Range Narrows Appalachia Footprint With $634 Million Asset Sales

Range Resources Corp. is selling a chunk of its prized Appalachia footprint as the oil and gas producer works to strengthen its business through asset sales.

In total, the Fort Worth, Texas-based company said July 19 it had agreed to sell assets in three separate transactions for combined proceeds of about $634 million. Sale processes to monetize additional noncore assets remain underway, according to the Range press release.

Proceeds from the asset sales will be used to reduce company debt. Range CEO Jeff Ventura expects the company’s debt reduction over the past year will total $1 billion by the close of the transactions.

“Over the past year, Range will have generated asset sale proceeds that equate to approximately 75% of our current market cap through the divestment of assets with a net impact to annual cash flow of less than 4%,” Ventura said in a statement July 19.

Two of the asset sales comprised separate agreements for the sale of a 2% proportionately reduced overriding royalty interest (ORRI) in 350,000 net surface acres in southwest Appalachia for gross proceeds totaling $600 million. The remaining transaction was a $34 million sale of certain non-producing acreage in Pennsylvania that Range closed in June.

The non-producing acreage sale included about 20,000 acres in northwest Armstrong County, Pa.

Meanwhile, the sale of the ORRI properties only applies to existing and future Marcellus, Utica and Upper Devonian development on the subject leases, while excluding shallower and deeper horizons. Range said net production from the properties in the first quarter was about 1.9 billion cubic feet equivalent per day (Bcfe/d). The company also projects annualized cash flow associated with ORRI to be roughly $48 million, based on first-half 2019 pricing.

Franco-Nevada Corp. was the buyer for half of the ORRI, according to law firm Porter Hedges, which is representing the company in its $300 million purchase of the assets. The identity of the remaining buyers has not been disclosed.

The series of transactions follow a sale by Range in October 2018 of a 1% ORRI in its Washington County, Pa., leases for gross proceeds of $300 million. According to Ventura, the asset sales on July 19 once again highlight the significant intrinsic value of Range’s assets

“Harvesting value from our asset base through these divestitures coupled with capital-efficient operations positions Range for future success through commodity price cycles,” he added.

Combined proceeds from the asset sales is expected to reduce Range’s total debt by 17%. The company also anticipates its annual interest expense to decline by roughly $30 million.

Range expects to close the ORRI transactions in July. The separate transactions have an effective date of March 1.

J.P. Morgan Securities LLC was financial adviser to Range on the overriding royalty sales. Vinson & Elkins LLP (V&E) provided the company with legal advice. The V&E corporate team was led by partner Bryan Loocke with senior associate Tan Lu and associate Josh Rocha. Meanwhile, the Porter Hedges team representing Franco-Nevada was led by Jeremy Mouton and James Thompson.

Range produced about 2 Bcfe/d during the first quarter from its roughly 875,000 net-acre position in the Appalachia Basin, according to the company website. The company also holds about 140,000 net acres in North Louisiana but has plans to spend mineral capital on its development over the next five years.

Emily Patsy can be reached at epatsy@hartenergy.com.