Range Resources - Lowering my valuation

[dan_s]

Range Resources (RRC) reported solid first quarter results that beat my forecast. However, NGL prices are getting hammered. RRC's realized price for NGL's has dropped from $30.30/bbl in Q1 2014 to $12.20/bbl in Q1 2015. RRC produces a lot of NGLs, so this is a near-term concern.

RRC's realized prices should improve later this year, but the next two quarters will suffer a bit. Only 10% of RRC's current production is crude oil.

I am lowering my Fair Value Estimate for RRC $5.30/share to $68.20/share. First Call's Price Target is $69.12/share.

Don't panic if you own it. RRC has HUGE proven and 3P reserves. They also have very low production costs that continue to fall. The long-term outlook for this great growth company is outstanding. It probably deserves a higher multiple than what I am using, but I want to see some improvement in natural gas and NGL prices before I get too bullish. RRC does have 95% of their 2015 natural gas production hedged at ~$3.70/mcf.