Range Resources (RRC) Q4 Results - Feb 28

[dan_s]

Highlights –

All-in 2019 capital spending was $728 million, approximately $28 million less than the original budget

Sold assets for gross proceeds of $785 million in 2019 to reduce debt

Fourth quarter cash unit costs improved by $0.26 per mcfe compared to prior year period

Year-end proved reserves increased to 18.2 Tcfe, with 95% from Marcellus Shale

All-in 2020 capital budget of $520 million maintains production at ~2.3 Bcfe per day

2020 well costs expected to average less than $610 per lateral foot in 2020, lowest in Appalachia

Expanded credit facility to $2.4 billion in October 2019, making year-end 2019 liquidity $1.7 billion

Commenting on the results and 2020 plans, Jeff Ventura, the Company’s CEO said, “Range made solid progress on key strategic objectives in 2019. For the year, we reduced absolute debt, lowered well costs, improved our cost structure and delivered our operational plan for $28 million less than budgeted. During the year, Range executed approximately $785 million in asset sales and, in January, refinanced $550 million of nearer-term debt. These results reflect the organization’s continuing focus on capital discipline and further strengthening our financial position as we methodically develop the most prolific natural gas and NGL play in North America.

The durability of Range’s high-quality resource base is demonstrated in the year-end PV10 reserve value of $7.6 billion, which equates to approximately $17 per share, net of debt. Our resilience is further demonstrated by the underlying efficiency of our 2020 capital program that can maintain production at 2.3 Bcfe per day for only $490 million of drilling and completion capital without a change in lateral inventory. Looking forward, I believe Range’s high-quality asset base, capital discipline and peer-leading operational efficiencies provide a solid foundation for creating stockholder value in the years ahead.”
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Stifel's Take

Range Resources Corporation (RRC, $2.75, Buy; Target $9.00)
In-line Quarter; 2020 Guidance Reaffirmed. - Jane Trotsenko

RRC delivered in-line 4Q19 results and re-iterated its 2020 guidance outlook. As such, we view today's earnings as a net neutral. Even under a zero growth scenario, RRC's per-unit costs and maintenance capex continue to decline allowing for a growing wedge of FCF assuming a flat commodity price environment. For 2020, the management team is looking to align capital spending with cash flow, which could be quite an undertaking to achieve. The near-term focus will continue to be on near-term maturities, asset sales, and leverage.
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MY TAKE: RRC is trading for $2.73 today. It was so grossly oversold before the COVID-19 selloff started that the only justification for RRC trading at less than 20% of net asset value today is that Wall Street believes there will be no market for natural gas and NGLs in the future. Demand for U.S. natural gas will continue to increase even if COVID-19 kills a few million people.
At this share price there is very little downside risk remaining for RRC. First Call's price target is $5.50.

I'm updating my forecast/valuation model for RRC now. It will be posted to the EPG website late this afternoon.