CURRENT SCENARIO
Ok, I’ll start this post with a brief analysis of where we are at, based on 2093m shares, and £1:$1.55, then I’ll run through the fundamentals of that valuation and then the options to show the upside potential.
1) NCR: $69m: 2.12p
2) ECV: $8.669m: 0.268p
3) TT: $452m: 13.935p
4) GEO: $42.97m: 1.325p
5) PNT: $131.2m: 4.04p
6) Cash (Est): $30m: 0.925p
7) Liabilities: -$5m: -0.15p
8.) Investments: $2.75m: 0.084p
That totals 22.463p, so at current price around 10.5p it’s an absolute steal, considering that over 16p of that is proved P1 reserves.
Items 1 and 2, NCR and ECV, we have reserves reports covering the values here, the values used are the totals of just P1 reserves at NPV10 discounted.
Item 3, Trinidad, I’ve ignored production and again I’ve gone for NPV10 discounted P1 of $452, at the flat rate and not NYMEX forward strip prices.
I’m ignoring any LGO deal for the meantime, still no guarantee it will go ahead.
Item 4, Georgia, we are regrettably still all exploration here, a mix of prospects and leads.
I’ve hammered down the price per barrel, and the CoS, particularly on the Vani prospects and leads. For the forthcoming Kursebi 6 drill, plus K2 thereafter (an educated guess), I’ve given a 1in 12 CoS (8.33%), on 40% share, 30% recov, $10/bbl, and for the rest I’ve gone for 1in30 chance (3.33%) as leads only.
Total Georgia is now just $42.97m.
Item 5 is Puntland, always and I am over the moon that I can value a drill IN PROGRESS!
I’ve based a valuation split into 2: Dharoor and Nugaal. For Dharoor I’m going with 2.25bn bbls OIP, 20% share, 30% recovery, 24.9% chance of success, and $3.5/bbl end valuation (based on similar undeveloped region sales), that comes to $94.5m. For Nugaal it’s 4bn bbls OIP, and 20% chance of success, that comes to $168m. Total $262.5m for the two, but I’ve added a 50% security discount given the regions ‘difficulties’.
I’ve made no account for the offshore and Nugaal east deal with Marauder, I’ll leave that for the potential upside case.
Items 6 and 7 are guesstimates at this stage, but the effect on SP is negligible in any case.
Item 8 is our investment in Tangiers, 5m shares currently at $0.64, but with funding placed at $0.50 today we could be seeing a short term drop pre-AIM listing. I’ve assumed we are not involved in the placing either.
After that, it’s consideration of the potential near term upside, and there’s no single calc to take into account all chances of success, and all being successful at the first attempt, so I’m going to tackle it item by item.
FUTURE VALUATION
1) North Chapman Ranch
Relatively simple this one, the main objective being to move P3 reserves into P1/P2, thereby ending up with a valuation of $248m, so we’ll stick with that.
Possible downside is that the Albrecht#1 well does not come in commercial, and the valuation stays as-is at $69m P1. We’ll know this very soon.
2) East Cotton Valley
Similarly, moving P3 into P1/P2 will give a valuation of some $30m, but I’m going to ignore this one as I can’t see the market ascribing any value to it.
3) Trinidad
Again, I’m going to ignore production and concentrate on reserves for the meantime.
We’ve already seen the effect of the water flood programme on reserves, and the Morne Diablo field drill programme looks to be increasingly successful in extending the fields outwards as hoped. We have to remember that only a small proportion of the current shallow fields have been exploited so far.
In addition, the main upside on Trinidad could be the deeper zones – Herrera and Upper Cretaceous – subject to licensing. This is where the LGO deal could become very useful, as taking on this additional area will give Range additional clout in terms of deal making with Petrotrin.
Taking the existing P1 reserves at $452 (majority based on Beach Marcelle), and adding perhaps a discounted 25% for similar success at South Quarry and Morne Diablo, that gives $565m. Not beyond all expectations given what we know already. Limited risk here.
Adding in potential Herrera zones, and although there is conflicting information out there, let’s go with 6x50m OIP leads, 30% recoverable, 1in8 CoS (given proven success on adjacent blocks), and a conservative $5/bbl unproven value, that gives around $60m pre-drill.
Deeper still, the Upper Cretaceous zones are contiguous with the Venezuelan fields and have the chance of more than doubling any Herrera prospects, so in line with above I’m going with potential $100m valuation pre-drill.
Very vague here, so a $60m-$100m valuation is ultra-conservative, but bear in mind that these licenses are not issued, and may never be. Further upside is drilling success, and if those come in you are looking at potential 200mmbbo recoverable here, a $2bn prize fund at $10/bbl proved in-the-ground.
So, short term we could be looking at $725m in 12 months or up to $2.5bn in 24-36 months.
4) Georgia
A simple calc to change CoS to 100% for 2x Kursebi drills would change the value to $300m+ and thereafter upgrading the remaining derisked leads and prospects up to $100m, with a potential future eventual in-the-ground valuation of $750m, possibly $1bn after 24-36months appraisal work.
That is at 40% share, however bear in mind the potential for a gas shale farm in partner.
Of course, if K6 fails after the V3 failure, then the market will discount this even to the extent of it becoming a liability. Potential zero value.
5) Puntland
Now, there will be no drills in Nugaal at this stage, but success in Dharoor will further derisk by way of proving the link to the Yemeni basins, especially given Nugaal’s exploration history.
In Dharoor, we are targeting the Shabeel and Shabeel North prospects, with 300m and 375m bbls recoverable respectively, so assuming success here gives a valuation of $675m net to Range ($3.375bn overall value).
Add in prospective resources for the entire valley and you could be looking at $800m-1bn.
Add in the derisking of Nugaal, and we are up around $1.5bn.
Add in the potential Offshore and Nugaal East deal, you are up over $2bn depending on the terms of that deal. I’ll ignore this for now until official confirmation, but keep that in the back of your mind.
However, the AGIP well of 1958 did discover some dead oil zones, in addition to the light sweet oil it tested. And, let’s not forget the complications at Georgia, and the complications that Conoco were dealt on the Nogal-1 well – 3 side tracks then abandoned without reaching the primary target, albeit the well did hit 3 commercial zones with over 90mmbbs recoverable. 24.9% CoS is excellent, but still a 3 in 4 chance of fail.
8.) Tangiers
Some of you may need to revisit this, the potential is awesome. Tangiers are targeting a potential 867mmbbs oil off the coast of Morocco, and 140 trillion cubic feet of gas in Australia.
Even applying some hefty security and valuation discounts to these fields, the potential NAV for TPT is CURRENTLY somewhere around $350m, rising to a potential unrisked $7.5bn! So current rerating potential at $3.50, rising to over $35 - even allowing for 100% funding dilution!
For the meantime, let’s say that it’s rerated at $3.50. Our 5m shares are then valued at $17.5m
Now, if I redraw that table with those near-term valuations (ignoring items 6/7, and assuming an increased dilution figure of 2.5bn shares) we get the following:
1) NCR: $248m: 6.4p
3) TT: $725m: 18.7p
4) GEO: $400m: 10.3p
5) PNT: $800m: 20.6p
8.) TPT: $17.5m: 0.5p
Total now is 56.5p, and all based on reasonable assumptions on success.
How about the 24-26months figures, keeping 2.5bn shares in issue, but removing Texas and Tangiers following sale and capital return as the compromise (I’ve kept the remainder to lower-optimistic values!):
3) TT: $2000m: 51.65p
4) GEO: $750m: 19.35p
5) PNT: $2000m: 51.65p
Total now is 122.65p, and all based on optimistic assumptions on success, yet still ignoring offshore Puntland and East Nugaal, and also ignoring the fabled Colombia deal.
All well and good, now what about potential for disaster: Dharoor non-commercial x2, but Nugaal success (as it’s already been proved by Conoco) [$800m]; Marauder deal stalls at PSA agreement; Trinidad no deep licences, but reserves coming in at [$750m]; Texas Albrecht duster and ECV abandoned, [$100m] asset sale price with no capital return, and both Tangiers and Georgia complete fail and abandon, all gives a total of $1.65bn, with a potential 3bn shares in issue, would leave you with a completely unlikely fire sale value of 35p per share, or 330% upside, on an unprecedented series of complete failures from this point.
Personally, I’ll go with a 24-month investment mean average of the two higher figures, so around 90p, with the potential for some capital return in there, perhaps 5p/share, and add to that future T&T profit dividends.
Home 