Range Resources Corp. has agreed to sell a 2 percent proportionately reduced overriding royalty interest in 350,000 net surface acres in southwest Appalachia for $600 million. Range also sold non-producing acreage in Pennsylvania for $34 million as of June 2019. The properties included approximately 20,000 acres in northwest Armstrong County.
The royalty interest transactions are scheduled to close in July with proceeds utilized to repay amounts outstanding under the company’s revolving credit facility. The combined gross proceeds of $634 million will reduce total debt by approximately 17 percent. Annual interest expense is expected to decline by approximately $30 million and offset a significant amount of the cash flow reduction associated with the royalty sales.
The two royalty interest transactions are effective March 1, and apply to existing and future Marcellus, Utica and Upper Devonian development on the subject leases, while excluding shallower and deeper horizons. The properties produced approximately 1.9 Bcfe net per day in the first quarter of 2019 and annualized cash flow associated with these overriding royalty sales is expected to approximate $48 million, based on first half 2019 pricing.
Sale processes to monetize additional non-core assets remain underway.
While the company is based in Fort Worth, Texas, Range has operations focused in stacked-pay projects in the Appalachian Basin and North Louisiana.
“Following the expected closing of these transactions, Range will have executed a $1 billion reduction in absolute debt over the past 12 months as the company strengthens the business through organic free cash flow generation and asset sales,” Range CEO Jeff Ventura said in a statement. “These asset sales once again highlight the significant intrinsic value of our assets. Over the past year, Range will have generated asset sale proceeds that equate to approximately 75 percent of our current market cap through the divestment of assets with a net impact to annual cash flow of less than 4 percent. Harvesting value from our asset base through these divestitures coupled with capital efficient operations positions Range for future success through commodity price cycles.”
J.P. Morgan Securities LLC acted as the financial advisor to Range on the overriding royalty sales. Vinson & Elkins LLP acted as legal advisor.