Touchstone Exploration has reported its operating and financial results for the three months and year ended December 31, 2019. Unless otherwise stated, all financial amounts herein are rounded to thousands of United States dollars .
Subsequent Events and Outlook
- Subsequent to year-end, we issued 22,500,000 common shares raising net proceeds of approximately $10.8 million to primarily fund the Chinook prospect on our Ortoire block.
- Our emphasis remains on bringing Coho-1 and Cascadura-1ST1 onto production as soon as possible.
- We are preparing to drill an earning exploration well at the Chinook prospect and anticipate continuing with the planned exploration program unless it becomes absolutely necessary to suspend it.
- Touchstone has immediately responded to the significant global economic uncertainty created by the novel coronavirus ("COVID-19") pandemic combined with the unprecedented decline in crude oil prices. Discretionary costs have been minimized with field operations limited to emergency workovers.
- Management's main concern is the safety and wellbeing of its employees and stakeholders. International travel has been restricted, and remote working and physical distancing measures have been implemented where possible to allow our operations to continue as smoothly as possible in the circumstances.
- Aside from voluntarily restricting certain field operations, the Company has had no operational impacts from COVID-19 to date, and we will monitor the situation and adapt our operations accordingly.
- Our low base production decline rate, strong operating netbacks, top-tier capital efficiencies, lack of development drilling commitments and solely operated exploration capital program provide flexibility in this volatile market. Bolstered by the recent private placement, the Company had approximately $13.5 million of cash as at February 29, 2020, and no repayments are required on the Company's debt until January 2021. We remain focused on managing our operations to ensure that we operate within our credit facility financial covenants.
- Achieved annual crude oil sales of 1,825 barrels per day ("bbls/d"), a 6% increase relative to the 1,718 bbls/d produced in 2018.
- Executed a $10,113,000 exploration program to drill two gross (1.6 net) successful wells.
- Increased petroleum sales by 2% from the prior year, generating $38,654,000 versus $37,729,000 in 2018.
- Despite an annual 10% decrease in Brent reference pricing, we realized an operating netback of $26.61 per barrel in 2019, consistent with the $26.68 per barrel generated in the prior year.
- Reduced operating costs by 8% and 14% on an absolute and per barrel basis from the prior year, respectively.
- Despite a 90% annual decrease in discretionary development capital investment, we delivered funds flow from operations of $6,840,000 ($0.04 per share) compared to $8,548,000 ($0.07 per share) realized in 2018.
- Exited the year with cash of $6,182,000 and net debt of $16,503,000, representing 2.4 times net debt to annual funds flow from operations.
Throughout 2019, Touchstone conducted minimal capital development activity and continued to allocate capital to exploration activities on our Ortoire property. As a result, crude oil production during the fourth quarter averaged 1,690 bbls/d, a 9% decrease relative to the 1,851 bbls/d produced in the fourth quarter of 2018, as incremental production achieved from wells drilled in 2018 were offset by natural declines. 2019 crude oil production averaged 1,825 barrels per day, representing an increase of 6% from production delivered in 2018. We invested $1,388,000 in development activities in 2019, which mainly consisted of recompletion activities on legacy wellbores.
We commenced our onshore exploration program on the Ortoire block (80% working interest) in the second half of 2019, drilling two gross exploration wells (1.6 net). Coho-1, the first natural gas prospect, had an encouraging production test that exceeded the Company's expectations. Touchstone completed drilling its second Ortoire exploration prospect, Cascadura-1ST1, in December 2019, with production testing in February and March 2020 confirming a substantial liquids-rich gas discovery. In aggregate, we invested $10,113,000 in exploration activities, including $8,901,000 in drilling, completion and lease building activities (2018 - $2,557,000 and $nil, respectively).
Source: Touchstone Exploration