Fort Worth, Texas-based oil and gas company, Range Resources Corporation (RRC), announced record-setting, third-quarter 2010 production volume of 503 million cubic equivalent per day (MMcfe/d), up 15% from the comparable quarter last year and 7% from the second quarter.
Out of the total production volume, 77% was natural gas. This is marked as the company’s 31st consecutive quarter of sequential production growth.
Moreover, Range’s quarterly production crossed 500 MMcfe/d of volumes for the first time. Importantly, Range’s oil production is gaining traction with 23% of the third quarter production attributable to liquids, compared with 19% in the second quarter and 16% in the third quarter of 2009.
Range’s chief executive officer confirmed the company’s interest in liquid production. The company is currently deploying about 90% of its total capex toward oil, especially in the liquids-rich portion of the Marcellus play and other oil and liquids-rich areas.
For the fourth quarter, Range has hedged its 335,000 MMbtu per day of natural gas production at an average floor price of $5.56. For 2011 and 2012, these figures are 408,200 and 119,641 at an average floor price of $5.56 and $5.50, respectively.
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 facilitate in increasing value for shareholders.
While we commend Range for its increasing focus on liquids, its production is still natural gas-heavy. In the third quarter, more than three fourth of its production was natural gas. We believe the company remains vulnerable to fluctuations in natural gas markets. Our Underperform recommendation for the stock remains with the Zacks #4 Rank (Sell).
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