Energy Prospectus

I have updated my forecast/valuation for RRC after listening to their Q2 CC, reviewing their fresh guidance and adjusting for their current hedges.
My current valuation declines by $0.75/share to $30.25.

Four analysts have already updated their price targets:
$29.00 by Truist Financial 7/24/2023
$44.00 by Bank of America 7/24/2023
$37.00 by Piper Sandler 7/25/2023
$38.00 by Siebert Williams Shank 7/25/2023
TipRanks consensus price target is $34.27

Range is dropping down to one drilling rig for the remainder of the year, but they will be completing several more high rate horizontal wells. They will generate a lot of free cash flow over the next two quarters.

They are forecasting production of 2.2 Bcfepd in Q4, up from 2.081 Bcfepd in Q2. My 2024 forecast assumes only a small increase, but if natural gas prices improve in 2H 2024, which I expect to happen, they might ramp up production into 2024 year-end. Most of Range's Tier One leasehold is held by production, so they have a lot of flexibility.

The only fundamental reason for my lower valuation is the big decline in NGL prices.

RRC was trading at $30.58 at the time of this post. I recommend selling RRC and moving the money to companies with a lot more oil production. Oil prices have a lot more near-term upside for us.

My long-term outlook for RRC is very bullish. This company has a first-class team and over 30 years of high value development drilling inventory in Appalachia. The "Right Price" for natural gas after 2024 will move toward 10% of the oil price as the U.S. gains more access to the international markets. Today's natural gas prices are $9.94 in Europe and $11.26 in the Asia.

Wow a sell call on a Sweet 16 member. Are you planning on replacing them?

Maybe.
I am thinking of moving Diamondback (FANG) back to the Sweet 16.
I will decide before the August newsletter.

Nothing is wrong with RRC. It is a great company. I just think NOW is the time to get more exposure to oil.

Baytex (BTE) also looks like Sweet 16 quality.

I now expect AR, CTRA and EQT to report Adjusted Net Income lower than my forecast because of the big drop in NGL prices. GAAP or Reported Net Income could be much higher for CTRA and EQT because of their big mark-to-market gains on their hedges.

Agree with AR and Coterra. Hard to sell RRC with all their great locations. They might be on someone’s shopping list. I really like EQT and GPOR. GPOR came out of reorg lean and mean with great new management. Great hedge book with lots of FCF used to buy back stock. They are likely on someone’s shopping list as well.

And lastly a name with which you might be familiar, I really like HESS. Their Guyana field with XOM is just getting started with many years of oil production locked in. Hard not to like it with what a believe is a maturing shale landscape and certainly a lousy political environment for the painful duration of the BCS.

This might be a good time for a major to swoop in and buy a gasser while prices are weak. It might be without a takeover premium though.

We have to look at who gets paid off with their executive options. The eqt guys are too young

Of the analysts price targets above what are the buy hod sell ratings of each?

Truist Financial and Citi are HOLD. The other three are BUY. Neal Dingmann's Price Target is $29.

My $30.25 current valuation of RRC is based on 5.5 X annualized operating cash flow, which is at the high end of the multiples that I am using these days.

My updated profile on RRC has been posted to the EPG website.