Torchlight Energy (NASDAQ:TRCH) recently updated investors as to scientific information returned from third-party providers who performed testing on its University Founders B-19 #1 well. Results were overwhelmingly positive and reflect the substantial upside opportunity in the wildcatter-stage E&P.
The University Founders B-19 #1 well is the second drill-out operation successfully executed by Torchlight Energy and its farm-in partner Founders Oil & Gas LLC for the E&P's West Texas located Orogrande Project.
For those unfamiliar with Torchlight Energy, a largely preproduction, venture-level oil & natural gas company, the E&P has been acutely focused on the development of its Orogrande Project, a concept-level, potentially oil-heavy resource play that to date is entirely undeveloped, dating back to securing a massive acreage position in late 2014. Torchlight Energy, as of the filing of its last Form 10-Q with the U.S. Securities and Exchange Commission, lists assets in the Orogrande of 172,000 largely contiguous acres. Torchlight Energy, also via its Form 10-Q, has secured a multiyear commitment from development partner Founders Oil & Gas for $50 million in total exploration and development funding - essentially fully funding concept prove-out of its contiguous acreage position in the Orogrande Project.
In addition to having secured a funding and development partner in Founders Oil & Gas LLC Torchlight Energy also claims an impressive equity ownership fraternity - something made highly unusual by its maturation profile and largely wildcatter level of development. Torchlight Energy disclosed greater than 5% shareholders via recent SEC filings that included Anthion Management Founder, Managing Member, and Portfolio Manager David Moradi as well as McCabe Ventures President Greg McCabe. Torchlight Energy is also consulted by highly decorated geologist Rich Masterson. Masterson, a prospector who helped originate the prolific Wolfbone play, is using the same application of logic and parameters of evaluation in his scientific evaluation of the Orogrande project as he did in his prior seminal work.
Finally, Torchlight Energy made recent governance optimizations which included adding New York City-based Batuta Advisors Founder Alex Zyngier to its board of directors. Zyngier, it should be noted, has a specialty background in strategic advising and turnaround execution.
As for the scientific information returned for the University Founders B-19 #1 well, the results were outstanding. According to Torchlight Energy, logs run and analyzed for the well by Schlumberger (NYSE:SLB) included a triple combo log, a cased hole log, a lithoscan and a sonic imaging log. In addition, 25 sidewall cores were produced in the primary pay zone. Results for the University Founders B-19 #1 well improved on initial well information derived from Orogrande project inception well Rich A-11 #1. Masterson noted via press release that, so far, scientific information for the Orogrande project drill-out wells is comparing closely to analogies in the Midland Basin Wolfcamp A and B and Lower Spraberry. Production will be validated once the frac is delivered in the coming weeks and, providing a successful frac is delivered, the rocks are viable for production. Torchlight Energy, while having highly encouraging early scientific information capture, still must perform completion procedures over the coming weeks to identify oil productivity and ultimate potential for future horizontal development.
We remain highly invested in Torchlight Energy while realizing that it is a venture-level investment opportunity. We're confident in our capital exposure and our opportunity cost associated with taking on a wildcatter investment opportunity and while providing research and consulting services surrounding the opportunity for both retail and institutional clients. We believe ultimately that the asymmetric upside of the Orogrande project, based on early scientific results, reward weights any capital exposure to Torchlight Energy, but that responsible capital exposure should be taken in all instances. Torchlight Energy is very much so a wildcatter E&P, which could run into significant execution risk on all durations. Still, we continue to be impressed with the return of early scientific data and with the overall ownership structure and governance of the E&P. Should the concepts of the Orogrande Project prove out - again these are fully funded in opportunity - we believe Torchlight Energy equity returns could be exponential. We anticipate a 12-24 month maturation cycle prior to Torchlight Energy equity being fully valued, assuming Orogrande Project concept prove-out, and we anticipate continuing to be long-term, venture-level investors.
Dallas Salazar currently owns and operates as CEO an Austin-based enterprise consulting firm, Atlas Consulting, that specializes in private company lifecycle management, up to and including taking companies public, and in helping consult publicly traded companies ranging in market cap from $100 million to $500 million.
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