Mr. Paul Baay reports

TOUCHSTONE ANNOUNCES 2024 CAPITAL BUDGET, PRELIMINARY 2024 GUIDANCE AND AN OPERATIONAL UPDATE

Touchstone Exploration Inc. has provided its 2024 capital budget, preliminary 2024 guidance and an operational update.

Paul Baay, president and chief executive officer, commented:

"Our top priority remains maintaining a culture of safe and responsible operations that continues to drive near- and long-term value creation for our investors. I am pleased to announce our growth-oriented capital budget for 2024 which reinforces Touchstone's commitment to pursue development opportunities that generate positive returns to position the company for sustained success. The budget and preliminary guidance reflects our near-term strategy to deploy capital to developmental drilling opportunities and use our existing natural gas and liquids infrastructure capacity. We will remain disciplined when deploying our 2024 capital and increasing our credit capacity, adhering to our long-term net debt and liquidity targets. This approach will allow us to fund future exploration drilling from cash flows expected to be generated through our 2024 development drilling program and maximization of our existing financing facilities."

Financing position

The company is in advanced discussions with its existing lender to increase its current debt capacity to facilitate the forecasted timing and amount of the 2024 capital budget presented herein. The 2024 budget contemplates increasing the company's revolving component of its credit facility from $7-million to $20-million in the first quarter of 2024. Although the company is confident of reaching agreement, currently there is no firm commitment in place between the parties. Accordingly, the 2024 budget and preliminary guidance may be subject to change, and such changes may be material. The company will provide further updates in due course.

2024 budget highlights:

• Capital budget allocation -- Touchstone plans to invest approximately $33-million of capital in 2024, with approximately 42 per cent of its capital expenditures directed to its Cascadura field and 38 per cent to its Coho assets. The remaining 20 per cent is allocated to the company's legacy oil properties, exploration licence payments and corporate infrastructure.
• Drilling operations -- the initial 2024 capital budget contemplates drilling two Cascadura development wells, two CO-1 Block crude oil development wells, one Coho development well and one Coho exploration well.
• Production growth - the company's 2024 midpoint annual average production guidance of 9,400 barrels of oil equivalent/day represents an approximate 135-per-cent increase from its forecasted 2023 average production, with a budgeted exit average production rate of 14,500 boe/d. Annual production guidance is 9,100 to 9,700 boe/d (approximately 82 per cent natural gas weighted).
• Funds flow generation and balance sheet strength -- the 2024 budget is designed to generate approximately $32-million of funds flow from operations (Brent price of $75/barrel and an 18-per-cent realized Brent differential), resulting in a net debt to annual funds flow from operations ratio of 0.78 times.

2024 budget and guidance overview

For 2024, Touchstone's board of directors has approved an initial capital budget of $33-million to drill, complete and tie in six wells, resulting in estimated annualized average daily production between 9,100 boe/d and 9,700 boe/d with a forecasted production mix of 82 per cent natural gas and 18 per cent crude oil and liquids.

Touchstone's initial 2024 drilling plan includes drilling two legacy property crude oil wells, two Cascadura development wells, one Coho development well and one Coho exploration well. Production growth is expected to be weighted in the fourth quarter of 2024, with two Cascadura wells expected to be drilled in the first half of the year and tied in to the Cascadura plant prior to the end of the third quarter of 2024. The two Coho wells are expected to be drilled in the fourth quarter of 2024, and production additions from those wells are anticipated in the first quarter of 2025.

Using midpoint forecasted average production of 9,400 boe/d and a Brent benchmark price of $75 for crude oil and liquids, Touchstone expects to generate approximately $32-million of funds flow from operations. Based on the approved capital budget of $33-million, Touchstone is forecasting to exit 2024 with a net debt of $25-million, resulting in a net debt to annual funds flow from operations ratio of 0.78 times.

Operational update

In November, 2023, Touchstone achieved average net sales volumes of 8,268 boe/d as follows:

• 6,623 boe/d (8,279 boe/d gross) of Cascadura field net sales volumes consisting of:
  • Net natural gas sales volumes of 36.1 million cubic feet/day or 6,022 boe/d (45.1 MMcf/d or 7,528 boe/d gross) with a realized price of $2.46/thousand cubic feet;
  • Net natural gas liquids volumes of 601 bbl/d (751 bbl/d gross) with an average realized price of $71.46 per barrel.
• Coho field net average natural gas sales volumes of 3.2 MMcf/d or 527 boe/d (four MMcf/d or 659 boe/d gross) at a realized price of $2.29/Mcf;
• Average gross and net daily crude oil sales volumes of 1,118 bbl/d with an average realized price of $71.46 per barrel.

Cascadura

Commissioning of the Cascadura natural gas facility has been completed, and the facility is fully functional. Since commencing production in September, the Cascadura facility has had an uptime of 97.9 per cent with minimal interruptions experienced through the commissioning phase. Through Nov. 30, 2023, the facility has processed 3.8 billion cubic feet of gross natural gas volumes and 73 million barrels of gross natural gas liquid production volumes.

Touchstone continues to optimize Cascadura production volumes, with adjustments being made to the mechanical chokes which are constraining production in both wells. Through Dec. 1 to Dec. 17, 2023, Cascadura-1ST1 produced approximately 35.7 MMcf/d of gross field estimated natural gas volumes from the upper overthrust sheet while Cascadura Deep-1 contributed approximately 11.4 MMcf/d of gross field estimated natural gas production from the lower overthrust sheet.

Touchstone is evaluating the Cascadura Deep-1 well for future optimization, including the potential for additional perforations in the lower sheet. The additional perforations could increase production by reducing current reservoir drawdown rates allowing for an increase in the surface choke, which is currently at 54 per cent. These additional perforations can be achieved without the use of a service rig or having to kill the well. The Cascadura Deep-1 well has approximately 200 feet of perforations currently open (118 feet net pay), and wireline logs indicate an additional 149 feet of reservoir sands (109 feet net pay) in the lower part of the formation available for future completion. The well also has 366 feet of gross sand (274 feet net pay) in the upper overthrust sheet that can also be perforated in the future. Touchstone anticipates commencing a staged approach to adding these sands in the lower overthrust sheet in the first half of 2024.

Preparation works for drilling the Cascadura-2 development well using Star Valley Rig No. 205 are under way, with the intent to spud early in the first quarter of 2024 from the Cascadura-C surface location located approximately 5,000 feet northeast of the company's producing Cascadura wells. The Cascadura-2 well is targeting the same Herrera 7bc overthrust sand packages as the current Cascadura producing wells.

Coho

Touchstone completed a workover on the Coho-1 well on Dec. 4, 2023, successfully isolating the lowermost perforations and shutting off approximately 77 per cent of the produced water. Two weeks following the workover, field estimated gross production volumes have averaged approximately 4.6 MMcf/d of natural gas with approximately 54 barrels of water per day, compared with November gross production volumes of four MMcf/d of natural gas and 230 barrels of water per day. Based on the decreased water production, Touchstone expects fluid hauling expenses to decrease by approximately 80 per cent.

Preparations are under way to facilitate the drilling of the Coho-2 development well and the Gibba-1 exploration well which are expected to be drilled on the existing Coho-1 surface location in the fourth quarter of 2024.

Royston

Production testing of the Royston-1X exploration well has been suspended, and no further testing or expenditures are planned. The uppermost Karamat and Herrera sands were put to pump; however, the rates encountered were not economic. Touchstone will review the data collected during testing from both the Royston-1 and Royston-1X wells to determine if a declaration of commerciality for the Royston structure is warranted.

CO-1 block

Preparations are under way on the company's CO-1 block for a two-development-well drilling program. A local drilling contractor is expected to mobilize a drilling rig to the location in late January, pending completion of its current drilling operations. Two wells are expected to be drilled from an existing surface location, both targeting Forest and Cruse sands which have proven to be highly prospective based on the company's previous drilling campaign offsetting the area.

About Touchstone Exploration Inc.

Touchstone Exploration is a Calgary, Alta.-based company engaged in the business of acquiring interests in petroleum and natural gas rights and the exploration, development, production and sale of petroleum and natural gas. Touchstone is currently active in onshore properties located in the Republic of Trinidad and Tobago. The company's common shares are traded on the Toronto Stock Exchange and the Alternative Investment Market of the London Stock Exchange under the symbol TXP.

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