Range Resources (ASX:RRS, LON:RRL) has been reviewed by UK broker Fox Davies in a Flash Note and likes what it sees, opining the company is increasing its exposure to Atzam which is a welcome lift for Range. (Following is a summary of its views).
Range will gain further exposure to near to medium-term cash generating assets, which in turn will support its development of assets elsewhere in its portfolio.
With a full field reserves upgrade from 2.4mm bbl likely, we believe that the timely investment in Citation will represent a substantial increase in value for the Company.
In this news:
- Range to hold 20% Project Interest and 19.9% Company Interest (net attributable interest 32%). Following the decision to drill the Atzam #5 development well, Range has executed a debt conversion agreement with Citation, under which loans and interest owed to Range will be converted into direct equity in the Company and the transfer of a 10% working interest in LAR.
- Following the conversion of the loans, which will be completed in a two stage process (based on Citation's future capital needs), Range will hold a 19.9% shareholding in Citation and a 20% shareholding in LAR funded through to the next stage of development;
- Atzam #4 continues to produce between 130-140 bopd on restricted 8/64ths choke; Nearly 5,000 barrels of oil produced by Atzam #4 to date;
- Finalising operational plans for two well re-entries and 6 potential new wells on the Tortugas Salt Dome structure for late 2013/early 2014. Re-entries expected to produce between 200-300 bopd per well;
- Updated reserve report on Atzam #4 well due shortly - expected upgrade to the current Probable Reserve estimate of 2.3m bbls;
- Spudding Atzam #5 development well expected in September; and
- Following success of flow testing of Atzam #4 in excess of 1,000 bopd, decision to proceed with Atzam #5 triggers milestone share issues.
Fox Davies has estimated a Net Asset Value (NAV) for Range of $945 million or 22 pence per share.
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