Ann: Range signs conditional MOU for US$50 million funding, page-5

I have another one of Oma' contributions submitted elsewhere.
The reason I am posting this is, that i noticed very little value added posts on Hotcopper over the last months on Range and this is an attempt to get good debate happening again, instead of the waffle of late.
I am of the opinion, that Range is now a totally different beast with a professional business plan made by Oil people.
It may take longer to get there, but the foundations laid so far are promising.
Our CEO has no other directorships anywhere else, which must be a good start.
While young, he is probably learning on the job, but with the new chairman and his other team members as advisers, Range is in better hands than before.

Re: How the $30M is covered ? Unread post 05 Nov 2014, 19:23

I hope this illustrates that 1p is a temporary and justified short term level with a fairly quick recovery to 2.65p minimum once production starts to increase. I don’t see 1p as a cap at all.
Note if the SP falls below .66p before Lind is repaid RRL are in breach of it’s covenants on the Lind loan.

A quick illustration of the benefits to shareholder of taking equity rather than debt. The recent accounts allow for a reasonable calculation, but it is important to remember that accounts did not include any liabilities, such as the LandOcean optional $50M finance as a means of extracting value from the assets. As such Option 1 (debt) would be the true value of a going concern and is close to the SP we had seen before the funding announcement.

Option 2 represents the situation as we now understand and indicates that we should move towards 1p on book value alone.

Current Position

Balance Sheet Net Assets $109M
Shares in issue 5BN
Assets Per Share $0.0218 (1.36p)

Option 1 (debt)

Add $50M debt
Net Assets $60M
Shares in Issue 5Bn
Assets Per Share $0.012 (0.75p)

Option 2 (equity)

Raise $50M Equity
Net Assets $109M + $50M= $169M
Shares in Issue 10Bn
Assets per share $0.0169 ( 1p)

So 1p per share represents a fair price to pay by the new investor.

Option 2 does not require an average repayment (10% over 5 years) of $13M per annum. The effect of this is that RRL will go into profit earlier under the equity option

On a P/E Ratio of 8, this represents an increase in Mcap of $104M or $0.01 per share (0.65p).

This gives a value at b/e of 1.65P per share

CFG give us a NPV of Trinidad reserves of $162M.

Under the debt option this reduces by $50M to $112M or $0.0224 per share (1.4p)

Under the equity option this is $0.162 per share (1.0p)

So the debt option total is .75p + 1.4 = 2.15p
Equity Option is 1p + .65p + 1p = 2.65p.

The addition benefit of the equity option over the next 5 years is primarily due to not having to service the debt and investors benefitting from the value that the market places on achieving profit earlier. After 5 years this benefit disappears.

This works out at a potentially higher SP once production capability has been proven and just on Trinidad know reserves.