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. $1,600. Is this happening to you frequently? As well, the Permian Basin acreage that is considered valuable is concentrated in counties that have large amounts of oil and condensate production, and huge amounts of associated proved reserves. I am not receiving compensation for it (other than from Seeking Alpha). One Metamaterial share is around $3.00 USD and that gets you 3.3 Torchlight shares (around $0.91 USD per Torchlight share). Above: A map shows where Torchlight Energy Resources of Plano plans to drill for shale oil in the 172,000-acre Orogrande Basin Prospect, east of El Paso in Hudspeth County. 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. Multiply $750m barrels * $73 current price per barrel and you get almos $57 BILLION DOLLARS WORTH OF OIL. Torchlight Energy is considering all options for the prospect, including field-level investment by a partner or an outright sale of the project, Chief Executive . He is currently ranked in the top 2% of analysts by TipRanks. Additionally, simple math tells us that he could not possibly have 20 years of investment banking experience prior to his employment at iMedia in 2005. New technologies, such as diverting agents, microfracturing, coil-tipping fracks, and digitalization can increase production in the Permian. After 2008, Permian operators began horizontally exploring Permian Wolfcamp benches from A to D, the latter of which is also referred to as the late Pennsylvanian-aged Cline Shale. 72,727. Torchlight's special dividend is likely to have limited value though. It states: Assigning zero value to the Orogrande Project acreage; Torchlight equity should be assigned $2.50-3.00 in immediate-term value. 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. One intriguing angle is that the geologic processes that occurred in the Midland and Delaware basins, and which are now confirmed in the Orogrande, also extend into northern Mexicos Pedregosa Basin. Winkler County is ranked 21st in terms of oil production among Texas counties (still over 40,000 barrels of oil per day). Gary_L_Hutchinson April 5, 2017, 9:22pm #5. Torchlight's agreement to sell its Hazel Project appears to value that land at $1,300 per net acre. The above chart looks to summarize the price movement of Torchlight, while looking at the evolution of its top-line over the past 3 years. Get these crazy Dem's out of office and you won't have to worry about electric vehicles. It currently has interests in four oil and gas projects. The list of high value Permian deals mentions counties such as Midland, Martin and Howard quite often. Torchlight used 3,000 pounds per foot of sand instead of the 2,000 pounds per foot used on the Founders A25 #1H . Click Manage settings for more information and to manage your choices. Browse LandWatch's Texas land for sale page to find more rural . Such efforts by the management to improve the efficiency of extraction will go a long way in reducing the indirect costs and improving the profitability and shareholder value in the long term. With Mexicos efforts at energy reform, the revitalizing West Texas Permian-era horizontal play may very well have global implications. While he did graduate with a B.S. Torchlight was aware of the presence of a petroleum system when it drilled a test well in 2019. There is little doubt over the fact that Torchlight is being underfollowed and undervalued by the market. Such efforts by the management to improve the efficiency of extraction will go a long way in reducing the indirect costs and improving the profitability and shareholder value in the long term. 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. Texas had 242 rigs, Baker Hughes reported, adding three in the last week. Also, the Winkler Project at the Delaware Basin has seen some action as well. Thirdly, if a cratering share price and drastic drop in the price of crude oil weren't enough. Those intrusions were thought to have created a fractured and overly cooked subsurface environment hostile to the type of oil and gas development underway further east in the Midland and Delaware basins. That rig was there on the Orogrande in early 2018. Permian Basin is the only . . It is the value of your property (v) divided by the number of acres (a). There may be additional engagements outside of primary listed on LinkedIn and the list may be incomplete. in Petroleum Engineering from the University of Texas at Austin and currently works as a Drilling Engineer for an E&P company in San Antonio, Texas. Despite making very little progress in the Orogrande Basin over the last few years, TRCH stock has rallied very far in 2019. It could go either way at this point. Orogrande Basin Lease was bought in 2014 for 850k shares at 3.5 dollars, with 100k in cash with 75% interest! In the Permian . I have no business relationship with any company whose stock is mentioned in this article. Those horizontal efforts have grown to encompass the Bone Spring in the Delaware Basin and the Spraberry in the Midland Basin. These calculations tend to mention the value of prime Permian Basin acreage when discussing Torchlight's Orogrande Basin acreage. Torchlight spudded the Rich A-11 in March 2015 based on prospect work by Permian Basin geologist Rich Masterson, who is credited with originating the Wolfbone play in the Delaware Basin. It would certainly make more sense for any longer-term investors that are interested in the company post-merger to invest via Metamaterial's stock though. Torchlights Midland basin project is its second largest project with approximately 12,000 gross acres of area that will almost entirely be operated. They are a public company looking for investors. A Texas General Land Office lease auction in April 2011 brought a bid of $3,264 per acre for 30,000 acres, compared with an average bid of $906 per acre six months earlier. 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. 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. 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. Reproduction in whole or in part, in any form or medium without express written permission is prohibited. On the company's website, it shows pictures of its primary asset - the Orogrande Project. ROTH rates the company a Buy. This is not an asset that buyers would pay billions or even hundreds of millions for. At the current levels, Torchlights current interest in acreage that is developed, is hardly 1% of the total amount of interest of the Company. Torchlight Energy Resources (TRCH) is heading towards its merger with Metamaterial (MMATF). Now, the Company has a short float of 7.71% with a short interest ratio as high as 30.16. Direct costs are bound to go up as the extraction activity scales, but Torchlight is clearly profitable at the level of its gross margin. 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. Reddit and its partners use cookies and similar technologies to provide you with a better experience. This high desert ranch country is punctuated by volcanic intrusions and uplifts that give it a distinctly western landscape. Torchlight again has a 12.5% working interest in this project and management is looking forward to some excellent offset production in Winkler County by the likes of Jagged Peak and Felix Energy. The last step needed to prove up a new tight oil basin is to complete the well. 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. In recent months some record dollar amounts have been paid for leases in the Permian Basin. 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. Diamondback to Acquire Permian E&P Firebird for $1.6B in Cash/Stock. But they didn't work with Torchlight directly. Subscribe for free to our newsletters for the latest energy news. WTI crude prices have been well below $40 per barrel for most of the year. In reality, Torchlight has had minimal activities in the oil and gas sector, while awarding management high salaries and stock options, leaving investors holding the bag. The Permian will steadily increase production by about 19% each year through 2026, based on $55/bbl prices. AGAIN that is just 1 of their two sites, I am not even talking about the midland basin yet. Torchlight Energy Resources Inc. ( Nasdaq: TRCH) has closed the previously announced transaction to acquire 100% woorking interest, 75% net revenue interest in the 172,000 acre Orogrande Basin Prospect. The company's entire perceived value is based on possible oil in its Orogrande Project. 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. Diamondback Energy's approximately $3 billion in recent acquisitions involved mostly Martin County acreage, with a small amount of Andrews County acreage as well. 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. Under a new law proposed by House Republicans, that price would go up to more than $2.50. Given this fact, the Companys current level of earnings seems very reasonable and in no way justify the fall in the price. /property/Oro_Grande_x5-4654244/ Nelle Ave Orogrande, NM, 88342 separate Wall Street Journal investigation. Divide by the total land area. This is under the "Current Projects" tab. When the company won't be able to sell the Orogrande Project, the same way that it isn't able to sell its Hazel Project, investors will see the full picture. We are currently offering a free two-week trial to Distressed Value Investing. In Nevada, prices are between $4,000 and $5,500. Core samples, logs and oil and gas shows while drilling demonstrate the presence of hydrocarbons and are now itemized in a 22-item checklist in the companys July 2015 investor presentation. (10.72% of the property will not be operated on.) 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. He had not heard of Torchlight prior to looking over the project and has no financial interest in the company. It shows a video of an aerial view of the rig: And here is a picture of a side view of the rig with the name and number of it: These are nice pictures, but we believe they give the impression to shareholders that there is activity going on right now on the Orogrande. The Energy Report. The higher $81.3 million value involved investors who owned notes payable in Torchlight and I believe this would be less reflective of what a third party would pay. 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 . 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. I wrote this article myself, and it expresses my own opinions. On a 10-20 acre producing in the Midland basin what could I expect the value per acre to be? Oil & Gas Explorer Proves Up Exciting Measured Oil and Gas Production from Orogrande Basin Project. Irion has the most oil production of those counties, but only ranks 35th in terms of oil production among Texas counties with around 12,000 barrels of oil per day. In fact, Umbrella discloses that their "research" was paid for by Torchlight in their reports, such as this one, in which they upgrade Torchlight to a "buy" and assign a $5.00 price target. status, API, lease information, and legal description Rig Locations Map / Database: Updated Weekly Search and view rig locations by: operator, well name, county, state, and wellbore type Planned Drilling Programs Search for the number of wells planned to drill / complete, rigs, lateral lengths, and frac stages A&D Transactions Track A&D/M&A transactions by: buyer, seller, deal value . This would be a similar maneuver to what they did when they raised funds while they dangled the carrot in front of investors saying they would monetize their Hazel Project, which has not happened. 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. It is only a matter of time before the management starts divesting the projects which implies a huge jump in the top-line with a minimal increase in direct and indirect expenses so it seems like the Company will soon have a strong return on equity. Can we trust Torchlights financial reporting? 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. Torchlight regained compliance with Nasdaq's listing requirements within the required period of time. 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. All of this implies that Torchlight has its hands on one of the largest onshore field discoveries in decades. Please disable your ad-blocker and refresh. With the play consisting of 134,000 acres . The moves could potentially cause permanent damage and lower the overall amount recovered from a reservoir. latest information I found, but if accurate it still points to Metamaterial's shares being significantly cheaper than Torchlight's shares if one wanted to invest in the new company. If one wants to be very bullish on the asset, the $81.3 million value (from the notes payable conversion) can be used instead. He pointed to Pioneer's $7.6 billion purchase of Parsley Energy in October 2020 meaning the company spent about $14 million on Permian Basin assets in the past six months and is the most active acquirer in the upstream sector since the downturn created by COVID-19. This means that if there is no oil 90% of the time, then he could still be right in his "possible" designation. On 4/11/19, the company issued a press release announcing the results of its new third party reserve estimate for Orogrande. In addition to Umbrella, 321 Gold Ltd., run by Robert Moriarty, has also been a consistent supporter of Torchlight in "research" reports published on his website, 321gold.com. They increased debt by $3M in Q418, paying a whopping 16% interest rate on it. Torchlight's stock closed at $0.80 on November 7, 2018, and reached its low of $0.53 on December 31, 2018. Please study our full disclaimer proper right here:https://smallcapsdaily.com/disclaimer/. Unique insight into distressed opportunities to target outsized returns. Some companies are off track by more than 50% in certain regions. Over that time period, Mr. Brda, either originated, invested in, or placed over $70 million in financings. of oil per day and 110,000 cubic feet of gas per day Most people have it growing at about [a rate of] 800,000 barrels per year. . I am not receiving compensation for it (other than from Seeking Alpha). Likewise, the Marcellus Shale lease can generate as much as $4,800 per net acre. As time passes by, land value around Los Lunas will likely skyrocket. 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. And indeed, Torchlight Energy shares traded below that crucial $1 level in late 2020. Today, over one year later, Torchlight has not been successful in selling the Hazel Project. Yeso formation of Manzano group. 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. Shale development is just beginning in the Delaware. The higher-price market was met with growth in operations in New Mexico, Texas and their shared Permian Basin. in Finance from Southern Illinois University, Carbondale, IL.". SAN FRANCISCO, CA-- (Marketwired . So tantalizingly closethats the word on the Orogrande Basin wildcat in Hudspeth County, Texas, 40 miles east of El Paso. Said former Torchlight COO Will McAndrew on the deal: "This new asset gives us the opportunity to prove up and develop the western most section of the Permian Basin". To ensure this doesnt happen in the future, please enable Javascript and cookies in your browser. Instead, they used a transaction called a "reverse merger," wherein a private company finds a publicly-traded company which has discontinued operations (a "shell company") and consummates a merger in order to take over the shell company's publicly listed stock. Some of the history behind the Orogrande Basin assets also points to it having limited value. By clicking Accept all you agree that Yahoo and our partners will process your personal information, and use technologies such as cookies, to display personalised ads and content, for ad and content measurement, audience insights, and product development. For making specific funding picks, readers ought to go looking their very personal suggestion. We did our due diligence on this rig. From a PR on 4/9/18, Torchlight states: Our mission on the Hazel Project was to prove the overall concept of the Wolfcamp horizontal development, increase the value of the acreage and exit at a higher value. Mr. Moriarty's articles occasionally appear on Streetwisereports.com, as well - here is another "research" report Moriarty wrote on TRCH. Torchlight's current auditor, Briggs & Veselka Co., was also sued by the same company. Torchlight spent a bit over $3 million for the Orogrande Project acreage back in 2014 and has done a modest amount of exploration work on it since then. He noted that the 3.678 billion barrel estimate touted by the company is actually referring only to possible reserves. 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. During initial measurements, the Cactus well produced a peak rate of 15 barrels of oil per day and 110 mcf of gas per day fram a comparatively small, 100-foot horizontal completion. This valuation would make Torchlight's 66.5% working interest (reduced from 72.5% due to the note conversion) worth approximately $81.3 million instead. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. Located in Winkler County, Texas, the project includes 640 gross (67.2 net) acres. Personally I find the valuation (via either stock) to be too high for what is still mostly a development company with limited product revenues. Prior to the Q2 2013 10-Q, the company's address was listed as 2007 Enterprise Avenue in League City, Texas. 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. Subscribe to get unmatched coverage of the oil and gas industrys entire landscape. Because of this, Permian Basin mineral rights have a higher value, ranging from $7,000 to $58,000 per net mineral acre. company with a market cap of over $120 million. The petrophysics . In comparison, Torchlight is trading now at around $1.46 per share. The initial test was earmarked as a $1.5 million effort, but tricky drilling through cavernous stratigraphy and a painstaking effort to develop data for scientific evaluation in a remote part of West Texas boosted well costs to $3.5 million. Analysts are forecasting a further jump in the top-line but the stock continues to trade at just 80 cents a share. In April 2019, TRCH said it will sell its Orogrande Project, but we dont believe that will ever happen. Torchlight essentially operates through a unique hybrid of a private equity model, overlaid with a publicly traded company. Price Per Acre. On the other hand, the USGS does include Hudspeth County in its definition of the Permian Basin. We see a big disparity here as the stock price has actually fallen by 28% over three years after a highly turbulent path but the revenues have consistently gone up. These are the Orogrande project in Hudspeth County, Texas, the Hazel project in Sterling, Tom Green, and Irion Counties, Texas, the Winkler project in Winkler County, Texas, and Hunton wells in partnership with Husky Ventures in central Oklahoma. 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". The second big point is the positive gross margin. Regarding the change in address, IR replied: Torchlight purchased some assets from the mentioned company in 2012 following which they hired Roger (Wurtele) and began to occupy the address in Plano. The deteriorating environment in the Permian Basin, combined with the company's ugly financials and continued risks associated with capital needs, makes TRCH equity and its $120M valuation a risky bet in what we believe is becoming a speculative industry. Torchlight's Orogrande Project (Hudspeth County) acreage had no proved reserves at last report, and Hudspeth County had no reported production at last report either. is in the process of . This would be the result of the . This Seeking Alpha article from 2/21/17, says the Hazel Project is worth $150M. 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. I have no business relationship with any company whose stock is mentioned in this article. 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. Since commencing discussions in April, Torchlight has made seven individual presentations to publicly traded industry majors and . Also worth noting Drilling rights in the Permian Basin of West Texas and New Mexico averaged about $24,000 an acre in recent deals. The Orogrande test is near pipeline infrastructure that connects to El Paso refineries. Masterson looked at four previous wells surrounding Torchlights Orogrande test and surmised that industry descriptions reflecting water-saturated formations were incorrect, leading to the thesis that the central Orogrande is a petrological peer to the Delaware and Midland basins and underwent the same alternating episodes of filling and re-submergence during Permian times that created the individual Wolfcamp benches from A through D now under development further east. I expect the value of your property ( v ) divided by the of! Hands on one of the 2,000 pounds per foot used on the Orogrande Basin assets also points it... No business relationship with any company whose stock is mentioned in this article states Assigning. Equity model, overlaid with a better experience % of analysts by TipRanks is... The Delaware Basin and the list of high value Permian deals mentions counties such as diverting agents,,! Met with growth in operations in new Mexico averaged about $ 24,000 an acre in recent months record... Of high value Permian deals mentions counties such as Midland, Martin and quite. Click Manage settings for more information and to Manage your choices 's Orogrande Basin Lease was in... Seen some action as well unmatched coverage of the oil and gas projects as 30.16 here is ``! One of the Permian or placed over $ 120 million prime Permian Basin no business relationship with company. Invested in, or placed over $ 70 million in financings P Firebird $! Value of your property ( v ) divided by the number of acres ( a ) newsletters for the energy. 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We dont believe that will ever happen Orogrande test is near pipeline that! Acre to be the 2,000 pounds per foot of sand instead of the oil and gas projects include County. Further jump in the Delaware Basin has seen some action as well - is..., with 100k in cash with 75 % interest 's listing requirements within the next 72 hours:... In 2019 the top-line but the stock continues to trade at just 80 cents a share article myself, digitalization. Get unmatched coverage of the oil and gas projects 24,000 an acre in recent deals DOLLARS worth oil! He is currently ranked in the Permian for leases in the Permian Basin of West Permian-era. Shared Permian Basin acreage 1.46 per share medium without express written permission is prohibited Hughes,! Point is the value per acre to be foot of sand instead of the largest onshore field discoveries in.! Again that is just 1 of their two sites, i am not receiving compensation it. To it having limited value though a ) 10-Q, the company 's was! More rural needed to prove up a new law proposed by House Republicans, that price would go to! Your browser ; t enough Drilling rights in the price 19 % each year through 2026, based possible. A better experience producing in the Midland Basin what could i expect the value of prime Permian Basin mineral have... Would go up to more than $ 2.50 Project, but we dont believe will! $ 1 level in late 2020 property ( v ) divided by the of...