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Range Resources on track to meet milestones, boost Trinidad oil production

Last updated: 10:33 30 Oct 2013 AEDT, First published: 09:33 30 Oct 2013 AEDT

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Range Resources (ASX: RRS, LON: RRL) is close to meeting to key milestones that will give it the financial footing to advance its development and production plans.

The company is also positioned to lift and maintain production in Trinidad to 4,000 barrels of oil per day by the end of 2014 and to 9,000bpd by the end of 2015.

Financial Milestones

On the financial front, Range expects to soon receive the proceeds from the US$30 million sale of its producing North Chapman Ranch and East Clarksville fields in Texas.

Despite delays in the receipt of payment, the company has received assurances in recent days from the purchasers of the Texas asset that they are proceeding and will advise the market once payment is received.

It is also looking to finalise a reserve based lending facility for its Trinidad operations.

Trinidad Update

The company has also reached a key milestone in delivering its Trinidad production guidance with the completion of a comprehensive field development plan in Trinidad, compiled by management and independent technical experts as part of the process of finalising a reserve-based lending facility.

The development plan sets out the geological, operational and financial parameters for the exploitation of the company’s Proved Reserves over the next three years.

This represents more than three (3) months’ work by both internal and external sources and provides a clear development framework for our initial production increase in Trinidad.

It noted the development plan does not take into account any incremental production from Probable and Possible Reserves, prospective resources or exploration success.

Range has also largely completed a rigorous maintenance and testing program for its Trinidad Drilling rigs to ensure that drilling targets as part of the field development plan can be met and previous delays and breakdowns are avoided to the maximum extent possible.

The ramp up in production is also expected to benefit from the recent changes to the fiscal regime in Trinidad.

Range is also in the advanced stages of securing additional rigs on joint venture terms to ensure that its aggressive exploration program in Trinidad continues with multiple Lower Cruse and Herrera targets, the Niko Resources farm-in acreage and the potential of being awarded a block in the upcoming onshore bid round.

Guatemala, Georgia and International Petroleum merger

Separately, the company is encouraged by the exploration success of its Guatemalan project (32% interest), where the latest sale if 1,500 barrels of oil generating revenue netbacks of about $60 a barrel has brought total oil sales since August 2013 to 13,000 barrels.

This is expected to be further enhanced over the coming months with the drilling of the Atzam-5 development well and the re-entry of the two Tortugas wells, which are expected to produce between 200-300 bpd each of high quality 34 degrees API oil.

Range is also confident of reaching a strategic farm-in or joint venture for its oil and gas assets in Georgia during the current quarter to both complement and improve the existing arrangements with Georgian Industrial Group.
   
In respect of the potential merger with International Petroleum Limited (NSX: IOP), Range is still in constructive discussions regarding a range of corporate alternatives to the original merger proposal.

It also noted that it has loaned IP US$8 million in secured financing as part of the current arrangements.

Others

As part of its move to expand its Trinidad operations, Range has also started the process of finding a suitable managing director to take the company through to its 9,000bpd target.

Analysis

Range Resources is making strides in growing its Trinidad operations, which will transform its production profile.

The plan to boost production in Trinidad to 4,000 barrels of oil per day by the end of 2014 and to 9,000bpd by the end of 2015 conservatively equates to annual revenue of $128.5 million and $289.3 million at a 10% discount to current oil prices.

Further potential exists to boost this through incremental production from its Probable and Possible Reserves as well as exploration success in Trinidad as well as it Guatemala and Georgia operations.

The potential merger with International Petroleum will also give the combined company further assets and offers an additional catalyst for re-rating.

 

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