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Range Resources is an independent oil & gas production company that focuses on the acquisition and drilling of oil & gas producing properties in the Southwestern, Appalachian, and Gulf Coast Regions.[1] Over its history, Range Resources has been evolving from a strategy of acquiring older, producing properties cheaply and then boosting production quickly to one more focused on "drillbit" growth and developing its own wells. Now, RRC focuses on its three core regions in order to build economies of scale and local geological and drilling expertise[2]

Today, most of the company's properties are unconventional shale and coal bed methane plays. These (like its properties in the prolific Barnett Shale) generally have long production lives and slow declines, but sometimes require more ingenuity and higher cost to drill effectively, and are only profitabl when prices are high. Thus, the company benefits most from efficient use of drilling technology and operational management in order to extract from these properties. About 82% of the company's proved reserves are natural gas, the production and sale of which accounts for around 66% of revenues.

RRC has experienced significant tailwinds from rising oil and gas prices. Nonetheless, long-term pressure from breakthroughs in potentially sustainable (and perhaps someday more affordable) alternative energy sources may have negative impacts on the oil and gas industry.

Financial and Operating Metrics

Below are relevant operating data for the company.


Trends & Drivers

RRC extracts gas from largely unconventional places like shale and coal bed methane.

With such drilling endeavors mostly in Texas and the Appalachian regions, this strategy involves a greater degree of certainty in terms of knowing beforehand how much gas is present. However, it also requires a bit more ingenuity in determining how to most efficiently extract the reserves. An important determinant of the company's success, then, is figuring out and implementing effective drilling strategies for each of the unconventional gas deposits. That said, once the right method is used, the company can reach near perfection in its drilling success rate. RRC's plays are mostly low-risk, long-lived, and slow decline, meaning that the company has a very good idea what's underground before producing, is able to drill with very high success rates, and can do so for the foreseeable future (i.e. depletion is slow to occur). This strategy also allows for greater focus on operating efficiency and more predictable cash flow.

RRC operates in the prolific Barnett Shale and promising Devonian Shale.[5]

The Barnett Shale has proven one of the largest and most economically vital formations in the US. The company's properties here should provide for years worth of drilling inventory and strong production. The company also has a stake in the Devonian Shale, which some experts believe is under-appreciated and, hence, under-explored. Most of the wells in Devonian are from 3000-5000 feet, but it is believed that deeper wells could produce at very attractive levels if exploited by the likes of RRC.

Rising natural gas prices have been a major tailwind for RRC.

With around 82% of its reserves and 66% of its revenue in natural gas, the company is highly dependent on favorable market prices for the commodity, which tend to fluctuate significantly over time, but have risen notably of late.[6] Over the past few years, rapidly increasing demand for energy coupled with constrained supply has led to higher prices for natural gas. This has juiced returns for RRC, while providing strong cash flow and favorable access to capital as creditors place significant weight on market prices of the company's production. Increases in the prices of oil and gas are not, however, without negative side effects. Because drilling for oil and gas becomes much more profitable when prices are on the rise, the company faces much stiffer competition for the acquisition of land or drilling rights to oil- and gas-rich properties. These properties' market values rise in proportion to the rise in the value of the commodities underneath them, which cuts into the company's possible return on investment and puts a damper on hope for rapid growth. A similar phenomenon can occur in buying or leasing drilling equipment, as prices are driven by eager competitors bidding them up in order to drill for the commodities.

Hybrid and Alternative Energy Technology

Rising oil and natural gas prices and environmental consciousness have led both consumers and companies to seek out alternative sources of energy and to invest in renewable energy such as nuclear, solar, as wind technologies to heat homes and generate electricity. Global consumer demand can shift toward renewable energy sources in the long run and incentives to develop long-term solutions to the world's dependence on oil and gas become stronger due to recent environmental concerns over climate change, consumer consciousness and the entrepreneurial profit motive. And, to be sure, Congress is probably quite likely to incentive R&D and renewable energy usage through subsidies, target minimums, or other means over the next several years. While no massive legislation has taken effect, several bills have been proposed and Congress generally has renewable energy high on the to-do list.

Competition and Market Share

As a seller of a commodity product, the company operates in a highly competitive environment in which all firms are price-takers, selling their oil and gas production at given market prices. Firms generally compete on their ability to drill efficiently and earn high returns on investment through intelligent property acquisition and operational prowess. Scale does matter some, as companies with greater production levels and revenue can generally cover many administrative expenses over a wider base of properties. Below, for instance, is a regression of revenue and operating margin for 14 independent oil & gas companies.

Below is a table comparing several independent oil & gas companies across several metrics.[7] It is worth noting that the Energy Information Administration reports that there exists around 170 trillion cubic feet of natural gas proved reserves in the United States.[8] Given this, an estimated "market share" for Range's 1.436 trillion cubic feet gas reserves would be around 0.89%, indicative of the dispersion and fragmentation of the natural gas industry in the US.

Proved Reserves Square Footage
Revenue TTM ($M)Operating MarginProduction (MMcfe/Day)[9]Oil (MMBbls)Natural Gas (Bcf)LNG (MMBbls)Gross developed acreage (in thou)Gross undeveloped acreageGross Total


  1. RRC 2006 10-K, "Business," pg 2
  2. RRC 2006 10-K, "Business," pg 2
  3. RRC 2006 10-K, "Business," pg 4
  4. RRC 2006 10-K, "Properties," pg 14
  5. RRC 2007 10-K, "Properties," pg 14
  6. RRC 2006 10-K, "Risk Factors," pg 8
  7. All data compiled from company annual reports and 10-K's
  8. Energy Information Administration - Annual Energy Outlook 2002
  9. MMcfe/day, or millions of natural gas cubic feet equivalent, is a measure of the level of production per day that converts oil into the energy-yielding natural gas equivalent using a ratio of 6 to 1 (natural gas to oil)
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