Duster number 2 for Range Resources and Red Emperor in Puntland

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As widely predicted, its bad news (yet again) for the consortium of Range Resources, Red Emperor and Horn Petroleum drilling in Puntland, Somalia this morning.

The RNS is as follows,

The Shabeel North well has reached a total depth of 3,945 meters, penetrated 149 meters of interbedded sands and shales of the Triassic Adigrat Formation with no oil or gas shows and only minor porosity exhibited on electric logs. Accordingly, the well is being plugged. As noted in a previous drilling update, the Upper Cretaceous Jesomma sands did exhibit porosity and hydrocarbon shows but produced only fresh water on a drill stem test. These sands are similar to the Jesomma sands encountered in the previously drilled Shabeel well in respect of log response and oil and gas
shows. It has therefore been determined that additional testing of these zones in the previously drilled Shabeel well is also not warranted.

So two wells drilled in Puntland and two dusters. For Red Emperor (which has been suspended from trading for a week), and Horn Petroleum, this is particularly bad news given their reliance on Somalia. For Range it’s also not good but, not quite as catastrophic given its other assets. Still, at close to 5p on Friday, expect Range to suffer acutely this morning given its £114 million market capitalisation at that price – a market cap that now looks out of kilter with the findings of the latest drill… With its Georgian and Columbian assets at an early stage, its Texan assets which are currently being sold unlikely to raise a good price given very weak gas prices in the US, the company is now pretty much reliant on Trinidad which is at least generating cash. With Range’s cash reserves virtually depleted, it is now dependent on a new debt facility being signed in the next month or two to fund additional exploration and appraisal activity at its assets.

The Puntland adventure rounds up a pretty nasty few months for the AIM oil and gas sector illustrated by the trouble and strife at Max Petroleum, drilling disappointment at Stebbing for Borders and Southern and lethargic response to Rockhoppers farm in with Premier Oil. The lesson? Approach with care and don’t over commit on wild cat drilling!

Contrarian investor UK



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