6th Feb 2023 11:05
(Alliance News) - Touchstone Exploration Inc announced on Monday that it has begun operations at its Royston-1X sidetrack well at the onshore Ortoire block in Trinidad & Tobago.
Analysts at Shore Capital said they were "very pleased and encouraged" to see such news confirmed "so soon" into 2023. Shore is the nominated advisor and joint broker to Touchstone.
Royston-1X is a sidetrack well re-entering the previously drilled Royston-1 well. It is expected to be drilled to a measured depth of 11,300 feet, targeting hydrocarbon accumulations in the Middle Miocene Herrera overthrust and subthrust sheets.
The Royston-1 exploration well was drilled in 2021 to a total depth of 10,700 feet and identified over 1,000 feet of Herrera section in the overthrust and intermediate sheets. It encountered light, sweet crude oil in both sheets.
Touchstone holds an 80% operating working interest in the well, with Heritage Petroleum Co Ltd holding the remaining 20%.
Shore said it expects further news regarding the well to emerge in the second half of March, around the time that Touchstone's commercial production from the Cascadura discovery also is being targeted.
"Our model currently assumes that Royston is brought online at around 500 barrels of oil per day in mid-2023, following the sidetrack which is now underway, and we eagerly look forward to results from Royston-1X and adjusting our production forecasts accordingly," the broker said.
Shore's last-published forecasts put Touchstone's 2023 production at 11,000 barrels of oil equivalent per day, revenue of USD105 million, and adjusted earnings per share of USD0.06.
It confirmed on Monday that it was "very happy" to maintain these numbers ahead of the release of Touchstone's 2022 results in March.
"We continue to expect a step-change in the company's financial performance once the major Cascadura discovery is on-stream by the end of the current quarter," Shore added.
Cascadura, also on the onshore Ortoire block in Trinidad & Tobago, is an exploration well which has been sidetracked and drilled to a total depth of 6,350 feet.
In December, Touchstone raised USD13 million through a placing of 19.9 million shares at a price of 54.5 pence each, in order to help accelerate its exploration and development programme at the Ortoire block. This programme included a focus on bringing Cascadura onto production.
Shares in Touchstone Exploration were up 3.0% at 73.62 pence on Monday morning in London, "nicely above" its December placing price, Shore noted.
The broker said Touchstone's prevailing share price remains at a "very substantial discount" to its own estimated 215p per share risked net asset value.
"We therefore continue to see excellent scope for patience to be rewarded as demonstrable progress at Cascadura helps to close what is obviously a substantial valuation gap - and with initial logging results from the Royston-1X sidetrack also now offering scope for an important share price catalyst over the next six weeks or so," Shore said.
By Heather Rydings, Alliance News senior economics reporter
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