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Tuesday, March 1, 2011

Range drops Barnett for $900 million and diverts 86% of 2011 capex to Marcellus... Marcellus challenges even oil plays for high rate of return!!!

Range Resources agreed to sell its Barnett Shale properties in the Fort Worth Basin to Legend Natural Gas for $900 million. The properties included in the sale encompass 390 producing wells covering approximately 52,000 net acres. Current production is approximately 113 Mmcfe per day. The assets have a large resource base with 1.7 Tcfe of total 3P potential and ~700 low risk infill drilling locations. Range is retaining certain non-producing land holdings in the Barnett Shale, which it values at approximately $50 million. Scotia Waterous advised Range in connection with this transaction.



Range- Exits Barnett and Enters Marcellus!!
Commenting on the announcement, John Pinkerton, Range's Chairman and CEO, said, "The sale of our Barnett Shale properties will be the catalyst for Range becoming cash flow positive in 2013. Under our plan, we will retain 100% of the resource potential of our Marcellus Shale play as well as from the Upper Devonian and Utica Shale plays. It will also allow us to pursue our other opportunities in the Nora area, the Midcontinent and Permian Basin”.


Range announced that its 2011 capital expenditure budget has been set at $1.38 billion. Approximately 86% of the budget will be directed toward the Marcellus Shale play. Also, Range disclosed in one of their reports that:
- Marcellus generates 79% rate of return (5.0 Bcfe) at $5.00 flat NYMEX
- Nora and Barnett generate 32% rate of return at $5.00 flat NYMEX.

The divestiture is in-line with Range’s strategy to sell non-core properties and reinvest in its higher-return projects.




In addition to this $900 million divestiture, Range has also identified $200 to $250 million of miscellaneous properties it plans to offer for sale over the next 12 months.

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