. Most people have it growing at about [a rate of] 800,000 barrels per year. This means that if there is no oil 90% of the time, then he could still be right in his "possible" designation. Prior to the Q2 2013 10-Q, the company's address was listed as 2007 Enterprise Avenue in League City, Texas. One of the central goals of the research Smallcaps Daily conducts is to provide our readers with hidden small cap gems that are growing in terms of revenues and profitability in markets with a very high potential. In 2016, the firm settled a class action lawsuit in Toronto, Canada relating to publishing falsified financials for Nobilis Healthcare Corp. Calvetti Ferguson agreed to pay $2 million to settle the suit, which also released them from another class action lawsuit in Texas for the same actions. Torchlight Energy Resources not only has discovered a new oil field in Texas, but has also effectively produced hydrocarbons from it. This would make it very easy for the Company to transport the oil and gas from the facility and would reduce transportation costs. For making specific funding picks, readers ought to go looking their very personal suggestion. The Energy Report Examines Torchlight Energy's Drilling and Development Agreement with University Lands. Within Radius. We had an independent petroleum engineer review Torchlight's reserve estimate report. . For the Quarter Ended September 30, 2019 . On the other hand, the USGS does include Hudspeth County in its definition of the Permian Basin. The various Orogrande Basin transactions point to a value of well under $1 per share for the special dividend, perhaps as low as a dime or two. The Energy Report. The answer is that Torchlight did not make its way onto the public markets through a conventional IPO. The Orogrande Project has zero proved reserves and zero commercial production. We believe that both projects are worthless, and this will be revealed in a short amount of time. Engineers warn the new wells could produce as much as 50% less in some circumstances. We believe that Torchlight would be a failing, money losing business that decimates shareholders even if it had a suite of seasoned industry executives. When they completed the Cactus A35 #1H drilling, the management was able to confirm the presence of oil in the Pennsylvanian formation. 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. In order for reserves to be designated as "possible" (as opposed to "probable" or "proved"), the engineer only needs to determine a 10% chance of recovery. Shares even hit the $2 target on . In the Permian Basin, a prospect is to be drilled soon in the lightly explored Orogrande Basin. Complete this form to receive a Free copy of our Research on . 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. Although Mr. Brda was not the mastermind of the APL scheme, he has shown a tendency to associate himself with bad actors at other public companies. Has House? One of the biggest reasons for this is that the management communication through press releases has largely revolved around the technical aspects of the different projects rather than talking about the huge upside potential that its projects hold. Direct costs are bound to go up as the extraction activity scales, but Torchlight is clearly profitable at the level of its gross margin. 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. At the time of the original Orogrande vertical tests, the industry was in the earliest evolution of combining horizontal drilling and multistage fracturing in shale plays like the Barnett, and the concept of applying the same techniques to tight formation oil plays had yet to take root. Following his time at Energy & Engine, Mr. Wurtele served as the CFO of Xtreme Oil & Gas, Inc. Xtreme Oil & Gas, Inc. was headquartered at 5700 West Plano Parkway, Suite 3600, the same address being used at Torchlight's corporate address. 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. The Upper Pennsylvanian Silt (WolfPenn), a new field discovery made by Torchlight in its Orogrande Basin Project, is a hydrocarbon rich formation with over 600 feet of thickness. They are a public company looking for investors. ROTH rates the company a Buy. Cookie Notice From the administrative proceeding: a common abuse found among certain small publicly held companies. Price Per Acre. Orogrande Basin Lease was bought in 2014 for 850k shares at 3.5 dollars, with 100k in cash with 75% interest! What we interpret Torchlight's above statement to mean is it has done all it can with its other projects, nothing came from them, and now, the only worthwhile project it has left to devote its effort and capital to is the Orogrande. I am not receiving compensation for it (other than from Seeking Alpha). Now, the Company has a short float of 7.71% with a short interest ratio as high as 30.16. Before, Torchlight was looking to participate in drilling activities. All rights reserved. Given this fact, the Companys current level of earnings seems very reasonable and in no way justify the fall in the price. 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. Collectively, the companies that made projections are on track to pump nearly 10% less oil and gas than they forecast for those areas, according to the analysis of data from Rystad Energy AS, an energy consulting firm. In 2018 a Santa Fe firm that places bids for anonymous investors bid more than $95,000 per acre for a tract of U.S. government land on the New Mexico side of the Basin. Once you get down lower on the list, the value tends to drop off fairly quickly. The other good point is that these institutions have held on and this is evident from the fact that the institutional holding actually went up even with spike in price around March 2019. To ensure this doesnt happen in the future, please enable Javascript and cookies in your browser. The Permian Basin is an oil-and-gas-producing area located in West Texas and the adjoining area of southeastern New Mexico. 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. For the transition period from _____ to _____. Winkler County is ranked 21st in terms of oil production among Texas counties (still over 40,000 barrels of oil per day). At every small dip in the price, hedge funds, mutual funds, and all forms of institutional owners have literally jumped at the opportunity to average their investments in the stock. New oil plays are focused on the stacked pay of the Midcontinent's Meramec, Springer and Canyon Lime. He noted that the 3.678 billion barrel estimate touted by the company is actually referring only to possible reserves. According to Torchlight's 2012 10-K (and not mentioned in the other 10-Ks): Involvement in certain legal proceedings. discussed below). You can do the same for the tax liability. New Mexico held steady in the last week at 84 oil and gas rigs as of Friday, compared with 41 reported a year ago, per the latest data from Baker Hughes. More:$1.9 billion oil and gas merger targets Permian Basin amid growing energy prices Reddit and its partners use cookies and similar technologies to provide you with a better experience. Based on this article from Nov 2020, the price per acre for the Orogrande basin (part of the Permian Delaware basin) was around $30K. The Orogrande test is near pipeline infrastructure that connects to El Paso refineries. 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). There are two very important points that are evident from the above 10K excerpt. A searchable database of oil and gas debt and equity offerings. The moves could potentially cause permanent damage and lower the overall amount recovered from a reservoir. It currently has interests in four oil and gas projects. Now that it isn't there anymore, we believe at minimum Torchlight should have a date on the picture to show viewers that it's gone. But in July, Plano, Texas-based Torchlight Energy Resources Inc. reported results from a comprehensive logging suite and 25 core samples out of its University Rich A-11 well, the companys 6,000-foot vertical Orogrande entrada. In April 2018, TRCH said it would sell its Hazel Project, but never did, and raised equity instead. Information on assets, buyers and sellers, deal values, and more. The above excerpt is from the Companys 10K filings for 2018 and it clearly shows the huge amount of potential that its operations have. Orogrande is easily the largest project of Torchlight as it has a net acreage of around 134,000 with the Company having a 72.5% working interest in the project. In order to avoid having its stock delisted from the Nasdaq Stock Exchange, the company was required to maintain a minimum bid of $1 per share for a minimum of 10 consecutive business days during the compliance period. 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. with many not being able to survive the fallout. the court entered a default judgment against him in September 2012. As the company discloses in an 8-K filing with the SEC, Torchlight was given 180 days to regain compliance with Listing Rule 5550(A)(2), which requires the company to maintain a minimum bid of $1 per share. The value of the special dividend is estimated at $0.45 million for the Winkler Project sale plus $12.4 million for the Hazel Project sale if that goes through. While the Orogrande Basin could be technically considered a sub-basin of the Permian Basin, its omission from some definitions of the Permian Basin is one indication that it is a fringe area. Any Yes No . The EIA does not include Hudspeth County (circled below) in its definition of the Permian Basin. AGAIN that is just 1 of their two sites, I am not even talking about the midland basin yet. Elephant Analytics has 15 years of analytical experience and unique skills in numerical analysis and practical mathematics. It could go either way at this point. It appears that he has employed a similar strategy at Torchlight. In compliance with Governor Abbott's Stay-At-Home Order until at least April 30th, Torchlight has suspended current field . Some companies are off track by more than 50% in certain regions. Torchlight has attracted a fair bit of attention on social media as it heads towards a merger with Metamaterial. I have no business relationship with any company whose stock is mentioned in this article. Thus, comparisons to prime Permian acreage values (or even to the value of lesser Permian acreage such as the Hazel Project) are unfounded. From original discovery in 1924 annual New Mexico oil production peaked at 129 million bbls per year in 1969 and then settled into a long decline that was ameliorated in the 1980's and 1990's by the discovery of new trends in the Permian Basin, redevelopment of underdeveloped fields, and implementation of enhanced recovery projects in existing . Indeed, this property is a gem! has pushed up prices. Torchlight's reserves at the end of 2019 were entirely attributable to its Winkler asset. . With a team of experienced geologists, the Company looks to identify land with heavy oil potential, acquires the same, carries out various experiments and drilling of test wells to determine the oil and gas potential, and eventually sells off the acquisitions to large oil companies. All of this implies that Torchlight has its hands on one of the largest onshore field discoveries in decades. Torchlight overcame both technical and financial challenges and subsequently closed on an additional $9.8 million in funding once technical information on the well was compiled. Torchlight still appears significantly overvalued based on the percentage of the post-combination company it will own, although the valuation gap has closed a fair bit over the last few weeks. For more information, please see our As a result of the sudden progress and M&A hopes, Torchlight's stock has appreciated 200% year-to-date, closing at $1.59 per share on April 23, 2019. The value of oil and gas leases in an area that has minimal historical production and lacks proved reserves is of quite limited value. All documents filed by us pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act (excluding any information furnished pursuant to Item 2.02 or Item 7.01, or any corresponding information furnished under Item 9.01, on any Current Report on Form 8-K) after the date of the initial registration statement and prior to the effectiveness of the registration statement and after the date of . I have no business relationship with any company whose stock is mentioned in this article. Founders Oil & Gas was designated as the operator of the leases back in 2015. The same section of the company's 2018 10-K, filed on 3/18/19, states: We are primarily focused on the acquisition of early stage projects, the development and delineation of these projects, and then the monetization of those assets once these activities are completed. We know they are the same entity as a result of the disclosure below, which names Umbrella "analysts" Dmitriy Shapiro and Joe Giamichael as the controllers of voting and investment power for Catalytic. Torchlight used 3,000 pounds per foot of sand instead of the 2,000 pounds per foot used on the Founders A25 #1H . In Arizona, the price is about . The Business Overview section of Torchlight's 2017 10-K, filed on 3/16/18, states: We anticipate acquiring exploration and development projects both as a non-operating working interest partner, participating in drilling activities primarily on a basis proportionate to the working interest, and acquiring properties we can operate. Essentially, it appears to be just a matter of time before the prospective buyer can start producing millions of barrels of oil and natural gas each year. Texas allows for single drilling and development units. It appears that shortly before Mr. Wurtele joined Torchlight in September 2013, the company took over his prior company's office space. . The success of the Cactus A35 #1H drilling acts as strong evidence for international oil players that oil and natural gas can be successfully drilled out of this project and it has increased the projects saleability immensely. The Journal states: Newer shale wells drilled close to older wells are generally pumping less oil and gas than the older wells, according to early corporate results. The former operator of the Orogrande Project sold its 9.5% working interest in the assets for $2.5 million in 2018, which gives a better idea of the potential worth of Orogrande Basin assets. 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Ranked 21st in terms of oil per day ) in cash with 75 % interest to be soon. 10K filings for 2018 and it clearly shows the huge amount of potential that its have..., Texas entered a default judgment against him in September 2013, company! Damage and lower the overall amount recovered from a reservoir media as heads. ) in its definition of the Midcontinent & # x27 ; s drilling and Development Agreement with University Lands Pennsylvanian... Fall in the Permian Basin, a prospect is to be drilled soon in Permian! Is just 1 of their two sites, i am not even talking about the midland Basin.... Foot of sand instead of the 2,000 pounds per foot used on the 10-Ks... # 1H ( other than from Seeking Alpha ) towards a merger Metamaterial... Attracted a fair bit of attention on social media as it heads towards a merger with Metamaterial one the. That both projects are worthless, and this will be revealed in a short interest ratio as as... 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