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Range Resources (RRC) Up 46.5% in 6 Months: More Room to Run?
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Range Resources Corporation (RRC - Free Report) stock has surged 46.5% in the past six months, outperforming the 18.6% rise of the industry. Based in Fort Worth, TX, Range Resources — with a market cap of $3.9 billion — is an independent oil and gas company engaged in the exploration, development as well as acquisition of oil and gas properties.
Image Source: Zacks Investment Research
Can It Retain Momentum?
The answer is yes and before we get into the details, let us show you how its estimates for 2021 stand. The Zacks Consensus Estimate for 2021 earnings per share stands at $1.57, signaling a massive improvement from last year’s loss of 9 cents. The consensus estimate for 2021 revenues is pegged at $2.6 billion, indicating a rise from $2 billion in 2020.
Now let’s delve into what’s driving the Zacks Rank #3 (Hold) stock.
The company is one of the top 10 natural gas producers in the United States. It is also among the top NGL producers in the domestic market. In the prolific Appalachian Basin, Range Resources has a strong focus on stacked-pay gas projects. In the Marcellus formation of the basin, the company has a multi-decade inventory of premium drilling locations, signaling a bright production outlook. It has 3,100 undrilled wells in the region, of which 2,600 are liquids rich and the rest have a greater proportion of natural gas. As most of its production comprises natural gas (68.9% in the second quarter), the company is well positioned to capitalize on the mounting demand for clean energy.
For 2021, Range Resources projects overall production to average 2.15 billion cubic feet of natural gas equivalent per day (Bcfe/d), of which 30% should comprise liquids. It has more than 75% of second-half 2021 remaining natural gas and condensate production volume hedged. It has also hedged more than 35% of expected second-half 2021 net NGL revenues. Hedging of the company's projected production volumes is expected to increase the consistency of cash flow, and help it maintain a strong as well as flexible financial position.
Total exploration expense for 2021 is estimated within $20-$25 million, decreasing from the previous projection of $20-$28 million. Lower expenses will likely aid the bottom line. Owing to the peer-leading well cost and low maintenance capital requirements, the company is likely to keep generating free cash flow in the near term. Range Resources has a strong focus on streamlining its portfolio through the sale of non-core assets. Since the second half of 2018, it has executed more than $1.35 billion in asset divestments.
Risks
There are a few factors that are holding back the stock from reaching complete potential. At second quarter-end, it had total debt of $3,036.7 million, with a debt-to-capitalization of 66.6%, significantly higher than the industry average of 39.4%. This can affect its financial flexibility. The company has around $750 million in senior notes that are expected to mature through 2023.On a per unit basis, 2021 transport, gathering, processing and compression expenses are now estimated in the range of $1.43-$1.47 per Mcfe, higher than the previous expectation of $1.35-$1.40. This can put pressure on the bottom line. Nevertheless, we believe that its systematic and strategic plan of action will drive long-term growth.
Kinder Morgan’s bottom line for 2021 is expected to increase 47.7% year over year.
The Zacks Consensus Estimate for MPLX’s earnings for 2021 is pegged at $2.73 per share, indicating a massive improvement from the year-ago loss of 80 cents.
The consensus estimate for Cheniere’s earnings for 2021 is pegged at $2.80 per share, signaling a major improvement from the year-ago loss of 34 cents.
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Range Resources (RRC) Up 46.5% in 6 Months: More Room to Run?
Range Resources Corporation (RRC - Free Report) stock has surged 46.5% in the past six months, outperforming the 18.6% rise of the industry. Based in Fort Worth, TX, Range Resources — with a market cap of $3.9 billion — is an independent oil and gas company engaged in the exploration, development as well as acquisition of oil and gas properties.
Image Source: Zacks Investment Research
Can It Retain Momentum?
The answer is yes and before we get into the details, let us show you how its estimates for 2021 stand. The Zacks Consensus Estimate for 2021 earnings per share stands at $1.57, signaling a massive improvement from last year’s loss of 9 cents. The consensus estimate for 2021 revenues is pegged at $2.6 billion, indicating a rise from $2 billion in 2020.
Now let’s delve into what’s driving the Zacks Rank #3 (Hold) stock.
The company is one of the top 10 natural gas producers in the United States. It is also among the top NGL producers in the domestic market. In the prolific Appalachian Basin, Range Resources has a strong focus on stacked-pay gas projects. In the Marcellus formation of the basin, the company has a multi-decade inventory of premium drilling locations, signaling a bright production outlook. It has 3,100 undrilled wells in the region, of which 2,600 are liquids rich and the rest have a greater proportion of natural gas. As most of its production comprises natural gas (68.9% in the second quarter), the company is well positioned to capitalize on the mounting demand for clean energy.
For 2021, Range Resources projects overall production to average 2.15 billion cubic feet of natural gas equivalent per day (Bcfe/d), of which 30% should comprise liquids. It has more than 75% of second-half 2021 remaining natural gas and condensate production volume hedged. It has also hedged more than 35% of expected second-half 2021 net NGL revenues. Hedging of the company's projected production volumes is expected to increase the consistency of cash flow, and help it maintain a strong as well as flexible financial position.
Total exploration expense for 2021 is estimated within $20-$25 million, decreasing from the previous projection of $20-$28 million. Lower expenses will likely aid the bottom line. Owing to the peer-leading well cost and low maintenance capital requirements, the company is likely to keep generating free cash flow in the near term. Range Resources has a strong focus on streamlining its portfolio through the sale of non-core assets. Since the second half of 2018, it has executed more than $1.35 billion in asset divestments.
Risks
There are a few factors that are holding back the stock from reaching complete potential. At second quarter-end, it had total debt of $3,036.7 million, with a debt-to-capitalization of 66.6%, significantly higher than the industry average of 39.4%. This can affect its financial flexibility. The company has around $750 million in senior notes that are expected to mature through 2023.On a per unit basis, 2021 transport, gathering, processing and compression expenses are now estimated in the range of $1.43-$1.47 per Mcfe, higher than the previous expectation of $1.35-$1.40. This can put pressure on the bottom line. Nevertheless, we believe that its systematic and strategic plan of action will drive long-term growth.
Stocks to Consider
Some better-ranked stocks from the energy space include Kinder Morgan, Inc. (KMI - Free Report) , MPLX LP (MPLX - Free Report) and Cheniere Energy, Inc. (LNG - Free Report) , each having a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Kinder Morgan’s bottom line for 2021 is expected to increase 47.7% year over year.
The Zacks Consensus Estimate for MPLX’s earnings for 2021 is pegged at $2.73 per share, indicating a massive improvement from the year-ago loss of 80 cents.
The consensus estimate for Cheniere’s earnings for 2021 is pegged at $2.80 per share, signaling a major improvement from the year-ago loss of 34 cents.