While it's clear that current natural gas prices are unsustainable, nobody knows when the commodity will rebound. In the meantime, looking at natural gas companies with low cost structures and liquids exposure may yield some promising opportunities. One such company is Range Resources (NYSE: RRC).

Low cost structure and liquids potential
One of the main reasons I'm optimistic on the company's outlook is its ability to withstand a prolonged period of depressed gas prices while still offering significant upside potential through its high-rate-of-return liquids-rich projects.

Range has been among the top five low-cost producers for eight years running, when measured in terms of reserve replacement costs, proved undeveloped reserve adjustment costs, interest expense, general and administrative expenses, and lease operating expense. Notably, it has broad exposure to highly profitable so-called "super-rich" areas of the Marcellus shale, where gas can be extracted at extremely low cost.

On top of this low cost structure, the company has built up significant liquids exposure, which should help mitigate the risk of continued weakness in natural gas prices. Currently, acreage in the Marcellus, the Upper Devonian, the Mississippian, and the Permian has the highest liquids potential.

Now let's take a look at some other factors that could make this company a compelling long-term investment opportunity.

Consistent growth in reserves and production
Finding companies that can grow reserves and production is crucial because it offers a cushion against a slight weakness in commodity prices as long as costs remain under control. For example, shares in gas producers growing reserves and production at double-digit rates can still appreciate if prices remain steady.

This is another one of Range's major strengths: The company has seen double-digit growth per share in both production and reserves for the past six years. Debt-adjusted production per share has grown at a compounded annual growth rate of 12% since 2006. And reserves per share, debt-adjusted, have grown at a 20% CAGR from the same baseline year.

And that's not all. Range believes it's at an inflection point in its history and that growth in both production and reserves is set to accelerate. Given the company's strategy of per-share growth at low cost and its large and high-quality inventory, it's a convincing thesis.

Controlling costs
The company has made impressive strides in terms of keeping its costs down while still improving production. As of the second quarter, three major unit cost metrics -- lease operating expense, total cash cost, and DD&A per Mcfe -- continued to fall. And most recurring cost items were either consistent with or below management's guidance.

In its operations in the Southern Marcellus, cost per foot drilled fell 23% despite drilling longer laterals. And through new initiatives in this same region, the company expects to save $4 million in completion capital by year-end. In the Northern Marcellus, drilling cost per foot fell 21% from the first quarter and the company reported a 25% decline in completion cost per stage through optimizing its completion designs.

Going forward, the company will be focusing on its two highest rate-of-return assets: the Marcellus, particularly the wet part, and the Mississippi Lime. In the Marcellus, it competes with major drillers Chesapeake Energy (NYSE: CHK), the largest leaseholder, with 1.8 million net acres, and Exco Resources (NYSE: XCO), which commands roughly 400,000 acres in the play. And in the Mississippian, it's up against SandRidge Energy (NYSE: SD), which boasts more than 1.5 million net acres, as well as Devon Energy and Chesapeake.  

Capital spending and hedging
For the rest of the year, the company will fund capital spending through cash flow, asset sales, and the proceeds from the recent issuance of senior subordinated notes. Fortunately, the coast is clear for a few years since the company doesn't have any debt maturing until 2016 and beyond.

In terms of its hedging strategy, Range remains well hedged for oil, natural gas, and natural gas liquids  for the rest of the year and into 2013. The company has hedged more than 80% of its remaining gas production for the year at a floor of $4.18 per Mcf. It has also hedged around 80% of its oil production at $91.19 and 60% of its natural gas liquids above market.

Final thoughts
There are certainly many reasons to like Range. It has consistently grown reserves and production, while maintaining its low cost structure. It is also clearly focused on controlling its costs and is achieving strong efficiency gains in many of its operations -- a welcome development given the poor economics of its main product, natural gas.

Given its large inventory and favorable positions in the Mississippian and the Marcellus -- two very high rate-of-return projects -- it should be able to continue growing reserves and production in the double digits for years to come.

However, at their current price of around $66, shares of Range look expensive when compared to other natural-gas-heavy producers. On a price-to-cash-flow basis, Southwestern Energy looks more attractive. And when looking at enterprise value to proved reserves, Ultra Petroleum (NYSE: UPL) appears majorly undervalued. With that said, I still think Range is a great company, but you may want to consider waiting for a pullback in price before jumping in.

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