Energy Prospectus

October 13, 2023
Range Resources Corporation
Model Update For New Price Deck & Hedge Settlements

RBC's price target for RRC is $38.00, with their upside target of $53.00

Our view: We are updating our 2023-2025 estimates to reflect RBC's
recent commodity price update. We increase our 4Q23 EPS/CFPS by $0.28/
$0.36 to $1.86/$3.88 and our FY24 EPS/CFPS by $0.80/$0.95 to $8.50/
$16.68. Additionally, this week RRC provided a pre-earnings supplement
that included cash hedge settlements, which increased our 3Q23 estimates
slightly.

Key points:

• Pre-Earnings Supplement (8K filing). Earlier this week, RRC reported a
$77 million cash settled derivatives gain, slightly above our prior $59
million gain. This increased our 3Q23 EPS/CFPS by $0.04/$0.05 to $0.37/
$0.93.

• Summary of price deck changes (full note). Our 4Q23 HH/WTI forecasts
increase by $0.25/$9.03 to $3.00/Mcf and $86.50/Bbl. Our 2024 HH
forecast was unchanged at $3.50/Mcf, while our WTI expectation
increased by $5.10 to $86.45/Bbl. Our 2025 price assumptions with
$3.75/Mcf for HH and $77/Bbl for WTI.

TipRanks: "In the last 3 months, 15 ranked analysts set 12-month price targets for RRC. The average price target among the analysts is $35.75. The 15 price targets range from $21 to $47 per share."

The price target range is "stunning" for a company of this quality and the fact that it provides detailed and accurate guidance. Even if I assumed that U.S. natural gas prices would remain at $2.50 forever, I still can't justify a stock price of $21. If Range's realized gas price is $2.50/mcf in 2024, it would still generate over $1 billion of operating cash flow and $400 million of free cash flow.

My current valuation of $35.00 is based on 6X annualized operating cash flow. RRC has an incredible amount of high-quality "running room" in Appalachia (Marcellus and Utica Shale). If Raymond James forecast of $5.00/MMBtu ends up being the price of U.S. natural gas after 2024, RRC should be worth $70/share in "Future World".

Based on Range's 12-31-2022 3rd party reserve report, RRC had a PV10 Net Asset Value of $48.26/share just using their proved reserves (P1).

Who said 21?

I haven't seen you reiterate your recommendation to sell gassers in awhile. Are you still committed to that call?

As I posted here numerous times, I was "concerned" that with gas in storage significantly higher than a year ago that there was significant risk that mild weather in December would cause HH ngas prices to pull back to the low $2.00s at the end of Q4.

Today I am "less concerned", but that is still a risk.

There is a strong El Nino in the Pacific. El Nino winter often start mild and become colder than normal in Q1. If we have a normal winter, U.S. natural gas storage levels should normalize in Q1 and may go below the 5-year average. If we do get a normal U.S. winter AND LNG exports remain (Golden Pass and Plaquemines) come on-line next summer.

My long-term outlook for our "gassers" is bullish, which is why I keep them in the Sweet 16.

The $21 Price Target was from Devin McDermott at Morgan Stanley on 10/02/23

Chuck,

I have my eye on the gassers but still sitting on sidelines for the most part. I prefer oily exposure. I have a few token small positions but prefer ng above 3.50 before committing more capital

NG prices and strip have improved , production might be topping out, but we have to get thru q3 earnings and then winter weather. I agree things look better in 2024.

We might have seen the lows in the names. Good luck.