Range Resources shareholders disappointed by latest news

Range resources, the troubled oil and gas explorer, with assets in Trinidad, Texas, Georgia and Columbia managed to disappoint shareholders with the release of its annual financial report for the year ending June 2014.

The shares are currently down over 30% to around 1.15p as mounting losses, worse than expected production figures, a less than ideal $15 million financing deal with Lind partners and some very heavy write downs on some of its assets weighed on investors.

Total losses for the year came in at $102.5 million for the last financial year ending June 2014, compared with a $20.3 million for the prior year, including a $24.3 million asset write off. Financing costs came in at a whopping $21.8 million. Revenues were down from $26 million in 2013 to $21.2 million in 2014 with total gross oil production for the year in Trinidad being 208,979 bbls.

On the subject of production from its Trinidad acreage, the focus of operations, Rory Russell, Chief Executive said “However, there is no denying that the production figures reported for the year are disappointing and below where we were hoping to be at the time of reporting these results. This was largely due to a historic lack of investment in drilling rigs which has prevented our drilling operations from running at full capacity. Although our fleet has benefited from some maintenance improvements, our rigs will require further investment before they are capable of carrying out our ongoing drilling plans and running at a capacity that will enable us to achieve our production targets.”

So equipment problems caused by lack of investment seem to be at the heart of problems in Trinidad with little positive news flow until the first half of 2015. “Whilst the slower than expected progress in Trinidad means we are unlikely to meet our previously stated target of an exit rate of 1,000 barrels of oil a day by the end of 2014, we are confident that the preparation work we have done to date, the ongoing improvements to our rig fleet and the improved understanding of our acreage that we have obtained through our relationship with LandOcean, will enable us to meet the previously stated production forecasts during the first half of 2015. I am particularly excited about the upcoming onshore exploration well on the Guayaguayare licence that is due to spud by Q1 2015.”

The latest financing deal  with Lind also had the sting in the tail of a high interest rate with attached warrants, “The Loan is for a maximum term of 24 months and will be available in 2 tranches.  The first tranche (Tranche 1) totalling US$10 million will be available at closing with the second tranche (Tranche 2) totalling US$5 million available at the Company’s option, 6 months later. The total amount repayable under the facility is US$18.375 million (US$12.25 million for Tranche 1 and US$6.125 million for Tranche 2). ” So $15 million will cost the company $18.375 million, a 22% return for Lind!

Issues with divesting its diverse assets and an unpaid $8 million loan to International Petroleum following a botched merger has dogged Range for some time. In August the company came to a settlement with International Petroleum to repay the loan following the sale of some Russian assets and hopefully this asset sale will finally come through.

Shareholders in Range have had to have a lot of patience and the latest financial report shows that plenty more patience will be needed when it comes to ramping up production in Trinidad after historical mismanagement of the company’s assets. With average production at 573 barrels per day, there’s a long way to go for the 1,000 barrels a day target and a prolonged wait for a new drilling programme. A disappointing day for Range Resources shareholders and Rory Scott Russell has plenty to prove after the horrible days of his predecessor Peter Landau who left the company in a sorry state. As the company said today,” In summary, although I can fully understand that some Shareholders remain impatient for further positive news, in reality the Company in its current form is still young and there is no quick fix for certain inherited legacy issues. It is my intention to continue to transform Range in a pragmatic way for the long-term benefit of all Shareholders. So far, a large amount of time and effort has gone into cleaning up the business at a corporate level and refocusing the Company’s strategy.” This one is certainly a hot potato after all the problems and far cry from what Leni Gas and Oil have managed to deliver in Trinidad.

Contrarian Investor UK

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