Range Resources (RRC)
Posted: Mon Mar 13, 2017 1:59 pm
I am working on the updated profile for RRC today. We will publish it on Wednesday, but I want to send a few highlights today so those of you that don't own RRC can begin your due diligence.
If you are one of our Founding Members, you know that RRC is one of my all-time best Sweet 16 picks. This is a Great American Success Story. Back in 2003 (when I added it to the Sweet 16) it was a tiny Fort Worth based E&P. A few years later they "discovered" the Marcellus Shale. Today, RRC holds over a million acres in the Marcellus/Utica play and it is the #1 natural gas company in North America. The merger with MRD that closed in September, 2016 makes it a must have Core Holding for all energy sector funds (IMHO of course).
RRC's production topped 1.8 Bcfe per day in Q4 2016
Their production should top 2.2 Bcfe per day in Q4 2017. The midpoint of their guidance is for 34% production growth YOY in 2017 and 20% in 2018.
Hedges lock in strong cash flow (more than enough to cover this year's $1.15 Billion capex program)
> 58.9% of their 2017 gas is hedged with SWAPS at $3.19/MMBtu and another 12.3% with Puts at $3.48/MMBtu
> 65.7% of their 2017 oil is hedged with SWAPS at $55.77/Bbl
> A lot of the NGLs are also hedged for 2017 and I estimate that the full-year realized price for RRC's NGLs will go from $12.86/bbl in 2016 to $18.50/bbl in 2017. (Actual Q4 2016 = $17.20/bbl)
Since they released Q4 results, First Call's forecasts for Revenues, EPS and CFPS for 2017 have moved very close to my forecast/valuation model.
My valuation is $52.00/share, compared to First Call's price target of $45.67.
"Winter in March" is pushing the NYMEX strip for natural gas higher. NGL prices should be a lot higher in the second half of 2017.
If you are one of our Founding Members, you know that RRC is one of my all-time best Sweet 16 picks. This is a Great American Success Story. Back in 2003 (when I added it to the Sweet 16) it was a tiny Fort Worth based E&P. A few years later they "discovered" the Marcellus Shale. Today, RRC holds over a million acres in the Marcellus/Utica play and it is the #1 natural gas company in North America. The merger with MRD that closed in September, 2016 makes it a must have Core Holding for all energy sector funds (IMHO of course).
RRC's production topped 1.8 Bcfe per day in Q4 2016
Their production should top 2.2 Bcfe per day in Q4 2017. The midpoint of their guidance is for 34% production growth YOY in 2017 and 20% in 2018.
Hedges lock in strong cash flow (more than enough to cover this year's $1.15 Billion capex program)
> 58.9% of their 2017 gas is hedged with SWAPS at $3.19/MMBtu and another 12.3% with Puts at $3.48/MMBtu
> 65.7% of their 2017 oil is hedged with SWAPS at $55.77/Bbl
> A lot of the NGLs are also hedged for 2017 and I estimate that the full-year realized price for RRC's NGLs will go from $12.86/bbl in 2016 to $18.50/bbl in 2017. (Actual Q4 2016 = $17.20/bbl)
Since they released Q4 results, First Call's forecasts for Revenues, EPS and CFPS for 2017 have moved very close to my forecast/valuation model.
My valuation is $52.00/share, compared to First Call's price target of $45.67.
"Winter in March" is pushing the NYMEX strip for natural gas higher. NGL prices should be a lot higher in the second half of 2017.