?Alabama-based Energen Corp., Birmingham, (NYSE: EGN) via E&P subsidiary Energen Resources Corp., plans to acquire interests in Fuhrman-Mascho Field in the Permian Basin of West Texas from Range Resources Corp., Fort Worth, Texas, (NYSE: RRC) for $182 million.

The assets include Range’s interests in 445 producing wells and 54 water injection wells on approximately 13,200 acres in Andrews County. Net daily production from the properties averaged 15.5 million cu. ft. equivalent in the first quarter (2,131 barrels of oil and 2.7 million cu. ft. of gas) from the Grayburg-San Andres formation at depths of 4,000 feet to 4,800 feet.

Energen estimates total proved reserves of 15.3 million barrels of oil equivalent (91.9 billion cu. ft. equivalent; 70% proved developed producing; and 76% oil), representing 90% of the purchase price, with 3.6 million BOE of proved undeveloped (PUD) reserves accounting for 10%.

Future development costs associated with identified PUD reserves will be approximately $57 million for drilling 90 new wells, bringing the all-in reserve acquisition cost to approximately $16.30 per BOE.

The properties are part of a field that was discovered in the late 1930s and acquired by Range in 1996. Range increased production from the properties by almost seven times, utilizing waterflood rejuvenation and tighter well spacing. In 2005, Oil and Gas Investor awarded Range the “Best Field Rejuvenation Award” for its redevelopment of the field.

Energen says an estimated 15.6 million BOE of probable and possible reserves offer significant upside potential, with 10.6 billion barrels of probable reserves generating a drilling of approximately 290 locations. An estimated 5 million barrels of possible reserves relate primarily to extension of waterflood operations.

The field is surrounded by other Energen assets in the Permian.

“This acquisition is an excellent fit for Energen,” says James McManus, Energen chairman and chief executive. “It is exactly what we were looking for. This acquisition meets our rate-of-return criteria on proved reserves and offers significant upside potential as oil prices rebound.”

“In addition, its location in the heart of the Permian Basin allows for seamless integration into our existing operations and gives us another excellent opportunity to capitalize on our expertise in the region.”

The company has hedged a substantial portion of production through 2013 to lock in near-term returns. “Given the uncertainty in the commodity markets today, we opted to hedge beyond our typical one to three years.”

Energen will fund the deal using existing lines of credit and plans to repay the debt by year-end 2009 with internally generated cash flow.

John Pinkerton, Range chairman and chief executive, says, “We believe the Fuhrman property still holds excellent development potential, and its sale represents a win-win situation for Range and Energen. We are now directing most of our capital into the

Barnett, Nora and Marcellus shale plays. Given that Fuhrman’s development cost and lease operating costs per unit of production are substantially higher than our Barnett, Nora and Marcellus shale properties, our further development of Furhman would likely have been delayed several years.”

The sale is expected to close this month. The effective date is May 1.

Following closing, Range plans to monetize certain oil hedges associated with the properties with a current mark-to-market value of approximately $8 million.

Pro forma, Energen will hold approximately 3.6 trillion cu. ft. equivalent of proved, probable and possible reserves in the San Juan, Permian and Black Warrior basins. Its subsidiary, Alabama Gas Corp., is the largest distributor of natural gas in Alabama.

Stifel, Nicolaus & Co. Inc. analyst Michael Hall values the deal at $1.98 per proved thousand cu. ft. equivalent (Mcfe) and $11,742 per daily Mcfe. The deal high-grades Range’s asset base, he says. “Strategically, the deal sheds a noncore, higher-cost asset which makes plenty of sense to us,” as the proceeds will help to maintain its balance sheet and fund capex.

Analysts at Tudor, Pickering, Holt & Co. Securities Inc. call the deal “nice” for Energen and value it at $8.80 per BOE proved based on Range’s estimate of 20.7 million barrels, and $66,000 per flowing barrel based on 2,600 barrels equivalent per day. The transaction is “right up EGN’s alley—buy core area properties cheap, hedge the risk and goose returns via behind-pipe exploitation.”