Range and Red Emperor lower despite "monumental" spudding
Shares in Range Resources (RRL) and Red Emperor Resources (RMP) sank lower on Tuesday as the companies announced the spudding of the Shabeel-1 well on the Dharoor Block in Puntland, Somalia.
Well operator Horn Petroleum is currently preparing to drill ahead to a total planned maximum depth of 3,800 metres.
Drilling operations have also commenced on the Shabeel North-1 well with the setting of the 30-inch surface casing and the drilling of a 50-metre pilot hole.
The AIM-listed companies said the Sakson 501 rig will be used to drill both wells and this will take around 90 days for each drilling and evaluation.
These two wells satisfy the first exploration period minimum work obligations of the production sharing contracts for both the Dharoor and Nugaal Blocks. They are the first oil exploration wells to be drilled in over 20 years in the country.
The spudding was described as a "monumental achievement" by Range's executive director Peter Landau.
He also took the opportunity to commend the company's shareholders, "who have stuck with the company and supported us over the past six years as we now realise one of our key objectives in drilling a well in Puntland".
However, the news failed to warm investors, who sent shares in Range almost 10% lower in the first half an hour of trading, while Red Emperor shares were down almost 13%.
Analyst view
"We retain our 'buy' recommendation and target price of 13.8p," said Leila Reddy at Panmure Gordon.
"We believe that Range offers an undemanding leverage to exploration: we value the Shabeel-1 and Shabeel North-1 prospects at an unrisked net asset value (NAV) of 7.3p per share and 9.1p per share respectively, translating to a risked exploration net asset value of 0.9p per share and 1.0p per share respectively on applying a cost of sales of 12%."
She added that the longer-term exploration upside of Range's portfolio is illustrated by the un-risked NAV of 92p per share attributed to the Herrera Formation and the wider Georgian and Puntland acreage.
Looking for more on Range Resources?The explorer's aims in Puntland are among other topics discussed in the Take2 episode: Your questions answered by Peter Landau.
