Range does not sound or look like the company that is taking so much heat in the financial press and as valued by WS. Despite the fact it appears that the Memorial bunch dumped some core assets that are turning out to be not so core, I believe management has responded favorably to its challenges and has positioned the company to reward its shareholders.
I’ all in on this one.
Look forward to Dan’s analysis.
Range Resouces
Re: Range Resouces
03:09 PM EST, 03/01/2018 (MT Newswires) -- RBC has cut its price target on Range Resources(RRC) to $23 from $28 while keeping its outperform rating, expecting its asset quality to help weather a commodity downturn and significant leverage to a gas recovery.
"We think RRC's decision to pull back on Terryville capital is a great first step to repairing the story," RBC analyst Brad Heffern said in a note.
"However, RRC continues to face a number of headwinds, with pervasive investor bearishness on gas being the strongest," he said. "That being said, we don't see such a quality asset base trading below PV-10 for long."
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I just got back from Dallas, so lots to catch up on.
"We think RRC's decision to pull back on Terryville capital is a great first step to repairing the story," RBC analyst Brad Heffern said in a note.
"However, RRC continues to face a number of headwinds, with pervasive investor bearishness on gas being the strongest," he said. "That being said, we don't see such a quality asset base trading below PV-10 for long."
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I just got back from Dallas, so lots to catch up on.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Range Resouces
Q4 Highlights –
GAAP earnings for 2017 reached $333 million ($1.34 per diluted share) versus a loss of $521 million ($2.75 per diluted share) in 2016 < Gain on hedges and BIG GAIN in income tax expense (thanks to the GOP Tax Plan) cause big jump in reported earnings.
Net cash provided from operating activities in 2017 increased to $816 million in 2017 compared to $387 million in 2016, an increase of 111% < Compares to my forecast of $837 million
GAAP revenues increased to $2.6 billion in 2017 compared to $1.1 billion in 2016, an increase of 137%
Production increased to 2.0 Bcfe per day in 2017 compared to 1.5 Bcfe per day in 2016, an increase of 30% < agrees with forecast
Southwest Marcellus production in fourth quarter 2017 increased to 1,657 net Mmcfe per day, a 34% increase over the prior year
Commenting, Jeff Ventura, the Company’s CEO said, “Financial results were much improved in 2017 with increases in earnings, cash flow, revenues and production compared to 2016. Operationally, the Marcellus continues to drive growth and profitability, with increasing capital efficiency. Outstanding Marcellus drilling results during the year expanded the core Marcellus drilling inventory in all directions. Our marketing strategy, which will be fully implemented in 2018 after years of planning, is expected to improve margins going forward as Range will be positioned to access growing demand for natural gas and NGLs, particularly in the expanding export markets. We are slowing activity in North Louisiana following disappointing results in 2017, which will allow time for additional technical analysis that we expect will improve results in 2018.
As shown in our five-year outlook, we expect to grow production by approximately 11% annually, while generating greater than $1 billion in cumulative free cash flow. With Range’s long-life inventory of over 4,000 high-quality drilling locations, extensive transportation network and ability to add reserves at some of the lowest costs in the industry, we believe Range is well positioned to generate shareholder value for many years, while also significantly strengthening the balance sheet.”
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All three of the "gassers" in the Sweet 16 generated solid results in 2017, but you sure wouldn't know it by looking at their stock charts. For example, RRC is going to generate over $100 Million in FREE CASH FLOW FROM OPERATIONS in 2018 because they have over 70% of their gas hedged in 2018 at more than $3.00, primarily with Swaps. A company with this much running room and a strong balance sheet should be trading at much more than 4X CFPS, which is where it sits today.
My valuation will go down a bit because of the disappointing results so far at Terryville.
GAAP earnings for 2017 reached $333 million ($1.34 per diluted share) versus a loss of $521 million ($2.75 per diluted share) in 2016 < Gain on hedges and BIG GAIN in income tax expense (thanks to the GOP Tax Plan) cause big jump in reported earnings.
Net cash provided from operating activities in 2017 increased to $816 million in 2017 compared to $387 million in 2016, an increase of 111% < Compares to my forecast of $837 million
GAAP revenues increased to $2.6 billion in 2017 compared to $1.1 billion in 2016, an increase of 137%
Production increased to 2.0 Bcfe per day in 2017 compared to 1.5 Bcfe per day in 2016, an increase of 30% < agrees with forecast
Southwest Marcellus production in fourth quarter 2017 increased to 1,657 net Mmcfe per day, a 34% increase over the prior year
Commenting, Jeff Ventura, the Company’s CEO said, “Financial results were much improved in 2017 with increases in earnings, cash flow, revenues and production compared to 2016. Operationally, the Marcellus continues to drive growth and profitability, with increasing capital efficiency. Outstanding Marcellus drilling results during the year expanded the core Marcellus drilling inventory in all directions. Our marketing strategy, which will be fully implemented in 2018 after years of planning, is expected to improve margins going forward as Range will be positioned to access growing demand for natural gas and NGLs, particularly in the expanding export markets. We are slowing activity in North Louisiana following disappointing results in 2017, which will allow time for additional technical analysis that we expect will improve results in 2018.
As shown in our five-year outlook, we expect to grow production by approximately 11% annually, while generating greater than $1 billion in cumulative free cash flow. With Range’s long-life inventory of over 4,000 high-quality drilling locations, extensive transportation network and ability to add reserves at some of the lowest costs in the industry, we believe Range is well positioned to generate shareholder value for many years, while also significantly strengthening the balance sheet.”
-----------------------------
All three of the "gassers" in the Sweet 16 generated solid results in 2017, but you sure wouldn't know it by looking at their stock charts. For example, RRC is going to generate over $100 Million in FREE CASH FLOW FROM OPERATIONS in 2018 because they have over 70% of their gas hedged in 2018 at more than $3.00, primarily with Swaps. A company with this much running room and a strong balance sheet should be trading at much more than 4X CFPS, which is where it sits today.
My valuation will go down a bit because of the disappointing results so far at Terryville.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Range Resouces
Range’s 2018 capital budget is $941 million. At year-end strip pricing, this is expected to be less than cash flow, with the excess cash flow expected to be used to reduce debt. In addition, any proceeds received from asset sales are also expected to be applied to reduce debt.
Approximately 85% of the capital budget is expected to be allocated to the Appalachia division and 15% to the North Louisiana division. The budget includes projected service cost increases in 2018. In Appalachia, approximately 60% of activity will be directed towards liquids-rich drilling, where successful drilling in 2017 led to improved type curves in the Company’s super-rich area. In addition, Range’s liquids-rich acreage has an extensive inventory of existing pads that reduce capital costs and gathering expense. The acreage is also in close proximity to capacity for both existing and expected NGL and natural gas takeaway projects, improving netback pricing. The Company expects production of approximately 2.23 Bcfe per day in 2018, which equates to 11% growth compared to 2017.
The 2018 capital budget includes approximately $857.4 million for drilling and recompletions (91% of the total), $54 million for leasehold, $4.3 million for seismic, and $25.5 million for pipelines, facilities and other capital expenditures. The budget includes 100 wells expected to be brought on line during the year in the Marcellus and 11 wells in North Louisiana. In the Marcellus, approximately half of the wells are planned to be drilled from existing pads in 2018.
Approximately 85% of the capital budget is expected to be allocated to the Appalachia division and 15% to the North Louisiana division. The budget includes projected service cost increases in 2018. In Appalachia, approximately 60% of activity will be directed towards liquids-rich drilling, where successful drilling in 2017 led to improved type curves in the Company’s super-rich area. In addition, Range’s liquids-rich acreage has an extensive inventory of existing pads that reduce capital costs and gathering expense. The acreage is also in close proximity to capacity for both existing and expected NGL and natural gas takeaway projects, improving netback pricing. The Company expects production of approximately 2.23 Bcfe per day in 2018, which equates to 11% growth compared to 2017.
The 2018 capital budget includes approximately $857.4 million for drilling and recompletions (91% of the total), $54 million for leasehold, $4.3 million for seismic, and $25.5 million for pipelines, facilities and other capital expenditures. The budget includes 100 wells expected to be brought on line during the year in the Marcellus and 11 wells in North Louisiana. In the Marcellus, approximately half of the wells are planned to be drilled from existing pads in 2018.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Range Resouces
John Gerdes at KLR Group published a new report on RRC today (3-1-2018). He rates it a BUY with a $27.00 price target.
I have updated my forecast/valuation model for RRC. My valuation is lowered by $3.80 to $24.00/share. I was using a multiple of 7X CFPS to value RRC, but I decided to lower it to 6X CFPS because of the disappointing results at Terryville, which still need to be evaluated.
First Call's price target is $21.82, but it is based on a lot of outdated forecasts. It take almost a month for First Call to get their price targets updated for all of the revised forecasts submitted to Reuters. The important thing to watch is the trend.
My new forecast model will be posted under the Sweet 16 tab on the EPG website this evening. Note that on each forecast model I show First Call estimates for revenues, EPS and operating cash flow per share, so you can see if my forecast is "way out there". For RRC, I am starting with revenues about 10% below what First Call is starting with for Q1 and revenues narrow to around 5% of FC's numbers by Q4.
I have updated my forecast/valuation model for RRC. My valuation is lowered by $3.80 to $24.00/share. I was using a multiple of 7X CFPS to value RRC, but I decided to lower it to 6X CFPS because of the disappointing results at Terryville, which still need to be evaluated.
First Call's price target is $21.82, but it is based on a lot of outdated forecasts. It take almost a month for First Call to get their price targets updated for all of the revised forecasts submitted to Reuters. The important thing to watch is the trend.
My new forecast model will be posted under the Sweet 16 tab on the EPG website this evening. Note that on each forecast model I show First Call estimates for revenues, EPS and operating cash flow per share, so you can see if my forecast is "way out there". For RRC, I am starting with revenues about 10% below what First Call is starting with for Q1 and revenues narrow to around 5% of FC's numbers by Q4.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group