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  • Range Resources Acquiring Stake In Citation Resources, Gears Up For Busy 2013 0 comments
    Jan 24, 2013 8:37 PM

    Range Resources (ASX: RRS) is acquiring a 19.9% strategic stake in Citation Resources (ASX: CTR) as it prepares for a busy year targeting an increase in production to 6,000 barrels per day of oil by the second half of 2014.

    The stake acquisition grants the company non-operating exposure to two oil and gas exploration and development blocks in Guatemala that have known reserves and significant short term upside potential.

    It also provides a potential spin-off vehicle for Range's Puntland assets given its operational and financial focus on its Trinidad assets, where it is working to have all six drill rigs running to increase production and cash flow.

    "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," executive director Peter Landau said.

    "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."

    Transaction details and background

    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 at A$0.02 with a 1 for 2 free attaching listed Citation option for a total of A$2 million.

    Citation holds a farm in right to acquire a 70% interest in Latin American Resources (LAR), which holds an 80‐100% interest in Block 1‐2005 and Block 6‐93 in the South Peten Basin in Guatemala.

    Additionally, Range has acquired a direct 10% stake in LAR for A$2 million, which is financed carried through the first US$25 million spent on the project.

    These blocks have proved and probable reserves of 2.3 million barrels of oil with exploration upside potential. Between 0.45 million and 0.6 million is attributable to Range's stake in both Citation and LAR.

    LAR is currently carrying out acid washes on the Atzam-4 well as part of its flow testing program. This will be followed by the spudding of the Atzam-5 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 1,200bpd of oil.

    Recent mapping of the Atzam structure using existing data from previous operators and incorporating reservoir data acquired since production initiated in December 2007 indicates the possibility of a structure of comparable size and orientation to that of the existing Rubelsanto field in Guatemala.

    Rubelsanto has produced more than 30 million barrels of oil since 1976 and is still producing more than 1,000bpd of oil.

    In addition to the Atzam structures on Block 1‐2005, the Tortugas structure is a suspended oil field that was discovered by a minerals explorer looking for sulphur.

    2013 outlook

    Range is also looking forward to a prospective and busy 2013 across its three onshore licences in Trinidad where it has an inventory of more than 40 wells yet to be drilled.

    It has also received final revised licence agreements that will see an initial reduction in the enhanced royalty it currently pays.

    Landau noted that Trinidad was fully funded through existing facilities, the sale of its Texas assets as well as reserve based lending options that it has available.

    "With Range close to finalising the GIG joint venture in Georgia, the financial and operational focus will be firmly placed on Trinidad and our target of 6,000bpd of oil by the second half of 2014 based on known PDP and PUD reserves," he added.

    "The revised fiscal terms will only serve to further benefit increased production over the coming year as production ramp up moves into full swing."

    Revised License Agreements

    The revised terms will see an improvement in net back per barrel of oil produced of US$40 per barrel before tax at production rates of 1,000bpd and US$50 per barrel at 2,000bpd.

    This is based on a US$90 per barrel price and similar operating expenditure levels.

    Only minor administrative items relating to market communications remain to be resolved.

    Trinidad - Lower Forest

    Development of the Lower Forest Formation continues with the QUN 139 well drilling ahead at 950 feet with a revised target depth of 1,300 feet having encountered about 80 feet of good quality oil sands to 945 feet.

    The QUN 139 location is contiguous to producing wells QUN 119 and QUN 129 which achieved initial oil production rates of 129bpd and 138bpd respectively, and are still producing under natural pressure.

    Range will also shortly spud the QUN 140 well that is contiguous and up‐dip to the recently drilled QUN 138 well, which had intersected 100 feet of net oil sands across a number of horizons.

    Trinidad - Deeper Formations

    Range has drilled its QUN 135 well to its planned depth of 3,500 feet after experiencing operational delays.

    Results indicate the well may have penetrated a new Middle Cruse pay zone with logging identifying more than 80 feet of net oil pay in the Lower Forest, Upper Cruse and Middle Cruse formations.

    Based on oil shows while drilling and induction logs indicating that the well reached its planned total depth in the top of a Middle Cruse oil zone, the 135 well will now be deepened to confirm what may represent a previously undiscovered reservoir in the Middle Cruse section.

    Following deepening of the well and evaluation of open hole logs, the Company will determine which of the multiple oil zones present is the best candidate for initial completion.

    The company is also looking at re‐entering four Lower Forest wells that have experienced comingling of oil and water sands.

    Remedial work will be performed on these wells with a small work‐over rig, with additional perforations to be added in two of the four wells. This is expected to improve the performance of these wells and add further to production.

    The MD 248 well has reached 4,000 feet. and will continue to drill towards the target depth of 6,500 feet to test the Lower Cruse formation.

    Morne Diablo Waterflood Project

    The shallow Forest water flood project on the Morne Diablo licence in Trinidad is currently being simulated/modelled with completion estimated for mid‐February followed soon thereafter by a presentation and application for approval to the regulatory authorities.

    Development of the project is still forecast to start in mid-2013.

    Beach Marcelle Licence

    Range has finalised the Environmental Impact Assessment (NYSEMKT:EIA) to be submitted to the Environmental Management Authority (NYSEMKT:EMA) in application for a Certificate of Environmental Clearance (CEC) to drill up to 40 wells and conduct the water flood program.

    The EMA is expected to take up to three months to review and grant environmental approval. Final approvals will then be sought from the regulatory authorities.

    Once all permits and approvals are in place, Range will start preparation for the 40 well work program and water flood.

    Range has also applied for a separate CEC to deepen six wells in the licence. Once this is approved, it will mobilised a medium capability rig to start the drilling program.

    Proactive Investors Australia is the market leader in producing news, articles and research reports on ASX "Small and Mid-cap" stocks with distribution in Australia, UK, North America and Hong Kong / China.

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