Touchstone Exploration has reached an agreement with Trinity Exploration and Production on the terms of an all-share acquisition by which Touchstone will acquire all of the issued and to be issued ordinary share capital of Trinity. Trinity is a crude oil exploration, development and production company with onshore and offshore assets located solely in the Republic of Trinidad and Tobago and is publicly listed on the AIM market of the London Stock Exchange ("AIM").

Under the terms of the Acquisition, Trinity shareholders will receive 1.5 common shares of Touchstone ("Touchstone Shares") for each Trinity common share ("Trinity Share") held.

Based upon the closing Touchstone Share price of 41.25 pence on AIM on April 30, 2024, the Acquisition represents an implied value of Trinity of approximately $30.1 million, representing a 71.9 percent premium to the April 30, 2024 closing price of Trinity Shares on AIM of 36 pence. The terms of the Acquisition represent a 13.6 percent premium to the nine-month volume weighted average price of Trinity Shares as at the close of April 30, 2024. Approximately 24.91 percent of currently outstanding Touchstone Shares will be issued pursuant to the Acquisition, and the Acquisition will not be a "significant acquisition" for Touchstone under Canadian securities laws.

The board of directors of Trinity intends to recommend unanimously that Trinity shareholders vote in favour of the Acquisition and Touchstone has received irrevocable undertakings from certain of Trinity's shareholders (including directors) to vote their Trinity shares in favour of the Acquisition representing, in aggregate, approximately 38.9 percent of Trinity's issued ordinary share capital as of April 30, 2024 (excluding Trinity shares held in treasury). Completion of the Acquisition is subject to customary regulatory, stock exchange and Trinity shareholder approvals and is expected to close by the end of the third quarter of 2024.

Highlights

• Creates a Trinidadian operator of scale with a significant inventory of onshore and offshore exploration and development assets.
• Combined funds flow from operations from an increased production base will allow the combined company to invest in multiple development programs concurrently to accelerate the potential of the asset base and allow greater optionality over capital allocation decisions.
• Accretive on a funds flow from operations basis to Touchstone shareholders in the first full year following completion of the Acquisition prior to expected synergies.
• The combined company will benefit from greater economies of scale and recurring annual cost synergies with a significant anticipated reduction in combined fixed overhead and corporate costs.
• Following completion of the Acquisition, existing Touchstone shareholders will own approximately 80 percent of the post-Acquisition Touchstone Shares, and Trinity shareholders will own approximately 20 percent of the post-Acquisition Touchstone Shares.

Paul Baay, President and Chief Executive Officer, commented:
"We believe this acquisition represents a compelling strategic opportunity which will deliver enhanced scale, balance sheet strength, and growth opportunities. The business combination will create an upstream oil and natural gas company of increased scale in Trinidad, enhancing our ability to deliver growth in reserves, production and cash flows for the benefit of our combined shareholders and local stakeholders. The combined group will be able to invest in multiple development programs and accelerate the growth potential of the enlarged asset base, thereby giving us the potential to materially enhance long-term value."

The Acquisition

The Trinity assets are a natural extension of Touchstone's assets in Trinidad assets. The addition of Trinity's existing production portfolio, along with its exploration and development assets, will position Touchstone as a key player in the Trinidad oil and gas sector, and one of the leading independent operating companies dedicated to investing in both onshore and offshore activity to grow Trinidadian oil and natural gas production. On a pro-forma basis, the Acquisition is expected to create a producing portfolio between approximately 11,700 and 12,400 boe/d (based upon 2024 average daily production guidance from each company) with combined estimated proved plus probable reserves of approximately 80.3 MMboe as of December 31, 2023.

Following completion of the Acquisition, Touchstone will have strong cash flows from operations from an increased crude oil and natural gas production base. The combined group will have the resources, capacity and flexibility to invest in multiple development programs concurrently to accelerate the potential of the combined asset base. The combined entity will have an attractive portfolio of exploration and development prospects across Trinity's onshore Hummingbird portfolio and Buenos Ayres block (subject to the execution of the relevant licence agreement), as well as its TGAL discovery at the offshore Galeota block, and at our Ortoire area and Cipero, Charuma, and Rio Claro blocks (subject to the execution of the relevant licence agreements). Together, the portfolio provides a diversified opportunity with the potential to materially enhance the long-term value of the combined entity.

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