Range Resources, First Energy Form Appalachian Giant
Range Resources Corp. and FirstEnergy Corp. announced Thursday
the formation of a $1 billion joint venture in the Appalachian
Basin. Each company will own 50% of the yet-to-be-named venture.
The deal is expected to close within 60 days.
Once formed, the venture will have proved reserves of 450 Bcfe,
of which roughly 90% will be natural gas, as well as 4,700 miles of
gas gathering and transportation lines and a leasehold position of
980,000 gross acres.
For Range Resources, the move offers an opportunity to pay down
debt. The Texas-based energy company will contribute $300 million
in assets and $200 million in debt to the project. Half of the
venture's debt will be included as a non-recourse liability on
Range's balance sheet, decreasing its debt by $100 million.
FirstEnergy declined to comment on its funding.
John Pinkerton, Range's CEO saw benefits through "significant
cost savings, and the size and efficiency of the venture should be
a catalyst for continued growth. In addition, the transaction
represents a substantial step in deleveraging Range, reducing our
recourse bank debt by more than 50%. While the transaction is
expected to reduce cash flow modestly in the short-term, it is
projected to be immediately accretive to earnings."
FirstEnergy, a holding company for utilities such as Ohio
Edison, The Illuminating Company, Pennsylvania Power, and Toledo
Edison, as well as an energy-related products and services company,
said the venture will create its largest Appalachian asset. "The
move allows us to market our share of the energy produced at a
low-cost, more efficient rate. Being a full service energy
provider, this opportunity was too good to pass up," said Mark
Durbin, a FirstEnergy spokesman.
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