Range Resources (RRC) Update - Feb 11

Range Resources (RRC) Update - Feb 11

Postby dan_s » Mon Feb 11, 2019 12:32 pm

RRC is one of the four "gassers" in our Sweet 16. More than 50% of their 2019 gas production is hedged at $2.83/MMBtu and they sell a lot of NGLs. My valuation of $21.00 is supported by the outstanding year-end reserve report below. - Dan

FORT WORTH, Texas, Feb. 11, 2019 (GLOBE NEWSWIRE) -- RANGE RESOURCES CORPORATION (RRC) announced today that proved reserves at December 31, 2018 increased by 18% from the prior-year to 18.1 Tcfe.

Highlights –
•Year-end 2018 PV10 value of reserves using future strip prices was $9.9 billion
•Year-end 2018 SEC PV10 value of proved reserves was $13.2 billion, up $5.1 billion from prior year
•Proved reserves increased by 2.8 Tcfe, or 18%
•Reserve extensions, discoveries and additions were 3.1 Tcfe
•Proved developed reserves increased 1.4 Tcfe, or 17%
•Drill-bit finding cost of $0.22 per mcfe, including performance revisions < This will lower their DD&A rate going forward; increasing reported earnings.
•Future development costs for proved undeveloped reserves estimated to be $0.40 per mcfe
•Unhedged recycle ratio over 2.5x based on future development costs of $0.40 per mcfe

Commenting on Range’s 2018 proved reserves, Jeff Ventura, Range’s CEO, said, “Range had another solid year of reserve additions, with drill-bit finding costs of only $0.22 per mcfe. The quality of reserves was highlighted by another consecutive year of positive performance revisions, which were a result of extending laterals and improvements from optimized targeting and completions. Future development costs for proven undeveloped locations are expected to be approximately $0.40 per mcfe, which is outstanding and underpins a strong unhedged recycle ratio of over 2.5x at current strip pricing. Range added a record 3.1 Tcfe to proved reserves from extensions, discoveries and additions, driven by our large inventory of low-risk, high-return projects in the Marcellus Shale.”

“Similar to previous years, Range’s strong reserve growth was accomplished while having less than one-third of our offset proven undeveloped locations currently recorded for each horizontal producing well. We believe this demonstrates our ability to grow SEC reserves in the future as capital is allocated to offset locations. Our economic resilience is further demonstrated in the year-end PV10 reserve value of $9.9 billion using futures strip pricing from year-end, which equates to approximately $24 per share, net of approximately $3.8 billion of debt at year end. Going forward, Range is committed to translating well-level returns from our high-quality asset base into corporate-level returns, including a free cash flow yield that is competitive not only within energy, but across the broader market.”
Dan Steffens
Energy Prospectus Group
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Re: Range Resources (RRC) Update - Feb 11

Postby dan_s » Mon Feb 11, 2019 1:00 pm

Lots of snow coming the last two weeks of February that should help support natural gas and propane prices.
Watch the daily update here: https://www.weatherbell.com/premium/
Dan Steffens
Energy Prospectus Group
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Re: Range Resources (RRC) Update - Feb 11

Postby dan_s » Mon Feb 11, 2019 2:01 pm

In the last 3 months, 15 ranked analysts set 12-month price targets for RRC. The average price target among the analysts is $16.31.
> All of the reports are dated prior to today's BIG increase in proven reserves.
> Their valuations range from $11.00 to $21.00 per share.
> The most recent valuation submitted to Reuters is $17.00 per share.
> First Call's estimates for 2019 are $0.64 EPS and $3.91 operating cash flow per share. < A company of this quality should be trading for AT LEAST 4X operating cash flow per share.

Range is a PRIME TAKEOVER target because they hold over a million acres of HBP leasehold in the Marcellus/Utica, the most valuable natural gas resource play on Earth.

My valuation of $21.00/share is based on an average realized natural gas price of $2.83/mcf, where they have ~53% of this year's natural gas hedged. Note in the press release above that at strip prices the NAV of just their P1 reserves is $24/share. IMO their undeveloped leasehold is worth at least $10/share.
Dan Steffens
Energy Prospectus Group
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Re: Range Resources (RRC) Update - Feb 11

Postby cmm3rd » Fri Feb 22, 2019 1:22 pm

Dan,

Range is scheduled to report on Monday, I believe, following up their Feb. 11 YE reserve report. What will you be looking for in their Q4 report? Do you expect it to be positive in a way that might get attention? It's been a very tough road for shareholders who are waiting for RRC to persuade WS that regardless of ngas prices being in the 2s, RRC will be able to make good money over the long term.

Is your valuation still $21/sh?

Thanks,

Scott
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Re: Range Resources (RRC) Update - Feb 11

Postby dan_s » Fri Feb 22, 2019 6:25 pm

It probably doesn't matter what they report because the Wall Street Gang is extremely negative on natural gas. They don't seem to notice how profitable these companies are at $2.50 gas or that they also produce a lot of liquids. AR, GPOR, RRC and SWN all trade below book value, which s/b impossible if the auditors are doing their jobs.

Book value is never below net asset value because upstream companies must right down their fixed assets if they aren't worth book value. It is an SEC requirement.
Dan Steffens
Energy Prospectus Group
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