Range Resources Corporation
) second quarter 2012 production volume experienced an impressive
42% improvement from the year-earlier period, mainly on the back of
sustained accomplishment from its drilling program.
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The company's second quarter production averaged 719.3 million
cubic feet equivalent per day (MMcfe/d), comprising 80% natural
gas, 14% natural gas liquids (NGLs) and 6% oil. NGL rose 20%, while
its oil and natural gas production exceeded the guided range by 14%
and 1% to increase 23% and 48%, respectively, on a year-over-year
In April last year, Range sold all of its 52,000 acre Barnett Shale
properties for $900 million in order to focus on its Marcellus
Shale assets. Excluding the impact of the sale, production for the
April-through-June quarter would have risen 51%.
For the second quarter, Range's total price realization, on a
preliminary basis (including the effects of hedges and derivative
settlements) averaged $4.74 per Mcfe, down 26.3% year over year.
The overall price comprised NGL at $42.30 per barrel, crude oil at
$84.31 a barrel and natural gas at $3.66 per thousand cubic feet
Range Resources displays a diversified high-quality asset base
across the low-risk/long-reserve Appalachian assets and
large-volume/rapid-payout Gulf Coast properties. Given a dominant
presence in the Marcellus Shale play, we believe that the large
acreage holdings will support several years of oil and gas drilling
in the fast-growing fields.
The company remains well on track to reach its 2012 production
growth target of 30% to 35%. During the second half of 2012, Range
Resources expects oil and NGLs production to grow owing to its
shift to drilling in liquids-rich projects in the Marcellus and the
horizontal Mississippian oil play.
In a low natural gas price environment, Range Resources' record
production, declining unit costs and the sale of non-core
properties will be beneficial over time. At June 30, 2012, the
company had approximately 80% of its expected 2012 natural gas
production hedged at a weighted average floor of $4.18 per Mcf.
However, considering the company's exposure to volatile natural gas
fundamentals, interest rate risks and the uncertain macro backdrop,
we maintain our long-term Neutral recommendation. Headquartered in
Fort Worth, Texas, Range Resources competes with
SM Energy Company
Ultra Petroleum Corp.
The company retains a Zacks #3 Rank, which is equivalent to a
short-term Hold rating.