Range Resources Corp. (RRC - Analyst Report) trumped the third-quarter 2013 Zacks Consensus Estimate of 22 cents with its adjusted earnings of 28 cents a share. The results also increased from the year-earlier adjusted profit of 7 cents a share.
Third quarter total revenue of $442.0 million also outpaced the Zacks Consensus Estimate of $432.0 million and grew 47.5% year over year from approximately $300.0 million. The annualized growth is attributable to production growth.
The company’s quarterly production averaged almost 960.0 million cubic feet equivalent per day (MMcfe/d), comprising 19% natural gas, 28% natural gas liquids (NGLs) and 43% oil. Total production volume expanded 21% from the year-earlier quarter, mainly on the back of continued accomplishments from the company’s drilling program primarily in the Marcellus Shale.
Oil production expanded 58%, NGL rose 29% and natural-gas production increased 21% on a year-over-year basis. Range’s high liquid-rich spending level led to the relative increase in oil and natural-gas liquids production.
Range’s total price realization (including the effects of hedges and derivative settlements) averaged $4.88 per Mcfe, up 5% year over year. The overall price comprised NGL at $32.73 per barrel (up 6% year over year), crude oil at $93.33 a barrel (up 14%) and natural gas at $3.81 per Mcf (down 2%).
At the end of the quarter, debt rose to $3.1 billion versus $2.9 billion at the end of the year-ago quarter. During the third quarter the company generated $244 million of adjusted cash flow an increase of 29% from the prior-year quarter.
For the fourth quarter, the company expects to average approximately 1.0 Bcfe per day with 25% liquids.
For 2013, the company expects production on the upper end of its previously issued guidance range of 20% to 25%. The company remains on track with its 2013 capital expenditure budget of approximately $1.3 billion.
We believe that Range Resources’ large acreage holdings will support several years of oil and gas drilling in the fast-growing fields. In a dynamic natural gas price environment, the company’s record production, declining unit costs as well as sale of non-core properties will prove beneficial over time. We believe that with a robust asset base, Range Resources remains on track to reach its projected production level for this year. The company made significant operational progress in recent times in all of its five liquids-rich and oil ventures, namely, Marcellus, Upper Devonian, wet Utica, horizontal Mississippian and Cline Shale.
Range Resources’ diversified asset portfolio is spread between low-risk/long reserve-life Appalachian assets and large-volume/rapid-payout Gulf Coast properties. The company has an impressive inventory in the Marcellus Shale, one of the prominent emerging shale plays in the U.S. Lower 48. We see the company’s dominance in the Marcellus Shale play and continued endeavors to control costs as favorable for its profitabilty and long-term shareholder value creation.
However, we remain on the sidelines as the company is still exposed to volatile natural gas fundamentals, interest rate risks and an uncertain macro backdrop. Additionally, Range Resources is governed by several stringent regulations, especially in the Marcellus Shale, the Appalachian Basin and the southwestern U.S., where it has a robust asset base.
Range Resources currently retains a Zacks Rank #3 (Hold). However, there are other stocks in the oil and gas industry like VOC Energy Trust , Natural Gas Services Group Inc. (NGS - Snapshot Report) and Niska Gas Storage Partners LLC , which appear promising with a Zacks Rank #1 (Strong Buy).