October 22, 2014 - 3:37 PM EDT
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Update: Torchlight Discloses Disadvantaged Economic Arrangement

Torchlight (TRCH) filed an amended 10-k. It disclosed for the first time in an SEC filing the economics of the company's deal with Husky. As cited in a previous article I wrote, Husky's other partner, Gastar (GST) disclosed this in its filings, which is one way we knew about the economic arrangement without disclosure by Torchlight.

The disclosure highlights Torchlight's disadvantaged Hunton economics and limited exposure to the Hunton. Torchlight only owns just over 1,000 net acres in the Hunton in the areas that have been actively developed. And Torchlight pays Husky 15% of every well drilled. Combined with an over 20% royalty on the wells and state production taxes, only about 60 cents of every revenue dollar goes back to Torchlight, which makes it extremely unlikely that the Hunton makes any profit for Torchlight, as discussed in the prior article. And 1,000 net acres means that investors are currently paying $60,000 per acre when buying the stock, an astronomical price even if the land wasn't burdened with the Husky…

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Source: SeekingAlpha (October 22, 2014 - 3:37 PM EDT)

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