The Anatomy of a Sh*tco, Energy Edition
Since our last article, some new information has come to light on those involved in the equity, used loosely here, of MMTLP which was a security intended to be a special dividend place holder for the eventual sale of oil and gas assets marked by the company itself to have no value except when toted by management on Twitter Spaces and alongside YouTube influencers. Originally held by Torchlight Energy(TRCH), which was acquired by Metamaterials Inc(MMAT) through a reverse merger in June of 2021 and was recently spun out into another entity to essentially eventually default on its leases and debt obligation in another, what many still argue as either public or private, company. Confused yet? Probably by design. Many have offered up their views of what transpired over the past 2 years with these companies’ assets and though it may be easier to listen to a Twitter Space and fantasize, I implore you to have a read of Keubiko’s substack articles titled MMTLP: Valuing the non-cash distribution and MMTLP: You want it to be one way... But it's the other way as well as Forbes’ and our favorite green chicken’s take on the situation. Moving forward there will be a lot of references to filings and other data sources including some light-hearted memes that will offend.
Am I a fraud or a scholar? I am both of course, as we all are. Because half of what I know I don't believe. And half of what I know I cannot prove. - Nick Harkaway
If you ask most MMTLP investors, also used loosely, who the brains of the operation and running the show is, they would tell you it’s John Brda(CEO of Torchlight). However, looking back at the original structure of Torchlight Energy and the allocation of shares and working interest of the oil and gas assets over the years it seems that Gregory McCabe of Midland, TX is in control of the operation. If not for any other reason than the simple fact that McCabe sold 6.77M shares leading into the halt. In this S-1, McCabe is shown as having 12,826,492 filed on January 1, 2023 where only 2 months earlier this S-1 filed on November 11, 2022 prior to delisting McCabe had 19,605,348 or a difference of 6,778,856 shares. Since the stock was halted on December 8th that means those 6.77M shares sold were done in 19 trading days with an average price of $8.58 and total volume of 45M McCabe alone made up for 14.6% of the volume on those days and a tidy profit of $58M.
MMTLP investors, now under the spun out Next Bridge Hydrocarbons(NBH), do reference McCabe often since there is an unsecured promissory note in the principal amount of up to $20 million if NBH raises $30 million or more in capital through debt or equity.
That is a big ‘if’ on raising capital but since the S-1 McCabe isn’t taking any chances and has swapped his Working Interest for shares and in doing so has removed his obligations to provide capital for the drilling of the Orogrande assets ‘which borne by the non-operating working interest owners of such properties’ according to a NBH recent report.
The drilling and development of the Orogrande into an asset that can be sold to a major oil and gas producer has been toted since pre merger of TRCH and MMAT in June of 2021. Unfortunately MMAT, under the guidance of John Brda for the majority of 2022, didn’t seem interested in keeping the leases of the Orogrande since drilling(spud date) didn’t start until mid December of 2022.
In a filing by Metamaterials early in the year, we at Energy Crisis substack began to question Brda on Twitter many times asking about lack of drilling as well as sent an email to investor relations of Next Bridge in December. Neither responded. This is a major issue since the full value of MMTLP relies on an acquisition of the assets in cash but NBH was on the verge of losing the rights to the lease.
While Brda was receiving a sizable salary of $375k per year and a potential bonus of $1.5M, not much was getting done by management to secure the leases from defaulting back to UT Lands. Luckily for Brda, he was most likely advised by McCabe to sell into the halt but was instructing retail on how to buy while dumping shares. What was his response after being asked if he did in fact sell shares leading into the halt? ‘GO F**K yourself’.
Getting back to the euphemism of the anatomy of a sh*tco this would make Brda the dick and asshole collectively, Brda seems to forget that he was awarded a high six figure salary as CEO for years under Torchlight and Metamaterials while bringing little to no value of the companies. Typically a good indicator when looking at companies that don’t plan to deliver on their promises is to analyze the cash burn and when a large portion of that capital is allocated to inflated management salaries it’s usually a perfect sign to run in the opposite direction. It is unfortunate how Brda sees retail investors as liquidity for his exit from what every indicator points to as a long time fraud.
Brda seems to enjoy the limelight given to him as what he seems to perceive himself as the greatest oil and gas CEO to ever walk the earth, or at least that’s the way he comes across when making his claims of barrels in the Orogrande founded on almost no investment. Unfortunately, Brda’s persona attracts those with a cult like mentality who are willing to take aim at anyone who get in their way. Found in Freedom of Information(FOIA) Requests to FINRA we can see that the organization allowed employees to work from home due to physical safety concerns after many threats were made by MMTLP holders.
FINRA also had MMAT/MMTLP light up their fraud radar which is understandable with the amount of misinformation coming from even the ex-CEO of TRCH. Some in the community read this as FINRA committing the fraud but anyone without a bias to the situation could clearly see that this was directed towards executives of TRCH/MMAT/NBH and/or pumpers on Twitter and YouTube.
NBH has spent some of their remaining capital on a third party report by PETech to show reserves in the Hazel Project. Masterson Hazel Partners(MHP) is owed all projected revenue from the remaining reserves, the 'famed geologist' Masterson had the option to buy out the project and declined. The reserves are discounted(10% is industry standard) and obligations of debt to MHP(Masterson Hazel Project) makes those reserves essentially a ZERO, but luckily Masterson will get paid on the eventual sale of these mostly worthless assets. The tradition of paying insiders while retail holds the bag continues.
Torchlight pre merger began marketing its only producing asset that were economical called the Winkler Project that sold on November 11, 2020 for $450k and was producing all their recoverable barrels on 320 acres. These proceeds were used to help pay management over investors and remove as much value post merger from retail investors promised a special dividend.
Brda with the help of Masterson wasn’t the first to push the narrative of billions of barrels in the Orogrande for Torchlight. An often forgotten individual that held the position of Chief Operating Officer for TRCH, Willard McAndrews III, expressed a high value of those assets in Sept 2014 at EnerCon. ‘How long will it take for someone like a Pioneer, Devon, or Chesapeake to come knocking at our door… on 2500 wells we can drill… ‘ McAndrews was quoted as saying in the interview but apparently ‘how long’ is a decade running from that statement. Interestingly enough, some of the assets mentioned by McAndrews seem to be from a previous sell by Xtreme Oil & Gas, Inc. and Willard G. McAndrew III to TRCH in 2013.
McAndrew in the same interview also mentions names ‘that a lot of people recognize’ such as Ring Energy and Husky Ventures. It took Ring Energy less than 2 years to realize that these projects were not worth much which is a shorter time than many original holders of TRCH leading into the merger have been holding out hopes for these oil and gas assets to eventually sell and payout. Husky Ventures also took what they could claw back from TRCH and ran, according to the Purchase and Sale Agreement signed in November 2015.
Where did McAndrew go after leaving Torchlight? Literally walked across the building that TRCH was operating in at 5700 W. Plano Pkwy, Ste 3600, Plano, Texas 75093 and into another oil and gas company operating in Texas named Amazing Energy(AMAZ).
Recently AMAZ’s status was revoked by the Securities Exchange for failure to comply with periodic filing requirements and is currently in bankruptcy proceedings where a similar character to McCabe name Jed Miesner of Amarillo was the brains behind this sh*tco. Miesner didn't make it out of AMAZ with as much hard cash as McCabe did with TRCH and his Amarillo home is currently listed for sale.
Looking through some of the Railroad Commission(RRC) filings for Jilpetco, a corporation purchased by AMAZ from Miesner, we can see that AMAZ keeps it in the family with Jed’s son singing off on many RRC reports. Marty looks very familiar but maybe we have ran into him since Energy Crisis is written out of a office in Odessa/Midland.
AMAZ operated most of their oil and gas leases in Pecos County which for many MMTLP holder may be a familiar name as a lot of credibility has been put into an oil and gas ‘expert’ that utilizes the region’s name as they pump the stock. Pecos County not to be confused with Pecos, TX which is in Reeves County where oil and gas along with the prison are the leading contributors to the local economy. Maybe the correlation of oil and prison systems that Pecos has will translate well into certain management of these companies and pumpers.
This same pumper that has done plenty of recorded Twitter Spaces stated he has invested in several companies like this(MMTLP), knows NBH management, knows the geologists of TRCH, ect. It’s not hard to imagine someone that makes those claims and continues to pump an essentially worthless equity may have some deeper connections to management not disclosed.
Masterson may be a good friend of the Pecos pumper after the influencer claimed that his friends were geologists that came from Chesapeake, Petrohawk, Samson, and other names, used to self promote the equity, but with no real ties to the Orogrande.
Another name that came from TRCH and into AMAZ is Edward Devereaux which luckily had the ease of transition from one role to another in different companies without having to move buildings.
Throwing out different technical terms while ranting about the Permian Basin was thought to be lost in the past of private equity oil and gas companies attempting to pump their assets to the open market from years past but TRCH didn’t seem to get the memo. The commingled production from the Wolfcamp and Bone Springs formations were given the name WolfBone which is worth mentioning, Rich Masterson is also credited with the development of this play. This same formation can be seen referenced by AMAZ Energy in filings for Lea County in New Mexico.
We can possibly mark this up as synergy where the two companies could collaborate with open doors on the development of their oil and gas assets alongside their SEC reporting which showed the true health of these entities. Though the capital burned by these two companies can’t be seen as an extreme amount when comparing to other major operators, they did a decent job at destruction of capital to get very little out of the ground and no return on investment to anyone other than management.
The knees of this cumbersome organized crime on retail is the now CEO of MMAT George Palikaras that is found holding up the body of work. Metaphorically, George could be found on his own knees pushing the narrative of the oil and gas assets Metamaterials would acquire through the reverse merger with statements of the special dividend ranging from $1-20/share.
Audio 13:00 - ‘As you know when Torchlight decided to sell the business to change 180 degrees there business model and find a company like us. They look at many different companies, they selected us and we selected them. Today the price of oil from one twelve month period the price of oil went from negative to lets say more momentum and lets say the more time that goes by over the next 6 months, I can tell you that Torchlight is speaking to the right potential buyers and that they are top tier and frankly no one can predict where this will be a $1 or $20 dividend… depending on where we are in the market’
‘Very exciting for the Torchlight shareholders and frankly no one in the Oil and Gas industry and that makes assets or the assets of the Torchlight has even more valuable. So if you announce a dividend today, you are shooting yourself in the foot as they say. I believe the dividend will be very exciting for the Torchlight shareholders and they will do with it whatever they like and maybe buy some additional MMAT stock on the future on the Nasdaq. Thats my hope and why we did not want to touch the dividend because we on the Meta side could not even predict the price of oil 6 months ago or where this Biden Administration would create additional reasons for these assets to be more valuable. And for you its a preferred share for a reason and that's not priced and in order for the shorts to deliver this they have to own the stock. They cannot borrow the stock, they cannot short the stock, they have to own the stock to participate in the dividend and so does any other normal investor. As a result because of the potential is, if you look at the statistics, it could be a dollar($1) to more than twenty dollars($20) according to the analysis. It's difficult to predict where it will end up.
Though it is our opinion at Energy Crisis substack that George was just a useful idiot in the fraud playing out on the energy side, it must be said that at many points he would of been able to shed light to investors on where things were really headed.
As MMAT moves forward through the mess that its CEO entangled the company in we can see that the current loan pledged to NBH has been marked down to only $2.2M from its original $15M. Looking back at the drilling obligations and cost of capital to complete those obligations to UT Lands in order to not lose the lease rights of the Orogrande, it is safe to assume that George was smart in not perusing the costly drilling.
However, separating MMAT from what was TRCH and current NBH may not be as simple as spinning off the oil assets and hoping the fanatic retail chants die with the debt and the assets. Looking in as an outsider of the design of the spin off, this seems to be the case but a deep SEC investigation with communication between the TRCH executives and MMAT CEO will result in a clear view for retail investors in years to come. From MMAT recent quarterly filing we get this:
It is possible that an unpaid creditor of Next Bridge or an entity vested with the power of such creditor (such as a trustee or debtor-in-possession in a bankruptcy) could claim under various state and federal fraudulent conveyance laws that the Spin-off left Next Bridge insolvent or with unreasonably small capital or that we intended or believed Next Bridge would incur debts beyond its ability to pay such debts as they mature. If a court were to agree with such a plaintiff, then such court could void the Spin-off as a fraudulent transfer and seek recovery of Next Bridge’s liabilities from us.
The good news is that even if MMAT may be in trouble for some misgivings to retail investors that piled into MMTLP lucky enough to not hold MMAT can at least look forward to NBH being in control of the oil and gas assets. If we blindly decide to ignore the red flags of the near default of the drilling obligations since most of these holders are trapped anyways, our Pecos friend has told us he knows the management of NBH as well and trusts them. This could essentially be seen as a positive since the CEO of MMAT had no idea what he was doing with the oil and gas assets.
Our savior of last hope comes from the CEO of NBH Clifton Debose which Keubiko points out in his recent article MMTLP: Valuing the non-cash distribution:
We have one final data point to look at. While NBH does not trade, it is technically a public company under securities laws due to the number of shareholders the company has. As such, it needs to file documents with the SEC just like other public companies. Because of this, we can see a series of Form 4s filed on March 8, 2023, whereby management is being issued many millions of stock options. The exercise price on these options is a very specific (out to four decimal places) $1.2056 as shown below in the CEO’s ~5 million share grant:
Keubiko goes on to show that NBH doesn’t accurately include $30M in liabilities on the NBH balance sheet and the awarded stock options formula is flawed. While NBH is considered the current expert on the assets and we know very little of new developments we can still look at the past dealings of TRCH where the leases rights were originally bought for $3.3M and promoted as worth billions only months later.
If the history of TRCH serves as an indicator on how NBH evolves and if Brda is still heavily involved we can expect little news for many years until there is a definitive default on the leases from UT Lands or a bankruptcy filing. One thing that is still in the immediate presence of many who held through the halt and are now trapped with their ‘stop loss as NBH’ is a tax implication on the spin-off.
Essentially these holders that never sold in hopes of riches are now burdened with an unknown tax debt to the IRS. It is difficult at this juncture to say what is owed by those that held, but the last trading day price of $2.90 is where the value most likely will be pegged and depending on the time of buy and amount could result in taxes paid but a tax professional consultation seems to be the best course of action immediately.
bless you for writing this. the fact that retail is completely blind to the people who really fleeced them here (for well over a YEAR later now!) is unreal. i've never seen anything like it. i've tried to write a similar piece many times but kept getting lost in the weeds.
No oil and the US District Court for the Central District of California just told them to get bent on their FINRA and DTCC claims one wonders if they will wake up to the fact of who really fleeced them.