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I took a fair old beating on the Bulletin Boards after advising you that AIM listed penny share oil explorer Range Resources (RRL) was hugely overvalued at 4.86p following the abject failure of its drilling campaign in the Islamofascist hell hole that is Puntland. Report him to the regulators screamed the muppets. He must be helping Evil who is short (he was not) said others. I was not. But the shares initially traded up to 5.6p which delighted both my critics who argued that I could not tip a waiter but also those who were so in love with the stock that they decided to buy more shares.
One helpful fellow commentated on this blog that I should bury my head in the sand. At least if that was Puntland sand I would not get any oil in my hair but I am afraid that is not my style and so with the shares now back at 4.76p I make a couple of observations.
The shares went up following the Puntland duster for two reasons. Firstly there clearly were some folks who were short who moved to close out and bank gains. Their buying must have helped. But secondly the company is reported to have stated: We will update shareholders later in the week with numerous positive developments in Trinidad. That prompted buying from the BB fan club.
This is very strange indeed. I find the way that certain companies communicate news says a lot about how they operate. If Range was sitting on positive price sensitive news from Trinidad it should have reported it at once. AIM rules simply do not allow you to “manage” newsflow by sitting on it until you feel the time is right. But in fact the news was really about as price sensitive as the revelation that a non exec had farted in the bath. We learned that a new well had been spudded as part of a multi well programme on a block in Trinidad. Results will be out in 6-8 weeks. The start of drilling which we all knew was going to happen is hardly exciting. That the Trinidad authorities have also passed a new drill rig through its equivalent of its MOT was not exactly gripping either.
And so why the hell did the company makes this statement on the 28th about “numerous positive developments?” And 48 hours later reveal these numerous positive (but hardly price sensitive or significant) events? This is the sort of behaviour I expect from companies that obsess about managing the share price on a daily basis and it is rarely a good sign.
It rather reminds me of the curious behaviour of Sefton Resources (SER) highlighted here which bragged in early August that a broker note was on the way in September so encouraging folk to buy ahead of that note at 2p. I said back on August 9th that I could resist that temptation and at 1.75p today I am still resisting without any trouble.
I have to say that the way Range communicates with its devoted followers is pretty bizarre. I shall ignore the whole Puntland debacle. What interests me is the US gas assets which are for sale. The sale price target for them just keeps moving (downwards) from $150 million to $50 million and now (via Edison research which Range commissioned and approved) to $25-40 million. But when we were looking for $150 million the BBs were full of reports (that Range did not deny) that the company had two potential purchasers interested. Yet now we are told not to expect a quick sale. For what it is worth with US gas prices slumping and the whole resource asset market dead I certainly do not expect a quick sale and I do not expect that a sale (if there is ever one) will realise anything like $40 million.
My bear case and valuation of 1.18p is not changed. I remind you that if one extrapolates from the June 30th quarterlies this company will be more or less out of cash by the end of THIS month. It says that it will have a new debt facility in place this month. It needs it. Without it the outlook is very grim indeed. With it my valuation is still only 1.18p a share as explained HERE and HERE.
The stance remains sell.
