Range reported Q1 results a week earlier than I expected. Best News (thanks to strong NGL prices) is that Adjusted Cash Flow from Operations of $193 million, beat my forecast of $186.3 million. The Company is on-track for $850 million of operating cash flow that compares to their CapEx budget of $425 million. Lots of free cash flow that will pay down debt. My valuation will be going up to at least $15/share.
FORT WORTH, Texas, April 26, 2021 (GLOBE NEWSWIRE) -- RANGE RESOURCES CORPORATION (NYSE: RRC) today announced its first quarter 2021 financial results.
Highlights –
Realizations before index hedges of $3.20 per mcfe, or approximately $0.51 above NYMEX natural gas
Pre-hedge NGL realization of $26.35 per barrel, highest since late 2018
NGL differential of $1.52 per barrel above Mont Belvieu, best in Company history
Natural gas differentials, including basis hedging, averaged $0.14 per mcf below NYMEX
Production averaged 2,081 Mmcfe per day, approximately 70% natural gas
All-in first quarter capital spending was $105 million, approximately 25% of the annual budget
Approximately 45% of pre-hedge revenue from liquids sales
In March, Range’s $3.0 billion borrowing base and $2.4 billion elected commitment were reaffirmed
In April, Range redeemed approximately $63.3 million of senior notes and senior subordinated notes due between 2021 and 2023
Commenting on the quarter, Jeff Ventura, the Company’s CEO said, “Range continues to make progress on key near-term objectives: improving margins with a focus on cost structure, generating free cash flow, enhancing liquidity, and operating safely while maintaining peer-leading capital efficiency. There were sizable improvements in pricing quarter-over-quarter leading to Range’s $193 million in cash flow from operations before changes in working capital. The corresponding capital spending of $105 million generated solid free cash flow for the quarter.
Range remains committed to disciplined capital spending and generating sustainable free cash flow. Over time, we believe Range will be differentiated as a result of our low sustaining capital, competitive cost structure, marketing strategies, environmental leadership and importantly, our multi-decade core inventory life, which will be an increasing competitive advantage in the years to come.”
Range Resources (RRC) Q1 Results - April 26
Range Resources (RRC) Q1 Results - April 26
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Range Resources (RRC) Q1 Results - April 26
This is the primary reason that RRC's Q1 results beat my forecast. Best news is that RRC expects NGL prices to stay high all year.
"Pre-hedge NGL realizations were $26.35 per barrel, an improvement of $8.33 per barrel versus the fourth quarter of 2020 driven by an improving market for propane and heavier products. At a $1.52 premium over Mont Belvieu equivalent, the first quarter premium was the best in Company history. Range continues to see strong NGL export premiums at Marcus Hook because of the Company’s access to international markets and diversified portfolio of sales agreements. As a result of these improvements, the Company expects to average a pre-hedge premium differential to Mont Belvieu equivalent of $0.50 - $2.00 per barrel for 2021."
RRC's average NGL realized price was $15.77/bbl in 2020. They will produce over 100,000 bbls per day of NGLs this year, so higher NGL prices will increase their cash flow by more than $300 million.
"Pre-hedge NGL realizations were $26.35 per barrel, an improvement of $8.33 per barrel versus the fourth quarter of 2020 driven by an improving market for propane and heavier products. At a $1.52 premium over Mont Belvieu equivalent, the first quarter premium was the best in Company history. Range continues to see strong NGL export premiums at Marcus Hook because of the Company’s access to international markets and diversified portfolio of sales agreements. As a result of these improvements, the Company expects to average a pre-hedge premium differential to Mont Belvieu equivalent of $0.50 - $2.00 per barrel for 2021."
RRC's average NGL realized price was $15.77/bbl in 2020. They will produce over 100,000 bbls per day of NGLs this year, so higher NGL prices will increase their cash flow by more than $300 million.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Range Resources (RRC) Q1 Results - April 26
I have updated my forecast/valuation model for RRC and it will be posted to the EPG website this afternoon.
RRC is currently trading for $9.50.
My valuation increases by $2.25 to $15.25, primarily because their Q1 results beat my forecast and their updated guidance for 2021 increases my confidence in the model. RRC should generate over $400 million of free cash flow from operations this year and I see no reason for the stock to be trading below 3X operating cash flow per share.
Their bankers have reaffirmed their credit facility, so the company has plenty of liquidity and no near-term debt problems.
70% of their production is natural gas and I believe gas prices will be higher in 2H 2021. NGL prices have already exceeded my expectations and the outlook for NGL prices remains very bullish.
I expect our other gassers (AR, CRK, EQT, GDP and SBOW) to also report strong Q1 results.
RRC is currently trading for $9.50.
My valuation increases by $2.25 to $15.25, primarily because their Q1 results beat my forecast and their updated guidance for 2021 increases my confidence in the model. RRC should generate over $400 million of free cash flow from operations this year and I see no reason for the stock to be trading below 3X operating cash flow per share.
Their bankers have reaffirmed their credit facility, so the company has plenty of liquidity and no near-term debt problems.
70% of their production is natural gas and I believe gas prices will be higher in 2H 2021. NGL prices have already exceeded my expectations and the outlook for NGL prices remains very bullish.
I expect our other gassers (AR, CRK, EQT, GDP and SBOW) to also report strong Q1 results.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Range Resources (RRC) Q1 Results - April 26
Watch the Dan Deming video at this link: https://www.cmegroup.com/trading/energy ... lobex.html
Traders are starting to realize how difficult it will be to refill U.S. gas storage this summer thanks to demand for U.S. gas exports. < Something that I have been telling you for months in my weekly podcasts.
As storage levels fall below the 5-year average over the next few months, I expect utilities to get into a "bidding war" for supply in Q3.
Key Point: Refilling storage before the next winter heating season is not an option. Utilities across the country MUST have adequate gas in storage to meet customer demand during the winter months. Considering the very high spot prices that they had to pay in February, the bidding war could get very interesting.
Traders are starting to realize how difficult it will be to refill U.S. gas storage this summer thanks to demand for U.S. gas exports. < Something that I have been telling you for months in my weekly podcasts.
As storage levels fall below the 5-year average over the next few months, I expect utilities to get into a "bidding war" for supply in Q3.
Key Point: Refilling storage before the next winter heating season is not an option. Utilities across the country MUST have adequate gas in storage to meet customer demand during the winter months. Considering the very high spot prices that they had to pay in February, the bidding war could get very interesting.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Range Resources (RRC) Q1 Results - April 26
MKM Partners: RRC (Buy, $15 PT) — Exceptional Gas Producer Full-Cycle Return (Gerdes)
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group