Range Resources and Leni Gas & Oil team up in Trinidad

Range Resources (LON:RRL, ASX:RRS) and Leni Gas & Oil (LON:LGO) have today agreed a tie-up to jointly develop onshore oilfields in Trinidad.

The deal will see Range taking a 50 per cent stake in LGO’s Goudron oilfield by spending US$8 million. And LGO has an option to acquire a 15 per cent stake in Range’s Beach Marcelle project by spending a maximum of US$7 million.

Range already owns a number of producing assets nearby and this tie-up gives it additional reserves and production growth in Trinidad, while LGO gets sufficient cash to buy out Goudron’s previous owner and take the project forward.

LGO struck a deal to buy the Goudron field in October 2011, agreeing to pay US$9 million for Goudron E&P Ltd – which has exclusive rights to acquire the production contract for the field.

The company can now take control of the asset and start a work-over programme to regenerate the old oilfield, which was first discovered in 1927. 

“This agreement marks a turning point in our growth in Trinidad since we now have access to full funding for the acquisition and the first phase of the Goudron field re-development,” said LGO chief executive Neil Ritson.

He added: “A close collaboration with Range offers some significant synergies and we look forward to working closely to develop further opportunities."

Initially Range will pay US$4 million to acquire a 30 per cent stake in Goudron E&P Ltd. It will be able to increase its stake to 50 per cent by spending another US$4 million in the first year of the partnership.

The arrangement also gives Range an accelerated return on its initial investment, with it taking 75 per cent of the field’s early revenues.

“The Goudron field has enormous potential for increased production and reserves and by collaborating closely with LGO we anticipate additional benefits and synergies moving forward," said Peter Landau, director of Range Resources.

He adds: “The opportunity is of particular importance to Range as it is in the final stages of choosing an appropriate debt financing facility to develop the major aspects of our Trinidad operations for the next 18-24 months.” 

The original Goudron oilfield development comprised 150 wells. It is estimated to host 21.8 million barrels of reserves. The wells have in the past produced from two reservoir formations at depths between 300 and 3,500 feet.

Less than 100 barrels of oil are currently produced each day at Goudron. 

The new partnership plans to work-over the wells, including hydraulic fracturing, to raise the field’s production up to around 4,000 barrels a day. It is also believed by the partners that there is further potential in deeper reservoirs and through the use of secondary recovery techniques like water-flooding.

The partners say that production will rise steeply over the first six months of operations.

Today’s tie-up also gives LGO the opportunity to partner Range on the nearby Beach Marcelle block. 

Range aims to start production from Beach Marcelle using water-flood techniques in 2013. It hopes the field will produce 5,000 barrels a day by 2015.

LGO will cover 22.5 per cent of the development costs, capped at US$7 million, to earn its 15 per cent stake in Beach Marcelle.

Additionally the new partners say that they will work collaboratively to optimise and extend their joint interests in the Eastern Fields area in Trinidad. The two AIM quoted firms have a number of assets in the country.

LGO shares soared on AIM following the news, gaining 0.32p, or 40 per cent, to trade at 1.14p each, while Range shares fell slightly to trade at 11p each.

Range currently has two highly anticipated exploration programmes underway in Somalia and Georgia. Drilling began last week on the Shabeel-1 well in the Puntland region of Somalia, while the location of the Namakhvani well is currently being prepared.