Torchlight Energy (TRCH)

[dan_s]

I was VERY IMPRESSED by the presentation that Torchlight made at our luncheon in Houston today. This is a small-cap we need to keep an eye on.

It will be a few quarters before they generate profits, but production should be ramping up sharply this year. They are in a JV in Oklahoma's Horizontal Hunton Oil Play that has HUGE potential for a company of this size. They are drilling 90+ gross wells this year. The HZ wells come on at 500-1000 boepd (mostly crude oil) and payout in less than a year. This year's drilling program should produce a very impressive year-end reserve report.

They have ~1000 low risk drilling locations in their inventory.

I also like the low risk project they have up in Kansas.

The slides they spoke from will be on our website on 3/29. The video taped the presentation and I am check on what I need to do to get the link. It should be on the company's website by Monday.

[dan_s]

TRCH is in seven AMIs (Areas of Mutual Interest) with Husky in Oklahoma. Their working interest is 15% to 25% in each AMI. Husky plans to drill 50-60 wells in these joint ventures this year.

[wilmawatts]

Company conference call at 3:30 pm CST today

[wilmawatts]

Good call, good questions. They need to tie their financing down, and get a few well results announced, which will give us a better picture. Fuzzy right now, but I expect this one will be interesting to watch.

It will either be a moonshot or will blow up on the launch pad is my take, for better or worse, place your bets accordingly.

Feedback from the Houston luncheon was very positive. I see Dan has them on the calendar for Dallas in May

[ajootian]

They are presenting at IPAA in NYC next week. This will be the first time they are presenting at that being a stock on a listed exchange. In addition to their IPAA presentation and private meetings there, I'm sure they'll be pounding the pavement around Manhattan all week. Many institutions have restrictions on buying stocks that are not listed -- all of those guys can now finally start looking at Torchlight.

A buddy of mine really likes this story but has held off buying because he doesn't like the capital structure. In addition to the convertible notes that are deeply in the money he is spooked by the fact that just over half a million shares were issued as restricted stock by Torchlight to acquire some leases just over 6 months ago, which means that such shares can now be blown onto the market. These fears have so far merely resulted in this guy missing the boat on a great story.

If we see some big crosses going though over the next several weeks I would not be surprised. To me it would indicate that a home has been found for some of the overhang mentioned above. This would enable some institutions to initiate positions in the stock without having to step into the open market, which as we can see is pretty thin at this point.

I'm sure everyone they are meeting with will inquire about an equity raise, in an effort to get some sort of sweetheart deal, but Torchlight will likely just politely decline those overtures since they are just weeks away from inking their mezz. debt deal and have no need to issue any more equity in the foreseeable future.

[dan_s]

Ed: Fantastic post.

News moves micro-caps like this one and Torchlight is going to have lots of it. They plan to drill 90-100 gross wells this year (15-20 net wells).

[setliff]

help! please explain difference between gross wells and net wells.

[dan_s]

Torchlight will have a non-operating interest in 90-100 gross wells.

"Net wells" is their working interest percentage (15% to 25%) in each well. They are in seven different Areas of Mutual Interest with Husky Ventures, the operator.

So if they drill 100 wells with an average working interest of 20% they will have 20 net wells.

[setliff]

thx,

jim