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Doriemus PLC: Significant upside with a fundamental NPV of £6.8m

DOR's market cap is £5.1m based on 14.4  billion shares (pro-forma) in issue. This is in comparison to a fundamental NPV of £6.8m, which does not including the cash from the recent £0.65m fund raise.

Doriemus Plc (‘DOR’) has three key investments:

  • 6.5% (indirect) interest in Horse Hill
  • 30% interest in Lidsey
  • 10% interest in Brockham 

With regards to the NPV:

Horse Hill: UKOG recently purchased 1.9% of HHDL for £323,000 which equates to an indirect 1.235% of the HH asset. This transaction implies a gross valuation of £26.2m for 100% and therefore £1.7m market value for DOR's indirect 6.5% stake.

Lidsey: We have valued Lidsey at a gross value of £7.9m assuming the new well is successful. All the value is in the new horizontal well, which will be drilled in the summer and DOR has 30% interest in this well. This implies a value of £2.4m for DOR's interest.

Brockham: We have valued Brockham previously on the basis of restarting the conventional production programme from the Portland and a single side-track well (already drilled but not tested) into the Kimmeridge. This provides an un-risked gross valuation of £26.95m and a net value to DOR of £2.7m for its 10% interest.

If we combine these together, this provides a base NPV of £6.8m, representing a 33% uplift on the current market cap. The company has also raised £650,000 to fund its share of drilling at Lidsey. We have not included this in the base NPV as the cash is required to realise the NPV of Lidsey, therefore including it would be double counting.

Significant Upside: There is huge potential upside for each asset at various risk stages. We are not considering the Kimmerdige potential at Lidsey at this stage as it is considerably further south than the existing sweet spot around HH/Broadford Bridge/Brockham. However, Brockham is the most advanced play as it has a production licence. The operator Angus Energy has permits to drill up to six development wells which could tap into a significant portion of resources assuming oil can be flowed. An extended well test is required to ascertain this and hence forth all numbers should be treated as highly indicative. Nevertheless, if we model a fully permitted development with initial production peaking at 2,000 bopd from a multi well development, the gross value could be between £50m - £67m with DOR's interest worth up to £6.7m. Note that this is currently unfunded although this is unlikely to be a problem if testing is positive.

HH also represents significant upside. Permits for an extended well test and two additional wells have been submitted with testing indicated in Q4 2017 assuming they are awarded. Before this, it is likely that UKOG will also test Broadford Bridge which is a lookalike to HH. If both of these wells can sustain flow rates in the 100s of bbls over a sustained period then DOR will be holding interests in two assets worth multiples of its current NPV.

The risks to the value of DOR's interests are:

  • Disappointing well tests from Brockham, HH and by direct inference, Broadford Bridge.
  • Drilling risk at Lidsey if the well underperforms
  • Permitting problems at Brockham and HH (recent experiences with Wressle and Brockham with local councils should be viewed as a potential risk)

 

Conclusion: 

At the base level, DOR looks like very good value. We expect strong stream of news flow regarding on all three assets over the next six months complemented by Broadford Bridge, which has direct relevance as to the Kimmeridge play. As the only player involved in HH and Brockham and with huge potential upside from the key plays, DOR is looking undervalued compared to its peers. Given the share price spikes for UKOG and Angus, we think DOR represents a logical choice to gain exposure to this regional oil play.

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