RANGE RESOURCES LTD: Strategic Stake in Citation Resources
25 January 2013
The Manager Company Announcements Australian Securities Exchange Limited Level 6, 20 Bridge Street Sydney NSW 2000
STRATEGIC STAKE IN CITATION RESOURCES
- Range increases its Latin American footprint by acquiring a strategic stake of 19.9% in Citation Resources Limited (ASX:CTR), with interest in two highly prospective oil and gas blocks in Guatemala;
- The strategic stake allows Range to obtain non-operating exposure to known reserves with significant upside potential with a similar owner / operator project to Range's Trinidad operations;
- The Guatemalan Blocks have proved plus probable reserve estimates (2P) of 2.3 MMBBL (on a gross 100% basis), with significant exploration upside potential;
- The blocks have had significant previous exploration with the two well appraisal drilling program currently underway with one well already successfully completed and flow testing currently ongoing; and
- The second well will spud in February upon completion of current flow testing program on the first well.
Range Resources Limited ("Range" or "the Company") is pleased to announce that as part of the Board's on-going review of opportunities and strategic options, Range has secured a strategic stake (19.9%) in Citation Resources Limited ("Citation") (ASX:CTR). Citation holds a farm in right to acquire a 70% interest in Latin American Resources Ltd ("LAR"), which holds an 80-100% interest in two oil and gas development and exploration blocks in Guatemala ("Projects"). LAR is the operator of the blocks. Additionally, Range has acquired a direct 10% equity stake in LAR.
The Projects consist of Block 1-2005 and Block 6-93 in the South Peten Basin in Guatemala ("Guatemalan Blocks"). The Guatemalan Blocks have Canadian NI 51-101 certified proved plus probable (2P) reserves of 2.3 MMBBL (with approximately 0.45 - 0.6 MMBBls attributable to Range's combined equity interest in Citation and 10% direct interest in LAR), with significant exploration upside potential. In addition, the blocks have had significant previous exploration with the two well appraisal drilling program currently underway with the Atzam #4 well having already been successfully completed and flow testing currently underway. The Projects and drilling/operational infrastructure are owned by LAR together with its minority joint venture partners in a similar set up to Range's Trinidad operations.
The strategic stake in Citation and LAR provides Range with non-operating exposure to a project with known reserves and significant short term upside potential, as well as creating the potential spin off vehicle for the company's Puntland assets.
Given the current share price and the development potential of Trinidad, the Company's operational and financial focus remains on Trinidad. With that view, Range believes the stake in Citation to be a cost effective growth opportunity with minimal further funding required in the near term.
Range will acquire its 19.9% strategic interest in Citation, by conversion of existing debt funding provided by Range to Citation into ordinary Citation shares (subject to any necessary Citation shareholder approvals) at $0.02 with a 1 for 2 free attaching listed Citation option ($0.04, June 2015), which is approximately $2m for the 19.9% interest. In addition, Range will pay $2m for the 10% interest in LAR, which is finance carried through the first US$25m spent on the Project.
Concurrently, Range has completed a placement of 40m new shares to Citation nominees at A$0.05 per share (being a premium to the current share price) to raise gross proceeds of $2m, along with the issue of 40,000,000 unlisted options ($0.05, 31 January 2016) in facilitation, introduction and corporate advisory fees.
Executive Director Peter Landau commented:
"The acquisition of the interest in Guatemala through the strategic stake in Citation Resources and at project level further strengthens our portfolio of assets in the region that has yielded significant discoveries, yet remains relatively underexplored. This acquisition is consistent with Range's strategy of acquiring low cost barrels in areas of strategic advantage. It provides Range with a unique opportunity to participate in near term appraisal and development along with potential high impact exploration opportunities at minimal costs. We now look forward to the flow test results from the first well, and subsequent spudding of the second well."
Guatemala Projects Summary - Atzam and Tortugas Formations
The Projects consist of Block 1-2005 and Block 6-93 in the South Peten Basin in Guatemala ("Guatemalan Blocks"). As reported by Citation, the Guatemalan Blocks have Canadian NI 51-101 certified proved plus probable (2P) reserves of 2.3 MMBBL, with significant exploration upside potential. In addition the blocks have had significant previous exploration with the two well appraisal drilling program currently underway with the Atzam #4 well having already been successfully completed and flow testing currently underway. The projects and drilling / operational infrastructure are owned by LAR together with its minority joint venture partners in a similar set up to Range's Trinidad operations.
The first appraisal well Atzam #4, which successfully drilled to its target depth of 4,500 ft., is currently undergoing flow testing operations. The intention is for the second well, Atzam #5, to spud following completion of the flow testing program on the Atzam #4 well. The Atzam #4 well is being drilled on the same structure that the Atzam #2 well tested at an initial flow rate of up to 1,200 BOPD of 34°API oil at a depth of 3,850 ft.
Recent mapping of the Atzam structure using existing data from previous operators (Basic, Hispanoil) and MEM, and incorporating reservoir data acquired since production initiated in December 2007, indicate the possibility of a structure of comparable size and orientation to that of the existing Rubelsanto field in Guatemala. To date, the Rubelsanto field has produced more than 30 MMBBL of oil since its discovery in 1976. The field currently continues to produce more than 1,000 BOPD, 36 years after its discovery.
In addition to the Atzam structures on Block 1-2005, the Tortugas structure is a suspended oil field. Originally 17 wells on Tortugas salt dome were drilled by Monsanto looking for sulphur. One well (T9B) had an oil blowout at approx 2,200 ft and most others had oil shows in multiples zones.
The Atzam and Tortugas Fields have had significant previous exploration and development with 2D seismic and previous production wells. In 2012/13 the planned exit production is approximately 1,000 bbl/d based on successful production from the two new appraisal wells based on the previous flow rates of wells drilled on the same structure.
For more information, please refer to citation.net.au
Guatemala is a politically stable country with a developing economy. Guatemala has enjoyed political stability since 1983 when the first free election for National Assembly (Congress) took place and a new constitution, currently in force was approved. In 1985 the first civil president was elected. Since that date, there have been six civilian presidents elected in free and democratic elections. Guatemala has enjoyed more than 30 years of stability, in the social, economic, and political sectors
Underpinning development in Guatemala are excellent fiscal terms with net backs per barrel of approximately US$45 (assuming US$80 oil price) after all costs (including taxes and royalties).
Current production in Guatemala is approximately 14,000 bopd with similar hydrocarbon geology to Mexico. The trends of major Mexican discoveries (such as the Nazareth Field) have been found to extend into Guatemala. The major producing basins, North Peten and South Peten, account for 90% of domestic production.
Range Resources Limited is pleased to announce the issue of the following securities:
- 40,000,000 Ordinary Fully Paid Shares issued at A$0.05
- 8,613,780 Ordinary Fully Paid Shares issued in lieu of cash loan repayments at £0.0313 (YA Global)
- 10,000,000 Ordinary Fully Paid Shares issued in lieu of cash for consultancy and corporate advisory fees
- 40,000,000 unlisted options ($0.05, 31 January 2016) in facilitation, introduction and corporate advisory fees.
Application will be made for the 58,613,780 new shares to be admitted to trading on the ASX and AIM. Trading in the new shares is expected to commence on or around 31 January 2013.
Following the issue of these securities, the total number of securities on issue are as follows:
2,505,371,560 Ordinary Fully Paid Shares (RRS)
855,166 Unlisted Options (£0.04, 30 June 2015)
7,058,824 Unlisted Options (£0.17p, 30 April 2016)
5,180,000 Unlisted Options (£0.075p, 31 January 2017)
9,000,000 Unlisted Options (£0.125p, 31 March 2015)
17,921,146 Class B Performance Shares
15,708,801 Unlisted Options (£0.0615, 19 October 2015)
32,275,862 Unlisted Options (£0.05075, 30 November 2015)
40,000,000 Unlisted Options (A$0.05, 31 January 2016)
Peter Landau Executive Director
Range Resources Limited Peter Landau Tel : +61 (8) 9488 5220 Em: firstname.lastname@example.org
RFC Ambrian Limited (Nominated Advisor) Old Park Lane Capital (Joint Broker) Stuart Laing Michael Parnes Tel: +61 (8) 9480 2500 Tel: +44 (0) 207 493 8188
Fox-Davies Capital Limited GMP Securities Europe LLP (Joint Broker) Daniel Fox-Davies / Richard Hail James Pope / Chris Beltgens Tel: +44 (0) 203 463 5000 Tel: +44 (0) 207 647 2800
PPR (Australia) David Tasker Tel: +61 (8) 9388 0944
Range Resources Limited is a dual listed (ASX:RRS; AIM:RRL) oil & gas exploration company with oil & gas interests in the frontier state of Puntland, Somalia, the Republic of Georgia, Texas, USA, Trinidad and Colombia.
- In Trinidad Range holds a 100% interest in holding companies with three onshore production licenses and fully operational drilling subsidiary. Independently assessed Proved (P1) reserves in place of 17.5 MMbls with 25.2 MMbls of proved, probable and possible (3P) reserves and an additional 81 MMbls of unrisked best estimate prospective resources.
- In the Republic of Georgia, Range holds a 40% farm-in interest in onshore blocks VIa and VIb, covering approx. 7,000sq.km. Range completed a 410km 2D seismic program with independent consultants RPS Energy identifying 68 potential structures containing an estimated 2 billion barrels of undiscovered oil-in-place (on a mean 100% basis) with the first (Mukhiani-1) exploration well having spudded in July in 2011. The Company is focussing on a revised development strategy that will focus on low-cost, shallow appraisal drilling of the contingent resources around the Tkibuli-Shaori ("Tkibuli") coal deposit, which straddles the central sections of the Company's two blocks.
- In Puntland, Range holds a 20% working interest in two licenses encompassing the highly prospective Dharoor and Nugaal valleys. The operator and 60% interest holder, Horn Petroleum Corp. (TSXV:HRN) has completed two exploration wells and will continue with a further seismic and well program
over the next 12-18 months.
- Range holds a 25% interest in the initial Smith #1 well and a 20% interest in further wells on the North Chapman Ranch project, Texas. The project area encompasses approximately 1,680 acres in one of the most prolific oil and gas producing trends in the State of Texas. Independently assessed 3P reserves in place (on a 100% basis) of 228 Bcf of natural gas, 18 mmbbls of oil and 17 mmbbls of natural gas liquids.
- Range holds a 21.75% interest in the East Texas Cotton Valley Prospect in Red River County, Texas, USA, where the prospect's project area encompasses approximately 1,570 acres encompassing a recent oil discovery. The prospect has independently assessed 3P reserves in place (on a 100% basis) of 3.3mmbbls of oil.
- Range is earning a 65% (option to move to 75%) interest in the highly prospective PUT 6 and PUT 7 licences in Putumayo Basin in Southern Colombia. The Company will undertake a 350km2 3D seismic program across the two licences and drill one well per licence, as well as looking to re-enter a previously suspended well that had a significant historical reserve estimate.
Table of Reserves and Resources
Detailed below are the estimated reserves for the Range project portfolio.
All figures in Gross Oil Reserves Net Attributable MMboe
Range's Project 1P 2P 3P Interest 1P 2P 3P Operator Oil & NGL Texas - NCR * 16.4 25.2 35.3 20-25% 2.2 3.4 4.8 Western Gulf Texas - ETCV 1.0 1.6 3.3 22% 0.2 0.3 0.6 Crest Resources Trinidad 17.5 20.2 25.2 100% 17.5 20.2 25.2 Range Total Oil & Liquids 34.9 47.0 63.8 19.9 21.3 28.9 Gas Reserves Texas - NCR * 106.0 162.7 228 20-25% 11.7 18.1 25.4 Western Gulf Total Gas Reserves 106.0 162.7 228 11.7 18.1 25.4
* Reserves attributable to Range's interest in the North Chapman Ranch asset, which are net of government and overriding royalties as described in the Forrest Garb report.
Detailed below are the estimated resources and oil-in-place delineated across Range's portfolio of project interests.
All figures in Gross Oil Resources Net Attributable MMboe
Range's Project Low Best/ High Interest Low Best/ High Operator
Mean Mean Prospective Resources Trinidad 8.1 40.5 81.0 100% 8.1 40.5 81.0 Range Total Prospective 8.1 40.5 81.0 8.1 40.5 81.0 Resources Undiscovered Oil-In-Place Puntland - 16,000 - 20% - 3,200 - Horn Petroleum Georgia - 2,045 - 40% - 818 - Strait Oil & Gas Colombia - 7.8 - 65-75% - 5.1 - 5.8 - Petro Caribbean
All of the technical information, including information in relation to reserves and resources that is contained in this document has been reviewed internally by the Company's technical consultant, Mr Mark Patterson. Mr Patterson is a geophysicist who is a suitably qualified person with over 25 years' experience in assessing hydrocarbon reserves and has reviewed the release and consents to the inclusion of the technical information.
The reserves estimates for the 3 Trinidad blocks and update reserves estimates for the North Chapman Ranch Project and East Texas Cotton Valley referred above have been formulated by Forrest A. Garb & Associates, Inc. (FGA). FGA is an international petroleum engineering and geologic consulting firm staffed by experienced engineers and geologists. Collectively FGA staff has more than a century of worldâ€wide experience. FGA have consented in writing to the reference to them in this announcement and to the estimates of oil and natural gas liquids provided. The definitions for oil and gas reserves are in accordance with SEC Regulation Sâ€X an in accordance with the guidelines of the Society of Petroleum Engineers ("SPE"). The SPE Reserve definitions can be found on the SPE website at spe.org.
RPS Group is an International Petroleum Consulting Firm with offices worldwide, who specialise in the evaluation of resources, and have consented to the information with regards to the Company's Georgian interests in the form and context that they appear. These estimates were formulated in accordance with the guidelines of the Society of Petroleum Engineers ("SPE").
The prospective resource estimates for the two Dharoor Valley prospects are internal estimates reported by Africa Oil Corp, the operator of the joint venture, which are based on volumetric and related assessments by Gaffney, Cline & Associates.
In granting its consent to the public disclosure of this press release with respect to the Company's Trinidad operations, Petrotrin makes no representation or warranty as to the adequacy or accuracy of its contents and disclaims any liability that may arise because of reliance on it.
The Contingent Resource estimate for CBM gas at the Tkibuli project is sourced from the publically available references to a report by Advanced Resources International's ("ARI") report in 2009: CMM and CBM development in the Tkibuli-Shaori Region, Georgia. Advanced Resources International, Inc., 2009. Prepared for GIG/Saknakhshiri and U.S. Trade and Development Agency. - .globalmethane.org/documents/toolsres_coal_overview_ch13.pdf. Range's technical consultants have not yet reviewed the details of ARI's resource estimate and the reliability of this estimate and its compliance with the SPE reporting guidelines or other standard is uncertain. Range and its JV partners will be seeking to confirm this resource estimate, and seek to define reserves, through its appraisal program and review of historical data during the next 12 months.
Reserve information on the Putumayo 1 Well published by Ecopetrol 1987.
SPE Definitions for Proved, Probable, Possible Reserves and Prospective Resources
Proved Reserves are those quantities of petroleum, which by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be commercially recoverable, from a given date forward, from known reservoirs and under defined economic conditions, operating methods, and government regulations.
Probable Reserves are those additional Reserves which analysis of geoscience and engineering data indicate are less likely to be recovered than Proved Reserves but more certain to be recovered than Possible Reserves.
Possible Reserves are those additional reserves which analysis of geoscience and engineering data indicate are less likely to be recoverable than Probable Reserves.
1P refers to Proved Reserves, 2P refers to Proved plus Probable Reserves and 3P refers to Proved plus Probable plus Possible Reserves.
Prospective Resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from undiscovered accumulations by application of future development projects. Prospective Resources have both an associated chance of discovery and a chance of development. Prospective Resources are further subdivided in accordance with the level of certainty associated with recoverable estimates assuming their discovery and development and may be sub-classified based on project maturity.
Contingent Resources are those quantities of hydrocarbons which are estimated, on a given date, to be potentially recoverable from known accumulations, but which are not currently considered to be commercially recoverable.
Undiscovered Oil-In-Place is that quantity of oil which is estimated, on a given date, to be contained in accumulations yet to be discovered. The estimated potentially recoverable portion of such accumulations is classified as Prospective Resources, as defined above.
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