By April 5, 2016 Read More →

Torchlight Energy acquires Midland Basin assets from McCabe Petroleum

Torchlight pursuing joint development partner to provide project capex funding


Midland Photo: James Durbin, MBR

PLANO, Texas – Torchlight Energy Resources, Inc. says it has signed an agreement to purchase a 66.66 per cent working interest and take over operations in ~12,000 acres (19 sections) in the Midland Basin from McCabe Petroleum Corporation.

The acreage was previously acquired by McCabe through a farm-out. Well-known geologist Rich Masterson has worked closely with McCabe to develop this prospect and the company expects Masterson will reside as the project geologist throughout its development.

“Torchlight continues to create value for our shareholders by executing on initiatives that are cost conscious, reward weighted and return oriented,” said Torchlight Energy CEO John Brda.

“We continue to leverage our network of strategic partners, McCabe Petroleum Corporation being a primary example, to find opportunities that because of size and maturation profile likely would not have been presented otherwise.”

Terms of the agreement:

  • ~12,000 gross acres (7,999 net acres), 100% of which will be operated
  • 75% Net Revenue Interest
  • 19 contiguous sections with a potential of as many as 300 horizontal drilling locations targeting the Wolfcamp A and B formations (pay zones currently being developed by operators in the Midland Basin)
  • Prospective for the Leonard and Dean formations providing upside
  • Continuous drilling clause on the lease starting in July of 2016; Torchlight is obligated to drill one well (vertical or horizontal) every six months to hold the entire ~12,000 acre block

McCabe will receive 1,500,000 warrants to purchase Torchlight common stock with an exercise price of $1.00 and a back-in after payout of 25 per cent working interest.

The president of McCabe Petroleum Corporation is currently Torchlight’s largest shareholder, according to a press release.

“Torchlight remains focused on the development of our existing assets but will continue to be opportunistic when presented with accretive opportunities or those that value the company at forward looking prices,” said Brda.

The drilling plan developed by Masterson calls for initially drilling two vertical test or “science” wells. The vertical wells will be utilized to collect all of the data necessary to achieve optimum results.

The company says it intends to perform a full suite of logs, including imaging, sonic logs and sidewall cores before setting pipe and completing the wells.


Permian Midland rigs

Torchlight’s plan is to ultimately develop the field employing horizontal drilling, which is consistent with development by other Midland Basin operators also targeting the Wolfcamp A&B.

The two initial vertical wells will be drilled with sufficient casing size to add lateral legs at a later date. Torchlight plans to drill its third well horizontally and quickly move to full scale development.

The primary field objective will be the Wolfcamp A&B zones. Secondary horizontal targets include the Leonard and the Dean formations.

Overall thickness in the Wolfcamp ranges from 150 feet to 350 feet, which could require multiple horizontal legs per bench to fully drain, as seen in analogous Wolfcamp formation wells in the Midland Basin.

Torchlight estimates the potential EUR’s (Estimated Ultimate Recoverable barrels) at over 100,000 per 1000 ft. of lateral and horizontal well costs are estimated at between $5.5 and $6.5 million. All field services are available within close proximity to the acreage including oil and gas pipelines.

The company will pursue a joint development partner, much like it did with the Orogrande Project, to provide for project capex funding. Torchlight plans to begin discussions with suitors immediately and will consider both operating and non-operating financial partners.


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