Range Resources Share Price Down on Asset Swap - Analyst Blog

Independent oil and gas company, Range Resources Corporation's RRC share price dropped 0.6% to $87.80 on Jun 17, 2014 from the previous day's closing price. This was primarily due to the announcement of the closure of a asset exchange transaction with EQT Corporation EQT. The deal, which was declared in late Apr 2014, involved the swap of both the companies' producing properties and other assets.

Per the agreement, Range Resources transferred the ownership of about 73,000 net acres and related assets in Glasscock and Sterling Counties, TX to EQT Corp. The assets consist of over 900 producing wells in the Permian Basin and all of Range Resources' Conger properties, which are currently yielding about 28 million cubic feet equivalent per day (Mmcfe/d), with 62% being liquids mainly from Cisco/Canyon. These Permian Basin properties are believed to hold several horizontal and vertical stacked pay drilling prospects in the Wolfcamp, Cline and Wolfberry horizons.

On the other hand, Range Resources acquired operated ownership interests spread across 138,000 net acres and the remaining stake in 1,200 miles of gathering pipelines and compression in the Nora Field of Virginia from EQT Corp. The agreement has given Range Resources complete ownership of these assets along with cash proceeds of $145 million.

Currently, the Nora properties yield about 41 Mmcf/d. These properties have several vertical and horizontal stacked pay drilling prospects in the coalbed methane, conventional tight gas intervals and Devonian shale horizons. Notably, the aforementioned transaction has kept Range Resources' 2014 capital expenditure budget unchanged at $1.52 billion.

Range Resources' net Virginia production has increased to 111 Mmcf/d from 70 Mmcf/d, thanks to the new combined 385,000 gross and net acres it owns in the region.

The company believes that the exchanged property has net unproved resource potential of 2 trillion cubic feet equivalent (Tcfe). This has boosted Range Resources' net unproved resource potential in properties held in Virginia to 5 Tcfe.

At present, Range Resources carries a Zacks Rank #4 (Sell). However, better-ranked stocks in the same sector include Magellan Midstream Partners LP MMP and Ultra Petroleum Corp. UPL. Both stocks have a Zacks Rank #1 (Strong Buy).