Torchlight Energy Resources Inc. (TRCH:NASDAQ), an oil and gas exploration and production (E&P) company with rights to property in the Midland Basin, the Delaware Basin and the Orogrande Basin, just released an update on its first horizontal well, reporting production of 465 barrels per day.
"This company is still flying under the market's radar… We're a buyer under $1.50 right now, and you should be also." — Keith Koh, Pure Energy Trader
The company has rights to 9,600 net acres in its 12,000-acre lease that comprise the Hazel Project, which is located in the Midland Basin in Texas, and is part of the Permian Basin. Torchlight's Hazel Project E&P neighbors include EQT Corporation (EQT:NYSE), Pioneer Natural Resources Company (PXD:NYSE), Concho Resources Inc. (CXO:NYSE), Cimarex Energy Co. (XEC:NYSE) and Laredo Petroleum Inc. (LPI:NYSE), companies with multiple billion dollar market caps many times larger than Torchlight's $81 million.
Torchlight reported that its first horizontal well in the Hazel Project, the Flying B Ranch #3, has "attained a highest measured production rate of 465 BOPD and 248 MCFPD of gas as the well continues to clean up with 45% of load water recovered." Torchlight also reported "continually improving oil cuts as high as 30% and over 12,000 barrels of oil produced thus far."
"The recent production rates are comparable to other Midland Basin Wolfcamp A wells with 5,000 foot Laterals and on par with Torchlight's expectations for the well," the company stated.
In Pure Energy Trader, Keith Kohl wrote on Dec. 14 that "we're going to see much higher production rates reported as Torchlight continues to develop this project—something the investment herd has sorely overlooked thus far.
"Torchlight, definitively, is now the single most attractive oil-focused junior E&P in the Energy Complex." – Dallas Salazar
"We are pleased to demonstrate meaningful horizontal production in the Wolfcamp A section of our 12,000-acre lease," stated John Brda, CEO of Torchlight. "We expect that this asset will be developed employing extended laterals of up to 10,000 feet in length providing Torchlight with between 30 and 100 new Wolfcamp A well locations alone, depending on spacing. With only one productive horizontal bench of three we have seen and targeted in this field, our total number of supported horizontal locations could be well over 200 in total."
With rights to land in the Midland Basin ranging from $10,000 an acre to $40,000 and above, even at the lower end of the range, Torchlight's 9,600 acres would be worth $96 million, a figure much higher than the company's current market cap. This does not account for the company's other two properties, the 133,000-acre Orogrande property and the Delaware Basin property where Torchlight has 20 10,000-foot lateral locations.
Dallas Salazar, CEO of Atlas Consulting, told Streetwise Reports, "Torchlight's operational update is, in my opinion, the most meaningful in company history. With this update, confirming a prior update on Hazel Project Well results, Torchlight further validates its investment and operational thesis: that its ability to recognize anomalies in geology and its ability to utilize leading edge Frac Tech allow it to realize economics on what have been traditionally thought of as non-core assets."
"Further impressive, and further validating of both theses," Salazar stated, "Torchlight has completed its transformation from a minority working interest owner to a majority working interest non-operating E&P, something that is unprecedented for an E&P of its size and made further impressive given that the transformation has taken place in the single worst commodity crisis in the history of the Energy Complex. What Torchlight has done and the circumstances under which it has done it is nothing short of remarkable."
Torchlight noted in its update that the science that it gleans from its first horizontal well will inform future exploration in the area. Torchlight has drilled the Flying Ranch #4, and stated that it is "permitted, drilled and reached vertical total depth as outlined under the Company's lease requirements. Torchlight plans to continue to weigh the production data from the Flying B #3 before deciding on which zone to target for a horizontal objective in the well."
Torchlight also has a 67.75% working interest in the 133,000-acre Orogrande Project in Texas. Torchlight reported that "the University Founders A25H well has been spud and the Company is currently preparing to drill below intermediate casing at ~3,000 feet."
Salazar noted that Torchlight "can look to execute its multi-well, multi-play drilling program with confidence. Torchlight updated that its 133,000 acre Wildcat prospect, the Orogrande Project, has successfully been drilled through the geologically complex "top rock," with Torchlight utilizing leading-edge air drilling technology. After identifying at which depth to finish the horizontal portion of the drilling, Torchlight will again look to prove its thesis—only this time in a prospect field that has approximately one billion barrels of conceivably recoverable oil reserves. Ultimately, if Torchlight can prove its thesis in the Orogrande Project it will have wildcatted one of the largest shale discoveries in the history of the U.S."
"While there is still much work to be done, Torchlight now has a second data point which proves out its ability to identify, delineate, and successfully recover oil via abandoned, disregarded, or completely unproved plays. The question at Torchlight is no longer "can it prove its thesis" but "to what degree can it prove its thesis." Torchlight, definitively, is now the single most attractive oil-focused junior E&P in the Energy Complex," Salazar concluded.
Rich Masterson, Torchlight's consulting geologist, originated the Orogrande Prospect and the Wolfbone Unconventional Play in the Delaware Basin.
Torchlight also recently announced that it has closed a Delaware Basin transaction with Greg McCabe and MECO IV, LLC, an independent, private E&P. Torchlight has received $6 million and "has received the Working Interest and Carry in the Winkler County project."
"We are happy to get this transaction closed," stated CEO Brda. "We look forward to working with MECO IV as the operator on the project and drilling some nice wells with them in an area that is seeing a lot of activity. In addition, the liquidity will be a huge help as we continue to develop the Hazel Project and the Orogrande Project."
Technical analyst Clive Maund on Dec. 7 in CliveMaund.com provided his chart analysis of Torchlight. He concluded that "Torchlight looks out of favor here and it is suspected to be at a cyclical low. Therefore [it's] rated a buy as any news out could drive it sharply higher—even if it doesn't break out of its large base pattern and only makes it back up to its highs earlier this year, it would result in good percentage gains from the current low price."
On Dec. 12, Maund noted that Torchlight has rallied 5.2%, "a modest gain so far, but don't be fooled by it closing well off its highs—it has broken out of its downtrend and the intraday rally yesterday served to drain off overhanging supply, clearing the way for further gains."
Pure Energy Trader's Kohl concluded on Dec. 14, "As I write this now, the stock is around $1.21 per share, which only bolsters my belief that this company is still flying under the market's radar. I don't want us to be late to this party. We're a buyer under $1.50 right now. . .and you should be also."
Torchlight has approximately 60 million common shares outstanding, with insiders owning about 14 million shares.
Read what other experts are saying about:
Want to read more Energy Report articles like this? Sign up for our free e-newsletter, and you'll learn when new articles have been published. To see a list of recent articles and interviews with industry analysts and commentators, visit our Streetwise Interviews page.
1) Patrice Fusillo compiled this article for Streetwise Reports LLC and provides services to Streetwise reports as an employee. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
2) Dallas Salazar: I, or members of my family or household or company (ATLAS Consulting), own greater than 1% but less than 5% of the outstanding shares of the following companies mentioned in this interview: Torchlight Energy Resources Inc. I personally am, or members of my immediate household or family are, paid by the following companies mentioned in this article: None. My company has a financial relationship with the following companies mentioned in this article: None.
3) Clive Maund: I, or members of my family or household, own shares of the following companies mentioned in this interview: None. I personally am, or members of my immediate household or family are, paid by the following companies mentioned in this article: None. My company has a financial relationship with the following companies mentioned in this article: None.
4) Keith Kohl: I, or members of my family or household, own shares of the following companies mentioned in this interview: None. I personally am, or members of my immediate household or family are, paid by the following companies mentioned in this article: None. My company has a financial relationship with the following companies mentioned in this article: None.
5) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: Torchlight Energy Resources Inc. Streetwise Reports does not accept stock in exchange for its services. Click here for important disclosures about sponsor fees. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
6) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers.
8) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Torchlight Energy Resources Inc., a company mentioned in this article.
Note: Comments from Pure Energy Trader were added on Dec. 15.
The above represents the opinion and analysis of Mr Maund, based on data available to him, at the time of writing. Mr. Maund's opinions are his own, and are not a recommendation or an offer to buy or sell securities. Mr. Maund is an independent analyst who receives no compensation of any kind from any groups, individuals or corporations mentioned in his reports. As trading and investing in any financial markets may involve serious risk of loss, Mr. Maund recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction and do your own due diligence and research when making any kind of a transaction with financial ramifications. Although a qualified and experienced stockmarket analyst, Clive Maund is not a Registered Securities Advisor. Therefore Mr. Maund's opinions on the market and stocks can only be construed as a solicitation to buy and sell securities when they are subject to the prior approval and endorsement of a Registered Securities Advisor operating in accordance with the appropriate regulations in your area of jurisdiction. Mr. Maund does not own shares of Torchlight Energy Resources.