Range Agrees to $116.5 Million Permian Basin Purchase
Range Resources has agreed to acquire Permian Basin oil and gas properties for $116.5 million through the purchase of Plantation Petroleum Holdings II, LLC, a private company. Range estimates that proved reserves attributable to the properties are 77 Bcfe. The reserves are 82% natural gas, with 62% proved developed. The proved producing reserves-to-production ratio is 15 years. Range will assume operations of the properties and will own approximately a 100% working interest.
The properties to be acquired are similar in nature to Range's existing properties in the Permian Basin. In particular, at its West Fuhrman Mascho Unit, which is an analogous Permian Basin field, Range has increased production each of the last three years. The properties to be acquired currently produce approximately 7 Mmcfe net per day from 58 wells. Production is derived from multiple formations, ranging in depths from 2,500 to 8,500 feet. Range has identified 58 proven recompletion and drilling opportunities on the properties. In addition, a number of unproved opportunities have been identified. Upon completion of the transaction, Range will initiate a drilling and recompletion development program targeted to double production by year-end 2006. Range intends to finance the transaction with a combination of bank debt and equity and anticipates it will be accretive to future cash flow and earnings per share. Range is in the process of hedging a portion of the production through costless collars. Closing of the transaction is anticipated by the end of June, subject to standard closing conditions, including the satisfactory completion of final due diligence by Range.
Commenting, John H. Pinkerton, Range's President stated, "This is
an attractive opportunity for Range. The properties are comprised of
high-margin, long-life reserves, that contain predictable growth
opportunities. Importantly, the properties fit very well within our
existing Permian Basin operations. The acquisition's cost metrics are
excellent in that without any allocation of the purchase price to
unproven reserves or acreage, the proved reserves are being acquired
for $1.51 per mcfe ($1.77 per mcfe fully developed). In addition to
purchasing long-life reserves within one of our core operating areas,
the acquisition replaces approximately 90% of our anticipated 2005
production and puts us in a solid position to continue to deliver
double digit production growth in 2006."
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