Annual 2025 Financial and Operating Results

ANNUAL 2025 FINANCIAL AND OPERATING RESULTS

CALGARY, ALBERTA (March 31, 2026) - Touchstone Exploration Inc. ("Touchstone", "we", "our" or the "Company") (TSX, LSE: TXP) reports its operating and condensed financial results for the three months and year ended December 31, 2025. Selected financial information is outlined below and should be read in conjunction with Touchstone's December 31, 2025 audited consolidated financial statements and related Management's discussion and analysis, both of which are available on the Company's profile on SEDAR+ (www.sedarplus.ca) and website (www.touchstoneexploration.com). Unless otherwise stated, all financial amounts presented herein are in United States dollars, and all production volumes disclosed herein are sales volumes based on Company working interest before royalty burdens.

Fourth Quarter 2025 Financial and Operating Highlights

· Production: Averaged 4,877 boe/d (71% natural gas) in Q4 2025, an 8% decrease from 5,287 boe/d (73% natural gas) in Q4 2024. The Central field contributed 2,065 boe/d, highlighting its significant contribution to the portfolio since its acquisition.

· Revenue: Petroleum and natural gas sales totaled $11.0 million, a 19% decrease from $13.54 million in Q4 2024, primarily due to lower production and softened realized pricing.

- Crude oil sales: $5.0 million from average production of 996 bbls/d at an average realized price of $54.57 per barrel.

- NGL sales: $1.15 million from average production volumes of 413 bbls/d at an average realized price of $30.30 per barrel.

- Natural gas sales: $4.85 million from average production of 20.8 MMcf/d (3,468 boe/d) at an average realized price of $2.54 per Mcf.

· Operating netback: Generated $4.22 million, a 39% decrease year-over-year, impacted by lower petroleum and natural gas sales and increased natural gas operating expenses.

· Funds flow from operations: Totaled $0.62 million, compared to $3.61 million in Q4 2024. The decline was driven by lower operating netbacks and higher cash finance expenses, partially offset by reduced general and administration expenses.

· Net income: Reported $13.62 million ($0.04 per share), compared to a net loss of $0.54 million in Q4 2024. The increase was primarily non-cash, driven by a $9.55 million deferred tax recovery and a $4.98 million gain on asset dispositions.

· Capital investments: Invested $7.44 million, focused on drilling the CR-3 development well on the Central property.

· Financial position: Net debt decreased to $72.89 million from $77.75 million at September 30, 2025, supported by $8.37 million in net proceeds from a private placement.

Annual 2025 Financial and Operating Highlights

· Health and safety: Achieved a safety milestone with zero lost-time injuries recorded throughout 2025.

· Strategic acquisition: Completed the acquisition of Shell Trinidad Central Block Limited on May 16, 2025. The asset contributed an average of 2,095 boe/d of liquids-rich natural gas since closing and provides critical exposure to global LNG pricing.

· Annual production: Averaged 4,686 boe/d, an 18% decrease from 5,734 boe/d in 2024. Incremental production from the Central block partially mitigated natural declines at Cascadura and mature crude oil fields.

· Financial performance:

- Revenue: Petroleum and natural gas sales totaled $45.82 million, down 20% from $57.47 million in 2024, primarily attributable to lower natural gas production volumes and decreased crude oil and liquids realized prices.

- Operating netback: Generated $21.26 million ($12.44 per boe), compared to $32.89 million ($15.68 per boe) in 2024.

- Funds flow from operations: Reported $5.37 million, a 68% year-over-year decrease from $16.75 million in 2024.

- Net income: Realized $10.89 million ($0.04 per share), compared to $8.27 million ($0.04 per basic share and $0.03 per diluted share) in 2024, reflecting a $4.98 million gain on asset disposition and a $12.61 million deferred income tax recovery recorded in 2025.

· Capital program: Executed a $28.38 million capital program, pivoting from infrastructure build out to active drilling, including three gross (2.25 net) development wells.

· Strategic portfolio rationalization: Divested the non-core Fyzabad property. Consideration included three turnkey drilling wells on the Company's WD-8 and WD-4 blocks, aligning with our strategy to focus on higher-return core assets.

· Financing and liquidity:

- Bank debt: Obtained an additional $30 million term loan facility to finance the Central block acquisition.

- Convertible debt: Issued a $12.5 million three-year secured convertible debenture to fund the completion of the 2025 Cascadura drilling program.

- Private placements: Raised an aggregate of $13.6 million in net proceeds through two equity placements in 2025.

2025 Financial and Operating Results Overview

Notes:

(1) 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) Specified or supplementary financial measure. Refer to "Advisories - Non-GAAP Financial Measures" for further information.

(4) Percentages have been rounded to the nearest whole number and are limited to increases or decreases of 100 percent.

Liquidity and Going Concern

Management continues to closely monitor the Company's liquidity position to ensure that operating cash flows and working capital remain sufficient to support ongoing financial obligations, planned capital programs, and future work commitments.

The Company's audited consolidated financial statements for the year ended December 31, 2025 include a note regarding the existence of material uncertainties over its ability to continue as a going concern. As at December 31, 2025, the Company had a working capital deficit of $15.4 million, excluding the convertible debenture maturing in 2028. Additionally, the Company currently projects a breach of its bank debt net senior funded debt to trailing annual EBIDA and debt service coverage covenants as of December 31, 2026, which could result in the bank debt becoming due at that time.

Management is actively focused on several initiatives to bolster liquidity and address these uncertainties:

· Operational cash flow: Realizing anticipated production growth from the 2025 and 2026 drilling programs and benefiting from strengthening commodity pricing.

· Value-added tax receivables: Monitoring and accelerating the collection of outstanding value-added tax receivables.

· Capital management: Maintaining active engagement with its lender regarding potential amendments to the loan agreement or obtaining waivers for the projected 2026 covenant breaches.

In the absence of mitigating actions, the Company's current cash resources may not be sufficient to fund expected operating and development expenditures and scheduled bank debt repayments over the next twelve months. Should these conditions persist, the Company is actively evaluating and is prepared to implement contingency measures, including optimizing capital expenditures or seeking additional debt or equity financing to ensure ongoing obligations are met.

2025 Annual Filings

Touchstone has filed its annual audited financial statements, along with the related Management's discussion and analysis and annual information form ("AIF") for the financial year ended December 31, 2025. The AIF includes reserves data and other oil and gas disclosures in compliance with National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities ("NI 51-101"). The reserves information presented in the AIF is consistent with the details disclosed in Touchstone's announcement issued February 25, 2026. These documents are available on the Company's profile on SEDAR+ (www.sedarplus.ca) and website (www.touchstoneexploration.com).

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 R. Baay, President and Chief Executive Officer Tel: +1 (403) 750-4487

Scott Budau, Chief Financial Officer

Brian Hollingshead, EVP Engineering and Business Development

Canaccord Genuity (Nominated Advisor and Joint Broker)

Adam James / Charlie Hammond Tel: +44 (0) 207 523 8000

Cavendish Capital Markets Limited (Joint Broker) 

Neil McDonald / Derrick Lee / Graham Hall Tel: +44 (0) 131 220 6939

FTI Consulting (Financial PR)

Nick Hennis / Ben Brewerton Tel: +44 (0) 203 727 1000

Email: [email protected]

Advisories

Certain information contained in this announcement would have been deemed inside information as stipulated under the UK version of the EU Market Abuse Regulation (2014/596) which is part of UK law by virtue of the European Union (Withdrawal) Act 2018, as amended and supplemented from time to time, until the release of this announcement.

Forward-looking Statements

The information provided in this announcement contains certain 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 "expect", "believe", "estimate", "potential", "anticipate", "forecast", "pursue", "aim", "intends", 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 hereof 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 business plans, strategies, priorities and development plans; anticipated developmental drilling and facility upgrade activities, including locations, the timing thereof and related production and cash flows therefrom; the Company's expectation of improved commodity pricing market fundamentals and the benefits to be derived therefrom; the Company's expectations of accelerating the collection of VAT; the Company's ability to amend its current loan agreement and/or obtain future waivers for projected financial covenant breaches; and Touchstone's current and future financial position, including the Company's liquidity and the sufficiency of resources to fund current obligations future capital expenditures. The Company's actual decisions, activities, results, performance, or achievement could differ materially from those expressed in, or implied by, such forward-looking statements and accordingly, no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur or, if any of them do, what benefits that Touchstone will derive from them.

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 2025 Annual Information Form dated March 30, 2026 which is available on the Company's profile on SEDAR+ (www.sedarplus.ca) and 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 references 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 Canadian Generally Accepted Accounting Principles ("GAAP") and do not have a standardized meaning prescribed by IFRS Accounting Standards as Issued by the International Accounting Standards Board ("IFRS") 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 herein.

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 royalty 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

Working capital and net debt are capital management measures used by Management to monitor the Company's capital structure to evaluate its true debt and liquidity position and to manage capital and liquidity risk.

Working capital is calculated as current assets minus current liabilities as presented in the applicable consolidated balance sheet, excluding the carrying value of the convertible debenture. Management excludes the carrying value of the convertible debenture from working capital given the instrument has a maturity date in 2028.

Net debt is determined by adding the Company's working capital surplus or deficit to the principal (undiscounted) balance of non-current bank debt and the principal (undiscounted) balance of the convertible debenture. Net debt is most directly comparable to total liabilities as disclosed in the Company's consolidated balance sheets.

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.

Realized crude oil sales per barrel, realized NGL sales per barrel and realized natural gas sales per boe - are comprised of sales from the respective product type as determined in accordance with IFRS, divided by the Company's total production volumes of the respective product type for the period. Crude oil sales, NGL sales and natural gas sales are components of petroleum and natural gas sales as disclosed on the consolidated statements of comprehensive income.

Realized crude oil and liquids sales per barrel - is comprised of the sum of crude oil and NGL product sales as determined in accordance with IFRS, divided by the sum of the Company's total crude oil and NGL production volumes for the period. Crude oil and NGL sales are components of petroleum and natural gas sales.

Royalty expense per boe - is comprised of royalty expense as determined in accordance with IFRS, divided by the Company's total production volumes for the period.

For further information, please refer to the "Advisories - Non-GAAP Financial Measures" section of the Company's most recent Management's discussion and analysis for the three months and year ended December 31, 2025 accompanying the December 31, 2025 audited consolidated financial statements, both of which are available on the Company's profile on SEDAR+ (www.sedarplus.ca) and website (www.touchstoneexploration.com). Touchstone's Management's discussion and analysis is incorporated by reference herein and includes further discussion of the purpose and composition of the specified non-GAAP financial measures consistently used by the Company and detailed reconciliations to the most directly comparable GAAP measures.

Oil and Natural Gas Measures

To provide a single unit of production for analytical purposes, natural gas production has been converted mathematically to barrels of oil equivalent. The Company uses the industry-accepted standard conversion of six thousand cubic feet of natural gas to one barrel of oil (6 Mcf = 1 bbl). The 6:1 boe ratio is based on an energy equivalent conversion method primarily applicable at the burner tip. It does not represent a value equivalency at the wellhead and is not based on either energy content or current prices. While the boe ratio is useful for comparative measures and observing trends, it does not accurately reflect individual product values and may be misleading, particularly if used in isolation, as the value ratio between crude oil and natural gas based on current commodity prices may differ significantly from the 6:1 energy equivalency ratio.

Product Type Disclosures

This announcement includes references to crude oil, NGLs, crude oil and liquids, natural gas average daily production volumes. Under NI 51-101, disclosure of production volumes should include segmentation by product type as defined in the instrument. In this announcement, references to "crude oil" refer to light and medium crude oil and heavy crude oil; references to "NGLs" refer to condensate and propane; and references to "natural gas" refer to conventional natural gas, all as defined in the instrument. References to "crude oil and liquids" include crude oil and NGLs.

For further information regarding specific product disclosures in accordance with NI 51-101, including 2025 and 2024 total and average production information by product type, please refer to the "Advisories - Product Type Disclosures" section of the Company's most recent Management's discussion and analysis for the three months and year ended December 31, 2025 accompanying the December 31, 2025 audited consolidated financial statements, both of which are available on the Company's profile on SEDAR+ (www.sedarplus.ca) and website (www.touchstoneexploration.com).

Abbreviations

The following abbreviations may be referenced in this announcement:

bbl(s) barrel(s)

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 million cubic feet

MMcf/d million cubic feet per day

LNG liquefied natural gas

NGL(s) natural gas liquid(s)

Touchstone Exploration Inc.

Consolidated Balance Sheets

Stated in thousands of United States dollars

Going concern (Note 1)

Commitments and contingencies (Note 24)

See accompanying notes to these consolidated financial statements.

Approved on behalf of the Board of Directors:

(signed) "Kenneth R. McKinnon" (signed) "Stanley T. Smith"

Kenneth R. McKinnon Stanley T. Smith

Chair of the Board of Directors and Director Chair of the Audit Committee and Director

Touchstone Exploration Inc.

Consolidated Statements of Comprehensive Income

Stated in thousands of United States dollars (except per share amounts)

See accompanying notes to these consolidated financial statements.

Touchstone Exploration Inc.

Consolidated Statements of Changes in Shareholders' Equity

Stated in thousands of United States dollars

See accompanying notes to these consolidated financial statements

Touchstone Exploration Inc.

Consolidated Statements of Cash Flows

Stated in thousands of United States dollars

See accompanying notes to these consolidated financial statements.

1. Nature of Business

Touchstone Exploration Inc. and its subsidiaries (collectively, "Touchstone" or the "Company") are engaged in the business of petroleum and natural gas exploration, development, acquisition and production. The Company is currently active in the Republic of Trinidad and Tobago ("Trinidad").

Touchstone Exploration Inc. is incorporated under the laws of Alberta, Canada with its head and principal office located at 4100, 350 7th Avenue SW, Calgary, Alberta, Canada T2P 3N9. Touchstone's common shares are listed on the Toronto Stock Exchange ("TSX") and on the AIM market of the London Stock Exchange ("AIM") under the symbol "TXP".

Going Concern

These consolidated financial statements have been prepared on a going concern basis, which assumes the Company will continue in operational existence for the foreseeable future and be able to realize its assets and discharge its liabilities in the normal course of business.

As at December 31, 2025, the Company had a working capital deficit of $15.4 million, excluding the convertible debenture which is only convertible into common shares of the Company at any time prior to maturity in August 2028. In the absence of timely collection of value added tax receivables and incremental production from its 2025 development well program, which historically has experienced additional capital costs and operational challenges impacting additional production, the Company expects that cash balances may not be sufficient to fund projected operating and development expenditures and required bank debt repayments of $12.8 million, included in the working capital deficit, over the next twelve months. In addition, the Company projects a breach of its bank debt net senior funded debt to trailing annual EBIDA and debt service coverage covenants as of December 31, 2026, which could result in the entire bank debt balance becoming due at that time. These conditions indicate the existence of material uncertainties that may cast significant doubt upon the Company's ability to continue as a going concern.

The Company's ability to continue as a going concern is dependent upon generating sufficient cash flows from operations, obtaining additional financing through debt or equity, or restructuring existing debt obligations and financial covenants. Management is actively evaluating alternatives to meet the remaining capital requirements, including potential additional debt or equity financing and adjustments to its operational and development plans.

These financial statements do not reflect potential adjustments to the carrying amounts of assets and liabilities, reported amounts of revenue and expenses, or balance sheet classifications that would be required if the going concern assumption were deemed not appropriate. Such adjustments could be material.

2. Basis of Preparation

These consolidated financial statements (the "financial statements") have been prepared in accordance with IFRS Accounting Standards as issued by the International Accounting Standards Board ("IFRS"). Unless otherwise stated, all amounts presented in these financial statements are denominated in United States dollars ("$" or "US$").

The financial statements have been prepared on a historical cost basis, except for those items presented at fair value as detailed in the significant accounting policies disclosed in Note 3 "Summary of Material Accounting Policies".

The Company's operations are viewed as a single operating segment by the chief operating decision makers of the Company for the purposes of resource allocation and assessing performance.

The preparation of financial statements requires Management to use judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, and the disclosure of contingencies at the date of the financial statements, and revenues and expenses during the reporting period. Accordingly, actual results could differ from those estimated. Significant estimates and judgments used in the preparation of the financial statements are detailed in Note 5 "Use of Estimates, Judgements and Assumptions".

These financial statements were approved and authorized for issuance by Touchstone's Board of Directors (the "Board") on March 30, 2026.

3. Summary of Material Accounting Policies

The accounting policies set forth below have been applied consistently to all periods presented in these financial statements by the Company and its subsidiaries.

Basis of Consolidation

The financial statements include the accounts of Touchstone Exploration Inc. and its wholly owned subsidiaries. The following table outlines the Company's subsidiaries as at December 31, 2025.

Effective December 12, 2025, the Company completed a simplified horizontal amalgamation of its wholly owned subsidiaries, Touchstone Trinidad Central Block Ltd. and Primera Oil and Gas Limited. Primera Oil and Gas Limited continues as the surviving legal entity. Touchstone Trinidad Central Block Ltd. (formerly Shell Trinidad Central Block Limited) was acquired by the Company in May 2025 (refer to Note 7). This internal reorganization was conducted to streamline the Company's Trinidadian legal and reporting structure.

All intercompany balances, transactions, income and expenses have been eliminated on consolidation in these financial statements.

Joint Arrangements

Touchstone conducts a significant portion of its petroleum and natural gas ("P&NG") activities through jointly controlled operations. Joint control exists only when decisions about the relevant activities, such as the approval of annual operating and capital budgets, require the unanimous consent of the parties sharing control. These arrangements are classified as joint operations, and accordingly, the financial statements reflect the Company's specific share of the assets, liabilities, revenue, and expenses.

The Company's arrangements with state owned Heritage Petroleum Company Limited ("Heritage") are considered material jointly controlled arrangements:

· Ortoire block: The Company holds an 80 operating working interest, with Heritage holding the remaining 20 percent interest.

· Central block: Following the acquisition in May 2025, the Company holds a 65 percent operating working interest, with Heritage holding the remaining 35 percent interest.

Because both parties must approve the strategic work programs and budgets for these blocks, the Company has determined that joint control exists. Touchstone recognizes its share of production, royalties, and operating expenses based on these respective working interest percentages.

Foreign Currency Translation

The financial statements are presented in US$, which is the Company's presentation currency.

Items included in the financial statements of each consolidated entity are measured using the currency of the primary economic environment in which the entity operates (the "functional currency"). Touchstone has determined that the functional currency of the parent company is the Canadian dollar ("C$"); the functional currency of the Company's Barbadian entity is the US$; and the functional currency of each of its Trinidadian subsidiaries is the Trinidad and Tobago dollar ("TT$").

Foreign currency transactions are translated into the respective functional currency of the Company and its subsidiaries using exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the consolidated statements of comprehensive income ("statements of income").

The results and financial position of the Company and its consolidated subsidiaries that have a functional currency different from the US$ presentation currency are translated as follows:

· assets and liabilities for each consolidated balance sheet ("balance sheet") presented are translated at the reporting date closing rate;

· revenue and expenses and certain cash flow items for each period are translated at average monthly exchange rates (unless this is not a representative approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case revenue and expenses are translated at the dates of the transactions); and

· all resulting exchange differences are recognized in other comprehensive loss, a separate component of shareholders' equity.

Fair Value Measurement

Fair value represents the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the principal (or most advantageous) market at the measurement date. All assets and liabilities measured or disclosed at fair value in these financial statements are categorized within the following three-level fair value hierarchy, which reflects the significance of the lowest level input that is significant to the measurement as a whole.

· Level 1: Quoted prices in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

· Level 2: Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable as of the reporting date. Level 2 valuations are based on inputs that can be substantially observed or corroborated in the marketplace, including quoted forward price for commodities, time value, and volatility factors.

· Level 3: Inputs that are not based on observable market data.

At each reporting date, the Company assesses whether transfers have occurred between levels of the hierarchy by reassessing the classification of each financial asset and liability measured or disclosed at fair value. Judgement is required in evaluating the significance of inputs used in determining fair value, which may affect classification within the hierarchy.

Financial Instruments

Classification and measurement of financial instruments

The Company's financial assets and liabilities are classified into two categories: amortized cost and fair value through profit or loss ("FVPTL"). The classification of financial assets is determined based on the characteristics of their contractual cash flows. Touchstone does not classify any of its financial instruments as fair value through other comprehensive income.

Financial assets and liabilities are initially recognized at fair value, which is generally equal to the transaction price, net of directly attributable transaction costs, unless the instrument contains a significant financing component. Subsequent measurement depends on the classification of the financial instrument.

· Amortized cost: Financial instruments measured as amortized cost are initially recognized at fair value and subsequently measured using the effective interest method. Financial instruments classified as amortized cost include accounts receivable, restricted cash, accounts payable and accrued liabilities, acquisition consideration payable, income taxes payable, lease liabilities and bank debt.

· FVPTL: Financial instruments classified as FVPTL are measured at fair value on initial recognition and subsequently at fair value at each reporting date, with changes in fair value recognized in the statements of income. The Company's convertible debenture is classified as FVPTL.

Impairment of financial assets

The Company recognizes loss allowances for expected credit losses on its financial assets measured at amortized cost. Expected credit losses exist if one or more loss events occur after initial recognition of the financial asset, which has an impact on the estimated future cash flows of the financial asset and that impact can be reliably measured. Touchstone uses a combination of historical and forward-looking information to determine the appropriate expected credit loss. The carrying amount of the asset is reduced through the use of an allowance account, and the loss is recognized in general and administration expense.

Derecognition of financial liabilities

If an amendment to a contract or agreement comprises a substantial modification, Touchstone will derecognize the existing financial liability and recognize a new financial liability, with the difference recognized as a gain or loss in the statements of income. To determine whether a modification is substantial, the Company performs quantitative and qualitative tests. Quantitatively, if the present value of the cash flows under the new terms is at least 10 percent different than the remaining cash flows of the original liability, the modification is deemed to be substantial. Qualitatively, the change is evaluated based on its impact to the economic risk associated with the liability and would be specific to the contract.

If the modification results in the derecognition of a liability, any associated fees are recognized as part of the gain or loss. If the modification is not deemed to be substantial, any associated fees are adjusted against the liability's carrying amount and are amortized over the remaining term.

Business Combinations

Touchstone accounts for business combinations using the acquisition method. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued, and liabilities incurred or assumed at the acquisition date. Identifiable assets acquired and liabilities assumed are measured and recognized at their fair value at the date of the acquisition, with the exception of income taxes, right-of-use ("ROU") assets, and lease liabilities. Any deferred income tax asset or liability arising from a business combination is recognized at the acquisition date.

Transaction expenses associated with a business combination are expensed as incurred. Results of acquisitions are included in the financial statements from the closing date of the acquisition. If the consideration of the acquisition is less than the fair value of the net assets received, the difference is recognized immediately in the statements of income. If the consideration of the acquisition is greater than the fair value of the net assets received, the difference is recognized as goodwill on the balance sheet. Subsequent measurement of goodwill is stated at cost less any accumulated impairment expenses.

Exploration and Evaluation Assets

Expenditures incurred before the Company has obtained legal rights to explore an area are recognized in the statements of income as exploration expense.

Exploration and evaluation ("E&E") assets reflect expenditures for an area where technical feasibility and commercial viability have not yet been determined. Expenditures, including land acquisition, geological and geophysical, exploration drilling, completion and production testing costs, directly attributable overhead and share-based compensation expenses, and estimates of any decommissioning costs are capitalized and accumulated pending determination of technical feasibility and commercial viability. Technical feasibility and commercial viability of E&E assets are dependent upon the assignment of a sufficient amount of economically recoverable crude oil, natural gas liquids and natural gas reserves ("reserves") relative to the estimated potential resources available, available infrastructure to support commercial development, as well as obtaining the appropriate internal and external approvals.

Assets classified as E&E may have sales of P&NG products associated with production from test wells. Proceeds from the sale of P&NG products during the E&E phase, and the related costs of producing those items, are recognized in the statements of income.

When a project classified as E&E is determined to be technically feasible and commercially viable, the relevant costs are transferred to property, plant and equipment ("PP&E") on the balance sheet. The assets are assessed for impairment prior to any such transfer, by comparing the carrying amount to the greater of the assets' fair value less costs of disposal ("FVLCD") or value in use ("VIU"). If a decision is made by Management not to continue an E&E project, the E&E carrying value is derecognized and all associated costs are expensed as impairment in the statements of income at that time.

Property, Plant and Equipment

Items of PP&E, which include P&NG development assets, ROU assets and corporate assets, are measured at cost less accumulated depletion and depreciation expense and accumulated impairment expense.

P&NG development asset costs include expenditures for areas where technical feasibility and commercial viability have been determined. All costs directly associated with the acquisition and development of P&NG properties are capitalized. These costs include transfers of E&E assets, property acquisitions, facilities, directly attributable overhead and share-based compensation expenses, as well as decommissioning liabilities, geological and geophysical, and drilling, completion and production testing costs.

The Company depletes its P&NG development assets using the unit-of-production method by reference to the ratio of production in the period to the related proved plus probable reserves. Proved plus probable reserves are estimated annually by independent qualified reserves evaluators in accordance with National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities ("NI 51-101"). Estimated future development costs necessary to bring the reserves to production are included in the depletion calculation. The Company operates under numerous production and exploration leases with varying expiry dates. Under its operating agreements with Heritage, the Company does not have ownership of the reserves but is entitled to all associated cash flows therefrom. For impairment assessment and depletion purposes, the Company assumes that all relevant agreements will be renewed in accordance with any contractual renewal options.

Depreciation of corporate assets are calculated on a declining balance basis at various rates per annum over the estimated useful lives of the related assets. Depreciation methods, useful lives and residual values are reviewed at least annually.

Impairment of Non-financial Assets

Property, plant and equipment

P&NG development assets are accumulated in cost centres at the cash-generating unit ("CGU") level for the purposes of assessing impairment. A CGU is a grouping of assets that generate cash flows independently of other assets held by the Company. CGUs are determined based on the smallest group of assets that generate cash inflows that are largely independent of the cash inflows from other assets, considering shared infrastructure and geography.

CGUs are reviewed at each reporting date for indicators of potential impairment and, in the case of previously impaired CGUs, reversal of impairment. If such indicators exist, an impairment test is performed by comparing the CGU's carrying value to its recoverable amount, defined as the greater of the CGU's FVLCD and its VIU. Any excess of the carrying value over the estimated recoverable amount is recognized in the statements of income as impairment expense.

If there is an indicator that a previously recognized impairment expense may no longer exist or may have decreased, the estimated recoverable amount of the relevant CGU is calculated and compared against the carrying amount. A previous impairment expense is reversed to the extent that the CGU's estimated recoverable amount does not exceed the carrying amount that would have been determined, net of accumulated depletion, if no impairment had been recognized. A reversal of impairment is recognized in the statements of income against impairment expense.

FVLCD is estimated using the amount obtainable from the sale of the asset in an arm's length transaction between knowledgeable and willing parties, less any costs of disposal. Available fair value indicators, such as recent market information and appropriately discounted cash flow valuation models, are typically used in determining FVLCD. In assessing VIU, estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and risks specific to the asset. Recoverable amounts are generally computed by reference to the present value of the related future cash flows expected to be derived from estimated proved plus probable reserves.

Exploration and evaluation assets

E&E assets are assessed for impairment at the operating area level and are reviewed at each reporting date for indicators of potential impairment or, in the case of previously impaired E&E assets, reversals of impairment. An impairment expense on E&E assets is recognized if the carrying value of the E&E assets exceeds the recoverable amount. Similarly, a previously recorded impairment may be reversed if the recoverable amount of the relevant E&E asset is greater than the carrying amount. E&E asset impairment expenses or reversals are recognized in the statements of income as impairment expense or impairment recovery, respectively.

Assets Held for Sale

Non-current assets are classified as held for sale if their carrying amounts will be recovered through a sale transaction rather than through continuing development or use. This condition is met when the sale is highly probable, and the asset is available for immediate sale in its present condition. For the sale to be highly probable, Management must be committed to a plan to sell the asset, and an active program to locate a buyer must have been initiated. The asset must be actively marketed for sale at a price that is reasonable in relation to its current fair value, and the sale should be expected to be completed within one year from the date of classification. Certain events or circumstances beyond the Company's control may extend the period to complete the sale beyond one year.

Immediately before E&E and PP&E assets are classified as held for sale, they are measured at the lower of their carrying amount and FVLCD, with any impairment expense recognized in the statements of income. Non-current assets held for sale and their associated liabilities are classified and presented in current assets and liabilities within the balance sheet. Assets held for sale are not depleted or depreciated.

Dispositions

Gains or losses on disposal of assets are determined as the difference between the net proceeds from disposal and the carrying amount of the net assets held for sale and are recognized in the statements of income.

Exchanges of assets are measured at fair value, unless the transaction lacks commercial substance or fair value cannot be reasonably measured, in which case the acquired assets are measured at the carrying value of the assets disposed.

Provisions and Contingent Liabilities

Provisions are recognized when Touchstone has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of economic benefit will be required to settle the obligation, and the amount can be reliably estimated. Provisions are measured using the best estimate of the expenditure required to settle the obligation.

A provision for an onerous contract is recognized when the expected economic benefits to be derived by Touchstone from the contract are lower than the unavoidable cost of meeting the obligations in the contract. The provision is measured at the lower of the expected cost of terminating the contract and the present value of the expected net cost during the remaining term of the contract. Before a provision is established, the Company first recognizes any impairment expense on any assets associated with the onerous contract.

A contingent liability is disclosed when Touchstone has a possible obligation arising from a past event and whose existence will be confirmed only by the occurrence or non-occurrence of one or more future events not wholly under its control, or when the Company has a present obligation that arises from past events but is not recognized because it is not probable that an outflow of resources will be required to settle the obligation, or the amount of the obligation cannot be measured with sufficient reliability.

Lease Arrangements

The Company assesses whether an arrangement is a lease based on whether the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

As lessee

When Touchstone is a party to a lease arrangement as the lessee, leases are recognized as a ROU asset and a corresponding lease liability on the balance sheet on the date that the leased asset becomes available for use.

ROU assets and lease liabilities are initially measured on a present value basis. Lease liabilities include the net present value of the lease payments which may include fixed payments, variable lease payments based on an index or a rate, amounts expected to be payable under residual value guarantees, and payments to exercise an extension or termination option if the Company is reasonably certain to exercise either option. The interest rate implicit in the lease is used to determine the present value of the liability and ROU asset arising from a lease, unless this rate is not readily determinable, in which case the Company's incremental borrowing rate is used. Touchstone uses a single discount rate for a portfolio of leases with reasonably similar characteristics. Lease payments are allocated between the lease liability and finance expense. Finance expenses are recognized in the statements of income over the lease term.

ROU assets are measured at cost, which is composed of the amount of the initial measurement of the lease obligation, less any incentives received, plus any lease payments made at, or before, the commencement date and initial direct costs and asset restoration costs, if any. ROU assets are depreciated on a straight-line basis over the shorter of the estimated useful life of the asset or the lease term.

Lease liabilities and ROU assets are remeasured when there is a modification to the underlying contract terms, a change in the future lease payments arising from a change in an index or rate, if there is a change in the amount expected to be payable under a residual value guarantee, or if there is a change in the assessment of whether the Company will exercise a purchase extension or termination option.

Leases that have terms of less than twelve months or leases on which the underlying asset is of low value are recognized as an expense in the statements of income on a straight-line basis over the lease term.

As lessor

Where Touchstone acts as the lessor in a lease arrangement, the Company determines at inception whether the lease is a finance lease or an operating lease. Leases where the Company transfers substantially all of the risk and rewards incidental to ownership of the underlying asset are classified as finance leases. Under a finance lease, Touchstone records the current portion of the finance lease in accounts receivable and the non-current portion in other assets. Finance interest income related to the lease is recognized using an approach that equals a constant rate of return on the net investment of the lease. The net investment of the lease is the aggregate of the net minimum lease payments and unearned finance income discounted at the interest rate implicit in the lease. Unearned finance income is deferred and recognized in the statements of income over the lease term against net finance expense. The Company records lease payments received under operating leases as other revenue on a straight-line basis over the lease term.

Bank Debt

The Company's bank debt balance includes three term loan facilities and a revolving loan facility that may be renewed on a two-year basis. The term loan facilities were initially measured at fair value, net of all transaction fees, and are subsequently measured at amortized cost using the effective interest rate method. The discount on each term loan facility is unwound using the effective interest rate method to the face value at maturity, and the associated accretion expense is recognized in the statements of income in net finance expense. The revolving loan facility is measured at amortized cost using the effective interest rate method.

Convertible Debenture and Warrants

The Company's convertible debenture issued in August 2025 was designated as a hybrid financial instrument measured at FVPTL in accordance with IFRS 9 Financial Instruments ("IFRS 9").

On issuance, the convertible debenture was initially recognized based on the gross proceeds, net of the holder's placement fee, and the fair value allocated to the detachable warrants. The fair value of the convertible debenture is remeasured at each reporting date using a valuation model incorporating assumptions related to the volatility of the Company's share price, the risk-free interest rate, credit risk, forward foreign exchange rates, and the expected timing and probability of conversion. Changes in fair value are recognized as non-cash components of net finance expense. If converted, the carrying amount is reclassified to share capital. Although the debenture matures in 2028, it remains classified as a current liability because it is convertible at the holder's option at any time prior to maturity.

The fair value of the detachable warrants was determined using the Black-Scholes option pricing model, based on assumptions regarding share price volatility, the risk-free rate, and the expected term. The value attributed to the warrants was recorded in equity on issuance, as they are exercisable for a fixed number of common shares at a fixed exercise price. The warrants are not subsequently remeasured, and the recorded balance is reclassified to share capital upon exercise.

Decommissioning Liabilities

Provisions for abandonment and reclamation obligations associated with Touchstone's E&E and PP&E assets are recognized as decommissioning liabilities. Decommissioning liabilities are measured at the present value of Management's best estimate of expenditures required to settle the liability at the end of the related assets' useful life at the balance sheet reporting date.

The discount rate used to determine the present value is a risk-free rate that reflects the currency and the estimated timing of the expenditure. On at least a quarterly basis, Management reviews these estimates, and any changes, if any, are applied prospectively. These changes are recognized as an increase or decrease to the liability, with a corresponding increase or decrease to the carrying amount of the related asset.

The capitalized amount included in PP&E is depleted based on a unit-of-production basis consistent with the underlying assets. The liability is increased in each reporting period with the passage of time, and the associated accretion expense is recognized in the statements of income as finance expenses. Periodic revisions to the liability-specific risk-free discount rate, estimated timing of cash flows, or to the estimated undiscounted cost can also result in an increase or decrease to the decommissioning liability and the related asset. Actual costs incurred upon settlement of the obligations are recognized against the provision to the extent of the liability recognized.

With respect to decommissioning liabilities associated with the Company's operating agreements with Heritage, the Company is obligated to pay its proportional share of well abandonment costs. This share is determined by the ratio of the Company's cumulative crude oil sales from a specific well compared to the well's total historical production. Touchstone remains responsible for its working interest share of site restoration, well abandonment costs and removal of infrastructure and facilities used in P&NG operations conducted on its properties under production licences with the Government of Trinidad and Tobago Ministry of Energy and Energy Industries ("MEEI") and private landowners.

Revenue Recognition

The Company principally generates revenue from the sale of commodities, including crude oil, natural gas liquids ("NGLs") and natural gas. Revenue is recognized when the Company satisfies its performance obligations by transferring control of the commodity to the buyer. This occurs when the buyer has the ability to direct the use of and obtain substantially all the remaining benefits from the commodity, and the Company has a present right to payment.

Revenue from the sale of crude oil and NGLs separated at the Company's processing facilities is recognized at the point in time when the product is delivered to Heritage at its sales batteries or designated facilities. This delivery represents the transfer of legal title and control. Realized prices are based on contractually agreed-upon pricing mechanisms, typically referencing local and global pricing benchmarks adjusted for quality differentials.

The Company recognizes natural gas sales revenue at the point of delivery based on the following primary arrangements:

· Domestic market: Revenue is recognized upon delivery to the National Gas Company of Trinidad and Tobago ("NGC") at the field gate or inlet to the NGC pipeline system.

· Export-linked sales: For Central block natural gas sales to the Atlantic LNG facility, revenue is recognized upon delivery at the specified inlet point. The transaction price is variable and determined using a contractually defined formula linked to global energy benchmarks. This includes provisional pricing adjustments for heating value and liquids content, with final adjustments recognized when the definitive values are determined.

Touchstone may also generate revenue from third-party product gathering and processing through its infrastructure. This is recognized as other revenue in the statements of income as the services are provided, typically based on throughput volumes and contractually agreed-upon tariffs.

Share-based Compensation Plans

The Company's share-based compensation plans include both cash-settled awards and equity-settled awards.

The Company's restricted share units ("RSUs"), performance share units ("PSUs") and deferred share units ("DSUs") are considered cash-settled awards. Liabilities associated with cash-settled awards are determined based on the fair value of the award at the grant date and are subsequently revalued at each period-end. This valuation incorporates the period-end share price, dividends declared during the period, the number of awards outstanding at each period-end, and certain Management estimates, such as a performance multiplier and estimated forfeitures. Compensation expense is recognized in the statements of income over the relevant service period with a corresponding increase or decrease in accrued liabilities. Classification of the associated current and non-current liabilities is dependent on the expected payout dates of the individual awards.

Compensation expense associated with equity-settled awards for stock options is determined based on the fair value of the stock option at the grant date, as measured using the Black-Scholes option-pricing model and is recognized over the period that the options vest with a corresponding increase to contributed surplus. The estimated forfeiture rate is adjusted to reflect the actual number of stock options that vest. When equity-settled awards are exercised, the consideration received, and the associated amounts previously recorded as contributed surplus are reclassified to shareholders' capital.

Income Taxes

Income tax expense or recovery comprises current and deferred tax and is recognized in the statements of income, except to the extent that it relates to items recognized directly in equity, in which case the related income tax is also recorded in equity.

Current income tax is the expected income tax payable on taxable income for the period, using enacted or substantively enacted income tax rates at the reporting date and any adjustment to income tax payable in respect of previous years.

Deferred income tax is recognized using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred income taxes are not recognized for temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit and loss or for taxable temporary differences arising on the initial recognition of goodwill. Deferred income tax is measured at the income tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.

Deferred income tax assets and liabilities are presented as non-current. Deferred income tax assets and liabilities are offset if there is a legally enforceable right to set off the recognized amounts, and the intent is to either settle on a net basis or to realize the assets and settle the liabilities simultaneously. A deferred income tax asset is recognized for unused tax losses, tax credits, and deductible temporary differences only to the extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred income tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

Income Per Share

Basic income per share is calculated by dividing net income attributable to shareholders by the weighted average number of common shares outstanding during the period.

Diluted income per share is calculated by adjusting the weighted average number of common shares outstanding for the dilutive common shares related to the Company's share-based compensation plans, convertible debenture and warrants, which could have a dilutive impact on net income during the year. The number of shares included is computed using the treasury stock method, whereby the common shares are assumed to be purchased at the average market price.

4. Future Accounting Pronouncements

Amendments to IFRS 9 Financial Instruments and IFRS 7 Financial Instruments: Disclosures

In May 2024, the International Accounting Standards Board ("IASB") issued amendments to IFRS 9 Financial Instruments and IFRS 7 Financial Instruments: Disclosures to clarify the date of recognition and derecognition of financial assets and liabilities. The amendments are effective for fiscal years beginning on or after January 1, 2026, and are not expected to have a material impact on the Company's financial statements.

IFRS 18 Presentation and Disclosure in Financial Statements

IFRS 18 Presentation and Disclosure in Financial Statements ("IFRS 18") was issued in April 2024 by the IASB and replaces IAS 1 Presentation of Financial Statements. IFRS 18 introduces a defined structure to the statements of comprehensive income, including new totals, subtotals, and categories for income and expenses. In addition, management defined performance measures will require note disclosure. IFRS 18 is required to be adopted retrospectively and is effective for fiscal years beginning on or after January 1, 2027, with early adoption permitted. The Company is currently assessing the extent of the impact of IFRS 18 on its consolidated financial statements.

5. Use of Estimates, Judgements and Assumptions

The timely preparation of financial statements in conformity with IFRS requires Management to make estimates, judgments and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, revenues, expenses and the disclosure of contingent liabilities. These estimates, judgments and assumptions are subject to change, and actual results could differ from those estimated, and those differences could be material. Estimates and underlying assumptions are reviewed on an ongoing basis, and any revisions to accounting estimates are recognized in the period in which the estimates are revised.

Significant estimates and judgements made by Management in the preparation of these financial statements are discussed below.

Financial Instruments

The estimated fair value of financial instruments is reliant upon a number of estimated variables including forward commodity prices, foreign exchange rates and interest rates as well as the risk of non-performance. Fair value estimates of financial instruments are made at a specific point in time, based on relevant information about financial markets and specific financial instruments. As these estimates are subjective in nature, involving uncertainties and matters of significant judgment, they cannot be determined with precision. Changes in assumptions can significantly affect estimated fair values.

Additionally, estimates must be made with respect to impairment of financial assets and the provision of expected credit losses recognized. In making an assessment as to whether financial assets are credit-impaired, Management considers historically realized bad debts, any applicable public credit ratings, evidence of a debtor's present financial condition and whether a debtor has breached certain contracts, the probability that a debtor will, or has entered bankruptcy or other financial reorganization, changes in economic conditions that correlate to increased levels of default, the number of days a debtor is past due in making a contractual payment, and the term to maturity of the specified receivable.

Hybrid financial instruments

The Company measures the convertible debenture at FVTPL at each reporting date. This requires the use of a valuation model with several unobservable key inputs (Level 3). The fair value of the convertible debenture is determined using valuation techniques that incorporate several key assumptions, including the expected volatility of the Company's share price, risk-free interest rates, the credit risk spread associated with the instrument, forward foreign exchange rates, and the expected timing and probability of conversion.

The valuation relies on significant management judgment in selecting and assessing these inputs, particularly those categorized as Level 3 within the fair value hierarchy. Due to the high degree of estimation uncertainty, changes in these underlying assumptions could significantly affect the reported fair value of the instrument and the resulting revaluation gain or loss recognized in the statements of income.

Business Combinations

Management judgment may be required to identify one of the combining entities as the acquirer for accounting purposes and then to determine the fair value of the acquired entity. The determination of fair value is estimated based on information available at the date of acquisition and requires Management to make assumptions and estimates about future events. The assumptions and estimates with respect to determining the fair value of PP&E and E&E assets using a FVLCD model generally require significant judgment and include proved plus probable reserves and forecasted production volumes, forecasted oil and natural gas prices, forecasted royalty, operating, general and administration and income tax expenses, forecasted future development costs and inflation rates, and discount rate. Assumptions are also required to determine the fair value of the decommissioning liabilities associated with the assets, the ROU assets and associated lease obligations and other deferred liabilities.

Changes in any of the assumptions or estimates used in determining the fair value of acquired assets and liabilities could impact the amounts assigned to assets, liabilities, and goodwill (or net assets acquired in excess of purchase consideration). Future comprehensive income will be affected as the fair value on initial recognition impacts future depletion and depreciation expenses, non-financial asset impairment expenses or reversals, or goodwill impairment expenses.

Petroleum and Natural Gas Reserves

There are inherent uncertainties associated with estimating proved plus probable reserves. Reserve estimates are based on a number of significant assumptions, such as engineering and geological data, forecasted oil and natural gas price estimates, forecasted production volumes and decline rates, and the timing and amount of forecasted royalty, operating and future development costs, all of which are subject to many uncertainties, interpretations and judgments. Estimates reflect market and regulatory conditions existing as of December 31, 2025 and 2024, which could differ significantly from future periods. The estimate of reserves and the related cash flows are evaluated by Touchstone's independent qualified reserves evaluator at least annually in accordance with NI 51-101.

Petroleum and Natural Gas Investments

The Company applies judgment when classifying the nature of P&NG investments as E&E or PP&E and when determining whether capitalization of the initial costs of these investments is appropriate. The Company uses historical drilling results, project economics, resource quantities, estimated operating expenses and future development costs to make judgments about future events and circumstances.

Determination of Cash-generating Units

Determination of what constitutes a CGU is subject to Management's judgement. The recoverability of P&NG development asset carrying values included in PP&E are assessed at the CGU level, and the asset composition of a CGU can directly impact the recoverability of the assets included therein. Geological formation, shared infrastructure and marketing arrangements, product type, geographic location, and internal management are key factors considered when grouping Touchstone's P&NG development assets into CGUs.

Recoverability of Asset Carrying Values

Management applies judgement in assessing the existence of indicators of impairment and reversal of impairment based on various internal and external factors.

In estimating the recoverable amount of E&E assets, Management factors in future development plans, licence expiries, and required regulatory approvals into the relevant asset assessment. Where applicable, the Company uses proved plus probable reserves to assess certain E&E assets for impairment prior to being transferred to PP&E as estimated by the Company's independent qualified reserves evaluator. E&E assets remain capitalized as long as sufficient progress is being made in assessing whether the projects are technically feasible and commercially viable. This assessment requires significant Management judgement, as E&E assets are subject to continuous internal review to confirm the ongoing intent to establish the technical feasibility and commercial viability of a project.

The recoverable amounts of Touchstone's PP&E CGUs are estimated based on VIU calculations using discounted pre-tax cash flows derived from the Company's proved plus probable reserves as estimated by the Company's independent qualified reserves evaluator. The reserve evaluation is based on an estimated reserve life up to a maximum of 50 years. Key input estimates used in the determination of related future cash flows from proved plus probable reserves are set forth below.

· Proved plus probable reserves and forecasted production volumes: Assumptions that are valid at the time of reserves estimation may change significantly when new information becomes available. Changes in forecasted oil and natural gas price estimates, forecasted operating costs, required forecasted future development costs or recovery rates may change the economic status of reserves and may result in revisions to reserves estimates. Discounted future cash flow models consider development plans approved by Management and reasonable assumptions that a market participant would apply in establishing a development plan for the assets.

· Forecasted oil and natural gas prices: Forecasted product pricing estimates are used in the discounted future cash flow models. These prices are adjusted for consideration stipulated in contracts with customers. Commodity prices have experienced increased volatility in recent years due to global and regional factors including supply and demand fundamentals, inventory levels, expected future demand, economic and geopolitical factors.

· Forecasted royalty, operating, general and administration and income tax expenses: Estimates of these inputs are based on historical results and estimates regarding inflation over the forecast periods. Forecasted income tax calculations are based on the laws that have been enacted or substantively enacted for the appropriate cash flow streams.

· Forecasted future development costs and inflation rates: Forecasted future development costs are estimated based on expected future costs of wells and facilities and estimates regarding inflation over the forecast periods. There also exists uncertainty regarding the estimated timing of capital projects, as the Company has significant development opportunities in several properties, and the ultimate pace of development is controlled to meet future capital expenditure and liquidity targets.

· Discount rate: The discount rates used to calculate the net present value of future cash flows are based on estimates of an approximate industry peer group weighted average cost of capital as appropriate for each CGU being tested. Changes in the general economic environment could result in significant changes to this estimate.

Depletion of Petroleum and Natural Gas Development Assets

Depletion of P&NG development assets is determined based on proved plus probable reserves as well as forecasted future development costs estimated by the Company's independent qualified reserves evaluator.

Exploration and Evaluation Assets

E&E assets remain capitalized at the operating level area as long as sufficient progress is being made in assessing whether the recovery of P&NG products is technically feasible and commercially viable. Determining whether sufficient progress has been made is a judgemental area, and it is possible to have E&E assets classified as such for several years while activities are being conducted, or the Company is seeking regulatory and internal approvals for development plans. E&E assets are subject to ongoing Management review to confirm the intent to establish technical feasibility and commercial viability of a discovery. This assessment includes many changing factors, including reserves, project economics, expected capital expenditures and production expenses, access to infrastructure, obtaining and the timing of receiving required regulatory approvals, and potential infrastructure construction and expansions. Furthermore, the transfer of E&E assets to PP&E is based on Management's judgement of technical feasibility and commercial viability.

Lease Arrangements

Management applies judgment in reviewing each of its contractual arrangements to determine whether they contain a lease. Leases that are recognized are subject to further Management judgment and estimation in various areas specific to the contractual arrangements, including lease terms and discount rates. In determining the lease term to be recognized, Management considers all facts and circumstances that create an economic incentive to exercise an extension option or not to exercise a termination option. Where the discount rate implicit in a lease cannot be readily determined, the rate is estimated using Touchstone's incremental borrowing rate. This represents the rate that the Company would incur to obtain the funds necessary to purchase an asset of a similar value, with comparable payment terms and security in a similar economic environment.

Provisions and Contingent Liabilities

The determination of provisions and disclosure of contingent liabilities involves Management judgements about the probability of outcomes of future events and estimates on timing and amount of expected future cash flows. Such disclosure could relate to predicted outcomes of ongoing legal matters, ongoing or completed asset dispositions, and current regulatory processes.

Decommissioning Liabilities

The provision for abandonment and reclamation obligations associated with Touchstone's E&E and PP&E assets is based on numerous assumptions and judgements, including ultimate remediation plans, estimated costs to settle the obligations, the Company's proportionate share of obligations under operating agreements with third parties, inflation factors, risk-free discount rates, the expected timing of settlement, and changes in the applicable legal and regulatory environments. Actual costs and timing of cash outflows could differ from estimates because of changes in laws and regulations and market conditions. Additionally, further discovery, analysis of site conditions, and changes in technology could also cause actual amounts to differ from estimated amounts.

Share-based Compensation

Compensation expense recognized for Touchstone's equity-settled stock option plan is measured using the Black-Scholes option pricing model. The measurement inputs to this model, including expected volatility, weighted average expected life of the stock options, expected dividend yield, risk-free interest rate (based on Government of Canada bonds) and expected forfeitures, rely on Management's judgements. Forfeitures are estimated through the vesting period based on past experience and future expectations and are adjusted upon actual vesting and forfeitures.

Compensation expense accrued for PSUs awarded under Touchstone's share-based compensation plan is dependent on an adjustment to the final number of PSU awards that eventually vest based on a performance multiplier that is estimated by Management. Large fluctuations in compensation expense may occur due to changes in the underlying common share price or revised Management estimates of relevant performance factors.

Income Taxes

Accounting for income taxes is a complex process requiring Management to interpret frequently changing laws and regulations and make judgments relating to the application of tax law, the estimated timing of temporary difference reversals, and the estimated realization of income tax assets. Income tax filings are subject to subsequent government audits and reassessments and changes in facts, circumstances, and interpretations of the standards may result in a material change in the Company's provision for income taxes.

6. Financial Assets and Credit Risk

Credit risk is the risk of a financial loss to the Company if a partner or counterparty to a product sales contract, financial instrument, jointly controlled operation, or other financial transaction fails to meet its contractual obligations. As at December 31, 2025, Touchstone's exposure to credit risk related primarily to its accounts receivable balances.

Credit risk is typically considered low for the Company's accounts receivable balances, as exposure primarily relates to monthly commodity sales to Government of Trinidad and Tobago ("GOTT") owned entities and a third-party LNG marketing company, joint interest billings from Heritage, and value added tax ("VAT") receivables from the GOTT.

For the year ended December 31, 2025, the Company's P&NG sales were concentrated among three customers, each representing more than 10 percent of annual sales.

P&NG sales are generally collected within one to two months following production. As at December 31, 2025, approximately 13 percent of the Company's credit exposure was attributed to accrued revenue from December 2025 production volumes. Joint interest billings are typically settled within one to three months following invoicing.

The following table discloses the composition and aging of Touchstone's accounts receivable balances, representing the Company's maximum credit risk exposure.

In connection with the business combination (refer to Note 7), the Company recognized $8,525,000 in accounts receivables relating to VAT and income tax receivable from the GOTT as at December 31, 2025. Per the share purchase agreement, these funds are only remitted to the seller upon collection. As a corresponding liability was recorded as an acquisition consideration payable, the Company bears no credit risk regarding these specific balances.

As at December 31, 2025 and 2024, the Company determined the expected credit loss on its accounts receivables was $nil. Management considers past due balances fully recoverable as they primarily represent VAT receivable from the GOTT. While the timing of recovery remains uncertain, the Company has no historical record of collection issues.

During the year ended December 31, 2025, the Company collected $724,000 of past due VAT receivable and received approximately $2,960,000 in TT$ denominated government-issued bonds in lieu of VAT payments. These bonds were sold to a Trinidad-based financial institution in September 2025 for net proceeds of $2,862,000. A loss of $104,000 was included in net finance expense during the year ended December 31, 2025 related to this transaction.

7. Business Combination

On May 16, 2025, the Company, through its wholly owned Trinidadian subsidiary, completed the acquisition of 100 percent of the share capital of a Shell Trinidad Central Block Limited (the "Acquisition") for preliminary cash consideration of $28,400,000. The Acquisition was financed through an additional $30 million six-year term loan facility (refer to Note 13).

The acquired entity holds a 65 percent operating participating interest in the onshore Central block exploration and production licence, with Heritage holding the remaining 35 percent interest. Effective December 12, 2025, the acquired entity was amalgamated with an existing Trinidadian subsidiary of the Company.

The Central block asset includes four producing natural gas wells and an associated natural gas processing facility. The Acquisition provides Touchstone with increased low-decline base production, exposure to global liquefied natural gas pricing, and expanded access to the hydrocarbon-rich Herrera fairway, which is contiguous with the Company's Ortoire block.

Purchase Price Allocation

The Company estimated the fair value of P&NG development assets acquired as at the acquisition date using proved plus probable P&NG reserves derived from an evaluation prepared by the Company's independent qualified reserves evaluator. Associated future cash flows were discounted at an after-tax rate of 30 percent to reflect acquisition-date market participant assumptions. The fair value of the associated decommissioning liabilities was determined using a credit-adjusted risk-free rate of 14 percent.

The following purchase price allocation ("PPA") is based on Management's best estimate of the fair values of assets acquired and liabilities assumed and is subject to change based upon finalizing the value of the net assets acquired.

Measurement Period Adjustments

The PPA is subject to change as the Company continues to evaluate and obtain further information regarding the facts and circumstances that existed at the acquisition date. The Company may recognize adjustments to the fair value of the net assets acquired and the resulting consideration within the measurement period, which shall not exceed one year from the acquisition date.

During the year ended December 31, 2025, the Company obtained new information related to the acquisition-date fair values, resulting in several retrospective revisions to the preliminary PPA. Specifically, consideration payable and accounts receivable to the seller each increased by $24,000. Accounts receivable decreased by $196,000, while accounts payable and accrued liabilities decreased by $1,330,000. Additionally, the Company recognized an increase of $716,000 to decommissioning obligations based on updated environmental assessments of the acquired facility. These adjustments led to an $855,000 decrease in the fair value attributed to P&NG development assets, which was partially offset by a $437,000 decrease in the related deferred income tax liability.

Pro-forma Results of Operations

The results of operations from the Acquisition have been included in the consolidated financial statements effective May 16, 2025. From the acquisition date to December 31, 2025, the acquired operations contributed P&NG sales of $9,277,000 and a net loss of $746,000.

Had the Acquisition closed on January 1, 2025, Management estimates the acquired operations would have contributed approximately $14,755,000 in P&NG sales and an estimated net loss of $1,302,000 for the year ended December 31, 2025. These pro-forma amounts are based on unaudited financial information prepared by the acquiree and do not reflect any potential synergies, integration costs, or other adjustments that could arise from combining the operations.

Contractual Obligations

The following table summarizes the estimated minimum contractual payments acquired as at December 31, 2025, consisting of lease payments and fees related to the Central block exploration and production licence.

8. Exploration and Evaluation Assets

The following table summarizes the changes in the Company's E&E assets for the years ended December 31, 2025 and 2024.

Asset Disposition

During the year ended December 31, 2024, the Company disposed of a non-operated interest in the previously impaired Cory Moruga exploration property. In consideration for the interest, the purchaser assumed $779,000 in decommissioning and accrued liabilities. As the carrying value of the operating area was previously impaired to $nil, the transaction resulted in a $779,000 gain on asset disposition recognized during the year ended December 31, 2024.

9. Property, Plant and Equipment

As at December 31, 2025, future development costs of $167.1 million were included in P&NG development asset cost bases for depletion calculation purposes (2024 - $168.0 million).

During the year ended December 31, 2025, the Company capitalized $400,000 of direct and attributable overhead charges to PP&E (2024 - $532,000).

Asset Swaps

On December 1, 2025, the Company completed the sale of its 100 percent working interest in the Fyzabad oil property. The transaction was structured as an asset swap for services, under which the purchaser committed to drilling three turnkey oil wells. The total consideration, valued at $2,303,000, resulted in a gain on sale of $4,981,000 recorded during the year ended December 31, 2025. No impairment was recognized upon the initial classification of the assets and liabilities as held for sale. As at December 31, 2025, $2,188,000 of the consideration related to drilling services was classified as non-current other assets.

During the year ended December 31, 2024, the Company closed an asset swap transaction. Touchstone swapped its 100 percent working interest in a non-core privately leased property for a 100 percent working interest in an operating agreement with Heritage governing the Balata East block. The Company recorded a $1,434,000 gain on acquisition during the year ended December 31, 2024, representing the excess of the $237,000 identifiable net assets acquired over the $1,197,000 net liabilities of the assets disposed.

Disposition

During the year ended December 31, 2024, Touchstone disposed of its interest in the CO-2 lease operating agreement for aggregate consideration of approximately $1,066,000. The transaction resulted in a pre-tax impairment expense of $474,000, with no further gain or loss recorded on closing.

10. Impairment

Exploration and Evaluation Assets

The following table summarizes E&E asset impairment expense (reversal) for the years ended December 31, 2025 and 2024 by operating area.

2025 Assessment

As at December 31, 2025, the Company assessed its E&E assets for indicators of impairment and concluded that no such indicators existed.

2024 Assessment

During the year ended December 31, 2024, Touchstone recognized a $63,000 impairment reversal in the Cory Moruga operating area reflecting changes in decommissioning estimates prior to the disposal of the Company's interest in the licence (refer to Note 8).

Additionally, the Company identified indicators of impairment in the Ortoire operating area as at December 31, 2024, following a realignment of long-term capital priorities. An impairment test determined that the recoverable amount was insufficient to support the carrying value, resulting in a pre-tax impairment expense of $2,385,000.

Property, Plant and Equipment

The following table summarizes PP&E impairment expense (reversal) by CGU.

2025 Assessment

As at December 31, 2025, the Company identified indicators of impairment for the Cascadura CGU due to a material decrease in assigned reserve volumes as reported in the year-end independent reserves evaluation. Consequently, the Company performed an impairment test using a VIU calculation. The results indicated that the $80,017,000 estimated recoverable amount of the CGU exceeded its $47,288,000 carrying value (net of associated deferred income tax liabilities), and no impairment was required.

The estimated recoverable amount was determined using a VIU calculation incorporating discounted after-tax cash flows of proved plus probable reserves. The calculation utilized forward commodity prices and cost estimates assessed by the Company's independent qualified reserves evaluator. Cash flows were discounted at an after-tax rate of 25 percent (approximately 55 percent on a pre-tax basis).

The recoverable amount was calculated using the following benchmark prices (adjusted for CGU-specific differentials) effective January 1, 2026. Prices and costs beyond 2035 were adjusted for inflation at an annual rate of 2 percent.

Sensitivity analysis indicated that a 1 percent change in the discount rate or a 10 percent change in commodity prices would not have resulted in an impairment expense for the Cascadura CGU as at December 31, 2025.

2024 Assessment

During the year ended December 31, 2024, the Company recorded a $474,000 pre-tax impairment expense for the CO-2 CGU as the FVLCD was lower than the carrying value upon disposition (refer to Note 9).

Indicators of impairment were identified for the Cascadura and Coho CGUs in 2024 due to declines in assigned reserve volumes. Impairment tests using VIU calculations resulted in a $137,000 reversal for the Coho CGU as noted in the following table.

Note:

(1) Net of associated deferred income tax liabilities.

The following table details the forward benchmark prices used in estimating the recoverable amount of each CGU as at December 31, 2024.

For the 2024 assessment, the Company applied a 20 percent after-tax discount rate (approximately 53 percent pre-tax). An increase or decrease in the discount rate by 1 percent or commodity prices by 10 percent would not have affected the $137,000 pre-tax impairment reversal recorded as at December 31, 2024.

The VIU calculations were classified as Level 3 fair value measurements, as significant inputs are based on non-observable market data and Management estimates. Changes in key judgments, such as reserves revisions, changes in forecasted commodity prices, inflation rates, operating expenses, future development costs, or the discount rate would impact the estimated recoverable amounts, and any resulting change in impairment would affect comprehensive income.

11. Financial Liabilities and Liquidity Risk

Liquidity risk is the risk that the Company will be unable to meet its financial obligations as they become due. Touchstone manages this risk through prudent cash and debt management practices, including the continuous monitoring of actual and forecasted cash flows, maintaining appropriate working capital levels, and monitoring compliance with the financial covenants under its loan agreement. The Company also regularly assesses its ability to access additional liquidity through debt or equity financing as required.

As at December 31, 2025, the Company had a $25,405,000 working capital deficiency, with no remaining borrowing capacity under its revolving loan facility (refer to Note 13). The working capital deficit was primarily driven by significant 2025 capital expenditures deployed throughout 2025, approximately $12,786,000 in current bank debt, and the inclusion of the $9,979,000 convertible debenture carrying value within current liabilities, despite its long-term maturity profile.

To address the current working capital deficit and enhance financial flexibility, the Company is actively pursuing a strategic recapitalization plan. This initiative may include renegotiating existing credit facilities to improve amortization terms and financial covenants, or the issuance of additional equity (refer to Note 1).

Touchstone's near-term development strategy is focused on increasing operating cash flows through its continued development activities. The Company intends to maintain a disciplined approach to capital expenditures to preserve financial flexibility and ensure it can meet current and anticipated financial obligations, including planned capital programs and contractual commitments.

The following table summarizes the Company's estimated undiscounted cash outflows and financial maturities of its financial liabilities as at December 31, 2025.

Notes:

(1) Undiscounted cash outflows represent total estimated payments and may differ from financial statement carrying values.

(2) Excludes the current portions of lease liabilities and share-based compensation liabilities.

(3) Includes both notional interest and principal components.

(4) Future interest payments are based on interest rates in effect as at December 31, 2025. Interest rates on three of the Company's loan facilities are reset annually (refer to Note 13).

(5) Represents accrued obligations for share-based compensation awards expected to be settled in cash.

Refer to Note 13 "Bank Debt", Note 14 "Convertible Debenture", Note 23 "Capital Management" and Note 24 "Commitments and Contingencies" for further details regarding the Company's debt structure, capital management objectives and contractual obligations.

12. Lease Liabilities

Touchstone is a party to lease arrangements for a drilling rig, office facilities, vehicles and equipment. Lease agreements are negotiated on an individual basis and contain a wide range of varying terms and conditions. The Company's lease arrangements have effective terms of one to eight years and may include extension options. Discount rates used to calculate the present value of lease payments during the year ended December 31, 2025, ranged between 5 and 10 percent.

The following table provides a continuity of the Company's lease liabilities for the years ended December 31, 2025 and 2024.

During the year ended December 31, 2025, the Company recorded an aggregate lease modification of $237,000, reflecting the termination and an extension of office leases.

In 2024, the Company extended a drilling services contract through October 6, 2026, requiring a minimal utilization of 120 days per annum. This resulted in the recognition of a $2,930,000 lease liability and associated ROU asset.

The following table details the undiscounted cash flows (principal and interest) related to the Company's lease liabilities as at December 31, 2025 and 2024.

Payments for short-term leases and leases of low-value assets for the year ended December 31, 2025 were $210,000 (2024 - $67,000). These primarily related to motor vehicles and well service equipment and were recognized within operating expenses. Variable lease payments of $195,000, which are not included in the measurement of lease liabilities, were recognized within general and administration expense during the year ended December 31, 2025 (2024 - $181,000).

13. Bank Debt

On May 12, 2025, the Company entered into a Fourth Amended and Restated Loan Agreement (the "Loan Agreement") with its Trinidad-based lender. The Loan Agreement provided a new $30 million six-year non-revolving term loan facility (facility 3), the proceeds of which were used to finance the Acquisition (refer to Note 7).

The following table summarizes the Company's credit facilities under the Loan Agreement as at December 31, 2025.

As at December 31, 2025, outstanding principal balances totalled $57,750,000, and there was no remaining available capacity under the revolving loan facility.

The following table summarizes the movements of the Company's bank debt balances for the years ended December 31, 2025 and 2024.