CALGARY, ALBERTA–(Marketwired – March 24, 2016) – Touchstone Exploration Inc. (“Touchstone” or the “Company”) (TSX:TXP) announces its financial and operating results for the year ended December 31, 2015. Selected financial and operational information is presented below and should be read in conjunction with Touchstone’s December 31, 2015 audited consolidated financial statements and related management’s discussion and analysis. Tabular amounts herein are in thousands of Canadian dollars and amounts in text are rounded to thousands of Canadian dollars unless otherwise stated.
2015 Annual Highlights
- Achieved average oil sales of 1,756 barrels per day (“bbls/d”), 1,600 bbls/d produced in Trinidad and 156 bbls/d produced in Canada. Trinidad production increased 40% from the prior year while Canadian production decreased 61% from 2014.
- Realized Trinidad operating netbacks of $16,272,000 ($27.88 per barrel) which offset Canadian operating netback losses of $1,475,000 ($25.88 per barrel). Company operating netbacks were $14,797,000 or $23.09 per barrel, which represented a decrease of 2% from the prior year.
- Reduced annual per barrel operating expenses by 16% or $4.85 per barrel from 2014. Trinidad operating costs reduced by approximately US$4.97 per barrel or 22% from the previous year.
- Generated positive corporate funds flow from operations of $2,908,000 ($0.04 per basic share) compared to $390,000 ($0.01 per basic share) in 2014. Trinidad operations generated funds flow from operations of $7,157,000, offsetting Canadian funds flow losses of $4,249,000 recognized in 2015.
- Recorded a net loss of $22,147,000 ($0.27 per basic share), which was primarily driven by non-cash property and equipment impairment charges mainly associated with the decrease in forward commodity prices.
- Reduced net debt by $7,913,000 from the prior year, as the Company exited 2015 with a net surplus of $987,000.
- Entered into various ICE Brent referenced financial swaps for 800 bbls/d at an average price of US$63.25 for the 2016 year.
- Released an updated independently evaluated reserves assessment prepared by GLJ Petroleum Consultants Ltd. with proved plus probable reserves growth of 5% over 2014, increasing to 15,465 Mbbls and achieving a 219% reserve replacement ratio with total 2015 gross reserve additions of 679 Mbbls.
- Achieved Trinidad based proved plus probable reserves finding and development costs of $5.83 per barrel including future development capital.
- Disposed of various non-core Canadian assets for combined cash proceeds of $8,500,000.
- On February 1, 2016, disposed of the Kerrobert property and various undeveloped land rights for cash proceeds of $650,000. Through the disposition, the Company immediately eliminated operating losses and transferred its estimated Canadian discounted decommissioning liability balance of $4,028,000 to the purchaser effective December 31, 2015.
Annual Financial and Operating Results
| Year ended December 31, | |||
| 2015 | 20141 | ||
| Operating | |||
| Average daily oil production (bbls/d) | |||
| Trinidad | 1,600 | 1,146 | |
| Canada | 156 | 4042 | |
| Company total | 1,756 | 1,5502 | |
| Average realized oil prices before derivatives ($/bbl) | |||
| Trinidad | 58.45 | 89.93 | |
| Canada | 38.80 | 73.752 | |
| Company total | 56.70 | 85.712 | |
| Trinidad operating netback3 ($/bbl) | |||
| Reference price – Brent | 66.62 | 109.04 | |
| Petroleum revenue | 58.45 | 89.93 | |
| Royalties | (18.35) | (29.15) | |
| Net revenue | 40.10 | 60.78 | |
| Realized gain on derivatives | 10.59 | 0.53 | |
| Operating costs | (22.81) | (27.57) | |
| Operating netback | 27.88 | 33.74 | |
| Canada operating netback3 ($/bbl) | |||
| Reference price – WTI | 61.95 | 102.71 | |
| Petroleum revenue | 38.80 | 69.64 | |
| Royalties | (6.93) | (5.60) | |
| Net revenue | 31.87 | 64.04 | |
| Operating costs | (57.75) | (49.59) | |
| Operating netback | (25.88) | 14.45 | |
| Financial ($000’s except share and per share amounts) | |||
| Funds flow from operations3 | |||
| Trinidad | 7,157 | 8,901 | |
| Canada | (4,249) | (8,511) | |
| Company total | 2,908 | 390 | |
| Per share – basic and diluted3,4 | 0.04 | 0.01 | |
| Net loss | (22,147) | (57,262) | |
| Per share – basic and diluted4 | (0.27) | (0.82) | |
| Capital expenditures | |||
| Exploration assets | 1,245 | 11,355 | |
| Property and equipment | 3,572 | 23,610 | |
| Company total | 4,817 | 34,965 | |
| Total assets – end of period | 100,619 | 140,333 | |
| Net (surplus) debt3 – end of period | (987) | 6,926 | |
| Weighted average shares outstanding4 | |||
| Basic and diluted | 83,080,417 | 70,245,489 | |
| Outstanding shares4 – end of period | 83,087,143 | 83,059,643 | |
| Notes: |
| 1 Canadian 2014 results only include results for the six months ended December 31, 2014 as all properties were in the exploration stage prior to July 1, 2014. Trinidad comparative results are subsequent to the May 13, 2014 acquisition date. |
| 2 Average daily production and average realized prices include Canadian exploration property results. |
| 3 See “Non-GAAP Measures.“ |
| 4 All current and comparative share amounts have been adjusted to reflect the two for one common share consolidation completed on May 13, 2014. |
Throughout 2015, Touchstone focused on operational initiatives to ensure the sustainability and future profitability of the Company through all commodity cycles. As a result, production volumes in Trinidad declined based on reduced operating and capital investment. Touchstone remains focused on developing our core Trinidad resources, as we completed or recompleted 28 wells in 2015. Despite a decrease in realized oil prices and production, we exited 2015 with a year-end net surplus position of $987,000. The decrease in net debt from the prior year was primarily based on three Canadian asset dispositions that closed in 2015 for total cash proceeds of $8,500,000.
Production volumes averaged 1,756 bbls/d during the year December 31, 2015 (100% oil). Trinidad and Canadian petroleum sales averaged 1,600 bbls/d and 156 bbls/d, respectively, representing a combined increase of 13% from 2014. Touchstone responded to the continued weakness in oil prices by decreasing capital spending to $4,817,000 in 2015 from $34,965,000 in 2014. The 2015 expenditures were mainly on Trinidad based recompletions and exploration costs and represented a decrease of 86% from prior year capital spending.
Funds flow from operations for the year ended December 31, 2015 was $2,908,000 ($0.04 per basic share) versus funds flow from operations of $390,000 ($0.01 per basic share) recognized in the prior year. Funds flow increased from 2014 due to a full year of Trinidad operations and decreased Canadian based operating losses. Due to $38,142,000 in non-cash impairments, we recorded a net loss of $22,147,000 ($0.27 per basic share) during the year ended December 31, 2015. The impairment charges, mainly attributed to all Trinidad producing properties, was the result of sustained declines in forecasted short and long-term crude oil pricing.
Touchstone’s current bank loan borrowing base is US$9,000,000, of which US$6,000,000 is dedicated to a letter of credit, US$2,000,000 is drawn and US$1,000,000 is currently available. The previously disclosed interim reductions to the borrowing base subsequent to December 31, 2015 are subject to a semi-annual borrowing base redetermination scheduled on April 1, 2016, which will incorporate the Company’s December 31, 2015 independent reserves evaluation. There can be no certainty as to the ability of the Company to successfully restructure its credit facility or obtain new financing should low crude oil prices persist. The Company will continue to assess new sources of financing available and to manage its expenditures to reflect current financial resources in the interest of sustaining long-term viability.
2016 Outlook
Touchstone will continue to apply a prudent approach to capital expenditures, as we remain focused on cash flow preservation and balance sheet flexibility. Touchstone will not proceed with capital expenditures that have no immediate economic value at current price levels. We continue to have significant future growth potential with shut-in production and a large inventory of low risk development locations, but a majority of that potential will continue to be deferred until oil prices rebound. Touchstone’s 2016 work obligations include the drilling of five development wells on our Trinidad concessions. We have restricted discretion over the timing of these commitments, and will schedule these operations as permitted by the terms of our Trinidad operating agreements.
Building on operating and general and administrative cost reductions achieved in 2015, we are continuing to actively pursue cost reductions to our fixed cost base. Subsequent to December 31, 2015, we closed the sale of our Kerrobert facility, which immediately eliminated operating losses and will allow for future general and administrative cost reductions.