We have maintained our long-term Neutral recommendation on
Range Resources Corporation
) based on its balanced risk-reward profile.
Range Resources is an independent oil and gas company, engaging
in the exploration, development and acquisition of oil and gas
properties. Its diversified asset portfolio is spread between
low-risk/long reserve-life Appalachian assets and
large-volume/rapid-payout Gulf Coast properties.
Moreover, the company has a track record of growing production
at a double-digit rate while reducing its finding and development
(F&D) costs and sustaining an industry leading low-cost
structure. Total production volume experienced a 20% improvement
from the year-earlier period in the last quarter, mainly on the
back of sustained accomplishment from the company's drilling
Range Resources has an impressive inventory in the Marcellus
Shale, one of the prominent emerging shale plays in the U.S. lower
48. In the first quarter, Northeast Marcellus rates remained solid.
Four wells had an average test rate of 22 million cubic feet
equivalent per day (MMcfe/d) each, which is well above the average
results clocked by the company in this region.
Range Resources is focused on five liquid-rich plays that
include Marcellus, Upper Devonian, wet Utica, Mississippian, and
Cline oil shale. Collectively, these plays are estimated to drive
its liquids production by more than 40% year over year in 2012. The
overall production growth is targeted at 30% to 35% for this year
and 15% to 20% for 2013. The company has also reaffirmed its 2012
capex budget of $1.6 billion, 75% of which is apportioned for
liquids-rich and oil projects in Marcellus and Mississippian plays
with the balance 25% allocated for dry gas projects in Northeast
However, the company is susceptible to the weak natural gas
price environment as 79% of Range Resources' reserves are weighed
toward natural gas. In the first quarter, natural gas comprised 78%
of the total volume.
Besides, lower realized prices that the company experienced in
the preceding quarter remain a matter of concern. Total price
realization averaged $5.19 per Mcfe, a decrease of 14% year over
year. Natural gas liquid as well as natural gas prices decreased
5.0% and 25.7%, respectively. However, its crude oil price was up
Additionally, we believe that risks such as cost inflation for
services and equipment, delays in commencing pipeline operations
and environmental regulatory rulings are major impediments for the
company's growth momentum.
The company, which competes with
LINN Energy, LLC
Ultra Petroleum Corporation
), holds a Zacks #3 Rank (short-term Hold rating).
LINN ENERGY LLC (LINE): Free Stock Analysis
RANGE RESOURCES (RRC): Free Stock Analysis
ULTRA PETRO CP (UPL): Free Stock Analysis
To read this article on Zacks.com click here.