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Range Resources (RRC) Down 26.7% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Range Resources (RRC - Free Report) . Shares have lost about 26.7% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Range Resources due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Range Resources Q2 Earnings & Revenues Beat Estimates

Range Resources delivered second-quarter 2019 adjusted earnings of 2 cents per share, surpassing the Zacks Consensus Estimate of a break-even earnings. However, the company’s bottom line declined significantly from the year-ago earnings of 20 cents per share.

In the quarter under review, total revenues amounted to $851 million, which beat the Zacks Consensus Estimate of $649 million. Moreover, the same improved nearly 30% from $656 million in the prior-year quarter.

The better-than-expected results were supported by higher natural gas equivalent production volumes from the Appalachian Basin. This was partially offset by lower price realizations of commodities.

Operational Performance

During the second quarter, the company’s production averaged almost 2287.3 million cubic feet equivalent per day (MMcfe/d), up from 2200.3 MMcfe/d in the prior-year period. Natural gas contributed 69% to total production while NGL and oil accounted for the remaining 31%.

Oil production dropped 19% on a year-over-year basis. However, natural gas liquid (NGL) and natural gas production increased 4% and 5% year over year, respectively.

Notably, production of 2,062 MMcfe/d from the Appalachian Basin increased 10% year over year. The year-over-year growth in the Appalachian Basin drove the upstream energy player’s total production volumes.

The company’s total price realization (including derivative settlements and after third-party transportation costs) averaged $1.42 per thousand cubic feet equivalent (Mcfe), down 25% year over year. Also, NGL prices totaled $6.81 per barrel, down 35% year over year.

Natural gas prices declined 21% on a year-over-year basis to $1.25 per thousand cubic feet. Further, crude oil prices totaled $51.02 per barrel, down 4% year over year.

Expenses

Total expenses were $696.14 million, down 9% year over year. This was primarily backed by a fall in the operating expense to $33.4 million from the prior-year figure of $34.5 million. However, the exploration cost rose to $7.7 million from the prior-year number of $7.1 million.

Capital Expenditure & Financials

The company incurred drilling and completion expenditures worth $183 million in the reported quarter.

At the end of the second quarter, the company had long-term debt of approximately $3,792.5 million with a debt-to-capitalization ratio of 47.6%.

Guidance

For the third quarter of 2019, the company estimates production in the range of 2.25-2.26 billion cubic feet equivalent (Bcfe) per day, excluding daily volumes of 50 Mmcfe from asset divestments. Forthe full year, production is reaffirmed at2.3 Bcfe per day. 

The upstream energy player maintains 2019 capital spending at $756 million, which suggests a decline from $910 million reported in 2018.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -25% due to these changes.

VGM Scores

Currently, Range Resources has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Range Resources has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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