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Range Resources: Fox Davies Recommends BUY With A 25p (A$0.38) Price Target

Range Resources (ASX: RRS) continues to be the subject of a Buy Recommendation with a price target of 25p (A$0.38) from Fox-Davies.

This comes on the company's technical team identifying the oil prospectivity of the Middle Cruse Formation and its preparation to test it. Production growth provided by the recompletion of the existing well stock also bodes well for the company.

The following is an extract from the report.

Quinam Wells Confirm Prospectivity

Range Resources has reported that the deepening of the Quinam 135 well (QUN 135), down to 3,800ft has resulted in a discovery in the Middle Cruse formation between 3,490 - 3,540ft with 50ft of net pay.

Initial work suggests that the horizon has excellent porosities in the 21 - 23% range; permeability was not disclosed.

The company's seismic and well control in the area suggests that the formation could extend over a wide area.

Elsewhere, the QUN-139 has reportedly intersected 70ft of good quality oil sands at 1,300ft, as well as a further 190ft of lower resistive (on the logs) potentially oil bearing sands in the Lower Forest formation.

Once testing has been completed on these intervals, we will revisit our valuation to assess the impact that it may have.

Range currently holds net proved and probable oil and liquids reserves of 21.3 million barrels of oil equivalent in Trinidad.

Progress in Production Too

While new discoveries have a potentially explosive impact on the valuation, the company's drilling programme has been no less successful on the development drilling front, with QUN-138 brought on at 85 barrels per day of oil.

While singly this will not move the Company's needle, once you compare it with the number of wells in the inventory and the relatively modest costs involved (about $50 million), the wells will bring all important cash flow.

All Looking Good for the Start of the Year - BUY & 25p

At our last update, we highlighted that the Company would be looking to target growth from its increasingly core Latin American and Caribbean operations, most notably Trinidad.

This update underlines the potential upside in Trinidad, as well as the extent to which it will also generate cash flow.

Following this update, we are reiterating our BUY Recommendation and 25p Target Price.

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