RIG letter to RSR- 28/10/14

Today's RIG Letter to Rory

Letter as follows:

Dear Mr Scott Russell,
In line with RIG’s commitment to relay the comments of our members to the company on any information communicated by Range Resources, we are writing to provide feedback on recent regulatory announcements and some general comments on recent events.

A. Notice of Annual Financial Report and Audiocast (25 September 2014)
• In principle, good advance notice and professionally prepared so no adverse comment, however...
• There was a significant issue which should have been handled better. The PDF document of the announcement of the Range website contained the document properties “14.09.24 Range - 15m financing DRAFT Announcement (HSF comments)”. The same document properties are on the mirroring announcement on the ASX website, and at the time of writing remains there. This document has an update date of 1408 on 25/9/14.The PDF document on the Range site was subsequently replaced with one with a more conventional properties name of “Notice of Results” and timed at 1531. This would surely have been the moment to issue an honest clarifying announcement, rather than hide and hope. There is a huge interest in Range’s activities and we think the management underestimates the disproportionate level of attention the company gets, but it must learn to live with it and behave accordingly.

B. Statement re share price movement (26 September 2014)

• 24 hours after the initial problem and a price increase late on the morning of the 26th, a clarifying announcement was belatedly made, but hardly explained properly what had happened.

C. Portfolio update (29 September 2014)

• In principle a good announcement, although a sad end to most of the Colombia project the company had announced would be progressed soon after initial involvement and the dilution associated with the Crede loan used to finance the exploration bond has had a devastating impact on the share price. We wondered why those directors on the board of Range who were in position at that time in 2012 were still there? (This point subsequently partly dealt with in item K below).
• The timing of this announcement is curious given that release of the Colombian blocks presumably happened before this date – and if so should have been announced as such – given that the write off appeared in the accounts issued the following day. We wonder if this was an item picked up by the NOMAD?

D. Range secures up to US$15 million loan financing (30 September 2014)

• Belated release of the information previously leaked. Given the fanfare with which clearance of dilutive debt had been announced earlier in the year, the actual and potential dilutive elements of this arrangement could have been better explained.

E. Response to price query (30 September 2014)

• Telling the sorry story of 25-26 September, that Range seemingly cannot even do a cover-up effectively. Specifically what processes are in place to prevent a repeat of the overall fiasco e.g. checks by one or more directors on each announcement made / document uploaded?

F. Annual Financial Report (30 September 2014)

• In the Directors report is the revelation that the Albrecht-2 well was drilled during the year and that it was non-commercial. Why was this not notified by regulatory announcement? Given that the Texas assets have been up for sale during the period, and at least one sale failed (as suggested by “Malcy” earlier this year and again referred to in the 14 October piece, rather than by regulatory announcement), this was clearly a material development and should have been properly announced at the time.
• The Georgian asset has again been cause for a qualified audit opinion. Why has the information not been made available to the auditors?
• Please can you confirm if Mr Beattie, the Chief Financial Officer, is a qualified accountant, as the inter alia the appropriate designatory letters appear to be missing, and the biography pieces appear to highlight only his banking background.
• We welcome the mention that a proper remuneration committee is being established and trust this good practice will help transparency.
• The headline mention of Trinidad having a positive EBITDA of $2.1m is encouraging, however it is of course a slightly selective yardstick without also covering associated charges down to ultimate segment bottom line, which gives a bottom line loss of $7.5m. We would welcome a future company presentation elaborating on this point and perhaps explaining for the benefit of investors the impact of changing oil prices and recent changes in the fiscal regime.
• There are several mentions of the QUN452 well, although shareholders have not been advised of the full results of this well. Also results from high profile drills on wells MD248 and QUN135 from earlier in the financial year have still not been advised by official announcement. Can shareholders please be updated on these key items.
• Some detail on waterflood activity – this might have been seen more positively had it been released as a separate news item.
• Please explain the increases in costs of sales shown in note 4a of production costs ($3.2m to $4.7m) and staff costs ($3.1m to $4.8m).
• We note the sorry tale of the huge finance costs and trust you will ensure that those responsible are never again involved with Range.
• Please explain the transactions giving rise to the foreign exchange loss in note 4b, G&A costs ($0.1m to $1.5m).
• Please provide some breakdown of the consultancy costs of $3.4m in note 4b, G&A costs.
• Please explain the increases in legal costs shown in note 4b, G&A costs ($0.1m to $1.3m).
• Please explain the reason for the increase in AIM listing costs, also in note 4b of G&A costs.
• Please explain the $1.2m shown for Puntland exploration expenditure in note 4d. Is this payment for runway building costs linked with the offshore licence, as previously announced on 20/3/12? If so, please confirm whether there is any ongoing commitment for this despite now relinquishing the interest in the offshore blocks.

G. Company Presentation and Audiocast (30 September 2014)

• After the separation of events of the period and subsequent developments, this was a disappointing return to lumping them out together.
• The revelation that current production in Trinidad was in the 500-550 bopd range is disappointing and clearly a material change to that last notified on 17 June of a rate of 630 bopd, which as announced was an 18% increase on the 533 bopd as at 22 April.... yet a fall back subsequently was not thought worthy of balanced reporting.
• Our previous questions highlighting concerns arising from reported Ministry data were met with being advised to refer to Range’s announcements – which were not made in a timely fashion. Why was this drop off in production not advised more currently? We are also aware that informal approaches to Range received the reply only shortly before the date of this presentation that shareholders should assume the 1,000+ bopd by year end was on course – this was now revealed to be very misleading given the slippage of this target to H1 2015 as now announced.

H. Trinidad Ministry Bulletin for August 2014 (6-7 October 2014)

• The news accompanying the annuals revealing the poor quarter’s production made these figures less of a surprise. However, zero rigs in action, no drilling activity and a further decline in production mean the month’s performance was materially less than that announced in June, and therefore should have been announced currently, not several weeks later. This reinforces our call for monthly reporting going forward as current shareholders rightly feel they have been kept in the dark and fed misleading information (or no information) during the recent period.

I. Tip TV interview (14 October 2014)

• The piece with Malcolm Graham-Wood came across better than the Audiocast – perhaps such a conversational format could be adopted in audio pieces in the future?
• There was mention of cuts in general and administration (G&A) costs but there were no real specifics given. Please can you provide some quantified examples.
• There were conflicting messages on the state of the waterflood projects. Please can you clarify for shareholders the current position.
• The comment that directors have foregone salary for a while is potentially encouraging in establishing directors’ commitment. Given the recent poor operational performance it is obviously correct that no bonuses should be awarded, but can you please clarify the point on general pay – is this a waiver of pay, or simply a deferral?

J. US$15m loan completion and issue of shares (17 October 2014)

• The deal was signed on 30 September. Why have Range allowed it to be amended so soon?
• We are surprised the terms of the loan were changed citing share price movements when it was the surprise announcement of poor operational performance (items above) allied with the dilutive effects of the initial announcement that had led to the share price fall in the first place.
• Can you categorically state that Lind or an associated party were not involved in moving the share price e.g. by shorting activity? Are such practices prohibited under the loan agreement?
• Please advise the details of the shares referred to as issued for salary – who to and is this connected to the comment in the TipTV interview and / or is it for example under an HMRC salary sacrifice scheme?
• Whilst we welcome the new directors having shares in the company as ‘skin in the game’, we are disappointed in as much as the issue is of new shares, which is obvious dilution. We look forward to the directors making further share purchases in due course, but on the open market.

K. Directorate change (20 October 2014)

• Although some members have misgivings about losing Sir Sam Jonah with his high profile connections e.g. as a NED with Vodafone, we welcome the news that Range will have an apparently more hands-on Chairman in future in the shape of Mr Lyon, together with his industry-specific experience.
• We look forward to seeing the removal of the final director from the discredited era in due course, so that Range may move forward free of the baggage and suspicions from the past.
• We trust that in line with the company’s stated policy of cost efficiency, there will be no additional avoidable costs associated with these changes.

L. Annual Report (22 October 2014)

• An impressive glossy publication but largely repeating the 30th September issue, a reminder of bad news most shareholders probably feel they could have done without and that a better opportunity for a colourful release might be when there was something more tangibly positive to write about.
• In previous years this announcement came together with the AGM announcement, so we would understand the need for duplicating bad news if the separation has been made for positive reasons, with the change being perhaps indicative that there are plans to hold the AGM nearer to the company’s management base and the majority of the company’s shareholders, in the UK.

M. IOP Loan update (23 October 2014)

• A welcome timely conclusion to the matter previously announced.

We appreciate the extensive work that has been done by the new management team to put in place the foundations for recovery but note, that for all of the share price fluctuations, we now have a 30-40% lower share price than when the team joined Range. The company needs to demonstrate delivery to the market rather than just putting enablers in place - and this means production increases, increased drilling productivity and the divestment of non-core assets.

We are grateful for the time you take in dealing with our comments, which we hope are viewed as constructive, as they are intended. Ultimately they would not be necessary if the company’s communications conveyed timely, accurate and useful information for shareholders. We understand from recent communication that the company sees the benefit of conveying regular detailed progress of operations in Trinidad. We look forward both to the refreshing change in approach and also hopefully to some credible progress in the territory.

Yours sincerely,


On Behalf of Range Investor Group