Range Resources (RRC) Q4 Results - Feb 24

[dan_s]

Stifel's take
Range Resources Corporation (RRC, $10.43, Hold; Target $11.00) -
4Q Short on Gas Price - Michael S. Scialla -
We view the release as neutral. The positives include: i) unit cash costs were 3% below our forecast; ii) 2021 well costs are expected to decline from 3Q20; iii) we project 2021 FCF of $285MM. The negatives include: i) 4Q EBITDA was 15% below consensus primarily due to realized prices; ii) 4Q20 capex was 9% above consensus. In summary, despite a slow start to winter and disappointing 4Q20 gas prices, RRC's plan to reduce debt via FCF while maintaining production remains largely intact.

Five Wall Street analysts have updated their price targets for RRC since the company released Q4 2020 results and detailed guidance for 2021. Their price targets range from $11 to $20.

RRC is trading for $10.43 at the time of this post.
> Q4 results were a bit disappointing and production guidance for 2021 was lower than my expectations.
> Range is saying that they are committed to generate free cash flow from operations and use it to pay down debt. This is good, but just holding production flat is not so go.
> Based on my forecast model. FCF should be approximately $300 million
> If natural gas and NGL do what I expect them to do, I think Range will add two more rigs in 2H 2021 and ramp up production into a significantly under-supplied U.S. gas market in six months.
> RRC has plenty of liquidity.
> I have decided to lower my valuation by $2 to $12.50. Net Asset Value based on $2.75 natural gas price is over $22/share.