Canadian company buys oil producer Trinity

LOCAL oil producer Trinity Exploration and Production has received a huge vote of confidence in its US$30 million purchase by Canadian Touchstone Exploration Inc, announced on May 1.

Energy Minister Stuart Young, while speaking at the natural gas audit press conference on Tuesday, hailed Touchstone's recent performance in tripling its volumes of gas, due to the CAS-Deep-1 well in the Cascadura field drilled in 2021. He included Touchstone as one of the energy firms that has a "bullish approach" on TT's energy sector.

Trinity is a crude oil exploration, development and production company with onshore and offshore assets located solely in Trinidad, said a Touchstone statement on May 1.

For each Trinity share, existing shareholders will get 1.5 Touchstone shares, hiking the value of Trinity shares overnight by 72 per cent, from 41 pence to 62 pence, according to a statement by the London Stock Exchange (LSE). Trinity will be valued at £24 million or US$30 million, the statement said.

Existing Trinity shareholders will end up owning 20 per cent of the Touchstone/Trinity combined group. Trinity shareholders including directors now own 39 per cent of Trinity's ordinary shares, excluding those held in treasury, and support the acquisition.

The LSE statement explained the strategic rationale for the acquisition.

It said Touchstone was TT's largest independent onshore oil and natural gas producer, with assets in several reservoirs having an extensive inventory of petroleum and natural gas opportunities.

Touchstone's Coho-1 well and two wells at its Cascadura field meant its production and flow of funds from operations has increased markedly, the LSE said.

The company expects funds flow from operations of US$32 million, sufficient finances to continue to invest in its development and exploration to hike its future reserves and production volumes.

"Touchstone believes that from this position, the acquisition will provide an opportunity to create a business of significant scale in Trinidad with an enhanced ability to deliver growth in reserves, production and cash flow for the benefit of both sets of shareholders and local stakeholders."

The Touchstone statement explained how the deal would create a local 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.

"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."

The statement quoted Touchstone CEO Paul Baay.

"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 Touchstone statement said the Trinity assets were a natural extension of Touchstone's assets in Trinidad assets.

"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."

The combined entity is expected to produce 11,700-12,400 barrels of oil equivalent (boe) per day, said the Touchstone statement.

It will have combined estimated proved plus probable reserves of about 80.3 million boe as of December 31, 2023.

"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 our 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."

The website proactveinvestors.com cited Trinity CEO Jeremy Bridglalsingh, saying, “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."

It said Touchstone, with its ramping up of production from new fields, was expected to generate US$32 million of funds from operations.

The transaction is expected to be completed before the end of the third quarter, the website said.