The following is a collaborative effort between Marny and myself, based on publicly available reports and company releases, and with all information sources duly referenced. Please do your own due diligence before making any investment decisions.
24,430,003# Entitlement Options (Expiring 1 Oct 2010, Exercise Price $1.00)
2,952,029 Broker Options Expiring 30 Jun 2012, Exercise Price $0.50
Unlisted Options:
69,185,660# Replacement Options Expiring 1 Oct 2008: Exercise Price $1.00
50,823,029 Expiry 2010, Exercise Price $1.00
(# dependant upon the take up of entitlements after the ratification of option resolutions at the recent AGM)
Full Dilution: 347,830,745 shares
Conversion of options to achieve full dilution would provide additional funds to the company of just over $120 million.
Current Market Cap based on 195m shares trading: $87m as per ASX Friday 30 Nov, 2007
Current Cash Position: Approx $AU 7.6m (Does not include $9m expected from recent placement + $936K expected from Entitlement Issue/Options Issue)
Peer Comparison:
AIM Listed White Nile (WNL)
WNL Interests: Key Project is disputed Oil exploration leases in Southern Sudan, which are estimated to contain between 3-5million barrels of oil
WNL Market Cap: $AU 485 million as per AIM Nov 30, 2007
Range’s Main Assets
Exclusive rights to the greater majority of all onshore and offshore oil, gas and minerals in Puntland (semi-autonomous state of Somalia)
Range’s Puntland Joint Venture Mineral & Petroleum Concessions:
Range’s Current Focus: Oil & gas. Key focus currently is on previously explored Nogal and Dharoor (also called Darin) Blocks, refer map:
The Nogal and Dharoor basins are considered world-class exploration plays with a petroleum system geologically similar to and formerly contiguous with those within the Republic of Yemen – refer map:
Seismic Data:
Approx $US150 million of Seismic work has already been done throughout Puntland by companies such as Conoco, exploring in the 1990?s. This information has been made available to Range/Africa Oil Corp, and is used as a basis of the various reports on the company website.
Puntland Previous Oil & Gas Concessions:
The Nogal Valley in particular has been described as having a potential of 10.4 billion barrels, and is characterized by:
1. Abundant oil shows;
2. Thick, high porosity reservoirs;
3. Many large structures; and
4. An excellent regional seal.
Quotes by Executive Director Peter Landau:
nobody disputes the fact that we have basins that are analogous to Yemen across the Gulf of Aden, with up to 5 billion barrels of oil apiece - as recently reported on wallstreetreporter.com
The offshore is a bonus to us but the real benefit is going to be our 20% of the onshore, including areas formerly demarcated as Blocks 28 and 29, where Sproule International this month reported to us an upside potential of 10.4 billion barrels on today's data alone. as appearing in Upstream publication, October 26 2007:
Quote by President Hersi of Puntland:
I honestly believe our country is rich in natural resources and it requires people to do the work. The big oil companies were previously all exploring in my country 20 years ago. I was the Governor of the area back then and believe an oil discovery was near...........
Production Sharing Agreements:
A MOU was effectively formalised in January 2007 with the signing of the Puntland Product Sharing Agreement (?PSA?) between the Government of Puntland, Range Resources Limited and Africa Oil Corp (then Canmex) The PSA relates to the two main exploration areas in Puntland, namely the Nogal and Dharoor Valleys. (refer to Annual Report for details)
Range’s Potential Mineral Assets in Puntland
- Silver Rich Lead/Zinc
Historic silver rich lead/zinc mines in the Jurassic limestones at Qandala, 80 kms east of Bosasso. Geology analogous to the Jabali silver lead zinc deposit in Yemen. Jabali was reputedly one of the ancient world’s richest sources of silver.
Significant lead/zinc anomaly identified at Magia Yahan, 30 kms south of Bosasso
- Iron Ore
Interesting iron ore occurrence located south west of Bosasso
- Uranium
A historic (1954) geological report identified Aantarra (on the coast 60kms east of Bosasso) as the “largest Uranium anomaly located in Somalia�
Other Interests
Approx 10% of Contact Uranium (ASX:CTS). Key Project for CTS is a very promising Uranium lease in Peru
Key Board & Senior Management:
Sir Sam Jonah – Non-Executive Chairman (Ex Chairman Anglo Ashanti, Extremely successful and well known African Identity) (pictured:)
Michael Povey – Managing Director (Mining Engineer, 25 years experience including Rio Tinto and Anglo American)
Peter Landau – Executive Director (Corporate Advisor and lawyer, Director of a number of ASX / AIM Resource Companies with African Focus)
Liban Bogor – Executive Director (Key Advisor to Puntland President and Parliament)
Marcus Edwards-Jones – Non-Executive Director (Co-Owner of a Paris-based broking house specialising in natural resources)
David Archibald – Technical Consultant – Oil & Gas
High Profile Backer
- Lukas Lundin (controls African Oil Corporation (TSX:AOI), Range’s Joint Venture Partner). Lundin is a powerful Swiss based mining magnate who also sits on the board of Lundin Mining and Lundin Petroleum, two companies with long histories of African interest and involvement.
High Profile Share Holders
- Consort Private (16.9%, approx 32.7 mill shares) - a group based in Dubai who formerly owned the rights to oil & mineral rights in Puntland and who have on sold them to Range Resources
- Sam Jonah (4.7%, 8.27 mill shares): Erine International Limited
Plus
- UBS Nominees (10.38%) {appears that UBS sold around 1 million shares recently to UK investors on AIM}
- Toscafund Asset Management (6.9%): managed by Toscafund Holdings, a global hedge fund Manager. Information on funds under management is not available – however, the founder of Toscafund, Martin Hughes, a former analyst at Credit Lyonnais, received a whopping 41.6mPounds salary this year from Toscafund. Toscafund Chairman is George Mathewson, former boss of the Royal Bank of Scotland.
- Firebird Global Master Fund (6.6%): managed by US Fund Manager Firebird Management, has US$3.5Bn in Managed Funds. James Passin runs Firebird, specializing in Russia but also seeking to invest in oil and mining companies operating in Africa.
- Tudor Capital UK (5.5% ): part of the Tudor Investment Group, controls US$11bn in Managed Funds. Tudor Investment Group is run and owned by US billionaire Paul Tudor Jones II.
Fox-Davies Capital Limited (FDC) has been advising and raising funds for the natural resource sector since February 2001. The firm specialises in assisting international resource companies to gain access to the UK, European and North American capital markets and has a substantial background in emerging markets particularly in Africa, Asia, Russia and the CIS.
Their strength lies in the oil & gas and mining sectors. Clients include such companies as Heritage Oil and Gas (TSX), First Calgary Petroleums (TSX & AIM), Hardman Resources (ASX & AIM) and First Quantum Minerals (TSX & AIM) amongst others.
Independent Reports and Valuations:
Taipan Group-Crisis Trader Newsletter: released a report in May 2007 written by professional analysts who valued the company at between $5-$7
Intersuisse Research Note: Sept 20, 2007 Immense hydrocarbon potential, spec buy at 52.5 c and also mentioned that the company provides exposure to a ?A free ride on a potential elephant?
Existing Joint Venture Partner: Africa Oil Corporation (TSX:AOI)
$US50 million JV over 5 years to earn an 80% interest in the Nogal Basin and Dharoor Basin oil leases, while Range retains the remaining 20%. Four drill holes are fully funded, 2 holes in each of the two Basins.
Of the Africa Oil Corp. 80% farm in right, 20% (in one or both basins) is available to farm out to third parties on terms to be agreed between Range and Africa Oil Corp. Any sign on bonuses with third parties will be split 60% Range , 40% Africa Oil Corp.
Africa Oil Corp. has completed their seismics reprocessing program for Nogal Block, with drilling scheduled for two wells in 4Q07/1Q08.
About Africa Oil Corporation (TSX:AOI)
Formerly Canmex Minerals Corporation, Africa Oil Corp. was a Lundin shell company waiting for a project. Lukas Lundin scoured the world for projects to put into this vehicle. It has been stated many times at various trade shows that whatever he places in Canmex it will be big and it will be good. The Project chosen was the Puntland Oil & Gas play with Range Resources.
CEO: Richard Schmitt.
Rick has spent a significant part of his career managing and developing projects in the prolific oil basins of Yemen. His expertise and experience in this region will be of great benefit as the Company pursues a major oil exploration program in Puntland, Somalia, an area geologically and structurally similar to Yemen.
The Korean National Oil Company (KNOC)
State-owned KNOC contacted the Company in late 2005 expressing an interest regarding the exploration and development opportunities in Puntland. KNOC's preference is to be part of a Consortium with another company as an operator in the area. To that end, the Company has had discussions with several parties and in 2006 was hopeful that a significant joint venture partner might be procured. Hasn’t happened yet.
CNOOC (The China National Offshore Oil Corporation)
State-owned CNOOC has signed an agreement with the TFG for exploration rights in the Mudug Province of Puntland. These leases are not owned by Range.
Current Political Situation:
The clan system is the basis of society in Somalia.
The Somali political system is based on a “4.5� formula, which gives equal quotas for government representation to the four major clans - Hawiye, Rahanweyn, Dir (including Isaaq) and Darod - and a half-point to the fifth which is the collective of minority clans.
The Transitional Federal Government (TFG) is headed by President Abdullahi Yusuf Ahmed (pictured:) It is important to note that President Yusuf is from the Darod clan, and is a former President of Puntland.
Puntland is an independent state with its own autonomy and its own recognized Government, headed by President Mohamud Muse Hersi (pictured:)
The dominant clan of Puntland is the Darod clan. Puntland is the most stable region in Somalia. Without backing by the Puntland Government, the Transitional Federal Government (TFG) of Somalia would be ineffective.
Note that the World Bank and International Aid Agencies deal directly with the Puntland Government.
Proposed National Oil Law:
Earlier this year, a complication for Range with its Puntland focused exploration projects, was a proposal to introduce a National Somalian Oil Law. It was thought that such a law might have implications for agreements already negotiated by private companies in Somalia. The conjecture has been a destabilizing element for Range, and has resulted in a weaker share price. The driving force for the National Oil Law was ex-Prime Minister Prof Ali Mohammed Gedi of the TFG.
PM Gedi resigned in October, thus alleviating the conjecture about the proposed Oil Law. In any case the President of the TFG Abdullahi Yusuf Ahmed is closely allied with Puntland, being a former President of the state. And according to the charter of the TFG, as President, he is the only person authorised to sign off on any new law. This effectively negates such a Law from ever getting approval in the parliament while Yusuf is in charge, and while he disagrees with the implementation of such a law.
The Puntland Government has publicly reiterated a number of times its strong support of the agreements with Range. In a recent strongly worded statement they have proclaimed that they would become independent and go it alone if necessary, to bypass such a restrictive law. (refer 2007 Annual Report). It now appears that such action will not be necessary.
Ex-PM Gedi was a member of the Abgaal subclan of the Hawiye clan, as is his replacement, respected elder Colonel Nur Hassan Hussein who has been appointed to the Office of Prime Minister.
Border Tensions:
Recently, border tensions have erupted in Las Anod, the capital of the disputed Sool region between Puntland and Somaliland. Puntland President Hersi has reaffirmed in Parliament during November that these tensions will not impact on exploration efforts and his government will ensure that borders will remain secure to aid the exploration fast tracking process.
Of Relevance:
- The USA appear to be lurking in the background in Somalia, taking an interest in the country generally, helping with quelling conflicts, providing aid, encouraging reconciliation and generally playing a low key role. One wonders why they would bother, particularly since the US has a track record of having vested interests in the parts of the world it involves itself in.
- US ally Ethiopia was instrumental in overturning the Union of Islamic Courts in 2006 from Mogadishu, and retains a strong presence in Somalia, backing the government.
- The World Bank has recently been involved in talks with the Puntland Government directly as it attempts to move forward with economic development.
- The world is approaching Peak Oil, which is limiting supply and forcing the price of oil up. New discoveries of size are urgently needed to meet growing demand.
- Various media outlets with self-serving agendas publish spurious and sometimes unsubstantiated reports on the Somalian political situation. Garowe Online and All Africa are two such outlets with a long history of publishing articles which have proven to be misleading.
Recent Events:
- Crisis Trader Newsletter (Taipan Group) was re-released (Oct 3) to emphasize Range’s $5-$7 valuation based on reports from professional analysts.
- Competent Persons Report released in preparation for AIM
- AIM listing occurred on October 23
- Road shows to numerous brokers for AIM (in Australia and the UK)
- Broker recommendation by Intersuisse rating Range as a speculative buy
- AOI appointment of an experienced Drilling Manager
- AOI seismic reprocessing program completed for Nogal Block
- Fox-Davies (London-based Oil & Gas Specialist Broker) released their initial report on Range Resources.
Fox Davies Valuation: Some excerpts are as follows:
Sproule has estimated undiscovered oil-in-place resources in the Nogal block net to Range Resources at 860mmbbl Assuming a 30% recovery rate we estimate recoverable resources net to Range Resources at 258 mmbbl.
At 20% chance of success (FDC estimate) we think that the risked recoverable resources net to Range are at 52mmbbl. After a 50% discount for political risk the Risked NAV of the company is estimated at US$182mn, or US$0.99/share (or 0.50 pound/share). In Australian currency, the estimate amounts to A$1.17/share
The Unrisked NAV excludes geological risk, but includes a 50% discount for political risk. The unrisked NAV is estimated at US$886mn, which equates to US$4.85/share (or 2.37 pounds/share). In Australian currency, the estimate amounts to A$5.71/share.
The Fox Davies valuation does not include any value for the Darin Block and for acreage Offshore Puntland, nor does it consider any value for minerals.
Given the political and geological risks involved we anticipate high share price volatility driven by newsflow and drilling success.
COMMENT: Should the political risk be resolved/removed, we can adjust the valuations as follows.
GEOLOGICAL RISK ONLY: Allowing for only geological risk (1 in 5 chance) the price estimate becomes $2.34, (ie 2 times $1.17)
DISCOVERY: Should oil be found the valuation adjusts to $11.42. (ie 2 times $5.71)
Again with both of these estimates, no allowance is made for other onshore blocks, offshore blocks or minerals.
Upcoming Events:
- AOI could potentially farm out some of its interest to a 3rd party (possibly to RAK from the United Arab Emirates) entitling Range to a sign on payment of between 5-10 million dollars.
- AOI to mobilize a drill rig for the Nogal Block in late 2007/2008. Seven targets identified. Each target has possible recoverable reserves of 500 million barrels of oil. From the end of January 2008, 2 wells are to be sunk, likely target is near Kallis-1 in Block 28B. Drilling to take approx. 30 days per well, back-to-back.
- AOI 3D seismic acquisition program scheduled for Dharoor Block (> 5000km) over the next few months. Drilling program to follow.
- A comprehensive seismic reprocessing program, including review and integration of all geophysical and geological data, has been successfully completed on the Nogal Block. The Company expects to mobilize a drill rig into the area in late 2007/early 2008 with the anticipation of spudding the first of two back-to-backs wells in the first quarter of 2008. A drill program is also being planned for the Dharoor Block to follow the drill campaign at Nogal. The Company is scheduling a major seismic acquisition program over the Dharoor area and expects a seismic crew to be mobilized in early 2008. The Company has added another key member to its technical team. Mr. Paul Colyer has joined the Company as Drilling Manager. Mr. Colyer, considered one of the top drilling managers in the industry, brings over 35 years of experience to the Company. Mr. Colyer has spent the greater part of his career at Occidental Petroleum (4th largest US Oil & Gas Company) and has drilled and managed drill programs in both Yemen and Somalia.
November 22, 2007: Puntland Visit by Africa Oil Corp Delegation
- Mr. Rick Schmitt President and CEO Africa Oil Corporation (formerly of CanMex Minerals Corporation) and his staff arrived at the Bossaso Airport. Accompanying Mr. Schmitt were Mr. Paul Coyer Drilling Manager and Mr. John West Geophysicist.
The purpose of the visit was to brief the President and Government on the drilling program and the target areas that the company is planning to drill.
November 22, 2007: New Prime Minister Appointed
APPOINTMENT OF PRIME MINISTER SHOULD SPUR RECONCILIATION
- The appointment of seasoned humanitarian worker Colonel Nur Hassan Hussein (also known as Nur Adde, profile at Wikipedia; pictured:)
as Prime Minister of the Transitional Federal Government of Somalia should spur efforts to promote reconciliation in the country, United Nations Secretary-General Ban Ki-moon pronounced. This appointment in November 2007 will be an important step towards making reconciliation and reconstruction a reality. Col Nur Adde was voted in by 211 out of 212 MPs, and significantly, has been politically neutral in the past.
SUMMARY
Range Resources has come a long way since signing an agreement 2 years ago with the Puntland Government and Consort Private for access to 50% of Puntlands oil and mineral rights. It has been a slow, torturous and problematical journey, accompanied by considerable pumping and dumping of the stock, and constant down ramping on the forums. Yet is still ticking the necessary boxes associated with achieving its stated aims and objectives. It has moved to 100% rights for the oil and mineral rights, it has raised money and issued shares to complete payment obligations associated with the Puntland transaction, and it has negotiated a free carried 20% interest into oil exploration in the Nogal Valley to be conducted by Africa Oil Corp. The upside in the Nogal Valley is an estimated 5 to 10 billion barrels of oil. Also there is the oil potential in the Dahoor Valley and the Offshore basins to factor in, as well as a number of mineral projects awaiting exploration.
There is unanimous agreement by a number of experts that the oil potential in Puntland is enormous. The Range share register is tight and a number of very successful and credible institutional investors who are recognised internationally, have significant holdings. The political situation, while confused at times, now looks much more settled with the resignation of Prime Minister Gedi, and the appointment of respected elder Colonel Nur Hassan Hussein to replace him. Procurement of a drilling rig is underway, and drilling is forecast to take place late January early February 2008.
At this point in time, with everything set for drilling to commence shortly, the share price is effectively back to where it was almost 2 years ago. It is trading well below the valuations of all analysts that have assessed the stock. Currently, the outlook has never looked better for the company. The recent AIM listing has given exposure to world markets at a time when the oil price is approaching $100 per barrel. The peer comparison with White Nile, currently caught up in disputation about its leases, makes Range with its full support of the Puntland Government behind it, seem irresistibly cheap. Somalia is one of the last oil frontiers yet to be developed. Gaining access to ‘easy’ oil in one of the few remaining unexploited oil provinces is a rarity these days as Peak Oil rapidly approaches. What’s more, Range is cashed up, fulfilling obligations and geared for success.
Range’s success in the upcoming Nogal Basin drilling is highly dependent on their partner Africa Oil Corp. With the industry recognized expertise of Africa Oil Corp’s key personnel in the region, and the acknowledged geological analogy to the oil rich Yemen Basin, the probability for Range’s future success is extremely high.
RRS Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
