Operating cautiously
Touchstone Exploration (TO:TXP) has put a strategy in place for 2015 aimed at weathering the current storm of low crude oil prices while maintaining the ongoing viability of its assets in Trinidad. In an effort to conserve the balance sheet, TXP is restricting capital spend in Q115 to funds generated from operations, in addition to pledging to cut operating expenses and corporate overheads in both Canada and Trinidad. In our view, TXP has a proven strategy in place to exploit its assets in Trinidad. In entering ‘temporary hibernation’, the group is preserving its assets for reactivation under a more favourable macro environment.
Maintaining balance sheet strength is key
In a clear effort to protect the balance sheet, TXP is limiting its Q115 capital investment programme to cash flow within the period. This is based on a single rig drilling programme, with any increase beyond this to be assessed quarterly in response to crude activity. The group has a further $15m debt facility with $10m undrawn as part of its maximum $50m facility agreed with Scotia Bank in December.
Preserving assets and a working strategy
In Trinidad, TXP controls acreage with just over a billion barrels of oil in place. With production having reached 2,276b/d in Q414 the group has proven a working strategy to exploit its assets in Trinidad. In restricting capital investment and reducing costs in the short term, TXP is weathering the storm of low commodity prices, preserving assets for reactivation of the investment programme under a more favourable macro environment.
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