Range Resources has plenty of potential, with extensive low-cost production capacity in the Marcellus shale play as well as other plays around the country, including the Permian Basin, the Utica Shale, and the Mississippian region. But the company has had to deal with a big plunge in natural gas prices, and that’s hurt the company hard, as nearly three-quarters of Range’s proved reserves are dry gas, with only 4% crude and 22% natural gas liquids exposure.
Another challenge that Range Resources has had throughout the year is getting gas from new finds in out-of-the-way areas like the Marcellus to market. With Sunoco Logistics Partners L.P. (NYSE:SXL) converting a petroleum pipeline for natural-gas transmission, Range Resources signed a 15-year agreement to ship its Marcellus ethane production through the pipeline, with the intent of using Sunoco, Inc. (NYSE:SUN)‘s Marcus Hook refinery as a natural-gas processing facility to deliver the gas to a Swiss petrochemical buyer.
Long-term, though, Range Resources is still paving the way to future growth opportunities. Last week, it announced that its proved reserves had jumped 29% as of the end of 2012 to 6.5 trillion cubic feet equivalent. Despite making no acquisitions that added reserves, the jump represented more than seven times the 276 billion cubic feet equivalent that Range Resources produced in 2012.
For Range Resources to improve, it needs to keep costs down and wait out the slump in nat-gas prices. If the company can cut its wellhead costs down toward the levels that Anadarko Petroleum Corporation (NYSE:APC) and Ultra Petroleum Corp. (NYSE:UPL) have achieved, it might be enough to make Range Resources profitable again even in a weak nat-gas market.
The article Has Range Resources Become the Perfect Stock? originally appeared on Fool.com and is written by Dan Caplinger.
Fool contributor Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Range Resources and Ultra Petroleum and owns shares of and has options positions on Ultra Petroleum.
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