Range Resources Corporation (RRC) raised its estimated unrisked unproved resource potential as of Dec 31, 2013 to 64–85 trillion cubic feet equivalent (Tcfe), up from 48–68 Tcfe at year-end 2012 and 60–83 Tcfe at mid-year 2013. The year-end 2013 unproved resource potential includes 42–55 Tcf of natural gas and 3.7–4.9 billion barrels of NGLs and crude oil.
Of the total year-end 2013 unproved resource potential, approximately 62% is attributable to the Marcellus Shale where Range has 955,000 net acres. The remaining 38% is attributable to other formations in Appalachia, the Midcontinent and west Texas. The company previously announced that its year-end 2013 proved reserves were 8.2 Tcfe.
We believe that Range Resources’ large acreage will support several years of oil and gas drilling in the fast-growing fields. In a dynamic natural gas price environment, the company’s record production, declining unit costs as well as sale of non-core properties will prove beneficial over time. We believe that with a robust asset base, Range Resources is on track to reach its projected production level for this year. The company made significant operational progress in recent times in all of its five liquids-rich and oil ventures, namely, Marcellus, Upper Devonian, wet Utica, horizontal Mississippian and Cline Shale.
Range Resources’ diversified asset portfolio is spread between low-risk/long reserve-life Appalachian assets and large-volume/rapid-payout Gulf Coast properties. The company has an impressive inventory in the Marcellus Shale, one of the prominent emerging shale plays in the U.S. lower 48. The company also inked two additional ethane transportation agreements – ATEX and Mariner East – which are likely to prove beneficial in the long run. Given its dominant position in the Marcellus Shale play and its continuous endeavor to control costs, we believe that Range Resources will be capable of long-term shareholder value creation.
Range Resources has a track record of growing production at a double-digit rate while reducing its finding and development costs and sustaining an industry leading low-cost structure. This is attributable to increased production from the low-cost Marcellus region. The company recently disclosed that it aims to sell its acreage in the Permian Basin properties in southeast New Mexico and West Texas. The properties currently produce 18 million cubic feet equivalent per day of oil and gas.
Range Resources’ 2013 capex budget is $1.3 billion, $300 million less than the 2012 level. Of this, 85% is apportioned for liquids-rich and oil projects in the Marcellus and Mississippian plays with the remaining 15% allocated to dry gas projects in Northeast Pennsylvania. The company has been expanding its drilling activity to Northeast Pennsylvania, which has seen a pickup in industry activity. Mississippian results are encouraging and the company intends to ramp up activity going forward.
However, as a company operating in the oil and gas industry, it remains susceptible to volatile natural gas prices, an imbalance between supply and demand for products, and rising interest rates. The company’s 2012 total reserve comprised 77% natural gas. Such factors could hurt the company’s volumes and margins.
Range Resources currently retains a Zacks Rank #3 (Hold). However, there are better-ranked stocks in the oil and gas sector. These include Cabot Oil & Gas Corp. (COG), QEP Midstream Partners, LP (QEPM) and Swift Energy Co. (SFY), each sporting a Zacks Rank #1 (Strong Buy).
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