Energy Prospectus

Range Resources (RRC) 2nd quarter results almost hit my forecast on the nose. RRC is heavily weighted to natural gas and they should be reporting strong 2nd half results. Keep in mind that this company's value is primarily in their dominant acreage position in the Marcellus Shale, which makes it a Prime Takeover Target. It also has many years of double digit production and proven reserve growth locked in.

I hope to have an updated profile on RRC early next week.

RANGE RESOURCES CORPORATION (RRC) today announced its second quarter 2012 results. Revenues for the second quarter 2012 totaled $442 million, a 32% increase over the prior year quarter. Net cash provided from operating activities including changes in working capital totaled $127 million, declining 25% from the prior year quarter. Reported net income for the second quarter 2012 totaled $55.7 million ($0.34 per diluted share), a 6% increase over the second quarter 2011. Revenue and cash flow results were driven by higher production volumes and lower unit costs offset by lower realized prices. Revenue and earnings also included the impact of a derivative mark-to-market gain of $136 million.

Adjusted net income comparable to analysts’ estimates, a non-GAAP measure, was $18.1 million ($0.11 per diluted share) compared to $43.2 million ($0.27 per diluted share) in the prior year quarter. Cash flow from operations before changes in working capital, a non-GAAP measure, decreased 7% year-over-year to $156 million.

Commenting on the announcement, Jeff Ventura, Range’s President and CEO, said, “Our second quarter results reflect excellent performance. The benefits of our Barnett sale last year have positively impacted our second quarter operating and financial results. The sale allowed us to fast-forward the development of our core plays, improve our capital efficiency, lower our cost structure, and strengthen our financial position. The 42% increase in production coupled with a 16% decrease in aggregate cash unit costs are a vivid reflection of our performance combined with the sale benefits. While low natural gas prices impacted our financial results, our strong hedge position provided substantial protection. Looking ahead, we have approximately 80% of expected production hedged for the remainder of the year.

“We now expect our 2012 production growth to be 35%, or the high end of our previous full-year guidance. We also expect liquids growth in the fourth quarter to reach 40% compared to the fourth quarter of 2011. With the excellent drilling results in the first half of the year and our strong hedge position, we are well positioned to add material per share value in the second half of 2012.”

At June 30, 2012, Range had more than 80% of its expected 2012 natural gas production hedged at a weighted average floor of $4.18 per mcf. Similarly, Range has hedged or committed approximately 80% of its projected crude oil production at a floor of $91.19 and approximately 60% of its composite NGL production for 2012 at above current market prices.

Should make investors in RRC sleep better at night.

Sweet 16 Growth Portfolio: An updated Net Income and Cash Flow Forecast model for Range Resources (RRC) has been posted under the Sweet 16 Tab.

If you believe natural gas prices are going higher, then RRC is for you. This company has top tier management and technical team. Plus, it holds the very best acreage in the Marcellus Shale. Liquids production is ramping up to give overall production more balance but it is still heavily weight to natural gas.