Range Resources (RRC): Let’s Try This Again…

| October 17, 2014 | 0 Comments

natural gasEgg…

Meet face.

About two months ago, I wrote an article on why I bought top-tier natural gas producer Range Resources (RRC). If you missed it, you can find it here. At the time, RRC was oversold and a great candidate for a recovery as natural gas prices rallied into the winter heating season.

The thesis was solid.

But it didn’t work…

RRC fell out of bed as oil prices plummeted from $95 to $80 a barrel. Even though RRC is heavily weighted in natural gas, it couldn’t avoid the broad energy industry wipeout that has occurred over the past few weeks.

As I mentioned in the August article, I had a tight stop loss order to control my downside risk in the trade.   As a result, I closed my RRC position for a small loss on September 2nd.

Now, here’s the deal…

With RRC 13% lower than where it traded just a few weeks ago, energy investors are getting an even better opportunity to add this natural gas producer to their portfolios.

Remember, RRC is one of the lowest cost producers of natural gas in the country with lifting cost of around $0.60 per Mcfe.

Speaking of natural gas…

The commodity is still trading near multi-month lows at $3.80 mmBtu. Large EIA storage injections and relatively balmy US weather has kept the commodity under wraps the past few weeks.

But that could change soon.

In fact, take a look at this forecast from the NOAA…

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As you can see, below average temperatures are expected for the next 6-10 days over a large swath of the Eastern US. Since this region is heavily served by natural gas, we’ll likely see an increase in demand as consumers turn on their heaters.

And keep in mind, natural gas is notorious for rallying into the winter heating season. While the bullish run has been delayed this year due to large storage injections, the odds still favor an increase in prices soon. 

Add it all up and RRC is a great buy at current levels… 

Now listen closely.

As you’re likely aware, there’s an extreme amount of volatility in the markets right now. Global growth fears and the Ebola situation have investors sitting on the edge of their seats.

That’s why it’s important to take a smaller position in RRC than you usually would.

We’ll likely see wild trading action continue for a while longer, so don’t be surprised to see RRC move with the ebb and flow of the market. But if you have patience, this top-tier gas producer will likely generate strong returns from these oversold prices in the long run.

Of course, always use appropriate position sizing and risk control measures with all your trades! 

Until Next Time,

Justin Bennett

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Category: Energy, Natural Gas

About the Author ()

Justin Bennett is the editor of Commodity ETF Alert, an investment advisory focused on profiting from the ebb and flow of important commodities via ETFs. The commodity veteran and options specialist is also a regular contributor to the Dynamic Wealth Report. Every week, Justin shares his thoughts with our readers on a variety of commodity-related topics. Justin is also a frequent contributor to Commodity Trading Research’s free daily e-letter. And he’s the editor of another highly successful and popular investment advisory, the Options Profit Pipeline.