SYDNEY — THE Australian market’s affair with the controversial Somalia exploration assets of Range Resources looks set to come to an end as the company prepares a spin-off of the projects on to London’s AIM board.
Speaking to The Australian at the ASX Small to Mid Caps conference in Hong Kong, Range executive director Peter Landau said the spin-off would help focus attention on the company’s other assets in Trinidad and Colombia.
Range became one of the first Western companies to move into Somalia, in 2005.
The company’s efforts to operate in the war-torn nation have regularly attracted controversy, with the local authorities at one point accused of being linked to piracy in the region. Range’s perseverance resulted in the company and its joint venture partners this year drilling the first exploration well in the country for more than 20 years.
But with production from Range’s Trinidad oil fields continuing to grow, Mr Landau said a spin-off of the Somalia interests would allow the market to provide more uncluttered valuations of the assets.
“What we’ve seen is Trinidad doesn’t get valued because all the punters trade Range on Puntland. So let’s take Puntland out, give (Range investors) the free stock, and have a separate AIM-listed stock,” he said.
Range’s joint-venture partners in Somalia, Horn Petroleum and Red Emperor Resources, are covering the company’s share of costs in the first two exploration wells.
The first well this year intersected oil-bearing sands, but it remains to be seen whether the reservoir is capable of flowing oil at commercial rates.
Drilling of the second well is to begin soon.
Away from Somalia, Range is focusing on lifting production in Trinidad from about 800 barrels of oil a day to about 2500 by the end of the year, a lift that would see the company generating about $30 million in free cashflow.
“Trinidad is always going to be the focus. It’s got 15 million barrels of (proven reserves), so we can’t spend the money quick enough,” Mr Landau said.
“Every time we put another well in we’re getting between 50 and 100 barrels a day.
“These wells are paying back in two to three months, and they’ll keep going for 20 years.”
Range is also set to shortly begin a sale of its oil and gas assets in Texas, which Mr Landau said should fetch about $50m to $70m in the current market.
The proceeds from that sale would be invested into Range’s recently acquired acreage in Colombia. Range has the right to earn a 65 per cent interest from two licences in the Putumayo basin.
By Paul Garvey
The Australian
May 30, 2012
