Range Resources (RRC) Q1 Preview - April 5

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dan_s
Posts: 34471
Joined: Fri Apr 23, 2010 8:22 am

Range Resources (RRC) Q1 Preview - April 5

Post by dan_s »

Note received from Mizuho Securities 4-5-2023

1Q23 Preview: Modest EBITDA miss, but steady operating model gives
flexibility to maintain activity. Although not immune from lower natural gas
prices, we expect RRC to maintain its 2023 operating plan. This is partly driven
by their more optimistic macro view that expects a supply response from private
producers in 2H23, but it also reflects the steady cadence of operations, low
balance sheet leverage, low base decline and deep inventory of Appalachia well
locations. We model an ~8% miss on EBITDA and ~5% miss on CFPS versus
relatively stale Street estimates. But RRC should still generate ~$185mm of FCF
in 1Q23, based on our updated model.

Our NAV-based price target moves to $30/sh

My current valuation for RRC is $29 < RRC is a "gasser", but ~30% of production is liquids that now generate over 50% of their revenue.
Dan Steffens
Energy Prospectus Group
dan_s
Posts: 34471
Joined: Fri Apr 23, 2010 8:22 am

Re: Range Resources (RRC) Q1 Preview - April 5

Post by dan_s »

More details from Mizuho

Key focus for 1Q23 earnings. With natural gas prices significantly weaker over
the past three months, investors are looking for potential cuts in capital spending
from gas-focused E&Ps. We expect this to be a focus for the RRC 1Q23 call, but
do not anticipate any major changes to the operating plan given the company's
low base decline, advantaged marketing (50% of gas sold to Gulf Coast) and
NGL driven revenues that offset gas price weakness.

Other key topics. (1) This will be incoming CEO Mr. Dennis Degner's first
earnings call since the succession plan was announced on March 16. We look
for his thoughts on strategy for the company. (2) Management expects the 2023
capital plan to deliver sequential quarterly volume growth from 1Q23 to 4Q23.
We look for any changes to that cadence in light of recent commodity volatility.
(3) As one of the largest gas producers, we look for RRC's view of the outlook
for natural gas and NGL prices, as well as any changes to the timing of LNG
projects given current weak conditions.

1Q23 production and earnings. We estimate production to be ~2.12 bcfe/d or
at the lower end of the annual guidance, which is consistent with management
commentary and street consensus. With gas realizations at certain Appalachia
hubs seasonally stronger, we model an average differential of ~$0.15-0.20/
mmbtu below the bid week Henry Hub price of $3.42/mmbtu and better than the
annual guidance of $0.35-0.45 below Nymex. NGL realizations are likely to be
between $26.00-26.50/boe and we model a hedging gain of ~$30mm during the
quarter.
Capex should be 1H weighted, and our estimate of $170mm is ~13%
above street. We estimate 1Q23 EBITDA/FCF/Capex of $396mm / $185mm /
$170mm vs. current street consensus at $429mm / $255mm / $150mm (Please
see Exhibit 1 for details).
Dan Steffens
Energy Prospectus Group
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