Energy Prospectus

From TipRanks:
"In a report released today, Gabriele Sorbara from Siebert Williams Shank & Co reiterated a Buy rating on Range Resources (RRC), with a price target of $45.00." and "Credit Suisse analyst William Janela raised the price target on Range Resources (NYSE: RRC) to $31.00 (from $27.00) while maintaining a Neutral rating."

Two very smart guys that must disagree on where natural gas prices are heading.

I have updated my forecast/valuation model for RRC after listening to their Q1 conference call. In addition to their outstanding Q1 results which beat my operating cash flow forecast, thanks to their realized ngas and NGL prices (net of cash settlements on their hedges) of $4.04/mcf for ngas and $38.57/bbl for NGLs, Range provided detailed guidance for the rest of the year, increases the confidence that I have in my forecast model.

At the time of this post RRC was trading for $30.53. My valuation increases by $5 to $51.00/share.

My updated 2022 operating cash flow forecast of $2,235 million ($9.11/share) less the high end of their cap-ex guidance of $480 million has Range on pace to generate approximately $1,755 million of free cash flow from operations this year. They will continue to pay off large chunks of debt, fund stock buybacks and start paying dividends.

Ranges' rapidly improving balance sheet deserves a higher valuation multiple, so I have raised my valuation from 6.0X to 6.5X annualized operating cash flow.

Listen to the first 15 minutes of their Q1 CC and I think you will get a better sense of how undervalued RRC is.

From Stifel

Range Resources Corporation (RRC, $29.50, Buy; Target $49.00)
Debt Targets in Sight as 1Q22 FCF Beats - Michael S. Scialla
We view the release as slightly positive. The positives included: i) 1Q22 FCF beat consensus by 11% on price realizations, cash costs, and capex; ii) RRC repurchased $16.2MM worth of stock at $27/share; iii) as previously announced, debt declined by $350M during the quarter with the redemption of 9.25% senior notes due 2026, resulting in annual interest savings of >$40MM. The negatives include: i) 2022 guidance for GP&T expense and net brokered gas marketing expense increased 4% and 36%. In summary, 1Q capex was below expectations while the company appears to be on track to achieve its debt targets by mid-year before pivoting more aggressively to return of capital in 2H22.

Dan,

I am curious about the historic relationship between RRC's market price and RRC's PV10. Today RRC indicated $60 is a reasonable PV10 number. Has RRC historically traded above or below PV!0 during the $3 environment? Should that $60 number be relevant in today's environment?