Range Resources Corp. said late Monday it sold a 1% overriding royalty interest in its leases for core properties in Southwest Pennsylvania for $300 million to an undisclosed buyer as part of ongoing efforts to reduce leverage.
In a deal already completed, Range sold the interest in its Washington County leases. The company has 875,000 net acres in the state, where it produced 1.87 Bcfe/d in 2Q2018. The Washington County properties encompass 300,000 net surface acres and accounted for most of the company’s production in the region at 1.7 Bcfe/d in the second quarter.
The overriding royalty applies to existing and future Marcellus, Utica and Upper Devonian shale development. Range would maintain a net revenue interest of 82% on the Washington County acreage. Cash flow from the royalty was expected to be $25 million next year, but Range said proceeds from the sale would be used to reduce debt by 7%, helping to cut annual interest expense by roughly $15 million.
“This transaction highlights the quality and value of Range’s inventory and represents a realization of a portion of that embedded value,” said CEO Jeff Ventura. “We have made steady progress this year on our strategic objective of pairing Range’s world-class asset base with a strong balance sheet.”
Financial analysts said they expect to see more asset sales from the company. Management said last summer that it remains focused on reducing leverage and said sales of core properties in Southwest Pennsylvania were a possibility, in addition to divesting assets in Northeast Pennsylvania and North Louisiana.
Range entered North Louisiana’s Cotton Valley Sands Terryville Complex in 2016 in a $4.4 billion deal to acquire Memorial Resource Development Corp., but the assets have underperformed since. Ventura said in July that the company wouldn’t rule out a sale. Tudor, Pickering, Holt & Co. estimated that Range could earn up to $1 billion for the Terryville assets and up to $400 million for its properties in Northeast Pennsylvania.
Range had $4.2 billion of total debt on its books at the end of September.