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Range Resources & EQT Swap Assets

Zacks Equity Research

The share price of Range Resources Corporation (RRC) fell 0.5% following the news of the company’s agreement with EQT Corporation (EQT). The deal entails exchange of both the companies’ producing properties and other assets.

Per the agreement, Range Resources will transfer ownership of about 73,000 net acres and related assets in Glasscock and Sterling Counties, TX to EQT. The assets consist of all of Range Resources’ Conger properties, which are currently yielding about 28 million cubic feet equivalent per day (Mmcfe/d), with 62% being liquids mainly from the Cisco/Canyon. These Permian Basin properties are believed to hold several horizontal and vertical stacked pay drilling prospects in the Wolfcamp, Cline and Wolfberry horizons.

On the other hand, EQT will transfer its operated ownership interests spread across 138,000 net acres and its 50% interests in 1,200 miles of gathering pipelines and compression in the Nora Field of Virginia to Range Resources. This will give Range Resources complete ownership of these assets, along with cash proceeds of $145 million.

Currently, the Nora properties are yielding about 41 Mmcf/d. These properties have several vertical and horizontal stacked pay drilling prospects in the coalbed methane, conventional tight gas intervals and Devonian shale horizons. The transaction has kept Range Resources’ 2014 capital expenditure budget unchanged at $1.52 billion.

The deal, which will expectedly be complete in the second quarter of 2014, is subject to customary closing conditions, final due diligence and post closing adjustments.

Once the transaction is complete, Range Resources’ net Virginia production will increase to 111 Mmcf/d from 70 Mmcf/d, thanks to the new combined 385,000 gross and net acres owned by the company in the region.

Range Resources believes that the exchanged property has a net unproved resource potential of 2 trillion cubic feet equivalent (Tcfe). This has boosted the company’s net unproved resource potential in properties held in Virginia to 5 Tcfe.

At present, Range Resources carries a Zacks Rank #4 (Sell). However, better-ranked stocks in the same sector include Unit Corp. (UNT) and Boardwalk Pipeline Partners, LP (BWP), both of which have a Zacks Rank #1 (Strong Buy).

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