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Range Resources (RRC) Q2 Earnings Beat on Record Production

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Range Resources Corporation (RRC - Free Report) recently reported second-quarter 2018 earnings (adjusted for one-time items) of 20 cents per share, beating the Zacks Consensus Estimate of 10 cents. The bottom line was up 233% from the year-ago figure of 6 cents.

The strong second-quarter 2018 earnings were boosted by an increase in oil and gas equivalent production, and price realizations, partially offset by higher expenses.

Total revenues of $656.2 million, however, missed the Zacks Consensus Estimate of $661 million. Moreover, the top line declined 2.5% year over year from $673.1 million in the prior-year quarter. The fall in revenues was due to lower realized prices of natural gas, which accounts for the majority of Range Resources’ production.

Following the earnings release, the stock jumped 6.6%.

Range Resources Corporation Price, Consensus and EPS Surprise

Range Resources Corporation Price, Consensus and EPS Surprise | Range Resources Corporation Quote

Operational Performance

Production

During the second quarter, the company’s production touched a record level of around 2,200.3 million cubic feet equivalent per day (MMcfe/d). Natural gas made up 68% of the total production, while natural gas liquids (NGLs) and oil accounted for the remaining 32%.

Total production improved 13% from the year-ago quarter and also surpassed the Zacks Consensus Estimate of 2,183MMcfe/d, primarily due to improvement in the Appalachia division, partially offset by a decline in North Louisiana output.

On a year-over-year basis, oil production increased 15%, while NGL production rose 11%. Moreover, natural gas production jumped 14% year over year.

Price Realization

The company’s total price realization (including the effects of hedges and derivative settlements) averaged $1.88 per thousand cubic feet equivalent (Mcfe), up 5% from the prior-year quarter. Of this, NGL prices surged 51% to $10.41 per barrel while crude oil prices rose 8% to $52.95 per barrel, both on a year-over-year basis. However, natural gas prices were down 9% year over year to $1.58 per Mcf.

Expenses

Direct operating costs in the second quarter was $34.5 million, increasing 11.8% from the year-ago quarter. Total expenses were $764.5 million, up 40% year over year.

Financials

At the end of the quarter, the company had a total debt of approximately $4,207.2 million, with a debt-to-capitalization ratio of 42.2%. The company’s expenditure totaled $260 million in the second quarter for drilling and completion of 27.3 net wells.   

Guidance

For the third quarter of 2018, the company estimates production at about 2.2 Bcfe per day. Given this, the annual output is likely to rise 11%.

The upstream energy player reiterated its 2018 capital budget of $941 million. The budget will be funded by the company’s cash flow.

For the second half of the year the company expects pre-hedge NGL realization to remain at the high end of the guidance.

Zacks Rank & Key Picks

Currently, Fort Worth, TX-based Range Resources has a Zacks Rank #3 (Hold). Investors interested in the Energy sector can opt for some better-ranked stocks like Canadian Natural Resources Limited (CNQ - Free Report) , ConocoPhillips (COP - Free Report) and Cheniere Energy, Inc. (LNG - Free Report) . While Canadian Natural Resources sports a Zacks Rank #1 (Strong Buy), ConocoPhillips and Cheniere Energy both carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Calgary, Canada-based Canadian Natural Resources is an upstream energy company. The company’s top line for 2018 is anticipated to improve 35.3% year over year, while its bottom line is expected to increase more than 170%.

Houston, TX-based ConocoPhillips is an integrated energy company. The company’s top line for 2018 is likely to improve 14.4% year over year. In the last four reported quarters, the company delivered an average positive earnings surprise of 27.6%.

Houston, TX-based Cheniere Energy mainly focuses on liquefied natural gas-related businesses. The company’s top line for 2018 is anticipated to improve 25.9% year over year, while its bottom line is expected to increase more than 225%.

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