Q2 2023 FINANCIAL AND OPERATING RESULTS
SECOND QUARTER 2023 FINANCIAL AND OPERATING RESULTS
CALGARY, ALBERTA (August 11, 2023) - 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, 2023.
Selected information is outlined below and should be read in conjunction with our June 30, 2023 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.
Paul Baay, President and Chief Executive Officer, commented:
"I am pleased to provide an update on our financial and operational results for the second quarter of the 2023 financial year. The results come as we continue to focus our efforts on the commissioning of the Cascadura facility and completing production testing at Royston-1X. We look forward to providing shareholders with further updates in the near term."
Second Quarter 2023 Financial and Operational Highlights
· Achieved quarterly production average volumes of 1,827 boe/d, representing a 29 percent increase relative to the 1,420 boe/d produced in the prior year equivalent quarter.
· Natural gas production from our Coho-1 well averaged net volumes of 4.2 MMcf/d (703 boe/d) in the quarter and contributed $811,000 of net natural gas sales at an average realized price of $2.11/Mcf.
· Realized petroleum and natural gas sales of $7,181,000 compared to $12,596,000 in the 2022 comparative quarter, as $811,000 in net natural gas sales were offset by decreased crude oil sales of $6,226,000, reflecting a 36 percent decline in realized crude oil pricing and a 21 percent decrease in crude oil production.
· Generated an operating netback of $2,826,000, representing a 51 percent decrease from the 2022 equivalent quarter primarily attributed to the 43 percent decline in petroleum and natural gas sales.
· Reported funds flow from operations of $6,000 in the quarter compared to $803,000 in the preceding quarter and $1,150,000 in the prior year equivalent quarter.
· Recognized a net loss of $71,000 ($0.00 per basic share) and comprehensive income of $136,000 in the quarter compared to a net loss of $262,000 ($0.00 per basic share) and a comprehensive loss of $529,000 reported in the same period of 2022.
· $5,135,000 in quarterly capital investments primarily focused on expenditures related to the construction of the Cascadura natural gas and liquids facility and two Royston-1X production tests.
· Amended our Trinidad based loan agreement in May 2023, allowing for an additional $7 million revolving loan component that was fully drawn in June 2023 to provide liquidity while we complete construction of the Cascadura facility.
· Exited the quarter with a cash balance of $10,138,000, a bank debt principal balance of $31,000,000 and a net debt position of $28,913,000.
Financial and Operating Results Summary
|
|
Three months ended June 30, |
% change |
Six months ended June 30, |
% change |
||
|
2023 |
2022 |
2023 |
2022 |
|||
|
|
|
|
|
|
|
|
|
Operational |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average daily production |
|
|
|
|
|
|
|
Crude oil(1) (bbls/d) |
1,124 |
1,420 |
(21) |
1,204 |
1,408 |
(14) |
|
Natural gas(1) (Mcf/d) |
4,215 |
- |
n/a |
4,667 |
- |
n/a |
|
Average daily production (boe/d)(2) |
1,827 |
1,420 |
29 |
1,982 |
1,408 |
41 |
|
|
|
|
|
|
|
|
|
Average realized prices(3) |
|
|
|
|
|
|
|
Crude oil(1) ($/bbl) |
62.26 |
97.48 |
(36) |
63.64 |
90.61 |
(30) |
|
Natural gas(1) ($/Mcf) |
2.11 |
- |
n/a |
2.12 |
- |
n/a |
|
Realized commodity price ($/boe)(2) |
43.19 |
97.48 |
(56) |
43.64 |
90.61 |
(52) |
|
|
|
|
|
|
|
|
|
Production mix (% of production) |
|
|
|
|
|
|
|
Crude oil(1) |
62 |
100 |
|
61 |
100 |
|
|
Natural gas(1) |
38 |
- |
|
39 |
- |
|
|
|
|
|
|
|
|
|
|
Operating netback ($/boe)(2) |
|
|
|
|
|
|
|
Realized commodity price(3) |
43.19 |
97.48 |
(56) |
43.64 |
90.61 |
(52) |
|
Royalties(3) |
(12.94) |
(34.97) |
(63) |
(12.98) |
(31.80) |
(59) |
|
Operating expenses(3) |
(13.25) |
(17.52) |
(24) |
(12.61) |
(17.35) |
(27) |
|
Operating netback(3) |
17.00 |
44.99 |
(62) |
18.05 |
41.46 |
(56) |
|
|
|
|
|
|
|
|
|
Financial |
|
|
|
|
|
|
|
($000's except per share amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Petroleum and natural gas sales |
7,181 |
12,596 |
(43) |
15,657 |
23,092 |
(32) |
|
|
|
|
|
|
|
|
|
Cash from operating activities |
2,975 |
3,533 |
(16) |
3,888 |
3,883 |
- |
|
|
|
|
|
|
|
|
|
Funds flow from operations |
6 |
1,150 |
(99) |
809 |
2,593 |
(69) |
|
|
|
|
|
|
|
|
|
Net loss |
(71) |
(262) |
(73) |
(350) |
(498) |
(30) |
|
Per share - basic and diluted |
(0.00) |
(0.00) |
- |
(0.00) |
(0.00) |
- |
|
|
|
|
|
|
|
|
|
Exploration capital expenditures |
4,795 |
2,932 |
64 |
13,545 |
4,806 |
182 |
|
Development capital expenditures |
340 |
436 |
(22) |
609 |
1,116 |
(45) |
|
Capital expenditures(3) |
5,135 |
3,368 |
52 |
14,154 |
5,922 |
139 |
|
|
|
|
|
|
|
|
|
Working capital deficit (surplus)(3) |
|
|
|
10,913 |
(346) |
n/a |
|
Principal long-term bank debt |
|
|
|
18,000 |
24,000 |
(25) |
|
Net debt(3) - end of period |
|
|
|
28,913 |
23,654 |
22 |
|
|
|
|
|
|
|
|
|
Share Information (000's) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding - basic and diluted |
233,144 |
212,204 |
10 |
233,091 |
211,517 |
10 |
|
Outstanding shares - end of period |
|
|
|
233,428 |
212,275 |
10 |
|
|
|
|
|
|
|
|
Notes:
(1) In the table above and elsewhere in this announcement, references to "crude oil" refer to light and medium crude oil and heavy crude oil product types combined and references to "natural gas" refer to conventional natural gas, all as defined in National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities ("NI 51-101"). Refer to "Advisories - Product Type Disclosures" for further information.
(2) In the table above and elsewhere in this announcement, references to "boe" mean barrels of oil equivalent that are calculated using the energy equivalent conversion method. Refer to "Advisories - Oil and Natural Gas Measures" for further information.
(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.
Paul Baay, President and Chief Executive Officer Tel: +1 (403) 750-4487
Scott Budau, Chief Financial Officer
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
FTI Consulting (Financial PR)
Nick Hennis / Ben Brewerton Tel: +44 (0) 203 727 1000
Email: touchstone@fticonsulting.com
Advisories
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. The forward-looking statements contained in this announcement speak only as of the date thereof and are expressly qualified by this cautionary statement.
Specifically, this announcement includes, but is not limited to, forward-looking statements relating to the Company's development and exploration plans and strategies 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 2022 Annual Information Form dated March 23, 2023 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 or intent to update publicly or revise any forward-looking statements made herein or otherwise, whether as a result of new information, future events or otherwise.
Non-GAAP Financial Measures
This announcement may reference various non-GAAP financial measures, non-GAAP ratios, capital management measures and supplementary financial measures as such terms are defined in National Instrument 52-112 Non-GAAP and Other Financial Measures Disclosure. Such measures are not recognized measures under GAAP and do not have a standardized meaning prescribed by International Financial Reporting Standards ("IFRS" or "GAAP") and therefore may not be comparable to similar financial measures disclosed by other issuers. Readers are cautioned that the 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. Below is a description of the non-GAAP financial measures, non-GAAP ratios, capital management measures and supplementary financial measures disclosed in this announcement.
Funds flow from operations
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.
Operating netback
Touchstone 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 and natural gas sales. The most directly comparable financial measure to operating netback disclosed in the Company's consolidated financial statements is petroleum and natural gas revenue net of royalties. Operating netback per boe is a non-GAAP ratio calculated by dividing the operating netback by total production volumes for the period. Presenting operating netback on a per boe basis allows Management to better analyze performance against prior periods on a comparable basis.
Capital expenditures
Capital expenditures is a non-GAAP financial measure that is calculated as the sum of exploration and evaluation asset expenditures and property, plant and equipment expenditures included in the Company's consolidated statements of cash flows and is most directly comparable to cash used in investing activities. Touchstone considers capital expenditures to be a useful measure of its investment in its existing asset base.
Working capital and net debt
Management monitors working capital and net debt as part of the Company's capital structure to evaluate its true debt and liquidity position and to manage capital and liquidity risk. Working capital is calculated by subtracting current liabilities from current assets as they appear on the applicable consolidated balance sheet. Net debt is calculated by summing the Company's working capital and the principal (undiscounted) long-term amount of senior secured debt and is most directly comparable to total liabilities.
Supplementary Financial Measures
Realized commodity price per boe - is comprised of petroleum and natural gas sales as determined in accordance with IFRS, divided by the Company's total production volumes for the period.
Royalties per boe - is comprised of royalties as determined in accordance with IFRS, divided by the Company's total production volumes for the period.
Operating expenses per boe - is comprised of operating expenses as determined in accordance with IFRS, divided by the Company's total production volumes for the period.
For information regarding such measures, including reconciliations to the nearest GAAP measures, please refer to the "Advisories - Non-GAAP Financial Measures" section in the Company's Management's discussion and analysis for the three and six months ended June 30, 2023 accompanying our June 30, 2023 unaudited interim condensed consolidated financial statements which will be available on our website (www.touchstoneexploration.com) and under our SEDAR profile (www.sedar.com).
Oil and Natural Gas Measures
Where applicable, natural gas has been converted to barrels of oil equivalent based on six thousand cubic feet to one barrel of oil. The barrel of oil equivalent rate is based on an energy equivalent conversion method primarily applicable at the burner tip, and given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different than the energy equivalency of the 6:1 conversion ratio, utilizing the 6:1 conversion ratio may be misleading as an indication of value.
Product Type Disclosures
For information regarding specific product disclosures in accordance with NI 51-101, please refer to the "Advisories - Product Type Disclosures" section in the Company's Management's discussion and analysis for the three and six months ended June 30, 2023 accompanying our June 30, 2023 unaudited interim condensed consolidated financial statements which will be available on our website (www.touchstoneexploration.com) and under our SEDAR profile (www.sedar.com).
Abbreviations
|
bbls/d |
barrels per day |
|
boe |
barrels of oil equivalent |
|
boe/d |
barrels of oil equivalent per day |
|
Mcf |
thousand cubic feet |
|
Mcf/d |
thousand cubic feet per day |
|
MMcf/d |
million cubic feet per day |
Touchstone Exploration Inc.
Interim Condensed Consolidated Balance Sheets
Unaudited, stated in thousands of United States dollars
|
As at |
|
June 30, 2023 |
December 31, 2022 |
|
|
|
|
|
|
Assets |
|
|
|
|
Current assets |
|
|
|
|
Cash |
|
10,138 |
16,335 |
|
Accounts receivable |
|
6,734 |
7,487 |
|
Inventory |
|
101 |
129 |
|
Prepaid expenses |
|
941 |
1,342 |
|
Assets held for sale |
|
- |
1,122 |
|
|
|
17,914 |
26,415 |
|
|
|
|
|
|
Exploration and evaluation assets |
|
65,310 |
51,352 |
|
Property, plant and equipment |
|
66,098 |
67,162 |
|
Restricted cash |
|
903 |
1,021 |
|
Other assets |
|
412 |
481 |
|
Abandonment fund |
|
1,567 |
1,446 |
|
Total assets |
|
152,204 |
147,877 |
|
|
|
|
|
|
Liabilities |
|
|
|
|
Current liabilities |
|
|
|
|
Accounts payable and accrued liabilities |
|
15,519 |
12,737 |
|
Income taxes payable |
|
308 |
1,014 |
|
Current portion of bank debt |
|
13,000 |
6,000 |
|
Liabilities associated with assets held for sale |
|
- |
1,672 |
|
|
|
28,827 |
21,423 |
|
|
|
|
|
|
Lease liabilities |
|
1,662 |
1,373 |
|
Bank debt |
|
17,961 |
20,962 |
|
Decommissioning liabilities |
|
11,017 |
11,182 |
|
Deferred income taxes |
|
13,717 |
14,557 |
|
Total liabilities |
|
73,184 |
69,497 |
|
|
|
|
|
|
Shareholders' equity |
|
|
|
|
Shareholders' capital |
|
114,743 |
114,635 |
|
Contributed surplus |
|
5,583 |
4,905 |
|
Other comprehensive loss |
|
(13,313) |
(13,517) |
|
Deficit |
|
(27,993) |
(27,643) |
|
Total shareholders' equity |
|
79,020 |
78,380 |
|
|
|
|
|
|
Total liabilities and shareholders' equity |
|
152,204 |
147,877 |
Touchstone Exploration Inc.
Interim Condensed Consolidated Statements of Loss and Comprehensive Income (Loss)
Unaudited, stated in thousands of United States dollars (except per share amounts)
|
|
|
Three months ended June 30, |
Six months ended June 30, |
||
|
2023 |
2022 |
2023 |
2022 |
||
|
|
|
|
|
|
|
|
Revenue |
|
|
|
|
|
|
Petroleum and natural gas sales |
|
7,181 |
12,596 |
15,657 |
23,092 |
|
Less: royalties |
|
(2,152) |
(4,519) |
(4,656) |
(8,105) |
|
Petroleum and natural gas revenue, net of royalties |
|
5,029 |
8,077 |
11,001 |
14,987 |
|
Other revenue |
|
22 |
11 |
34 |
20 |
|
Total revenue |
|
5,051 |
8,088 |
11,035 |
15,007 |
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
Operating |
|
2,203 |
2,264 |
4,523 |
4,421 |
|
General and administration |
|
2,376 |
1,897 |
4,477 |
3,870 |
|
Net finance |
|
631 |
617 |
1,062 |
1,560 |
|
Gain on asset dispositions |
|
(800) |
(85) |
(800) |
(120) |
|
Foreign exchange loss (gain) |
|
48 |
(140) |
(62) |
(196) |
|
Equity-based compensation |
|
252 |
399 |
613 |
643 |
|
Depletion and depreciation |
|
1,041 |
975 |
2,418 |
1,905 |
|
Impairment |
|
14 |
35 |
29 |
171 |
|
Other |
|
(440) |
540 |
(440) |
540 |
|
Total expenses |
|
5,325 |
6,502 |
11,820 |
12,794 |
|
|
|
|
|
|
|
|
(Loss) earnings before income taxes |
|
(274) |
1,586 |
(785) |
2,213 |
|
|
|
|
|
|
|
|
Provision for income taxes |
|
|
|
|
|
|
Current expense |
|
180 |
1,547 |
395 |
2,175 |
|
Deferred (recovery) expense |
|
(383) |
301 |
(830) |
536 |
|
Total income tax (recovery) expense |
|
(203) |
1,848 |
(435) |
2,711 |
|
|
|
|
|
|
|
|
Net loss |
|
(71) |
(262) |
(350) |
(498) |
|
Currency translation adjustments |
|
207 |
(267) |
204 |
133 |
|
Comprehensive income (loss) |
|
136 |
(529) |
(146) |
(365) |
|
|
|
|
|
|
|
|
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
For the six months ended June 30
Unaudited, stated in thousands of United States dollars
|
|
|
2023 |
2022 |
|
|
|
|
|
|
Shareholders' capital |
|
|
|
|
Balance, beginning of period |
|
114,635 |
101,757 |
|
Equity-based settlements |
|
108 |
336 |
|
Balance, end of period |
|
114,743 |
102,093 |
|
|
|
|
|
|
Contributed surplus |
|
|
|
|
Balance, beginning of period |
|
4,905 |
3,466 |
|
Equity-based settlements |
|
(39) |
(119) |
|
Equity-based compensation expense |
|
613 |
643 |
|
Equity-based compensation capitalized |
|
104 |
159 |
|
Balance, end of period |
|
5,583 |
4,149 |
|
|
|
|
|
|
Other comprehensive loss |
|
|
|
|
Balance, beginning of period |
|
(13,517) |
(13,219) |
|
Other comprehensive income |
|
204 |
133 |
|
Balance, end of period |
|
(13,313) |
(13,086) |
|
|
|
|
|
|
Deficit |
|
|
|
|
Balance, beginning of period |
|
(27,643) |
(24,446) |
|
Net loss |
|
(350) |
(498) |
|
Balance, end of period |
|
(27,993) |
(24,944) |
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, |
||
|
2023 |
2022 |
2023 |
2022 |
||
|
|
|
|
|
|
|
|
Operating activities |
|
|
|
|
|
|
Net loss |
|
(71) |
(262) |
(350) |
(498) |
|
Items not involving cash from operations: |
|
|
|
|
|
|
Gain on asset dispositions |
|
(800) |
(85) |
(800) |
(120) |
|
Unrealized foreign exchange loss (gain) |
|
52 |
(139) |
(67) |
(279) |
|
Equity-based compensation expense |
|
252 |
399 |
613 |
643 |
|
Depletion and depreciation expense |
|
1,041 |
975 |
2,418 |
1,905 |
|
Impairment expense |
|
14 |
35 |
29 |
171 |
|
Other |
|
(81) |
(24) |
(186) |
285 |
|
Deferred income tax (recovery) expense |
(383) |
301 |
(830) |
536 |
|
|
Decommissioning expenditures |
|
(18) |
(50) |
(18) |
(50) |
|
Funds flow from operations |
|
6 |
1,150 |
809 |
2,593 |
|
Change in non-cash working capital |
|
2,969 |
2,383 |
3,079 |
1,290 |
|
Cash from operating activities |
|
2,975 |
3,533 |
3,888 |
3,883 |
|
|
|
|
|
|
|
|
Investing activities |
|
|
|
|
|
|
Exploration and evaluation expenditures |
|
(4,795) |
(2,932) |
(13,545) |
(4,806) |
|
Property, plant and equipment expenditures |
(340) |
(436) |
(609) |
(1,116) |
|
|
Abandonment fund expenditures |
|
(56) |
(30) |
(122) |
(59) |
|
Proceeds from asset dispositions |
|
250 |
100 |
250 |
135 |
|
Change in non-cash working capital |
|
(4,312) |
(1,186) |
112 |
(6,806) |
|
Cash used in investing activities |
|
(9,253) |
(4,484) |
(13,914) |
(12,652) |
|
|
|
|
|
|
|
|
Financing activities |
|
|
|
|
|
|
Changes in restricted cash |
|
59 |
35 |
118 |
40 |
|
Net advance of bank debt |
|
5,500 |
- |
4,000 |
- |
|
Net finance lease receipts (payments) |
|
95 |
74 |
(200) |
153 |
|
Issuance of common shares |
|
69 |
142 |
69 |
217 |
|
Change in non-cash working capital |
|
(122) |
(143) |
(252) |
(250) |
|
Cash from financing activities |
|
5,601 |
108 |
3,735 |
160 |
|
|
|
|
|
|
|
|
Change in cash |
|
(677) |
(843) |
(6,291) |
(8,609) |
|
Cash, beginning of period |
|
10,859 |
10,148 |
16,335 |
17,936 |
|
Impact of foreign exchange on foreign denominated cash balances |
|
(44) |
120 |
94 |
98 |
|
Cash, end of period |
|
10,138 |
9,425 |
10,138 |
9,425 |
|
|
|
|
|
|
|
|
Supplementary information for cash flow from operating activities: |
|
|
|
|
|
|
Interest paid in cash |
|
501 |
588 |
1,031 |
1,128 |
|
Income taxes paid in cash |
|
86 |
520 |
1,099 |
556 |
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