A month has gone by since the last earnings report for Range Resources (RRC). Shares have added about 2.7% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Range Resources due for a pullback? 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 Beats Q1 Earnings on Higher Production
Range Resources posted first-quarter 2020 adjusted earnings of 4 cents per share against the Zacks Consensus Estimate of a loss of 2 cents. However, the year-ago quarter’s profit was 37 cents.
In the first quarter, total revenues amounted to $693.9 million, beating the Zacks Consensus Estimate of $582 million. However, the top line deteriorated from the prior-year quarter’s $748.1 million.
The better-than-expected results were supported by higher natural gas equivalent production volumes and decreased expenses. This was partially offset by lower price realizations of natural gas and natural gas liquids (NGLs).
During the first quarter, the company’s production averaged 2,294.2 million cubic feet equivalent per day (MMcfe/d), up 2% from the prior-year period. Natural gas contributed 69.8% to total production, while NGL and oil accounted for the remaining.
Oil and natural gas production increased 7% and 3%, respectively, on a year-over-year basis. However, NGL production decreased 1% from the prior-year quarter.
Its total price realization (including derivative settlements and after third-party transportation costs) averaged $1.18 per thousand cubic feet equivalent (Mcfe), down 39% year over year.
Natural gas price declined 36% on a year-over-year basis to $1.12 per Mcf and NGL prices dropped 65%, while oil prices rose 5%.
Total exploration cost declined to $6.7 million from the prior-year number of $7.7 million. Moreover, on a unit basis, transportation, gathering and compression expense was recorded at $1.36 per Mcfe, lower than $1.49 in the prior-year quarter. Also, direct operating costs contracted to 15 cents per Mcfe from the year-ago figure of 16 cents.
In the first quarter, the company bought back 8 million shares at an average price of $2.80. At quarter-end, it had $71 million remaining under the $100-million share buyback program.
Capital Expenditure & Financials
The company’s drilling and completion expenditures totaled $124 million in the reported quarter.
At first quarter-end, it had a long-term debt of $3,187 million, with a debt-to-capitalization of 56.3%. This January, the company suspended dividend payouts, which will lead to savings of around $20 million per annum and will be used to reduce debt. Absolute debt reduction remains a priority for the company, as is evident from almost $111 million decrease in the same in the first quarter.
For 2020, Range Resources expects production volumes of 2.3 billion cubic feet equivalent per day (Bcfe/D), which indicates no change from 2019 production volumes. The company expects 2020 capital expenditure to be $430 million, suggesting a decline from $728 million in 2019.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 32.22% due to these changes.
At this time, Range Resources has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren’t focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Range Resources has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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