Touchstone Exploration Inc.

TSX VENTURE : TAB


Touchstone Exploration Inc.

February 28, 2013 09:00 ET

Touchstone Exploration Inc. Announces First Quarter Financial Results

CALGARY, ALBERTA--(Marketwire - Feb. 28, 2013) - Touchstone Exploration Inc. (TSX VENTURE:TAB) (the "Company") reported its financial and reserves results for the three months ended December 31, 2012. All values in this news release are in United States dollars unless otherwise stated.

Highlights for the first quarter ended December 31, 2012 are noted below:

  • Achieved average quarterly oil production of 1,549 barrels per day, 14 percent higher than the preceding quarter and 67 percent greater than the corresponding 2012 quarter.
  • First quarter 2013 funds flow from operations increased from $134,341 ($0.00 per share) in the first quarter of 2012 to $3,122,717 ($0.03 per share).
  • Drilled three new wells and performed eight recompletions in the quarter.

Financial and Operational Highlights

Three months ended December 31 2012 2011
($000's unless otherwise stated)
Petroleum revenue net of royalties $ 9,351 $ 5,869
Net earnings (loss) (306 ) (256 )
Per share (basic and diluted) (0.00 ) (0.00 )
Funds flow from operations1 3,123 134
Per share (basic and diluted)1 0.03 0.00
Operating netback1 ($/Bbl) 49.74 49.43
Funds flow netback1 ($/Bbl) 19.07 1.52
Capital expenditures 2,705 3,142
Assets acquired from acquisitions 12,605 -
Total assets (end of period) 140,686 125,977
Total debt1 (end of period) 24,437 26,170
Shareholders' equity (end of period) 53,144 44,108
Weighted average shares outstanding
Basic and diluted 119,046,465 108,928,242
Outstanding shares (end of period) 138,956,917 108,928,242
Average daily production (Bbls/day) 1,549 925
Average realized selling prices ($/Bbl) 88.67 95.60
1See "Non-GAAP Measures"

The first quarter ended December 31, 2012 was a pivotal period for the Company. The quarter represented the Company's fifth straight reporting period of positive cash flow and the tenth consecutive reporting period of incremental production growth. During the quarter the Company also completed the acquisition of Primera Energy Resources Ltd. ("PERL") which further consolidated its direct and indirect holdings in Trinidad.

The Company drilled, and placed on production, three wells during the first quarter ended December 31, 2012. This organic growth served to further validate the Company's proof of concept, as the development wells were drilled on three blocks that had not been previously drilled by the Company. Production from these wells has exceeded the Company's expectations and as a result the Company has prioritized a number of new locations in its upcoming drilling schedule. The 2013 drilling program is scheduled to commence mid-March with five initial wells.

Business Acquisition

On November 30, 2012, the Company closed the court-approved plan of arrangement with PERL, whereby the remaining PERL common shares not otherwise owned by the Company were exchanged for 0.9 of a Company common share. Prior to the plan of arrangement, the Company owned an aggregate 41.6 percent of the issued and outstanding shares of PERL, a TSX-V listed company registered under the Business Corporations Act (Alberta), through the Company's indirect wholly-owned Trinidad subsidiary Primera Block WD-4 Limited. 2013 first quarter financial results incorporate the operations of PERL commencing December 1, 2012.

The acquisition of PERL provides a number of advantages to the overall operations of the Company. PERL's producing block, WD-4, is located approximately four miles south of the Company's core producing property (WD-8) and is complementary both technically and operationally to the Company's assets. WD-4's relatively low development density offers excellent potential for future drilling prospects and the property's 72 wellbores afford the Company a number of recompletion and optimization opportunities. The production facilities at WD-4 have recently been upgraded to have significant sales volume capacity and the property has been recognized under the "Safe TO Work" program, the Energy Chamber of Trinidad and Tobago's quality assurance certification for all aspects of health, safety and environment.

Since the close of the acquisition the Company has brought on one new well in the block that was drilled to a depth of 5,400 feet during November of 2012. With this most recent well now on-stream, WD-4 production volumes are approximately 500 barrels per day.

Along with the WD-4 block, the Company acquired a 16.2 percent interest in the Cory Moruga exploration block. Initial exploration wells have established the presence of hydrocarbons, which encourages further development of the field. The Company's geoscience team is currently evaluating the exploration and development opportunities on the block for future exploitation.

Subsequent to the acquisition, the Company has successfully amalgamated PERL's staff, operations and administrative functions.

Financial Statements

Below is selected financial statement information as at and for the three months ended December 31, 2012 with 2011 comparative data which should be read in conjunction with the Company's audited consolidated financial statements and the related Management, Discussion and Analysis for the year ended September 30, 2012 and the Company's unaudited consolidated financial statements and the related Management, Discussion and Analysis for the three month period ended December 31, 2012, available at the 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, 2012 September 30, 2012
ASSETS
Current assets
Cash and cash equivalents $ 5,913 $ 7,409
Accounts receivable 12,700 7,330
Inventory 147 172
Prepaid expenses and deposits 407 452
Assets held for sale 830 830
19,997 16,193
Investment in associate - 5,070
Exploration and evaluation assets 30,447 30,447
Property and equipment 77,496 63,833
Goodwill 12,746 8,154
$ 140,686 $ 123,697
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities $ 8,854 $ 7,050
Income taxes payable 14,388 11,342
Current portion of long-term debt 1,126 114
24,368 18,506
Liability component of convertible debentures 1,245 1,176
Embedded derivatives related to convertible debentures 76 112
Decommissioning obligations 5,685 4,619
Long-term debt 22,066 23,242
Warrant component of long-term debt 687 574
Deferred income taxes 33,415 28,574
87,542 76,803
Shareholders' equity
Share capital 47,264 40,764
Contributed surplus 6,000 5,944
Accumulated (deficit) earnings (120 ) 186
53,144 46,894
$ 140,686 $ 123,697
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
2012 2011
Income
Petroleum $ 12,636 $ 8,140
Royalties (3,285 ) (2,271 )
Share of earnings of an associate - 431
Interest and other 642 117
9,993 6,417
Expenses
Operating costs 2,263 1,660
General and administrative 1,548 837
Transaction costs 533 455
Depletion and depreciation 1,708 1,101
Share-based payments 5 148
Loss (gain) on unrealized embedded derivatives 86 (180 )
Foreign exchange (gain) loss (94 ) 112
Finance expenses 979 1,033
7,028 5,166
Earnings before income taxes 2,965 1,251
Income taxes
Current expense 1,637 2,081
Deferred expense (recovery) 1,634 (574 )
3,271 1,507
Net loss for the period $ (306 ) $ (256 )
Net loss per share
Basic and diluted $ (0.00 ) $ (0.00 )
Weighted average number of common shares outstanding (000's):
Basic and diluted 119,046 108,928
Touchstone Exploration Inc.
Consolidated Statements of Cash Flows
(amounts in 000's of U.S. dollars)
(unaudited)
Three months ended December 31
2012 2011
Cash provided by (used in):
Cash flows from operating activities:
Net loss for the period $ (306 ) $ (256 )
Items not involving cash from operations:
Depletion and depreciation 1,708 1,101
Share-based payments 5 148
Loss (gain) on unrealized embedded derivatives 86 (180 )
Unrealized foreign exchange gain (331 ) -
Accretion on long-term debt 91 -
Accretion on liability component of convertible debentures 82 144
Accretion on decommissioning obligations 154 182
Deferred income tax expense (recovery) 1,634 (574 )
Share of earnings of an associate - (431 )
Change in non-cash working capital (3,061 ) 2,716
62 2,850
Cash flows from financing activities:
Share issuance costs - (27 )
- (27 )
Cash flows from investing activities:
Exploration and evaluation expenditures - (20 )
Property and equipment expenditures (2,705 ) (3,122 )
Acquisitions 2,553 -
Change in non-cash working capital (1,406 ) 321
(1,558 ) (2,821 )
Change in cash and cash equivalents (1,496 ) 2
Cash and cash equivalents, beginning of period 7,409 7,118
Cash and cash equivalents, end of period $ 5,913 $ 7,120
Cash paid during the period for interest 615 621
Cash paid during the period for income taxes 4,703 1,799

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.

The companies in which Touchstone Exploration Inc. directly and indirectly owns investments or assets are separate entities. In this news release "Touchstone" or the "Company" are sometimes used for convenience where references are made to Touchstone Exploration Inc. and its subsidiaries in general.

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 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 common shares outstanding during the year.

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.

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.

Contact Information

  • Touchstone Exploration Inc.
    Mr. Scott Budau
    Chief Financial Officer
    (403) 992-8407

    Touchstone Exploration Inc.
    Mr. Paul R. Baay
    Chairman & Chief Executive Officer
    (403) 992-8407
    (403) 514-0383 (FAX)
    www.touchstoneexploration.com