Range Earnings: Balance Sheet Continues To Be the Focus for the Time Being

Range’s RRC third-quarter results largely met our expectations. After updating our model, our no-moat rating and $22 fair value estimate remain unchanged.

We continue to think the firm remains well positioned as U.S. LNG feed gas demand is expected to increase significantly over the next few years. Range remains in maintenance mode for the time being, waiting for new LNG terminals to come online. Production was flat on a year-over-year basis while the firm reaffirmed its production midpoint of 2.14 billion cubic feet equivalent per day. Other guidance components were unchanged, except transportation and gathering costs are now expected to be a bit below $1.45 per million cubic feet equivalent (mcfe) compared with a midpoint of $1.48 per mcfe last quarter and natural gas realizations are expected to decline to around $0.425 below Henry Hub pricing compared with a midpoint of $0.40 last quarter.

Range is nearing its net debt target of sub-$1.5 billion with $1.6 billion at the end of the quarter. We would expect it to be about $1.5 billion next quarter, suggesting the relatively modest buybacks and dividends will be the plan for at least another quarter. Range bought back $400 million in shares last year but only about $10 million year to date. We think this stance is appropriate given we consider the stock quite overvalued.