US-based Range Resources has agreed to buy Memorial Resource Development for about US$4.4 billion in total, in a rare deal at a time when many companies are holding back from acquisitions.
The transaction includes US$3.3 billion in stock and US$1.1 billion of net debt associated with Memorial as of March 31, 2016, Range said in a statement.
The transaction will combine Range’s gas resources in the Appalachian Basin with Memorial’s assets in Louisiana.
“This is an exciting announcement that brings together two high-quality unconventional producers with large de-risked, high-return projects into one portfolio,” said Range’s CEO, Jeff Ventura.
The transaction, which is still subject to the shareholders’ approval as well as certain regulatory approvals, is expected to close in the second half of 2016.
Memorial will have the right to nominate an independent director from the company to a seat on Range’s board.
Credit Suisse, Morgan Stanley and Barclays Capital acted as financial advisers on the sale, while Sidley Austin, Vinson & Elkins and Akin Gump Strauss Hauer & Feld acted as legal advisers.
Texas-based Range operates with a focus on stacked pay projects in the Appalachian Basin.
The firm has roughly 1 million net acres (4,047 square km) of assets across Pennsylvania. Most of this acreage has stacked pay potential for the Marcellus, Utica and Upper Devonian shale formations, according to the company’s website.
Range had proven reserves of 9.9 trillion cubic feet (280.4 billion cubic metres) of gas equivalent as of December 31, 2015. It estimates that it has a further 54-70 tcf (1.5-2.0 trillion cubic metres) equivalent in net unrisked resource potential in the Marcellus and Upper Devonian formations.
Houston-headquartered Memorial focuses on the acquisition, exploration and development of oil and gas assets in North Louisiana. It had 1.378 tcf (39.0 bcm) equivalent of proven reserves as of December 31, 2015.
“It’s a very strategic and opportunistic deal for both Range and Memorial,” a Wunderlich Securities analyst, Irene Haas, was reported by the Wall Street Journal as saying. “To me, it’s a pretty plain vanilla deal, because you don’t have many companies in the gassy space that you can buy and sell from.”