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.
