Touchstone Exploration Inc share price, company news, analysis and interviews

In an exclusive interview, Touchstone Exploration CEO Paul Baay discusses positive drilling results at Cascadura-2 well and future plans for the company.

Touchstone Exploration plc (LON:TXP) Chief Executive Officer Paul Baay caught up with DirectorsTalk for an exclusive interview to discuss first gas at Cascadura, production capacity, Royston-1X, the Coho facility, the second half of the year and their 5-year vision for the company.

Q1: Paul, you announced the eagerly anticipated first gas at Cascadura, what does this mean for Touchstone Exploration?

A1: It really is a transformational moment for us. In our last quarter, we were doing about 1,800 BOE a day of production and this adds about 9,000/10,000 BOE a day of production when we get it ramped here. So, it’s a really a huge step change for us in what we do.

It also does a couple of other strategic things for us, we became the largest independent onshore producer in Trinidad so it gives us an opportunity to leverage some of that into some future opportunities.

The other thing it’s really going to do is give us cash to self-fund the rest of the drilling programme that we’ve got ahead of us. Part of this arrangement was a fixed gas contract that we have for National Gas Company and that gives us a really predictable cash flow stream as we along here so I think that’s good.

The other side of this is that it’s long awaited, we tested the patience of our shareholders a little bit in this but it was a huge project for us to do onshore and it’s the first real big project that’s been brought on in probably 20 years of natural gas in Trinidad.

So, there was a lot of  logistics to it but it’s sure nice to have it behind us now and gives us the opportunity to fill the plat up over the next couple of years.

Q2: What did you say for production capacity in terms of barrels of oil per day and when do you think that’ll be reached?

A2: The plant is actually designed for 200 million cubic feet a day and 5,000 barrels a day of liquids.

The first phase that we just completed is capable of 90 million cubic feet a day, about 2,000/3,000 barrels a day of liquids. So, we’re going to ramp up the production as we go here but right now the initial phase of production will be 60 million cubic feet with the liquids about 1,400 barrels a day, and that’s with the two wells that we have now.

Now, as we drill the additional wells, we’ll fill up that additional volume to get up to the full 200 million cubic feet a day.

Q3: You’ve also been carrying out testing at the Royston-1X well, can you tell us what the latest is there?

A3: We announced a couple of weeks ago, a little disappointing results, and we would agree with that. We have had light oil in five different tests that we’ve done but none of them have been at commercial rates, we haven’t been able to get the well to flow at commercial rates to surface, it looks like there’s some sort of low permeability.

What we’ve chosen to do now is we’ll optimise which zone we think is the best zone and then we’ll put that to pump and see if we can get some good economic rates out of it. There’s no doubt there’s oil here, it’s just the question is the permeability, getting it out of the rock as we go forward so it’s going to take a couple more months for us to figure out what’s going on.

I think there’s opportunity there, the real key is what are the economics look like and we won’t know that until we get some sustained rates.

Q4: Elsewhere in the Ortoire block, there’s the Coho facility which commenced production in 2022, how is that performing?

A4: That little facility’s really performed well in the sense that it was our proof of concept for the area. To put it in relationship to Cascadura, that facility is designed for 24 million cubic feet a day when you got Cascadura designed for 200 million cubic feet a day. So, it’s one tenth the size of the facility that we just brought on this morning.

What it does is it gives us the proof of concept that this Herrera gas production that we have there is economic, that we can bring it on, we’ve already done over $4 million of revenue and it hasn’t even been on a year.

The update on that is that we just got approval to drill two more wells at Coho so we’ll be drilling two more wells in there. The plan is really simply, to take that up to the full 24 million cubic feet a day of production that that facility is designed for.

Q5: Obviously, a transformational time for the company and you’ve been really busy working to get this latest facility online, but what does the second half of the year look like? What do you have in store for us?

A5: The second half of the year is really the optimisation at Cascadura making sure that plant is up and running and getting as much out of those wells as we can so that’ll be the number one focus. Then, to kick off the drilling programme, we want to get back out there.

We really have three parts to the drilling programme now, we’ve got the development drilling at Coho and Cascadura, which we never had before, and that will be the number one focus. The number one focus will be to get those plants to full capacity as quickly as we can.

The second part of it is there’s still a tonne of exploration opportunities in the Ortoire block, whether that’s our Kraken prospect or Steelhead, and they’re all fairly close in and around those existing facilities. So, if we do have success on that exploration side, we can then go ahead and bring it on.

On that Ortoire block, we’ve drilled six ells and we’ve had three successes, in any exploration programme, that’s a terrific success so although there may have been some disappointments along the way, we still think overall, the overall exploration programme has certainly been a success.

The third part of the programme will be to really put in place that longer term five-year plan and we’ve been successful in picking up a couple of additional blocks in Trinidad that will fall on the back of the development plan.

The first six months is really to optimise those facilities that we see in front of us.

Q6: You just mentioned that the longer term, what is the vision for Touchstone Exploration over the next five years?

A6: The vision has remained a little bit unchanged in that we want to be the largest onshore producer in Trinidad. We’re getting very close to that now, I know that was hard to believe we were a couple of hundred BOE a day a few years ago, we’re making those kinds of strides.

The real plan here is to take those two facilities that we have which are equivalent to about 35,000 BOE a day and fill those up, that’s the first part of the five-year plan.

The second part of that longer term is to continue to do the exploration drilling, there’s still some very very exciting things to do, and I think a lot of people are maybe looking at this Cascadura facility as the end of the story, really, it’s the end of the beginning for us.

It gives us the cash flow to do what we want to do and a much more stable company than it was when we were purely an exploration company, it was kind of a very volatile to the well results. We’ve now got this development capacity, we’ve got facilities in place and we’re going to have the funding to do exploration drilling programme.

So, we talk about it being transformational, it’s transformational on the production side, the facilities side, operations, cash, it’s a good day today.

Touchstone Exploration Inc (LON:TXP) Chief Executive Officer Paul Baay caught up with DirectorsTalk to discuss how the funds from the recent raise will be used, rate of production at Coho, capacity at the Shell pipeline, plans for the rig deployment and their 2023 goals & exploration plans.

Q1: Paul, how will the funds be used from the placing in the UK and Canada?

A1: We raised $13 million and all of those funds have been earmarked to drilling. So, there’ll be a combination of development drilling at Cascadura and then a follow up well to our original well at Royston, which was our light oil discovery that we had last year. We’ve got enough funds to finish the projects to bring the wells on stream that we have already drilled.

So, these funds were just supplemental to get us to be able to get back in the field and start drilling so it’s a pretty simple raise for what we’re looking at.

Q2: What can you tell us about the rate of production at Coho?

A2: So, Coho came on October the 10th, and there were some up and downs at the plant we go through that’s operated by Shell. We’ve been able to keep that well up and down depending on whether or not Shell’s been running at full capacity or not.

The well seems to be levelling out about 9-9.5 million cubic feet a day, which is just a little bit below what we originally targeted, but part of that reason is we were backing out some of the gas that Shell was putting through their own facility so they’ve backed us down a little bit.

It’s been rock solid as far as the production base goes, and so I think we’re pretty happy with Coho. As a matter of fact, we’ve agreed internally now that we should probably look at drilling a development well there in the next coming years so we can take full capacity of that plant up to 24 million.

Q3: Can the current Shell pipeline handle any more than the current output, or is it at capacity now?

A3: No, the Coho pipeline, it can handle at least the 25 million a day that we’ve got at the facility so we’re putting through roughly call it 9-9.5 million a day, so we could double and that’s really the reason we’re looking at the development well as it would give us a second well that we could take that up to capacity. So, that’s the plan.

Coho, it wasn’t really a big step change for us when you compare it to Cascadura or some of the other things we’re looking at, it was more really a proof of concept, and I think now what we’re seeing is that proof of concept is actually for sure working.

Q4: What are the plans for the rig deployment and what’s going to be drilled there?

A4: Thanks to having this funds now, the rig will move over to the Royston well initially, that’ll be the first well that we go and look at drilling and it’ll probably be moved in early January. We actually put the mast up a couple of days to make sure everything’s good so we’ll line up the crew here in the remainder of the month, December, and probably right after Christmas, they’ll look to move into Royston.

At Royston, what we’ll do is, because this rig is bigger than the rig we had last time when we drilled Royston, we’ll drill it about 600 feet deeper, take full advantage of everything we learned the first time. When we’re done at Royston, the rig will go over to Cascadura, start drilling development wells at our Cascadura C pad, which is the pad to the Northeast, and that’ll basically be development drilling into the Cascara facility.

While that’s drilling, we can test Royston, when we’re done at Cascadura, the rig will come back over to Royston and start doing development drilling at Royston. S

It’s basically, these funds and the programme kick-off a continual drilling programme on the Ortoire block, which I think will happen for the next probably two or three years.

Q5: Just looking into 2023, what are the goals for Touchstone Exploration?

A5: So, the goals are really twofold.

Number one is to get the production on at Cascadura which should bring our production to somewhere around 15-17,000 boe a day in 2023. If we really get to these Cascadura development wells as quickly as we can, we could see that number get pretty close to 20,000 boe a day by the end of the year if we’re successful on that. That’s one of the reasons for raising the money as it accelerates that programme and gets us there quite a bit sooner.

The second part of that will be drill the exploratory wells and expand our acreage. We think there’s some really great opportunities to further expand our acreage position in Trinidad, both through the land sale and some other deals that we might be able to do.

Q6: Could you expand on the exploration plans for 2023?

A6: I think that the Royston well, although a lot of people may look at it as an exploration well, we did discover oil in that first well that we drilled there, it tested three zones, 34+ API on all of them. Independent evaluators gave that particular well about 3.5 million barrels of recoverable oil, up to about 165 million barrels of oil in place so I think the market’s looking at Royston as being an exploratory well, I think really what we’re looking at is as being as a proof of concept well, we think we’ve already discovered the oil.

So, from an exploration point of view, I guess that’s the first piece and then the other part would be underneath Royston sits this very large structure that we call the cretaceous, we call it Kraken. One of the other advantages these funds is it’s going to allow us to get back over to Royston, it might be as early as the end of 2023 to drill that very, very large anomaly that we see sitting below the current Royston structure in the cretaceous. Quite frankly, if that works, it makes everything else that we’ve done look small compared to what we’re looking at there.

So, there’s kind of this balance now in the drilling programme of combination of the exploration side plus the development drilling side, which we really haven’t had before so it talks about how the company’s transitioned.

Q7: Are there any opportunities to expand Touchstone’s existing exploration acreage?

A7: I touched on that a little bit. The onshore bid round that is coming up in January, January the 9^th, the last one was 10 years ago so these don’t come up every month so you really have to be positioned.

There are some very interesting blocks, obviously I won’t give all the details because it is a competitive process, but I think there is a number of things within that fairway that we would be interested in picking up. I really want to emphasise that even on our existing lands, we’ve got 20 additional exploration opportunities so we will look at some of that acreage, but our real focus is going to be on the development and the exploration on our existing acreage.

Touchstone Exploration plc (LON:TXP) Chief Executive Officer Paul Baay caught up with DirectorsTalk for an exclusive interview to discuss the completion of the EIA, the production timeline at Cascadura, pre-commissioning and commissioning at Coho and the support from the Trinidad government.

Q1: Paul, you announced this morning that the Environmental Management Authority have confirmed that the environmental impact assessment is complete, which is great news. Could you just explain for us though what this means for the Cascadura well?

A1: I think it’s really significant for Touchstone Exploration, it’s something we’ve been waiting for a long time and what it is, it’s basically the environmental permit for us to proceed with the project. It’s been something we’ve been working on for about a year.

It’s a really thorough project but what it’ll do is it outline for us the next five years of operations that we can operate under out there so although it’s been painful to get us to this point, it allows us to drill wells, it allows us to build our gas facility, it allows us to build roads and pipelines. So, now we can really lay out a really firm and clear plan for the next five years so as I say, it’s been a very thorough and time consuming process but really happy to finally get across the line.

Q2: Do you expect there to be any effects on production timeline at Cascadura because of the delays with the EIA?

A2: It’s definitely been delayed and we’ve been pushing forward on two fronts. We’ve been continuing to fabricate various things that we could without actually going on the site. So, we’re still hopeful that we’ll have production on between now and the end of the year and it’ll really depend on how quickly we can move and how good the weather is between now and then but everything’s going to push forward as fast we can.

So, the next couple of weeks we’ll firm that timeline up, as I say, we just got this information on Friday, but the plan right now is it may push things by a couple of months but it’s not going to push us into 2023.

Q3: Now, last week you announced that pre-commissioning and commissioning is starting at Coho. Can you just talk us through the process?

A3: So, that process is really one of the facilities now completely done and so is the pipeline so what we’ll do is we go through a set of safety checks, we’ll pressure the system up then we’ll start to introduce gas from the Coho well, that’ll go through again, various different stages of testing. When that’s done, we’ll ramp that up into production.

I’m actually in Trinidad this week, not that I’m going to be the one to oversee that project, that’s not my expertise, but really hopeful that before I leave here next week, that we’re starting to see gas flow going through that facility.

So, that’ll be the first new onshore gas in 20 years that’s come on in Trinidad so a big deal for us, but also big deal for the country.

Q4: So, following the pre-commissioning and the commissioning, what’s next for Coho?

A4: The facility there is built for about 20 million cubic feet a day, we think the initial well should be pretty comfortable around 8-10 million cubic feet a day so we’ll line that out for a little while. We then do have an approval to drill a second well there so we’ll look at getting back in there at some point and drill the second well.

Before that, I think once we get things rolling here, the rig will probably move over to Royston, do the side-track at Royston and then what we really want to do is ramp up production at Cascadura. With that new permit, it’ll allow us to drill and update more wells, I don’t think we’ll need that many to fill the facility, we’ll go over and drill enough wells to fill that up, get it up to about 200 million a day in 2023, and then we’ll look at Coho after that.

Q5: How does the Trinidad government view the announced production from the Ortoire block? Are they supportive?

A5: They are very supportive. I think there’s been a lot of concern, this EIA has taken much longer than certainly we anticipated and I think a lot of people questioned the authenticity of the Trinidad government but in fairness, this is the first new gas brought on in 20 years and we are talking about a facility that’s 200 million cubic feet a day.

So, we had to go through the process to make sure that all the public consultation was done, all the design was correct and so we worked in conjunction with them.

They’re really excited to get this on and we’re going to do it as quick as we can. It also provides a lot of jobs, both once the plant’s up and running but also, Touchstone Exploration will be using all local contractors for all the construction here so it’s going to be a pretty good employer over the next couple of six months.