Range Reports Solid 4Q on Oil Vol
Fort Worth-based Range Resources Corp. (RRC) reported impressive fourth quarter as well as full year 2012 results on the back of solid contribution from the Marcellus plays associated with liquid volume growth.
Adjusted fourth quarter earnings came in at 46 cents per share, beating the Zacks Consensus Estimate of 14 cents comprehensively. The reported results also improved approximately 39.4% from the year-ago adjusted profit level of 33 cents.
Quarterly total revenue of $398.7 million surpassed our $387.0 million projection and increased 20.1% year over year.
Full year 2012 adjusted earnings were 92 cents per share, representing a 17.1% decrease from $1.11 per share in full year 2011.
Total revenue in 2012 increased 9.7% to $1,351.7 million from the 2011 level of $1,232.5 million.
Production
The company's fourth quarter production averaged a record 844.3 million cubic feet equivalent per day (MMcfe/d). Total production volume experienced a 35.1% improvement from the year-earlier period and 7% sequentially, mainly on the back of continued success in its drilling program in the liquid-rich high return plays. In particular, liquids output jumped 41% from the year-ago period.
The fourth quarter average net production volumes of oil, natural gas liquids (NGLs) and natural gas were 9,863 barrels per day (:BPD), 21,652 BPD and 655 MMcf per day, respectively. Natural gas made up 78% of total production, while the balance was constituted by NGL and crude oil.
Natural gas production expanded 33.4%, NGL rose 27.9% and oil production increased 82.3% on a year-over-year basis.
Full year 2012 total production of 752.6 MMcfe/d improved 35.8% from the 2011 level of 554.1 MMcfe/d.
Realized Prices
For the fourth quarter, Range's total price realization (including the effects of hedges and derivative settlements) averaged $4.64 per Mcfe, down 14.2% year over year. The overall price comprised NGL at $41.96 per barrel (down 22.7% year over year) and natural gas at $3.35 per Mcf (down approximately 18.1%). However, crude oil was sold at $82.30 a barrel (down 1.7%).
Financials
At the end of the quarter, long-term debt was $2,878.2 million, representing a debt-to-capitalization ratio of 55.0% (versus 55.5% in the preceding quarter).
Total capital spending for 2012 stood at $1.62 billion that involves $189 million for leasehold.
Hedging
For each of the four quarters of 2013, Range has hedged 280,000 million British thermal units per day (MMbtu/d) of natural gas production at an average floor price of $4.59.
The company has also hedged 402,500 MMbtu/d of natural gas at an average price of $3.81 for 2014 and 55,000 MMbtu/d at an average floor price of $4.03 for 2015.
Guidance
The company now expects 2013 production growth in the range of 20% to 25% with liquids likely to be higher than the above mentioned range. It also expects total production growth of 845–850 MMcfe/d for the first quarter, of which liquid growth is expected at around 20%.
2013 production growth will be mainly driven by the substantial impetus from the Marcellus and Horizontal Mississippian oil plays. This will be further aided by the solid liquids potential in the Cline Shale, Wolfberry and Utica plays.
Range Resources also remains enthusiastic about the growing global markets for NGLs through its Mariner East and West projects.
Earlier, Range Resources had set its capital budget for 2013 at $1.3 billion, which is nearly 20% less, year over year. The total budget comprises about $1.1 billion for drilling and recompletions, $100 million for leasehold and renewals, $75 million for pipelines and facilities, and $25 million for seismic.
The company aims to spend approximately 85% of the budget toward oil and liquids-rich projects mostly in the Marcellus Shale and Horizontal Mississippian plays that have a combined acreage of about 500,000.
The independent oil and natural gas producer plans to fund the capital outlay from operating cash flow, proceeds from asset sales and existing liquidity under its credit facility. The properties to be sold involve some of its Permian Basin properties in southeast New Mexico and West Texas. It also anticipates shedding a total of $2.3 billion worth of properties since the start of its asset sale program in 2004 with this recent sale.
Zacks Rank
Range Resources currently retains a Zacks Rank #2 (short-term Buy rating). There are other stocks in the oil and gas industry that can also be considered. These include Linn Co, LLC (LNCO) with a Zacks Rank #1 (Strong Buy), and Breitburn Energy Partners L.P. (BBEP) and Hyperdynamics Corporation (HDY) with Zacks Rank #2 (Buy).
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