Case Study TXP

Touchstone Exploration (TXP) (“Touchstone”) (“the Company”) is an oil exploration and production company active in the Republic of Trinidad and Tobago, where it is one of the largest independent onshore producers with interests of approximately 90,000 gross acres (64,000 net working interest acres) of exploration and development rights. Touchstone currently produces approximately 1,300 barrels of crude oil per day from its onshore properties. Touchstone is currently listed on the Canadian TSX Exchange and is seeking Admission to AIM through a dual listing.

Touchstone will raise £1,45million (before costs) on Admission to AIM, through the issue of 20,000,000 new ordinary shares, priced at 7.25p per share. On admission to trading on AIM, Touchstone’s market capitalisation will be approximately £7.5million.

A total of £83,500 worth of new ordinary shares in Touchstone priced at 7.25p per share are being made available to onboarded users of the Teathers App. The deal will be open from 1630 Thursday 25 May until 1630 Friday 02 June. Note that any applications may be subject to scale back. If this occurs it will be applied pro rata on the basis of application size.

Company Description

Touchstone’s core focus is on developing production on its four onshore lease operatorship properties and its Fyzabad onshore property. Touchstone is the operator and has a 100% working interest in each of these key properties, details of which are as follows:

  • Coora 1 & 2 – 1,699 working interest acres with 2.78 million barrels of proved reserves;
  • WD-4 – 700 working interest acres with 2.23 million barrels of proved reserves;
  • WD-8 – 650 working interest acres with 2.20 million barrels of proved reserves; and
  • Fyzabad – 564 working interest acres with 1.11 million barrels of proved reserves.

In addition, the Company has a number of small undeveloped exploration properties and two larger exploration blocks being:

  • East Brighton – a 20,589 gross acre offshore exploration block in which the Company has a 70% working interest; and
  • Ortoire – a 44,731 gross acre onshore exploration block in which the Company has an 80% working interest.

Touchstone’s strategy is to leverage on the Board’s enhanced oil recovery experience and capability with international onshore properties to create shareholder value. In March 2017, Touchstone announced the commencement of its 2017 capital programme. The programme consists of the recompletion of 24 wells and the drilling of four wells.

The net proceeds of the Placing Shares together with the existing cash balance of the Company is expected to be used to review the drilling programme and for general working capital purposes.

Corporate comparators

Trinity Exploration (TRIN) and LGO Energy (LGO) are oil and gas exploration companies, with operations in Trinidad and Tobago, and are both listed on AIM. The following two tables presents comparative market statistics of these two companies and Touchstone:

Company Share Mid Price Shares in Issue Market Cap
Trinity £0.15 282,400,000 £42,360,000
LGO £0.02 539,200,000 £12,132,000
Touchstone £0.0725 103,137,143 £7,477,443

TRIN & LGO Data correct as of 25/5/17 – TXP data projected based on Admission to AIM

 

Company BOPD Produced Market Val per flowing barrel
Trinity 2,500 £16,944
LGO 435 £27,890
Touchstone 1,300 £5,950

TRIN & LGO Data drawn from latest quarterly reports as of 25/5/17 – TXP data projected based on Admission to AIM

 

Company 2P Reserves Market Val per 2p barrel
Trinity 21,300,000 £1.99
LGO 11,790,000 £1.03
Touchstone 11,000,000 £0.70

TRIN & LGO Data drawn from latest annual reports as of 25/5/17 – TXP data projected based on Admission to AIM

Links

Touchstone’s website
AIM Schedule 1 Document


Stock specific risks

  • The company will be subject to typical oil and gas exploration and development risks. There is no guarantee the company will be able to define economically viable resources.
  • Any delay to the development timeline would disappoint the market and sentiment towards the shares.
  • Commodity prices will fluctuate, which could affect the economic feasibility of the project.

If you are buying outside of normal market size then this may prevent you from selling the shares at market price.

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