Why Shares In Range Resources Ltd Plummeted Today

Range Resources Ltd (LON:RRL) hopes to finally “draw a line under” failed transaction with International Petroleum.

Mark Stones

Mark Stones (TMFMumbojumbones) joined The Motley Fool in 2014 and initially worked as a writer for Fool.co.uk, before joining the Fool’s analyst programme. Mark earned a BA in English from Loughborough University. Although he spends more time reading annual reports than Russian literature these days, he still appreciates a novelist’s antipathy toward the accepted view, which is a useful attitude when trying to sniff out hidden gems on the stock market. His approach to investing has been largely influenced by the principles of Warren Buffett and Peter Lynch. He also takes a special interest in the work of healthcare companies. Outside of investing, Mark plays guitar, enjoys good writing and has a guilty passion for combat sports.

Published 4 August, 2014 2:11 pm BST

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Although we don’t believe in timing the market or panicking over every stock fluctuation, understanding how a business is performing, competing and changing is vital to sensible investment.

What: Shares in Range Resources (LSE: RRL) dropped 10% — making the oil and gas explorer one of the top fallers on the AIM market — after extending the repayment date of a loan to International Petroleum (IOP).

So what: Range Resources lent $8m to IOP as part of a proposed merger last year, but this was subsequently aborted and the loan, which was due to have been repaid with interest by 30 April 2014, remains outstanding due to IOP’s “financial constraints”.

The new payment date is 30 November 2014 to allow IOP time to dispose of its Russian assets, after which IOP will make a cash payment of $500,000 and the balance will convert into ordinary shares of National Stock Exchange of Australia (NSX) listed IOP.

Now what: Range is happy to have recovered “as much value from this difficult situation as possible”. The chief executive, Rory Scott Russell, added: “IOP holds an international portfolio of exploration and production licences including a large acreage position in Niger, a highly prospective and under-explored country with considerable onshore oil potential.”

Range Resources is expected to hold around 9% of IOP with a further 5 million options exercisable at $0.06 two years from the issue date.

Even after this morning’s price movement Range Resources shares are still sitting on a handy 11% gain year-to-date, whereas the FTSE All-Share has contracted 1%.