Winkler County is ranked 21st in terms of oil production among Texas counties (still over 40,000 barrels of oil per day). Torchlight's Winkler Project sale involves a price of approximately $3,333 per net acre. Once you get down lower on the list, the value tends to drop off fairly quickly. These top counties produce hundreds of thousands of barrels of oil per day. Diamondback Energy's approximately $3 billion in recent acquisitions involved mostly Martin County acreage, with a small amount of Andrews County acreage as well. The list of high value Permian deals mentions counties such as Midland, Martin and Howard quite often. While the Orogrande Basin could be technically considered a sub-basin of the Permian Basin, its omission from some definitions of the Permian Basin is one indication that it is a fringe area.Īs well, the Permian Basin acreage that is considered valuable is concentrated in counties that have large amounts of oil and condensate production, and huge amounts of associated proved reserves. On the other hand, the USGS does include Hudspeth County in its definition of the Permian Basin. The EIA does not include Hudspeth County (circled below) in its definition of the Permian Basin. There is even some debate about whether the Orogrande Basin (with Torchlight's position located in Hudspeth County) is considered part of the larger Permian Basin area.
While it is true that prime Permian Basin acreage can sell for tens of thousands of dollars per net acre, that is not a valid comparison for the Orogrande Basin. Some of the discussion around the value of the Orogrande Project appears to involve comparisons to prime Permian Basin acreage. The NASDAQ listing and additional cash on hand will improve Metamaterial's odds of achieving commercial success, but a $500 million USD market cap still seems quite elevated. Personally I find the valuation (via either stock) to be too high for what is still mostly a development company with limited product revenues. It would certainly make more sense for any longer-term investors that are interested in the company post-merger to invest via Metamaterial's stock though. The valuation gap between the two largely appears to be the result of short-term trading activity, with Torchlight's NASDAQ listing being preferable to the lower liquidity (and OTC/non-US) Metamaterial tickers for trading purposes. One Metamaterial share is around $3.00 USD and that gets you 3.3 Torchlight shares (around $0.91 USD per Torchlight share). This is just a rough estimate based on the latest information I found, but if accurate it still points to Metamaterial's shares being significantly cheaper than Torchlight's shares if one wanted to invest in the new company.įor example, one Torchlight share is currently $2.29 USD (perhaps $2.08 USD net of the value of its oil and gas properties as discussed below). Based on the formula mentioned in Metamaterial's circular, Torchlight may issue approximately 403 million shares to exchange for Metamaterial's shares, which would imply around 3.3 Torchlight shares for each Metamaterial share.
Metamaterial may have approximately 122 million fully diluted shares now, while Torchlight may have around 153 million fully diluted shares. The former operator of the Orogrande Project sold its 9.5% working interest in the assets for $2.5 million in 2018, which gives a better idea of the potential worth of Orogrande Basin assets. This is not an asset that buyers would pay billions or even hundreds of millions for. Torchlight's Orogrande Project (Hudspeth County) acreage had no proved reserves at last report, and Hudspeth County had no reported production at last report either.
However, that comparison shows a lack of understanding about oil and gas assets and is not that much more valid than using Manhattan land values to value a parcel in rural Nevada just because both areas are part of the United States. These calculations tend to mention the value of prime Permian Basin acreage when discussing Torchlight's Orogrande Basin acreage. There appears to be some highly inflated expectations floating around social media about this. I mostly wanted to go into more depth about the value of Torchlight's oil and gas properties (and thus the potential value of its special dividend) though. Metamaterial's stock is up around 36% since that report, while Torchlight's stock is down around 38% over the same period. Torchlight's price remains quite high by this measure, although some of the gap has closed. I've expressed my opinion about Torchlight's relatively high price compared to Metamaterial's given their relative stakes in the post-combination company. Torchlight Energy Resources ( TRCH) is heading towards its merger with Metamaterial ( MMATF).
0 kommentar(er)
