In a news release, Torchlight Energy Resources Inc. (TRCH:NASDAQ), announced "the signing of an option agreement to sell the Hazel project to a group of private investors."
The firm reported that it has agreed to sell the acreage after an option period and settled on a price of $1,300 per acre. According to the terms of the agreement, the investors are required to drill and complete the Flying B Ranch #4 well in the project in order to earn the option. Upon completion of the well there is to be an evaluation period after which time the investor group will have the option to acquire the remaining acreage for the agreed upon price.
Torchlight Resources advised that it controls 9,600 net acres in the project and would receive approximately $12.4 million if the option is duly exercised and the acreage is sold. The company indicated that in that case the funds would be transferred by no later than March 31, 2021.
The firm added that in the event that the investors choose not exercise their option, they will be entitled to recoup their funds from the revenue associated with the Flying B #4 well's production. After their costs have been repaid, the wellbore and production would be turned back over to Torchlight and the well would be drilled and completed horizontally in the Wolfcamp A formation with a proposed lateral distance of 7,500 feet.
Torchlight CEO John Brda stated, "We have remained steadfast in our pursuit to sell off our non-core assets and focus on the Orogrande prize...This transaction solidifies the value we have in the Hazel project and more importantly, if the option is exercised and the transaction completed, will provide for sufficient capital to pay off our secured debt. The group of investors are sophisticated high net worth investors who see the value in the Hazel project, having the foresight to move the asset forward in a down market."
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