Ann: Range signs conditional MOU for US$50 million funding, page-4

Good post from Omadawn on uk board:

04 Nov 2014, 20:20
I haven’t been able to catch up with all the comments made on the new funding arrangements RRL have put in place. Apologies if I have repeated comments from other contributors. It takes several days to get the internet running in a Spanish mountain village so it’s an occassional trip to the bar
Very good to see that RRL have been able to get better terms than LO were able to offer despite LO having had the opportunity to undertake extensive due diligence. Very good that the new deal appears to require no security and that the new investors gain is also our gain. Very good to see that revenues generated from oil production are to the benefit of all shareholders and not just drained off to LO via capital, interest , 15% markup and profit oil.
The overhead cost reductions that Rory has instigated, means most of the new raising will be invested in revenue generation. This is a significant change from the old management. This also means that most of the money can be recovered and re-cycled using the new fiscal regime. It looks like the Lind debt will be settled early. This avoids the potential dilution from this bridging loan and the new arrangement means we get more cash raised for the same number of shares. It certainly does look like St Mary’s and Nico exploration is fully funded.
We should benefit from St Mary’s being exploited quicker and without the need for a farm out or JV taking revenues out of RRL and hence to our benefit. Abraham’s as a major investor will have been consulted on the strategy as their voting intentions are critical to getting this deal through shareholder approval.
If I recall the figures correctly they will be diluted to the extent that they loose the right to appoint 2 Directors unless they cash in their options, or buy on market. If Abrahams are to vote in favor then are interests are all aligned. The strength of this deal for investors is that profit generated by the business is increased substantially compared with taking on conventional capital and interest debt.
This will be recognized by the market and more than compensate for the dilution. $50M dollars at 10% over five years would cost RRL and average of $13M a year in repayments. If , with no debt to service this feeds through to profit on a P/E of 8 then its worth $104M on MCap.If as existing shareholders we have been diluted by 50% then the the MCap increases relative to existing shares in issue by $51M. No problem. Net asset value per share is reduced by 50% and becomes very close to the current MCap, which probably already recognized the need for $50M of funding.
The MCap would be higher if the debt was by way of a capital and interest bond but once RRL start to deliver on oil production this will be more than compensated for as the NPV calculation will be used for pricing. However we do still have Georgia & Texas to be resolved could improve cash position significantly more than the carried amount. The NPV per share of P1/P2 reserves is reduced by 50% per share, but the funding is in place to actually realize this value, which is not currently recognized is now available. In addition the funding is in place to hopefully double up the reserves over 2 years and compensate for the dilution. We are were we are because of very poor management in the past. In may ways the current action is unavoidable but at least Rory is turning things are as efficiently as he can do.
The key now to delivering shareholder value for all is to accelerate production. I use the word accelerate with care as with less money being bleed out for overheads and to pay LO a range of fees, most of the money can be used more efficiently, with higher cash retention and higher cash recycling through the fiscal incentives. All this leaves me thinking what will LO do now ? It’s one thing RRL unwinding a deal and giving LO the opportunity to renegotiate terms.
It is a totally different scenario when a Private Investor comes along and pulls the rug out from under a $1Bn company OUCH !! So in summary, probably the best we could hope for under the circumstances.
I haven’t read any one putting forward a viable alternative.

OMA User avatar omadawn Posts: 2105 Joined: Apr 2013 Location: Marbella