Range Resources Corp., Fort Worth, Texas, (NYSE: RRC) plans to acquire $219 million of Appalachian oil and gas properties through the purchase of a private company, Pine Mountain Oil & Gas. Approximately half the value is attributable to royalty interests. Owners of Pine Mountain are First Reserve Fund IX LP, Robertson Investment Trust, and Donald E. Vandenberg, Richard M. Brillhart, Jeremy H. Grantham and Charles Ian Landon. Range estimates proved reserves on the properties are approximately 205 billion cu. ft. of gas equivalent (99% gas; 40% developed). More than 80% of the reserves are coalbed-methane. At year-end 2004, the reserve-to-production ratio on the properties will exceed 20 years. The acquisition involves legacy coal-company assets, including 417,000 acres primarily in Virginia and West Virginia. Approximately 30% of the current proved reserves are derived from royalty interests, which bear no operating costs. Of the 1,872 producing wells being acquired, Range will own a royalty interest in 1,317 wells, a royalty and working interest in 516 wells and a working interest in 39 wells. A total of 1,550 drilling locations have been identified to date, of which 790 have been classified as proven. Current production from the properties is approximately 14.8 million cu. ft. of gas equivalent per day, of which 40% is royalty gas. Approximately 70% of the current production is coalbed-methane, with the balance coming from tight-sand reservoirs. As a result of Range's buyout recently of 50-50 partner Great Lakes in Appalachian assets plus this purchase, Range's Appalachian production and reserves have more than tripled during 2004. The company's acreage position in Appalachia will exceed 1.9 (1.7 net) million acres upon closing. Closing was expected by year-end. The purchase will be financed through bank borrowings and a possible offering of equity and/or subordinated debt. Albrecht & Associates Inc. represented Pine Mountain. John White, an E&P analyst with Next Generation Equity Research LLC, has initiated coverage of Range with a 12-month price target of $23. He expects the company will have 2004 and 2005 cash flow per share of $2.98 and $3.95, respectively. "Increased gas production from recent acquisitions and the development drilling program are the main reasons," he says. The company's prospects to watch are a coalbed-methane project named Unity, the Trenton Black River play in New York and several Appalachian gas shales, White reports. -A&D Watch

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