Range Resources Limited announced the formation of a partnership with Leni Gas & Oil plc ("LGO") to jointly develop their interests in the Eastern Fields Area onshore southern Trinidad, including the Goudron and Beach Marcelle fields.
In a binding Heads of Agreement ("HOA") Range and LGO have agreed that, subject inter alia to full legal and technical due diligence (see Appendix below for Conditions Precedent):
GEPL, a wholly owned subsidiary of LGO, holds the exclusive rights to purchase the existing Incremental Production Service Contract ("IPSC") for the Goudron Field. Range, through its subsidiary Trincan Oil Limited, holds a 100 percent interest in the Beach Marcelle IPSC where it has approved the redevelopment of the existing field production by means of a water-flood.
LGO's Goudron Field was originally developed by Texaco with 150 wells and holds an estimated 21.8 mmbbls of reserves in proven, probable and possible categories. The block covers an area of 2,875 acres and produces from the Goudron and Gros Morne (Cruse equivalent) sandstone formations at depths between 300 and 3,500 feet. Current production averages below 100 bopd.
An initial work program involving well work-overs and selected infill wells is planned to bring Goudron production up to 450-500 bopd funded by the consideration in this agreement. Additional infill drilling and hydraulic fracturing of wells is expected to raise production to up to 4,000 bopd.
Further potential exists in deeper reservoirs and through the implementation of secondary recovery techniques, such as a water-flood. Production from Goudron will commence on assignment of the IPSC and is expected to rise steeply over the first 6 months of operations.
Range's Beach Marcelle block covers an area of 624 acres and contains a proven reserve of 12.8 mmbbls recoverable through secondary production techniques involving a field-wide water-flood of the producing Forest and Cruse age sandstones. Beach was also originally developed by Texaco and has produced over 30 mmbbls of oil to date through the drilling of approximately 230 wells. Range
Range also owns and operates a local drilling company with five onshore rigs, three production / work-over rigs and a swabbing unit. LGO, through its association with Altech Services Limited, also has access to five further work-over rigs.
Both Range and LGO also own a range of other interests in Trinidad. LGO holds a significant exploration land position in the Cedros Peninsular where it also participates in the Icacos Field with a 50 percent interest. LGO also has a farm-in to the North Moruga Field and associated exploration leases where LGO will earn up to a 49 percent interest and where drilling is hoped to commence in 2012. Range hold a 100 percent interest in the Morne Diablo and South Quarry fields where it is engaged in a 21 well program to expand production and explore the deeper Lower Cruse potential in these fields.
The assignment of the Goudron IPSC requires approval by the Trinidad and Tobago Ministry of Energy and Energy Affairs and it is hoped to conclude that process during the next few months.
Range's Executive Director, Peter Landau commented, "This exciting agreement with LGO further enhances our position in Trinidad and gives us additional access to reserves and production growth, especially in the short-term whilst the Beach Marcelle water-flood project is ramping up to full capacity during 2013. The opportunity is of particular importance to Range as it is in the final stages of choosing an appropriate debt financing facility to develop the major aspects of our Trinidad operations for the next 18-24 months. The Goudron Field has enormous potential for increased production and reserves and by collaborating closely with LGO we anticipate additional benefits and synergies moving forward."
Neil Ritson, LGO's Chief Executive, commented, "This agreement marks a turning point in our growth in Trinidad since we now have access to full funding for the acquisition and the first phase of the Goudron field re-development. Accessing an equity stake in Beach Marcelle further diversifies and strengthens our Trinidad portfolio. A close collaboration with Range offers some significant synergies and we look forward to working closely to develop further opportunities."
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