Torchlight (September 9) TRCH

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Disclaimer: These are excerpts from student assignments conducted as part of a Corporate Finance class. The opinions represented do not necessarily agree with mine. I do not vouch for the quality of the recommendations or the accuracy of the numbers. Follow the recommendations on your own risk.

http://ir.torchlightenergy.com/proxy#

Final #AGM for @LSEPKUSummerSch #CorpFin #students voting recommendations on September 9: #Torchlight $TRCH

#Torchlight $TRCH #AGM: #Students for most directors, concerned about Mr. Stockey’s advanced age (78) and lack of industry experience #OldDirectors #CorpGov

#Torchlight $TRCH #AGM: #Students divided on #Calvetti as #auditor: experience in oil & gas but why the steep fee increase? #CorpGov #AuditorFees

#students on #Torchlight $TRCH #AGM: Proposals aim at cash preservation. Shareholders may face dilution in the short term but if successful rewards in the #longrun

#students on #Torchlight $TRCH #AGM: Given that directors and management own more than 40% of stock shareholders can be confident about aligned incentives in the long term #CorpGov

#students on #Torchlight $TRCH: could #octopus multi-well drilling save millions in the #Orogrande basin project? @LSEPKUSummerSch #CorpFin

 

Proposal Excerpt of Student Recommendations
For Against
(1) Election of directors
  • “..substantial experience”
  • “3 out of 5 directors are independent
  • Against Mr. Stokey:” Given Mr. Stokey’s age (78), the current situation in the industry, and his lack of experience in the oil and gas industry, I recommend against a re-election and instead strongly recommend to find a person with successful experience in a mid-sized oil company during the oil-crisis”
(2) Auditor ratification
  • “Calvetti… great experience and expertise in analysing oil and gas industry…will contribute to better understanding of the company”
  • “The total fees.. had an 67.5% increase in only one year’s time, which seems unreasonable …considering that the development of Torchlight did not have that a sharp rise”

Additional student recommendations and comments

  • Technology: “I have found a new prospective technology of oil welling, multi-well drilling called “Octopus”. Octopus in a relatively new technology with multiple pro’s over the currently used horizontal drilling. For the Orogrande Basin Project which is a new well, and the company already has a license for exploring and producing oil from this project, the important advantage is that by implementing the Octopus system it can significantly lower its costs and extract more from the well, resulting into potentially five times as much value to be created from the project.”
  • Financing: “The greatest difficulty the company faces is the lack of capital, especially cash to fund future investment and operation. It cannot generate sufficient operating cash flows to support continuing operations, and expect to incur further losses in the development of its business. Although the revenue keeps growing at a rate of 328% annually, the company still doesn’t have sufficient capital. Therefore, the purpose of all the proposals is to avoid the payment of cash in short term, including the compensation for key employees, the interest and principal of the note and the fixed cash dividend of preferred stock. Although on the short-run shareholders face dilution, if the company solves the capital problem, there will be positive profit coming from the projects that the company owns. Looking into the future, the stock price is still optimistic because of the potential. …The key employees and founders own more than 40% of outstanding common stock all together. And those people mainly focus on the stock price in the long run.”