Range Resources Corporation RRC recently released 2020 capital budget of an estimated $520 million. The amount is much lower than the projected 2019 capital expenditure of $728 million. Notably, in order to improve the balance sheet, the company has decided to shelve dividend payments, which will enable it to save $20 million per annum.
Performance in 2019
Markedly, the 2019 estimated capital spending is almost $28 million lower than its original guidance, owing to improved drilling and completion efficiencies, reduction in service costs, and the water recycling program. Production for fourth-quarter 2019 is expected near the upper limit of its guided range of 2.33-2.35 billion cubic feet equivalent (Bcfe) per day.
Over the past 60 days, the Zacks Consensus Estimate for the current quarter has moved from 3 cents per share to breakeven earnings, suggesting a steep decline from the year-ago earnings of 21 cents per share.
Expectations for 2020
The exploration and production company expects 2020 spending to enable it to maintain production volumes of around 2.3 Bcfe per day. Majority of the capital budget will likely be spent on the company’s Marcellus properties. For 2020, average well cost will likely remain below the $625 per lateral foot mark.
For 2020, Range Resources has hedged more than 1 billion cubic feet of natural gas per day of production at $2.64 average price. This year, the company expects to export additional propane and butane volumes to international markets, with the help of the Mariner East system.
Returning Capital & Debt Reduction
Last October, the company had initiated a $100-million share repurchase program, via which it bought back 1.8 million shares for around $7 million.
Last December, the company had declared a quarterly cash dividend of 2 cents per share but suspended the same to reduce debt burden. At the end of the third quarter, it had long-term debt of approximately $3,134 million, with a debt-to-capitalization ratio of 43%, significantly higher than the energy sector’s average of 31.1%. Importantly, the company generated $1.1 million in asset divestments over the past 18 months, which can further reduce debt.
Range Resources announced that its reserves increased to almost 18.2 trillion cubic feet equivalent (Tcfe) at the end of 2019 from the corresponding year-ago period’s 18.1 Tcfe. Of the current serves, only 2% comprised oil and condensate, while natural gas and NGLs constituted 67% and 31%, respectively.
The stock has declined 59.4% in the past year compared with 21.5% fall of the industry it belongs to.
Zacks Rank & Key Picks
The company currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the energy sector include CNX Resources Corporation CNX, Antero Midstream AM and Frank's International N.V. FI, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
CNX Resources’ earnings for the current year have witnessed four upward revisions in the past 60 days versus no movement in the opposite direction.
Antero Midstream’s fourth-quarter 2019 earnings growth is expected to be 130%.
Frank's International’s bottom line for 2019 is expected to rise 23.8% year over year.
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