Range Resources (ASX: RRS, AIM:RRL) has received a vote of confidence with a Hong Kong based private institutional investor subscribing for US$12 million worth of shares priced at £0.01 (A$0.0179) per Share.
Notably, this represents a premium of approximately 49% to the mid-market share price at the close of business on AIM on 14 May 2014.
Proceeds from the issue of about 712 million shares will be used to repay existing debt, including convertible instruments that have diluted the company's equity over recent months.
Range had debt of about US$10.5 million as of 30 April 2014.
The remainder of the funds will be used for general working capital.
"The investor is subscribing for shares at a significant premium to the market price which demonstrates their confidence in the new management team, the underlying quality of our assets and the newly focused strategy at Range," chief executive officer Rory Scott Russell said.
"The US$12 million Subscription will allow us to refinance the expensive and dilutionary corporate debt and provide working capital as we now move forward with Range's operational and long term financing objectives, particularly in Trinidad."
The US$12 million subscription will consist of two equal tranches.
In each tranche the shares will be subscribed at a price of £0.01 per share, which equals approximately 356 million shares.
The subscription proceeds are agreed in U.S. dollars and given potential exchange rate fluctuations the final number of shares to be issued in each tranche may vary.
While funds from both tranches are expected to be received by 30 May 2014, the second tranche is repayable if shareholder approval is not obtained within 60 days of signing the Subscription Agreement.
Range will also issue about 237 million unlisted warrants to the investor, or about 1 warrant for every 3 shares subscribed, that mature four years after the date of issue.
Half of these have an exercise price of £0.01 while the remainder have an exercise price of £0.02.
As part of the Subscription Agreement, following completion of tranche one, the investor can nominate up to two non-executive directors to Range's board and shall retain this ability for so long as it holds 8% or more of the company's shares on issue.
Range had produced an average of 529 barrels of oil per day during the March 2014 quarter from its operations in Trinidad.
It had successfully drilled and completed four new wells and is continuing maintenance work on its remaining two heavy drilling rigs.
Approval has been received from Petrotrin for its Beach Marcelle waterflood program with further regulatory approvals pending. This has the potential to substantially increase oil production.
The company had also completed a MoU to form a strategic alliance with China's LandOcean Energy Services for the development of international oil and gas projects.
This significantly increased Range's technical capabilities while also providing additional options for the funding of future projects.
Range plans to double oil production in 2014 and drill two exploration wells.
Its Trinidad operations have Proved and Probable oil reserves of 20.2 million barrels of oil.
The US$12 million share subscription at a 49% premium is a strong show of confidence by the Hong Kong-based private institutional investor in Range Resources, its management team and its assets.
It also allows the company to repay its debts, which have undoubtedly put a ceiling on its share price.
With further development drilling and other efforts designed to double its oil production this year as well as the expected drilling of two exploration wells in Trinidad, Range is positioned to grow.
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