Source: Range Resources
Range Resources Corporation (NYSE: RRC) has signed a definitive agreement with a private company to sell its Barnett Shale properties in the Fort Worth Basin for a purchase price of $900 million. The sale is expected to close in late April and is subject to customary closing conditions and purchase price adjustments.
The properties included in the sale encompass 390 producing wells covering approximately 52,000 net acres. Current production is approximately 113 Mmcfe per day. Range is retaining certain non-producing acreage in the Barnett Shale, which it values at approximately $50 million.
The Company also announced that its 2011 capital expenditure budget has been set at $1.38 billion. The 2011 capital budget includes $1.13 billion for drilling and recompletions, $160 million for land, $55 million for seismic and $35 million for pipelines and facilities. Approximately 86% of the budget will be directed toward the Marcellus Shale play. The remaining budget is currently divided as follows: 6% for the Midcontinent division, 4% for the Appalachian division and 4% for the Southwest division.
The 2011 capital budget will be funded with operating cash flow and a portion of the proceeds from the sale of the Barnett Shale properties. Range has also identified $200 to $250 million of miscellaneous properties it plans to offer for sale over the next 12 months. After combining 2011 estimated cash flow and the expected proceeds from the property sales, less the 2011 capital expenditures, Range anticipates carrying over approximately $400 million into 2012. The Company currently plans to fund its 2012 capital budget with the $400 million carryover proceeds, operating cash flow and drawing approximately $150 million under its bank credit facility. Based on current future prices, Range currently anticipates it can fully fund its 2013 capital spending with expected cash flow.
For 2011, Range is targeting year-over-year production growth of 10%, including the impact of the expected property sales. Adjusting for the property sales, 2011 production growth would be 25%. Looking to 2012, the Company currently anticipates year-over-year production growth in the 25% to 30% range. For 2011 and 2012, all-in finding and development costs are currently projected to be $1.00 per mcfe or less.
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. We have assembled a very attractive inventory of high return, low-cost drilling opportunities. This is evidenced by our plan to sell the Barnett properties, representing more than 20% of our current production, and fully replace its production and generate double-digit growth all within the same year. With the signing of the Barnett sale agreement coupled with the outstanding drilling results we have already achieved early in the year, we are well on our way to accomplishing our 2011 plan.”