Range Resources (RRC)

[dan_s]

I spent a lot of time over the last two days (yes I do work on Sundays) working on the RRC forecast/valuation model because I think it is one of the stocks that will do very well for us in the 2nd half of this year. Plus, Q4 was the first full quarter of activity since the merger with MRD. RRC + MRD has created a "power house" of a natural gas / NGL company.

If you watched my latest podcast, you know that I am bullish on natural gas and NGL prices for later in 2017. NGL prices are up more than 30% since the 3rd quarter and they should continue to rise. Natural gas prices have softened because the winter heating season is coming to an end, but the U.S. gas market is really much tighter than most people think and that will become evident as we move deep into the summer.

RRC's production mix is approximately 69% natural gas, 27% NGLs and just 4% crude oil. Plus, ~60% of their crude oil production in 2017 is hedged at $55.81/bbl, so movement in oil prices has almost no impact on this company.

VERY IMPORTANT: Over 75% of Range's 2017 natural gas production is hedged at $3.22/mcf

My updated valuation of RRC is $52.00/share, which compares to the First Call price target of $47.14.

RRC is not going anywhere until natural gas prices firm up a bit, so you have time to do your due diligence. My updated forecast model will be posted to the EPG website this afternoon. We will send out an updated profile on the company next week.