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Range Resources Corp (NYSE:RRC) is an independent oil and gas company primarily engaged in acquiring, developing, exploring and producing oil and gas properties. Range Resources has established three core operating areas in the Appalachian, Southwestern and Midcontinent regions of the U.S. The company has been affected by the historical low prices of natural gas and declining commodity prices. However, Range has strategically positioned itself to increase earnings in 2013 and 2014 making the current stock price undervalued.

RRC has ramped production at a 15% annual pace since the end of 2006, on the Marcellus Shale. Absolute production was up 12% in 2011, but excluding sold assets, organic production rose 36%. On aggressive drilling at Marcellus, we see production growth of 41% in 2012, 21% in 2013 and 16% in 2014. In 2012, RRC has several new initiatives, targeting "super-rich" wet gas (more ethane and more liquids) at Marcellus, Utica, the Mississippi horizontal play and Cline Oil Shale. RRC will cut rigs at Marcellus in 2013 and run 5 rigs at the Mississippi play.

Range Resources announced that its fourth-quarter 2012 production volumes reached a record high of 844 Mmcfe per day. Fourth-quarter 2012 production increased 35% over the prior-year quarter and was 7% higher than third-quarter 2012. While total production rose 35%, oil and NGL production increased 41% during the fourth quarter reflecting the company's focus on its high return, liquids-rich plays. Production for full-year 2012 averaged 753 Mmcfe per day, a 36% increase over 2011. This represents Range's ninth consecutive year of double-digit production growth and posting record production each year.

During the fourth quarter, Range increased its commodity hedge position. The company currently has approximately 75% of its anticipated natural gas and crude oil production for 2013 hedged at a weighted average floor of $4.18 per Mmbtu and $94.36 per barrel, respectively.

Range Resources has hired Bank of America Corp. to market some of its Permian Basin properties in southeast New Mexico and West Texas as the company looks to fund projects in 2013 like drilling and recompletions, and focus on the Marcellus liquids-rich area and its Horizontal Mississippian play. Range said its $1.3 billion capital spending budget includes about $1.1 billion for drilling and recompletions, $100 million for leasehold and renewals, $75 million for pipelines and facilities and $25 million for seismic.

Range announced that its planned five-rig drilling program for 2013 in the Horizontal Mississippian play along the Nemaha Ridge in Oklahoma, and Kansas, is already under way. Two new wells with 24-hour initial production rates to sales each greater than 1,000 boe per day averaging 82% liquids are operating. Range has completed 18 horizontal wells in 2012 with four of these wells having initial 24-hour production rates to sales greater than 1,000 boe per day averaging 83% liquids. Updated production results continue to reaffirm the company's estimated 600 Mboe EUR for the greater than 3,500-foot lateral well design.

The increase in production will increase EPS in the next two years. We see EPS of $0.67 in 2012, $0.92 in 2013, and $1.44 in 2014, as we believe natural gas prices will slowly rebound from decade lows in 2012.

Based on the EPS of $0.92 in 2013, this will move the current RRC price of $68 closer to the 12-month target price of $78.

Source: Range Resources Is Ramping Up Production And Profits In 2013