Torchlight Signs Agreement with Investor on Orogrande Project – Partners Plan to Pursue Fracking Operation on Hudspeth County Lease
Torchlight Energy Resources has signed a definitive agreement with a partner and investor, which the company says will allow it to move forward in opening a new oil-and-gas play on the desert grasslands of northwestern Hudspeth County.
Torchlight announced the “farm-in” agreement with Founders Oil and Gas, of Midland, in a press release Tuesday (Sept. 29). Under the terms of the agreement, Founders will reimburse Torchlight for the $5 million the company has spent thus far on the Hudspeth County project – and will invest $45 million during the next two years to develop a fracking operation on the Torchlight lease. Torchlight received a $1 million cash payment from Founders upon the closing of the agreement, the press release said.
Torchlight CEO John Brda said Founders was the “ideal partner” for Torchlight’s “Orogrande Project” in Hudspeth County.
“We are excited to enter this development agreement with Founders Oil and Gas,” Brda said in the press release “In addition to their capital commitment, the Founders team has demonstrated a deep technical understanding of the project and alignment with our development plans. We are encouraged to enter this stage of maturation on the project and by Founders’ joint approach to development. We consider the Orogrande development agreement to be the herald of advancement for Torchlight and our shareholders.”
Torchlight officials could not be reached Tuesday afternoon, and the company’s timeline for moving forward on the project is uncertain. But it appears that Torchlight and Founders will begin by completing the test well Torchlight drilled this spring. The companies plan to begin fracking that well – which is located in northwestern Hudspeth County, about 10 miles east of El Paso County and 2 miles from the New Mexico state line – with a goal of bringing it into production.
In an interview with the Herald in July, Torchlight Chief Operating Officer Will McAndrew said the company was in discussions with ““several big New York Stock Exchange companies” about partnering on the project. Founders does not fit that description, but the company’s president, Brian M. Sirgo, has 35 years of experience in the oil-and-gas industry, including in West Texas and eastern New Mexico.
In the press release, Sirgo said the Orogrande Project is “the type of opportunity we are interested in.” Under the terms of the agreement announced Tuesday, Founders will receive a 50 percent working interest in the Orogrande Project in return for its $50-million investment.
“Controlling an entire undeveloped basin under favorable lease terms and having access to the technical data from the Rich A-11 made our decision to be collaborative an easy one,” Sirgo said. “Following completion of the first project well, we plan to further define the science and move into full-scale development.”
Torchlight has leased about 170,000 acres in northwestern Hudspeth County, including about 130,000 from the University of Texas system and about 30,000 acres from El Paso developer John Turner. Using the techniques of hydraulic fracturing, or fracking, and horizontal drilling, company officials believe they can open up a major new oil-and-gas play on the lease. Oil-and-gas development has expanded just east of the Guadalupe Mountains in recent years, but Torchlight’s project – which company officials say could involve as many as 2,500 wells – would be the first of its kind in the desert-mountain country of Far West Texas.
Torchlight’s project is informed by the scientific work of geologist Rich Masterson. Masterson’s work is credited with opening up the Delaware Basin oil play, in West Texas and southeastern New Mexico, which boomed during the last five years. Masterson believes that a deeply buried formation underlying Hudspeth County and adjacent areas in New Mexico, called the Orogrande Basin, mirrors the strata that have been fracked productively in the Delaware Basin. Torchlight officials say the Orogrande Basin could be “a significant new oil field discovery in the State of Texas.”