Range Resources (RRC) Valuation Update - Feb 2

[dan_s]

RANGE RESOURCES CORPORATION (NYSE: RRC) announced that its second quarter 2024 financial results news release will be issued Tuesday, July 23 after the close of trading on the New York Stock Exchange.

I dropped RRC and Antero Resources (AR) from the Sweet 16 early this year when it became clear that U.S. natural gas prices were going to remain low in 1H 2024 because of the warmer than normal winter that left a lot of gas in storage.

Market Forces are working to rebalance the U.S. natural gas market AND the HOT summer has increased gas demand for power generation. We will also see three more LNG export facilities coming online soon. So, it is time to take a hard look at RRC.

At the time of this post RRC was trading for $33.77, First Call's price target is $38.58 and TipRanks' price target is $37.69.

My current valuation is $37.00, but if HH ngas averages $3.50 in 2025, the outlook for RRC after 2024 looks VERY GOOD.
> Range's 2024 drilling program is designed to hold production flat YOY.
> The Company's balance sheet is in good shape.
> Free cash flow for 2024 should be approximately $500 million, more than enough to cover their small dividend and continue to buyback common stock.
> If HH gas averages $3.50 in 2025, Range should generate approximately $1,620 million of Adjusted Operating Cash Flow next year, a $445 million increase YOY.
> RRC deserves to trade at a high multiple of CFPS because it has an incredible amount of "Running Room" in Appalachia AND most of their Tier One leasehold is held by production.
> See RRC's June presentation slide here: https://ir.rangeresources.com/news-and-events/company-presentations

Based on my forecast, a 12-month price target for RRC would be over $41/share.

AR and RRC are strong candidates for our Sweet 16. After all of the current Sweet 16 companies release Q2 results and updated guidance, there should be two openings in the portfolio.

[dan_s]

My updated forecast/valuation model for RRC has been posted to the EPG website.