Why Shares In Range Resources Ltd Plummeted Today

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).

oilSo 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%.

Steady returns?

Will Range continue to outperform? Hard to say. Rather than thinking in terms of cycles and year-to-date returns, we'd sooner back companies in robust financial health, with the potential to still be making profits decades from now.

The Motley Fool has identified five such shares which will compliment any investor's portfolio. And we'd like you to find out about them. What's more, our detailed guide to the best blue-chips around is FREE of charge. Simply click here now and your free copy will be delivered straight to your inbox.

Mark Stones has no position in any shares mentioned. The Motley Fool has no position in any of the shares mentioned.