trending Market Intelligence /marketintelligence/en/news-insights/trending/CYpohJucZKURW_Mmtfh5WA2 content esgSubNav
In This List

Memorial buy to boost Range in short term despite price tag, Bernstein says


The Big Picture: 2024 Energy Transition Industry Outlook

Case Study

An Oil and Gas Company's Roadmap for Strategic Insights in a Quickly Evolving Regulatory Landscape


Essential IR Insights Newsletter Fall - 2023


Cleantech Edge: Private energy transition capital stages subdued summer rebound

Memorial buy to boost Range in short term despite price tag, Bernstein says

After its acquisition of ,Range Resources Corp.may now be better positioned for short-term growth despite the deal's pricetag, SanfordC. Bernstein & Co. analysts said.

The deal, which closed Sept. 16, is to consolidate and betweenRange Resources' Marcellus position and Memorial's Gulf Coast focus. But whileBernstein acknowledged in a Sept. 28 report that the price is on the high end,the analysts said the newly purchased assets are of high quality.

Bernstein analysts estimated the deal to be worthabout $11,000 per acre, which is in line with recent Marcellus/Uticatransactions. This price is justified by an average estimated ultimate recoveryof 11 Bcf for a seven-well Terryville sample, the report said.

Low prices for additional volumes meant Range couldnot grow its production to its firm transportation capacity before the merger,which put the company at a disadvantage given Bernstein's bullish near-termoutlook on Henry Hub prices. With Memorial's assets, Range Resources canrespond to increases in price with additional volumes.

"What [Memorial] adds is the ability to reinvestsurplus cash flows generated by the Marcellus business — which, with the largertransportation footprint of 2018 and beyond, should be significant — into anasset that can generate strong returns regardless of volume," theBernstein analysts said in the report.

Bernstein increased Range's target price to $47 from$46, with an "outperform" rating. Range shares closed at $36.97 onSept. 27.

Range's all-stock deal with Memorial was valued at $4.2 billionat closing, including the assumption of Memorial's net debt. Each share ofMemorial's common stock was exchanged for 0.375 Range share.