RANGE RESOURCES CORPORATION (NYSE: RRC) announced today that it had completed the sale of its Austin Chalk properties located in central Texas to a private company for $82 million. The properties were originally acquired in mid-2006 as part of the Stroud purchase. Upon closing the Stroud acquisition, Range designated the properties as “properties held for sale.” As a result, the production and associated operations were excluded from Range’s income from continuing operations. In addition, the production and reserves associated with the properties are excluded from Range’s historical production results and year-end 2006 proved reserves and the sale does not impact those previously reported amounts.
In designating the properties “held for sale,” Range viewed the properties as non-core to its existing operations. Range’s plan was to monetize the properties and to redirect the sales proceeds into its core activities. In concert with the plan, Range also announced that it has reinvested a portion of the sales proceeds. First, Range has acquired the minority owner’s interest in its northern Oklahoma shallow oil play for $30.5 million. Approximately 15.7 Bcfe of proved reserves were acquired at a cost of $1.94 per mcfe. Importantly, Range now owns 100% of the project and will reap all the benefits from proving up the additional reserves. Range has identified more than 400 drilling locations on the current acreage position of which only 67 are classified as proven. Second, Range has recently expanded its Barnett Shale acreage position by almost 10,000 acres to a total of 73,000 gross (64,000 net) acres. More than 90% of the Barnett Shale leasehold is located in the core and expanding core portions of the play. One of the recently drilled wells was placed on production two weeks ago and is now producing in excess of 12 Mmcfe per day. For 2007, Range plans to drill 60 Barnett Shale wells on its existing acreage position.
Because of the non-core nature of the assets held for sale and the proportion of non-producing reserves present at purchase, our acquisition price of Stroud attributed $80 million to the properties. However, at the closing of the Stroud acquisition, the assets held for sale were recorded at $140 million based upon an independent third-party fair value assessment. Therefore, accounting for the $82 million of sales proceeds, a $25.4 million after-tax non-cash loss from discontinued operations will be recognized in the fourth quarter of 2006.
Commenting, John H. Pinkerton, the Company’s President, said, “We are pleased to have completed the Austin Chalk sale at an attractive price. Importantly, we have reinvested a portion of the sales proceeds in core areas where we are having terrific drilling results. We are also considering the sale of our Gulf of Mexico properties. These actions are in lock-step with our strategy of focusing on long-lived, onshore properties in our core areas. The asset sales coupled with our rising cash flow, should be more than sufficient to fund our 2007 capital expenditure program.”
RANGE RESOURCES CORPORATION (NYSE: RRC) is an independent oil and gas company operating in the Southwestern, Appalachian and Gulf Coast regions of the United States.
Except for historical information, statements made in this release, including estimates of oil and gas reserves, and future expenses are forward-looking statements as defined by the Securities and Exchange Commission. These statements are based on assumptions and estimates that management believes are reasonable based on currently available information; however, management’s assumptions and Range’s future performance are subject to a wide range of business risks and uncertainties, and there is no assurance that these goals and projections can or will be met. Any number of factors could cause actual results to differ materially from those in the forward-looking statements, including, but not limited to, the volatility of oil and gas prices, the costs and results of drilling and operations, the timing of production, mechanical and other inherent risks associated with oil and gas production, weather, the availability of drilling equipment, changes in interest rates, litigation, uncertainties about reserve estimates, environmental risks and other risks and uncertainties set forth in Item 1.A. of Range’s 2005 Annual Report Form 10-K filed with the Securities and Exchange Commission on February 23, 2006. Range undertakes no obligation to publicly update or revise any forward-looking statements. Further information on risks and uncertainties is available in Range’s filings with the Securities and Exchange Commission, which are incorporated by reference.
Range’s internal estimates of reserves, particularly those in the properties recently acquired where we may have limited review of data or experience with the reserves, may be subject to revision and may be different from estimates by our external reservoir engineers at year-end. Although we believe the expectations and forecasts reflected in these and other forward-looking statements are reasonable, we can give no assurance they will prove to have been correct. They can be affected by inaccurate assumptions or by known or unknown risks and uncertainties.
