(4) ACQUISITIONS AND DISPOSITIONS

Memorial Merger

On September 16, 2016, we completed our merger with 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 MRD Merger are included in our consolidated statements of operations. The MRD 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 MRD Merger, Memorial’s liabilities, which are reflected in Range’s consolidated financial statements, included approximately $1.2 billion fair value of outstanding debt. In the last nine months of 2016, we incurred MRD Merger-related expenses of approximately $37.2 million which includes 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 final 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 MRD Merger, with any excess of the purchase price over the estimated fair value of the identifiable net assets acquired recorded as goodwill (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		108,367
Long-term debt		1,204,449
Deferred taxes		547,706
Other long-term liabilities		77,223
Total purchase price plus liabilities assumed	$	5,026,542

Fair value of Memorial assets:
Cash and equivalents	$	7,180
Other current assets		99,969
Derivative instruments		152,994
Natural gas and oil properties:
Proved property		1,122,311
Unproved property		1,999,187
Other property and equipment		3,579
Goodwill ^(a)		1,641,197
Other		125
Total asset value	$	5,026,542

^(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, based on the current published credit default swap rates and other market based indicators. 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 values 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 MRD 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 MRD 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 statements of operations beginning on September 16, 2016. We recognized $369.9 million of natural gas, oil and NGLs revenues and $220.0 million of field net operating income from these assets from January 1, 2017 to September 30, 2017.

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 MRD Merger as if it had occurred on January 1, 2016. The information below 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 results for the nine months ended September 30, 2016 were adjusted to exclude $36.4 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 is not necessarily indicative of the results that might have actually occurred had the MRD Merger taken place on January 1, 2016. In addition, the pro forma financial information below is not intended to be a projection of future results (in thousands, except per share amounts).


	Three Months Ended September 30,			Nine Months Ended September 30,
	2016			2016
Revenues	$	521,669		$	1,080,768
Net loss	$	(18,257	)	$	(431,225	)

Loss per share:
Basic	$	(0.08	)	$	(1.77	)
Diluted	$	(0.08	)	$	(1.77	)

2017 Dispositions

We recognized a pretax net gain on the sale of assets of $102,000 in third quarter 2017 compared to a pretax net loss of $2.6 million in the same period of the prior year and a pretax net gain on the sale of assets of $23.5 million in first nine months 2017 compared to a pretax net loss of $7.5 million in the same period of the prior year.

Western Oklahoma. In first nine months 2017, we sold certain properties in Western Oklahoma for proceeds of $26.0 million and we recorded a gain of $22.1 million related to this sale, after closing adjustments and transaction fees.

Other. In third quarter 2017, we sold miscellaneous inventory and other assets for proceeds of $295,000 resulting in a pretax gain of $102,000. In first six months 2017, we sold miscellaneous unproved properties, inventory, other assets and surface acreage for proceeds of $1.3 million resulting in a pretax gain of $1.3 million.

2016 Dispositions

Western Oklahoma. In third quarter 2016, we sold properties in Western Oklahoma for proceeds of $900,000 and we recorded a loss of $2.6 million. In first six months 2016, we sold certain properties in Western Oklahoma for proceeds of $77.7 million and we recorded a $2.7 million loss related to this sale, after closing adjustments and transaction fees.

Pennsylvania. In first nine months 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 third quarter 2016, we sold miscellaneous inventory and surface property for proceeds of $131,000 resulting in a gain of $30,000. In first six months 2016, we sold miscellaneous proved and unproved properties, inventory, other assets and surface acreage for proceeds of $1.7 million resulting in a pretax loss of $198,000. Included in the $1.7 million of proceeds is $1.2 million received from the sale of proved properties in Mississippi and South Texas.