News: Range Resources outlines case for US$60mln Core Capital funding

Range Resources' (ASX:RRS, LON:RRL) board has sent a letter to shareholders urging they vote in favour of a US$60mln funding with Core Capital.

Among other factors, it says it will provide the firm with an additional US$50mln facility and allow it to refinance its debt position.

But an independent expert’s report (IER) has described the proposed transaction as 'not fair but reasonable'.

After completing the financing, Chinese investor Core will own 38.4% of the company, while subsequent conversion of the debt would see that stake increase to 47.7%.

Because of this large stake, Range is obliged to hire a third party to give an independent view to shareholders and it hired RSM Bird Cameron to produce the report.

RSM said: "In our opinion, the position of the shareholders of Range if the proposed transaction is approved is more advantageous than the position if it is not approved.

"Therefore, in the absence of any other relevant information and/or a superior offer, we consider that the proposed transaction is reasonable for the shareholders of Range."

The Range board added:  “We appreciate the rationale for the calculation of the fairness opinion by RSM, however, we would highlight to Shareholders that the implied valuation using the DCF [discounted cash flow] calculation for the assets assumes that Range is able to finance the development.

“The proposed investment is the cornerstone to unlock the potential of these reserves.

“As RSM highlights, the position of shareholders would be more advantageous if the transaction is approved, as it would provide the company with the required funding to develop the Trinidad assets.”

In Trinidad, the firm said the proceeds would allow work on three existing onshore blocks - Morne Diablo, South Quarry and Beach Marcelle, where Range has reserves of 22.1 million barrels of proven and probable (2P) in well-known reservoirs.

Range has commitments on its existing blocks to drill 34 development wells over the next two years.

The extraordinary general meeting is on March 27.

If the financing with the Chinese investor is not approved, oil group Range must find alternative capital to develop its assets and repay a loan from asset manager Lind, it told shareholders.

Drill firm LandOcean has committed to providing a facility of US$50 million to fund the water-flood programme on Range's Trinidad assets, but this will not be available without additional cash being secured, the firm said.

Range has outstanding debt with Lind with a face value of US$7.25mln, for which it has received a statutory demand for payment.

The funds would allow Range to repay this loan.