The rumor mill is buzzing that Range Resources is a prime candidate for a takeover. With 1.2 million acres of Marcellus leases, whoever buys it will need deep pockets. Both BP and Exxon Mobil have been mentioned as potential suitors.
While Range is trading at 56 times estimated 2012 earnings, the highest of any exploration and production company valued at more than $5 billion, the company owns the second-most leases in the Marcellus shale, according to Bloomberg data. With that region estimated to hold enough gas to supply the United States for six years, analysts project the Fort Worth, Texas-based company’s profits will triple over the next three years. Range is scheduled to issue financial results later today.
As energy companies look to tap unconventional assets after the average cost for finding and developing oil for the largest U.S. producers surged sixfold in the past decade, Raymond James Financial Inc. said Range may be a logical target for BP Plc or Exxon Mobil Corp. The $10.2 billion company may fetch at least $78 a share in a takeover, according to Morningstar Inc. The stock closed Friday at $65.72 a share.
"The rationale for any M&A candidate is do you have access to top quality resource plays and do you have size in those plays?" said Andrew Coleman, an analyst at Raymond James. "Range definitely checks both of those boxes. It’s a relatively expensive stock with a well-defined track record of growth and a very large acreage position in the Marcellus."
Range doesn’t comment on speculation, spokesman Matt Pitzarella said.
The shale-gas producer owns leases on 1.2 million acres in the Marcellus shale, second only to Chesapeake Energy Corp.’s 1.78 million acres.*
*Pittsburgh Tribune-Review/Bloomberg News (Feb 21, 2012) – Range Resources could be takeover target