16th Mar 2012 07:58
The ManagerCompany AnnouncementsAustralian Securities Exchange LimitedLevel 6, 20 Bridge StreetSydney NSW 2000By e-lodgement
HALF YEAR REPORT FOR THE PERIOD ENDING 31 DECMBER 2011
Please find attached extracts from the Company's Half Year Report for the period ended 31 December 2011, being the:
- Statement of Comprehensive Income;- Statement of Financial Position; and- Statement of Cashflow.- Extract of notesA copy of the full Half Year Report is available on the company's website:
www.rangeresources.com.auYours faithfullyPeter LandauExecutive DirectorContactsRange Resources LimitedPeter LandauTel : +61 (8) 8 9488 5220Em: plandau@rangeresources.com.auAustralia LondonPPR Tavistock CommunicationsDavid Tasker Ed Portman/Paul YouensTel: +61 (8) 9388 0944 Tel: + 44 (0) 20 7920 3150Em: david.tasker@ppr.com.au Em: eportman@tavistock.co.ukRFC Corporate Finance (Nominated Advisor) Old Park Lane Capital (Joint Broker)Stuart Laing Michael ParnesTel: +61 (8) 9480 2500 Tel: +44 (0) 207 493 8188 Panmure Gordon (Joint Broker) Katherine Roe / Brett Jacobs Tel: +44 (0) 207 459 3600 RANGE RESOURCES LIMITED ABN 88 002 522 009 DIRECTORS' REPORT
Your directors submit the consolidated financial report of Range Resources Limited for the half-year ended 31 December 2011.
1. Directors
The names of the Directors who held office during or since the endof the half-year:Sir Samuel Jonah Non-Executive ChairmanPeter Landau Executive DirectorAnthony Eastman Executive DirectorMarcus Edwards-Jones Non-Executive Director2. Results
The Consolidated entity incurred an operating loss after income tax of $2,218,790 (December 2010: $2,213,841) for the half-year ended 31 December 2011.
3. Review of Operations
Reserves and Valuation Upgrades - Trinidad and Texas
Shortly before period end the Company announced the results of theindependent Reserves and Valuation Report as prepared by the Company'sReserves Auditors, Forest A. Garb and Associates, ("Forest Garb"), which wasan analysis of the estimated reserves, prospective resources and future netrevenue attributable to the Company's portfolio of producing and developmentassets onshore Trinidad and Texas.The report included the 490% Proved (1P) Reserve increase inTrinidad following the completion of engineering work on the secondaryrecovery potential of the Company's Beach Marcelle block, however did notinclude the positive results from the Company's development drilling programat North Chapman Ranch in Texas, recent extensions to the Morne Diablo fieldin Trinidad where Range had drilled five successful development wells toperiod end, nor the significant exploration potential associated with theHerrera formation, which underlies the existing Trinidad blocks.Set out below is Range's attributable interest in the netrecoverable reserves combined across the Texas and Trinidad assets which isnet of government and overriding royalties and represents Range's economicinterests in its development and production assets as classified in the reportfrom Forest Garb.Category Oil Natural Gas Natural Gas (MMbbls) (Bcf) Liquids (MMBbls)Proved (P1) 16.1 10.8 0.7Probable (P2) 2.8 5.5 0.5Possible (P3) 3.7 14.6 1.3Total Reserves 22.6 30.9 2.5Prospective ResourceBest 1.7 - -High 18.2 - -Total Reserves / Resources 42.5 30.9 2.5
Set out below is the total estimate Gross Reserves and Resources split between Trinidad and Texas.
Category Oil Natural Gas Natural Gas (MMbbls) (Bcf) Liquids (MMBbls) Trinidad Texas Trinidad Texas Trinidad TexasProved (P1) 16.2 6.0 3.2 64.3 - 5.0Probable (P2) 3.0 4.4 - 48.6 - 3.8Possible (P3) 2.9 11.6 - 129.6 - 10.1Total Reserves 22.1 22.0 3.2 242.5 - 18.9ProspectiveResourceHigh 2.4 - - - - -Best 25.0 - - - - -Total Reserves /Resources 27.4 22.0 3.2 242.5 - 18.9
Set out below is Range's attributable interest in the net recoverable reserves split between the Company's Texas and Trinidad assets which is net of government and overriding royalties and represents Range's economic interests in its development and production assets as classified in the report from Forest Garb.
Category Oil Natural Gas Natural Gas (MMbbls) (Bcf) Liquids (MMBbls) Trinidad Texas Trinidad Texas Trinidad TexasProved (P1) 15.4 0.7 3.2 7.6 - 0.7Probable (P2) 2.2 0.6 - 5.5 - 0.5Possible (P3) 2.0 1.7 - 14.6 - 1.3Total Reserves 19.6 3.0 3.2 27.7 - 2.5ProspectiveResourceHigh 1.7 - - - - -Best 18.2 - - - - -Total Reserves / 39.5 3.0 3.2 27.7 - 2.5Resources
Based on the reserve numbers cited above, Forrest Garb's estimated net undiscounted cash flow value to Range for Proved (P1), Probable (P2) and Possible (P3), along with discounted cash flow (at a 10% discount rate) valuation based on two pricing scenarios:
- Flat US$85 / bbl oil and US$4.69 / Mcf gas
- Nymex forward strip prices reported on 1 October 2011
following reductions for royalties, opex, capex, production taxesetc are as follows: Flat Nymex Forward Strip $85/bbl & $4.69/Mcf Price at 1 October 2011Category Undiscounted PV10 Undiscounted PV10 US$'m US$'m US$'m US$'mProved (P1) 787 452 885 495Probable (P2) 211 115 243 129Possible (P3) 335 134 420 162Total Reserves 1,334 701 1,549 786 TrinidadFollowing the acquisition of the Trinidad assets, the Companycommenced its initial 21 development well program on the Morne Diablo licensearea utilising the Company owned rigs. Five wells were completed during theperiod with two of the Company owned rigs, which included two sidetrack wells,with production for the period from Trinidad of circa 90k barrels of oil. Ofthe five successfully completed wells, the initial two wells were shallow`infill' wells, whilst the last three were step out wells which saw asignificant increase in initial production per well, which has continued withthe wells successfully completed subsequent to period end.
Also during the period, an additional 70+ employees were added to the Trinidad operations resulting in operations now running on a 24 hour basis. Progress was made on a number of the rigs to get them drill ready, with the Company anticipating having four drilling rigs fully operational late March / early April, with all six drilling rigs being fully operational by mid-year. Advance site construction was completed on a number of well locations that allows for each rig to immediately move to the next location and continue with the development well program.
Georgia
During the period, the Company, along with its joint venturepartners, successfully spudded the first exploration well - Mukhiani 1, on theVani 3 Prospect on Block VIa with a planned target depth of circa 3,500m. TheMukhiani Well reached a total depth of circa 1,550m, and following theanalysis of the re-interpretation of the seismic supported by the Mukhiani-1Vertical Seismic Profiling ("VSP"), results indicated that the wellencountered previously unrecognised faults that led to possible basement beingencountered far earlier than predicted.
New fault trap and stratigraphic trapping potential were also identified in the vicinity of the well and based on these findings; Range and its joint venture partners have the option to side-track and test these targets. However, the Company and its partners decided that, based on its exploration schedule and the availability of the drilling rig that it would continue onto the next proposed Kursebi well with site construction on the Kursebi 6 prospect continuing post period-end. Severe weather that has been experienced at the Kursebi 6 site over recent weeks has delayed the anticipated spudding date into April 2012.
Also during the period, the Company engaged new independent technical consultants, NTD Energy, to provide overall technical support with respect to the Georgian operations which include:
- Providing a fresh review of all of the seismic and geological data across the top 3 Kursebi prospects previously identified, as well as across the whole license areas;
- Assisting in the management and supervision of the Company's drilling program for the Namakhavani well on the Kursebi 6 prospect; and
- Assisting in the promotion and development of the unconventional (shale / CBM) plays that may exist across the two license areas.
Texas
North Chapman Ranch
During the period the Company spudded the third well on NorthChapman Ranch - the Smith #2 well. The Smith #2 well was an offset well to theexisting Smith #1 well and was categorised as a proved undeveloped location.Drilling was completed in December 2012 followed by completion operations andthe successful fracture stimulation of the well occurring post period end. TheSmith #2 well is expected to come on-line into production shortly.The Smith #2 well was followed closely by the Albrecht #1 wellwhich spudded shortly before period end. The Albrecht #1 well is an appraisalwell that, if successful, is anticipated to prove up the reserves in thesouth-east portion of the North Chapman Ranch license area, and support there-classification of the current Possible (P3) reserves into the Probable (P2)and Proved (P1) categories.
East Texas Cotton Valley Prospect
During the period, testing continued on the Ross 3H horizontal wellas individual zones are perforated and swabbed to check fluid content prior tohydraulic fracturing. The Ross 3H was drilled to a total depth measured depthof 8,500 ft and showed good evidence of reservoir quality rock and oilsaturation.
Puntland
During the period the operator of the Puntland onshore licenses,Horn Petroleum Corp. ("Horn") completed all of the sourcing of drillingrelated materials with the majority of materials arriving on site. Sitepreparation, including the drill site, air strip, ingress route constructionand water wells were completed in readiness for the spudding of the historicfirst exploration (of two planned) well, Shabeel-1.
The Sakson 501 rig will be used to drill both exploration wells which are expected to take approximately 90 days each for drilling and evaluation and are the first oil exploration well in the region to be drilled in over 20 years.
CorporateStrategic Investment
During the period, the Company completed a strategic investment in Tangiers Petroleum Limited . Tangiers is an ASX listed exploration company which has a portfolio of two potentially world class oil and gas projects located in Morocco and Australia. The investment saw Range subscribe for 5m Tangiers shares at a price of $0.40 ($2m investment).
Tangiers successful listed on the UK Alternative Investment Market ("AIM") subsequent to period end.
Capital Raisings
During the period the company completed a US$15m placement of shares and options to Socius CG II, an established and highly successful United States based investment group and wholly-owned subsidiary of Socius Group ("Socius"), with the share placement price being at a 10% premium to the Company's share price at the time of the placement.
The Company also raised circa $4m through the exercise of options with the balance of cash physically received from the exercise of all outstanding options expiring 31 December 2011 occurring post period end.
Also during the period the Company increased its existing credit facility with First Columbus by £30m and drew down £3m of this facility subsequent to period end.
4. Events Subsequent to Reporting Date
Puntland
Subsequent to period end the Company, along with its joint venture partners, successfully spudded the historic Shabeel-1 well on the Dharoor Block in Puntland, Somalia which has a total planned maximum depth of 3,800 meters. Drilling operations also commenced on the Shabeel North-1 well with the setting of the 30 inch surface casing and the drilling of a 50 meter pilot hole.
The Sakson 501 rig is being used to drill both wells which areexpected to take approximately 90 days each for drilling and evaluation. Thesetwo wells represent the first exploration wells to be drilled in the countryin over 20 years and will satisfy the first exploration period drillingcommitments as required under the Production Sharing Contracts for both theDharoor and Nugaal Blocks. In order to provide sufficient time to evaluatedrilling results, the Puntland Government has granted an extension of thefirst exploration period expiry date to 17 October 2012.
Trinidad
Subsequent to period end, the Company has successful drilledanother three wells which has resulted in production increasing to circa 750barrels of oil per day. The initial drilling program continues and it isanticipated that these number of rigs operating on the Company's onshorelicenses will double during March/April, with another two rigs joiningoperations. It is then anticipated that the remaining two Company rigs willjoin operations towards the end of Q2, 2012 resulting in a significant ramp upin drilling activity, and subsequent accelerated increase in production.Work is nearing completion on the Company's extensive reprocessingof its 3D seismic database in Trinidad. State-of-the-art seismic reprocessingis expected to improve Range's ability to identify and image deeper drillingtargets across its Morne Diablo and South Quarry acreage, including theprolific Herrera Formation. The Company believes that improved imaging of its3D dataset will help define existing targets and lead to additional prospects,which should in turn result in lower dry hole costs and continued growth inreserves and production, respectively. Once data reprocessing is completed,the Company's technical team will begin by confirming its existing portfolioof deeper drilling targets, with the expectation of drilling its first deep
test well in Q3 2012.TexasNorth Chapman RanchSubsequent to period end, the Albrecht #1 appraisal well was loggedand casing having been run. Completion operations have commenced in readinessfor the well to be fracture stimulated and subsequently tied into production.Work is currently underway to revise the reserve estimates at North ChapmanRanch, and is expected to be finalised once the Albrecht #1 comes on line.
5. Auditors Independence Declaration
The Lead auditor's independence declaration under section 307C of the Corporations Act 2001 is set out on page 7 for the half-year ended 31 December 2011.
This report is made in accordance with a resolution of the Board of Directors.
The reserves estimates for the 3 Trinidad blocks and updatereserves estimates for the North Chapman Ranch Project and East Texas CottonValley referred above have been formulated by Forrest A. Garb & Associates,Inc. (FGA). FGA is an international petroleum engineering and geologicconsulting firm staffed by experienced engineers and geologists. CollectivelyFGA staff has more than a century of world¢â‚¬wide experience. FGA haveconsented in writing to the reference to them in this announcement and to theestimates of oil and natural gas liquids provided. The definitions for oil andgas reserves are in accordance with SEC Regulation S¢â‚¬X an in accordance withthe guidelines of the Society of Petroleum Engineers ("SPE"). The SPE Reservedefinitions can be found on the SPE website at spe.org.RPS Group is an International Petroleum Consulting Firm withoffices worldwide, who specialise in the evaluation of resources, and haveconsented to the information with regards to the Company's Georgian interestsin the form and context that they appear. These estimates were formulated inaccordance with the guidelines of the Society of Petroleum Engineers ("SPE").
The prospective resource estimates for the two Dharoor Valley prospects are internal estimates reported by Africa Oil Corp, the operator of the joint venture, which are based on volumetric and related assessments by Gaffney, Cline & Associates.
RANGE RESOURCES LIMITED ABN 88 002 522 009 STATEMENT OF COMPREHENSIVE INCOME FOR THE HALF-YEAR ENDED 31 DECEMBER 2011 Consolidated 31 December 31 December 2011 2010 Notes $ $ Revenue from continuing operationsRevenue from sale of goods 12,772,317 1,096,923Interest revenue 150,299 140,031Other income 1,823,494 8,530Expenses from continuing operationsOperating costs (8,277,128) (640,401)Depreciation (2,525) (11,467)
Technical, Consultancy and Administration 2 (8,687,258) (2,719,040) expenses Realised loss on available for sale financial
- (55,413) assets Foreign exchange gain/ (loss) 2,011 (8,737)Loss before income tax expense from 2 (2,218,790) (2,189,634)continuing operations Income tax expense - (24,207) Loss after tax from continuing operations (2,218,790) (2,213,841) Net loss for the half-year attributable toequity holders of Range Resources Ltd (2,218,790) (2,213,841) Other comprehensive incomeChanges in the value of available-for-sale 929,220 160,841
investments
Exchange differences on translation of 1,357,218 -
foreign operatives Other comprehensive income for the half-year, 2,286,438 160,841 net of tax
Total comprehensive income / (loss) 67,648
(2,053,000)
attributable to equity holders of RangeResources Ltd
Continuing Operations
Basic loss per share (cents per share) (0.13)
(0.19)
Diluted loss per share (cents per share) N/A N/A The Company's potential ordinary shares were notconsidered dilutive as the Company is in a loss position.The accompanying notes form part of thesefinancial statements. RANGE RESOURCES LIMITED ABN 88 002 522 009 STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2011 Consolidated 31 December 30 June 2011 2011 Notes $ $ Current AssetsCash and cash equivalents 4,723,147 17,359,870Trade and other receivables 7,519,457 3,002,395Other current assets 3,444,964 309,013Inventory 269,390 -Total Current Assets 15,956,958 20,671,278 Non-Current AssetsProperty, plant & equipment 189,501 19,883
Financial assets available for sale 3,941,562 912,342Exploration & evaluation expenditure 6
95,710,495 87,809,879Development assets 7 175,353,299 6,140,208Deposits for investments 8 - 54,426,730Investments in associates 9 5,891,595 5,891,595Non-current receivable 10 18,279,546 12,122,177Total Non-Current Assets 299,365,998 167,322,814 Total Assets 315,322,956 187,994,092 Current LiabilitiesTrade and other payables 11 10,782,651 1,419,646
Derivative financial instrument
4,193,777 -Provision 328,176 11,645Total Current Liabilities 15,304,604 1,431,291 Non-Current LiabilitiesBorrowings 45,372 -Deferred tax 12 86,726,423 -
Total Non-Current Liabilities
86,771,795 - Total Liabilities 102,076,399 1,431,291 Net Assets 213,246,557 186,562,801 EquityIssued capital 13 252,047,090 227,671,125Reserves 23,234,968 18,708,387Accumulated losses (62,035,501) (59,816,711)Total Equity 213,246,557 186,562,801
The accompanying notes form part of these financial statements.
RANGE RESOURCES LIMITED ABN 88 002 522 009 STATEMENT OF CASHFLOWS FOR THE HALF-YEAR ENDED 31 DECEMBER 2011 Consolidated Notes 31 December 31 December 2011 2010 $ $ Cash Flows From Operating ActivitiesReceipts from customers 10,844,981 811,833Payments to suppliers and employees (12,342,084) (2,173,379)Interest received 150,299 140,031Interest paid and borrowing costs (13,825) (222,063)
Net cash provided by/(used In) Operating (1,360,629) (1,443,578) Activities
Cash Flows From Investing ActivitiesPayments for plant and equipment (172,143) -Payments for development expenditure (4,991,394) -Payments for exploration and evaluation expenditure (8,718,597) (2,246,351)Deposits to acquire investments - (5,780,624)Payments for investment in shares (2,100,000) -Loans to other entities (3,108,009) -Loans to associate (6,157,369) -
Payment for acquisition of subsidiary, net 14 of cash acquired
(4,613,945) -
Net cash provided by/(used In) Investing (29,861,457) (8,026,975) Activities
Cash Flows From Financing ActivitiesProceeds from issues of shares 19,350,982 10,001,657Payment of share issue costs (765,619) (406,846)Loan funds received - - Net cash provided by/(used in) Financing 18,585,363 9,594,811
Activities
Net Increase/(Decrease) In Cash and Cash (12,636,723) 124,257 Equivalents Held Cash and cash equivalents at beginning of 17,359,870 7,398,470 period
Cash and cash equivalents at end of period 4,723,147 7,522,727
The accompanying notes form part of these financial statements.
NOTES TO THE FINANCIAL STATEMENTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2011
Note 1: Basis of Preparation
The half-year consolidated financial statements are a general purpose financial report prepared in accordance with the requirements of the Corporations Act 2001 and Accounting Standard AASB 134: Interim Financial Reporting.
The half year financial statements do not include all the notes of the type normally included in an annual financial report. Accordingly, it is recommended that these financial statements be read in conjunction with the annual financial report for the year ended 30 June 2011 and any public announcements made by Range Resources Limited and its controlled entities during the half-year in accordance with continuous disclosure requirements arising under the Corporations Act 2001.
Impact of standards issued but not yet applied by the entity
The accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period.
Reporting Basis and Conventions
The half-year financial statements have been prepared on anaccruals basis and are based on historical costs modified by the revaluationof selected non-current assets, financial assets and financial liabilities forwhich the fair value basis of accounting has been applied.
Subsidiaries
A controlled entity is any entity over which Range Resources Limited has the power to govern the financial and operating policies so as to obtain benefits from its activities. In assessing the power to govern, the existence and effect of holdings of actual and potential voting rights are considered.
As at reporting date, the assets and liabilities of all controlledentities have been incorporated into the consolidated financial statements aswell as their results for the year then ended. Where controlled entities haveentered (left) the consolidated Group during the year, their operating resultshave been included (excluded) from the date control was obtained (ceased).
Inventories
Inventories are stated at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less any anticipated costs to be incurred prior to its sale.
Oil and gas production activities
Cost is allocated on an average basis and includes direct material, labour, related transportation costs to the point of sale and other fixed and variable overhead costs directly related to oil and gas production activities.
Derivatives
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value at the end of each reporting period.
Where a derivative financial instrument does not quality for hedge accounting, changes in fair value are recognised immediately in profit or loss within finance costs.
Deferred TaxesAt 31 December 2011, the Group has provisionally accounted for thebusiness acquisition of SOCA Petroleum. In accordance with the requirements ofAustralian Accounting Standard AASB 112 Income Taxes, at the date ofacquisition, a deferred tax liability of $72m has been recognised in relationto the difference between the carrying amount of the deferred exploration anddevelopment costs for accounting purposes and the cost base of the asset fortax purposes. The Group does not have a tax payable in relation to thedeferred tax liability at 31 December 2011 and it is anticipated that thedeferred taxation liability will be reduced in the future as the deferredexploration and development costs are amortised in future periods.
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