Range Resources (RRC) Update - April 13

[dan_s]

I have increased by valuation of RRC by $5 to $46/share. At the time of this post it was trading for $32.43.

Recent analysts' upgrades from TipRanks

Wells Fargo 4/14/2022 to $44.00
RBC Capital 4/12/222 to $33.00
Benchmark 4/11/2022 to $43.00
Mizuho Sec 4/8/2022 to $42.00
Truits Financial 4/7/2022 to $33.00

RRC gets less of a "bang" from rising gas prices because ~65% of their 2022 gas is hedged with collars that have average ceilings of $3.49

RRC does produce a lot of unhedged NGLs that will give them a nice revenue boost. Even with the "Bad Hedges", RRC should generate over $1.5 Billion of FCF from operations this year.

[dan_s]

I just scrolled through the 10-day weather forecast for the U.S. here: https://weather.com/maps/tendayforecast

On April 1 the U.S. natural gas storage was 285 Bcf below the 5-year average.

Based on the forecast at the link above, it now looks like storage could be more than 350 Bcf below the 5-year average at the end of April.

May is the month when the most gas is added to storage, so with LNG exports remaining near capacity, we could see storage more than 400 Bcf below the 5-year average heading into June. By mid-June demand for power generation really ramps up.

One heat wave this summer and we could see $10.00 HH gas on the NYMEX strip for the winter months.

[SergioSays]

Dan--assuming we get seriously near inventory mins in NG, I suppose HH should theoretically get to near parity with TTF/JKM (delivered Europe/Asia LNG quote) in order to close the export arb. Agreed?

[Fraser921]

Announced after hours

Derivative fair value loss per consolidated statements of operations, Q1 will be

$ (939,057)

Wow

[dan_s]

Mark-to-market adjustments on hedges are IMHO the most misleading accounting rule ever invented. The rules for hedge accounting are a knee jerk reaction to the Enron mess.

All of my forecast models are based on "realized commodity prices" that are net of cash settlements on each company's hedges.
Thanks to the GAAP accounting rules "Reported Net Income" is a worthless number for companies that hedge.

Always focus on operating cash flow when comparing upstream companies. Especially true during periods of high commodity price volatility.