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Range Resources, First Energy Form Appalachian Giant

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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