Canadian oil & gas firm bringing UK-headquartered player into its fold

Canada-based Touchstone Exploration has set the wheels in motion to acquire all of the issued and to be issued ordinary share capital of the Aberdeen-headquartered Trinity Exploration and Production, which has a portfolio of onshore and offshore oil assets located solely in Trinidad and Tobago. The Canadian player claims this will position it as a key player in the country’s oil and gas sector.

This acquisition is estimated to represent an implied value of around $30.1 million, based upon the closing Touchstone share price of 41.25 pence on AIM on April 30, 2024, and approximately 24.91% of the Canadian firm’s currently outstanding shares will be issued. Trinity’s board of directors has confirmed its intention to recommend unanimously to shareholders to vote in favor of the acquisition.

Jeremy Bridglalsingh, Chief Executive Officer of Trinity, commented: “I am pleased to be recommending Touchstone’s offer to our shareholders. Our two companies have operated in close proximity over many years. The premium offered demonstrates the value Touchstone sees in Trinity’s team and operations and its confidence in the future potential of the enlarged business.”

The completion of this acquisition, which is subject to customary regulatory, stock exchange, and Trinity shareholder approvals, is expected to close by the end of the third quarter of 2024. Following the closure of the acquisition, existing Touchstone shareholders will own approximately 80% of the post-acquisition shares with Trinity shareholders owning the remaining 20%.

Furthermore, both players underline that the acquisition is expected to create a Trinidadian operator of scale with a significant inventory of onshore and offshore exploration and development assets, with the combined company benefiting from greater economies of scale and recurring annual cost synergies with a significant anticipated reduction in combined fixed overhead and corporate costs.

According to Touchstone, 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.

Paul Baay, Touchstone’s President and Chief Executive Officer, highlighted: “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.”

Aside from enabling Touchstone to have strong cash flows from operations from an increased crude oil and natural gas production base, the acquisition is expected to create a producing portfolio between approximately 11,700 and 12,400 boe/d on a pro-forma basis, based upon 2024 average daily production guidance from each company, with combined estimated proved plus probable reserves of around 80.3 MMboe as of December 31, 2023.

The combined company will have a portfolio of exploration and development prospects across Trinity’s onshore Hummingbird area and Buenos Ayres block, subject to the execution of the relevant license agreement, as well as its TGAL discovery at the offshore Galeota block, where Trinity hired Petrofac last year to undertake a concept-screening study for the development of further reserves.

Additionally, the combined company’s portfolio will include prospects at Touchstone’s Ortoire area and Cipero, Charuma, and Rio Claro blocks, subject to the execution of the relevant license agreements. Last year, Trinity produced net daily average crude oil sales volumes of 2,790 bbls/d and 2,669 bbls/d during the three months ended March 31, 2024.

The company’s management estimate of its total proved plus probable reserves was 12.91 MMbbl on December 31, 2023. The firm operates seven onshore oil blocks from which it produced 1,495 bbls/d in 2023, accounting for 53% of its net annual average crude oil production.

Moreover, Trinity’s west coast assets, the Point Ligoure-Guapo BayBrighton Marine and Brighton Marine licenses, are located offshore and produced net crude oil volumes of 352 bbls/d in 2023, representing 13% of its annual net production.

The firm currently produces crude oil from three platforms in the Trintes field – residing within the Galeota block – where the net average 2023 crude oil production was 943 bbls/d, representing 34% of the company’s net annual production.

“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,” concluded Baay.