2011-03-08-2011-03-01-2011-05-02
Bought majority stake in TX Barnett shale assets including 390 producing wells on 52,000 net acres in Tarrant, Johnson, Dallas, Denton, Parker, Hood, Hill, Ellis, Somervell & Wise counties, gaining 113 MMcfe/d.
Houston-based, privately held Legend Natural Gas IV LP has closed its purchase of the Barnett shale properties held by Range Resources Corp., Fort Worth, Texas, (NYSE: RRC) for $900 million.
Legend has acquired 95% of total consideration and the remaining 5% of assets are expected to take place as further consents to lease assignments are obtained.
The assets, which will be operated by Legend, include approximately 390 producing wells on 52,000 net acres (80% Barnett core, 80% held by production) in Tarrant, Johnson, Dallas, Denton, Parker, Hood, Hill, Ellis, Somervell and Wise counties with approximately 1,000 drilling locations. Net production is approximately 113 million cubic feet of gas equivalent per day. Range reported in March that it was retaining certain nonproducing acreage in the Barnett, which it values at approximately $50 million.
Legend now owns an interest in approximately 800 operated, producing wells located in three core areas: the Fort Worth Basin, the Permian Basin and South Texas.
Proceeds from the closing have been applied to fully retire the current outstanding balance under Range's revolving credit facility with the excess proceeds invested in cash equivalent investments.
John Pinkerton, Range chairman and chief executive, says, "The Barnett sale is a significant catalyst to help fuel our future performance and growth. Today, Range has the strongest balance sheet in our history with cash on hand and no amount outstanding on our $1.5 billion bank credit facility. Despite the sale, we still expect to grow full year production 10% and make up all the production sold from the Barnett by the end of the third quarter."
Scotia Waterous was financial advisor. Legend's equity provider was Riverstone/Carlyle Global Energy and Power Funds, a group of energy-focused private equity funds managed by Riverstone Holdings LLC.
When the deal was announced in March, KeyBanc Capital Markets' Jack Aydin estimated its value at $17,308 per net acre and $7,965 per thousand cubic feet equivalent per day. "While the sale price was lower than we were expecting, we think the price compares favorably to other recent transactions in the Barnett when looking at the price paid for production," Aydin said in a March research note.
The senior managing director added that the firm believes the lower-than-expected price was due in part to a decrease in the gas strip price by about $0.40 per Mcf since Feb. 28. "Regardless of the price tag, based on our calculations, we estimate the weighted average price per flowing daily production for three Barnett shale transactions announced during the second half of 2010 to be $5,767 per Mcfe per day," Aydin said.
Wells Fargo Securities senior analyst David Tameron also noted that Range's Barnett price tag "will likely disappoint," as it came in well below market expectations. Tameron valued the deal at $7,965 per Mcfe per day (Range is currently trading at $15,900 per Mcfe for 2012) and $17,300 per acre.
The effective date is Feb. 1.