Success at Chinnok-1 would provide another major uplift to the valuation and the growth outlook, suggest finnCap.
Production has taken a back seat to the drilling programme, but impressive cost reductions and cash preservation efforts leave Touchstone in a healthy financial position with US$15mln of available liquidity, said the broker.
“Touchstone remains not only an exciting high-impact exploration play but also a strong production and cash flow growth story as it looks to rapidly bring its material low-cost gas/condensate discoveries onshore Trinidad into production”.
The broker has a target price of 91p.
Chinook-1 is targeting hydrocarbon prospects in the Herrera formation, the same horizon found in the successful Coho and Cascadura discoveries.
It will be drilled to depth of 9,880 feet and the drill programme is expected to take 40 days.
“The spudding of the Chinook well marks the next phase of our Ortoire block exploration program that has already delivered two successful natural gas wells in just over a year,” Paul Baay, Touchstone chief executive said in a statement.
“The Chinook well is being drilled in proximity to the original 1959 well and will further evaluate the turbidite concept eastward from the original Coho discovery. With the assistance of a 3D seismic survey, we are now expecting to move up structure to target the Herrera sands.
Second-quarter results confirmed average daily crude oil production of 1,396 barrels per day, compared to 1,589 barrels per day in the preceding quarter and 1,768 barrels in the second quarter of 2019.
The company noted that it saw an operating netback of $10.73 per barrel despite realized price reductions and operating costs were down 28%.
It exited the quarter with some US$6.89mln of cash and had US$8.46mln of net debt.
Shares eased 2% to 73.5p.