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Why Range Resources (RRC) is Up 18% Since Q3 Earnings Report

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Shares of Range Resources Corporation (RRC - Free Report) have surged more than 18% since its earnings announcement on Oct 23.  

The reasons for the rally were better-than-expected third-quarter results and improved 2019 guidance. The upstream energy player expects to increase total production in 2019 despite lowering the capital budget. Let’s delve deeper.

Range Resources posted third-quarter 2019 adjusted loss of 7 cents per share, narrower than the Zacks Consensus Estimate of a loss of 9 cents. However, in the year-ago quarter, the company had reported earnings of 26 cents per share.

In the third quarter, total revenues amounted to $622.5 million, which beat the Zacks Consensus Estimate of $596 million. However, the top line deteriorated from the prior-year quarter sales of $811.2 million.

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 third quarter, the company’s production averaged almost 2243.8 million cubic feet equivalent per day (MMcfe/d), down a marginal 1% from the prior-year quarter. Natural gas contributed 70% to total production while natural gas liquid (NGL) and oil accounted for the remaining 30%.

Oil and NGL production dropped 10% and 7.3%, respectively, on a year-over-year basis. However, natural gas production increased 2.1%.

Although total gas equivalent production witnessed a nominal drop, volumes from the Appalachian Basin increased 3% year over year.

The company’s total price realization (including derivative settlements and after third-party transportation costs) averaged $1.25 per thousand cubic feet equivalent (Mcfe), down 34.2% year over year.

While natural gas price declined 21% on a year-over-year basis to $1.23 per thousand cubic feet, NGL and oil prices deteriorated 69% and 5%, respectively.

Expenses

The exploration cost rose to $10.5 million from the prior-year number of $7.9 million. Moreover, direct operating costs increased to almost $35 million from the year-ago figure of $30.4 million.

Capital Expenditure & Financials

The company incurred drilling and completion expenditures worth $148 million in the reported quarter.

At the end of the third quarter, the company had long-term debt of approximately $3,134 million, with a debt-to-capitalization ratio of 43%.

Guidance

For the fourth quarter of 2019, the company estimates production in the range of 2.33-2.35 billion cubic feet equivalent (Bcfe) per day. For 2019, production is reaffirmed at 2.28 Bcfe per day, suggesting an increase from 2.2 Bcfe per day in 2018. 

Moreover, the upstream energy player has lowered its 2019 capital budget by $20 million to $736 million, suggesting a decline from $910 million in 2018.

Zacks Rank & Stocks to Consider

Range Resources currently carries a Zacks Rank #3 (Hold). Meanwhile, a few better-ranked players in the energy space are CNX Resources Corporation (CNX - Free Report) , Pembina Pipeline Corporation (PBA - Free Report) and California Resources Corporation (CRC - Free Report) . All the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

CNX Resources beat the Zacks Consensus Estimate in two of the prior four quarters, the average positive earnings surprise being 34.8%.

Pembina Pipeline has an average positive earnings surprise of 28.1% for the past four quarters.

California Resources has managed to beat the Zacks Consensus Estimate for earnings in three of the past four quarters.

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