Touchstone Exploration, the publicly-quoted Canadian company that was unknown to most people in the energy sector when it bought over the assets of Primera Oil and Gas from C L Financial in July, 2010, is one of those S and MS (small and medium-sized) companies that is poised to help turn around the calamitous decline in the country's crude oil production.
Its production averaged 1,012 b/d in the first quarter of 2012, nine percent higher than the preceding quarter and 229 percent above the corresponding quarter in 2011.
This may seem modest to the layman's eye but these days in Trinidad and Tobago every barrel of crude counts, especially with condensate production also slumping dramatically.
Touchstone, whose very amiable chairman and chief executive officer (CEO) is ex-economist, Paul Baay, aged 49, achieved its output increase by a mixture of new development wells (five), recompletions (17) and reactivations (seven).
Another 17 wells will be sunk in the current quarter and during the rest of the year, with the focus on its WD8 lease operatorship (LO) block, the two Coora LO blocks and the Sunty field.
Touchstone does not lack acreage on which it can be active, that's for sure. Following its first acquisition in Trinidad (WD8 from a company called Territorial Services), it then assumed control of Damus Oil's four producing properties (which included the Coora LO blocks mentioned above) and, most recently, Primera's extensive holdings.
It now has 32,000 net acres in Trinidad, which suggests that the 10,000 b/d which is Baay's unofficial objective in the long term, is not entirely fanciful.
'Energy Insider'' counts 20 properties now held by Touchstone – four LO blocks, two FO blocks, 12 fields and the two sub-blocks into which the East Brighton field in the Gulf of Paria is divided.
Of course, an energetic drilling programme requires money to fund it and Touchstone, which trades on the Toronto Venture Exchange, has recently reorganised its financial affairs to achieve greater cash flows (in fact, the January-March, 2012 period represented the first quarter of positive funds flow since the beginning of the Trinidad operation).
It obtained US$10 million from disposing of its 33.8 per cent interest in the Cory Moruga block to fellow Canadian company, Parex Resources, arranged a long-term loan to repay the existing vendor take-back notes, which had partly financed the purchase of Primera and reached an agreement to buy Can$4 million of the existing Can$6 million convertible debentures, thus lowering its total debt position and freeing up cash that would have been used for interest payments.
In addition to all this, it is (or was before the recent decline in international oil prices, which has presumably had some effect) receiving very attractive prices for its 1,012 b/d from state company Petrotrin's refinery, to which, like all onshore operators, it is obliged to sell its crude.
This was US$102.18 during the first quarter of 2012, boosting revenue by 32 per cent over the previous quarter and 280 per cent over the comparative period in 2011.
The Touchstone boss is not among those who criticise the state company for its parsimonious attitude towards S and MS producers.
"We are exceptionally satisfied with the price we get," he told me in an exclusive interview. "We've got two contracts with Petrotrin, one being the one we inherited from Primera and on that we're getting a better price than we would get in Canada. On both contracts, to be honest with you, we are really happy with the arrangements. You put the oil in a pipe in the field and that's the transfer point. Petrotrin takes title from there. It's a very good arrangement."
These "good arrangements" yielded Touchstone US$6.4 million during January-March, 2012, as against US$1.4 million in the same period in 2011. For the six months ending March 31, revenue, net of royalties, amounted to US$12.3 million, compared with US$2 million in 2011.
Baay is a strong supporter of Energy Insider's thesis that any crude production turnaround must be based, among other initiatives, on aggressively going after "stranded" oil and not awaiting miracles from new discoveries via exploratory drilling (if these happen, as they have happened recently, then that's a welcome bonus).
"Traditional recovery factors from land fields can be considerably raised by new drilling and recompletions," he insists. "We've done 14 recompletions of old wells, including those in the first quarter of the year, that were not producing or producing at very low rates. The company's four geologists are now going through the 1,000 well bores we have access to and picking up formations they think need to be perforated."
Touchstone, whose Trinidad and Tobago country manager is Canadian Jim Krissa, currently reckons it has about nine million barrels of proven reserves in all its properties, of which around five million is classified as "proved producing".
The latter figure is an increase of four million barrels over early 2011. This is mainly attributable to the Primera acquisition, in addition to well recompletions and the identification of new formations for perforation.
These reserves upgrades are crucial, since Touchstone is operating nowhere else at the moment, not even in Canada itself, and has to keep its shareholders on side, particularly, as Baay says, "We hope to graduate to the main Toronto exchange in 2012."
This implies an expansive approach to its business in Trinidad and Tobago – as much activity as possible on the current 32,000 acres and any additions to that as may be feasible.
Energy and Energy Affairs Minister Kevin Ramnarine has pledged to offer some land blocks for auction in the last quarter of 2012 and Touchstone, says its chairman, "will be taking a look at that for sure".
David Renwick was awarded the Hummingbird Medal (Gold) in 2008 for the development of energy journalism in Trinidad and Tobago.
