Range Resources Corporation (RRC) reported a record fourth quarter 2010 production volume of 541.0 million cubic feet equivalent per day (MMcfe/d), beating its guided range of 535–540 MMcfe/d.

Fourth quarter production volume jumped 18% from the year-earlier level and 8% on a sequential basis. This marks the company’s 32nd consecutive quarter of sequential production growth. Out of the total production volume, natural gas accounted for nearly 76%, while natural gas liquids (NGLs) and oil contributed 18% and 6%, respectively.

Full year 2010 production jumped 14% to 495.3 MMcfe/d, representing the company’s seventh consecutive year of double-digit output growth. After adjusting for asset sales, however, the 2010 production growth would have been 19%.

Range Resources’ total price realization for the fourth quarter averaged $5.33 per Mcfe, down 19% year over year, while it increased 7% sequentially. The overall price comprised NGL at 42.09 per barrel, crude oil at $72.41 a barrel and natural gas at $4.38 per Mcf.

The Fort Worth, Texas based company has already hedged 408,200 million British thermal unit (MMbtu) per day of its anticipated 2011 natural gas production at an attractive average price of $5.56 per MMbtu.

We believe that the company’s large acreage holdings will support several years of oil and gas drilling in fast-growing fields. In a low natural gas price environment, the company’s record production and declining unit costs along with the sale of non-core properties will be beneficial over time. Although we appreciate Range Resources’ increasing focus on liquids, which increased to 24% in the fourth quarter from 23% in the previous quarter, its natural gas weighted production and reserves will weigh on the stock.

Competition from peers such as Petrohawk Energy Corp. (HK) and SM Energy Co. (SM) is also a concern. Our long-term Underperform recommendation for the company remains unchanged. Range Resources also holds a Zacks #4 Rank, which is equivalent to a short-term Sell rating.

 
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