Torchlight Finds Financial Partner
I wrote about Torchlight Energy three weeks ago. The stock has gone up 60% since. Some of the gain may have been from the article but I suspect more came from investors guessing they were about to announce a major financing partner.
Torchlight has a giant new unconventional oil find in Western Texas that they did a deal on with the University of Texas they refer to as the Wolfpenn/Orogrande field. They control some 168,000 acres. Star oil geologist Rich Masterson discovered the field using metrics he pioneered in similar oil fields in the Midland Basin selling recently for from $16,000 an acre to $51,000 an acre.
The real issue facing Torchlight wasn’t if they had come up with a giant potential field but given the low prices for oil today, how could they come up with the tens of millions of dollars needed to prove the field. The answer came on the 9th of September when Torchlight announced signing a Letter of Intent with a partner prepared to spend $50 million in development to earn a 50% interest in the field.
In their press release Torchlight says they expect the Farm-in to be polished and signed before the end of September. The basic terms suggest their partner invests $50 million to earn 50% of the deal. $5 million would go to reimburse Torchlight for what they have spent already.
That’s a really big deal. Between now and the announcement in the next three weeks or so there is some risk. Once the deal is signed, most of the risk goes away and Torchlight becomes a play on the Orogrande Field and the price of oil. With only 30 million shares outstanding there is a lot of potential.
I am biased. I own Torchlight shares bought in the open market, I have participated in PPs at higher prices and Torchlight is an advertiser. Do your own due diligence.
Torchlight Energy Resources Inc