Touchstone Exploration: Revenue Surge, EPS Disappointment

In the ever-evolving landscape of the energy sector, Touchstone Exploration Inc. (TSX:TXP)(LSE:TXP) has emerged as a notable player, reporting its full-year 2024 earnings on March 20, 2025. The company's financial performance for the year ended December 31, 2024, reveals a tale of two metrics: impressive revenue growth and a lagging earnings per share (EPS) performance. Let's delve into the details to understand the underlying factors driving this discrepancy.

Revenue Growth: A Stellar Performance

Touchstone Exploration's 2024 revenue growth significantly outperformed industry benchmarks. The company reported revenue of USD 43.66 million for the full year, marking a 21% increase from USD 35.99 million in the previous year. This growth rate is notably higher than the 2.9% growth forecast for the Oil and Gas industry in Canada. Several factors contributed to this outperformance:

1. Full Year of Cascadura Production: The company achieved record annual production volumes of 5,734 boe/d, a 44% increase from 3,981 boe/d in 2023. This increase was driven by a full year of Cascadura production, which significantly boosted natural gas sales by 77%. The production consisted of 1,220 bbls/d of crude oil, 132 bbls/d of NGLs, and 26.3 MMcf/d of natural gas.

2. Natural Gas Sales: Natural gas sales rose by 77%, contributing to the overall revenue increase. This was partially offset by a 3% decline in crude oil and NGL sales, but the substantial increase in natural gas sales was a key driver of the company's revenue growth.

3. Operational Efficiency: Touchstone Exploration successfully drilled, completed, and brought online two wells at the Cascadura C pad, alongside the installation of a new natural gas separator. This infrastructure enhancement positioned the company to accelerate the transition from drilling to production for future wells, contributing to operational efficiency and revenue growth.

4. Strategic Acquisitions and Portfolio Optimization: The company expanded its Trinidad onshore acreage by approximately 103,000 working interest acres and acquired the Balata East block, which supports Cascadura NGL marketing. These strategic moves helped in optimizing the portfolio and enhancing revenue streams.

5. Cost Management: The company's move to profitability was primarily driven by lower expenses, as indicated by a profit margin of 19% compared to a net loss in FY 2023. This cost management strategy contributed to the overall financial performance and revenue growth.



EPS Performance: A Mixed Bag

Despite the impressive revenue growth, Touchstone Exploration's EPS performance lagged behind expectations. The company reported net earnings of USD 8.27 million, compared to a net loss of USD 20.60 million in 2023. However, the EPS for 2024 was USD 0.04 per basic share and USD 0.03 per diluted share, which did not reflect the same level of improvement as the revenue growth. Several factors contributed to this discrepancy:

1. Increased Production and Revenue: The significant increase in production and revenue did not translate into a proportional increase in net earnings. While the company generated more revenue, the net earnings did not grow at the same pace.

2. Operating Netback and Funds Flow from Operations: The company's operating netback was USD 32.89 million or USD 15.68 per boe, compared to USD 26.22 million or USD 18.04 per boe in 2023. Funds flow from operations increased by 22% to USD 16.75 million from USD 13.73 million in 2023. These figures indicate that while the company was generating more revenue, the net earnings did not proportionally increase.

3. Capital Expenditures and Financial Position: The company invested USD 23.68 million in development and infrastructure, including four gross (3.6 net) development wells and key upgrades to the Cascadura natural gas processing facility. This significant capital expenditure likely impacted the company's net earnings and EPS, as these investments are not immediately reflected in revenue but are necessary for future growth.

4. Analyst Estimates and Market Performance: Touchstone Exploration's revenue exceeded analyst estimates by 12%, but earnings per share (EPS) missed analyst estimates by 26%. This discrepancy indicates that while the company's revenue performance was strong, the market had higher expectations for EPS, leading to a shortfall in EPS performance relative to revenue growth.

Looking Ahead

Touchstone Exploration's 2024 financial performance highlights the company's strengths in revenue generation and operational efficiency. However, the lagging EPS performance underscores the need for continued focus on cost management and strategic investments. As the company moves forward, it will be crucial to balance revenue growth with profitability to meet market expectations and deliver value to shareholders.



In conclusion, Touchstone Exploration's 2024 earnings report presents a mixed picture of revenue growth and EPS performance. While the company's revenue growth is impressive, the lagging EPS performance highlights the challenges in translating revenue into earnings. As Touchstone Exploration continues to navigate the energy sector, it will be essential to focus on cost management, strategic investments, and operational efficiency to deliver sustainable growth and value to shareholders.