An interview with the CEO of Range Resources,Pete Landua, and Mining Maven on December 6, 2011 concerning Puntland. Lots of very good intel
MM: Speaking of first drills, Puntland, this is something that most investors are eagerly awaiting and it seems it is upon us quite shortly. Can you give us an update on Puntland please?
PL: Yes, for those listeners who know my background, Puntland is very dear and near to my heart, having been involved from the start, so barring any Al-Shabab terrorist attack, which to me is the only small risk that faces at the minute, we are looking at spudding this well through Horn Petroleum at the base there at the end of the year. The cap is 80% complete, there is an airstrip there, the water construction dams, the berm. There is a presentation that we put on the website today if shareholders would like to have a look at some of the photos of the Puntland operations. It’s the last well drilled in Somalia in 1991 so it’s pretty significant event and at this point in time, we are on track to spud end of the year so reminding everyone that it’s a billion barrel in place target, potential 330-350 recoverable, that will be back to back wells and, like everyone, it’s incredibly exciting because of the significance, not only of the well itself, but for the region. A lot of people always said it was impossible to operate in Puntland. A 2D seismic program was completed and we think we’ll get a back to back well program completed so very exciting times for us and we are on track with regard to that timetable.
MM: This is, obviously, is a monumental occasion for the area. What is the feeling amongst the Puntland senior officials and ministers?
PL: Again, the point to know of any oil production development, the Puntland government takes, off the top royalty profit share of around 55%, so there is an enormous incentivisation to make this work so we’ve had great assistant from the Puntland government and the local clans and, as I said, the only real risk factor to this project doesn’t come from the locals or from the government, but from the Al-Shabab terrorist organisation who operate throughout Somalia, Ethiopia and Kenya but we think from a security perspective, we are managing very well, there have been no incidents in the three month lead up to this. Everyone knows what a successful well will do to the region and the potential size of any development so all anyone can ask is let’s get the wells drilled and let’s see where we get to.
MM: And in parallel with your exploration and drilling work to come, you have also started the social programs in the area?
PL: It goes without saying, Horn Petroleum is our operator. We’ve always done a few social programs ourselves when we had the assets with regard to both, water wells is always one of the ones that you do, given the region. Horn Petroleum has been excellent both with health and education. We are looking at some youth fitness programs as well that Range in Nugal. It’s actually not a cost of doing business, it’s an obligation of doing business. The only issue you have got is manage how much to do, because obviously in an area like Puntland, you can be going on and on because they are in such desperate need of assistance at all levels, and I think by demonstrating that it is a safe and effective place to operate in, you will hopefully then draw more support and attention to assisting with Puntland and its redevelopment.
MM: So the first drill is targeting 300 million barrels, recoverable. If you look across the licence areas in total, what is the potential oil in place?
PL: No one is arguing geologically that both the Dharoor and Nugal Basins are replicas of the Yemeni Basins found by Hunt in the early 80s so there has been a couple of independent reports done on it. The potential in Dharoor is around the 5 billion barrel in place mark for the Dharoor acreage, the Nugal is actually bigger. The potential for Nugal is anywhere from the 8-10 billion barrels. That’s why we’re all there. No one has ever geologically questioned that this is serious serious elephant country – it’s all about execution and its success as opposed to potential because no one has ever questioned the potential of the multi billion barrel fields of Puntland.
MM: This project now must be taking up quite an amount of your time. How do you manage it?
PL: Understand we are not the operator in Puntland. We’d like to think we put in the significant hard yards in ’05, ’06 and ’07 to allow someone to come in and operate effectively. Obviously, we kept the relationships with the Puntland government, we still do have an office in Bosaso, but I definitely don’t want to underestimate the fact that Horn Petroleum are operator, they are doing a fantastic job, truly, Dave Grillman, Keith Hill, so it’s their project, all we are there for is to assist them in any way possible. Given we have been there for a longer period of time, we do assist with some things but at the end of the day, it’s their project and they are managing it very well.
MM: That’s great. If we go down an optimistic pathway, and we’re private investors too, so it’s worth asking the question: If you find oil, find what you’re looking for, what then happens?
PL: I think what happens is that we then expedite a development program in Puntland. I think what is important to understand is that it’s so easy for people to say “well, war starts”, which is the furthest from the truth, because what people want to happen is to see significant capital development in the country. So what happens is there becomes a development drilling program, a 3D seismic program. Production isn’t going to immediately start and it’s not about cash flow to Range if we have a discovery. It is about either, the potential for a serious take out and the logical groups still are probably from the US or the Chinese, at this point in time, given our previous discussions on that and the strategic importance of the Horn of Africa. Either there will be a take out at that point in time or there will be the standard oil exploration, advanced stage development, infill drilling, as I said, 3D seismic, so it won’t be immediate production, but again, it will transform the area with the amount of capital that will start to be invested in the region.
MM: And the discovery of oil in this well, does that provide you with information that you can then translate on to other prospects?
PL: Clearly, it does in the Dharoor Valley, absolutely. Do understand that even if you don’t discover oil because the last wells drilled in Dharoor in the 50s, so no matter what, this well is of immense technical importance because you will learn so much more about the rocks and the source rocks and potential trap structures by drilling this well. Similarly, to Georgia, the fact that if we don’t find oil on this first well, should never be seen as a failure because in any history of oil exploration, even at the best, these tops are targets 1 in 4, 1 in 5, and whilst I would love to say, flip of the coin, 50/50, its not, but we’d all like to think its Puntland and hopefully the oil gods will be on our side.
MM: Staying on Puntland, perhaps moving offshore, there has been a lot of speculation, particularly with Marauder Resources, listed on the TSX, in their recent announcement about what is happening with offshore Puntland. Can you give us an update there?
PL: Marauder has entered into a MOU with the government and Range. It is subject to some conditions precedent that clearly needs to be finalised before any formal announcement from our side can happen, but we think it’s fantastic for the region. You have got another listed vehicle who wants to invest into Puntland, so we are fully supportive of Marauder. On the offshore, you’re looking at Marauder financing a seismic program, and obviously Range having a carried interest through to completion of that seismic program, we obviously need to finalise details but that will be the general structure of two offshore blocks. Then they are also looking at potentially drilling a well in the East Nugal region which comprises some of the areas that were previously relinquished by us and Africa Oil, and potentially, and again, this is where its subject to negotiation and potentially, some of the existing East Nugal acreage, and these things need to be finalised but again, we will continually support anyone who wants to work with the Puntland government and put capital development into oil exploration and development in Puntland so hopefully, everyone will be in a position to formally announce something in the coming weeks. It’s all very constructive today and again, it will be an added benefit for both Range and Puntland.
MM: When you did these interviews a couple of years ago, there were a smaller number of assets and the company seems to be bolting on additional assets as it goes. Are there any plans to add anything else to the portfolio?
PL: There are. I’d like to think that a lot of additional value is coming from the development of the existing assets. I’ve said it before, there’s probably only one other project that we are extensively looking at. Timing is obviously playing a part with the current market. It’s probably not as appropriate to plough forward with it but we are definitely looking onshore Colombia. We had hoped to be in a position early in the New Year with regards to announcing something that is final but it’s a region where we think offers a lot of synergies with our Texas and Trinidad operations. It’s well known by a lot of our executive management and technical team and there are some magnificent on shore opportunities in Colombia, so you asked previously about where we’d be if we sold the Texas assets. That’s probably one we’d look to do. We’re not there yet, but we’d definitely look to do it, but other than that, we’re very comfortable with our exploration and development program for 2012.
MM: If we then move forward to the end of 2012, 12 months hence. Where would you like to see the company?
PL: Where I’d like to see it and reality may well be two different things, so I think the best way to answer it is realistically, “where will we be?” because I think that’s the question people want answered, so realistically, let’s look at Texas: We think Albrecht’s got a very big chance of coming in, so realistically most of our Texas reserves will be P1 and P2, whether they have been sold or not, we don’t know, but that valuation of 100-150 is going to stick, so that is on Texas, but we do think it’s a strong chance of being sold. Trinidad is the one that we are going to go full steam ahead on, not just next year, but the year after and the year after, so what can we hope to achieve in 2012 in Trinidad? Obviously, by the end of the year that the water floods successfully online in the Beach Marcelle project, that we have drilled probably over 21 current and then at least another 40, if not, 50 on Morne Diablo; the Herrera, we really hope to have at least drilled three Herreras next year and obviously, had success on any one of them. So it’s a monumental year for us with Trinidad on those three programs alone. Georgia: we hope to have completed the second well. Whether or not it’s going to be a success, obviously, we all know the risks involved, but will definitely would have completed, and let’s hope that it is a success. We would have completed a seismic program on Block 6B that’s going to identify, not only firm up on some exploration targets on 6B, but also look at the shale gas potential of 6B which has been identified as one of the most prospective areas in Georgia. We wouldn’t develop shale gas ourselves in Range, but we would definitely invite potential farming partners if the seismic program delivers on what we hope it will deliver on shale gas potential, we will then look to get farming partners in Georgia on the shale, as well as drilling those lines on Mukhiani. Then on Puntland: successfully completed two wells in Dharoor and potentially a third well in East Nugal.
MM: Fantastic. All of this is included in a presentation that listeners can go and have a look at that is on the website?
PL: Absolutely. We gave a shareholder update in London last night, so that’s Monday 5 December, so that presentation is available on the website. I would encourage everyone to have a look at it because pictures do definitely add to getting a comprehension of what we’re talking about, especially the photos on Puntland and also a lot of the diagrams on Trinidad which will help people understand some of the things that I’m talking about.
Red
News 
Market Data 
Discover 
AI
