Readers will remember our original Value Proposition for Range Resources (LON:RRL) was prepared in January, just six months ago. It’s probably worth another scan (to view, click here) as you may be surprised at quite how much progress has been made in the interim. So much so, that we are now in the process of updating it and we hope to have the latest Value Proposition available very soon. The job has been rather fraught, since the Company is quite a fast moving target; just when we get to the point of capturing all the latest developments, they go and release another update - and its back again to the desk!! As Private Investors we understand the hunger in the market for ‘fast and furious’ progress. But oil and gas exploration is never expected to be this type of business. Careful analysis of data leads to well-planned drill programmes holding the best chance of finding oil and gas in the ground. This would certainly seem to apply for the Georgian and Puntland interests and thank goodness for that; with blue sky targets in the hundreds of millions and billions of barrels (respectively), one would expect diligent preparation at every level.
But on another front, Range Resources seems to cater for the Investor’s appetite for rapid progress. The company’s interest in the Smith#1 well in North Chapman Ranch, Texas, came as some surprise in the 3rd quarter 2009. But an even bigger surprise was how rapidly an investment of just over $1million turned into a significant commercial oil and gas discovery. Moreover, the recent Independent Reserves Report for Smith#1 well estimated P1 (proved) ,P2 (probable) and P3 (possible) reserves attributable to Range of some $226 million (PW10 DCF valuation). This equates to about £147 million or roughly 15pence per share - around three times the current price.
Now the trick with Smith#1 was firstly to fracture stimulate the well so as to improve flow rates and enhance revenues. Stimulation has now been undertaken successfully as confirmed in their recent news announcement. But we are still waiting for the flow rates to determine just how much revenue this well can now produce. The more the better obviously, as this income would certainly help towards funding the operational costs of pursuing the Georgian and Puntland major targets.
Then, alongside fracture stimulation of Smith#1,…
