Range Resources reiterates “exponential” growth agenda

Range Resources’ (LON:RRL, ASX:RRS) executive director Anthony Eastman says that while the company is “distressed” by the fall in its share price amid the market turmoil of recent days, the group remains very much on track to deliver value for shareholders.

In a wide ranging interview with openbriefing.com, Eastman assured investors that, most importantly, the group’s current planned activities are fully funded from existing cash reserves.

He says: “Range has a 12-month exploration and development plan which it will complete irrespective of market conditions.

“The board believes that the plan will see Range fulfil its exponential growth agenda for the benefit of all shareholders.”

Among its key projects is the Mukhiani-1 well in Block Via in the Republic of Georgia. The well is targeting the Vani-3 prospect, which is estimated to hold between 41.7 million and 115.2 million barrels of oil-initially-in-place, with net attributable to Range of 40 per cent.

In the best case of 115.2 million barrels, Range’s stake would amount to 46 million barrels, attributable through its 40 per cent holding.

In mid-July Range spudded the Mukhiani-1 well and the company has been advancing drilling since then as part of a “high impact campaign” in Georgia.

Eastman reiterates in the interview with openbriefing.com that drilling Mukhiani-1 continues to progress well, with the lithology (rock formation characteristics) encountered in line with expectations.

He estimates the well will reach its target depth of around 3,500 metres around mid-September, following which the rig will move to a second drilling location.

The company is also very active in the Puntland State of Somalia, where it holds a 20% interest in the Dharoor and Nugaal Valley blocks.

Eastman says exploratory prospects in Puntland remain “excellent” and include three high potential drill sites in the more accessible Dharoor Valley of the Darin Basin.

At least three large closures of 50 to 150 km2 each have been mapped in Dharoor. Drilling locations have been selected over two of these “robust prospects”.

The two wells are targeting gross best estimate prospective resources of 300 million barrels and 375 million barrels recoverable respectively, with 60 million barrels and 75 million barrels net attributable to Range.

Range’s joint venture partner in Somalia, African Oil (CVE:AOI), is finalising the appointment of drilling contractors and Eastman expects rig mobilisation for the first well, which will be located in Dharoor, to commence in the current September quarter.

Contracts for the drilling rig and third party services are in advanced stages of negotiation and are expected to be executed shortly.

He adds: “From our perspective, the Puntland Government and key Dharoor Valley clans fully support the project, and will assist to ensure the drilling project moves forward safely and expeditiously.

“Specific milestone target dates have been adjusted by the Puntland government allowing Range and our joint venture partners to move the drilling start-up to the fourth quarter of 2011.”

Meanwhile in Trinidad, Range Resources recently commenced a 21 well development program across its 100 per cent owned oilfields.

The fields are currently producing 600 to 700 barrels of oil per day (bopd). The development program is targeting an increase in production to between 1,400 and 1,800 bopd by the end of calendar 2011, and potentially 4,000 bopd within 24 to 36 months.

Eastman says Trinidad represents a pure crude oil play at a time of very high commodity prices, adding that the project has low finding and development costs, low operating costs, low geological risk, and high potential exploratory targets.

“There are literally dozens of relatively shallow drillable locations that have been identified in the existing oil reservoirs in Trinidad. Each of these potential well sites take one to two weeks to drill, complete and bring to production, allowing rapid development of the existing oil reservoirs,” he says.

Range has already successfully drilled the first development well of its initial 21 well program for Trinidad. The well was drilled to a depth of approximately 900 feet and open hole logs indicate the presence of around 145 feet of net oil pay, exceeding Range’s expectations.

“We expect to commence production testing on this well next week,” says Eastman.

For the remainder of 2011 the company plans to drill a further 20 of the shallower well targets in the existing oil reservoirs. Only last week it spudded the first of these.

In addition, the company is progressing with a re-examination of existing 3D seismic work for the highly prospective Herrera formation. Producing fields in the Herrera formation located adjacent to Range's Trinidad acreage are producing at rates of 500 to 2,000 bopd.

“We have numerous existing leads which, subject to successful exploration drilling, could have the potential to increase gross production to between 8,000 and 10,000 bopd and add 100 million barrels of additional recoverable reserves.

It is anticipated that the first of these Herrera leads will be targeted to drill in October 2011.

Eastman assures that Range remains well funded to continue progressing its various projects. It reported net operating cash outflow of A$26.2 million for the 12 months to 30 June 2011 with cash in hand of A$17.4 million as at the end of June.

He says that in addition to the existing cash reserves, Range currently has around 190 million options outstanding with an exercise price of AUS$0.05 and 60 million options outstanding with an exercise price of AUS$0.10.

“The exercise of these options, which expire in December 2011, can be expected to provide Range with an additional AUS$15-16 million.”

In Trinidad it plans to fund the work and exploration program from cash flow from existing production, supplemented by a financing facility. After the initial 12 to 18 months of development drilling, the Trinidad program is expected to be self-funding.

In Puntland, Eastman notes that African Oil has already spent US$30 million as part of its joint venture agreement with Range and that its remaining expenditure commitments mean Range will be carried for the first US$15 million spent on the second well.

In Georgia, meanwhile, the first well is all but paid for while Range’s farm-in agreement with Red Emperor Resources (LON:RMP, ASX:RMP) requires it to pay 40 percent of the cost of the second well.

He adds: “If we want to pursue additional opportunities, we have a number of fund raising mechanisms being offered to us in the form of equity, convertible notes or pure debt.

“Obviously we will need to take into account market circumstances and sentiment when considering the size, pricing and timing of any potential fund raising.