Torchlight released their third quarter report for 2014 last November 17 that indicated a total production number of 200 barrels of oil for each day and a total of 70 barrels of natural gas for each day. The 270 boepd overall average in production number is lower by 75% than the previous 1,000 boepd Torchlight guided last June.
Torchlight recently missed their 730 barrels for each day of production that the company was expecting to achieve, in spite of spending more than 20 million US dollars during the previous 12 months that involved drilling and property acquisitions. Instead, the company only attained production amounting to 160 barrels for each day from last year’s production levels
The huge miss in production virtually is considered an unprecedented occurrence among all public gas and oil companies. The miss is very shocking considering because of the huge overall capital expenditure, adding that the guidance was only recently issued.
Torchlight’s miss may force the company to lower their asset values, as the company’s reserve overall value is currently substantially lower compared to the amounts that were previously booked.
Even if an accounting firm was used, with Torchlight is being its one and only public client, and even if virtually it uses the services of an unknown engineering firm in auditing their reserves, such auditors don’t have the chance to miss the company’s overall operational failure.
The firm may face much scrutiny because their audits proved to be very problematic. Torchlight had to already restate their financial statements because of the findings. Additional restatements of such reserves and also associated balance sheets can eventually lead to write down.