Touchstone having a gas

Touchstone Exploration (TXP) may be one such driller. The Calgary-based company already produces and explores for oil and gas in Trinidad. It currently needs $16m (£12.4m) to get its Cascadura onshore gas project going, with the aim of producing around 15,000 barrels of oil equivalent per day (boepd), using the proved and probable reserve estimate. Tightening that up to just the proved reserves, Touchstone could spend £12m on a 10,000 boepd asset. 

Gas prices are not strong currently, at well under $2 per million thermal units (mbtu), although supply is already falling in the US due to lower prices. Meanwhile, Touchstone’s independent reserves evaluation, published this month, forecasts that Cascadura’s production will be sold at $2.55/mbtu next year. That might be too optimistic, but Rystad Energy, a consultancy, thinks US gas production has fallen by around 8 per cent since the end of 2019, suggesting a price recovery could be on the cards. 

Touchstone's chief executive, Paul Baay, says direct sales to Trinidad and Tobago’s National Gas Company (NGC) will keep prices at least at the level forecast in the reserves evaluation. The company, which has a primary listing in Canada as well as trading on London's Aim, is confident of getting the Cascadura project into production in mid-2021. 

Usually these claims need to be taken with a shaker of salt, given the need to raise money. But Touchstone raised $11.6m earlier this year to cover its exploration costs and has a credit line of $20m set up. Some of that development money will be needed elsewhere, however. Touchstone has two more onshore exploration wells, which will cost $4m each, that it aims to complete this year. The Chinook target should spud in the coming weeks, then Cascadura Deep in the coming months. 

This is where Mr Baay steers away from the usual Aim developer pitch, reminding shareholders that the company may not have a third positive well result in a row. It was the Cascadura result earlier this year that saw Touchstone's shares climb a third in a day in February and then make it over 70p this month, from 22p at the start of the year. 

Touchstone is at a mid-point on the ideal evolution from explorer to gas producer. It has its reserves and its buyer in the NGC. The NGC is also building most of the infrastructure needed to get the gas from Cascadura into its network, cutting development costs. The island has the major Atlantic LNG gas refinery, but Touchstone is skipping that by handing its product straight to the NGC.