Range Resources (RRC) - Analysts liked Q1 results

[dan_s]

RRC is one of the 3 "gassers" in the Sweet 16. I was expecting natural gas prices to stay under $2.00/MMBtu until the 3rd quarter and then drift to over $3.00 by year-end. The NYMEX June futures contract for Henry Hub gas closes at $2.14 on April 29, so Wall Street funds are looking to get more exposure to gas. RRC, AR and GPOR are good choices. - Dan

Range Resources Corporation (RRC) reported its Q1 2016 earnings . Following are highlights from the quarter with a conference call recap.

Q1 Highlights
Unit costs reduced by 10%, or $0.29 per mcfe compared to prior-year quarter
Completed and contracted asset sales announced totaling approximately $190 million of proceeds
Absolute debt levels reduced by $631 million over the last twelve months
Existing $3 billion bank credit facility borrowing base unanimously reaffirmed by all 29 banks
Marcellus production up 17% over prior-year quarter
Well productivity drives production towards high-end of annual guidance
Range becomes the first North American company to export ethane to Europe
Peer-leading Marcellus well costs driven by operational improvements
Recently completed Utica dry gas well appears to be one of the best in the play based on early data

Full article:
http://www.oilandgas360.com/range-resou ... dium=email

[dan_s]

What analyst had to say about RRC Q1 results

From Capital One

RRC 1Q Post-Call Comments
$40.75, EQUALWEIGHT, $38.00 Target
RRC outperforming the EPX Index by ~800 bps likely driven by mild beat & raise on production, lower cash costs, headline EPS/CFPS beats, and strong results for RRC's 3rd dry gas Utica well. That said, we expect Street ests will likely be relatively stable b/c consensus production ests already conform to the slightly higher FY16 guidance. Questions on the call focused on the long-term growth outlook and RRC’s ability to drill new wells on its existing pads. While the company did not offer a specific price that it would look to ramp activity, it did note that the growth outlook will be driven by cash flow with a focus on preserving the balance sheet. One unique (albeit not necessarily novel) advantage for RRC is the ability to drill new wells on existing pads. Utilizing this method, the company believes it can shave anywhere from $200K - $500K (in rare circumstances even up to $850K) off existing well costs without any well productivity loss. In fact, the company has 600 days of production data from new wells on existing pads indicating a ~53% increase in cumulative production over that time period. There were 5 wells drilled in '15 in the SW Wet area that are showing EUR uplifts of 22% from the average wet well, and 3 wells drilled in the SW Dry area that are showing 20% EUR uplifts from the average dry well. The company has identified 180 existing pads that it can return to in order to drive incremental near-term capital efficiencies. RRC estimates it can keep '17 production flat w/ projected '16 exit rate levels by only spending $300MM in CAPEX (~60% of our current '17 CAPEX assumption). While the results of the 3rd Utica dry gas well are certainly encouraging, the costs to drill those wells are still ~2.5x those of Marcellus wells and thus will likely not compete for capital until prices rebound. More details to follow in full 1Q follow-up. (Johnston/Roberts)

From KLR Group

RRC ($40.75, B, $46, Gerdes) – 1Q/16 Quick Look: EPS Miss On Slightly Lower Price Realizations, Slight Production Beat, Divests Portion Of Oklahoma Acreage (Negligible Value Impact) – Range reported 1Q/16 recurring EPS of ($0.10) vs. our ($0.03) estimate due to slightly lower price realizations. Production of ~1.38 Bcfepd (~32% liquids) in 1Q/16 was ~1% above our ~1.37 Bcfepd (~30% liquids) estimate and ~2% above consensus (~1.35 Bcfepd). The production beat was attributable to higher ethane output. The company raised the low end of its ’16 production guidance ~1% to 1.41-1.42 Bcfepd. The company anticipates 2Q/16 production of 1.41 Bcfepd (32%-35% liquids). Preliminarily, we expect to be slightly above 2Q/16 and full year production guidance. Range has signed an agreement to sell ~9.2k net acres in Blaine, Canadian and Kingfisher Counties, OK for ~$77 million in cash. Current production is ~5 Mmcfepd. Assuming a ~$3k/Mcfe production rate multiple, the transaction equates to ~$6,700 per acre net of production. Southern Marcellus net production increased ~6% q/q to ~1,097 Mmcfepd. Northern Marcellus net production decreased ~5% q/q to ~233 Mmcfpd. This update should have a negligible value impact.

[dan_s]

RRC has posted a new corporate presentation to their website. It includes some slides that will help you understand why I am forecasting a much tighter natural gas market heading into next winters heating season. It will also help you understand why RRC deserves to trade at a high multiple of cash flow per share.

I have updated my forecast model for RRC and it will be posted to the EPG website later today.

My valuation of RRC has increased by $6.50/share to $47.50/share. If natural gas prices increase, as I now believe they will by year-end, RRC has a lot more upside for us.