WTI (June) $58.07 -$1.02, Brent (July) $61.12 -$1.03, Diff -$3.05 -1c
USNG (June) $3.62 +16c, UKNG (June) 82.32p -2.48p, TTF (June) €34.765 +€0.085

Oil price

Oil has regained the dollar or so that it lost yesterday when it fell back on talks that the USA/Iran talks were gaining some ground. Today it has bounced as hooky tankers are being discovered with Iranian crude. Apart from that the knowledge that the US are going to talk tariffs with China at the weekend in Switzerland is in the background to the news of a ‘low level’ trade agreement between the USA and the UK. 

Touchstone Exploration

Touchstone has announced that it has successfully raised £15.375 million (approximately US$20.5 million) by way of a private placement of 75,000,000 new common shares of no par value in the Company with certain institutional and other investors in the United Kingdom (the “Private Placement”).

Touchstone is also pleased to announce that it has additionally signed a binding term sheet with its Trinidad-based lender, Republic Bank Limited (“RBL”), to provide debt financing for the previously announced transaction to acquire the entire share capital of Shell Trinidad Central Block Limited (the “Acquisition”). 

Private Placement

The placement price of 20.5 pence (approximately C$0.38) per new common share represents an 11.8 percent discount to 23.25 pence, which was the closing price of the Company’s common shares on the AIM market of the London Stock Exchange (“AIM”) on May 7, 2025. The new common shares will, when issued, represent approximately 24.1 percent of the total issued share capital of the Company as enlarged by the Private Placement.

The new common shares will, when issued, rank pari passu in all respects with the Company’s existing issued common shares. All new common shares being issued by the Company pursuant to the Private Placement will be freely transferable; however, any of these new common shares that are resold to residents of Canada (or any person otherwise subject to the securities laws of any jurisdiction of Canada) will be subject to applicable Canadian securities laws, which may include restrictions on resale, whether through a Canadian exchange or otherwise.

Applications have been made for the new common shares to be admitted to trading on the Toronto Stock Exchange (“TSX”) and AIM (the “Admission”). Subject to the receipt of required approvals from the TSX and AIM, it is expected that settlement of the Private Placement and Admission will occur at or before 8.00 a.m. (BST) on May 15, 2025. The Private Placement is conditional, among other things, upon Admission becoming effective and the placing agreement entered into between the Company and OAK Securities in connection with the Private Placement not being terminated in accordance with its terms. The Private Placement is not conditional on the Acquisition.

The Company currently has 236,460,661 common shares in issue. Following Admission, the Company’s issued share capital will consist of 311,460,661 common shares. The Company does not hold any common shares in treasury and, therefore, following Admission, the total number of voting rights attributable to the common shares in the capital of the Company will be 311,460,661. This figure may be used by shareholders to determine if they are required to notify their interest in, or a change to their interest in, the Company.

The Private Placement was arranged by Portillion Capital and OAK Securities.

Use of Proceeds of Private Placement

The Company intends to use the net proceeds from the Private Placement to finance the following development activities and provide additional working capital to:

• finish drilling and completion of the Cascadura-4ST1 development well;
• drilling and completing the Cascadura-5 development well;
• tie-in the Cascadura-4ST1 and Cascadura-5 wells; and
• drill and complete two Central block development wells (subject to completion of the Acquisition).

Rather than finance the 2025 capital budget as previously announced through an expansion of its debt facilities, the Company intends to finance its 2025 capital budget by way of the Private Placement. The Cascadura-4ST1 and Cascadura-5 development wells formed part of the Company’s 2025 capital budget announced on December 9, 2024. The planned drilling of the two Central block development wells will replace two of the Cascadura development wells previously included in the 2025 capital budget. As previously noted, revised 2025 guidance will be issued by the Company subsequent to completion of the Acquisition.

Financing of the Acquisition

As previously announced, on December 13, 2024 the Company’s wholly owned Trinidadian subsidiary, Touchstone Exploration (Trinidad) Ltd. (“TETL”) signed a conditional share purchase agreement (the “SPA”) to acquire 100 percent of Shell Trinidad Central Block Limited (“STCBL”) from BG Overseas Holdings Limited. STCBL holds a 65 percent participating interest in the onshore Central block exploration and production licence, as well as four producing gas wells and a gas processing plant in Trinidad, with state-owned Heritage Petroleum Company Limited holding the remaining 35 percent participating interest. Under the terms of the SPA, on closing Touchstone will pay $23 million in cash plus December 31, 2024 cash and abandonment fund balances, currently estimated to be approximately $30 million.

TETL has signed a binding term sheet with RBL providing for a new $30 million six-year non-revolving term loan to partially fund the Acquisition. TETL and RBL are currently preparing a Fourth Amended and Restated Loan Agreement and related security registrations (the “Amended Bank Loan Agreement”). Subject to the execution of the Amended Bank Loan Agreement, Touchstone intends to use the net proceeds from the term loan together with existing cash resources to fund the cash consideration payable under the terms of the Acquisition. The Acquisition is expected to close during the second quarter of 2025.

The Acquisition

As first announced on December 13, 2024, the Acquisition will be transformational for Touchstone. Gross field estimated production from the Central block from March 1, 2025 through April 15, 2025 was approximately 17.5 MMcf/d of natural gas and 185 bbls/d of NGLs (approximately 3,075 boe/d), equating to net production of approximately 2,000 boe/d for STCBL.

Touchstone has assessed the pro forma net working interest reserves in STCBL, as of April 1, 2025 (based on a 65 percent working interest), to be approximately 3.2 MMboe of proved developed producing reserves, 5.1 MMboe of total proved reserves, and 5.6 MMboe of total proved plus probable reserves. These estimates correspond to before tax NPV10 values of approximately $41.7 million, $85.7 million, and $95.5 million, and after tax NPV10 values of approximately $19.4 million, $38.5 million, and $42.9 million, respectively. The estimates are based on reasonable assumptions. Actual results may differ materially from these projections, and all figures remain subject to change and are contingent upon completion of the Acquisition.

STCBL holds one natural gas marketing contract accessing the Trinidad domestic market, and two natural gas marketing contracts accessing the Atlantic LNG facility in Trinidad. The pricing associated with the LNG contracts is a combination of commodities including Brent oil, Henry Hub natural gas and world LNG pricing. The pricing varies monthly depending on market conditions, which differs from the Company’s current natural gas contract, which is a fixed price arrangement for volumes produced from the Ortoire block.

Following completion of the Acquisition, the Company’s initial Central block development plan will focus on the optimization of the four existing wells prior to drilling the two development wells set out above. Combined with the Cascadura development drilling noted above, the Company’s 2025 budgeted capital activity has the potential to increase production during the second half of 2025 to between 8,000 and 9,000 boe/d, prior to natural declines. As noted above, revised 2025 guidance will be issued by the Company subsequent to completion of the Acquisition.

I will add more on this deal tomorrow after I have had a proper discussion with Paul Baay scheduled for this afternoon.

At first glance this looks to be a good deal, raising money from keen, new institutional shareholders at a modest discount and with a good amount of scaling back. With the debt from the Republic Bank the work programme will cover both the Cascadura and the Central Block and shareholders will benefit significantly from it.

Genel Energy

Genel has issued the following trading and operations update relating to Q1 2025, ahead of the Company’s Annual General Meeting, which is being held today.

Paul Weir, Chief Executive of Genel, said:
“In line with expectations, the Tawke PSC continues to deliver consistent, reliable production and generate significant cash flow even at the discounted domestic sales prices. The operational performance delivered from the Tawke and Peshkabir fields, together with the significant cost efficiency, continues to set these fields apart from others in the region.

Our entry into Block 54 in Oman is expected to complete in the coming weeks, with first substantial work programme activity commencing around the end of the year.

We continue to work towards diversifying our production, both through expansion of our footprint in Oman as well as the purchase of new assets in other preferred jurisdictions. We addressed the maturity of our bond debt by calling the old bond and issuing a new $100 million bond, thereby increasing available cash and putting in place a capital structure that can provide funding towards delivery on our strategic objectives, regardless of whatever uncertainties may face the business at the macro-economic level.”

This is an upbeat, positive update which shows the resilience of the Tawke and Peshkabir fields production and that its WI of 20.5/- b/d at $35 pb revenue is highly respectable due to the company’s ‘significant’ cost efficiencies.

Sarta and Qara Dagh have gone, at low costs and ‘minimal’ residual liabilities and Genel have left Morocco exiting the Lagzira licence after the First Extension Period ends next month. The company are however, staying with the ‘highly prospective’ Toosan-1 well in Somaliland. 

Readers know of my interest in, and love for Oman and Genel’s move there is looking increasingly attractive with activity expected in the second half of the year and as I have said before, further involvement is more than likely once final approvals are granted.

The company has had a reduction in the arbitration costs owed by them to the KRG from c. $36m to c.$27m but is still appealing this sum on the basis that ‘because the KRG did not provide any breakdown of the amounts claimed by reference to any items of work, the Arbitration Tribunal was unable to assess the reasonableness and proportionality of the recoverable costs and consequently did not have jurisdiction to make an award’. 

Genel continues to flourish in whatever situation it finds itself in, with its robust balance sheet strong and aided by clever market operations pushing out the debt length, it gives management optionality in both organic and inorganic growth. 

KURDISTAN

• Gross production of 82,081 bopd in Q1 2025 (Q4 2024: 74,140 bopd) from the Tawke licence where performance continues to be robust and domestic sales demand reliable
  • Working interest production of 20,520 bopd (Q4 2024: 18,540 bopd)
• Q1 2025 sales price has been consistent with the previous quarter around $35/bbl
• Exit from the Sarta and Qara Dagh licences has now been approved by the KRG, in the form of relinquishment and termination agreements with minimal residual potential liabilities

OMAN

• As previously announced, we are delighted to have entered Oman through the award of an interest in Block 54
• Royal Decree is expected in the coming weeks and we are working with OQEP, the operator, on planned activity for the second half of the year

SOMALILAND

• On SL10B13 in Somaliland, we continue to work towards achieving conditions that support drilling of the highly prospective Toosan-1 exploration well

MOROCCO

• We have informed ONHYM that we will not be extending beyond the Initial Period of the Lagzira licence to the First Extension Period, and consequently will be abandoning the licence in June 2025

FINANCIAL

• Net cash of $135 million at 31 March 2025 (YE2024: $131 million)
• Q1 2025 free cash flow of $5 million (Q4 2024: $1 million free cash outflow)
  • Ahead of guidance due to higher production and some timing differences on spend
  • Tawke free cash flow expected to cover organisational costs this year
  • No spend to date on Oman
• Cash of $201 million at 31 March 2025 (YE2024: $196 million)
  • In April the Company called $66 million of bonds maturing October 2025 and issued a new $100 million bond maturing April 2030

• Balances with KRG
  • Both receivable and payables have reduced as a result of the exit from Sarta and Qara Dagh
    • Gross reported nominal receivables of $99 million, reduced from $107 million at YE2024
    • Payables of around $40 million, reduced from around $50m million at YE2024
    • The arbitration costs award  made by the Tribunal for amounts owed to the KRG by Genel Energy Miran Bina Bawi Limited (“GEMBBL”) is circa $27 million, reduced from the circa $36 million claimed by the KRG
    • GEMBBL has appealed this costs award to the High Court on the grounds that, because the KRG did not provide any breakdown of the amounts claimed by reference to any items of work, the Arbitration Tribunal was unable to assess the reasonableness and proportionality of the recoverable costs and consequently did not have jurisdiction to make an award

OUTLOOK

• Tawke free cash flow at current production and prices is expected to continue to cover organisational costs, with net cash at year-end expected to be about the same as the start of the year
• Following our entry into Oman, there will be some direct capital investment this year as we work towards testing previously discovered resource
• Talks between the Kurdistan Regional Government and Federal Government of Iraq and Ministry of Oil regarding the Iraq-Türkiye Pipeline are ongoing, but no material progress has been made since March and the timing of the resumption of exports remains uncertain

Reabold Resources

Reabold has announced that it has converted £500,000 of outstanding convertible loan notes into 374 ordinary shares of LNEnergy Limited at an average price of £1,350 per share.

Following this conversion, Reabold holds approximately 45.1% of LNE’s enlarged share capital.

Earlier this year, as announced on 26 March 2025, LNE entered into a binding purchase and sale agreement (“PSA”) to acquire the entire outstanding issued share capital of LNEnergy S.r.l (“LNE S.r.l”). LNE is the manager and 100% owner of LNE S.r.l., the Italian company that has a 90% interest in, and is seeking regulatory approval for the development of, the Colle Santo gas field in the Abruzzo region of Italy.

The Colle Santo gas field is a highly material gas resource with an estimated 65Bcf of 2P reserves1, with two production wells already drilled and flow-tested, making the field development ready. LNEnergy believes that the field has the potential to generate an estimated €11-12m of gross post-tax free cash flow per annum.

All common sense from Reabold here, adding to their position at what is a low entry cost ahead of anticipated progress on the regulatory front. When the Colle Santo development happens Reabold will undoubtedly do extremely well. 

1 RPS estimate, September 2022

Original article   l   KeyFacts Energy Industry Directory: Malcy's Blog