Range Resources (RRC) Update - June 29

[dan_s]

I will be updating all of the Sweet 16 forecast models this week, starting with four gassers (AR, CRK, EQT, and RRC). See my updated commodity prices below.

I just updated my forecast model of Range Resources.
It has about 70% of 2021 natural gas hedged with collars that have $2.79 ceilings, so they don't get a BIG BANG this year for higher gas prices. However, 30% of their production is liquids, so they will get a nice revenue boost from higher NGL prices.

I am increasing my stock valuation for RRC by $2.50 to $24.50.
During June, six other analysts have published updated forecasts and price targets for RRC. Their price targets range from $12 to $23.
At the time of this post, RRC is trading for $16.22.

Based on my forecast, Range should generate $950 million of cash flow from operations in 2021, which compares to their CapEx Budget of $425. Most of their FCF will be used to pay down debt. Range does have a lot of high quality drilling locations in the Marcellus Shale and they may decided to increase D&C spending in Q4 to take advantage of higher gas prices. They have more than enough liquidity to do so.

Obviously, most of the analysts covering RRC are using much lower commodity prices to value it. If gas prices hold up, RRC should get a lot of upgrades after they release Q2 results.
-----------------------
I will be updating all of my forecast/valuation models over the next two weeks. I will be increasing the oil, gas and NGL prices used in the models.
Here is what I will be using for oil and natural gas. NGL prices are more unique to each company.

WTI Oil Prices for modeling. I do think WTI will move higher, but it is better to use a more conservative price for modeling.
2021
$58 for Q1
$65 for Q2
$70 for Q3
$75 for Q4
2022 I will us $75 for the full-year

Henry Hub Natural Gas Prices for modeling. Natural gas prices are set by regional supply/demand, so if we have a hot summer followed by a cold winter the price of U.S. natural gas could go a lot higher, but better to use more conservative prices for modeling.
2021
$2.60 for Q1
$3.00 for Q2
$3.30 for Q3
$3.50 for Q4
2022
$3.50 for Q1
$2.75 for Q2
$3.25 for Q3
$3.50 for Q4
Ave if $3.25 for the year