Finance & Investing | Debt | Hedging | Capital Markets

Touchstone Liquidates Hedging Contracts to Repay Debt

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   |    Wednesday,June 08,2016

Touchstone Exploration Inc. announces that it liquidated its outstanding commodity hedging contracts on June 2, 2016 for gross proceeds of US$2,019,000 and voluntarily repaid its outstanding US$2,000,000 principal credit facility balance.

Effective June 7, 2016, the Company and its lender executed an Amendment and Limited Waiver to the Credit Agreement. The Amendment waived the Company's minimum hedging requirement under the credit facility, which was previously set at notional volumes of 800 barrels per day on a rolling twelve-month basis. The Amendment also cured the Company's April and May monthly production covenant breaches. Touchstone produced an average of 1,318 bbls/d in April and 1,366 bbls/d in May compared to the minimum monthly average requirement of 1,400 bbls/d.

In addition, the Amendment reduced the credit facility borrowing base from US$8,000,000 to US$6,000,000. Currently there is no balance drawn on the credit facility, and the full $6,000,000 borrowing base is dedicated to the Company's letter of credit relating to the East Brighton property.

The Amendment also extended the previously disclosed US$1,000,000 prepayment due on May 31, 2016 to July 15, 2016 should the East Brighton letter of credit remain outstanding. In the event that this prepayment occurs or the East Brighton letter of credit is cancelled, the borrowing base is concurrently reduced by an equal amount.

Upon the closing of the East Brighton disposition and the cancellation of the associated letter of credit, the Company and its lender will assess the credit facility which may include a new borrowing base redetermination.