Touchstone Exploration (LSE: TXP) has just dropped its first operational update since snapping up Shell’s Central Block asset in Trinidad back in May – and there are a few interesting nuggets to chew on. The acquisition, giving Touchstone a 65% operating stake (with Heritage Petroleum holding the remaining 35%), is starting to show its colours. Let’s break down what the numbers and the narrative are telling us.
Steady Growth Straight Out the Gate
First up, production. It’s not a moonshot, but it’s solid, steady growth – exactly what you want to see when integrating a new asset:
- Q1 2025 (Gross): Averaged 2,969 barrels of oil equivalent per day (boe/d) – breaking down to roughly 16.74 million cubic feet of natural gas per day (MMcf/d) and 179 barrels per day (bbls/d) of Natural Gas Liquids (NGLs).
- Q2 2025 (Gross – Preliminary): Averaged 3,023 boe/d – comprised of approx. 17.05 MMcf/d gas and 181 bbls/d NGLs.
That’s a modest but meaningful quarter-over-quarter uptick. Crucially, Touchstone attributes this to “continued plant optimisation” since they took the reins on May 16th. It suggests they’ve hit the ground running and are already squeezing more efficiency out of the existing infrastructure. Net production (Touchstone’s 65% share) naturally followed suit, rising from 1,930 boe/d to 1,965 boe/d.
The Revenue Picture: LNG Liftings and Domestic Sales
Where things get particularly interesting is the revenue mix. Central Block gas flows through two distinct pipelines:
- LNG Export Market: Linked to international LNG pricing (typically higher, but more volatile). Sales here depend on “liftings” – basically, when the LNG cargo ships show up.
- Domestic Market: Primarily supplying Trinidad’s petrochemical sector. Generally offers more stable, but potentially lower, pricing.
Jan-Apr 2025 Performance Snapshot
The reported revenue covers January to April 2025 (remember, Touchstone only owned it from mid-May, so this reflects the asset’s performance pre and post-acquisition for that period):
- LNG Liftings (Gas & Liquids): 11 liftings completed, totalling 2,207,696 MMBtu. Generated gross revenue of $13.6 million ($8.9 million net to Touchstone).
- Domestic Sales: 11,065 MMBtu sold. Generated revenue included in the above figures.
- Transport & Processing Costs: These bit deep. The $13.6 million gross revenue became $8.9 million gross after costs ($5.8 million net).
- Condensate Sales: Added another $1.0 million gross ($0.65 million net) from sales averaging $48.49 per barrel.
- Total Gross Revenue (Jan-Apr): $9.9 million ($6.4 million net). Remember, this is before the 12.5% state royalty and ongoing plant operating costs.
The Price Realised
The pricing differential between the two markets is stark:
- LNG Liftings: Achieved an average realised price of $6.15 per MMBtu. However, after transportation and processing deductions, the net price at the plant gate was $4.00 per MMBtu.
- Domestic Sales: Achieved a higher net plant gate price of $4.33 per MMBtu.
This highlights a crucial point: the headline LNG price looks attractive, but the associated costs of getting it to the export market significantly erode the netback. The domestic price, while potentially lower on the open market, delivers a better net return once costs are factored in.
Strategy & Outlook: Integration and Growth
Paul Baay, Touchstone’s CEO, struck a confident tone, emphasising two key strategic wins:
- Immediate Production Uplift: Delivering growth quickly through optimisation validates their operational approach.
- Portfolio Diversification: The Central Block brings crucial exposure to LNG-linked pricing, complementing their existing oil and fixed-price gas sales. Baay noted that “commercial documentation” for the LNG sales is complete, with the first payment expected by end-July 2025 – aiming for “predictable cash flows” from this stream.
What’s Next? Drilling on the Horizon
Touchstone isn’t just sitting back. They’ve completed site surveys for two new well pads, each capable of hosting up to four future drilling locations. The ball is now in the government’s court – they’re “awaiting construction approvals”. This is the next potential catalyst for significant production growth, though timing on permits is always a watchpoint.
The Bottom Line
This first Central Block update paints a picture of a smooth integration and early operational success for Touchstone. Steady production growth is being delivered, and the strategic value of diversifying their revenue streams – particularly adding that LNG exposure – is front and centre. While the netback on LNG sales highlights significant cost structures, the overall acquisition rationale appears sound based on this initial performance. The focus now shifts to securing those drilling permits to unlock the next phase of growth. One to watch.
As always, remember this contains forward-looking statements (plenty of them detailed in the RNS!) dependent on factors like commodity prices, government approvals, and operational execution. BOE figures use the 6:1 conversion ratio – see the advisories in the announcement for the important nuances on that.
