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Range Resources Has Substantial Value

Summary

Range Resources has a substantial portion of assets in the Marcellus Shale.

Its new marketing initiatives will lead to higher netbacks and earnings.

The asset sale has reduced debt by 24 percent.

Overview:

Range Resources (NYSE:RRC) is a natural gas and oil exploration and production company that operates in the United States. Range Resources has a strategy of increasing the reserves that are below ground, increasing production through internally generated drilling projects and synergistic acquisitions. The competitive advantage that distinguishes Range Resources from the plethora of competitors is the low cost that it can extract natural gas and oil from the ground. This low cost has benefited the company during the significant downturn in the natural gas and oil market.

Natural Gas Market:

Baker Hughes: A leading oil field services company provides a weekly look at how many natural gas rigs are operating. For the week ending January 8th, 2016, the United States had a decrease of 14 natural gas rigs. The natural gas rigs are down 181 since last year.

Weather is significant catalyst in determining demand for natural gas during the cold months of the year. As consumers turn their thermostat up, more natural gas is used and demand increases. When an El Nino occurs, the norm for temperatures is disrupted and demand is disrupted. In the graphic above, you can see how the temperatures across the United States have been disrupted.

Essentially, the demand for natural gas will be below average in the North and Northeast United States, which are typically large users of natural gas during the winter months. While this is a temporary bear for the natural gas market, companies in the industry are feeling the hurt.

Oil Market:

OPEC (Organization for Petroleum Exporting Countries) has abandoned its policy of supporting prices by acting as the swing producer. The reason for the abandonment is an array of theories including, wanting to curb the increase in American oil production, negatively impact Shi'ite countries such as Iran. While the most believable reason is to curb American production, it cannot be forgotten that Saudi Arabia and Iran are engaged in two proxy wars in Yemen and Syria.

The U.S. Energy Information Administration releases...


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