Please ensure Javascript is enabled for purposes of website accessibility

How Range Resources Stock Will Reward Investors

By Matthew DiLallo - Apr 11, 2013 at 2:00PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Investors in Range Resources have done quite well over the past year. The stock could climb even higher thanks to two core competencies of the company

Investors in Range Resources' (RRC -1.17%) stock have been well rewarded over the past year. While the market is up about 12%, Range Resources' stock is up almost 40% over that same time frame. While rising natural gas prices are playing a role, Range Resources has the foundation already in place to continue to deliver outstanding results.

Focus on growth per share
Range Resources is focused on the per-share growth of both production and reserves, on a debt-adjusted basis. It's not a common practice in the industry as most of its peers are simply focused on growing or, worse, working feverishly just to adjust that debt burden lower. Range Resources per-share focus instead reminds me a lot of Devon Energy (DVN -0.90%). Both companies are focused on deploying capital on higher returning projects while not overspending and becoming too heavily indebted.

This focus has enabled Range Resources to grow production per share of its stock by 15% annually since 2007. Last year it nearly doubled that rate as production per share was 29%. The company believes it can continue growing at that higher pace and sees its production growing by 20%-25% per year for the foreseeable future. 

Low-cost producer
Range Resources isn't a company that seeks growth at all costs. Over the past five years the company has brought down its unit costs by 30%. That's taken it from $4.30 per Mcfe in 2008 all the way down to just $3.00 per Mcfe last year. That puts Range Resources among the lowest-cost natural gas producers in the country and one reason why the company can grow production and still make money. Take a look at the following chart and you'll see what I mean:

Source: Range Resources Investor Presentation

Overall the company ranks in the top five, though it's still well behind the top low-cost producers Southwestern Energy (SWN -1.16%) and EQT (EQT -1.60%). Both companies have enjoyed total cost of production of almost a dollar less per Mcfe; still, Range Resource's cost structure puts in in an elite group. That's served owners of its stock very well as it's up nearly 40% over the past year.

Final thoughts
With a focus on per-share growth and a low-cost structure, Range Resources can grow its natural gas production and profits when most others can't. While that's served stock investors well in a low price environment, the company can really outperform when natural gas heads higher. If you believe that's the most likely scenario, then Range Resources is one stock you'll want to buy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Range Resources Corporation Stock Quote
Range Resources Corporation
$28.73 (-1.17%) $0.34
Devon Energy Corporation Stock Quote
Devon Energy Corporation
$71.93 (-0.90%) $0.65
Southwestern Energy Company Stock Quote
Southwestern Energy Company
$7.25 (-1.16%) $0.09
EQT Corporation Stock Quote
EQT Corporation
$41.79 (-1.60%) $0.68

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/18/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.