Oil & Gas Corporate News
Range Resources Limited (HOLD, 8p) (RRL.L, 7.0p, ? 0.3%) has entered into a binding Heads of Agreement through SOCA Petroleum to acquire its rights to a 10% percent interest in companies whose wholly owned subsidiaries hold production licences for three blocks in producing onshore oilfields in Trinidad and a major local drilling compa ny. The production acreage and operating wells cover the Morne Diablo, Beach Marcelle and South Quarry oilfields, with the total acreage covering 16,253 gross acres on the southern coast onshore Trinidad. Current production from the fields is 700 bopd, however Range believes a minimal work program could lift production to more than 3,500 bopd within 36 months on the known reserves. In addition to the two subsidiaries holding production licences for the onshore acreage, the proposed Range acquisition also includes a 10% interest in the parent of a wholly owned drilling company located in Trinidad , which owns five onshore drill rigs, three production rigs, one swab rig and a full workshop and pipe yard, storage tanks and facilities. Importantly, Range will be carried through initial development expenditure. The company is planning to use company-owned drilling rigs and equipment and, with cashflow from existing production, is expected to be self-sufficient (other than a significant initial working capital injection of which Range will be carried) in its forward program which aims to increase the production from 700 bopd to 3,500 bopd within 36 months from known reserves without taking into account any exploration upside. In addition to the known reserves significant potential exists in the deeper Herrera Formation which will be a primary target of future drilling using company-owned drilling rigs, which are capable of reaching the depth of these formations. Subject to the successful drill testing of this formation, the Company is ultimately targeting an increase in the production level to between 800-1,000 bopd attributable to Range. Under the terms of the HOA, Range is required to pay US$2m upon execution of definitive agreements and US$2.25m upon formal completion of the acquisition.
Comment: In view of recent performance we change our rating to Hold from Buy previously and maintain our price target of 8p.
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