Annual Report 2016

 

Range today releases the financial report for the year ending 30 June 2016.  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).

 

Commenting on today's announcement, Yan Liu, Chief Executive Officer, said:

 

"During the period, the Company has achieved a number of significant milestones as we move towards full implementation of the waterflood projects and growth in production. We continue to firmly believe in the long-term prospects of the Trinidad assets to deliver value to shareholders and look forward to continued progress. There is a lot of work to be done to start generating long-term sustainable profitability, but we are confident that the right building blocks are now in place and will remain focused on improving performance in the years ahead."

 

HIGHLIGHTS OF THE FINANCIAL YEAR

 

Completion of funding: The Company has established a stable funding position to underpin its growth by completing a US$30 million equity financing at a 50% premium to the share price.

 

Increase in reserves: The Company commissioned an independent reserves audit with 2P reserves increasing by 11% to 24.4 million barrels, which validates the quality and potential of the Trinidad assets. 

 

Commencement of waterflood projects: Water injection on two waterflood projects commenced, which account for the majority of the Company's reserves. These projects will be crucial to increasing Trinidad production towards 2,500 bopd target by the end of 2017.

 

Significant improvement in HSE performance: During the year, all key HSE indicators substantially improved, including the Lost Time Incident frequency rate which decreased by 75%.

 

Royalty rates reduced in Trinidad: Range signed an agreement to reduce the overriding royalty rates on the Company's producing fields in Trinidad, which is particularly encouraging during the period of lower commodity prices.

 

Licences: The Company signed an amendment agreement to double its interest in the Guayaguayare block.

 

Strengthened technical team: Two new independent Directors and a Trinidad General Manager appointed, all bringing significant technical experience and broad industry knowledge.

 

Refined strategy of acquisition-led growth: The Company continues to pursue acquisition opportunities of new transformational assets, whilst continuing implementation of waterflood projects in Trinidad.

 

Continued strengthening of the relationship with LandOcean: The strategic partnership not only allows Range to benefit from LandOcean's technical expertise and vast experience, but also provides Range with financial flexibility from the beneficial credit terms.

 

Financial:  

-      Cash outflow from operating activities was significantly lower than the prior year at US$4.2 million (2015: US$7.0 million).  Range benefits from the credit terms offered by LandOcean which minimises cash outflow whilst production growth is achieved from implementation of the waterflood programme and selected development drilling;

-      The Group's revenue was US$7.1 million (2015: US$13.2 million), a decrease of approximately 46%. Group production was broadly stable for the year and the fall in revenue is due to reduced average oil price realised of US$36.40/barrel (2015: US$69.46/barrel);

-      This fall in revenues contributed to an increase in the gross loss of US$7.8 million (2015: US$2.9 million). The other main factor in the gross loss was an increase for the year overall in operating costs to US$7.3 million (2015: US$6.4 million);

-      General and administrative costs decreased materially by 66% overall during the year and totaled US$3.4 million (2015: US$9.9 million). This was achieved as a result of stringent cost cutting measures implemented with significant reduction seen in discretionary expenditure, lower staff costs and elimination of corporate management costs;

-      During the year Range reduced the carrying value of the Trinidad assets by US$20.6 million to US$78.8 million, which was principally due to the substantial, and sustained drop in oil prices seen throughout the year. The majority of this impairment was reported during the half-year unaudited results announced in March and a small further impairment of US$3.4 million has been adopted to recognise historic wells which are no longer in production. This valuation does not take into consideration the inherent value in the exploration acreage and resource potential with the Trinidad assets and the Company continues to firmly believe in the long-term prospects of these assets to deliver value to shareholders;

-      Total loss after tax for the year of US$43.9 million (2015: US$30.3 million). Excluding impairments however, the underlying loss after tax has improved by 15% to US$17.4 million (2015: US$20.4 million);

-      Despite the impairments during the year and the loss from operations, the balance sheet overall remains strong with total assets of US$158.0 million (2015: US$161.9 million) and net assets of US$72.2 million (2015: US$95.0 million); and

-      Total cash (including restricted cash) of US$21.0 million, together with the remaining funding available from LandOcean for the Trinidad work programme positions Range in a strong position to meet its growth ambitions during 2017.

 

Included with this announcement is a summary of Range's full year audited annual accounts for the year ended 30 June 2016 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; and

-      Notes to Financial Statements.

 

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ("MAR"). Upon the publication of this announcement via Regulatory Information Service ("RIS"), this inside information is now considered to be in the public domain.

 

 

Statement from the Chairman and Chief Executive Officer

 

Dear fellow shareholder

 

2016 has been another year of low oil prices which continue to impact our industry. Despite this challenging environment, as a result of ongoing initiatives and a proactive approach to running a successful company, we have shown that Range is a fundamentally strong and resilient business.

 

The actions undertaken during the year were firmly focused on pursuing new projects, cutting costs, strengthening the balance sheet, and progressing waterflood projects in Trinidad. We have achieved a number of significant operational and corporate milestones, including:

• Increased 2P reserves in Trinidad by 11% to 24.4 mmbbl;
• US$30 million equity financing completed at a 50% premium to the share price;
• Extended credit terms agreed with LandOcean Energy Services Co., Ltd ("LandOcean") for oilfield work undertaken in Trinidad;
• Further Board and management restructuring completed, with Mr Zhiwei Gu appointed as a Non-Executive Chairman and three new Non-Executive Directors appointed to the Board. Mr Lijun Xiu, an oil industry veteran with long and distinguished career of over 30 years, appointed as Trinidad General Manager;
• Significant progress on the waterflood programme continued with water injection commencing on two projects;
• Four development wells successfully drilled during the period, with two further wells drilled subsequently to the period end;
• Substantial, positive progress achieved in obtaining acceptable outcomes to a number of historic legal issues; and
• Strong cash position of circa US$21 million (including restricted cash of US$8m).

 

We have ended the financial year with increased reserves in Trinidad, strengthened technical expertise on the Board, cash position of circa US$21 million, and a mutually beneficial relationship with our strategic partner LandOcean. Range is a leaner, stronger and better organised company than ever before, ready to take on new opportunities that lie ahead and fulfil our growth ambitions.

 

Acquisition-led growth strategy

 

Following a Board review, our strategy has been refined and can be summarised as follows:

 

1.  Optimise Trinidad assets by focusing on waterflood projects and continuing low cost production and reserves growth;

2.   Pursue growth opportunities through acquisition of new assets;

3.  Build an asset base demonstrating significant production, reserves and cashflows, whilst maintaining further growth potential through selective exploration;

4.   Continue to evolve through strong technical strategic partnerships, applying the best talent and the best technologies; and

5.   Maintain financial strength, flexibility and stringent cost control.

 

During the period, we have actively vetted numerous acquisition prospects. We are confident in the longer term oil price recovery and focused on taking advantage of the opportunities presented in this lower commodity price environment, which is favourable for acquirers and presents unique opportunities for companies with strong cash positions, like Range.

 

We have not limited ourselves to looking at traditional E&P projects and have expanded our search globally. Those projects that are in development / production stage, with near term cashflows, are of particular interest to Range. Attractive valuation is key, and having reviewed numerous opportunities, we have turned down a number of potential targets that we believed were overvalued.

We are continuing to actively pursue numerous new projects. We believe the Company and its team have all the credentials to take advantage of the current downturn in the industry and maximise future shareholder value through opportunistic acquisitions.

 

Realising value from Trinidad

 

2016 has been a year of record investment into our Trinidad operations, with over US$16 million incurred during the period. As a result of this investment, we expect to see a notable increase in production as we realise the inherent value in these assets from the successful implementation of the waterflood projects. Our ongoing commitment in Trinidad is to ensure that the business is self-sustaining over the long-term, and generates returns for shareholders particularly in a lower commodity price environment.

 

We have been working to reorganise our operations in Trinidad to cut costs, improve efficiencies and position ourselves for the future. We have already implemented material and sustainable cost reductions but there is a lot more to be done, particularly to reduce operating costs. We will continue to actively work with our partner LandOcean to drive costs down even further.

 

Mr Xiu has been appointed as Trinidad General Manager, to oversee all Trinidad operations and strengthen the local management team. He has a long and distinguished geological career of over 30 years working for China National Petroleum Corporation, and is a valuable addition to our management team.

 

Our assets in Trinidad provide a balance of exploration, appraisal, development and production activities. We are encouraged with the increase in our independently audited 2P reserves by 11% to 24.4 mmbbls during the year, which validates the quality and potential of the Trinidad assets. 

 

During the period, we produced 193,868 bbls net to Range, which is broadly unchanged from our production last year. The production was line with our expectations, given the limited number of wells drilled during the period and our continued longer term focus on commencing production from waterflood projects.

 

During the period, waterflood projects were the biggest component in our capex programme, with approximately US$13.5 million incurred as follows:

 

·      Waterflood development work (well workovers, gathering station, water injection system, power supply, road improvements) - US$9.4 million;

·      Design work (drilling engineering design, surface facility design) - US$1.2 million;

·      Studies and evaluation reports - US$1.6 million; and

·      Infrastructure (power systems, roads, civil engineering, communication systems) - US$1.3 million.

As a result of this continued work, initial water injection commenced on two waterflood projects. Together with LandOcean, we are continuing to commission the remaining facilities and infrastructure, in order to increase water supply and achieve projected production rates towards our goal of 2,500 bopd by the end of 2017 (calendar year).

 

The exploration component also gives much to look forward to, and we are hopeful to commence drilling on the Canari North exploration prospect early in 2017 once the drilling rig becomes available.

 

Our commitment to Health, Safety and Environment ("HSE") is a number one priority for all our operations and is crucial to our success as a growing business. During the year, we have seen a substantial improvement in all key HSE indicators including Lost Time Incident ("LTI") frequency and environmental incidents, which is a notable achievement. The Company is proud to have decreased the LTI frequency rate by 75% to 0.61, which is significantly below the average of 1.35 reported by the International Association of Drilling Contractors for the onshore US Oil & Gas Industry.

 

We are encouraged by the support of Petroleum Company of Trinidad and Tobago Limited ("Petrotrin") and the Trinidad government who signed an agreement to reduce the overriding royalty rates on our producing fields in Trinidad. These incentives are particularly welcome during the period of lower commodity prices for producers like Range. We are hopeful that the government will continue to incentivise operators to invest into growing production onshore Trinidad through further incentives, such as reduced rates of Supplemental Petroleum Tax.

 

Our strategic partners

 

We always aim to build and maintain high quality long lasting relationships with our communities, governments and partners. We are delighted to have the ongoing support from our partner and oilfield services provider LandOcean, one of the largest listed oilfield services providers in China.

 

LandOcean provides an extensive range of services to the oil and gas industry internationally, from research and development of software technology to various product sales and the provision of technical services. Headquartered in Beijing, LandOcean has over 400 employees, and attracts top talent including professors, senior engineers, post-doctorates, doctors and masters in the fields of geology, geophysics, and reservoir engineering.

 

The two companies have been working together since 2014 and LandOcean has continued to support Range throughout the period despite the challenging macro-environment.

 

During the year, Range and LandOcean have focused on implementing the waterflood projects targeting to bring them into first production towards the end of 2016, with substantial progress made to date. The initial water injection has commenced on both projects as a result of the hard work of both teams, and the main effort now will be aimed at completing the full schemes and increasing water injection rates. LandOcean provides Range with credit terms of 720 days for up to US$50 million which covers work related to these waterflood projects.

 

During the period, LandOcean also added four brand new rigs to its fleet in Trinidad. The addition of these modern rigs has been extremely beneficial in delivering safe and efficient drilling operations and continuing Range's drilling campaign. Two of the rigs are already being successfully used, which has seen wells being completed ahead of schedule, and in line with high safety standards.

 

The strategic partnership not only allows Range to benefit from LandOcean's technical expertise and vast experience, but also provides Range with financial flexibility from the generous credit terms, as it allows the Company to repay LandOcean from future cashflows once the expected production levels ramp up. In addition, LandOcean has agreed to further extend its credit terms for drilling services and earlier work undertaken under the first purchase order.  We look forward to continued strengthening of our relationship and mutually benefitting from our joint success.

 

During the year, we were also pleased to have completed funding with a new cornerstone investor, Beijing Sibo Investment Management LP ("Sibo"), which invested US$30 million into Range at a significant premium to the share price at the time of the transaction. This investment came at a time when securing funding was particularly challenging for oil juniors, therefore it is a true testimony of the underlying value of the Company's assets and the team.

 

Sibo has played a key role in strengthening our balance sheet and providing us with financial flexibility to consider new acquisitions. Sibo currently holds 32% interest in Range's share capital and has appointed Mr Yu Wang, as a representative Director during the period.

 

Platform for growth

 

During the period, we have appointed two new independent Non-Executive Directors, Mr Lubing Liu and Dr Yi Zeng, both bringing significant experience and broad industry knowledge. We are very fortunate to have attracted such high calibre oil industry veterans, from which Range will benefit considerably. We have the right mix of technical and management expertise to further strengthen Range's prospects and fulfil our growth ambitions.

 

The Company has gone through a significant investment phase in Trinidad over the last 12 months and the focus going forward will be on driving efficiencies to ensure the Trinidad business is self-sustaining over the long-term. The continued focus in the next year will be on the waterflood projects which account for the majority of reserves and is a critical element in our goal of increasing production and generating returns for shareholders.

 

We will continue to adapt to changes in the industry and are determined to maximise shareholder value. The remainder of 2016-2017 holds significant potential to add exciting new projects to our portfolio and build upon the share price recovery.

 

We would like to thank all shareholders for your support, and welcome those who joined during the year. We also thank our fellow Directors, staff and management team for their hard work over the past year and look forward to the continuing growth into the future.

 

Yours Faithfully

 

                               

 

Zhiwei Gu                                              Yan Liu

Chairman                                               Chief Executive Officer

 

 

 

DIRECTORS' REPORT

 

The Directors of Range Resources Limited ("Range" or "the Company") and the entities it controls (together, the "Group") present the financial report for the year ended 30 June 2016.

 

DIRECTORS

 

The names of the directors in office and at any time during or since the end of the year are:

 

Mr Zhiwei Gu	Non-Executive Chairman	appointed 25 May 2016
	Non-Executive Director
Mr Yan Liu	Executive Director	resigned 31 January 2016, re-appointed 25 May 2016
	Non-Executive Director	appointed 31 January 2016, resigned 25 May 2016
Mr David Yu Chen	Non-Executive Director	appointed 25 May 2016
	Non-Executive Chairman	resigned 25 May 2016
Ms Juan Wang	Non-Executive Director
Mr Yu Wang	Non-Executive Director	appointed 30 September 2015
Mr Lubing Liu	Non-Executive Director	appointed 16 June 2016
Dr Yi Zeng	Non-Executive Director	appointed 16 June 2016

 

 

Directors have been in office since the start of the financial year to the date of this report unless otherwise stated.

 

 

COMPANY SECRETARY

 

The following persons held the position of company secretary during the financial year:

 

Mr Nick Beattie 

Ms Sara Kelly   

 

 

PRINCIPAL ACTIVITIES

The principal activity of the Group during the financial year was oil and gas exploration, development and production in Trinidad. The Company holds further interests in non-core oil and gas projects in Georgia and Guatemala and continues to explore potential disposal options of its interests.

In line with the growth strategy of the Company to create value for shareholders, Range continues to evaluate potential acquisitions of high quality value-generating assets. 

 

FINANCIAL RESULTS

 

·      The Consolidated Statement of Profit or Loss and Other Comprehensive Income for the financial year shows a net loss attributable to owners of US$43,874,885 (2015: net loss of US$30,279,054).

·      The Group's revenue was US$7,062,226 (2015: US$13,152,954). The decrease of US$6,090,728 (46% from prior year) was primarily due to lower oil prices in the 2016 financial year which averaged US$36.4/bbl. (2015: US$69.5/bbl.).

·      The net loss after tax from continuing operations was US$38,994,885 (2015: US$22,581,895). The increased loss is primarily due to an impairment charge against the carrying value of the Trinidad assets in the current year which totalled US$20,564,829

·      Net cash outflow from operating activities for the period was US$4,186,035 (2015: outflow US$6,955,264).

·      General and administrative costs overall decreased by US$6,548,456 (65% reduction) to US$3,400,038 (2015: US$9,948,494) as a result of material cost cutting measures implemented across the Group.

·      The net assets of the Group decreased by US$21,786,324 to US$72,237,132 (2015: US$95,023,456). This decrease is primarily due to the loss reported from operations combined with impairments made in the year to the Group's Trinidad asset (impairment of US$20,564,829), Georgian asset (US$3,750,000) and Guatemalan asset (impairment of US$1,000,000).

 

DIVIDENDS

No dividends have been declared, provided for or paid in respect of the financial year ended 30 June 2016 (2015: Nil).

 

Operations

 

TRINIDAD

The Company holds 100% interest in three onshore production licences - Morne Diablo, South Quarry and Beach Marcelle, as well as interests in two exploration blocks - St Mary's and Guayaguayare.

Given the continued lower oil price environment and in line with ongoing cost management, during the period the Company completed a review of its work programme for 2016 (calendar year). As a result, the Company identified implementation of its waterflood projects as the highest priority, which have subsequently been the focus of operations.

Production

 

The Company's oil and gas production for the period in Trinidad was 193,868 bbls (average of 531 bopd) net to Range. Production during the year was broadly unchanged from the previous year (2015: average of 562 bopd). This production is in line with internal expectations, given a limited number of development wells drilled during the period as well as reduced number of workovers undertaken.

Range continues with implementation of its waterflood projects and completion of the development work programme, aiming towards achieving production guidance of 2,500 bopd by the end of 2017 (calendar year).

Reserves

Range commissioned an independent reserves audit as at 30 June 2016 for the Company's licences in Trinidad. The audit report was compiled by the independent petroleum consultants, Rockflow Resources Limited ("Rockflow").

 

The audit showed an increase in the Company's total 2P reserves by 11% from the previously reported 22.0 MMBOE (30 June 2015) to 24.4 MMBOE. The reserve increase was a result of the adoption of a wider range of in-place volumes, and recovery estimates from waterflooding for the Beach Marcelle licence.

 

Development and workover programme

 

During the year, the Company drilled four development wells, as follows:

Well	Field	Total Depth (ft)	Status
MD 249	Morne Diablo	2,610	On production
GY 679	Beach Marcelle	2,000	On production
GY 680	Beach Marcelle	1,685	On production
MD 250	Morne Diablo	4,100	Under production testing

 

In February 2016, the Company identified five development wells for drilling, based on their risk and economic returns. The first of the five wells, the MD 250 well was drilled during the period (included in the table above).

Subsequently to the period end, the Company drilled two further wells, the MD 251 and the QUN 159 wells. The MD 251 well is a follow on well which was drilled to a total depth of 3,900 feet from the same drilling pad as the MD 250 well. The QUN 159 well was also successfully drilled to a total depth of 2,600 feet at the Morne Diablo field.

All three wells (the MD 250, MD 251 and QUN 159) are undergoing production testing. The remaining scheduled development wells to be drilled during 2016 (calendar year) include one well in Morne Diablo and one well in Beach Marcelle.

Given the Company's continued focus on delivery of the waterflood projects, Range will be scaling back on its other work programme in Trinidad, with no development wells currently planned for 2017.

The Company also reduced the number of workovers being undertaken, which contributed to the production decline during the period. Range will keep the workover programme under regular review and intends to continue workover operations on the most profitable wells.

Waterflood programme

Beach Marcelle South East block

The Company and LandOcean have been making continued progress with implementing the full waterflood scheme on the South East block of the Beach Marcelle project during the period, including workovers on the selected waterflood wells; repair work on these selected wells; installation of injection stations; engineering design of the gathering station; and installation of pipeline network.

Initial water injection commenced during the period at an average rate of approximately 600 barrels of water per day ("bwpd"). This is the maximum rate that can be achieved based on one water source well being used and power and infrastructure in the area. The water source well can produce higher volumes depending on power availability, which is expected to increase once power network installation has been upgraded.

In order to achieve the expected average production of 1,600 bopd from this block, Range estimates that approximately 11,000 bwpd of water injection rate is required. The Company will initially use water from water source wells, which will be supplemented by produced water as the project progresses. The number of water source wells will be adjusted as the availability of surface facilities is increased, and depending on the response from the aquifer. Water injection volumes will increase accordingly as additional wells are commissioned.

The Company has been working on the installation of a high pressure pipeline network, with the majority of work (7,220 m) already completed. Given that Range's Beach Marcelle field is located on the eastern side of Trinidad where numerous major operators have processing facilities and oil and gas pipelines that pass through the field, Range requires various permissions in areas where it plans to install the remaining water injection pipeline.

The Company has been working with the relevant operators to obtain the necessary approvals and is focused on securing these approvals as soon as possible. The remaining pipeline network (530 m) is expected to be completed once the agreement is reached with these operators.

The average production from the field over an 8-year period is expected to be approximately 1,600 bopd, subject to approvals in respect of the remaining pipeline installation and access to higher water injection volumes. Beach Marcelle waterflood production is estimated to be the largest contributor towards the 2,500 bopd production target by the end of 2017.

Morne Diablo Expansion project

The initial water injection on the project commenced in December 2015 and is continuing at an average rate of 200 bwpd, which is the maximum volume of water available at present from Range's producer wells.

To get access to additional water supply, Range has been negotiating with Petrotrin to use produced water from Petrotrin's existing operations, which will increase water injection by 3,000 bwpd. The agreement with Petrotrin has been reached and Range expects to execute final agreements during the remainder of 2016 (calendar year). 

The Company will be constructing a new water pipeline to connect the gathering and injection stations at the Morne Diablo field to Petrotrin's water treatment facility. Range is pleased to advise that the environmental approvals for use of the additional water and construction of the new water pipeline have been granted by the regulatory body in Trinidad. 

The average production over an 8-year period is expected to be approximately 200 bopd, and is forecast to be achieved when water injection is increased to approximately 3,000 bwpd.

Additional waterflooding areas

The Company has identified additional areas around the previously drilled development wells in the South Quarry and Morne Diablo fields, which could be suitable for waterflooding. The Company continues to evaluate these areas and study the field for waterflooding potential.

Exploration programme

Guayaguayare block

During the period, Range signed an amendment agreement to acquire the full remaining interest of Niko Resources Ltd. ("Niko") in the Guayaguayare block. Following completion of the agreement, Range holds an 80% interest in the Deep PSC and a 65% interest in the Shallow PSC (subject to final government approvals). Range is the Operator of the block.

Range also applied for the extension of the PSCs which expired during July 2015. Following ongoing discussions with the Ministry of Energy and Energy Industries ("MEEI"), Range is confident that the extension will be granted once the first shallow commitment well on the license (Canari North well) completed. The well location has been prepared with the well expected to spud during early 2017 once the drilling rig is available. 

The Canari North well will be the first exploration well to be drilled by Range in Trinidad, and any success with the well is expected to de-risk the Moruga sub-basin and could result in material potential upside in the Guayaguayare block with multiple follow-on prospects and leads to be tested by further exploration drilling. The planned drilling programme is for a vertical well to be drilled to a target depth of 5,000 ft. The well is expected to spud once the rig is approved for drilling by the government.

St Mary's block

During the period, Range completed a comprehensive evaluation of all existing data on the block which was presented to Range's management team. The Company has also been working with the government of Trinidad and Tobago to obtain high resolution gravity surveys and additional seismic data for the block. Subsequent to the period end, this technical data was received. The Company now intends to conduct further studies utilizing the data provided. This completed work will guide future work programme to be undertaken. 

 

Royalty rates reduced

During the period, Range signed an agreement with Petrotrin to reduce the overriding royalty rates ("ORRs") on the Company's producing Morne Diablo, Beach Marcelle and South Quarry fields in Trinidad. The revised ORRs apply when the received oil price is below US$50 per barrel. The changes took effect from 16 March 2016 and apply retrospectively to sales made from 1 February 2016 onwards.

The reduced ORRs are particularly encouraging for producers like Range and are a welcome incentive introduced by Petrotrin during the period of lower commodity prices.

Range is also encouraged by the comments in the 2016 Mid-Year Budget Review that the government of Trinidad and Tobago intends to review the level of Supplemental Petroleum Tax on crude oil prices moderately higher than US$50 per barrel. This review is anticipated to be completed during 2016. 

Strategic partnership

 

During the period, Range continued its strategic partnership with LandOcean. LandOcean acts as the preferred oilfield services contractor to Range in Trinidad, as part of the Integrated Master Services Agreement entered into during 2014.

 

During the period, LandOcean added four brand new drilling rigs to its fleet in Trinidad with drilling capabilities of 13,000 ft. (4,000 m), 6,500 ft. (2,000 m), 4,900 ft. (1,500 m) and 3,200 ft. (1,000 m). Two of these rigs (4,000 m and 1,500 m) have been granted all necessary regulatory and government approvals and were successfully brought into operations. These rigs are currently being used for Range's drilling programme. Range continues to assist RRDSL in obtaining the necessary certification and approvals for the remaining two new drilling rigs.

 

During the period, LandOcean agreed to further extend its credit terms on drilling services to 24 months (previously 12 months). It is a rolling credit facility and payments will be due after 24 months from the date each invoice is agreed. The terms of the credit terms have not changed and in line with the previous agreement announced on 1 May 2015, and interest will be payable by Range at the rate of 10% per annum.

 

LandOcean also agreed to defer the outstanding payment of US$2.5 million for work in relation to Purchase Order 1 by a further 12 months. In addition, LandOcean provides Range with credit terms of 720 days for all work undertaken as part of Purchase Order 2 for US$50 million which covers work relating to waterflooding projects.

 

NON-CORE ASSETS

 

Georgia

During the period, the Company along with the other investors in Strait Oil & Gas ("SOG") have continued to pursue disposal of their shareholding in SOG (SOG holds interests in Block VIa in Georgia). SOG advised Range that the Production Sharing Agreement ("PSA") across Block VIa remains in good standing. Ongoing sale negotiations continue with a potential interested party.

Guatemala

During the period, the Company was unable to engage with the Operator of the project, Latin American Resources ("LAR") or obtain any information with regards to operations. The Company is seeking legal advice with regards to this matter and will update shareholders as appropriate.

Corporate

 

Equity financing completed

 

During the period, the Company secured a new cornerstone investor, Sibo. The total investment by Sibo was US$30 million at a subscription price of £0.008 per share - the first tranche of the proceeds had been received in the previous financial year, and the remaining US$22.1 million was received during the period. The Company's Directors and senior management also subscribed for ordinary shares totalling US$0.3 million at the same subscription price.

 

Acquisition strategy

 

In line with the growth strategy of the Company to create value for shareholders, and to provide Range with additional production and revenue, the Board continues to evaluate potential acquisitions of high quality assets at attractive valuations. During the period, the Company has witnessed an increase in the available attractive opportunities, and is hoping to conclude an acquisition in the coming months. The Board believes the Company is well positioned to take advantage of this opportune environment for acquirers.

Directorate and management changes

 

During the period, Mr Zhiwei Gu, who joined the Board in January 2015 as a Non-Executive Director, was appointed to the role of Non-Executive Chairman. Mr David Chen has stepped down from the role of Chairman of the Board but continues as a Non-Executive Director of the Company,

 

The Company also announced the appointment of three new Non-Executive Directors to the Board: Mr Yu Wang, a nominee of Sibo; Mr Lubing Liu and Dr Yi Zeng.

 

During the period, the Company also appointed Mr Lijun Xiu as Trinidad Deputy General. Mr Xiu has a long and distinguished geological career of over 30 years working for Jilin Oilfield Research Institute of Petroleum Exploration & Development (a division of China National Petroleum Corporation). Mr Xiu has extensive experience in oilfield exploration and development planning, drilling design, research on geological conditions for oil and gas accumulations and target selection, evaluation of oil reservoir properties and productivity construction, evaluation of well logging, and assessment of hydrocarbon reserves.

 

Unmarketable parcels sale 

 

During the period, Range completed a share sale facility for holders of unmarketable parcels on ASX. As a result, the Company has reduced its ASX shareholders by 63% to 1,854 holders at 22 December 2015, which significantly reduced the ongoing administrative and other share registry costs to the Company associated with these very small holdings.

 

Legal proceedings

 

Lind

 

During the period, Range was pleased to announce that it reached a binding agreement with Lind Asset Management LLC ("Lind") to settle all outstanding claims and disputes between the parties. As previously announced, Lind initiated legal action in New South Wales Supreme Court seeking payment of approximately US$600,000 in respect of interest and legal costs. Lind also sought other damages for breach of contract. Range filed a defence against the claims and a cross-claim for damages. Under the terms of the settlement agreement, Range made a payment to Lind of US$325,000 and Lind retains the beneficial ownership of the 38 million collateral shares which were issued by Range in 2014 as part of the original funding agreement. Range is pleased to have reached a mutually acceptable settlement agreement with Lind which enables the Company to draw a line under this long-running dispute.

 

Mark Patterson

 

During the period, the Company was involved in an arbitration hearing with Mr Mark Patterson who had claimed approximately US$5.8million. In February 2016, the Company received the final award of the arbitration tribunal who found fully in favour of the Company (with just an immaterial award of costs being made to Mr Patterson).

 

Colombia

 

During the period, Range received notification from the Agencia Nacional de Hidrocarburos ("ANH") in Colombia advising that the licences over three exploration blocks PUT-5, VMM-7, and VSM-1 had been revoked. The licenses had been awarded to a consortium of Optima Oil Corporation ("Optima") and the Company in December 2012.

ANH alleges that various obligations and commitments contained within the exploration licences had not been fulfilled and that invalid letters of credit had been presented by Optima to support the minimum work obligations. Under the terms of the JOA it was agreed between the consortium that it was the sole responsibility of Optima to complete the minimum work obligations and to provide all necessary funding, including the provision of valid letters of credit in favour of ANH. Under the JOA, Range has an indemnity to recover from Optima any payment incurred by Range for any contractual obligations under the licences which were not paid by Optima.

Subsequent to the period end, Range received a demand notice from ANH addressed to the consortium seeking payment of the full amount of the outstanding obligations due to ANH totalling up to approximately US$53 million.

The consortium submitted a comprehensive response to ANH on 7 September 2016. This defence addressed the numerous areas in which Range and the consortium object to the demand which was received from ANH.

The Company continues to work with Optima and legal advisers to defend its position to the maximum extent possible and is considering what further action can be taken to challenge the actions taken by ANH.

 

Geeta Maharaj

 

Range has received an invoice from Geeta Maharaj, a Trinidad based attorney seeking payment of approximately US$1.9million.  The invoice purports to relate to legal work undertaken during mid-2014 in the preparation of inter-company loan agreements.  Range strongly refutes the amount of this purported invoice and intends to vigorously defend its position. Range has engaged Trinidad legal counsel to assist in this matter. Range considers that that the amount of the purported invoice is vastly excessive and is not payable.

 

Financial

 

The Group reports a loss after tax for the year of US$43.9million which compares to a loss for the prior year of US$30.3million. Despite reporting an increased loss for the year, Range believes that there continues to be positive overall momentum seen in the underlying business as we continue to reposition the group towards sustainable long-term profitability and positive operating cashflow.

 

Range has reported consecutive losses for over the last 10 years and the current Board are focused on, once and for all, turning around performance and creating value and returns for all shareholders through the delivery of the strategy outlined in the report.  Range has endured significant losses and expenses in recent years as a result of legacy issues and non-core assets.  Regrettably this has had an effect once again this year with further impairments seen for the investments in Georgia, Guatemala and International Petroleum.  Range believes that these legacy issues, which have proved a drag on financial performance and management time over recent years, are now under control and the remaining balance sheet value for these previous projects and investments is now minimal.

 

During the year Range reduced the carrying value of the Trinidad assets on the balance sheet and this was principally due to the substantial, and sustained drop in oil prices which have been seen throughout the year. The majority of this impairment was reported during the half-year unaudited results announced in March and a small further impairment of US$3.4million has been adopted at this stage to recognise historic wells which are no longer in production, and have no likely future use.  This valuation does not take into consideration the inherent value in the exploration acreage and resource potential with the Trinidad assets and the Company continues to firmly believe in the long-term prospects of these assets to deliver value to shareholders.

 

The following table summarises performance including on a normalised basis excluding impairments:

 

Measure	Unit	2016	2015	Change	%
Total production (Trinidad)	barrels of oil	193,868	205,209	(11,341)	-5.5%
Revenue	US$	7,062,226	13,152,954	(6,090,728)	-46.3%
Average received oil price	US$/bbl	36.42	64.10	(27.68)	-43.2%
Reported NPAT / (loss)	US$	(43,714,086)	(29,823,747)	(13,890,339)	-46.6%
Underlying NPAT / (loss)	US$	(17,429,295)	(20,397,109)	2,967,814	14.6%
Underlying EBITDAX	US$	(5,658,343)	(7,461,927)	1,803,584	24.2%

Underlying NPAT (Net Profit after Tax) and Underlying EBITDAX (Earnings before interest, tax, depreciation, amortisation and exploration expenditure written off) are not defined measures under Australian Accounting Standards or IFRS, and are not audited.  These measures have been calculated by the Company who believe they provide meaningful analysis of underlying 'normalised' performance of the Company.

 

On an underlying basis, excluding impairments and other asset write-offs, the underlying NPAT for the year would be a loss of US$17.4million which is a 15% improvement on prior year (prior year comparable loss US$20.4million).  On an EBITDAX basis, there is a similar positive trend evident with underlying EBITDAX 24% improved for the year with a loss of US$5.7million seen (2015:  loss of US$7.5million).

 

Looking at key areas in the income statement:

 

·     The Group's revenue was US$7.1 million (2015: US$13.2 million), a decrease of approximately 46%.  Group production was broadly stable for the year and the fall in revenue is due to reduced average oil price realised of US$36.42/bbl (2015: US$64.10/bbl);

·     This fall in revenues contributed to an increase in the gross loss which increased to US$7.8 million (2015: US$2.9 million). The other main factor in the gross loss was an increase for the year overall in operating costs to US$7.3million (2015: US$6.4million).  This increase in operating cost is partially reflective of the first full year following the disposal of Range Resources Drilling Services Limited in 2015.  Following completion of the sale, Range is now exposed to 3^rd party rates for a majority of operating costs, as opposed to previous periods where it was just the incurred cost which was reflected (with no 3^rd party margin).  Additionally, certain activities during the year including swabbing and workovers were completed which did not result in increased revenue to compensate for the cost incurred.  Range is focused on delivering improvements in this during the current financial year and the effective cost per barrel will also reduce as production grows.  Production growth is the key to reducing operating costs on a per barrel basis, given the inherent fixed cost element within the operations in Trinidad;

·    General and administrative costs decreased materially by 66% overall during the year and totalled US$3.4 million (2015: US$9.9 million). This was achieved as a result of stringent cost cutting measures implemented with significant reduction seen in discretionary expenditure, lower staff costs and elimination of corporate management costs.

 

Cash management is an absolutely critical function within Range and total cash (including restricted cash) at year end was US$21.0mlllion (2015: US$10.5million).  This increase was largely as a result of the new equity raising completed during the year with Sibo combined with the effect of lower G&A costs and credit terms in place.

 

Importantly, cash outflow from operating activities was significantly lower than the prior year at US$4.2million (2015: US$7.0million).  Range benefits from the credit terms offered by our principal service provider (LandOcean Energy Services Co. Ltd.) which minimises cash outflow whilst production growth is achieved from implementation of the waterflood programme and selected development drilling. 

 

As previously announced, LandOcean are providing Range with credit terms on the work under purchase order 2, of 720 days from issuance of each invoice.  The total value of PO2 is US$50milion and as detailed in the operations review substantial progress has been seen during the year in implementation of the waterflood programme.  This work is reflected within the growth seen in long-term interest-bearing liabilities on the balance sheet which total US$14.0million (2015:  $nil) and accrued expenses of US$9.8million (2015: $nil); these principally reflect the payable balance to LandOcean which will be paid on a progressive basis in future years.  Range anticipates that this balance will continue to increase during the 2017 financial year as the waterflood programme is further advanced and other planned development drilling is completed.

 

Despite the impairments during the year and the loss from operations, the balance sheet overall remains strong with total assets of US$158.0million (2015: US$161.9million) and net assets of US$72.2million (2015: US$95.0million).  Total cash (including restricted cash) of US$21.0million, together with the remaining funding available from LandOcean for the Trinidad work programme positions Range in a strong position to meet its growth ambitions during 2017.

 

The Board recognise that there is a lot of work to be done to start generating long-term sustainable profitability. Range is confident that the right building blocks are now in place and will remain focused on improving financial performance in the years ahead.

 

SIGNIFICANT CHANGES IN STATE OF AFFAIRS

The following significant changes in the state of affairs of the Company occurred during the financial year:

·      Equity financing of US$30 million completed with Sibo.

 

Further details on the above matters can be found in the Review of Operations.

 

EVENTS SUBSEQUENT TO REPORTING DATE

 

Colombia

 

Subsequently to the period end, Range received a demand notice from ANH addressed to the consortium seeking payment of the full amount of the outstanding obligations due to ANH totalling up to approximately US$53 million.

 

The consortium submitted a comprehensive response to ANH on 7 September 2016. This defence addressed the numerous areas in which Range and the consortium object to the demand which was received from ANH.

 

The Company continues to work with Optima and legal advisers to defend its position to the maximum extent possible and is considering what further action can be taken to challenge the actions taken by ANH.

 

LIKELY DEVELOPMENTS AND EXPECTED RESULTS

 

The Company intends to continue with its work programme in Trinidad by implementing and bringing into production the secondary recovery projects (waterflood). In line with the growth strategy of the Company to create value for shareholders, and to provide Range with additional production and revenue, the Board continues to pursue potential acquisitions of new assets.

 

Please refer to the Review of Operations for full details on likely developments and future prospects of the Group

 

Corporate sustainability

 

Range is committed to operating in a socially responsible way with the highest standards of Business Ethics, Environmental Awareness and Health & Safety by:

·      Ensuring the health and safety of its employees and contractors;

·      Preserving and protecting the environment; and

·      Cultivating a harmonious relationship with the local communities and key stakeholders.

 

Health, Safety and Environment ("HSE")

 

Range is committed to "Operational Excellence", a core value that drives achievement of its sustainable growth and financial performance. The Company's vision of "Zero Harm" is that "no one gets hurt and nothing gets harmed" and as a result HSE performance is a critical element of our Operational Excellence goal. It is, therefore, the Policy of the Company, and far as is reasonably practicable, to:

·     Implement and maintain HSE management systems to prevent accidents, occupational injuries, illnesses and environmental incidence;

·      Meet or exceed compliance with all applicable HSE laws and regulations;

·      Ensure the provision and maintenance of a safe work environment, safe equipment and work procedures;

·      Foster a culture where all employees and contractors are held accountable for following all Company Policies and Procedures;

·      Provide appropriate training, re-training and supervision to maintain the competence levels of all employees to safely perform their duties;

·      Promote the development of a positive Health and Safety culture;

·      Ensure timely investigation and reporting of all HSE related incidents; and

·      Conduct regular reviews of the Company's Policies and Procedures.

Concern for the environment is of utmost importance to Range where our policy is to minimise our potential environmental impact by striving to:

·      Protect the natural environment;

·      Implement a cost effective waste and emissions management programme to prevent and control pollution;

·      Manage, monitor and communicate our environmental performance; and

·      Integrate environmental considerations into all our business processes and strive for continuous improvement.

 

Environmental regulation

 

The Group's operations are not regulated by any significant environmental regulation under a law of the Commonwealth or of a state or territory.

 

The Directors have considered compliance with the National Greenhouse and Energy Reporting Act 2007 which requires entities to report annual greenhouse gas emissions and energy use. The directors have assessed that there are no current reporting requirements, but may be required to do so in the future.

 

Ethics and principles

 

Range's employees share a responsibility for ensuring that they conduct business in an open, honest, and ethical manner and maintain the highest standards of integrity; and through corporate governance measure, audit and publicly report performance on Corporate Social Responsibility programmes.

 

Anti-bribery & corruption ("ABC")

 

Range has a zero tolerance approach with respect to its Anti-bribery and Corruption policy, procedures and implementation and complies with all applicable laws and regulations of the countries in which it operates. It is the responsibility of all Range employees to ensure that none of Range's businesses engage in practices which infringe legal or regulatory requirements or which fall below the highest standards of ethical business conduct.

Any Range employee engaging in business practices which infringe legal or regulatory requirements or fall below the highest standards of ethical business conduct may be subject to disciplinary action which may lead to dismissal and may face personal criminal or civil liability.

It is the responsibility of all Range employees to ensure that they report any infringement or suspected infringement of legal or regulatory requirements or the highest standards of ethical business conduct to the management of the Company.

Social responsibility and community involvement

 

Range strives to grow and strengthen the social and economic relationships within the communities we operate in, through the support and employment opportunities, as well as innovative programmes in local health, education, environment, and cultural activities. Our people and partners play a key role in creating value for our shareholders.

 

We recognise the need for our business to provide direct support to our local communities which rely on sponsorships and donations to survive. We will continue our involvement through various activities and will encourage the participation of our employees in the relevant events.

 

Supporting schools and awarding scholarships: educating and training future talent

Range aims to foster and promote the success of children in the communities and provide assistance to students from local schools. During the year, Range partnered with the Mayaro Past Pupils Association (MPPA) and provided a scholarship grant to a local primary school in an effort to promote and develop the young people living in the Mayaro / Guayaguayare area.

Range has also engaged with the Guayaguayare Roman Catholic Primary School located near the Company's Beach Marcelle field and provided a scholarship grant and stationery supplies. Range's employees held workshops at the school, educating students about prospects of working in the oil and gas industry. This programme is a concrete example of our commitment to educating, training and developing young local talent.

 

Trinidad and Tobago Society of Petroleum Engineers

 

During the year, Range participated in the Trinidad and Tobago Section of the Society of Petroleum Engineers. The event included a meet and greet opportunity, career development session, a young professional interactive workshop and a resume review session.

 

This was an excellent opportunity for engineering and geoscience students, recent graduates and young professionals to learn more about the energy industry and available career opportunities, as well as to meet with potential employers and key industry players. Range's participation in the event introduced the Company to the young talent and most importantly, allowed the opportunity to provide guidance and knowledge to those who are seeking to enter the industry. Range will continue its contribution to training and development of young local professionals in years to come.

Steel orchestra for youth

Range continues its support for the Morne Diablo Funk-a-delic steel orchestra in Trinidad. First formed in 2004, the steel orchestra band consists of around 40 local children between the ages of 6 and 18. Providing the children with an outlet for team building and community participation, the programme provides music lessons up to three times a week, where they learn how to play the steel pan (Trinidad and Tobago's national musical instrument) and to read music. The orchestra has performed at a number of ceremonies, including events hosted by the government of Trinidad and Tobago.

During the period, Range provided financial assistance to the Morne Diablo Funk-a-delics to build a pan shelter for the summer camp, as well as oil drums to be used as steel pans. Range is also looking to provide a cash donation towards constructing a pan theatre for orchestra's practice.

 

Principal risks and uncertainties

 

The achievement of the business strategy, production growth outlook and future financial performance is subject to various risks including the material business risks. Range continually monitors the effectiveness of the Company's risk management, internal compliance and control systems. The Board has identified the following principal business risks and adopted mitigating strategies as described below. It is not an exhaustive list of all risks that may affect the Company nor have they been listed in any particular order of importance.

Risk	Description	Mitigation
Exploration and development activities	There is a significant element of technical risk in exploring for and developing oil and gas fields. Exploration activities are inherently uncertain in their outcome. Failure to discover and develop hydrocarbons in commercially viable quantities could have a material adverse effect on the Company's business.	The Company aims to continuously improve the quality of its operations through rigorous reviews. Technical work processes are used to ensure each opportunity has been thoroughly evaluated before investment decisions are made. Range is focused on lowering its exploration risk by applying disciplined capital allocation processes and investing in technologies such as seismic.
Oil and gas reserves	Estimations of recoverable oil and gas reserves and resources contain significant uncertainties attributable to the reservoir geology, seismic data, well data, operating costs, commodity prices etc.	Range has established reserves committee which undertakes annual audits and evaluations of the Company's reserves and resources consistent with the Society of Petroleum Engineers' Petroleum Resource Management System.
Safety and Health	Exploration, development and production of oil and gas involve risks which may impact the health and safety of personnel, the community and the environment. Failure to manage these risks could result in injury or loss of life, damage or destruction of property, and damage to the environment. In addition, impacts may include reputational damage and fines.	Health and safety are a very high priority for Range. The Company is committed to maintaining robust HSE policies, and cultivating an organizational culture committed to superior HSE performance. The Company maintains strict reporting requirements in respect of any incidents, hazards or near misses. Training, procedures and competency are performed throughout the organisation. Appropriate insurances are in place.
HR	Key personnel and positions are required in order to implement the Company's strategy. The risk occurs when the appropriate personnel are difficult to recruit and retain.	The Company identifies the key positions and personnel and ensures that the incentive package offered reflects the key needs of the business.
Access to funding	Range's growth aspirations require the investment of significant capital to generate returns. The ability to explore for and develop oil and gas reserves is dependent on its ability to generate and otherwise access capital to fund these activities.	The Board reviews and approves the allocation of cash resources via the annual budget. The Board also considers longer term cash forecasts to ensure sufficient funds to meet its goals. Range continues to assess long-term funding needs and manage capital efficiently.
Commodity price change	The Company's revenues, profitability, cash flows and rate of growth are significantly impacted by prevailing oil prices. Sustained periods of low oil price may impact the viability of growth projects.	Range does not currently hedge its oil price exposure. Price hedging arrangements would be implemented if deemed appropriate for financial planning and to mitigate commodity price risks.
Exchange rate fluctuations	The Company is exposed to financial market volatility and fluctuation in various foreign exchange rates.	Range does not currently hedge its US Dollar exposure. Given the proportion of development capital expenditure and operating costs incurred in currencies other than the US Dollar, the Company routinely reviews potential hedges and will execute hedges if necessary to mitigate foreign exchange rate risk.
Political, economic, and regulatory risks	A substantial amount of Range's properties and operations are located in Trinidad and Tobago and the Group's results of operations and financial condition are affected by policy, taxation and other political or economic developments in or affecting Trinidad and Tobago. Approvals for Range's projects may be delayed or denied, or costs associated with the projects may impact their economic viability.	Range continuously monitors the political, economic, and regulatory environments in which it operates and actively cooperates with the government of Trinidad and Tobago on strategies that might impact the Company.
Litigation risks	The nature of Range's business means that it is likely to be involved in litigation or regulatory actions arising from a wide range of matters, as well as investigations, inquiries or disputes, debt recoveries, commercial and contractual disputes, environmental claims, occupational health and safety claims etc. Any of these claims or actions could result in delays, increase costs or otherwise adversely impact Range's operations, and adversely impact on financial performance and future financial prospects of the Group.	Range and its legal advisers actively monitor and manage potential and actual claims, actions and disputes.

 

 

 

RESERVES & RESOURCES STATEMENT

For the year ended 30 June 2016

Reserves attributable to Trinidad assets (net to Range)

MMBOE	Developed	Undeveloped	Total
Proved reserves (1P)	0.5	16.8	17.3
Proved plus probable reserves (2P)	-	7.1	24.4
Proved plus probable plus possible (3P)	-	12.5	36.9

 

Resources attributable to Trinidad assets (net to Range)

MMBOE	Total
Contingent resources (2C)	3.1
Prospective resources	14.8

 

Reserves and resources movement

MMBOE	30 June 2015	Revisions and production (FY16)	30 June 2016	%Change
1P reserves	19.4	(2.1)	17.3	(11%)
2P reserves	22.0	2.4	24.4	11%
3P reserves	27.6	9.3	36.9	34%
2C resources	3.2	(0.1)	3.1	(3%)
Prospective resources	91.3	(76.5)	14.8	(84%)

 

Notes to the statement

1. During the financial period, Range engaged independent petroleum consultants, Rockflow Resources Limited, to prepare an updated reserve report for Range's Trinidad assets for the period ended 30 June 2016.

2. Range estimates and reports its petroleum reserves and resources in accordance with the definitions and guidelines of the SPE Petroleum Resources Management System (SPE-PRMS).

3.  The reserve and resource estimates were calculated using probabilistic method.

4.  All estimates of petroleum reserves reported by Range are reviewed by a qualified petroleum reserves and resources evaluator.

5.  Range reviews and updates its oil and gas reserves position on an annual basis and reports the updated estimates as of 30 June each year. Separately, Range reviews and updates its oil and gas reserves position as frequently as required by the magnitude of the petroleum reserves and changes indicated by new data.

6.  Range's Morne Diablo and South Quarry fields are operated under farm-out agreements, with rights to production net of Trinidad government royalties, overriding royalties, and production taxes.

7.  Range's Beach Marcelle field is operated under the terms of an Incremental Production Service Contract, entitling Range to a defined portion of the future revenue stream. No oil and gas reserves are owned by Range.

8. The reserve figures (1P, 2P and 3P) include reserves associated with the Company's Morne Diablo, South Quarry and Beach Marcelle licences in Trinidad. The change in reserves from the previously reported figures is due to the adoption of a different calculation approach, using a wider range of in-place volumes, and recovery estimates from waterflooding for the Beach Marcelle licence.

9.  The Central block and the deeper sands of the North East block of the Beach Marcelle waterflood project were considered uneconomic at current oil prices and will require further studies. These have been classified as contingent resources.

10. The reported prospective resources relate solely to the Guayaguayare licence.

11. The St Mary's exploration licence was not included in any of the estimates, as further technical studies had not been finalised at the time of the audit.

Qualified Petroleum Reserves and Resources evaluator

This report contains information on petroleum reserves which is based on and fairly represents information and supporting documentation reviewed by Dr Douglas Field. Dr Field is a petroleum and reservoir engineer who is a suitably qualified person with over 30 years' experience in assessing hydrocarbon reserves, and holds a PhD in Organic Chemistry. Dr Field is a member of the SPE (Society of Petroleum Engineers) and the PESGB (Petroleum Exploration Society of Great Britain). Dr Field holds a role of an Engineering Consultant with the Company.

Glossary - SPE Definitions

MMBOE stands for Million Barrels of Oil Equivalent.

Proved Reserves are those quantities of petroleum, which by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be commercially recoverable, from a given date forward, from known reservoirs and under defined economic conditions, operating methods, and government regulations. Probable Reserves are those additional Reserves which analysis of geoscience and engineering data indicate are less likely to be recovered than Proved Reserves but more certain to be recovered than Possible Reserves. 1P refers to Proved Reserves, 2P refers to Proved plus Probable Reserves, 3P refers to Proved, plus Probable, plus Possible Reserves.

Contingent Resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations by application of development projects, but which are not currently considered to be commercially recoverable due to one or more contingencies. Contingent Resources may include, for example, projects for which there are currently no viable markets, or where commercial recovery is dependent on technology under development, or where evaluation of the accumulation is insufficient to clearly assess commerciality. Contingent Resources are further categorized in accordance with the level of certainty associated with the estimates and may be sub-classified based on project maturity and/or characterised by their economic status.

Prospective resources are defined as those quantities of petroleum estimated, as of a given date, to be potentially recoverable from undiscovered accumulations by application of future development projects. Prospective resources have both an associated chance of discovery and a chance of development. Prospective resources are further subdivided in accordance with the level of certainty associated with recoverable estimates assuming their discovery and development and may be sub-classified based on project maturity. Further exploration appraisal and evaluation is required to determine the existence of a significant quantity of potentially moveable hydrocarbons.

 

 

 

DIRECTORS' REPORT (continued)

 

INFORMATION ON DIRECTORS

 

Mr Zhiwei Gu	Non-Executive Chairman (appointed 25 May 2016) Non-Executive Director
Qualifications	LL.B, LL.M., MSc
Experience	Mr Gu, is an experienced corporate lawyer, who has worked with numerous companies seeking listing approval on various stock markets including Chinese A share, NASDAQ, TSX and HKSE. He is currently a partner of Dentons, which is one of the largest global law firms. Mr Gu has participated in several Venture Capital and Private Equity investment cases by various funds, such as London Asia Fund, Warburg Pincus, Korea Development Bank, China Venture Investment Co, and China Cinda AMC.  During his time with China National Gold Group Corp., Mr Gu was in charge of mineral resource M&A activities. Mr Gu holds a LL.B. from the Jilin University in China; a LL.M. from the Northeast University in China; and a Master of Applied Finance from the Macquarie University in Australia. Mr Gu is a qualified lawyer and securities practitioner in China.
Interest in shares and options	2,083,333 ordinary shares 7,500,000 unlisted options (£0.01, 30 March 2020)
Directorships held in other listed entities during the past three years	None
Mr Yan Liu	Executive Director (resigned 31 January 2016, re-appointed 25 May 2016) Non-Executive Director (appointed 31 January 2016, resigned 25 May 2016)
Qualifications	B.Ec, MCom
Experience	Mr Liu, has over 19 years of accounting and corporate advisory experience in China and Australia. Mr Liu was the Chief Financial Officer with AIM listed China Rerun Chemical Group Limited, a China-based lubricant oil company and a partner of Agile Partners, the financial advisory company based in China. Previously, Mr Liu was the Financial Controller at Legalwise Seminars Pty in Australia and he spent 8 years at Chinatex Corporation where he worked in project management positions. Mr Liu holds a Bachelor degree in Economics from Central University of Finance and Economics, China, and a Master degree in Commerce from the University of New South Wales, Australia.
Interest in shares and options	6,333,333 ordinary shares 10,000,000 unlisted options (£0.01, 30 March 2020)
Directorships held in other listed entities during the past three years	None
Mr David Yu Chen	Non-Executive Director (appointed 25 May 2016) Non-Executive Chairman (resigned 25 May 2016)
Qualifications	B.Ec.
Experience	Mr Chen has over 18 years of corporate experience, having served as Chief Executive and Board member for companies listed on US and Hong Kong stock markets. He founded Huashan Capital in 2009 to invest in the resources sector. His investment experience includes the establishment of a US-listed special purpose acquisition fund and venture capital investments in China. Mr Chen is currently the Vice Chairman and President of Hengxing Gold, a Hong Kong Stock Exchange listed gold mining company. Mr Chen has served as a director of several technology companies in China, including Payeco, a leading mobile payment service provider; Cardvalue, a data driven online small business loan provider; and Freshfresh eCommerce, an online fresh produce retailer.
Interest in shares and options	18,288,070 ordinary shares 42,742,654 unlisted options (£0.01, 14 July 2018) 30,000,000 unlisted options (£0.01, 30 March 2020)
Directorships held in other listed entities during the past three years	Hengxing Gold Holding Company Limited (from March 2013) Zhonglu Company Limited (from May 2009 to November 2014)
Ms Juan Wang	Non-Executive Director
Qualifications	BA, MBA
Experience	Ms Wang is currently a president of Energy Prospecting Technology USA, Inc. and LandOcean Energy Canada Ltd. where she is responsible for overall management work for the subsidiary companies of LandOcean Energy Services Co. Ltd. in Houston and Calgary. Prior to the current position, she was an investment manager at Anterra Energy Inc. responsible for Chinese investor liaisons. Prior to joining Anterra, Ms Wang was manager of corporate mergers and acquisitions at LandOcean Energy Services Co. Ltd. Ms Wang has a commercial banking background, having previously worked for Deutsche Bank and Bank of East Asia.
Interest in shares and options	2,083,333 ordinary shares 7,500,000 unlisted options (£0.01, 30 March 2020)
Directorships held in other listed entities during the past three years	Anterra Energy Inc. (from December 2014 to June 2016)
Mr Yu Wang	Non-Executive Director (appointed 30 September 2015)
Qualifications	BSc; MSc
Experience	Mr Wang has over five years of corporate experience in finance and investments, focusing on energy and mineral sectors. He is currently a senior investment manager at Shanghai Anjin Investment Co., Ltd., responsible for project investments and management, both domestically and overseas. Previously, he worked as an investment manager at Weihai International Economic & Technical Cooperative Co., Ltd, specialising in project analysis and evaluation of energy and mineral projects in Africa, including oil and gas projects in the Republic of the Congo. Prior to that, Mr Wang was an investment analyst at Beijing Golden Valley Investment Management Co., Ltd. Mr Wang holds an MSc in Economics from the University of Edinburgh, and a BSc in Financial Economics from the University of Dundee.
Interest in shares and options	Nil
Directorships held in other listed entities during the past three years	None
Mr Lubing Liu	Non-Executive Director (appointed 16 June 2016)
Qualifications	BSc
Experience	Mr Lubing Liu, has over 20 years' extensive global experience in petroleum exploration, development, production, joint venture operations and new ventures. He is currently an independent consultant to MEO Australia Limited (an ASX listed company). Prior to that, he held various subsurface leader roles, including Chief Reservoir Engineer with MEO Australia Limited, Vice President of Exploration and Petroleum Technology with Sinopec East Puffin Pty Ltd, and other international E&P and energy service companies including ConocoPhillips, CNOOC, Woodside, RPS and Senergy. Mr Liu has an extensive waterflooding experience having worked at the Penglai oilfield in China, the Chinguetti oilfield in Mauritania and Block 95 in Peru. Mr Liu holds a BSc in Petroleum Engineering from the Southwest Petroleum University, China. He is a Member of the Society of Petroleum Engineers.
Interest in shares and options	Nil
Directorships held in other listed entities during the past three years	None
Dr Yi Zeng	Non-Executive Director (appointed 16 June 2016)
Qualifications	BSc; MSc; PhD
Experience	Dr Yi Zeng, has over 30 years of experience in the oil and gas and mining industries. Dr Zeng has held various technical and research positions with global companies, including BHP Billiton and Santos Asia Pacific. Dr Yi Zeng holds a PhD in Geophysics from the Victoria University of Wellington, New Zealand; MSc in Applied Geophysics; and BSc in Geophysical Exploration from the Chengdu University of Technology, China.
Interest in shares and options	Nil
Directorships held in other listed entities during the past three years	None

 

 

 

INFORMATION ON COMPANY SECRETARIES
Mr Nick Beattie	Joint Company Secretary
Qualifications	BA (Hons), FCIBS, AMCT
Experience	Mr Nick Beattie has over twenty years of experience in finance working with a range of international banks. Most recently he was a Managing Director in the BNP Paribas Upstream Oil and Gas team in London where he was responsible for leading the bank relationships with UK focused independent E&P companies. Nick has approximately ten years' experience specifically financing the E&P sector and whilst at BNP Paribas, he structured and led numerous reserve based loans, development financings and other debt facilities. Prior to working with BNP Paribas, Nick worked as a Director within the Oil and Gas finance team at Fortis Bank covering Europe, Middle East and Africa and in a variety of roles with National Australia Bank Group. Nick is an Associate Member of the Association of Corporate Treasurers and a Fellow of the Chartered Institute of Bankers in Scotland.
Interest in shares and options	2,916,667 ordinary shares 25,000,000 unlisted options (£0.01, 30 March 2020)
Directorships held in other listed entities during the past three years	None
Ms Sara Kelly	Joint Company Secretary
Qualifications	B.Com, LLB
Experience	Ms Sara Kelly is an experienced Company Secretary and Corporate Lawyer with over 11 years' experience. Sara has comprehensive knowledge of and experience in administering regulatory frameworks and processes in a listed company environment and practised as a corporate lawyer specialising in acquisitions, takeovers, capital raisings and listing of companies on ASX and AIM. Sara has acted as the company secretary of a number of ASX listed companies.
Interest in shares and options	1 ordinary share
Directorships held in other listed entities during the past three years	None
Directorships held in other listed entities during the past three years	None

 

 

 

REMUNERATION REPORT (AUDITED)

 

This report details the nature and amount of remuneration for each director of Range Resources Limited.

 

Remuneration Policy

 

The remuneration policy of Range Resources Limited has been designed to align director and executive objectives with shareholder and business objectives by providing a fixed remuneration component and offering specific long-term incentives based on key performance areas affecting the Group's financial results. The Board of Range Resources Limited believes the remuneration policy to be appropriate and effective in its ability to attract and retain the best executives and directors to run and manage the Group, as well as create alignment of goals between directors, executives and shareholders.

 

The Board's policy for determining the nature and amount of remuneration for Board members and senior executives of the Company is as follows:

 

The remuneration policy, setting the terms and conditions for the executive directors and other senior executives, was developed and approved by the Board.

 

Non-executive directors, executive directors and senior executives receive a base salary (which is based on factors such as length of service and experience), which is calculated on a total cost basis and includes any FBT charges related to employee benefits including motor vehicles, as well as employer contributions to superannuation funds.

 

Executive and Non-Executive directors can be employed by the Company on a consultancy basis, on Board approval, with remuneration and terms stipulated in individual consultancy agreements.

 

The Board exercises its discretion in determining remuneration performance of executives.  Given the size and nature of the entity, the Board does not deem it to be realistic to measure performance against defined criteria.  As such remuneration and performance have historically not been linked.

 

All remuneration paid to directors and executives is valued at the cost to the Company and expensed.  Shares given to directors and executives are valued as the difference between the market price of those shares and the amount paid by the director or executive.  Unlisted options are valued using the Black-Scholes methodology.

 

The Board policy is to remunerate non-executive directors at market rates for comparable companies taking into consideration time, commitment and level of responsibility.  As approved by shareholders in 30 November 2011, the aggregate non-executive remuneration per annum is currently A$350,000 (US$260,555).  The Remuneration and Nomination Committee determines payments to the non-executive directors and reviews their remuneration annually.  Independent external advice is sought when required.  Fees for non-executive directors are not linked to the performance of the Group.  The directors are not required to hold any shares in the Company under the Constitution of the Company; however, to align Directors' interests with shareholder interests, the directors are encouraged to hold shares in the Company.

 

Options may be issued to directors and executives as part of remuneration. Options issued to directors have historically not been based on performance criteria. However, the options issued to the current directors on 27 March 2015 and the Key Management Personnel on 1 September 2015 principally vest upon satisfaction of set company performance criteria detailed in Note 31.

 

Under the Company's share trading policy, all employees and directors of the Company and its related companies are prohibited from trading in the Company's shares or other securities if they are in possession of inside information.

The Board believes that it has implemented suitable practices and procedures that are appropriate for an organisation of this size and maturity.

 

Remuneration Committee

 

A Remuneration Committee was established during the year ended 30 June 2015. One meeting was held during the current year to undertake annual review of performance remuneration for senior executives and directors.

 

Company Performance, Shareholder Wealth and Directors and Executives Remuneration

 

No relationship exists between shareholder wealth, director and executive remuneration and Company performance.

 

Use of remuneration consultants

 

During the year ended 30 June 2015, the Group contracted the service of a remuneration consultant, The Curzon partnership, to provide market comparison for executive and non-executive remuneration. The fee for this service was GB£480 (US$755). No such services were contracted in the year ended 30 June 2016.

 

 

Voting and comments made at the company's 2015 Annual General Meeting

 

Range Resources Limited received 99% of "yes" votes on its remuneration report for the 2015 financial year. Range notes this was a significant improvement on the previous year and reflects the conservative remuneration practices of the company.

 

Key Management Personnel

 

Name	Position Held	Appointment / Resignation Date
Mr Zhiwei Gu	Non-Executive Chairman	appointed 25 May 2016
	Non-Executive Director
Mr Yan Liu	Executive Director	resigned 31 January 2016
		re-appointed 25 May 2016
	Non-Executive Director	appointed 31 January 2016 resigned 25 May 2016
Mr David Yu Chen	Non-Executive Director	appointed 25 May 2016
	Non-Executive Chairman	resigned 25 May 2016
Ms Juan Wang	Non-Executive Director
Mr Yu Wang	Non-Executive Director	appointed 30 September 2015
Mr Lubing Liu	Non-Executive Director	appointed 16 June 2016
Dr Yi Zeng	Non-Executive Director	appointed 16 June 2016
Officers
Mr Nick Beattie	CFO & Company Secretary	appointed 23 May 2014 (as CFO) and 30 March 2015 (as Company Secretary)
Ms Sara Kelly	Company Secretary	resigned 21 Jul 2014, re-appointed 7 January 2015