29 Aug | Range Resources and Newton’s Third Law Redux
For those of you who drop by from time to time, you may remember a little piece I penned late last month titled, Range Resources and Newton’s Third Law. To cut out the babble (and there was a fair bit of babble), the post travelled along the lines that, if: prices (of late) were tending to drop on good news, then surely there was a case to be argued that a little bad news could see a…drumroll…price rise.
It was all a bit tongue in cheek – a dig at how fickle (impatient) we as private investors have become. A little bad news (or even good news for that matter) and we’re on our bike. What happened to doing your homework and holding a holding for a journey. I mean, you wouldn’t consider up and selling your property in Kensington because it had a little dodgy wiring. Would you?
But I digress. Tongue in cheek or not, Range Resources allowed us to test this little theory out further yesterday, when they announced their second well in Puntland (Shabeel North) had come up dusty (no black gold, no Texas tea). Now for a hydrocarbon hunter this is unequivocally bad news! There can be no argument there.
But after a little early morning dip – and almost to script – the price, within hours, was back in positive territory, finishing the day up around 5%. As I type it’s added another 12% today and looks likely to test 6 pence in the coming days, if not hours.
Okay, so the Puntland (don’t you just love the irony of that name) failure was well and truly factored into the price – even prior to yesterday’s announcement. I think that much is a given, but why the rise? Are investors wary of high-risk, high reward even when it’s only part of a company’s business model? Do they prefer it when there’s no potential ground-breaking news on the near horizon? No really, I’d love to know.
There’s more than a little conflicting opinion on where Range will be trading this time next year – Old Park Lane Capital argues the case for (then there’s the Range analysis avalanche on the BBs).
For what it’s worth I’m sitting somewhere in the middle at the moment. I’m not expecting anything ground-breaking from Range in the near future but the price reaction over the past couple of days has given me a little reason for optimism for what Range already have in place.
After Peter Landau told us of the shutdown at Shabeel North he offered up this little carrot at the end of Tuesday’s release: “We will update shareholders later in the week with numerous positive developments in Trinidad and look forward to the imminent growth of our flagship Trinidad Projects both from a daily production and P1 Reserve perspective.”
One thing’s for sure, there’s never a dull moment when you’re portfolio’s playing host to any AIM oil exploration holdings. Good luck to all and thanks again for dropping by.