Number of major oil companies rumored to be interested in buying Range Resources' natural gas assets, bumping company's shares up 8%; ExxonMobil, Chevron, Shell likely suitors for Range's 1.2 million acres with access to Marcellus Shale
September 21, 2011
– Speculation of an acquisition by Big Oil sparks 8 pct rise in Range Resources shares
Shares of Range Resources Corp. jumped more than 8 percent Wednesday afternoon on rumors that a number of companies are interested in its natural gas assets.
Range Resources, based in Fort Worth, Texas, owns 1.2 million acres with access to the Marcellus Shale formation, an underground layer of rock that's rich with natural gas. North America is sits on top of numerous shale layers, but the Marcellus is considered one of most lucrative, where it costs little more than $1 to produce 1,000 cubic feet of natural gas.
Natural gas currently trades at about $3.75 per 1,000 cubic feet on the New York Mercantile Exchange.
Even with natural gas prices at less than half the price from just a few years ago, companies can still earn a 20 percent rate of return by drilling wells in the region, Michael Scialla, an analyst with Stifel Nicolaus & Company Inc., said.
"That's about as good as it gets," Scialla said.
Range Resources would make an excellent acquisition for just about any company, Scialla said. The most likely suitors would be Exxon Mobil Corp., Chevron Corp. or Royal Dutch Shell. Each have bought acreage in the Marcellus region and are looking to expand.
Scialla said those companies likely would develop Range Resources' assets faster, since they have deeper pockets and the means to bring in more drilling rigs at once.
The Wall Street Journal reported on Wednesday, citing unnamed people familiar with the matter, that there had been no formal takeover talks between Range Resources or Shell.
Range Resources, Exxon and Chevron spokesmen didn't return calls for comment. A Shell spokeswoman said the company doesn't comment on market speculation.
Range shares jumped $5.29, or 8.2 percent, to $70.18 in afternoon trading. They had peaked at $77.24, their highest level in at least a decade, earlier in the day before the Wall Street Journal report.
© 2017 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.