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Range Resources provides quarterly update

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Oilfield Technology,


The company's oil production for the period was 50 309 bbls (average of 547 bpd net to Range, which is a 23% increase from the previous quarter.

The exit production rate for 2016 exceeded 800 bpd, a 40% increase from the exit rate for 2015. The increase is a result of the continued well workover programme, commencement of production at the Morne Diablo waterflood project, as well as development wells put on production during the period.

Waterflood projects

The company continues its focus on full implementation of the waterflood projects, which account for the vast majority of reserves and are crucial to Range's production growth in Trinidad. Approximately 20% of the original oil in place on the two ongoing waterflood projects has been recovered by primary depletion. Waterflooding is estimated to recover an extra 10% of OIIP, therefore increasing the total recovery factor to over 30% over the next 8 years.

Morne Diablo waterflood: During the quarter, production commenced at the Morne Diablo waterflood project in line with the previously anticipated schedule. At the date of this report, production is approximately 60 bpd, which includes production from both the expansion and pilot waterflood schemes.

The company has been injecting water into the expansion area of the field since December 2015, with injection continuing at an average rate of approximately 350 barrels of water per day. During the quarter, Range signed an agreement with Petrotrin to use produced water from Petrotrin's existing operations, which will increase water injection by 3000 bpd. To get access to this additional water supply, the Company will be constructing a new water pipeline, as well as the gathering and transfer stations. All major approvals to carry out this work are already in place.

Beach Marcelle waterflood: Following commencement of the initial water injection on the South East block in May 2016, the Company has been focused on completing the remaining work programme on the project, including water source wells, injection stations, power network, transfer and gathering stations and water pipeline.

The company has been experiencing electrical outages in the area in the recent months, which has effected some of the injection pumps and resulted in reduced water injectivity rates. In order to improve reliability of the electrical power supply, the Company made a decision to upgrade the electrical system in the Beach Marcelle area and seek connection directly from the national grid rather than from Petrotrin, as was done previously.

Once the remaining work programme has been completed, the water injection rates are expected to increase to approximately 6000 bpd. In addition, the Company is finalising agreements with Petrotrin to use produced water from their operations, which will increase injection rates by a further 700 bpd. In the meantime, the water injection is continuing at an average rate of 1200 bpd.

Additional waterflood projects: The Company has identified additional areas on its fields which could be suitable for waterflooding and will be carrying out injectivity testing and pilot programmes to determine the feasibility of waterflooding in these areas. The company continues to study and evaluate further areas of the field for waterflooding potential.

Drilling programme

During the quarter, the Company successfully drilled the remaining two development wells from its five-well 2016 drilling campaign, the QUN 160 and GY 681 wells, which have been subsequently put on production. The QUN 160 well was put on production on 1 December 2016 at an average stabilised rate of 35 bpd. The GY 681 well was put on production on 13 January 2017 and has continued to flow at an average stabilised rate of 60 bpd.

Given the Company's continued focus on waterflood projects, the drilling of any further developments wells during 2017 will be evaluated in due course.

Corporate and financial

US$20 million convertible note financing: During the period, Range signed an agreement with LandOcean Energy Services Co., Ltd. ("LandOcean") for the issuance of a US$20 million convertible note by Range. The conversion price is at a significant, 130% premium to the closing price as at 28 October 2016 of 0.38p.

The proceeds from this convertible note will be utilised solely to replace a portion of the outstanding payable balance due to LandOcean under the terms of the Integrated Master Services Agreement.

The conversion is conditional upon receipt of shareholder approval from Range. The extraordinary general meeting of shareholders to consider the transaction will be held at 9:30am (AEDT) on Tuesday, 7 February 2017 at RSM Corporate Australia Pty Ltd, Level 13, 60 Castlereagh Street, Sydney, Australia, NSW 2000. A copy of the Notice of Meeting has been dispatched to shareholders and is available on the Company's website: http://www.rangeresources.co.uk/investors/shareholder-information/shareholder-meetings/.

Annual General Meeting of Shareholders ("AGM"): During the period, the Company held its AGM, where all proposed resolutions were passed. The resolutions included the adoption of remuneration report; re-election of Ms Juan Wang, Mr Lubing Liu and Dr Yi Zeng as Directors; and issue of Director options to Mr Yan Liu and Mr Zhiwei Gu.

As a result, 50 500 000 unlisted options were issued to Directors and management exercisable at £0.010 per option subject to vesting conditions and expiring on 30 March 2020.

Directorate change: During the period, Mr David Yu Chen tendered his resignation as Non-Executive Director. 30,000,000 unlisted options, exercisable on or before 30 March 2020 at £0.010 per Option, which were issued to Mr Chen on 30 March 2015 have been cancelled.

Acquisition strategy: In line with the growth strategy of the Company to create value for shareholders, and to provide Range with additional production and revenue, the Board continues to evaluate potential acquisitions of high quality assets at attractive valuations.

Proposed changes to Trinidad fiscal regime: Range notes the recent press comments made by the Acting Trinidad Minister of Energy and Energy Industries Colm Imbert, which could signal a long-awaited overhaul of the country's oil and gas fiscal regime, including the reform of supplementary petroleum tax ("SPT") in response to the lobbying of small/medium operators. While there can be no guarantees, the proposed changes are anticipated to be finalised by the government during Q1 2017, and are expected to see the SPT which currently takes effect when realised oil prices reach US$50/bbl, move to a profit-based tax mechanism rather than a volume or revenue based tax. This potential change would be a welcome government incentive for operators like Range, and should see an increase in exploration, development and production activities in the country.

Receipts from product sales and related debtors (for the 3 months to 31 December 2016): of US$2.0 million, compared with US$1.5 million in the previous quarter. This increase was due to a combination of increased production and the steadily improving oil price.

Capital expenditure (for the 3 months to 31 December 2016): of US$0.7 million, compared with US$1.0 million in the previous quarter. Underlying capital expenditure was broadly stable on the previous quarter.

Cash at 31 December 2016: of US$20.6 million, compared with US$20.4 million in the previous quarter. The increase in cash is a result of higher sales revenue in the period and a VAT refund received in Trinidad, combined with continued limited net capital expenditure.

Read the article online at: https://www.oilfieldtechnology.com/drilling-and-production/26012017/range-resources-provides-quarterly-update/


 

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