I am not receiving compensation for it (other than from Seeking Alpha). Suddenly, Torchlight's sole focus is the sale (or "monetization") of its early stage projects, including the Orogrande Project. Located in Winkler County, Texas, the project includes 640 gross (67.2 net) acres. Right now the Orogrande Basin of West Texas is ground zero for just such a key discovery. 09-30-2022. 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? 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. 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. Divide by the total land area. Privacy Policy. 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 . Permian Basin is the only . 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. Yet, as of their 2018 10-K, Torchlight continues to retain Briggs & Veselka as their auditor. 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. 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. The Orogrande Project is a speculative play that hasn't been proved out (zero proved reserves as of Torchlight's 2019 10-K). This project was the result of the work of a well known Permian Basin expert Geologist, Rich Masterson. . 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). 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. 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. Source: Peter Krauth for Streetwise Reports 02/25/2020. $23,529. Is this someone you would want to invest your capital with? 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 company paid $100K in cash and 868,750 shares of stock for a 75% revenue interest in the property. With over 20 years of investment banking experience, including 5 years as a fund manager, prior to becoming a consultant, Mr. Brda has the knowledge and experience to execute and ensure success for his client companies. April 05, 2017 08:45 ET | Source: Streetwise Reports. He was promoted to CEO in December of 2014 with the exit of our co-founder Tom Lapinski. Additionally, a separate Wall Street Journal investigation from early in 2019 noted that fracking wells are simply yielding far less than the optimistic projections once used to help raise capital. 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. We believe that while shareholders are hoping that Torchlight will sell its Orogrande acreage, the company will instead do another equity raise soon. 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. On the company's website, it shows pictures of its primary asset - the Orogrande Project. UNITED STATES. 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. Torchlight took back operational control in Q4 2017 after Founders had spent $9.5 million to gain a 9.5% working interest in the project. Torchlight Energy has a net revenue (NRI) of 75%. PLANO, TX / ACCESSWIRE / May 21, 2019 / Torchlight Energy Resources, Inc. (NASDAQ: TRCH) ("Torchlight" or the "Company"), today provided an update regarding the Company's process addressing acquisition interest from industry majors in its Orogrande Basin Project. We are short Torchlight Energy Resources, Inc. (TRCH) because we believe it is a classic pump-and-dump run by a questionable management team in our opinion, with some of the leadership having previous run-ins with securities regulators. In April 2018, TRCH said it would sell its Hazel Project, but never did, and raised equity instead. For the transition period from _____ to _____. 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. 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. . 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! We believe this news could really change the market perception and send the stock skyrocketing. The post-October median transaction value declined 95% to just $294 million from the pre-November median value of $5.6 billion. Investors looking at the previous data on the revenues would probably ask Yes, the revenues have more than doubled but have Torchlights margins been up to the mark? The answer is Yes. The above excerpt is from the Companys 10K filings for 2018 and it clearly shows the huge amount of potential that its operations have. 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. I've expressed my opinion about Torchlight's relatively high price compared to Metamaterial's given their relative stakes in the post-combination company. 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. 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. Any Yes No . Mr. Brda's motion to vacate was accepted by the court, contingent upon Mr. Brda's compliance with his settlement. 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). Generally, these estimates are made using a variety of techniques - the use of petrophysical analysis alone leaves much open to interpretation. 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"). In 2018, Founders sold its 9.5% working interest for a total of $2.5 million. I mostly wanted to go into more depth about the value of Torchlight's oil and gas properties (and thus the potential value of its special dividend) though. 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. Torchlight's stock closed at $0.80 on November 7, 2018, and reached its low of $0.53 on December 31, 2018. There is also likely to be zero proved reserves attributed to the Orogrande Project in Torchlight's 2020 10-K. The shales, frequently gypsiferous . We specialize in the technology and healthcare sectors. On June 12, 2018, Nobilis Health Corp. filed a malpractice lawsuit in Houston, Texas against Briggs & Veselka. Metamaterial may have approximately 122 million fully diluted shares now, while Torchlight may have around 153 million fully diluted shares. $1,600. They are a public company looking for investors. Mr. Brda, who also co- founded the Company, has been the Managing Member of Brda & Company, LLC since 2002, which provides consulting services to public companies - with a focus in the oil and gas sector. 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. Added to that would be any proceeds from an Orogrande Basin sale. 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. The list of high value Permian deals mentions counties such as Midland, Martin and Howard quite often. is in the process of . Once you get down lower on the list, the value tends to drop off fairly quickly. Texas had 242 rigs, Baker Hughes reported, adding three in the last week. . Right now the Orogrande Basin of West Texas is ground zero for just such a key discovery. Torchlight is in the process of drilling more test wells before it may eventually find a buyer for the development of these huge acres of land for what will surely be a handsome price. 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. 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. Rextag database of energy infrastructure assets. One Metamaterial share is around $3.00 USD and that gets you 3.3 Torchlight shares (around $0.91 USD per Torchlight share). We private zero shares of Torchlight Energy Resources, Inc. We dont intend to buy or promote additional shares of Torchlight Energy Resources, Inc., throughout the open market at any time, along with sooner than, all through or after the Website and Information, present public dissemination of favorable Information. Thus, comparisons to prime Permian acreage values (or even to the value of lesser Permian acreage such as the Hazel Project) are unfounded. The Rich A-11 presents a 700-foot hydrocarbon-bearing column with up to 6 million barrels of oil or liquids-rich gas per section. February 27, 2020. Diamondback Energy's approximately $3 billion in recent acquisitions involved mostly Martin County acreage, with a small amount of Andrews County acreage as well. Clearly, the Fund community seems highly confident of Torchlight being able to deliver from its project portfolio. 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. 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. Saint used 0.50 per barrel in his calculations (I work in oil & gas industry, 0.50 is low, but we'll use this as floor price evaluation). We spoke to a representative of Sendero Drilling. Lease Prices, Demystified. I have no business relationship with any company whose stock is mentioned in this article. 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. This is clearly the sign of a big investment opportunity in the stock. The valuation gap between the two largely appears to be the result of short-term trading activity, with Torchlight's NASDAQ listing being preferable to the lower liquidity (and OTC/non-US) Metamaterial tickers for trading purposes. 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. 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. Northern Oil and Gas, Inc. Alpha Energy Partners. Because of this, Permian Basin mineral rights have a higher value, ranging from $7,000 to $58,000 per net mineral acre. For the Quarter Ended September 30, 2019 . 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. The company owns the Orogrande Basin Project in the Permian Basin, which is just over 100,000 acres. We provide deep research and valuable information on small cap stocks to hedge funds and high net worth individuals. ROTH has a Buy rating and a $1.75 per share price target on Torchlight, whose share price is currently $1.17. Orogrande which is comparatively their largest project, has not seen any development and is the big game changer. That's your value per acre. These calculations tend to mention the value of prime Permian Basin acreage when discussing Torchlight's Orogrande Basin acreage. Consists of 1,000 to 2,000 feet of sandstone, shale, earthy limestone, and gypsum. 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 . . The province takes its name from the community of Orogrande, New Mexico.. Geology. 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. 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. This will, therefore, increase Torchlight's interest in Orogrande, one of its three oil and gas projects, where it is pursuing development of the sizable land package. In April 2019, TRCH said it will sell its Orogrande Project, but we dont believe that will ever happen. It currently has interests in four oil and gas projects. 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. . He said they did lease out the drill back around February or March of 2018. Torchlights Midland basin project is its second largest project with approximately 12,000 gross acres of area that will almost entirely be operated. Washington, D.C. 20549 . 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. Under a new law proposed by House Republicans, that price would go up to more than $2.50. . In April, closely held DoublePoint Energy sold to Pioneer . 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