Thread for Range share tips and industry nudges, etc

Quote :

WhatsHot.com article June 26, 2010

"Buy Range Resources (RRL) at 4.875p

Says James Faulkner of specialist small cap website WatsHot.com

When it comes to oil and gas, the semi-autonomous Somali state of Puntland is perhaps most famous (or infamous) for the pirates which operate out of its ports. Ironically however, Somalia is understood to be sitting on vast hydrocarbon reserves of its own, which have hitherto been undeveloped due to political strife. The Puntland State of Somalia was established in August 1998 after a decision made by local political and traditional leaders following several failed national reconciliation efforts in the wake of the Somali Civil War. Whilst the rest of Somalia remains a very dangerous place, Puntland has largely managed to avoid internal conflict and civil strife (excepting a few isolated occurrences).

In a 1991 a World Bank coordinated study intended to encourage private investment in the petroleum potential of eight African nations, Somalia and the Sudan topped the list of potential commercial oil producers; and while Sudan is now a producer, primarily due to the relatively calmer political climate of that country in the last decade, Somalia's potential remains untapped. Before the Civil War, Somalia had been previously identified to possess all the requirements for a petroleum province. This view was further reinforced in the mid 1980s following the successful exploration efforts of Hunt Oil Corp across the Gulf of Aden in Yemen. There Hunt discovered multi-billion barrel oil reserves that their geologists believed were part of a great underground rift or valley that arced into and across northern Somalia. This led to a flurry of exploration activity by the majors during the late 1980s and early 1990s, which the Civil War brought to an abrupt halt in 1991.

Range has been able to obtain through Government sources previous exploration documentation relating to the hydrocarbon exploration in the Nogal Valley area in Puntland up until 1991. The documentation includes original seismic tapes, well logs and processed seismic sections identifying major targets found prior to exploration activities ceasing in Somalia. Range acquired the sole rights to to all mineral and hydrocarbon exploration and development in Puntland in July 2006. In October of the same year, Range signed a Memorandum of Understanding with Africa Oil regarding a $50 million 80% farm-in right for the latter in the Nogal Basin and Darin Basin Blocks. This has since resulted in a Joint Venture project being formalised between Range and Africa Oil which saw the formal signing of the Production Sharing Agreement between Range, Africa Oil and the Puntland Government take place on 17 January 2007. Just one of the two blocks - the southern basin - is purported to contain between 2.2 billion and 10.4 billion boe (barrels of oil equivalent), and there is every reason to believe the northern basin offers similar prospects. Range was recently given the go-ahead by the Puntland administration, with the drilling of the first exploration well by Africa Oil scheduled for mid 2010. Range is free carried until Africa Oil has spent the $50 million earmarked for exploration.

Africa Oil recently completed a comprehensive interpretation of newly acquired 2D seismic data over the Dharoor Block, and has identified "several large prospects". Africa Oil and its joint venture partners have agreed to initially drill one prospect in Dharoor, with the well expected to commence drilling before the end of 2010. The company has also completed a re-interpretation of the existing 2D seismic data over the Nugaal Block, having also identified "several large prospects". Africa Oil and its joint venture partners are in discussion regarding drilling plans for 2010-2011.

The second most exciting feature in Range's portfolio is its 50% farm-in of two onshore oil and gas licenses covering about 7,000 square kilometres (roughly 10% of the country's total surface area) in the Republic of Georgia. Although the project is at a less advanced stage of development than Puntland, the acreage was heavily drilled during soviet era and initial analysis has identified 14 well locations suitable for oil in place estimates. Georgia represents an exciting investment for the company. The country was named "the year's number 1 reformer" in the World bank's 2007 Doing Business Survey. Three major pipelines crossing the country make Georgia an important strategic crossroad for hydrocarbon transit in the Caspian Region. Indeed, one pipeline runs just south of the firm's blocks. In addition to the oil targets there are also numerous prospective gas fields, which include highly prospective natural gas and coal bed methane targets. Early production revenues could be achieved through supplying the nearby city of Kutaisi (the second biggest city in Georgia).

The seismic acquisition program across the License Blocks VIa and VIb was recently completed and signed off by the company's Georgian Partner, Strait Oil and Gas. The seismic programme was acquired using the vibroseis technique and in total 410 km of 2D seismic data were recorded. From the onset the character of the data observed in the QC brute stacks was "good to very good and remained so throughout the programme". The company must now decide whether to progress the targets at the current 50:50 equity basis with its partner or to look for a new farm-in partner.

However, it is the firm's near-term production prospects in Texas that have been providing the bulk of the newsflow of late. Range made the important transition from explorer to producer, less than three months after its confirmation of a commercial discovery at the North Chapman Ranch field. An independent reserves report put gross recoverable reserves at an estimated 215 billion cubic feet of gas (Range: 45Bcf), with a further 15.9 million barrels of oil (Range: 3.3 million barrels). Whilst the majority of these reserves are in the P3 or 'Possible' category, the upcoming multi-well programme should help move this into the 'Probable' (P2) and 'Proved' (P1) categories. From an investment of a mere $1.8 million, net undiscounted cashflow value to Range could be worth as much as $226 million in a 'best case' scenario. Obviously, net present value will be significantly lower given the undiscounted natur e of this estimate, but we are still looking at significant value for shareholders. It is looking increasingly likely that North Chapman alone will be enough to justify the current share price, with the high-impact exploration upside from Puntland and Georgia thrown in for free.

Last week's announcement of a placing to raise $10 million points to further development and diversification of what is becoming an increasingly exciting portfolio. Buy."

Source: WhatsHot.com

Most of the material was lifted from the WhatsHot.com article of James Faulkner but I reposed the bit from Share Crazy in which they've deviated offf onto their own SP projections. I've highlighted in bold the best bit. Check out the unrisked upside it mentions...

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Share Crazy June 2010:


TEXAS


The most recent addition to Range's portfolio is its 25% interest in the North Chapman Ranch Project in Nueces County, Texas. The operator, US based private oil and gas company Crest Resources, has already commenced drilling the first well. The project area encompasses approximately 1,280 acres in one of the most prolific oil and gas producing trends in Texas. The company is hopeful that production from this well has the potential to payback its investment of 1.35 million Australian dollars in around 8 months. Although the targeted reserves of 80 billion cubic feet are nothing to go to town about as far as gas fields are concerned, Chapman Ranch is a relatively low-risk asset which should bring in a stable, if modest, income for Range in the near future.

ALL SET TO SPIKE IN 2010?

Obviously the massive potential of the firm's exclusive rights in Puntland are the main reason to own the shares, but going forward the valuation could increasingly be underpinned by progress in Texas and Georgia, both of which have the potential to yield early cashflows for the company. Broker Fox Davies reckons commercial success in Texas would add close to 2p to the share price, while the resumption of the exploration programme in Puntland is worth close to 4p (assuming just a 10% probability of a 500 million barrel discovery!). Its overall price target for the stock is 8p, while it suggests unrisked upside … wait for it… 75p per share. There is substantial risk here, but the potential upside is worth it. Buy, at 4.125p.

Source: http://sharecrazy.com/beta/Tips/3173/buy-range-resources-rrl-at-4125p

Enjoy peeps.

Great read! Thanks for posting!

Hopefully get a suspension on ASX tonight then we'll spike up tomorrow

ADMIN wrote:

Great read! Thanks for posting!

Hopefully get a suspension on ASX tonight then we'll spike up tomorrow

Well to be honest I'm in for the longer haul with this one so spikes don't really matter to me right now but each to his/her own!

I'm prepared to sit on this egg and hatch it.

I'll post more articles as/when I find them.