Range Resources (RRC) - Q3 Results

[dan_s]

FORT WORTH, TX--(Marketwired - Oct 29, 2014) - RANGE RESOURCES CORPORATION (NYSE: RRC) today announced its third quarter 2014 financial results.

Third Quarter Highlights -
•Range produced a record average of 1,209 Mmcfe per day, an increase of 26% over the prior year quarter (above my forecast)
•Unit costs decreased $0.36 per mcfe or 10% compared to the prior year quarter
•Outstanding well results continue in the Marcellus
•New technology in Nora field yields best results in years with returns up to 100%
•45 new gas purchase customers added to date in 2014
•New bank agreement announced with a maximum facility amount of $4.0 billion and reduced borrowing costs
•Credit upgrades announced from Standard and Poor's and Moody's

Commenting on the results, Jeff Ventura, Range's President and CEO, said, "Range set a record production level this quarter of over 1.2 Bcfe per day net to Range, driven by the Marcellus. It is exciting to see how far we have come since Range completed the Marcellus discovery well ten years ago this month. We are even more excited about future growth, as we capitalize on the first mover advantages Range enjoys in the Marcellus. This includes the largest net acreage position in Pennsylvania, specifically in southwest Pennsylvania, where we have leased the core of the highest hydrocarbon in place in the basin when considering stacked pay potential in the Marcellus, Utica and Upper Devonian. This also is the area that has the liquids-rich portion of the Marcellus and Upper Devonian. We have secured the lowest cost firm transportation portfolio of our peers which aligns with our production growth target of 20% to 25% per year. As these transportation contracts come into service, they will move an increasing portion of our natural gas and natural gas liquids to markets with strong year-round demand and stable index prices."

"Although the rapid growth in Marcellus production has created a challenging regional pricing environment for this quarter, looking ahead, prices are expected to improve. In addition, our liquids pricing, net of transportation costs, will be enhanced with the start-up of Mariner East. The propane portion is projected to start in early 2015 and the ethane portion in July 2015. We believe that as midstream projects come on line in 2015 and beyond, designed to move Marcellus gas to new markets with increasing levels of demand, the current supply/demand imbalance in the Appalachian basin will improve. As a first mover, with a low cost structure, strong balance sheet and a proven track record, Range is well-positioned to continue our annual 20% to 25% production growth to 3 Bcfe per day and beyond."

If Joe Bastardi's winter forecast is correct, the price of propane is going to go very high by Christmas. RRC now produces a lot of propane. - Dan

[dan_s]

An updated Net Income & Cash Flow Forecast model for RRC has been posted under the Sweet 16.

I have lowered by Fair Value Estimate to $81.30, compared to First Call's Price Target of $90.81.

RRC is probably the best bet on natural gas in the energy sector. They have a fantastic marketing department that will allow them to sell their gas in the NE market for decent prices when others will be getting killed next summer in that market. I am bearish on natural gas for 2015, but bullish after that. Demand for natural gas will ramp up sharply in 2016 for LNG exports and industrial demand grow by 6-8 Bcf per day from current levels. 2015 should be the low point for natural gas prices. About 70% of RRC's production is natural gas.

During the next 90 days I do expect natural gas prices to ramp up, but a lot depends on the weather. Only a very cold winter will save natural gas prices in 2015.