to steward the Company's overall debt position and assess overall financial strength.

 

Management monitors working capital and net debt as part of the Company's 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.

 

Supplementary Financial Measures

 

The following supplementary financial measures are disclosed herein.

 

Realized sales price per barrel - is comprised of petroleum sales as determined in accordance with IFRS, divided by the Company's total crude oil sales volumes for the period.

 

Royalties per barrel - is comprised of royalties as determined in accordance with IFRS, divided by the Company's total crude oil sales volumes for the period.

 

Operating expenses per barrel - is comprised of operating expenses as determined in accordance with IFRS, divided by the Company's total crude oil sales volumes for the period.

 

Refer to the "Non-GAAP Financial Measures" advisory section in the Company's June 30, 2022 Management's discussion and analysis for reconciliations of non-GAAP financial measures included herein to applicable GAAP measures.

 

Forward-Looking Statements

 

Certain information provided in this announcement 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 announcement may include, but are not limited to, statements relating to the Company's development and exploration plans and strategies, including anticipated future natural gas production, the receipt of regulatory approvals, the expectation of the Company filing a pollution insurance claim and receiving proceeds therefrom, and Touchstone's current and future financial position including the sufficiency of resources 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 2021 Annual Information Form dated March 25, 2022 which is available under the Company's profile on SEDAR ( www.sedar.com ) and on the Company's website ( www.touchstoneexploration.com ). The forward-looking statements contained in this announcement are made as of the date hereof, and except as may be required by applicable securities laws, the Company assumes no obligation to update publicly or revise any forward-looking statements made herein or otherwise, whether as a result of new information, future events or otherwise.

 

Touchstone Exploration Inc.

Interim Condensed Consolidated Statements of Financial Position

Unaudited, stated in thousands of United States dollars

 

As at


June 30,

 2022

December 31, 2021



 


Assets


 


Current assets


 


Cash


9,425

17,936

Accounts receivable


9,192

7,546

Crude oil inventory


99

143

Prepaid expenses


880

1,055

Assets held for sale


1,121

1,176



20,717

27,856



 


Exploration and evaluation assets


56,090

50,760

Property, plant and equipment


62,114

61,275

Restricted cash


1,138

1,178

Other assets


569

673

Abandonment fund


1,344

1,278

Total assets


141,972

143,020



 


Liabilities


 


Current liabilities


 


Accounts payable and accrued liabilities


10,844

16,000

Income taxes payable


1,858

236

Term loan


6,000

3,000

Liabilities associated with assets held for sale


1,669

1,695



20,371

20,931



 


Lease liabilities


2,085

2,265

Term loan


23,943

26,896

Other liabilities


546

908

Decommissioning liabilities


11,741

10,012

Deferred income taxes


15,074

14,450

Total liabilities


73,760

75,462



 


Shareholders' equity


 


Shareholders' capital


102,093

101,757

Contributed surplus


4,149

3,466

Other comprehensive loss


(13,086)

(13,219)

Deficit


(24,944)

(24,446)

Total shareholders' equity


68,212

67,558

 


 


Total liabilities and shareholders' equity


141,972

143,020

 



 

Touchstone Exploration Inc.

Interim Condensed Consolidated Statements of Loss and Comprehensive Loss

Unaudited, stated in thousands of United States dollars (except per share amounts)

 

 


Three months ended June 30,

Six months ended June 30,

2022

2021

2022

2021

 


 

 

 


Revenue

 

 

 

 


Petroleum sales

 

12,596

7,586

23,092

13,706

Less: royalties

 

(4,519)

(2,310)

(8,105)

(4,153)

Petroleum revenue, net of royalties

 

8,077

5,276

14,987

9,553

Other revenue


11

8

20

31

Total revenue

 

8,088

5,284

15,007

9,584


 

 


 


Expenses

 

 


 


Operating


2,264

1,899

4,421

3,610

General and administration


1,897

1,614

3,870

3,149

Net finance


617

425

1,560

574

Net (gain) loss on asset dispositions


(85)

4

(120)

(21)

Foreign exchange (gain) loss


(140)

96

(196)

196

Equity-based compensation


399

156

643

266

Depletion and depreciation


975

819

1,905

1,622

Impairment


35

(19)

171

10

Other


540

-

540

-

Total expenses

 

6,502

4,994

12,794

9,406


 

 


 


Earnings before income taxes

 

1,586

290

2,213

178


 

 


 


Provision for income taxes

 

 


 


Current expense


1,547

432

2,175

773

Deferred expense


301

142

536

149

Total income tax expense


1,848

574

2,711

922



 


 


Net loss


(262)

(284)

(498)

(744)

Currency translation adjustments


(267)

225

133

270

Comprehensive loss

 

(529)

(59)

(365)

(474)



 


 


Net loss per common share


 


 


Basic and diluted


(0.00)

(0.00)

(0.00)

(0.00)

 



 

Touchstone Exploration Inc.

Interim Condensed Consolidated Statements of Changes in Shareholders' Equity

Unaudited, stated in thousands of United States dollars

 



Six months ended June 30,



2022

2021

 

 

 


Shareholders' capital


 


Balance, beginning of period


101,757

101,385

Equity-based settlements


336

372

Balance, end of period

 

102,093

101,757


 

 


Contributed surplus

 

 


Balance, beginning of period


3,466

2,476

Equity-based settlements


(119)

(132)

Equity-based compensation expense


643

266

Equity-based compensation capitalized


159

81

Balance, end of period


4,149

2,691



 


Other comprehensive loss


 


Balance, beginning of period


(13,219)

(13,331)

Other comprehensive income


133

270

Balance, end of period

 

(13,086)

(13,061)



 


Deficit


 


Balance, beginning of period


(24,446)

(30,165)

Net loss


(498)

(744)

Balance, end of period


(24,944)

(30,909)

 



 

Touchstone Exploration Inc.

Interim Condensed Consolidated Statements of Cash Flows

Unaudited, stated in thousands of United States dollars

 

 


Three months ended June 30,

Six months ended June 30,

2022

2021

2022

2021

 


 

 

 


Operating activities

 

 


 


Net loss

 

(262)

(284)

(498)

(744)

Items not involving cash from operations:

 

 


 


Net (gain) loss on asset dispositions


(85)

4

(120)

(21)

Unrealized foreign exchange (gain) loss

 

(139)

113

(279)

187

Equity-based compensation

 

399

156

643

266

Depletion and depreciation

 

975

819

1,905

1,622

Impairment

 

35

(19)

171

10

Other

 

(41)

274

251

274

Deferred income tax expense

 

301

142

536

149

Decommissioning expenditures


(50)

-

(50)

-

Funds flow from operations

 

1,133

1,205

2,559

1,743

Change in non-cash working capital

 

2,383

(197)

1,290

(1,969)

Cash from (used in) operating activities

3,516

1,008

3,849

(226)


 

 


 


Investing activities

 

 

 

 


Exploration and evaluation expenditures


(2,932)

(6,664)

(4,806)

(9,618)

Property, plant and equipment expenditures


(436)

(125)

(1,116)

(252)

Abandonment fund expenditures


(30)

(28)

(59)

(55)

Proceeds from asset dispositions


100

103

135

207

Change in non-cash working capital


(1,186)

1,389

(6,806)

(3,097)

Cash used in investing activities

 

(4,484)

(5,325)

(12,652)

(12,815)


 

 


 


Financing activities

 

 


 


Changes in restricted cash


35

-

40

-

Production liability payments

 

(168)

(101)

(308)

(182)

Net finance lease receipts


91

36

187

34

Issuance of common shares


142

240

217

240

Change in non-cash working capital


25

18

58

40

Cash from financing activities


125

193

194

132



 


 


Change in cash


(843)

(4,124)

(8,609)

(12,909)

Cash, beginning of period


10,148

15,451

17,936

24,281

Impact of foreign exchange on foreign denominated cash balances


120

(113)

98

(158)



 


 


Cash, end of period

 

9,425

11,214

9,425

11,214

 

 

 


 


Supplementary information for cash flow from operating activities:


 


 


Interest paid in cash


588

147

1,128

294

Income taxes paid in cash


520

37

556

59

 

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