TRINIDAD 2

Range Resources

AUDITED ANNUAL RESULTS FOR THE 12 MONTHS ENDED 30 JUNE 2018

Range, an international company with oil and gas projects and oilfield service businesses in Trinidad and Indonesia, today releases its Annual Report for the 12 months ended 30 June 2018. A copy of the full Annual Report is available on the Company’s website www.rangeresources.co.uk and also the Australian Securities Exchange website www.asx.com.au (ASX code: RRS).

Highlights

  •  Increase in production: 25% production growth in Trinidad during the year (net average production of 650 bopd);
  •  Continued drilling and workover programme in Trinidad: two new wells drilled, and over 250 workovers competed;
  •  Encouraging levels of production from waterflood schemes: average production for the period of 200 bopd;
  •  Two new acquisitions completed: oil and gas project in Indonesia and an oilfield services business in Trinidad;
  •  3rd party contract wins for oilfield services business;
  •  Indonesia operations initiated: field operations commenced; and
  •  Financial:
    • o 55% increase in revenues to US$13.1 million (2017: US$8.4 million);
    • o 43% improvement in OPEX per barrel for Trinidad upstream operations to US$26/barrel (2017: US$46/barrel);
    • o 24% improvement in EBITDAX with loss of US$6.0 million for the year (2017: loss of US$7.9 million).

Range’s Chairman, Zhiwei Gu, commented:

“After another busy period, it is our pleasure to be reporting on significant operational and financial improvements delivered by the team. Looking ahead, we remain focused on achieving long-term profitability and positive operating cashflow through growth in revenues and production whilst maintaining a tight control over costs. On behalf of the Board, I would like to express our gratitude to our stakeholders and staff for their continued commitment and hard work to maximise the value of our high-quality assets. We look forward to reporting on our progress during the year ahead.”

Operational summary

During the year, the Company’s focus has been on growing production from its Trinidad assets with 25% increase in production achieved during the period (total production of 237,352 barrels and average of 650 bopd net to Range). Production growth was achieved as a result of the ongoing work programme, which included drilling of two new development wells, workovers on 250 wells, and production growth from the Beach Marcelle waterflood project. The Company also completed an upgrade to its oil handling and storage facilities at the Beach Marcelle field to accommodate production growth at the field.

In addition, the Company has been focused on integrating the newly acquired oilfield services business into the Group. The acquisition is particularly significant as it allows Range to have greater control over operating and drilling costs in Trinidad and the benefits of this acquisition have already been seen with the total cost for drilling the GY684 well in late 2017 being over 1/3rd cheaper than the cost of drilling the comparable GY681 well drilled prior to the acquisition. RRDSL has also been actively marketing its services to 3rdparties and has generated revenues of US$0.43 million.

In Indonesia, two offices and a services company have been established. The operations at the Perlak field commenced in May 2018, with reactivations on two wells underway. The initial production and well performance are below the original expectations, however work is still underway to establish stable production.

Range also provided an update on its reserves and contingent resources for Trinidad and Indonesia for the financial year ended 30 June 2018. The total reserves (net to Range) are estimated as follows: 1P of 9.3 MMbbl, 2P of 15.2 MMbbl, and 3P of 21.9 MMbbl. The total contingent resources (net to Range) are estimated as follows: 1C of 5.8 MMboe, 2C of 12.9 MMboe and 3C of 40.7 MMboe. The full summary of the reserves and resources statement is included with this announcement.

Financial summary

Range reports a significant improvement in the financial performance for the year with a materially reduced loss after tax of US$17.5 million compared to a loss in the prior year of US$54.4 million. Whilst still disappointing to be reporting a loss, the Company believes there has been positive progress seen in several key areas, including:

  •  Revenues: 55% higher at US$13.1 million (prior year US$8.4 million) with 97% of revenues coming from upstream operations;
  •  Realised oil price: 25% higher at US$55.40/barrel (prior year: US$44.27/barrel);
  •  First revenues generated by RRDSL from 3rd party drilling work;
  •  General and administration expenses: 21% lower at US$4.1 million (prior year US$5.2 million). This includes one-off costs of US$0.75 million related to the AIM listing process completed during the year, therefore on an underlying basis the spend was lower at US$3.3 million (36% reduction from prior year); and
  •  Operating expenses for Trinidad upstream operations of US$6.2 million, representing US$26/barrel, which is a 43% improvement on prior year (prior year: US$46/barrel).

During the year, Range continued to invest in growing the asset base of the Group with US$3.9 million capital expenditure in Trinidad in drilling, waterflood and workover activity. In addition to the activity undertaken at the core Trinidad fields, the Group also completed two important acquisitions. With the Perlak field in Indonesia, Range has invested approximately US$3.8 million during the year to firstly acquire its interest and then to fund its share of the operating costs during the first year of operation.

It is important to highlight that this is the first financial year since 2013 where there has been no impairment charge recognised and the Company continues to see significant value in the Trinidad asset base which can be released in the years ahead as production growth is delivered.

Cash management remains a critical area of focus and at the period end the Group had cash on hand and other liquid assets of US$6.7 million (including a US$2.8 million refundable deposit). Post-reporting period, Range completed an equity placement raising gross proceeds of GBP 1 million.

The acquisition of RRDSL has resulted in an increase in the level of net borrowings and other interest-bearing payables to US$87 million (2017: US$61.9 million). Range continues to benefit from highly competitive terms offered by LandOcean across the various funding arrangements with no security provided over any assets, no financial covenants or restrictive controls in place, no amortisation due until maturity and a competitive interest rate of between 6-8% pa. The first repayment is due at the end of November 2019 and Range has held initial discussions with LandOcean regarding potential refinancing options. The Company will be considering the most appropriate means to repay or refinance the balance during the coming months.

Outlook

The upcoming work programme in Trinidad is principally focused on completing the upgrades to sales infrastructure at the Beach Marcelle field. Once this work has been completed, Range will be in a position to grow production through new drilling activity and other field work. Regrettably, the infrastructure upgrade programme is running behind the original schedule and Range currently anticipates this will not be fully completed until late 2018 / early 2019.

Once most of the upgrades are completed, the Company can commence drilling a new development well at the Beach Marcelle field (the GY684 400’NE well). Range has already commenced initial planning work for this well and received the relevant government approvals with the intention to commence drilling operations in December 2018. It is currently expected that the second development well will be drilled in 2019. As part of the ongoing optimization programme, the Company will also be undertaking workovers on approximately 50 wells.

In addition, the Company is planning to undertake expansion of the Beach Marcelle waterflood project to incorporate more producer and injector wells. The programme is expected to deliver enhanced production during early 2019. The Company has already commenced data collection on some of the selected wells as part of expansion programme.

Range is also acquiring a new geological tool which will be instrumental in developing an extensive, shallow well drilling programme initially focused on the Morne Diablo field. This new tool is an enhanced version of the stratagem tool which was used very successfully by Range in the past and Range expects to receive the new tool later this year.

The delay to the infrastructure programme and the knock-on delay to drilling will clearly have an impact upon production growth and Range no longer expects to achieve its previous target of 1,000 bopd by the end of 2018. Range remains focused on seeking sustainable production growth from its Trinidad operations but given the anticipated timeline for infrastructure works and drilling, it will be into 2019 until that growth can be achieved.

In Indonesia, Range intends to undertake G&G studies to improve reservoir understanding and to assist in establishing a longer-term development plan for the field. Given that the results from the reactivation programme on two wells are below the original expectations, the Company does not believe the previous production guidance from Indonesian project of 200 bopd (gross) by the end of 2018 is achievable.

RRDSL has got off to an encouraging start to the FY2019 with 3rd party turnover year to date already in excess of the full year results for 2018. The focus for RRDSL remains securing 3rd party work and the Company is encouraged by the pipeline of drilling activity anticipated across both Trinidad and the wider Caribbean/Latin America region.

The Company will continue to provide updates on the progress of its operations as appropriate.

Reserves & resources and financial statements

Included with this announcement is a summary of Range’s Reserves and Resources statement and Full Year Audited Annual Accounts for the year ended 30 June 2018 as extracted from the Annual Report, being:

  •  Reserves and resources statement;
  •  Consolidated Statement of Profit or Loss and Other Comprehensive Income;
  •  Consolidated Statement of Financial Position;
  •  Consolidated Statement of Changes in Equity;
  •  Consolidated Statement of Cashflows; and
  •  Notes to Financial Statements.

Contact Details

  1. Range Resources Limited
  2. Evgenia Bezruchko (Group Corporate Development Manager)
  3. e. admin@rangeresources.co.uk
  4. t. +44 (0)20 3865 8430
  5. Cantor Fitzgerald Europe (Nominated Adviser and Broker)
  6. David Porter / Nick Tulloch (Corporate Finance)
  7. t. +44 (0)20 7894 7000

Qualified person review

In accordance with AIM Rules, Guidance for Mining and Oil & Gas Companies, the information contained in this announcement has been reviewed and approved by Mr Lubing Liu. Mr Liu is a suitably qualified person with 23 years of industry experience. Mr Liu is a full-time employee of Range and holds a role of a Chief Operating Officer and Trinidad General Manager. He holds a BSc in Petroleum Engineering from the Southwest Petroleum University, China and is a member of the SPE (Society of Petroleum Engineers). Mr Liu is qualified in accordance with ASX listing rule 5.41 and consents to the use of petroleum reserve and resource figures in the form and context in which they appear in this statement.

Reserves

As at 30 June 2018, Range’s net proved and probable reserves (2P) are assessed to be 15.2 million barrels of oil (MMbbl). The key factors attributing to the revision in reserves are:

  •  Production during the period; and
  •  Amended timing for waterflood activity and drilling.
  1.  The reserve figures (1P, 2P and 3P) include reserves associated with the Company’s Morne Diablo, South Quarry and Beach Marcelle licences in Trinidad. Range’s net interest in all three fields is 100%.
  2.  Competent Persons Report (“CPR”) prepared by Rockflow Resources Ltd, effective 30 June 2017 was used as a basis for estimation of the reserve figures.
  3.  Range’s Morne Diablo and South Quarry fields are operated under farm-out agreements, with rights to production net of Trinidad government royalties, overriding royalties, and production taxes.
  4.  Range’s Beach Marcelle field is operated under the terms of an Incremental Production Service Contract, entitling Range to a defined portion of the future revenue stream. No oil and gas reserves are owned by Range.

Contingent resources

  1. As at 30 June 2018, Range’s net contingent resources 2C (P50) are assessed to be 12.9 million barrels of oil equivalent (MMboe). The key factor attributing to the increase in contingent resources is the inclusion of the Indonesia assets.1. The Trinidad resource figures (1C, 2C and 3C) include contingent resources associated with the Company’s Morne Diablo, South Quarry and Beach Marcelle licences in Trinidad. Range’s net interest in all three fields is 100%.
  2.  The Trinidad resource figures are based on the CPR prepared by Rockflow Resources Ltd, effective 30 June 2017.
  3.  The Indonesia resource figures (1C, 2C and 3C) include contingent resources associated with the Company’s interest in the Perlak field. Range’s net interest is 23%.
  4.  The Indonesia resource figures are based on the CPR prepared by LEAP Energy Partners Sdn. Bhd, effective 1 August 2017.
  5.  The interest in the Indonesia project was acquired during FY2018, therefore contingent resources for FY2017 do not include Indonesia resources.
  6.  The conversion factor used for converting gas to oil equivalent volumes is 6,000 scf to 1 boe.

Exploration assets (continued)

(i) Non-controlling interest is recognised at fair value. All the other expenses in relation to Indonesia are expensed in exploration costs in the Income Statement.

(ii) Trinidad:   At 30 June 2018, US$667,124 (30 June 2017: US$632,176) capitalised exploration and evaluation expenditure relates to the interests of the Group in the Guayaguayare and St Mary’s Blocks in Trinidad.

US – Heritage Petroleum
New­ly-formed state-owned Her­itage Pe­tro­le­um Com­pa­ny Lim­it­ed, one of two new en­ti­ties re­plac­ing Petrotrin, shares a sim­i­lar name to a pe­tro­le­um com­pa­ny in the Unit­ed States. Her­itage Pe­tro­le­um LLC (Lim­it­ed Li­a­bil­i­ty Com­pa­ny) op­er­ates as one of the largest in­de­pen­dent pe­tro­le­um dis­trib­u­tors in south­ern In­di­ana.

It of­fers a “range of ser­vices in­clud­ing fu­el man­age­ment and SMAR­Tank mon­i­tor­ing, Pa­cif­ic Pride com­mer­cial fu­elling, pipeline ser­vices, and emer­gency fu­el man­age­ment ser­vices. It op­er­ates as a “full-ser­vice fu­el trans­porter and provider of fu­el prod­ucts, in­clud­ing pe­tro­le­um fu­els and al­ter­na­tive fu­els, oils, and lu­bri­cants. It al­so of­fers the Oil Analy­sis Pro­gram and has been in ex­is­tence for more than 50 years.”