Agree you can't compare the two companies. Shares are down about 50% since the CEO took over, about 70% since the energy decline, while compensation doubled over past 4 years. And this is in a strong stock market. A company with a market cap of 13 B is now $5B despite having the best assets in the Marcellus, worth multiples of the share price. One Director sold 100K shares in past 30 days, T Rowe unloaded more than 70% of their holdings per latest 13F. That's a big no confidence vote. CEO just sold Nora for a good price, but it was only 18 months ago they doubled down on it with EQT deal, but never funded it with any capital then sold it-for what purpose. For a 5B company they have a bloated Board with 12 Directors. The stock trades like a casino and they have decimated long term shareholders, and clearly missed forecasting the supply/ demand situation and still earned 40 mil over past four years. Is seven years not enough time to create some shareholder value.
Noticed in the latest T Rowe 13 F an 18 million share reduction in their RRC holdings, they had been the largest shareholder. Perhaps this will reduce the downward pressure that has been on the stock. They held their position time but were not rewarded.
Don't see any catalyst for significant share price upside near term. Appalachian Basin prices are horrendous and weather dependent until infrastructure gets built. On the positive side, RRC is positioned better than the NE producers due to the Spectra pipeline and better takeaway capacity in the SW, allowing for some better pricing, the upcoming Mariner 1 ethane/propane arrangement and being about 50-60% hedged will aide netbacks. The Nora sale helped their debt metrics, but imo taking 1/4 to 1/2 of the proceeds to buy back 5-10% of the outstanding shares would show the market confidence in the stock and also a benefit to long term shareholders who have been decimated. A 10% buyback with roughly half the Nora proceeds would be very positive, but I think they are committed to using it all for debt repayment. They should consider it. Absent a buyback, some bold action, like a merger with COG or an outright sale to a major, would be a catalyst.
RRC management has built a very efficient, low cost company with the best overall acreage in the Marcellus, with EUR's only second to COG, Unfortunately, they are producing an oversupplied product with no pricing power. They are not clueless. But if you give them credit for the above, they also have to take responsibility for misreading the market (supply/demand) over an extended period of time. When Ventura became CEO in 1/2008 the share price was $51, seven years later it's $29, a 43% decline not an enviable record with compensation of $40 mil during the past five years. Only the Board can review his performance, but if you've been a long term shareholder during his tenure half your investment has evaporated. They should consider using some of the Nora proceeds for buybacks or take more bolder actions to preserve the share price.
With 95% of capex going into the Marcellus mid continent sale is likely. Like you waiting for the full ride back, but it may be a longer slog. RRC value is enormous, but seems we have time before we get the demand increase occurs, we get the pipeline expansion, and we also have to wait for a lot of the smaller overleveraged players with some good assets to shake out i.e MHR essentially bankrupt is a good example. A RRC/GOG merger would really set up well for the future. COG has huge pipeline expansions in 2016/2017 to market all the NE gas and the RRC Lycoming assets would fit well there, and RRC could focus on the SW wet and dry and Utica going forward. Valuations could change quickly if a major player steps in and buys either RRC or COG.
No idea about the buyer, maybe a utility company. The economics of the Marcellus is just too good, especially after the EURs per lateral foot cited in the conference call. Like Chrxind I wonder what the deeper Nora zones would yield, but I think its a very good move to sell it. May result in an non overspend of capex for RRC and certainly should move them faster to investment grade.
That's a good way to look at, with the Marcellus assets substantially ore productive than Nora the premium would be much greater. Too bad market conditions didn't allow RRC to hold Nora, it is a terrific asset, mostly untested.
RRC has achieved significant reserve growth but clearly hampered by pricing, but I understand your position. Since Ventura became CEO in 2008 the share price has declined 40%, more than 66% off its high, while his compensation has been significant-certainly sufficient to weather the downturn while shareholders have been decimated. His argument for a correction in demand and pricing, will hopefully take effect in the near term, I do expect dates for free cash flow and investment grade status pushed back. I see the performance as industry/macro driven. This decline has been brutal for the shareholders, but I still think over time, conditions will rebalance, and Ventura has the company in a position to survive and prosper when it corrects. Listen to the COG results-they're in the same boat, but at the mercy of the NY DEC for Constitution pipeline approval which is a no brainer for all except for States like NY.
Last earnings call the CEO said HUN share price way undervalued. Six weeks later, after the market close on a Friday, they issue a negative release. Shareholders lose 25% of their value in one day. Held my shares based on the CEO's optimism and forecasts-was a mistake.
Yogue-Morningstar issued an updated report on RRC that factored in the current energy prices , and the long term resource potential arriving at a fair value of $65, a sell at $100.75 and a 5 star rating. That's a reasonable report as most of these analysts focus on the shorter term-still imo it underestimates the resource value with RRC having 30 TCFE of reserves with the lowest finding costs, as compared to Equitable 16 TCFE, XOM 6 TCFE, Cog 18 TCFE and Shell 3TCFE-all with much higher finding costs. RRC also has the advantage of better pipeline capacity in South PA with excellent liquids contracts that will generate 90 mil in additional cash flow and capital efficiencies, and significant Northern PA acreage that will benefit with future pipeline expansion out of that part of the basin.