Range Resources (RRC) Q4 Results - Feb 23

[dan_s]

My valuation will be going up. PV10 Net Asset value now over $40/share!

RANGE RESOURCES CORPORATION (NYSE: RRC) announced its fourth quarter 2021 financial results and plans for 2022.

Fourth Quarter and Full-Year 2021 Highlights –

Reduced net debt in 2021 by $379 million compared to year-end 2020

All-in 2021 capital spending was $414 million, approximately $11 million less than original budget

2021 daily production averaged 2.13 Bcfe per day

2021 NGL realizations averaged a premium of $1.18 per barrel above Mont Belvieu, a Company record

2021 Direct Operating Expense averaged less than $0.10 per mcfe, a Company record

Realized maximum payout of $29.5 million from contingent derivative based on 2021 commodity prices

PV10 of year-end proved reserves of $12.7 billion, or approximately $40 per share net of debt, assuming NYMEX strip prices at year-end 2021

2022 Guidance and Return of Capital Highlights –

Annual cash dividend of $0.32 per share ($0.08 quarterly), or an approximate 1.5% dividend yield based on recent share price, expected to begin in second half 2022

Authorization of $500 million share repurchase program, or approximately 10% of outstanding shares based on recent market capitalization, effective immediately

2022 capital budget of $460 to $480 million maintains production at 2.12 to 2.16 Bcfe per day, or approximately $0.60 per mcfe, best in Appalachia

2022 well costs expected to average $625 per lateral foot or less, lowest in Appalachia

Free cash flow forecasted to exceed $1 billion in 2022 based on recent strip pricing

Leverage, defined as Net-Debt-to-EBITDAX, forecasted at approximately 1.0x at year-end 2022 based on recent strip pricing

Commenting on the results and 2022 plans, Jeff Ventura, the Company’s CEO said, “During 2021, Range generated significant free cash flow, reduced debt, refinanced near-term maturities, lowered well costs, expanded cash margins and delivered our operational plan safely and for less than budgeted. These results reflect the organization’s continuing focus on capital discipline and further strengthening our financial position as we develop the most prolific natural gas and NGL play in North America. In 2022, we expect to build upon these achievements, generating over $1 billion of free cash flow at recent strip pricing. Range’s improved financial positioning supports our plan to reinstate our dividend program with a yield that is competitive with the broader market, in addition to authorizing a share repurchase program. Given that our equity is currently valued at approximately one-half of proved reserve value, which excludes any value attributable to multiple decades of core inventory, we believe that share repurchases provide an excellent opportunity to create significant, long-term shareholder value. We look forward to the year ahead, as we generate significant free cash flow, further strengthen our balance sheet, return capital to shareholders and maintain our leadership position on environmental efforts.”

Reinstatement of Cash Dividend

Range’s Board of Directors has approved the reinstatement of the Company’s regular quarterly cash dividend, with payments expected to start in the second half of 2022, at an anticipated annual dividend rate of $0.32 per share of the Company’s common stock ($0.08 per quarter). Details regarding the record and payment dates for quarterly dividends will be announced as each quarterly dividend is formally declared by the Board.

Authorization of $500 Million Share Repurchase Program

Range’s Board of Directors approved an expansion of the Company’s share repurchase program with $500 million available and effective immediately. This repurchase program, which is equivalent to approximately 10% of Range’s market capitalization, is expected to be funded with free cash flow generation.

As deemed appropriate by Range management, Range may repurchase shares in the open market from time to time, or in privately negotiated transactions, in compliance with SEC rules and federal securities laws. The authorization under the program does not have a stated expiration date. The repurchase program does not obligate Range to acquire any particular amount of common stock and, in Range’s discretion, it may be modified or discontinued at any time.

[dan_s]

At the time of this post RRC was trading at $22.63. I am increasing my current valuation by $6 to $38 per share.

There is no justification for RRC to be trading below the PV10 net asset value of just its P1 reserves, which is over $40/share.
> The balance sheet is not in great shape, but they have no near-term debt problems and should generate over $1 billion of free cash flow this year.
> RRC now pays a dividend and has an active stock buyback program.
> My 2022 operating cash flow per share forecast is $6.87, which compares to the company's CFPS of $4.25 in 2021 and TipRanks' forecast of $5.87.
> 6X operating cash flow is a reasonable valuation.