SEC Filings

10-K
RANGE RESOURCES CORP filed this Form 10-K on 02/22/2017
Entire Document
 

 

The following table sets forth our preliminary purchase price allocation (in thousands, except shares and stock price):

Purchase price:

 

 

 

Shares of Range common stock issued to Memorial stockholders

 

77,042,749

 

Range common stock price per share at September 15, 2016 (close)

$

39.37

 

Total purchase price

$

3,033,173

 

 

 

 

 

Plus fair value of liabilities assumed by Range:

 

 

 

Accounts payable

$

55,624

 

Other current liabilities

 

114,426

 

Long-term debt

 

1,204,449

 

Deferred taxes

 

547,348

 

Other long-term liabilities

 

77,223

 

Total purchase price plus liabilities assumed

$

5,032,243

 

 

 

 

 

Fair value of Memorial assets:

 

 

 

Cash and equivalents

$

7,180

 

Other current assets

 

97,875

 

Derivative instruments

 

152,994

 

Natural gas and oil properties:

 

 

 

Proved property

 

1,117,011

 

Unproved property

 

1,999,187

 

Other property and equipment

 

3,579

 

Goodwill (a)

 

1,654,292

 

Other

 

125

 

Total asset value

$

5,032,243

 

(a) Goodwill will not be deductible for income tax purposes.

The fair value measurements of derivative instruments assumed were determined based on published forward commodity price curves as of the date of the MRD Merger and represent Level 2 inputs. Derivative instruments in an asset position include a measure of counterparty nonperformance risk and the fair values of commodity derivative instruments in a liability position include a measure of our own nonperformance risk, each based on the current published credit default swap rates. The fair value measurements of long-term debt were estimated based on published market prices and represent Level 1 inputs.

The fair value measurements of natural gas and oil properties and asset retirement obligations are based on inputs that are not observable in the market and therefore represent Level 3 inputs. The fair value of natural gas and oil properties and asset retirement obligations were measured using valuation techniques that convert future cash flows to a single discounted amount. Significant inputs to the valuation of natural gas and oil properties include estimates of: (i) recoverable reserves, (ii) production rates, (iii) future operating and development costs, (iv) future commodity prices and (v) a market-based weighted average costs of capital rate. These inputs require significant judgments and estimates by management at the time of the valuation and may be subject to change. Management utilized the assistance of a third party valuation expert to estimate the value of natural gas and oil properties acquired. In some cases, certain amounts allocated to unproved properties are based on a market approach using third party published data which provides lease pricing information based on certain geographic areas and represent Level 2 inputs.

Goodwill is attributed to net deferred tax liabilities arising from the differences between the purchase price allocated to Memorial’s assets and liabilities based on fair value and the tax basis of these assets and liabilities. In addition, the total consideration for the merger included a control premium, which resulted in a higher value compared to the fair value of net assets acquired. There are also other qualitative assumptions of long-term factors that the merger creates including additional potential for exploration and development opportunities, additional scale and efficiencies in other basins in which we operate and substantial operating and administrative synergies.

The results of operations attributable to Memorial are included in our consolidated statement of operations beginning on September 16, 2016. We recognized $146.6 million of natural gas, oil and NGLs revenues and $94.9 million of field net operating income from these assets from September 16, 2016 to December 31, 2016.

Pro forma Financial Information. The following pro forma condensed combined financial information was derived from the historical financial statements of Range and Memorial and gives effect to the merger as if it had occurred on January 1, 2015. The below information reflects pro forma adjustments for the issuance of Range common stock in exchange for Memorial’s outstanding shares of common stock, as well as pro forma adjustments based on available information and certain assumptions that we believe are

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