Energy Prospectus

FORT WORTH, Texas, Oct. 29, 2020 (GLOBE NEWSWIRE) -- RANGE RESOURCES CORPORATION (NYSE: RRC) today announced its third quarter 2020 financial results.

Third Quarter Highlights

Well costs continue to average less than $600 per lateral foot, including facility costs, the lowest in Appalachia

2020 annual capital spend expectation reduced by at least $15 million, due to efficiency improvements

Total capital expenditures were $63.5 million during the quarter

Transportation, gathering, processing and compression expense improved $0.10 per mcfe, or 7% versus prior year

Lease operating expense improved to $0.10 per mcfe, a record low for the Company

Total cash unit costs improved $0.18 per mcfe, or 9% versus prior year

Closed on North Louisiana asset divestiture for gross proceeds of $245 million, plus an additional $90 million contingent on future commodity prices

Issued $300 million in additional 2026 notes and repurchased $500 million in near-term maturities via tender offer, extending the Companys debt maturities while maintaining liquidity

Reaffirmation of the existing $3.0 billion borrowing base and elected commitments of $2.4 billion

Published an updated Corporate Sustainability Report highlighting Ranges environmental leadership, strong governance, and focus on workforce health and safety.

Commenting on the quarter, Jeff Ventura, the Companys CEO said, Range continued to make steady progress in the third quarter by operating safely, improving our cost structure, reducing debt, extending our maturity runway, and methodically developing our core asset with peer-leading well costs and capital efficiency. As a result of efficient operations, we were able to reduce our capital budget for 2020 while accomplishing our operational objectives, setting us up well for 2021.
Looking forward, our shallow base decline of less than 20% and peer leading well costs provide Range a sustaining capital requirement per unit of production that we believe is the best among peers, providing us a solid foundation for generating corporate returns. With an improved price outlook for natural gas and natural gas liquids, Range is well-positioned to generate durable free cash flow, which at todays stock price equates to a free cash flow yield that competes with any sector.

GAAP earnings was a loss of $680 million ($2.83 per diluted share). Third quarter earnings include $522 million exit and termination costs associated with the sale of North Louisiana assets and a $125 million non-cash derivative loss due to increases in commodity prices. Adjusted earnings comparable to analysts estimates, a non-GAAP measure, was a loss of $11 million ($0.05 per diluted share) in third quarter 2020. < Compares to my forecast of a Q3 loss of $17.5 million, $0.07 per share.

Non-GAAP revenues for third quarter 2020 totaled $510 million, and cash flow from operations before changes in working capital, a non-GAAP measure, was $91 million. < Compares to my operating cash flow forecast of $88.8 million.

Hedging Status

Range hedges portions of its expected future production to increase the predictability of cash flow and to help maintain a more flexible financial position. Range has over 75% of its remaining 2020 projected natural gas production hedged at a weighted average floor price of $2.62 per Mmbtu. Similarly, Range has hedged over 80% of its remaining 2020 projected crude oil production at an average floor price of $58.02. For 2021, Range has hedged 1.0 Bcf per day of natural gas production with an average floor price of $2.60 and an average ceiling price of $2.80. < ~60% of their 2021 natural gas production.

My updated forecast/valuation model for RRC will be posted to the EPG website late tonight.

My valuation of RRC increases by $1 to $14.50, primarily because of the big increase in natural gas and NGL prices coming this winter. Thanks to asset sales and free cash flow from operations this year, the balance sheet is in much better shape and their debt has been pushed out, so near-term they have plenty of liquidity.

First Call's price target of $8.85 is based on some very old reports on file with Reuters. 27 Wall Street analysts are included in the consensus and half of their reports are dated back in June and July when natural gas and NGL prices were in the tank. Range and all of our "gassers" will be drawing a lot more attention as gas prices keep increasing.

Stifel 10/29 note:

Summary
We view the release as slightly negative. The positives include: i) 3Q20 capex was 31%
below consensus; ii) well costs remained below $600/ft; iii) the borrowing base on the revolver
was reaffirmed. The negatives include: i) CFPS was short on realized price; ii) implied 4Q20
production and capex guidance were slightly below and meaningfully above consensus,
respectively. In summary, realized prices during a noisy quarter (N Louisiana asset sale closed)
with seasonally weak basis differentials prevented RRC from generating 3Q20 FCF despite a
material capex beat while 4Q20 guidance appears conservative, if not disappointing.

Operating and Financial Results
3Q20 EPS/CFPS (pre-working capital) of ($0.05)/$0.21 compared to our estimates of $0.01/
$0.46 and consensus of ($0.03)/$0.43. Adjusted EBITDAX of $137MM was 12%/6% below SF/
consensus. CFPS missed our estimate on production (-1%) and realized price (-4%), partially
offset by unit cash costs (-3%) (Figure 1).
3Q20 production declined 7%/2% from 2Q20/3Q19 to 2.194 Bcfepd, 1%/2% below SF/
consensus. Notably, RRC curtailed 210 MMcfepd during the last 2 weeks of September and
most of October although production has now been restored. 3Q20 production would have been
inline with consensus were it not for curtailments. 3Q20 capital expenditures of $63.5MM were
32%/31% below SF/consensus. Lower well costs that averaged less than $600/ft contributed to
lower than expected spending. The company outspent 3Q20 cash flow by $13.5MM compared
to SF/consensus FCF estimates of $18MM/$11MM.

Guidance
2020 production guidance of 2.24 Bcfepd, implies 4Q20 volumes of 2.12 Bcfepd, 2%/2% below
SF/consensus. Excluding curtailed volumes, 4Q20 production guidance would have been in line
with consensus. 2020 capex guidance was further reduced to $415MM, implying 4Q20 capex
of $117MM, 36%/31% above SF/consensus. We suspect 4Q20 expenditures could come in
significantly below guidance.

Operational Highlights
The company turned-in-line (TIL)19 wells in 3Q20, compared to our estimate of 15. RRC is
currently operating 3 rigs. The 2020 plan contemplates and 67 net TILs including 7 in 4Q20.
DC&E costs are expected to average less than $600/ft down 4% from RRC's initial 2020 target
of $625/ft. The 2020 planned TIL mix by area remained unchanged at 3 in SWPA Super-Rich,
31 in SWPA Wet, and 33 in SWPA Dry. The company sees strong NGL export premiums at
Marcus Hook vs Mont Belvieu and expects NGL markets to tighten.

Balance Sheet
During 3Q20, RRC reduced long-term debt by $203MM as $245MM of proceeds from the North
Louisiana asset sale and the issuance of $300MM of 9.25% senior notes due 2026 were used
to redeem $500MM of aggregate principal amount of notes due 2021 through 2023. At quarterend,
the $3.0B borrowing base and $2.4B elected commitment on the company's revolving
credit facility was reaffirmed. As of 09/30/20, liquidity of $1.4B consisted of the revolving credit
facility's $2.4B commitment less $706MM outstanding and letters of credit. We project YE20/
YE21 net debt/TTM EBITDA of 4.9x/3.5x vs 4.8x at 09/30/20. Notably, the credit facility does
not carry a debt/EBITDA covenant.