Shares in Range Resources (LSE: RRL) perked up 0.2p this morning to 0.997p, for a gain of 25% on last night’s close. By the time of writing the price has slipped back to 0.84p, but still up 6% on the day.
The reason? Two major news releases revealing a new exploration license and the raising of $50m in new funding.
Oil-rich Trinidad
The company was been awarded an exploration and production licence for the St Mary’s Block in Trinidad. Initially for six years during which Range will drill four exploration wells, the licence will last for 25 years should a commercially viable discovery be made. The company will also conduct 2D and 3D seismic analysis, together with other technical studies.
What’s especially exciting about this is that Trinidad sits on multiple valuable oil plays, and other oil firms have done extremely well there. Leni Gas & Oil has seen its share price rise sixfold in the past few months after successes in its Goudron field and the Cedros Peninsula — both in Trinidad.
Range’s new block has multiple possible targets and the area has already yielded several significant finds, and Range already has significant infrastructure in the region which should ease the exploration and production effort.
Plenty of cash
How about the cash to pay for it?
Range has also announced a $50m investment from Chinese investor Core Capital Management, with $20m covered by a new share issue and $30m as convertible bonds — Core Capital will own 19.99% of the share capital.
As well as helping finance ongoing Trinidad exploration work, some of the new cash will be used to repay debts.
We could now be at the start of a price recovery, after Range Resources shares have lost two thirds of the value since the middle of July — and they’re actually down 96% since April 2011!
A share to buy?
Before today, Range was forecast to report a pre-tax profit for the year ending June 2015 — only a modest £11.5m, but it’s a start. Things will need to be re-evaluated now to account for the costs of the new exploration, but it did put the shares on a forward P/E of just 3.2.
With Trinidad very much today’s hot oil prospect, this is definitely one to keep an eye on — Core Capital clearly thinks it sees a good thing at today’s valuation levels.