Touchstone Exploration Inc.
TSX VENTURE : TAB

Touchstone Exploration Inc.

February 27, 2014 09:00 ET

Touchstone Announces First Quarter Financial Results

CALGARY, ALBERTA--(Marketwired - Feb. 27, 2014) - Touchstone Exploration Inc. (the "Company") (TSX VENTURE:TAB) is pleased to report its financial and operating results for the three months ended December 31, 2013. All values in this news release are rounded to thousands of United States dollars unless otherwise stated.

During the three months ended December 31, 2013, the Company successfully completed three wells that were spudded in the fourth quarter of fiscal year 2013. As a result, the Company achieved average quarterly oil production of 1,695 barrels per day, 4 percent higher than the preceding quarter and 9 percent greater than the corresponding 2013 quarter. The Company also decreased total debt by $2,240,000 from the prior year and $1,963,000 from the fourth quarter of 2013.

Following the well completions, the Company deliberately minimized its drilling program for the remainder of the quarter as it awaited the implementation of a revised, more favourable tax structure that was introduced by the Trinidad government in October and effective January 1, 2014. The Company will be recommencing its drilling program in the next thirty days with wells planned in WD-4, WD-8 and Coora. The 2014 drilling program will be focused on follow-up locations proven by the success of the 2013 drilling campaign.

In October 2013 the Company received approval from the Trinidad government for the East Brighton Exploration and Production License. Upon official signing of the license, the Company will be paid $2,000,000 by the block operator based on agreements in existence at the time of the August 2011 Primera Group acquisition. As a result, the Company recognized $2,000,000 in other income during the three months ended December 31, 2013.

As announced in a previous news release, in February 2014 the Company was informed by the Trinidad and Tobago Minister of Energy and Energy Affairs ("MEEA") that its application for the Ortoire block in the 2013 Trinidad Onshore Bid Round was successful. The Company is currently in the process of finalizing the exploration and production license with the MEEA. The 44,500 acre block is located in south-east Trinidad and is adjacent to production from a variety of existing oil pools.

Financial and Operational Highlights
Three months ended December 31 2013 2012
Petroleum revenue net of royalties $ 10,060,000 $ 9,351,000
Net earnings (loss) 2,790,000 (306,000 )
Per share (basic and diluted) 0.02 (0.00 )
Funds flow from operations1 4,270,000 3,123,000
Per share (basic and diluted)1 0.03 0.03
Operating netback1 ($/Bbl) 48.08 49.74
Funds flow netback1 ($/Bbl) 15.28 19.07
Capital expenditures 2,454,000 2,705,000
Assets acquired from acquisitions - 12,605,000
Working capital (end of period) (6,892,000 ) (4,137,000 )
Current portion of long-term debt (end of period) 5,557,000 1,126,000
Long-term debt (end of period) 15,051,000 22,066,000
Total debt1 (end of period) 22,197,000 24,437,000
Average daily production (Bbls/day) 1,695 1,549
Average realized selling prices ($/Bbl) 95.70 88.67
1See "Non-GAAP Measures"

Financial Statements

Below is selected financial statement information as at and for the three months ended December 31, 2013 with 2012 comparative data which should be read in conjunction with the Company's audited consolidated financial statements and the related Management's, Discussion and Analysis for the year ended September 30, 2013 and the Company's unaudited consolidated financial statements and the related Management's, Discussion and Analysis for the three month period ended December 31, 2013, available at the Company's website (www.touchstoneexploration.com) or on the Canadian System for Electronic Document Analysis and Retrieval ("SEDAR") website (www.sedar.com).

Touchstone Exploration Inc.
Consolidated Statements of Financial Position
(amounts in 000's of U.S. dollars)
(unaudited)
December 31, 2013 September 30, 2013
ASSETS
Current assets
Cash 3,975 7,110
Accounts receivable 9,084 7,532
Inventory 160 199
Prepaid expenses and deposits 441 370
13,660 15,211
Exploration and evaluation assets 30,447 30,447
Property and equipment 76,052 75,084
Goodwill 11,514 11,514
131,673 132,256
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities 5,381 6,517
Income taxes payable 9,614 10,408
Current portion of long-term debt 5,557 5,747
20,552 22,672
Liability component of convertible debentures 1,589 1,522
Embedded derivatives related to convertible debentures 2 17
Decommissioning obligations 3,034 2,832
Long-term debt 15,051 16,891
Warrant component of long-term debt 360 530
Deferred income taxes 34,908 34,561
75,496 79,025
Shareholders' equity
Share capital 47,264 47,264
Contributed surplus 6,703 6,547
Accumulated earnings (deficit) 2,210 (580 )
56,177 53,231
131,673 132,256
Touchstone Exploration Inc.
Consolidated Statements of Earnings (Loss) and Comprehensive Earnings (Loss)
(amounts in 000's of U.S. dollars)
(unaudited)
Three months ended December 31
2013 2012
Income
Petroleum 14,927 12,636
Royalties (4,867 ) (3,285 )
Interest and other 2,008 642
12,068 9,993
Expenses
Operating costs 2,562 2,263
General and administrative 1,618 1,548
Transaction costs - 533
Depletion, depreciation and impairment 1,659 1,708
Share-based payments 124 5
(Gain) loss on unrealized embedded derivatives (166 ) 86
Foreign exchange gain (687 ) (94 )
Finance expenses 1,038 979
6,148 7,028
Earnings before income taxes 5,920 2,965
Income taxes
Current expense 2,785 1,637
Deferred expense 345 1,634
3,130 3,271
Net earnings (loss) and comprehensive earnings (loss) for the period 2,790 (306 )
Net earnings (loss) per share
Basic and diluted 0.02 (0.00 )
Weighted average number of common shares outstanding (000's)
Basic and diluted 138,957 119,046
Touchstone Exploration Inc.
Consolidated Statements of Cash Flows
(amounts in 000's of U.S. dollars)
(unaudited)
Three months ended December 31
2013 2012
Cash provided by (used in):
Cash flows from operating activities:
Net earnings (loss) for the period 2,790 (306 )
Items not involving cash from operations:
Depletion, depreciation and impairment 1,659 1,708
Share-based payments 124 5
(Gain) loss on unrealized embedded derivatives (166 ) 86
Unrealized foreign exchange gain (805 ) (331 )
Accretion on long-term debt 107 91
Accretion on convertible debentures 117 82
Accretion on decommissioning obligations 99 154
Deferred income tax expense 345 1,634
Change in non-cash working capital (2,916 ) (3,061 )
1,354 62
Cash flows from financing activities:
Repayment of long-term debt (1,400 ) -
(1,400 ) -
Cash flows from investing activities:
Property and equipment expenditures (2,454 ) (2,705 )
Acquisitions - 2,553
Change in non-cash working capital (635 ) (1,406 )
(3,089 ) (1,558 )
Change in cash (3,135 ) (1,496 )
Cash, beginning of period 7,110 7,409
Cash, end of period 3,975 5,913
Cash paid during the period for interest 653 615
Cash paid during the period for income taxes 3,667 4,703

Touchstone Exploration Inc. is 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 internationally. The Company is currently active in onshore properties located in the Republic of Trinidad and Tobago. The Company's common shares are traded on the Toronto Venture Exchange under the symbol "TAB". Please see the latest corporate presentation on the Touchstone Exploration Inc. website at www.touchstoneexploration.com.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this news release.

READER ADVISORY

Forward-looking Statements

The information herein contains forward-looking statements and assumptions. All statements other than statements of historical fact may be forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as "seek", "anticipate", "plan", continue", "estimate", "expect", "may", "will", "project", "predict", "potential", "targeting", "intend", "could", "might", "should", "believe" and other similar expressions. Statements relating to "reserves" and "resources" are deemed to be forward looking statements, as they involve the implied assessment, based on certain estimates and assumptions, that the reserves and resources described exist in the quantities predicted or estimated, and can be profitably produced in the future. Such statements represent the Company's internal projections, estimates or beliefs concerning future growth, results of operations based on information currently available to the Company based on assumptions that are subject to change and are beyond the Company's control, such as: production rates and production decline rates, the magnitude of and ability to recover oil and gas reserves, plans for and results of drilling activity, well abandonment costs and salvage value, the ability to secure necessary personnel, equipment and services, environmental matters, future commodity prices, changes to prevailing regulatory, royalty, tax and environmental laws and regulations, the impact of competition, future capital and other expenditures (including the amount, nature and sources of funding thereof), future financing sources, business prospects and opportunities, among other things. By their nature, forward-looking statements are subject to numerous known and unknown risks and uncertainties that could significantly affect anticipated results in the future and accordingly, actual results may differ materially from those predicted. Although the Company's management believes that the expectations and assumptions reflected in the forward-looking statements are reasonable, it cannot guarantee future results, levels of activity, performance or achievement since such expectations and assumptions are inherently subject to significant business, economic, competitive, political and social uncertainties and contingencies.

The Company is exposed to numerous operational, technical, financial and regulatory risks and uncertainties, many of which are beyond its control and may significantly affect anticipated future results. Operations may be unsuccessful or delayed as a result of competition for services, supplies and equipment, mechanical and technical difficulties, ability to attract and retain qualified employees on a cost-effective basis, commodity and marketing risk and seasonality. The Company is subject to significant drilling risks and uncertainties including the ability to find oil reserves on an economic basis and the potential for technical problems that could lead to well blowouts and environmental damage. The Company is exposed to risks relating to the inability to obtain timely regulatory approvals, surface access, and access to third party gathering and processing facilities, transportation and other third party related operation risks. The Company is exposed to risks related to recent acquisitions including unforeseen difficulties in integrating acquired companies, properties, personnel and infrastructure into the Company's operations; the outcome of litigation brought against the Company or acquired companies or other disputes involving the Company or any acquired companies; or the failure generally to realize the anticipated benefits of such acquisitions. The Company is subject to industry conditions including changes in laws and regulations including the adoption of new environmental laws and regulations and changes in how they are interpreted and enforced. There are uncertainties in estimating the Company's reserve base due to the complexities in estimated future production, costs and timing of expenses and future capital. The financial risks the Company is exposed to include, but are not limited to, the impact of general economic conditions in Canada and the Republic of Trinidad and Tobago, the ability to access sufficient capital from internal and external sources, changes in income tax laws or changes in tax laws, royalties and incentive programs relating to the oil and gas industry, fluctuations in natural gas and crude oil prices, interest rates, the U.S./Canadian dollar exchange rate and the U.S/Trinidad and Tobago dollar exchange rate. The Company is subject to regulatory legislation, the compliance with which may require significant expenditures and non-compliance with which may result in fines, penalties or production restrictions or the termination of licence, lease operating or farm-in rights related to the Company's oil and gas interests in Trinidad and Tobago.

Readers are cautioned that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and as such, undue reliance should not be placed on forward-looking statements. Readers are also cautioned that the foregoing list of factors and assumptions is not exhaustive. The Company does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws. Additional information on these and other factors that could affect the Company's operations and financial results are included elsewhere herein and in reports, documents and disclosures on file with Canadian securities regulatory authorities and may be accessed on SEDAR.

Non-GAAP Measures

This press release contains terms commonly used in the oil and gas industry, such as funds flow from operations, funds flow from operations per share, total debt, operating netback and funds flow netback. These terms do not have a standardized meaning under International Financial Reporting Standards ("IFRS") and may not be comparable to similar measures presented by other companies.

Funds flow from operations represents cash flow from operating activities before changes in non-cash working capital. Management believes that in addition to net earnings and cash flows from operating activities, funds flow from operations is a useful financial measurement which assists in demonstrating the Company's ability to fund capital expenditures necessary for future growth or to repay debt. The Company calculates funds flow from operations per share by dividing funds flow from operations by the weighted average number of basic and dilutive common shares outstanding during the period.

The Company uses funds flow netbacks as a key performance indicator of results. Funds flow netbacks do not have a standardized meaning under IFRS and therefore may not be comparable with the calculation of similar measures by other companies. Funds flow netbacks are presented on a per barrel basis and are calculated by deducting royalties, operating expenses, general and administrative expenses, transaction costs, finance expenses excluding non-cash items and current income tax expenses from petroleum sales. Funds flow netbacks are a useful measure to compare the Company's operations with those of its peers.

The Company also uses operating netbacks as a key performance indicator of field results. Operating netbacks do not have a standardized meaning under IFRS and therefore may not be comparable with the calculation of similar measures by other companies. Operating netbacks are presented on a per barrel basis and are calculated by deducting royalties and operating expenses from petroleum sales. Operating netbacks are a useful measure to compare the Company's operations with those of its peers.

Total debt is calculated by summing the Company's current and long-term portions of interest bearing instruments (not including derivative instruments). The Company uses this information to assess its true debt position and manage capital risk. The Company's determination of total debt may not be comparable to that reported by other companies.

Contact Information

  • Touchstone Exploration Inc.
    Mr. Paul R. Baay, Chairman & Chief Executive Officer
    Mr. Scott Budau, Chief Financial Officer
    Tel: (403) 992-8407