Recommend that you listen to the Rice Conference on the company website. Cramer, very smart and successful guy but his advice often geared to current market conditions and trading, so it often appears conflicting as you noted. He has been very positive on RRC and some excellent CEO interviews. Bottom line-RRC effectively has 1.9 mil PA acres due to stacked plays, growing at 20-25% a year, with a 100% ROR. The Utica Pt Pleasant could be enormous with 400,000 acres which is not factored in reserve estimates. RRC maps indicate they're in the sweet spot for the Utica. Everything in place to grow through 2018 to 3bcf including contracts, permits, takeaway capacity etc. In the future RRC will surpass XOM gas production which is about 3.8 bcf-think about that. Next year Ethane extraction will add 100 mil to C/F; units costs down 38% and debt/cap ratio declining; recent upgrade by Moody's and c/f positive in 2016. The Nora economics are as good as the Marcellus where they have 475 K acres and excellent results in Mid Continent. Natural gas demand growing significantly in the future. I've been a shareholder for a long time, company has less risk and more potential than at any time in its history. Great company-with great mgt. Sounds like you already figured this out.
Some positives to think about despite the stock price. Cobalt is 6/6 off West Africa with major discoveries and 3/7 with major discoveries in the GOM; Loengo and Mufa have huge potential and the Cameia sanction is expected later this year. The FCPA matter will be resolved and CIE actions have been appropriate; we can expect financial partners due to the huge discoveries and I would expect that Angola wants to monetize the huge gas assets so an agreement will be forthcoming. Definitely like the risk/reward at this price level with the CIE achievements and progress on monetizing gas with Angola would almost double reserves. Is CIE more likely to move up from these levels with these facts and a solid mgt team-I think so and added.
Can't predict the share price but added some today, didn't think I would be able to buy at these levels, but its an ugly energy market. The results of the MHR Utica Shale well announced today in WVA was also a factor, a monster well doing 48million a day. Will be very interesting when RRC announces their Utica result. Hopefully, this starts to rebound soon.
I agree, also seems that RRC is getting lumped in with some Marcellus drillers that have takeaway capacity issues. Not the case with RRC with firm takeaway for their production and even going forward to 3 bcfe per day. The analysts really need to study the pipeline transport arrangements. Also RRC not getting credit for the value of underlying assets-stock is selling for less than 1/3 of PA acreage value and essentially all of it is derisked-that's just crazy.
Worst months for RRC that I can recall, but hard to figure. Growing 25% a year, plenty of takeaway capacity, unit costs declining, debt to ebitax declining to investment grade levels, 80% hedged this year, the Utica well could be outstanding for reserves, gas demand going forward will be increasing-and on track to 3bcfe a day in a few years. Price decline clearly overdone here.
Yogue, Not the headline you would expect from RRC as they have been a leader on these issues, especially with the stock off 25% from its high. Mgt has always been superlative, but they dropped the ball here, although there is little if any apparent environmental impact. I'd say a bit more top mgt oversight required on keeping tabs of these regs and hold employees accountable. Doesn't change the overall story here. I'd like to see some aggressive share buys at these levels.
Yogue, even though many don't read this board I'll include some facts to show how much RRC is undervalued. Just looking at the PA acreage, roughly 1 million acres. Due to the stacked pay the Southern PA acres have to be worth at least $60,000 (based on announced deals 23K for Utica acreage), which equates to about $190 a share. The other 500,000 acres, non stacked, at least $80 per share. That's $270 per share excluding the Nora and Mississippi plays. Gives you an idea what an acquirer would have to pay. Should RRC be selling for only 25% of its asset value?-keep in mind how much of their acreage is technically proved by their drilling and the drilling by others and that nat gas demand will rise substantially in future years. If cash flow and production are growing faster than 25% each year, then the company doubles in size in 3-4 yrs, so 3BCF production in 2017-2018.. IN South PA $4 natural gas is really $7 nat gas to RRC when you factor in the liquids and ethane extractions. Then you factor in the amazing decline in units cost, almost 40% since2008-which also serves as a hedge on nat gas prices along with the bonus cash flow from the ethane sales. Todays stock price is what it is, but this thing is a monster going forward.
Chrxind, Take a Look at the Royal Dutch Shell release yesterday on their Utica wells near the ny pa border, one producing at 28 mil a day. Many were unaware the Utica was as widespread. News bodes well for rrc as announce Utica results layer this year
Chrxind, Excellent observation. The Bigfoot 9H flowing at 14 million per day. will produce 5 B's in one year huge-and as good as the Marcellus. Analysts haven't figured it out yet-but RRC has 400000 Utica shale acres with better rock and pressure-none of which is included in reserves. RRC has the additional advantages from the wet gas and the economics of drilling in locations where they already have infrastructure saving almost 1m per well. They'll figure it out after the well is announced, take advantage of the opportunity.
Thought the release was very informative. Analyst reaction to earnings not unexpected. They all think short term, look at the natural gas and liquids price weakness, and plug it into their models-just no long term analysis. Bunch of robots. Reality is that RRC has the best acreage in the best gas field in the world, and will be doubling production and cash flow every 3-4 years. They are a low cost producer and continue to drive costs down (which offsets nat gas price declines and will serve as a multiplier when prices rebound). They have the wells identified and takeaway capacity to triple their production and beyond and a marketing strategy to sell this production. Didn't see that in any analyst notes this morning or any mention of their long term planning securing a diverse pipeline transportation arrangement at very low cost or the future ethane and propane sales arrangements. No mention the value of their underlying acreage assets which may be worth four times the current share price or that their stacked pay shale formations will provide huge cost savings going forward (saving almost 900K per well with infrastructure savings) . If companies are paying $20K for Utica acreage in Ohio-what would you pay for triple stacked pay acreage in PA with better rock and gas in place. No mention how the company achieved record production despite the Mark West plant being down for five weeks or any mention of their ability to focus on their dry or wet gas acreage as circumstances warrant. Didn't read anything in the analyst comments today about the potential impact of the Utica well where they have 400,000 Utica acres. Doesn't hurt to read what these guys are saying, but do your own diligence and look beyond the next quarter or two-many of them have agendas. In any event-seems that the RRC board has dried up-I'll keep a watch on it, for me really makes no sense to post anything in the future for discussion with no one here.
Hey Yogue, Saw some recent analyst notes on RRC-Breen Cap just upped target price to 114, Canacord at 107, Cantor Fitz at 98, Deutch Bank at 100 and Morningstar just gave it a 4 Star rating and increased fair value by $10 to $89. I agree natural gas prices and liquids prices having their effect here. Still RRC selling at too big a discount to its asset value along with all the other attributes we often discuss here. Been buying a some shares at these levels.I think we have to look forward longer term to the natural gas exports, utility switching and increasing demand.
Looks like about a 20% correction off the RRC high, painful to watch. Haven't seen anything company specific to justify the decline. Appears to result from the decline natural gas prices and the storage numbers. but at some point the company needs to address this substantial loss in market cap as it declines again today. RRC appears to be doing very well on all metrics but when it drops 20% the company needs to get in front of it.
Yogue, I agree, looked at natural gas prices and the sector, clearly in oversupply mode now with gas prices down sharply. Nonetheless, did not expect RRC to drop this sharply with the anticipated Utica well, marketing announcements and their hedge positions, outstanding asset base, low cost production and the efficiencies they have from the stacked pay. I see it got a Buy rating and 107 target this morning from Cannacord. Actually, bought a some shares this morning. I think we may be getting close to some deals in the E&P sector with the low interest rates, recent correction in the sector and opportunity for the major players to get ahead of the natural gas exports-COG and RRC definitely have an outstanding asset base.
Yeah-good luck with your purchase. Used to be more activity on the RRC board, thought there might be some interest and insights here with the stock declining almost 16% percent in a very short time. If there was any material reason I expect the company would have commented-but a sharp drop in any event. I think there is a lot of value here for some of the reasons I cited, but in the end, the market makes that decision, and doesn't seem to like it now. RRC down for the year in a record market.
Impressive Utica Shale results announced by CNX, bodes well for RRC which appears to have better acreage:
In the Utica Shale, CONSOL's 3-well NBL19 pad in Noble County, OH, was completed using RCS/SSL with an average of 64 stages per well and had an average lateral length of 9,510 feet. The pad, which had a controlled drawdown in pressure, yielded 24-hour average rates over 23 MMcfe per day, which included condensate yields of 70 barrels per million cubic feet of gas and an estimated NGL yield of 55 barrels per million cubic feet of gas. CONSOL is optimizing production facilities, midstream liquids handling and managing the reservoir pressure, and the company believes that the pad has the potential to produce at much higher rates. Each of the three wells achieved peak flow rates of approximately 18 MMcf per day, which would equate to 33.4 MMcfe per day. In the Ohio Dry Gas area, CONSOL has started drilling the top-hole on one dry Utica and one Marcellus in Monroe County, OH and expects to drill the horizontal for each well early in the fourth quarter in 2014.
That's an excellent purchase, which is about a 50% discount to the current value of the company, just for its Pennsylvania assets alone. RRC has 1.9 million PA acres, all of which are in reality proved. So if you assume 20% of those acres will never be drilled, you have 1.5 million acres. If you conservatively value 10% of those acres at 152,000 at $22,000 (approximate amount of acreage drilled to date) and the remaining 1.4 million acres at $15,000 with 160 mil shares you get an approximate $148 per share value. In reality, those acres will be proved so the share price is $210, without calculating for the other company assets. Like I say, any major player interested in RRC would have to pay north of $150 today and only significantly more later. This is a simple calculation but gives you an idea of the company's real value. No one can predict the share price near term and of course analysts do a different model computation, but it seems that you made a smart purchase, and ultimately you will receive its true value per share, as they continue to develop these assets.
The other day CHK announced the sale of 22,000 undeveloped acres in Green County to rice for 336 mil or about 15K per acre. RICE also announced their Bigfoo9H Utica well came in at 41 mmcf/d. Repeating myself, but RRC has 1.9 million Marcellus, Utica and Devonian share acres which are in more productive locations-just using the undeveloped acreage cost that RICE paid that equates to an approximate $190 per share value for RRC; using a more reasonable value of 22,000 for proved acreage the share price value jumps to $275-this is excluding other asset plays they have. Obviously, it will take time to develop their assets, but the value for RRC going forward is tremendous. Always said that I prefer RRC to remain a stand alone company, but if any major player is paying attention the price will only get higher. With RRC I think investors should just stay focused on the value of its underlying assets, and with their proven track record, the stock price will take care of itself.
Ohio regulators reported today that Utica Shale drilling has doubled Ohio production in the past year. RRC contends they have the best Utica acreage and are drilling what will likely be a huge impact well in the Utica Point Pleasant with over 500,000 acres. Not sue why the stock has drifted down the past few weeks, but a good opportunity to buy some RRC before they announce the Utica results this year. If you go back and read some of the earnings transcripts you can see that RRC is very optimistic and confident about their Utica acreage. Something to think about...