Range Resources confident of commercial discovery in Puntland

Range Resources’ (LON:RRL ASX:RRS) Shabeel-1 well in Puntland, Somalia could produce up to 130mm barrels of recoverable oil, the company’s MD said in an interview today.

Drilling of Shabeel-1 has been suspended pending testing, with Range saying it had been a significant success to date with the discovery of a 12 to 20 metres net hydrocarbon pay zone in the Jesomma sands.

Managing director Peter Landau added that based on Range's internal technical team's review of the net pay zone and results to date, a successful flow test could result in 70 to 130mm barrels of recoverable oil from the well.

Of that, 14 to 26mm bbls would be attributable to Range.

“The zone needs to be commercially flow tested and this will be undertaken after the completion of the second well, Shabeel North, which will spud early June,” he said.

“It is also important to remember that this is the first hydrocarbon well drilled in the Dharoor Valley for over 50 years and it is a massive credit to all involved, namely Horn Petroleum, the Puntland Government and the local Puntland communities that the well has been successfully drilled to date,” he said in an interview with Open Briefing.

“Globally, the average discovery rate is between one in five and one in 10 for a ‘wildcat’ well, which essentially is what Shabeel-1 is, hence we consider the well successful to date with both the net pay and the confirmation of an active petroleum system.

“Whilst the market and short term traders may have been anticipating further success in the deeper sections of the well, what we have discovered is extremely significant and the chances of a commercial hydrocarbon operation in Puntland are far greater now than when the well was spudded.

“And it must be remembered that we did encounter additional potential net pay sands in a Jurassic aged formation over a 184 metre section at a depth of 3,246 metres to 3,430 metres. The fact that hydrocarbons were encountered at a number of levels is particularly significant moving ahead.”

Landau added the company decided to test the Shabeel-1 well after drilling Shabeel North for timing and logistic reasons.

“Obviously the preference would be to flow test immediately but timing and logistics would mean that the rig and crew would be idle for four to six weeks at what are expensive day rates in the region.

“Previous test equipment flown in was designed for open hole, smaller diameter testing as opposed to the now cased well requiring high performance perforation.

“This is quite standard practice across the world, particularly in remote areas.”

Laundau added that the Shabeel North well is scheduled to spud early June with a revised target depth of 2,400 metres.

“The well has an identified Jessoma formation significantly thicker and of better quality than the Shabeel-1 well providing the joint venture with great comfort in moving the rig immediately to drill the second well.

“Internal technical estimates suggest recoverable oil of between 100 to 150mm barrels from a successful discovery in the Jessoma formation, of which 20 to 30mm barrels would be attributable to Range.

“It is also important to note that given the Jessoma discovery in the first well, the second well will be drilled with smaller casing to ensure that open hole testing can be undertaken with the equipment already on site.“

Landau said that the Shabeel North well is not contingent on the Shabeel-1 outcome, but the success there certainly gives Range greater confidence moving forward.

He added that he was still confident of a commercial discovery even with a revised target of just the Jessoma formation.

“If the Shabeel-1 well successfully flows and the Shabeel North well delivers to current expectations, we would have discovered between 170 to 280mm barrels of recoverable oil in our first two wells (with 34 to 56mm barrels attributable to Range) with the remainder of the basin still to be tested.

“Investors must also remember the well's proximity to the coast (approx 60 km) and the relative ease of constructing a pipeline to an offshore loading facility based on a commercial discovery.

“Nothing changes for Range in the immediate future. We are fully funded and look forward to updating the market on a number of fronts including Colombia and our flagship operations in Trinidad and of course hopefully on further drilling success in Puntland,” he concluded.

Range has a 20 per cent stake in the Dharoor Block in Puntland, Horn Petroleum has 60 per cent and Red Emperor Resources 20 per cent.