Torchlight Energy Resources announced Monday it has executed an LOI to farm into a gas and condensate prospect in Waller County, Texas.
On December 16, Torchlight agreed to farm-in to a 940-acre block controlled and operated by La Sal Energy LLC of Houston. The block is a direct offset and extension to the prolific Katy Field discovered by Exxon in the mid-1960's. The field is reported to have had 6 TCF of gas and many wells are still producing today.
Torchlight will contribute funds to re-entry and fracture stimulate the Sparks Formation, the main producing zone in Katy field. For that contribution, Torchlight will earn a 40 percent interest in the block, which has one additional re-entry and one possible new well to drill. Torchlight will also have the option to increase its working interest up to an additional 5 percent following the results of the re-entry.
"We look forward to this in-close development opportunity as it gives us nearly immediate cash flow and upside potential with the two additional locations. And under the terms of our farm-in, we receive a significant portion of the revenue before payout, which makes for attractive economics. Further La Sal has a well established and experienced operations team with many years experience in the Texas Gulf Coast," said Tom Lapinski , Torchlight's CEO. "This opportunity fits Torchlight's strategy of capturing opportunites that have rapid cycle time, are low-risk, in close development, or re-development with established industry partners. It also has the potential for more than one productive zone and the gas is rich in condensate which adds significant value to the economics."
The re-entry is expected to be done as soon the farm-in documents are executed and contract services can be scheduled. The farm-in documents should be finalized by December 22.
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