Canaccord Genuity lowers Touchstone Exploration to 'speculative buy' following Chinook well test

Canaccord said the Chinook-1 well test result on the company's Ortoire licence in Trinidad was both "disappointing and confusing", with the result being a reminder that exploration was risky, even after "a good run", and that it also confirmed the "geological complexities" of this part of its licence.

"Understanding the reasons for the poor test outcome and any implications for the wider area prospectivity will take some time," Canaccord of the well, which only recovered very small volumes of oil.

The Canadian bank stated that Touchstone's initial working hypothesis is that the wellbore may have been damaged, inhibiting its ability to flow, something that may be fixable. However, the analysts stated that answering why it appeared initially to be "a highly promising gas discovery" but produced only a little oil on testing was "another matter" that still required more work.

"We think it prudent now to heavily risk Chinook and to reset our risk levels for nearby targets including Cascadura Deep (the next test) and the Royston exploration well," said Canaccord, which lowered its target price on the stock from 185.0p to 140.0p.