LONDON (Alliance News) - Range Resources Ltd on Monday said it will continue to optimise its producing assets in Trinidad but growth will come from an acquisition-led strategy as the firm reported a pretax loss amounting to USD37.9 million in the recently ended financial year.
The loss compares to the USD21.1 million loss reported in the financial year to the end of June 2015, driven by large impairments being booked and unprofitable operations as revenue in the year fell to USD7.1 million from USD13.2 million.
Total cost of sales, including depreciation, amortisation and royalties, fell year-on-year to USD14.9 million from USD16.0 million but the gross loss still widened to USD7.8 million from USD2.9 million.
Notably, operating expenses of USD7.3 million still outstripped revenue in the year, whereas last year Range would have booked a gross profit excluding royalties, depreciation and amortisation of around USD6.8 million.
Although exploration expenditure and land fees rose year-on-year to USD4.3 million from USD2.2 million, that was more than offset by the fall in general and administrative costs to USD3.4 million from USD9.9 million.
However, the main driver for the wider pretax loss in the year was the USD20.6 million impairment booked against, with no impairments being booked at all in the previous year. Impairments were made to reflect lower oil prices and to recognise historic wells which are no longer in production.
"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," said Yan Liu, chief executive of the company.
A total of USD16.0 million was invested into Trinidad over the year, of which USD13.5 million was spent in capital expenditure toward the waterflood programme aiming to turn the operations profitable by raising production and lowering costs.
Production from the country averaged 531 barrels of oil per day net to the company in the year, slightly lower than the rate of 562 barrels a day a year earlier. However, by the end of the 2017 calendar year, the company is expecting production to soar to around 2,500 barrels per day.
"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," said Range.
"We have not limited ourselves to looking at traditional exploration and production 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," said Range.
"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," it added.
Range shares were down 8.3% to 0.440 pence per share on Monday morning.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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