Mr. Paul Baay reports

TOUCHSTONE EXPLORATION ANNOUNCES ACQUISITION OF TRINITY EXPLORATION AND PRODUCTION PLC

Touchstone Exploration Inc. has reached an agreement with Trinity Exploration and Production PLC 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 Alternative Investment Market of the London Stock Exchange (AIM). Unless otherwise stated, all financial amounts presented herein are stated in U.S. dollars, and all production volumes disclosed herein are sales volumes based on company working interest before royalty burdens.

Under the terms of the acquisition, Trinity shareholders will receive 1.5 common shares of Touchstone for each Trinity common 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-per-cent 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-per-cent premium to the nine-month volume-weighted average price of Trinity shares as at the close of April 30, 2024. Approximately 24.91 per cent 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 per cent 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 per cent of the postacquisition Touchstone shares, and Trinity shareholders will own approximately 20 per cent of the postacquisition 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. 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 barrels of oil equivalent/day (based upon 2024 average daily production guidance from each company) with combined estimated proved plus probable reserves of approximately 80.3 million boe as of Dec. 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 Touchstone's 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.

Information on Trinity

Trinity is an independent oil exploration, development and production company with producing assets onshore, as well as offshore off the east and west coasts of Trinidad.

Trinity produced net daily average crude oil sales volumes of 2,790 barrels/d during the year ended Dec. 31, 2023, and 2,669 bbl/d during the three months ended March 31, 2024. As at Dec. 31, 2023, Trinity's management estimate of its total proved plus probable reserves was 12.91 MMbbl.

Trinity operates seven onshore oil blocks from which it produced 1,495 bbl/d in 2023, accounting for 53 per cent of its net annual average crude oil production. Trinity actively manages its onshore asset portfolio in order to optimize production and mitigate declines through the application of workover activities, well recompletions, well swabbing and infill drilling. Trinity's west coast assets, the Point Ligoure-Guapo Bay-Brighton Marine and Brighton Marine licences, are located offshore and produced net crude oil volumes of 352 bbl/d in 2023, representing 13 per cent of Trinity's annual net production. Trinity has been operating and producing offshore from the east coast of Trinidad since 2013, and currently produces crude oil from three platforms in the Trintes field which resides within the Galeota block. Net average 2023 crude oil production from the Trintes field was 943 bbl/d, representing 34 per cent of Trinity's net annual production.

As at March 31, 2024, Trinity reported an unaudited cash balance of $4.8-million and drawn borrowings of $4-million. For the three months ended March 31, 2024, Trinity reported unaudited earnings before interest, income taxes, depreciation and amortization (EBITDA) of $4-million. Trinity's unaudited EBITDA figures are ordinary course profit estimates within the meaning of the code (as defined below).

Approvals

The acquisition is subject to the conditions and terms of the Rule 2.7 announcement (as defined below) which includes, amongst other things:

• The approval of the scheme by a majority in number of the Trinity shareholders who are present and vote, whether in person or by proxy, at the court meeting and who represent 75 per cent in value of the Trinity shares voted;
• The resolutions required to implement the scheme being duly passed by Trinity shareholders representing 75 per cent or more of votes cast at the general meeting;
• The receipt or waiver of anti-trust clearances in Trinidad;
• The approval of the scheme by the High Court of Justice in England and Wales;
• The London Stock Exchange having acknowledged that the Touchstone shares issuable pursuant to the acquisition will be admitted to trading on AIM;
• The acceptance by the Toronto Stock Exchange (TSX) of the listing of the Touchstone shares issuable pursuant to the acquisition on customary postclosing conditions;
• Insofar as the acquisition requires such approval, the government of the Republic of Trinidad and Tobago Ministry of Energy and Energy Industries having provided consent to the acquisition in a form and subject to conditions (if any) that are reasonably satisfactory to Touchstone;
• The receipt of the following consents or waivers from Heritage Petroleum Company Ltd.:
  • Heritage having provided its written consent to the acquisition under the terms of the lease operatorship agreements, the Galeota joint operatorship agreement and the royalty conversion agreements in a form and subject to conditions (if any) that are reasonably satisfactory to Touchstone;
  • The waiver (or non-exercise within any applicable time limits) by Heritage of any right of pre-emption, right of first offer or refusal, or any similar or analogous right, arising as a result of or in connection with the acquisition under the terms of the joint operatorship agreements (other than the Galeota joint operatorship agreement in circumstances where Heritage has already provided its prior written consent) in a form and subject to conditions (if any) that are reasonably satisfactory to Touchstone.

Rule 2.7 of the U.K. City Code on Takeovers and Mergers

In accordance with Rule 2.7 of the U.K. City Code on Takeovers and Mergers, a firm offer announcement has been published and is accessible on Touchstone's website. This news release should be read in conjunction with, and is subject to, the full text of the Rule 2.7 announcement (including its appendices). The offer will be subject to the conditions and certain further terms set out in the Rule 2.7 announcement and to the full terms and conditions to be set out in the scheme document to be published in due course.

Advisers

In connection with the acquisition for Touchstone, Shore Capital Ltd. is acting as lead financial adviser, Canaccord Genuity Ltd. is acting as co-financial adviser, and Beacon Securities Ltd. and Cormark Securities Inc. are acting as strategic advisers. Norton Rose Fulbright LLP is acting as legal adviser to Touchstone.

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 AIM of the London Stock Exchange under the symbol TXP.

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