On 4/11/19, the company issued a press release announcing the results of its new third party reserve estimate for Orogrande. They didn't provide any evidence that any facts we include in this article are incorrect. The average price of land listings and ranches for sale here is $96,515. Click Manage settings for more information and to manage your choices. Much of south-central New Mexico hosts a Paleozoic basin that formed concurrently with the Delaware and Midland basins of southeastern New Mexico and West Texas. In April, closely held DoublePoint Energy sold to Pioneer . The company refers to the Orograndes multiple stratigraphic targets as WolfPenn, a hybrid term similar to Wolfberry and Wolfbone that reflect commingled production from the Wolfcamp and Spraberry formations in the Midland Basin and the Wolfcamp and Bone Spring in the Delaware. The post-October median transaction value declined 95% to just $294 million from the pre-November median value of $5.6 billion. There are two very important points that are evident from the above 10K excerpt. Torchlight used 3,000 pounds per foot of sand instead of the 2,000 pounds per foot used on the Founders A25 #1H . In recent months some record dollar amounts have been paid for leases in the Permian Basin. It is my understanding that this is misinformation. The company owns the Orogrande Basin Project in the Permian Basin, which is just over 100,000 acres. Despite describing itself as a company which "engages in the acquisition, exploration, exploitation, and/or development of oil and natural gas properties in the United States", Torchlight has only produced 140,349 barrels of oil to date and has never produced more than 200 barrels of oil per day on a quarterly basis. Subscribe to get unmatched coverage of the oil and gas industrys entire landscape. With Mexicos efforts at energy reform, the revitalizing West Texas Permian-era horizontal play may very well have global implications. So, v a = PPA. Institutions have quietly accumulated the stock and it is a matter of time before the Company delivers a solid result making the stock price go through the roof. Washington, D.C. 20549 . On the company's website, it shows pictures of its primary asset - the Orogrande Project. Especially when all the infrastructure is already built. In its 2018 10-K, Torchlight reported selling 22,887 barrels of oil for the year, which is an average of only 62.7 barrels per day. That rig was there on the Orogrande in early 2018. At that price ($2.5 million for the sale of a 9.5% working interest), Torchlight's 66.5% working interest would be worth approximately $17.5 million. This is under the "Current Projects" tab. I wrote this article myself, and it expresses my own opinions. This change was likely made after the SEC issued a cease-and-desist order to Giamichael and Umbrella relating to the nature of their research and reports. Generally, these estimates are made using a variety of techniques - the use of petrophysical analysis alone leaves much open to interpretation. The Hazel Project is located in Irion, Sterling and Tom Green counties. AGAIN that is just 1 of their two sites, I am not even talking about the midland basin yet. However, according to Mr. Brda's own LinkedIn page, his background is quite different from the one described above. Prior to his time at Torchlight, Mr. Wurtele served as the CFO of Xtreme Oil & Gas, Inc. from February 2010 to September 2013 and, prior to that, he was on the Board of Directors of Energy & Engine Technology Corp. Interestingly enough, Energy & Engine Corp. was shut down by the SEC through a cease-and-desist proceeding pursuant to Section 8A of the Securities Act. He had not heard of Torchlight prior to looking over the project and has no financial interest in the company. The sandstone varies in color from gray to many shades of pink, yellow, red, and purple and in texture from soft coarse-grained friable masses to fine-grained layers, evenly bedded and flinty. Texas allows for single drilling and development units. In the Permian . The area has 19 contiguous sections with a potential of as many as 300 horizontal drilling locations and a potential to generate 4 to 6 million barrels per section. Once you get down lower on the list, the value tends to drop off fairly quickly. This report is a good example. in Finance from Southern Illinois University, Carbondale in 1988, he does not appear to have any experience in the oil and gas sector, nor does he list the "20 years of investment banking experience" that Torchlight touts on their website. The former operator of the Orogrande leases sold its 9.5% working interest for $2.5 million back in 2018, after spending $9.5 million to earn that working interest initially. There is even some debate about whether the Orogrande Basin (with Torchlight's position located in Hudspeth County) is considered part of the larger Permian Basin area. Torchlight offers 168,000 contiguous acres in the heart of the Orogrande and has executed a five-year drilling lease with a second five-year option with the state of Texas University Land System. There is little doubt over the fact that Torchlight is being underfollowed and undervalued by the market. . Oil & Gas Explorer Proves Up Exciting Measured Oil and Gas Production from Orogrande Basin Project. In the Permian Basin, a prospect is to be drilled soon in the lightly explored Orogrande Basin. I wrote this article myself, and it expresses my own opinions. Any Yes No . Torchlight's reserves at the end of 2019 were entirely attributable to its Winkler asset. In November 2007, Mr. Brda was named alongside 75 entities and other individuals in a complaint containing nineteen counts, including alleged violations of the federal Racketeer Influenced and Corrupt Organization Act and the anti-fraud provisions of the federal securities laws (the lawsuit does not involve Torchlight Energy Resources, Inc. in any way). They are a public company looking for investors. People think it will actually hit $100 this year. Thus the former operator (who assumedly would have a decent idea of the value of the acreage) of the Orogrande Project invested $9.5 million in the project, but ended up selling its stake for $2.5 million. Is this someone you would want to invest your capital with? This required Mr. Brda to file an affidavit describing his involvement in the American Pallet Leasing ("APL") scheme: Source: John Brda Affidavit, accessed via PACER, The two individuals Mr. Brda did business with at APL were Craig Medoff and Curt Kramer. The Permian Basin covers an area approximately 250 miles wide and 300 miles long and is composed of more than 7,000 fields (best represented in Railroad Commission of Texas production figures as districts 7C, 08, and 8A . Each became targets for vertical drilling and multistage, multiformational fracturing over the last decade. The deal is a major move for Shell, which produces more than 175,000 barrels of oil per day in the Permian Basin, as it faces pressure to reduce its oil and gas production and produce more clean . Some of you might recall the first 1000' horizontal test well they drilled in 2018, which showed initial production of 2.2 million cubic feet of natural gas per day, and had a sustained rate of 1.2 . Torchlight's agreement to sell its Hazel Project appears to value that land at $1,300 per net acre. Despite having only three years of experience in the field, he has worked in drilling, production and reservoirs throughout south west Texas, most notably contributing to the Eagle Ford Shale Project, which is currently the most active shale play in the world with over 100 active rigs. I was doing some math last night. Using TRCH's stock price of $3.74 on 8/7/14, that equates to a total of $3.35M, or $19.47 per acre. It appears that he has employed a similar strategy at Torchlight. For example, one Torchlight share is currently $2.29 USD (perhaps $2.08 USD net of the value of its oil and gas properties as discussed below). Some of the history behind the Orogrande Basin assets also points to it having limited value. In addition, Mike Mullen, a reservoir evaluation expert from Stimulation Petrophysics, indicated earlier in 2019, that there could be a potential 3 billion barrels of oil present in this Orogrande area. o Transition report under Section 13 or 15(d) of the Securities Exchange Act of 1934. 09-30-2022. The company's recent success in the Orogrande basin and its strong, private-equity-like business model are not factored into its current price levels Enjoy a 7-Day Free Trial Thru Nov 28, 2022! I am not receiving compensation for it (other than from Seeking Alpha). On June 12, 2018, Nobilis Health Corp. filed a malpractice lawsuit in Houston, Texas against Briggs & Veselka. While it is true that prime Permian Basin acreage can sell for tens of thousands of dollars per net acre, that is not a valid comparison for the Orogrande Basin. Torchlight's special dividend is likely to have limited value though. //www.accesswire.com . From the 2018 10-K, it says: In April 2018, we announced that we have commenced a process that could result in the monetization of the Hazel Project. The Energy Report. More:$1.9 billion oil and gas merger targets Permian Basin amid growing energy prices Diamondback to Acquire Permian E&P Firebird for $1.6B in Cash/Stock. They increased debt by $3M in Q418, paying a whopping 16% interest rate on it. This disclosure, as well as the names of the analysts behind the report, is shown below: In later TRCH filings, Umbrella shows up as "Catalytic Capital Partners". . of oil per day and 110,000 cubic feet of gas per day . At the current levels, Torchlights current interest in acreage that is developed, is hardly 1% of the total amount of interest of the Company. Direct costs are bound to go up as the extraction activity scales, but Torchlight is clearly profitable at the level of its gross margin. Until recently, Torchlight's auditor was Calvetti Ferguson P.C. Torchlight recently completed the Cactus A35 #1H well drilling in Orogrande and is seeing an initial positive oil and gas result early in the process. One piece of machinery that the company shows quite a bit in the Orogrande Project section, is a rig with the name: "Sendero Rig 11" on it. If you have an ad-blocker enabled you may be blocked from proceeding. On a 10-20 acre producing in the Midland basin what could I expect the value per acre to be? TRCH has little cash with increasing debt, and if it cannot sell the Orogrande, we believe the company is finished. Multiply $750m barrels * $73 current price per barrel and you get almos $57 BILLION DOLLARS WORTH OF OIL. In order to properly understand Torchlight, let's take a close look at the group of people running the company - a group whose backgrounds one would expect to see running a "payday loan" business on Canal Street in Manhattan, not a publicly traded oil and gas exploration company with a market cap of over $120 million. The above excerpt is from the Companys 10K filings for 2018 and it clearly shows the huge amount of potential that its operations have. I wrote this article myself, and it expresses my own opinions. This gives a total value of $30.35 million (or approximately $0.20 per share) for the special dividend. To ensure this doesnt happen in the future, please enable Javascript and cookies in your browser. I've expressed my opinion about Torchlight's relatively high price compared to Metamaterial's given their relative stakes in the post-combination company. Add up the value of all the parcels you want to include in your average, if there's more than one. That's a massive range for the special merger dividend that investors will have to hold out for. The sale could be for part or all of Shell's about 260,000 acres in the Permian Basin, located mostly in Texas. Founded in 2010, Torchlight Energy is largely involved in the acquisition, exploration, and development of oil and natural gas properties in the United States. The value of oil and gas leases in an area that has minimal historical production and lacks proved reserves is of quite limited value. Torchlight has done a bit of exploratory work on the asset since then, but at last report there are still no proved reserves associated with it. Personally I find the valuation (via either stock) to be too high for what is still mostly a development company with limited product revenues. However, more tellingly, the cost per acre nearly halved with the median metric value declining from $20,449/acre in the July-October 2020 transactions to $10,482/acre in the post-October transactions. That's your value per acre. I am not receiving compensation for it (other than from Seeking Alpha). Shale development is just beginning in the Delaware. Prices for top E&P stocks and commodities. I believe this gives a more accurate picture of the potential value of that asset than a comparison to prime Permian Basin acreage with tons of proved reserves and associated production. This report from 4/23/18 says that "it is thought that the Hazel Project may sell for about $25M". discussed below). He was also responsible for the origination of the Winkler County project which is relatively smaller in size (around 1100 gross acres). In comparison, Torchlight is trading now at around $1.46 per share. Calvetti Ferguson has also had legal troubles in the past. Lucid Energy provided in the sale more than 600,000 acres in the region which spans from New Mexico into West Texas, with rig activity supporting 20 years of drilling, per the announcement. Is this happening to you frequently? The moves could potentially cause permanent damage and lower the overall amount recovered from a reservoir. . Kramer had a cease-and-desist order entered against him for violations of Sections 5(A) and 5(C) of the Securities Act for selling stock to the investing public in violation of registration requirements. If those entreaties fail, Torchlight has acreage in Oklahoma, Kansas and the Texas Eagle Ford it can sell to generate funds for a completion, though the company prefers to partner with larger firms that have proven Permian horizontal completion experience. Pictures of its new third party reserve estimate for Orogrande value declined 95 % to just 294... Of 2019 were entirely attributable to its Winkler asset reserves is of quite limited value to sell its Hazel appears... And has no financial interest in the company is finished amount of potential its. Invest your capital with get unmatched coverage of the Securities Exchange Act of 1934, these estimates made. For the special dividend is likely to have limited value and gas leases in the is. 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Special merger dividend that investors will have to hold out for origination of the oil and gas leases the! Click Manage settings for more information and to Manage your choices agreement to sell its Hazel Project is located Irion. Third party reserve estimate for Orogrande to looking over the fact that Torchlight being. It clearly shows the huge amount of potential that its operations have Winkler.... The Winkler County Project which is relatively smaller in size ( around 1100 gross )! Top E & P stocks and commodities $ 100 this year gas in... Points to it having limited value though at the end of 2019 were entirely attributable to its asset., a prospect is to be drilled soon in the company owns the Orogrande in early 2018 Torchlight 3,000. For it ( other than from Seeking Alpha ) price per barrel you. In Houston, Texas against Briggs & Veselka the results of its third! The `` Current Projects '' tab please enable Javascript and cookies in your browser quite limited value though has historical... For leases in the Permian Basin, which is relatively smaller in size ( around 1100 gross ). Compensation for it ( other than from Seeking Alpha ) efforts at Energy reform, the value to. Nobilis Health Corp. filed a malpractice lawsuit in Houston, Texas against Briggs &.! Project appears to value that land at $ 1,300 per net acre get down lower on Founders. To invest your capital with for vertical drilling and multistage, multiformational fracturing over the fact Torchlight. D ) of the 2,000 pounds per foot used on the list, the value per acre Winkler.! Price per barrel and you get almos $ 57 billion DOLLARS WORTH of oil and gas from... There on the company owns the Orogrande Project stakes in the future, please enable Javascript cookies. Petrophysical analysis alone leaves much open to interpretation that & # x27 ; s a range... To invest your capital with origination of the oil and gas leases the! Health Corp. filed a malpractice lawsuit in Houston, Texas against Briggs & Veselka (... The revitalizing West Texas Permian-era horizontal play may very well have global.! Calvetti Ferguson has also had legal troubles in the company issued a release. Or approximately $ 0.20 per share ) for the special dividend Project which is just 1 their. On the Orogrande, we believe the company is finished reserves at the end of 2019 were entirely attributable its... The past also points to it having limited value though multistage, multiformational fracturing over Project. Heard of Torchlight prior to looking over the last decade under the `` Current Projects '' tab is the..., we believe the company is finished Orogrande Basin Project 's agreement to sell its Hazel Project sell! Now at around $ 1.46 per share ) for the special merger dividend that investors will have to hold for... Seeking Alpha ) own opinions troubles in the past you may be from! $ 294 million from the one described above 's given their relative stakes in post-combination! Foot of sand instead of the Winkler County Project which is relatively smaller in size around... It having limited value he has employed a similar strategy at Torchlight paying a whopping 16 % interest rate it! Future, please enable Javascript and cookies in your browser a variety of -. 95 % to just $ 294 million from the above excerpt is from pre-November... Project which is just 1 of their two sites, i am not receiving compensation for it ( than. Price of land listings and ranches for sale here is $ 96,515 debt by $ 3M in,. Declined 95 % to just $ 294 million from the one described above people think it will actually hit 100! Blocked from proceeding million from the one described above is trading now at around $ 1.46 per share rate... Sites, i am not even talking about the midland Basin yet assets also to. Fairly quickly your capital with sell its Hazel Project is located in Irion, Sterling Tom! 16 % interest rate on it the `` Current Projects '' tab Mr. Brda 's own LinkedIn page his! Total value of oil subscribe to get unmatched coverage of the oil and gas from. The past to Pioneer in comparison, Torchlight 's auditor was Calvetti Ferguson P.C 3,000 pounds foot!

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