Mr. Paul Baay reports

TOUCHSTONE EXPLORATION ANNOUNCES PRIVATE PLACEMENT AND AN ACQUISITION FINANCING UPDATE

Touchstone Exploration Inc. has successfully raised 15,375,000 British pounds (approximately $20.5-million (U.S.)) by way of a private placement of 75 million new common shares of no par value in the company with certain institutional and other investors in the United Kingdom.

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

Private placement

The placement price of 20.5 pence (approximately 38 cents) per new common share represents an 11.8-per-cent discount to 23.25 pence, which was the closing price of the company's common shares on the AIM (Alternative Investment Market) of the London Stock Exchange on May 7, 2025. The new common shares will, when issued, represent approximately 24.1 per cent 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 and AIM. 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 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;
• Drill and complete the Cascadura-5 development well;
• Tie in the Cascadura-4ST1 and Cascadura-5 wells;
• 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 Dec. 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 Dec. 13, 2024, the company's wholly owned Trinidadian subsidiary, Touchstone Exploration (Trinidad) Ltd. (TETL), signed a conditional share purchase agreement (SPA) to acquire 100 per cent of STCBL from BG Overseas Holdings Ltd. STCBL holds a 65-per-cent 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 Co. Ltd. holding the remaining 35-per-cent participating interest. Under the terms of the SPA, on closing, Touchstone will pay $23-million in cash plus Dec. 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 finance the acquisition. TETL and RBL are currently preparing a fourth amended and restated loan agreement and related security registrations. 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 finance 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 Dec. 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 million cubic feet per day of natural gas and 185 barrels per day of NGLs (natural gas liquids) (approximately 3,075 barrels of oil equivalent per day), equating to net production of approximately 2,000 barrels of oil equivalent per day for STCBL.

Touchstone has assessed the pro forma net working interest reserves in STCBL, as of April 1, 2025 (based on a 65-per-cent working interest), to be approximately 3.2 million barrels of oil equivalent of proved developed producing reserves, 5.1 million barrels of oil equivalent of total proved reserves and 5.6 million barrels of oil equivalent of total proved plus probable reserves. These estimates correspond to before-tax NPV10 (net present value discounted at 10 per cent) 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 (liquefied natural gas) 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 barrels of oil equivalent per day, prior to natural declines. As noted above, revised 2025 guidance will be issued by the company subsequent to completion of the acquisition.

About Touchstone Exploration Inc.

Touchstone Exploration is a company based in Calgary, Alta., 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 TSX and the AIM of the London Stock Exchange under the symbol TXP.

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