10th Aug 2011 07:00
Lodgement of Open Briefing®
Range Resources Progress Update Open Briefing with Executive Director Anthony Eastman Range Resources Limited is an oil & gas producer and
explorer with producing assets in Trinidad and Texas, US; and with exploration interests in Puntland, Somalia and the Republic of Georgia.
In this Open Briefing®,Executive Director Anthony Eastman discusses:
* Commencement of Trinidad well development program and production targets
* Puntland drilling contracts nearing execution * Increased production outlook for North Chapman Ranch, Texas Open Briefing interview: openbriefing.comRange Resources recently commenced a 21 well development program at itsTrinidad oilfields (RRS: 100%) which are currently producing 600 to 700 barrelsof oil per day (bopd). The program is targeting an increase in production tobetween 1,400 and 1,800 bopd by the end of calendar 2011 and potentially 4,000bopd within 24 to 36 months. What is the planned work program and risks toachieving this targeted production?
Executive Director Anthony Eastman
Trinidad represents a pure crude oil play at a time of very high commodity prices. The project has low finding and development costs, low operating costs, low geological risk, and high potential exploratory targets.
Our acquisition in June of a 100% of SOCA Petroleum, which holds the threeproduction and exploration licences for the onshore Trinidad oilfields,included a fully operational local drilling company. This allows us completefreedom to internally dictate our exploration and development work programwithout having to rely on third parties, especially at a time of increaseddemand for drilling rigs and personnel. It also allows us to move into the roleof international operator.There are literally dozens of relatively shallow drillable locations that havebeen identified in the existing oil reservoirs. Each of these potential wellsites take one to two weeks to drill, complete and bring to production,allowing rapid development of the existing oil reservoirs.We have already successfully drilled the first development well (MD 247) of ourinitial 21 well program. The well was drilled to a depth of approximately 900feet and open hole logs indicate the presence of around 145 feet of net oilpay, exceeding our expectations. In addition, the well is the first well to bedrilled and completed by our own operations team using our own equipment. Weexpect to commence production testing on this well next week.For the remainder of 2011 we plan to drill a further 20 of these shallower welltargets in the existing oil reservoirs, having recently spudded the first ofthese last week, targeting an increase in production to between 1,400 and 1,800bopd by year end and then continue to systematically work through thisinventory while testing select exploratory prospects.In addition, we're also in the process of re-interpreting the existing 3Dseismic over the highly prospective Herrera Formation. The Herrera Formation isa Miocene aged deep-water sandstone that is a prolific producer and present ona regional scale. Producing fields in the Herrera Formation located adjacent toRange's acreage are producing at rates of 500 to 2,000 bopd. We have numerousexisting leads which, subject to successful exploration drilling, could havethe potential to increase gross production to between 8,000 and 10,000 bopd andadd 100 million barrels (Mmbbls) of additional recoverable reserves. It isanticipated that the first of these Herrera leads will be targeted to drill
inOctober 2011.openbriefing.comIn mid July Range spudded the Mukhiani 1 well in Block V1a (RRS: 40%) in theRepublic of Georgia. Can you outline the expected timetable for completing theMukhiani 1 well and spudding the second well in this initial two-wellexploration program?
Executive Director Anthony Eastman
Our high impact exploration drilling program in the Republic of Georgia is nowin full swing. The Mukhiani 1 well is the first in a planned two-wellexploration program and is targeting best mean estimate of oil in place inexcess of 115 Mmbbls (with 46 Mmbbls net attributable to Range). The Mukhianiwell is progressing well with the lithology encountered in line withexpectations. We estimate the well will reach its target depth of circa 3,500maround mid September following which the rig will move to the second location.
openbriefing.com
Range holds a 20% interest in the Dharoor and Nugaal Valley Blocks in thePuntland State of Somalia. The amended production sharing agreement (PSA) withoperator African Oil Corporation requires that two exploratory wells be spuddedprior to 17 January 2012. What are the prospects for these wells and howcertain are you of meeting the PSA timetable?
Executive Director Anthony Eastman
Exploratory prospects in Puntland are excellent, including three high potentialdrill sites in the more accessible Dharoor Valley of the Darin Basin. At leastthree large closures of 50 to 150 km2 each have been mapped in Dharoor.Drilling locations have been selected over two of these robust prospects andeach well is targeting gross best estimate prospective resources of 300 Mmbblsand 375 Mmbbls recoverable for the two prospects (with 60 Mmbbls and 75 Mmbblsrespectively net attributable to Range).African Oil is finalising the appointment of drilling contractors and we expectrig mobilisation for the first well, which will be located in Dharoor, tocommence in the current September quarter. Contracts for the drilling rig andthird party services are in advanced stages of negotiation and are expected tobe executed shortly.
From our perspective, the Puntland Government and key Dharoor Valley clans fully support the project, and will assist to ensure the drilling project moves forward safely and expeditiously. Specific milestone target dates have been adjusted by the Puntland Government allowing Range and our joint venture partners to move the drilling start-up to the fourth quarter of 2011.
openbriefing.com
Range Resources recently announced that production from the North Chapman Ranchfor the June quarter (net to Range) was 95,000 million cubic feet (mcf) of gasand 7,863 barrels of oil (bbls), up from 48,000 mcf of gas and 2,804 bbls inthe March quarter. What is your work program to further increase production andreserves at your Texas projects over calendar 2011?
Executive Director Anthony Eastman
As demonstrated by the successful fraccing program in North Chapman Ranch, theplanned work program in Texas is expected to add new reserves, production, andcash flow. We expect to drill a third well (the Albrecht well) on the NorthChapman Ranch Project in mid October and we're in discussions regarding thelocation of a possible fourth well to be drilled before the end of calendar2011. The Albrecht well will be located toward the east south east portion ofthe license area while the Smith #1 and Russell Bevly wells are located up inthe north west corner of the license area. Assuming the Albrecht well issuccessful this will `bridge the gap' between the three wells resulting in asignificant increase in P1 (proved) and P2 (proved and probable) reserves.In addition to the Howell Height formation that the Smith #1 and Russel Bevlywells are currently producing from, the Albrecht well is also targeting ashallower formation. This formation appears on trend from existing producingwells adjacent to our license area.As we have demonstrated with the Smith #1 and Russell Bevly wells, if and whenthese two planned development wells are successful, we expect to be able tobring them on-line and producing within two months. This will allow us to havefour wells up and producing in the next three to six months with combined grossproduction of 11 to 14 mmcf and 1,000 to 1,300 bopd (of which approximately 21percent will be net to Range).As previously outlined, we're currently taking steps to identify the source ofwater yielded in swabbing runs undertaken prior to initiating hydraulicfracturing operations at the Ross 3H well on our East Texas Cotton Valleyproject. Given the project area is adjacent to an oil field that is currentlyundergoing water injection as part of a secondary recovery effort (waterflooding); there is a strong likelihood that neighbouring operations havepushed injected water into Range's acreage. Water samples are currently beinganalysed to determine whether or not this is the case, in order to adjust theRoss 3H completion and development drilling program. Regardless of the outcomeof these tests, over 2,250 feet of horizontal section remain to be testedbefore final results are known. We remain confident that the Ross 3H will besuccessfully completed as a producer
openbriefing.com
Range reported net operating cash outflow of A$26.2 million for the 12 monthsto 30 June 2011 with cash in hand of A$17.4 million as at the end of June. Howare you placed to fund your work program over the coming 12 months?
Executive Director Anthony Eastman
In addition to our existing cash reserves, Range currently has around 190million options outstanding with an exercise price of AUS$0.05 and 60 millionoptions outstanding with an exercise price of AUS$0.10. The exercise of theseoptions, which expire in December 2011, can be expected to provide Range withan additional AUS$15-16 million.
In Trinidad we plan to fund our work and exploration program from cash flow from existing production, supplemented by a financing facility. After the initial 12 to 18 months of development drilling, the Trinidad program is expected to be self-funding.
On our exploration program in Puntland, where African Oil has already spentUS$30 million as part of its joint venture agreement with us, its remainingexpenditure commitments mean Range will be carried for the first US$15 millionspent on the second well. In Georgia, the first well is all but paid for whileour farm-in agreement with Red Emperor Resources requires it to pay 40 percentof the cost of the second well.If we want to pursue additional opportunities, we have a number of fund raisingmechanisms being offered to us in the form of equity, convertible notes or puredebt. Obviously we will need to take into account market circumstances andsentiment when considering the size, pricing and timing of any potential fundraising.openbriefing.com
Given the impact of recent global market instability on Range's share price, how confident are you in your ability to complete the planned work program?
Executive Director Anthony Eastman
Whilst it's distressing to see such a large drop in our share price, the keyfundamentals of Range remain on track. Most importantly, our current plannedactivities are fully funded from existing cash reserves. Range has a 12-monthexploration and development plan which it will complete irrespective of marketconditions. The Board believes that the plan will see Range fulfil itsexponential growth agenda for the benefit of all shareholders.
openbriefing.com
Thank you Anthony.
For more information on Range Resources, visit www.rangeresources.com.au or call Peter Landau / Anthony Eastman on +61 8 9488 5220.
For previous Open Briefings by Range Resources, or to receive future Open Briefings by email, visit openbriefing.com
The reserves estimate for the North Chapman Ranch Project and East Texas Cotton Valley has been formulated by Lonquist & Co LLC who are Petroleum Consultants based in the United States with offices in Houston and Austin. Lonquist provides specific engineering services to the oil and gas exploration and production industry, and consults on all aspects of petroleum geology and engineering for both domestic and international projects and companies. Lonquist & Co LLC have consented in writing to the reference to them in this announcement and to the estimates of oil, natural gas and natural gas liquids provided. These estimates were formulated in accordance with the guidelines of the Society of Petroleum Engineers ("SPE"). The SPE Reserve definitions can be found on the SPE website at spe.org. The reserves estimates for the 3 Trinidad blocks referred above have been formulated by Forrest A. Garb & Associates, Inc. (FGA). FGA is an international petroleum engineering and geologic consulting firm staffed by
experienced engineers and geologists. Collectively FGA staff has more than a
century of world-wide experience. FGA have consented in writing to the
reference to them in this announcement and to the estimates of oil and natural
gasliquids provided. The definitions for oil and gas reserves are in accordance with SEC Regulations S-X.
RPS Group is an International Petroleum Consulting Firm with offices worldwide,
who specialise in the evaluation of resources, and have consented to the information with regards to the Company's Georgian interests in the form and context that they appear. These estimates were formulated in
accordance 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.
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Open Briefing® | Range Resources Limited | 10 August 2011.
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