Range Resources (NYSE:RRC) Considered Investment Opportunity by FBR

Range Resources (NYSE:RRC) is undervalued according to FBR, citing a lack of clarity on the potential of 3P reserve potential.

FBR says, "We view current RRC investment opportunity as mispriced development risk. We believe the current RRC franchise is a north of 60 Tcfe platform, which currently trades at about $0.10/Mcfe—a material discount to our DCF-driven value of $0.30/Mcfe or $140/share. This discount, in our opinion, is due to lack of clarity on the full scope and source of 3P reserve potential, value of the back end of the production curve, the current funding gaps’ ($1.2 billion through 2013 @ $5.50/Mcf) impact on cost of capital, and, of course, outlook for natural gas prices.

"We expect the company to report 4Q10 EPS/CFPS of $0.11/$0.94 versus the consensus estimate of $0.13/$0.97. Driven by expectations of 2.0 Bcfe/d of net Marcellus production by 2015 and associated reduction in unit cost structure, we expect EPS/CFPS to increase from $0.94/$4.39 per share in 2011 to $1.93/$6.82 per share in 2012, $3.45/$10.19 in 2013, and $8.17/$20.08 in 2015."

FBR Capital maintains an "Outperform" rating on Range Resources, which was trading at $47.99, up $1.53, or 3.27 percent, as of 11:26 AM EST. FBR boosted their price target on them from $50 to $55.