TIDMRRL
RNS Number : 3691N
Range Resources Limited
08 August 2017
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulations (EU) No. 596/2014 ("MAR"). Upon the
publication of this announcement via Regulatory Information Service
("RIS"), this inside information is now considered to be in the
public domain.
ACQUISITION OF OIL AND GAS INTERESTS IN INDONESIA
In line with the growth strategy of the Company, Range is
pleased to announce an acquisition of interests in an established
oil block in Indonesia. The Company has signed a Sale and Purchase
Agreement (the "SPA") with PT Hengtai Weiye Oil and Gas
("Hengtai"), to acquire a 23% interest (to increase to 42% upon
completion of the minimum work programme) in the Perlak field. The
acquisition consideration of US$3.2 million will be funded from the
existing cash resources of the Company.
The Perlak field has a long history of oil production of c.60
million barrels ("mmbbls"). Range estimates material remaining oil
in place of up to 500 mmbbls (this figure covers all reserve and
resource categories), which demonstrates the high prospectivity of
the field and substantial reserves and resources growth
potential.
The low risk low cost work programme is aimed at re-initiating
production from the existing wells, firming up the field
development plan ("FDP"), and fully exploiting the potential
resources.
Acquisition highlights:
-- Established oilfield, located in a mature hydrocarbon province of Northeast Sumatra;
-- Estimated oil in place of up to 500 mmbbls (this figure
covers all reserve and resource categories) and provides material
reserves and resources growth potential (Range's internal
estimate);
-- Expansion into Indonesia provides exposure to a prolific oil
& gas country and diversifies geographic risk;
-- Low acquisition cost of US$3.2 million, payable in tranches;
-- Range is protected against underperformance of the project
via a put option which allows Range to sell its shares to the
vendor at full investment cost;
-- Low work programme commitment, with Range's share of the work
commitment amounting to US$2.3 million over a three-year
period;
-- Range's initial interest of 23% will increase to 42% once the
minimum work programme is completed;
-- Experienced operator and local government as partners in the project; and
-- Long term licence of 15 years in place (expires 31 March 2032).
Commenting on the acquisition, Chairman, Kerry Gu said:
"We are extremely pleased with the investment in this
established oilfield with a long history of production. The low
acquisition cost, minimal work programme commitment and protection
from underperformance present a very attractive opportunity for the
Company to expand its footprint and potentially grow its reserves
base. We look forward to the commencement of the work programme and
unlocking the full potential of this highly prospective asset,
which should deliver significant benefits to our shareholders in
the form of increased production, reserves, and new development
opportunities.
In the meantime, we continue to progress with further
acquisition opportunities of oil and gas assets in line with our
stated acquisition-led growth strategy. On behalf of the Board, I
would like to thank all shareholders for their support and look
forward to what promises to be an exciting time for the
Company."
The Perlak field overview
The field is located in an established hydrocarbon province of
Aceh, Northeast Sumatran basin and covers an area of 10.4 km(2) .
The field is one of the oldest producing oilfields in the world,
first discovered in 1899. It lies on-trend with many producing
hydrocarbon fields, including the giant Arun field.
The Perlak field was produced primarily in the period up to the
early 1940s from the crestal part of the structure (the "developed
area"). Over 300 wells have been drilled to date, with 250 of those
put into production. The field has produced approximately 59 mmbbl
to date from very shallow depths of less than 1,000 metres (3,300
feet). The oil is very light with average API of 45-50 degrees. The
average recovery factor of the developed area to date is estimated
at 36%.
The field was shut-in during World War II and there has been
limited activity carried out since that time, mainly by smaller
local operators. Eleven wells had been drilled on the field since
1970s. Two of the more recent wells drilled in 2011 were put into
production of 180 and 100 bopd, respectively, producing very light
high quality oil 53 degrees API.
The mature operating environment offers low cost development
opportunities of the field with potentially short lead times to
production. In addition, the Company believes that substantial
potential exists in the areas of the field that have not yet been
developed.
The field benefits from 2D and 3D seismic which has been
obtained by previous operators and will be evaluated as part of the
upcoming work programme.
Work programme
The agreed minimum work programme ("MWO") covers a 3-year period
from the date of licence award, and involves geological and
geophysical studies, workovers of existing wells, and drilling of
one well. The Company has identified four low-cost workover
opportunities of existing wells. The Company estimates that these
wells will add over 120 bopd of production once brought online. The
Company will be evaluating the potential to expand its workover
programme beyond these four wells and expediting its work
programme.
The overall objective of the work programme is to firm up an
FDP, in order to produce additional reserves across the field and
fully exploit the potential resources.
Range's share of the cost of the MWO is US$2.28 m. The field
will be operated by a local company, PT Aceh Timur Kawai
Energi.
Key terms of the SPA
-- Range Resources HK limited, a wholly owned subsidiary of
Range Resources Limited registered in Hong Kong has entered into a
binding SPA to acquire 60% interest in Hengtai,
Indonesia-registered company, which provides Range with 23%
indirect interest in the Perlak field. The proposed structure can
be found in Appendix B of this announcement;
-- Consideration of US$3.2 million will be payable in cash in the following tranches:
a) US$640,000 upon signing of the SPA;
b) US$960,000 upon completion;
c) US$960,000 upon the establishment of a service company *; and
d) US$640,000 upon completion of the MWO.
-- Range is required to provide its share of the bank guarantee
to Pertamina (Indonesian state-owned oil and natural gas
corporation), net US$0.9 million to Range;
-- Once the minimum work programme has been completed, Range's
indirect interest in the Perlak field will increase to 42%;
-- Completion of the transaction is conditional upon approval
from the Indonesian Investment Coordinating Board (BKPM), and
completion of statutory notification requirements; and
-- Range has the right to appoint 1 Director, 2 Commissioners to
the Board of Hengtai, as well as a financial controller.
*Range and the vendor are intending to establish a services
company in Indonesia to provide oilfield services to the oil and
gas industry (including potentially the Perlak field). 30% of
consideration is payable once this company has been established (as
stated above).
Put option
As part of the SPA, the vendor has agreed to provide Range with
a put option, whereby Range has the option to enforce a buyback of
its full 60% interest in Hengtai should the agreed milestones not
be achieved, therefore providing protection to Range's investment.
These milestones, amongst others, include achieving minimum
production of 800 bopd from Perlak field over a continuous 90-day
period, as well as proving up independently audited 1P reserves of
at least 10 mmbbl within a three-year period.
Click on, or paste the following link into your web browser, to
view the associated PDF document.
http://www.rns-pdf.londonstockexchange.com/rns/3691N_-2017-8-8.pdf
Glossary
Oil in place - the quantity of oil or petroleum that is
estimated to exist originally in naturally occurring accumulations
before any extraction or production
Competent Person statement
In accordance with AIM Rules, Guidance for Mining and Oil &
Gas Companies, the information contained in this announcement has
been reviewed and approved by Dr Douglas Field. Dr Field is a
petroleum and reservoir engineer who is a suitably qualified person
with over 30 years' experience in assessing hydrocarbon reserves,
and holds a PhD in Organic Chemistry. Dr Field is a member of the
SPE (Society of Petroleum Engineers) and the PESGB (Petroleum
Exploration Society of Great Britain). Dr Field holds a role of a
Chief Petroleum Engineer with the Company.
Contact details
Cantor Fitzgerald Europe
Range Resources Limited (Nominated Advisor and
Evgenia Bezruchko (Group Broker)
Corporate Development Manager) David Porter / Sarah
e. admin@rangeresources.co.uk Wharry (Corporate Finance)
t. +44 (0)20 3865 8430
t. +44 (0)20 7894 7000
This information is provided by RNS
The company news service from the London Stock Exchange
END
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