Oil & Gas Pro

Range Resources buys Memorial resources; Breitburn files for bankruptcy

Range Resources to buy Memorial Resource in $4.4B deal
  • Range Resources (NYSE:RRC) agrees to acquire Memorial Resource Development (NASDAQ:MRD) in a deal valued at $4.4B including $1.1B of debt.
  • The all-stock deal is valued at $15.75/share, a 17% premium to MRD's Friday closing price.
  • RRC says the acquisition will strengthen its position in the Appalachian and Gulf Coast regions, providing greater marketing capabilities and opportunities, with added beneficial exposure to growing natural gas demand; gas accounted for 71% of the RRC’s production last year, while oil and other liquids accounted for 29%.
  • MRD shareholders will own 31% of the combined company, and MRD will have the right to nominate one of its independent directors to RRC’s board.
  • MRD +8.9% premarket.
Breitburn files for bankruptcy protection
  • Breitburn Energy Partners (NASDAQ:BBEP) and some of its units have filed for restructuring under Chapter 11, the latest energy company to face the brunt of low commodity prices.
  • The oil and gas MLP said it secured a $75M debtor-in-possession financing, in addition to cash from its operations and cash on hand, to fund its operations during the bankruptcy process.
  • Breitburn also listed both assets and liabilities in the range of $1B-$10B.
  • Previously: Energy bankruptcies pile up (May. 13 2016)

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Replies to This Discussion

Permalink Reply by Chris on May 16, 2016 at 3:05

I don't think MRD believes their own press releases and presentations to the market. 


Oil & Gas ProPermalink Reply by Skip Peel - Mineral Consultant on May 16, 2016 at 3:28

I doubt that MRD was a willing partner in this sale.  I think it more likely that we should look to the parent company, NGP, for the reason for the sale.

Permalink Reply by Chris on May 16, 2016 at 4:30

No doubt about it that this was the financial guys looking to make an exit.

There is most likely more to the story. Last 3 months- New CEO,cut drilling program in half,  NGP MEMP board members resign, MRD severs ties totally with MEMP. Lots of shake up at a high level. 


Oil & Gas ProPermalink Reply by Skip Peel - Mineral Consultant on May 16, 2016 at 5:03

I suspect that MRD was one of a small number of assets that could command a decent fair market price in the NGP portfolio of companies.  I think Range picked up a good asset that will be economic long term.  The question for many GHS members will be Range's interest in expanding the Terryville Complex trend.  And their willingness to HBP the large undrilled acreage position they acquired with MRD.

Permalink Reply by Chris on May 21, 2016 at 6:50

Skip, 

I find it interesting that nobody appears to have questioned the relationship between Penn-Tex and MRD, both NGP portfolio companies. I don't know much about mid-stream, but I bet an experienced attorney could have a field day signing up royalty owners who are possibly being taken advantage of in post-production deductions. Thoughts?

The relationships are disclosed in their respective SEC filings but it just seems overly complicated and fishy to me. Most likely due to a combination of my ignorance and skepticism. 

 


Oil & Gas ProPermalink Reply by Skip Peel - Mineral Consultant on May 21, 2016 at 7:01

There has been little mention of displeasure with MRD regarding royalty deductions that I can recall.  Nor Wildhorse Resources before them. If anyone thinks they have been subject to improper deductions, they should seek legal council.  There are few law firms that are experienced in the specifics of deductions. 

http://www.gohaynesvilleshale.com/forum/topics/legal-notice-for-lou...


Oil & Gas ProPermalink Reply by Skip Peel - Mineral Consultant on May 21, 2016 at 9:43

Thanks, Kathy. 


Oil & Gas ProPermalink Reply by Skip Peel - Mineral Consultant on May 24, 2016 at 8:46

15% deductions doesn't wave any red flags for me.  Compared to peers in other NW LA plays 15% is low.  That and the fact that we haven't had any prior replies from Wildhorse Resources/MRD lessors raising questions of improper deductions leaves me looking for specifics, not general statements implying unethical behavior.  There is nothing inherently unethical in an upstream company (WR/WRM/MRD) doing business with a midstream company (Penn-Tex) that share the same investors.  Details regarding deductions are important but often hard to find beyond what appears on a royalty statement.  If deductions were 30% or more that would tend to support the possibility of improper deductions.  Natural Gas Partners holds equity stakes in a number of energy industry companies.

http://www.ngpenergycapital.com/investment

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