Range Resources Ltd

Range Resources Limited (“Range” or “the Company”) is both an ASX-listed (ASX: RRS) and AIM-listed (AIM: RRL) exploration and production company with assets in Texas- U.S, Republic of Georgia, Trinidad and Puntland- Somalia.
 
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 NAV and Profit calcs

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DiamondDon

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PostSubject: NAV and Profit calcs   Tue Jul 13, 2010 9:27 am

Just for you Mr Right (I'll post on iii shortly):

Just a couple of quick calcs on Trinidad values, profits etc.
Sorry if it's a bit rambling.....

I'm basing this NAV calc on the recent reserve valuation of NCR, following the Smith#1 independent report by Lonquist.
Also, I'm taking full P1/P2/P3 reserves as stated.

At NCR we have 3.3mmbbls oil, 3.2mmbbls Gas Liquids, and 44.8bcf (7.46mmbboe) gas, all net to RRL.
So taking a valuation of $226m for 13.96mmboe this gives a figure of $16.19/bboe.

At $16.19/bbl NAV, for the 0.69mmbbls net to RRL at Trinidad this would give a figure of $11.17m, or 1.0877c/share (0.725p).

Additional prospective resources are stated at 2.0mmbbls net, this would then give a NAV figure of $43.55m, or 4.2c/share (2.8p), a considerable increase and most likely how PL came to his 50% market cap increase suggestion.

Alternatively, we can look at it from a profit/revenue point of view:

At 700bopd (70 net) there is revenue of $52500 ($5250) per day, and a field duration of 27 years at these flow rates.
At 3500bopd (350 net) there is revenue of $262500 ($26250) per day, and a field duration of 5.4 years.

Net profit per annum is $0.767m, net to RRL, when extracting at 700bopd, a 6 year payback period, EPS of 0.05p, p/e of 130.
Net profit at 3500bopd increases to $3.8m, net to RRL, payback in just over a year, an EPS of 0.24p, p/e of 27.

Also, by the time we have 3500bopd (in 36 months), PL also looks to have increased reserves by 2mmbbls and rates up to 10000bopd (1000 net), meaning annual profit of $11m, a field duration of 7.37 years, an EPS of 0.7p, p/e of 9.25.

For these EPS and P/E figures, I have used current share issue of 1.072bn and current SP of 6.5p approx, so really they mean nothing other than being a comparison tool. The higher EPS the better, and the lower p/e the better.

What it would say to me is that, although it's not the incredible bargain we got with NCR, it's still pretty good business seeing as we are fully funded throughout future development of the fields, especially if they turn out their anticipated results.

Once again, further de-risking and underpinning of the business and that is incredibly rare amongst same sector companies at this price.

I've previously calculated NAV of current texas fields at 19.47p/share (perhaps around 19p given recent fluctuations in exchange), and would suggest that, IMHO, the revised NAV based on just Texas and Trinidad may be around 21-22p/share, meaning at 6.5p we are trading at around 29% of net asset value (and that is excluding Georgia and Puntland, unbelievable as it seems).

Again, this is in my humble opinion, for my own research purposes only, and posted purely to help any research you may wish to do

yourself.

cheers, DD



Last edited by DiamondDon on Tue Jul 13, 2010 3:30 pm; edited 1 time in total
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PostSubject: Re: NAV and Profit calcs   Tue Jul 13, 2010 3:29 pm

Great work DD, Thanks for that.

Alls coming together lovely!
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DiamondDon

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PostSubject: HB Markets Flashnote (12/7/10)   Wed Jul 14, 2010 9:50 am

http://www.hbmarkets.com/stock-research-prices/small-cap-flash/read/
(scroll down to 12/7/10)

Range Resources (RRL, 6.88p, £75.44m)has entered a binding Heads of Agreement to acquire a 10% interest in three production licences onshore Trinidad and significant local onshore drilling operations for $4.25m.
The country has produced >3bn bbls and currently produces 100k bopd with all onshore oil acquired by the state.
Competent Person’s Forrest Garb assessed the 3 producing fields to contain of 4.8mmbl 2P, 2.1mmbl 3P and 20 mmbl prospective.
At this stage we are attributing an additional 0.42p of value for the prospects which may be conservative.
Prior to further information on economic and fiscal terms of the PSA we assign $15/bbl of the 2P which seems reasonable given the relatively stable geopolitical backdrop (no.82 on the World Bank’s ease of doing business ratings) and existing production.
We assign the same for the P3 and the prospective resources (for which we attribute a 10% chance of success).
Current production from the fields is 700 bopd, however Range perceives a work program could lift this to > 3.5k bopd within 3 years.
Range will be carried through initial development expenditure, is planning to use company-owned drilling rigs and equipment and cashflow from existing production is expected to make operations self-sufficient.

This looks like a sound deal.

Ultimately an increase in the production to between 800 -1,000 bopd attributable to Range is targeted which suggests between 8k bopd to 10k beopd.
We estimate that the initial 3.5k bopd would lead to revenues in the region of $8m per year for Range’s share.

Thus we see the value now significantly underwritten by proven and probable producing assets (5p in our view) and mobilisation is likely to lead to great deal of excitement with share price volatility (and a potential run).

We upgrade our price target to 7.32p.

We expect to see some profit taking (always advisable for speculative situations in good >30% profits) but while still very high risk, investors attracted by the original Puntland assets may be advised to hold some of their stake given potential for news flow in Q3 (or before) - when mobilisation of a rig for Puntland is targeted - could herald a further run in the shares.

HOLD


DD
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PostSubject: DD   Wed Jul 14, 2010 4:17 pm

Superb info and thanks for your time and effort,its great to have a reference library type bulletin board to refer back to.
All the best
Illumi

cheers
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PostSubject: Re: NAV and Profit calcs   Wed Jul 14, 2010 4:48 pm

Good stuff DD!

rabbit
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