Opinions

Josef Schachter Touchstone Exploration Inc. TXP-T BUY Aug 26, 2019

He has always wanted to have exploration stories in his portfolio. This company was just doing re-activations in Trinidad, but they raised money to go after deeper targets there. They now have three new wells underway. He likes this stock.

Josef Schachter

Owned

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$0.260

Stock price when the opinion was issued

Energy

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PAST TOP PICK

(A Top Pick Mar 28/19, Up 100%) They work in Trinidad, drilling for oil onshore. They have long-term potential with a plan to drill three wells in 2019-2020. The first was successful with a well likely to produce in July. A second discovery could come on in early-2021 and add more production. These drills have rallied the stock. He has an 80-cent target, so there's lots of upside. Even in tough times with low prices, successful drilling for oil will pay off.

BUY ON WEAKNESS

They just released that they will be bringing on two new discoveries -- the first sometime in the second-half of the year. They are in Trinidad and hoping to add natural gas. This will double their production. Currently they are only a crude oil producer. The natural gas market there is paying up to $2.90 US -- a very good price. He has a $0.80 target. He would buy on any pullback. He owns this one.

TOP PICK

Operating in Trinidad in oil, but are now drilling for natural gas. They found two successes, one of which they will bring into production in Q3. When that happens, the stock could hit $1.50. This is a good, rare story on the exploration front. He will buy more shares on weakness. More exploration drilling will happen later in 2020 into 2021. (Analysts’ price target is $1.30)

TOP PICK

Operates in Trinidad. It is a highly prolific energy producing region with an 80% success rate. TXP-X have four wells they are drilling and had two successful natural gas discoveries and will be drilling the other two later this year. (Analysts’ price target is $1.27)

BUY

Have done a good job with exploratory plays. Want price and volume leverage for oil stocks. TXP does not get the benefit of gas prices due to fixed gas price deals with the government. Would consider it if there was more liquidity and the price fell a little more.

BUY ON WEAKNESS

Smallest weight in his fund. The stock imploded on bad exploration drilling. Primarily natural gas and some oil. Fixed price on gas so it is a volume story. Bought it at 2x future cashflow so it was a great opportunity. Thinly traded.

PARTIAL BUY

Holds 4M shares. A volume over price story. Exploration is uncommon these days and the share sold off 33-40%. Buying it on cashflow profile with optionality. Buying due to the selloff. Different from other plays in his fund.

PAST TOP PICK

(A Top Pick Jul 02/20, Up 51%) Happy he used stops on this. It's appreciated nicely since last year till February, when the stock pulled back after poor results from a well. He's watching it now. IF they show better drilling results, he will buy back in.

TOP PICK

Big discoveries in 2020, trouble with licensing, but the first one will come on in May. Bringing on major wells this year and 2023. $6 target in 4-5 years. Great buy at these levels. No dividend. (Analysts’ price target is $3.05)

BUY

Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research

Q1 production was 7,015 b/d (80% gas), up 80% from the prior year period. Production fell 18% largely due to natural depletion. Cash flow was $6.1M vs $10.5M on the production decline but also due to lower prices. Debt fell, but is still $27.6M, about 1X cash flow annualized. Bloomberg does not show quarterly estimates even with five analysts following the stock. The Trinity acquisition is proceeding but it is relatively small, representing about 14% of TXP's market cap. The stock is very cheap at 7X earnings, but there is size risk here in addition to typical sector risks. It is expected to show 30%+ growth next year, but will need gas prices to co-operate to achieve this.
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Josef Schachter Touchstone Exploration Inc. TXP-T BUY Aug 26, 2019

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