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Charles Kennedy

Charles Kennedy

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U.S. Natural Gas Assets Are Selling For Pennies On The Dollar

Range Resources has agreed to sell its North Louisiana natural gas assets for just one-tenth of what it paid for it in 2016, as shale drillers struggle with high debt and low commodity prices.

Range Resources said on Monday that it had signed an agreement to sell its North Louisiana assets for gross proceeds of US$245 million, plus another potential US$90 million that is contingent on future commodity prices. The buyer is Castleton Resources LLC, whose president and CEO Craig Jarchow said:

“We are very pleased to be able to purchase quality assets at a low-point in the commodity-price cycle.”

“We remain focused on strategically growing and diversifying our upstream and midstream assets, and broadening our portfolio with attractive opportunities that complement our long-term business strategy,” Jarchow added.

At the time of the sale, the assets were producing 160 Mmcfe per day, while Range Resources didn’t have any drilling and completion activity planned for the assets this year.

The deal, expected to close in August with an effective date February 1, 2020, is another sign that low commodity prices and high debt levels have resulted in companies in the shale patch selling assets for pennies on the dollar.

To compare, Range Resources acquired the North Louisiana assets via the merger with Memorial Resource Development Corp back in 2016, which was an all-stock transaction valued at US$4.4 billion, including Memorial Resource Development’s US$1.1 billion debt at the time.

U.S. oil and gas deals ground to a halt in the first half of 2020, as “the short-term distress and potentially irreversible demand destruction are forcing players across the value chain to conserve cash and rethink their long-term strategies,” PwC said in its mid-year 2020 analysis.

In the first half this year, deal activity in U.S. oil and gas hit the lowest level since 2011, according to PwC.

“While the COVID19 and oil price uncertainty have dampened deal-making, broader trends point towards M&A as one of catalysts ushering the next cycle,” said Mile Milisavljevic, US Oil & Gas Deals Leader.

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By Charles Kennedy for Oilprice.com

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