Disclosure: The following represents my opinions only. I am not receiving any compensation for writing this article, nor does Hydra Capital have any business relationship with companies mentioned in this post. I am long TXP.TO
A very quick note today, but I did want to point out that Touchstone Energy (TXP.TO, last at $1.76) tapped the market overnight by issuing 24.3 million shares for ~US$30 million at 95 pence / C$1.64 per share. For those who have forgotten Rule #1 of the issuer side of the capital markets, it is “always take the money” (i.e., holding out for slightly better pricing for a financing that represents minor overall dilution is a mug’s game). At times like these, armchair quarterbacks abound, with everyone having their own opinion about pricing, offering size, and relative dilution, but none of it is relevant today. What is relevant to me is that TXP, which barely had two dimes to rub together just a year ago, is now “properly” cashed up, insulating it from the financial risks associated with drilling high-pressure wells (it would really suck to get into a “rodeo” on a well without adequate cash reserves to ride it out) and answering the market’s question of “when are they going to raise”. This much cash should seal the deal for a two-rig program in 2021 assuming that TXP can find another rig that it likes. It also gives TXP all the cash it needs for topside equipment to get gas out of the ground and to the edge of its lease at Cascadura-Chinook, at which point NGC will take it to market.
With a well drilling (Cascadura Deep), a well test pending (Chinook), a gas sales contract around the corner, and first gas from Coho in the near-term, TXP has no lack of things to keep the market interested. BHP’s recent (apparently) dry hole at Broadside in the T&T offshore only serves to underscore what a unique situation TXP finds itself in at Ortoire. It’s very are for a company to find gas fields like these so close to a major pipeline with significant free capacity. Never mind the fact that the pipeline serves industrial customers who are literally starved for gas.
All in all, it’s steady as she goes with a boatload full of cash. Onwards and upwards.