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Dispositions and Acquisitions | 12 Months Ended
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Dec. 31, 2016
Business Combinations [Abstract] |
Dispositions and Acquisitions |
(3) | Dispositions and Acquisitions
We recognized a pretax net loss on the sale of assets of $7.1 million in the year ended December 31, 2016 compared to a loss of $406.9 million in 2015 and a gain of $285.6 million in 2014. The following describes the significant divestitures that are included in our consolidated results of operations for each of three years ended December 31, 2016, 2015 and 2014. 2016 Dispositions Western Oklahoma. In first nine months 2016, we sold various properties in Western Oklahoma for proceeds of $78.6 million and we recorded a loss of $5.3 million related to these sales, after closing adjustments and transaction fees. Pennsylvania. In first quarter 2016, we sold our non-operated interest in certain wells and gathering facilities in northeast Pennsylvania for proceeds of $111.5 million. After closing adjustments, we recorded a loss of $2.1 million related to this sale. Other. In 2016, we sold miscellaneous proved and unproved property, inventory and surface property for proceeds of $3.7 million resulting in a gain of $302,000. Included in the $3.7 million of proceeds is $1.2 million received from the sale of proved properties in Mississippi and South Texas. 2015 Dispositions Virginia and West Virginia. In December 2015, we sold the majority of our producing properties and gathering assets in Virginia and West Virginia for cash proceeds of $876.0 million, before closing adjustments. We recorded a pretax loss of $407.7 million related to this sale. We recognized $52.3 million of field net operating income (defined as natural gas, oil and NGLs sales plus net brokered margin less direct operating expenses, production and ad valorem taxes, transportation expense, exploration expense and divisional office general and administrative expense) for these assets for the period from January 1, 2015 to December 30, 2015 compared to $98.3 million in the year ended December 31, 2014. West Texas. In February 2015, we sold certain of our West Texas properties for cash proceeds of $10.5 million and we recognized a pretax loss of $101,000 related to this sale. Other. During 2015, we also sold miscellaneous inventory, surface acreage and unproved property for proceeds of $4.4 million and resulting in a pretax gain of $943,000. 2014 Dispositions Conger Exchange Transaction. In April 2014, we entered into an exchange agreement with EQT Corporation and certain of its affiliates (collectively, “EQT”) in which we sold our Conger assets in Glasscock and Sterling Counties, Texas in exchange for producing properties and gas gathering assets in Virginia and $145.0 million in cash, before closing adjustments (“the Conger Exchange”). We closed the exchange transaction in June 2014 and recognized a pretax gain of $272.7 million, after selling expenses of $5.0 million, which is recognized as a gain on sale of assets in our consolidated statements of operations for the year ended December 31, 2014. For the period from January 1, 2014 through June 16, 2014, we recognized $21.9 million of field net operating income (defined as natural gas, oil and NGLs sales plus net brokered margin less direct operating expenses, production and ad valorem taxes and transportation expenses) for our Conger assets. In connection with the Conger Exchange, we acquired the remaining 50% interest held by EQT in Nora Gathering, LLC (“NGLLC”), a natural gas gathering operation, which we had previously accounted for using the equity method of accounting. As of June 2014, we consolidated NGLLC into our consolidated financial statements. Our previous 50% membership interest in NGLLC was remeasured to fair value of $134.8 million on the acquisition date, resulting in a gain of $10.0 million which is recognized in gain on sale of assets in our consolidated statements of operations for the year ended December 31, 2014. For the period from June 16, 2014 through December 31, 2014, we recognized $33.8 million of natural gas, oil and NGLs sales from the property interests acquired in the Conger Exchange and we recognized $25.7 million of field net operating income from the property interests acquired in the Conger Exchange. Conger Exchange Fair Value. Accounting standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (often referred to as the “exit price”). The fair value measurement is based on the assumptions of market participants and not those of the reporting entity. Therefore, entity-specific intentions do not impact the measurement of fair value unless those assumptions are consistent with market participant views. The fair value of the Conger Exchange described above was based on an income approach which was supplemented by a market approach. For the natural gas and oil properties, the income approach uses significant inputs not observable in the market, which are Level 3 inputs. The significant inputs assumed include future production, costs and capital, commodity prices, risk-adjusted discount rates, natural gas and oil pricing differentials, and projected reserve recovery factors. The market approach uses inputs such as recent market transactions in a similar geographic region and with similar production. The income approach for the natural gas gathering operations was based on a discounted future net cash flow model, which uses Level 3 inputs and was supplemented by a market approach. Other. During 2014, we also sold miscellaneous proved and unproved oil and gas properties, inventory and other property and equipment for proceeds of $35.5 million and recognized a pretax gain of $3.0 million. Memorial Merger On September 16, 2016, we completed our merger with Memorial Resource Development Corporation (the “MRD Merger” or “Memorial”) which was accomplished through the merger of Medina Merger Sub, Inc., a Delaware corporation and a direct, wholly-owned subsidiary of Range, with and into Memorial, with Memorial surviving as a wholly-owned subsidiary of Range. The results of Memorial’s operations since the effective time of the merger are included in our consolidated statement of operations. The merger was effected through the issuance of approximately 77.0 million shares of Range common stock in exchange for all outstanding shares of Memorial using an exchange ratio of 0.375 of a share of Range common stock for each share of Memorial common stock. At the effective time of the merger, Memorial’s liabilities, which are reflected in Range’s consolidated financial statements, included approximately $1.2 billion fair value of outstanding debt. In connection with the MRD Merger, we have incurred merger-related expenses of approximately $37.2 million to date including consulting, investment banking, advisory, legal and other merger-related fees. Allocation of Purchase Price. The MRD Merger has been accounted for as a business combination, using the acquisition method. The following table represents the preliminary allocation of the total purchase price of the MRD Merger to the assets acquired and the liabilities assumed based on the fair value at the effective time of the merger, with any excess of the purchase price over the estimated fair value of the identifiable net assets acquired recorded as goodwill. Certain data necessary to complete the purchase price allocation is not yet available, and includes, but is not limited to, valuation of certain pre-merger contingencies, final tax returns that provide the underlying tax basis of Memorial’s assets and liabilities and final appraisals of assets acquired and liabilities assumed. We expect to complete the purchase price allocation during the 12-month period following the merger date, in line with the acquisition method of accounting, during which time the value of the assets and liabilities, including goodwill, may be revised as appropriate. 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 reasonable, including (i) the depletion of Memorial’s fair-valued proved oil and gas properties and (ii) the estimated tax impacts of the pro forma adjustments. Additionally, pro forma earnings for the year ended December 31, 2016 were adjusted to exclude $37.2 million of merger-related costs incurred by Range and $7.1 million incurred by Memorial. The pro forma results of operations do not include any cost savings or other synergies that may result from the MRD Merger or any estimated costs that have been or will be incurred by us to integrate the Memorial assets. The pro forma condensed combined financial information has been included for comparative purposes and is not necessarily indicative of the results that might have actually occurred had the MRD Merger taken place on January 1, 2015. In addition, the pro forma financial information below is not intended to be a projection of future results (in thousands, except per share amounts).
|  |  | Year Ended December 31, |
|  | 2016 |  |  |  | 2015 |
Revenues |  | $ | 1,334,290 |  |  | $ | 2,253,368 |
Net loss |  | $ | (590,777 | ) |  | $ | (555,793 | )
Loss per share: |  |  |  |  |  |  |  |
Basic |  | $ | (2.42 | ) |  | $ | (2.28 | )
Diluted |  | $ | (2.42 | ) |  | $ | (2.28 | )

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- Definition The entire disclosure for business combinations, including leverage buyout transactions (as applicable), and divestitures. This may include a description of a business combination or divestiture (or series of individually immaterial business combinations or divestitures) completed during the period, including background, timing, and assets and liabilities recognized and reclassified or sold. This element does not include fixed asset sales and plant closings. + References No definition available. + Details
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