Chinese private equity pumps millions into Range Resources

Range Resources will get a $50 million (£31 million) injection of funding after signing a Memorandum of Understanding (MoU) with a Chinese private equity firm. It has the makings of a decent deal for the tiny oil explorer, although the stockmarket's reaction suggests more than a little scepticism.

First off, Core Capital Management has promised to buy $20 million of Range shares at 1p each, a 26% premium to Friday's closing price of 0.795p. That will give it a 19.99% stake. Then, Core will provide $30 million of bonds, convertible into shares at 1p. They rose just 7% Monday to 0.85p.

"This is a major investment and whilst dilutive it proves that there are funds out there looking to invest in the right projects and managements," says oil industry expert and blogger Malcolm Graham-Wood.

Range boss Rory Scott Russell is breathing a sigh of relief. "The proposed financing puts Range on a firm footing and allows us to repay existing debt, as well as progress our rig maintenance, development and exploration programmes in Trinidad, which will in turn lead to significant production increases," he says. "The MOU also provides scope for the acquisition of new assets to complement and enhance Range's core portfolio."

However, Range investors have been burned before - the shares traded above 22p three years ago - and are rightly cautious. "This deal might just be the 'firm foundation' that the company is hoping will provide the springboard for future sustainable growth but they will understand if the shareholders, like the jury, remain out until solid proof of a Lazarus-like recovery is evident," says Graham-Wood.

Range says it will use the cash to crank up to the next phase at the Waterflood development. It will also come in handy after Range also announced Monday that it has finally got local government sign-off for the exploration & production licence for the St Mary's Block in Trinidad.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.