TIDMRRL
ASX Announcement
9 July 2009
Range to acquire a 50% farm in interest in two key Georgian O&G blocks
Highlights:
* Heads of Agreement signed with unlisted UK company to acquire a 50% farm in
interest in two oil and gas blocks in Georgia.
* Blocks cover 7,000 sq km (approx 10% of the acreage of the Country) and
have been subject to significant exploration in the Soviet era.
* As part of the agreement Range must complete next phase of exploration
activity (350 km of 2D and 3D seismic and well selection).
* Range is proceeding with a strategic placement of AUD$2.5m to meet initial
requirements as part of the transaction ($1m to December 2009) and to fund
operational activities on Puntland assets.
* Acquisition to complement existing Puntland assets - Range remains 100%
committed to and sees marked progress in the second half of 2009 (placement
will also assist with Puntland initiatives).
Australian based oil and gas explorer Range Resources Limited (ASX: RRS; AIM:
RRL) ("Range" or "the Company") has significantly enhanced its oil and gas
portfolio, with confirmation it has entered into a Heads of Agreement with
unlisted UK company Strait Oil and Gas Limited ("Strait") to acquire a 50%
interest in two oil and gas blocks in the Republic of Georgia, Eastern Europe.
The two blocks subject to this agreement, Blocks VIa and Vlb cover a contiguous
area of 7,000 sq km (approx 10% of the surface area of the Country) and were
subject to significant exploration in the Soviet era. Please refer Figure 1 for
outline of block locations.
Led by seasoned international energy executives Mark Patterson and Greg Smith,
Range's management team is well placed (in conjunction with Strait's
established team) to find and produce commercial volumes of oil and natural gas
on the Georgian Blocks.
Blocks VIa and Vlb Background
A significant number of wells were drilled during the Soviet era (mainly in the
1980's and early 1990's) in and adjacent to the Blocks. Strait has undertaken a
large scale review of all available data over the last two years with the
assistance of recognised international oil and gas consultants RPS Energy. Key
findings of the technical review include:
* Very few of the approximately 200 wells were drilled with the specific
objective of finding oil and gas reservoirs. Certain wells were drilled to
relatively shallow depths, to further define structural features identified
from surface geological mapping, and to assist in planning the location and
design of water reservoirs. Deeper wells were drilled for the purpose of
detailed identification of the stratigraphy of the area. Many of these
wells found oil and gas shows, in which case they were shut in and
abandoned without testing. Much of the work carried out by the technical
staff of Strait has been to collate information from these diverse
databases and to integrate the data into their own regional interpretation.
Data reviewed includes seismic, gravity and magnetic, well, structural
mapping and field analogues and reservoir data.
* An initial analysis of 24 areas identified 11 structures suitable for oil
in place estimates and key targets for future drilling. Of these structures
two are deeper than 2,500 meters and the rest are shallow features between
600 and 2,500 meters. Range intends to release an announcement detailing
the oil in place potential of the identified leads and prospects following
completion of its final stage due diligence review.
* In compliance with the terms of the applicable PSA (see below), Range
proposes to complete 350km of 2D and 3D seismic before May 2010 (in
accordance with the PSA) and then commence a minimum two well drilling
program.
* In addition to the oil potential of the Blocks there are numerous
prospective gas fields, which include highly prospective natural gas and
coal bed methane targets. Of the 161 wells drilled for gas, 22 displayed
potentially commercial flow rates. Early production could be attained by
supplying the local city of Kutaisi (second biggest in Georgia) with a
dedicated natural gas supply.
Please refer to website for map.
Under the terms of the agreement, subject to standard due diligence,
shareholder and regulatory approvals, Range (to earn its 50% interest):
* will complete Phase II under the relevant Production Share Agreement (PSA)
applicable to the blocks, consisting mainly of 350 km of 2D and 3D seismic
and well selection. Budgeted costs for Phase II are between US$4-$5m,
* make the following equity payments to Strait's nominees:
- 20m Range Shares and 20m Range Options (RRSOA) upon due diligence
completion and obtaining relevant shareholder approvals;
- 20m Range Shares and 20m Range Options upon completion of Phase II under
the PSA and
- 30m Range Shares and 30m Range Options upon completion of the first 2 wells
under the PSA or a commercial discovery, whichever occurs first.
- appoint a Strait nominee to the Range board upon regulatory and due
diligence completion.
Please refer to Editors Notes for full terms of the Heads of Agreement.
Background on Georgia
Since the Rose Revolution, Georgia has focused on developing its political and
economic systems to Western European standards. Following the unrest with
Russia in 2008 Georgia has returned to a state of civil order. The European
Union has been advisor, establishing a base and opening a branch of the
European Bank for Reconstruction and Development in the capital Tbilisi. Some
key background points include:
* Georgia was named the year's number one reformer in the World Bank's 2007
"Doing Business Survey," improving its overall ranking from 112 to 37.
* Significant decrease in corruption in the public and private sectors made
Georgia the World Bank's top anticorruption performer in 2006
"Anticorruption in Transition-3" (ACT3) report.
* Repatriation of profit. Foreign investor's rights and guarantees are equal
to those granted to Georgians. Profit and property repatriation is allowed.
* Infrastructure: Located at the crossroads of Europe and Central Asia,
Georgia's three major oil and gas pipelines, Black Sea ports,
well-developed railway systems, together with its airports are playing an
increasingly important role, linking East & West. The Georgian Railway, one
of the crucial links in Eurasian transit, serves as a short-cut between
Europe and Central Asia, carrying 3.9 million passengers and 22.6 million
tons of cargo in 2006. Georgian Railway now directly links to the railway
systems of Armenia, Azerbaijan and Russia.
* Oil and Gas Pipelines: Georgia plays an important role as a strategic
crossroad for hydrocarbon transit in the Caspian region. During the last
ten years, approximately $5 billion has been invested to develop the three
major oil and gas pipelines that cross Georgia including:
- The Baku-Tbilisi-Ceyhan (BTC) pipeline, completed in 2005 at a total
construction cost of nearly US$4 billion, can transport up to a million
barrels of oil a day from the Sangachal terminal in Azerbaijan to a
newly constructed marine terminal in Ceyhan on the Turkish
Mediterranean coast.
- The South Caucasus gas Pipeline (SCP), completed in 2006, will carry
natural gas from the Shah Deniz field in the Caspian Sea to customers
in Georgia, Turkey and Azerbaijan.
* Construction of two new pipelines across Georgia increases its role as a
strategic crossroad for hydrocarbon transit in the Caspian region. One
pipeline runs just south of the Blocks.
With Range's planned onshore drilling program in Puntland, and its progress
towards developing a joint exploration strategy with the Puntland Government
for offshore Puntland , the Georgian farm in is considered by the Company to be
a significant step towards establishing the company as a diversified
international explorer with a growing oil and gas acreage position and
significant upside potential.
End
For further information please contact:
Range Resources
Peter Landau
Tel : +61 (8) 8 9488 5220
Em: plandau@rangeresources.com.au
Australia London
PPR Conduit PR
David Tasker Jonathan Charles
Tel: +61 (8) 9388 0944 Tel: + 44 (0) 20 7429 6666
Em: david.tasker@ppr.com.au Em: jonathan@conduitpr.com
RFC Corporate Finance (Nominated Advisor) Fox-Davies Capital (Broker)
Stuart Laing Daniel Fox-Davies
Tel: +61 (8) 9480 2500 Tel: +44 (0) 207 936 5200
Editors Notes
Figure 1: Past Activity on the Blocks - please refer to website for map.
Key Terms of Heads of Agreement
Key Terms of the Heads of Agreement include:
* To earn its 50% interest Range will complete Phase II under the relevant
PSA applicable to the Strait Blocks. Phase II consists mainly of 350 sq. km
of 2D and 3D seismic and well selection. Budgeted costs for Phase II are
between US$4-$5m.
* Initial funding required is approximately US$1m through year end 2009. To
this end Range is proceeding with a placement of AUD$2.5m to parties
identified by Strait (AUD$0.035 cents per Share together with a 1 for 1
free attaching listed RRSOA option - conversion price of AUD$0.05 on or
before 31 December 2011). Funds will also be used to continue with the
completion of the Puntland offshore database and interpretation, Puntland
Government initiatives and contributions to onshore drilling when required.
* Standard due diligence and regulatory approvals.
* PSA is initially a 50:50 production split (no taxes or royalty) with the
Government through the cost recovery period after which it reverts to a 65:
35.
* Range will make the following equity payments to Strait's nominees:
- 20m Range Shares and 20m Range Options (RRSOA) upon due diligence
completion and obtaining relevant shareholder approvals;
- 20m Range Shares and 20m Range Options upon completion of Phase II under
the PSA, and
- 30m Range Shares and 30m Range Options upon completion of the first 2 wells
under the PSA or a commercial discovery, whichever occurs first;
* Appointment of Strait nominee upon regulatory and due diligence completion.
Proposed Director is Dr Mustafa Mutlu. Dr Mutlu Mustafa has extensive
regional experience having been an advisor to two Presidents of Azerbaijan
and currently advises several Turkish Companies in Georgia where he has
residency. He is a Professor at Kyrgyz State University of Construction,
Transport and Architecture in Bishkek Kyrgyzstan and has a BA in Economics
from Columbia University New York, a Masters in Finance and a PhD in
Economic and Social Upheaval from Istanbul University.
* Following completion of Phase II under the PSA, Range has the following in
respect of the residual 50% interest in the Blocks:
- Range has standard commercial pre-emptive rights and tag along rights;
- Range can invite farm in partners on shared, pro rata terms with Strait;
and
- Range will "finance carry" the residual 50% on the basis of a loan account
repayable at LIBOR plus 2% from production cashflow if an event above has
not occurred.
END
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