You do realise that TXP has a fixed price deal for their gas with the NGC. They get 2.5$. They will not be getting "half the HH gas price" you suspect...no........fixed price 2.5$
No, I did not know that. Send me a link to that information. Is it $2.50 U.S. or Trinidanian currency? Is it for a fixed term or perpetual? I would appreciate any details you have.
5 year deal with the NGC at 2.5US$ from first production, so the moment Coho flows the 5 years starts. They can have a small rise each year I believe up to max of 2%. Deal is renegotiated at the expiry of the initial 5 year term. The deal is covered by an NDA but the details are pretty well known and disclosed in various broker notes. If you are looking for a couple of other Canada/UK oil and gas stocks that are interesting, try Southern Energy SOU.V and i3Energy ITE.TO
Thank you. If the volumes materialize, TXP is deeply undervalued even at US$2.50 a gigajoule (about CAD$3.13) I am not a holder of Southern or i3 and don't expect to become one, given my large holdings in BIR, TOU, SDE, CNQ and PNE.
Capital costs are nowhere near $300 MM as the national Oil Company will be building the infrastructure and pipelines for the Cascadura gas
All the info you require for TXP is on their website and the numbers you quote are published there. The company has discovered 3 large oil and gas pools that will be producing by year end up to 35,000 BOED and downside risk is almost negligible as the wells have tested at high rates and will be producing shortly
I don't think 35,000 Boe/day by December 2022 is a realistic projection, with respect. It would be unusual to have a capital efficiency (capital cost per barrel per day) less than $10,000 and 35,000 Boe/day would typically cost ~$350 million more or less. Even Tourmaline, with exceptional land holdings, has a capital efficiency of ~$6,000 plus or minus.
I presume the $2.50 per gigajoule price agreement with the National Gas Company (if that is the correct price) includes a capital recovery by the national oil company since the market is now ~$9.00 a gigajoule Henry Hub. The company's website (presentation) points to adding 10,500 Boe/day in the medium term (gross, 1,339 boe/day net to TXP), an increase from about 1,400 boe/day at present. I don't see any guidance that gets anywhere close to 35,000 boe/day on the company's website.
With royalty rates from 12.5% to 35% and tax rates from 18% to over 50%, TXP cash flows may be less than the market expects.
There is no shortage of risk in this industry. It is encouraging that the wells are robust. Let's "circle back" in early 2023 and see how much progress TXP has made.
I will be delighted with my holding if TXP even comes close to your 35,000 Boe/day over the next few years and throw a party if that occurs by year end.
Thanks for the e-mail and interest in Touchstone. I just joined your Blog last week and find your articles interesting as I’m a big oil and gas investor with holdings like your self in SGY, VET, ARX, WCP etc.
Anyway you are correct that 35,000 BOED in 2022 is unrealistic with Touchstone, forecasting about 10,000 BOED by year end but with the drilling of 3 development wells at Cascadura the pipeline capacity is designed for 200 MMCFD or
About 35,000 BOED hopefully by year-end 2023.
Here are the guidelines from their last website presentation:
2022 and Beyond.
Complete the Cascadura production facility which is initially designed for 90 MMcf/d, expandable up to 200 MMcf/D (Thats approx. 35,000 BOED with associated liquids.)
Bring both Cascadura wells online, initial estimated net production to be in excess of 9,200 boe/d.
And as far as capital commitments are concerned the company only has to pay for the on site production facilities which I would think would be relatively cheap, as the NGC is constructing the pipeline,
(NGC carries a 20% WI with TXP owning 80%) hence a reduced gas price of approx. $2.50/MCF which was signed a year ago before prices spiked.
They have 3 more development wells to drill at Cascadura in 2023 to get the forecast rate up to pipeline capacity of 200 MMCFD which I think is very doable.
The smaller COHO gas well should be on production shortly and the Royston oil discovery will also be further delineated adding future oil production.
Anyway lots of activity with TXP and I believe the share price is very undervalued.
I agree. I like the odds on this one
You do realise that TXP has a fixed price deal for their gas with the NGC. They get 2.5$. They will not be getting "half the HH gas price" you suspect...no........fixed price 2.5$
No, I did not know that. Send me a link to that information. Is it $2.50 U.S. or Trinidanian currency? Is it for a fixed term or perpetual? I would appreciate any details you have.
5 year deal with the NGC at 2.5US$ from first production, so the moment Coho flows the 5 years starts. They can have a small rise each year I believe up to max of 2%. Deal is renegotiated at the expiry of the initial 5 year term. The deal is covered by an NDA but the details are pretty well known and disclosed in various broker notes. If you are looking for a couple of other Canada/UK oil and gas stocks that are interesting, try Southern Energy SOU.V and i3Energy ITE.TO
Thank you. If the volumes materialize, TXP is deeply undervalued even at US$2.50 a gigajoule (about CAD$3.13) I am not a holder of Southern or i3 and don't expect to become one, given my large holdings in BIR, TOU, SDE, CNQ and PNE.
Capital costs are nowhere near $300 MM as the national Oil Company will be building the infrastructure and pipelines for the Cascadura gas
All the info you require for TXP is on their website and the numbers you quote are published there. The company has discovered 3 large oil and gas pools that will be producing by year end up to 35,000 BOED and downside risk is almost negligible as the wells have tested at high rates and will be producing shortly
Thanks Dan.
I don't think 35,000 Boe/day by December 2022 is a realistic projection, with respect. It would be unusual to have a capital efficiency (capital cost per barrel per day) less than $10,000 and 35,000 Boe/day would typically cost ~$350 million more or less. Even Tourmaline, with exceptional land holdings, has a capital efficiency of ~$6,000 plus or minus.
I presume the $2.50 per gigajoule price agreement with the National Gas Company (if that is the correct price) includes a capital recovery by the national oil company since the market is now ~$9.00 a gigajoule Henry Hub. The company's website (presentation) points to adding 10,500 Boe/day in the medium term (gross, 1,339 boe/day net to TXP), an increase from about 1,400 boe/day at present. I don't see any guidance that gets anywhere close to 35,000 boe/day on the company's website.
With royalty rates from 12.5% to 35% and tax rates from 18% to over 50%, TXP cash flows may be less than the market expects.
There is no shortage of risk in this industry. It is encouraging that the wells are robust. Let's "circle back" in early 2023 and see how much progress TXP has made.
I will be delighted with my holding if TXP even comes close to your 35,000 Boe/day over the next few years and throw a party if that occurs by year end.
Hi Michael,
Thanks for the e-mail and interest in Touchstone. I just joined your Blog last week and find your articles interesting as I’m a big oil and gas investor with holdings like your self in SGY, VET, ARX, WCP etc.
Anyway you are correct that 35,000 BOED in 2022 is unrealistic with Touchstone, forecasting about 10,000 BOED by year end but with the drilling of 3 development wells at Cascadura the pipeline capacity is designed for 200 MMCFD or
About 35,000 BOED hopefully by year-end 2023.
Here are the guidelines from their last website presentation:
2022 and Beyond.
Complete the Cascadura production facility which is initially designed for 90 MMcf/d, expandable up to 200 MMcf/D (Thats approx. 35,000 BOED with associated liquids.)
Bring both Cascadura wells online, initial estimated net production to be in excess of 9,200 boe/d.
And as far as capital commitments are concerned the company only has to pay for the on site production facilities which I would think would be relatively cheap, as the NGC is constructing the pipeline,
(NGC carries a 20% WI with TXP owning 80%) hence a reduced gas price of approx. $2.50/MCF which was signed a year ago before prices spiked.
They have 3 more development wells to drill at Cascadura in 2023 to get the forecast rate up to pipeline capacity of 200 MMCFD which I think is very doable.
The smaller COHO gas well should be on production shortly and the Royston oil discovery will also be further delineated adding future oil production.
Anyway lots of activity with TXP and I believe the share price is very undervalued.
Thanks Dan Palmer