Annual Financial Report

RNS Number : 9407S

Range Resources Limited

30 September 2014

 



Annual Financial Report

Range today releases the financial report for the year ending 30 June 2014.  A copy of the full Annual Financial Report is available on the Company's website www.rangeresources.co.uk and also the Australian Securities Exchange website www.asx.com.au (ASX code: RRS).

Included with this announcement is a summary of Range's full year annual accounts for the year ended 30 June 2014 as extracted from the annual report, being:

•   Consolidated Statement of Profit or Loss and Other Comprehensive Income;

•   Consolidated Statement of Financial Position;

•   Consolidated Statement of Changes in Equity;

•   Consolidated Statement of Cashflows.

Chief Executive's Letter to Shareholders:

Dear Shareholder,

This is the first Annual Financial Report that I have the honour of contributing to following my appointment as Chief Executive Officer on 3 February 2014. I would like to take this opportunity to reflect on the progress made since I came on board and share my thoughts and observations as we look forward to the next twelve months and beyond.

It is clear that the year to 30 June 2014 has been particularly challenging for Range but I am firmly of the view that developments over the last six months have put the Company on to a much more solid footing. Since becoming Chief Executive, I have worked tirelessly with the rest of the Board and new senior management team to stabilise the situation we inherited and while there is still work to be done, we can be pleased with what we have achieved so far. 

The first step in rebuilding the Company was the appointment of a new management team and organisational restructure to ensure a fresh start, and to address the need for the right skills and expertise that were severely lacking. New hires from Board level through to the technical and operational level means that Range now has the appropriate team in place to deliver our plans. I cannot overemphasise how important these changes are as we look to rapidly grow the Company and I am particularly excited that we have been able to attract these high quality individuals to Range - clear testimony to their belief in the Company's assets and shared desire to create material value for Shareholders.

The next significant milestone was securing US$12 million in equity financing from a new investor, allowing us to refinance the complicated and expensive short-term debt from numerous providers that had plagued the Company for some time. The investor, Abraham Ltd, subscribed to Range shares at a significant premium to the market price at the time, demonstrating their confidence in the new team, as well as the underlying quality of assets and newly focused strategy at Range.

Further notable achievements centre on our core assets in Trinidad. We reported an increase of over 9% in 2P reserves as a result of our ongoing development drilling work, which more than replaces production since the last independent reserves report and again highlights the potential of our acreage. We also signed an Integrated Master Services Agreement with LandOcean, an extremely capable international oilfield services provider and I am delighted with the support they are providing to our technical teams both in Trinidad and London.

It is critical that Range operates our assets safely and responsibly and I would particularly like to highlight our Health, Safety, Security and Environment (HSSE) performance in Trinidad. The new management team has implemented comprehensive new set of HSSE policies and monitoring procedures to significantly improve our performance. During the year, we have seen a substantial improvement in all key HSSE indicators including Lost Time Incident frequency and environmental incidents. As part of our commitment to continuous improvement, we are looking forward to becoming certified under the Trinidad Energy Chamber's STOW (Safe to Work) initiative, one of the first onshore operators in Trinidad to achieve this.

Trinidad remains a favourable country to operate in, and the recently ratified fiscal incentives are expected to have a significant positive impact on our cashflows and returns. Adding low risk onshore exploration acreage in Trinidad continues to be a strategic priority for Range and I am pleased that earlier this year we were awarded the highly prospective St Mary's block as part of the Trinidad Onshore Bid Round 2013. 

However, there is no denying that the production figures reported for the year are disappointing and below where we were hoping to be at the time of reporting these results. This was largely due to a historic lack of investment in drilling rigs which has prevented our drilling operations from running at full capacity. Although our fleet has benefited from some maintenance improvements, our rigs will require further investment before they are capable of carrying out our ongoing drilling plans and running at a capacity that will enable us to achieve our production targets. That said, we were able to complete seven development wells during the year, six of which were drilled and completed since my appointment in February 2014, including the South Quarry QU 452 well which encountered encouraging results and has resulted in additional development targets. Whilst the slower than expected progress in Trinidad means we are unlikely to meet our previously stated target of an exit rate of 1,000 barrels of oil a day by the end of 2014, we are confident that the preparation work we have done to date, the ongoing improvements to our rig fleet and the improved understanding of our acreage that we have obtained through our relationship with LandOcean, will enable us to meet the previously stated production forecasts during the first half of 2015. I am particularly excited about the upcoming onshore exploration well on the Guayaguayare licence that is due to spud by Q1 2015. It will be the deepest well to be drilled by Range to date and will test two sandstone targets in the highly prospective Gros Morne formation. We are also busy progressing activity across our acreage including a multi-well reactivation programme at Beach Marcelle and the much anticipated waterflood programmes.

The Company has made good progress on its strategy of disposing of non-core assets. Since the new management team was appointed, we have reduced our stake in the Guatemalan project through a partial sale of our shareholding in Citation Resources, and have refocused our Colombia strategy to a carried position on three exploration assets in the highly prospective Magdalena and Putumayo basins, and exited from high-commitment PUT-6 and PUT-7 blocks. Additionally, given the Company's focus on onshore assets and Trinidad in particular, we will not be pursuing any formal agreements relating to potential offshore blocks in Puntland, whilst maintaining our non-operated stake in onshore blocks. We have also reached a commercially satisfactory outcome to the International Petroleum loan (subject to the sale of the Russian assets) and continue to see good progress with the disposal processes underway for Texas and Georgia.

Looking at our financial statements it is, of course, disappointing to report an overall loss of US$102 million. However, I believe it is important to look at this result in context of the year overall.  Given our strategy of focusing on Trinidad it was important to review the overall carrying value in the balance sheet of the non-core assets; the non-cash loss from discontinued operations and asset write-downs accounts for almost 60% of the total loss. Similarly, there were substantial non-cash related finance costs incurred as a result of the numerous historic financing arrangements that had been in place during the year. Our core business in Trinidad, however, continued to produce a credible and profitable performance with EBITDA for the year of approximately US$2.1 million. I believe this is a very encouraging result given the lack of investment in the business during the year and it underlines the potential for significant growth in profitability that can be achieved through increased production. 

Regarding financing, we are also pleased to have announced the signing of an up to US$15 million loan financing with Lind Asset Management LLC. This is a very important step in our new financing structure and it provides Range with flexible, medium-term financing from one single party, which allows us to progress our near to medium-term plans in Trinidad and once we demonstrate progress in this regard, we believe we will be in a strong position to obtain longer-term finance which remains an important target for the Company as we grow and develop our reserve base in Trinidad. Prior to entering into the Lind agreement, we undertook a detailed review of all the financing options that are available to Range at this time and we firmly believe that this facility is the most appropriate, and attractive option for us.

In summary, although I can fully understand that some Shareholders remain impatient for further positive news, in reality the Company in its current form is still young and there is no quick fix for certain inherited legacy issues. It is my intention to continue to transform Range in a pragmatic way for the long-term benefit of all Shareholders. So far, a large amount of time and effort has gone into cleaning up the business at a corporate level and refocusing the Company's strategy. These priorities are outlined in further detail in this announcement. The year ahead will see the Company maintaining focus on creating value from our assets in Trinidad and rationalising the remaining non-core assets in the portfolio. Range has evolved significantly since my appointment and I am confident that the future is bright for the Company and our Shareholders.

Finally, I wish to thank all our Shareholders and employees for their continued support during this transitional period and in the future, as we move into the next phase of our evolution.

Yours faithfully

Rory Scott Russell

Chief Executive Officer

Highlights of the Financial Year

Corporate - in the year to 30 June 2014 and post year-end:

·      The Board and senior management restructure completed with an experienced operational team now in place;

·      Completion of the farm-in agreement with Niko Resources on the Guayaguayare licences in Trinidad;

·      St Mary's block in Trinidad awarded as part of the Trinidad Onshore Bid Round 2013;

·      Loan settlement agreement signed with International Petroleum;

·      Integrated Master Services Agreement signed with oilfield services provider LandOcean;

·      New Positive Fiscal Incentives for oil development projects approved by Government of Trinidad;

·      Refocus of Colombia strategy to carried position on three exploration assets, and exit from high-commitment PUT-6 and PUT-7 blocks (exit from PUT-6 block - post year-end);

·      In line with the Company's strategy of focusing on onshore assets, the Company will not be pursuing any formal agreements relating to potential offshore blocks in Puntland (post year-end).

Operational - in the year to 30 June 2014 and post year-end:

·      Total gross oil production for the year in Trinidad was 208,979 bbls (average of 573 barrels of oil per day);

·      Over 9% increase in 2P reserves in Trinidad from 20.2MMbbo to 22.1MMbbo, as a result of the Company's ongoing development drilling programme and consequent update to development schemes in Trinidad;

·      Operations continued without any significant Health, Safety, Security and Environment (HSSE) incidents;

·      Completion of 7 development wells, 163 work-over wells and 339 well swabs;

·      Preparations are ongoing for the waterflood programmes in Trinidad;

·      Planning advanced for the spud of the first of two onshore exploration wells, which is expected to spud by Q1 2015;

·      One of the Company's production rigs was successfully mobilised to Beach Marcelle to reactivate wells as part of a multi-well programme. It is the first rig to be used for production work in the Beach Marcelle field since November 2011 (post year-end).

Financial - in the year to 30 June 2014 and post year-end:

·      Completion of US$12 million equity financing and corporate debt repayment deal, with total debt reduced from US$10.5 million to nil at year end;

·      Profitable performance from our core Trinidad business;

·      Balance sheet values assessed based on revised corporate strategy. Non-cash, asset write-downs on various assets totalling US$24.5 million. Georgia asset transferred to being held for sale (along with Texas asset) reflecting strategic decision to exit from these countries;

·      Total finance charges of US$ 21.7 million. The majority of these were non-cash however, with total cash outflow due to finance charges being less than US$5million;

·      US$15 million debt facility finalised (post year-end).

Outlook and Strategy

The Company aims to create sustainable shareholder value by growing oil production, developing discovered resources and exploring for new resources in its assets in Trinidad, while rationalising the remaining assets within the portfolio. In order to achieve this, the Company is pursuing the following business strategy:

1.         Maintain focus on Trinidad

·      Pursuing a clear strategy to benefit from the Company's unique position in Trinidad; Range is the largest private onshore acreage holder, with extensive onshore operating experience, in-depth knowledge of the local operating and economic environment, together with its wholly owned drilling subsidiary;

·      Range's extensive network of relationships with national and regional governments, national oil companies, key service providers and customers is a significant competitive advantage, and will increase the Company's chances of profitably exploiting its current portfolio and capturing new opportunities.

2.         Value creation

·      Range will utilise its extensive technical and subsurface knowledge as well as existing infrastructure in Trinidad to reduce capital and operating expenditure to enhance the financial returns from the exploration, appraisal and development of its core assets;

·      The Company plans to continue to successfully add low risk onshore oil exploration acreage to its portfolio in Trinidad.

3.         Production growth

·      Range aims to grow production in Trinidad safely and responsibly through a combination of infill and step-out development drilling, implementation of modern oilfield practices, secondary recovery (waterflood) projects and low risk exploration of deeper production horizons using its captive drilling and well services business.

4.         Rationalise the portfolio

·      The Company will seek to complete the rationalisation process of the current portfolio, to include a fewer number of prospective yet promising opportunities and redeploy capital to focus on efforts in Trinidad.

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2014
	Note					Consolidated
						2014 US$		2013 US$
Revenue from continuing operations		3				21,185,745		26,073,811
Operating expenses						(9,549,610)		(6,304,313)
Royalties						(7,353,237)		(6,990,430)
Depreciation, depletion and amortisation						(7,909,945)		(8,307,574)
Cost of sales		4a				(24,812,792)		(21,602,317)
Gross profit /(loss)						(3,627,047)		4,471,494
Other income and expenses from continuing operations
Other income		3				1,221,108		484,539
Finance costs		4b				(21,797,779)		(4,027,704)
General and administration expenses		4b				(14,485,854)		(13,404,402)
Assets written-off		4c				(24,267,968)		-
Exploration expenditure		4d				(1,163,920)		(5,839,253)
Share of net loss of investments in associates		19				(659,400)		-
Loss before income tax expense from continuing operations						(64,780,860)		(18,315,326)
Income tax expense		6				(906,620)		(2,628,763)
Loss after income tax from continuing operations						(65,687,480)		(20,944,089)
Profit/(loss) from discontinued operations, net of tax		5a				(36,854,510)		639,828
Loss for the year attributable to equity holders of Range Resources Limited						(102,541,990)		(20,304,261)
Other comprehensive income/(loss)
Items that may be reclassified to profit or loss
Revaluation of available for sale financial assets		27d				325,263		(1,105,172)
Exchange differences on translation of foreign operations		27c				(411,110)		(681,064)
Other comprehensive income/(loss) for the year, net of tax						(85,847)		(1,786,236)
Total comprehensive loss attributable to equity holders of Range Resources Limited						(102,627,837)		(22,090,497)
Loss per share from continuing operations attributable to the ordinary equity holders of the Company:
Basic loss per share (cents per share)		8a				(1.85)		(0.86)
Diluted loss per share (cents per share)		8b				n/a		n/a
Loss per share attributable to the ordinary equity holders of the Company:
Basic loss per share (cents per share)			8a			(2.89)		(0.95)
Diluted loss per share (cents per share)			8b			n/a		n/a

The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes contained in the Annual Financial Report.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2014
	Note	Consolidated
		2014 US$		2013 US$
ASSETS
CURRENT ASSETS
Cash and cash equivalents	9		2,977,410	1,732,231
Restricted deposits	17		-	3,480,000
Trade and other receivables	10		5,338,769	14,297,007
Other current assets	11		728,544	3,818,816
			9,044,723	23,328,054
Non-current assets classified as held for sale	12		11,000,000	8,769,792
TOTAL CURRENT ASSETS			20,044,723	32,097,846
NON-CURRENT ASSETS
Deferred tax asset	6		462,325	216,920
Available for sale financial assets	13		876,347	822,751
Goodwill	15		46,198,974	46,198,974
Property, plant and equipment	16		11,254,269	12,300,418
Exploration & evaluation expenditure	17		523,605	9,453,636
Producing assets	18		82,517,820	85,422,826
Investments in associates	19		2,779,476	37,295,453
Other non-current assets	20		1,500,000	15,324,218
TOTAL NON-CURRENT ASSETS			146,112,816	207,035,196
TOTAL ASSETS			166,157,539	239,133,042
CURRENT LIABILITIES
Trade and other payables	21		8,705,005	7,170,178
Current tax liabilities			310,335	1,806,030
Borrowings	22a		-	11,026,440
Option liability	22b		2,189,913	-
Provisions	23		696,244	654,873
TOTAL CURRENT LIABILITIES			11,901,497	20,657,521
NON-CURRENT LIABILITIES
Deferred tax liabilities	24		44,376,033	44,995,633
Employee service benefits	25a		584,746	482,092
Other non-current liabilities	25b		-	431,211
TOTAL NON-CURRENT LIABILITIES			44,960,779	45,908,936
TOTAL LIABILITIES			56,862,276	66,566,457
NET ASSETS			109,295,263	172,566,585
EQUITY
Contributed equity	26		352,599,569	314,199,634
Reserves	27		27,862,006	26,991,273
Accumulated losses			(271,166,312)	(168,624,322)
TOTAL EQUITY			109,295,263	172,566,585

The above consolidated statement of financial position should be read in conjunction with the accompanying notes contained in the Annual Financial Report.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 FOR THE YEAR ENDED 30 JUNE 2014

Consolidated	Note	Contributed Equity	Accumulated Losses	Foreign Currency Translation Reserve	Available for Sale Investment Revaluation Reserve	Share-based Payment Reserve	Option Premium Reserve	Total Equity
		US$	US$	US$	US$	US$	US$	US$
Balance at 1 July 2012		283,645,540	(148,320,061)	4,096,806	779,909	13,970,253	9,815,752	163,988,199
Other comprehensive income/(loss)		-	-	(681,064)	(1,105,172)	-	-	(1,786,236)
Loss attributable to members of the company		-	(20,304,261)	-	-	-	-	(20,304,261)
Total comprehensive loss  for the year			(20,304,261)	(681,064)	(1,105,172)	-	-	(22,090,497)
Transactions with owners in their capacity as owners:
Issue of share capital	26	30,905,011	-	-	-	-	-	30,905,011
Exercise of options	26	-	-	-	-	-	-	-
Cost of share-based payments		-	-	-	-	114,789	-	114,789
Issue costs	26	(350,917)	-	-	-	-	-	(350,917)
Balance at 30 June 2013		314,199,634	(168,624,322)	3,415,742	(325,263)	14,085,042	9,815,752	172,566,585

		US$	US$	US$	US$	US$	US$	US$
Balance at 1 July 2013		314,199,634	(168,624,322)	3,415,742	(325,263)	14,085,042	9,815,752	172,566,585
Other comprehensive income/(loss)		-	-	(411,110)	325,263	-	-	(85,847)
Loss attributable to members of the company		-	(102,541,990)	-	-	-	-	(102,541,990)
Total comprehensive loss for the year		-	(102,541,990)	(411,110)	325,263	-	-	(102,627,837)
Transactions with owners in their capacity as owners:
Issue of share capital	26	32,467,157	-	-	-	-	-	32,467,157
Unissued share capital	26	6,000,000	-	-	-	-	-	6,000,000
Exercise of options	26	652,778	-	-	-	-	814,761	1,467,539
Cost of share-based payments		-	-	-	-	141,819	-	141,819
Issue costs	26	(720,000)	-	-	-	-	-	(720,000)
Balance at 30 June 2014		352,599,569	(271,166,312)	3,004,632	-	14,226,861	10,630,513	109,295,263

The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes contained in the Annual Financial Report.

CONSOLIDATED STATEMENT OF CASH FLOWS FOR YEAR ENDED 30 JUNE 2014
	Note	Consolidated
		2014	2013
		US$	US$
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers		21,786,510	24,662,614
Payments to suppliers and employees		(19,638,193)	(25,042,225)
Payments for exploration and evaluation expenditure		(1,163,920)	(5,839,253)
Income taxes paid		(2,236,840)	(4,736,902)
Interest received		10,293	183,714
Interest & other finance costs		(4,979,631)	(1,678,438)
Net cash outflow from operating activities	31	(6,221,781)	(12,450,490)
CASH FLOWS FROM INVESTING ACTIVITIES
Payment for property, plant & equipment		(857,934)	(1,661,699)
Payment for available for sale financial assets		-	(200,000)
Proceeds from sale of available for sale financial assets		-	2,091,522
Payment for producing assets		(3,146,149)	(8,396,480)
Payment to investments in associates		(2,715,517)	(6,962,418)
Payments for exploration and evaluation assets		(683,887)	(2,202,930)
Payments for assets held-for-sale		-	(912,687)
Payment to restricted deposits		-	(3,480,000)
Loans to external parties		(700,000)	(9,001,871)
Net cash outflow from investing activities		(8,103,487)	(30,726,563)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of equity		16,002,037	21,504,846
Payment of equity issue costs		(720,000)	(350,917)
Proceeds from borrowings		16,407,790	21,499,815
Repayment of borrowings		(16,119,380)	(8,323,022)
Net cash inflow from financing activities		15,570,447	34,330,722
Net increase / (decrease) in cash and cash equivalents		1,245,179	(8,846,331)
Cash and cash equivalents at beginning of financial year		1,732,231	10,578,562
Cash and cash equivalents at end of financial year	9	2,977,410	1,732,231

The above consolidated statement of cash flows should be read in conjunction with the accompanying notes contained in the Annual Financial Report.

Contacts

Range Resources Limited
Rory Scott Russell (CEO)

Evgenia Bezruchko (IR)

Cantor Fitzgerald Europe
(Nominated Advisor and Broker)

David Porter / Sarah Wharry
(Corporate finance)

Richard Redmayne (Corporate broking)

t.   [phone]

Buchanan (Financial PR - UK)

Ben Romney / Helen Chan

t.   [phone]

e.  [e-mail]

MAGNUS (Financial PR - Australia)

Rupert Dearden / Richard Glass

t.   + 61 8 6160 4900

e.  [e-mail]

Australian Office

945 Wellington Street

West Perth, WA 6005

Australia

t.   [phone]

f.   [phone]

UK Office

Suite 1A, Prince's House
38 Jermyn Street
London, SW1Y 6DN
United Kingdom

t.   [phone]

f.   [phone]

e.  [e-mail]

www.rangeresources.co.uk

 

END

 

 

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