Range Resources (RRC): An updated Net Income & Cash Flow Forecast model has been posted under the Sweet 16 Tab.
My Fair Value Estimate went up $0.10/share to $95.50.
RRC
Re: RRC
RRC deserves to trade at a higher multiple because it has MASSIVE reserves in the liquids rich Marcellus shale. Those HUGE reserves put RRC on the "Takeover Radar Screen" of every major in the world.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: RRC
Drew Venker, CFA – Morgan Stanley
February 26, 2014
2014 production guidance was in line at 20-25% growth, but with higher liquids growth. Raising our price target to $98 on higher Marcellus EURs.
Raising Marcellus EURs increases our NAV to $98. Range increased EURs across its southwest Marcellus position. The increase was 22% in the super rich area, 14% in the rich gas area, and 10% in the dry gas area. We expected this in the wet gas and super rich gas areas, but less so for its dry gas area. It plans to drill longer laterals in these areas, which is the primary driver of the higher EURs.
1Q14 liquids growth higher, driven by super rich drilling. Production guidance for 1Q14 calls for 30-35% liquids, which equates to 23-44% growth sequentially from a 25% liquids mix in 4Q13. Range has focused its drilling program on the super-rich gas area of its Marcellus position, which is the primary driver of this increase. The other contributing factor is additional ethane extraction that will continue through 2014 now that additional gas processing capacity and NGL takeaway is online.
2014 guidance: net positive. Guidance for 20-25% production growth was in line with long-term guidance. Capex guidance was above our estimate and consensus, but higher liquids production has a more significant impact to valuation. Range trades at 14.3x 2014e EBITDA on our new estimates vs. 14.5x on our old numbers.
Testing the Utica in SW PA in 2Q14. Range will drill a Utica/Point Pleasant well on its acreage in southwest Pennsylvania in 2Q14. It has already drilled successful wells in the play, but we believe it will apply what it has learned from experimenting with new wells designs in the Marcellus to this play.
Permian sale: Range did not provide an update on the sale of its Conger properties in the Permian Basin, but we believe this sale process is still underway.
February 26, 2014
2014 production guidance was in line at 20-25% growth, but with higher liquids growth. Raising our price target to $98 on higher Marcellus EURs.
Raising Marcellus EURs increases our NAV to $98. Range increased EURs across its southwest Marcellus position. The increase was 22% in the super rich area, 14% in the rich gas area, and 10% in the dry gas area. We expected this in the wet gas and super rich gas areas, but less so for its dry gas area. It plans to drill longer laterals in these areas, which is the primary driver of the higher EURs.
1Q14 liquids growth higher, driven by super rich drilling. Production guidance for 1Q14 calls for 30-35% liquids, which equates to 23-44% growth sequentially from a 25% liquids mix in 4Q13. Range has focused its drilling program on the super-rich gas area of its Marcellus position, which is the primary driver of this increase. The other contributing factor is additional ethane extraction that will continue through 2014 now that additional gas processing capacity and NGL takeaway is online.
2014 guidance: net positive. Guidance for 20-25% production growth was in line with long-term guidance. Capex guidance was above our estimate and consensus, but higher liquids production has a more significant impact to valuation. Range trades at 14.3x 2014e EBITDA on our new estimates vs. 14.5x on our old numbers.
Testing the Utica in SW PA in 2Q14. Range will drill a Utica/Point Pleasant well on its acreage in southwest Pennsylvania in 2Q14. It has already drilled successful wells in the play, but we believe it will apply what it has learned from experimenting with new wells designs in the Marcellus to this play.
Permian sale: Range did not provide an update on the sale of its Conger properties in the Permian Basin, but we believe this sale process is still underway.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group