Range Resources
Range Resources Limited is both an ASX and AIM exploration Company, with its principal activity directed towards finding and delineating natural resources in the oil, gas and mineral sectors in Puntland, Somalia. Puntland is believed to have all the geological requirements to become a commercial oil-producing region. Somalia, and in particular Puntland, remains one of the last under-explored countries that has a high potential for considerable reserves of hydrocarbons which can be subsequently developed for the benefit of both the people of Puntland and Range Shareholders The Company believes that through the generation of work and government royalties from hydrocarbon and mineral exploration and development numerous social and economic benefits will result.
Range Resources: A Punt on Puntland
The AIM oil and gas sector will receive a new racy entrant in the form of Range Resources next week. Everything about Range is controversial! The company has acquired - from Consort Private Ltd - hydrocarbon and mineral exploration rights and exploitation rights, for the entire onshore and offshore area covering the Puntland State of Somalia. Puntland is a tiny, autonomous state that covers more than 200,000 square kilometres of the north-eastern tip of Somalia, often referred to as the Horn of Africa.
The name Puntland couldn't be more perfect. Range Resources originally went to Somalia in search of minerals, but soon discovered that the tiny region had, in fact, been the subject of intense oil and gas exploration in the past, with some US$150 million spent in the early 1990s by Conoco alone, before the region destabilised in 1991, and the oil majors pulled out. Range Resources was in luck. When the oil companies moved out, they dropped the options on their licences which eventually created an opportunity for Range to negotiate the exploration and exploitation rights for oil and minerals across the entire state.
In the late 1980s and 90s several major oil companies, including AGIP, Shell , Conoco, Phillips and Amoco, obtained exploration licences and carried out extensive, onshore and offshore, exploration and drilling over large parts of this region. In 1991 the World Bank coordinated a study intended to encourage private investment in the petroleum potential of eight African nations with Sudan and Somalia topping the list of potential commercial oil producers. A decade later and Puntland is now a semi autonomous region of Somalia.
Initially, Conoco appeared to gain the best ground, and completed the most work, including some 4000 kms of modern 2D seismic in the Nogal basin and two wells drilled within block 28 of the basin. Conoco's results from the log analysis indicated three different impregnated layers between 2,500 metres and 3,200 metres, with potential recoverable reserves of approximately 90 million barrels within 20 kilometres of the well. The results from Nogal-1 also allowed interpretation for the entire 28/B prospect, with a 'most likely' case of 516 million barrels of recoverable reserves across the Jurassic and Cretaceous horizons.
ENI also completed drilling and geological work in the Darin Basin and apparently flowed hydrocarbons, but the full data collected has never been released to Range. Puntland lies south of Yemen, and appears to share numerous geological characteristics with the Darin Basin, not to mention that both basins lie almost parallel to major oil fields discovered in Yemen. Range Resources has reprocessed all of the data collected by Conoco, and notes that the Nogal basin has abundant oil shows, high porosity reservoirs, several large structures and an excellent regional seal. This information together with the close proximity to Yemen has analysts and commentators throwing around seriously big numbers for Puntland - as much as 5 billion barrels!
So Range Resources certainly appears to have been in the right place at the right time. This kind of acreage doesn't come up for grabs all that often, and it will be of no surprise to readers that this small ASX/AIM listed oil and gas exploration company has come under considerable media speculation, and also pressure from all manner of camps, trying to undermine or query its position and the security of its tenure. We aren't going to dwell on the political risk of Range Resources; instead we leave that up to the reader to decide just how much risk should be applied to the address of Range's assets and the risk of having those assets stripped away by a bigger, or less scrupulous player, not to mention the overriding risk of political infighting in Somalia if Puntland does, indeed, have vast oil reserves.
Range Resources has brought in Africa Oil Corp (TSX-V: AOI) - as a joint venture partner - Africa Oil has the right to earn an 80% interest in the Nogal and Darin Basins by expending US$50 million, including four wells. This greatly alleviates Range Resources' cash requirements for exploration drilling as the company is free carried, yet leaves it with a meaningful stake if a commercial discovery is announced.
So the time is rapidly approaching for the first well in eighteen years will be drilled in Puntland. Range Resources is already a hotly debated stock on the ASX, with some seven thousand shareholders on the register. Peter Landua, Executive Director, is more than happy to admit that Range Resources is a complete punt at this stage, and also accepts that if you read twenty different articles on the geopolitical state of Somalia, you will get twenty different answers. So on a scale for high risk investments, Range Resources is off the top, but it also scores exceptionally high on the potential reward side, which makes this company a racy mix of noteworthy upside yet considerable risk.
Links
Puntland Government www.puntlandgovt.com
Africa Oil Corp www.africaoilcorp.com
Other Range Resources articles
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05/08/08 Range Resources oil targets are still there
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21/04/08 Interview with Range Resources
Other Range Resources news
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21/11/08 Range Resources denies ‘defamatory’ comments by Australian broadsheet over alleged ties to Somali pirates
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01/10/08 Range Resources aiming to spud first well around year end
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23/07/08 Range Resources shuffles board of directors
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16/07/08 Range Resources seismic programme starts
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30/05/08 Firebird Global Master Fund increases stake in Range Resources
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27/05/08 Range Resources confirms arrival of seismic equipment
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29/04/08 Drilling delay hits Range Resources hard
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09/04/08 Range Resources challenges defamatory article
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03/04/08 Range Resources says Opes Prime holds less than1%
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26/03/08 Range Resources rebounds on Puntland update