peter landau-update interview

http://www.finnewsnetwork.com.au/archives/finance_news_network18867.html

Targeting 2500 barrels per day from Trinidad assets October 04, 2011 02:21 PM


TRANSCRIPTION OF FINANCE NEWS NETWORK INTERVIEW WITH RANGE RESOURCES LIMITED (ASX:RRS) EXECUTIVE DIRECTOR, PETER LANDAU

Nicholas Hayes: Hi, Nicholas Hayes for Finance News Network. Joining me from oil and gas explorer and producer Range Resources (ASX:RRS), is executive director, Peter Landau. Peter thanks for joining us.

Peter Landau: Thanks Nick.

Nicholas Hayes: Can you start by introducing Range Resources?

Peter Landau: I can, thanks. Look Range Resources is a dual listed company trading in both the ASX and the AIM market in London. Currently capped at around $300 million and I guess entering a very exciting stage of its corporate life, with 27 wells being drilled over the next four to five months.

Nicholas Hayes: Thanks. So where are your projects?

Peter Landau: Predominantly our production assets are in Trinidad and Texas, just outside of Corpus Christi. Exploration - big exploration assets in the former Soviet Republic of Georgia and Puntland, Northern Somalia.

Nicholas Hayes: Thanks Peter. So how is it that you have such a diverse geographic spread?

Peter Landau: Well I think it comes more from opportunity. I mean you never look at an asset based on the asset itself or the country; you basically look at it as a value proposition. And obviously when the GFC occurred we just had Puntland. Then after that, we were looking at spreading the risk portfolio and the best value propositions over the last two years have come out of Georgia, then Texas and then Trinidad. So, we don’t operate in all four regions, so we don’t really see ourselves spreading ourselves too thin. Operate Trinidad and Georgia and we’re a partner obviously in Texas and Puntland.

Nicholas Hayes: And for the viewers not familiar with the Company, what’s your share price and market cap?

Peter Landau: Currently around, in Aussie terms, around 18 to 20 cents and that caps us at around AUD320 million.

Nicholas Hayes: Turning to your projects starting with Trinidad. What is the size of the resource, current production and your stake in the project?

Peter Landau: Sure. Trinidad is probably our most recent acquisition and we like it, given where it’s at from a value proposition. So currently it’s producing 600 to 700 barrels a day, P1 to P3 including prospective resources, is around 28 million barrels - that’s pure oil, so it’s 30-32 API. We are looking to increase that production as part of our program, up to 4,000 barrels a day over the next two years. And then there’s also what are called some deeper Herrera Formations which could increase production anywhere up to 10,000 barrels a day. And of the Herrera structures, you’re looking at around 10 structures on our properties which could again be recoverable, an additional 50 to 100 million barrels over and above the 28, P1 to P3 that we have. And its pure oil no gas.

Nicholas Hayes: What is the prospect of an increase in reserves given the history of the oil and gas production in the area?

Peter Landau: Sure, I mean obviously the P1s to P3s are all the shallow stuff, so that’s pretty well set at that 28 million barrels. But the Herrera is a deeper formation, never been drilled on our properties. Despite that, as I said we’ve got 3D seismic, 10 structures are being mapped, it’s being reprocessed. So that 28 million barrels could go anywhere up to 150 million barrels over the next two years.

Nicholas Hayes: OK, so what is taking place now and planned for 2012?

Peter Landau: So right now we’re doing a 21 well program, through to the end of December - and that’s purely on P1 reserve development. That should take production up to anywhere from 1,500 to 1,800 barrels a day. Then 2012, to increase that production to probably around 2,500 to 3,000, we’ll do another 60 wells shallow and then we’ll also drill three of the deeper Herrera’s. So the key feature about Trinidad, which makes us probably a bit unique as a junior, is we own all of our rig inventory. We’ve got five drilling rigs, four production rigs; we employ currently around 200 people in Trinidad – that should move up to 300, electrical engineering pipe, all of the workshops. We are 100 per cent in control of our own destiny and look, the first two wells that we’ve done in Trinidad have already come on stream as a success.

Nicholas Hayes: And now your North Chapman Ranch project in Texas. What is the size of the resource, the current production and your stake in the project?

Peter Landau: So stake in North Chapman is, it depends which well, but it’s anywhere from 20 to 25 per cent. Current attributable resources to range and this is on a P1 to P3, is around 50 BCF and seven million barrels of liquid. So it’s quite a big size, it’s one of the bigger discoveries in Texas over the last 10 years and that’s attributable to range. There are two wells currently producing. Between them they’re doing six to seven MCF a day and around 500 to 600 barrels a day. The field itself could support anywhere up to 25 to 30 wells and there are another two wells planned, coming up.

Nicholas Hayes: Good and what is the prospect of an increase in reserves given the long history in this particular area, for oil and gas production?

Peter Landau: The key with Texas is not so much about increasing, the key feature is converting. About 50 per cent of our resources are P3; it’s about converting those into P1, P2. Because once you’ve converted a P1, P2 you’ve then got basically bankable reserves in Texas. So the next two wells we’re drilling – first one’s spudding early October, next one November or early December. Those 2 wells should, if they come in, basically convert most of our P3s to P1 and P2 which will then become Range’s interest very, very valuable and someone wanting to bank P1 and P2 reserves in Texas.

Nicholas Hayes: Thanks, so what did your stake cost and when will the investment be paid off?

Peter Landau: Yeah I mean that’s probably a good question, because its bank paid off already. Texas for us was just timing and luck. We knew someone who was pulling out of it during the middle of the GFC, so basically we didn’t pay anything upfront, we simply paid for our proportion of share of the first well which is $1.5 million. So that’s already paid back. So basically Texas is something that’s probably valued at around $200 million, it’s been our best investment to date. And you know, but like with anything in life, it’s timing and luck that play a good part of it, so it’s already paid back.

Nicholas Hayes: Now to your other projects. Can you briefly introduce each, starting with Puntland?

Peter Landau: Sure, I mean Puntland’s the one closest to my heart because I’ve been involved in it from the start. It’s the autonomous region of northern Somalia, obviously it doesn’t suffer from the same problems that Mogadishu suffers with, that you read in the media. Look it is high risk but it is also high reward. Now to give you an idea we are now drilling through our operator Africa Oil, drilling two wells - first well will spud early November. Each well is around one to 1.2 billion barrels in place, so they’re some of the bigger onshore wells that were drilled, especially in the last few years, big, big prospectivity. Last wells drilled in that region were by Conoco in the early 90s, and so the world’s eyes will be on that region. The Horn of Africa is strategically a very poor part of the world and as I said, first two wells drilled for 20 years and each of them, a billion barrel in-place targets. It is a very, very exciting time for us. We have a 20 per cent interest; we carried on the second well, so we get exposure to potentially 2.2/2.4 billion barrels in place for a cost of around $5 to $6 million, into the ground drilling.

Nicholas Hayes: The People’s Republic of Georgia?

Peter Landau: Yeah Georgia again, in terms of immediacy that’s the one we’re drilling right now. We came into that again, which we think as a farm-in on a good deal. We’re drilling two back-to-back wells in Georgia, each around 140 million barrels in place. We’ve got 40 per cent of both wells. Georgia, the first well, is currently at 900 metres, TDs are 3,500 metre wells and the excitement for us will build around the third or fourth week of September. Georgia, the regions that we have, the Soviets did a lot of geological work on them in the early 90s, not hydrocarbon work as they all moved to Siberia. So there aren’t test structures, but their potential is considered sort of the two areas in Georgia that have the most potential. But we won’t know until we hit 3D. So exciting times, first well into September, then we’ll move on and drill the second well early November.

Nicholas Hayes: Morocco?

Peter Landau: Look Morocco’s more of a small indirect investment through Tangiers Petroleum that we recently made. We really like Tangiers – drilling and exploring offshore is not really Range’s scene. It is for the bigger boys, it’s expensive and it’s time consuming. You know, we like shorter time frame, higher impact stuff but we know Tangiers assets very well and we really like them. From their current cap of around $30-$40 million and their high impact, so for us the best way to get exposure to those assets was through the equity side as opposed to having to farm-in.
So the Tangiers was more interesting, we know the management, we’re very comfortable with the management, very highly skilled at what they do and we are excited to get exposure to it. But through a $2 million equity investment as opposed to having to potentially fork out $10/$20/$30/$40 million over 2-3 years.

Nicholas Hayes: And what about home here in Australia?

Peter Landau: Well again, through Tangiers. So yes it’s a big target 70 TCF, prospectivity that’s phone book numbers and again, that’s one of the reasons why we like Tangiers.

Nicholas Hayes: Thanks Peter sounds like plenty of potential there, now for corporate matters. Who has been supporting the Company to this point?

Peter Landau: Sure I mean predominantly we’ve been – we are on a volume per market cap with number one traded stock on the AIM market. We do anywhere from four to six million quid a day, so two brokers in the UK. Old Park Lane has been great with us over the last couple of years and we recently announced Panmure Gordon as an institutional broker. So they’re our two brokers in the UK with coverage. Patersons Australia have just started covering us as well with research, so we are looking to increase our exposure in Australia during this 27 mil programme and obviously with the Patersons research, that will help us. And as I said 90 to 95 per cent of our volume is in London but we do want to increase Australia at this point in time.

Nicholas Hayes: What’s your cash position and are you funded for 2011/2012?

Peter Landau: Yeah well look, we’re funded through to about June. Our current cash is around $10 million but remember we do have farming commitments on two of our projects. And importantly we’ve got option exercise, which I think 500 per cent in the money, which will bring another $15 million into the Company at the end of the year, as well as a $45 million draw-down facility that we can draw on. We’re debt free, so obviously right now cash position is fine. Clearly if we do have a success on any one of our bigger wells, obviously the development budget will then - we’ll consider that and obviously make arrangements then. But clearly once we’ve had a success we don’t anticipate any problems raising any money on the back of development profiles.

Nicholas Hayes: And what is your long term strategy?

Peter Landau: Long term strategy is interesting; we’re not into empire building. Clearly we think the patience of investors in this current world has probably shortened from two years to two days. So we’re more into short term impact, high impact high return quickly. So to give you an example, obviously Texas if the P3s go to P1 and P2, we’ll look to monetise and liquidate those assets and do a capital return or share buy-back to shareholders. Similarly I think the only asset we will hold onto would definitely be Trinidad because that’s going to be a three year development play. But if there is an offer that is commensurate with the return on the investment, if Somalia, or Puntland or Georgia come in, we’d definitely look to obviously capitalise on that and return it to shareholders. We probably have one other region that we might look at going into onshore. But I think it’s fair to say if you’re a shareholder, you’re not going to be left wondering where the return’s going to be, because we’re in the business over the next 12 months of realising value and returning a lot of it to shareholders, as opposed to trying to accumulate production assets.

Nicholas Hayes: Last question Peter. Where would you like to see the Company 12 months from now?

Peter Landau: We’d like to be capped at, call it the billion dollar mark and that’s not just through issuing shares, it’s from a genuine increase in share price which would effectively represent a tripling of our share price. We’d like to have returned at least $150 million in cash to shareholders through the sale of our Texas assets. Obviously we’d love Georgia and Puntland to have been a success with each of the two wells that are currently drilling now, so we’ll be drilling appraisal wells in each of those two regions. And we’d probably be in one other onshore area, with a 3D seismic potential drill program. So that’s the crystal ball, we struggled to predict seven days in advance let alone 12 months, but that is the master plan for the next 12 months. And obviously with Trinidad, hopefully be producing 2,500 barrels a day, this time in 12 months’ time.

Nicholas Hayes: Peter Landau thanks for introducing Range Resources.

Peter Landau: Pleasure thanks for your time.


ENDS





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