Touchstone Exploration Inc. (TXP) announces the results of the independent December 31, 2016 reserve evaluation (the Reserves Report) with respect to the Company’s crude oil reserves in the Republic of Trinidad and Tobago (Trinidad). Amounts herein are in Canadian dollars unless otherwise stated.
Touchstone’s year-end reserves were evaluated by independent reserves evaluator GLJ Petroleum Consultants Ltd. (GLJ) in accordance with definitions, standards and procedures contained in the Canadian Oil and Gas Evaluation (COGE) Handbook and National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities (“NI 51-101”). Additional reserves information as required under NI 51- 101 will be included in the Company’s Annual Information Form which will be filed on SEDAR on or before March 31, 2017. The reserves estimates set forth below are based upon GLJ’s Reserve Report dated March 17, 2017. All values in this press release are based on GLJ’s forecast prices and estimates of future operating and capital costs as at December 31, 2016. All financial information presented in this press release are based on estimates and are unaudited.
In 2016 Touchstone remained sensitive to the low commodity price environment and continued to follow a strategy of conservatively deploying exploration and development capital. The Company focused on operations directly related to maintaining production from the Company’s core assets and arresting base declines through low cost recompletion projects. Touchstone recompleted a total of nine wells and stimulated two wells as part of an evaluation project but deployed no drilling capital during the fiscal year. Notwithstanding the Company’s minimal capital investment in 2016, annual crude oil production was 476,057 barrels, representing an average of 1,301 barrels per day. The Company was able to organically grow reserves as a result of better than previously forecasted well performance and the effectiveness of the recompletion program.
2016 Reserve Report Highlights
1- Proved developed producing reserves (PDP):
- Decreased 6% to 4,606 Mbbl, replacing 40% of 2016 production.
- Reserve life index of 9.9 years based on forecast 2017 PDP production of 1,277 bbls/d.
- PDP comprise 51% of 1P and 29% of 2P.
2- Proved reserves (1P):
- Increased 2% to 8,977 Mbbl, replacing 134% of 2016 production.
- Reserve life index of 15.1 years based on forecast 2017 1P production of 1,628 bbls/d.
- 1P comprise 57% of 2P.
3- Proved plus probable reserves (2P):
- Increased 2% to 15,698 Mbbl, replacing 149% of 2016 production.
- Reserve life index of 24.0 years based on forecast 2017 2P production of 1,790 bbls/d.
4- Total 2P net present value of future net revenues before tax (10 percent discount rate) of $324.9
million ($161.1 million on a 1P basis).
5- Total 2P net present value of future net revenues after tax (10 percent discount rate) of $130.7
million, which excluding net debt equated to a net asset value of $1.57 per basic common share
($72.7 million or $0.87 per basic common share on a 1P basis).
6- Total future development costs (“FDC”) of $48.7 million for 1P and $72.3 million for 2P.
7- Finding and development costs (including changes in FDC) were $7.35 for 1P and $6.00 for 2P.
Using the Company’s estimated operating netback before hedging of $15.08 per barrel, the 1P
recycle ratio was 2.05 times and the 2P recycle ratio was 2.51 times.
Future development costs are associated with a portion of the Company’s internally identified drilling
location inventory and the Company’s estimated portfolio of low cost, low risk recompletion projects.
8- 1P have been assigned for 52 drilling locations (25% of the Company’s identified drilling inventory)
and 64 recompletions (19% of the Company’s identified recompletion projects).
9- 2P have been assigned to 78 drilling locations (38% of the Company’s identified drilling inventory)
and 122 recompletions (36% of the Company’s identified recompletion projects).
The Company’s total inventory of 208 drilling locations and 338 recompletion or workover projects are based upon current Management estimates. The Company currently operates 1,133 wells in Trinidad, 410 of which had associated production in 2016.
GLJ has forecast reserve volumes and future cash flows based upon current and historical well performance through to the economic production limit of individual wells. Notwithstanding established precedence and contractual options for the continuation and renewal of the Company’s existing operating agreements, in many cases the forecast economic limit of individual wells are beyond the current term of the relevant operating agreements.
