Torchlight Energy Resources (ticker: TRCH) is a high growth oil and gas exploration and production (E&P) company with a primary focus on acquisition and development of domestic oil fields. Since going public in 2010, Torchlight has established itself in four separate regions across the mid-continent, focusing on liquids production from proven areas. Rather than explore, the company uses its geologic knowledge to exploit plays such as the Eagle Ford, Hunton, Mississippian and Maquoketa Dolomite/Viola formations. In 2013, the company transferred from the over-the-counter (OTC) exchange to the NASDAQ. Shares have more than doubled within the last year.
Click here for an introduction to Torchlight Energy and its Mid-Continent operations.
Q1’14 Drilling Results
Torchlight Energy Resources announced daily net production of 250 BOEPD in an operations update on April 23, 2014. The rate is 119% higher compared to its 2013 year-end results of 114 net BOEPD, which was announced on March 31, 2014.
TRCH allocated the majority of its 2013 capital toward asset base development, ultimately increasing its 2013 net proved reserves to 1,566 MBOE from 417 MBOE in 2012 (276% increase). A report by Netherland, Sewell & Associates revealed 86% of reserves are classified as proved undeveloped (75% oil). TRCH’s PV-10 value was set at $27.7 million in total proved reserves – roughly 47% higher than the company’s initial estimate of $18.9 million.
The current fiscal year will involve exploitation rather than development. The company reaffirmed its estimate to drill more than 90 gross wells in the fiscal year, and 28 are currently in various forms of completion. The company believes it will have 101 gross wells online by year-end 2014 with the number expected to jump to 173 gross wells by year-end 2015. In turn, net production is forecasted to rise to 770 MBOE and 1,634 MBOE, respectively. A total of 1,000 drilling locations have been identified on TRCH’s properties, which spans 50,000 gross acres.
Central Oklahoma. TRCH holds more than 22,000 gross acres in the Hunton formation and spud its first three wells in Q3’13. Current net production is 125 BOEPD from 12 gross wells. The company now has five gross rigs drilling an average of five new wells each month and currently has another four wells awaiting completion. The majority of operations are conducted through a partnership with Husky Ventures, a company that has spent roughly $100 million in geologic research in the state.
Kansas. Results from a five-well pilot program will be announced upon its completion in May 2014 as part of TRCH’s joint venture with Ring Energy (ticker: REI). The JV spans 17,000 acres and wells are expected to return initial production rates of 80-100 BOEPD from the primary formation at a cost of roughly $650,000 per well. Another five well test is set to begin in June 2014 and will factor into a decision to drill another 15-20 Kansas wells before year-end 2014.
South Texas. TRCH currently has three producing wells in the area with 125 net BOEPD and expects to drill two to three horizontals within the fiscal year. Both the Austin Chalk and Buda formations are accessible on the acreage. Workovers were completed in Q1’14 and increased gross production by 70 BOEPD. ExxonMobil (ticker: XOM) is an immediate operator but has not stated particular intentions on development of its properties.
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