Range Resources (ASX: RRS) has reached an in principle agreement to farm-in to over 280,000 acres of both onshore and offshore oil and gas acreage in Trinidad held by Canada listed Niko Resources (TSX: NKO).
Notably, this will give the company access to acreage that is on trend with its existing exploration, development and secondary recovery projects.
The company will earn 50% of Niko's existing interests in the deep and shallow rights of the Guayaguayare Block, increasing its gross acreage footprint in the country by about 17 times.
Niko currently holds shallow and deep Production Sharing Contracts for 65% of the onshore portion and 80% of the offshore portion of the license area with the Guayaguayare Block comprising 280,170 shallow acres and 293,999 deep acres.
Trinidad's State Owned petroleum company, Petrotrin, holds the remaining balance of the interests (35% onshore and 20% offshore).
Range will earn 50% of Niko's existing interests in the deep and shallow rights covering both onshore and offshore areas, with the consortium to drill two onshore wells: one shallow onshore well to a maximum of 5,000 feet and one deep onshore well to a minimum of 5,000 feet.
In the event of a discovery from either of the two initial wells, the consortium will look to drill an initial appraisal well. The first well is targeted to spud in early 2014.
"We are very enthusiastic about the opportunity to work with the Niko team on this venture. The new block gives Range vast exposure to both onshore and offshore potential and creates excellent synergy between our three existing blocks and Guayaguayare," Range executive director Peter Landau said,
"The Guayaguayare Block represents a perfect opportunity for Range to add highly prospective acreage on trend with its existing exploration, development and secondary recovery projects, while leveraging its fleet of drilling and production rigs and operating experience within the region.
"Given our ongoing production operations in South Quarry, Morne Diablo, and Beach Marcelle, Range is uniquely positioned to operate future discoveries, whether on or offshore, which in turn should result in appreciable synergy and lower operating costs. "
Range will fund the two onshore wells and the potential initial appraisal well at its sole expense, and will split costs 50/50 with Niko in the offshore well as well as any other costs going forward.
Under the agreement, certain payments will be made to Niko upon achievement of commercial production from any discoveries.
Range will use its own drilling rigs and personnel for the farm‐in, and is in advanced discussions with a leading International Drilling and Oil‐field Services Provider to complement existing infrastructure and accelerate development.
The Guayaguayare Block covers both onshore and offshore portions of known, productive trends along the southern coast of Trinidad.
It is situated along trend with the most prolific oil and gas fields in Trinidad and lies in the transition area between the transpressional Southern basin and the extensional Columbus basin.
A regional wrench fault, and extension of the Los Bajos fault, cuts through the onshore to offshore transition zone. Traps associated with this fault produce oil in Southwest Trinidad and off the East Coast from Upper Miocene / Pliocene Sands.
The Block surrounds Range's Beach Marcelle Field, and extends south to the limits of Trinidad's territorial waters.
In addition to proven Tertiary‐age exploration targets, the block is believed to hold significant potential in the Cretaceous section, which has been successfully developed in the Eastern Venezuelan basin.
There are four prospective onshore fields within the Guayaguayare block, each considered to have significant potential for oil, whilst the offshore structural complex is believed to have significant potential for large gas discoveries with several large structures mapped.
Niko and previous operators have acquired and processed 217 square kilometres of 3D seismic on the onshore acreage as well as 277 square kilometres of 3D seismic in 2011 on the offshore acreage.
The latter has been merged with the reprocessed data from two 3D marine surveys from 1997 and 1990 to cover a total area of 836 square kilometres.
Range is in advanced discussions with a leading International Drilling and Oil‐field Services Provider, with a view to maximise the development of current acreage and potential new licenses, through bringing in additional rigs, infrastructure and manpower to Trinidad.
The partnership will complement the Company's existing drilling fleet of 6 rigs and over 250 employees, as the Company looks to rapidly ramp up activities in Trinidad through expansion and organic growth.
With plans to utilising its reserve based lending facility for its expanded activities in Trinidad and potentially in Russia (with the proposed International Petroleum merger), Range has increased to US$100 million its previously announced US$35 million reserve based debt financing through Meridian SEZC.
"We are also extremely excited about our potential partnership with a leading International Drilling and Oil‐Field Services contractor, which fits well with our increased operations in Trinidad, and complements our existing infrastructure, by providing additional rigs, infrastructure and personnel," Landau added.
"With the increased reserve based lending facility almost complete along with the Texas sale, we are fully set for expansive growth in operations and expertise in a country with immense hydrocarbon potential."
Range Resources has kept up the drilling momentum in Trinidad with new wells being brought into production targeting the Lower Forest, Middle Cruse and Lower Cruse formations.
Recent wells include QUN 142 in the Lower Forest that is flowing at a rate of 75 barrels per day of oil and Upper Cruse well QUN 135, which is expected to produce 150bpd of oil.
Field production is expected to exceed 1,200bpd in the near-term.
The company has also received approvals for a further five well locations at the Morne Diablo licence, which is part of a larger 100+ million barrel of oil production trend associated with regional Los Bajos fault.
It has identified more than 100 new well locations here while shallow drilling to date has added 40-60 more shallow locations.
In addition, the company expects to commence waterflood operations this quarter that extend field life to more than 10 years by accessing a further 1.8MMbbl of oil.
The farm-in opens up a large acreage position adjacent to Range Resources' existing acreage, where it has been carrying out an aggressive drilling campaign with its own rigs, offering up significant opportunities to increase production and reserves.
This ties in well with the company's moves to bring in a leading drilling and oil field services provider as well as the expansion reserve based lending facility to US$100 million, which taken together highlights its Trinidad operations as one of its core focus areas even after the International Petroleum merger is completed.
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