Torrent Energy Announces Preliminary Frac Results; DIP Lender Ceases Funding; Negotiating to Sell Assets
Torrent Energy Corporation (OTCBB: TRENQ) today announced that the Company successfully completed the field work for fracture stimulation of five wells located in its Westport pilot project area in late August and has now commenced a process of production testing these wells located in Coos Bay, Oregon. Additionally, the Company announced that it is negotiating a sale process under Section 363 of the Bankruptcy Code. The sale will be made to YA Global Investments, L.P., (” YA Global”) in satisfaction of its DIP funding unless the Company receives a better offer from another party pursuant to a sale process that would be approved by the Bankruptcy Court. On September 18, 2008, YA Global issued to the Company a “Notice of Lender’s Election to Cease Funding” pursuant to the DIP Credit Agreement.
Preliminary Frac Results
The frac program at the Company’s Coos Bay Westport project tested both nitrogen foam and cross linked gel fluids as carriers for the frac sand and it is the Company’s position that the preliminary technical analysis of the frac results indicates that the fracs were successful and met expectations in terms of increasing the productivity of the wells and most importantly providing confirmation in management’s opinion of the proof of concept for the Coos Bay CBM project. The data will allow for optimization of completion techniques on all future wells drilled in the project area.
The wells have been producing a combined rate of approximately 356 barrels of water per day and 48 MCF per day of gas. The wells have been on test for three weeks starting the dewatering process, which is a key component of the gas desorption process and developing future gas production. This early data is the order of magnitude predicted by the Company’s reservoir modeling. Baker Energy Services from Sheridan, Wyoming is the project manager for both the frac program and the production testing.
YA Global Notice to Cease DIP Funding
As previously disclosed in the Company’s current reports on Form 8-K, the Company on June 6, 2008 entered into a senior secured super-priority debtor-in-possession credit and guaranty agreement (the “DIP Credit Agreement”) with YA Global, pursuant to which YA Global provided the Company with funds to permit the Company to continue its operations during its reorganization under Chapter 11 including provide the necessary funds to frac and perform production testing of the Coos Bay wells. On September 18, 2008, YA Global issued to the Company a “Notice of Lender’s Election to Cease Funding” pursuant to the DIP Credit Agreement. The notice stated that YA Global has elected to exercise its right to cease funding the Company, and will provide no further advances to the Company, under the DIP Credit Agreement, except for advances for compensation payable to certain of the Company’s employees at their discretion. YA Global has informed the Company that its election to cease ongoing funding is irrevocable, but is discussing funding such costs necessary to affect the sale described immediately below. YA Global has not claimed that the Company is in default, and the Company does not believe it is in default, under the DIP Credit Agreement.
Proposed Sale of Assets
Torrent and its subsidiaries continue to operate their businesses and manage their properties as debtors-in-possession pursuant to Sections 1107(a) and 1108 of the Bankruptcy Code. As a result of YA Global’s irrevocable election to cease funding under the DIP Credit Agreement and the Company’s limited available working capital, the Company today announced it has begun negotiating with YA Global a sale of all assets under Section 363 of the Bankruptcy Code (the “363 Sale”). In this proposed 363 Sale, YA Global would be allowed to credit bid its existing DIP Credit Agreement outstanding balance to acquire the assets of the Company. Other qualified third parties would be allowed to also bid on the assets for an amount in excess of a YA credit bid.
Torrent has focused its exploration efforts on coalbed methane resources in the U.S. Pacific Northwest since 2004. Over the ensuing period, Torrent has acquired a significant portfolio of mineral leases in both Oregon (107,000 acres at 100 percent working interest) and Washington (76,000 acres with a 60% working interest). Torrent is the operator of both projects.
Torrent has drilled a total of 12 wells in 3 pilot projects at its Coos Bay holdings located in Oregon. Five wells have been completed and fraced and have been on production testing since the end of August 2008. The Coos Bay assets are located in close proximity to highly valued local and regional gas markets which can be readily accessed by a regional gas transmission line having significant excess throughput capacity. The Coos Bay leases are primarily fee leases bearing a royalty of 12.5%. Torrent has acquired a water disposal permit which allows for the disposal of 2,200 barrels per day of produced water directly into tidal waters after treatment. A significant body of technical data has been accumulated since 2004, including cores, gas desorption data, isotherm data, seismic interpretation, regional geology of the local coals and drilling and completion results.
Torrent has drilled one test well on its Washington acreage and to date has accumulated significant regional seismic and geological data from which both conventional and coalbed methane leads and plays have been developed.
Torrent is seeking prospective buyers of all of Torrent’s coalbed methane assets and intends to complete the sale of the assets no later than October 31, 2008, subject to the required approvals of the Bankruptcy Court. Interested parties should contact the Company officers noted below:
Steve Pappajohn Pete Craven President Methane Energy Corp. CFO Torrent Energy Corp. Bus: 541.396.3025 Bus: 503.224.0072 Email: email@example.com Email: firstname.lastname@example.org
About Torrent Energy Corporation
Torrent Energy Corporation is an exploration company focusing on developing non-conventional natural gas reserves in the Northwestern United States.
Forward Looking Statements: This report contains certain “forward-looking statements” that are made pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements, particularly those statements regarding the preliminary frac results, the proposed asset sale under the Section 363 of the Bankruptcy Code and those preceded by the words “believes,”"expects,”"estimates,”"anticipates,”"will” or words of similar import are statements of management’s opinion. These statements are subject to certain assumptions, risks, uncertainties and changes in circumstances. Actual results may vary materially from those expressed or implied from the statements herein. Factors that might cause such a variance include the effects of the Chapter 11 filing, the ability of the Company to continue to operate its business and maintain adequate liquidity and the uncertainty of the approval of the Company liquidation of its assets. These and other risks are or will be detailed from time to time in the Company’s periodic reports filed with the Securities and Exchange Commission. More detailed information about risk factors that may affect the Company’s actual results is set forth in filings by the Company with the SEC on Forms 10-K, 10-Q and 8-K, including the annual report on Form 10-K filed by the Company on July 15, 2008. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s opinions only as of the date of this communication. Except as required by law, we undertake no obligation to publicly update or review any forward-looking statements to reflect events or circumstances that may arise after the date of this report.
For further information please contact: Torrent Energy Corp. John Carlson President & CEO Pete Craven CFO Phone: 503-224-0072 Email: Email Contact
SOURCE: Torrent Energy