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Range Resources to take another write-down on disappointing La. shale gas asset

Appalachian shale gas producer Range Resources Corp. will write off some or all of the remaining value of its Terryville, La., shale gas operation as natural gas prices stay stuck near $2/MMBtu in the middle of winter.

Range purchased the field's operator, Memorial Resource Development Corp., for $4.2 billion in 2016, hoping to get around bottlenecked pipelines in Appalachia with a dry gas play close to a coming boom in LNG terminal construction.

Executives had said Terryville would be cheaper to drill than the company's Marcellus Shale position in southwestern Pennsylvania, but it could never get the play to perform up to those expectations. In the fourth quarter of 2018, Range wrote down the value of the assets by nearly half, taking a $1.6 billion impairment of goodwill associated with the deal and a $515 million impairment of unproved properties there.

"We expect to record a significant non-cash impairment charge related to our natural gas and oil properties in North Louisiana during the fourth quarter of 2019, although we cannot currently estimate the value of the impairment," Range said in a Jan. 8 securities filing. "We do not expect to record any impairment charge related to our natural gas and oil properties in the Appalachian Basin."

Range said it was carrying Terryville on its books at $2.7 billion as of the most recent third quarter, and it would be taking a noncash impairment charge against that figure.

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Range said Jan. 6 that it planned to cut its 2020 capital spending by nearly one-third compared to 2019 while holding its production volumes flat at 2.3 Bcfe per day. The company said it plans to use the hoped-for increase in free cash flow to pay down more debt.

"Good to see the focus on living within cash flow at the expense of growth as we see this as the right move in the current gas macro environment," analysts at energy investment bank Tudor Pickering Holt & Co. said after the announcement, but they reiterated the advice of a chorus of analysts urging Range to sell Terryville. "We agree with the strategy given elevated leverage and remain focused on seeing continued execution on asset sales (southwest Pennsylvania overriding royalty interests, northeast Pennsylvania and Terryville)."

The purchase of Memorial Development and the Terryville operation included 220,000 acres in northern Louisiana near the Haynesville Shale with 1.4 Tcfe of proved reserves.