It'll have been oversold IF Landau delivers what he promises, but then again he rarely manages that. 1000bopd would be alright for most oil juniors, but the cash burn of this company on admin and consulting charges wipes out any profit RRS is making now, and there's still obligations in Puntland and Georgia to meet (and who knows what Columbia will end up costing? We don't have much information on that project).
The market cap of Range, fully diluted, is about £115m. Landau said every 1000bopd from Texas generates $12m in cash to Range, or roughly £8m. On a 8x earnings basis Range is valued almost twice as much as it should be- there's some £51m of 'potential' priced in. And according to recent estimates that difference won't be made up for by a Texas sale.
Of course, if 2500bopd is achieved, things start looking better. $30m, or £20m cashflow gives an 8x earnings value of £160m which represents decent gain from here providing there's no more dilution beyond the shares that must be issued to SOCA at the 1250bopd and 2500bopd points. Plus if the Herrera's get drilled the potential alone there will see a decent rise.
But further dilution is always a massive danger with Range. Personally I think there is another 1-1.5p of downside left in the short term if the Puntland result is negative. Long term if Landau can get his act together Range should be OK, but that's a big 'if'.
RRS Price at posting:
7.4¢ Sentiment: None Disclosure: Not Held
