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Resource World - June 2013 - Vol 11 Iss 6

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THE OIL PATCH REPORT Joe l C hury Rangeford Resources building East Texas oil reserves M uch like a strategic batting order in baseball, oil and gas company portfolios can have a mix of both solid singles and homerun potential. Low-risk ventures can easily bring in steady growth in production and revenue, whereas high-risk/high-reward plays can truly make a stock jump. In the case of Rangeford Resources Corp. [RGFR-OTCQB], its two areas of interest in the southern US provide a balanced lineup that's bound to drive in runs, as the company awaits the announcement of its upcoming reserves report, expected in July. "Texas represents our solid singles, while Oklahoma brings in more doubles, triples, and homeruns," says Mark Teinert, Director. The analogy is quite apt in this case. Rangeford is steadily increasing its revenues and production through a joint venture with private partner Great Northern Energy (GNE), on a 4,000+ acre property in the Waskom Field, East Texas. As part of the acquisition terms, the company brings in about $75,000 a month in revenue from existing wells, while presenting potential, low-risk upside through reworking older existing wells and drilling new wells. "We've got a lot of re-entry and new well site opportunities on our East Texas Waskom property," says Teinert. "Texas represents our solid singles, while Oklahoma brings in more doubles, triples, and homeruns," says Mark Teinert, Director. 42 www.resourceworld.com "It's a blanket formation, so it's not a matter of wondering whether we'll get oil out of each well or not." The company is confident it has over 100 existing well bores on the property that are ripe for re-entry, and over 100 potential new well sites, all within the existing acreage. The project has 38 wells producing, while there are also existing shut-in wells that can be brought back to life through stimulation, acidizing, fracking, and treatment with chemicals. On average, each well is expected to produce 8 to 12 barrels of oil per day (BOPD) with low decline rates. On the offset development drilling sites (10-acre spacings), the company is expecting slightly higher rates of production, in the ballpark of 20-40 BOPD. What these East Texas "singles" represent are methods to gain immediate cash flow, and to help to further develop a proven oil and gas reserve base for their balance sheet. On average, Rangeford retains a 35% working interest in the Waskom Project through its private partner. This low-cost property will see its share of work in the upcoming program, which includes four vertical wells (two of which have already been drilled and completed), two horizontal wells, and the reworking of 30 wells for a total cost to Rangeford of less than $2 million. While the Texan Waskom property provides the steady flow of revenue growth, blue sky potential comes from the company's natural gas projects in Oklahoma. Rangeford holds a position of some 16,000 acres in the Talihina Field, as well as a lease option on a large 412,000-acre parcel on the same trend. It's worth noting that neighboring wells have averaged 11 billion cubic feet (BCF) in cumulative production, per well head, (over 21 wells) within geology that is nearly identical to Rangeford's. "The surrounding wells look very nice," says Teinert. "GNE had an engineer look at old wells on the Talahina 16,000-acre plot and he believes we can still pull another 383 BCF of gas out of those existing wells after reworking them." Even at today's natural gas prices, Rangeford is confident it can comfortably make its Oklahoma leases economical, and more importantly, profitable. As well, the structure of its deal with GNE has Rangeford only paying 25% of the costs, but retaining 50% of the working interest due to a 25% carried working interest in the project. The estimated capital required for each well is under $1 million, with an estimated net cash flow per well being $16.15 million. In terms of stock value, the company is paying cash and stock to acquire its portion of the assets from its private partner, to the tune of $3.9 million in cash ($700,000 of which has been paid to date with the remaining $3.2 million in debt) and 7,400,000 shares valued at $5.00 for purposes of the acquisition. Costs per both oil and natural gas wells are both reasonable and profitable. The company is working to increase its cash flow with each well, whether it is a new drill or a rework. A catalyst for the company may come in the form of the updated July reserve report for Waskom. After that, Rangeford and partners are looking to expand their Waskom acreage by several thousand acres. Already, the company has a good idea of what it's sitting on, from historic reserve reports dating back to 1978. By overlaying the numbers from the old reports, Rangeford believes it has an ace up its sleeve. "In terms of a public company, we look to our share of the reserves in the East Texas portion of our asset base to be worth a minimum of $150 million," says Teinert. "The beautiful thing about Waskom is that it's an income producing property with extraordinarily high reserves." n JUNE 2013

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