Touchstone Exploration reveals 2025 capital budget to boost Cascadura growth

Touchstone Exploration Inc (LON: TXP) has announced its preliminary annual 2025 capital budget and financial guidance.

Paul Baay, President and Chief Executive Officer, commented:

“Our 2025 strategy focuses on driving sustainable growth by building on the success of our foundational Cascadura asset. We aim to fully leverage the extensive infrastructure and flowline installations completed in 2024 to unlock the field’s potential. Our preliminary 2025 capital budget focuses on executing our “drill-to-fill” strategy, which involves drilling four gross Cascadura development wells to increase production and optimize asset performance. This approach will enable us to capitalize on the existing processing capacity established at our Cascadura facility.

We intend to fund this program through operating cash flows generated from our assets, complemented by a near-term increase in our debt facilities. With prudent financial management, we expect to exit 2025 with a net debt level consistent with that of 2024, demonstrating our commitment to maintaining financial stability.

I want to extend my gratitude to our employees, shareholders, and stakeholders for their unwavering support and trust. At Touchstone, we remain dedicated to delivering operational excellence, guided by a culture that prioritizes safety above all else. Building on the achievements of 2024 – including substantial production growth and the expansion of critical infrastructure to enhance operational efficiencies – we are excited to carry this momentum into 2025.“

2025 Budget Highlights

·     Planned expansion of debt facilities – We plan to increase our existing debt capacity by $10 million in the first quarter of 2025 to manage the forecasted timing of the 2025 capital program. No firm commitment is currently in place with our existing lender.

·     Capital budget allocation – We project to invest approximately $23 million in capital expenditures for 2025. Of this, approximately $20 million is expected to be directed toward our Cascadura field. The remaining $3 million is allocated to exploration licence payments and well optimization operations across our crude oil properties.

·      Drilling operations – To further optimize our existing Cascadura infrastructure, our preliminary 2025 capital budget includes the drilling of four gross (3.2 net) Cascadura development wells. Two wells are expected to be drilled from pad B in the first quarter of 2025, followed by two additional wells from pad C in the third quarter of 2025.

·    Production growth – We project a mid-point annual average production of 7,000 boe/d for 2025, reflecting an estimated 19 percent increase from our latest 2024 guidance. Annual production is expected to range between 6,700 and 7,300 boe/d, with approximately 77 percent of production being natural gas.

·    Funds flow generation and balance sheet strength – Our 2025 budget is projected to generate approximately $22 million in funds flow from operations. This will result in a net debt to annual funds flow from operations ratio of 1.36 times, well within the Company’s internal target of 2.0 times or below. Net debt at the end of 2025 is expected to be comparable with our forecasted 2024 closing position, underscoring our commitment to maintaining financial discipline during a period of growth.

2025 Budget and Guidance Overview

The preliminary 2025 capital budget and financial guidance presented herein is contingent on increasing the Company’s existing debt capacity by $10 million in the first quarter of 2025. Currently there is no firm commitment from our existing lender, and accordingly, the 2025 budget and preliminary guidance may be subject to change, and such changes may be material. The Company will provide further updates in due course.

Following a 2024 year of growth and land acquisitions, Touchstone’s Board of Directors has approved a preliminary 2025 capital budget of $23 million to drill, complete, and tie-in four gross (3.2 net) Cascadura development wells. The Cascadura-4 development well, initially planned for December 2024, has been deferred to the first quarter of 2025 to align with our updated drilling schedule and represents one of the four gross Cascadura development wells.

The preliminary 2025 drilling program includes two gross Cascadura development wells to be drilled from the pad B location in the first quarter, with production expected to come online in the second quarter of 2025. Additionally, two more gross wells are planned for the third quarter from the Cascadura C site, with production anticipated to commence in the fourth quarter of 2025. These investments are expected to deliver 2025 annualized average daily production of 6,700 to 7,300 boe/d, with a production mix comprising approximately 77 percent natural gas and 23 percent crude oil and liquids.

Assuming a midpoint forecasted average production of 7,000 boe/d and an annual Brent benchmark price of $71.00 per barrel for crude oil and liquids, Touchstone anticipates generating approximately $22 million in funds flow from operations. With the approved $23 million capital budget, the Company projects exiting 2025 with a net debt of $30 million, resulting in a net debt-to-annual funds flow from operations ratio of 1.36 times, reflecting our commitment to balancing growth and financial discipline.

2025 Guidance Summary⁽¹⁾

Notes:

(1)   Forward-looking statement representing Management estimates. Additional information regarding the assumptions used are provided in the “Advisories – Assumptions for 2025 Guidance” section herein.

(2)   Non-GAAP financial measure. See the “Advisories – Non-GAAP Financial Measures” section herein for additional information on the definitions and calculation of these measures.

(3)   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. See the “Advisories – Oil and Natural Gas Measures” section herein for further information.

(4)   See the “Advisories – Product Type Disclosures” section herein for further information.

(5)   The financial performance measures included in the Company’s 2025 preliminary guidance are based on the midpoint of the average production forecast.

Production Volumes

In November 2024, we attained average net sales volumes of 6,924 boe/d comprised of:

·      average net natural gas sales volumes of 28 MMcf/d (4,668 boe/d); and

·      average net crude oil and natural gas liquid sales volumes of 1,626 bbls/d.

Currency

All financial figures are stated in United States dollars unless otherwise noted.

Working Interest

Touchstone has an 80 percent operating working interest in the Cascadura field, which is located on the Ortoire block onshore in the Republic of Trinidad and Tobago. Heritage Petroleum Company Limited holds the remaining 20 percent working interest. All production volumes disclosed herein are based on Company working interest volumes before royalty burdens.

Assumptions for 2025 Guidance

The preliminary 2025 capital budget and financial guidance is predicated on the Company securing an increase of $10 million in its existing credit capacity during the first quarter of 2025. While discussions are underway, there is no assurance that the Company will successfully secure this increase, either in the amount or within the timeframe envisioned by Management. Consequently, the 2025 budget and preliminary guidance disclosed herein are subject to potential revision, and such revisions could be material.

Production estimates provided are expressed as anticipated average production over the 2025 calendar year. In formulating these estimates, Touchstone evaluated historical drilling, completion, and production results, as well as prior-year decline rates, while factoring in the expected impact of the Company’s planned 2025 drilling, completion and well tie-in activities.

The key assumptions underpinning the forecast for average daily production, funds flow from operations, and net debt are outlined below. These metrics are based on the midpoint of 2025 average production guidance of 7,000 boe/d.

Note:

(1)   Non-GAAP financial measure. See the “Advisories – Non-GAAP Financial Measures” section herein for further information.

Changes in Touchstone Exploration’s available bank debt capacity, variations in forecasted crude oil and liquids prices, differences in the amount and timing of capital expenditures, and variances in average production estimates and decline rates can have a significant impact on the key performance measures included in the guidance disclosed herein. The actual results of the Company’s operations and the resulting financial results will vary from the amounts set forth in this announcement and such variations may be material.

Using the midpoint of the Company’s production guidance and holding all other assumptions constant, a $5/bbl increase (decrease) in the forecasted average Brent crude oil price for 2025 would increase funds flow from operations by approximately $1.6 million (decrease by $1.6 million). Assuming capital expenditures and other variables are unchanged, the impact on funds flow from operations is estimated to result in an equivalent decrease (increase) in forecasted year end 2025 net debt.