"Range Resources announced a quarterly update for the period ended 30 June 2010. The company is in a strong position with cash of A$7.4m and no debt. We believe that this cash position is now over A$11m since the period end as a result of the issue of new shares and the exercise of listed options.
? In Puntland, Range expects that exploration drilling will commence in Q4 2010. The operator of Range?s acreage interest, Africa Oil, is continuing its efforts to finalise terms with an international drilling contractor willing to participate in the proposed drilling programme.
? In Texas, the fracture stimulation of the Smith #1 well is complete and production has recommenced. Output from the well has been limited by the operator in order to maximise performance of the well and this is likely to increase the payback period to Range slightly. However, it will also extend the life of the well and the amount of revenue that Range will receive over the life of the well will not be impaired.
? The successful Russell Bevly well is also being completed for production and is expected to add significant additional reserves and production. We intend to reflect this in our valuation when production commences. A third well on the North Chapman Ranch Project is expected to spud in Q4 2010.
? In other regions, Range has acquired new acreage in Cotton Valley in northern Texas and is assessing drill targets and potential farm in partners in Georgia (FSU). The company has also entered into a binding Heads of Agreement to acquire a 10% interest in a suite of producing assets in Trinidad.
We have factored in a valuation of 0.4p per share for Range?s interest in Cotton Valley which offsets the recent increase in Range? share capital. With no value attributed as yet for Georgia, Trinidad and a potential North Chapman reserves upgrade, we believe that our 11.5p per share valuation for
Range looks very attractive. Additionally, we expect the share price to rally on news of mobilisation in Puntland.
RRS Price at posting:
10.5¢ Sentiment: LT Buy Disclosure: Held
