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Gold/Mining/Energy : News Flash On The Aim Market
LSE 5.220-0.8%Nov 7 9:30 AM EST
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From: miningoz4/29/2014 3:31:41 AM
   of 161
 
Mercom Oil Sands Plc (Mercom) is an early stage oil exploration company. In fact, it is only
planning to become one, subject to it obtaining a working interest in an oil sands project in
Alberta – the Chard project.

The project is estimated to hold about 240 million barrels of
heavy oil, but further exploration is needed to book any reserves and to estimate its
economic feasibility. In addition, there are uncertainties regarding Mercom’s ability to
obtain a working interest in Chard due to a stall in negotiations with Chard’s owner, which
is currently the largest risk for Mercom and its investors.
The main opportunity lies in the potential payout if exploration proves a success. At the
same time, it is highly speculative and there is no assurance that oil exists in the ground in
expected quantities or that it can be profitably extracted. There are a number of other
important risks, including lack of diversification, access to funding, environmental risks
and other.
Our valuation suggests that Mercom’s potential value is $245.2 million1
($0.64 or 40.5
pence per share), if the Chard project is acquired and developed successfully, with current
fair value (adjusted for risk of failure) of $20.1 million, or $0.05 (3.3 pence) per share.
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