Upon completion of the transaction, Range plans to retain nearly all of Stroud's 27 employees, including those involved in the Barnett Shale play. This will expand Range's Barnett shale team under the leadership of Mark Whitley, Range's Senior Vice President. By adding Stroud's leasehold position, Range will own approximately 42,900 gross (35,300 net) acres in the Barnett Shale play. Range plans to develop the leasehold position with a five-rig drilling program, including the three rigs Stroud is currently running, plus two additional contracted rigs scheduled to arrive in the third quarter.
In announcing the transaction, Range indicated that it will consider divesting of the Austin Chalk properties. These properties produced approximately 16 Mmcfe per day in the first quarter of 2006.
Commenting on the announcement, John Pinkerton, Range's President and CEO, said, "This transaction doubles Range's leasehold position in the Barnett Shale play and our shale play team benefits from the addition of the Stroud employees, who are highly regarded. We believe the expanded Barnett team will enhance and accelerate our shale effort. Excluding the Austin Chalk properties, which we will consider divesting, we estimate that the fully developed cost of the Barnett Shale and East Texas reserves will be approximately $2.35 per mcfe. The transaction expands our leasehold position with high-quality Barnett acreage, increases our drilling inventory and provides us with a number of additional top-tier people. Importantly, it continues Range's strategy of growing production and reserves at a "top quartile" cost structure. Assuming the transaction closes in late June, we are increasing our 2006 production growth target from 11% to 15%."
The acquisition is structured as a merger pursuant to which Stroud's shareholders who satisfy certain suitability standards may individually elect to receive, in exchange for their shares of Stroud common stock, consideration in one of three forms: 100% in Range common stock, 100% in cash or 50% in Range common stock and 50% in cash, subject to adjustments and allocations provided for in the definitive agreement. The exchange ratio for the Stroud stock, and on which the cash consideration will be determined, will be based upon the average closing price for Range's stock for the 15 days ending five days prior to closing. Based on the latest 15-day average price of Range's common stock, and assuming all of Stroud's shareholders were to elect to receive Range common stock in the transaction, Range would issue approximately 13.2 million shares of stock, representing approximately 9% of the outstanding Range stock giving effect to such issuance. Stroud shareholders who do not satisfy the suitability standards will receive their consideration 100% in cash. Range intends to utilize funds currently available under its bank credit facility to finance the cash portion of the transaction. The Stroud acquisition is subject to approval by the shareholders of Stroud and other customary closing conditions. Assuming the Stroud shareholders approve the transaction and the other closing conditions are satisfied, closing is expected to occur in late June 2006. There is no assurance the acquisition will be consummated.
Range Resources Corporation is an independent oil and gas company operating in the Southwestern, Appalachian and Gulf Coast regions of the United States.
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