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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 For the doubters!

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DiamondDon

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Join date : 2010-06-16
Location : The Oil Capital of Europe

PostSubject: For the doubters!   Sun Mar 06, 2011 9:51 pm

I've been away for a few days, and the break from forums and bulletin boards has been a breath of fresh air. Looks like i timed it well too. 
While I was away, I managed to jot down a few notes on the projects which I've tidied up to post below, if it's worth anything to any of you:

Well, what a start to the year, let alone the month.

As expected the huge increase in share price has led to a big increase in Range's profile and the unavoidable influx of derampers, doubters and bashers.
So, for all these temporarily mislead individuals, I offer this  summary on the potential value of Range Resources, before I retreat back into the sanity of Jamaica's finest!

Puntland: Our elephant in the horn.
A long time considered (by me, anyway) the ball and chain around the legs of this share, the giant prospect of Puntland is beginning to realise it's potential.
Previously, the terms of the PSA have been extended with strict deadlines imposed upon the operator, Africa Oil. In the background, AOI are apprently working on the mobilisation team.  On the ground, a site team have already commenced preparations for the project compound.
All good for us.
Plus, Range and AOI are in possession of a huge amount of historic and new data, detailing seismic studies and previous discoveries on the same blocks (yes, discoveries), which can only derisk the projects. 
Very few multi-billion barrel prospects remain, we are fortunate to be involved in one of the remainder, and it's one of the largest to remain untapped.
I've previously worked out (and revised to suit dilution) that each 250mmbls recoverable is worth 15pps net to Range in asset value. Remember that.
Range are also part carried on the first two wells as part of AOI's farm-in terms, plus Red Emperor pay a disproportionate slice of the costs.

Georgia: Puntland Plan B
A shrewd deal at a time of global weakness has Georgia on our books (along with 50% of the concession owners Strait Oil and Gas) for a very nice price. 2bn bbl oil on place, albeit somewhat scattered, but with over 700mmbbls in place in the top 6 targets, three of which will be imminently drilled.
Even taking account of our reduced farm-in share of 40% and the maximum government split of 65/35, the localised demand providing an increased net value, a prospective recoverable figure of 250mmbbls from the top six wells gives an asset value of 30pps. This doesn't include our additional share by way of half ownership of Strait.
The helium survey has confirmed 100% the existence of a hydrocarbon system, the question remaining is the commerciality.
This project was Peter Landau's hidden ace, in case Puntland fell through. Now it looks like it could eclipse Puntland as THE company maker for Range.
The farm-in of Red Emperor takes away a disproportionate funding requirement.
A UK firm has been paid a fee to commence mobilisation.
If all of that isn't enough for you, The infrastructure on place - road, rail, pipelines, future refinery (Jindal Petroleum) gives added incentive to push this one through to production as soon as possible (assuming success obviously). 
Our operator status means this is finally the project by which the management should be judged.
A commercial strike here will be massive news across Europe, make no mistake about that.
Oh, I almost forgot some of the biggest news - Block VIII, a concession recently awarded to Strait Oil and Gas (of which we own 50% remember). Range are currently in discussions with the previous concession occupiers with a view to obtaining previous exploration data, further derisking your investment.

Texas: Underpinning through production
Our 20% share of wells on North Chapman Ranch (25% on Smith#1), with targeted production of 1000boepd and 10mcf/day is worth 1p per well, and with 22 wells planned at 3/yr that provides a solid base for future funding.
RB#1 gas been part frac'd, and by all accounts the frac team have returned early to frac Smith#1 before completing RB#1. We shall wait and see if the target figures are achieved, but even half that with 22 wells to come is pretty good going.
Future expansion of the NCR programme will be self funding once the first few wells are in full production, thereafter providing crucial income stream.
East Cotton Valley sees our first venture into horizontal drilling, and who knows this may be the experience required to explore all cost effective commercial production avenues in Georgia. No expected daily figures for these wells, only 250kboe total well life, at ten years duration 25kboe per annum is worth 0.5p per share, per well. Three wells per year, 22-25 wells in total assuming a successful first well. 
The first horizontal well is a follow up to a failed vertical well, where they found oil but had a drill pipe failure, so a successful first well is substantially derisked (a common theme amongst Range projects).

Trinidad: The hidden gem
In 2010, Range entered into Heads of Agreement terms to purchase 10% of Soca Petroleum. Much of the publicised information regarding this project has centred around the efforts made by Monitor to take the remaining percentage. Now it is said that Soca will list on the AIM this year, with funding coming from the institutions who were approached by MHL. Soca will be headed by Greg Smith, a Range man who has some interesting leads elsewhere.
Potential upside on this project is an increase in production from 700 to 4000bopd, together with mouthwatering 100mmbbl targets at the deeper Herrera formations.
The Soca deals comes complete with drilling rigs and crews, so work can commence almost immediately upon completion of the funding deals.
Also in the pipeline is an additional slice for Range, said to now be 15%.
We are free carried on initial development of increased production.
Other parties in the fray are RMP and ALO, but this is just speculation at this stage. Both have strong links to Range.

Funding: The derampers favourite weapon
It's always an easy one to drop into the conversation on a BB of a surging AIM company - there will be funding to come; a placement at huge discount; loads of dilution to pay for the drills; management have awarded themselves huge share bonuses etc etc
Anyone spouting this rubbish clearly hasn't done their homework. 
Range is funded via a drawdown facility of £20m GBP at a modest 7% discount, so no
placements.
We have around £10m cash at hand.
We also have a few hundred million options to be converted this year, adding yet more funds.
The share-based payment of management is no big secret or shady deal, it saves having the burden of large fixed salaries and is actually quite common in AIM-type companies.

Colombia: The future...?

The management: Global dealmakers
It's clear that the management are well connected across the globe. Range have gone through a massive diversification process over the past two years, bringing in Georgia, North Chapman, East Cotton, Trinidad, and now it looks like Colombia. All these (except the unknowns of Colombia) are greatly derisked by the sheer amount if background work which goes on by the team.
As well as the front of house professional company guys, Mr Landau and Mr Eastman, the management of Patterson and Smith are the industry experts, and these guys have opened a lot of these global doors. If ever there was a dream team in the making.... you could be sitting back in a few years thinking how you watched this incredible team evolve right before your eyes.

Personally, I cannot see any other AIM lister with as much diversification, potential production per mcap £, and with so much hard work and research done to derisk the projects.

And such nice shareholders, too!

Cheers
DD
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DiamondDon

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PostSubject: For all the doubters pt II   Tue Mar 08, 2011 6:21 am

As a follow up to my post last night, I thought it missed a share price summary based on the notes on each project, for 2011 alone.

Puntland: Say the two Dharoor drills prove up 750mmls recoverable, at 15pps/250mmbls, that's 45p on the share price based on $5/bbl gross value.
Not only that, it derisks the remainder of the project and could add up to 20p to the share price.
So, Puntland adds 65p (based on this example).

Georgia: First 3 drills this year prove the 400mm bbls oip, with 35% recoverable at 140mmbls, $10/bbl, and a potential for 500bcf gas, $1/mscf, gives 17.5p.
Again, derisking the next three drills (there are 6 targets ready to drill) could add up to 7.5p to the share price.
Again, lets ignore the 50% stake in Strait, but bear in mind this adds 50% to the valuation!
Georgia adds 25p.

Texas: Currently, NCR reserves (P1+P2) are valued at $106m. Two further drills should move significant reserves from P3 to P2/P1.
Lets assume $34m to take to a nice round $140m, or 5.5p.
ECV reserves are estimated at around 15m, negligible effect on sp, so lets add just 1p for cashflow effect and reserves combined.
Texas adds 6.5p.

Trinidad: Assuming our stake is 15%. Let's assume a modest increase in production this year, to 100bopd net to Range, say 0.5p on the SP. We will drill the Herrera formations, target 100mmbls oip. At 35% recoverable, and a safe $15/bbl valuation, 15% stake, that's another 3pps.
Trinidad adds 3.5p.

Summary of this lot:
P 65p
G 25p
Tx 6.5p
TT 3.5p

Total 100p, that's a bit too handy I must admit - totally fortunate - but I kept the guesswork fairly respectable.
That's all based on drills we know will happen this year, possibly more. Clearly, all my opinion and based of full success, but I repeat that all projects are substantially derisked as a result of all the BoD's hard work behind the scenes.

Enjoy the rest of your time as shareholders, I recommend you make it as long as possible!

cheers
DD
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PostSubject: Time to get busy   Thu Jun 30, 2011 8:25 am

In light of recent events, ie since March, I think it's about time I did a redraft of the above to kick things off.

Any special requests for inclusion??!!

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PostSubject: Re: For the doubters!   Thu Jun 30, 2011 11:28 am

Vinaka Don, nice to see new breath in this old chestnut, am really looking forward to the update.

Breathless maxine.
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