Asset Sale Sends Range Resources Corp.'s Stock Soaring

By Matthew

What: Shares of natural gas producer Range Resources jumped as much as 12% on Wednesday. Fueling the surge was the announcement that the company sold its Nora assets in Virginia for $876 million.

So what: The Nora field, which is located on 460,000 net acres in southwestern Virginia, was responsible for 7.5% of Range Resources' daily output. However, it wasn't a growth asset for the company, which is why Range is selling it. It plans to use the cash to cut its debt by 24%, which will significantly enhance the company's financial flexibility.

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In commenting on the transaction, Range Resources CEO Jeff Ventura noted:

In other words, Nora, while solid, simply could not complete with the compelling potential seen in the company's core acreage position. That's why it chose to pull forward the value by selling the asset, which will provide it greater flexibility to invest in its core acreage position.

Unloading non-core assets is becoming a very common practice among shale drillers. RivalEQT Corp sold a number of its non-core assets over the past few years so that it could focus on its own Marcellus and Utica acreage. In late 2012, EQT sold its Equitable Gas utility business for $720 million and more recently sold its Northern West Virginia Gathering System for $1.05 billion and its Jupiter natural gas gathering system for $1.18 billion. EQT then used those proceeds to initially bolster its balance sheet so that it had the finances to invest in its own rich natural gas acreage.

Now what: Range Resources is significantly improving its balance sheet by offloading its Nora assets. However, this is less of a balance sheet move than it is about giving it the financial flexibility to invest in better opportunities elsewhere. It's a common practice whereby shale drillers are cashing in on non-core assets in order to have the cash to invest in more compelling growth options.

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