Opinion

Oil Price, Range Resources, RockRose, Lamprell and Finally…


WTI $61.19 +23c, Brent $65.12 +23c, Diff -$3.93 n/c, NG $2.68 -5c

Oil Price

The most unreliable of the three main forecasters, the IEA started to back track on its more bearish than most demand forecasts yesterday and at this rate, despite the US shale ‘torrent', equilibrium might be achieved in Q2 of this year. Whilst they were changing their numbers they snuck in a crafty rise in world oil consumption past the historic 100m b/d number, they must have been reading back issues of the blog…

Having said that Russia is going to be on everyone's mind for the time being, with Putin's coronation after Sunday's vote a shoe-in things might change but the world is hardly likely to become a more peaceful place…

Range Resources

Interims to 31/12/17 are out this morning and present a welcome return to health for Range where genuine operational focus is leading to positive results. I visited Trinidad last week and was allowed full access to all its operations and met with CEO Yan Liu and the new COO, Lubing Liu, no relation. As readers know I always think that field trips are important for two main reasons, one obviously to take a look at the assets but also to spend some time with the management and the operational leaders.

I am happy to say that Range ticked the boxes in all these areas, operationally things are picking up and specifically, as can be seen in today's results, the Beach Marcelle waterflood is reacting positively to investment of time and money. We were also able to take a good look at the fleet of rigs which are indeed modern and in one case almost ready to go out on assignment. On the management front it was more important than usual to meet the CEO, Mr Yan Liu who as far as I know has not yet met many analysts or investors, this being the first visit to the company for some considerable time. He, and the new COO who is new in his position but not to the company, having been a non-exec until recently are clearly hands on and determined to make a success of the company.

Today's results therefore give an indication as to how things are progressing under their charge, early doors admittedly but there are definite signs of a recovery. Operationally, in Trinidad production in the period averaged 606 b/d, up 22% which was mainly due to concentration on the waterflood programme, selective development drilling where two wells were brought on-stream, and with workovers where 130 were completed. The Beach Marcelle waterflood is a ‘vast majority' of the company's reserves in Trinidad and it already accounts for around 30% of production.

The recent CPR confirmed net 2P reserves of 16 MMstb and net 2C net resources of 8 MMstb which gives plenty of room for upside now that the work programme is being put into action.

In Indonesia the company are in the process of building an experienced operational team and undertaking initial geological and geophysical studies as well as preparing a suitable work programme for which a budget is being finalised. Here the CPR gives Range  confirmed net 2C contingent resources of 10.9 Bscf and 3.1 MMstb. The company has a fairly undemanding set of work commitments and I expect that they will easily pass through them as they re-initiate production in this area.

The RRDSL acquisition gives Range a Trinidad based fleet of modern drilling rigs, workover rigs and equipment that will reduce costs and provide ‘operational flexibility' as well as expand its third party client base. We saw rig 19 ready to go onsite and I noted that the drilling manager had already made some very smart adaptations so that it could be used in tight locations with a smaller load of kit if needed, often the case here. Rig 16 is a more powerful rig and could easily be moved elsewhere in the Caribbean or nearby Latin America as it can easily handle a +13,000 foot drill, deeper than normal on Trinidad. We also saw a number of workover rigs either working or on warm stand-by all having been used recently either by Range or for other local drillers, the fleet is more modern than almost anything in the region and whilst margins could be better will provide very useful ‘flexibility' as they say.

On the numbers things are also looking up, there is a 77% reduction in pre-tax losses to $8.5m, revenues are up 39% to $5.4m and with opex down 14% to $34.50 a barrel and G&A down 40% things are moving in the right direction. Cash is $10.9m down after recent spending and for the first time in a while the CFO hasn't had to report an impairment charge.

It has been a long haul but much went on when the shares were suspended last year, as the operational success in Trinidad continues, Indonesia starts to see some action and RRDSL gets some 3rd party work should easily see Range be back on the right road.

RockRose Energy

RRE has commissioned ERC to evaluate existing upside potential for the Blake field and its nearby Tain satellite discovery ‘with a view to inform FID on Tain development'. RockRose has also commissioned Crondall Energy to review the FPSO options on the Blake and Ross field where options are to either replace the vessel or to to extend the life of it.

The interesting point of this announcement is to point out that whist RRE continues its policy of acquisition driven growth it has also seen upside potential through organic growth. The last time I spoke with the management they pointed out that the life of every asset that they owned has been pushed out by at least a year by the operator since acquisition thus giving yet more value to shareholders, what's not to like…

Lamprell

An update from Lamprell today that indicates that all is going well at the JV in Saudi Arabia and that IMI is now fully in business. Construction is underway at the maritime yard at Ras Al Khair for which Lamps has already paid its initial cost of $20m of a total of $140m. Things should really start to motor for the company as ARO drilling are committed to ordering 20 jackup rigs from the yard over the next ten years, whilst construction is underway ‘significant component parts of the first 2 rigs are expected to be subcontracted to Lamprell's UAE facilities'.  This announcement is very important in that it looks like any lingering doubts about the JV should now be dismissed. As for current trading that is a different thing altogether to be discussed at the forthcoming results meetings…

And Finally...

The draw for the Quarter Finals of the Champions League has been made and – you've guessed it the Noisy Neighbours and the HubCap Stealers have been drawn together….

This weekend we are back to the FA Cup QF's in which the Swans host Kane-less Spurs and the Seagulls go to the Theatre of Nightmares and after the Sevilla disaster they must feel they have every chance. On Sunday the Latics host the Saints and Chelski go to the Foxes.

The last round of the Six Nations is tomorrow with Ireland expecting to celebrate St Patrick's day with a win over hapless England at Twickenham. Elsewhere Italy host Scotland and Wales host France.

My Moto GP correspondent informs me that the new season starts this weekend under floodlights in Qatar..

And of course, saving the best until last this afternoon sees the Cheltenham Gold Cup, the blue riband event of the jump racing season.


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