To build its presence in the U.S. offshore, Itochu Corp. has purchased Range Resources Inc.'s Gulf of Mexico (GOM) natural gas-rich assets for $155 million. Japan's fourth-largest trading company said it plans to invest about $170 million [Y20 billion) this year in the United States to build its U.S. gas business.
On Sunday, Japanese newspapers were reporting Itochu plans to spend up to $850 million (Y100 billion) over the next three years to expand its U.S. gas business. In November, Itochu launched sales of U.S. gas by taking over the rights from Kansas Energy Co. Itochu said it plans to expand its gas sales territory to include both the East and West Coasts. And in January, Itochu bought stakes in several gas exploration blocks in the GOM from Australian-based Santos Group. It said it plans to drill three wells on the Santos prospects this year.
Fort Worth-based Range in February announced it was considering the sale of its Gulf Coast and GOM operations to concentrate its exploration efforts in Texas, Appalachia and the Midcontinent (see Daily GPI, Feb. 27). Its Gulf Coast assets are 85% weighted to gas, and altogether, account for about 4% of proved reserves and 11% of total production.
Range estimated that the properties to be sold to Itochu hold about 40 Bcfe of proved reserves, or 2% of Range's total proved reserves. The properties include Range's interest in 37 nonoperated platforms in water depths ranging from 11 to 240 feet. As a result of the sale, Range will record a pre-tax gain of approximately $100 million in the first quarter of 2007.
"This sale, coupled with the February sale of Austin Chalk properties [in central Texas] has generated $237 million of aggregate proceeds," said Range CEO John Pinkerton. "In both cases, the properties were not integral to our future growth, so we elected to monetize them. The sales strengthen the balance sheet, enhance our asset quality, lengthen our reserve life and lower our unit cost structure. Most important, the sales allow us to accelerate the development of other properties where we are confident that we can aggressively grow production and reserves in the future."
Itochu already has a North American presence, with Canadian offices in Montreal and Vancouver, and U.S. offices in Chicago, Houston, Los Angeles, New York, Portland, OR, San Francisco, Westlake, CA, and Washington, DC. Itochu's U.S.-based subsidiary, IPC (USA) Inc., trades crude oil and petroleum products.
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