FT WORTH, Texas (AP) _ Range Resources Corp. (RRC) on Monday reported first-quarter net income of $170.1 million, after reporting a loss in the same period a year earlier.
On a per-share basis, the Ft Worth, Texas-based company said it had profit of 69 cents. Earnings, adjusted for non-recurring gains, were 25 cents per share. < This compares to my forecast of $0.15 EPS The results surpassed Wall Street expectations. The average estimate of 12 analysts surveyed by Zacks Investment Research was for earnings of 19 cents per share.
The independent oil and gas company posted revenue of $776.7 million in the period, also surpassing Street forecasts. Ten analysts surveyed by Zacks expected $569.3 million. < My forecast was for revenues of $612.9 million.
Range Resources shares have dropped 21 percent since the beginning of the year, while the Standard & Poor's 500 index has climbed 6 percent. In the final minutes of trading on Monday, shares hit $27.23, a decline of 31 percent in the last 12 months.
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I will update my forecast model and have more comments later, but my valuation of $52.00 now looks way too low. IMO Range Resources is the #1 "gasser" in North America. It has first class management and technical teams and over a decade of annual double digit production growth.
Range Resources (RRC) = Very Good Q1 Results
Range Resources (RRC) = Very Good Q1 Results
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Range Resources (RRC) = Very Good Q1 Results
Range had a "Kick Ass" quarter and Wall Street should finally wake up to the upside this one has.
Highlights –
First quarter GAAP net income reached $170 million, or $0.69 per diluted share, compared to a net loss of $94 million, or $0.56 per share in the prior-year quarter
First quarter cash margins improved to $1.47 per mcfe, compared to $0.77 per mcfe in the prior-year quarter, an improvement of 91%
Cash flow from operations before changes in working capital, a non-GAAP measure, reached $258 million, $1.05 per diluted share, compared to $99 million, $0.59 per diluted share, in first quarter 2016 < My CFPS forecast was $0.95
Record production of 1.93 Bcfe per day, an increase of 40% compared to the prior-year quarter
Total unit costs continued to decline, with first quarter 2017 costs of $2.57 per mcfe, compared to $2.71 in the previous year quarter, an improvement of 5% < Very Good News
Super-rich pad in northwestern Washington County, PA averages 31.4 Mmcfe per day per well
North Louisiana well costs continue to improve, currently at $7.4 million per well, compared to $7.7 million in the previous quarter and approximately $8.7 million when the properties were acquired
Commenting, Jeff Ventura, the Company’s CEO said, “The first quarter of 2017 was an excellent quarter for Range. First quarter cash margins improved to $1.47 per mcfe, compared to $0.77 per mcfe a year ago. In addition to improved macroeconomic conditions, margin expansion is being driven by improving netbacks from better transportation arrangements and a continued focus on cost and operational improvements throughout the company. With our extensive drilling inventory combined with expected increasing demand for natural gas and NGLs over the next several years, Range is well-positioned to generate shareholder value for years to come.”
Highlights –
First quarter GAAP net income reached $170 million, or $0.69 per diluted share, compared to a net loss of $94 million, or $0.56 per share in the prior-year quarter
First quarter cash margins improved to $1.47 per mcfe, compared to $0.77 per mcfe in the prior-year quarter, an improvement of 91%
Cash flow from operations before changes in working capital, a non-GAAP measure, reached $258 million, $1.05 per diluted share, compared to $99 million, $0.59 per diluted share, in first quarter 2016 < My CFPS forecast was $0.95
Record production of 1.93 Bcfe per day, an increase of 40% compared to the prior-year quarter
Total unit costs continued to decline, with first quarter 2017 costs of $2.57 per mcfe, compared to $2.71 in the previous year quarter, an improvement of 5% < Very Good News
Super-rich pad in northwestern Washington County, PA averages 31.4 Mmcfe per day per well
North Louisiana well costs continue to improve, currently at $7.4 million per well, compared to $7.7 million in the previous quarter and approximately $8.7 million when the properties were acquired
Commenting, Jeff Ventura, the Company’s CEO said, “The first quarter of 2017 was an excellent quarter for Range. First quarter cash margins improved to $1.47 per mcfe, compared to $0.77 per mcfe a year ago. In addition to improved macroeconomic conditions, margin expansion is being driven by improving netbacks from better transportation arrangements and a continued focus on cost and operational improvements throughout the company. With our extensive drilling inventory combined with expected increasing demand for natural gas and NGLs over the next several years, Range is well-positioned to generate shareholder value for years to come.”
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Range Resources (RRC) = Very Good Q1 Results
My valuation of RRC will definitely be going up. I will be stunned if First Call's price target of $43.37 is not raised by quite a bit this week.
RRC is going to put up some VERY IMPRESSIVE numbers this year because I think they will beat the top end of their production guidance. More impressive is that they are now producing a lot more NGLs and NGL prices will be going higher as we move through this year. A high percentage of their production is hedged with floors that lock in strong cash flows but keep the upside in the event that we have higher gas prices heading into year-end (very likely).
My preliminary valuation is $53.00, but I may tweak it a bit after I listen to their conference call.
RRC is going to put up some VERY IMPRESSIVE numbers this year because I think they will beat the top end of their production guidance. More impressive is that they are now producing a lot more NGLs and NGL prices will be going higher as we move through this year. A high percentage of their production is hedged with floors that lock in strong cash flows but keep the upside in the event that we have higher gas prices heading into year-end (very likely).
My preliminary valuation is $53.00, but I may tweak it a bit after I listen to their conference call.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Range Resources (RRC) = Very Good Q1 Results
Wall Street's reaction this morning appears to be more 'kick to the curb'. Any thoughts on why the reaction was so negative in a strong up day?
Re: Range Resources (RRC) = Very Good Q1 Results
At this time of year, Wall Street is not too interested in the "gassers". Plus, ngas is down a couple of cents today.
Range's production guidance is 33% to 35% YOY growth in 2017 (partially due to the merger with MRD), followed by 20% annual growth going forward. That is incredible growth rate for a company of this size.
You should all listen to Range's Q1 conference call and follow along on the slides. Just go to their website.
Range's production guidance is 33% to 35% YOY growth in 2017 (partially due to the merger with MRD), followed by 20% annual growth going forward. That is incredible growth rate for a company of this size.
You should all listen to Range's Q1 conference call and follow along on the slides. Just go to their website.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Range Resources (RRC) = Very Good Q1 Results
I have updated my forecast model for RRC. It will be posted to the EPG website later today.
My valuation increases by $2.80 to $53.50/share, which compares to First Call's price target of $43.37. FC's price target has not been updated for Q1 actuals, so expect it to go up.
There is significant upside to my valuation if natural gas and NGL price firm up and if they continue to have 20% YOY production growth.
If you listened to their Q1 conference call you know that Range is setting up for very strong production growth during the 2nd half of the year. They will be completing a lot of high rate wells in the Terryville Field in North Louisiana during Q3 and Q4, just in time for higher winter gas prices. NGL prices should also be a lot higher in the 2nd half of this year because of (a) a tighter overall market and (b) several large petrochemical plants coming on-line later this year.
Based on my forecast model, RRC's earnings per share and operating cash flow per share will exceed the current First Call estimates for Q3 and Q4 by a wide margin. ~75% of their ngas for 2017 is hedged at good prices, so commodity price risk is minimal on this one.
Cash flow from operations will more than double YOY, from $493.5 million in 2016 to more than $1.1 Billion in 2017. Cash on hand today plus cash flow from operations should cover this year's capital expenditures program. CFPS should top $1.6 Billion in 2018 if their average realized ngas price is $3.25 (For Q1 2018 RRC has 2/3s of their gas pre-sold with SWAPs at $3.43.)
Proven Reserves:
Per their 12/31/2016 reserve report, RRC has 12.1 Tcfe of "proven reserves". However, their current leasehold position has estimated recoverable reserves (by RRC) of more than 100 Tcfe of recoverable gas and liquids. This is a HUGE company.
My valuation increases by $2.80 to $53.50/share, which compares to First Call's price target of $43.37. FC's price target has not been updated for Q1 actuals, so expect it to go up.
There is significant upside to my valuation if natural gas and NGL price firm up and if they continue to have 20% YOY production growth.
If you listened to their Q1 conference call you know that Range is setting up for very strong production growth during the 2nd half of the year. They will be completing a lot of high rate wells in the Terryville Field in North Louisiana during Q3 and Q4, just in time for higher winter gas prices. NGL prices should also be a lot higher in the 2nd half of this year because of (a) a tighter overall market and (b) several large petrochemical plants coming on-line later this year.
Based on my forecast model, RRC's earnings per share and operating cash flow per share will exceed the current First Call estimates for Q3 and Q4 by a wide margin. ~75% of their ngas for 2017 is hedged at good prices, so commodity price risk is minimal on this one.
Cash flow from operations will more than double YOY, from $493.5 million in 2016 to more than $1.1 Billion in 2017. Cash on hand today plus cash flow from operations should cover this year's capital expenditures program. CFPS should top $1.6 Billion in 2018 if their average realized ngas price is $3.25 (For Q1 2018 RRC has 2/3s of their gas pre-sold with SWAPs at $3.43.)
Proven Reserves:
Per their 12/31/2016 reserve report, RRC has 12.1 Tcfe of "proven reserves". However, their current leasehold position has estimated recoverable reserves (by RRC) of more than 100 Tcfe of recoverable gas and liquids. This is a HUGE company.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group