Fort Worth-based Range Resources Corp., which concentrates on exploration onshore in the United States, has increased its domestic oil and natural gas holdings with the $116.6 million purchase of privately held Plantation Petroleum Holdings II LLC. Range estimated that the proved reserves of the Permian Basin properties are 77 Bcfe, tilted 82% to natural gas and 62% undeveloped.
Once the transaction is completed -- which is expected by the end of this month -- Range plans to begin a drilling and recompletion development program targeted to double production by year-end 2006. The reserves-to-production ratio is 15 years. Range is assuming all operations and will own 100% of the working interest.
"This is an attractive opportunity for Range," said President John H. Pinkerton. "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."
Pinkerton said 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/Mcfe ($1.77/Mcfe fully developed). In addition to purchasing longlife 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."
The properties to be acquired are similar in nature to Range's existing properties in the Permian Basin, the company said. In particular, at its West Fuhrman Mascho Unit, which is an analogous Permian Basin field, Range has increased production in each of the last three years. The properties to be acquired currently produce approximately 7 MMcfe/d net from 58 wells.
The new properties' 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, several unproved opportunities have been identified.
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. The company is in the process of hedging a portion of the production through costless collars.
Range's proved reserves as of Dec. 31, 2003 totaled 685 Bcfe of natural gas equivalents. Following the June 2004 acquisition of the remaining interest in Great Lakes Energy Partners, pro forma reserves totaled 946 Bcfe and were 76% gas with a 13-year reserve life index.
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