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Range Resources

Range Resources Limited is both an ASX and AIM exploration Company, with its principal activity directed towards finding and delineating natural resources in the oil, gas and mineral sectors in Puntland, Somalia. Puntland is believed to have all the geological requirements to become a commercial oil-producing region. Somalia, and in particular Puntland, remains one of the last under-explored countries that has a high potential for considerable reserves of hydrocarbons which can be subsequently developed for the benefit of both the people of Puntland and Range Shareholders The Company believes that through the generation of work and government royalties from hydrocarbon and mineral exploration and development numerous social and economic benefits will result.
Company information about: Range Resources
Tuesday, August 05, 2008
Range Resources oil targets are still there
by Ian Mclelland company news image

Since completing a secondary listing on the Alternative Investment Market (AIM), Range Resources has had pretty much everything thrown at it. When we first wrote about Range, we noted that it was always going to be an ultra high risk – high reward play. Unfortunately, for the past 6 months, all the attention has focused on the country risk side of the equation, pushing the shares down from 30 pence to below 10 pence.

Range Resources has the hydrocarbon and mineral exploration rights, and exploitation rights, for the entire onshore and offshore area covering the Puntland State of Somalia. Puntland is a small, autonomous state that covers more than 200,000 square kilometres of the northeastern tip of Somalia, often referred to as the “Horn of Africa”.

Range Resources originally went to Puntland in search of minerals, but soon discovered that the tiny region had, in fact, been the subject of intense oil and gas exploration in the past, with some US$150 million spent in the early 1990s by Conoco alone, before the region destabilised in 1991, and the oil majors pulled out. Range Resources was in luck. When the oil companies moved out, they dropped the options on their licences, which eventually created an opportunity for Range to negotiate the exploration and exploitation rights for oil and minerals across the entire state.

In the late 1980s and 90s, several major oil companies (including AGIP, Shell, Conoco, Phillips and Amoco) obtained exploration licences, and carried out extensive onshore and offshore exploration and drilling, over large parts of this region. In 1991, the World Bank co-ordinated a study intended to encourage private investment in the petroleum potential of eight African nations, with Sudan and Somalia topping the list of potential commercial oil producers. A decade later, and Puntland is now a semi-autonomous region of Somalia.

Initially, Conoco appeared to gain the best ground, and completed the most work, including some 4,000 kilometres of modern 2D seismic in the Nogal Basin and two wells drilled within block 28 of the basin. Conoco's results from the log analysis indicated three different impregnated layers between 2,500 metres and 3,200 metres, with potential recoverable reserves of approximately 90 million barrels within 20 kilometres of the well. The results from Nogal-1 also allowed interpretation for the entire 28/B prospect, with a 'most likely' case of 516 million barrels of recoverable reserves across the Jurassic and Cretaceous horizons.

ENI also completed drilling and geological work in the Darin Basin and apparently flowed hydrocarbons, but the full data collected has never been released to Range. Puntland lies south of Yemen, and appears to share numerous geological characteristics with the Darin Basin, not to mention that both basins lie almost parallel to major oil fields discovered in Yemen. Range Resources has reprocessed all of the data collected by Conoco, and notes that the Nogal Basin has abundant oil shows, high porosity reservoirs, several large structures and an excellent regional seal. This information, together with the close proximity to Yemen, has analysts and commentators throwing around seriously big numbers for Puntland - as much as 5 billion barrels!

The main point of interest regarding Range Resources, is that no one is denying the incredible potential to find oil in Puntland; instead, the attention has focused on the issues surrounding the wider country of Somalia. Political and country risk comes in all shapes and forms, but for Range Resources, managing the intense media speculation surrounding the security and tenure of its agreements with the State of Puntland, must be an overwhelming job. Range Resources appeared to mitigate at least some of this risk by signing a joint venture with Africa Oil (TSXV-AOI), which has the right to earn an 80% interest in the Nogal and Darin Basins by expending US$50 million, including four wells. This greatly alleviates


Range Resources' cash requirements for exploration drilling, as the company is free carried - yet leaves it with a meaningful stake if a commercial discovery is announced.

But as luck would have it, rather than calm investor concerns, the Africa Oil joint venture, itself, has become an area of intense speculation, mostly consisting of unfounded rumours that they may pull out of the deal. On the contrary, Africa Oil has remained committed to the joint venture, and has mobilised seismic crews ahead of carrying out the first of the four-well drill programme. The joint venture has been hit by delays, partly due to the problem of importing equipment via ports in Somalia, where security is a major issue - and piracy on the open seas is not uncommon. But the time is rapidly approaching for the first well in eighteen years to be drilled in Puntland, which is bound to continue to generate all sorts of wild stories in the press.

From an investor’s point of view, the choice is pretty simple: either stay clear, noting political instability as an unknown quantity that doesn’t warrant the risk, or take a position and put your helmet on. There was one positive update recently from Range Resources. Liban Bogor, Managing Director, announced that he had resigned from his post to work exclusively for the Puntland Government on "various initiatives". Range said that it considered the move as a positive step for the joint venture, as Mr. Bogor would be aiming to take into account the interests of "all stakeholders" in Puntland. Shrewd move.

Links
Puntland Government www.puntlandgovt.com
Africa Oil Corp www.africaoilcorp.com


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Other Range Resources articles

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21/04/08 Interview with Range Resources
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16/01/08 Range Resources: A Punt on Puntland

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23/07/08 Range Resources shuffles board of directors
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16/07/08 Range Resources seismic programme starts
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30/05/08 Firebird Global Master Fund increases stake in Range Resources
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27/05/08 Range Resources confirms arrival of seismic equipment
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29/04/08 Drilling delay hits Range Resources hard
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09/04/08 Range Resources challenges defamatory article
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03/04/08 Range Resources says Opes Prime holds less than1%
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26/03/08 Range Resources rebounds on Puntland update
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28/02/08 Range Resources expects first well to spud by summer
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28/02/08 Range Resources expects first well to spud by summer

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