CALGARY, AB, June 22, 2021 /CNW/ - Touchstone Exploration
Inc. ("Touchstone", "we", "our", "us" or the "Company") (TSX:
TXP) (LSE: TXP) announces that we have executed ten-year Lease
Operatorship Agreements ("LOAs") with Heritage Petroleum Company
Limited ("Heritage") for our CO-1, CO-2, WD-4 and WD-8 Blocks
(collectively, the "Blocks") effective January 1, 2021. The LOAs governing our core
legacy oil producing properties expire December 31, 2030 and were renewed under
substantially similar terms to the previous arrangements. In
conjunction with the execution of the LOAs, the Company's Board of
Directors has approved the drilling of one well on each Block in
the second half of 2021.
Paul Baay, President and Chief
Executive Officer, commented:
"Our suite of mature crude oil assets continues to provide
consistent and predictable base petroleum revenue as we expand our
operations in Trinidad on the
Ortoire exploration property. With the recovery of world oil
prices, we are focusing on optimizing these mature assets through
well recompletion and workover operations.
The new arrangements present an opportunity for us to drill
additional wells in the second half of 2021, with the expectation
that any increase in production will decrease overall royalties
under the revised fiscal structure. We have budgeted to drill four
wells on the Blocks prior to the end of the year at an average cost
of $1 million per well and expect to
utilize the new drilling equipment that we have contracted onto the
island to perform the drilling operations.
The long-term agreements will also allow us to evaluate
deeper exploration opportunities which we have identified on our
CO-1 and CO-2 Blocks. With legacy wells and new 3D seismic data
from Heritage, we plan to delineate a Coora Herrera turbidite trend
for future exploitation. In addition, the agreements will
permit us to target zero effluent discharge by the end of 2021,
which is a major Company-wide environmental initiative in our
continued efforts to significantly reduce the environmental
footprint of our operations.
We would also like to thank Heritage for engaging in
collaborative renewal negotiations, and we look forward to
continuing to work together as partners in the years to
come."
LOA Key Terms
Minimum production and work obligations
Under the new arrangements, the Company is subject to annual
minimum production levels and minimum work obligations from 2021
through 2030 specified under each LOA. Failing to reach either the
annual minimum production levels or complete the annual minimum
work obligations will not constitute a breach provided the minimal
production levels have been attained or the minimum work
obligations have been completed, as the case may be.
The LOAs contain an aggregate minimum of 20 new infill wells and
40 well recompletions to be completed over the licence periods.
Similar to the previous arrangements, we will be required to
provide aggregate guarantees to Heritage of approximately
$0.5 million to support the future
minimum work obligations.
Royalties
The new LOAs include favourably adjusted royalty rates to
incentivize increased production from all field activities.
In addition to the crown royalty rate of 12.5 percent, the
LOAs apply a sliding scale overriding royalty ("ORR")
structure, which is indexed to the average price of oil realized in
a production month. Base ORR rates are applicable to pre-defined
monthly base production levels which decline by 2 percent per
annum. For any monthly volumes sold in excess of base production
levels, the Company incurs reduced enhanced ORR rates. The former
arrangements allowed for new drill ORR incentives, which were
reduced ORR rates applicable to production from new wells drilled
in the initial two years. This concept has been replaced with the
super enhanced ORR, which contemplates a further reduction in
royalty rates based on increased property production from all field
activities. The super enhanced ORR applies a 50 percent reduction
from enhanced ORR rates for any production in excess of combined
base and enhanced production levels.
In the current realized oil price band (US$50.01 to US$70.01), base ORR and enhanced ORR rates have
decreased from the rates specified under the previous licences by
15 percent and 11 percent, respectively.
LOA Operations
Crude oil volumes from the properties governed by the LOAs
currently comprise approximately 87 percent of our 2021 crude oil
sales through May 31, 2021. With the
execution of the new ten-year arrangements, the Company will move
forward with a number of planned projects on the Blocks. The Blocks
have significant oil in place across multiple stacked sand
reservoirs and offer tremendous potential for recovery factor
improvements through both primary and secondary recovery
development. In aggregate, we have identified 80 drilling
opportunities on the Blocks and will prioritize the projects based
on economic parameters and liquidity. Initially the Company expects
to drill four development wells prior to the end of 2021 and will
review the timing of future drilling on a regular basis.
At Forest Reserve WD-8, we have identified three high-grade
drilling locations on the north-west section of the property which
are targeting the Lower Cruse Formation. The Lower Cruse Formation
has yielded exceptional production in previous drilling campaigns,
particularly following our successful 2018 drilling program. These
locations are focused on targets offsetting the FR-1801 well, which
to date has produced over 88,000 barrels of oil since its
completion in January 2019 and is
currently producing approximately 37 barrels per day ("bbls/d").
Along with this planned drilling program, the Company has applied
for a pilot waterflood program using the FR-1715 well which is
anticipated to further enhance production potential from the WD-8
Block.
At Grande Ravine WD-4, Touchstone has identified five initial
high-grade drilling locations, two of which target the Lower Cruse
Formation at depths of approximately 8,000 feet. Located on the
south side of the Los Bajos Fault, minimal development has been
completed in the Lower Cruse Formation in WD-4 compared to other
properties including our WD-8 Block located to the north. The
remaining three prospects target the shallower Upper and Middle
Cruse Formations which achieved exceptional results in our 2017 and
2018 drilling campaigns. Further development and a potential
exploration program on the WD-4 Block will be evaluated as new
information, including available 3D seismic data, is reviewed and
interpreted.
On our Coora Blocks (CO-1 and CO-2), we have identified three
development drilling locations to further evaluate the fault blocks
offsetting our 1CO-369 well which has produced in excess of 249,000
barrels of oil in four years of production and is currently
producing approximately 173 bbls/d. The Company is using historical
well data and anticipates available 3D seismic data will help us
evaluate the potential for an exploration well targeting oil in the
Herrera Formation. This is the same formation that we have been
pursuing on the Ortoire Block on the eastern side of the island and
is on trend with the Penal-Barrackpore field which is one of the
most productive onshore blocks in Trinidad. The Company is also applying to
commence a waterflood program at our 1QU-26 well where initial
injectivity testing has shown excellent recovery potential.
Touchstone Exploration Inc.
Touchstone Exploration Inc. is a Calgary, Alberta based company 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. Touchstone is currently active in onshore
properties located in the Republic of Trinidad and Tobago. The Company's common
shares are traded on the Toronto Stock Exchange and the AIM market
of the London Stock Exchange under the symbol "TXP".
Advisories
Forward-Looking Statements
Certain information provided in this news release may constitute
forward-looking statements and information (collectively,
"forward-looking statements") within the meaning of applicable
securities laws. Such forward-looking statements include, without
limitation, forecasts, estimates, expectations and objectives for
future operations that are subject to assumptions, risks and
uncertainties, many of which are beyond the control of the Company.
Forward-looking statements are statements that are not historical
facts and are generally, but not always, identified by the words
"expects", "plans", "anticipates", "believes", "intends",
"estimates", "projects", "potential" and similar expressions, or
are events or conditions that "will", "would", "may", "could" or
"should" occur or be achieved.
Forward-looking statements in this news release may include, but
are not limited to, statements relating to the Company's
development plans and strategies, including anticipated well
recompletions, workovers, waterflood programs and infill drilling,
drilling locations, timing thereof and ultimate production
therefrom; the Company's estimate of oil in place and the potential
for increased recovery factors; estimated cumulative and current
field production levels; the Company's expectation of reduced
royalty rates based on expectations of increased production; and
the Company's expected achievement of zero effluent discharge in
its operations and the expected timing thereof. Although the
Company believes that the expectations and assumptions on which the
forward-looking statements are based are reasonable, undue reliance
should not be placed on the forward-looking statements because the
Company can give no assurance that they will prove to be correct.
Since forward-looking statements address future events and
conditions, by their very nature they involve inherent risks and
uncertainties. Actual results could differ materially from those
currently anticipated due to a number of factors and risks. Certain
of these risks are set out in more detail in the Company's 2020
Annual Information Form dated March 25,
2021 which has been filed on SEDAR and can be accessed at
www.sedar.com. The forward-looking statements contained in this
news release are made as of the date hereof, and except as may be
required by applicable securities laws, the Company assumes no
obligation to update publicly or revise any forward-looking
statements made herein or otherwise, whether as a result of new
information, future events or otherwise.
SOURCE Touchstone Exploration Inc.