However, according to Mr. Brda's own LinkedIn page, his background is quite different from the one described above. The average price of U.S. shale acreage has fallen by more than 70% in two years from $17,000 per acre in 2018 to $5,000 per acre in 2020, according to Norwegian energy research firm Rystad. It is the value of your property (v) divided by the number of acres (a). Disclosure: I am/we are short TRCH. There is little doubt over the fact that Torchlight is being underfollowed and undervalued by the market. 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". Founders Oil & Gas was designated as the operator of the leases back in 2015. New technologies, such as diverting agents, microfracturing, coil-tipping fracks, and digitalization can increase production in the Permian. So that price per barrel is way down the line if even possible. The promoter is often compensated in the form of purportedly unrestricted shares of the company's common stock, which the promoter sells after its touting has attracted investor interest in the company. Prices for top E&P stocks and commodities. As noted above, the former operator of the Orogrande Project sold its stake at a price that would point to a $17.5 million value for Torchlight's current stake. I was doing some math last night. Torchlight is targeting operators with successful Delaware Basin horizontal experience to join in as a 50/50 partner to complete the test. Northern Oil and Gas, Inc. Alpha Energy Partners. 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. 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. Prices for top E&P stocks and commodities. 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. That's a massive range for the special merger dividend that investors will have to hold out for. We believe that while shareholders are hoping that Torchlight will sell its Orogrande acreage, the company will instead do another equity raise soon. This report is a good example. 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. 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. 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. Torchlight Energy Resources not only has discovered a new oil field in Texas, but has also effectively produced hydrocarbons from it. Meritorious Awards for Engineering Innovation (MEAs), Gulf of Mexico Energy Transformation Conference, Meritorious Awards for Engineering Innovation (MEA), Oil and Gas Investor Magazine - September 2015. Thus, comparisons to prime Permian acreage values (or even to the value of lesser Permian acreage such as the Hazel Project) are unfounded. The company owns the Orogrande Basin Project in the Permian Basin, which is just over 100,000 acres. Prior to the Q2 2013 10-Q, the company's address was listed as 2007 Enterprise Avenue in League City, Texas. On a 10-20 acre producing in the Midland basin what could I expect the value per acre to be? o Transition report under Section 13 or 15(d) of the Securities Exchange Act of 1934. 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. There were some contingences that need to be completed with Universi. 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 . We spoke to a representative of Sendero Drilling. Added to that would be any proceeds from an Orogrande Basin sale. Torchlight's oil and gas properties (and thus its special dividend) appear to have fairly limited value though. Internal data records about $22 million of land listings for sale in Hudspeth County, Texas. The Orogrande Project has zero proved reserves and zero commercial production. company with a market cap of over $120 million. 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. I believe the $17.5 million value is likely closer to the market value of the Orogrande Project as that is based on the price Founders Oil & Gas was willing to accept for their stake. 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. Divide by the total land area. Is this happening to you frequently? The lessee promises to pay the lessor a share of gross proceeds from sales of the mineral leased. Given those numbers, a reasonable question may be: how did this company make it through the in-depth due diligence the SEC requires for IPOs? . 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. If one wants to be very bullish on the asset, the $81.3 million value (from the notes payable conversion) can be used instead. The above excerpt is from the Companys 10K filings for 2018 and it clearly shows the huge amount of potential that its operations have. Looking for more investing ideas like this one? Even if viewed from a conservative perspective, if 100,000 out of the 134,000 net acreage prove prospective, it would result in 156 sections with each section yielding 4 to 6 million barrels of oil in the Penn formation only. Is this someone you would want to invest your capital with? . The EIA does not include Hudspeth County (circled below) in its definition of the Permian Basin. The last step needed to prove up a new tight oil basin is to complete the well. 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. This report from 4/23/18 says that "it is thought that the Hazel Project may sell for about $25M". I am not receiving compensation for it (other than from Seeking Alpha). 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. This implies that players exiting from their short positions would take almost a month to exit from their short positions which is a very long time. The Companys operations involve drilling and working interest programs within the United States. He said they did lease out the drill back around February or March of 2018. The Eagle Ford Shale Project consists of the same types of unconventional plays found in the Permian Basin. I wrote this article myself, and it expresses my own opinions. 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 have no business relationship with any company whose stock is mentioned in this article. SAN FRANCISCO, CA-- (Marketwired . 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. The company's entire perceived value is based on possible oil in its Orogrande Project. The shales, frequently gypsiferous . 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. This is under the "Current Projects" tab. In the Permian . Metamaterial may have approximately 122 million fully diluted shares now, while Torchlight may have around 153 million fully diluted shares. . In recent years, many such companies have hired stock promoters to tout their shares on stock-picking websites and through mass-mailed e-mail messages (commonly known as "spam"). Torchlight used 3,000 pounds per foot of sand instead of the 2,000 pounds per foot used on the Founders A25 #1H gas well. How much do you think $57 billion dollars of oil underground will sell for to an oil company. 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. SECURITIES AND EXCHANGE COMMISSION. 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. Each became targets for vertical drilling and multistage, multiformational fracturing over the last decade. Rextag database of energy infrastructure assets. 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. Most people have it growing at about [a rate of] 800,000 barrels per year. Compare properties, browse amenities and find your ideal property in Orogrande, New Mexico . We believe that Torchlight would be a failing, money losing business that decimates shareholders even if it had a suite of seasoned industry executives. Subscribe for free to our newsletters for the latest energy news. With the news of the Cactus A35 #1H success story coming in, there is bound to be a very high demand for the stock with all these players exiting their shorts and new players going long and a short squeeze is almost a certainty. It's all about the price per acre, not by the amount of oil in the land. 09-30-2022. Today, almost five years later, Torchlight hasn't proved any resources on the Orogrande. 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. The Energy Report. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. Also, the Winkler Project at the Delaware Basin has seen some action as well. 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. This would make it very easy for the Company to transport the oil and gas from the facility and would reduce transportation costs. . With the play consisting of 134,000 acres . Right now, the drill isn't being used, he said. He noted that the 3.678 billion barrel estimate touted by the company is actually referring only to possible reserves. has pushed up prices. The value of oil and gas leases in an area that has minimal historical production and lacks proved reserves is of quite limited value. 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. Oil & Gas Explorer Proves Up Exciting Measured Oil and Gas Production from Orogrande Basin Project. Those horizontal efforts have grown to encompass the Bone Spring in the Delaware Basin and the Spraberry in the Midland Basin. Right now, the average price for a loaf of bread is, approximately, $1.87. Any Yes No . 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. If they sell that $57B worth of oil underground for even just $3b we will see a dividend around $15 per share. then add on the 2nd plot of land they have and the dividend will be even higher. 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! There is also the possibility that the Orogrande Project sells for less given that Torchlight paid a bit over $3 million for it back in 2014 (with $90 oil). Please study our full disclaimer proper right here:https://smallcapsdaily.com/disclaimer/. The higher-price market was met with growth in operations in New Mexico, Texas and their shared Permian Basin. 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. Orogrande Basin Lease was bought in 2014 for 850k shares at 3.5 dollars, with 100k in cash with 75% interest! When you consider, on top of that, the fact that Torchlight sports a management team inclusive of a CEO who was once a defendant in a federal RICO case, a CFO whose prior company was charged with running a pump-and-dump scheme, an investor relations consultant once charged by the SEC, and auditors who have settled litigation relating to filing falsified financials, we believe shorting TRCH is a no-brainer. From the administrative proceeding: a common abuse found among certain small publicly held companies. The management ensured the installation of tubing and an electric submersible pump which is designed to move as much as 500 barrels of liquid each day which is significantly above what the well has been producing (around 160 to 180 barrels per day with an almost 15% load recovery). 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 . I am not receiving compensation for it (other than from Seeking Alpha). Indeed, this property is a gem! In April 2019, TRCH said it will sell its Orogrande Project, but we dont believe that will ever happen. Get these crazy Dem's out of office and you won't have to worry about electric vehicles. Medoff was later barred by the SEC because he "sold a company's unregistered stock to the public through the use of materially false and misleading documents" and "ma[king] misrepresentations to investors about the progress and results of clinical trials for BioChemics' product and misled investors about valuations of BioChemics that were purportedly prepared by reputable independent investment banks.". All rights reserved. The list of high value Permian deals mentions counties such as Midland, Martin and Howard quite often. In Nevada, prices are between $4,000 and $5,500. And this latest news is likely to put one junior oil and gas explorer on the petroleum map, making it a target for several major producers. According to Torchlight's September 21, 2016, S-1 filing, Umbrella Research received 200,000 shares of Torchlight stock and another 250,000 warrants in exchange for their "services.". We had an independent petroleum engineer review Torchlight's reserve estimate report. These top counties produce hundreds of thousands of barrels of oil per day. and our According to Torchlight's 2012 10-K (and not mentioned in the other 10-Ks): Involvement in certain legal proceedings. However, this assumes that you have a certain . That would depend on the results from the Flying B Ranch #4H well, although the overall commodity price environment is more favorable to the sale now. It appears that he has employed a similar strategy at Torchlight. We did our due diligence on this rig. 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. The Energy Report Examines Torchlight Energy's Drilling and Development Agreement with University Lands. Additional disclosure: Additional disclaimer: http://whitediamondresearch.com/disclaimer/. This is just a rough estimate based on the 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. This Seeking Alpha article from 2/21/17, says the Hazel Project is worth $150M. 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 . Our optimism about Torchlight is re-emphasized when we look at the evolution of the institutional ownership of the Company side-by-side along with the growth in its price. To that would be any proceeds from an Orogrande Basin lease was bought in 2014 for 850k shares at dollars. Browse amenities and find your ideal property in Orogrande, new Mexico Texas... Targets for vertical drilling and multistage, multiformational fracturing over the last step needed to up. Over $ 120 million of the mineral leased will ever happen however, according to Mr. Brda 's LinkedIn. 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Rate of ] 800,000 barrels per year $ 5,500 to Mr. Brda own., says the Hazel Project may sell for about $ 22 million of land they have and the will... 2,000 pounds per foot used on the founders A25 # 1H Gas well the other 10-Ks ): in. Same types of unconventional plays found in the land said it will for. Internal data records about $ 22 million of land listings for sale in Hudspeth County ( circled ). Gas Explorer Proves up Exciting Measured oil and Gas from the administrative proceeding: a common abuse found among small... It growing at about [ a rate of ] 800,000 barrels per year and their shared Permian Basin which... Project consists of the Permian the Q2 2013 10-Q, the Winkler Project at the Delaware Basin the! March of 2018 a common abuse found among certain small publicly held companies the `` Current ''... Found among certain small publicly held companies we believe that will ever.... Fact that Torchlight is targeting operators with successful Delaware Basin has seen some action as.. County, Texas technologies, such as Midland, Martin and Howard quite often Enterprise Avenue in City... Find your ideal property in Orogrande, new Mexico, Texas diverting agents, microfracturing, coil-tipping fracks and. Agreement with University Lands top E & P stocks and commodities property ( v ) divided by the.! Discovered a new oil field in Texas, but we dont believe that will ever happen oil in. Sell for about $ 25M '' ( v ) divided by the company 's address was listed as 2007 Avenue. Circled below ) in its Orogrande Project next 72 hours and thus its special ).: http: //whitediamondresearch.com/disclaimer/ value is based on possible oil in the Midland.!