To get an insight into the Landau brain, read the following (Warning, long post):
From Bill Fish iii
'Good Afternoon SS, You seem a bit down today. I know how much this share means to you so I would have to say that I am encouraged by the early actions of the new CEO.
He is by nature a bean counter so you would expect his early actions to center on his area of expertise i.e. the counting of the beans.
IMHO he has not only counted the beans but correctly identified where the beans have come from and the effect they have had on the value of the average PI investment in this company.
He has followed this up with the correct action and relieved PL of his executive duties and shown OPL the door.
Sometimes when you end up in a place you neither wanted or expected to be it is instructive to retrace the steps to see how you got there in the first place.
I am not going to retrace the whole Range story - I will however revisit the events of 2010 and 2011 that I believe shed some light of the situation we find ourselves in.
3 key events took place in 2010.
On the 5th of January 2010 Range raised capital as follows:
"Range Resources risked losing favour with investors on Tuesday after the oil and gas firm launched a AUD$7 million cash call.Range Resources (RRL) risked losing favour with investors on Tuesday morning after launching a AUD$7 million (£3.9 million) cash call.
The independent oil and gas company's shares slipped over 3% as fears of dilution drove investors away.
The cash call offers shareholders the right to acquire one new ordinary share for every four existing shares they already hold at A$0.05 per share.
In conjunction with the rights issue, AIM-listed Range Resources has also embarked on a share placement with institutional investors under the same terms to raise up to AUD$2 million (£1.1 million) through the issue of 40 million ordinary shares.
The company, which has a predominant focus on the US, said it will use the proceeds to fund its operations in Georgia and Texas."
On the 18th Nov 2010 the Seismic study results for Georgia.
"GEORGIAN ESTIMATE OF PROSPECTIVE GROSS OIL-IN-PLACE OF 2 BILLION BARRELS
Highlights: * 68 individual structures, each containing stacked reservoirs, have been indentified across Range's two Georgian Block's VIa and VIb; * Independent best estimate of gross undiscovered and unrisked oil-in-place across these identified prospects of 2.05 billion barrels (1.025b barrels attributable to Range); and * Six ready to drill targets identified with gross oil-in-place of 728m barrels (Range 50% plus cost recovery)."
The following week the 3B was published on the 24th of Nov as follows:
"Following the issue of these securities the total number of securities on issue are as follows: 1,194,976,372 Ordinary Fully Paid Shares (RRS) 327,018,136 Listed Options (RRSO) (A$0.05, 31 December 2011) 25,412,044 Unlisted Options (A$0.05, 31 Mar 2015) 5,420,655 Unlisted Options (£0.04, 30 June 2015) 60,000,000 Unlisted Directors Options (A$0.10, 31 Dec 2011) 3,177,029 Unlisted Options (A$0.50, 30 June 2012) "
Notwithstanding the 67% uplift in Texas P1 reserves announced that year 2010 ended on a very positive note.
A successful fund raising 1.195 shares in issue 68 individual structures containing stacked reservoirs giving Joe Soap Range investor just shy of 1 barrel of unrisked OIP PER SHARE. Compare that to what we have today.
How many of you recognized that this also marked the parting of the ways between the Range shareholder and the Range BOD. Not many I would suspect.
I am not referring to the fact that the 68 structures and 2.05 billion barrels disappeared in a puff of smoke after a single 1500 ft well. This is something that the Range BOD have, as yet, provided no adequate explanation for.
Rather I am referring to the capital raising on the 5th of January.
The majority of that capital raising £3.9m consisted of raising capital via a rights issue from the shareholders with the additional placing raising £1.1m.
The shares in issue at the end of 2010 was 1.194BN.
We now have 3 times the number in issue at 3.5bn and Range have never once gone back to their shareholders to raise capital via a rights issue since that raising in Jan 2010. Instead 2.3 bn shares have entered the market by a variety on non-shareholder related mechanisms. or to put it another way twice as many shares as those held by the shareholder base.
The announcements from the following year are instructive when examining their structure.
Two announcements were made with regard to the acquisition of T&T assets.The first on 20/4/2011 with the announcement of the completion on 01/06/2011.
Apart from the stark contrast with which this deal was completed compared with those of today, I believe the following 2 excerpts show where we are today.
"Current production is approximately 600 bopd with a planned work program expected to lift production to more than 4,000 bopd within 36 months on known reserves;"
and
" Consideration Under the terms of the Agreement with SOCA Petroleum, Range will pay the following to acquire the remaining 90% interest in SOCA that it doesn't already own:
* US$52m upon formal completion of the acquisition (scheduled to happen imminently upon all necessary closing actions being completed); * The issue of 35,842,293 fully paid ordinary shares upon completion; and * The potential issue of two parcels of a further 17,921,146 fully paid ordinary shares upon production from the SOCA licences reaching 1,250 bopd and 2,500 bopd respectively.
To help provide funding for the cash component of the acquisition consideration, Range has received commitments to a placement of 117,647,059 shares at an issue price of £0.17 per share to raise £20 million. The placement was undertaken through the Company's UK broker, Old Park Lane Capital, to a number of sophisticated and institutional investor. The placement was well oversubscribed and Company is looking at accepting up to £5m in over subscriptions due to demand."
This deal was a cash plus shares deal with OPL placing 117 million shares to raise the cash.
The existing Range shareholders played no active part in this transaction - they were not asked to provide a bean to directly support this transaction.
Whether PL became seduced by the ease with which OPL were able to raise capital I don't know but I do know RRL never went back to their shareholders for support as they issued a further 2.3bn shares in the ensuing years.
The role of a stock market listing or in this case an Aim quote is to allow a company to raise funds to advance its assets for the benefits of the shareholders.
In effect the BOD became divorced from the shareholders. Their perceived funding needs were no longer subject to the validation of their shareholders via a rights issue. Rather the funds were provided via multiple placings and the issue of share options.
Now the bold Peter isn't all that great at extracting oil from the ground, he can't get his coal to the surface in commercial quantities, he is still dicking around trying to mine silver and the least said about his platinum operation the better.
However what he can do, what his major strength is, is his ability to mine a rich seam of capital when he sees one.
OPL provided the access to the capital and PL, being the financial innovator that he is, introduced the Range shareholder to their own private version of QE before the bank Bernanke or Mervin King had even thought about it.
The one thing that intrigued me throughout this whole thing is how OPL, a lightweight in the financial world, could achieve the task. After all they have only been in existence since 2007 and share the OKAP contempt for corporate governance by having a single executive director and a single non-exec director.
Well hubris plays a large part - have a look at this from their website.
So not for the likes of you and me - noooooooooooooooo!!!!!!!.
Invitation only. - well excuse moi!!!!
.....those clients who meet our strict criteria and whom we feel are best suited to benefit from our service.
I wonder what that strict criteria might be?
Who would be best suited to benefit from the service?.
This must be the gateway to all those money making opportunities that are only available to those in the know - yes?.
Must offer access to investments in 3D printing, some Israeli biotech perhaps, maybe some internet based tat that Google or Microsoft will pay 500 times over the odds for before they sling it in the bin 18 months down the line.
I could hardly contain my excitement as I checked out the client list. which you see here.
The last time I saw tat like that Del-boy was flogging it out of suitcase on the totenham court road.
The criteria for being an OPL stockbroking client would appear to be a severe cerebral challenge and a masters degree in "nice but dim".
Leaving aside the quality of the OPL stockbroking client, the effect this has on the Range shareholder is to place placing shares in weak hands i.e. in the hands of those who will drop them on the market and the Range shareholder becomes the sponge that mops up the shares in the secondary market rather than the provider of capital via the primary issue of the stock
Were those same shares offered via a rights issue then one could expect that a far higher proportion would end up in "sticky hands" ie. they would hold on to them for longer, leaving fewer to be absorbed by the market thus supporting the share price and requiring less shares to be issued to support the capital needs of the company.
Maybe a busy ,part time, executive director does not have the time or inclination to raise funds via a rights issue. Perhaps the ease of the placing mechanism is too seductive as a never ending source of funds.
What is evident is that the original ease with which capital has been available has done nothing to increase the rigor with which the deals were evaluated and has certainly diluted and devalued the Range PI beyond where he would have been had a more conventional approach to financing been adopted.
The current financial squeeze on Range points to a lessening of appetite for their paper amongst the OPL client base.
Perhaps this constant diet of Range paper has caused the universe of OPL HNWI to drop more Hs than Elisa Doolittle in a production of Pygmalion and they are now the same as us --- LNWI.
Whatever the cause, Rory seems to have spotted this dichotomy and hopefully any future funding raising will be conducted with the effects on the existing shareholder base foremost in mind.
Getting rid of OPL, although not getting much credit at the moment , will I believe come to be seen as a smart move as we go along.
In the same vein perhaps examining the role of the Nomad in relation to the veracity and completeness of RNS would be a positive step as well. Perhaps this may come in time as you can't chuck all the advisors in one go.
I have seen some raise the question about production targets and where we are and what to expect from this year.
I would expect Rory to announce his pals for this in 6 weeks at the end of Q1.
This will be of major interest as we have a baseline contained in the original announcement of the T&T listed above.
"Current production is approximately 600 bopd with a planned work program expected to lift production to more than 4,000 bopd within 36 months on known reserves;" is what they wrote in April 2011.
Well we are 2 months shy of the 36 months and are producing less that we were when the RNS was released.
The T&T asset under 3 years of PL management is yielding less BOPD than it did at the start.
In April 2011 they expected to take 36 months to get production up to 4,000bopd and that was having one more rig than we have today as Rig 7 has been broke up for spares.
It will be interesting to see what the Shell team come up with, but 36 months is the baseline set by the original Range team. It was hardly surprising that Rory would not commit to PL's targets as the targets that PL produced were at complete odds with what was contained in the RNS above .
So SS I would not throw in the towel yet. The SP will bounce all over the place until we see the new plans at the end of Q1. I suspect that they are working on a rabbit to pull from the hat. Something that will set the SP on an upward trajectory,something that will underline the end of the PL era and something that will give the a much needed boost to the shareholders moral.
GLA
BF
PS I would personally like to see how Tethys get on in Georgia before we chuck in the towel with that asset. They are prodding around there at the moment and I just don't believe that 2bn barrels of OIP in 68 separate structures can just disappear on the say so of a single 1500 ft drill.'
CTR Price at posting:
1.2¢ Sentiment: Hold Disclosure: Held
(20min delay)