The worst of XLE
In 2017, Range Resources (RRC) was the worst-performing energy stock of the Energy Select Sector SPDR ETF (XLE). It’s a natural gas (UNG) (UGAZ) (DGAZ) producer with operations in the Marcellus Shale and North Louisiana. In 2017, RRC fell from its 2016 close of $34.36 to $17.06, a huge fall of more than 50%. In comparison, XLE fell ~3% in 2017.
Range Resources underperformed the SPDR S&P Oil & Gas Exploration & Production ETF (XOP), which represents an index of stocks across the energy industry. XOP has ~79.3% exposure to the oil and gas exploration and production industry. XOP fell ~8% in 2017. Range Resources also underperformed natural gas (UNG) (BOIL) and crude oil (USO) (SCO) prices. In 2017, natural gas fell ~21%, whereas crude oil rose ~12%.
Range Resources’ revenues and earnings
In the first nine months of 2017, Range Resources reported revenues of ~$1.7 billion. That’s ~98% higher than ~$858 million in the same period of 2016. In the first nine months of 2017, RRC reported a net profit of ~$112 million, which is better than its loss of ~$361 million in the same period of 2016.
RRC’s higher revenues and higher net income in the first nine months of 2017 is the result of its acquisition of Memorial Resource Development (MRD) in 3Q16. It acquired MRD in an all-stock transaction valued at $4.2 billion. Since the acquisition, Range Resources’ total debt increased from ~$2.6 billion in 2Q16 to ~$4 billion in 3Q17. Its total common shares outstanding increased from ~170 million in 2Q16 to ~248 million in 3Q17. It looks like the MRD acquisition may not have set well with investors, with RRC stock falling more than 58% since then.
Next, we’ll compare the 2017 returns of Chesapeake Energy (CHK) with the broader market and energy commodities and analyze its fundamental metrics.