Range Resources Corp. (RRC): Why Nat Gas?

Page 2 of 2

Core Competency

Range Resources is a leader in cost control. Maintaining low finding and extracting cost is part of the company culture, as employees at all levels are rewarded with equity for efficiency in that regard. In Q1 2013, Range had record daily production of 876 Mmcfe per day, an increase of 34% over prior-year quarter. They have met or exceeded their production goals every year for the past 5 years. Over the past couple of years, management has focused on strengthening the balance sheet, lowering their debt to capitalization ratio. Cash flow was $219 million, an increase of 34% as compared to the prior-year quarter (despite lower realized prices), including a decline in unit costs as compared to the prior-year quarter.

At Range, each proposed drilling well undergoes a rigorous cost benefit analysis before any funds are committed. In 2011, Range drilled 301 gross wells with a staggering success rate of 99.6%. Consider that Range’s capital Budget for 2012 was virtually the same as 2011, but production rose at a significantly higher rate as they maintain industry low drill bit costs on an annual basis, and continue to be successful in drilling prolific wells.

Range Resources Corp. (NYSE:RRC) also has a strong safety record. They have surpassed more than 1 million man hours worked in the Marcellus Shale with no OSHA reportable incidents. One of the largest costs and environmental risks associated with “Fracking” is water usage and disposal. Range Resources is one of the pioneers in water recycling, which has benefits for both the bottom line and the environment.

Range’s Future

Range is on track not only for 20-25% production growth in 2013 but also for many years in to the future. In 2012, Range was able to navigate a tough market for Nat Gas because of their low cost structure, divestiture of lesser performing assets, and focus on their most prolific assets like the Marcellus shale. They continue to expand their proven reserves. While the Marcellus will continue to be one of their most prolific assets for years to come, many underestimate the potential of their other reserves. By some estimates they might be able to eventually extract 500,000 Barrels on oil per well in the Mississippian. Consider that with the potential of 2,000 wells, there is the potential of a billion barrels of oil in the Mississippian alone. That potential yield is not reflected in their share price. Because of the company’s operational talent, superior assets and a bright future for Natural Gas adoption, Range Resources Corp. (NYSE:RRC) will continue to grow and be one of the stalwarts of establishing America’s energy independence.

The article Range Resources: An Investment in American Energy Independence originally appeared on Fool.com and is written by James Fantaci.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Page 2 of 2