Doral Energy is an oil and gas exploration and production company headquartered in Los Angeles, CA, with an operations office in Midland, Texas. The Company is publicly traded on the NASDAQ OTC Bulletin Board under the symbol DRLY.
Doral Energy's Mission and Strategy
Doral Energy's mission is to discover and extract oil and gas to help provide the United States with energy for a secure future.
Doral's primary strategy is to build shareholder value by generating near-term cash flow as an oil and gas “exploitation” company. By identifying and leveraging established but under-exploited producing assets with strong proven developed reserves (PDPs), the Company can increase the value of the assets and generate very attractive returns on capital investment. This goal is achieved by acquiring producing properties that are operating below their potential, either due to outdated technology, failure to keep up with maintenance required for optimal production, or lack of access to growth capital to conduct new drilling on proven undeveloped reserves (PUDs).
The Company also targets new exploration and drilling programs with low-to-medium risk profiles, including infill drilling of proven undeveloped reserves (PUDs) on its existing properties. The goal of the exploration and drilling program is to provide the potential for very large shareholder returns, while not jeopardizing the overall cash flow generated by Doral’s producing properties.
The new exploration and drilling opportunities that Doral Energy considers are chosen carefully based on assessing the risk/reward ratio. Among the characteristics Doral looks at specifically for identifying attractive risk/reward profiles are:
Regions with previously unrecoverable reserves that are now accessible due to advances in technology and operational methods;
Properties with powerful neighbors - large international energy companies that are actively developing adjacent fields;
The ability to minimize cash requirements and leverage assets by partnering with well-capitalized major companies to fund exploration and development of Doral's properties.
The Permian Basin – The Most Prolific U.S. Oil & Gas Region
Doral Energy has a particular focus on acquiring producing fields and exploration plays in the Permian Basin of Texas and New Mexico. The Permian Basin has generated a total of 30 billion barrels of oil equivalent (BOE) in over 80 years as a major force in U.S. oil and gas production. The Basin contains 22% of remaining U.S. oil reserves, and it continues to be an area of vibrant activity amongst major energy companies, independents, and even small “Mom and Pop” operators. The Permian Basin is expected to continue playing a very significant role in U.S. energy production for many years to come.
Though Doral certainly does not exclude promising opportunities in other regions, having its Midland, Texas Operations Office located in the heart of the Permian Basin positions the Company well to find acquisition targets in this region that meet its requirements. In addition, the operation of properties in the Permian Basin can be done more readily from a home base in Midland.
Why Doral?
Doral Energy Corp has been created both to help meet the United States' rapidly growing demand for additional secure domestic energy supply, and to take advantage of the outstanding value-creation opportunities this dynamic generates for companies with sound strategies, experienced management, access to growth capital, and financial discipline. Doral Energy is well-positioned to capitalize on this market, simultaneously creating value for its shareholders and enhancing energy security for the American economy – and American citizens as well.
Doral's Projects
Doral’s initial production project is the 7,800 acre Eddy County Properties, located in Eddy County, New Mexico on the western end of the Permian Basin. The Company has a 97.5%average workinginterest and a 76.0% average net revenue interest in 66 leases comprising the Eddy County Properties. Gross daily production is approximately 120 barrels of oil equivalent (“BOE”) per day. Total proved reserves for the Eddy County Properties are estimated at 4,100,000 BOE, with approximately 800,000 BOE of proved developed reserves and 3,300,000 BOE of proved undeveloped reserves. Doral acquired the Eddy County Properties using financing from its $50 million credit facility with the Energy Capital Group of Macquarie Bank Limited.
Doral’s plan is to capitalize on numerous opportunities identified by its engineers for operational improvements to existing wells. A work plan including well repair and clean-out workovers, well chemical treatments and acid stimulations, and improvements in pump and production facility efficiencies will be undertaken immediately, in order to boost production and cash flow from the Properties.
Doral’s overall plan for the Eddy County Properties is to capitalize on the proved undeveloped reserves by implementing an infill drilling program intended to maximize production from the Eddy County Properties. Similar infill drilling programs in the immediate vicinity have had very good success over the past 20-30 years, helping to guide Doral’s strategic planning. The Company has identified over 160 potential infill locations that have been classified as containing proved undeveloped reserves. Because Doral’s rights generally extend from the surface to 3,500 feet in depth, the infill drilling program will require shallow drilling only, which can be done with lower costs and fewer operational risks than deeper wells.
Projects
Eddy County, New Mexico
Doral Energy acquired its Eddy County, New Mexico Properties in July 2008. The Properties cover 7,800 acres on the northwestern end of the resource-rich Permian Basin in Eddy County, New Mexico, outside the city of Artesia. Doral holds a 97.5% average working interest and a 73.5% average net revenue interest in the 62 leases that comprise the assets. Doral is the sole operator of the Eddy County Properties.
Doral acquired the Eddy County Properties partly with cash from a $50 million credit facility extended to the Company by the Energy Capital Group of Macquarie Bank Limited of Sydney, Australia. The credit facility can be used not only for Doral's acquisition, but also the further development of the Properties, which represents a great deal of additional value potential in the Eddy County Play.
Regional Overview & Geology
The Eddy County Properties are located along the Artesia Vacuum Trend near the north-western edge of the Permian Basin. The Permian Basin has been a top U.S. oil and gas producing region for over 80 years, producing a cumulative 30 billion BOE and estimated to contain 22% of remaining U.S. proved oil reserves. The Permian Basin will clearly continue to play a major role in U.S. energy production for years to come, making it a high profile region for ongoing investment in exploration and production activity.
The Artesia Vacuum Trend consists of reservoirs of the Upper San Andres and Grayburg Platform, extending in an east-west direction from the city of Artesia, NM to the city of Hobbs, NM. The play contains 13 reservoirs with more than 1 million BOE of combined annual production. Cumulative production from the 13 reservoirs exceeds 800 million BOE. Production in most reservoirs is commingled from the San Andres and Grayburg Formations, with depths to the top of the reservoirs ranging from 1290 to 4700 ft.
While the Artesia Vacuum Trend is a relatively mature play, recent development of lower permeability Grayburg sandstones in the Grayburg Jackson reservoir during the mid-1990s has been successful to the point of reversing production decline and is a major focus of current and future development in the region. Doral's leases convey shallow rights, generally extending from the surface to 3,500 feet in depth, generating production that is thus primarily from the Upper San Andres and Grayburg.
Current Production & Activities
Gross production from the Eddy County Properties is 120 BOE per day, with 98% from oil and 2% from natural gas. Total proved reserves are approximately 4.1 million BOE, consisting of 800,000 BOE of proved developed reserves and 3.3 million BOE of proved undeveloped reserves.
Doral's initial work on the Properties is based on the Company's engineering studies that indicate there are numerous opportunities for operational improvements to existing wells. A work plan including well repair and clean-out workovers, well chemical treatments and acid stimulations, and improvements in pump and production facility efficiencies, is being undertaken, with the goal of achieving significant increases in production.
The workover program is intended to ramp up production, and thus cash flow, in the first several months of Doral's ownership of the Eddy County Properties. The cost of the workovers is expected to be very reasonable relative to the potential near-term increase in production revenue, making this a highly attractive strategy to Doral from a risk/reward standpoint.
Future Development
Doral plans extensive further development of the Eddy County Properties to capitalize on the proved undeveloped reserves. Implementation of an infill drilling program is planned to maximize production from the Eddy County Properties and extract greater shareholder value from the assets.
Similar infill drilling programs in the immediate vicinity of Doral's leases have had very good success over the past 20-30 years, helping to guide the Company's strategic planning. Doral's technical team has identified over 160 potential infill locations that have been classified as containing proved undeveloped reserves.
The shallow rights contained in the Eddy County Properties are especially attractive because they provide the opportunity to drill and complete wells with lower costs and fewer operational risks than deeper wells. The result is a risk/reward profile that conforms closely to Doral's growth plans while allowing the Company to maximize its upside from the Properties.
Beyond just its current leases, Doral is actively seeking additional acquisitions in the Eddy County region in order to create economies of scale in its operations and enable tight management focus, utilizing regional expertise developed. There is a great deal of potential in the proved reserves of the Artesia Vacuum Trend, and Doral would like to make it a significant piece of its portfolio as the Company grows.
Market
Growing demand, declining production, and all-time high prices have created an extremely positive environment for oil and gas. This backdrop is ideal for Doral Energy's strategy of building shareholder value through exploration and production projects.
A Growing Market
Energy drives the engine of today's global world, and modern society's thirst for this vital commodity is virtually unquenchable. Total global energy use in 2006 was equivalent to 81 billion barrels of oil. It is projected to grow to 121 billion by 2030.
The continued progress of mankind - and especially of the United States - depends upon the availability of sufficient, reliable sources of energy. The following facts tell the story of where the global energy market is heading:
- The United States uses 4.5 times as much energy per capita as the global average, making energy supply supremely important to the world's sole remaining super power
- Two out of every three barrels of oil used in the United States are imported
- Rapid development in countries with huge populations e.g. Brazil, Russia, India, and China - is creating energy demand and usage far beyond historical levels
- The developing world's rapidly growing thirst for energy is cutting into the share of global energy production available for US needs and driving up prices
- The Bottom Line: global energy demand is projected to grow 2.2% annually through 2020, compared to the 1.7% annual rate that has been in place since 1986. This equates to 33% more energy by 2020, extracted from depleting reserves. The energy must come from somewhere.
